February 14, 2012
This is why I hate fiscal sponsorships.
From today's Los Angeles Times comes this story about a fiscal sponsorship organization going under - it will be interesting to watch this saga unfold as the California AG takes a look at what occurred. To be sure, a properly-run fiscal sponsorship organization (such as the Tides Foundation) can be a good and useful thing and a welcome alternative to the proliferation of small and probably unsustainable charities. Too many times, in my experience anyway, the sponsored projects don't really understand the terms of the agreement - that in a properly structured sponsorship, it really isn't their money and the agency does have oversight responsibility and control. If it's not properly structured (that is, it was a fiscal agency or some other ... thing), then it wasn't really accomplishing the goals for which it was set up in the first place. The scary thing, of course, is that there is no such term "fiscal agency" or "fiscal sponsorship" anywhere in the tax code, nor as far as I know in any state staute (I think Washington was considering legislation at one point, although I don't know what happened to that). And yet, for something that is really so undefined, fiscal sponsorships and/or agencies are everywhere and commonly used - appropriately and inappropriately. I really think that this is an area ripe for some study and some educational outreach to the nonprofit sector.
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We agree that this area needs some study. We wrote two articles about the IHC collapse a week before the Los Angeles Times article:
IHC Part I: http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=19616:vanishing-act-activist-groups-say-donations-disappeared-with-fiscal-sp
IHC Part II: http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=19776:a-fiscal-sponsors-collapse-lessons-learned-from-the-ihc-implosion&catid=153:features&Itemid=336
Posted by: Rick Cohen | Feb 14, 2012 7:17:48 PM