Giving Compass’ Take:
• Michael Jarvis explains that more funders are opting for fiscal sponsorship – when a larger tax-exempt organization sponsors a small startup with the same mission. Here are a few factors to consider before entering into this model.
• What are some potential challenges with the fiscal sponsorship model? Does this model align with your charitable goals?
• Read about ending the stigma of fiscal sponsorships.
One of the big trends we’ve noticed in both philanthropy and international development is increasing interest in funding different and new types of organizations. For many foundations, traditional public charities are not their first choice for investment. Instead, they are turning to international networks and partnerships that bring together diverse stakeholders, innovation platforms, funder collaboratives and re-granting funds, social enterprises, and short-term projects with a handful of staff.
As a result of this, we’re seeing many funders and project leaders consider the fiscal sponsorship model, which typically entails a project or small startup being “sponsored” by a larger tax-exempt organization with an aligned mission. The larger organization handles governance, financial management, and administration for the project it has agreed to sponsor, while the project (in many cases) pursues an independent strategy with semi-autonomous staff and its own advisors.
We are frequently asked about fiscal sponsorship and wanted to share some of the things you should consider before taking the plunge. (Nonprofit leaders may also want to consider how some of these factors are shaping organizational structures in their own fields.) Based on our own experience and what we’ve heard again and again from other projects that have gone this route, below are the top factors in deciding whether to pursue a fiscal sponsorship arrangement:
- Time spent on administration
- A need to be nimble and/or drive short-term impact
- Getting value from economies of scale
- Leveraging synergies
- Balancing the interests of founders, funders, and stakeholders
- Qualifying for tax-exempt donations sooner rather than later
Read the full article about fiscal sponsorship by Michael Jarvis at Philanthropy News Digest.
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