Curious about fiscal sponsorship? Heard the term but not sure how it might apply to your community project? Interested in finding a fiscal sponsor, but not sure where to start? You've come to the right place! 

 

Navigating the world of nonprofit fiscal sponsorship may appear challenging, but we've rounded up some key resources to help make it easier. 

 

What is fiscal sponsorship? 

 

Fiscal sponsorship is an arrangement in which an organization agrees to accept and manage funds on behalf of another person or organization. In the nonprofit world, groups and individuals usually enter this agreement when they would like to receive tax-exempt contributions for charitable or community-focused activities without having to go through the complicated process of receiving 501(C)3 status from the IRS.

 

Fiscal sponsorship arrangements can vary, but two are most common:

  • Comprehensive: Ongoing sponsorship and support which may include things like human resources management, IT support, and other services. If your project is raising more funds than what is described in your ioby campaign, or if you’ll need long term sponsorship that extends beyond the life of your project, comprehensive fiscal sponsorship from another organization may be an option to consider.
  • Project specific: Limited to a specific project. ioby’s fiscal sponsorship is a type of project specific, and limited to the project that you’ve described on ioby. More about ioby’s fiscal sponsorship service.

 

What does a fiscal sponsor do?

They typically sponsor projects with a charitable purpose that is consistent with the sponsor’s own mission. They can:

  • Receive and administer donations on your behalf, so that your donors can make tax-exempt contributions.
  • For comprehensive sponsorship, offer a number of support services like human resources management, IT support, and other services.

In exchange for these services, most sponsors will charge an administrative fee for its services, typically a percentage of the budget of the project or program. ioby charges a 5% fee for campaigns that use ioby's fiscal sponsorship service, a charge we deliberately keep low so that you can use your funds to get good done while allowing ioby to continue to offer services to leaders like you. 

 

Because sponsors manage funds on behalf of another individual or group, and become responsible for those finances, they take on significant legal and financial risk. If you are seeking fiscal sponsorship from an organization, it is important that they be well-informed of the risks, and are structured to manage and accept those risks.

 

How does fiscal sponsorship help me? 

(Information via Community Partners)

Fiscal sponsorship can benefit you and your project in a number of ways. 

  • Receive tax-deductible donations. Fiscal sponsorship allows you to receive tax-deductible donations, which may often encourage supporters to give to your project (or give more generously).
  • Move quickly and get off the ground faster. Since you won’t have to undergo the formal (and often long) process of becoming a nonprofit, it can help you start working towards your goal faster than waiting to incorporate as a nonprofit. For small groups, groups with short-term goals, time-sensitive projects, and groups seeking to test-drive ideas this can be a big benefit.
  • Expand your base of support. If your fiscal sponsor has a solid track record with foundations and other funders, this may benefit a “project” of that organization. If you don’t already have pre-existing relationships with funders, having a reputable charity supporting you with fiscal sponsorship could put you in a better position to secure grants or charitable donations.
  • Technical and administrative support. Many sponsors provide comprehensive fiscal sponsorship, and can provide additional support like insurance, payroll and accounting space, publicity, and more. This support can help free up your time to hone in on your mission, and spend less time on administration. Because of economies of scale, your sponsor may also be able to provide these services at a lower cost than you would be able to procure them on your own.
  • Lower Insurance Costs. Often, sponsors will be able to obtain lower insurance rates than would be available to a small start-up nonprofit corporation, which means savings that can be passed along to your project.

How do I find a fiscal sponsor? 

If you’ve decided to crowdfund with ioby and don’t have your own 501(C)(3) status, you might benefit from using ioby’s fiscal sponsorship service. You'll be able to receive tax-deductible donations to your crowdfunding campaign, and receive grants towards your project (as long as you crowdfund at least 25% of the total project amount).

If you’re looking for comprehensive fiscal sponsorship than what ioby offers, here are a few tips on where to look and what to keep in mind as you search:

  • Nonprofits with missions similar to yours are more likely to be able to offer fiscal sponsorship. You might start with your current affiliations.
    • NEXT STEP: Make a list of the professional societies, educational associations and institutions, religious organizations, social and recreational clubs, and other groups with which you are already associated.
  • The Fiscal Sponsor Directory allows you to search by state, service category, or keyword for nonprofit fiscal sponsors. Profiles include eligibility requirements, fees, services, and types of projects supported. The site also provides statistics and resources on fiscal sponsorship.
  • The National Council of Nonprofits also provides very helpful suggestions for Fiscal Sponsorship Resources, including further tips and tools for finding a fiscal sponsor.
  • If you're looking for more comprehensive fiscal sponsorship, you may want to check out this great guide from Grantspace.
  • When approaching prospective sponsors, be ready to give a verbal or written proposal that explains:
    • Your project: Why it’s needed, and its goals, objectives, method, evaluation, staffing, and budget. This is similar to a grant proposal.
    • How it advances the nonprofit’s mission.
    • Other ways the nonprofit can benefit from being associated with your project.

Other useful links:

 

Have questions? We want to help! 

If you'd like to speak to someone about ioby's fiscal sponsorship service and see whether your idea might be a fit for ioby's platform, reach out to us any time at hello@ioby.org, or give us a call at (917) 464-4515.