Key Takeaways:
The Philanthropy Project found $4 billion per year moves between donor-advised fund sponsors like Fidelity, Schwab, and Morgan Stanley, reported as charitable grants on IRS 990s but never reaching an operating nonprofit.
$234 billion currently sits in DAF accounts where donors have already taken the tax deduction but no charitable work has been funded.
State attorneys general are being called to investigate whether these transfers qualify as actual charitable grants.
The Philanthropy Project published an investigation this week showing $4 billion per year moves between donor-advised fund sponsors in transfers reported as "charitable grants" on IRS 990 filings. None of it reaches an operating nonprofit.
The numbers are specific. National Philanthropic Trust sent $63 million to Fidelity Charitable. Fidelity sent $194 million back to NPT. Schwab Charitable sent $120 million to Fidelity. Fidelity sent $183 million to Schwab. The Vermont Complex Systems Institute visualized the 42 largest DAF sponsors as a network, and the result looks like a money circle.
These transfers appear on tax filings as charitable grants. They inflate each sponsor's reported giving numbers. But no food bank received a dollar. No shelter got funded. No program was delivered.
The investigation matters because DAFs now hold $234 billion in assets. Donors took their tax deductions when they deposited funds. There is no legal deadline requiring that money ever reach a charity. Jon Pratt, a longtime nonprofit advocate, calls it "trapped value."
State attorneys general are now being called to examine whether sponsor-to-sponsor transfers should legally count as charitable grants or whether they represent special accommodations for investment clients moving assets between platforms.
The pattern is worth watching. Federal fraud enforcement hit $16 billion in intended losses this year. A patent examiner paid $500,000 for financial conflicts. And now the charitable sector has its own transparency problem, measured in billions.
People Also Ask
Q: What is a donor-advised fund? A: A charitable giving account where donors deposit money, receive an immediate tax deduction, and recommend grants to nonprofits over time. There is no deadline requiring distributions.
Q: How much money is sitting in donor-advised funds? A: Approximately $234 billion as of 2025, according to the Philanthropy Project. Donors have taken tax deductions on these funds, but much of it has not yet reached operating nonprofits.
Q: Are DAF-to-DAF transfers legal? A: Currently yes. They are reported as charitable grants on IRS 990s. State attorneys general are being asked to investigate whether these transfers provide any actual charitable benefit.
Q: Why do DAF sponsors transfer money to each other? A: The Philanthropy Project suggests these may be accommodations for investment clients moving assets between platforms, not genuine charitable distributions.