‘People on the ground really do have a strong sense of what’s happening and how to move forward, and CLF is listening.’

These are the words of Christine Canaly of the San Luis Valley Ecosystem Council when asked what makes Conservation Lands Foundation (CLF) so highly rated in one of the largest datasets of grantees of intermediaries.

Organisations or entities that regrant funds – often called intermediaries – have enjoyed a sunny reputation in recent years. A number of reports, often published by organisations who themselves facilitate or support intermediaries, have argued that intermediaries will be better positioned than traditional funders to take more risks, do more ‘equity work,’ and align more with community. The reality of whether these arguments are true is less clear.

In fact, data recently published by the Center for Effective Philanthropy show that, unless chosen wisely, these may just be stories foundations are telling themselves.

Our data – which draws from the experiences of thousands of grantees of both intermediaries and more traditional funders – highlight three common such ‘stories’ and suggest three important questions for funders to ask themselves when considering using intermediaries.

1. We want to fund ‘riskier’ work, so we should not fund it directly ourselves.

Whether a nonprofit is organising union workers or teachers, looking to serve more individuals through a ‘controversial’ housing program, or working with young people who few other funders support, one could argue that for the nonprofits involved, each of these types of ‘riskier’ work requires more flexibility and more funding with fewer strings attached. However, our data show that intermediary organisations re-grant funds at lower dollar amounts and with more strings attached. To be exact, when nonprofit organisations receive grants from an intermediary versus an originating funder, the median grant is $75,000 less. Also, fewer grantees of intermediaries receive general operating support or multiyear grants.

Funders looking to use intermediaries to mitigate their own risk should consider the resources they’d need to do similar work themselves, and they should ensure that their funding for intermediaries really supports the intermediary organisations to succeed.

2. We want to fund ‘more equity’ work, and another organisation can do that better.

Equity work is under direct attack. And it’s interesting that at the moment this work is under attack, some funders would choose to continue to shift responsibility to other organisations for funding this work more directly. But our data show that on average, intermediary organisations were not rated differently from originating funders on their commitment to or communication about diversity, equity, and inclusion.

However, for our top-rated intermediaries they rated very highly on these characteristics. This points to the importance of either doubling down on the equity work you are already doing and not outsourcing it, or being much more careful in how you choose intermediaries who are doing this work to ensure their equity values align with communities. What funders should not do is assume that by their very nature, intermediaries are going to do their ‘equity legwork’ for them.

3. We want to align more with community needs, and other organisations are better positioned to do this.

This may be closest to the truth. Our data show that intermediaries rate slightly higher on understanding grantees fields. One grantee of an intermediary interviewed during our research noted that, ‘Groundswell Fund has demonstrated a model of philanthropy that actually feels so functional that I’m like, wow, there are really ways to bring this money through mechanisms that actually work for community.’

That said, the differences overall between intermediary funders and originating funders are not large – which begs the question: how do we make this alignment even stronger, for all types of funding organisations? Once again, the lesson for funders here is to not make assumptions about the capabilities of a regranting organisation, but to do the due diligence to understand the strengths of any given intermediary you are considering working with.

The goals that foundations have in mind when using intermediaries are worthy – to fund more boldly, more equitably, and in greater alignment with community needs – and it is perhaps no surprise that there is no silver bullet when it comes to achieving those goals. In our report we lay out a few questions for foundations to ask themselves when they are considering using an intermediary. Below, I’ve listed a few of those questions and added a few additional ones.

• Does the funding you provide to intermediaries allow them to provide long-term and flexible funding to grantees? This question is especially important. As part of the process of this research, I talked with one international grantee who mentioned having at least five layers of intermediary organisations between them and the originating funders. It seems it could be difficult to provide long-term and flexible funding with five layers of bureaucracy between the originating grant and the individuals on the ground doing the work.
• Do the values of the intermediary you have chosen truly align with the values of the community you seek to serve? How do you know? Ensuring that intermediary organisation values truly align with community needs is not any easy task, but it is necessary to ensure that work is truly happening ‘in partnership’ with community versus being ‘done to’ community. One grantee we interviewed noted, ‘If any nonprofit wanted to work with an intermediary funder, I would say make sure their stated mission and vision actually aligned with how they practice.’
• Even if you choose to use an intermediary, do you have a clear plan for how you will continue to build relationships directly with grantee organisations? One of the primary findings in much of our research at the Center for Effective Philanthropy, drawn from years of our Grantee Perception Report data, centers on the importance of grantee-funder relationships. An intermediary we interviewed for this research said it best ‘I cannot emphasise enough that building relationships with nonprofit grantees makes a huge difference. As we’ve learned from the pandemic, things can happen that completely shift the way you do your work, so having that relationship and being able to talk through ideas or challenges with our grantees makes for a better product at the end of the day.’

Sometimes in life and at work, we can fall into the trap of telling ourselves certain truths and not re-examining them. This study is not indicating that intermediaries should never be used, but instead, suggesting that we re-interrogate when, why, and how to use intermediaries most effectively. It is crucial to ask questions such as: Why is using an intermediary appropriate in this instance? In doing so, are you supporting an organisation that is better positioned than you are to achieve a goal, or are you avoiding and outsourcing the difficult work of relationship-building or power-sharing?

In short, will funding in this way truly get the job done better? Or is this an instance where it might make more sense to simply give folks the money directly, and let them do the work?

Elisha Smith Arrillaga, Ph.D. is vice president, Research, at the Center for Effective Philanthropy.