What is fiscal sponsorship? Everything you need to know

Curious about fiscal sponsorship? Heard the term but not sure how it might apply to your community project? Interested in finding a fiscal sponsor, but not sure where to start?

Friend, you’ve come to the right place! Here’s a practical FAQ about nonprofit fiscal sponsorship in general, and an introduction to ioby’s own fiscal sponsorship services.

[The organizers of Hike the Heights, in New York City, wanted to remain a loose coalition of neighbors and organizations, and didn’t want to incorporate as a nonprofit. So they leaned on ioby for fiscal sponsorship as they crowdfunded.] 

Q: What is fiscal sponsorship?

The experts at Foundation Center’s GrantSpace offer this concise working definition:

“Fiscal sponsorship is a formal arrangement in which a 501(c)(3) public charity sponsors a project that may lack exempt status. This alternative to starting your own nonprofit allows you to seek grants and solicit tax-deductible donations under your sponsor’s exempt status.”

Q: What exactly does a fiscal sponsor do?

Typically, a fiscal sponsor:

• Allows donors to make tax-exempt contributions to the charitable activities of individuals or unincorporated groups by extending its tax-exempt status to them
• Receives and administers donations on behalf of the sponsored people or organization
• Sponsors projects with a charitable purpose that are consistent with its own mission
• Accepts significant legal and financial risk—so it is important that sponsoring organizations are well-informed and structured to manage these risks, and that unincorporated people and organizations seek experienced sponsors
• Charges an administrative fee for its services—usually a percentage of the budget of the sponsored organization or project

[When neighbors wanted to create a DIY, community-designed skatepark in Memphis, they turned to ioby’s fiscal sponsorship and crowdfunding platform to raise tax-deductible donations to get it done.]

Q: How can fiscal sponsorship help me?

A: With fiscal sponsorship, your unincorporated community group will be able to:

• Receive tax-deductible contributions from donors
• Get started faster, without having to apply and wait for nonprofit status
• Benefit from the name recognition of your reputable nonprofit sponsor

Additionally, some sponsors offer what’s called comprehensive fiscal sponsorship. In this model, community groups may also:

• Receive technical assistance and administrative support, potentially including payroll and accounting services, office space, publicity, and capacity building
• Save on insurance costs (often, sponsors can obtain lower insurance rates than individuals and unincorporated groups, then they pass these savings on)

ioby was an early crowdfunding leader on the fiscal sponsorship scene. As a nonprofit crowdfunding platform for local positive change, we offer fiscal sponsorship nationwide to any eligible project on our platform that needs it. (See our eligibility criteria here.)

Q: How does fiscal sponsorship work at ioby?

A: When you create your ioby campaign page, just select the option that you need ioby to serve as your fiscal sponsor we’ll walk you through the steps of fiscal sponsorship with us. As your fiscal sponsor, ioby requires a certain level of documentation for all transactions. For example, all project-related purchases must be substantiated by receipts or invoices (which you can email us).

Q: Does it cost anything?

A: Like most fiscal sponsors, ioby retains a small percentage of the money you raise to help cover our administrative costs of managing the funds. We’ve kept our fee to 5%—much lower than most—in an effort to best support your community-based work.

[Tim Kovach crowdfunded with ioby rather than applying to a grant to get just the right amount of funding–and fast! He raised over $13,500 to refurbish bikes to help Cleveland’s newest neighbors, refugees to the city, move around efficiently and affordably.]

Q: What if I got a grant and need a fiscal sponsor to receive it?

We can help with that, too! If you receive a grant during the course of your ioby crowdfunding campaign, we can accept it on your behalf and apply it toward your total fundraising goal online. The amount disbursed to you at the end of your campaign would be the total of any grant funds plus all the online donations you’ve raised, and ioby’s 5% fiscal sponsorship fee would apply to that total.

At ioby, we’re experts on supporting local leaders build support in their community through neighborhood crowdfunding. There are a whole host of benefits to crowdfunding that you wouldn’t get from just applying to a grant. Having a grant as part of your crowdfunding campaign can also be a powerful way to boost your campaign, and build support amongst your community of donors too. But, if you are not interested in running a crowdfunding campaign on ioby, we are not the right fiscal sponsor for you, and that’s ok! We list some tips below on finding another fiscal sponsor who can meet your needs. 

Q: What if I already have a fiscal sponsor—and it’s not ioby?

That’s fine, too! You are still welcome to crowdfund on ioby with a different nonprofit fiscal sponsor. When you finish your campaign, we’ll distribute the funds you raise to your fiscal sponsor, who will distribute them according to the agreement that you have in place with your sponsor. 

We hope this overview has given you a good idea of how fiscal sponsorship can help community-based projects succeed. If you’d like to crowdfund for your project on ioby and think we’d be a good fiscal sponsor for you, tell us your idea! We want to help.

Looking learn more about fiscal sponsorship? Here’s some deeper-dive reading on fiscal sponsorship-related topics:
– GrantSpace’s comprehensive video What You Need to Know About Fiscal Sponsorships
– If ioby is not the right fiscal sponsor for you, see the links under “How Do I Find a Fiscal Sponsor?”
– Learn more about ioby’s fiscal sponsorship service