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Built for Good is for the community builders driving missions that matter. Host Kian Alavi shares real stories, hard-won lessons, and data that challenges assumptions, helping you move with more clarity and less guesswork. Each episode delivers actionable insights to accelerate decisions and make meaningful work less of a solo struggle.
Now… let’s build for good.
Built for Good is brought to you by Mazlo. Mazlo simplifies accounting, banking, compliance, and fundraising—so you can focus on your mission, not your back office.
00:00:00:04 - 00:00:20:17
Unknown
If you're not listening to them, how are you going to know what they think those solutions are? So that that's sort of something else I've been very excited about. He and Purpose Driven Board Leadership Board source has a number of resources on it, and I think it's a, a very, very impactful way to view governance moving forward.
00:00:20:21 - 00:00:48:20
Unknown
Today, I have the pleasure of interviewing Gene Takagi, who is one of the most well-respected legal thinkers in the nonprofit space. He's the lawyer's lawyer, if you will. While he does work directly for nonprofits, he's also called upon to join panels and to speak in other spaces around tax exemption, as well as fiscal sponsorship and all things that relate to governance and long term sustainability at nonprofits.
00:00:48:22 - 00:01:19:20
Unknown
His work sits at the intersection of law and impact, helping nonprofits not just start, but succeed. He's a courageous thinker. He's one who shares for the benefit of others and has been doing so for decades. And it's truly an honor to spend some time talking with Gene. Today, I hope you enjoyed this episode, but I do want to just recognize the fact that I've been a long time fan of your work and thought leadership, and this is like really my first time ever getting to meet you and speak with you.
00:01:19:22 - 00:01:43:16
Unknown
Yeah, it's really nice to meet you, too. And so I read your LinkedIn posts quite religiously and really appreciate your point of view and perspectives on multiple things, including fiscal sponsorship. Thank you Gene. That means. That means it really does mean a lot to me. I was actually reading your blog before I understood who I was, or the calling that I would follow to build in this space.
00:01:43:16 - 00:02:12:02
Unknown
And so you have really been laying the foundation for a long time in terms of, you know, tax exempt law and especially around fiscal sponsors, fiscal sponsorship in general. I wanted to start this conversation with just a simple question what is keeping you up at night right now? Because I think if it's keeping you up, we all should be thinking about it too.
00:02:12:04 - 00:02:46:07
Unknown
I mean, it's a great question, and I think as it relates to fiscal sponsorship, it's sort of the broad misunderstanding by policymakers, by regulators, by funders, by other charities, and by some fiscal sponsors of what does fiscal sponsorship actually mean? And because we have different models, I think there's been some confusion, and there are forms where you might have to apply for a government contract or grant, and they talk about fiscal sponsorship, but they talk about it as if it's only one model.
00:02:46:08 - 00:03:30:09
Unknown
Right. And we've seen recent legislation the same way. It took a definition of fiscal sponsorship that looks a little bit like model C. But what does that mean if we get it sort of codified into law fiscal sponsorship. And it only means one thing, which is not how most people perceive fiscal sponsorship to be. So I get a little worried that the lack of cohesive understanding of the multiple variations of fiscal sponsorship could lead to something bad, you know, which impacts all fiscal sponsors and potentially, you know, the tens of thousands, if not hundreds of thousands of projects that that get the benefits of fiscal sponsorship.
00:03:30:10 - 00:03:59:21
Unknown
So with the work that you have done and built with your practice, neo neo law, you are often brought in to other conversations by tax exempt law experts to explain fiscal sponsorship or to bring folks up the learning curve around fiscal sponsorship. Generally speaking, what do you say when you're sitting on a panel in front of other tax exempt attorneys that are like, what is this thing?
00:03:59:23 - 00:04:24:02
Unknown
It's sometimes a bit of a challenging question because of the different models, and I really respect those who laid the path before I came around and those that influenced me, including Greg Colvin, who wrote the seminal book, you know, Six Models How to Do It right, on fiscal sponsorship. And.
00:04:24:04 - 00:04:57:02
Unknown
For for me, the way I see fiscal sponsorship, it's leveraging the corporate status and the tax exemption of a tax exempt entity to be able to collaborate with other charitable projects that don't fall within the tax exemption or, you know, sometimes don't have their own corporate limited liability status as well to be able to advance their common charitable goals.
00:04:57:03 - 00:05:21:15
Unknown
So I know that's a there are multiple exceptions, including that there can be see for fiscal sponsors, there can be C-6 fiscal sponsors. So there can be, you know, multiple variations on that. And then the different models of fiscal sponsorship again, make it hard to to really talk about. But I do think and what I get from some of the posts I've read from UConn, is your understanding that this is a collaboration.
00:05:21:15 - 00:05:52:11
Unknown
It's not service provision, right? Right. I like to and I've come to this realization, you know, obviously just thinking about it and being in service and building technology for it, it's sharing in an infrastructure, right? It's sharing in an infrastructure. And the work to to to maintain it. When we talk about a second ago, you were talking about, you know, a misunderstanding around it or opacity.
00:05:52:13 - 00:06:19:12
Unknown
What can we do to overcome that? I mean, so here's the thing for me, it's like the pendulum is going to swing and, you know, the winds will shift, the tides will change, whatever you want to call it. Who knows how long or or how fast. But fiscal sponsorship, as a practice of nonprofit work, is one of the most beautiful, innovative things that we have.
00:06:19:14 - 00:06:44:16
Unknown
It's a way where we can say yes to so many people who are working on a problem in their community, on their street, or wherever it may be, and helping them advance a cause, as you said, a second ago. So it really matters. I mean, it really matters. It powers thousands of jobs, typically low and middle income jobs at that, who may have been shut out of the normal economy, if you will.
00:06:44:18 - 00:06:56:15
Unknown
So. So what do we need to do to change the perception and to self educate and educate others around this work?
00:06:56:17 - 00:07:44:19
Unknown
The first thing, Kian is strengthened leadership of the field. So we do have a body called the National Network of Fiscal Sponsors, which has taken on different legal forms, and I think it's currently sponsored, if you will. Bye bye. Third sector New England. It has been previously sponsored by some of the other founding fiscal sponsors that that had created or caused the creation of NFS, and they are really good about putting on an annual conference that's grown in popularity and attendance and influence with their sort of best practices in the two most common forms of fiscal sponsorship, the model A and model C, right?
00:07:44:20 - 00:07:52:10
Unknown
That's great, but they're not really.
00:07:52:12 - 00:08:37:12
Unknown
A body that has the capacity to do the advocacy that's needed every day on fiscal sponsorship and no fault of their own. They were not set up to do that. But I think we do need kind of a body that that's out there representing this specific subsector of the nonprofit sector and educating all the people I mentioned before, including policy makers and regulators and foundations and other funders and charities about what fiscal sponsorship actually is in its multiple different models, and how when we talk about one particular model or whether we have some pros or cons about it, that may not apply to all of the other models.
