Episode 43: A Nontraditional Approach to Running a Nonprofit - Fiscal Sponsorship
Fiscal Sponsorship is a way to start up quickly, secure grants faster, and “do a test run” of being a nonprofit without investing thousands of dollars before discovering it’s not what you want. Learn how fiscal sponsors work and how one can help you bridge your knowledge gap while you learn to run an efficient, compliant, and effective nonprofit.
LINKS:
NONPROFIT SPOTLIGHT: Step Up for Students
Podcast Transcript
Speaker 1 (00:04):
Welcome to On Air with Amber Wynn, where nonprofit leaders learned to fuse passion and commitment with proven business strategies to create long-term funding, impact, and sustainability. And now here's your host and resident Philanthrepreneur, Amber Wynn.
Speaker 2 (00:25):
Welcome fam. It's your girl, Amber Wynn. You're On Air with Amber Wynn, Philthrepreneur, and today I am going to talk to you about doing things differently. Y'all know I'm different. I mean my whole title, Phil entrepreneur, I could have just been a philanthropist. I could have just been an entrepreneur. I could have been your typical solopreneur. But no, I am a Philanthrepreneur. I fuse the best of heart and passion with proven best practices to support the most amazing people in the world. That would be you, my nonprofit Founders and Leaders. I am different. I think differently. I've always just groove to the beat of a different drum and that has transferred to my work in the nonprofit sector. And I have to say, I have noticed a trend, a trend with nonprofit Founders and it's you come into the space, you do things that you see are being done and you rinse and repeat.
Speaker 2 (01:35):
And I have to say, you know, I get it. You think you're doing what all of the other people are doing who are successful. And I'm gonna challenge you to step out of the norm. I'm going to challenge you to take a nontraditional approach to philanthropy. So for the next couple of weeks, that's what we're gonna do. We're gonna take a nontraditional approach to how you do business. This episode, we're gonna start with a nontraditional approach to running a nonprofit. Yep. That's what we're gonna do. Because when you do things the same way, you get the same outcomes and there's so many nonprofits doing things the same way. I want you to distinguish yourself from your competitors. I want you to innovate. I want you to stand out so that your supporters, your potential clients and potential funders will say, Wow, that is sexy. Cuz it's all about the sexy. When we come back from our first break, cuz y'all know how we do it, we're gonna dive into a nontraditional approach to running a nonprofit; when we get back.
Speaker 3 (02:46):
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Speaker 2 (04:06):
Welcome back. You're On Air with Amber Wynn, and today we're starting our series on a nontraditional approach to ... And today we're gonna talk about a nontraditional approach to starting and running a nonprofit. Now I'm talking about fiscal sponsorship today. And if you go back to our early beginnings, I did a segment on fiscal sponsorship under alternatives to starting a nonprofit. But today I'm going to talk about fiscal sponsorship in the space of running a nonprofit. So what is a fiscal sponsor? A fiscal sponsor is an organization that has a 501(c)(3) tax exempt status. They already have it. They are a nonprofit. And what they do is they leverage their tax exempt status to help you implement a program. So you can have a program that you want to test out, that you wanna do, that you wanna run, and if it aligns with their mission, they'll bring you in as a program.
Speaker 2 (05:12):
What does that mean? That means that you get to leverage their tax exempt status. So you don't have to go out and create a full board, you don't have to submit to the IRS, you get to leverage their 501(c)(3). You get to leverage their history, their experience. And a lot of times my nonprofit founders will start a nonprofit fast, meaning they'll just grab three people, Monkey, Pookie, and Sheek and put 'em on the board because you need three people to file that 1023. They'll throw together a budget, they'll throw together a program description because they want to get out there and start a nonprofit. And that is the absolute worst thing that you can do. You need to take your time and set your foundation very solidly. So that's what a fiscal sponsor will allow you to do. Now I will just say a fiscal sponsor is going to have some type of requirements.
Speaker 2 (06:07):
They're not gonna just take you on raggedy, right? So they're gonna help you start off slow and they're gonna help you start off accurately, right? You're gonna have to have an advisory board. These things are great because they're preparing you. If in the end you decide you wanna start a 501(c)(3) tax exempt organization, you have prepared yourself in a manner that is slow and intentional. So let's get back to the Fiscal Sponsor. Why am I suggesting that you leverage a fiscal sponsor? Well, first of all, I'm talking about an organization that operates as a fiscal sponsor, not your cousin who has a nonprofit and they're gonna let you use it. You do not want to engage in that type of relationship. You want an organization that functions as a fiscal sponsor. When they function as a fiscal sponsor, they know what they're doing.
