How to Approach a Fiscal Sponsor
The Foundation Center is hosting a live Q&A chat about how projects can prepare information about themselves when they approach a fiscal sponsor. The chat also will give fiscal sponsors a platform to share what they find most useful from potential projects.
This free discussion, Monday, Jan. 30, 2-3 p.m. Eastern time, features panelists Nikki Carpenter, program manager of the Foundation Center’s Fiscal Sponsorship Program, and Katie Kern, director of program administration at United Charitable Programs, in the chat window at GrantSpace: http://grantspace.org/Classroom/Training-Calendar/Live-Chat-Discussions/How-to-Approach-a-Fiscal-Sponsor-2012-01-30-Live-Chat
There will be no audio. When the chat goes live, submit your questions and comments and interact with the panelists and other readers.
Please share the link for this event with your colleagues.
How fiscal sponsor works with Occupy Wall Street
By Marjorie Beggs
Senior Writer/Editor
San Francisco Study Center
The explosive growth of the Occupy movement took many by surprise, not least Chuck Kaufman, Alliance for Global Justice national co-coordinator, who helped set up the fiscal sponsor contract between AfGJ and Occupy Wall Street.
“Back in September, I didn’t go to my board right away when a member of Occupy Wall Street’s finance committee approached us to be its sponsor,” Kaufman told fiscalsponsordirectory.org. “I thought it would just be a short-term project that might bring in maybe $20,000.” But within days, the board voted to approve the new project.
AfGJ’s Website has a daily ticker, charting the online donations to Occupy Wall Street. On Nov. 21, it read $268,275. The real number, Kaufman says, is far greater — $550,000, with many donations in the under-$100 range — because the money is coming in so fast, bank processing can’t keep up with it.
The movement has followed a similar accelerated trajectory. What started with 1,000 people at a Sept. 17 protest in Manhattan’s Liberty Square (a.k.a. Zucotti Park) skyrocketed by mid-November to 20,705 occupiers in 2,414 cities worldwide, according to Occupy Together, a Website formed to consolidate the daily changes in the movement.
The dismantling of large encampments — Oakland Nov. 12, Portland a day later, and the surprise 1 a.m. eviction of the New York park Nov. 15 — is unlikely to stop the protesters.
“I have confidence that Occupy Wall Street will continue, whether at Liberty Park, somewhere else, or many other places,” Kaufman said in an email to fiscalsponsordirectory.org. “We don’t anticipate that the police repression will have a material effect on our fiscal sponsorship relationship with OWS. In the 24 hours following the eviction, donations shot up to a level we haven’t seen since Oct. 22.”
AfGJ signed its sponsor agreement with Occupy Wall Street Sept. 28. Since then, Kaufman says he’s fielded more than a dozen requests from Occupy locales nationwide to sponsor them, but he’s turned them all down. “I encouraged them to find a local sponsor, like Tides on the West Coast. The Alliance simply can’t handle any more.”
AfGJ, founded in 1979 as the Nicaragua Network, sponsors 35 projects in addition to Occupy Wall Street; about half of them are international and half national or local. Some, like Occupy Wall Street, lack a titular leader. All reflect the Alliance’s mission — to support grassroots social change and economic justice movements.
AfGJ’s contract with Occupy Wall Street is not unique to that project: AfGJ takes an administrative fee of 7%, completes the federal tax forms, collects credit card donations, and distributes contributions based on receipts. The project agrees to submit receipts and to do nothing to jeopardize AfGJ’s tax-exempt status.
In practice, however, there are big differences with Occupy Wall Street.
“The novelty for us is in the sheer number of donations,” Kaufman says. “Most of our other projects get their support as grants that come in $40,000 hunks.” In October, he told ABC News that AfGJ was processing 400 donations a day, compared with the dozen a week it was used to. Last month, the flurry even touched off a freeze by the credit card company handling its account — “the company freaked out,” Kaufman says — but it was resolved quickly.
