At Black Fox Global, we often have clients and prospective clients from global NGOs who approach us with questions on the most strategic ways to secure funding from US-based foundations and funders. Establishing 501(c)3 status is often the first thought that comes to mind, but there are other options to consider, including fiscal sponsorship. And while our team’s expertise in fundraising provides some peripheral knowledge on this topic, fiscal sponsorship is outside our core service offerings at Black Fox Global. Thus, in order to share best practices and tips for this approach to diversifying funding sources and securing additional support services within the social impact sector, we got together with our partners and friends at Panorama Global to dive into this topic. We are thrilled to be sharing our conversation with Panorama Global’s Riley Glandon-Shetty, and hope it provides valuable insights as you consider the best ways to move your mission forward.
Black Fox Global: We are witnessing incredible experimentation and innovation happening in the social change space, and therefore nonprofit and philanthropic organizations need to continuously adapt and reimagine models of collaboration in ways that enable systems change to happen. What is fiscal sponsorship and how can fiscal sponsors provide a support structure for social entrepreneurs to scale their impact as systems change drivers and networkers?
Panorama Global: Well first, I want to thank you for connecting with me and making this space for talking about the really quite exciting opportunities that fiscal sponsorship can offer. I might be biased in saying this, but fiscal sponsorship can be a game-changer for leaders and organizations who are interested in experimenting with new ideas or who need to navigate constantly changing landscapes. I’ve seen this first-hand in my role at Panorama Global, where we’ve been privileged to work with dozens of leaders looking to try something new over the past few years.
As defined very dryly by the IRS in the U.S., fiscal sponsorship is the practice of 501(c)3 nonprofit organizations extending their legal and tax-exempt status to a person or group of individuals engaged in charitable activities related to its mission. Put more simply, fiscal sponsorship is a tool that allows newly formed initiatives to receive tax-exempt contributions for charitable or community-oriented activities without having to take on all the administrative hurdles of obtaining and maintaining 501(c)3 status from the IRS. However, in practice, a fiscal sponsor can provide so much more than just receiving and regranting funds.
For instance, at Panorama, we improve the operational capacity of sponsored initiatives by providing shared infrastructure so initiatives can tap into our existing accounting, grants management, human resources, administrative, and other services.
As a nonprofit that does social change work in our own right, in addition to fiscally sponsoring a number of initiatives, we see fiscal sponsorship as an incredible tool that can help social entrepreneurs minimize administrative work and focus on their mission. Fiscal sponsors take the burden of accounting and much more off of the shoulders of impact leaders so they can put more energy into the mission they are passionate about!
BFG: As an early-stage social entrepreneur contemplating how best to structure an initiative and whether fiscal sponsorship is a good option, what should folks be considering?
PG: It’s important to confirm that priorities are aligned with what a fiscal sponsor’s operations and approach can offer. As the leader of an initiative, you will typically lead programmatic activities, fundraising, and donor relationship management, while leaving other operational processes to the sponsor. By plugging into an existing U.S.-based 501(c)3 nonprofit’s operational infrastructure leaders can spend more of their limited time focused on programming and fundraising.
Leaders might also want to consider fiscal sponsorship if they know the funding is out there for their work – whether or not they’ve applied for 501(c)3 status. It can be a great short-term option if organizations have applied and would like to receive grant funding while waiting for an IRS determination. Or, if an organization hasn’t applied for 501(c)3 status and are still on the fence, they can work with a fiscal sponsor to receive funding while they discern if a 501(c)3 is ultimately right for them.
Here are a few other questions leaders should consider as they think about fiscal sponsorship:
- Will planned activities for funding be considered “charitable” in the eyes of the IRS? A fiscal sponsor will need to ensure that any 501(c)3 funding is spent in compliance with IRS regulations. If you plan to engage in both charitable and for-profit work, there may be a fiscal sponsorship option as long as an independent entity is established to manage the non-charitable work.
- Has the organization conducted a cost-benefit analysis of starting up an independent entity versus tapping into an existing platform for a nominal fee? Candid put together some great resources that can help you decide if starting a nonprofit is right for you.
