The Common Impact Initiative: The Case for Field Research
The Opportunity
The field of fiscal sponsorship is growing by leaps and bounds, driven by the diversity of urgent overlapping problems and opportunities for reinvention that we face today: social justice, climate change, income inequality, and many others—not to mention the global COVID-19 pandemic. Adding to these broader forces are the changing dynamics of the nonprofit sector writ large. Fiscal sponsorship is finding itself at the center of the conversation around nonprofit resource sharing, consolidation, and general “repositioning”. And new generations of social entrepreneurs and changemakers are finding fiscal sponsorship an attractive and flexible alternative to forming standalone nonprofits.
These dynamics are motivating the need for a deeper understanding of the depth and breadth of the field today. Philanthropies and policy makers are asking for information on the size and shape of the ecosystem. Amidst the sector’s wider focus on impact, how or to what degree do fiscal sponsors define impact, and do we measure it? Finally, we know that the breadth of fiscal sponsorship practice extends far beyond the bounds of self-identifying fiscal sponsors to include organizations engaged in sponsorship, intentionally and accidentally, as well as fiscal-sponsorship-adjacent work that shares common practices and concerns, but carried out by nonprofits not identifying as fiscal sponsors. These include large, multiunit nonprofits and networks, found often in healthcare and higher education, as well as multi-entity structures commonly found among community land trusts and nonprofit development corporations.
Of the many virtues and values that fiscal sponsorship offers, two areas of interest and opportunity rise to the top today: Equity/Access and Efficiency/Sustainability. Anecdotal evidence abounds and some quantitative data exists illuminating various aspects of how sharing resources can lead to greater sustainability, mission focus, and economies of scale, as well as provide improved and more equitable access to nonprofit resources. But we are still lacking in field-wide, collective data on these fronts, which is predicated on our ability to identify some key data points for each that can be tracked across a diverse ecosystem of sponsors.
Equity & Access: Fiscal sponsors offer ready-at-hand, “plug and play” infrastructure for leaders of new, grassroots, and community-based projects, virtually eliminating the prevalent knowledge, legal, and financial barriers to starting a nonprofit . This attribute of fiscal sponsorship alone presents a solution for many of the access and equity challenges that face BIPOC and other marginalized leaders in accessing the resources of the tax-exempt sector and advancing the interests of their communities. Indeed, many of the first fiscal sponsors were formed in the wake of the Civil Rights Movement out of the need to provide communities of color greater access to government funding streams. Effective fiscal sponsors share their resources through equitable sharing power and authority with the leaders of the projects they serve. Yet, the fiscal sponsorship field remains largely white-led, reflecting the larger profile of the nonprofit sector. Fostering the development of more fiscal sponsors of, by, and for historically marginalized communities is of urgent importance in the larger struggle for racial equity and social justice. Fiscal sponsors can be a catalyst for transforming the nonprofit sector from its role as participant in racial and social inequity to that of agent in uplifting leaders and communities that have been long disenfranchised.
Efficiency & Sustainability: Fiscal sponsors are collective capacity builders. As fiscal sponsors add more projects and grow their shared support, the overall capacity of the community of projects grows as well, a much more efficient way to build capacity than one organization at a time. Using data from SMU Data Arts, Impact Commons conducted a comparative study of a sample of 475 arts organizations operating below $2 million in budget in Southeastern Pennsylvania. We found that they spent between 17% and 27% of revenues on the equivalent back office supports that a comprehensive fiscal sponsor can provide for between 10% and 15% of revenue. That is a “savings” difference or re-allocation to program or other priorities of about 10%.
In addition to financial economies, we also find that a number of fiscal sponsors provide a wide range of wrap-around consulting services, as well as community learning and collaboration. As collective capacity builders, they are also collective risk managers. The cooperative nature of the fiscal sponsorship business model--typically a percent of each dollar received is allocated to shared expenses--means projects are only paying for services when money comes in, allowing them to weather vagaries in cash flow and other events through the collective strength of the portfolio of projects. This ultimately leads to greater overall sustainability of the community. Even in the event of a catastrophic event, such as the COVID-19 pandemic, a fiscal sponsor is able to mobilize stabilizing resources and support more quickly for its projects, than if they were operating independently.
