Not for the faint of heart: Selecting a fiscal sponsorship accounting application

Deborah Elizabeth Finn — Wed, 28 Jun 2006 06:02:35 -0400

Any number of nonprofit 501(c)3 organizations in the U.S. serve as fiscal sponsors (sometimes known as "fiscal agents") to unincorporated mission-based projects or associations. For example, a 501(c)3 dedicated to saving the whales, might offer to serve as the fiscal sponsor of a project designed to save the sea otters, because their missions are congruent, and it's less trouble than setting up a separate entity. But they're really in the business of saving the whales, not providing services to other nonprofit organizations.

However, a relatively small number of nonprofit mangement support organizations undertake fiscal sponsorship on a large scale, providing not only a legal umbrella but all sorts of back office services to unincorporated projects. A well-known example is the Tides Center in San Francisco.

As I've previously mentioned in my blog, one of my clients that also does this is Third Sector New England. As of this writing, TSNE has 26 fiscal sponsorship clients, and an entire team of accountants, HR specialists, and others who dedicate themselves to the needs of these projects. It's intricate work, and they are very, very good at it.

Unfortunately, it's difficult to find accounting and finance applications that are up to this sophicated task. The transactions involve multiple donors, grantmakers, vendors, and contractors - on behalf of 26 different projects, each of which having records that must be segregated as if they were completely freestanding organizations. The security issues are enormous, and added to that are the challenges of integrating an accounting application with workflow management, digital signatures, and document management.

These days, I spend a lot of time researching applications that will meet TSNE's fiscal sponsorship accounting needs. This is not a task for the faint of heart, because the specifications are numerous, the solutions are shockingly expensive, and the potential for spending a lot of time, energy, and money without actually improving capacity is very high.

Here are some of the applications that I have been checking out:

NetSquared, an initiative of TechSoup.org - ThirdSectorNewEngland

Not for the faint of heart: Selecting a fiscal sponsorship accounting application