With IRS delays for approval of c3 applications often extending to a year or even longer, we are seeing an increasing number of inquiries from groups who are interested in fiscal sponsorship (FS) as a short term bridge to independent status.
As one of the country’s leading fiscal sponsors, TSNE works with these types of groups who intend to or already have applied for federal 501c3 tax exempt status.
Serving as a temporary home for mission-compatible projects is an important way fiscal sponsors effectively catalyze social enterprises. Getting your ducks in a row while under the wing of an experienced fiscal sponsor can help set you up for success as an independent entity. But thinking of FS as nothing more than a temporary home, a bridge to independence, undervalues the more substantive capacity building benefits of the model. In most situations a strong business case can be made for fiscal sponsorship as the preferred long term option for new ventures or transitioning social enterprises.
In our 50+ years of experience as a fiscal sponsor we have partnered with scores of groups whose initial intent was to stick around only until their c3 came through, only to remain with us for many years afterwards. Why? Because they soon realize they can do virtually everything as a fiscally sponsored group that they could do as an independent c3, but with sound partner to handle their management and administrative needs without substantial added costs and operational overhead. Accounting and financial reporting, insurance, audit, regulatory compliance, recruitment, benefits administration, human resources compliance and a many other valuable capacity building services are typically part of the package in a full-service relationship, freeing up the project’s leaders to focus on what they’re best at: mission –related activities and fundraising. As one of our project directors Toni Elka the executive director of Future Chefs puts it,
“TSNE has been an invaluable partner right from the start. Their human resources and financial expertise combined with our program know how and organizational leadership enabled us to focus confidently on building a well-run, mission-driven organization, helping hundreds of students succeed in school and in their careers. 21st century fiscal sponsorship is an effective hybrid organizational model that provides funders with opportunities to confidently invest in potent social justice efforts like Future Chefs.”
TSNE MissionWorks’s longest fiscal sponsorship relationship was 25 years; many others have lasted for 6-10 years, ending only when funding dried up or when the project developed sufficient internal capacity to make spinning off a reasonable option. Foundations around the country now routinely refer groups to experienced fiscal sponsors, recognizing the efficiency of the model and the value this extra level of support and oversight adds to both grantor and grantee . With a “professional” fiscal sponsor, the issue of control – of programming or funding – doesn’t come into play the way it often does for startup groups that align themselves with larger organizations in the same field, thus greatly diminishing the need to spin off as an independent entity. In fact, a sizable number of the projects currently in TSNE’s FS program came to us from other fiscal sponsors where there were issues around control and/or administrative capacity.
And at TSNE MissionWorks, where we offer our projects an array of capacity building services to supplement – coaching, succession planning, organizational assessments, training, to name a few – the rationale for a quick spin off is even weaker. So if you or someone you know is cooking up a great nonprofit idea, fiscal sponsorship can be a potential long term option, not just a bridge to stand-alone incorporation.