DONOR-ADVISED FUNDS

UNDERSTANDING DONOR-ADVISED FUNDS

DFAs are becoming a popular way of giving, but come with concerns

ALBERT VAN SANTVOORT

The 21st century has seen boundless change across almost every industry, and philanthropy is no exception.

Over the past five years, an emerging trend has introduced a different structure for philanthropic organizations, one that diverges from traditional charities and private family foundations.

Instead of establishing personal foundations like the Bill & Melinda Gates Foundation, or donating to established charities, both donors and corporations are increasingly turning to donor-advised funds (DAFs).

DAFs supply the infrastructure needed to run a philanthropic organization. They provide donors with administrative convenience, cost savings and immediate tax advantages. Meanwhile, donors maintain advisory privileges as to what charitable causes will receive their funding. Donations can be invested through a DAF to generate investment income on a tax-free basis, and these funds can subsequently be given to various

charitable endeavours over a period of time.

Despite the recent popularity of DAFs, they are not new to the philanthropic community. The Vancouver Foundation believes it created Canada’s first DAF in 1968. DAFs have, however, increased in popularity and have seen significant growth in recent years. According to a report from Investor Economics, the annual growth rate for DAFs in Canada has been between 10% and 12% since 2016.

This is an aggressive growth rate, according to Leann Burton, director for partnership development with MakeWay, a foundation that supports DAFs geared toward conservation and environmental sustainability.

DAF organizations, like the Vancouver Foundation and MakeWay, help establish, manage and operate funds, while donors help direct funds to causes that are important to them. The Vancouver Foundation is a community foundation that supports charities across B.C., and has the infrastructure to help manage over 2,000 different funds, according to Craig Hikida, the Vancouver Foundation’s vice-president of donor services. “Those who establish the funds still have the opportunity to support their favourite charities of choice, but we take care of all that messy stuff in the background,” says Hikida. “We will do the investment management, the tax receipts and [deal with] any CRA [Canada Revenue Agency] or legal issues. All of those things we have the infrastructure here to take care of. So people find us a more convenient way to have that private family foundation control without having to do all that administration.”

Like in any business, there are economies of scale that can be achieved. Hikida believes that the Vancouver Foundation is able to provide administrative support on a more cost-effective basis.

DAFs also allow for unique alternatives as to who influences the ultimate use of donated funds. Some organizations and corporations have employee-advised DAFs where corporate donations are aligned with employees’ charitable priorities. The Quebec-based Trottier Family Foundation created a staff DAF program, where each individual employee controls $5,000 of the program’s donations annually. Through a DAF operated by MakeWay, each employee can direct $5,000 to a charity of their choice, thereby giving the family foundation the ability to democratize their corporate giving.

However, DAFs may not be the best solution for all corporate giving. Even industry proponents and insiders have concerns about some of the trends within this type of investing. While corporate DAFs are a good way to encourage and facilitate employee donations, Hikida is concerned that corporate DAFs can redirect funds away from traditional charities, jeopardizing the support they provide and that many have come to rely on.

There is also concern both within and outside the industry regarding current tax implications. Contributions to DAFs can be immediately written off, despite the fact that the money is invested and could take considerable time before it makes its way into the hands of charities and the communities they serve. Hikida says this is an issue, and it is why the Vancouver Foundation has implemented the requirement that all funds under its control must donate to their designated charities on an annual basis, so as to avoid the warehousing of funds. “While it is wonderful that we see more charitable capital going into these funds, we don’t see the same rate of capital going out to these communities,” says Burton. “There is a social concern that the capital has tax benefits to the individuals, but society has not yet benefited because [the donation] has not made its Craig Hikida is the Vancouver way out to communities.” Foundation’s vice-president Corporate charitable giving comes with both tax and public relations benefits, but a corporate DAF may be structured of donor services • VANCOUVER to provide benefits to a corporation under the appearance of charitable giving. There has been public concern that Master-FOUNDATION card is using its DAF funds to invest in Mastercard stock, and bolster its stock value. And there is concern that, as more and more corporations move into DAFs, they will be able to take advantage of similar benefits while also enjoying tax write offs. Burton also highlights that there is some opaqueness surrounding the investments that DAFs make, and that those investments might ultimately undermine the causes those charities are fighting for. She says that many of the investments DAFs make are in safe, traditional industries. A DAF with an environmental focus that invests in heavy-emitting industries could ultimately be hurting its own cause.

