white paper on comprehensive fiscal sponsorship

7/29/2019 White Paper on Comprehensive Fiscal Sponsorship

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By Joshua Sattely, Esq.


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2

The purpose o this paper is to provide readers

with a thorough understanding o the emerging feld

o Comprehensive Fiscal Sponsorship (CFS).

It is intended or use by:

Individualsandgroupsconsideringusingascal

sponsor to acilitate their mission-related work

Organizationsconsideringoeringscal

sponsorship services

Nonprot,foundationandlegalpractitionerswho

wish to inorm themselves about this topic


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1a w h i t e p a p e r : O n C O m p r e h e n s i v e F i s C A L s p O n s O r s h i p

table o f Contents

Executive Summary 2

I. Introduction 5

II. Mission Alignment 6

III. Te Memorandum o Understanding and Advisory Boards 7

IV. Ease o Entry 8

V. Ongoing Compliance 9

VI. Nurturing Support 10

VII. Addressing Misconceptions 12

A. Donor Advised Fund vs. Fiscal Sponsorship 12

B. Comprehensive Fiscal Sponsorship for the 501(c)(3) 13

C. Incubator Only? 16

VIII. Intangible Benets o Comprehensive Fiscal Sponsorship 16

IX. Ease o Exit 18

X. Conclusion 19


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a w h i t e p a p e r : O n C O m p r e h e n s i v e F i s C A L s p O n s O r s h i p2

exeCutive summary

Tis white paper examines the contours and constructs o Comprehensive Fiscal

Sponsorship (CFS), a sub-practice o the broader field o fiscal sponsorship. ypically

fiscal sponsorship describes a relationship in which an unincorporated group wishing

to conduct charitable activities afiliates with an existing 501(c)(3) nonprofit with a

compatible mission. With Comprehensive Fiscal Sponsorship, the parent organiza-tion, in accepting the group as one o its programs, provides legal and financial

oversight as well as accounting, human resources and other back-ofice support.

Fiscal sponsorship has been practiced in varying degrees since at least 1959 when the

Massachusetts Health Research Institute, now Tird Sector New England (SNE),

incorporated and began sponsoring research and community-based public health

activities. In 2004, a group o fiscal sponsors rom around the country created the

National Network o Fiscal Sponsors (NNFS) to share and promote eective,

responsible practices in the field.

Fiscal sponsors receive grants and other tax deductible contributions that are allo-

cated in support o project activities. Such payments are usually disbursed in theorm o payments to project sta, vendors, contractors and grantees.

Fiscal sponsors provide this support only to groups whose activities urther the

sponsors mission and tax-exempt purpose. Te level o engagement between sponsor

and project varies, but at a minimum all fiscal sponsors:

Retaincontrolanddiscretionastotheuseofthefunds

Maintainrecordsestablishingthatthefundswereusedforsection

501(c)(3) purposes

Limitdistributionstospecificprojectsthatareinfurtheranceoftheirown

exempt purposes.

A Uni qU e An d Vi tAl Ro le

Comprehensive fiscal sponsorship contemplates a more integral, connected role

or the sponsor than other models. Te nature o CFS means that sponsors must

exercise great care in screening potential new projects. When, ater careul consider-

ation, a fiscal sponsor accepts a new project, the project becomes a program o the

sponsor, part o the same legal entity. Te sponsor, thereore, has a vested interest in

its success. Because o the total assumption o legal and nancial liability, such

relationships should not be equated with so-called scal agency, conduit or

pass-through arrangements. In act, a CFS relationship is the converse o an agency

arrangement, in which a principal is in control and directs an agent to carry outactivities on its behal. In CFS, the sponsor and the project are both part o the same

legal entity, governed by the sponsors board o directors.

CFS urnishes projects with comprehensive personnel policies, liability insurance,

financial and administrative expertise, and keeps projects abreast o and trained on

new government regulations as they arise. Having these reliable operational mecha-

nisms in place aords project leaders peace o mind, eliminating many o the stresses

that can derail an operation.


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impRoVing pRogRAms

Te intangible benet o CFS to projects and their leaders is critical. A leaders time

and attention will not be sidetracked by the plethora o issues inherent in managing

back ofice operations. Project sta work towards mission ulfillment knowing that all

administrative and compliance issues are being eficiently addressed. CFS keeps the

engines o their projects humming, allowing passionate, mission-driven project leaders

and sta to ocus on the activities that are core to the projects existence.

Even large projects may find that the quality service and support oered by CFS are

advantageous and cost eective. Te large size and unified inrastructure o most

CFS organizations create economies o scale otherwise unavailable to stand-alone

smaller entities, maximizing administrative eficiencies while minimizing the costs o

back ofice support and overhead. Tis is one reason why existing 501(c)(3)

nonprofits are increasingly seeking out established comprehensive sponsors as

long-term solutions to meet their needs o lower costs and increased proficiency.

Despite the growth and widespread acceptance o fiscal sponsorship, certain miscon-

ceptions linger. One concern voiced occasionally by oundations is that fiscal sponsors

are actually sponsoring organizations that manage donor advised unds. However, itis clear rom a careul analysis that, with rare exceptions, these two constructs are not

at all similar. Te three-pronged denition o donor-advised unds contained in the

Internal Revenue Code is dierent in key respects rom the practice o scal spon-

sorship. Such misconceptions are ully addressed in this White Paper.

Oten an aterthought, ease o exit is a significant advantage o CFS. When a

stand-alone nonprofit organization winds up its operations, it must do so in compli-

ance with time-consuming and oten complex IRS and state requirements. When a

CFS project terminates its operations, all assets previously maintained by the project

willsimplybespentoutonmission-relatedpurposes.Likewise,ifaprojectremains

viable but wishes to become independent or find a new sponsor, a well-drated fiscalsponsorship agreement should provide that all project specific assets and liabilities be

transerred to the new entity upon termination o the agreement.

Sponsorship with a reputable CFS practitioner conveys several messages to ounda-

tions, other unders and the public. It says: (1) this project has been through a

thorough evaluation process that determined it has the capacity to achieve its

underlying objectives; (2) all back-ofice operations o the project are managed by

competent, experienced proessionals ensuring maximum transparency; (3) project

sta receive proper compensation and good benefits, increasing retention and

minimizing burnout; and (4) the project will be able to ocus on the mission and

not be distracted by administrative burdens and complex compliance issues.

Whether oundation, charitable initiative or fiscal sponsor, due diligence coupled

with an open mind to creative solutions like comprehensive fiscal sponsorship can

contribute substantially to advancing the purposes or which the social sector exists.

CFS stretches charitable dollars urther and more eectively than most stand-alone

small to midsized and even many large nonprofits could ever on their own. CFS also

oers a realistic, honest approach to not only survive, but excel in the challenges o

our day and those that lie ahead.


