The $10 billion charity no one has heard of

by Andrew Wright
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Philanthropic Transparency

“The $10 billion philanthropic mystery: Unraveling the Enigma of the SDG Impact Fund”

A donor-advised fund dedicated to advancing the United Nations Sustainable Development Goals has recently experienced a staggering transformation, morphing from a relatively inconspicuous charity into an entity boasting assets comparable to giants like the Andrew W. Mellon and David and Lucile Packard foundations.

The SDG Impact Fund, headquartered in Cartersville, Georgia, underwent a meteoric rise, escalating from $238 million in assets in 2020 to a jaw-dropping $10 billion in 2021. This astonishing growth has raised inquiries from experts in philanthropy and tax matters, particularly due to its association with the rapid ascent of cryptocurrencies and digital art assets.

One significant challenge in comprehending the SDG Impact Fund’s remarkable expansion is the comparatively lax legal reporting requirements for donor-advised funds (DAFs) when compared to private foundations. DAFs are not obligated to disclose the identities of donors, making it impossible to discern the sources of donations. Furthermore, it remains unclear how the fund has deployed these donations for charitable purposes or whether donors are receiving any associated benefits. Requests for clarification directed to SDG Impact’s leadership have gone unanswered.

In contrast to foundations, which are mandated to allocate at least 5% of their total assets annually towards charitable endeavors, DAFs offer more flexibility in handling non-cash gifts such as stocks and collectible artwork, converting them into charitable contributions. Recent years have witnessed substantial fluctuations in cryptocurrency donations to large DAFs like Fidelity Charitable, reflecting the volatility in crypto markets. In 2021, donations to Fidelity accounts in cryptocurrency reached an equivalent of $331 million, a significant increase from the previous year’s $28 million, largely due to the elevated values of cryptocurrencies offering donors the opportunity for more substantial tax deductions. However, in 2022, this figure dropped to $38 million amid market turmoil triggered by the FTX crypto exchange’s collapse.

Researchers Helen Flannery and Brian Mittendorf, examining 990 filings with the Internal Revenue Service, uncovered that a substantial portion of the donations to the SDG Impact Fund in 2021 consisted of non-cash assets, including art, collectibles, and crypto-gifts, notably nonfungible tokens (NFTs). NFTs are unique digital assets frequently traded as art.

The fund’s assets experienced an extraordinary surge over a span of just a few years, beginning with $117,000 in 2017 and escalating to $238 million by 2020. Astonishingly, its 2021 Form 990 reported assets of $10 billion. What’s perhaps even more perplexing is that the fund maintained a similar asset figure in 2022, despite the cryptocurrency market’s downturn and a significant reduction in new donations to the fund. This has raised suspicions about whether the fund’s primary objective has lately been to maximize tax benefits for donors holding NFTs and appreciating cryptocurrencies.

To add to the mystery, it remains unclear how much of the gifts received by the SDG Impact Fund were in the form of NFTs or cryptocurrency. While the fund reported over $9.8 billion in non-cash donations in 2021, only a fraction of this sum was itemized on the filing’s Schedule M, leaving nearly $8 billion unaccounted for. This lack of transparency, coupled with the absence of a signature from an independent accounting firm on the latest IRS tax filing, has raised concerns and questions about the fund’s operations.

Despite its stated commitment to the U.N. Sustainable Development Goals, the SDG Impact Fund’s website leaves much to be desired in terms of clarity. It offers donors the opportunity to contribute to various causes, but it does not explain the connection between these contributions and the achievement of the Sustainable Development Goals. Additionally, the website does not disclose the amounts allocated to each cause, as DAFs are only required to identify grantees receiving over $5,000.

Critics argue that DAFs like the SDG Impact Fund allow wealthy individuals to derive tax benefits from charitable giving without ensuring that these contributions are directed towards actual charitable purposes aligned with the Sustainable Development Goals. The meager amount of grants made by the fund relative to its massive asset base raises concerns about its commitment to philanthropic endeavors.

In conclusion, the SDG Impact Fund’s exponential growth, coupled with a lack of transparency regarding its operations and sources of donations, has cast a shadow of doubt over its true philanthropic objectives. The questions raised by experts in the field underscore the need for increased scrutiny and transparency in the world of donor-advised funds. The fund’s leaders’ reluctance to provide answers only adds to the intrigue surrounding this $10 billion philanthropic enigma.

This article was originally published by The Chronicle of Philanthropy and is provided courtesy of The Big Big News. Alex Daniels is a senior reporter at the Chronicle. For inquiries, please contact [email protected]. The AP and the Chronicle receive support from the Lilly Endowment for philanthropy and nonprofit coverage and are solely responsible for this content. For more philanthropy coverage by AP, visit https://bigbignews.net/philanthropy.

Frequently Asked Questions (FAQs) about Philanthropic Transparency

Q: What is the SDG Impact Fund, and why is it in the spotlight?

A: The SDG Impact Fund is a donor-advised fund (DAF) that supports the United Nations Sustainable Development Goals (SDGs). It has gained attention due to its rapid growth, increasing its assets from $238 million in 2020 to $10 billion in 2021. This growth is notable because of its connection to cryptocurrencies and digital art assets, raising questions about transparency and philanthropic practices.

Q: How does the SDG Impact Fund’s growth compare to other charitable foundations?

A: The SDG Impact Fund’s growth is remarkable, putting it on par with renowned foundations like the Andrew W. Mellon and David and Lucile Packard foundations. This rapid expansion has raised eyebrows within the philanthropy community.

Q: What concerns have been raised about the SDG Impact Fund’s transparency?

A: Transparency concerns stem from the less stringent reporting requirements for DAFs compared to private foundations. The fund is not required to disclose donor identities or provide clear details about how donations are used for charitable purposes. These factors have contributed to questions about the source of donations and the fund’s operations.

Q: Why is the relationship between the SDG Impact Fund and cryptocurrencies significant?

A: The SDG Impact Fund’s growth appears to be closely tied to the surging popularity of cryptocurrencies and digital art assets. The use of non-cash assets, including cryptocurrencies and nonfungible tokens (NFTs), in philanthropy has drawn attention, as it may provide donors with substantial tax benefits.

Q: What steps have been taken to investigate the SDG Impact Fund’s operations?

A: Researchers have examined the fund’s IRS filings and noted that a significant portion of donations in 2021 consisted of non-cash assets, including crypto-gifts and NFTs. However, the lack of transparency regarding the nature and sources of these gifts has prompted further investigation and calls for transparency in donor-advised funds.

Q: How much of the SDG Impact Fund’s assets are directed towards charitable causes?

A: In 2021, the SDG Impact Fund reported $10 billion in assets but made only $4.3 million in grants, which amounted to less than one-tenth of a percent of its asset base going to charitable causes. This has raised concerns about the fund’s commitment to its stated philanthropic goals.

Q: What can be done to address transparency issues in donor-advised funds like the SDG Impact Fund?

A: Experts and critics are advocating for increased scrutiny and transparency in DAFs to ensure that donations are used for legitimate charitable purposes aligned with their stated missions. They also call for better reporting and disclosure practices to provide a clearer picture of DAF operations and their impact on philanthropy.

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