Any number of nonprofit 501(c)3 organizations in the U.S. serve as fiscal sponsors (sometimes known as "fiscal agents") to unincorporated mission-based projects or associations.  For example, a 501(c)3 dedicated to saving the whales, might offer to serve as the fiscal sponsor of a project designed to save the sea otters, because their missions are congruent, and it's less trouble than setting up a separate entity.  But they're really in the business of saving the whales, not providing services to other nonprofit organizations.

However, a relatively small number of nonprofit mangement support organizations undertake fiscal sponsorship on a large scale, providing not only a legal umbrella but all sorts of back office services to unincorporated projects.  A well-known example is the Tides Center in San Francisco.

As I've previously mentioned in my blog, one of my clients that also does this is Third Sector New England.  As of this writing, TSNE has 26 fiscal sponsorship clients, and an entire team of accountants, HR specialists, and others who dedicate themselves to the needs of these projects.  It's intricate work, and they are very, very good at it.

Unfortunately, it's difficult to find accounting and finance applications that are up to this sophicated task.  The transactions involve multiple donors, grantmakers, vendors, and contractors - on behalf of 26 different projects, each of which having records that must be segregated as if they were completely freestanding organizations.  The security issues are enormous, and added to that are the challenges of integrating an accounting application with workflow management, digital signatures, and document management.

These days, I spend a lot of time researching applications that will meet TSNE's fiscal sponsorship accounting needs.  This is not a task for the faint of heart, because the specifications are numerous, the solutions are shockingly expensive, and the potential for spending a lot of time, energy, and money without actually improving capacity is very high.

Here are some of the applications that I have been checking out:



In addition, the good folks at the Tides Center have also informed us that they are developing a suite of applications in-house that will provide integrated solutions to all the back office needs of fiscal sponsors.  Their project is being supported by about  $1,000,000.00 (USD) in foundation grants.  We have provided them with detailed information about our specifications, and are awaiting progress reports with great interest.

As my esteemed colleague Wayne Glynn points out, this is an opportunity - not just to find a solution for TSNE - but to expand capacity (on the part of software developers) and disseminate the knowledge of the field that we are gaining (among nonprofit and philanthropic organizations).  Not every mission-based organization is in the position to spend time and money to research all the possibilities and to work closely with vendors to make sure that they understand all the technological, financial, and legal implications of fiscal sponsorship accounting. TSNE can do this, and is hoping that many organizations can benefit from what they are learning.