Donor Advised Funds

Marlissa Cunningham · August 2017

Daphne-Ann Singleterry:

I am curious to learn how other organizations are processing Donor Advised Fund gifts in the Raise'rs Edge? Since the gift is being recommended by the donor, and technically is the donors money, who's record are you applying the gitt to and who is being soft credited - if anyone?

When the donor provides contact information, we hard credit to their record and soft credit the broker. If the donor does not provide information, we hard credit the broker. We're considering a change in policy on the latter.

Brenda Anderson · September 2017

Ryan Hyde:

Aaron - insofar as pledges go, here's my interpretation of what's going on based on my own experience.

There tend to be two different use cases for pledges in RE; I'll call them "traditional" and "work flow." A traditional pledge is an agreement between the donor and the organization, typically formalized in writing, and logged as income by finance on the date of the pledge (preferably by posting the pledge directly to FE, if you have FE and it's integrated with RE). Based on the language being tossed around here on the forum, I would say that DAF money cannot and should not be used to pay this kind of pledge.

But "work flow" pledges are different. These pledges are far less formal. They may be promises made verbally or in email, the timeframe for payment isn't usually all that consequential (e.g., so long as it's paid this fiscal year, we're good), and the amounts are typically lower than big formalized pledges (though this doesn't have to be true). These pledges are NOT logged by finance and are NOT posted to FE (if applicable). In these cases, a gift officer may put in a pledge for the donation so that when the gift comes in, our data entry person can see that there's a pledge on the record, apply it, and allow the campaign/fund/appeal/package from the pledge flow to the payment. This keeps the data entry person moving along without much interruption because s/he is sure that the data is what the solicitor expects.

I would say that in this case, a DAF gift can go ahead and be applied to the pledge, no problem. The pledge is just a record keeping tool at this point and doesn't reflect a formal, legally binding agreement. So if you were putting the DAF gift directly on the constituent record, then really this would just make the whole thing easier to manage.

I can see some folks being uncomfortable with this process, but I wouldn't flinch at it myself.

Sorry, I have to disagree. Our finance department records pledges. Very important during a multi-year campaign. They can not except a pledge where the donor intends to use a DAF. This would get audited.

Melissa S Graves · September 2017

Brenda Anderson:

Sorry, I have to disagree. Our finance department records pledges. Very important during a multi-year campaign. They can not except a pledge where the donor intends to use a DAF. This would get audited.

Brenna - I do not understand, what are you disagreeing with - We do this same thing. DAF gifts can not be linked to traditional pledges - the ones booked by finance. But the other pledge type we have (clearly marked and clearly NOT booked in finance) is simply a recordkeeping mechanism in RE (not FE) that the business office (and the auditors) would NEVER even see. SO therefore it can't possibly get audited! It simply helps sort out what we "know" is coming but can't be booked because of an IRS technicality.

Cheryl Segear · November 2017

Aaron Rothberg:

I'll put my neck on the chopping block to say that with DAF gifts I break all the rules everyone else has mentioned and I'll add that Bill Connors agrees with me.

It is true that DAF funds do not belong to the donor and cannot legally pay off a pledge from a donor. If your organization's auditors audit the Raiser's Edge for tax compliance you will not be able to follow the practice I'm about the describe. Bill Connors has often said that Raiser's Edge is not accounting software, but rather fundraising software and as such our database needs to support our fund raising and stewardship efforts. At my organization if the IRS shows up to audit us, they are going to audit our Business Office books, not the Raiser's Edge database.

Given that, when we receive a check from a DAF we, unlike everyone else, hard credit the donor that directed the funds and soft credit the DAF. We also use a Gift Attribute of Name on Check so we can capture the legal entity that gave us the donation. This practice better supports stewardship in that when we produce a list of donors Fidelity is not one of them. Additionally, because the donor that directed the funds did not legally own the money we received, we mark the Gift Receipt Amount as zero dollars and we do not issue a receipt to the constituent, only an acknowledgement letter and we recognize the DAF in that acknowledgement letter. If the DAF requires a receipt we will send them one, but we don’t run into that request very often.

Quote from Bill Connors book "Fund Raiding with the Raiser's Edge: A Non-Technical Guide" pg. 27

"Many fundraising database users in the United States say, ‘The IRS requires that the name on check be entered as the hard credit constituent in our database.’ My research and experience have shown this is not the case. The IRS requires acknowledgement letters clearly indicate the name of the true donor. However, the IRS does not dictate how we set up our database and who the constituents are. Correct this belief among your data entry staff to avoid duplicates and difficulty retrieving data."

We do not use our Raiser's Edge software for financial either, our controller uses FE. Could you give me more details on how you batch these gifts out? We currently have a consultant in and the reports he has me pulling are somewhat skewed because it looks like National Christian Foundation is a major donor when in reality (as far as the fundraising aspect of it goes) it was not NCF that made the donation. We are trying to find a solution because the controller says the auditors see it as a business/foundation check so whatever I key into the gift batch and push across to her has to match. Thanks for any advice you can give me on this. I have only been working with Raiser's Edge for a year and my training was just in house training.

Cheryl Benoit 2 · July 2019

So, how do you designate a "work-flow" pledge, so that it can be easily be identified and not logged by finance?

The issue of tracking DAF 'pledges' could be solved if Blackbaud would just create a new gift type entitled DAF similar to the 'Planned Gift' type.

Thanks, Cheryl

Donor Advised Funds

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