14 December 2014

When Wall Street and philanthropy went on a date

ProPublica keeps taking a bite out of the wider charitable sector. This time, it turns to donor-advised funds. As a young person with not much money to kick around, this is a new concept to me. Here is their set up of the problem:
For about 40 years, charitable giving held steady at about 2 percent of gross domestic product, while donations from individuals have stayed at around 2 percent of disposable personal income, according to Ray D. Madoff, a Boston College law professor and frequent critic of donor-advised funds.

Over the last few years, the donor-advised funds have grabbed significant market share. The total amount of assets under management at donor-advised funds rose to $54 billion in 2013, up 20 percent from $45 billion a year earlier. Fidelity's alone have skyrocketed to $13.2 billion.

Contributions to donor-advised funds rose 24 percent in 2013, compared with the previous year, to $17 billion. They only gave out less than $10 billion, so money is building up in them. And the amount paid out each year declined in each of the last three years through 2013, according to Alan Cantor, who runs a philanthropy consultancy and is a frequent critic of donor-advised funds.
The decline in money available is certainly concerning, but that is based on a lot of assumptions. Chief among them is that all money is well spent. There are some worrisome incentives here and an issue of witholding money that can generate long term impact, but spending is not the biggest problem when it comes to creating impact. At least that is in my estimation.

Anyway, the story is worth reading in full.