Those of us who care deeply about the nonprofit community find ourselves working overtime to navigate this period of economic, social, and political uncertainty. While moments of uncertainty can cultivate confusion, I believe they can also breed a level of clarity and vision that produces tools for sustainable change. There are significant opportunities to strengthen our sector and deepen the positive impact we make every day in our communities.
It is in this context, that the concept and practice of fiscal sponsorship should be discussed amongst the nonprofit and philanthropic communities. I believe that fully embracing the concept will prove to be a wise investment in sustaining and scaling the social sector.
While many are still unfamiliar with the concept, for over 50 years organizations have practiced fiscal sponsorship with remarkable success. Recently, leaders in the field have worked collaboratively to raise awareness, advance understanding, and provide comprehensive guidelines for best practice. Yet, the practice of fiscal sponsorship continues to be mistakenly relegated to a fiscal agent definition, undervalued, or widely misunderstood.
A fiscal sponsor is a tax-exempt, nonprofit corporation that receives and disburses funds for programs that may or may not have their 501(c)3 status from the IRS. Beyond this basic definition, fiscal sponsorship relationships have several models of practice and the support a fiscal sponsor can provide to an individual, organization, or project can be tailored to strengthen and best meet administrative and financial needs. Overall, fiscal sponsorship is a sustainable, cost-effective way to implement programs, bring together groups to collaborate around an issue, or test new approaches to social change.
However, there are three major challenges to embracing fiscal sponsorship that we must address as a sector. First, institutions and individuals often misunderstand the basis of fiscal sponsorship relationships and the value of oversight and fiscal accountability. They are hesitant or unwilling to give money to another organization other than the one they support. Second, there is an overlying idea that fiscal sponsorship is only for start up organizations. Yes, it is an outstanding tool for organizations or individuals who need a solid administrative, financial, or legal infrastructure while they focus on launching their programs. Yet, fiscal sponsorship cannot and should not be confined to this “only for start ups” characteristic. The various models of practice and levels of support can be applied depending on the specific types of activities or stages of organizational evolution. Third, even those who understand the concept of fiscal sponsorship, often confuse terms which leads to a dilution of the comprehensive model. This is particularly the case in terms of the definition of fiscal agent vs. fiscal sponsorship.
Fiscal sponsorship and fiscal agency are not one and the same. The distinction between the two lies not only in the definition, but also in the overall approach to each practice. Fiscal agents direct funds based on the direction given by projects or individuals, often with no connection to mission, and without a strategic or layered approach. Fiscal sponsors are more than a conduit and direct and retain full control of how all funds are dispersed. By definition, projects must fulfill the sponsor’s mission. And fiscal sponsors also take a layered approach to supporting recipients by also offering critical infrastructure tools that allow projects to focus on their programmatic goals.
In a time when there is limited resources and an increase in demand and need across all social issues, we must move beyond these challenges. Fiscal sponsorship is one of the best-kept secrets and a tool that can strengthen and transform our sector. In light of the recession, emerging leadership that needs support, significance for scale and the need to focus on programming, I am calling for us to embrace the concept. This means educating ourselves, sharing our understanding, and being willing to support fiscally sponsored organizations. They should not be marginalized.
In addition, I believe there should be more education and promotion on fiscal sponsorship amongst the philanthropic community. This can occur on a large-scale level at conferences, meetings, publications, through online resources, or by accessing and highlighting resources like the National Network of Fiscal Sponsors (NNFS). But education and sharing should also be included in one-on-one conversations when funding priorities and requirements are considered. A recent article in the Chronicle of Philanthropy suggests that foundations will reassess their funding priorities as their assets begin to recover. It would be helpful if the philanthropic community would explore cultivating more willingness to fund capital infrastructure projects, or provide general operating support for nonprofits. Direct support to fiscal sponsors to continue efforts to build the capacity of the sector will also go a long way in strengthening the sector as a whole.
Embracing the concept includes asking hard questions. Fiscal sponsorship is not without its challenges. But challenges don’t remove the fundamental potential, nor the proven impact. I am heartened by the efforts of my colleagues and groups like NNFS who diligently work to provide ongoing support, guidelines, and understanding on how to implement best practices for both sponsors and recipients.
Tides is deeply connected to a thirty-five year journey that is rooted in embracing a visionary approach to an idea, and connecting people and resources in order to manifest the idea into a reality. This inspires social change on an individual, community, national, and global level. This is the legacy and visionary approach we will continue to take in regards to the discourse on fiscal sponsorship. We are proud to be part of a growing community who are clear about its definition, impact, and potential.