Fiscal Sponsorships: A Growing Trend in the Nonprofit Sector

It's a given that many nongovernmental organizations (NGOs) outside of the U.S. want to find opportunities to benefit from the generosity of American donors as well as the desire of donors to support projects abroad. One way they get a foothold into the American philanthropic community is by using fiscal sponsors, which also works in reverse. 

Fiscal sponsors are 501(c)(3) organizations that allow foreign NGOs and smaller entities in the U.S. to have essential resources. For instance, one critical aspect of fiscal sponsors is allowing Americans to get tax deductions on their giving if they qualify. However, they're also an excellent tool for U.S. nonprofits to leverage global donations in ways that optimize taxes for donors.

As any nonprofit leader understands, creating a charitable organization is expensive. Significant costs include regulatory filings, accounts, lawyers and, of course, program and fundraising teams. Fiscal sponsors are an excellent way to grow an American charity beyond its local base. 

4 Advantages of Fiscal Sponsorships

We know that the world's gotten a lot smaller in the digital age. We also know nonprofits must keep figuring out ways to attract fundraising revenue. Fiscal sponsorship continues to gain traction for a variety of compelling reasons. One reason is that nonprofits must deal with ever more complexity in every aspect of their operations. That's why every fundraiser seems to be continuously looking for new donors. (Pro tip: Focus on your current donors and steward them well.) Fiscal sponsorship allows any organization to expand internationally as an additional income stream with advantages.

1. Cost-Effective Alternative

If a nonprofit chooses to pursue fiscal sponsorship to expand its overseas philanthropy, it does so at a much more cost-effective cost. As we know, 92% of nonprofits in the U.S. operate with budgets of less than $1 million. So, even if most nonprofit leaders wanted to expand their fundraising base internationally, it's almost impossible because of limited financial resources. Moreover, if they had it funded by, say, a major donor, they still have to adhere to global compliance. Fiscal sponsors eliminate that hassle at a much lower cost.

2. Quick Start and Enhanced Credibility

The nonprofit sector in the U.S. is constantly straining to do more with less. A Forvis report noted that 68% of nonprofits plan to cut programs and services within the next two years. However, 71% of the nonprofits surveyed saw an increased need for their programs and services. In other words, money isn't easy to come by, and nonprofits need to do other things to expand their income. Fiscal sponsorship allows nonprofits to start overseas efforts quickly under the umbrella of an established partner. That provides credibility for donors. 

3. Administrative and Operational Support

One of the biggest challenges for any nonprofit leader that might consider attracting overseas donations is the regulatory burden. Countries have different laws about everything from marketing to fundraising to legal and financial obligations. A reputable and qualified fiscal sponsor, which a nonprofit can find at the National Network of Fiscal Sponsors, cuts through all of it. In turn, it allows U.S.-based nonprofits to focus on building relationships, partnerships and other activities to establish and develop their brands outside of America.

4. Learning and Mentorship Opportunities

Another excellent benefit of fiscal sponsorships is that the best ones have robust learning and mentoring opportunities. Even the best fundraisers in the U.S. and nonprofit executives understand how to do things in our country. In other words, if professionals aren't actively working cross-border, they're not aware of the differences in customs, cultures, business norms, etc., that happen outside of the U.S. Fiscal sponsors help U.S.-based 501(c)(3)s that choose this path to learn, innovate and expand their work and relationships beyond our borders. 

Simplifying Global Giving to U.S. Nonprofits

For nonprofits that see the potential of going global, it's essential to go with a reputable and established fiscal sponsor to start on the journey. Typically, you'll find fiscal sponsors with lawyers, accountants, program professionals and fundraisers with international experience. However, together, they work to simplify what could be a complex but very exciting opportunity for nonprofits. Again, as a global fundraising expert, fiscal sponsorship can open many new doors and allow international donors to contribute to U.S. causes with confidence and efficiency. And it allows U.S. donors to fund projects abroad and get a U.S. tax deduction by using a U.S.-based fiscal sponsor.

As the philanthropic sector continues to reinvent itself with new opportunities, such as impact investing, fiscal sponsorship is another chance for savvy nonprofits to stay ahead in a dynamic, shifting landscape. Fiscal sponsors offer nonprofits an immense opportunity for 501(c)(3)s in the U.S. The reality is that much of the world still marvels at American ingenuity and our philanthropic sector. However, American nonprofits have a wealth of opportunities if they focus their sights overseas. In short, global philanthropy is one great way to innovate, collaborate cross-border, and drive social change. 

The preceding post was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.