Better Giving Through Better Grants

For many who have a donor advised fund (DAF), you may already have a very specific awareness of the charities and causes that are important to you and that you want to support.

However, many DAF donors may have been driven to open their DAF due primarily to tax saving concerns. It is not an accident that nearly 40-50% of all new DAFs opened each year occur in the 4^th quarter, driven by the need to meet an annual tax deduction deadline.

For these persons, their experience in charitable giving may have been sporadic and small scale in nature, if at all. The presence of a pot of money that can be used for no other purpose than charitable giving can be a source of confusion. What should you give to? How much from your DAF should you give? What type of giving makes sense … Should you give to a charity and allow the nonprofit to use those dollars as they see fit? Or do you make a grant to support a specific campaign or project? How do you know if a nonprofit uses your dollars as effectively as they should?

With the proper level of research and an understanding of what causes are truly important to you, you can move from uncertainty or confusion to becoming  a giver who uses your DAF to be a source of high-impact giving.

A charity checklist can help you better decide on which causes deserve your grant recommendations

Understanding Yourself and the Charities That Need Your Help

To be a strategic grant maker, you need to think of your DAF as a source of venture capital to fund social good.

Before you browse a single nonprofit website, define your boundaries. If you try to fund everything, you move the needle on nothing. What were times in your life that you needed help? Where there any nonprofits that gave you the assistance you needed? How have friends and family members been helped in the past during difficult times?

By picking two to three areas of importance to you (improving education, fighting poverty, social injustice, nature conservation, etc.), you recognize that your dollars may not be able to solve all the world’s problems, but you can help alleviate some of the ones most important to you. It allows you to say “no” to many good causes but be able to say “yes” to those charitable missions that best align with your beliefs.

Research the Charities That Need Your Help

Online tools like Candid and Charity Navigator are excellent for a "quick check" to review a nonprofit. Nonprofits have to file a Form 990 with the IRS. This provides insights into how much money has been raised and how those charitable dollars have been spent.

The Form 990 and the website of the nonprofit will allow you to dig deeper into leadership stability; an Executive Director with a 3+ year tenure and an engaged, diverse Board usually signals a resilient organization. Many nonprofits will have an annual program book that will showcase their efforts. A nonprofit that openly discusses "lessons learned" from a failed pilot program may prove to be a safer charitable investment than one claiming a perfect success rate.

The following chart can help you score and differentiate nonprofits from each other and determine which may be best for your support:

How to score the results:

• 8–10 Points: The "Legacy" Partner. This organization is an ideal candidate for a multi-year, unrestricted grant. They have the leadership and systems to use your money wisely.

• 5–7 Points: High Potential. They are doing good work but may have a specific gap (like low reserves or a new director). Consider a program-specific grant or a "capacity building" grant to help them strengthen their infrastructure.

• 0–4 Points: Proceed with Caution. If you still love the mission, consider a smaller "pilot" grant first, or reach out to their development team to ask about the red flags you found in their Form 990.

Unrestricted vs. Program-Specific

Which type of grant is best:

• Unrestricted Funding (often called General Operating Support)  allows a nonprofit to cover essential "backbone" costs—utilities, competitive staff salaries, and technology upgrades. This flexibility is what allows a nonprofit to pivot during a local crisis or scale a successful pilot program without having to beg for permissions or new grants. It signals to the organization: "I trust your leadership to put this money where it is needed most."

• Program-Specific Funding is when you want your DAF to fund a tangible, time-bound outcome, such as building a new playground, launching a specific medical research study, or providing 500 backpacks to local students. This "restricted" giving is perfect for donors who want a clear path from their contribution to a specific result.

Although it may be exciting to see your name attached to a very specific outcome, is that the goal of your giving? If a nonprofit scored well on your scorecard, don’t they deserve the gift of financial flexibility from you? Only you as the donor can decide that.

The Grant Recommendation

This is where your strategy finally meets reality. Does a large one-time gift make best sense for you and your DAF? Or does consistent giving make better sense and provide better value to the charity you support?

Setting up recurring grants—such as a quarterly $500 gift—provides your favored nonprofits with predictable revenue. It allows them to budget for staff and long-term projects with confidence, rather than riding the boom-and-bust cycle of one-time donations.

Do you want to be an anonymous donor or an engaged one? While giving anonymously can feel humble and keeps your mailbox clear of other charities asking for money, attaching your name to a grant can be a strategic move. Sharing your identity allows the nonprofit’s development team to build a relationship with you. By opening that door, you move from being a faceless giver to a true partner in their mission and belief, ensuring your DAF dollars aren’t just spent, but invested in a cause you can watch grow.

Next Steps

The true value of your DAF isn’t found in the tax deduction you received; it’s found in the lives changed by the money you grant and the causes you support today. A DAF is far more powerful when used as an active engine for change. Deciding on the best causes to meet your beliefs and earn your grants can be a challenge. At Generosity Nexus, we provide a long track record of helping DAF donors determine the best channels to make an impact.

Don’t hesitate to schedule an appointment to learn more about how we can help you.