There was recently an article in VOX entitled “Google’s Larry Page gave $400 million in Christmas donations. Not a penny went straight to charity. How Silicon Valley billionaires skirt charity rules each holiday season.”   The article discusses how Larry Page gives a large amount from his private foundation to a donor-advised fund or “DAF”.  It is not clear what the purpose of that donation is.  Is it to hide the eventual grantees as the DAF has many funds and it is not easy to work out which fund gave which charity money?  This is one possibility.   Another possibility is that the gift is a way to satisfy the 5% requirement for disbursements from a US private foundation – without having to actually give “real charities” any money.   In other words, if you have a private foundation with 10 billion in assets you need to spend say $500 million per year.  Let us say you don’t want to actually give any charities any money – you can take the $500 million and give it to a DAF who holds the money and in some cases would not distribute any of it until you make a recommendation to do so.   Such a recommendation may not come for decades.

It is not at all clear what Larry Page’s motivation is.   Presumably, if he wanted to have people know which charities he was giving money to he could have either given the funds directly to a number of charities which he then would disclose on his 990 or he could put out a press release letting people know about the grants.   That deals with the first concern about transparency.

The problem with some DAFs is that they are often non-transparent about who their “advisors” are, how many accounts they have, how much is in each account – this is deliberate.  There is nothing prohibiting a DAF from being transparent – also nothing requiring it.    When a donor gives $50,000 to a DAF and it ends up going to some local hospitals it is questionable whether the is much public interest or a need for the public to know.  But when donors are receiving billions in tax relief, potentially moving around billions of dollars and sometimes using DAFs to fund unsavoury groups as other unrelated articles have discussed – at a certain point the public may become concerned and this could be a problem for the charity sector.

There is no evidence that Page used the DAF to basically avoid supporting other charities.  It is possible that Page’s foundation (the Carl Victor Page Memorial Foundation) gave the funds to the DAF and gave a recommendation that all the funds be disbursed the next day to children’s hospitals and cancer charities.   The problem is that we will never know and when billions or tens of billions are at stake in the wider DAF area it may cause some concerns. What we do know for example is that in 2017 he gave two distributions to one of the DAFs.  $80 million to one fund at the DAF that a “disqualified person” has advisory privileges and about $800,000 to another fund over which “no disqualified persons has advisory privileges”.

Larry Page apparently has a net worth of about $65 billion so he may not even fit into Trudeau’s idea of the middle class.  According to VOX, he has given $2B to charity – which is both very generous and not so much when one takes into account his wealth.  Of the funds disbursed over 15 years, VOX calculated that 96 percent went from Page’s private foundation to a DAF and only 4% was directly given by the foundation to other charities that were not DAFs.   So 96% of the donations are basically hidden and potentially some or all of that 96% even though it counted towards his disbursement requirement may still be hidden in some DAF.   Of course, Larry Page could clear up this mess quite quickly – let us see if he does.

Do we care if billionaires receive billions of dollars in deductions and perhaps little or none of the funds contributed to charities actually goes to charities that are doing real work?  Perhaps not.   Most people don’t know what a DAF is, let alone how it operates and the significant tax benefits accruing to donors especially if the donation is highly appreciated marketable securities.

While there are definitely significant differences between DAFs in Canada and the US, there are also a lot of similarities.  Just as the US government is looking at whether additional regulation of DAFs is required the Canadian government is also doing that.

Here is a quote from the VOX article:

“It makes a mockery of the rules governing foundations,” said Al Cantor, a consultant to nonprofits. “I think in virtually every case it’s some kind of last-minute realization that they haven’t met their 5 percent and they dump it into a DAF, or it’s a conscious effort to avoid public scrutiny. And both of those really are not legitimate reasons. It may be legal, but it shouldn’t be.”

There is in fact nothing illegal about a foundation choosing to give to a DAF. And trade groups and lawyers representing philanthropists say there are good reasons to occasionally do so.

Advocates have told the IRS, which has explored new regulations to police these transfers, that these gifts make sense for a variety of reasons: Say, if a donor wants to dedicate money to a troubled nonprofit but doesn’t want to hand the money over to them until the situation improves; or if a donor wants to tap the expertise of a DAF provider’s staff; or if making a donation to a controversial group overseas could put the foundation at security risk; or to make a contribution to a cause that is outside the stated scope or region of the foundation’s work; or to easily pool money from multiple foundations for joint work.

“As charitable leaders, we will concede that if a private foundation (PF) is meeting all (or a substantial portion) of its payout requirement by making grants to a DAF, and then the DAF sits dormant or not making regular distributions, this is an abuse of the public trust and a loophole that should be closed,” wrote one trade group, the Community Foundation Public Awareness Initiative, to the IRS. But, it added: “We disagree with the implication by some DAF critics that if a private foundation meets a portion of its payout requirement with a grant to a DAF, this is prima facie suspect or nefarious.”


How prevalent is this problem in the US?  Apparently it is not widespread and the VOX article notes: “When the Economist randomly sampled 4,000 foundations, it found that only 11 of those gave over 90 percent of their distributions to major DAF providers. But those foundations that do give almost all of their money to DAFs can add up to some real coin. The Chronicle of Philanthropy ran a cursory search and found $737 million that the top DAF providers took in over three years from these types of private foundations. (Given its methodology, that’s a “conservative estimate.”)”

Is this also an issue in Canada? Yes, it is an issue in Canada, but CRA does not require that registered charities that have DAFs disclose on their filings that they have DAFs.  So there may be many registered charities that we don’t even know have DAFs.   Also there is no question that some private foundations are providing funds to DAFs but as discussed above that does not necessarily mean that it is a problem.  Perhaps the private foundation in Canada which has a 3.5% disbursement requirement is giving 2% of its assets to a DAF and 15% directly to other charities – clearly exceeding their disbursement quota.   Perhaps the private foundation is giving the money to a DAF or another charity to redistribute and funds are quickly going to other ‘operating charities’.     Without knowing quite a bit about the details, much of which is not currently required to be disclosed, it is not possible to be too definitive – but it certainly can result in some people wondering whether these charitable funds are being spent appropriately.

One interesting tidbit is in attachment 18.  Apparently Larry Page spends about 15 minutes per week on the foundation.   He is Director, Chairman and President.    So he is very efficient and distributes hundreds of millions of dollars per year while only spending about 12 hours per year thinking about it.  I will leave you to think about that one.