Would you like to form a nonprofit but are stymied by the legal requirements and paperwork? Are you interested in learning about a simple way to conduct your good work in the community without actually applying for 501(c)3 nonprofit status? By working with a fiscal sponsor, you can achieve the benefits of a tax-exempt entity without having to file for official nonprofit status.
According to the National Council of Nonprofits, “a fiscal sponsor is a nonprofit organization that provides fiduciary oversight, financial management and other administrative services to help build the capacity of charitable projects.” It further explains that the role of the fiscal agent can include performing many different administrative functions on behalf of the sponsored organization or program, including taking on the responsibility of receiving and administering charitable contributions on behalf of the sponsored organization. Some fiscal sponsors do a lot more, such as performing back-office functions. Some charge an administrative fee for the services, and some do not charge anything.
» Santa Barbara City College Foundation and a few other local organizations provide fiscal sponsor services.
Geoff Green, CEO of the Santa Barbara City College Foundation, explains that SBCC offers this service on a limited basis.
“Our most notable work in this area was providing the launching pad (as fiscal agent) for the Bucket Brigade, Santa Barbara Support Network and 805 Conservation Collective in the wake of the Thomas Fire and Montecito debris flow,” he says.
Green often advises organizations on the issue of fiscal sponsorship vs. incorporation. Green also serves on the board of directors for CalNonprofits, which offers support as a fiscal sponsor as well as helping groups apply for 501(c)3 status.
Green keeps his finger on the pulse of the nonprofit sector locally and statewide. He says “the real experts in this model are Community Partners in Los Angeles.” For example, the YouthWell Coalition was previously under the Mental Wellness Center, but when it outgrew the relationship, it worked with Community Partners of Los Angeles, and now it exists as YouthWell in Santa Barbara.
Green explains that there are a number of local nonprofits that began under the fiscal agency of another and then spun off later. Examples include Santa Barbara Channelkeeper and Los Padres ForestWatch, which both began under the Environmental Defense Center; Art From Scrap, which began under the Community Environmental Center’s umbrella in 1994; and Storyteller Children’s Center, which began as a project of Transition House.
Green further says that at the other end of the spectrum are those nonprofits that consider mergers after starting off independently. For example, the Teddy Bear Cancer Foundation explored going under the Cancer Center’s fiscal umbrella in 2010, but decided against it.
Green says that the IRS considers a close “mission match” between the fiscal agent and organization to be the most important factor to consider. He suggests that it’s important to have a clearly written memorandum of understanding between the two groups. He points out that when a group works with a fiscal agent, it gives up legal governance but receives valuable support. Usually, the trade-off between independence and support is well worth it.
» The Santa Barbara Foundation also provides fiscal sponsorship.
Each fiscal agent has its own parameters and requirements. The Santa Barbara Foundation provides fiscal sponsorship for groups that intend to apply for their 501(c)3 within 18 months to two years. Its service is intended for short-term fiduciary oversight only.
Tax-deductible donations can be made to the Santa Barbara Foundation using a Doing Business As (DBA) name for the organization. The foundation pays all of the organization’s expenses based on available funds. It also will work with groups to brainstorm existing nonprofits that might want to take them on as a program, eliminating the need for a fiscal sponsor.
» The Santa Barbara Education Foundation has provided valuable resources to groups as a fiscal sponsor.
The Santa Barbara Education Foundation offers two kinds of fiscal sponsorships: district-initiated programs and community-initiated programs.
“It can be a little complicated,” Executive Director Margie Yahyavi says. “The restrictions that we have are surrounding fit with our mission and approval by the school site or the district. We’ve been serving as the fiscal sponsor for some programs for more than 10 years, so there is no time restriction.”
She explains that many of the foundation’s fiscal sponsorships are programs that are initiated and executed by district staff. Typically, the programs need outside resources in order to function — usually funding. For example, PEAC (Program for Effective Access to College) needs funding for after-school mentors and tutors who work with the students. The Academy for Success needs funding for life coaches and mental health therapists. In those cases, SBEF assists in raising money for the programs and, at the very least, provides information on its website, bookkeeping services, marketing, filing of all the official documents and matching donor interests with the various programs.
Yahyavi explains that the foundation also works with community members who would like to bring programs to the students, do not have a 501(c)3 status and are executed by nondistrict staff (community members). Examples of these types of programs are What Is Love or Mission Scholars.
“In all cases,” Yahyavi says, “we want to ensure that the service or program aligns with our mission, has measurable results and that the program provider is dependable.”
Eryn Shugart, major gifts officer, offers The Academy for Success as an excellent example of one of SBEF’s very successful programs that came about through a fiscal sponsorship. The program accepts high school students at risk of dropping out of school in 10th grade and provides those students with wraparound support for the duration of their high school years. Students have the same teachers through 12th grade, and they have the option of working with life coaches and receiving individual and group therapy.
Shugart shares the story of two of their students, Liz and Rebecca. Neither girl was motivated to graduate, had very low grades and never thought they would attend college. To both girls, now seniors, the academy has made a world of difference.
“The Academy is like my family,” Liz says. “I now want to give back and help others.” Rebecca shares: “The Academy is a safe place; it gave me hope. I want to help others and make them feel seen, like I do now.” Both girls are applying for college and plan to major in psychology.
SBEF has stepped up to provide additional support to the district during remote learning and is helping to cover WiFi costs for low-income families so their children are able to access their classes remotely. For more information about the Santa Barbara Education Foundation, such as how to make a donation to support the SBEF’s many programs, including the Academy for Success, please visit SantaBarbaraEducation.org.
If your program or one you know about would like to find out more about a fiscal sponsorship, please contact one of these fine organizations listed above.
— Dr. Cynder Sinclair is a consultant to nonprofits and founder and CEO of Nonprofit Kinect. She has been successfully leading nonprofits for 30 years and holds a doctorate in organizational management. To read her blog, click here. To read her previous articles, click here. She can be contacted at 805.689.2137 or cynder@nonprofitkinect.org. The opinions expressed are her own.