00:08:37:12 - 00:09:16:16
Unknown
So we have to be more specific as we talk about it. It's kind of like maybe we'll talk about this more later when the federal government talks about Dei diversity, equity and inclusion. Right. There's no legal definition, right? Just the same way with fiscal sponsorship, there's no legal definition. So if you want to create laws or you want to create criticisms or you want to sing praises about these things without some form of common definition, we may be talking about different things, and we can end up seeing either bad laws, bad agreements, misunderstandings happen because everybody is on a different page.
00:09:16:16 - 00:09:42:01
Unknown
So I think trying to set the sort of the right stage where there's a broader understanding of what it is, is great. And I think, you know, too often can maybe, you know, you hang out with some of the same people I hang out with with respect to fiscal sponsor. Oh, no, quite a bit about it. So when we talk about the different models, we have a good understanding of what that means.
00:09:42:02 - 00:10:14:21
Unknown
Right? But we don't realize that 90% of the country out there may have no idea what we're talking about, including charities that are dipping in and engaging in fiscal sponsorship because they see it as a way to not only maybe help a group that is just a fledgling group and maybe a friend is leading that group, but without knowledge of how that's supposed to be structured, they can, you know, be creating really bad circumstances for everybody involved.
00:10:14:21 - 00:10:45:23
Unknown
And the charitable purpose, which might originally get a push from this, this fiscal sponsorship done wrong, can really get hurt by it. And, you know, there were racial equity groups in particular that quickly set up a bunch of fiscally sponsored projects where they each got their own Ein and didn't register with anybody, didn't file any taxes with anybody because they thought fiscal sponsorship meant they were housed inside.
00:10:46:03 - 00:11:22:22
Unknown
But fiscal sponsor, where the fiscal sponsor thought they were separate entities. And a little long winded about this, but I'd like to do the McDonald's versus Starbucks metaphor, where McDonald's is a franchisor, right? Where the different McDonald's branches might be owned by different individuals. And so what happens at one franchise doesn't mean that the whole sort of network rises or falls with that one franchise, whereas Starbucks is all owned by Starbucks Inc., I think, for the most part.
00:11:22:23 - 00:11:59:22
Unknown
And so any one of those Starbucks, if if there's something that happens there that affects Starbucks Inc., the whole the whole network, and with fiscal sponsorship, I think there's this lack of understanding of our fiscally sponsored projects housed in like a Starbucks model where we're all just one, the same corporation. And is it more like the McDonald's model where each project has their independent legal existence and they're responsible for taking care of all of those things, getting their own insurance, registering to do business, paying taxes if they're not tax exempt themselves.
00:11:59:23 - 00:12:36:23
Unknown
Right. And I think this fundamental misunderstanding of are we Starbucks model or are we McDonald's franchise model is what's led to much of the confusion about fiscal sponsorship. Fascinating. Fascinating metaphor. You know, just starting from where you started, from a fantastic group of people who have built and powered the national network of fiscal sponsors and by their own admission, volunteer driven and lack the capacity to or maybe don't have the resources at the time and the folks to stand up the advocacy necessary.
00:12:36:23 - 00:12:52:11
Unknown
Is this just a matter of time and maturation and density, or is this something that maybe, by nature of this specific subsector of nonprofit work, just hasn't been able to organize?
00:12:52:13 - 00:13:20:19
Unknown
I think it's a little bit of the latter. And so, you know, I think you can let things naturally organize, but you may be playing, you know, behind the the curve if you do that so that all of a sudden you're, you're working with obstacles in front of you that might not have been there if you had gone ahead of the curve and tried to to shape what the playing field was going to be like.
00:13:21:00 - 00:13:53:23
Unknown
So I think I'm using too many metaphors. But if we can, if we can sort of engage our advocacy to really educate ourselves and try to standardize kind of what are we talking about when we're talking about fiscal sponsorship, if the different models are so different from one another? How do we make sure that when we're talking about fiscal sponsorship, we understand that, that it's a very, very diverse set of relationships, and each one needs to be treated separately and talked about separately.
00:13:54:00 - 00:14:29:21
Unknown
And can we make sure that our regulators understand that? Can we make sure our funders who give us these funding applications that treat fiscal sponsorship as just one thing, know that you can't actually do that. You're going to have to leave more narrative in there that may affect how AI treats, you know, fiscal sponsorship as as well, because it's easy to confuse the system if the definitions and the different types of relationships and models are not clear amongst all of the data that we are producing about fiscal sponsorship, you know, we're going to spit out bad ideas.
00:14:29:21 - 00:15:05:15
Unknown
And then like for the the many, many charities that are dipping into fiscal sponsorship that I feel outweigh in at least the numbers, the number of fiscal sponsors who've been doing this for a number of years and know how to structure it properly, right. This huge group of newer fiscal sponsors won't be so confused and won't get it wrong, and won't cause there to be new legislation that addresses those farms at the expense of all of the right things that have been done in structures that have been created to ensure that the more established fiscal sponsors know how to do it right.
00:15:05:15 - 00:15:27:01
Unknown
So I think we just can't forget that there's this whole group of other charities out there that are trying to do it, but may not really understand it and know how to do it. And I don't know that we're giving them enough of a resource or a set of resources that are consistently saying, hey, these are the different models and you have to treat each one separately.
00:15:27:03 - 00:15:52:15
Unknown
By the way, if you like a little bit of each model, it doesn't mean that you can blend them. It might not work if you do that. So, you know, make sure you have a great understanding of this. Especially, you know, when there aren't a lot of lawyers who are so geeky like me that want to get deep into the weeds of a very, very, you know, niche part of the of the nonprofit sector.
00:15:52:16 - 00:16:16:16
Unknown
I mean, Genene, so you may or may not know my story, but I was a model C fiscally sponsored rebranding project, and we were building youth programing in the city of San Francisco, which still lived today. And we merge them in with our fiscal sponsor, which was 120 year old organization that just saw what we were doing and said, you need to apply for these grants.
00:16:16:16 - 00:16:34:23
Unknown
You should think about fiscal sponsorship, this kind of new idea to them anyways. And I'll never forget, we just sat down in a room with a 30 year CFO, the Ed and the book Six Ways to Do Fiscal Sponsorship right. We each had it, we highlighted it, and then we tried to self educate to pick the right model going forward.
00:16:34:23 - 00:17:02:11
Unknown
So I completely, like in my heart, know that this is happening everywhere, not just the fiscal sponsor nerds that are running really great practices. You are proposing that it's probably going to be impossible to organize. Tell me if I'm right, unless we have at our root the we get our facts and definitions about what we're doing straight. Does that sound about right?
