Recording Gifts from Donor Advised Funds

Ken Hontz

Hi, all. I've read through the previous OBP topics on Donor Advised Funds, and wanted to get a feel for what the consensus is on this topic.


Previously, when we received gifts from a Foundation or Schwab/Fidelity/etc, we hard credited the organization, soft credited the advisor, and referenced the name of the DAF. Recently, we've started soft crediting the advisor and the DAF.


To confuse matters, I recently came across a document from Market Smart titled "Donor-Advised Funds: The Ultimate Guide for NonProfits" which advocated just the opposite, stating "Enter the contribution in your database under the individual's name, not the sponsoring organization. Remember the donor directed the grant to your organization and the sponsoring organization facilitated it." They make no mention of recording/attributing the name of the DAF.


What do you do? And is there a Best Practice/legal documentation for "how it should be done"?


I know the first method creates extra effort to tease out the soft credit information for Annual Statements/Reports, how do you make this easier?


Thanks in advance for all the input.

Lynnette Fisher

I add the gift to the donor's record. I also don't soft credit the issuing agency as they are just the distribution site.

JoAnn Strommen

For years I did as you previously did - hard credit on the DAF organization, SC individual. When I started and determined processes, it was recommended as way to do it.


In new position at different org, we record gift on individual doing the 'advising' and put the org name in the reference field. I actually prefer this as it has made reporting so much easier. In my first year, I can't even recall how many reports I would have had to manually sort through to get credits to the individuals as that is where they want credit for analysis, LTG, feasibility study reporting.


Possibly just an oversight on not mentioning if DAF is recorded on the record. Name of the DAF could be recorded in Reference field, a note or as a gift attribute. With attribute you could have table for description for easy querying if needed.


Biggest issue is be consistent. If you change I would do it in conjunction with fiscal year.

Steve Townsend

We hard credit the advisor, soft credit the organization and record the name of the DAF as a gift attribute. However, for the next fiscal year we're planning to change to hard crediting the organization.

Angela Tuttle

Hey!


We hard credit on the DAF organization, SC individual and add a DAF gift attribute. We have some Organizations that are more than DAF's so we only add the attribute to gifts that are donor advised.

Tim Clark

We used to hard credit the individual and put the DAF name in the reference field and as a gift attribute until partway through last FY, when we changed (in conjunction with advice from our auditors and the business office) to hard-crediting the DAF organization and soft-crediting the advisor.


We re-arranged our reporting in RE to accommodate the change by putting a constituent attribute of "Suppress Organization Donations" on the DAF org constituent record and then excluding records with that attribute from the report. In the case of married school parents who give a gift, we soft credit both parents on the gift record. We run the report through a query that only includes Head of Household constituents, and ask the report to give credit to all hard and soft credit donors). The exclusion criteria for constituent attributes combined with the Head of Household query means that the money is credited only once, and this gives us a complete picture of our contributor base that isn't skewed by counting DAF organizations that give multiple gifts as being only one donor, or having a high dollar amount come from DAF's when, for the Development office's tracking and stewardship purposes, it's really coming from the individual advisors.


The downsides to this system are that (a) it complicates soft-crediting multiple constituents who aren't spouses on a gift, and (b) it doesn't work well for reporting in NXT that can't taking into account soft credits (or exclude using gift or constituent attributes), and (c) it takes a bit of auditing after gift entry to make sure that everything is entered correctly and soft credits appropriately applied. But it does allow us to credit money to the entity where it is legally originating, and helps our business office to keep better track of our money trail to increase our transparency and accountability for our funds.

Lynnette Fisher

We hard credit the donor themselves since it is their funds which are making the donation.

AnnMarie Schell

This article, Best Practices for Processing Donor-Advised Funds - BWF , from Bentz Whaley Flessner recommends what I've always heard. It gives specific terminology for "both the legal donor (the donor-advised fund) and the person who established the donor-advised fund." If the person who established the fund wants to remain anonymous, it's not an issue (no need to soft credit Anonymous). For purposes of publishing in the Annual Fund report, soft crediting is only an issue for those donors who want that recognition--hard credit would go to the DAF. In fact, I had a donor once who wanted to be sure that the DAF was recognized in our Annual Report, and they encouraged others to give to us through that same DAF. The organization who issued the check would only be recorded in the reference line for research purposes. I know they're not the same, but I look at the organization similar to any other bank or 3rd party distribution like Benevity--they don't even receive a soft credit.


BWF is global fundraising consultancy that has published free articles like this one I cited. They appear to be very reputable and on target!

Jenny Marquardt

Thank you for this article. I am in the process of creating a process at my new organization and this helpful!

Steve Townsend

Thanks, the article is helpful. I note that it says "Bentz Whaley Flessner recommends recording the DAF transaction on the record of the donor-advised fund (e.g., Fidelity)". Would Fidelity not be the organization who issued the check? We've always soft-credited the organization, rather than creating a record for each donor's DAF. We also soft credit Benevity where the donation comes directly from them - sometimes they are merely the distributor and our bank account shows the name of the donor. Next financial year we plan to hard credit the organization, including Benevity - basically we will be hard crediting whoever issues the check or bank transfer.

