To soft credit or not soft credit donor advised fund gifts

Nicole McMorrow 2 · July 2017

I came from an organization that would enter a gift in the donor advised fund constituent record and soft credit the individual donor. In the org I am in now, this is not the practice--the gift is entered directly in the individual's record. Are there any disadvantages to not doing the SC method (i.e., is there anything valuable gained by changing the procedure and having to go back a certain number of years to revise records)?

Melissa S Graves · July 2017

I woul dsearch the community for donor advised fund. This question is asked a lot and I am sure there is tons of past discussions you can read.

Ryan Hyde · July 2017

Well, there are two distinct schools of thought on this, and you've had some experience with both. And there are tradeoffs for both as well.

I'll talk about the Bill Connors philosophy of this though. He believes that you should hard credit these gifts to the constituent record directly. The reason for this is that soft credits cause difficulties when reporting becase RE eiteher counts all soft credits or doesn't count any soft credits when you query or report or export information. This isn't a problem if you only ever have one circumstance in which you do soft credits, and for most orgs, that one circumstance is spouse soft credits. So as soon as you layer in another type of soft credit, you will definitely face some difficulties in the reporting world.

The tradeoff with this method is that you cannot count these gifts as charitable contributions from the donor him/herself. This means you've got to use some method to easily distinguish these gifts from other kinds of gifts that can be counted as tax deductible charitable contributions. You can do this in one of several ways: a special attribute, a special appeal, or by using the gift type of 'other.' I personally would suggest using the gift type of 'other' for anything that isn't a tax deductible contribution because it doesn't limit you from using various appeals, and it's more in your face than a gift attribute (at the very least it's on the first tab of a gift record).

All that said, my org hard credits an org record that is tied to the donor advised fund and soft credits the donor. We make it work, but I do think it would be better to do it the other way around, but I'm not interested right now in doing all the work to clean these gifts up. Just not top priority for me.

Melissa S Graves · July 2017

I will vote no for using the gift type of "other" if you are linked to FInancial Edge or anything similar. I reserve "other" for things that are truly not gifts - not going to the GL and only count for recognition. These are charitable gifts - just not charitable from the individual - the DAF is the donor. I believe most using the Bill Connors Method (which I am sure he hates it being called that, BTW) just use a gift attribute noting who the actual donor is.

You can do this method for DAFs most easily because they do not need a gift acknowledgement (most do not want you to send a letter) and you can use a letter code to have your system spit out a nice appropriate letter (not a receipt) to the donor advisor. But note that it will not eliminate all soft credits as Family Foundations and such will need their own acknowledgement letters and should go on the org record and SC the individual (who can get their own thank you if at a different address than the foundation but it can not be a receipt).

If your new org is putting the gifts on the individual - how are they doing acknowledgements/receipts? That is the biggest challenge with the method you are using. - otherwise it can be a helpful system for most reporting.

Ryan Hyde · July 2017

That's interesting - I use 'other' for all fee-for-service payments and any united way "pledges" that get imported - basically anything that I don't want to show up on a year-end summary of charitable contributions. Some of those fee-for-service items are in fact linked to funds that do push into FE and get posted just like any gift would. Using 'other' doesn't prevent that process from working or anything.

But just like most things in RE, there's no one categorically right way to use 'other.' It's a good tool, so long as you have a clear understanding of why/how you're using it.

Denise Covington · July 2017

I like what Ryan Hyde said. We use "Other" and "Pay-Other" for all our payroll deductions. It never hits cash, so we didn't want to use "Cash" or "Pay-Cash". We then use a sub-type of Payroll Deduction with the proper GL account number.

I guess we get around the ones that we don't want to list in the Annual Report or come via our Parent Association by using 4 campaigns that are in all capital letters. Set up before I got here, but does the job just fine.

Melissa S Graves · July 2017

We use a gift subtype on pledges that are payroll deduction (edit: and their payments) to stop them from hitting cash. There are so many ways to do things.

Jen Claudy · July 2017

I prefer to enter the gift on the DAF's record, and SC to the individual(s) and, if applicable, the "parent company" of the DAF (in my case, normally The Greater Cincinnati Foundation). To me, it just keeps everything cleaner, and doesn't run the risk of someone sending something wrong. I've encountered DAF gifts that needed to SC to two different individual records and also have needed to pull a total amount received from all DAFs administered by The Greater Cincinnati Foundation during a particular time period (and sometimes they move, so having that SC helps).

Daniel Bayer · July 2017

I've done this both ways, but my preferred method (probably solely because this was the method I was trained on) is to hard credit the individual donor and put "from the XYZ Foundation of the ABC Charitable Giving Fund" or something similar in the Reference line. Then in any receipting/acknowledging, we export and use the Reference line to distinguish between gifts that were made by another entity, included a non-tax-deudctible portion, and/or anything else "weird" without too much trouble.

To soft credit or not soft credit donor advised fund gifts

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