AfGJ also doesn’t pay Occupy Wall Street as receipts come in.
“They have a bank account and a hard-working finance committee that includes a lawyer and a CPA,” Kaufman says. “The CPA provides us with profit-and-loss statements and a balance sheet. She keeps the receipts, which she will send to us, and we wire the money to their account in blocks of $50,000, almost like a form of a grant to them.”
Insurance is another element that AfGJ hasn’t dealt with in this contract. The state of New York requires AfGJ to carry a $2 million liability policy, which it uses for all its projects. AfGJ has provided a certificate of insurance for a specific location for some of its projects, say for an event. “So far, Occupy Wall Street hasn’t asked for it, and I’m grateful for that,” says Kaufman.
Occupy Wall Street also collects cash donations wherever it gathers, reportedly more than $121,000 in its first six weeks. Asked if those donations would be a part of AfGJ’s IRS accounting, Kaufman wasn’t sure: “That is a concern to me, but I don’t know if it will be a problem or not. The next 990 we file [the form required of tax-exempt organizations with annual receipts of more than $100,000 or total assets more than $250,000] may tell the tale. Meantime, we just will trust their CPA.”
Oct. 30 the finance committee released the report of its first month’s spending: Of just over $50,000, $19,000 went to communications such as computers and cameras, almost $22,000 paid for food, bedding and laundry, and $10,000 bought tools, generators, other equipment and office supplies.
Kaufman says there was money left over, and the New York occupiers sent 100 tents and some cash to the Oakland encampment, which had just been evicted for the first time. “Occupy Wall Street wants to serve the whole movement when it can. It’s absolutely committed to others, but it also doesn’t want to become their sugar daddy.”
Kaufman’s suggestion to other tax-exempt organizations contemplating a fiscal sponsor relationship with Occupy groups is to first see if trust can be established between the two entities. The occupiers’ level of organization and experience is likely to build as time goes on, as it did with Occupy Wall Street.
“I’ve been impressed from day one with the seriousness of the finance committee members, plus they’re developing incredible business skills,” he says. “They understand that the world we live in requires receipts. I’m confident we could open our books to the IRS and be clean.”
As the Occupy story unfolds, AfGJ remains engaged. Kaufman says his organization is in talks about handling fundraising and logistics for a national social forum for all of the Occupations. Its staff remains at five, where it was before Occupy Wall Street.
“We’ve just become much more rigorous in our record-keeping.”
More Information
Alliance for Global Justice: http://afgj.org/?p=1787
From Gregory Colvin: http://www.nonprofitlawmatters.com/
6 Ways to Do It Right author leads COF workshop
By Wayne Heuring
Directory.org reporter
Acting as a fiscal sponsor can be helpful and profitable endeavor for community foundations, and there are various ways to do it. But there are hazards along the way, as dozens of community foundation staffers heard about from the foremost legal expert in the field.
Gregory Colvin, author of Fiscal Sponsorship: 6 Ways to Do It Right, led a workshop at the annual Council on Foundations’ conference for community foundations Sept. 20. He made the point that whichever approach is taken, diligence is needed. There was much nodding of heads as, from a show of hands, only a few had no fiscal sponsorship experience.
Kelly Shipp Simone, COF’s deputy general counsel, legal, said from the crowd that at one time the council published its own guide to fiscal sponsorship, but when Colvin's book came out in 1993, “we stopped publishing our own guide.”
She said that community foundations have increasingly shown interest in fiscal sponsorship in recent years.
Colvin, a partner in the Adler & Colvin law firm in San Francisco, said a community foundation has six basic options with regard to fiscal sponsorship:
- Operate a full-scale fiscal sponsorship program. Most foundations already have sufficient resources on hand to do so.
- Shoehorn it into donor services, such as donor-advised funds, or supporting organizations.
- Spin off a free-standing regional fiscal sponsor organization, which can serve to isolate liability.
- Operate a limited fiscal sponsorship program. This can involve a variety of approaches, including limiting the number, duration or size of projects.
