How To Talk To Your Board About DAFs & What Nonprofits Should Know

Lauren Watson
Sep 18
2 min read

A Board meeting at a table with a man and woman talking.

What They Are

A Donor-Advised Fund (DAF) is essentially a charitable investment account, usually managed by a public charity. That could mean commercial sponsors like Fidelity, Schwab, or Vanguard, or your local community foundation.

Here’s how it works:

Donors contribute, receive an immediate tax deduction, and then recommend grants to nonprofits over time.
And here’s the plot twist, that money can sit there indefinitely while the sponsor manages it.

Why Nonprofits Care

Here’s why your development team and Board should care about this funding channel:

Access: DAFs open doors to high-net-worth individuals who prefer to give this way.
Flexibility: Donors can support one-time projects or commit over multiple years.
Visibility: Being “DAF-friendly” shows wealth advisors and community foundations that your organization is ready to receive this type of support.

How to Access DAFs

There isn’t a central application, but nonprofits can position themselves by:

Making sure you’re a recognized 501(c)(3).
Registering or updating profiles with large sponsors (Fidelity Charitable, Vanguard Charitable, Schwab Charitable) and community foundations.
Posting simple, clear instructions on your website for donors who want to recommend you.
Building relationships with your local community foundation; often the most effective entry point.

The Catch: Ethical & Logistical Implications

Boards should understand both the potential and the pitfalls:

Transparency problem: DAFs have no payout requirement. Billions can sit idle for years.
Inflated giving stats: Many industry reports count DAF-to-DAF transfers as “giving,” even when no funds have reached a single nonprofit. It makes the numbers look better, but doesn’t mean impact has happened.
Equity concern: Donors receive tax benefits immediately, while communities may wait years (or longer) to see the actual dollars.
Strategy risk: Over-reliance on DAFs can leave your organization exposed. Grants are donor-driven and unpredictable.

The Takeaway

DAFs are a tool, not a lifeline. They can diversify your revenue, build donor relationships, and improve visibility. But nonprofits should never stake their future on them. The bigger picture (sustainable fundraising strategy, diversified revenue, and active donor cultivation) is what keeps organizations resilient.

Board Talking Points

“DAFs are growing fast, but they don’t pay out on a schedule.”
“We should be DAF-accessible, but not DAF-dependent.”
“Our best strategy is to treat DAFs as one option in a diversified revenue mix.”
“Transparency and equity questions matter. Our role is to use DAF dollars well, but also keep developing sustainable funding streams.”

Final Thought

At Lauren Watson Grants LLC, we believe in meeting nonprofits where they are, while guiding them toward where they’re meant to go. DAFs are one piece of a complex funding puzzle, and navigating them requires clarity, confidence, and an unshakeable commitment to ethical fundraising.

We help nonprofits build fundraising strategies that last, leadership that aligns, and Boards that understand the terrain. Sustainable advocacy starts with transparency, and this Dispatch is part of our ongoing work to equip organizations for the long game.