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The term fiscal

sponsorship actually

reers to several diferent,

oten overlapping

arrangements. Fiscal

sponsors receive tax

deductible contributions

that are then allocated in

support o projects.

1 r. rul. 68-489, 1968-2 C.B. 210

2 Chronology o Fiscal Sponsorship, T Fcal soo

Dctoy at tt://www.caloodctoy.og/

coology.

3 Brie History, Td scto nw eglad at

tt://www.t.og/about/o

4 natoal ntwok o Fcal soo at

tt://www.td.og/couty/twok-at/

/

what is fisCal sp onsorship?

Te term fiscal sponsorship actually reers to several dierent, oten overlapping

arrangements. Te common denominator is generally that a group wishing to

conduct a charitable program without incorporating or obtaining Internal Revenue

Service (IRS) recognition finds an existing 501(c)(3) nonprofit to serve as its fiscal

sponsor. Many groups, though charitable in nature, lack the legal status they needto receive grants rom oundations, individual donors and government agencies. In

recent years, existing tax exempt charities have also turned to comprehensive

sponsors, realizing benefits that extend beyond tax-exempt status such as enhanced

back ofice eficiencies, cost savings and other value inherent in comprehensive

fiscal sponsorship.

Fiscal sponsors receive tax deductible contributions that are then allocated in

support o projects. Such unds are usually disbursed in the orm o payments to

project sta, vendors, contractors and grantees.

A fiscal sponsor is able to oer this support only to groups whose activities urther

the sponsors mission and tax-exempt purpose. Te level o engagement betweensponsor and project varies greatly, but at a minimum all fiscal sponsors must:

Retaincontrolanddiscretionastotheuseofthefunds

Maintainrecordsestablishingthatthefundswereusedforsection501(c)(3)

purposes

Limitdistributionstospecificprojectsthatareinfurtheranceoftheirown

exempt purposes.1

501(c)(3) organizations acting as fiscal sponsors that ail to conorm to these

requirements jeopardize their own exempt status.

Fiscal sponsorship has been practiced in varying degrees since at least 1959 whenthe Massachusetts Health Research Institute, now Tird Sector New England

(SNE), incorporated and began sponsoring community-based public health

projects and research laboratories.2 SNE has since expanded and now oers

Comprehensive Fiscal Sponsorship (CFS) to groups o people involved in many

types o civic engagement activities in their communities.3 Over the years, SNE,

along with other like-minded organizations throughout the country, independently

developed a unique brand o fiscal sponsorship known as CFS.

In 2004 these groups came together and created the National Network o Fiscal

Sponsors (National Network) to share and promote eective, responsible practices

in the field as well as gain a deeper understanding o the current practice o fiscal

sponsorship around the country. Founders o the National Network includedCommunity Partners, Colorado Nonprot Development Center, Earth Island

Institute, PHFE Management Solutions, CIF o the San Francisco Foundation

(now Community Initiatives), SNE, and ides Center.4
http://www.fiscalsponsordirectory.org/chronology.phphttp://www.fiscalsponsordirectory.org/chronology.phphttp://www.tides.org/community/networks-partners/nnfshttp://www.tides.org/community/networks-partners/nnfshttp://www.tides.org/community/networks-partners/nnfshttp://www.fiscalsponsordirectory.org/chronology.php


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A core tenet and legal

requirement o any fiscal

sponsorship relationship is

that the purposes o a

potential project must be

consistent with the

sponsors own mission.

5 Col, Ggoy. Fiscal Sponsorship; 6 Ways To Do It Right,

study Ct p, 2005.

6 See r. rul. 68-489, 1968-2 C.B. 210

Most members o the Network practice a type o fiscal sponsorship commonly

reerred to as Model A sponsorship. Under a Model A relationship, the project

becomes a part o the sponsor; the sponsor takes the project in-house. Te project

has no separate legal existence.5 All employees o the project become employees

o the sponsor. Te sponsors payroll tax withholding, workers compensation

insurance, unemployment benefits, and health and retirement plans oered all are

applied to the project sta in the same manner as the organizations otheremployees. Te sponsor will be liable or the actions o project employees within

the scope o their employment as well as any other liabilities the project accrues.

Additionally, all tax reporting is done by the sponsoring organization.

Although the Model A direct project is the most commonly practiced orm o

fiscal sponsorship, other maniestations occur throughout the charitable commu-

nity and their use as legitimate, creative models should not be discounted. Gregory

Colvins Fiscal Sponsorship; Six Ways To Do It Rightprovides the most thorough

treatment o the various incarnations o fiscal sponsorship to date.

CFS can best be characterized as a subset o fiscal sponsorship, typically patterned

ater the Model A relationship, where the sponsor plays a deeper, more nurturingrole than contemplated by any other model. In addition to serving as the legal

employer o project employees, oering insurance, and seeing to state and ederal

compliance matters, sponsors provide a comprehensive suite o services designed to

enhance the capacity and eectiveness o projects. Most o these oerings all into

our broad categories: financial management, human resources management,

inormation systems support, and capacity building.

Comprehensive sponsors run the essential back ofice operations o their projects

in a highly competent, cost-eective manner, allowing agents o change to ocus

their passions and energies on activities central to project purposes. Tese sponsors

also engage the projects in a wide array o capacity building endeavors, andbeyond that, a host o intangible benefits begin to accrue the moment a project

finds a home with a credible comprehensive sponsor.

Te end result o CFS is that progressive movements are able to minimize

administrative burdens and maximize project impact and societys corresponding

return on investment. Below, the parameters o CFS are thoroughly explored.

mission alignment

A core tenet and legal requirement o any fiscal sponsorship relationship is that the

purposes o a potential project must be consistent with the sponsors own mission.6

Tis threshold requirement is the first standard articulated in Guidelines for

Comprehensive Fiscal Sponsorship (Guidelines), a must-read set o guidelines and

recommended best practices or any nonprofit organization contemplating a role


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Advisory boards are

responsible or providing

assistance in the areas

o project policy

development, undraising

and organizational

development.

7 Gudl 1. Guidelines or Comprehensive Fiscal

Sponsorship at tt://www.td.og/lad/u/

nnFs/nnFs-Fcal-soo-Gudl-o-Co-

.d

8 id.

9 Gudl 7, Guidelines, Id.

as comprehensive fiscal sponsor or or any group seeking a responsible sponsor. 7

Tese guidelines, created through the collaborative eort o the members o the

National Network, will be reerenced throughout this paper.