- Provide back-office finance and administration only, avoiding issues of legal responsibility.
- Or, Colvin offers, stay out of fiscal sponsorship, but make smart grants to solid fiscal sponsors for projects they manage.
Colvin cautioned about donor-advised funds (DAFs), a potentially risky situation because those funds are restricted to a particular project or purpose, as opposed to general, or discretionary, funds. Colvin clarified the point later in an email to the directory.
“A fiscally sponsored Model A direct project could be a DAF if all or most of the funding came from a single person, family, or business and that funding source continued to advise the project on its expenditure of project monies,” Colvin wrote. “The 2006 federal tax amendments prohibit the use of DAF money to pay any natural person for anything, which prevents the hiring of employees, engagement of consultants, etc., whether for program management, fundraising, or direct services. Really, the only safe expenditures from a DAF would be grants to 501(c)(3) public charities, which may cause the fiscal sponsorship to be a useless exercise.”
He also advised that with some projects, such as those involving children, it’s wise to be well-insured. Another is a project that involves any kind of touring. Colvin's advice: “Buy insurance by the truckload.” This includes not only the normal general liability, professional liability and D&O, but also use of private cars, molestation and other types.
Workshop participants shared stories of their experiences in fiscal sponsorship — good and bad. Among the bad was the tale told by Richard Gentsch, executive vice president of the Delaware Community Foundation in Wilmington, Del.
Gentsch told of acting as fiscal sponsor for a project in which a man was raising money to purchase a customized car in honor of his son, who had been killed in an auto accident. The car would be auctioned, presumably at a profit, to raise money to support sports in Delaware.
The man used the foundation’s tax ID number to open a checking account, then took the car to Florida to raise money there. That’s when the foundation heard from the Florida attorney general’s office, telling them they couldn’t raise funds in that state.
It was a messy situation, Gentsch said, but Florida authorities were understanding and allowed the foundation to quickly register, and didn't make it pay a fine.
It’s not the only bad story they’ve had in their 10 years of fiscal sponsorship, either, Gentsch said. On the other hand, he said, their fiscal sponsorship activities have been well worth it:
“It's become our biggest money-maker.”
Workshops aim spotlight on compliance, nonprofit business basics
A two-day series of four workshops designed to help fiscal sponsors and project managers, nonprofits and community organizations develop a sound business infrastructure is set for Sept. 29-Oct. 1 in Tempe, Ariz.
The workshops are the brainchild of Maggie Lane-Baker, executive director of Arizona-based Help Is Here. Lane-Baker, whose organization sponsors 46 projects, got developed the idea after the IRS issued its second list in two years of nonprofits whose tax exempt status was revoked because they had failed to file Form 990 for three consecutive years. The 2011 list, released in June, included approximately 275,000 nonprofits throughout the country.
Lane-Baker posited that many nonprofits lost their status because their managers were unclear on basic business practices, including a firm grasp on IRS compliance. It’s a familiar scenario to Lane-Bakers, whose organization often mentors well-meaning beginners with great ideas but little practical business experience.
“The IRS was so good at handing out 501(c)3 status like candy. But it’s like giving a 14-year-old a baby to raise and saying ‘You have to figure this out on your own,’” she says. “We decided to help them. It’s really easy to pay a lawyer to fill out 501(c)3 paperwork, for you, but you have to know how to run it. Once you get that 501(c)3 status, what are you going to do? You have to know how to climb that mountain.”
Lane-Baker’s September workshops will cover the basics of fiscal sponsorship, IRS and internal compliance and control, insurance requirements, grant research and development, marketing and fundraising.
The workshops will be led by Francis Johnson, an Idaho businessman and educator, who will address business-building techniques; Anglie Clitherow, internal compliance officer for Help Is Here, whose topic is “IRS and Internal Compliance and Control”; John Bobell, an adjunct professor at Southern Illinois University, who will focus on grant research and development; and Peter Baker of Arizona, whose expertise is in marketing and fundraising. Lane-Baker will also conduct a workshop on fiscal sponsorship and leadership.
