There are hundreds of donor advised funds registered as charities in Canada and thousands in the United States.
In a nutshell, these funds receive capital from donors and invest those funds. Conceptually, each specific fund is thought of (by donors anyway) as separate but the fact of the matter is that the funds belong to the charity, not a sub-part of the organization.
Now the key element of these funds is that the charity consults (usually annually) with the donor as to where the income from each “fund” is to be allocated. In the overall there are usually some limitations. Normally in Canada the recipient of he income must be a qualified donee but there may be much more specific limitations.
The operative word is that the donor’s “advise” the organization as to where the income should go. But it must be stressed that advice is just that, advice and the donor’s wishes need not be followed. It is the Board of the foundation which makes the decision as to distributions.
Of course, it would be a rare thing for the foundation to ignore the advice of the donor. If that were to happen, it would put the whole concept at risk of imploding given that the operations are based to a great extent on trust. The odd case in Canada which we have run into where a donor’s wishes were not followed all involved a request to pay funds to an organization which was not a qualified donee. In each case, an explanation to the donor satisfied them and a new beneficiary was selected.
(We could conceive of situations where the Foundation refused to agree to a blatantly political transfer or one which might be considered contrary to public policy.)
But a recent article in the Non-Profit Quarterly (NPQ) gave two American examples, each similar to the other where the Foundation refused to honour the donor’s advice because of he Foundation Board’s political views.
The article cited one case where the donor was taken by surprise when the Jewish Community Foundation of L.A. (JCFLA), where she opened her donor-advised fund with her husband, Joshua, informed her that the donation she had requested to IfNotNow would not be made. IfNotNow is a group made up largely of younger Jews whose positions on the Israeli-Palestinian conflict are controversial.
The donor, a JCFLA trustee, saying the couple has used the fund to donate to a number of progressive Jewish nonprofits, like the New Israel Fund, as well as to non-Jewish groups. Over the five years since they established the fund, it has held anywhere from $100,000 to $1 million at a time. But in September, when she first tried to donate to IfNotNow by filling out the designated online form, she received a phone call from senior vice president saying the foundation was looking into IfNotNow’s nonprofit status. In early October, she was told at a face-to-face meeting with the JCFLA President and board chair they wouldn’t make the disbursement because IfNotNow uses “disruptive tactics” and takes a stand against the organized Jewish community.
A statement that confirmed the decision explained, “The Foundation was being asked to act as the vehicle to provide support for an organization that is hostile to established Jewish institutions, indirectly including The Foundation itself. […] We concluded that such a course of action would directly conflict with our core values, requiring us to deny this recommendation.”
The Foundation learned that [IfNotNow] has routinely included among the targets of its hostile activities such highly regarded Jewish organizations as the Jewish Federations of North America, with which The Foundation is affiliated, the Anti-Defamation League and Hillel International. […] Donors have the right to recommend grants, but the charitable resources contributed by the donor legally become assets of The Foundation.
The NPQ article continued:
“Earlier in 2016 Michael Bien, a San Francisco-based civil rights lawyer, had a similar experience at the Jewish Community Federation & Endowment Fund of San Francisco, the Peninsula, Marin and Sonoma Counties, where his donor-advised fund is housed. He had tried to donate to two organizations: the Jewish Voice for Peace and the American Friends Service Committee. He says he was aware of the Federation’s policies against engaging with organizations “undermining the legitimacy of Israel…including through participation in the boycott, divestment and sanctions (BDS)” but “I never assumed that they would apply to my donor-advised fund.”
At the time, Federation CEO Danny Grossman defended the action, writing, “The funding guidelines that we adopted several years ago are our community’s sincere and hard-won consensus on ensuring a safe space for a broad range of responsible views from left to right.”
Bien has since moved his money to Morgan Stanley. The JCFLA donor has not decided whether or not to move her fund. One would assume that donor education more than this kind of abrupt intervention by nonprofits managing DAFs would go further in attracting progressive Jews, particularly in the future.”
We think that this sort of story would be rare in Canada but not impossible if the Foundation in question has a particular religious or ethnic orientation and hat members of the community have differing views on political issues. We concur that donor education is essential.