00:17:02:13 - 00:17:41:11
Unknown
And maybe both at the same time and a little bit. I always like to hedge hedge my statements because I'm a lawyer. Yeah, I was going to say true form. Yeah. But yeah, I think essentially that's right. I think we we need to be operating more on the same page and really communicating with the same message, because I realize that from a business perspective, there are advantages for fiscal sponsors to sell their kind of their, you know, the collaborations that they're offering as if they are services.
00:17:41:12 - 00:18:13:03
Unknown
And we still, you know, fall back to calling it an administrative fee when, you know, my partner, Aaron Broderick, has been very good about trying to rebrand it. And I know others have joined her in talking about it as really an internal allocation of these since especially in the the model A and the model C fiscal sponsorship models, the two most common, the grants and donations received all belong to the fiscal sponsor.
00:18:13:03 - 00:18:37:17
Unknown
They don't belong to anybody else. And so when there is a fee, the so-called fee in there, it is really from one restricted fund of the fiscal sponsor to its general fund. So I like to call it an intra organizational B. Aaron doesn't like that because she thinks most people will have no understanding of what I'm saying about, except the 17 bookkeeping in the counting nerds.
00:18:37:18 - 00:19:06:15
Unknown
Right. But a former life, I was a bookkeeper too, so. But administrative allocation is probably a better just widespread term. But again, there's there's no one set of rules that anybody is playing by on on how we think about this. And so, you know, I've seen the newer fiscal sponsors here take that administrative fee and then mark that in as revenues in their form 990.
00:19:06:16 - 00:19:36:12
Unknown
So now they're taking the donation as revenues as gift income. And then part of those revenues they're actually duplicating in their 990 as the fiscal sponsorship fee and calling that earned income. Right. Where now, you know, they are they are counting they're they're they're dollars twice right there. So yeah there's there's work to be done in terms of again standardizing and trying to to make sure everybody's on the same page.
00:19:36:14 - 00:20:02:19
Unknown
And that if you are going to dip into to fiscal sponsorship or you really haven't done it very much, that we're not leaving it up to kind of the the real care that you showed with, you know, with the fiscal sponsors, CFO and looking at the book and highlighting it and working it through. Oftentimes it's people just asking AI or just taking a look at one model and copying that contract and saying, let's go with this.
00:20:02:21 - 00:20:29:12
Unknown
So if you haven't really spent the time just really understanding it and really embracing like the risks that you have to take, as well as appreciate the benefits that you are getting from the fiscal sponsor relationship. It's not really about the money, it is about advancing the mission. That's right. For from both parties. That's right. So I think that's kind of where we need more clarity.
00:20:29:14 - 00:20:52:14
Unknown
This is language is so important, right. It either makes things accessible or makes them obtuse or obscure, you know, and a lot of us, and I'm sure you agree, fiscal sponsorship doesn't really tell you what it is right away, especially if you have never heard of it. Is this a language problem?
00:20:52:16 - 00:21:20:19
Unknown
It's I mean, it's partly a language problem, and it's not one that's that easy to solve. Ken. Because again, you know, I'm from my background, which I'm not sure if you know about it. And I was in management for, for like 15 years before I went to law school. So I have a little bit of that perspective still remaining in me that law school hadn't had completely and took out.
00:21:20:20 - 00:21:44:04
Unknown
Yeah. All right. So I do think a little bit like a business person. And I know when we've been marketing fiscal sponsorship for the various models that we may offer, if I represent a fiscal sponsor in the business side, I, you know, I would say, well, we just can't give up and say we don't do fiscal sponsorship because we don't call that model fiscal sponsorship anymore, because then how are we going to compete?
00:21:44:05 - 00:22:08:20
Unknown
You know, and it is becoming a little bit of a competitive field, you know, and with nonprofits, I know we don't necessarily like to think about things being competitive, but when when there's limited pools for funds, when they are limited sort of options, then in a sense we are competing with each other in order to get those things.
00:22:08:20 - 00:22:48:12
Unknown
And we hope that we have the the people who have the best capacity and resources to be able to address things to to be able to focus on that while not closing off the pool to maybe smaller entities that will serve smaller markets that might otherwise be ignored by the bigger ones. So I you know, I think there's kind of a place for, for I don't want to say everyone because I'm again hedging on on that, but there's a place for all sorts of fiscal sponsors and all sorts of different projects that that would fit with, with different types of fiscal sponsors.
00:22:48:14 - 00:23:10:22
Unknown
But there is still some competition out there in fiscal sponsorship as a as a term is, you know, even if I think, well, maybe we should just use fiscal sponsorship for model A, because that's what most people think of and call, you know, model, see something else. You know, we can go back to the pre-approved grant relationship or, or whatever.
00:23:11:04 - 00:23:32:11
Unknown
It doesn't fall off the tongue as easily, my business hat being right. So I know that, hey, we're not going to have everybody change their terminology to to adopt what a lawyer says, like is the more accurate term for them. So I don't have an answer for that, Jen. But I, I think the wording is part of it.
00:23:32:11 - 00:23:59:00
Unknown
But that's not an easy fix. Yeah, it's interesting because what I'm trying to I'm trying to pin you down on the language as the maybe core disadvantage that needs to be overcome, such that maybe with ease, you know, language can, can, can, can move when it really is understood amongst many. And then you could start to coalesce around something.
00:23:59:00 - 00:24:29:21
Unknown
So I guess what I'm at, I guess the core of my question is how do we organize when we don't have a shared understanding, or when maybe it's not necessarily a shared understanding, but what we have is such a diverse and rich application of something. How do we organize? So I think you need resources for organization. As with most movements, it really is important.
00:24:29:23 - 00:25:19:12
Unknown
The people behind it are right now probably feeling quite exhausted from organizing around multiple social issues that are being threatened right now. So it is a difficult time for them to now try to organize over tax terminology. Right? So, right. That is just one challenge out there right now. But I do think that funders might spend a little bit more time and resources and allow for for more conferences to have sessions that focus in on some group that consistently is putting out the same message about here are the different types of fiscal sponsorship.
00:25:19:12 - 00:25:45:11
Unknown
And if we're going to talk about any sort of legislation or any rules around fiscal sponsorship, we have to understand what we're talking about. And, you know, we're going to either have to use the models consistently. And I know some people don't want to use the cold. And Pettit model A to to model L language. They prefer to use other terminology.
00:25:45:11 - 00:26:08:02
Unknown
But that also just creates a lot more confusion about what are we talking about. When you say you're a fiscal sponsor or you're going to fiscally sponsor my project, what type of relationship are we talking about? And just to have more funders invest in either the national network of fiscal sponsors or some other group that develops out of that?
