The OAF Blog

Donor Advised Funds – Who Makes the Decisions?

April 05, 2017

The Economist and Nonprofit Quarterly recently published articles, mildly critical, on the topic of donor advised funds.

A donor advised fund is a gift by an individual to a charitable foundation (typically community foundations, or foundations created by financial institutions) to establish a fund to express the donors personal philanthropy. Money or securities are contributed to an endowment, which is held and invested to create income which is disbursed to one or more charities.  

 

Benefits for the donor and charity
The donor benefits by receiving an immediate tax receipt.  The donor can then advise on the selection of charities who will receive a distribution each year from the fund. For the donor, it is a fairly simple means of achieving part of their estate plan.  They can identify charities to support, and achieve a tax credit now versus a future bequest through their estate. The charitable foundation handles all administrative details, communications with charities, and issues the cheques.

For financial institutions, donor advised funds represent an additional investment product generating investment management fees. The charitable foundation administering funds earns fee revenue for administering the funds.

If a donor, as they establish a new fund, immediately identifies one or more fixed charities to receive fund distributions, the charities benefit from the knowledge that a donor has made the irrevocable decision to donate a part of their personal wealth to philanthropic goals that support their mission. While they may or may not know the identity of the donor, it is helpful to know a source of revenue will be recurring.

 

Criticism
The critical commentaries of the articles focus on the grey areas in donor advised funds.  There is little transparency or public accountability around how funds are disbursed. Questions may be raised about where the money is going.  Charitable foundations often report at the macro or sector level, but not typically to the level where individual charities or communities are identified.

The beneficiary charity also loses the personal relationship with the donor.  They may not know if a grant is one-time or recurring – something a direct conversation with a donor could have affirmed.

Questions are also raised over the degree of fiduciary oversight being applied with respect to advice and recommendations received from donors or their family.  So long as the recipient entity is an eligible charitable organization, charitable foundations give great flexibility to the donor to identify donation recipients.

There is nothing inherently wrong with the concept of donor advised funds.  The fund can either be a permanent endowment (annual payouts in perpetuity) or a fixed-term fund (capital and income are intended to be fully distributed over a period of time).

What perhaps doesn’t get effectively communicated, and some donors overlook, is that they have made a legal transfer of ownership of property from themselves to the charitable foundation. The donor no longer has ownership rights. The legal agreement establishing the fund provides for the donor to offer advice on distributions, but the final decision and legal responsibility rests with the charitable foundation.

 

Fiduciary responsibility
At the Ontario Arts Foundation, we spend much time in conversation with our donors to ensure they understand the reality that once the donation is made, the ownership and control of the fund has passed to the Foundation. Our fiduciary responsibility is to ensure the fund is administered in a way that is consistent with its objectives. We may receive recommendations from a donor on disbursements, and if consistent with the charitable purpose of the fund, we will respond positively.

Charitable foundations must retain the right to decline a recommendation if it is contrary to:

  • the charitable purpose of the fund (eg. the fund objective is to fund music organizations, and a recommendation is received for a distribution to a health care organization – laudable but contrary to the fund purpose)

  • public policy (Canadian courts have ruled against trustees disbursing funds for purposes that support racism, ethnic orientation or political purposes not considered charitable under our tax laws.)

  • the recipient’s eligibility (A donation cannot be made to a non-charitable organization.)

  • the charitable foundation’s mission (Some foundations have a particular viewpoint on charitable or social issues as part of their mission. If a donor recommends a disbursement contrary to that mission, the foundation may respond by declining to follow the recommendation.)

It can take some time to develop comfort and trust between the donor and a charitable foundation about the distribution of funds from a donor advised fund. It is important that donors and the charitable foundation have a clear understanding of how decisions will be made, so that there are no future surprises….or disappointments.

 

 

Arts and Aging – Focus by Ontario Arts Organizations

December 01, 2016

 

It has been an uplifting experience over the past months to discover how many Ontario arts organizations offer community outreach initiatives intended to enhance the quality of life / wellbeing of older individuals.

The range of programs cross all arts disciplines – dance, visual arts, music, theatre – providing access for people who may be increasingly unable to attend regular performances or exhibitions.

