How do people enter a gift that is from Jane Doe but given through her fund at the Community Foundation?

I am new to my position and those prior to me have it set up this way....

They enter a pledge in Jane Doe's record and pay it off with the check from Community Foundation.  This is problematic when running reports because it appears that we received $2,000 ($1,000 from Jane and $1,000 from Foundation), but we really only received $1,000.

Should the gift be entered in Jane Doe's record with a note that it is via the Community Foundation and then we can soft credit the Community Foundation?

 I am interested in how people handle these situations and the rationale behind it.

Thanks. 

There is a lot going on in your question. 

A) It is illegal for a donor to use a donor advised fund to pay a personal pledge or for the donor in any way to get any benefits from the DAF gift.  There are stiff penalties from the IRS to the fund and the community foundation if you allow it so I would not create pledges for anyone who is going to pay via a DAF. 

B) The DAF is the legal donor and the Community Foundation should be hard credited and receipted (never the individual - they can be thanked but not receipted).

C) You need to determine your own soft crediting policies when they come to gifts.  They do have implications on reports and if you use SC to both then both will appear and if you give full amount to both then it double counts the amount.  i suggest searching past postings on Soft Crediting to read all about the issues and hopefully that will help you determine your own soft crediting policies.

Melissa Graves:

A) It is illegal for a donor to use a donor advised fund to pay a personal pledge or for the donor in any way to get any benefits from the DAF gift.  There are stiff penalties from the IRS to the fund and the community foundation if you allow it so I would not create pledges for anyone who is going to pay via a DAF. 

 Hi Melissa,

I was not aware that laws had been passed making it illegal for a DAF to pay a personal pledge to a non-profit.  I know the letter accompanying a DAF gift says that this cannot pay off a pledge and that the constituent may not receive any goods and services. 

Can you point me to the law that says this so I can finally have written proof?

Thanks!

As Melissa stated you can not pay off a pledge with a Donor Advised Fund of a Community Foundation if that Community Foundation say not to. Some CFs do not state one way or the other, some CFs are very specific. To that, we have been known to book the pledge on the donors record. Then we can report on it. When the gift comes in, we adjust the pledge to $0 with the note that payment was from a DAF and not applicable.  Then book the "cash" gift to the DAF and sc the donor. We list the Donor on the reference box of the DAF/Community Foundation for reference.  All our reports include soft credit donor only -- not the DAF.  We only list them in the Annual Report, and I pull that list in query.

I just want to be sure I understand.

If we receive a check from the Community Foundation for the Jane Doe Fund then we should hard credit the Community Foundation?   And maybe soft credit Jane Doe.

I see the value of getting rid of the pledge, but didn't know it was illegal. 

One more question....Do you make separate records for the donor, donor advised fund, and the community foundation?

Again,  This is just how we do it. 

 If the check is from the CF we hard credit the  CF and soft credit the donor, marking the DAF in the reference.  Sample:  a check comes in from The Community Foundation from The Joe and Joan Jones Family Fund.  We book the gift on the Comm Fdn record, put in the reference The Joe and Joan Jones Family Fund, soft credit the individual record of M/M Jones. 

 An exception, is some funds within the Community Foundation actually have their own checks.  These we make a separate record for.   Say the check is actually from the Steve and Amy Smith Fund of the Community Foundation and not on the general Comm Fdn check/paperwork.  I would make an organizational record for the Steve and Amy Smith Fund of the Community Foundation and the soft credit M/M Smith.

Hope this helps

Cindy Britz:

One more question....Do you make separate records for the donor, donor advised fund, and the community foundation?

I do prefer to make separate records for the DAF as there are some advantages.

1. On the DAF record you can set up and auto soft credit to the individual advisors so all gifts are soft credited without thinking about it.
2. You can more easily see the giving history of the particular fund.

I use the parent corporation field to record which community foundation the DAF is housed in so that I can easily query on all gifts from that foundation if need be.

Michael Sherman:

I was not aware that laws had been passed making it illegal for a DAF to pay a personal pledge to a non-profit.  I know the letter accompanying a DAF gift says that this cannot pay off a pledge and that the constituent may not receive any goods and services. 

Can you point me to the law that says this so I can finally have written proof?

Thanks!

See the following documents on the Fund Services Listserv download site

http://www.fundsvcs.org/uploads/control_and_power.pdf

http://www.fundsvcs.org/uploads/irs_response_to_daf_query.pdf

It is not up to the CF whether or not it is allowed.  Some are just better at communicating the laws they must abide by to their donors.

It should be up to your auditors whether or not even writing off a pledge after a DAF payment is allowable.  Some are so strict about the law that they will not allow it because it is giving the donor the benefit of a write off (no longer being obliged to pay a debt).  Not every auditor would allow this so you should be checking with your auditors.

If the pledge is in the same FY we adjust the gift to $0 not write it off.  If a pledge  we did not know was being paid by a DAF and it carried over the Fiscal Year, we do write it off, but only if the payment/check is in hand.  The donor has no idea that we wrote off his/her pledge and because we already have payment the donor has no chance to pull out.  I should mention, that the only individuals we even take pledges from, that even have the possibility that they could carry over, are board members and very long standing donors.

And-- Melissa, I am not sure that it is true that no pledges can be paid off through a DAF.  We have a few DAFs that have recently paid on pledges that the DAF knew were pledges.   I will check into that with our local DAFs/community foundations, our auditors and/or our lawyers.

I neglected to say that I am not a lawyer, accountant, or anything of the like and the statements I make are my own personal understanding of IRS rules.  I believe it is true that the no foundation can allow DAFs to satisfy individual pledges but it is only your auditors and lawyer's opinions that count.  They are doing their best to interpret the rule to protect your organization and your donors and some interpret it differently and may allow it.  I am just stating that it is not unheard of to have auditors not allow it.