A donor wants to give from her donor-advised fund. Whether your fund can accept it depends on the sponsor’s policy.
A donor emails you in November. She has a donor-advised fund at one of the large commercial sponsors and she wants to move $5,000 into your community fund before year-end. She has already made the contribution to her DAF. The deduction is behind her. Now she wants to recommend a grant.
You tell her you will look into it. You find out the sponsor’s policy may not allow a grant to a project that is not its own 501(c)(3). Your fund is fiscally sponsored. It has a 501(c)(3) of record. It is not that 501(c)(3.
The grant does not move. She is confused, because nobody explained this to her when she opened the account.
What a DAF actually is
A DAF moves money from a donor’s account to a charity’s account. The donor contributes, takes the deduction that year, and recommends grants over time. The sponsoring organization holds legal control and reviews each recommendation before it goes out.
The part donors rarely hear is that the sponsoring organization also sets its own grantmaking policy. Fidelity Charitable, Schwab Charitable, and Vanguard Charitable each publish their own rules about who can receive a grant. Those rules are not identical, and they are not written for your convenience.
Some grant only to standalone 501(c)(3) entities. A fiscally sponsored project is not a standalone entity. It is a program inside someone else’s 501(c)(3). Some sponsors read that distinction strictly.
Why this lands on the operator
You did not choose this. The donor did, when she opened the account years ago. But the conversation happens on your side of the table, and you are the one who has to say no.
Fund operators run into this at the worst time, which is December, when a donor is trying to close out her giving and the fund is trying to close a gap. The donor often assumes the problem is with your fund. It is not. Your fund has a real 501(c)(3) behind it. The DAF’s policy is what stopped the grant.
Two questions worth asking before you promise anything
First: which DAF sponsor holds the account? Fidelity, Schwab, and Vanguard are the large commercial sponsors, and community foundations and federation-managed funds operate their own programs with their own rules. The answer changes everything.
Second: does that sponsor grant to fiscally sponsored projects? Ask them directly. Ask the sponsor directly rather than relying on a colleague’s memory or a blog post. Call the sponsor or check their published grantmaking guidelines.
If the answer is yes, the donor signs into her DAF, recommends the grant to your fiscal sponsor, and the money transfers. If the answer is no, you need to know that before she starts the process.
What to do when the answer is no
The donor still has options.
She can give from a different source. A checking account, a card, an ACH transfer. The gift is still deductible, because she is giving to your sponsor directly rather than routing through the DAF. She loses nothing except the convenience of using the account she already funded.
She can give to a different organization. This is the outcome you are trying to avoid, and it happens when operators do not have an answer ready.
She can ask her DAF sponsor to reconsider. Sometimes a sponsor will make an exception for a project with a clear charitable purpose and a documented sponsor relationship. Sometimes it will not. It is worth one phone call.
The rent example
Here is why the distinction matters more than it sounds. Suppose your fund covers rent for a family in crisis. The disbursement goes to the landlord. It is a charitable payment tied to a stated purpose, reviewed and approved by your fiscal sponsor before it goes out.
A standalone 501(c)(3) can do this. A fiscally sponsored fund can do this. A DAF may not be able to, because the sponsor’s policy governs who can receive a grant. The donor who wants to cover rent through her DAF has the wrong tool for the job, and no amount of explaining will change the sponsor’s policy.
The structural point
Fiscal sponsorship and donor-advised funds sit on opposite sides of the same transaction. A DAF is a donor vehicle: it holds one donor’s charitable money and grants it out over time. Fiscal sponsorship is an operator vehicle: it hosts a cause and receives money from many donors. When the two meet, the DAF’s policy decides whether the grant happens.
The donor who learns in October that her DAF will not reach your fund has time to give another way. The donor who learns in December has a problem, and so do you.
If you run a fund and a donor asks about giving from a DAF, get the sponsor’s name and check the policy. If the grant can move, help her complete the recommendation. If it cannot, tell her what still works.