Leann Burton is director of partnership development at MakeWay •

MAKEWAY

Ronald McDonald House BC and Yukon keeps families close when it matters most

WHAT WE DO

When the unthinkable happens and a family is uprooted for their child’s critical medical treatment, there are many barriers they must overcome to stay together. Hotel stays are expensive, siblings need to be cared for, and staying in the hospital long term is unsustainable. That’s where Ronald McDonald House BC and Yukon (RMH BC) comes in—providing accommodation, comfort, compassion, and a sense of community to these families in need.

Families who depend on RMH BC often arrive in Vancouver on short notice, not knowing how long they will need to stay: weeks, months, or even years. At the House, families can stay together under the same roof with their sick child. They can enjoy everyday family moments like a home-cooked meal, playing catch outside, and snuggling up for superhero movie night. Most importantly, they can focus on helping their child to heal.

Staying at RMH BC also affects families long after their stay. A study by RBC found that families with a sick child experience a catastrophic financial burden which takes an estimated 10 – 12 years to recover from. By staying at RMH BC, they can save $3000 – $6000 per month, making them stronger once they return home.

HOW YOU CAN HELP

RMH BC depends on generous community supporters like you to provide a home away from home for families when it matters most.

Throughout the COVID-19 pandemic, we have stayed open as an essential service for families with seriously ill children when treatment can’t wait – and you make sure that we are here 365 days a year for these families in their time of need.

You can make a difference today by making a donation, joining our Housewarmers monthly giving club, or taking part in our Light the House community tree campaign. We also offer many corporate engagement opportunities that can take place from a safe physical distance.

Find out more at: rmhbc.ca 604-736-2957 info@rmhbc.ca

CHAMPIONS WANTED

When the unthinkable happens and a family is uprooted for their child’s critical medical treatment, there are many barriers they must overcome to stay together. Hotel stays are expensive, siblings need to be cared for, and staying in the hospital long term is unsustainable.

Ronald McDonald House BC and Yukon depends on community supporters like you to keep families close when it matters most.

Give today or get involved: www.rmhbc.ca

Surrey Hospitals Foundation – together, we are unstoppable

WHAT WE DO

Surrey Hospitals Foundation is unstoppable in their determination to inspire and encourage the community to support innovative medicine and lifechanging health care, raising over $170 million since they were founded in 1992.

Health care services in Surrey are primarily financed by government and through funds raised by Surrey Hospitals Foundation. In fact, the Foundation is the largest non-government funder of health care for families in Surrey and the surrounding communities. The Foundation’s work is essential, and critical to the health of 1.9 million residents who reside in the Fraser Health region.

Thanks to the generosity of community donors, Surrey Hospitals Foundation is able to help fund every one of the region’s major health facilities including Surrey Memorial Hospital and the Jim Pattison Outpatient Care and Surgery Centre. They also support and fund the Czorny Alzheimer Centre, along with many specialized community programs for newborns, children, adults and seniors. The Surrey health care campus provides care for the whole family, from birth to end-of-life. Because of past Foundation investments, the hospitals are able to recruit top medical professionals, hire the very best support staff, and purchase and operate state-of-the-art diagnostic and treatment equipment.

In the past 10 years, Surrey Hospitals Foundation donors have supported important projects, such as: opening of the Jim Pattison Outpatient Care and Surgery Centre, a first of its kind in BC; Emergency Department, one of only two in the province, at Surrey Memorial Hospital; improved space for patient care in the new 8-story Surrey Memorial Hospital Critical Care Tower, a $512 million redevelopment and expansion project; patients at Czorny Alzheimer Centre, a 72bed specialized, safe, comfortable home for dementia patients; Health Centre at Surrey Memorial Hospital. This renovation increased capacity in response to a growing population in Surrey and Fraser Health; Surrey Memorial Hospital, Fraser Health’s busiest surgical centre; response, raising funds to purchase urgently-needed equipment as requested by the hospital teams.

To learn more about Surrey Hospitals Foundation, and their current fundraising campaigns, please visit SurreyHospitalsFoundation.com.