Speaker 2 (07:00):
What are they responsible for? They're responsible for accepting grants on your behalf. They're responsible for dispersing the money to use so that you can implement your programs. They're responsible for providing reports to the funding agency financials. They are responsible for backend administration, so doing the reporting. This is why I am suggesting that those of you who have number one, no business experience because remember, a nonprofit is a business. It's just a business with a philanthropic purpose. So if you have no nonprofit experience, you are stepping into an arena that's gonna suck you up live, I'm telling you. So if you have no nonprofit experience, a fiscal sponsor will help you because they will create the infrastructure so that you're able to run your business successfully. Additionally, if you have no nonprofit experience, I know a lot of people don't think that that's necessary to run a nonprofit.
Speaker 2 (08:05):
Why? I don't know. But it is. Having nonprofit experience sets you up powerfully for success. So if you have no business experience, you have no nonprofit experience, a fiscal sponsor can help you grow and be really responsive to grant solicitations. Why? Well, number one, a Funder is gonna ask you for three years of financials. If you're just starting, will you have that? You won't. A Fiscal Sponsor will. They're gonna ask you for things like impact. They're gonna ask you for your Board. Will you have that? You'll have names, but will you have people of quality stature? No. Your Fiscal Sponsor will. So, I know that some of you want to get started quickly and if that is what you wanna do, a Fiscal Sponsor may help you do that. But you get to start quickly. But with structure, right? When I think of a Fiscal Sponsor, I think of nonprofits putting on training wheels because a fiscal sponsor, if it's a true fiscal sponsor, they're gonna teach you a couple of things.
Speaker 2 (09:08):
They're gonna teach you about reporting, they're gonna teach you about management, they're gonna teach you about leadership because that's what they're gonna be asking you for. So think about a fiscal sponsor and think about what it is you really wanna accomplish. <affirmative>. Now, there are pros and cons to fiscal sponsorship, right?. As a program, you get to leverage all of their history. Like I said before, if they've been around for 10, 15 years, that history becomes yours. Cuz that's what the Funder's gonna ask for. If they've been really astute with their finances, you get that, you get all of that. The pros are sometimes funding agencies don't approve fiscal sponsorship. They wanna know your track record, they wanna know your history, they wanna know your leadership. Now, over the years, I've seen that more and more Funders are accepting fiscal sponsors, which is good in my opinion because I'd rather have a program under a reputable fiscal sponsor learning about how to run a nonprofit than just a floundering nonprofit.
Speaker 2 (10:22):
So more and more I'm seeing that funders are accepting fiscal sponsorship, but sometimes they don't. Another pro is if you're trying to apply for government contracts, it is a heavy lift. They require you to have general liability insurance. If you're providing services, they require that you have errors and omissions insurance, those things can be quite costly. But with the fiscal sponsor a lot of times they will secure a insurance policy and divvy up the cost amongst all of their programs. So it's a whole lot cheaper. So you get access to that. And for government contracts, like I said, they're gonna require all of these financials. It's a challenge to fill out 15 pages of financials. You get to hand that over to your fiscal sponsor and say, Can you complete this, please? And they say, Sure, and they give you all of the documents and it's nothing that you have to worry about.
Speaker 2 (11:23):
So if the government agency allows fiscal sponsorship, then you're in there, right? You don't have to worry about the financials, the insurance or anything like that. That's all covered. So I want you to really think about what's your end game. If your end game is to own a business, if your end game is to quickly get into the community, I just want you to pause and I want you to realize that every nonprofit has to generate revenue. And the more solid that your organization is, then the more likely you'll, you'll be able to generate revenue. So using a fiscal sponsor will allow you to get to Funder quickly. It'll allow you to learn while you're on the job. And quite frankly, if you get into this and you decide I don't like it, you can tap out. If you start a nonprofit 501(c)(3), you have to dissolve the organization, you have to go through that.
Speaker 2 (12:25):
So I like the flexibility of trying it out before you actually commit, getting out there and seeing how challenging it is. Or some of my nonprofits, they've been with a fiscal sponsor and they love it and they say they will never start their own 501(c)(3). They love being able to have an organization that is responsible for the reporting and the finances and all of that kind of stuff. So I want you to do some research and I want you to check it out. All right, so we're gonna pause one more time for another sponsor, but when we get back, we're going to jump into Ask Amber. I'll be back.
