In the March 2019 issue of Nonprofit Business Advisor, George Constantine was quoted on how some organizations that struggle to obtain and maintain their 501(c)(3) certification are looking for different types of arrangements that offer some of the same benefits without as much red tape, including fiscal sponsorships.
According to Constantine, there are plenty of examples where a nonprofit might agree to fiscally sponsor an organization that does not hold a 501(c)(3) certification. "Most often, a charity is approached by a group with an idea for a project and wants to raise funds for it, but they need to be tax-deductible," he said. Sometimes, the arrangement is intentionally short-term—essentially, the goal is to allow the new group to accept donations and move ahead with the project while its 501(c)(3) application is in process, he said.
The benefits for the sponsoring organization, Constantine said, are not as cut and dried, and should be carefully considered and understood before the arrangement is agreed to.
"The 501(c)(3) should do a complete analysis to see how the new program would align with its own programs and how it would advance its mission," he said.
Under these arrangements, a certain percentage of the funds coming in for the sponsored group or program usually are earmarked for the sponsoring nonprofit, he said. But that shouldn't really come into play when looking at whether to enter into the arrangement.
"The question shouldn't be 'How much money can we get from this?' but 'How does it fit with our mission?'" Constantine said.