AnnMarie Schell

Good catch Steve! That's not the DAF though, it's the 3rd party organization that manages the DAF and writes the check. Again, I consider them similar to a bank or another 3rd party organization like Benevity. And for reasons of reporting, it's appropriate to hard credit the legal DAF, soft credit the individual contributing to the DAF, and not credit the 3rd party organization at all. The only reason I could see wanting to track third party check writers, which we of course do not do for any other checks or bank drafts, is to report on DAF's and Foundations. Why would it be important to track Benevity? For research purposes, you could put it in the reference field, but I would be tempted to put it in the bank field before I set up a 3rd party check writer attribute field to add another column to the batch entry process. If your system is flexible, there are a variety of ways to conquer this. Blackbaud usually just advises to be consistent and make sure everyone trained clearly understands the process.

Steve Townsend

I understand the difference between the DAF and the third-party organization but I'm still not clear on the advice here. The article says they recommend recording the transaction on the record of the donor-advised fund (e.g. Fidelity). Is Fidelity not, however, the third-party organization?

AnnMarie Schell

Yes, you're right, that's why I said "good catch," because I believe based on the full context of their article, it should have said (e.g., The John and Mary Black Fund). Fidelity is the 3rd party organization, not the DAF. It was somewhat of a typo if you will, but they should have caught it before publishing. Nevertheless, they do appear to be very reputable and on target!

JoAnn Strommen

Kenneth Hontz‍, as you might be picking up there may not be consensus on this. Some of the differences have to do with perspective of is db about accounting or donors.

Bill Connors‍, are you able to share your point of view? Had you book "Fundraising with Raiser's Edge" and would quote but it remained in my office at previous org.

Steve Townsend

Right, got it - yes, the wording of the article on that point is somewhat unclear, I would have interpreted it that one should be crediting Fidelity.

Bill Connors

JoAnn Strommen:
Kenneth Hontz‍, as you might be picking up there may not be consensus on this. Some of the differences have to do with perspective of is db about accounting or donors.

Bill Connors‍, are you able to share your point of view? Had you book "Fundraising with Raiser's Edge" and would quote but it remained in my office at previous org.

JoAnn, my thoughts on the matter are best expressed in my 2019 bbcon presentation on the matter rather than in the book. I wish we had a forum where we could get this aired once and for all, but as this keeps coming up and the same arguments are rehashed every time, for now I'll just stand by what I said in the bbcon presentation. Thanks for asking, however.

Diana Gray

Because everyone agrees that consistency is tantamount to having workable data, my question is,: Once we've decided the best approach to recording these gifts, how do we make the change?


My organization has years of data where gifts were hard-credited to the 3rd party disbursers ie Fidelity and Soft-credited to the donor/DAF. This concept of doing it differently is an eye-opener, and I agree, that RE is a Fundraiser's program and should function in a way that best enables fundraising.


Has anyone globally switched hard-credits and soft-credits? Is this even possible on a global level?


Thanks everyone,

Diana Gray

AnnMarie Schell

So it's really whatever your organization decides. I guess my experiences have all just coincidentally been to hard credit the DAF and soft credit the individual advising the fund's donation to us. There are also legal differences between Foundations and DAFs, but my experiences again have treated them similarly, so I found it interesting under your take that you treated them differently. "If it’s the Gates Foundation, enter the gift into a record of that name and consider soft or Other credit based on your other uses of soft credit." Again, what's important is consistency and clear communication of the process for those trained in gift entry, but I really like the fact that you drive home the point of our ownership of the database and it's use primarily for fundraising.


Thanks for your help!

Steve Townsend

Has anyone globally switched hard-credits and soft-credits? Is this even possible on a global level?

Our plan for the next fiscal year is to change our procedures going forward, we don't intend to change the historical data.

Diana Gray

Thanks for the response. If you don't change historical gifts, isn't that just another reporting headache?

Steve Townsend

Diana Gray:

Thanks for the response. If you don't change historical gifts, isn't that just another reporting headache?

I'm not yet clear on how it will work, I think there is a workaround when it comes to reporting but I don't know yet.

Jenny Marquardt

Yes, it would be a problem for me. I am changing the way we do ours at my new organization. I will have to pull both ways until they are all corrected.

Diana Gray

OK! If you develop a great report that will combine the new approach (hard credit going to the advisor and soft credit going to the check disbursor) and the historical (hard credit going to check disbursor and soft credit to advisor), please share!

keith kerber

Steve Townsend‍ We have used the BWF guideline at my organization. I agree with the article: the DAF is Fidelity Charitable, Schwaab Charitable, Vanguard Charitable, your local community foundation, etc. The IRS refers to these as the Sponsoring Organization (SO) or Aggregate DAF (ADAF). However you refer to it the money donated to Fidelity Charitable et.al. is owned and controled by that entitiy which is organized as a 501c3. These Sponsoring Organizations typically allow the donor some fom of influence over how the investment is managed and distributed, thus allowing said donor to make a 'recomendation to disburse X amount to another charitable organizations. Ultimately the SO/ADAF decides whether or not to execute the donor's recommendation. I opened a small DAF through Fidelity and the Terms and Agreement includes required acknowledgement that Fidelity basically owes you nothing in the end. HOwever, because SOs/ADAFs like Fidelity Charitable have so much money under investment and, management and annual fees make money for Fidelity and they are so trusted, they are likely to follow donor recomendations unless the org recommended for a grant is not verifiably a 501C3. So, we hard credit the Fidelity Charitables and soft credit the individual who recommended the grant (if provided). If the individual has named their DAF with a unique name we record that in the individuals record and try to include the name of their fund in thank you notes and annual giving summar statements. I feel like if the donor gave a name to their fund it may be important to them and important we recognize that.

keith kerber

Tim Clark‍ Sounds like you've found a method that works for you. What do you with the occasional DAF gift that is anonymous (assuming you've recieved a few)?