Speaker 4 (13:05):
Starting a new career, in a new sector with unfamiliar job titles and new jargon can lead to frustration and burnout.
Speaker 4 (13:15):
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Speaker 2 (14:24):
Hey, it's Amber and you're On Air with Amber Wynn. And today we're talking about a nontraditional approach to fiscal sponsorship. I am going to put in the link to put in the bio a link to fiscal sponsorship, a checklist so that you can just start your research on fiscal sponsorship to see if it's good for you. So be sure to check in the bio for that link. Right now, we are at the part of the segment where you get to ask me your questions. Y'all know I can talk forever because I have so much to share, but this is the time of the episode where you get to ask me your pressing questions. You can find me on social media, I'm on Anchor, I'm on Spotify, I'm wherever, wherever you can leave your messages. If you wanna use audio, you can leave that on Anchor, but you can send me your questions via email or DM me on my socials. This is your time, so let's jump right in it and Ask Amber.
Speaker 5 (15:28):
Hey Amber, I love your show. Listen, my name is Henry, I'm calling from Los Angeles and I'm looking into Fiscal Sponsors and it looks as if they charge a fee between, what was it nine and 12%. And that seems pretty steep considering we'll be starting up and not have a lot of revenue coming in. What are your thoughts about fiscal sponsors versus getting the 501(c)(3) tax exempt status? Thank you.
Speaker 2 (15:59):
Thank you, Henry. And that's a great point to bring up. Fiscal sponsors charge a fee, like he said, between nine and 12%. That fee is to do the work that you will not be doing, which is requesting financial statements that your Funder's gonna ask you for. It's for processing the grants that you're gonna receive. It's for doing things like giving them the certificates for insurance. It's all of the backend stuff that you won't be doing. So is nine to 12% steep, not considering the work that they're providing. I'll tell you for the accounting part filing the 990s, providing financial statements, you'll have to pay an accountant, a bookkeeper, and for the 990s a CPA, that's going to exceed that nine or 12%. In addition, you've got legal counsel on board. So this is what I would say, Henry, 88% of a hundred thousand is so much better than a hundred percent of nothing.
Speaker 2 (17:11):
What do I mean by that? Having the history and the expertise of a fiscal sponsor is going to help you secure grants a whole lot faster and a whole lot easier. So yes, you'll be giving up 12% of what you bring in cuz they take nine to 12% of every grant that you bring in. But look at it as you're paying for them to manage that money, right. So to me, it is an investment and what you get with it is cuz that's their reputation on the line. If they mismanage funds, that's their reputation and they're not gonna do that. And they know how to do it. They operate as fiscal sponsors. What I forgot to say at the beginning of the episode was I did say it, don't borrow someone's 501(c)(3). There's a registry out there. It's the National Directory of Fiscal Sponsors.
Speaker 2 (18:11):
They have vetted fiscal sponsors to start there. Look for a reputable fiscal sponsor, do your homework, make sure that you look for reviews, cuz when people are wronged, they're going to post a review. So make sure you do that. So yes, 88% of a hundred thousand is better than a hundred percent a zero <laugh>. All right, so we're moving on. The next segment is my favorite. I say it every week because I mean it every week and it's where I get to put a spotlight on the most amazing individuals in the world. That would be my nonprofits. My nonprofits work so hard, they have their noses to the ground and they're doing the work. And I wanna show the rest of the world all of the work that you guys are doing out there. So during this segment, I do what's called my Nonprofit Spotlight, and this week I am going to shine a light on Step Up for Students. Step Up for Students empowers families to pursue and engage in the most appropriate learning options for their children, with an emphasis on families who lack the information and financial resources to access these options. Let's take a look at Step Up for Students.
Speaker 6 (19:30):
Step Up for Students is more than a name. It's a mission statement. Since 2001, Step Up For Students, a state approved scholarship funding organization has empowered parents and students to make personalized education affordable. The impact is undeniable. Combined, more than 116,000 students benefited from the Florida Tax Credit Scholarship for lower income families and the Gardner Scholarship for children with certain unique abilities. And to empower more students Step Up has two new scholarships, The Hope Scholarship for Public School Children who are bullied, and the Reading Scholarship accounts for struggling readers in public school in third through fifth grade. Each child has his or her individual needs, and each educational journey is as unique as the student it serves. So, instead of all children learning in one specific way, we give parents and guardians the choice to find the learning environment that best matches the student. The Florida Tax Credit Scholarship for children in lower income families can be used to help pay tuition and fees up to $7,111 for K through 12th graders at one of 1,800 participating schools in Florida or up to $750 to help with the transportation cost of attending an out of district public school.