00:26:08:02 - 00:26:58:08
Unknown
And I know there's been some some talk between social impact comments. Now, a national network of fiscal sponsors, I know Andrew Shulman and his fiscal sponsor conversations has been sort of absorbed, if you will, or consolidated with part of social impact commons. And so I think some of these things are good in terms of, okay, let's create a more solid base where we can get this education out and this resource that feels like, you know, in the broader nonprofit sector, something like an independent sector or a council on foundation that really speaks with with kind of a little bit of authority in terms of its relationships with Congress and sometimes with state legislatures about saying,
00:26:58:08 - 00:27:25:13
Unknown
here's what we're talking about. These are the things that everybody should know about. And if there's any legislation that is actually designed to move forward. And I'm not sure if the sponsor Act by Ted Cruz is actually, I'm still not convinced that there's not an audience of one for this legislation. But if if it actually has legs, I need I think we need a publication, a short one.
00:27:25:13 - 00:28:03:06
Unknown
So not the full book, but a short publication that explains fiscal sponsorship really quickly so that legislators can read it. And I think we need people to go up to the Hill and talk about that with, with different legislators. So, you know, if this bill gets any legs, somebody's got to organize that. And I don't think that our independent sector, our Council on foundations, our National council, nonprofits, I don't really think they, you know, it's not part of their jobs to feel like, well, fiscal sponsorship is something that we want to marshal resources around it and go up to the hill and talk about it.
00:28:03:06 - 00:28:29:10
Unknown
But I don't think they have a full understanding of how big fiscal sponsorship is as well. So I think we just need this other group that's in there saying, yes, we will get in the mix. Yeah, we will produce that educational material. We will try to create a little bit more of a sense of self regulation within the fiscal sponsorship community, and we will actually go out on the hill when it becomes necessary to do so.
00:28:29:10 - 00:29:06:06
Unknown
Or support groups in states where state legislation and there has been different movements on state legislation to regulate fiscal sponsors for more than the last decade. And sometimes there are people that have been able to sort of explain how fiscal sponsorship works and say, well, we're really talking about something else, not fiscal sponsorship here. And again, not, you know, I'm already over overly talkative about this, but I think they're really just needs to be a group that has sufficient resources to do these things out there.
00:29:06:06 - 00:29:40:02
Unknown
And I think funders have got to jump in and want this for for the sector. So a group that's willing to take on the task of explaining, educating, self-educated, supporting the education of each other. So peer to peer, as well as educating up funders to resource this group. You're not necessarily saying that it would be easy to pivot away from the language at this point, because it's so deeply ingrained in the work and there's so many folks.
00:29:40:02 - 00:30:10:16
Unknown
It's just it's not coastal elites. Fiscal sponsorship is happening everywhere. Small town, Main Street, you know, whether folks know they're doing it or not. And it's a phenomenal way for people to act on their, as Oliver calls it, is their charitable impulse and, and do something in their community. And we should be promoting this and and promoting responsible application of this.
00:30:10:17 - 00:30:35:22
Unknown
Do you think there is an you are a specialty law firm, tax exempt law firm that really knows this work. You're in high demand, I'm certain. And I know you give back a lot of your time. Do you think from what you've seen, that there is an appetite of for the funding world, the foundations, those that care about this to support this work?
00:30:36:00 - 00:30:45:14
Unknown
Do you think maybe that appetites been there, but we just have had a lack of a body in organizing this work or what's stopping this now?
00:30:45:16 - 00:31:12:10
Unknown
I don't think there's a sufficient appetite by the funding community right now. I think partly because they don't have a strong understanding of fiscal sponsorship either. So some some funders, including some really major funders that everybody knows have been burned by fiscal sponsors at the time. And it may be sometimes by those fiscal sponsors that, you know, haven't done this very much or haven't been in community with the national network and the best practices.
00:31:12:11 - 00:31:34:19
Unknown
Right. And we've had a few scandals where physical sponsors ended up operating a little bit like a Ponzi scheme, where the fiscal sponsors were running out of money and then borrowing money from projects. And it may have been well intentioned to start with, but it becomes a house of cards and eventually, like money is lost to keep the fiscal sponsor going.
00:31:34:19 - 00:31:57:10
Unknown
But the money is taken from the different projects and the house falls. Right? Projects lose out on their on their money and all of those charitable sort of all of the charitable work that we hoped would be advanced by, by the fiscal sponsor can be lost that way. And of course, that hurts the whole field. It doesn't happen.
00:31:57:11 - 00:32:17:18
Unknown
I would say a lot with respect to how many fiscal sponsors are actually out there, but each time it happens, and this is true of the broader nonprofit community, whenever there's a nonprofit scandal, it sounds so much worse than a for profit scandal because we're talking about charitable funds. We're talking about donors who gave their money without getting anything in return.
00:32:17:20 - 00:32:50:17
Unknown
And it just feels like, well, there's not only a legal issue with that, but there's a huge ethical issue with taking charitable money and spending it for other things. So I you know, I think because of that, you know, there's some fiscal, some funders that have said, like, we don't really trust fiscal sponsorship because there's a wide variety of how it is practice and how it is enforced and what level of oversight a fiscal sponsor actually exercises over project.
00:32:50:18 - 00:33:13:21
Unknown
And it's unless we know that fiscal sponsor super well and they're long established, you know, we probably aren't going to fund that. And we don't know that funding an effort, you know, on behalf of all fiscal sponsors makes sense when they haven't even sort of put together their own effort that's out there. And so it becomes a chicken and an egg problem.
00:33:13:22 - 00:33:41:07
Unknown
Right. Resources to create it. Yeah. But they don't want to fund it unless there's something there to begin with. So I think that is you know, it's not a unique issue in the nonprofit world, but it is an issue of, you know, how how do we build it without a lot of resources to start with, it sounds a bit dire, because if if it's a chicken and egg problem, then it sounds like it's just never going to happen, right?
00:33:41:09 - 00:34:17:08
Unknown
What are you seeing that's making you not so doomy about this? Well, I think what happens, which is not necessarily my my optimistic view, but if you don't do anything about it, you get the Ted Cruz definition of the sponsorship. Right, which is not a good definition. Right. And all of a sudden, if that's the legal definition, that forces everybody to like what they're doing, because that's not the definition that describes their particular relationships.
00:34:17:10 - 00:34:45:17
Unknown
So if you do nothing, you run into some problems. If you do something about it, it is about, well, who's going to join and support that effort. We're saying we need funders, but before the funders join in, how strong can we make the national network of fiscal sponsors or a similar body that says, we're going to take it on, we're going to look at these resources.
