Active Voice is a nonprofit project that turns media into a powerful force for change by creating community screenings where documentaries can be viewed and then discussed.
Without Active Voice, a social issues documentary might just be a one-off affair, soon forgotten. With Active Voice, that film can kick off an advocacy campaign that lasts. The project has created action plans for acclaimed films such as "Food Inc.," "Welcome to Shelbyville?" and the "Visitor."
But Active Voice does not operate as its own 501(c)(3) nonprofit organization. Instead, it works with a fiscal sponsor called Community Initiatives in San Francisco.
Thousands of organizations throughout the US and even abroad, that could be official nonprofit organizations, have chosen to work with fiscal sponsors instead.
Fiscal sponsorship has come into its own in recent years. At one time, the concept was more opaque than clear, and some experts even warned against them. But, thanks to some forward looking organizations and a lot of work on the part of fiscal sponsors themselves, a set of best practices has emerged, and fiscal sponsorship is proving its worth.
The History of Fiscal Sponsorship
I asked Melanie Beene, executive director of Community Initiatives and a leader in the fiscal sponsorship field, to help me understand how fiscal sponsorship works and how an organization might choose to engage in a fiscal sponsor arrangement rather than file for 501(c)(3) status.
Community Initiatives was originally a part of the San Francisco Community Foundation. That organization saw the need for some way to "incubate" nonprofit projects that might go on to become full-fledged nonprofit organizations in their own right. There were already other fiscal sponsors around the country, most notably the Tides Center, Community Partners, and Earth Island Institute, all in California; the Colorado Nonprofit Development Center; and Third Sector New England in Boston.
A large group of fiscal sponsors joined together in 2004 to form the National Network of Fiscal Sponsors. The Network has held conferences across the country and collaborated on guidelines and best practices that now influence more than 140 fiscal sponsors.
What Fiscal Sponsorship Is and Isn't
Beene first wanted to clear up some misconceptions about fiscal sponsorship: mainly that fiscal sponsors provide funding or can find funding for a project seeking fiscal sponsorship. That isn't what fiscal sponsors do, she said.
Anyone who has investigated the road to nonprofit status knows that it is not easy.
Beene says that fiscal sponsorship, "...is a cheaper, faster, easier, and more efficient alternative to launching your charitable activity than trying to set up a 501(c)(3) corporation yourself. A fiscal sponsorship arrangement can give you time to see if your idea works, and it can also provide confidence to potential funders who are often reluctant to provide support to brand new nonprofits."
A fiscal sponsor can be any established 501(c)(3) that agrees to accept the financial responsibility for your project. But there is an advantage to being with an organization that is dedicated to fiscal sponsorship, and that has many projects in its portfolio.
Such organizations can provide economies of scale when it comes to securing things such as insurance. They can provide valuable guidance about governance, help with filing of reports and keeping records. A fiscal sponsor can become an efficient and cost-effective back office for a new project, allowing it to focus on its mission and programs.
Fiscal sponsorship originally was thought of as a stop-gap measure for new groups just getting started. However, now it can be short, medium or long term.
Active Voice's Operations Director, Daniel Moretti, said this about its arrangement with Community Initiatives:
"Working in operations at a small non-profit, I can deeply appreciate the value of a fiscal sponsor. We are saved from worrying about managing labor intensive financial processes such as an audit, and we don’t get sucked into many time consuming human resource tasks such as setting up benefits or administering payroll.
"This not only allows us to have more time to focus on our programmatic work, but it also provides us with a clearer head to do so knowing that the important back-end work is taken care of. Having a fiscal sponsor with a similar mission is definitely an added bonus; it’s a great feeling to see Community Initiatives staff at our events and supporting our campaigns.
"We have been with Community Initiatives since 2006. Having a fiscal sponsor is working quite well for us, given our current size and operating budget."
Beene says that the majority of fiscal sponsorships use one of these two models: Comprehensive Sponsorship (Model A) or Pre-approved Grant Relationship (Model C). (Click on the links to see the features of each model at Community Initiatives)