Fiscal Sponsors and Baltimore’s Grassroots Organizations
A new report examines the challenges faced by organizations in Baltimore without 501(c)(3) tax-exempt status — particularly those led by people of color — and shares steps that funders can take to better support them and the fiscal sponsors they rely on.
Mapping Baltimore’s Fiscal Sponsorship Landscape, funded by the Annie E. Casey Foundation and Open Society Institute-Baltimore, shares insights gleaned from 27 interviews with representatives of local grassroots groups and social entrepreneurs. Authors Jonalyn Denlinger and Erika Seth Davies say they intentionally prioritized individuals of color for these interviews because their value, and the key roles they play in the local fiscal sponsorship landscape, are often ignored.
“When we discuss fiscal sponsorship in Baltimore, it’s important that local leaders and organizations with strong ties to the community are centered in those conversations,” says Talib Horne, director of Casey’s Baltimore Civic Site. “Though these individuals and groups are in the best position to understand the needs of communities of color, they are often undervalued as partners for change.”
The report highlights several barriers faced by Baltimore-based groups, including lack of investment, limited resources and stagnant local infrastructure.
What Are Fiscal Sponsors?
Simply put, fiscal sponsors are nonprofit organizations that lend their 501(c)(3) tax-exempt status to an individual or project. They act as an intermediary between funders — such as individual philanthropists, private foundations or government entities — and groups or individuals working for community change. Sponsors can also provide oversight, manage finances and perform other duties as required to facilitate the exchange of funds.
Fiscal Sponsorships in Baltimore
According to the report, fiscal sponsors and the organizations they support in Baltimore and other cities across the country often must contend with longstanding institutional problems, such as bias in access to capital, ingrained systemic racism and inequitable power structures. What’s more, sponsors and grassroots groups must remain accountable to their funding partners and the communities they serve while often operating with limited resources and infrastructure.
Together, these challenges place stress on already overextended and underfunded social enterprises.
Key Takeaways from Mapping Baltimore’s Fiscal Sponsorship Landscape
Building on their interviews as well as existing research, the report’s authors share several key insights about the fiscal sponsorship landscape in Baltimore:
- As a middleman between funders and sponsored organizations, fiscal sponsors shoulder much of the financial and accountability responsibility in these relationships.
- Baltimore’s fiscal sponsorship infrastructure is underfunded, with sponsors often struggling to perform their duties and meet the needs of their partners.
- Each partner in a fiscal sponsorship relationship has unique needs, budgets and challenges.
- The demand for fiscal sponsors currently exceeds the number of sponsors available, worsening existing issues within philanthropy and the nonprofit community — such as lack of racial equity and the potential for unsustainable or unethical business practices.
- To flourish, Baltimore’s fiscal sponsorships must be reimagined to serve the needs of all stakeholders.
Recommendations to Strengthen Grassroots Organizations in Baltimore
In addition to their findings, the authors share several recommendations to better support grassroots organizations and their partners. These include:
- help sponsors access the resources and infrastructure support they need by providing general operating grants or investing in cash reserves;
- grow the pool of available sponsors in Baltimore by creating or attracting new fiscal organizations;
- build a cooperative network of sponsors to encourage collaboration, partnership and flow of capital and;
- consider directly investing in organizations or individuals without nonprofit status by exploring ways to invest in people and projects that bypass traditional fiscal sponsorship relationships.
To ensure that people of color and the organizations they lead can continue serving Baltimore, the city’s existing systems and philosophies on fiscal sponsorship must be rethought, the report’s authors write. With stable, thriving sponsorships in place, each party in a fiscal sponsorship relationship can “align with key national best practices” and even set new standards for how urban communities invest in grassroots efforts led by people of color.