All you need to know about fiscal sponsorship
Many people have amazing ideas for creating a nonprofit or public-benefit project, but aren’t sure how to get started or find funding. Instead of starting a new organization, you may want to consider working with an existing 501(c)(3) public charity under a formal arrangement known as fiscal sponsorship. We’re sharing all you need to know about fiscal sponsorship to help you decide if this is the right fit.
What is fiscal sponsorship?
Fiscal sponsorship is when a nonprofit organization agrees to assume legal and financial oversight for a charitable activity or project that does not have its own tax-exempt status. When you have a fiscal sponsor, your donors make tax-deductible donations to your sponsor, noting that the funds are intended for your project. Then, the sponsor passes the money to you and typically keeps a fixed amount (or percentage) for administrative services.
Why should I find a fiscal sponsor?
Starting a nonprofit requires a lot of work, including IRS and state applications and extensive annual reporting. Fiscal sponsorship may give you access to a team of dedicated professionals who handle your accounting, grants management, human resources, administration, and other needs. Not only does this make your life easier so that you can focus on your mission, it’s also less expensive and risky than operating as an independent organization. Perhaps most importantly, grantmakers typically only fund nonprofit organizations, not individuals or individual projects, so fiscal sponsorship can help you qualify for a wider range of funding opportunities.
We recommend checking out these Candid resources to decide if a fiscal sponsor is right for you:
- Our blog, What types of nonprofits can use fiscal sponsorship?
- Our free on-demand training, What You Need to Know About Fiscal Sponsorships
- Staff-selected examples of fiscal sponsorship agreements
How do I find a fiscal sponsor?
The best place to start is to look at your current affiliations and approach organizations that you are already associated with to see if they would act as your fiscal sponsor. Organizations that know you and your work may be more willing to act as your sponsor.
If you don’t have any connections, look for a nonprofit organization with a mission similar to yours and reach out to see if they would consider sponsoring your project. Candid’s GuideStar is a great place to look for nonprofits by location and mission. You can also try asking colleagues for recommendations.
Some organizations that provide fiscal sponsorship are:
- Community foundations;
- Religious organizations, such as churches;
- Institutional fiscal sponsors, or organizations dedicated to fiscal sponsorship;
- Any nonprofit who wants to—or is willing to– fiscally sponsor another.
One common question we get is whether there is a directory of fiscal sponsors and the answer is yes! The Fiscal Sponsor Directory allows you to search for nonprofit fiscal sponsors by state, service category, and keyword. However, the number of sponsors in the directory is limited so if you don’t find one there, try some of the suggestions above. You can also read Candid’s blog for more tips on finding sponsors.
How do I approach a sponsor prospect?
When approaching prospective fiscal sponsors, be ready to give a project proposal that explains:
- Your project: why it’s needed and its goals, objectives, method, evaluation, staffing, and budget.
- How your project advances the fiscal sponsor nonprofit’s mission.
- Other ways the nonprofit can benefit from being associated with your project.
Check out our proposal writing resources for help creating your project proposal.
To learn more, visit Candid’s knowledge base for the full article on fiscal sponsorship.
The information provided in this article is intended to offer general guidance on fiscal sponsorships. Candid recommends consulting with an accountant or financial consultant for detailed assistance.