Philanthropic Potential: How Do You Define It?

posted on: November 19, 2012

By: Christine Reeves

Donor-advised funds (DAFs) are crucial for the work of community foundations. In fact, many of these foundations’ DAFs account for as much as 90 percent (and sometimes even more) of their total annual giving. 

Last month, I found my interest in DAFs further piqued by reading FSG’s new report, “Do More Than Grow: Realizing the Potential of Community Foundation Donor-Advised Funds.” Then, I – along with 120 others – attended the corresponding and very thought-provoking webinar. The speaker panel included Becca Graves, executive director of CF Insights, Eva Nico, a director of FSG, and Carolyn Doelling, East Bay Community Foundation’s director of philanthropic services. 

A total of 31 community foundations participated in the report, including many of the country’s largest community foundations. Collectively, these grantmakers house 6,100 DAFs, approximately one-third of all community foundation DAFs nationwide.

Three key questions posed in the report included: 

  • How do Community Foundations define the strategic value of donor advised fund? 
  • To what extent are DAFs creating strategic value at community foundations today?
  • What policies and practices will best help realize strategic value now and in the future?
It also posed some interesting technical questions such as:
  • Do higher fees slow DAF growth? 
  • Do small funds grow over time?
A question I found particularly interesting was “Does provocative leadership attract or deter donors?” The findings showed that, “There is no correlation between leadership stance of community foundation and donor behavior.”

However, as I reached the end of the report, what struck me most was not something I read, but rather something I did not read. This was the most recent in a series of high-caliber reports I have read that focus on “philanthropic potential” of donors. The importance and popularity of this topic makes sense, of course. However, are the donors the only ones in the equation? What about the recipients of the grants? What about the facilitators of the grants, the nonprofits that carry out programming? What about the long-term, positive impact the donors can have on communities in need? None of this was explicitly mentioned. 

I understand that the focus of the report centered on realizing the potential of donor-advised funds. However, how can we truly discuss this issue for 60 pages without also including the directly related discussion of those individuals and groups that benefit from donations strategies that make each dollar go further? 

After all, what is the purpose of growing the potential of a DAF? Surely we are not growing DAFs for the end goal of creating more or bigger DAFs, which then increase the total annual giving of a community foundation. Rather, I am confident that we are growing DAFs for the end goal of achieving a foundation’s mission: Working responsively with community partners to alleviate and solve problems endured by people in need. Perhaps this goal is simply assumed and goes without saying, but I feel that it should be said … and said often.
I also feel that we should push ourselves to grow our sector’s DAFs by helping donors learn how they can leverage limited dollars to make greater impacts in communities. Of course, many foundations are already doing this and doing this quite successfully. 

The FSG report was very well done and quite thought-provoking, but it is crucial that we see the forest through the trees. It is so easy – too easy – to pour so much of our energy into doing good that we forget why we are doing good and how we can do better. 

Foundations help nonpropfits help people. If we let it, this high-altitude perspective can keep our philanthropic sector multiple steps removed from on-the-ground problems faced by communities in need. If we let it, our high-altitude can lead to aloof, deleterious understandings of philanthropy. Then, when we add in DAFs that help foundations help nonprofits help people, we can be yet another step removed. 

I find the work of community foundations incredibly laudable, as community foundation staffers simultaneously don many hats: grantmaking, fundraising, advising, convening, advocating and other roles. I would just encourage community foundations, as they continue working towards growing their DAFs, to also continue helping donors learn to make each dollar go further towards help communities in need. As a result, perhaps the philanthropic potential of expanding DAFs and helping communities in need can grow together, stronger because they are intertwined.

Christine Reeves is field associate at the National Committee for Responsive Philanthropy (NCRP).