Which fiscal sponsorship model is ideal for your impact work?
August 3, 2022

Which fiscal sponsorship model is ideal for your impact work?

Read on for a summary of two models of fiscal sponsorship Panorama offers, who is best served by each, and how Panorama builds custom solutions that can help get new ideas off the ground while saving time, capacity, and resources.

All social entrepreneurs dream about maximizing social impact through their ground-breaking solutions and projects. However, without a solid execution plan, great ideas almost always remain just that – an idea. To succeed, social entrepreneurs need a plan for how they are going to efficiently operationalize and scale their projects to maximize the impact they have set out to create.  

At Panorama Global, we help social entrepreneurs navigate the winding path from idea to impact. Through fiscal sponsorship, we help social entrepreneurs get off the ground while saving time, capacity, and resources for our partners.  

Our last blog explored why social entrepreneurs should consider fiscal sponsorship and explained that fiscal sponsorship refers to the practice of 501(c)(3) nonprofit organizations (the “fiscal sponsor”) extending their legal and tax-exempt status to a person or group of individuals engaged in charitable activities related to the organization’s mission and exempt purposes (the “project”).

Fiscal sponsorship is a powerful tool for changemakers looking to focus on their mission-driven work. Panorama's shared infrastructure enables social entrepreneurs to have a one-stop-shop for everything needed to get ideas off the ground: legal structure and compliance, human resources, financial management, grant-making, and much more.

While not defined by law, fiscal sponsorship is governed by the Internal Revenue Service (IRS) to ensure tax-exempt groups are not mere conduits for the distribution of funds. There are several models of fiscal sponsorship, but here we’ll look at the two most common types that social entrepreneurs can use to deepen their impact while tapping into operational efficiencies and infrastructure.  

But first, it’s important to note that the models below simply provide a framework to understand the possibilities offered by fiscal sponsorship arrangements. Each model of fiscal sponsorship can be adapted or used in combination to achieve the mutual goals of the fiscal sponsor and sponsored project.

Model A fiscal sponsorship

Model A fiscal sponsorship (direct project) is an arrangement where the project is part of the fiscal sponsor's program activities. In other words, no separate legal entity exists to conduct the project; the fiscally sponsored project is housed entirely within the fiscal sponsor. The fiscal sponsor is responsible for the project’s assets and liabilities and provides support and back-office administration on behalf of the project.  

Model A is ideally suited for social entrepreneurs who are interested in:

  • quickly launching a new project or initiative  
  • incubating projects, networks, and coalitions and do not have their own 501(c)(3) status  
  • leading social impact work while staying lean  
  • easily hosting a collaborative effort among funders or partners  

Model A fiscal sponsorship allows social entrepreneurs to focus on their mission and make an impact without having to worry about accounting, contracting, grant management, human resources management, or other compliance requirements.  

Model C fiscal sponsorship

Model C fiscal sponsorship is often referred to as a pre-approved grant relationship, and is an arrangement under which fiscal sponsors primarily serve as stewards of charitable funds. The fiscal sponsor and project agree to partner in order to solicit and receive funds for the project to use for designated charitable activities aligned with the fiscal sponsor’s mission and exempt purposes.

To qualify for Model C, the project must be incorporated as a separate legal entity from the fiscal sponsor. Therefore, this model is best suited for existing organizations without 501(c)3 status that are looking to legally receive charitable funding, such as:  

  • registered nonprofit corporations awaiting their 501(c)(3) determination from the IRS  
  • corporations, 501(c)(4)s, PACs, or other entities looking to fundraise for their charitable activities  

Of course, solutions are never going to be “one size fits all”

As a platform for social change, Panorama is designed to be flexible, scalable, and compatible with partners’ unique needs. We support and partner with social entrepreneurs and organizations at all stages of growth and development – whether the models above are the perfect fit or our partners choose additional services or tools to create a custom solution that better meets their needs.  

Whether Panorama is leading the charge, supporting behind the scenes, or connecting the dots, we are always focused on maximizing the impact of our partnerships. Our À la carte menu of services offers entrepreneurs and initiatives a more efficient and accelerated path to impact by leveraging shared administrative services and experienced relationship managers.  

Interested in learning more?

If you have any questions about fiscal sponsorship or would like to discuss which fiscal sponsorship model might best suit your needs, please feel free to reach out to our team at scalablesolutions@panoramaglobal.org.  

Article contributors: Andrea Ackerman, Francine Tran, Riley Glandon, Claire Healy, Linley Kirkwood

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