The fiscal sponsor organization charges an overhead fee on revenue to administer funds and provide other organizational support to the project.
The role of the [fiscal] sponsor is to accept and administer funds, in compliance with US tax law. Fiscal sponsors can also provide a larger umbrella that includes financial and administrative infrastructure to support grant and donation-funded projects.
One of the most challenging parts of becoming a fiscally sponsored project is understanding what different organizations offer sponsorship and why a project may choose one organization over another. Host organizations often charge rates from 7.5% and up with different selection criteria and services offered, making this a difficult decision for new or growing projects.
Code for Science & Society hosts strictly mission-aligned projects. We also seek to host projects in a stage where we feel our partnership will offer significant impact to the project and the project also can contribute to our wider community.
It's a win for us if a project works with us for a while, grows, and decides to incorporate a company or nonprofit. We're not interested in owning a project's IP long term, so we try to make it easy to leave when a project is ready to do so.
Code for Science & Society charges a fiscal sponsorship fee of 15% of total project revenue.
For many smaller organizations the fiscal sponsorship fee can be justified by the elimination of insurance, outside accounting, legal, tax preparation, and state charity registration fees alone. Here is a list of some of the significant things covered by the fiscal sponsorship fee:
- Strategic, governance, and fundraising support for the project via:
- 1 hour monthly project strategy calls with CS&S staff at a minimum
- Review of documents and processes that support the establishment, documentation, and implementation of functional project governance
- Review of grants applications, partnership agreements, contracts
- Coaching for project leaders to develop, maintain, and grow their relationships with funders and partners
- Accounting services and tracking of project budgets including:
- Processing payment for contractors and invoices (national and international)
- Reimbursements
- Tracking of expenses
- And general project accounting
- Basic legal services including contracting and policy development and review
- Other legal services are charged to the project, upon mutual agreement
- Insurance under the fiscal sponsor's insurance umbrella including:
- Property insurance
- Liability insurance
- Directors and Officers insurance
- Employment practices insurance
- Tax preparation and audit services:
- Professional financial statement audits
- Federal (Form 990) and state tax filings
- State charity registrations fall under the single entity filing requirements of the fiscal sponsor
- Access to HR and payroll services for US and international hires, including:
- Access to all CS&S' benefit programs for employees, many of which would be too costly or unavailable to a small organization trying to source them alone.
- Currently, we contract with TriNet to provide US based full time employees with access to quality benefits including health insurance, retirement savings, and flexible spending accounts for dependent care.
- Currently, we contract with Papaya Global to support international employees.
- These benefits support our projects to attract and retain talented teams.
- Access to (and in some cases discounted rates) expert support on specific topics including user experience and design, project governance, and leadership development.
- Connection to our network of open source projects across research, science, data science, new media, and more.
Our fiscal sponsorship program was born out of the need for administrative and financial capacity at open source public interest technologies. We have built the administrative and financial infrastructure to help projects succeed - and only makes sense to share our experience and resources with mission aligned projects.
The minimum level of acceptable project governance is a three person advisory committee who oversees the project leader. No more than 49% of this committee may be paid by the project. Many projects develop additional levels of governance that meet the needs of their communities.
The Process for Becoming a CS&S Project
Becoming a fiscally sponsored project can take a month or six months, depending on the existing structure of a project. Generally, the process looks like this:
- Project expresses interest in joining CS&S. We evaluate based on project funding, mission alignment, and impact on project and CS&S.
- Project leader(s) meet with CS&S executive directors to understand long-term mission alignment and project strategy.
- After both parties agree the relationship will be mutually beneficial we move on to the more formal steps.
- Project creates an advisory committee and establishes bylaws.
- CS&S does due-diligence on project financial statements, fundraising strategy, and value alignment.
- Project leader submits application package to CS&S
- CS&S board approves project.
- Project advisory committee signs CS&S agreement and policies (below).
- We announce and begin the on-boarding process!
