Understanding Donor Advised Fund (DAF) Terminology

Donor-Advised Funds (DAFs) are an increasingly common way for individuals and organizations to make charitable contributions. The terminology surrounding DAFs can sometimes be confusing, especially when determining how DAF activity should be recorded in Eleo.

This guide explains common DAF terms in simple, easy-to-understand language and describes how each term relates to Eleo.

DAF (Donor-Advised Fund)

What it means:

A Donor-Advised Fund (DAF) is a charitable giving vehicle that allows a donor to contribute assets to a sponsoring organization and potentially receive a charitable tax deduction.

The donor can then recommend grants to eligible charitable organizations over time.

Example:

A donor contributes $10,000 to a DAF. The donor later recommends that $2,500 be granted to a nonprofit. The remaining funds can potentially be used for future charitable grants.

Donor

What it means:

A donor is the individual or organization that contributes money or other assets to a Donor-Advised Fund (DAF).

Once assets are contributed to a DAF, they are generally owned and controlled by the DAF sponsoring organization. The donor can typically recommend which eligible charitable organizations should receive grants from the DAF.

In Eleo:

The donor is recorded as the contact.

DAF Sponsor / Sponsoring Organization

What it means:

The DAF sponsor, also called the sponsoring organization, is the charitable organization that establishes and administers the DAF.

The sponsor legally owns the assets contributed to the DAF and maintains legal control over how those assets are distributed. Donors generally have advisory privileges, meaning they can recommend charitable grants but do not legally control the funds.

Examples of DAF sponsors include community foundations and charitable organizations associated with financial institutions.

In Eleo:

The DAF sponsor is associated with the donor's contact record.

Nonprofit / Charitable Organization

What it means:

A nonprofit or charitable organization is an organization that receives charitable contributions or grants.

For DAF purposes, an important consideration is whether the organization is eligible to receive a charitable grant from the DAF sponsor.

In Eleo:

The nonprofit receiving the DAF grant is the client/database.

DAF Grant

What it means:

A DAF grant is a charitable distribution made from a DAF to an eligible nonprofit or charitable organization.

The donor typically recommends the grant, while the DAF sponsor reviews, approves, and distributes the funds.

Example:

A donor recommends that $1,000 from their DAF be granted to a nonprofit. Once the DAF sponsor approves the recommendation, the $1,000 is distributed to the nonprofit as a DAF grant.

In Eleo:

The DAF grant is recorded as the gift.

DAF Grant Recommendation

What it means:

A DAF grant recommendation is a request made by the donor to the DAF sponsor asking that a specific amount be distributed to a particular charitable organization.

It is important to understand the distinction between a recommendation and a grant:

• The donor recommends the grant.
• The DAF sponsor approves and distributes the grant.
• The nonprofit receives the grant.

The donor does not legally control the DAF assets after they have been contributed to the sponsoring organization.

In Eleo:

The DAF grant recommendation is recorded as a DAF soft credit.