Beore a project can be taken under the supportive umbrella o a fiscal sponsor, it

should be careully scrutinized to establish that its goals and vision are both

compatible and consistent with the sponsors own mission.8

Tis initial step isnecessary because 501(c)(3) exempt organizations must operate in urtherance o a

specific charitable purpose ound in their organizing documents and orms filed

with the Internal Revenue Service (IRS).

Te activities o all nonprofits, not just those practicing fiscal sponsorship, must

operate in accordance with a stated tax-exempt purpose. I a projects mission is not

compatible with that o its sponsor, that sponsor is not serving its exempt status,

and its 501(c)(3) classification could be jeopardized. Although the vetting processes

used by organizations engaged in comprehensive fiscal sponsorship vary, all must be

thorough, ensuring mission compatibility. Review and approval o the project by

the fiscal sponsors board o directors is an essential step in the process.

the memorandum of unders tanding

and advisory boards

Te union between project and Model A sponsor is typically described in a memo-

randum o understanding between the fiscal sponsor and the unincorporated

organization.9 Tis agreement establishes the project as a legal part o the sponsor.

Te parameters o employment and project management, delegations o authority,

the use and roles o advisory boards, property rights, and the duration and terms o

project closure are typically addressed in this document.

Te fiscal sponsor must be cautious in selecting projects because it assumes totallegal responsibility or the project, and all current and uture project employees

become direct employees o the fiscal sponsor. Tis is a serious matter, as any

previous legal issue attached to a project is generally absorbed by the sponsor.

Likewise,thesponsorbecomesliableforallsubsequentlegalissuesthatarisein

connection with the project. Until this arrangement concludes, the project is not a

legally separate entity. Te sponsors assumption o liability is a necessary compo-

nent o a CFS relationship. All nonprofits practicing CFS have established sets o

criteria used to evaluate prospective projects. Tis total assumption o legal and

financial liability dierentiates fiscally-sponsored relationships rom so-called

conduit or pass-through arrangements, where control and responsibility remainwith other parties.
http://www.tides.org/fileadmin/user/NNFS/NNFS-Fiscal-Sponsorship-Guidelines-for-Comprehensive.pdfhttp://www.tides.org/fileadmin/user/NNFS/NNFS-Fiscal-Sponsorship-Guidelines-for-Comprehensive.pdfhttp://www.tides.org/fileadmin/user/NNFS/NNFS-Fiscal-Sponsorship-Guidelines-for-Comprehensive.pdfhttp://www.tides.org/fileadmin/user/NNFS/NNFS-Fiscal-Sponsorship-Guidelines-for-Comprehensive.pdfhttp://www.tides.org/fileadmin/user/NNFS/NNFS-Fiscal-Sponsorship-Guidelines-for-Comprehensive.pdf


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Ease o entry into

community engagement

is a key benefit o fiscal

sponsorship.


11 Liecycle o a Public Charityat tt://www..go/

cat/catabl/atcl/0,,d=122670,00.tl

Ater a project joins the fiscal sponsor, project and sponsor maintain regular contact

in order to properly manage all risks. CFS practitioners recommend and sometimes

require that projects establish advisory boards that unction similarly to a tradition-

al board o directors.10 Although these advisory boards have no legal or governing

authority, they provide an important mechanism o accountability and support or

many projects.

Advisory boards are responsible or providing assistance in the areas o project

policy development, undraising and organizational development. Tey also

monitor and evaluate the perormance o project directors and provide the fiscal

sponsor with advice and recommendations regarding personnel, financial and

administrative matters as well as other issues related to their projects.

Likewise,whenanexisting501(c)(3)nonprofittransitionsintoacomprehensive

sponsorship relationship, the organizations board o directors oten assumes the

role o project advisory board. Te activities o the new advisory board remain

substantially similar to those o the previous board except that fiduciary duties and

legal liability are now vested in the sponsors board o directors, which must

exercise final decision-making authority to ensure that the project is in compliancewith all state and ederal laws.

ease of entry

Ease o entry into community engagement is a key benefit o fiscal sponsorship.

Te prospect o obtaining 501(c)(3) status and orever-ater complying with

complex requirements can be daunting to many would-be social entrepreneurs.

Organizing under state law, attaining an employment identification number, and

filing the lengthy Form 1023 along with other required documents and accompa-

nying ees are the first steps an organization must take to become tax-exempt under

IRC 501(c)(3).11

Ater all necessary filings have taken place, it can take many months to hear back

rom the IRS, which may respond with ollow-up inquiries. Although the date o

exemption is usually retroactive to the filing date or the date the organization was

created, oundations and other donors are understandably hesitant to extend

monetary support to groups that have yet to receive an afirmative determination

rom the IRS. Tis arduous undertaking siphons time, money and energy rom a

project, oten leaving it dead in the water. Costly legal assistance is oten neces-

sary and always recommended.

Many projects, such as small grassroots movements, may lack the resources to even

begin this process. For others organized with a short-term charitable goal in mind,

the process o obtaining an afirmative determination letter rom the IRS may take

more time than its worth. Speed is o the essence or many important nonprofit
http://www.irs.gov/charities/charitable/article/0,,id=122670,00.htmlhttp://www.irs.gov/charities/charitable/article/0,,id=122670,00.htmlhttp://www.irs.gov/charities/charitable/article/0,,id=122670,00.htmlhttp://www.irs.gov/charities/charitable/article/0,,id=122670,00.html


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Comprehensive FiscalSponsorship organizations

also have annual financial

audits that serve to

maintain the highest

standards o accountabilit

and transparency.

12 Gudl 5, Guidelines Id.

13 See Ogog Colac ad rqud Flg o a

ublc caty at tt://www..go/cat/

catabl/atcl/0,,d=122670,00.tl


15 T natoal Ct o Catabl stattc at

tt://cc.uba.og/tattc/quckact.c

endeavors.Largenonprofitorganizationsandtheirsetagendasareoftentooslowto

respond to urgent, emerging issues. For these time-sensitive movements, indepen-

dent 501(c)(3) status is not a viable option. For many groups unwilling to drain

limited resources engaging with the IRS, fiscal sponsorship represents an attractive

alternative.

Under a properly constructed CFS relationship, the unincorporated projectbecomes a program o the fiscal sponsor and will not be burdened with navigating

IRS red tape. As the project is now part o a larger nonprofit, its activities become

part o the sponsors exempt activities. Te project can immediately solicit and

receive unding in the fiscal sponsors name.

