Fiscal sponsorship isn’t just a trend. In the blog, we will outline why fiscal sponsorship is a complete necessity if our sector is truly committed to equity, social justice, sustainability, and impact. Essentially: How does fiscal sponsorship help the nonprofit sector?
In Kalamazoo, we have 1000+ registered nonprofits. This shows that we have people who want to get great work done. At Stara, we think we can get more work done by working together.
(Image description: 1000+ dots representing nonprofits in Kalamazoo County transform across the image into birds flying in a flock, from left to right. Text on the right says: “This is just about how many nonprofits are registered in Kalamazoo. Imagine if more of us were a thick flock, sharing resources and stretching our wings.”)
We think we could get more done in Kalamazoo that impacts people’s daily lives, if everyone wasn’t busy maintaining financial and legal standing as individual organizations. Imagine, if instead of all us asking foundations for administrative resources, we could work together and negotiate more resources in the long-term.
According to the latest writing from the social impact commons, the need for fiscal sponsorship falls in roughly two categories: equity and social justice, and sustainability and impact.
Equity & Social Justice
THE PROBLEM:
The nonprofit sector is increasingly under scrutiny for not living up to its mission. We are accused of perpetuating a model that gives tax deductions for the rich while barely serving those in need. Traditional nonprofit infrastructure, often inaccessible to marginalized communities, contributes to a lack of diversity in nonprofit leadership.
OUR SOLUTION:
Fiscal sponsors, like Stara, remove barriers to engaging in social purpose missions by providing immediate, affordable access to nonprofit infrastructure. Projects can benefit from experienced management, tax-exempt status, insurance, and administrative support without upfront costs.
With fiscal sponsorship, projects pay a small percentage of each dollar raised, reducing financial barriers. This model offers a sustainable solution for maintaining essential resources, allowing mission-driven leaders to focus on their work. Fiscal sponsorship can democratize access to nonprofit tools, advancing social, racial, and economic justice by enabling broader participation in the tax-exempt sector.
Sustainability & Impact
THE PROBLEM:
The nonprofit sector in the U.S. is fragmented, with around 88% of organizations operating with budgets below $500,000, and 97% under $5 million. Many of these organizations are inefficient, spending more on administrative costs than needed, which restricts funds for programs. Despite this, these small nonprofits operating below 500k deliver over 85% of the sector’s programs. However, many struggle with financial instability, as nearly half have less than 30 days of cash on hand.
OUR SOLUTION:
Fiscal sponsors, like Stara, can provide organizations with cost-effective back-office solutions, improving efficiency and sustainability. By supporting resource sharing and collective capacity building, fiscal sponsors can help small organizations overcome their challenges and boost their impact, ultimately enabling them to operate more effectively and sustainably.
For these reasons, we are committed to fiscal sponsorship as a practice of equity, social justice, sustainability and impact. Are you ready to get involved?