00:34:45:17 - 00:35:24:03
Unknown
And, you know, there was more momentum, I think, and this is I may be wrong because it's solely from my perception, but there is more momentum of the national network, fiscal sponsors, when they first came out with their best practice guidelines for model A and model C, because everybody was going to that, which was great, but I don't know that there would there was continued kind of look a continue to look at what NFS was producing other than conferences after those guidelines came out, whereas I think maybe there needed to be kind of monthly articles or something to to really say no.
00:35:24:03 - 00:35:51:19
Unknown
If you are a fiscal sponsor of any size, come here and look how this works and how how it should work. That's what I'm hoping funders will build or help build. Maybe this alliance with Social Impact Commons will help move that forward a little bit. I do think we have to be careful not to have, and this is with respect to a lot of social movements as well.
00:35:51:19 - 00:36:18:02
Unknown
It's another kind of problem with having like one champion that that drives the effort versus the community driving it collectively. Right? A champion sometimes is needed to be the catalyst to get it started. But if you rely just on one person, that movement can die. You know very quickly as well. And it really is getting the community behind it.
00:36:18:02 - 00:36:56:21
Unknown
So a little bit of, you know, if there's a champion behind all of this, that's great to get it started. But we do need, like all of the major fiscal sponsors to say, yes, we're on board. We are going to support this as well. We are going to leverage our relationships to make sure that even though some might think, oh, we're building more competition out there by teaching other people how to create fiscal sponsors that actually do things right and do things efficiently and effectively, are subsector of fiscal sponsorship in the field of fiscal sponsorship needs this very badly.
00:36:56:21 - 00:37:26:11
Unknown
Otherwise, again, we're going to get something imposed on us that nobody wants. And the people that designed it have no idea what they're talking about with respect to kind of this field, right, in regards to those who practice, whether knowingly or unknowingly. I mean, we have just seen folks across every state, in every space and every stripe, you know, doing this work, you know, doing cause related work and practicing fiscal sponsorship.
00:37:26:11 - 00:37:54:22
Unknown
Maybe they know it or they don't know it. It seems to me that this is such an important part of our social fabric and the nonprofit sector. There's not enough data on it, there's not enough visibility on it. But some organizing could really go a long way. Do you feel that as well or what? You are often employed by large fiscal sponsors and exempt organizations across the country.
00:37:54:23 - 00:38:09:04
Unknown
What do you think about that, and is there an opportunity to organize and make a bigger tent, if you will, for the benefit of the field? And is that what we should be thinking about?
00:38:09:06 - 00:38:39:13
Unknown
I think there is a possibility for sure for for doing that fiscal sponsorship. And now I'm going to put myself a little bit in the fiscal sponsor shoes is not easy, right? So a lot of community foundations had had started fiscal sponsorship programs and then decided that the risks to the whole foundation were bigger than their boards were willing to to take on.
00:38:39:13 - 00:39:27:02
Unknown
And so they spun off the fiscal sponsors to be independent charities. So that was the case for a group that we work with now. But I was actually on the board of Community Initiatives for six years, and they were spun off the San Francisco Foundation. So that is not an usual story, but it does also reflect how fiscal sponsorship can be a type of charity where if you are going to to operate or govern or lead a fiscal sponsor, you are doing so with more risk tolerance than a lot of other charities that that might find themselves doing grant making as their primary activity.
00:39:27:04 - 00:39:56:14
Unknown
Because you've got, you know, let's say, anywhere from a dozen to 100 or more projects under your wing. And how much oversight does your administrative team, how much can they provide over all of those projects if their model A or over all the grants you've been making to those projects? If they're model C and, you know, there's again, other models of fiscal sponsorship, but it's just too hard to talk about all of them at the same time.
00:39:56:14 - 00:40:17:15
Unknown
But if I if I just chose the top two, which is seems to be what the default is now, and when I go to legal conferences or even nonprofit conferences, when we talk about fiscal sponsorship, eventually just we're just talking about two different models now. Yeah, maybe we can just take Gene's brain here for a moment and let's.
00:40:17:17 - 00:40:46:07
Unknown
Can you just give the two minute talk that you would give around? What's fiscal sponsorship? Here is the most common model. That's practice and why. And here's the second most common model in practice. And why. Sure. So fiscal sponsorship, which I talked a little bit about before, is kind of leveraging the status of an existing. And I'll talk about it in the public charity context of an existing public charity that's usually incorporated.
00:40:46:07 - 00:41:13:20
Unknown
So offers corporate limited liability protection, not just to its leaders but to, to others as well. Usually has insurance and other sort of infrastructure that helps to protect everybody who's operating within that public charity. It's also registered so that it can engage in fundraising, and it has a board of directors. So it has a governance model built into it as well.
00:41:14:02 - 00:41:47:09
Unknown
So fiscal sponsorship leverages all of those things to allow these charitable projects or initiatives to collaborate with the fiscal sponsors in a way that allows the project to advance with charitable funds, where donors potentially can get deductions if they're eligible to take a deductible, a deduction off a charitable contribution, which is opened up, actually. So it's interesting. That was one good thing about the the OB three.
00:41:47:10 - 00:42:22:00
Unknown
I thought so too. Yeah, definitely. And but so that is sort of fiscal sponsorship. This collaboration and the two most popular models model A is where the project is housed inside the fiscal sponsor. So it is not acting independent, the fiscal sponsor, all of its assets, all of its liabilities, all of its activities, its employees, volunteers. That's all the fiscal sponsors, assets, liabilities, contracts, employees, volunteers.
00:42:22:05 - 00:42:58:08
Unknown
So we're just basically saying we are taking this charitable initiative or project, and we are going to put it inside the house of the fiscal sponsor and run it in there. Now, what makes that any different from just a regular internal project of a of a charity? The thing that makes it different is in the fiscal sponsorship agreement, there's usually a termination provision that allows the project to spin off to another public charity, another qualified organization, or to an organization that it creates.
00:42:58:08 - 00:43:43:22
Unknown
The founders created, you know, and get 503 status so that they are allowed to operate the project themselves. And they can all of a sudden fundraise as there is this independent 500 1C3. So that's the model A, the most common form, I struggle to say the most common form. I think it's maybe the most common form in terms of the revenues, but in terms of numbers of projects, model C, which is the second most popular model in my head, may actually be the most popular in terms of the number of projects, but model C is typically a model that a lot of artists art groups fall under, and a lot of newer nonprofits that don't
00:43:43:22 - 00:44:08:11
Unknown
have 500 1C3 status yet, but expect to apply and obtain 501 C3 status fairly soon. Model C can act as an incubator, and the big difference there is that the project is not housed inside the fiscal sponsor anymore. The project is housed outside either by an individual artist and by some legal entity they've created to run this charitable project.
