There’s an inconspicuous trend happening in philanthropy right now: fiscal sponsorship is rapidly growing. This is due to several factors and it is likely to become even more widespread in the coming years.

As the expansion of global authoritarianism continues and private foundations restructure their grantmaking to move larger grants through intermediaries, fiscal sponsorship opens up new possibilities for funders and activists alike.

Those who build new forms of funding infrastructure today are going to set the stage for what is possible for philanthropy in the future. So, this moment presents a clear opportunity for reimagining fiscal sponsorship in ways that will better serve social movements.

At the Human Rights Funder Network conference last month, I co-led a session with philanthropic strategist Mandy Van Deven of Both/And Solutions and Ruby Johnson of Closer Than You Think. Here, we shared practice-based insights from our complementary research projects, engaging the expertise of the activists and funders who attended, and facilitating a discussion to explore possibilities for what values-based fiscal sponsorship practice could be.

The role of fiscal sponsors is changing

The core work of fiscal sponsorship is not especially glitzy, but it is a critical piece of philanthropic infrastructure that allows money to move to people and places that have been historically excluded from formal philanthropy. Yet, many fiscal sponsors have been designed to operate in ways that mirror the priorities and onerous practices of private foundations and government donors rather than with the core purpose of routing resources to groups whose access to formal funding is most limited, such as those that are unregistered or based in the Majority World.

Fortunately, some fiscal sponsors have creatively designed their offerings to align with social movements’ ways of working, and others are emerging that have a deep political commitment to embodying liberatory practices and mobilising resources to groups that are often shut out of funding.

These fiscal sponsors delicately hold the tension between balancing the sponsored groups’ needs, such as autonomy and flexibility, with their own need for operational excellence and to meet compliance requirements. In doing so, they deliberately push the boundaries of legal, financial, and regulatory systems (sometimes of multiple countries), and serve as a risk buffer between the funders that refuse to take on systemic risk and the movement groups that shouldn’t have to.

By refusing to adopt practices that replicate and reinforce the status quo, values-based fiscal sponsors are likely to be subjected to scrutiny, and because they are setting new expectations, they will also make mistakes that will need correction. These are all unavoidable parts of learning and trying new things. To be truly transformative, values-based fiscal sponsors will need to operate without the threat of punishment (e.g., the rescinding of funds) and with encouragement to be pioneering rather than reproduce the norms of philanthropy that create the need for fiscal sponsors to exist in the first place.

The true cost of fiscal sponsorship

Many funders choose to work with fiscal sponsors that provide the greatest level of service at the lowest financial cost, even if that means a lower quality of the work and the fiscal sponsor is misaligned in values and mission. When funders underestimate the true costs of fiscal sponsorship, they drive a trend where the cost of providing these services exceeds the revenue generated, and the price is ultimately paid by movement groups. This undervaluing keeps both philanthropic and movement infrastructure weak.

Many fiscal sponsors structure their fees based on a fixed percentage that typically ranges from 5-15%. However, the larger, more traditional fiscal sponsors often have a bespoke fee structure that is determined based on the particular contours of each project, and the arrangement is consistently re-evaluated as the sponsored project grows and evolves. While a 15% fee may seem high to some, our research found that a higher fee is needed to cover the costs of fiscal sponsor service provision. This aligns with decisions being made by some foundations to set a minimum indirect cost rate of 15-25% on top of project grants to cover the cost of doing business. A similar practice is needed for fiscal sponsors.

Reimagine with us

Concerns about the conventional practices of US and European fiscal sponsors have led many to advocate for evolving the practice to better align with the values, aims, and circumstances of frontline leaders. There is a current opportunity to reimagine fiscal sponsorship practice in ways that share power and build self-governed philanthropic infrastructure in the Majority World. Our session was an invitation to join this ongoing exploration, and we invite you to reach out to us if you are curious to become part of this work.

Jocelyn Ban (she/her) is a consultant that supports philanthropy and the movement-aligned organizations and leaders that they support to advance justice and equity.