Charitable objectives or donor benefits? What sponsor language reveals about donor-advised fund priorities and resource flows

Recent years have seen a dramatic rise in donor-advised funds (DAFs).
Though housed in public charities, DAFs are often characterized as de
facto private foundations due to the deference sponsors typically give to
donors’ wishes. The consequence has been frequent calls to institute DAF
grant disbursement requirements and other restrictions akin to those on
foundations. Despite their growing importance, we know little about what
distinguishes different DAF sponsoring organizations beyond a commonly
used three-type split between community foundations, national sponsors,
and single-issue sponsors. To better understand variation in behavior
across DAF sponsoring organizations – which may, in turn, be driven by the
donors they attract – we develop a proxy measure of the priorities they
display in the language they use on their websites. The measure seeks to
identify the extent to which a sponsor emphasizes achieving charitable
objectives versus providing extrinsic benefits to donors. In addition to
presenting a new method of classifying DAF sponsors, we also show how this
measure complements existing sponsor type classifications, with national
sponsors emphasizing donor benefits more on average but also exhibiting
the most meaningful within-type variation in their emphasis. Most notably,
among national sponsors, greater emphasis on donor benefits is highly
predictive of greater DAF assets, and this feature is largely attributable
not to greater contribution receipts but rather to lower payout rates. Our
results suggest that variation in the language used by DAF sponsors can
help inform which organizations would be affected by regulatory proposals
targeting DAFs, and what effects such proposals would have on charitable
activity.