What types of nonprofits can use fiscal sponsorship?
This post was originally published on Schulman Consulting’s blog.
In the first post in this series, we covered some of the basics around fiscal sponsorship and described the two of the most frequently used models. (If you haven’t read that one yet, you can find it here.) Just as a refresher, the term “fiscal sponsorship” encompasses a variety of relationships between the project and the sponsor and this makes it flexible enough to benefit both projects and sponsors in a number of different scenarios. In this post, we’ll go into who can make use fiscal sponsorship and share some examples of how it’s being used. First, let’s look at the ‘who.’ Fiscal sponsorship involves two parties – the sponsor organization and the ‘project’ or sponsored organization. So, what kinds of organizations can be fiscally sponsored? Here are just a few of the many possibilities:
- A startup nonprofit that hasn’t yet filed for its 501(c)(3) paperwork, or that has filed, but is still awaiting its nonprofit status
- A small or startup organization that intends to file for its 501(c)(3) status, but wants to get its operations up and running first
- A small organization that wants to focus its resources on its mission and fundraising around that mission – not on accounting, filing and other admin work
- A nonprofit, seasonal arts festival or one-time arts exhibition that wants to raise funds but doesn’t want to manage an on-going nonprofit
- A documentary filmmaker who has a social mission and wants to fund their film as a nonprofit without having to go through the regulatory of setting up an independent 501(c)(3)
- A organization launched with philanthropic seed capital to tackle a specific social issue
- A coalition created by a consortium of nonprofits that want to house the new partnership at a neutral, impartial home
- A large, established organization that wants re-focus its mission, and reduce overhead
- An organization currently “housed” in a one-off situation, perhaps at a university or foundation, that has grown to the point where it needs a home that can better meet its requirements
- A program started with a nonprofit that has grown to the point where it can “leave the nest” and become a separate organization
And there are many, many other examples, but hopefully this gives you an idea of the breadth that fiscal sponsorship allows for. Now, let’s look at what types of organization can be a fiscal sponsor:
- Community Foundations
- Religious Organizations
- Others providing one-off or occasional sponsorship
- “Institutional” Fiscal Sponsors – organizations dedicated to fiscal sponsorship
- Any nonprofit
That’s right: technically, any nonprofit can become a fiscal sponsor to another organization. However, this should be approached VERY cautiously for first time sponsors as there are legal and accounting regulations that must be met to prove the validity of fiscal sponsorship. In addition, there are significant operational, staffing and financial policies that should be in place before fiscal sponsorship is undertaken. So, what does this all mean for you? First off, it means you now have a fuller view of the types situations where fiscal sponsorship may be a viable option. If you’re in one of the situations described above, hopefully it gives you some ideas of how fiscal sponsorship may apply in your specific situation – and how you can increase the focus on your mission and decreases the resources necessary to manage the overhead of your organization. Join me on December 5, 2019 at 2 pm Eastern Time for Candid’s webinar, The Benefits of Launching Your New Venture with a Fiscal Sponsor, to learn more about fiscal sponsorship and to get a head start on planning your own fiscally-sponsored project.