Existing Pledges & Donor Advised Funds

Claire Sherman

Hi,

I couldn't seem to find an existing thread that addresses this, but if I missed it and someone can point me in that direction, that would be great! I've only been at my organization for 4 months, I'm new to Altru…

Since donor advised fund money can't technically be used to pay off a pledge, what do others do when, for example, there's an open pledge on a board member's record, then we receive a check from a donor advised fund linked to that board member, and we know that the board member intends for us to recognize this money as fulfillment or installment on their open pledge? So far, I've had two instances of this come up and I have:

1. added the gift as a payment to the DAF organization record with soft credits to the appropriate constituent(s); added an attribute with more contribution details
2. Wrote off the open pledges, added an attribute explaining that the pledge was paid by another source, etc etc.

So, ultimately, the board members' constituent record shows they have that pledge write off (with attribute listing details), and under Revenue, we see the DAF contribution under their Recognition History.

Thanks in advance to anyone with some insights!

Chris Nungesser

Hi @Claire Sherman!

That's a good question. The part about whether a donor-advised fund gift can used to pay off a pledge is interesting. I feel like the guidance in this area could be better.

It appears as if there are some situations when a DAF gift can be applied to a pledge. One key point, it seems, is whether or not the pledge is legally enforceable. If the pledge is legally enforceable (that it represents a legal contract and you could take the donor to court should they fail to pay the pledge), then the DAF gift cannot be applied to a pledge. That legally-enforceable point really seems critical. But there are a couple of other rules. One is about benefits the donor might receive (which is, basically, that they can't receive anything more than “incidental benefit”). And, apparently, they also can't reference the pledge when making the DAF gift, which, to me, is just silly. Like it's cool as long as we all pretend the pledge doesn't exist. Maybe someone else gets that last point. Anyway, and maybe you've already done this, I'd find out whether your pledges are legally enforceable and I might also discuss as a team whether you want your pledges to be legally enforceable. My organization has chosen for our pledges to not be legally enforceable. As a result, we feel like we are still on the right side of the rules/laws when we apply DAF gifts to pledges.

So in Altru, we enter the DAF gift on the donor-advised fund's record. We connect it to the pledge/commitment in the payment window. And then we give the donor Recognition Credit for the gift.

I was thinking about the Write Off idea you suggested. That's an interesting way around the issue. If it were me, I would touch base with my financial auditor to see how they felt about that. If they are on-board, then that might be a solution. But I would just want to be in line with the auditor's advice.

Here are two links to web pages that discuss the rules for whether you can apply a DAF gift to a pledge:

• Article from National Philanthropic Trust
  
• Article from Fidelity Charitable