August 2026
Implosions and near-implosions of fiscal sponsors made headlines in 2025, underscoring the impact of these failures and the need for reflection, restitution, and reform.
In December 2025, The Philadelphia Inquirer reported that the Federation of Neighborhood Centers (FNC) – a Philadelphia fiscal sponsor with 104 projects under its umbrella that was supposed to help community groups manage grants and provide other supports — could not make payroll. Things only got worse, and in March of 2026 the Inquirer followed up to report that FNC could not account for $426,000 meant for small neighborhood organizations. Fiscal sponsors are struggling in other jurisdictions as well. There was a philanthropic bailout of the San Francisco Parks Alliance in fall 2025, and the collapse of Fusion Partnerships in Baltimore in March 2025, following the 2021–23 shittering of two other Baltimore fiscal sponsors (Thrive Arts and Strong City Baltimore).
Fiscal sponsorship is one of the toughest business models in the nonprofit sector to get right — and it’s so critical that sponsors do get it right
Fiscally sponsored projects and organizations only benefit from fiscal sponsorship arrangements if sponsors actually deliver on their commitments, and the consequences of failure are significant (even when there is a bailout).
Implosions and near-implosions take a serious toll on the projects and organizations that depend on sponsors – and, in turn, unjustly impact the communities and individuals supported by these projects. The toll is not only financial, but emotional and psychological as well. Fiscal sponsor failures consume precious time and other resources necessary for the projects they support, many of which operate with thin margins and often very limited capacity (the driving reason they may have turned to fiscal sponsors in the first place).
The impact of fiscal sponsorship failures hits grassroots initiatives and pilot projects especially hard, and especially the project leaders who were inspired to do good things and invested their own time and energy to make a difference. These closures are also likely to disproportionately impact certain populations and communities that benefit from the efficiencies and cost-sharing advantages that fiscal sponsorship arrangements offer.
Behavioral and structural change
As more and more fiscal sponsors struggle or shutter their operations, public trust in fiscal sponsorship erodes. Clearly there is a need for behavioral and structural change.
If you are a 501(c)(3) organization and are considering sponsoring a project, you’ll want to be sure to understand the risks and rewards involved. A quick must-read is Fiscal Sponsorship: Six Ways to Tank Your Organization, published on August 9, 2025, by Gene Takagi.
If you are leading a project that is seeking sponsorship, you’ll want to get up to speed on the options available and do your own due diligence, too.
Also trending: calls for reform
There is currently no Pennsylvania law governing fiscal sponsorship arrangements, though accountability is so critical — and the impact of the 2025 sponsor collapses seems significant enough to justify a push for state legislative reform and accountability of fiscal sponsors.
Minds will differ on how to regulate fiscal sponsors, and a debate is shaping up, with a December 10, 2025, Wall Street Journal opinion commentary (paid article) by Tal Fortgang, a legal policy fellow at the Manhattan Institute; a blog post (December 11, 2025) by law professor Darryll K. Jones; and the introduction of two “SPONSOR Act” bills proposed by two U.S. Congressmen in March 2026.
Careful, though, and remember it’s 2026, and political agendas are widespread. It’s important with any legislative or regulatory reform to:
- remain focused exclusively on considering what essential measures must be in place, to help to curb bad behavior and ensure the accountability of organizations that choose to become fiscal sponsors; and
- approach the initiative with a mindset that presumes fiscal sponsorship arrangements are largely beneficial, as they leverage economies of scale and help incubate important new ideas and initiatives.
More on fiscal sponsorship best practices coming in early fall!