00:44:08:12 - 00:44:37:15
Unknown
Right. It could also be a for profit that has a charitable initiative running, you know, and they say, well, we are like a dental office, but we have a specific program that's aimed at going out into rural areas and opening up free clinics for those who cannot otherwise access these dental services. And so we'd like to write, you know, raise charitable funds for that.
00:44:37:15 - 00:45:00:07
Unknown
But we don't believe that we can form a brand new entity and fundraise for for this brand new entity. We would like to do it within an existing fiscally sponsored project or a fiscal sponsor. The model C allows them. The fiscal sponsor doesn't house the project operations, so it doesn't have to license get a license to be a dental firm, right?
00:45:00:09 - 00:45:37:22
Unknown
So it doesn't need all of those things. It's agreed to be the sort of the grant maker to this project, and it's pre-approved them before they start to raise funds. So that's the model. See, the fundraising is done by the fiscal sponsor. But when I say it's done by the fiscal sponsor, it's not done by the fiscal sponsors, core staff, it's done by, in my example, the people running the dental program, but acting as authorized agents of the fiscal sponsor, they can't act as the dental program because the dentist's office is not registered to engage in charitable solicitations.
00:45:38:00 - 00:46:01:17
Unknown
So they're doing it as volunteers of the fiscal sponsor. They're fundraising for the purposes of the project. There is this existing pre-approved grant relationship. So as long as the dental office is operating lawfully, you know, then the fiscal sponsor has agreed to to make these grants when as they receive money for the project, they will make grants to this project.
00:46:01:18 - 00:46:29:06
Unknown
So that's model. See, it's a approved grant relationship, meaning that if something went wrong and somebody got hurt in that program, in a model, a situation, the fiscal sponsor would be responsible for any harm done and any negligence that that created that harm. This is the Starbucks model, right? Going back to what I said earlier, right. The model C is more like the McDonald's started.
00:46:29:06 - 00:46:55:13
Unknown
This dental program is kind of this offshoot, almost like a franchise of a separate corporation or a separate legal entity. And so when you make grants to it, if something happens in there, it's the grantees issue. You just had the responsibility as a funder. And the fiduciary responsibility is associated with being a funder of doing your due diligence beforehand and afterwards to make sure that the funds are properly used.
00:46:55:13 - 00:47:25:02
Unknown
But if somebody got hurt, the operations were focused by this model C project. That's a separate entity from the fiscal sponsor. So a little long winded. But again that's those are the fundamental differences between those two popular types of fiscal sponsorship. Gene that was great. I also love how you wove in the weaved in wove threaded in the Starbucks and McDonald's analogy, because it did really make sense and bring that home.
00:47:25:04 - 00:47:46:21
Unknown
And I also appreciate the the use of a dental clinic that is needing to do or wanting to do work in their community and receive the funding. And, you know, you may have a donuts, I've got money for you to do that. How do I give this to you? In a in a manner that's, you know, I can take my tax deduction and make this happen.
00:47:46:23 - 00:48:21:11
Unknown
And then they're partnering. I really appreciate that. Okay. So given the definition and the two major model types what is now what do you think is the next kind of up and coming model or models that are interesting to you or innovation in this work? This work is innovative on its own, but what do you think is kind of the next frontier with regards to model types?
00:48:21:13 - 00:48:47:02
Unknown
Great question. And just before we leave the innovative types, I want to just say that the model A is basically an internal project of a charity. Totally. So in one sense it's innovative because of the possibilities for exit and transfer, but in another sense, it's completely well-established law that there can be multiple projects in a single charity that just.
00:48:47:04 - 00:49:24:02
Unknown
Yeah, yeah, call them what you will be a program, a department, whatever you like. Yeah. So for for policymakers and and any regulators out there, there's nothing fishy about this. This is a program running inside a charity. It's very normal. The really only different differentiator here is what you shared earlier, which is if they wanted to, they could terminate and move on into their own nonprofit or to another charity, but otherwise comprehensively, that project is a part liability and all of the charity.
00:49:24:04 - 00:49:51:23
Unknown
Yeah, right. Absolutely. And that's why I think that the Ted Cruz bill actually targeted more. It sounds like they targeted, although again, they blended the word. So it's not very clear, but it looks like they were targeting something that looked more model C. So model C again also completely well established that you can have a funder that makes grants to an organization that is not a charity.
00:49:52:01 - 00:50:14:18
Unknown
So funder, especially if it's a public charity, can make grants for charitable purposes. There might be a little bit more due diligence that they would do to ensure that the funds are going to be properly used for charitable purposes, since the grantee may not have all of the laws applicable to them as a 500 and 1C3 entity, if they're not a 500 and 1C3 entity or a nonprofit entity.
00:50:14:19 - 00:50:44:13
Unknown
So yes, you may have to do more due diligence in advance. You might ask for a little bit more reporting than you would if you were giving to a public charity, but there's always been grant making from charitable organizations to, to, to non charitable entities for charitable purposes, exclusively for charitable purposes. And just sort of an example would be funders who fund medicines for developing nation.
00:50:44:13 - 00:51:05:04
Unknown
But the grantee may be big pharmaceutical companies because they have the lab and the infrastructure to actually do that research and development and create it and distribute those drugs. Whereas if you were to form a brand new charity to to have that type of infrastructure to do all those things, it would be cost prohibitive. They would never get off the ground.
00:51:05:09 - 00:51:35:19
Unknown
So grant making to these for profit entities exclusively for charitable purposes, so they can't mix the money in with their other monies, but they keep it segregated and they just work, use that money and create things that otherwise would not be created at all. And so model C is essentially doing the same thing, saying you've got a charitable initiative, you know, you're not your self a charity, but we can make sure that we grant to you will vet you in advance.
00:51:35:20 - 00:51:58:20
Unknown
We will track it after to make sure that you're reporting properly, that that the funds were actually used to advance charitable purposes. And you know again, nothing new there. So so sorry. Going back to your question. No, no. But before you do, before you do, I mean, this is a long standing practice of humans supporting each other, right?
00:51:58:23 - 00:52:24:14
Unknown
We are going to come together. Corporation, charity, local pizza shop, nonprofit. We're going to find a way to go hand in hand and make this happen and get you the funds because of the thing you're doing. Maybe you're teaching folks how to do one thing or going after a problem. So this is like basically part of human nature to solve these problems, to make sure we get the resources where they need to go.
00:52:24:14 - 00:52:51:03
Unknown
And indeed probably more innovative often because you have create this creative engine working together to do that. So it's like this is not new. As you said this, I think the expenditure reporting thing is probably the muscle that anyone who is coming into fiscal sponsorship. Right. This is probably the most important thing here. If you are doing a pre-approved you're regranted funds.
