Understanding Fiscal Sponsorship and its Importance to POC Organizations
Creating an organization to do good in the world can be difficult, especially for people of color. If you want to start a nonprofit but don't know where to begin, you may need a guiding light to show you the way. The Barefootin' Leadership Consortium is one such light.
For an organization that’s just getting started or doesn’t want to contend with the myriad administrative responsibilities running an organization is a massive undertaking, requiring thousands of hours of organizing, gathering resources, planning, and implementing.
All of that comes before you even get to the funding, taxes, and day-to-day challenges of running an organization. Many larger, pre-existing nonprofits use multiple systems (e.g., financial and administrative) to deal with grants, donations, and taxes. These systems give others the ability to focus more on their missions.
How does fiscal sponsorship work, exactly? And what benefits are available in a fiscal partnership?
Fiscal sponsorship allows an organization with more infrastructure, like ours, to provide technical assistance, fiduciary oversight, administrative services, and even risk management to individuals, groups, and organizations involved in charitable initiatives.
What Is Fiscal Sponsorship?
A means for an organization to act as a host and share its 501(c)(3) status. The 501(c)(3) designation is a provision of the United States Internal Revenue Code that allows a federal income tax exemption for nonprofit organizations, specifically public charities, private foundations, or private operating foundations. Any corporation, trust, or LLC can apply for 501(c)(3) determination, but the majority of 501(c)(3) organizations are nonprofits.
For Black-led and centered organizations, fiscal sponsorship can help overcome hardships and provide capacity support that might not otherwise be available. This isn’t unique to Black-led and -centered organizations, but here are a few statistics:
According to an analysis by Bridgespan, unrestricted net assets available to Black-led organizations are 76% lower than those available to non-Black organizations, and the average percentage of Black-led organizations’ revenue was less than half that of non-Black orgs. In addition, organizations led by and centering Black women receive less funding than organizations led by Black men and non-Black people consistently.
Black leaders often don't have access to the social networks necessary to connect with philanthropic individuals or organizations. This lack of access is harmful because many nonprofit initiatives rely on trust and community.
Many Black-led organizations experience increases in funding in times of crisis or during Black History Month. Unfortunately, smaller nonprofit groups lack the resources to best leverage a sudden influx of capital from well-meaning philanthropic sources.
Maintaining space for uplifting Black, indigenous, girls, women, and gender-expansive youth of color, the Consortium connects members to a network that allows them access to grants, 501(c)(3) status, and the support they need. Informal organizations can be launched quickly and attract charitable donations without the need to start a nonprofit or wait to obtain 501(c)(3) tax-exempt status. Those with status but no infrastructure can use the support in the same way. (Fiscal sponsorship also serves as a viable alternative to starting a nonprofit for initiatives and charitable endeavors with a short life span.)