​A nonprofit Swiss Army knife: How fiscal sponsorship works to help advance shared goals

Fiscal sponsorship offers changemakers a way to launch projects, expand existing nonprofit organizations, and/or embark on new collaborations more efficiently and effectively. At a time when new organizations are seeing significant delays in the review of their 501(c)(3) applications and when we need fresh approaches to solving challenges, fiscal sponsorship can play a crucial role. Fiscal sponsors in the United States currently steward over $2.6 billion, supporting an estimated 40,000 distinct projects. As founder and president of Goodnation, one of over 600 fiscal sponsors, I’ve had a front-row view of what’s possible using this tool—especially now. 

How does fiscal sponsorship work? 

At its simplest, fiscal sponsorship is the ability for an established 501(c)(3) or 501(c)(4) public charity to become the home for a new project. This way, changemakers don’t need to create a new nonprofit from scratch—which requires IRS tax-exempt status, a board of directors, a bank account, accounting, charitable registration, insurance, human resources, an audit, and state and federal filings. By signing a fiscal sponsorship agreement, they can have their projects up and running in days. They can immediately focus on key priorities, including fundraising and programs, while benefiting from the fiscal sponsor’s tax compliance, accounting, governance, and finance functions, including accepting gifts and approving and administering program expenses. Sponsors and programs typically share costs to support the sponsor’s role in the relationship, often in the form of a percentage of revenue and sometimes a set-up fee. Other fees may apply depending on the sponsor. 

Fiscal sponsorships also enable existing nonprofits to collaborate by pooling and administering funds toward a shared goal. To give an example of a program sponsored by Goodnation, a group of local nonprofits formed the Campaign Fund to Close and Transform Rikers Island, which fundraises for and raises awareness about potential benefits to New York City and the criminal justice system if this notorious jail were to close. 

Fiscal sponsorship helps nonprofits achieve their missions in new ways 

Because fiscal sponsorship works for both 501(c)(3) organizations and 501(c)(4) advocacy groups, it expands the ways existing nonprofits can achieve their missions. Under their 501(c)(3) designation, even the largest nonprofits are limited in how much they can participate in creating change at scale. In theory, 501(c)(3)s could form a partner 501(c)(4) to do so, but in practice, they rarely do. There are 1.586 million 501(c)(3)s in the U.S.; there are 75,681 501(c)(4)s.  

However, through fiscal sponsorship under an established 501(c)(4), a 501(c)(3) organization could easily establish a fiscally sponsored 501(c)(4) project through which they could advocate for their cause without the lobbying limits that a 501(c)(3) is subject to. This, at scale, might begin to address the imbalance of power over policy between the nonprofit sector and the corporate sector, which pours immense resources into lobbying for their business interests. 

Fiscal sponsorship supports agile collaborations 

The steep challenges our communities face require nonprofits of all sizes and stripes to collaborate, and fiscal sponsorship works as a simple, proven way to do so. Collaborations work better when they’re easily established and transparently administered. In fact, fiscally sponsored projects soared during the COVID-19 pandemic in part because so many new collaborations were required to meet unprecedented challenges.  

At Goodnation, we’ve fiscally sponsored many new collaborative funds focused on poverty reduction, civic engagement, and voter registration, to name a few. For example, Building for Democracy Education Fund was formed in 2024 by four established nonprofits to identify and unleash new resources to increase civic participation. Together, they were able to raise over $7 million toward their mission, much more than they each may have been able to raise alone. 

What are the responsibilities of a fiscal sponsor? 

If your organization is considering becoming a fiscal sponsor to expand your impact through mission-aligned programs while diversifying your revenue, bear in mind that fiscal sponsors have real responsibilities to and for their programs. Goodnation, as is expected of most fiscal sponsors, provides legal and financial accountability, clear and compliant policies, risk management, governance, and, for some of our programs, personnel support. For a public charity with this strong infrastructure in place, fiscal sponsorship can be a powerful way to serve the public sector. 

We can think of fiscal sponsorship as the Swiss army knife (or as an American invention, the Leatherman) of the nonprofit toolbox—really a set of useful tools with the ability to bring organizations and projects together to achieve shared goals. It provides various opportunities for both nonprofit project leaders and fiscal sponsors to advance innovative solutions to the challenges we’re facing today.  

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