How a congregation could use a Donor Advised Fund to increase the positive impact of its mission
If your community has a public Donor Advised Fund (they are often housed at community foundations) your congregation, or individuals within it, could write a check to your church designated to be deposited in the DAF. A public Donor Advised Fund (DAF), like the ones Impact Assets has given to the Boston Community Foundation and the Marin County Community foundation, enable you to get a deduction on your contribution, and then when you’ve reached $30,000 collectively, invest those dollars in a small business led by a person of color in your community (guided by your local Community Development Association; an institution that lends and invests in low income communities). Or you could make a climate change focused investment, depending.
If you decide you want your congregation, or you individually as a person of faith, to do as much as you can about the racial wealth gap and its consequences as fast as you can, if you feel an urgency, then investing can get you closer to that goal than giving alone.
Or you could use your congregation’s contributions to replicate a wildly successful experiment from Mississippi that simply gave $1,000 a month to moms in a poor community. It changed their lives. The choice is yours; these are just some ways you could use your mission budget. Ideally, you would give some local mission money away every year and only invest some of it. Circumstances and approaches could vary in every congregation. Give for present needs and invest to be able to give more in the future without requiring any new donations.
In this scenario, you’ll be investing in one of the Community Development Financial Institution’s (CDFI) borrowers. The investment would come in a Donor Advised Fund account the church has on the public platform maintained by the CDFI or similar philanthropic foundation active locally.
So, say your church and the members – and maybe some friends and families who don’t go to your church, but want to be part of it – gave the DAF $10,00 for the year. It could invest in the Black and brown business owners the CDFI is lending to, and get a return in the three percent a year range.
When the Black and brown business pays back the loan, the church gets it’s initial $10,000 back (the amount individuals donated goes into the church’s account to invest and give with again). And the church gets the three percent interest payment added to its DAF account that’s designated for local mission at the public DAF platform.
So let’s say your church gave $10,000 for local mission. Let’s say the goal was to bridge the racial wealth gap and be part of creating the missing intergenerational wealth in your local Black and brown communities. It could be a climate change goal, or anything where a local charitable investment is aligned with the church’s identified mission goals.
So at that year’s mission budget discussion, the committee has it’s annual allocation. Now it’s grown to $12,000 a year, as engagement around its portfolio of local business investments causes the congregation to be more engaged in the community, cross race, class neighborhood divides. That’s attracted some new people, and so giving has increased.
Add to that increased annual mission investment and donations, you have the initial $10,000 returned to you, so you have $20,000 to work with. Maybe you could give to create capacity for the organizations you give to, along with giving to explicit programs and appeals. Non-profits believe that $1 of capacity (the money to pay the people and the expenditures needed to do the work that program grants almost never give to a non-profit) is worth more to the organization’s ability to accomplish its goals than $3 of program grants or designated gifts that make the non profit do what the donor wants, rather than focus on where the leadership knows the need is.
And then you add the annual three percent profit, on a $10,000 investment over maybe three years. Add that to the capacity pot.
Repeat every three years and see $10,000 become $30,000 with no more money coming from the pew within 10 years or so, not to mention the profit on the loans. The initial amount is returned every cycle, to add to your mission budget.
If you want to make your donations that your investment enables be the most powerful and longed for money that a nonprofit seldom gets, there is a way to do that.
It starts with setting a policy in your church that the increased giving that is enabled through investing; the return of the money invested and the profit that investment in mission aligned local for profit businesses owned by people of color, the money the church gets back, always be explicitly given to increase nonprofit capacity; the means to hire staff to actually work with the community to create the conditions for the creation of intergenerational wealth in neighborhoods that lack it; neighborhoods without rich uncles or aunts who can help fund a great startup idea or help a sole proprietor (90% plus of Black owned businesses are sole proprietors, most under $50,000 revenue a year). They lack the capital they need to grow and then be able to access CDFI loans. Your church could help fill that gap with its donations and investments.
And no one will have to think any differently about their money, and they can be as engaged or as passive as they want to be. You just give money to your church designated for the local mission account on the public donor advised fund platform.
That money from your church will be the most valuable money a nonprofit can receive; unrestricted operating income. Money that the nonprofit gets to decide how it’s spent, money that is then spent on the things that are really needed, rather than what a donor wants, is exceedingly rare.
The mentors, or volunteers a church that gave that kind of money would be eagerly welcomed and respected throughout the community economic development ecosystem. If you want to engage with your community’s economy, across race, class, and neighborhood, giving the missing capital to nonprofits will make that engagement easier and more welcome.
A church who gave its profits from investing in local Black and brown businesses vetted by a CDFI to the community organizations it wants to give to without strings and control would be a church the community would appreciate. Taking that stance could enable more giving to increase and would help the church have a holistic relationship with its community.
That church would be seen as one that’s changing the game, locally, and partnering with the people making the community better.
Our Field Guide can help you figure out how to set up a DAF for your congregation on some appropriate platform to get the process started.
We will be doing some stories of churches starting to use DAF platforms to help make the process clearer. We will be posting interviews with the innovators who are using a DAF to double their mission budget without raising another dollar.