[ASK AN EXPERT] How Should Donor-Advised Fund Gifts Be Recognized?

Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity.

Today's question comes from a fundraiser who needs advice on how donor-advised funds should be recognized in their annual reports.

Dear Charity Clairity, I appreciated reading your guidance re: donor-advised funds (DAFs) and would like to have additional clarity re: listing DAFs in an annual report.

Are you saying we should list the individual donor/s' names and then separately list a grouping of all DAFs so that the DAFs receive recognition as well? For example, if Jane and John Smith contribute through Vanguard Charitable, then Jane and John are listed and Vanguard Charitable is acknowledged under: "Xyz would like to acknowledge the following Donor Advised Funds…" Please let me know your recommendations, and thank you so much!

—Double the Recognition?

Dear Double the Recognition,

Recognition is all these things:

• Almost universally appreciated.
• Relatively inexpensive to offer.
• Woefully missed when not offered.

All these truths are well established. Recognition is good donor stewardship. With donor-advised funds (DAFs), you have to think a bit out of the box.

Thinking about DAF recognition begins with your policy.

The question you must first ask is whether you have a general recognition policy, and whether it covers donor advised funds specifically. This is a “gaps in policies” situation that plagues many nonprofits. They have a policy, and it’s pretty general, but it doesn’t cover every possible situation.

You need a clear policy, put forth by leadership (often the development committee or the full board), that tells your staff, including development staff, exactly how to handle various donor recognition situations. Without a clear policy, you’ll be flying by the seat of your pants and making it up as you go.

This leads to inconsistency, which leads to some donors feeling shortchanged, and it’s also neither fair nor is it equitable.

Before I answer your specific question, I want to flag three basic, general acknowledgment considerations for DAFs:

1. You must acknowledge the gift to the DAF sponsor, never directly to the donor. The IRS requires acknowledgment be sent to the sponsoring organization (e.g., Vanguard Charitable). You can’t send it to the donor because, technically, they’ve already received a tax receipt from the DAF sponsor upon depositing their funds into the DAF account. Don’t worry, they know they’re not getting another receipt from you. But you can—and should—also send a personal thank you directly to your donor.
2. If the donor wishes to be known, add them to your database as the underlying donor for this gift and include them in your personal stewardship.
3. If the donor is unknown, you can only acknowledge and steward the DAF. Do treat it like a donor and work to try to identify and connect with the underlying donor, if possible.

Now, on to your specific question about annual report recognition.

In your specific case, you’re blessed to have known donors (you know the individual donor names). So yes, absolutely list the donors by name if they wish to be recognized. And yes, I would consider listing the donor advised fund as well. Here are a few different approaches:

Option 1: List just the donor

Jane and John Smith

Option 2: List the donor and specify the vehicle

Jane and John Smith (gift through Vanguard Charitable)

Option 3: List both the donor and the fund

Jane and John Smith; Vanguard Charitable

Option 4: List the fund and the donor separately

Jane and John Smith [in main list]; Vanguard Charitable [in DAF list]

My favorite of these is Option 2. It accomplishes several things: (1) It recognizes the donor. (2) It educates your other donors that this vehicle exists. (3) It acknowledges the fund sponsor.

There is no right answer here, however. What’s most important is for you to make a decision and codify it into a clear policy — and then to apply that policy consistently to all your donors.

I hope this helps!

— Charity Clairity

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