It’s always exciting to see the type of work we do profiled in a national business publication like Forbes. Yesterday, Anne Field wrote about “limited fiscal sponsorship” dubbing it a “new tool in the arsenal of social enterprise.” In the world of fiscal sponsorship, limited fiscal sponsorship is often referred to as a “Model B” sponsorship, and Field is right – it’s far less commonly used than other forms of fiscal sponsorship.
Unlike the vast majority of our projects at the Trust for Conservation Innovation, Limited or Model B projects are not operated as a direct project of the sponsoring organization. Instead, the sponsoring organization receives funds that are then managed, under contract, directly by an independent contractor, which can be an individual or a firm. The contractor maintains its own liability coverage, manages its own accounting, hires its own vendors and contractors, and bears ultimate responsibility for the program outcomes of the project.
The Forbes article highlights recent pilot efforts by Third Sector New England, a veteran fiscal sponsor founded in 1959, which has recently begun to experiment with this model as a way to work with innovative companies and social entrepreneurs who have established for-profit organizations but want to leverage philanthropic funds to accomplish social good.
It’s important to note that although the model does hold some promise as a more limited and flexible form of fiscal sponsorship, if it isn’t managed carefully, it can create significant risk for entrepreneurs, funders, and fiscal sponsors. For for-profit enterprises, navigating the compliance and reporting requirements that accompany charitable work can be daunting. State and federal tax laws for governing the use of tax-exempt funds are vastly different than laws governing for-profits and issues can arise around conflict of interest and private benefit that can put contractors, donors, and fiscal sponsors in jeopardy.
Model B fiscal sponsorship is definitely one option in an evolving model for cross-sector social innovation, yet we also serve social innovators in a number of other ways, often with far less risk and complexity. Learn more about fiscal sponsorship in our White Paper here.