April 22, 2019 Supporting Manhattan-area entrepreneurs, businesses, events

Getting Smart About Generosity with Donor Advised Funds

Sponsored by Greater Manhattan Community Foundation

Photo by Doug Barrett

In 2017, Americans gave $2,270 per household or $880 per person to charity, according to Giving USA. Increasingly, many of those givers want to give strategically and for the long-term. Apart from occasional spontaneous giving in small amounts, most donors tend to develop patterns of giving that revolve around a mission, an objective or a system of belief that they wish to advance.

Maximizing the impact of planned giving can be accomplished through a Donor Advised Fund (DAF). The Greater Manhattan Community Foundation (GMCF), the tax-exempt public charity that has served the Manhattan area for 20 years, defines DAFs as “charitable funds for those seeking active involvement in grantmaking. Fundholders and their successors, if desired, advise or recommend grants from their fund to support nonprofit organizations.” Since 2012, the number of individual DAFs have increased at a rate of over 6 percent per year, according to the National Philanthropic Trust, but many still wonder what a DAF is, how it works, and whether it is easy for the giver to use.

Photo by Doug Barrett

A DAF is a philanthropic account established within a public charity, much like a savings account at a bank. It allows donors to make contributions, receive an immediate tax deduction and then self-recommend grants from the account over time to charities of their choice. This allows individuals to annually plan and budget for their giving and tax benefits. It also removes the pressure on the giver to fully distribute their gifts before year-end in order to gain the tax deduction.

Convenience is advantageous, yet there is an even better reason to utilize a DAF as a personal charitable savings account: by allowing givers to pool funds without losing the short-term tax benefits, givers can see their giving safely invested for growth over time. In this way, donations can continue to do good for many years, even indefinitely, after the givers are gone.

In the past 20 years, over 110 DAFs have been established within the GMCF, and each DAF awards grants to organizations and programs that enhance the quality of life in our area. The amount of money under management has grown to around $80 million with more than $17 million in grants and distributions deployed to improve lives. “There were two significant years in our timeline that helped us take major steps toward coming this far,” said Vern Henricks, GMCF president and CEO. “The alliance with and support from the Goldstein Foundation in 2011 and the Howe Family Foundation in 2013 really put us on the map among Kansas community foundations. And now, we are grateful to announce the new addition of the Butler Charitable Family Foundation.”

Photo by Doug Barrett

While GMCF’s community impact is impressive, its management efficiency should be loudly celebrated. Forbes contributor William P. Barrett wrote that charitable management should cost no more than 25 to 30 cents for each charitable dollar collected, and the 100 largest charities in the United States average around 11 cents per dollar collected. In comparison, the GMCF spends only 6 cents to aggregate each dollar. Henricks points to the GMCF mission statement as his adopted modus operandi: “we don’t fundraise” he said, “we build relationships between donors and community needs without spending on marketing the way that fundraisers do.” Humility is admirable, but the GMCF operating template is a model that we in the community should cheer. It’s also the reason that many consider starting new DAFs with, or moving existing ones to, the GMCF to know that every dollar will be maximized toward doing good.

“Starting a DAF at the GMCF is not difficult and is much like opening an IRA,” Henricks notes. “With $10,000, a DAF can be opened with no up-front fees, which gives the donor the right to name the fund, gain professional management to help it grow, and recommend grants at any time to any qualified charity in the U.S. with checks issued in 2 to 3 days.” The GMCF notes on its website that DAFs help simplify, consolidate and establish a tradition of charitable giving among members of a family. For those who desire anonymity (giving without trying to gain personal recognition or public credit), a DAF can act as a proxy that benefits the charity receiving a grant without the charity knowing the giver.

Some high-net-worth families may opt to start and fund their own private foundations. While there are definitely advantages to doing this, including ultimate decision-making authority and control, most will find the startup, ongoing operational expenses and management time needed to run one’s own foundation, not to mention the regulatory and tax considerations, make the DAF at a community foundation a far more attractive and efficient option. In exchange for a small management fee, typically around 1 percent annually of the value of the account, donors can enjoy many of the benefits of a private foundation, without the management costs. Further, as the amount of assets managed by GMCF grows, its cost efficiency will increase so it intends to continuously reduce fees in the future.

