Intermediary Organizations (IOs) and Corporate Giving: Partnerships That Can Add Value and Increase Impact
Tags: Philanthropy, Intermediary, Organizations, IO, Corporate, Chris, Park
By Chris Park, Corporate Giving Consultant
For the more than 25 years that I have worked in corporate philanthropy I have repeatedly had people comment, “How hard can THAT job be?”
Yes, directing where a company donates its charitable contributions is a great job, but it isn’t an easy one. And it is made harder when companies have too few staff focused on giving and a broad, international giving program. This is where Intermediary Organizations come in.
Intermediary Organizations (IOs) are organizations who can help relieve the burden companies face with:
- Managing administrative tasks
- Helping to develop strategically focused areas of giving
- Identifying appropriate partners
- Doing appropriate due diligence
- Managing the grantor/grantee relationship, and
- Orchestrating evaluation and reporting
While all of these services add value for companies (used individually or in combination), in my opinion the most valuable is the role IOs play in managing risk, doing much needed vetting of potential partners.
Determining which organizations are appropriate partners for companies to give to is a challenge, especially when giving outside the United States where countries have their own sets of rules and regulations for charitable giving. Using an IO to help with the vetting process relieves the company of the responsibility of ensuring that the nonprofit partner is in compliance with U.S. laws/regulations including:
- Embargo and Trade Sanctions which may be in place with certain countries
- Executive Order 13224 regulating giving to organizations that may support terrorism
- Foreign Corrupt Practices Act (FCPA) prohibiting bribes or improper payments to government officials, and
- U.S.A. PATRIOT Act, also focused on terrorism, requiring checking people involved with the potential grantee against watch lists
In addition, vetting must consider country level rules and regulations to ensure that potential recipients can receive foreign funding. This can take a good deal of time and expertise which the company may or may not have in-house.
If companies have limited staff and giving portfolios in multiple countries, including those like India and China which have complex rules and regulations, I would highly recommend partnering with one or more Intermediary Organizations.
For those unaware of how the IO/company relationship works, basically the company agrees to create a donor advised fund with the IO. Once funds are established in the donor advised fund, the company can take a tax deduction for those funds even though grants will not have been made with those funds yet. This fund is designated for giving only on behalf of the donor company and is subject to the donor’s “designation” for the donations. However, it is important to know that once the fund is established, the IO is legally in control of the funds while the company is no longer responsible for the due diligence done on any given donee. This means that the IO will guide the company away from donations that have any risk involved and it behooves the company to listen to and accept the guidance from the IO.
IOs are often content and/or geographic experts. A company may find an IO with deep content area knowledge that aligns with the focus of the company’s giving or a focus in a geographic area in which the company wishes to give. Some IOs have broad content expertise and geographic reach. Finding an IO that fits content and geography is step one in deciding which, or how many, IOs to use.
Consideration should be given to the size of the IO and their experience handling grant and portfolio sizes that fit the company’s plans for giving. Choosing an IO with experience working with corporate clients may be preferable since it would signal that they know how a corporate giving culture works. Making sure there is a comfort level that the IO has the appropriate number of staff who know how to manage corporate relationships and the organizational capacity to manage the size of the new program is also important on the front end.
Also key to successful company/IO relationships is the fit with goals, values and culture. Finding an IO partner that has these in common with the company is paramount to building a long-lasting and trusting relationship. While this is an easy thing to write it is much more complicated in practice. Sorting out the “fit” takes time and a lot of conversation. Starting with sharing organizational and program goals will set the stage for discussing how each partner operationalizes those key components of their work. Discussing expectations for how the staff will work together must be done early in the relationship. Sorting out what is important to each partner at the start will help avoid problems later.
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EX: The company wants grant reports weekly. The IO traditionally provides reports monthly. The staff discuss this and discover that the company is responding to top management’s request for more frequent updates but could make bi-weekly work. The IO isn’t capable of doing weekly reporting but could change their processes to do bi-weekly instead of monthly.
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If the partners don’t have a solid sense of what is “driving” the other partner, or a comfortable relationship that allows for candid discussion about the “whys” of what they want or feel they need, then the relationship breaks down with both sides feeling the other is unreasonable. Once this type of disconnect begins to happen the relationship is in peril and success for both partners is compromised.
If the IO is not willing to be transparent and open about how they operate, make decisions, respond to and resolve problems, work with grantees, gather and report results, then they are not the right partner for the company. If the company is not open about how they operate, respond to and resolve problems,, then they are not the right partner for the IO.
Once the decision is made that the two organizations have common goals and objectives and work expectations, it is recommended that they create an agreement or “contract” that lays out how they plan to proceed.
Potential problems with IO/corporate relationships include:
- The IO underestimates the volume of work and their capacity to manage it and thus underperforms
- The company makes unreasonable and/or unexpected demands of the IO
- The company is inflexible about recommendations made for funding and pushes back on the IO when a grant is denied
- IOs feel their own reputation with their company partner will be undermined if the chosen grantees are not successful, thus some might underreport problems and/or challenges
- The agreement between the IO and the company is too short and subject to change which inhibits the building of a solid relationship built on experience and trust
- The company doesn’t t give the IO the authority it needs to perform the role it is assigned thus grantees are confused about the role each partner plays
- The IO does not build a strong relationship between the grantee and the company (if that relationship is desired by the company)
- A regular system of communication is not set up leaving one or more partners feeling they are not in the know
It is recommended that part of the agreement between partners includes a regular, perhaps yearly, evaluation of the relationship and the role each partner is playing.
In my career I worked for one company that had an international giving portfolio in 13 countries, including some with complex giving environments. We chose to partner with an IO that was working predominantly in our focus area of empowering youth through education and had experience doing grantmaking in all of the countries in which we wished to make contributions. Our IO partner introduced us to a number of fully vetted potential partners in each country and helped us choose those that fit our goals/values best. They facilitated our communication and reporting with each partner and helped us to bring all of our partners (along with in-country representatives from our company) together for shared learning and team building. This activity solidified our relationships in-country and across our content area globally which enhanced our ability to be more impactful in serving local youth in each location.
I am clearly a fan of using IOs in the right circumstances. They can be cost effective and make the work more efficient (grants often get distributed faster using an intermediary). But these relationships only work if a commitment is made on both sides to take the time to build common goals and regular, honest communications. I know from first-hand experience that IOs can add tremendous value to corporate giving programs when the timing, circumstances and fit is right!
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About the Author
Chris has been working in corporate philanthropy for the last two dozen years and has served as the President of the Dayton Hudson/Target, Washington Mutual Bank, Lucent Technologies and New York Life Insurance Company foundations. She has served on the board of the Council on Foundations and chaired the corporate philanthropic council of The Conference Board. She also chaired the board of Philanthropy New York, the New York regional association of grantmakers.
Chris retired from full time work in early 2014. She now consults with companies on best practices in corporate philanthropy. In addition to consulting, Chris is an avid volunteer, gardener and grandparent.
She can be reached at 732 403 6140 or chrisandgaryp@comcast.net.