In ulfillment o their fiduciary duties, CFS nonprofits careully monitor project

und-raising eorts and will sign o on grant applications, RFPs, and legally

binding project commitments.12 Under the legal control o a CFS organization that

also runs all back ofice operations, projects are aorded a great deal o autonomy

in both crating and achieving their goals so long as the activities continue to

urther the exempt purpose o the sponsor. For groups that need tax-deductible

donations to achieve a charitable purpose, fiscal sponsorship is the most straightor-ward and time-tested alternative to obtaining an afirmative determination letter

rom the IRS.

ongoing ComplianCe

Once an organization has received an afirmative determination letter rom the

IRS, it must meet a host o annual and semi-annual filing requirements under state

and ederal law.13 Tis process is costly and time consuming, but ailure to comply

properly can result in oreiture o the organizations exempt status. Once again,

these organizations are requently orced to seek the assistance o costly legal

counsel. With CFS, all required inormational reporting occurs in a streamlined,

consistent, and transparent ashion on the sponsors Form 990.

Te IRS also gains rom the organized inrastructure comprehensive sponsors

provide. For instance, a fiscal sponsor with 100 projects files one Form 990. Tis

single 990, assembled by experienced proessionals, presents all required inorma-

tion or the 100 projects that make up the organization. Te IRS thus has to review

a single return rather than 100 shorter returns oten prepared by nonproessionals.

CFS organizations also have annual financial audits that serve to maintain the

highest standards o accountability and transparency.14 With over 1.4 million

nonprofits operating in the United States15, fiscal sponsors serve to ease the burden

on the IRS, making eficient use o the corresponding tax dollars spent on the

Services operations.
http://www.irs.gov/charities/charitable/article/0,,id=122670,00.htmlhttp://www.irs.gov/charities/charitable/article/0,,id=122670,00.htmlhttp://www.irs.gov/charities/charitable/article/0,,id=122670,00.html


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The back-ofice support

structure inherent in

Comprehensive FiscalSponsorship creates fluidity

and continuity in project

operations.

nurturing support

Some commentators have likened scal sponsorship to a pass-through arrangement

where the sponsor is used as a vehicle to steer deductible contributions to improper

parties and individuals. Tis description does not stand up to scrutiny. Indeed,

even a cursory review demonstrates that CFS is best described as a capacity

nurturing relationship.

When, ater careul consideration, comprehensive sponsors adopt a project, they

are not merely extending a mission-consistent program their tax-exempt status in

exchange or a ee. Te unincorporated project is transormed into a program o

the scal sponsor. Te sponsor and the project are now one and the same. Te

sponsor has a vested interest in project success, because success or ailure is a

reection o the scal sponsors abilities.

By eectively nurturing thousands o projects, CFS nonprots such as Colorado

Nonprot Development Center, Community Partners, Earth Island Institute,

ides Center and Tird Sector New England have built up outstanding

reputations or growing capacity and ostering positive societal transormations.In order to ulll their missions and protect and enhance hard-earned brand equity,

a scal sponsor must take all necessary steps to maximize the potential o the

projects it serves.

When a comprehensive sponsor adopts a project, the project benets immediately

rom its interactions with the sponsors experienced sta and well-designed systems.

Te sponsor handles all aspects o nance, administration, human resources,

governance, compliance and risk management, enabling project teams to ocus all

their talents on project advancement.

Tis expertise relieves project leaders o the need to invest precious resources in

creating inrastructure. It also rees up signicant time leaders might otherwisespend hiring, training, monitoring and retaining the sta necessary to perorm

these critical administrative unctions. Many scal sponsors see their role as helping

to build the internal capacity o projects and project sta. In those relationships,

training and institutional knowledge transer is part o the service package.

Te back-ofce support structure inherent in CFS creates uidity and continuity in

project operations. With typical small to midsized stand-alone organizations, one

to several individuals provide all o the above unctions oten while being tasked

with other duties. I key sta members become unavailable even or a brie period

other members o the organization, though not always trained or qualied, must

ll this void.As sta attempt to perorm job unctions they are not trained to handle, while

scrambling to ulll their own duties, the mission inevitably suers. Te level o

in-depth, consistent support that comprehensive scal sponsors provide ensures sta-

bility and eliminates inefciencies, resulting in optimal usage o project unds and

talent. Tis, o course, maximizes the societal return on investment.


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Capacity building is

also emerging as key

component o

Comprehensive Fiscal

Sponsorship, adding

more value to the

projects served.

TesupportiveroleCFSorganizationsprovidecostsmoney.Likeallnonprotsand

or-prot programs, eective CFS requires that unds be allocated to cover admin-

istrative and back ofce expenses. Some CFS organizations direct a portion o a

projects unds towards administrative expenses when the unds are spent by the

project. Others make the allocation as unds are received. Either way, CFS oers

high quality services most oten at a cost lower than possible or small to-medium

independent nonprots.

Even large projects may nd that the quality service and support oered by CFS

are advantageous and cost eective. Much o these savings are achieved through

economies o scale. Te large size and unied inrastructure o most CFS

organizations create economies o scale otherwise unavailable to stand-alone smaller

entities. Tis maximizes administrative efciencies while minimizing the costs

attributable to back ofce support and overhead.

Largecomprehensivesponsorsareabletoutilizetheirsizeandcorresponding

bargaining power to secure better coverage at avorable prices on health insurance

coverage and other ringe benets. Te substantial benets scal sponsors provide

all employees make CFS projects enticing employment options, attracting well-qualied, passionate job applicants.

Capacity building is also emerging as a key component o CFS, adding more value

to the projects served. Some sponsors oer training seminars and webinars to

complement their back ofce support. Trough these oerings, projects are

schooled by nonprot leaders on diverse topics such as undraising, strategic

planning, inormation technology, and diversity and inclusion. Some sponsors

urther build capacity by providing projects with periodic assessments, crating

solutions to the myriad o issues nonprots commonly ace.

Surprisingly, terminology such as client and ee that does not accurately

reect the true legal structure o CFS relationships persists both within and

outside the scal sponsorship community. Such terms add ambiguity and uel

skepticism among those not amiliar with this brand o scal sponsorship.

Widespread adoption o consistent language by the scal sponsorship sector will

serve to eliminate conusion rom project sta and prospective unders. Accurate

terminology such as project rather than client and project administrative

expense instead o client ee is gaining currency as a clearer understanding o the

parameters o CFS evolves.


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Cash and in-kind

donations that support

specific projects are

requently solicited by

sponsored project staf.

16 s Col, eq., Is a Fiscal Sponsorship Account

Maintained or a Project by a Public Charity Also a Donor-

Advised Fund?at tt://www.caloo.co/

DAF%20dto%20o%20cal%20oo%20

_00211211_.d

17 irC 4966(d)(2) alo Donor-Advised Funds

Guidesheetat tt://www..go/ub/-tg/

doo_add_gud_t_073108.d

18 Donor Advised Funds Guide SheetExplanation at

tt://www..go/ub/-tg/doo_add_

xlaato_073108.d

addressing misConCeptions

donoR AdVised FUnd Vs. FiscAl sponsoRship

Despite the success and growth o scal sponsorship, certain misconceptions

surrounding the practice o CFS linger. One concern occasionally voiced by

oundations is that scal sponsors are actually sponsoring organizations that

manage donor advised unds. Te Pension Protection Act o 2006 created newrules and restrictions governing donor advised unds, putting oundations on

heightened alert.