Henricks said that additional benefits of creating a DAF include professional assistance finding charities that align with one’s interests while exploring different ways of giving. DAF account holders are able to work through their estate or financial planner, who will manage the DAFs for them. Some may appreciate having someone else handle all of the paperwork so they can simply enjoy the giving.

Photo by Doug Barrett

Perhaps the most personally satisfying benefit of opening a fund at a community foundation like the GMCF is the connection enjoyed with the larger community of local givers. Account holders have the opportunity to become more aware of the specific needs being met in the area. They can learn about the many ways that others are working to significantly improve lives by addressing these needs. DAF owners often serve on GMCF committees or its various programs and affiliated organizations. The current donor list numbers over 1,400 individuals and businesses. In only 20 years, it has launched dozens of defined-interest programs and named funds to address identified community needs.

A few of the many distinct programs that set the GMCF apart from others are featured on its densely packed annual calendar. August starts the annual grant cycle of Youth Impacting Community, which donated to 11 organizations in 2018. The uniqueness of this program is its board of high school students who investigate worthy non-profits impacting youth of all ages and decide on grant awards. Program coordinator Kim McAtee proudly reported that “these students can see the needs in the community and help to address them.”

In November, there’s the Lingerie Luncheon. Tara Claycamp explained how this annual event benefits several area women’s charities with attendees donating underwear, socks, and clothing for children to help those seeking refuge with nothing but the clothes on their backs. “I think the most rewarding thing for me was starting with a group of women 12 years ago who wanted to ‘be the change.’” Today, Tara is one of 700 Fairy Godmothers who anonymously help other women with critical needs like home repairs and transportation. In the last year, they have granted more than $56,000 to help 110 families in need and stretched those dollars further via local small business partnerships. In 2018, they also started the Hand Up Grant (HUG) program that provides up to $3,000 to take recipients beyond immediate needs and pay for additional education in order to break the poverty cycle.

Throughout the year, a small group of men called The Guardians help other men “live with hope and dignity,” as group leader Mark Hatesohl puts it, “by paying for essential needs that fill gaps when no other organization can.” With a budget of around $3,000 per month, The Guardians have purchased work tools for men to maintain employment, provided dental assistance, and even paid for pest extermination to allow a man’s children to be able to visit him in his home.

Among the best-known programs at the GMCF and affiliated foundations across area communities are the annual Match Day events, with at least six communities holding their own branded days. In May, there’s Marysville’s “Pony Up,” September brings Clay Center’s “Gather For Good,” Sabetha hosts “Give to Grow” in November, and then there is the perennial “Grow Green” every April in Manhattan. Doniphan County and Frankfort have just created their annual Match Day drives. These Match Days now bring in over one million additional dollars in combined donations annually and individual givers are able to designate donations they make day-of to any of a number of funds listed within each community.

On March 18, 2019, the GMCF will mark its 20th anniversary during the annual Community Foundation Awards. At the Community Foundation Awards, Flint Hills residents will celebrate the foresight of a local group of philanthropists who felt it was time for a growing region to facilitate residents’ desire to support charities here at home while also building a community investment nest egg for the future. What began as the Manhattan Community Foundation has since expanded, adding “Greater” to the name in 2008 to recognize the generosity and help of nine additional surrounding communities: Blue Rapids, Clay Center, Doniphan County, Dover, Frankfort, Junction City, Marysville, Sabetha and Wamego.

All givers who are interested to learn more about DAFs can find additional advice and assistance from their legal estate planner, accountant, financial advisor, or by scheduling a meeting with the GMCF or an affiliated foundation. Like retirement planning, the sooner an individual gets started with long-term planning for their charitable giving, the more they can enjoy the compounding effect, in this case, growing the long-range impact of their giving as a lasting legacy.

Jeff Koenig is the owner of Open 4 Business, a business and entrepreneurial consultancy.

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