Fiscal Sponsor Directory Highlights
- All 247 sponsors in the directory answered a 10-question survey asking about their experience, eligibility requirements, fee structure, services and philosophy — enough information that prospective projects can get a feel for which fiscal sponsors might make a good fit for them.
- The Directory, launched Nov. 19, 2008, has grown to be the largest database of essential information about individual fiscal sponsors; it includes most major players and an increasing number of sponsors with only a few projects.
- These sponsors operate in 36 states, Washington, D.C., and Ontario, Canada. California has the most, 88, more than a third of the total.
- Community foundations comprise 4% of the fiscal sponsors in the directory.
- Public Health Solutions is the most experienced fiscal sponsor in the directory — since 1957 — and sponsors three projects now. Third Sector New England started two years later and sponsors 59 projects today.
- Fractured Atlas in New York City is the largest fiscal sponsor with 3,677 projects as of March 2016. It operates only online and practices only Model C fiscal sponsorship.
Before the 1950s, only 152,000 501(c)(3)s were operating in the United States. The pace picked up in the 1970s and ’80s, adding roughly 190,000 new nonprofits in each decade. But numbers of brand-new nonprofits almost doubled — to 372,000 — in the 1990s. In 2014, GuideStar’s database had information on more than 2.2 million U.S. nonprofits, more than 1.8 million were active.
Fiscal sponsorship, on a much smaller scale, has followed that trajectory. Starting in the late 1960s and into the 1970s, when community programs began to soar as the free-services-for-all concept took hold in California and spread throughout the nation, the need for cost-efficient financial management grew, and the business model gained currency.
New fiscal sponsors jumped in the 1990s. That’s when 44 of the sponsors in this directory — more than double the number of startups in each of the previous two decades — took on their first project. The pace of new fiscal sponsors has accelerated, with 136 of Directory participants, or 55%, forming since 2000, a percentage that has been rising as the Directory continues to add fiscal sponsors.
SCOPE: 10,530 projects
The role of the fiscal sponsor has taken off. Though the numbers of fiscal sponsors and the projects they host are minuscule compared with the vastness of the nonprofit sector, fiscal sponsors are an important factor in the increasing quality of nonprofit management, a trend widely acknowledged as awareness of fiscal sponsorship’s benefits spreads throughout the sector.
These 247 fiscal sponsors are home to 10,530 projects, almost a third of which are housed at Fractured Atlas. An educated estimate suggests these sponsors manage charitable funding of up to $1 billion. The majority of sponsors in the Directory are of modest size. Nearly a third (32%) of the agencies sponsor 1 to 5 projects, 12% sponsor 51 to 100 projects. The 10 largest collectively sponsor 5972 projects, 56% of the projects represented in the Directory.
A hidden efficiency for nonprofit board development is suggested by the projects-to-sponsor ratio, which is 44 to 1. This means more than 10,000 community organizations in the country didn’t need a board of directors. Projects come under their fiscal sponsor’s board of directors so they don’t need a board of their own to operate. This takes pressure off the pool of volunteer professionals across the country. A truism of community service is that many board members wear multiple nonprofit hats. If each of the 10,000 projects had to have its own board of directors, up to 100,000 civic-minded people in communities across the country would have to stretch themselves ever thinner.
ELIGIBILITY: Aligned mission and geography are key
Fiscal sponsorship must be largely a labor of love, because 216 or 87% of the sponsors in the Directory say “aligned mission/values” is chief among their eligibility criteria. The second most-cited eligibility criterion is “geographic,” with just under half of the sponsors requiring their projects to operate nearby, in the same metropolitan area, county, state or region.
PROJECTS: Arts is tops
There is some specialization among fiscal sponsors in terms of their projects’ services, but, not surprisingly, arts and culture, hands-down, is the most popular project category, with 180 — 72% — of the sponsors willing to take them on. And of these, film and video projects are a major subcategory. Education is the next largest category of service with 146, followed closely by youth development at 137, and children, youth and families at 125, a snug third.
