Fiscal Sponsorship 101
What’s a fiscal sponsor?
A fiscal sponsor, or management commons, is a nonprofit organization that shares with multiple independent missions a common corporate structure, tax exemption, and insurances, as well as staff and systems for managing your finances, human resources, legal, fundraising, marketing, and other areas of back office support.
There are multiple “models” of fiscal sponsorship, seven or eight depending on how you count, each designated by a letter of the alphabet.
You are likely familiar with the Pre-approved Grant or “Model C” form, which is perhaps the most widespread approach, offered by many nonprofits. “Model C” allows individuals and companies without their own 501(c)(3) tax exemption to receive grants and donations, which pass through the sponsor (the tax-exempt nonprofit) as a re-grant to the “project” (the term for an independent mission operating under a fiscal sponsor’s umbrella).
But did you know that fiscal sponsorship can be a way to access more robust, long-term support for your work?
Fiscal sponsors, in particular Comprehensive or “Model A” sponsors, are shared infrastructure platforms for the nonprofit community. Unfortunately, when most people hear “fiscal sponsorship” they think of it as a solution for 501(c)(3) tax exemption and incubation support for start-up nonprofits or temporary projects. But there is a lot more support sponsors can offer! “Model A” fiscal sponsorship can offer access to complete, shared, back-office staff and infrastructure for projects and established organizations alike, either as a short-term or “forever” solution.
Fiscal sponsors provide the following integrated support.
Staff & Board
A full-charge, back-office team and shared governance.
Systems
Documents, policies, practices, and technologies for management.
Corporate Structure
Legal formation, tax-exempt status, and insurances.
Compliance
Keeping in good stead with regulators and tax authorities.
Fiscal sponsorship can address a wide range of needs.
For-Profit Businesses
You are a for-profit business working on a short-term or long-term social good project that could qualify as charitable, such as a media company producing an educational documentary, or offering services to low-income communities. Your project could find a quick and easy home with a fiscal sponsor.
Individual Change Makers
You are an individual culture bearer, social entrepreneur, change maker, artist, or community leader with a great social benefit idea or project you want to undertake. But you don’t have a nonprofit, and you need support. Do what you do best, and have a fiscal sponsor take care of the rest!
Nonprofit Organizations
You are an established nonprofit with your 501(c)(3) looking to save money or grow capacity by sharing back office staff and functions like bookkeeping, marketing, legal support, HR, etc. You may also seek a safe haven to explore new programs, business models, or generally reimagine your model.
Collectives & Collaborations
You are a collective or a collaborative of individuals and/or organizations working together on a project or initiative. You need a “neutral”, shared management platform where you can access administrative support for your work and distribute financial and other risks more equitably.
Frequently Asked Questions
Is fiscal sponsorship only for start-up nonprofits or temporary projects?
No. Comprehensive fiscal sponsorship can be a solution for sharing back office staff and systems among established nonprofits, without having to give up your nonprofit, board, mission or vision. For start-ups or projects without an entity or tax exemption, a fiscal sponsor can be either a temporary support solution or a “forever” home for your work.
Is fiscal sponsorship only for organizations that need a 501(c)(3) to receive contributions?
No. Other forms of fiscal sponsorship, notably comprehensive fiscal sponsorship, offer more robust wrap-around support: staff for finance, HR, legal, fundraising, and marketing, as well as insurances, regulatory/tax compliance, and key management technologies.
Is fiscal sponsorship more expensive than managing on my own?
In most cases, no. In fact it allows you to save costs while adding capacity. A recent study by Social Impact Commons examined 475 arts organizations in Southeastern PA operating below $2M in budget and found that they spent between 17% and 27% of their income on the same back office supports a fiscal sponsor can offer for between 9% and 15%—a savings of about 10% of income!
Is fiscal sponsorship only for projects and organizations with small budgets?
No. The above economic and value of integrated support holds true for projects and organizations up to about $10M in budget!
Will I lose control of my mission, vision, or decisions that I care about?
No. Fiscal sponsors are co-managers with you for everything behind the curtain. Your public face remains independent: your brand, donor/funder relationships and decisions about vision, mission, and organizational development remain with you (and your board, if you have one). Fiscal sponsors are like shopping malls and projects like the individual storefront businesses. The individual businesses share lots of common resources provided by the mall (parking, common space, wayfinding, security, etc.), but retain their independent brands, customer relationships, and secure space for their assets.
Will working through a sponsor impede my ability to pay for things and operate?
Not so. Quality fiscal sponsors help keep you out of financial trouble and make sure the financial house is in order, but should not stand in your way of maintaining smooth operations.
Will sharing infrastructure place my assets at risk?
No. Comprehensive fiscal sponsors manage all of your revenue and expenses, though only with your authorized instruction and through fully restricted fund accounting. Staff and systems may be shared, but there is no borrowing or sharing financial assets among sponsored organizations.
Is fiscal sponsorship an exotic or untested nonprofit model?
No. The “models” that have been identified are just ways to describe tried and true nonprofit structures. Fiscal sponsorship is actually just multi-program management—like a theatre managing multiple productions, a hospital with many different clinics, or a university with multiple schools and departments. Only with fiscal sponsorship, your brand, mission, vision, and core relationships remain independently yours.
Are funders and donors hesitant to work with fiscal sponsors?
This is increasingly not the case as the funding community is embracing fiscal sponsorship as a means of promoting greater sustainability in the nonprofit sector. Where we have encountered hesitancy, it’s almost always an issue of understanding of or familiarity with fiscal sponsorship, not hard or considered policy. A bit of clarification and education from the sponsor usually sets things right.