The rich have stashed billions in donor-advised charities — but it’s not reaching those in need - Zombie philanthropy? Michael Towner, Iconic Legacy

In 2014, the mobile camera company GoPro went public, and Nicholas Woodman, the company’s founder and chief executive, was suddenly worth about $3 billion. Later that year, Woodman and his wife, Jill, announced they were establishing a foundation with about $500 million worth of GoPro stock.

The foundation, however, was a donor-advised fund. A 2018 New York Times story noted that, four years later, Woodman’s foundation had no website and hadn’t appeared to have funded any significant charitable operations.

Google co-founder Larry Page’s use of DAFs has also raised concerns. Last December, an analysis by Recode found Page had stocked more than $400 million in DAFs from 2015 to 2017.

GoPro’s CEO Nick Woodman holds a GoPro camera in his mouth as he celebrates his company’s IPO at the Nasdaq MarketSite in 2014. (Seth Wenig/AP)

Google co-founder Larry Page made donations in 2017 to organizations known as donor-advised funds, a controversial and booming form of philanthropy.

​In December 2017, Google co-founder Larry Page made what appeared to be generous donations to two charities. To one charity, according to tax records filed by Page’s foundation, he gave $100 million in cash and stock. To the other, records show, Page gave $80 million in cash.
Two and a half years later, it’s unclear if any of that money funded any charitable works, or if it’s all still sitting in accounts mostly controlled by Page, collecting interest and earning investment income.
That’s because the organizations on the receiving end of Page’s donations were not working charities — such as the American Red Cross or the United Way — but donor-advised funds, a controversial and booming form of philanthropy attracting increasing scrutiny and criticism amid the coronavirus pandemic, as charities face a historic crisis. Page did not reply to a request for comment for this story. Spokesmen at the organizations that received his donations in 2017 — Schwab Charitable and the National Philanthropic Trust — declined to comment, citing privacy rules.

​Known in the industry as DAFs (rhymes with calves) — and criticized by some insiders as “zombie philanthropy” — the money and assets in donor-advised funds are intended to go to charity some day, but there are no payout requirements, and money can sit in a donor-advised fund for decades.
DAFs are the fastest growing form of charitable spending in America, with more than $120 billion in DAF accounts across the country in 2018, according to the most recent industry estimates, up from $45 billion just six years earlier. And while some executives who oversee these funds say critics exaggerate potential abuses, the coronavirus pandemic has prompted a few wealthy DAF users to express rising concern about the way these funds are managed.
“Charities are slammed for work, needing to do more than ever before … and yet this $120 billion is still sitting there … It’s kind of crazy,” said David Risher, a former Microsoft and Amazon executive who — with his wife, Jennifer — launched the #HalfMyDaf campaign in May to try to inspire donors to pay out at least half the money in these accounts to charities this year.
“The money is sitting there because people often have a plan for their philanthropy,” said Jennifer Risher, a former manager at Microsoft and author. “Well, the world is not on plan right now. Now is the moment.”
The Rishers’ echoed concerns raised by Kat Taylor — philanthropist, banking executive and wife to hedge fund manager and former presidential candidate Tom Steyer — who is a vocal critic of the DAF system and has supported draft legislation in California this year that would require more oversight and impose transparency obligations on these funds.
“They were created without, I think, as much oversight and foresight as we should have given them,” Taylor said. “These are the piggy banks of charity. We should be breaking our piggy banks right now.”

​The rise of what some critics denounce as “a perversion of the tax code” traces its roots to 1969, when Congress rewrote the tax code to favor public charities over private foundations, imposing more taxes on private foundations and requiring more public information on their finances.
To Norman Sugarman, a former IRS attorney in Cleveland, this created both concern and opportunity. Sugarman represented community foundations fearful the new law would scare off donors.
“For him, it was important that, no questions asked, these [community foundations] were public charities,” said Lila Corwin Berman, a history professor at Temple University who has written about Sugarman’s role in the popularization of DAFs. “He believed most social problems could be better solved by charity than government, and that individuals should have more control over what their wealth could do for society.”

​Sometimes, however, the money is just moving from one donor-advised fund to another donor-advised fund. A 2017 analysis by the Economist magazine of data from three of the largest donor-advised funds found two of the three largest recipients of their charitable spending were other donor-advised funds. (Account holders can move money and assets from one fund to another in search of better fees.)
“You start to kind of wonder … where is all the money?” David Risher said. “And then you realize that you have these funds that have more than $120 billion parked in them … and when you look at a system like this, you start to realize that there are financial incentives at some organizations, where the status quo is working pretty well for them.”

Original story by Will Hobson, Washington Post. Click here for more.