However, a brie examination o how a sponsoring organization maintaining donor

advised unds is dened and how this denition diers rom CFS makes it appar-

ent that, with rare exceptions16, they are not the same or even remotely similar.

Prior to the Pension Protection Act, the term donor-advised und was not dened

in the Code or Regulations. IRC 4966(d)(2) now denes the term as (1) a und or

account owned and controlled by a sponsoring organization, (2) which is separately

identied by reerence to contributions o the donor or donors, and (3) where the

donor (or a person appointed or designated by the donor) has or reasonably expects

to have advisory privileges over the distribution or investments o the assets.

All three elements o the denition must be met in order or a und or account to

be treated as a donor-advised und.17 Te practice o CFS does not qualiy under

this denition.

Starting with the second prong, a distinct und or account o a sponsoring organi-

zation must reer to contributions o a donor or donors, such as by naming the

und ater a donor, or by treating a und on the books o the sponsoring organiza-

tion as attributable to unds contributed by a specic donor or donors.18

Nonprots practicing CFS do not maintain accounts that identiy donors byreerence. Rather, unds donated to specic projects are typically held in accounts

reerencing the projects name or purpose such as Immigrant Support Services or

Save the Right Whales. No reerence is made to the actual donor, as that indi-

vidual or entity is irrelevant or purposes o administering project unds. Once a

donation is made, all control over those unds previously exercised by the donor

ceases.

Cash and in-kind donations that support specic projects are requently solicited

by sponsored project sta. In this respect, a donor can reasonably expect that the

contribution will go toward that particular project o the scal sponsor. However,

once the donation is made, the donor has no actual or implied inuence on the

scal sponsors use o the unds.
http://www.fiscalsponsorship.com/DAF%20definition%20for%20fiscal%20sponsor%20_00211211_.pdfhttp://www.fiscalsponsorship.com/DAF%20definition%20for%20fiscal%20sponsor%20_00211211_.pdfhttp://www.fiscalsponsorship.com/DAF%20definition%20for%20fiscal%20sponsor%20_00211211_.pdfhttp://www.fiscalsponsorship.com/DAF%20definition%20for%20fiscal%20sponsor%20_00211211_.pdfhttp://www.irs.gov/pub/irs-tege/donor_advised_guide_sheet_073108.pdfhttp://www.irs.gov/pub/irs-tege/donor_advised_guide_sheet_073108.pdfhttp://www.irs.gov/pub/irs-tege/donor_advised_guide_sheet_073108.pdfhttp://www.irs.gov/pub/irs-tege/donor_advised_explanation_073108.pdfhttp://www.irs.gov/pub/irs-tege/donor_advised_explanation_073108.pdfhttp://www.irs.gov/pub/irs-tege/donor_advised_explanation_073108.pdfhttp://www.irs.gov/pub/irs-tege/donor_advised_guide_sheet_073108.pdfhttp://www.fiscalsponsorship.com/DAF%20definition%20for%20fiscal%20sponsor%20_00211211_.pdf


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19 natoal Gogac socty, Doato FAQ ag at

tt://www.atoalgogac.co/doat/

quto.tl#cy

20 Id.

21 natoal Gogac maaalad egcy Fud

Doato ag at tt://doat.atoalgogac.

og/ssLpag.ax?d=608&cd=608

22 suot pBs at tt://www.b.og/aboutb/

aboutb_uot.tl

Allowing oundations and the general public to contribute to specic projects o

Model A sponsors is identical to the practices that large nonprots operating

multiple programs have successully engaged in or decades. For example, when a

donation is made to the National Geographic Society, donors can designate their

gits to one or more o the ve major areas o the National Geographic Societys

Mission Programs: education, research and exploration, conservation, cultures and

public outreach.19

Also oered are additional designation opportunities ranging rom purpose-speci-

ic unds to special initiatives.20 For example, donors may make charitable contri-

butionsthatwillgointoafunddedicatedtosavingtheAmboseliLions.21 I this

were not possible, a separate nonprot would have to be created to protect these

lions, a time-consuming undertaking that may not be set up until the lions are

urther endangered.

Without the ability to donate to this specic project o National Geographic,

individuals would not be able to oer direct nancial support to the project and

receive a tax deduction. Using the Public Broadcast Service as another example,

donations to PBS may be directed to local stations, which oten encourage donorsto designate support or specic programs.22

Donations to CFS projects and other nonprots operating several programs are,

properly maintained in accounts that reerence the project or campaign, never the

individual donor. Ater these donations are made, donors have no control o the

disposition o the unds. CFS practitioners do not maintain donor advised unds

and are, thereore, not sponsoring organizations.

nonpRoFits And the g ReAt Recession

Although typically utilized on behal o unincorporated projects, CFS is also an

option worth considering or existing 501(c)(3) public charities. In todays com-

petitive climate, even nancially healthy nonprots are seeking ways to reduce costs

and increase efciencies. Many other cash-strapped organizations are being pres-

sured to alter their mission and composition through merger. Although this trend

is in its early stages, a small but growing number o nonprots are embracing CFS

as a model enabling both short-term regrouping and long-term stability.

continUed need

Te Great Recession hit the independent sector beore it steamrolled Wall Street

and Main Street, and its devastating eects continued to aect nonprots even

ater the dust had settled elsewhere. Many believe the nonprot landscape has beenchanged permanently. Against this backdrop nonprots aced immense pressure to

Many believe the

nonprofit landscape has

been changed permanent

Against this backdrop

nonprofits aced immense

pressure to merge with

other organizations or old

altogether.
http://www.nationalgeographic.com/donate/questions.html#specifyhttp://www.nationalgeographic.com/donate/questions.html#specifyhttps://donate.nationalgeographic.org/SSLPage.aspx?pid=608&srcid=608https://donate.nationalgeographic.org/SSLPage.aspx?pid=608&srcid=608http://www.pbs.org/aboutpbs/aboutpbs_support.htmlhttp://www.pbs.org/aboutpbs/aboutpbs_support.htmlhttp://www.pbs.org/aboutpbs/aboutpbs_support.htmlhttps://donate.nationalgeographic.org/SSLPage.aspx?pid=608&srcid=608http://www.nationalgeographic.com/donate/questions.html#specify


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Having more players in themarketplace o ideas

ensures that innovative

ideas are brought to the

oreront and old, worn-out

models all by the wayside

rather than becoming

institutionally entrenched.

