Donor-Advised Fund Grantmaking Resilient in Downturns, Study Finds

Donor-Advised Fund Grantmaking Resilient in Downturns, Study Finds

Median payout rates at donor-advised funds remained steady during the Great Recession, as did a new variable called flow rate, a study by researchers at the University of Pennsylvania and University of Memphis finds. 

Based on an analysis of Internal Revenue Service data from nearly a thousand DAF sponsor organizations over the period 2007-2016, the report, Understanding Donor-Advised Funds: How Grants Flow During Recessions (50 pages, PDF), found that grants totaling more than $13.5 billion were awarded through DAFs in 2015, with a median payout rate of 13 percent — a rate that, with the exception of 2008, when it rose to 16 percent, remained fairly flat between 2007 and 2015.  

In addition, the study calculated the flow rate — the ratio of total grant dollars awarded to total contributions received in a given year — and found that the median flow rate in 2015 was 87 percent. That rate also remained fairly flat between 2007 and 2016, with the exception of 2009, when it peaked at 103 percent, meaning that the median DAF sponsor granted out more money than it received that year. During the first two years of the Great Recession — 2008 and 2009 — total contributions to DAFs dropped 36 percent, while total grant dollars awarded fell by only 7 percent. 

According to the report, national sponsors such as Fidelity Charitable, the National Philanthropic TrustSchwab Charitable, and Vanguard Charitable had the highest median payout rate, about 22 percent, but the lowest median flow rate, around 70 percent, while community foundation DAFs and single-issue charities had higher median flow rates of 82 percent and 100 percent but lower median payout rates of about 10 percent and 19 percent. According to the report's authors, that may be due to a greater emphasis among community foundations and their donors on maintaining a stable asset base.

"When we analyze organizational-level DAF activity, we observe that DAF grantmaking is relatively robust when compared to DAF assets and contributions," the report's authors conclude. "Giving from foundations decreased as readily as individual giving during the recession years of 2008-2009, when nonprofits needed the money the most. During this time, donors with money in donor-advised fund accounts were uniquely positioned to continue to support the causes they cared about. Our findings suggest that grantmaking from donor-advised funds is less affected by economic recession than other forms of charitable giving."

H. Daniel Heist, Danielle Vance-McMullen. "Understanding Donor-Advised Funds: How Grants Flow During Recessions." Independent Report 02/25/2019.