FEES: Most charge 5%-10%
More than half of fiscal sponsors say they charge a flat fee, and 42% of the total are in the 5%-10% range. Also, of those with sliding-scale fees, almost two-thirds charge 5%-10%, usually depending on a project’s revenues. Thirty sponsors will charge 12% or more to handle government-funded projects, which can require adhering to higher federal audit standards. What mostly accounts for the disparity in fees is the range of services a sponsor provides.
SERVICES: Spectrum of assistance
Attorney Gregory Colvin’s Fiscal Sponsorship: 6 Ways to Do It Right, published in 1993 with an expanded and updated edition in 2005 and a Kindle edition in 2015, is the most significant publication in the field. Colvin’s book has had great impact on fiscal sponsorship. It changed the nomenclature of the field — from “fiscal agent” to “fiscal sponsor” — helping the culture of fiscal sponsorship evolve. The term “fiscal sponsor” has helped to professionalize the management model from the days decades ago of “fiscal agency,” when the relationship was called “a trap for the unwary” funder.
Among the more than half of participating fiscal sponsors that had read Colvin’s book — a percentage that has grown steadily as more sponsors have joined the directory — 45%, or 113, practice Model C, the preapproved grant relationship. The second most popular scenario, Model A, the direct project, is practiced by 90 sponsors, 36%.
Bookkeeping/accounting and bill paying are the primary services sponsors provide their projects — more than two-thirds do one or the other and most provide both.
Only a third of the sponsors handle their projects’ payroll, which reflects the trend to Model C. About half provide organizational development and tax reporting.
The larger, more experienced sponsors, according to survey results, tend to provide a spectrum of financial services — all of the above plus they usually handle insurance and auditing. This explains why experienced sponsors’ fees are on the higher side — more services, more staff time required.
These highlights from the fiscal sponsors in the Directory were updated in March 2016. The next update will be based on June 30, 2016, data.
Updated March 2016
The roots of our field go back to the 19th century. The ensuing timeline of legislation, court rulings, IRS determinations, events, activities and organizational development sketch the highlights of fiscal sponsorship’s history, factors that have helped it grow or change direction.
Russell vs. Allen. U.S. Supreme Court determines on March 5 that federal tax law requires the beneficiaries of a charitable contribution to be indefinite, the intended activities and services available to all.
Internal Revenue Code 501(c)(3), enacted August 16, provides the modern basis for tax exemption: “Organizations organized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals.”
Massachusetts Health Research Institute, now Third Sector New England — the anchor for East Coast fiscal sponsors and a pioneer in the field — incorporates and immediately takes on its first fiscally sponsored project.
IRS ruling, enacted January 1, establishes that a donation is not tax-deductible unless the recipient is a charity. It declares that when a charity acts only as a conduit or establishes a pass-through arrangement to receive a donation earmarked for a noncharity, that arrangement will result in loss of tax deduction for the donor (Revenue Ruling 63-252).
IRS Revenue Ruling 66-79 approves funds solicited for and regranted to a foreign charity for a specific project as tax deductible if the U.S. charity exercises “discretion and control” — ensures that those funds are used to carry out the charity’s function and purposes.
The most significant development in fiscal sponsorship since 1954 was Congress amending the Internal Revenue Code by dividing 501(c)(3) organizations into public charities and private foundations. As a result, public charities became magnets for sponsored projects, spawning the growth of fiscal managers mistakenly called fiscal agents. This popular term suggested the manager works for the project instead of having sole discretion for the charitable contributions.
Tom Silk opens a law practice in San Francisco, develops early theories of proper fiscal sponsorship under federal tax law by providing advice and representation in IRS controversies; his firm grew into Silk, Adler & Colvin.
National Foundation vs. U.S. Court of Claims case approves a prototype of public charity that houses multiple donor-advised funds and sponsored projects. The organization splits into three entities that still operate: National Heritage Foundation, Congressional District Programs, and Charity Admin Inc. National Heritage Foundation and Congressional District Programs have agency profiles in this directory.