Why do this?
A growing body of research indicates that participation in arts activity is an effective way to improve health, intellectual stimulation and physical wellbeing of aging people. Research indicates:

    • Singing improves mental health and wellbeing –

    • Dance classes boost cognition, motor skills, balance, posture

    • Playing an instrument has benefits, including reducing dementia risk

    • Visual arts – viewing art, or art classes result in increased social engagement, psychological health and self- esteem

Ontario arts organizations
Examples of Ontario arts initiatives focused on the aging include, Dance Classes for People with Parkinson's – regular classes offered by the Canada’s National Ballet School. Jazz FM and the Alzheimer Society jointly offer a Tuesday morning program – Music Memory to highlight the importance music has on those suffering dementia. In Ottawa, MASC's Programs for Seniors brings professional artists in all disciplines to seniors in homes, centers and hospitals. Seniors in the Studio, a visual arts program offered by the Kitchener Waterloo Art Gallery stimulates the senses and mind through hands on art activities and dialogue with artists.


Benefit to artists as well
In addition to the benefits to participants, this kind of initiative benefits the artists as well as they see the opportunities to apply their creative skills in new ways. All together, these are marvelous initiatives that reconcile arts and culture with wellbeing in society.

 

 

Summer Travels - 2016

September 01, 2016


Parry Sound sunset
 

Among the arts organizations supported by the Foundation are theatre and music festivals located outside Toronto and whose programs are summer based. So this summer, I took the opportunity to visit as many as I could, seeing parts of southern Ontario I had never been to. It offers a different view to the ‘Canadian landscape’.

From Parry Sound to Gananoque, Grand Bend to Millbrook, the talent and creativity across the festivals was breathtaking. This was not ‘work’, in addition to meeting the Artistic Directors, Managers and actors, I saw a wide variety of performances. In every location,—the arts organization is a ‘presence’ in the local community, drawing in residents, visitors and tourists. Many local communities rely on the economic contributions from the arts.

 

It doesn’t get much better to combine being on the water’s edge in Parry Sound in July in the early evening, watching the sun set and then listening to superb  Canadian musicians at the Festival of the Sound.

Another perspective was a magical early evening northeast of Toronto in Millbrook. The 4th Line Theatre is an outdoor theatre, using farm buildings converted to seating/stage.

The production was developed from historical events in this part of Ontario and the cast (both

  
4th Line Theatre, Millbrook, Ontario

professional and local community volunteers) used the stage and adjacent fields, blending landscape into the performance experience. 

Further east, on the St. Lawrence River, we saw the most amazing one man performance based on the life of Tom Thomson at the Thousand Islands Playhouse. We stayed over and engaged in ‘retail therapy’ on the main street of the town.


Kincardine pipe band
    

In the tiny village of Blyth, the Blyth Festival has developed a history of compelling theatre where we were challenged by a thought provoking drama – well acted and creatively staged.

 

After experiencing a summer Saturday evening in Kincardine with the local Pipe Band parade (30-40 strong), we drove down Lake Huron to enjoy, sing and laugh at the Drayton Entertainment Huron County Playhouse's production of Mamma Mia. 

Embracing all ages, one of the lead actor’s children was performing on a smaller stage next door in a panto production of Aladdin – the arts embracing all ages!

We saw theatre in small productions in Port Dover (Lighthouse Festival Theatre) and Port Colborne (Showboat Festival Theatre), as well larger scale shows at the Shaw Festival and Stratford Festival -- ‘Breath of Kings’ two back to back performances (you can never have too much Shakespeare).

In the musical theme, I had great fun wandering festival site at Ottawa Bluesfest. This included small blues/jazz groups in an intimate stage setting as well as mingling with thousands to hear contemporary rock/rap groups!

The common denominator was a passion for excellence.  From playwrights,

     
    Blyth, Ontario

staging, directors, musicians, actors – the quality was high.  I came away impressed with every organization, every community.


Grand Bend, Ontario
 

All of this lies within a day’s drive of Toronto – it was a refreshing break to see more of Ontario, to meet playwrights, actors, musicians and be intellectually challenged and satisfied. It was VERY clear how important the arts organizations and festivals are to the life and economy of their towns/cities. Whether it was our having dinner in the bistro across from the Blyth Festival, staying in local inns/B&B’s or being one of 40,000 attendees at one BluesFest concert, it was clear that Ontario’s our arts organizations and festivals are important contributors to their local economy – employment, taxes, generation of visitor/tourist activity and effective engage with their community.

A visible example were the teenage volunteers at Huron County

Playhouse selling 50/50 tickets before the performance, acting as ushers – involving the local community.

What a treat this summer was – there are still many places and arts organizations to visit and I look forward to planning next summer !

 

 

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