23 natoal Ct o Catabl stattc

24 maaoka, Ja, Too Many Nonprofts? NoThere Arent

Enough Good Nonprofts, T Blu Aocado at tt://

www.bluaocado.og/cott/too-ay-oot-

o-t-at-oug-good-oot

merge with other organizations or old altogether. Much o this pressure is coming

rom oundations and government agencies that support nonprot endeavors.

Weve seen this dynamic beore in down cycles.

oo many nonprots! can be a popular but misguided mantra voiced by ounda-

tions during periods o economic crisis. And it is important to note that the

number o private oundations has ballooned by more than 85% over the past 15years twice the growth rate o the nonprots they serve.23

Te nonprot sector has indeed experienced substantial growth over the past

decade. However, this growth came about as the overall economy expanded,

government social service programs were dramatically cut or eliminated, and civil

liberties were being attacked. At the same time, income and wage disparities

between rich and poor grew to unprecedented levels, and the realities o climate

change were just beginning to be elt.

Tis is precisely the time that the need or charitable services would logically spike.

And this need remains as nonprots play a vital role in picking up the pieces and

creating a sustainable uture.Merger, though appropriate in certain circumstances, is a costly and immensely

complex option that will not always achieve an optimal or even positive outcome.

Multiple nonprots with overlapping, complementary services are not necessarily

indicative o inefciencies requiring remediation. Indeed, one commentator

suggests that there are actually too ew good nonprots. 24

Tere is no rule or law dictating that only one nonprot may oer a particular

service in a given area. Competition breeds innovation and drives efciencies.

Having more players in the marketplace o ideas ensures that innovative ideas are

brought to the oreront and old, outmoded models all by the wayside rather

than becoming institutionally entrenched.

Further, although it may oten appear that two nonprots are perorming identical

unctions, a closer examination will oten reveal that their operations are substan-

tially distinct or oered within a distinct geographic area.

compRehensiVe FiscAl s ponsoRship FoR the 501(c)(3)

Many nonprot inefciencies reside at administrative and not programmatic levels.

Comprehensive Fiscal Sponsorship addresses these issues by oering a sae haven

or merger-leery nonprots, preserving their missions while providing high-level

administrative support and the time and space to regroup. Unlike merger, there is

never any sense that one organization is being overtaken by another, undermin-

ing employee morale and service to constituents.
http://www.blueavocado.org/content/too-many-nonprofits-no-there-arent-enough-good-nonprofitshttp://www.blueavocado.org/content/too-many-nonprofits-no-there-arent-enough-good-nonprofitshttp://www.blueavocado.org/content/too-many-nonprofits-no-there-arent-enough-good-nonprofitshttp://www.blueavocado.org/content/too-many-nonprofits-no-there-arent-enough-good-nonprofitshttp://www.blueavocado.org/content/too-many-nonprofits-no-there-arent-enough-good-nonprofits


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Sponsorship ofers a

cheaper, aster, less

stressul alternative to

merger. Any nonprofit

eeling the pressure to

merge should careully

consider all available

options including


Sponsorship.

25 sack, Joata, Lets Slow Down the M&A Express,

Tsne eD Fou at tt://www.t.og/dou/

low_dow_g_x

Certainly, the consequences o merger can be devastating. Depending on the

bargaining power o the parties, a nonprot may nd that post merger its mission

is diluted or completely lost. Te real losers are the constituents and causes

squeezed through the cracks during these consolidations. So, the call or nonprot

merger must be careully weighed against its possible consequences.

Far rom being a hostile takeover or a predatory acquisition that benets oneparty only, a scal sponsorship transition, done properly, is a creative alternative

whose objective is to enable the development and nurturing o grassroots solutions

to community problems.25

Te organization retains its own brand identity and unique web presence with

CFS. Absent are time and asset-consuming negotiations over assets or program-

matic control or direction since the sponsored project will continue to control its

unding and programs. Tere is no potential board clash as boards may stay intact,

providing an extra layer o oversight in conjunction with the scal sponsor.

Nonprots transitioning into a CFS relationship go through a process similar to

that o unincorporated projects, with a ew minor variations. Tis transition ischeaper and ar less complex than a merger or acquisition. Outside consultants,

accountants and legal counsel are oten unnecessary. Mission compatibility remains

a threshold requirement.

Te employees o the nonprot become employees o the sponsor, gaining access to

attractive ringe benets administered by the sponsor. Operating unds o the

nonprot are typically transerred into an account held by the sponsor in the name

o the project. However, unds not needed to support project operations as well as

other assets, both real and intangible, may be retained by the nonprot in its own

separate accounts.

A memorandum o understanding specically tailored or nonprot projects shouldclearly dene the parameters o the relationship. I this option is exercised, meticu-

lous records must be maintained by both scal sponsor and the nonprot, encing

o assets subject to the sponsors control rom those that remain vested with the

independent 501(c)(3).

While the project is under the supportive umbrella o a CFS practitioner, its

corporate and 501(c)(3) designation will not be used in support o the CFS

projects purposes. I all sta and assets are transerred to the sponsor, the nonprot

essentially goes into hibernation until the project resumes independent operations.

When and i independent operations resume and the sponsored project is trans-

erred back to the 501(c)(3), the entire und balance and other assets residing with

the sponsor are directed back to the nonprot.
http://www.tsne.org/edforum/slow_down_merger_expresshttp://www.tsne.org/edforum/slow_down_merger_expresshttp://www.tsne.org/edforum/slow_down_merger_express


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The advantages oComprehensive Fiscal

Sponsorship are by no

means limited to small or

new organizations. The

flexibility, reduced burden

on project directors, greater

capacity, proessional

expertise, and cost savings

flow to fiscally sponsored

projects o all sizes.

26 Fo o oato sack, Joata, Fiscal

Sponsorship as a Nonproft Merger Alternative at tt://

www.t.og/dou/cal_oo_g_

altat

27 All b o t natoal ntwok o Fcal

soo actc CFs. tt://www.td.og/?d=212.

A atoal dctoy o cal oo ca b oud at

tt://www.caloodctoy.og/

28 See natoal Aocato o pooal eloy

Ogazato at tt://www.ao.og/

29 Fiscal Sponsorship Field Scan at tt://www.tdct.

og/lad/tc_d/Wp_FcalsooFldsca.d

Undoing a merger can be even more complex than creating one, i not impossible.

Te process or terminating a relationship with a scal sponsor, addressed in the

Ease o Exit section below is ar simpler. CFS oers a cheaper, aster, less stressul

alternative to merger. Any nonprot eeling the pressure to merge should careully

consider all available options including CFS.26Likewise,nanciallyhealthynon-

prots simply interested in increasing back ofce efciencies and renewing mission

ocus may wish to investigate what CFS has to oer. 27

incUb AtoR only?