00:52:51:04 - 00:53:15:20
Unknown
You know, you really have to make sure you close loop on the expenditure reporting. And that's probably where you get all the, you know, kind of the risk from the outside what it looks like. How are you tracking those funds? What are those funds doing? How do we know those funds aren't doing nefarious things right. Yeah, I'm completely on board with what you're saying.
00:53:15:20 - 00:53:40:20
Unknown
There can. So it is like, well, you're giving $10,000 to this for profit coffee shop and you're saying, well, you must use it for the charitable purposes that you told us you were going to use it for. And maybe that's to, to provide food in a disaster area. So they're going to go out and provide coffee and food to, to victims of that disaster.
00:53:40:20 - 00:54:10:23
Unknown
Right. You want to have some assurances as a funder that that was how they actually spent the money, that that that doesn't mean you need to know where every penny went. Right? Like so. You don't need to know. Well, you know, we spent $100 on half and half and $200 on, you know, sugar. So you don't need to do that, but you do need to have some sense of how the monies are spent so that that is important.
00:54:11:00 - 00:54:44:00
Unknown
We're giving to another charity, for example, a lot of sort of trust based philanthropy and a lot of really relying on general support grants so that there isn't really a detailed financial expenditure of how the grant funds came back to. You might just ask for a copy of the 990. And depending on how big the grant is. And we should also realize again, always the nuances are always not there underappreciated.
00:54:44:00 - 00:55:08:11
Unknown
But it really matters if you're giving $10 million to a small charity that filed a 1023 easy and like didn't really show what it was doing to anybody, and all of a sudden they get $10 million. That needs more vetting both beforehand and after hand, then giving $100 to a food bank, for which asking for a report back from them is ridiculous, right?
00:55:08:12 - 00:55:42:10
Unknown
So. Right. Really good point. So expenditure if you are practicing model C, expenditure reporting is a muscle you should have. And then the application of how much you ask for in return depends on the amount that's going out and what and purposes. I also want to just kind of reiterate what you said a moment ago. If it's going over to another charitable entity, there's a trust structure in place there and a transparency requirement with its filings and whatnot.
00:55:42:11 - 00:56:08:23
Unknown
Whereas maybe it's a brand new charitable entity and it has no transparency, and you don't know if it has actually the internal ability, the controls, the back office to manage that kind of funding. You're heightening your risks so you better be certain of what you're doing. And then when you're going out to a non charitable entity, you know what's reasonable to request at what dollar amount is what's reasonable to request in return.
00:56:08:23 - 00:56:36:21
Unknown
But at the end of the day you should probably have a framework of expenditure reporting and that you're applying it per the different nuances, as you said, the different types of things that you're supporting. But let's just just zero in on the why why do you need to do that. So I think it's twofold. One is there's kind of this legal theory behind it of, well, are your leaders.
00:56:36:23 - 00:57:00:01
Unknown
And this time, when speaking of the fiscal sponsors, are your leaders properly meeting their fiduciary duties of care and loyalty, of acting in the best interests of the organization with reasonable care under the circumstances of somebody who is responsible for where the funds go. And these are charitable funds again. So it's not like when you dish out your own money, you don't have to ask for reports because it's your own money.
00:57:00:02 - 00:57:27:10
Unknown
Nobody's relying on it. But if you're giving away the charity's money now, all of a sudden it's elevated concern because you are stewards and guardians of these charitable funds. So when you give it out, you've got to meet your fiduciary duties and asking for something back, especially if the organization isn't a charity, becomes very important right now. That might be, again, depending upon the nuance, that might be very, very simple.
00:57:27:10 - 00:57:50:22
Unknown
And I usually ask for a grant report, even if it is like a $1,000 grant to a food bank. I would say get a report back, but all you need is them to sign a checkbox, a single checkbox. I use this exclusively for charitable purposes and sign it, you know, so it's certified by an officer or the executive director of the charity.
00:57:50:23 - 00:58:29:20
Unknown
Right. So I think that's good enough on a small level. So you are legally so the first why it's a legal why. So you raised tax free dollars, right. As a charity and fiduciary, you are a fiduciary responsible for ensuring that those dollars went to the mission and for the reason of which it was raised. If you're if you're working with a pre-approved grant agreement and you're regranted those funds, you have to make sure that you're getting information back so that you can prove that you did your part to ensure that those funds were spent as they were meant to be spent.
00:58:29:20 - 00:58:59:06
Unknown
And that can be simply, you know, a confirmation on a small dollar grant, like a checkbox or something more rigorous if it's a larger amount. Okay. So so we know the why when it comes to a legal perspective. Are there otherwise? Yeah. I think the other big why is the public trust factor. So it is absolutely imperative that a community that the charity depends upon, including its beneficiary.
00:58:59:06 - 00:59:45:03
Unknown
So not just its donors, but for communities that that the charity depends upon, they must have trust in that charity. Otherwise everything can blow up and, you know, at the expense of both charitable dollars and the impact of the charitable activities. So it is really important that if you if you are giving out monies away and you find out that they were misused and others grab a hold of that, that misuse to say we don't trust leadership or we don't trust this organization, you're here, you know, charities that you thought were allies go, well, we don't want to elaborate with you anymore because we don't have trust in what you're doing.
00:59:45:03 - 01:00:03:14
Unknown
So there's that sense of of public trust as well. There's also kind of the in between the legal and this public trust. Is this in between part can now that is becoming more and more prominent. And that's when the government is.
01:00:03:16 - 01:00:50:06
Unknown
Using their own priorities to deliberately create some mistrust in some organizations. And so by that I mean the government, the federal government's priorities right now are attacks on Di attacks on undocumented immigrants attacked on on gender identity issues, especially for for minors, attacks on protest activities. You know, there's really this this chill that it wants to or it seems to want to place upon the whole nonprofit sector and beyond, not just nonprofits that doesn't want them to speak out or engage in activities that are in opposition to the federal government's priorities.
01:00:50:08 - 01:01:18:20
Unknown
So when you have that now, they have tools that they can use against you. And a lot of that has been rhetoric so far. And so we don't want to create this sort of wide public fear, which is, again, probably a goal of the federal administration to to say, okay, we can't do anything that's called Di and we can't engage in public policy that might be defensive of the rights of undocumented immigrants.
01:01:18:20 - 01:01:42:14
Unknown
And we can't do say things about, you know, kids having gender identity issues and like, you know, you can't just operate in fear and run away of everything, especially if that is inconsistent with your mission and when it's not really a legal issue, but it's a threat from the federal government to do things like, well, we can subpoena you, we can examine David.
01:01:42:14 - 01:02:06:07
Unknown
And yeah, it's a David and Goliath problem. And if you don't know you're David and you don't have resources to go up against Goliath, you're going to be scared shitless. Excuse my French. Yeah, yeah. And and part of the fear, some of the fear I think is, is misplaced. Like some of it is like, you know, di is not a and again, a definitional thing.
