There may be some confusion in the nonprofit world about donor-advised funds (DAFs). We wanted to offer a few tips – from one nonprofit to another – about how to best engage with donors who give through DAFs and spread the word that your organization welcomes DAF grants. 

What is a DAF? 

First, the basics: A DAF is a charitable giving account designed exclusively to invest, grow, and maximize the number of assets a donor has available to give to charities. For more information about DAFs, you can read more here.  

At their core, DAFs serve as seamless giving vehicles by reducing the administrative burden on nonprofits and donors. DAFs maximize sustained philanthropic impact because they allow donors’ diverse assets to grow over time. The invested growth means more grant dollars can become available to organizations like yours.  

Engaging with donors holding a DAF can offer your organization expanded opportunities to receive funding through a unique giving vehicle. Reminding donors you are DAF-friendly is a great way to encourage them to recommend grants to your organization.  

Do donors know your organization is DAF-friendly? Here are a few ways to find out.

1. Do you talk to your donors about DAFs?

Donors who open DAF accounts care deeply about giving back. They establish these accounts for the express purpose of supporting a charity. DAF holders view philanthropy as a core value and often include loved ones in the giving process. 

ACTION: Remind donors to support your organization with their DAF accounts. Share communications that mention your ability to accept DAF grants. This ensures donors feel comfortable recommending a grant to your organization. Mention it on your website, in marketing emails, and during fundraising events. 

2. Do you know the rules about DAFs?

DAF sponsors are nonprofits and and regulated by the IRS. Like you, we work within a pre-determined set of rules. Knowing the rules around DAFs may help ensure your organization doesn’t inadvertently step outside those parameters.   

For the most part, grants move smoothly through the DAF granting cycle. As part of the process, DAF sponsors, like Vanguard Charitable, perform due diligence around the grantee organization and the purpose of the grant. Most organizations are in good standing with the IRS and will be approved to receive the grant. During the review process, our Vanguard Charitable team will reach out to nonprofits when questions arise. DAF sponsors do retain the ability to deny a grant in some instances, which is an important step in ensuring funds are used for the public good.   

ACTION: Make sure your charity’s directory profile is up to date and accurately reflects your organization. Many DAF sponsors use GuideStar by Candid as a data source. If something’s incorrect, you can update your GuideStar profile online. Donors make decisions based on this content, and accuracy is important.   

3. Does your team know about DAFs?

Do your board members and senior leaders know what a DAF is and how it works? What about your fundraising, development, finance, and marketing teams? Are they comfortable engaging in conversations with donors who give through a DAF? Do you track donations from DAFs differently than direct donations?  

DAF donors are savvy, strategic philanthropists, and they use their DAF accounts to give conveniently, efficiently, and generously. Understanding their mindset will go a long way in successfully educating them about your nonprofit and encouraging them to give.   

ACTION: The way you handle a DAF grant or a donor with a DAF account is critical in building relationships. For example, did you know donors with DAF accounts receive tax receipts when they contribute into their DAF account? Instead of sending tax receipts to DAF donors, send a thank you letter instead. From there, you can start a conversation with the donor about scheduling recurring grants to support your organization. 

4. Do you build relationships with anonymous donors?

A very small percentage of our donors ask to give anonymously, and we respect our donors’ wishes. If donors have recommended grants to your organization through a DAF, they know about your organization and are impressed enough to support it.  

They've likely learned about your organization through an online directory, social media, email newsletter, prospect outreach, or mailing list. Continue sharing your organization’s updates through social media, newsletters, emails, and other channels to keep your donors updated about the ongoing needs and initiatives your organization is undertaking. 

ACTION: Remind donors to support your organization with their DAF accounts. Share communications that mention your ability to accept DAF grants. This ensures donors feel comfortable recommending a grant to your organization. Mention it on your website, in marketing emails, and during fundraising events.

5. Do you encourage donors to use DAFs for complex assets?

Many DAF sponsors have the expertise and resources to liquidate various complex assets, turning them into charitable dollars. Complex assets like real estate, private equity shares, stocks, insurance policies, and artwork may hold value that could create long-term charitable impact, especially when those charitable dollars are invested for growth.  

ACTION: If your organization isn’t prepared to facilitate a complex asset donation, talk to your donors about donating their complex assets to a DAF. Coach donors on how complex assets can be liquidated, invested for potential growth, and granted out on a recurring schedule.  

For more information about DAFs and nonprofits, please visit our nonprofits page.