Donor-Advised Funds: What Nonprofits Should Know

Donor-advised funds are one of the fastest growing ways donors give to nonprofits. Yet many organizations still find themselves unsure how to track, acknowledge, or steward these gifts effectively.

 

Understanding how DAF grants work can help nonprofits strengthen donor relationships and ensure strong financial oversight. 

 

1. Understand How DAF Grants Arrive

 

Unlike direct donations, DAF gifts often come through sponsoring organizations such as community foundations or financial institutions. Understanding this structure helps avoid confusion during reconciliation.

 

That means:

• The donor name may not always be listed
• Communication can come through a sponsor
• Gifts may arrive with limited context

 

Understanding this structure helps avoid confusion during reconciliation.

 

2. Track DAF Gifts Properly

 

DAF grants should be recorded carefully in your accounting and donor systems.

Best practices include:

 

• Noting the sponsoring organization
• Tracking the recommended donor when provided
• Ensuring finance and development teams stay aligned.

 

3. Acknowledge the Right Party

 

Sometimes the donor wants recognition. Sometimes they prefer anonymity.

 

Nonprofits should:

• Follow the instructions provided with the grant
• Send acknowledgement letters appropriately
• Maintain clear records of donor preferences.

 

4. Steward the Relationship

 

Even when gifts come through a sponsor, there is still a donor relationship behind the gift.

Organizations that steward DAF donors well often see repeat recommendations from the same fund .

 

Conclusion

 

Donor-advised funds are becoming an increasingly important part of nonprofit fundraising. By understanding how these gifts work and implementing clear processes, organizations can ensure both strong financial management and meaningful donor relationships.