What the Heck is Fiscal Sponsorship, Anyway?

If you’ve been in philanthropy or the nonprofit sector long enough, you’ve probably heard the term fiscal sponsorship thrown around. Maybe you nodded along, pretending to know exactly what it meant. Maybe you assumed it was some arcane financial loophole. Or maybe you dismissed it as a niche workaround for scrappy grassroots groups that can’t get their own 501(c)(3).

But here’s the thing—fiscal sponsorship isn’t just a workaround. It’s a powerful, evolving tool for moving money, building capacity, and supporting social change. And while the practice has been around for decades, it remains a black box for many funders and nonprofit leaders.

So, what the heck is fiscal sponsorship, anyway?

A Smarter Way to Do Nonprofit Work

At its core, fiscal sponsorship is a way for organizations to share infrastructure. A project with a charitable mission partners with an established nonprofit—its fiscal sponsor—to access charitable support, legal compliance, and operational support.

Instead of incorporating as a standalone 501(c)(3), the project operates under the sponsor’s umbrella, allowing it to focus on its work without the more expensive administrative overhead of running a stand-alone nonprofit.

That’s the simple version. The reality is that fiscal sponsorship takes many forms, from a compliant way to move money from point A to point B, to fully integrated shared nonprofit management. Some projects use fiscal sponsorship as a launchpad, a temporary home while they establish themselves. Others stay long-term, finding that shared infrastructure is a more sustainable alternative to operating independently.

All Shapes and Sizes

Fiscal sponsorship isn’t just for small initiatives. Some of the largest sponsors house projects with budgets well into the tens of millions. The ecosystem is broad and diverse—some sponsors focus on niche sectors like arts and culture, climate justice, or public health, while others support a wide range of initiatives.

For many projects, fiscal sponsorship is a way to test new ideas and respond to urgent needs without getting bogged down in bureaucracy. Others see it as a permanent model, providing financial stability and operational efficiency without the cost and complexity of running an independent nonprofit.

Today, the discernible fiscal sponsor ecosystem—though still largely unmapped—numbers roughly 600 organizations, though estimates suggest there are actually as many as 5,000 fiscal sponsors active nationwide.

In 2023, a field scan conducted by Impact Commons and the National Network of Fiscal Sponsors provided the first significant data snapshot, revealing a rapidly expanding and diversifying field. That scan found over 12,000 charitable projects operating under fiscal sponsorship, collectively managing more than $2.6 billion in project funds.

Notably, these sponsors facilitated $575 million in government funding, employed 18,000 staff members and contractors, and contributed nearly $700 million in income to individuals working within their projects.

How It Works: Two Main Models

There are multiple legal structures for fiscal sponsorship, but most projects operate under one of two models: Model “C” or Model “A”.

Pre-Approved Grant Model “C” is the more limited form. The fiscal sponsor receives grants and donations on behalf of an independent “project” and then re-grants those funds to the project, which is responsible for managing its own operations. The project and re-grantee in this case can be a person or group of people, a taxable entity, or a nonprofit awaiting its federal tax exemption.

While sometimes mislabeled as a “passthrough,” Model “C” requires strict compliance and oversight by the sponsor 501(c)(3) to ensure the funds are used for charitable purposes. Sponsors typically charge between 4% and 8% of revenue for this intermediary support.

Meanwhile, Comprehensive Model “A” fiscal sponsorship provides full operational support by making the project the equivalent of an in-house program. The sponsor serves as the project’s legal home, handling bookkeeping, HR, compliance, insurances, and all financial transactions. The project retains its own identity and decision-making power but operates under the sponsor’s umbrella, retaining the right to exit at any time.

This model is more expensive, with fees ranging from 10% to 15%, but it offers significant cost savings compared to running a standalone nonprofit.

Increasingly, Model “A” sponsorship is being used as a long-term shared infrastructure solution, helping established nonprofits reduce administrative costs while improving efficiency. For instance, we released a study comparing costs of Model “A” support with reported overhead costs of nonprofits with less than $2 million in expenses.

We found that by operating under a comprehensive sponsor, those organizations would save about 50% on overhead, allowing those funds to be reallocated to front-line programs and services.

The Age of Fiscal Sponsorship

While fiscal sponsorship has been around since the Civil Rights Movement, the field is still evolving. What started as a way to help community-led initiatives access funding has grown into something much bigger—a dynamic, adaptive model for stabilizing and strengthening the nonprofit sector.

As grassroots organizations face increasing financial and political pressures, fiscal sponsors are emerging not just as intermediaries but as stewards of shared infrastructure. They’re filling gaps, shifting power, and rethinking how nonprofits operate.

The 21st century will see the further evolution of fiscal sponsorship as a way to organize and sustain social impact work. In an era of growing crises—from climate disasters to economic instability—fiscal sponsorship isn’t just a technical solution. It’s a way to make philanthropy and our vast ecosystem of operating nonprofits more responsive, resilient, and equitable. The Age of Fiscal Sponsorship may be upon us.