The series costs $350, which covers hotel, breakfasts, lunches and workshop materials. Hotel check-in is Sept. 29; the workshops will be held Sept. 30 and Oct. 1.
To register, contact Help Is Here at 855-694-3574, ext. 1.
Annual conference puts fiscal sponsorship in spotlight
By Wayne Heuring
Fiscal sponsorship is a useful tool for community foundations, but there can be pitfalls, and nobody knows what to look out for better than attorney Gregory Colvin, whose presentation on the subject at the 2011 Fall Conference for Community Foundations could help some fiscal sponsors avoid problems.
Colvin, whose book is considered the standard on the subject, will talk about “Fiscal Sponsorship: The Legal Rules” at the Council on Foundations conference, to be held Tuesday, Sept. 20, at the San Francisco Marriott Marquis from 4 to 5:30 p.m.
“Greg is the leading expert on fiscal sponsorship and is best positioned to offer the legal and practical advice needed by our members,” said Janne Gallagher, Council senior vice president and general counsel. “In addition, his book, 'Fiscal Sponsorship: 6 Ways to Do It Right,' is popular among our membership and is one that we often recommend.”
Colvin's session will lay out various fiscal sponsorship models and the legal rules a community foundation should consider before deciding to serve as a fiscal sponsor.
He recalls presenting a session at a 1995 Council on Foundations conference in San Diego.
“It was very well attended,” he said, “because many community foundations were worried about whether their fiscal sponsorship activities were following the rules.
“By the end of the session,” he said, “some people were crying as they became aware they were using a method of sponsorship that was far out of compliance and could expose them to considerable risk, both from the IRS and also from liability to third parties on projects that were not well supervised.”
For example, Colvin explained, community foundations are typically focused on donor services, working more with people who are giving rather than those who get the grants and operate the programs. Donors often want to finance high-impact, high-cost projects that are short-term and don’t really need a 501(c)(3). So, to handle the project administration in-house in order to be cost-effective for the donors, a community foundation may try to shoehorn fiscal sponsorship into its business model, and it might not be a good fit.
Bob Small, associate director of Pike’s Peak Community Foundation in Colorado Springs, an 11-year veteran of fiscal sponsorship with 85 projects, suggests keeping it simple.
“It’s important for our projects to have a good match with our mission,” he said in a phone interview. “We restrict our fiscal sponsorship to projects in our area instead of across country.”
Colvin also says a community foundation might set up its projects as donor-advised funds. This gives donors their tax break, but, because the donation is no longer their money, they can't instruct the community foundation on what to do with it. The necessary separation of roles and responsibilities of community foundations and their donors can be a pitfall if not understood by all.
Colvin says community foundations can get into trouble with ERISA compliance on their pension plan if they don’t treat all their employees the same when it comes to benefits. Fiscal sponsor office staff and the people running the sponsored projects must be treated equally in all respects, or that can result in personnel problems ranging from bad feeling to lawsuits. This is a potential pitfall for other fiscal sponsors as well.
The Council on Foundations says there’s no data on how many community foundations are also fiscal sponsors, but “It is our belief that it is a common practice, particularly by community foundations in smaller and rural communities,” Gallagher said.
Fiscal sponsorship is a cost-effective tool for community foundations that is no doubt underused, Colvin says, but better do it right. His session will lay out the legal rules governing the process.
Colvin is a principal in the law offices of Adler & Colvin, San Francisco.
Wayne Heuring is a former copy desk chief of the San Francisco Chronicle and the San Francisco Examiner. Geoff Link, executive director of the Study Center, contributed to this report.
35 sponsors discuss top topics in field at regional meeting
Fiscal sponsorship’s value, appeal and challenges were consistent topics at the National Network of Fiscal Sponsors’ half-day regional meeting May 9 in Los Angeles.
