By Phoebe So, originally published on  The Center for Effective Philanthropy, July 2, 2024

In the philanthropic sector, intermediaries and fiscal sponsors play a vital role. They are the critical links that connect resources from donors to historically overlooked causes and marginalized communities. Pooling funds, providing back-office support, and absorbing risk enable grassroots groups to focus on their core mission and impact. 

Recently, I had the privilege of attending the Human Rights Funders Network Festival session titled “In the Chrysalis: A Time for Reimagining Fiscal Sponsorship.” The rich discussions and insights shared by my fellow attendees got me thinking about fiscal sponsorship and intermediary funds in a new light — through the lens of supply chain analysis.

Intermediaries act as an interface and buffer between large institutional funders and small, often unconventional recipients. This setup has unlocked significant funding flows to chronically underfunded areas. A 2023 report by Social Impacts Common and the National Network of Fiscal Sponsors found that fiscal sponsors enabled over $2.6 billion in charitable activities that may not have happened otherwise.

 At Fenomenal Funds, we’ve seen first-hand the power of this model. As a feminist funding collaborative, we act as an intermediary mechanism to channel resources to all 47 Prospera International Network of Women’s Fund members across various regions. By pooling contributions from our four funding partners and hosting them through a fiscal sponsor, we’re able to overcome restrictions on funding amounts, geographic focus, and thematic priorities that any individual donor would face. The result is a more flexible, responsive, and impactful funding vehicle for feminist movements.

However, for this funding chain to be genuinely empowering rather than exploitative, there are entrenched power dynamics and mental models we must confront. Too often, upstream funders’ due diligence requirements and strings attached place an outsized burden on downstream actors. Grassroots groups can end up spending excessive time on funder-facing activities rather than community-facing work and risk and administrative costs can get displaced to those with the least capacity to absorb them.

Shifting Power by Embracing Risk and Building Trust

As one of the attendees at the above-mentioned session astutely pointed out, many large donors have an overly narrow conception of their risk tolerance. With their sizable balance sheets, solid organizational infrastructure, and significant influence, they are well-positioned to take on more uncertainties in their grantmaking. Accepting more risk would enable, or perhaps we should say empower, them to loosen or eliminate unnecessarily onerous restrictions, freeing up intermediaries to be more facilitative and less controlling.

Practically, this could involve simplifying application and reporting requirements, providing multiyear unrestricted funding, and trusting intermediaries to make grant decisions based on their deep knowledge of the communities they serve.

Another significant takeaway for me was that trust must flow in all directions, not just top-down. Trust is the bedrock of any successful relationship, and in the philanthropic resource chain, it enables intermediaries to effectively support and empower grassroots groups.

Conversely, when intermediaries are chronically underfunded, it can strain trust in both directions. Inadequate resources limit intermediaries’ ability to provide high-touch capacity building and responsive support, which may lead grassroots groups to perceive them as gatekeepers or feel that their work is being constrained. By prioritizing trust through sufficient funding and genuine communication, funders, intermediaries, and grassroots groups can build strong, transparent relationships that lay the foundation for more impactful, transformative collaboration.

Moreover, the current dynamic of scarce funding trickling down from large donors creates artificial and unhealthy competition between intermediary funds and established movement organizations. Instead of collaborating to grow the overall resource pie for social justice movements, we are pitted against each other for limited slices. This scarcity mindset saps energy away from generative co-creation.

Moving money in a way that genuinely shifts power requires funders to rethink their role in the ecosystem. It’s not just about the quantity of funds moved but the quality of the relationships and the equitable distribution of risks. In an era of poly-crises — from climate change to widening inequality to democratic backsliding — we need alternative models of resourcing social change that are more adaptable, resilient, and accountable to communities. And we need to resource these models.

It’s About More than Moving Money: Shifting Dynamics

At Fenomenal Funds, we’ve learned that taking on and sharing risk as a funding collaborative, rather than downloading it to intermediary funds and grant recipients, is a crucial part of the power-shifting equation. This means having open and honest conversations with our partners about the costs and risks involved in their work, collaborating to develop appropriate security and risk-mitigation strategies, and allocating resources accordingly. It requires us to continually deepen our understanding of the contexts in which our partners operate and invest in building our capacities to manage and share risks responsibly.

Applying feminist principles [PS1] in our grantmaking necessitates a commitment to providing not just financial resources but also time, care, and flexibility. We recognize that shifting power is an ongoing process that requires us to be adaptable and responsive to the evolving needs of our partners, which often means taking an extra step to advocate internally for more flexible funding arrangements and working closely with our fiscal sponsor to streamline administrative and legal processes that can impede the timely flow of resources.

Four Next Steps for Intermediaries

So what can we, as intermediaries, do to shift these dynamics? Several concrete ideas emerged from the Human Rights Funders Network Festival session:

• Actively share best practices and hard-won lessons across the fiscal sponsorship field, for instance, the National Network of Fiscal Sponsors has developed guidelines for fiscal sponsors and Ignita, a sister brand of Women Win has recently consolidated five feminist dimensions of Feminist Philanthropy. By pooling our knowledge, we can collectively raise the bar and avoid reinventing the wheel.

• Increase transparency around the actual costs of fiscal sponsorship. Many donors need to realize the full scope of our back-end work. Sharing benchmarking data and cost breakdowns can help educate funders and make the case for sufficient operating support.

• Approach the work with a mindset of collaboration and abundance rather than competition and scarcity. We can model the change we want to see by partnering with other intermediaries, making warm referrals, and exploring joint fundraising opportunities. If we can grow the overall pie, everyone benefits.

• Amplify our advocacy by communicating with donors in concert. When multiple fiscal sponsors and intermediaries deliver a unified message about what we need to succeed, it’s more likely to get through. We can leverage our collective “middle power” for field-level change.

Four Next Steps for Donors

Relatedly, and just as importantly, here are some key ways that large donors can be part of the solution: 

• Expand your risk appetite and give more unrestricted funding. Recognize that investing in social movements inherently involves uncertainties and that intermediaries are well-positioned to assess and manage those risks.

• Fully fund the actual cost of fiscal sponsorship and intermediary services. Ensuring the health and resilience of intermediaries benefits the whole ecosystem.

• Streamline your reporting requirements and be open to alternative forms of due diligence. Trust that your intermediary partners have robust screening and monitoring processes; don’t duplicate that work unnecessarily.

• Incentivize and reward collaboration among your intermediary grantees. Use your influence to create collective action and learning conditions rather than relying on practices that fuel competition. Consider pooled funding mechanisms that give intermediaries more flexibility.

Revolutionizing these resource chains is about restoring community agency and autonomy. As donors and intermediaries, we must use our relative power responsibly to build trust, absorb risk, and cede control. Only then can we grow a philanthropic ecosystem that is genuinely life-giving for all.

 

This article is originally published on  The Center for Effective Philanthropy, July 2, 2024