Why Fiscal Sponsors Might Lead the Reimagination of our Post-COVID Sector

Philadelphia Contributionship Fire Insurance Building, Philadelphia, PA

Fiscal sponsors are well positioned to lead our sector to reimagine and reconstruct a more sustainable, impactful and equitable social good community in the aftermath of the COVID-19 pandemic. Yet the fiscal sponsorship ecosystem is under-built, poorly understood, and itself struggling with lack of capacity.

In recent weeks, we have heard calls in the nonprofit sector for reimagination and reconstruction, not recovery from the COVID-19 pandemic. “Recovery” implies returning to a previous state. Our sector has long been hobbled by the stress and strain of needless fragmentation and lack of capacity. Even if we could, why would we want to return to that state? Now, it’s likely no longer a choice. It’s time to reimagine. 

As the COVID-19 crisis and its economic aftershocks continue, we know our most vulnerable and marginalized populations are more at risk than ever before. Continued failures in government and resource allocation systems are perpetuating inequity when we need equity and justice to prevail. We see new nonprofit missions emerging–many we may have never imagined to be necessary–and many smaller, but invaluable community-based nonprofits threatened with closure. 

Conservatively, we are likely looking at hundreds of thousands of nonprofit organizations reaching insolvency or closing within the coming months. There are nearly one million registered nonprofits in the U.S. today, of which 97% operate below $5 million in budget, and more significantly 88% have budgets of less than $500,000. And this vast landscape of small-scale, locally acting organizations is responsible for roughly 80% of the expenditures and related activity of the entire sector: childcare centers, homelessness groups, community theatres, legal aid groups, food pantries and countless other missions.

Before the pandemic, these organizations were fragile, starved for resources, and overwhelmed by demand from their communities: according to the Nonprofit Finance Fund, 86% reported increasing demand for services, yet 57% were unable meet demand; 62% reported that financial stability is their top challenge; and 50% had less than one month of reserves.

It is time for us to understand fiscal sponsors not just as a temporary path to independent formation or home for a short-term project, but rather a permanent restructuring solution for the sector, in particular the vast expanse of organizations operating below $500,000 per year.

Fiscal sponsors have always been models for sharing essential backbone resources, such as management staff, policies, systems, expertise, and more. As such, fiscal sponsors are engines for collective capacity building. It is a time for this field to shine. This will mean, however, addressing the capacity strains that fiscal sponsors themselves navigate regularly, now with greater frequency and amplitude. It will also mean reaching out and embracing fiscal sponsors appearing in new and unexpected corners of our sector. 

Fiscal sponsors are risk managers at heart, helping projects navigate risk, failure, and success. They are expert repositioning technicians, designers of efficient systems. They are trusted intermediaries who can leverage networked relationships and scale. They can be the vanguard of long-overdue change in our sector. It’s no longer an option. It’s urgent and imperative.

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