- We also recommend exploring whether it’s critical that the organization have its own tax-exempt status from the start. To help answer this, leaders should ask themselves if it is important to retain full control over funds raised, as the sponsoring organization exercises fiduciary responsibility over any funding it receives on behalf of sponsored initiatives. Sponsored initiatives will still lead on and retain control over their programmatic work while the sponsor ensures that the program activities are 501(c)3 compliant.
This isn’t one-size-fits-all; fiscal sponsors vary in terms of their issue areas of focus, the services they provide, and how they partner with sponsored initiatives. There is an entire ecosystem of fiscal sponsors and intermediaries out there who can unlock access to philanthropic funding more quickly than you would think.
BFG: What are some of the benefits of working with a fiscal sponsor?
PG: Where to begin… Have I mentioned yet that you don’t have to hire an accountant or worry about reviewing contracts for compliance?! But in all seriousness, fiscal sponsorship can make the nonprofit sector more accessible and equitable in several ways. It can help you scale your work more quickly by navigating compliance burdens and alleviating start-up costs, as a fiscal sponsor will wade through the legal, financial, technical, and administrative weeds. This is an excellent option for initiatives that haven’t yet or do not plan to file for 501(c)3 status as fiscal sponsorship doesn’t have to be just a short-term solution but can be long-lasting. Similarly, established initiatives that wish to reduce overhead costs are often fiscally sponsored.
Starting, running, and maintaining a nonprofit requires many steps, and it can take new initiatives several months to be approved by the IRS for 501(c)3 status.
Another benefit is that some fiscal sponsors already have relationships with donor organizations or can easily provide the required organizational due diligence and compliance information needed to receive funding. At Panorama we know that connections are an important part of effective social change work, and that this can unfortunately put up a barrier for some early-stage innovators. One of my favorite parts of fiscal sponsorship work is making connections and introductions across our broad ecosystem of partners! We believe in lowering barriers to entry with donors and improving the equity of access to funds.
Lastly, I want to highlight that fiscally sponsored initiatives are well-suited to serving as neutral platforms for coalitions and networks of nonprofits and donors seeking a place to house their work and funds. Fiscal sponsors are a great option for this!
BFG: What does the fiscal sponsorship relationship look like and how can social impact leaders expect to partner with their fiscal sponsor to achieve their work?
PG: Each fiscal sponsor is unique in how they provide support, and this is a great question to ask potential fiscal sponsors in exploratory conversations. It’s important to ensure values and mission alignment, as the fiscal sponsorship relationship should be a very close one, as with any strong working partnership. For example, since all money in and money out is run through the fiscal sponsor, they will need to be in touch with critical stakeholders like donors, vendors, and fiscally sponsored employees. As I said, it can be a close partnership!
That said, I can only really speak to what these relationships look like at Panorama. Each of Panorama’s fiscally sponsored initiatives have a dedicated relationship manager – a single point of contact committed to answering questions and finding solutions. Our relationship managers are also great thought partners, helping tailor our support to meet initiatives’ unique needs while also ensuring critical risk assessment, management, and compliance procedures are in place so they can continue raising funds.
BFP: What are the key differences between fiscal sponsorship models and how would someone know which model is right for their initiative?
PG: There are several models of fiscal sponsorship, but the two most common types are Model A (Comprehensive) and Model C (Pre-Approved Grant Relationship). You can read more about these models on our website, but at a high level:
- Model A sponsorship is comprehensive, meaning the initiative does not have legal status on its own and relies on the fiscal sponsor’s status. In this scenario the fiscal sponsor provides shared infrastructure for sponsored initiatives, takes on responsibility for the sponsored initiative’s assets and liabilities, and handles back office administrative work like financials, grants, and HR management.
- Model C sponsorship is where the sponsor is a steward of funds and regrants them to an existing entity without 501(c)3 status (e.g., a 501(c)4 or international NGO) for charitable work aligned with the sponsor’s mission. For example, if your organization has charitable status in another country, you can work with a U.S-based fiscal sponsor to tap into U.S. fundraising that might otherwise be inaccessible.
Each model of fiscal sponsorship can be adapted – or used in combination – to achieve the mutual goals of the fiscal sponsor and sponsored initiative.
BFG: Under what circumstances does forging ahead with a 501c3 first make the most sense?