Over the past year, we have heard from many fiscal sponsors that COVID led to a great upswing in demand for support from new projects, as well as dramatically increased revenues for many existing projects. This precipitous growth motivated strategic planning, self-assessment, and an urgent need to evaluate the question of “right size”. How big do we want to be? If we want (or need) to grow, how do we do it responsibly? The need for working capital and change capital for sponsors (and their projects) is greater than ever, elevating the urgency for field-level case making to philanthropy.
The Status
Fiscal sponsorship has been around since 1959, when TSNE MissionsWorks launched the first recognized “Model A” comprehensive fiscal sponsorship practice. The first (and still only) authoritative text on the field appeared in 1993 by attorney Gregory Colvin, Fiscal Sponsorship: Six Ways to Do It Right, and has since gone through several reprints. In 2004, the National Network of Fiscal Sponsors (NNFS) was formed as the field’s first trade group, with support from the W. K. Kellogg Foundation. Fiscal sponsorship operates within the bounds of charitable and tax law, but has remained relatively untested in case law.
Today, the San Francisco Study Center (fiscalsponsorshipdirectory.org) tracks about 300 fiscal sponsors. This is complemented by the membership rolls of NNFS (fiscalsponsors.org), which number about the same, though the degree of overlap in these databases is unknown. Beyond the self-selected groups in the above two databases, anecdotal evidence from funders and nonprofit leaders indicates, as mentioned above, that there are many informal or occasional fiscal sponsors: nonprofits that provide fiscal sponsorship support when the need arises, often not as a publicly advertised service or significant component of their mission.
Over the past year, the lack of shared impact data for the field, as well as census-level data describing the shape and size of the fiscal sponsorship ecosystem has revealed itself to be a significant barrier to our work, as well as the growth of the field. For example, lack of baseline data limits the ability to find fiscal sponsor matches, refer sponsees from one fiscal sponsor to another as well as better understand different approaches to shared services and how an organization can benefit from them. Moreover, there is still a dearth of awareness in the sector and among nonprofit leaders of the potential and breadth of support and impact that sponsors can offer. Members of the funding community certainly see the potential fiscal sponsorship holds and are investing in sponsor creation and capacity building. Yet, as a whole, the philanthropic sector seems to be stymied by a lack of evidence about the size and the impact of the fiscal sponsorship overall.
The first and last field scan for fiscal sponsorship was commissioned in 2006 by Tides, following a 2005 study by TSNE MissionWorks of funder attitudes toward fiscal sponsorship. With the increased national reckoning with racism and social injustice, three studies have been commissioned examining equity-oriented practices in fiscal sponsorship and intermediaries in general: Centering Equity in Intermediary Relationships (Change Elemental, 2019), commissioned by Ford Foundation; Reimagining Fiscal Sponsorship in Service of Equity (TSNE MissionWorks, 2021); and most recently, Leveraging Fiscal Sponsorship for Equity (PROVOC & New Venture Fund, 2021, forthcoming). Building on these studies, which were more focused on patterns of practice, we now need to map the landscape to strengthen the case for fiscal sponsorship, as well as identify opportunities for strategic growth.
Big Questions
The field is at an exciting point of inflection after 60 years of practice, and more information is needed to effectively navigate the path forward. The below three foundational questions loom large on the landscape.
How is the field described, what are its defining attributes, and how big is it?
Can we define patterns (shared thinking) around the impact that a fiscal sponsor has on their projects (sponsees), such that patterns of common impact may be established for the field?
Does fiscal sponsorship offer a more equitable, scalable, sustainable, and impactful path for nonprofit work than the traditional, fully independent nonprofit route?
To begin to delve into these questions, Social Impact Commons is organizing a multi-year Common Impact Initiative, a collaboration among a consortium of convening, data holding, and supporting organizations for the fiscal sponsorship community. Our first step will be to assemble this group to gather some baseline data from known (self-identified) fiscal sponsors reachable through the networks of the consortium. Before the end of 2021, keep an eye out for a survey instrument. If you are a fiscal sponsor reading this post, we hope you will participate.
Here’s to the road ahead!