Speaker 6 (20:46):
The Gardner Scholarship allows children with certain special needs or unique abilities to use funds on approved services and educational tools such as tuition, therapies, specialists, curriculum, technology, educational games, and even a college savings account. Eligible students receive on average $10,000 in scholarship funds each year. The Hope Scholarship for bullying victims in the public school system gives parents the opportunity to receive a scholarship for their child to enroll in a participating private school, transfer their child to another K12 public school within the school district, or receive a scholarship to transport the student to a public school in another district. Reading scholarship accounts are available for public school children in third through fifth grade who struggled with the English Language Arts section of their Florida Standard assessment in the previous testing year. The Education Savings Accounts are worth $500 each and help pay for tuition and fees related to tutoring or summer and after school literacy programs, instructional materials and curriculum related to reading or literacy. For more information about Step Up for Student scholarship programs, please visit www.stepupforstudents.org.
Speaker 2 (21:59):
All right, so these scholarships strengthen public education by offering options to struggling school children. You can donate to this amazing organization by visiting www.stepupforstudents.org. Yes. All right, now it's time for me to expound on some things I've been thinking about. It's Mindset Minute. I take a minute just to ask you to envision a world through Amber's eyes. In this Mindset Minute, I'm gonna talk on the topic of one in the bush is better than two in the hand. I'm Gen X, so back in the day, you'd hear your parents say all of these little sayings, and this one is one in the bush is better than two in the hand. What does it have to do with nonprofits? What does that have to do with fiscal sponsorship? So many times, like Henry, I hear nonprofits saying, Why would I give 12% of what I'm bringing in?
Speaker 2 (23:04):
That's a lot of money. I need all of my money. One in the bush is better than then one in the hand is better than two in the bush means it's more important for you to have a solid nonprofit organization where you're getting consistent funding because you have an infrastructure, an infrastructure that's already created, an infrastructure that provides you with what you need to consistently receive funding, right? It could take you maybe two years to create your infrastructure. What does that mean? You've gotta put in systems, your bank account, your tracking, your accounting. You have to put in systems so that you can output financial statements, reports. You have to demonstrate impact, right? So maybe it's a year where you work with an organization so that you can say, Look at how successful we were, but it's gonna take you a while to build up that infrastructure, to build up that track record.
Speaker 2 (24:04):
In the meantime, you could have been working up under a fiscal sponsor who already has a track record, who already has systems in place that can help you provide the funders with the information that they're requesting. So you can think about getting 100% of that grant, or you can think about getting 88% of that grant. And if you get 100% of the grant, remember it's no guarantee. You still have to write it, you still have to win it. So it may not be one or two years, it may be three or four. I have nonprofits that I work with, they've been in existence for 10 years and never got a grant because they don't have the infrastructure. So you can be thinking, I want all the money, but I want you to know you may be getting none of the money. So, try it on, see how it works for you.
Speaker 2 (24:57):
You don't have to stay with the fiscal sponsor for your entire existence. You can try it on for a year or two, learn the ropes, get some history, and then transition into your own 501(c)(3). So when I say one in the bush is better than two in the hand, I'm saying create this infrastructure, leverage this infrastructure, use this infrastructure so that you can start learning how to run a nonprofit under the direction of an organization with expertise, and then step out and then see how you do now that you have this experience, right? So that's my Mindset Minute. As a matter of fact, that's all we have for this episode. We are starting a series called A Nontraditional Approach To…, and today we've talked about a nontraditional approach to running a nonprofit leveraging fiscal sponsorship. Next week in subsequent weeks, we're gonna talk about other ways of approaching philanthropy from a nontraditional perspective.
Speaker 2 (26:04):
Listen, if you've enjoyed what I've been talking about today, please make sure you subscribe. Make sure you share this episode with someone thinking about starting a nonprofit or someone already running a nonprofit. If you have a 501(c)(3), you still can partner with the fiscal sponsor because they will take you up under their wings as a program. You've just gotta make sure that your missions are in alignment. So subscribe, share, and make sure you come back next week to check me out and we talk about more nontraditional approaches to nonprofit philanthropy. We'll see you next week guys.
Speaker 1 (26:48):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.net/podcast for the links and resources mentioned in today's podcast. See you next time.
