Really I think the specific the problem here with DAF's is just misaligned incentives, the DAF values the donors donation but the government is the one that has to pony up the tax rebate. Obviously there is some auditing mechanism here where the valuation can't be too far from reality otherwise the government would come down on it but in practice it seems like that is one of their benefits. I think the more interesting and subtle problem though is that the rebate is awarded at donation time instead of when the money actually gets put to use which lets the DAF accrue fees on government money.

in a highly stylized example:

1. A donor gives the DAF a $10m yacht

* DAF gives a donor $10m donation receipt

* Government gives donor <donor tax rate> * <donation receipt> rebate i.e. .30 * $10m = $3m

2. DAF liquidates yacht into $9m cash and invests it

* the DAF charges .006 management fee on this for 5 years with a 5% return

3. At the end of 5 years the DAF liquidates its investments and puts all of that money to work on a cause.

* ~$11.2m goes to work on a charitable cause

* DAF has collected ~340k in fees

This is more or less the description the DAF in the article but now but we've simplified to assume a conservative consistent return and that the whole donation gets put to work at once at the end of a set term whereas more likely it would be slowly liquidated over time. Now let's assume that instead of the government paying up the tax rebate when the donation is made that it is paid out when the money left the DAF and went to work on a cause.

1. donor gives a DAF $10m yacht

* DAF values it at $9m and gives the donor <donor tax rate> * <donation receipt> rebate i.e. .30 * $9m = $2.7m

2. DAF liquidates yacht into $9m cash, covers their $2.7m rebate outlay and invests $6.3m

* the DAF charges .006 management fee on this for 5 years with averages a 5% return

3. At the end of 5 years the DAF liquidates its investment and puts all of that money to work on a cause.

* ~$7.8m from the DAF goes to work on a charitable cause + a $2.7m from the government to match that original rebate for a total of ~$10.5m

* DAF has collected ~238k in fees

What's the difference here?

1. The government saves $300k on a rebate because the DAF has to liquidated the yacht to come up with the money to pay the rebate so the valuation is based on something the reflects the actual cash

2. The government keeps <rebate amount> ($2.7m in this case) in its bank account for the 5 years while is in the DAF. This means the government can use it for it's own operations over that time period rather than it sitting in the "warehouses of wealth". It also means the DAF can't collect fees on this money because it is not managing it.

I'm not trying to make a statement on if the government should or should not subsidize donations to charity, just point out how that subsidy seems to be leveraged by the introduction of DAFs against its original intent.

sorry for the terrible formatting