When Judy Pearson completed her cancer treatment, she found herself wondering “What just happened? What was that all for? And how can I help someone else?”

After living through what she describes as a “hellacious experience,” Pearson says it became evident that there were plenty of women cancer survivors giving back to the greater good, and that her calling was to create a way to support and celebrate their efforts. This was the beginning of what would become the organization called A 2nd Act.

“I knew that the concept of A 2nd Act would work. But I needed to get it up and running. I started researching what it takes to become a nonprofit and I read about fiscal sponsorship. After researching fiscal sponsorship in Arizona, I found TAPAZ.”

Technical Assistance Partnership of Arizona (TAPAZ), an affiliate of Vitalyst Health Foundation, offers a breadth of fiscal sponsorship options for emerging and early-stage nonprofit organizations. In a nutshell, TAPAZ serves as “an outsourced CFO” while providing the financial backbone, reporting and management that is valued so highly by grantmakers such as government and philanthropies.

Fiscal sponsorship

Fiscal sponsorship has been described by some as a sort of incubator for nonprofits, or those who are considering becoming 501(c)(3) organizations – but it is much more.

There are three levels of support offered by TAPAZ: comprehensive fiscal sponsorship, grant-specific fiscal sponsorship, and fiscal agency.

In the case of comprehensive fiscal sponsorship, George Redheffer, associate director of sponsored projects at TAPAZ, explains that an entity does not even require a checking account; all money flows through TAPAZ.

“Their donations, grants, corporate sponsorships, contracts… everything comes through us,” said Redheffer.

This level of support is typically needed by groups or younger entities – as well as coalitions or alliances. Fiscal sponsorship is potentially a faster way to begin working without having to start a 501(c)(3) organization from scratch.  It allows a group to stay focused on their community passion and not be bogged down with administrative requirements involved in establishing a legal framework.

Perhaps just as important, fiscal sponsorship can allow one to avoid other possible “start-up” hurdles like qualifying for a grant (some grantors require that the recipient organization be legally established for a number of years in order to be eligible to apply) or establishing credibility through audited financial statements.

For both full and grant-specific fiscal sponsorship, TAPAZ fronts the required working capital for reimbursement contracts and grants, allowing groups to pay staff and bills in a timely fashion while TAPAZ awaits reimbursement.

Jessica Beresford, director of operations for the nonprofit Father Matters, says her organization worked with TAPAZ as a grant-specific fiscal sponsor, when the 501(c)(3) applied for, and received, a federal grant for $300,000.

“We were a small organization trying to analyze if we could take on such a high funding amount,” said Beresford. “We still felt like a small grassroots organization. TAPAZ helped put the audits and accounting systems in place to make sure our organization was fiscally responsible.”

Roy Pringle, executive vice president of TAPAZ, says TAPAZ support was a critical element in helping Father Matters secure that federal grant from the Department of Justice.

“The organization didn’t qualify to apply on their own, because they didn’t have audited financials. TAPAZ was the grant-specific fiscal sponsor and we were awarded the grant. That money would never have made it into south Phoenix if it were not for the fiscal sponsorship platform, because they wouldn’t have qualified to apply.”

Getting started

So who should consider exploring fiscal sponsorship? It could be a nonprofit organization needing back-office accounting and financial assistance, an alliance or unincorporated association who has a mission and wants to test it first, or a group of people who have a passion, such as an early stage nonprofit, early stage coalition, or part of an alliance.

Entities who think they could benefit from fiscal sponsorship are encouraged to visit tapaz.org to learn more. An online form enables applicants to complete and submit a fiscal sponsorship profile.

Pearson says A 2nd Act utilized all services included in comprehensive fiscal sponsorship.

“Everything they could do for us… that’s what they did,” said Pearson. “It is a brilliant way to launch yourself. They were very caring, they were very responsive. Our mission is so unique that I wanted to make it available as soon as possible. Without fiscal sponsorship being available and without such a dedicated organization as TAPAZ, all of that would have been very difficult and would have delayed me in getting it off the ground. They really cut six months minimum or maybe a whole year out of what I would have needed to plan and grow.”

Currently, TAPAZ has 72 active projects, and is open to taking on more, scaling resources as needed. TAPAZ does not charge a fee to meet with groups, and there is no cost to have TAPAZ submit grant applications. The fiscal sponsor charges a 7 percent fee when money flows through the platform in the form of donations, grants, sponsorships or contracts. In the case of federal grants, TAPAZ charges a 10 percent fee and acts as the legal reporting entity.

“You don’t have to spend a lot of money if you’re not making money,” said Pearson. “So that is hugely beneficial.”

Flying the Nest

Pringle says the goal of fiscal sponsorship is to have sponsored entities fly from the nest, noting that the role of TAPAZ is incubating, teaching, growing and helping.

“It isn’t always the best idea to become a nonprofit,” said Pringle. “We have a lot of groups that come in and they presume they want to create a 501(c)(3). If they are not already incorporated, we have a long conversation about if that is the right path. There’s nothing magic about being a 501(c)(3). Often it’s easier to be a for-profit with a social mission. If their business is predicated on earned revenue, then a 501(c)(3) can burden the founder with finding a board and potentially losing control of his or her idea.”

In Pearson’s case, TAPAZ did help A 2nd Act incorporate to become a 501(c)(3). Within a year, they had graduated from the program, after developing the needed financial skills.

“That was always my intention,” said Pearson. “I wanted to build a financial cushion and not have to put out a lot of my own money to get up and running. We grew more quickly than expected. TAPAZ was our fiscal sponsor for 15 months, from 2016-2017. In March we were approved as a nonprofit.” ν