This month in DAFinitively Speaking, we have an interview with Anna Habben and Kendra Stone, the co-authors of a new report, “Common Ethical Concerns About Donor Advised Funds and a Strategy for Addressing Them.” Published through Brigham Young University, they worked with Dr. H. Daniel Heist, professor at the George W. Romney Institute for Public Service and Ethics to dive deeper into some of the more common recent concerns about donor advised funds as they grow in popularity. By using theoretical research against philanthropic trends, what did they uncover? Did the results surprise them? Our discussion is below; enjoy!
Note: some responses have been edited for clarity.
Can you both discuss your backgrounds and what originally brought you to the world of nonprofits? Anna, I saw that you have seen both sides of fundraising as a grant writer and fundraiser and now as a consultant and researcher. What do you think that your experience has brought to your research? How did you join the development sphere?
AH: I have worked exclusively in the nonprofit sector since my first job out of college. I have always been interested in K-12 education policy, so I initially worked on the policy side as a research assistant for a small education policy think-tank in DC. [Since then] I’ve primarily focused on grant writing and campaign management. Over the years, I’ve developed an interest in nonprofit strategic planning, so I returned to school in 2020 to get my MPA.
I joined the development world when I was working at the University of Utah. I feel like it has given me a strong foundation for understanding nonprofits from both sides of the equation. As a fundraiser, you need to have a solid grasp of what motivates the funders while also understanding what an organization has to offer the community that it serves. It’s been great practice in looking at organizational operations from a variety of angles. Having the fundraiser’s perspective was especially helpful for this paper. I can understand why some of the mechanics of DAFs are frustrating to organizations seeking funding, but I also see their potential to really drive impact.
KS: My experience with nonprofits is primarily rooted in volunteer work. I’ve always been drawn to service and from a young age felt a desire to support organizations that I saw were doing good. As a volunteer I have largely worked with education nonprofits, serving in various roles such as program management, financial management, event planning, fundraising, etc. I have a master’s degree in public administration from Brigham Young University, a program that focuses a lot on nonprofits. As a graduate student I worked as a research assistant to Dan Heist, one of the nation’s leading researchers on donor advised funds and published original research with him on inactive and endowed DAFs.
What inspired the topic of your paper?
KS: The final state of this paper is rather different from where it started. It really is more of a thought piece than it is “research.” Our research advisor, Dan Heist, was asked to publish a new paper and he invited Anna and me to co-author it with him. Over time, though, [our conversations] led to internal discussions about DAFs from various ethical perspectives and the paper eventually became an attempt to offer practical solutions to common questions and concerns about DAFs through the lens of different ethical theories.
AH: Through our conversations and writing sessions, we often felt it was difficult to analyze the topic without making significant speculations about DAF donor intentions and the challenges that will be most pressing for society in the future. The Ethics Toolkit was a framework that was introduced to us in our MPA program. As we discussed the potential virtues and drawbacks of DAFs, we found ourselves naturally turning to [it] to help us explore the different perspectives. We hope our analysis will be useful to others and encourage deeper thinking about the many facets of DAFs and their implications and impact.
Would you be willing to share your biggest “take away” or “aha” moment from your research?
AH: When I was analyzing the issue of transparency with DAFs, I spent a lot of time thinking about how some values can be in opposition to one another if we aren’t careful about how we apply them. That can be true of the value of transparency and the value of protecting one’s right to privacy. Both values are important, but I realized that when you focus on one value too much without acknowledging its impact on the other, you limit your understanding of the full picture. In some of the articles I read as we prepared to write this paper, I noticed that people quickly diminish concerns about DAFs (and vice versa) instead of really addressing the arguments for or against them. I think that’s counterproductive to finding the most impactful ways to utilize DAFs.
KS: I would say that the biggest takeaway for me was not something new necessarily, but a reinforcement of the fact that one of the incredible benefits of DAFs is the flexibility and customization they allow donors and nonprofits. We argue in this paper that these “customizations,” and all philanthropic actions and policies really, should be rooted in a deliberate, determined ethical framework.
Why do you think that the ethical concerns around DAFs have arisen in the first place? Is there a historical aspect to them?
AH: There may be a historical aspect to the concerns, but I haven’t done enough research to really speak to that. I do think that it’s human nature to be skeptical of new things, especially new things that have to do with a lot of money! I just think that scares people. Scarcity is a reality for so many individuals and organizations that to have a new system where LOTS of money exists for a prescribed purpose but without the usual channels of oversight just makes people uneasy until they can look at the data and see how this money is being used. And citing “ethics” is what we tend to turn to when we don’t fully understand something.
KS: I think that many ethical concerns about DAFs have arisen simply because the use of DAFs has increased so much in recent years and professionals, and certainly the public, are still discovering the implications of that and how to best manage these funds. That process has been difficult in part because DAFs afford so much anonymity (which is not necessarily a bad thing, but it does have implications for this question) and also because substantive account-level research is still forthcoming. I also think that the instinct to be cautious and even skeptical of something new can be a healthy one, especially in the public service sphere.
It’s important that DAFs, or anything else that claims to benefit vulnerable populations, go through a process of analysis, vetting, and even criticism. That process is necessary in getting a thing to reach its highest potential and maximum effectiveness. And while I absolutely believe there is need for continued improvement in the DAF space (which will come, in part, from raising concerns and asking questions about its current state) it’s also true that the more I study DAFs the more encouraged and excited I feel about them as a valuable philanthropic vehicle.
