Primary Advantages Of Fiscal Sponsorship For Nonprofits
Fiscal Sponsorship is both an increasingly popular and strategic option for many start-up nonprofit organizations. Nonprofits that work with a fiscal sponsor can enjoy some significant advantages in terms of scaling up, increasing their fundraising capacity, and complying with regulatory requirements. This article will explore the benefits of fiscal sponsorship, identify steps that nonprofits can take to get the most out of them, and show how Angels for Angels has implemented these strategies.
What is Fiscal Sponsorship?
Fiscal Sponsorship is a contractual arrangement in which a nonprofit organization provides limited financial and legal oversight to help nonexempt projects achieve their charitable purposes. The fiscal sponsor can accept tax-deductible donations and grants on behalf of the sponsored project, without regard to its IRS 501(c)(3) status.
Major Advantages of Fiscal Sponsorship
Immediate Tax-Exempt Status: New nonprofits are allowed to function under fiscal sponsors' tax-exempt status right away, receiving donations as soon as possible.
Action: Make sure that all of your fundraising materials state donations are tax-deductible through the fiscal sponsor.
Administrative Support: Fiscal sponsors commonly offer other administrative services, including accounting, payroll processing, and compliance management.
Action: Use the sponsor's administrative support to spend less time on back-office functions and more on mission activities.
Improved Fundraising Opportunities: Projects will have the ability to receive larger grants and donations from philanthropic organizations/foundations that generally only fund tax-exempt entities through a fiscal sponsor.
Action: Create a story around the relationship with your fiscal sponsor to entice potential donors and grantmakers.
Compliance With Legal and Regulatory Requirements: When projects of fiscal sponsors fulfill every legal and ethical standard, the sponsor they work through shields donor commitments from penalties.
Action: Keep in touch with your sponsor and make sure to learn about compliance issues they may have fought through, or leverage any training they provide.
Credibility and Stability: Bringing a project under the umbrella of an experienced fiscal sponsor can increase its legitimacy and attractiveness to potential donors or partners.
Action: Promote the fiscal sponsor-partner relationship in all outreach and marketing efforts to instill confidence in stakeholders.
How to Reap the Benefits of these strategies
For nonprofits to maximize the advantages of fiscal sponsorship, below is a list of strategic actions:
Build a comprehensive fundraising plan: Use the fiscal sponsor's tax-exempt status to solicit donations and grants from donors. Prepare customized proposals that highlight the significance of your project and the legitimacy of your fiscal sponsor.
Integrate Financial Management systems: Establish a clear-cut workflow and aligned administrative procedures.
Stay in Touch: Keep the fiscal sponsor informed about how your project is going, where it's at financially, and any challenges you're facing. This open communication creates a bond and helps solidify the relationship.
Fund More of What Builds Capacity: Funders should offer to make investments in both training and capacity building experienced by the fiscal sponsor. These might be workshops on fundraising, compliance program evaluation, etc.
Case Study in Fiscal Sponsorship: Angels for Angels
Angels for Angels, specifically, has demonstrated time and again its ability to deliver a high level of service to nonprofits. Here we describe how they provided these capabilities:
Tax-Exempt Status and Fundraising: Angels for Angels has enabled numerous projects to receive tax-deductible donations from individual donors and grants from philanthropic organizations. By showcasing success stories and impact reports, AfA has helped projects build a strong donor base.
Full Administrative Support: The organization provides full administrative services including accounting, payroll, and compliance management. This enables projects to concentrate on their service deliverables, rather than the tedious administrative requirements.
Legality and Regulatory Compliance: Angels for Angels ensures legal compliance of all sponsored projects. They conduct regular compliance training and updates for projects to help avoid penalties.
Credibility + Stability: When a project is presented as an AfA fiscally sponsored project, they are recognized as being part of a creditable, registered fiscal sponsor. This partnership has made it easier for projects to be funded and for them to work with other organizations across initiatives.
Conclusion
In addition to these needs-based means of support, fiscal sponsorship provides a soup-to-nuts range of benefits that significantly bolsters the ability of nonprofits to fulfill their mission: The role of fiscal sponsors is critical for the nonprofit sector in terms of giving immediate tax-exempt status, administrative support and better fundraising power (such as a 501c3), and legal compliance - in essence, a one-stop-shop. Nonprofits can leverage these resources by focusing on strong fundraising planning, operational efficiency, open communication, and capacity building.
Angels for Angels is a great example of how fiscal sponsor organizations can properly implement and offer support to make sure that projects succeed. When nonprofits apply for fiscal sponsorship, they can spend less on the administrative functions related to running a nonprofit and more time on its vision and mission.
To find out how we can assist your non-profit visit Angels For Angels.