Annual Disbursement Quota
What is the Disbursement Quota (DQ)?
Each Benefaction Donor Advised Fund is required to disburse a minimum of 5% of the average value of the Fund annually to qualified donees, as per the terms of the Donor Agreement and in line with CRA regulations. This requirement comes into place the calendar year following the account funding, and the required dollar amount is reported on the quarterly Donor Report as the “Annual Disbursement Quota”. The DQ is subject to the current minimum grant amount as outlined in Benefaction’s Grants Policy, such that any calculations below this threshold will be stated as $250.
The calculation explained
As mentioned above, each fund is required to disburse a minimum of 5% of the average value of its assets annually. The calculation uses the quarter-end asset values for the prior two calendar years (eight quarters in total). This means the required disbursement amount can be calculated once the prior year-end account balance is reconciled, and the amount reported on the donor’s quarterly statements will remain static throughout that year.
Please refer to the page following if you’re interested in further details on the approach for determining the asset value.
Benefits of the approach
The objective and benefits of our approach are two-fold:
It is easy for our donors to plan their annual giving, since they will know the amount they need to disburse for the current year, from the time they receive their first quarterly statement from Benefaction; and
The calculation directly aligns with the approach used by CRA in determining Benefaction’s annual disbursement requirement for the overall foundation.
What this means for fundholders
Benefaction’s Donor Advised Fund account holders can make their grants earlier in the year, knowing with certainty the total amount they are required to give that year. We strongly encourage our Fundholders to accelerate the timing of their grants as it gets the much-needed funds in the hands of their supported charities sooner and helps to alleviate the year-end rush for all parties involved.
Questions?
The team at Benefaction would be pleased to answer any questions you have regarding our disbursement quota. We can be reached at info@Benefaction.ca or by telephone at 416-915-0700 and toll free at 1-866-910-8227.
Examples
Please find below two fictional examples of the calculation. The key difference between the two scenarios is that the ABC Family Fund has eight fully funded quarters included in the calculation, whereas the XYZ Family Fund has only five quarters with a Fund Asset Value and the first three quarters (prior to funding) are input with a zero value.
Note: If the disbursement quota calculated falls below our minimum grant size of $250, the disbursement quota automatically becomes $250.