“Use of Fiscal Agent: A Trap for the Unwary,” essay by John Edie, published by the Council on Foundations. Cautionary tale at a time of growing interest in fiscal sponsorship. IRS issues technical advice memo after a “fiscal agent” almost loses its 501(c)(3) exemption when one of its sponsored project’s activities is connected to the 1984 presidential campaign.
Series of meetings to collect and share information on sponsorship practices leads to grant support from the San Francisco and Wallace A. Gerbode foundations for a definitive book on fiscal sponsorship.
Fiscal Sponsorship: 6 Ways to Do It Right by attorney Greg Colvin is published by San Francisco Study Center. The book comprehensively explains why “fiscal agency” mislabels the funder-sponsor-project relationship. The change in nomenclature transforms the field and helps to professionalize the practice of fiscal sponsorship.
IRS Continuing Professional Education textbook states there is “nothing inherently wrong with fiscal sponsorship …,” which puts IRS acceptance on the record. 1994 textbook published July 1993.
Free-standing, multipurpose fiscal sponsor corporations established: Tides Center (Tides Foundation’s first fiscal sponsorship was in 1976), Community Partners in Los Angeles and Community Initiatives Fund of The San Francisco Foundation.
Fractured Atlas, now the largest fiscal sponsor, becomes first fiscal sponsor to do almost all of its business online, an increasingly popular model.
Tides Center examines fiscal sponsorship as a mechanism to support nonprofit innovation.
Based on Tides’ study, eight fiscal sponsors — the Steering Committee for what would become the National Network of Fiscal Sponsors — begin meeting to help define and build understanding of fiscal sponsorship.
W.K. Kellogg Foundation awards $4.07 million grant to Tides Center to expand its fiscal sponsorship capability.
Fiscal Sponsorship: 6 Ways to Do It Right, second edition, is published by San Francisco Study Center.
Fiscalsponsorship.com, Website of Greg Colvin, attorney and author of Fiscal Sponsorship: 6 Ways to Do It Right, is launched to explain developments in the field and as a companion resource to his book.
The Schwab Fund for Charitable Giving awards $50,000 grant to San Francisco Study Center to create an online directory of fiscal sponsors
Using funds from the 2005 Kellogg grant, National Network of Fiscal Sponsors launches field scan to gather first comprehensive data on fiscal sponsors.
Congress passes Pension Protection Act, with amendments to Internal Revenue Code affecting donor-advised funds and fiscally sponsored projects by imposing new excise taxes in some financial transactions.
National Network of Fiscal Sponsors inaugural gathering in Los Angeles in October.
Description of new Model L published. In this model, the fiscal sponsor acts as the sole member of an LLC, a limited liability company, and the project is operated from within this separate entity; if properly done, the sponsor should have no liability for LLC’s debts and obligations.
International Humanities Center in Woodland Hills Calif., a fiscal sponsor for 200 projects, fails, attracting public and regulatory attention. Losses to projects were estimated at more than $1 million.
An advisory committee to the IRS Exempt Organizations office recommends fiscal sponsorship as an alternative to the growing number of nonprofit corporations being formed and seeking IRS approval of their 501(c)(3) exemption.
IRS publishes Notice 2012-52, which clarifies that donations to a 501(c)(3)’s single member LLC (as in Model L) are deductible.
Resulting in part from International Humanities Center failures, AB 2327 takes effect in California. It requires charitable organizations with both restricted net assets and negative unrestricted net assets at the end of the year to explain their compliance with charitable trust responsibilities and to show the state attorney general’s office proof of its officers and their liability insurance.
IRS introduces Form 1023EZ for community groups with incomes below $50,000 seeking to become tax-exempt charities based on a three-page application and $400 fee.
National Network of Fiscal Sponsors conducts second field survey of sponsors to track growth and change in the field.
Kindle edition of Fiscal Sponsorship: 6 Ways to Do It Right published.
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