In November of last year, the National Philanthropic Trust released their 2021 report on donor-advised funds, or DAFs. The growth of these giving vehicles is staggering.

DAFs now take in a fifth of all individual giving in the US and have overtaken foundations as the favorite charities of the wealthy.

Observe their growth in popularity since 2007:

According to the NPT report, DAF assets grew by a whopping 40% from 2020 to 2021. There is now $234 billion sitting in the coffers of DAFs, up from $167 the previous year.

And in 2021, for the first time, DAFs received more contributions than private foundations did. Donors gave $73 billion to DAFs versus $50 billion to private foundations.

Giving USA, the gold standard of reporting on national charitable giving, said that individuals donated over $326 billion to charity in 2021. This means that the $73 billion that DAFs received made up a full 22 percent of individual giving that year.

Commercial DAF sponsors (like Fidelity Charitable and Schwab Charitable) totally dominate the field. Commercial DAFs took in more contributions in 2021 ($52 billion) than *all* DAFs did the year before ($50 billion).

We need to fix the charitable system to make sure DAFs are publicly accountable.

The problem is that once donations go into a DAF, there is no legal requirement that they ever come back out to working charities. Donors get publicly-subsidized tax deductions when they donate — but the money can just sit in the account, earning income for portfolio managers, forever.

DAF sponsors say payout is high, but they tend to only report the aggregate payout of all their accounts mashed together. There is no way to know whether any individual DAF account is paying out anything at all. We need to fix the charitable system to correct this.