The Problem With Donor Advised Funds

The Problem With Donor Advised Funds

With the growing popularity of donor-advised funds (DAFs), nonprofits have been keeping a close eye on new regulatory proposals that could result in increased oversight and scrutiny of DAFs. Recently, a new proposal from the Initiative to Accelerate Charitable Giving is gaining traction in the philanthropic community and may signal that major changes in regulation and oversight of charities may be in the works. 

Treasury Reports to Congress on SOs and DAFs

With regard to distribution requirements that would impose a minimum distribution for DAFs and SOs like that imposed on private foundations, the Treasury study found that the average payout rate for Aggregate DAFs in 2006 (the first year the data was available) was 9.3% of assets. The payout rate for other DAFs was similar to or above the average. Compared with data indicating a payout rate for private foundations just about 5%, the Treasury concluded that a distribution requirement is unnecessary as DAFs already distribute above the 5%minimum for private foundations. The Treasury did note however, that a definitive conclusion could not be made with only one year of data so further research will be necessary to determine if a distribution requirement will be necessary in the future.