Some observers mistakenly believe that scal sponsors are limited to serving as

incubators or uture independent nonprots. However, like proessional employer

organizations28 and other shared service models utilized by the private sector, scal

sponsors requently play a long-term role in the unctioning o charitable endeavors.

As ar as Comprehensive Fiscal Sponsorship practitioners are concerned, serving as

an incubator to uture nonprots is the exception rather than the rule. Results o

the most thorough survey o scal sponsors to date indicate that less than hal o

the projects o scal sponsors with over 50 projects have sought to be independent501(c)(3) nonprots.29 Te rate o retention is as high as 80 to 90% with some

organizations.

Although CFS practitioners generally adopt and oster the development o young,

experimental projects, ater these projects mature, they oten remain sponsored

programs. Te advantages o CFS are by no means limited to small or new organi-

zations. Te exibility, reduced burden on project directors, greater capacity,

proessional expertise and cost savings ow to scally sponsored projects o all sizes.

Tese advantages, both measurable and intangible, oten render leaving the nest

an unpalatable option or many, i not most, comprehensively sponsored projects.

the intangible benefits of

Comprehensive fisCal sponsorship

Every day, charitable organizations and their sta and volunteers add tremendous

value to our society. Tis value is oten impossible or prohibitively expensive to

quantiy. A group oering companionship to the elderly in their last days may not

add to our national GDP, yet has a proound eect on those served.

An organization that acilitates physical activity and teaches inner city children

healthy eating habits may be responsible or millions o dollars in medical cost

reductions years down the road or which it will never receive credit. An environ-mental nonprot that, through litigation, protects a water supply rom pollution
http://www.tsne.org/edforum/fiscal_sponsorship_merger_alternativehttp://www.tsne.org/edforum/fiscal_sponsorship_merger_alternativehttp://www.tsne.org/edforum/fiscal_sponsorship_merger_alternativehttp://www.tsne.org/edforum/fiscal_sponsorship_merger_alternativehttp://www.tides.org/?id=212.%20A%20national%20directory%20%20of%20fiscal%20sponsors%20can%20be%20found%20at%20http://www.fiscalsponsordirectory.org/http://www.tides.org/?id=212.%20A%20national%20directory%20%20of%20fiscal%20sponsors%20can%20be%20found%20at%20http://www.fiscalsponsordirectory.org/http://www.tides.org/?id=212.%20A%20national%20directory%20%20of%20fiscal%20sponsors%20can%20be%20found%20at%20http://www.fiscalsponsordirectory.org/http://www.tidescenter.org/fileadmin/tc_pdfs/WP_FiscalSponsorFieldScan.pdfhttp://www.tidescenter.org/fileadmin/tc_pdfs/WP_FiscalSponsorFieldScan.pdfhttp://www.tidescenter.org/fileadmin/tc_pdfs/WP_FiscalSponsorFieldScan.pdfhttp://www.tidescenter.org/fileadmin/tc_pdfs/WP_FiscalSponsorFieldScan.pdfhttp://www.tides.org/?id=212.%20A%20national%20directory%20%20of%20fiscal%20sponsors%20can%20be%20found%20at%20http://www.fiscalsponsordirectory.org/http://www.tsne.org/edforum/fiscal_sponsorship_merger_alternative


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30 See T noot Ct ntwok at

tt://www.ootct.og

31 saca pf,A haven in a high-rent world,

T Boto Glob at tt://www.boto.co/w/

local/aacutt/atcl/2008/04/02/a_a_

_a_g_t_wold/

saves thousands o lives, though attributing a single saved lie to that organizations

actions can be elusive.

Likewise,ComprehensiveFiscalSponsorshipprovidesprojectsthatcreatesocietal

value and advance culture with a wealth o benets that are not readily identiable

and rarely mentioned. Nevertheless they are real. As soon as a project becomes

scally sponsored and these intangible benets begin to accrue, projects otenreevaluate their independent aspirations.

Because CFS sta work with a diverse group o projects, they gain valuable knowl-

edge that they can then pass on to individual projects. Examples include spotting

and agging potential nancial and human resource concerns beore they become

problems, understanding the intricacies o unders requirements, and thinking

strategically about project needs. CFS projects are, thereore, in a better position to

weather economic downturns, navigating potential human resource issues and

stretching donor dollars arther.

Beyond back ofce operations, several sponsors now provide their projects with

capacity building services designed to inuse the projects with the capabilities andbest practices that the sponsors themselves operate under.

Tese sponsors oster a culture o sharing with shared back-ofce operations

being only one component o an accessible network created through CFS. Fiscal

sponsors that have operated or decades oer their projects access to an extensive

list o contacts and relationships cultivated over many years. Individuals and groups

that have worked with comprehensive sponsors in the past realize the immense

value these organizations bring.

Tus, requently they are willing to make themselves available, extending their

expertise and contacts to sponsored projects. Individual projects themselves derive

great value rom sharing experiences, lessons and best practices with one other.

FocUs And innoVAtion

Several organizations are taking the culture o sharing to another level, operating

nonprot centers, buildings that oer both aordable and stable ofce space to

nonprots and scally sponsored projects.30 raditionally, nonprots have been

subject to the ebbs and ows o the real estate market. When rent rates balloon,

these groups are oten orced to relocate to the ringes o urban centers impeding

access to public transportation and the constituents they serve.

Nonprot centers provide a solution to this persistent problem. Tey may consis-

tent rents oten below market value and may also oer shared conerencespaces, I support, and even lunchtime seminars and yoga classes.31 Having
http://www.boston.com/news/local/massachusetts/articles/2008/04/02/a_haven_in_a_high_rent_world/http://www.boston.com/news/local/massachusetts/articles/2008/04/02/a_haven_in_a_high_rent_world/http://www.boston.com/news/local/massachusetts/articles/2008/04/02/a_haven_in_a_high_rent_world/http://www.boston.com/news/local/massachusetts/articles/2008/04/02/a_haven_in_a_high_rent_world/


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Sometimes a project

reaches a point in its

development where a

spinof rom its fiscal

sponsor is appropriate.

32 Termination o an Exempt Organization at

tt://www..go/cat/atcl/0,,d=156422,00.tl

signicant numbers o mission driven groups in one location promotes collabora-

tion and increases networking opportunities through both planned networking

events and on an inormal basis.

As noted, Comprehensive Fiscal Sponsorship urnishes projects with comprehen-

sive personnel policies, liability insurance, and nancial and administrative exper-

tise. It also keeps projects abreast o and trained on new government regulations asthey arise. Having these reliable operational mechanisms in place aords project

leaders peace o mind, eliminating many o the stresses that can derail an opera-

tion. Tis intangible quality cannot be underestimated.