The event was part of the preconference activities for “Building Opportunities,” the biennial conference of the Nonprofit Centers Network. http://www.nonprofitcenters.org/ .
Most of the 35 leaders at the meeting represented California-based nonprofits, but the session also attracted participants from as far as New Orleans, Boston, Maryland and Edmonton. Some were experienced fiscal sponsors; others were new to the field or were considering providing fiscal sponsorship in their community.
The content of the session, which was facilitated by Jane Levikow and Heidi Gatty of the Tides Center, current chair of the NNFS Steering Committee, was wide-ranging, from Electronic Operations to Compliance & Liability to Understanding the Market.
One issue identified by virtually all participants exemplifies both the value and the challenges of being a fiscal sponsor: Its easy-in, easy-out model appeals to social entrepreneurs who don’t want to be bogged down by administrative responsibilities, but many visionary leaders are not especially compliance-minded, which creates liability exposure for their sponsors.
Other high-interest issues included the role of advisory boards (it was suggested that the term “advisory bodies” is more appropriate, to differentiate them from legally responsible boards of directors), transitioning projects in and out of a fiscal sponsorship relationship and the overall sustainability of the model.
The group also brainstormed ideas for future Hot Topic phone sessions or webinars and for more in-depth workshops on the practice of fiscal sponsorship. The need for high-quality marketing materials for the field surfaced as a priority for most in the room.
Jonathan Spack of Third Sector New England distributed a new White Paper written by TSNE’s Josh Sattely, aimed at dispelling common myths about the field: http://www.tsne.org/atf/cf/%7BD1930FAD-18A8-4D53-BBA2-A2971E3DEE1A%7D/FS%20WhitePaper%20Final%20web.pdf
The National Network of Fiscal Sponsors, established in 2004, brings together organizations from across the country committed to using and promoting fiscal sponsorship as a mechanism to support innovation in the nonprofit sector. http://www.tides.org/community/networks-partners/nnfs/ Among NNFS accomplishments are the first-ever scan of the field of fiscal sponsorship http://www.tides.org/fileadmin/user/pdf/WP_FiscalSponsorFieldScan.pdf and the publication of guidelines for groups looking for a sponsor or considering offering the service to others. http://www.tides.org/fileadmin/user/NNFS/NNFS-Fiscal-Sponsorship-Guidelines-for-Comprehensive.pdf.
Jonathan Spack is executive director of Third Sector New England, the nation’s earliest fiscal sponsor.
Big S.F. fiscal sponsor expands into shared office space
Intersection for the Arts, a leading fiscal sponsor in San Francisco's art scene, is moving
to 5M, a co-working space for artists, freelancers and entrepreneurs designed to stimulate cross-pollination of ideas and communities.
The move is an interim one for the 46-year-old organization, which has "outgrown" its Mission District headquarters, according to Executive Director Deborah Cullinan. Intersection moved its art gallery to 5M last spring, and is now in the process of moving the rest of its operations. Its new home — located in the San Francisco Chronicle building at 5th and Mission streets — will serve as gallery and administrative space by day, and performance and event space in the evening hours.
"This is a profound effort to create a campus of creativity and innovation that clearly values the role artists and arts organizations can play," says Cullinan, whose organization is fiscal sponsor to 110 Bay Area projects.
Cullinan says Intersection's interim move is part of a growing wave of space-sharing and resource-sharing in the nonprofit sector.
"We're very much about pursuing new models and discouraging duplicated infrastructure," she says. "The whole concept is to say, 'How can we maximize the impact these artists are having in their communities?' If we can build models where we're sharing space, expertise and resources, we can maximize creative output."
For more information on Intersection for the Arts' move, visit http://www.theintersection.org/calendar/index.php?op=view&id=3755
In May, the Nonprofit Centers Network — a group of nonprofits, professionals and philanthropic leaders from the financial, real estate and public sectors — is hosting a conference entitled Building Opportunities. The network includes Tides, a leader in the sustainable-workplace movement.
