- Fiscal sponsorship is a way for smaller or early stage OS projects to gain the advantages of being a nonprofit (receiving donations, tax benefits) while retaining a relative level of flexibility and independence.
- There are many different types of fiscal sponsors that have varying criteria for sponsorship and various types of support (such as legal, coaching, community, and administrative support). Many make it their mission to support open source projects in particular.
- Fiscal sponsorship is a support mechanism that allows digital infrastructure projects to fundraise while focusing on building and maintaining their work.
Fiscal sponsors, in the context of the United States, are typically nonprofit organizations that provide operational and administrative infrastructure to projects and organizations that do not have formal entities. Fiscal Sponsors provide their sponsored projects with an entity to receive funds (donations, grants, contracts), licensing/legal, operational and financial support (e.g.taxes, contracts). Some also provide events support, community engagement, and other services. Although not a funding mechanism itself, it is an important mechanism of support for many digital infrastructure projects.
How fiscal sponsorship works
Funding to a fiscally sponsored project - whether it is direct donations or philanthropic or government funding, typically will be disbursed directly to a projects' sponsor, but raised by the project team. This guarantees stewardship of the funds, but also that the project team can focus on what it does best: to build and sustain open source code - while maintaining agency to pursue funding sources aligned with project values. Each fiscal sponsor has a different set of criteria project applicants must meet, such as size of team, but generally the requirements are far simpler to navigate than setting up an entity and building out operations and management infrastructure. Since it can be challenging for smaller, grassroots OS projects to be in compliance with the requirements of many funders, becoming a fiscally sponsored project is one way to solve that challenge. And as recommended in Roadwork Ahead, Fiscal Sponsors “should be supported so as to make it easier for FOSS infrastructure projects outside the USA to comply with funders’ requirements.” As for sponsors themselves, they are typically sustained through an overhead fee that a project agrees to provide as a portion of funds raised. In the example of Open Source Collective - a host to over 3,000 projects, maintains a 10% fee against all services such as “holding funds, making expense payouts, meeting tax obligations, and access to the Open Collective software platform.”
Examples of Fiscal Sponsors in OS Ecosystem
There are many fiscal sponsors of open source and digital infrastructure projects. One example is an open-source specific fiscal sponsor is the Software in the Public Interest (SPI) which helps “substantial and significant open source projects by handling their non-technical administrative tasks so that they aren't required to operate their own legal entity." An example of this model in Germany is the Center for the Cultivation of Technology, which follows a very similar mechanism of supporting projects with finances and accounting.
Oftentimes, non profit organizations that fiscally sponsor projects will have broader focus or mission, much like a funding organization has a guiding mission and program focus areas. The Software Freedom Conservancy (SFC) has a mission to ”ensure the right to repair, improve, and reinstall software” and a core part of that mission is to 'foster' (by hosting) FOSS projects, while also leading efforts such as Outreachy, an internship program centered on providing opportunities for historically underrepresented individuals to work in open source. Code for Science & Society (CS&S), whose mission is to "advance the power of data to improve the social and economic lives of all people through public education, scientific research, and technology development and deployment," fiscally sponsored projects ranging from open research initiatives and alliances, to open source software that measures the internet (MLab) and refines messy data (OpenRefine). CS&S takes a broad approach to supporting critical digital infrastructure, both through its fiscally sponsored projects, but also by directly fostering projects and community through the Digital Infrastructure Incubator program.
Fiscal sponsorship helps projects focus on their priority of building and sustaining open source software. If a project aims to grow, fiscal sponsorship can also provide a reliable platform for projects to fundraise until they can apply for non profit status of their own. For others, where sustainability is the priority, fiscal sponsors provide much needed services to ensure that the focus is on sustaining code for security, compliance, and documentation. Most sponsors do not directly fundraise for projects, but they can provide support and networking opportunities that make fundraising possible and easier to navigate, in addition to financial stewardship of received funds. These additional services and community engagement mechanisms are of immeasurable value to projects. Sponsors can also add a layer of legitimacy and profile to a project that was otherwise little known, and through community engagement can encourage adoption and contributor growth.