Donor-Advised Funds

Quick answer: A donor-advised fund (DAF) is a charitable account held by a sponsoring organization that lets a donor make a tax-deductible contribution now and recommend grants to qualified charities over time. For nonprofits, DAFs are a common, flexible funding source that often requires different tracking and stewardship than direct gifts.

What is donor-advised funds?

A donor-advised fund (DAF) is a philanthropic vehicle where an individual, family, or advisor contributes cash, stock, or other assets to a sponsoring organization (like a community foundation or financial-services charity). The donor gets an immediate tax deduction for the contribution, retains the right to recommend grants from the DAF to IRS-qualified nonprofits, and can often involve family members or professional advisors in the recommendation process. The sponsoring organization holds legal control of the funds and processes grant distributions, but it typically follows donor recommendations.

Nonprofits encounter DAFs as both a source of incoming gifts and a stewardship opportunity. Because the donor’s recommendation and the sponsor’s grant are separate steps, nonprofits may see a recommended grant message before funds clear, or receive the grant months later. DAFs differ from private foundations: they usually have lower administrative burden for donors, fewer overhead requirements, and offer quicker tax deductions, but they also mean the sponsoring organization, not the donor, issues the grant.

Why donor-advised funds matter for nonprofits

DAFs can be a meaningful, sometimes unpredictable stream of revenue. They let donors give appreciated assets or large gifts in a tax-efficient way and then recommend grants on a schedule that fits their financial planning. For development directors, that means both opportunity and process: you may receive sizable DAF grants, but if you don’t track recommendations, match them to incoming checks, and steward the recommending donors thoughtfully, you can miss sustained support.

Because grant timing can lag, many nonprofits see a recommendation notice weeks or months before funds arrive; others never receive a recommendation at all if the sponsor issues the grant without donor notice. That complexity makes accurate tracking, clear acknowledgements, and proactive stewardship essential — not as a bureaucratic task, but as a way to deepen relationships and convert one-off DAF grants into repeat support.

National-level data show that total DAF assets grew 27.9% to $327.87 billion and DAF grantmaking increased 17.9% to $64.60 billion in fiscal year 2024. With the right systems, you can turn DAF activity into predictable income and stronger donor relationships.

How donor-advised funds works in practice

Scenario: The Lakeside Food Bank, a mid-sized nonprofit with about 2,300 donors, receives a notification from a donor’s DAF sponsor that a $5,000 recommendation was submitted for the food bank’s emergency meal program.

1. Record the recommendation: Lakeside logs the incoming recommendation as a pending DAF gift in their CRM, tagging the donor (if known), the sponsor organization, and the recommended program.
2. Send a tailored acknowledgement: Lakeside emails a prompt thank-you to the recommending donor or their advisor, confirming that the organization received the recommendation and explaining next steps.
3. Track timing: they add an expected grant window and a follow-up task to reconcile when funds arrive; sometimes the sponsor issues the grant within weeks, sometimes months.
4. Steward intentionally: regardless of when the check clears, Lakeside sends impact communications tied to the recommended program, and invites the donor or advisor to a program update or stewardship call.

If you want practical guidance for engaging DAF donors, see our blog post on leveraging donor-advised fund philanthropy.

Donor-advised funds: key metrics and benchmarks

• DAF gifts received (count and dollars)

• What to track: number of recommended grants, number of grants received, total dollars from DAFs each year.

• Benchmark note: Benchmark data for this metric is not standardized — consult your own year-over-year trends as the primary baseline.

• average DAF gift size

• What to track: median and mean DAF gift to your organization.

• Benchmark note: DAF gift sizes vary widely by organization and donor type; use your donor segments to set targets.

• DAF recommendation-to-grant lag (timing)

• What to track: days between initial recommendation notice and funds actually deposited.

• Directional guidance: timing varies by sponsor and asset type; many orgs see lag from a few weeks up to several months — treat any specific number as directional and verify against your data.

• percentage of donors with DAFs who convert to non-DAF support

• What to track: how many DAF recommenders later give outside the DAF (major gifts, monthly donors, planned gifts).

• Benchmark note: conversion rates depend on your stewardship program and donor profile.

• recognition and stewardship tasks completed

• What to track: acknowledgements sent within X days, stewardship touchpoints completed within Y months.

• Benchmark note: set SLAs that align with your capacity; quicker acknowledgements correlate with higher follow-through from sponsors.

Related nonprofit terms

major-gifts Large, individualized gifts that typically require a tailored solicitation and stewardship plan.

donor-retention The percentage of donors who give to your organization again in a subsequent period.

fundraising-appeal A targeted request for support, often centered on a specific program, campaign, or need.

donation-matching A fundraising approach where a donor or organization agrees to match gifts within a time frame to incentivize giving.

How Bloomerang helps you manage donor-advised funds

Bloomerang CRM makes DAF management part of your regular donor workflows. Use custom gift-type fields and source tags to mark recommended DAF grants as pending, track the sponsoring organization, and link the recommendation to a specific donor record. Automate acknowledgements and stewardship workflows so recommending donors and advisors get timely, personalized communications even before funds arrive. Build reports and dashboards that surface active DAF recommendations, show projected grant timing, and flag outstanding reconciliations so your finance and development teams always match gifts correctly.

For tactical steps and messaging templates, see our blog on DAF strategy: /blog/strategies-to-leverage-donor-advised-fund-philanthropy-faqs/.

Frequently asked questions

What’s the difference between a donor-advised fund and a private foundation?

A private foundation is a separate legal entity with a board, annual reporting requirements, and mandatory distribution rules; it also has different tax rules and overhead. A donor-advised fund is an account at a sponsoring organization where the sponsor legally controls distributions but typically follows donor recommendations. DAFs generally involve less administration and lower start-up costs for donors.

How does a nonprofit record a DAF recommendation before the check arrives?

Record the recommendation as a pending gift in your CRM with a custom gift type like “DAF recommendation,” include the sponsor name, recommended purpose, and any donor identifiers. Create follow-up tasks to reconcile when the grant clears and automate acknowledgements so stewardship begins immediately.

When should I expect funds after a DAF recommendation?

Timing varies by sponsoring organization and asset type. Cash grants often clear faster than grants that require liquidation of securities. Because timing isn’t guaranteed, treat recommendations as invitations to steward rather than confirmed revenue until the grant is received.

How can a nonprofit encourage repeat support from DAF donors?

Steward the recommending donor (or their advisor) promptly, share clear impact tied to the recommended gift, invite them to program updates, and ask about additional ways to engage outside the DAF (major gifts, volunteering, events). Tracking and personalized communication are key.

How does a nonprofit know who recommended a DAF grant?

Sometimes the sponsoring organization includes the donor’s name; sometimes grants arrive anonymously or only list the sponsor. Use any donor identifiers provided, match contact info in your CRM, and follow up with the sponsor when possible. When a recommender is unknown, acknowledge the grant and invite the sponsor or recommender to connect for stewardship.

The bottom line

A donor-advised fund is a charitable account held by a sponsoring organization that lets donors recommend grants to charities over time. For nonprofits, DAFs are an increasingly important but timing-sensitive revenue source that demand clear tracking and timely stewardship. One practical step: tag and track every DAF recommendation in your CRM, then automate acknowledgement and reconciliation so recommendations turn into relationships.