Do you think that the pending IRS legislation will help the concerns addressed in your work? Why or why not?
KS: Our paper wasn’t necessarily written with the pending legislation in mind. I hope, though, that as donors, fundraisers, or DAF sponsors read the paper, they will assess their own use of DAFs for ethical grounding and consistency. I think that the intended and ideal legislative process is one of representative legislation not initiative legislation (meaning I don’t think it should be left to legislators to initiate change). I believe that change is best effected as individuals and institutions address their most pressing concerns in ethical, consistent ways. Those methods and thought patterns then spread, ultimately being codified in our representative government.
Certainly enacting legislation is a fast way to create change, but some level of efficacy is sacrificed in the process. This is why our paper advocates so strongly for individuals and organizations to be accountable to these concerns and work to overcome them through adopting a more deliberate and purposeful ethical standard.
AH: My hope is that our work will encourage better discussion about what’s at stake in respect to regulating DAFs. Leaning hard into some values through policy can weaken how we adhere to others. I would hope that legislators would be mindful of the broader implications of their proposed policies.
What do you think is the primary concern about DAFs? What needs to be done to address the ethical concerns that people have about DAFs?
AH: In the paper, we discuss three primary concerns that come up most often about DAFs, and rather than single out one concern, I will say that it’s my opinion that what leads to these primary concerns about DAFs, at some level, is a misunderstanding about how they work and a failure to recognize that they are already quite regulated, both by law and by the policies of most DAF sponsoring organizations.
The purpose of our paper is not to define DAFs as ethical or unethical, but rather to give readers and practitioners a tool for self-analysis to better understand the ethical implications of many perspectives. Though we do make some recommendations for donors and DAF sponsors on actions they can take to be more in line with established ethical principles, I hope that deeper, more productive exchanges about this topic moving forward will contribute to progress toward both the ethical use of DAFs and greater confidence in the role DAFs play in contributing to society.
KS: [As Anna mentioned], three of the primary concerns about DAFs [that are addressed in our paper] are the timing (and possible delay) of charitable benefits, lack of transparency and accountability, and measuring donor benefits versus public benefits. There is so much flexibility and, therefore, variability in the way people and organizations utilize DAFs and that absolutely needs to be better understood before any large-scale regulatory changes are made.
As more and more research about DAFs is published, hopefully it will alleviate some fears or misconceptions while at the same time exposing things that truly need improvement. So sponsoring, encouraging, and publishing continued research is a great way to address concerns! What we suggest and provide an outline for in this paper is for individuals and institutions to address these primary (or any other) concerns directly through an established ethical framework. Obviously not everyone agrees on what constitutes ethical behavior, but if individuals and institutions can establish what it means for them and how their use of DAFs supports those standards it can go a long way for creating understanding and common ground and changing the tone of the discussion.
What can be done to inspire more public confidence in DAFs for both donors and recipients?
AH: I hope this paper helps the public to have more confidence in DAFs…and be less skeptical of the intentions of others. When detractors make arguments about the need for greater transparency or how long funds sit in an account, they almost always come to the conclusion that the motivation to contribute to or operate a DAF is greed, and that simply isn’t the case. There are many well-intentioned and highly ethical arguments that can be made in favor of anonymous giving and letting funds build up before they are distributed to qualifying 501c3s. That said, there is a lot that donors and DAF sponsors can do (and many already are) to instill greater public confidence, and we make many of those recommendations in the paper.
KS: I think the lack of public confidence in DAFs is part of a larger societal trend. Society seems to have, in large measure, lost the ability to be critical without being scathing. All that does is degrade discussion and erode confidence. Like I said previously, being skeptical or even critical about something can bring about a lot of good. But that can’t ever happen if the initial intent is to tear the thing down. The most important thing that anyone can do right now in regards to inspiring more public confidence is to support organizations and efforts that encourage reasonable discourse. That’s why the work you’re doing at the Helen Brown Group and DAFinitive® is so important—you have a platform and you’re utilizing it in really effective ways.
The problem is just that it’s always easier to find biased information than non-biased. But there are definitely ways! If donors have questions or concerns about the way their DAF is managed, I would tell them to contact their sponsoring organization directly. Most sponsors have their policies and fees published directly on their website, but if not, you can request them by email or phone. Compare your sponsor’s policies to those you find elsewhere. Educating yourself on the facts, not on opinions, is critical.
The Donor Advised Fund Research Collaborative is a wonderful resource for DAF information and research. Read the NPT’s annual DAF report. If you volunteer or work with a nonprofit in some other capacity, ask them if they’ve ever received donations from DAFs and learn what their experience has been. If you’re considering opening a DAF, talk to others you know who engage in philanthropy and find out if they use DAFs too. Ask them about their experience. These may all seem like small, insignificant measures but broadening awareness and experience with DAFs and supporting non-biased resources can really have a positive impact.
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Anna Habben graduated from the Executive Master’s in Public Administration program at Brigham Young University in 2023. She has worked as a nonprofit development professional since 2007 in the Greater Salt Lake City area and is currently a client manager with Mighty Penguin Consulting, where she helps nonprofits increase their impact by identifying strategic approaches to achieving their missions.
Kendra Stone graduated from the Executive Master’s in Public Administration program at Brigham Young University in 2023. She has experience in nonprofit, private, and public sector financial management. She currently works for Wall Consultancy Group where she advises government clients and manages program portfolios. She previously conducted research on inactive and endowed DAFs which was published in association with the Donor Advised Fund Research Collaborative.