The conference, which runs from May 9-11 in Los Angeles, will feature workshops
devoted to the sharing of workspace, administrative services, technology and programs
for the nonprofit sector. For more information, visit
http://www.tides.org/tidings/sharing-becomes-a-movement/ or https://www.regonline.com/builder/sideDefault.aspx?EventID=921965
Model C Regranting
San Francisco attorney Greg Colvin, author of "Fiscal Sponsorship: 6 Ways to Do It Right," sheds light on how a Model C project should apply to a foundation for a grant via a fiscal sponsor. He includes suggested language for a cover letter from the sponsor to the funder. For the full text, go to www.fiscalsponsorship.com
Community Initiatives issues annual report for FY10
During FY10 (July 1, 2009, to June 30, 2010), while the nation remained gripped in stubborn economic recession and foundation grant-making budgets continued to decline, Community Initiatives held steady. We added 15 new projects, launched three others into their own 501(c)(3) organizations, and ended the year in the positive. Community Initiatives' annual report paints a picture of its activities, with lists of its projects and funders, in its report, which is accessible by clicking http://www.communityin.org/annual-report.html. For a paper copy, please contact Prudy Kohler at (415) 230-7708.
California nonprofit seeking participants
The producers of the 32-year-old Northern California Nonprofit Compensation and Benefits Survey are inviting California nonprofits to participate in the 2010 survey. The survey helps organizations set fair salaries and benefits, evaluate industry compensation standards for a range of positions, and budget and plan for the cost of adding staff. Formerly administered by the Center for Nonprofit Management, this year’s survey will be produced by Nonprofit Compensation Associates of Oakland, Calif. The survey has been renamed “Fair Pay for Northern California Nonprofits: The 2010 Compensation and Benefits Survey.” To take the survey, visit NCA at www.nonprofitcomp.com or call 510/645-1005.
New info on donor-advised funds
San Francisco attorney Greg Colvin, author of the fiscal sponsorship bible "Fiscal Sponsorship: 6 Ways to Do It Right," has new information on a 2006 tax law change that could affect projects that are also donor-advised funds. Although the IRS has not issued regulations interpreting the new statute, on his Web site Colvin provides his firm's take on the law's relevance to fiscal sponsors. He also provides a detailed definition of a donor-advised fund.
For the full text, go to www.fiscalsponsorship.com and click on "memo."
To be, or not to be — a 501(c)(3)
When should a new program go for its 501(c)(3)? When is it better off choosing a fiscal sponsor?
This is the nonprofit startup’s dilemma.
The answers are on attorney Gregory Colvin’s blog, fiscalsponsorship.com. Colvin is author of the seminal book on the topic, Fiscal Sponsorship: 6 Ways to Do It Right, and partner in Adler & Colvin in San Francisco.
He lays out the advantages of each mode of operation and compares them in a realistic context that can result in pragmatic decisions.
Foundation Center seeking data
The Foundation Center is collecting the most recent data available on U.S. foundation support in response to the economic crisis, offering the first look at how foundations are aiding nonprofits as they struggle with the fallout from the downturn. The Center is making this information publicly available in an interactive map on its Web site, and has already gathered information on more than $56 million in support -- 135 grants and program-related investments (PRIs) of approximately $22 million and $34 million, respectively. The map displays the data by state, county, city, ZIP code, or congressional district. New grants will be added to the map on an ongoing basis to provide the most current picture of foundation giving for programs and issues relating to the downturn. An RSS feed will deliver the latest grants lists to anyone who signs up at the Center's site. Grantmakers are encouraged to send announcements about grants or PRIs related to the economic crisis to Matthew Ross at mr@foundationcenter.org. This mapping resource is part of the Center's broader initiative to provide the latest information, news and research to shed light on the potential impact of the economic climate on the field of philanthropy. Visit "Focus on the Economic Crisis" at http://www.foundationcenter.org/focus/economy
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