Funder or friend – the dilemma for local intermediary grantmakers

Olga Alexeeva

Increasingly, as described in the last issue of Alliance, international funders are using local NGO support centres to run grantmaking programmes for them. But is there a conflict of interest in making grants and at the same time providing consultations on fundraising? This question gave rise to heated discussions in our office recently when we discussed future plans for CAF Russia and how we see it in the longer term.

CAF Russia, the Russian representative office of Charities Aid Foundation, was opened in 1993 with the goal of assisting democratic development in Russia and extending CAF’s operation in this part of the world. From the very first it was clear that it was not going to be  possible to start typical CAF services (eg managing corporate donations, administering private trusts) in Russia. There was no serious corporate giving, no individual philanthropy; the non-profit sector was at the dawn of its development.

In that situation, the best way we could help was to set up a systematic technical assistance programme. This included free legal and fiscal consultations to NGOs, fundraising consultations, training, publications, a library. In a matter of months CAF Russia’s service was well known and well liked in Russia.

Becoming a grantmaker

By 1996 it was clear that the situation had changed. Growing Russian businesses were providing more and more donations, international companies were arriving in Russia. Also important for us, more and more international aid programmes and international foundations had started working in Russia as well.

Since 1996 CAF Russia has become increasingly oriented to philanthropy development and assistance to donors. We began to run grantmaking programmes funded by international and Russian donors; we implemented training projects to develop indigenous philanthropy. Long-term efforts to develop community foundations in Russia got their first positive results. By 2001 CAF Russia had finally become more a grantmaking intermediary foundation than a support centre for local NGOs. At the same time our services to NGOs are attracting more and more clients. Among the most popular topics at our Training School are fundraising, negotiating with donors and questions about tax.

Who are our clients?

This brings us to the heart of that question of identity. We asked ourselves: who we are? Who are our main clients? Whose interests should we see as a priority? On the one hand, we manage more than $7 million on behalf of international foundations, Russian and international companies and individual donors. On the other hand, since 1993 we have been a first port of call for many Russian NGOs that needed help in getting funding, resolving legal problems or finding reliable partners.

This very same question of identity is in fact being raised by other large NGO support centres in Russia which occasionally or regularly manage grantmaking programmes as well as providing services to NGOs. It is also being raised by community foundations, which started as pure grantmaking bodies but are now tempted to take on the roles of support organizations in regions where technical support for NGOs is not well developed.

This combining of roles stems partly from the fact that in a large and diverse country such as Russia, it is always going to be more effective to use local development organizations for re-granting. And when the objectives of a grantmaking programme are very complex and aimed at bring about major change, technical assistance is always likely to be necessary – and again provided by local organizations.

Take almost any priority area of international aid to Russia, like small enterprise development or social welfare reform. Any international funding organization will say that without technical assistance, training and development support there will simply be no one to give grants to. International funding organizations, quite rightly, do not automatically want to support existing practice and models; they also want to be able to draw on foreign experience or import models and practice which seem superior, and adapt them to the Russian context.

The result: local NGO support centres start announcing small grants programmes (usually grants up to $5,000 dollars) – which they certainly have enough expertise and knowledge of the sector to manage. In a situation where local grantmaking organizations as yet barely exist, where NGO support centres desperately need money to sustain their operations (re-granting is attractive because it brings in some income), where the legal system is extremely complicated and private lawyers and auditors are not only ridiculously expensive but have no idea of what ‘non-profit’ means, NGO support centres inevitably become one-stop shops for donors and NGOs. But this is where the problems of identity and conflict of interest arise.

Is prioritizing the answer?

It is easy to say: prioritize. Decide once and for all that your main client is the funder. Then you will need to establish equal conditions for all recipients of grants and technical assistance, make the process of provision of technical assistance (consultations, training) more formal, and avoid becoming deeply involved in the activities and problems of grantees or potential grantees.

And then … your service becomes less effective because it does not respond to the real needs of its recipients because these needs are being identified by formal surveys and short-term consultants that never look below the surface. The training you offer becomes more removed from real needs. You experience your first grantmaking failures because you do not know what is really going on in the organizations you support or what they most need to be effective.

Alternatively, you may decide that your main clients are those who receive funding. You are a friend of your grantees, you know them intimately, you can read between the lines and look behind the screens.

And then … you become involved in their activities. If you are working, for example, with AIDS victims or homeless children, it will happen in the very first month. But you cannot be involved with everyone equally. As a result you face conflicts of interest. Fairness and equality in grant competitions are gone, your employees develop a circle of their favourite clients and start lobbying on their behalf. Instead of providing formal training in sustainability, your trainers write proposals for potential grantees at weekends. Technical assistance may become highly effective, grantmaking is not. And over-involvement of a grantmaker in its grantees’ projects limits their independence and lessens their long-term chances of survival.

Funder or friend? This dilemma tends to result in changing of staff, constant rethinking of priorities, hopeless efforts to combine a formal style of grantmaking with a friendly and involved style of technical assistance.

Separate the two roles?

If prioritizing isn’t the answer, why not just divide the two roles: let grantmaking agencies do only grantmaking and support organizations do only supporting. You could opt for a strict division between the grantmaking and technical assistance departments of an organization or even a split into two organizations; or a total reliance on outside consultants to provide technical assistance, limiting the organization itself only to grantmaking, or a formal attitude to technical assistance, understanding from the beginning that a programme is not going to bring about real change.

But there are downsides to each of these solutions. Unless an organization is very large, a split may not be easy in practice, and the problems of conflict of loyalties and prioritizing still arise. Nor is it easy for an organization to decide to do only grantmaking or only technical assistance. Local donors rarely support infrastructural projects or activities such as those provided by NGO support centres, and local NGOs are too poor for their fees to sustain support centres. As a result, these centres tend to be dependent on foreign funding. But donors’ priorities change all the time, and NGO support centres are forced by economic necessity to follow their shifts in strategy, becoming grantmaking agencies today and support organizations tomorrow. They are donor-driven rather than client-driven; they simply cannot afford to take the plunge and opt for one or the other.

In CAF Russia we have decided to go for a split: to separate our donor programmes from our NGO support services. All consultations and training will be delivered by Russian CAF (Consultations for Associations and Foundations), a separate legal entity despite the shared acronym – a sign that we ourselves still could not resolve the dilemma of whether to be funder or friend? We do not know yet whether the split will work because we have only just started the process.

Olga Alexeeva is Director of CAF Russia. She can be contacted by email at

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