Nonprofit organizations progress through many stages of development. A group’s mission may evolve, a changing program may require greater management capacity, or an organization’s leader may realize finance and administration are more unwieldy than originally anticipated.
There are many reasons that prompt established 501(c)3 organizations to undergo conversions to fiscally sponsored projects with Community Partners. Over the last few years, reporting and oversight requirements for the sector have increased while available funding has dropped. In response, we have received applications from multiple 501(c)3 organizations with strong programs and fundraising ability, but limited capacity for, or interest in, finance and administration. For these organizations, the cost savings and lower “headache factor” of having a CFO and team of finance experts handling their accounting, tax filings, contracts, and HR outweigh the perceived benefits of operating completely independently.
The current economic climate has also led to a call for mergers within the nonprofit sector – but they are challenging and often expensive to implement. Fiscal sponsorship can be an attractive alternative, because it consolidates back-office costs without requiring an organization to upend its fundamental identity or battle over which board members and executives will be pushed out. Typically, organizations under fiscal sponsorship can retain:
- their name, programmatic identity, brand, and logos (although they inform donors, funders, and the public that they are now under fiscal sponsorship)
- key staff, including executive director and program managers, while lowering costs on services such as bookkeeping, accounting, and audit – many of which were previously contracted out
- some or all board members, albeit in an advisory capacity rather than as a legal governing board (some board members actually prefer this, as this also removes their liability)
Can fiscal sponsorship save an organization with no funds, no prospects, and no clear direction? No. But for many organizations – large and small – it’s an ideal solution during times of organizational change. And it’s a great way to reduce costs and improve the quality of finance and administration services.
To learn more about converting your existing 501(c)3 organization to a fiscally sponsored project, please contact Lupe Solorio.