How Can a Fiscal Sponsor Help Your Nonprofit Startup?

An infographic explaining what a fiscal sponsor does.
Part of an infographic about fiscal sponsorship. See it in full at the National Council of Nonprofits.. National Council of Nonproits

What Is a Fiscal Sponsor?

A fiscal sponsor can help a start-up nonprofit get a foothold in the nonprofit sector until it is officially recognized as a tax-exempt 501c3.

Or a small charitable group could find that it would be better to operate under the umbrella of another nonprofit, rather than to try to stand alone. 

A fiscal sponsor provides fiduciary oversight for its sponsored organizations, but also may provide financial management services.

 

In the case of grants or donations to the sponsored group, the fiscal sponsor receives the funds and manages them. In the event of a grant, the fiscal sponsor handles reporting back to the Foundation or other funders on the progress of the project.

Fiscal sponsors also sometimes serve as "incubators," providing shared office space and accounting and administrative services. The sponsored organization pays a fee to the sponsor for its services, usually a percentage of the sponsored group's budget.

Fiscal sponsorship is complicated and should be individualized for the two organizations.

If you wish to partner with a sponsor, first identify several possibilities.  Consider groups that have missions similar to yours. 

Approach potential sponsors with a sensible proposal. Both organizations should have legal counsel to help set up formal agreements that protect each group. A contract should be created making it clear that the fiscal sponsor assumes responsibility for legally overseeing charitable donations and grants.

  (Read about how one sponsorship program works)  

Why Would You Want a Fiscal Sponsor?

  • You want to apply for a foundation grant, but foundations require grantees to have tax-exemption from the IRS. A grant could be administered through a fiscal sponsor. (Read more about Foundation Grants)
  • Your nonprofit wants to try out its services to see if there is a market for them and willing donors who can support those services. Using a fiscal sponsor makes sense until you know that you have a feasible concept.
  • You don’t wish to create a new nonprofit and choose to find a fiscal sponsor that is willing to partner over an extended period.
  • You are already a tax-exempt nonprofit but operated solely by volunteers. Instead of hiring staff, you find that it is more cost efficient to outsource administrative tasks and back office needs to a fiscal sponsor.

Where Can You Find Out about Fiscal Sponsors?

Today there are organizations that focus only on providing sponsorship services. These are called "dedicated" sponsors.

Some well-known dedicated fiscal sponsorship organizations are The Tides Center in San Francisco and Community Initiatives.

The Fiscal Sponsor Directory provides a list of fiscal sponsors across the country.

The National Network of Fiscal Sponsors provides information about fiscal sponsorship and best practices for fiscal sponsors; as well as a directory of sponsors.

Read more about fiscal sponsorship at:

National Council of Nonprofits

The Foundation Center

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