On Monday, Gene and I had the pleasure of speaking at the “Understanding Fiscal Sponsorship in the Arts” workshop in San Francisco sponsored by the Creative Capacity Fund. There was an overwhelming attendance with over 150 registered participants comprised of current fiscal sponsors and fiscally sponsored projects as well as those considering becoming fiscal sponsors and fiscally sponsored projects in the arts.
Gene spoke on an opening panel on the topic of “Understanding Fiscal Sponsorship” with Melanie Beene, President and CEO of Community Initiatives, Deborah Cullinan, Executive Director of Intersection for the Arts, and Ruth E. Williams, Senior Program Officer of ZeroDivide and member of the Citizen Advisory Committee of Grants for the Arts.
Melanie started the discussion with a brief history of fiscal sponsorship which began soon after Section 501(c)(3) of the Internal Revenue Code was enacted as part of the Internal Revenue Code of 1954. Intersection for the Arts began fiscal sponsorship in 1977 and the Tides Center, currently one of the largest fiscal sponsors, incorporated in 1981. The field has continued to develop as evidenced by the publication of Greg Colvin’s book, “Fiscal Sponsorship: 6 Ways to Do it Right” in 1993 which is considered the authoritative text on fiscal sponsorship (since revised in 2005). Today, the fiscal sponsorship landscape is very much alive and growing. According to Melanie, it is estimated that somewhere around 9,652 projects are being fiscally sponsored by 501(c)(3) organizations and account for more than $1 billion in revenues. One-third of the fiscal sponsors listed in the Fiscal Sponsor Directory are located in California and 73% of all fiscally sponsored projects are in arts and culture.
Key takeaways from the opening panel included:
- Fiscal sponsorship is a contractually defined relationship. There are many ways to do it right but also many ways to do it wrong.
- Just because a fiscal sponsorship arrangement is legally possible doesn’t mean you should do it. For example, while it is possible to have a fiscal sponsorship agreement between a for-profit and nonprofit, it would probably not be attractive to funders or outsiders.
- Fiscal sponsorship may include services such as financial and accounting, human resources, and insurance, but it does not include access to funders, funding or fund raising on behalf of the project.
- Fiscal sponsors will differ. Make sure both parties know and understand how the fiscal sponsorship relationship is going to work (e.g., fiscal sponsorship policies attached to or included in the fiscal sponsorship agreement).
- Exit provisions for Model A fiscal sponsorship should be contemplated prior to the actual exit and outlined in the fiscal sponsorship agreement. A common mistake is failing to provide notice provisions for terminating the agreement.
Gene and I also facilitated a breakout session on legal issues where we discussed general considerations with fiscal sponsorship and distinguished Model A from Model C fiscal sponsorship. We had some interesting questions from the audience on issues such as dormant projects, managing donor expectations, and private benefit which we will highlight separately in subsequent posts. A PDF of our presentation can be downloaded here.
Thank you to the Creative Capacity Fund, speakers, and attendees for a great event!
For more information on fiscal sponsorship, please read our previous posts here.
Additional resources on fiscal sponsorship:
- San Francisco Study Center on Fiscal Sponsorship, Latest from Greg Colvin
- National Network of Fiscal Sponsors’ Guidelines for Fiscal Sponsorship
- “Fiscal Sponsorship is a Growing Field” by Melanie Beene