Donor-Advised Funds: A Growing Opportunity for Nonprofit Organizations
Ryan Kahn - Oct 21, 2026
Donor-Advised Funds: A Growing Opportunity for Nonprofit Organizations
How nonprofits can better understand, attract, and steward donor-advised fund contributions.
Common Good | October 21, 2026
The way Americans give to charitable organizations is changing.
Donors are increasingly using financial tools that allow them to plan their charitable contributions, manage philanthropic assets, and support organizations over time.
Among the most significant developments is the continued growth of donor-advised funds, commonly referred to as DAFs.
For nonprofit organizations, understanding how these funds work is becoming an important part of effective fundraising and financial management.
DAFs can create opportunities to build donor relationships, receive charitable grants, and develop more predictable financial support. Yet many nonprofits remain unfamiliar with how to attract and manage these contributions.
The opportunity isn't simply to raise more money. It's to make giving easier while building the financial infrastructure necessary to support an organization's mission.
Understanding Donor-Advised Funds
A donor-advised fund is a charitable giving account established and administered by a sponsoring organization, typically a public charity.
Donors contribute cash, securities, or other eligible assets to the sponsoring organization. Depending on applicable tax rules and individual circumstances, they may qualify for a charitable deduction when making the contribution.
Once assets are contributed, the sponsoring organization maintains legal control over the funds, while the donor generally retains the ability to recommend charitable grants to eligible organizations.
This arrangement allows donors to separate the timing of their charitable contributions from decisions about which nonprofits to support.
For nonprofit organizations, grants from DAFs can provide an additional source of financial support without requiring the nonprofit to establish or operate a donor-advised fund itself.
The Growing Importance of DAF Giving
Donor-advised funds have become a substantial part of the charitable giving landscape.
According to National Philanthropic Trust's 2025 Annual Report, the organization distributed approximately $6.44 billion in donor-recommended grants during its fiscal year ending June 30, 2025.
Those distributions included more than 159,000 individual grants supporting nearly 48,000 charitable organizations.
These figures represent just one sponsoring organization, illustrating the scale at which donor-advised funds now support charitable activity.
For nonprofits, this development highlights an important consideration: donors may already have money designated for charitable purposes, but they still need to decide which organizations will ultimately receive it.
Making your organization accessible to DAF donors can help ensure it is part of that decision.
Making It Easier for Donors to Give
One of the simplest ways to improve DAF fundraising is to remove unnecessary complexity from the donation process.
Many organizations prominently advertise traditional cash and credit card donations but provide little information about other giving methods.
A donor interested in recommending a DAF grant may have difficulty locating the organization's legal name, tax identification number, or appropriate contact information.
These barriers are often avoidable.
Nonprofits can improve their readiness for DAF giving by taking several practical steps.
1. Make Your Organization Easy to Find
Ensure your organization's legal name, Employer Identification Number (EIN), and contact information are readily available.
These details help donors and sponsoring organizations identify the correct charitable recipient.
2. Provide Clear Giving Instructions
Include donor-advised funds as an available giving option on your website and donation materials.
A dedicated page can explain how donors may recommend grants through their sponsoring organizations.
3. Establish a Process for Receiving Grants
Assign responsibility for reviewing grant notifications, recording contributions, identifying donor restrictions, and coordinating acknowledgments.
A consistent internal process reduces administrative confusion and supports accurate financial records.
4. Build Relationships With DAF Donors
When a donor's information is available, thank them for recommending the grant and keep them informed about your organization's activities.
DAF giving can become an ongoing relationship rather than a single transaction.
5. Communicate the Impact of Contributions
Donors want to understand how their support advances the causes they care about.
Regular updates, thoughtful reporting, and transparent communication can strengthen trust and encourage continued engagement.
Understanding the Financial Side of DAF Grants
While donor-advised funds can simplify charitable giving for donors, recipient organizations still need appropriate procedures for handling those grants.
A DAF grant is generally made by the sponsoring organization following a donor's recommendation.
This distinction matters for gift acknowledgment, donor records, and financial reporting.
Because donors generally receive any available charitable deduction when contributing to the sponsoring organization, nonprofits should not issue a second tax-deductible receipt to the donor for the subsequent grant.
Instead, organizations can send an acknowledgment thanking the donor for recommending the contribution while accurately identifying the sponsoring organization as the grantmaker.
Organizations should also pay attention to grant restrictions, applicable documentation, and appropriate accounting treatment.
DAF grants generally cannot be used to provide prohibited personal benefits to donors. Special care is warranted for event tickets, sponsorship benefits, and payments connected with legally binding pledges.
When these situations arise, nonprofits should coordinate with the sponsoring organization and qualified legal or tax professionals.
From Receiving Donations to Managing Resources
Attracting charitable contributions is only one part of financial sustainability.
Once a nonprofit receives funding, it must determine how those resources should be allocated, maintained, and used to advance its mission.
This creates an important connection between fundraising and financial stewardship.
For example, an organization receiving a substantial unrestricted DAF grant may need to evaluate whether the funds should support immediate operating expenses, strengthen reserves, or contribute to longer-term financial objectives.
The appropriate decision depends on the organization's financial position, grant terms, liquidity needs, and strategic priorities.
A thoughtful approach to financial management can help nonprofits distinguish between funds needed for current operations and assets that may be available for longer-term investment.
For organizations receiving ongoing support from donor-advised funds, this kind of planning can become increasingly important.
Building a Stronger Financial Foundation
Nonprofit leaders and boards should consider how DAF giving fits into their broader financial strategy.
Some important questions include:
Does our organization clearly communicate its ability to receive DAF grants?
Do we have procedures for recording, acknowledging, and tracking these contributions?
Are donor restrictions properly documented and monitored?
Do our cash management and reserve policies account for irregular or substantial charitable contributions?
Are we effectively communicating how charitable support contributes to our mission?
These discussions can help organizations connect fundraising activity with responsible management of financial resources.
Looking Ahead
Donor-advised funds are one example of how charitable giving continues to evolve.
For nonprofits, adapting to these changes requires more than adding another donation option.
It means creating processes that make giving accessible, maintain accurate records, strengthen relationships with supporters, and ensure financial resources are managed responsibly.
Organizations that approach fundraising and financial stewardship together may be better positioned to navigate uncertainty and support their missions over time.
The long-term goal isn't simply to receive more charitable contributions.
It is to build the financial strength necessary to make those contributions meaningful for years to come.
How Common Good Can Help
Common Good is an investment advisory firm focused on helping nonprofit organizations manage, invest, and steward their financial resources.
We help organizations evaluate cash management strategies, oversee operating reserves, manage investment portfolios, and develop long-term financial strategies aligned with their missions.
As nonprofits receive charitable grants and other contributions, thoughtful financial planning can help determine how those resources support immediate needs and future priorities.
Better nonprofit finance. Greater impact.
Contact Common Good to discuss your organization's cash management, investment, and financial stewardship needs.
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Important Disclosure
This material is provided for informational and educational purposes only. It does not constitute individualized investment, legal, or tax advice. Tax treatment of charitable contributions depends on applicable laws and individual circumstances. Investment management services involve risk, including the possible loss of principal. Common Good does not act as the sponsoring organization for donor-advised funds or control the approval of donor-recommended grants. Organizations should consult appropriate professional advisers regarding charitable contributions, grant restrictions, accounting requirements, and investment decisions.
