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Donor-Advised Funds Drive Denver Giving

Barbara Grogan created a donor-advised fund that she and her family could use to distribute their contributions to charity.

Little Pub Company owns 23 bars, including Don's Mixed Drinks.

Little Pub "lead Dog" Mark Berzins says he learned about donor-advised funds in the mid 2000s and has found them a great vehicle for his company's philanthropy.

While foundations and other aid organizations generate most of the attention in the charity scene, Colorado philanthropists are increasingly turning to a relatively new vehicle -- donor-advised funds -- to efficiently and effectively dole out their charitable contributions. And they're not alone: According to the latest figures from the National Philanthropic Trust, assets in donor-advised fund accounts grew by $5.5 billion in 2011 to a total of $37.4 billion for the year.
Barbara Grogan spent 22 years growing her Western Industrial Contractors business as the company's founder and CEO. After selling the company in 2004, Grogan began setting up a family foundation with the profits from the sale of the company that she hoped to use to aid the community while concurrently engaging her kids and grandkids in the practice of family philanthropy.
 
Then Grogan had a change of heart.
 
Just before the completion of her foundation, Grogan learned the benefits of a donor-advised fund. She tore up the paperwork for the private foundation that same day and instead created a donor-advised fund that she and her family could use to distribute their contributions to charity. Barbara Grogan created a donor-advised fund that she and her family could use to distribute their contributions to charity.
 
A charitable bank account
 
But why did Grogan and so many other donors choose donor-advised funds as the vehicle for their giving?
 
According to the IRS, a donor-advised fund is "a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account."
 
What this means is that, after you invest in a donor-advised fund, your money can grow tax-free and, whenever you want, you can direct some or all of the money in the fund to the eligible charity of your choice. An added benefit is that you can funnel stocks or other assets through a donor-advised fund, not just money.
 
"It's like your charitable bank account for years to come," explains Rebecca Arno, VP of Communications of the Denver Foundation.

Donor-advised funds are the fasting growing charitable giving vehicle in the country, Time recently reported.
 
According to the National Philanthropic Trust (NPT), the number of donor-advised fund accounts in the United States increased by 4.2 percent in 2011 to 177,357, and assets under management in all donor-advised fund accounts totaled $37.4 billion, an all-time high. But in perhaps the most important metric -- payouts -- donor-advised funds showed the most impressive figures: According to the NPT, payout rates from 2007 through 2010 in donor-advised funds exceeded 16 percent in each year. In contrast, the payout rates at a typical private foundation hover around 5 percent, including overhead.

Achieving your philanthropic goals
 
Margie Gart, Director of Philanthropic Services at Rose Community Foundation, agrees. She explains that donor-advised funds comprise $27 million of Rose's $275 million in assets. "Advised funds as a charitable vehicle are growing, and they have had enormous growth over the past few years," she says.
 
Gart says that all types of entities make use of donor-advised funds, from individuals to families to couples to friends to groups to companies of all kinds, but setting up a donor-advised fund is just the start of a successful charity effort. She says Rose Community Foundation works to advise its clients about potential giving opportunities, and then helps them track the progress of those funds. This sometimes leads to collaborations among the users of different donor-advised funds, organized by Rose staffers, around issues and topics they want to jointly affect with their donations.
 
"The real work is working in partnership with the donor to help them have the kind of impact they want to have with their philanthropy, achieving their philanthropic goals," Gart says.
 
Indeed, Sarah Hogan, Co-Founder of Barefoot Public Relations, says she now advises her clients to use donor-advised funds if they want to make an impact on their communities. She says a smaller company might have a pot of money to donate to specific causes, but might not have the internal resources to manage that effort, so a donor-advised fund is a relatively easy way to allocate that money.

The alternative, Hogan says, is for a company to set up its own foundation -- complete with a board of directors and meetings -- which can be slightly daunting for smaller companies just looking to make a difference.

One example is the Little Pub Company, owner of numerous bars and pubs in Colorado. The LoDo-based company makes use of a donor-advised funds in order to distribute grants and other charitable giving.

Little Pub "Lead Dog" Mark Berzins says he learned about donor-advised-funds in the mid 2000s and has found them an ideal vehicle for his company's philanthropy.Little Pub Company owns 23 bars, including Don's Mixed Drinks.

"I just didn't have it on my radar that it would be a good turnkey solution for a company like mine," says Berzins. "It was sort of an aha moment."

Before starting its donor-advised fund, Little Pub's philanthropy "was very piecemeal," he adds. "It started to become a real problem."

As the company then owned eight bars and now has 23, the problems of administration and budgeting would have snowballed, adds Berzins. "It solved both of those problems," he says.

Berzins says Little Pub's focuses to giving to arts organizations, but the flexibility of the company's fund allows for some wiggle room."As a donor advisor, I can change that focus anytime," he says, pointing to donations to Hunger Free Colorado and animal organizations as examples. "I like my giving to go to a grassroots level."

At the end of 2012, The Denver Foundation counted 550 donor-advised funds totaling $247 million in assets. The Foundation's total assets totaled $606 million at the end of last year, which means donor-advised funds represented 54.5 percent of the group's funds and 41 percent of its assets. The Denver Foundation's donor-advised funds range in size from $10,000 up to several million dollars.

For a last word on the subject, Barbara Grogan's take on philanthropy pretty much says it all. "I’ve seen money empower people. I’ve seen money destroy people. I want it to be a positive influence, to help my children and grandchildren learn the joy of giving," she explains. "We have been very blessed, and we always need to remember that much is expected of those to whom much is given."

This story was produced in partnership with the Denver Foundation as part of a series on giving and philanthropy. Read more stories from this series here.

Photos by Kara Pearson Gwinn.

Read more articles by Mike Dano.

Mike is a freelance writer and executive editor of FierceMarkets Telecom Group.
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