PG: Great question! Strong candidates for obtaining 501(c)3 status include social impact leaders who have the funding and capacity to operationalize their work and a strong desire to operate autonomously. If the leader feels they can confidently and sustainably manage the process and cost of filing the required paperwork, managing staff and payroll, overseeing finances, and executing contracts and grants, while also ensuring funds are spent compliantly, then becoming a 501(c)3 could certainly be a good path.
It’s also fairly common for new initiatives to be incubated at a fiscal sponsor while its leaders are busy raising funds and building capacity in order to eventually spin out into an independent 501(c)3. This can be a great way to use fiscal sponsorship as a steppingstone or way to pressure test ideas more quickly.
BFG: You’ve been generous with these insights; thank you! We’d love to give you a chance to toot your own horn if you’re open to it. How is fiscal sponsorship at Panorama unique?
PG: I’m really proud of the ways we’ve approached fiscal sponsorship at Panorama Global, so thank you for asking! As I mentioned earlier, fiscal sponsorship is just one facet of Panorama’s overall social impact work, but the idea of empowering changemakers through deep collaboration is central to everything we do. There’s overlap with the work my colleagues are doing to build peer learning communities for recipients of windfall grants, for example, or with another pilot program that is providing 1-on-1 strategic counsel for early-stage leaders. Many of our partners, regardless of where their work starts on our platform for social change, end up connecting in different ways with others in our network. When you work with Panorama, you’re really engaging the full breadth of our global network!
Most importantly, we have an amazing group of relationship managers that work day-to-day with our fiscally sponsored initiatives and a stellar Finance and Operations team that contribute to an operational excellence that is critical as a fiscal sponsor. This enables us to offer a range of services in addition to the standard financial, grants, and HR management, including access to international employment arrangements and international grantmaking capabilities. As a global organization, our international capabilities have played a critical role in several of our initiatives decentralizing hiring and building teams in the Global South.
I’d love to share an example of so much of what we’ve been talking about in action.
The Missing Billion Initiative was founded in 2020 as a systems change catalyst working to mobilize the global health community to take action on building more inclusive health systems. This collaboration, developed by four women co-founders and driven by a team in which half of them live with a disability, addresses the inequities that cause people with disabilities to have significantly worse health outcomes than those without. After securing their initial funding, it became apparent that The Missing Billion Initiative would be able to work more efficiently with support in organizational compliance along with financial, grants, contract, and staff management. They came to Panorama as a startup seeking Model A comprehensive fiscal sponsorship and after several exciting conversations, we agreed that their mission aligned well with Panorama’s own as well as our other work in the global health systems landscape. We’re proud to fiscally sponsor this impactful initiative.
Since launching, the Missing Billion Initiative has been focused on cultivating relationships with funders and partners, building out their team, and generating impactful research. By providing HR, contract, and financial management services, Panorama has supported the Missing Billion Initiative’s work which includes developing an assessment toolkit to help Ministries of Health assess their health system against disability, generating and sharing data through their reports, driving innovation around community health care worker training and inclusive primary clinic design, and mobilizing a movement by bringing stakeholders together to define collective projects. By partnering with Panorama to tap into our back-office infrastructure, the Missing Billion Initiative is fully establishing themselves as a systems-change catalyst for inclusive health unencumbered by the need to draft contracts or file organizational tax forms.
BFG: If folks are interested in learning more, how can they get in touch?
PG: We invite readers to fill out a quick contact form on our website to get in touch. We are always happy to connect, whether people have already decided fiscal sponsorship is a good fit or they’re still unsure. We’re also familiar with the broader social change landscape, so even if Panorama isn’t the right fit for your needs, we can suggest other options.
Thank you again for this opportunity to share more info about a topic that too few are aware is even an option!
BFG: Our pleasure! We’re always learning, and are grateful for you taking the time to visit with us on a solutions-based approach for leaders to consider as they seek infrastructure and support on their journey toward greater impact.
By Riley Glandon-Shetty, Director, Scalable Solutions, Panorama Global; Lisa Heinert, Chief Operating Officer, Black Fox Global; Natalie Rekstad, Founder, Black Fox Global
