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Why do some folks in the tax-exempt world hold donors in such contempt? Donors, like all us humans, can certainly make mistakes and succumb to narcissism. But in the main, American donors are a generous group who don’t need harsh scrutiny to keep them from crushing the rest of us under the heels of their jackboots.

And yet a recent issue of Chronicle of Philanthropy brings a dire warning:

“The growing trend of using donor-advised funds is symptomatic of a broader trend where needs and desires of donors are put ahead of the needs of communities and causes,” says Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, a watchdog group that monitors grant-making organizations. “This troubles me.”

Years after the recession, Mr. Dorfman adds, “economic inequality is higher than it’s ever been, and low- and even middle-class families have not recovered. People and communities with the least wealth and opportunity need philanthropic investments. I have concerns that some donor-advised funds could be used to warehouse donations.”

In addition to giving Dorfman a soapbox for these Halloween stories, the Chronicle reinforces his meme by implying that Fidelity Charitable, the world’s largest provider of donor-advised funds, is in “a battle” against the United Way to be number one on the Chronicle’s annual ranking of charities. The United Way, you see, has had declining revenues in recent years, whereas Fidelity has not. So beware:

The stark difference in the fundraising results of United Way, which helps the needy by distributing to social-service groups what it raises each year from mostly middle-class people, and Fidelity, a type of charitable bank for the affluent, bothers some people.

The very first commenter on the article agrees that he is “troubled,” not just because donor-advised funds are receiving more money, but also because the article calls Fidelity Charitable a “charity.” Fidelity, he sneers, is just

a marketing arm of Fidelity Bank. And they feed individuals’ needs to solve tax problems. If this weren’t the case, all the money given to DAFs [donor-advised funds] would be distributed in Year 1, which it is not.

Actually, the same Chronicle article on this figment-of-the-imagination “battle” between United Way and Fidelity contains several interesting bits of information that work against the envious resentments simmering in the authors’ and Mr. Dorfman’s heads. For example, a United Way official makes the painfully obvious point,

at the end of the day, giving does tend to trend to how the economy is going.

Perhaps the politicians Dorfman and the authors voted for should be interrogated on their hindrance of economic growth? Or maybe the Chronicle should look into the role that activists at ACORN—Dorfman's previous employer—played in the housing collapse (see my account here or the best book-length treatment: Reckless Endangerment by New York Times reporter Gretchen Morgenson and Joshua Rosner).

Later, a fundraising consultant complains that changes in the workplace have helped to lower revenues to United Ways, including the rise of

CEOs who are less willing to tell their employees to give to United Way

One suspects Dorfman and the authors wouldn’t mind if this and other varieties of subtle coercion were exercised against the nation’s donors, large and small. Certainly they’re not likely to object to the supreme coercion, namely, Congress ordering the IRS to take more of the larger donors’ money in taxes, so that the right “communities and causes” can take their proper place ahead of the tawdry “needs and desires of donors.”

Before the article ends, still more bits of information undermine its thrust. It turns out that charities have

benefited from Fidelity’s boom: In the first six months of this year, the amount donors distributed grew 33 percent over 2012. The jump was fueled by a 50-percent jump in grants of $1-million or more.

And this summer Fidelity “released its first-ever survey of its donors’ giving, intended to help charities learn to tap that support.”

And Fidelity is “using technology to help donors support their preferred causes.” It’s collaborated with other donor-advised funds to create a widget for charities’ websites that makes it easy for charities to receive gifts from the funds.

And last November, Fidelity launched an iPhone app. that lets donors use cellphones to make grants. A Fidelity staffer reports

one of our first grants on this app was for $500,000. We called the donor to make sure they didn’t type in an extra zero.

Thus even this brief article makes it laughable to act as if donor-advised funds are somehow letting donors hide their ill-gotten gains in a mattress unreachable by charities. The truth is even clearer for anyone who bothers to spend five minutes reading the Fidelity survey mentioned. Here are a few more data points:

● In 2012, the average number of grants per account continued a steady rise, reaching nearly seven grants per year

● Even during the worst years of the financial crisis (2008-2009), there was still a slight increase in grant volume

● The number of grants scheduled in advance or on a recurring basis has risen at an even faster clip than overall grants

● 57 percent of grants are made to nonprofits in the account holder’s home state

More light is shed on donor-advised funds in the same issue of the Chronicle by a profile of the National Christian Foundation (NCF), which specializes in providing the evangelical Protestant community with donor-advised funds.

The Chronicle headlines the article with the observation that NCF “succeeds by accepting complex assets.” (I’m proud to say that this is old news to readers of Philanthropy magazine; when I was editor there, we pointed out this aspect of NCF's services in a 2005 interview with the group's leaders.)

The article goes on to describe some of the ne’er-do-wells whose donor-advised funds keep Dorfman awake at night. First there are the Barnharts. Alan Barnhart began working in the family business, Barnhart Crane and Rigging, when he was ten. He and his wife “have studiously shunned the trappings of affluence” because of their Christian faith.

the couple and their six children began living on $150,000 a year and giving the rest away, eventually reaching their goal of donating $1-million each month to charities

And if that isn’t scary enough, the article adds that rather than hectoring their employees to give to the United Way, the Barnharts’ million-a-month giving is done “with advice from their employees.”

Let's pause briefly to ponder whether the average inside-the-Beltway philanthropy pundit would feel $150,000 a year is enough to support a second child, much less a sixth.

The article profiles another family business run by donors you should apparently resent; namely, the Hobby Lobby chain of stores run by the Green family. The Greens donate half of Hobby Lobby’s profits to charity. Somehow—I’m sure it was just an oversight—the Chronicle doesn’t mention that the Obama Administration is asking the U.S. Supreme Court to overrule a Circuit Court's decision that Hobby Lobby cannot be forced by Kathleen Sebelius to supply employees with abortifacients. (The Greens’ lawyers are my friends at the Becket Fund for Religious Liberty, whose case page provides more information.)

Business, or rather, giving is booming at the National Christian Foundation, and the group has reached number 12 on the Chronicle’s Philanthropy 400, up from 19 last year. Here another shoe drops in the narrative of oppressive donor-advised funds:

National Christian is different from many of the other funds: Its donors give substantially more as a percentage of the fund’s assets than donor-advised funds offered by companies, Jewish federations, and community foundations. 

One wonders if this means Dorfman should make a different complaint—perhaps he could object that more donors aren’t Christians?

FOOTNOTE: The Bradley Center for Philanthropy and Civic Renewal held a valuable discussion on donor-advised funds earlier this year; transcript available here.

1 thought on “Unphilanthropic carping”

  1. Kelley Unger says:

    This is why I cancelled my subscription to the Chronicle of Philanthropy and unsubscribed from their email. I was tired of backhanded and sometimes outright criticism of conservative donors, free market enterprise, and religious causes. Thanks for being a different voice in the crowd of philanthropic columnists!

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