DAF Donations

Michael — these are excellent questions to be asking.

There are a few different schools of thought on this, and the most important thing is that your organization develops a policy, documents it, and applies it consistently.

One resource that you may find helpful is @Bill Connors' bbcon presentation from a few years back. Tagging him here so he can share any updated perspectives.

In my own work, I’ve used both models:
• hard crediting the donor and soft crediting the DAF, and
• hard crediting the DAF and soft crediting the donors.
There are pros and cons to each approach.

Generally speaking, my preference is to hard credit the donor, soft credit the DAF, and then use gift subtypes, gift codes, or attributes to ensure I can report accurately on DAF giving while still receipting and acknowledging appropriately.

Since you’re currently hard crediting the donor, my recommendation — without knowing more about your internal reporting needs — would be to continue with that model and make sure you’re soft crediting and/or using subtypes, gift codes, or attributes to capture any additional information required for reporting.

Hi! We enter the gift on the donor record and use 'other' as the gift type. Gift type 'other' is only used for DAF gifts. We add an attribute to this gift record with the DAF Company details. We created a gift attribute and under Category section we called this 'alternate payment'. The description section is a table where you can choose or add the DAF company name. This way we only have one record of the donation. We can find the DAF company with an easy query. You could also enter the specific fund name in the comments section. I hope this helps.

I recommend that you take the course of least disruption. Since your practice is crediting the donor, I'd stay the course and leverage attributes as others have suggested. What you don't what to do is swing the other direction and have a reporting period where gifts before this date were credited to the donor and gifts after were credited to the DAF. This makes for labor intensive reporting for five-ish years depending on how many years your board/annual/monthly reports include. And if the person who understand how to do the reporting leaves and there is no succession plan with the institutional knowledge to generate the reports, you will find yourself with a staffing issue as nobody will want to stay in the role for long.

I do think if you aren't going to hard credit the individual then it makes sense to create DAF account records. Plenty of benefits I've found with doing that.

1. Automatic soft credit
2. Ability to assign fundraiser (usually as a trailing solicitor type when the individual is assigned)
3. Easy receipting with a proper letter type/template
4. Less confusing for staff - instead of looking at tons of gifts from different accounts on the one foundation record
5. Give them a DAF constituent code to easily exclude or include in reports, queries, etc.
6. VSE asks you to report on DAFs by the individual accounts

I've seen both. A major - but often underappreciated - difficulty with applying the gift to the DAF record is if you ever need to do a data migration. The soft credit connection often doesn't transfer to a new system, and then there is no way to connect the gift back to its donor.

While legally and financially, the funds do belong to the DAF fund, it's important to also remember that our job is in constituent relationship management. Recording to the donor record better facilitates relationship management because it improves functionality with donor giving levels, next ask amount formulas, historical attribution, and forward planning for potential data migrations, exports, and inter-organizational collaboration. Like others, we use the gift subtype to document its DAF source, and we assign a $0 receipt amount to eliminate any potential double-deduction issues.

@Penelope Saruwatari - technically, according to the legal rules for DAFs, they can't be used to pay donor pledges. See this article by the National Philanthropic Trust for a good explanation: https://www.nptrust.org/what-is-a-donor-advised-fund/grantmaking-rules/

To answer the original question: We are a school and follow CASE Global Reporting Standards, which say that the hard credit goes to the entity with ownership of the money. In the case of DAFs, this is the foundation that houses the DAF for the donor, since they have already given the donor a tax receipt for their donation. So we hard credit the Foundation and soft credit the donor with a "Reference" naming the individual DAF. We then pull all these fields into our acknowledgement letter so it is clear where the money came from. Example: "Thank you for your gift of $xx from the [DAF name] through [Foundation name]"

We also have set up a gift attribute called "Payment Type" where we can indicate it was a DAF payment, and then we can pull reports on it to see which donors use DAFs for specific solicitations.

I feel like this may be one of the top 10 most controversial topic in database management! The good news is unless you're part of a group that does have specific rules, there really isn't a "right" answer. No matter who you decide to hard credit or soft credit, just be sure you are consistent and you document your process. (And yes, be sure you're not including the donations in any tax receipting.)

I agree with Bill Connors that this has been one of the hardest topics for many years!

For us, we process DAF gifts as organization records rather than directly on the individual's record. This allows us to capture the exact name of the DAF fund and track the true source of the appeal, rather than coding the gift with a generic DAF appeal.

This method has been working well for us. All of the DAF gifts are in organization records tagging it with a primary Constituency Code of “Individual” and “Donor-Advised Fund” as a secondary code, so it gets counted as Individual records on reports. We link DAF record to the individual’s record; we configured the system to automatically soft credit the gift from the DAF’s record to the individual's record. This best practice ensures we don't lose the individual donor's history while accurately reflecting where the money legally originated.

We do this primarily for these reasons:

1. A single individual donor may hold multiple Donor Advised Funds (DAFs). By linking the gift to a specific, unique DAF fund record, we avoid confusion if that same donor makes subsequent grants from a different fund.
2. Rather than using a generic "DAF appeal" code, we prefer to track the actual source of the appeal (e.g., a specific direct mail piece) that triggered the grant recommendation.
3. We want to track the exact, official name of the recommending DAF fund for proper recognition and stewardship.
4. Giving the hard credit to the DAF record satisfies finance reports and align with IRS regulations, as the legal donor of the record is the sponsoring foundation.

By linking the DAF fund record back to the individual donor's personal profile, we can set up the system to automatically soft credit the gift to the individual. This ensures the donor's personal giving history remains accurate and they receive proper personal recognition without distorting our hard-credit revenue reporting.

We sometimes do what Joe Moretti mentioned above. You have the option in Raiser’s Edge on choosing whether to credit soft credits to the individual or both, but you need to be careful when choosing both especially for revenue reports. This option can easily lead to double-counting. It’s ideal for recognition, not for financial revenue totals.

I love hearing what others are doing!