Fidelity Charitable Gift Fund has topped the list of this year’s Philanthropy 400, The Chronicle of Philanthropy’s annual ranking of the 400 largest charities. The charities are ranked based on how much is raised from private sources. This is the first time a charity focused on donor-advised funds has taken over the top spot on the list.
The 25-year-old Boston-based charity knocked United Way Worldwide, founded in 1887, from the No.1 spot it has held for all but one year since the list debuted in 1991. (The Salvation Army topped the list in 2006.)
“You never have that kind of a huge vault in the charity world, where a young charity does so well,” Chronicle of Philanthropy editor Stacy Palmer told the San Francisco Chronicle.
Fidelity, a nonprofit “spinoff” of Fidelity Investments, collected $4.6 billion in 2015, a 20 percent increase from the year before, while United Way saw a 4 percent drop in donations to $3.7 billion.
Donor-advised funds, which some have likened to a charitable savings account, have become increasingly popular in recent years.
The account is set up at a public charity, like Fidelity Charitable, and while the money can’t be withdrawn, the donor is allowed to retain some control over how the money is invested.
Donors get a tax deduction when they make a contribution; however, there is no deadline for distributing the funds. Donors can even bequeath control of the fund to their children.
Critics of the funds argue that the money would be better put to use more quickly instead of possibly languishing in an account for years. Also, funds often have to pay out fees to wealth management companies, such as Fidelity Investments, for managing the money, reports The Washington Post.
“There is a potential problem with so much money going to donor-advised funds and delaying when it actually reaches charities that are helping families and communities,” said Aaron Dorfman, chief executive of the National Committee for Responsive Philanthropy.
Says Boston College law Professor Ray Madoff: “These things afford tremendous tax benefits to donors and financial benefits to the sponsoring organizations. The problem is, this isn’t why we have charitable tax benefits. The reason we have them is to encourage the flow of dollars to organizations engaged in charitable work.”
However, donor-advised funds and even some traditional charities argue that these fund encourage more giving by offering donors greater flexibility. They also point out that the money does eventually go to charity.
Pam Norley, president of Fidelity Charitable, says the popularity of donor-advised funds has increased because they make giving more accessible. She adds that Fidelity Charitable monitors accounts and encourages regular contributions from donors.
According to Norley, Fidelity has strived to make online-giving transaction painless for donors.
"A lot of what [donor-advised funds] have brought to charities and our donors is really technology," she says. "It’s an intermediary between the donor and charity that allows the process of giving to be simpler and more transparent and easier for record-keeping."
Brian Gallagher, president of United Way Worldwide, says his organization has no problem with donor-advised funds; in fact, United Way itself receives some donations via donor-advised funds.
“If it’s a convenient vehicle for individuals to give to charitable causes, and we’re a recipient of that, we’re good with that,” he said of the funds. “We don’t see ourselves as competitive with Fidelity.”
Chronicle of Philanthropy editor Stacy Palmer told ABC News that she expects donor-advised funds will continue to expand.
"There is a transformation going on in how donors give," she said. "It means donors have a lot more control over their donations than if they just write a check to United Way."
Feeding America, which supplies most of the country’s food banks, came in third on the list's top five, followed by Schwab Charitable, another donor-advised fund, and Catholic Charities USA.