Fiscal sponsorship is a powerful tool for philanthropists, non-profits and social entrepreneurs looking to offload the administrative, financial, and regulatory work of running a nonprofit and devote more energy and resources to their causes.
In the realm of development and social innovation, there are thousands of incredible social entrepreneurs who come up with ground-breaking ideas for saving and/or improving the lives of billions globally.
In reality, however, many of these innovative solutions either don't move beyond the conceptual stage or fail to scale. These failures are frequently related to the intensive backend work around incorporation and regulations, including establishing a board of directors, creating bylaws, and applying to the Internal Revenue Service (IRS), among others -- in other words, the nonprofit hustle.
Even so, despite the rigorous hurdles of starting a nonprofit organization, there are more than 1.5 million nonprofits registered in the United States, and 10 million more worldwide. That's thousands of entrepreneurs gathering thousands of board members to write thousands of bylaws and manage thousands of financial reports all while working on thousands of independently maintained IT systems, and the list goes on. Each of those nonprofits is devoting substantial resources to recreating a fairly standard wheel -- resources that could be focused on their chosen cause.
Fiscal sponsors act like a locomotive, pushing the behind-the-scenes work of building partnerships, raising funds, adapting tools, aligning agendas, and conducting due diligence to ensure new services and products materialize and scale.
Between the concept phase and implementation, there lies a "treacherous middle" that requires hours of time behind-the-scenes addressing operational issues. Not surprisingly, social entrepreneurs tend to devote more time to the first step (ideation) or the last mile (impact) than to the less glamorous hustle in-between. Administrative, financial, and legal hurdles not only require extensive time and effort, they can also hinder the delivery of innovative services and products to the communities nonprofits aim to serve.
Fortunately, we have a powerful tool for bridging the gap between first steps and last miles -- fiscal sponsorship. Here we define what fiscal sponsorship entails and share how Panorama uses this tool to power social entrepreneurs and their change-making initiatives.
Fiscal sponsorship is a term defined by the IRS and refers to the practice of 501(c)3 non-profit organizations (the "fiscal sponsor") extending their legal and tax-exempt status to a person or group of individuals engaged in charitable activities related to its mission (the "sponsored project").
In a narrow sense, fiscal sponsorship can be described as a method for newly formed organizations to receive tax-exempt contributions for charitable or community-oriented activities without dealing with administrative hurdles of obtaining 501(c)(3) status from the IRS. However, fiscal sponsorship is* more than a conduit for money*.
Fiscal sponsors can improve the operational capacity of sponsored projects by providing equitable access to the nonprofit sector and assisting with financial and other back-office infrastructure services. For example, fiscal sponsors can ensure compliance with applicable federal and state laws, implement internal controls to ensure that the funds are used for the intended charitable purposes, provide organizational development and scaling, offer strategic planning, communications, and procurement services, among others. In other words, fiscal sponsors act like a locomotive, pushing the behind-the-scenes work of building partnerships, raising funds, adapting tools, aligning agendas, and conducting due diligence to ensure new services and products materialize and scale.
A fiscal sponsor will wade through any legal, financial, technical, and administrative weeds standing between pilot initiatives and their scaled implementation. In more than just a figurative sense, fiscal sponsors agree to take on sponsored projects' causes as their own and have a vested interest in removing as many administrative barriers as possible.
Too often those in the sector of global development hear that yet another initiative is afflicted with "pilotitis" -- the inability of social innovation projects to become sustainable and scalable. Regulatory hurdles are often cited as barriers for breaking out of the pilot stage. Handing off some of the administrative and financial tasks to a fiscal sponsor can help social entrepreneurs effectively adapt and scale their projects for widespread impact.
Panorama serves as a buffer between our sponsored projects and many of the operational demands that come with the pilot phase. As a fiscal sponsor, we are committed to bringing value through efficiency so that sponsored projects can focus on achieving their programmatic goals.
We often work behind the scenes to leverage our expertise in helping sponsored projects achieve their ambitious goals. We provide financial oversight, assume legal and advisory responsibilities, work through regulatory approvals, and catalyze other areas needed to drive projects from ideation to execution.
Our comprehensive fiscal sponsorship services include:
Panorama helps sponsored projects to launch quickly, scales swiftly, and adapt deftly, all while meeting programmatic goals, developing impeccable nonprofit practices, and creating sustainable organizational infrastructure.
At Panorama we offer much more than is narrowly defined as fiscal sponsorship because we know firsthand what is needed to move from idea to impact.
We ourselves are a group of problem solvers working to address some of the most challenging issues of our day. Panorama not only provides fiscal sponsorship for leading social entrepreneurs doing important work -- we're fully engaged in the work as well.
Panorama provides fiscal sponsorship services to accelerate emerging ideas and leaders, catalyze bold action on pressing issues, and empower change agents, social entrepreneurs, and funders to scale solutions quickly, efficiently, and sustainably. With our feet firmly planted on both sides of the nonprofit world, we're able to match services more capably to our partners' needs.
In short, Panorama's fiscal sponsorship at Panorama is a true partnership.
Check back soon for more posts diving into real-world examples of fiscal sponsorship in action. We're excited to share more details about how this powerful tool can help power philanthropists, nonprofits, and social entrepreneurs!
If you have any questions about fiscal sponsorship please feel free to reach out to our team at firstname.lastname@example.org.
Author: Jahan Taganova
Contributors: Riley Glandon, Andrea Ackerman, Francine Tran