A project leaders time and thoughts will not be sidetracked by the plethora o

issues inherent in managing the back ofce operations o any organization. Project

sta works towards mission ulllment knowing that administrative tasks and

compliance matters are being efciently addressed. CFS keeps the engines o their

projects humming, allowing passionate mission-driven project leaders and sta to

ocus on the activities that are core to the projects existence.

ease of exit

Sometimes a project reaches a point in its development where a spino rom its

scal sponsor is appropriate. It is imperative that the process and terms o any such

separation be anticipated and memorialized in the memorandum o understanding

or similar agreement. Otherwise, unnecessary complications may occur. Under the

typical memorandum o understanding, the project may retain the unds raised

and allocated or it along with any real and intangible property it has developed so

long as it attains its own 501(c)(3) tax-exempt statuses or locates another suitable

scal sponsor.

For a number o reasons, projects occasionally cease to operate without being spuno into new entities. Te project may have ullled its purpose or is no longer

nancially viable. Winding up a projects operations highlights the nal advantage

scally sponsored projects may realize: ease o exit.

When a nonprot organization winds up its operations, it must do so in compli-

ance with IRS requirements. Tis usually entails, at a minimum, completing

Schedule N on Form 990 and listing the disposition o organizational assets in

excruciating detail.32When a Comprehensive Fiscal Sponsorship project terminates

its operations, all assets previously maintained by the project will simply be spent

on purposes in urtherance o the sponsors mission.


Sponsorship keeps the

engines o their projects

humming, allowing

passionate mission-driven

project leaders and staf

to ocus on the activities

that are core to the

projects existence.
http://www.irs.gov/charities/article/0,,id=156422,00.htmlhttp://www.irs.gov/charities/article/0,,id=156422,00.html


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Crisis breeds opportunityand organizations

practicing Comprehensive

Fiscal Sponsorship represe

a piece o a young but

rapidly maturing

movement in the social

sector that thrives on

the sharing o resources

and inormation.

33 Ud t law o agcy, a agt act o bal o

aot o o ogazato. Tat tty a t

ow to dct ad cotol t actt o t agt.

Ug t tology to dcb t lato

btw a 501(c)(3) ad a ojct l tat t

ojct xt cotol o t oot caty. To

coly wt irs dctat ad au accoutablty,

t oo ut walk a l ad lay t ol o

twad; allowg a gat dal o ojct autooy

wl xcg al autoty by oly gg of o

cotact ad ot cubac tat ut

t caty xt uo ad coly wt all

alcabl law.

Further, individual states have various regulations and procedures that must be

ollowed when a registered entity dissolves. None o these complicated ling

requirements are present when a scal sponsored project is terminated. Te

dissolution o the project is simply reected on the scal sponsors Form 990. Te

use o scal sponsorship eliminates considerable expenses (oten legal) associated

with complying with dissolution.

ConClusion

Savvy, orward-looking unders are taking notice o the numerous advantages that

comprehensive scal sponsors oer and are becoming more receptive to unding

programs that nd homes at credible sponsors. Tese scal sponsors increasingly

play the role o project authenticator, vouching or a projects credibility to

prospective unders. Becoming a program at a reputable Comprehensive Fiscal

Sponsorship practitioner conveys several messages to oundations, other unders

and the public. It says:

1) Tis project has been through a thorough evaluation process that determined ithas the capacity to achieve its underlying objectives.

2) All back-ofce operations o the project are managed by competent, experienced

proessionals ensuring maximum transparency.

3) Project sta members receive proper compensation and preerable benets,

increasing retention and minimizing burnout.

4) Te project will be able to ocus on the mission and not be derailed by adminis-

trative burdens and complex compliance issues.

A program utilizing Comprehensive Fiscal Sponsorship also communicates that

it has the wherewithal to recognize its strengths as a passionate, mission-driven

organization that properly addresses its need or efcient, seasoned backofce support.

new solUtions FoR new ReAlities

Fiscal sponsorship is still sometimes reerred to incorrectly as scal

agency.33 Fortunately, this outdated terminology is rapidly disappearing. Similarly,

old assumptions regarding nonprots and the social sector are being shed as new

realities demand innovative solutions.

For many years, a premium was placed on the independence o organizations

operating in the nonprot sector even as the private sector realized the advantages

oered through shared services, collaborative pricing and strategic outsourcing.Tis thinking is both illogical and counterintuitive. Crisis breeds opportunity and

organizations practicing Comprehensive Fiscal Sponsorship represent part o a

The use o fiscal

sponsorship eliminates

considerable expenses

(oten legal) associated

with complying with

dissolution.


22/24

a w h i t e p a p e r : O n C O m p r e h e n s i v e i s C a l s p O n s O r s h i p20

Comprehensive FiscalSponsorship ofers a

realistic, honest approach

to not only survive, but

excel in the challenges

o our day and those that

lie ahead.

young but rapidly maturing movement in the social sector that thrives on sharing

resources and inormation.

Creative solutions abound including the multitenant nonprot centers now ound

throughout the world and alliances o nonprots that turn over their back oce

operations to one supporting organization, such as the MACC Commonwealth

currently being pioneered in Minnesota.34

Likewise, innovative ventures like AnnArbors Nonprot Enterprise at Work (NEW), through their npServM system,

ofer nonprots shared I services that reduce hardware and sotware costs, increase

reliability, enhance data security and allow or easy remote access. 35

Tese orward-thinking organizations and alliances breathe long-term stability into

groups that, like themselves, are dedicated to strengthening the presence, voice and

efectiveness o civil society. Tough the methods employed vary, all o these groups

enable nonprots and progressive grassroots movements to ocus on mission-relat-

ed activities by assuming or sharing time-consuming and oten complex tasks that,

though essential, are not mission-related. By transerring jobs to organizations

better-positioned to perorm them eciently and efectively, precious time and

money are saved, maximizing the potential impact o the nonprot sector.

It is crucial to the uture success o Comprehensive Fiscal Sponsorship and the

charitable sector in general that oundations and individuals providing nancial

support to nonprots understand and embrace these solutions. Te bottom line is

that comprehensive scal sponsorship stretches charitable dollars urther and more

efectively than typical stand-alone small to midsized nonprots and even many

larger organizations can. Comprehensive scal sponsorship ofers a realistic, honest

approach to not only survive, but excel in the challenges o our day and those that

lie ahead.

34 maCC Coowt t

tt://cccoowt.og/

35 nooft et t Wok (neW) t

tt://www.w.og/wtwdo/tcoogy.t


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white paper on comprehensive fiscal sponsorship

Documents