“Intermediary” is one of those terms in philanthropy often used and little understood. By linking donors to nonprofits in specific causes, intermediary organizations have become powerful players over the past decade, with more big funders like the Ford and Gates foundations turning to them to distribute billions of dollars in grants.
Often intermediary groups have their own staffs and boards to guide grant making and are perceived as being more efficient and better connected to nonprofits on the ground than the funders that back them. Research from the Bridgespan Group, a philanthropic advisory firm and intermediary organization itself, found that more than half of the nearly 200 collaborative or pooled funds that it studied had been created since 2010. Together, they deployed about $2 billion to $3 billion in grant dollars annually. The spike reflects “increasing interest in new ways of giving,” Bridgespan explained.
However, a new report from the Center for Effective Philanthropy shows nonprofit grantees might not be quite as enamored with intermediaries as some donors are. Grantee experiences with intermediaries are neither more positive nor more negative than those with other funders, according to CEP, which based its report on 10 years of grantee survey data from more than 62,000 grantees of 364 funders based in the United States, including 24 intermediaries.
While the definition of an intermediary can be fuzzy, depending on who is giving it, CEP said it chose to exclude donor-advised funds, community foundations, and giving circles — entities that generally follow the original donors’ specific wishes about which organizations should receive funds, while playing an intermediary role in processing grants. CEP focused on “organizations that receive money from other institutional funding sources (‘originating donors’) to distribute on their behalf, such as collaboratives and regrantors.” Conservation Lands Foundation and Groundswell Fund are two such organizations highlighted in the report.
To cover their overhead costs, some intermediaries charge a fee for their services. About 35 percent of the collaboratives in Bridgespan’s study collected fees from donations. The amounts varied. When Rockefeller Philanthropy Advisors, an intermediary funder, serves as the legal and fiduciary host of a collaborative or other initiative, it typically keeps around 8 percent of the total grant funding from the originating donor, said Heather Grady, a vice president who oversees funder collaboratives.
“We provide financial management and legal guidance,” she said. “We are the employer of record, so we take care of many [human resources] issues. For this, we assess a percentage, and we think a fair amount is 8 percent. Some charge more, some charge less.”
As a whole, nonprofits found intermediary funders to be slightly more open to grantees’ feedback about their grant-making strategies and slightly more willing to engage in frequent contact with grantees, the CEP report said. However, while funders and intermediaries have suggested intermediaries could be more adept at advancing equity in the field, grantees saw intermediaries’ commitments to DEI as on par with originating donors.
Intermediaries were seen as understanding less about grantees’ work than originating donors and were less likely to provide multiyear or unrestricted funding, grantees reported. That is likely because intermediary funders are constrained by the type and duration of funding they received from the original donors and may face their own fundraising challenges, CEP noted.
The results were “surprising,” said Elisha Smith Arrillaga, CEP’s vice president for research, because funders often choose “to use intermediaries because it can help them get closer to communities. It can help them align better with their equity strategies. It can help them take on different kinds of risk.”
“But the data really shows that it depends a lot on who you choose.”
The report recommends that funders consider several questions when determining whether to work with an intermediary. This includes what kind of experience they hope to provide grantees and whether they are providing enough financial support to enable long-term and flexible funding to grantees. Intermediary donors also are encouraged to look for ways to strengthen their relationship with grantees — for example, asking them what they are doing well and what they could do differently.
The findings stand in contrast to most of the existing research, which has been from the perspective of the intermediaries or the funders who use them. What has been missing is the grantees’ perspective; the findings show they’re not totally satisfied, Smith Arrillaga said.
“Intermediaries aren’t a silver bullet,” Smith Arrillaga said. “It has to be a really thoughtful choice that’s aligned with the objectives you’re trying to achieve.”
The report, funded by the Ford and Bill & Melinda Gates foundations, could provide a blueprint for donors seeking to work with intermediaries. It was completed in consultation with Big Brothers Big Sisters of America and Co-Impact, an intermediary funder group, as well as other organizations affiliated with intermediary funders such as Arabella Advisors, Bridgespan, and Philanthropy Together.
While narrowly focused, CEP’s survey findings reinforced a lot of the benefits donors can reap when they take a considered approach to grant making through intermediaries, said Lee Bodner, president of the New Venture Fund, another intermediary group.
Two organizations spotlighted by CEP for being consistently highly ranked by grantees — Groundswell Fund and Conservation Lands Foundation — have succeeded in connecting with nonprofits on the ground because their funders provide less restrictive awards, said Bodner. The New Venture Fund incubated the Groundswell Fund.
“Ultimately, the intermediary is going to be influenced by how flexible it is allowed to be by its own donors,” he said.
Groundswell provided more than $17 million in grants for reproductive rights work in 2023. Chief Advancement Officer angelique nguyễn green told CEP that the organization’s funders had minimal influence on its grant making.
“We have been fortunate to raise much of our revenue in terms of general operating support, which gives us the maximum flexibility to conduct our own grant making,” nguyễn green said.
