Fiscal Sponsor Bulletin: Important Changes (and potential) for Government Awards

Every year federal, state, and local governments quietly drive roughly one third of all the revenues coming into nonprofits, far surpassing contributions from individual donors and private philanthropy.   For the most part, these awards have historically been given to institutions with big budgets, sophisticated systems, and highly specialized staff.  Fiscal sponsors can play a key role in shifting this paradigm towards a more equitable distribution framework supporting grassroots communities.

Social Impact Commons’ recent fiscal sponsorship field scan reported, across 100 fiscal sponsors surveyed, that half of the respondents accepted and managed nearly $600 million in government awards and contracts. This seems  an impressive amount until we reflect that that figure represents around 1/10th of 1% of total government awards to nonprofits. 

We understand why fiscal sponsors are wary of accepting government awards on behalf of the projects they partner with.  Government awards come with diverse sets of rules and expectations. For example, government grants are governed by OMB Uniform Guidance, a common set of rules government agencies and their recipients need to follow. While government-related contracts are governed by the Federal Acquisition Regulation (FAR). And many government agencies are authorized to have their own supplemental guidance too. These byzantine application and reporting requirements coupled with limited ability to recover administration costs have led many sponsors to conclude that they are not ready to set their systems up for managing government awards. . . perhaps, until now. . . 

Thanks to the sustained efforts by nonprofit advocacy groups, further revised and improved OMB rules will become effective October 1, 2024.  A few key changes that we want everyone to know include:

  • Increasing de minimis indirect cost rate from 10% to 15% with stronger rules so federal agencies and states can’t bypass this requirement;

  • Updates the definition of Modified Total Direct Costs to include up to the first $50,000 of a subaward.

  • Advanced payments as the default so long as certain criteria are met;

  • Increase audit threshold to $1 Million;

  • Increase equipment threshold from $5,000 to $10,000; and

  • Revised and clarified language in Notice of Funding Opportunities, clarified expectations regarding recipients and sub-recipients, and exclusive use of English language is no longer required.

We hope these forthcoming changes to the Uniform Guidance more fully summarized here will catalyze fiscal sponsors to adjust their systems and embrace a role where they serve as capacity-building centers helping bring more resources to communities while navigating the complexities of this particular revenue resource.  

Yes, challenges will remain, including antiquated EIN restrictions fiscal sponsors are all too familiar with. That said, the forthcoming changes could unlock new possibilities for groups partnering with fiscal sponsors. We invite you all to connect with us tomorrow and reflect on the opportunities you see within government funding and the internal readiness to support fiscal sponsors. Learn more about the conversation and sign up to join here.

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In the News: ‘Fiscal Sponsorship Is On the Rise’ by Eden Stiffman