01:02:06:08 - 01:02:36:09
Unknown
Right. It's not identified. So illegal Di is basically just saying illegal activity. So if it's illegal yes it's illegal. But if it's being Di or calling something Di doesn't make it illegal. Right. So it really is kind of just taking a look at these federal priorities and saying, can we should we be in fear that the government is actually examine, examine us and subpoena us because they can bury us in document requests?
01:02:36:10 - 01:02:58:02
Unknown
Or if we have to go to a law firm and say, would you review our documents before we turn them over to the to the federal government? That can cost tens of thousands, hundreds of thousands, in some cases even millions of dollars just to do that. And you'll find lawyers are going through slack channels of what movie are you going to see next Friday night?
01:02:58:04 - 01:03:38:01
Unknown
Yeah, yeah. So doing you know, once you're subpoenaed, you can't destroy documents. Right. So but doing a document management and review process and getting rid of stuff that really you don't need it all is a really good sort of exercise I think for, for a lot of non-profits who have a little bit of capacity right now, who especially might feel threatened by the work that they do, that they could be targets of the subpoenas, not that they're doing anything illegal, but that the government will try to bury them in work so that they can't actually have resources to spend on their mission and on their communications.
01:03:38:01 - 01:04:03:17
Unknown
So those are the three threats, I think the public the fiduciary threat, the legal threat, the public trust threat, and the in-between threat where you have a hostile government entity that's not not in line with with your way of thinking and your values and your mission, and you're trying to defend against that threat coming in. Gene, so much comes to mind here.
01:04:03:18 - 01:04:24:21
Unknown
I think, about how, you know, folks who are working in non-profits, wherever they are, and standing up for the little person or the marginalized or those who need help, you know, their purpose driven. So they're not just going to lay down, they're not just going to fold when they when they come up against it. Goodness, they've been up against it their whole time doing this work.
01:04:24:21 - 01:04:49:23
Unknown
This is just a harder, steeper slope now and likely in percentage comparison to for profit entities. The amount of nefarious activity or poor management or whatever is probably like so much we need data here. We need the data, but probably so much smaller than what's happening in for profit. You know, the world of for profits. So it's just so disheartening.
01:04:50:01 - 01:05:13:23
Unknown
But what you said was, was really important to hear. Now let's just talk about legal support. You know, you're a nonprofit, you're under resourced already. You've been told for years that your admin should be low so you can get a grant. And thankfully, you know that that big, powerful data body has changed course on that and tried to do a few Mia culpa here.
01:05:13:23 - 01:05:30:20
Unknown
But you know, you are conditioned to be under-resourced and so you may not have a line item for legal support. You may not be able to afford neo or any of the others out there. What is a nonprofit to do?
01:05:30:22 - 01:06:14:00
Unknown
So, you know, I think for smaller nonprofits it is to have a really good understanding of what are the core kind of compliance things that we know we absolutely have to do, because those are the things that they're actually most vulnerable from. So it's not like you left something that's a Di on your website, but your vulnerable fund is if you fail to register with the attorney general's office, because if you are found delinquent, suspended or otherwise disqualified from from an attorney general, not just in California, all of a sudden other things disappear.
01:06:14:00 - 01:06:48:02
Unknown
So if you're a California organization and you're on any of those sort of bad statuses with the attorney general, technically you don't have the right to operate anymore. You don't have the right to fundraise, and you don't have the right to operate. If you're a California organization that does some fundraising in Texas and you fail to register in Texas and Texas says, hey, you've been fundraising here and you did not register here, we are going to take away your white right to to to fundraise in Texas.
01:06:48:03 - 01:07:16:10
Unknown
You may think, well, you know, we've not raised very much money from Texas anyway. That's not going to hurt us. But guess what? Your charitable fundraising platforms may say you're suspended in Texas. We can't allow you to use our platform anymore because we don't have a way to differentiate where the funders are coming from so, or where they reside, because, you know, they might live in Texas, but they might be sending their donation from Hawaii.
01:07:16:10 - 01:07:40:14
Unknown
That's still they may still be protected by the Texas state laws. So that happens. And it's two weeks away from Giving Tuesday, and you had a big campaign plan. And all of a sudden, your charitable fund raising platform is not going to be there for you, right? That can be crippling. Right? So while you were spending resources trying to to to scrub your website of Di.
01:07:40:15 - 01:08:07:02
Unknown
References. It's that, hey, we you know, we failed to file one day late with Texas and they suspended us and now we can't use PayPal and now are giving Tuesday campaign that we've invested heavily in is gone. So the little things file your nine 90s file your state registrations like in California. You've got Secretary of State, you've got attorney General, you've got franchise tax board.
01:08:07:04 - 01:08:30:03
Unknown
And you might have other things as well. But those are the principal ones to keep you operating as a charity. So make sure you're taking care of those things. The other sort of the biggest sort of vulnerability amongst organizations is still not the federal government going after you. It's probably an employment claim. So make sure you know the difference between an independent contractor and an employee.
01:08:30:07 - 01:08:50:22
Unknown
It's not that simple. And that's a big one. That's a huge yeah. Because a lot of these organizations start as grassroots organizations. And it's we don't want to employ anybody because we don't have the funds to manage all that. We don't know how to do that. Right? Yeah, that's a huge one. It's persistent. Yeah. Yeah. And so, you know, you hire somebody an independent contractor.
01:08:50:22 - 01:09:08:22
Unknown
And the reasoning for that is because you wanted to save money because you couldn't afford employee. But if that person comes back to you and says, hey, by the way, you should have classified me as an employee and I'm going to sue you for that because I got hurt on the job. You don't have worker's comp insurance. You should have had worker's comp insurance.
01:09:08:23 - 01:09:30:02
Unknown
All of a sudden everybody's in trouble, and even your board members could be exposed to some personal liability if there's gross negligence there. So really taking care of the low hanging fruit, it's it's not super, super simple, but there's a lot of resources out there that can help you, that guide you to to doing the right things in those areas.
01:09:30:03 - 01:10:04:18
Unknown
Yeah. For the medium sized charities can and this is a little self-serving, but I would say you have to get legal help into your budget, even if you have to cut back a little on program service sort of budgets, you have to get your infrastructure right. And that that includes like accounting and bookkeeping infrastructure as well. Right. You've got to make sure that you are not going to create all the trust problems, including, you know, with regulators, because you are not properly reporting things or you're not properly complying with things.
01:10:04:18 - 01:10:32:14
Unknown
And if you're a medium sized organization, you know, legal costs are just part of the cost of doing business, and you can't see that as just sort of as like a, a luxury expense. It's not it really is fundamental to what you're doing. And I know that's really hard at a time when there's lower resources, cause funders are having problems with government funding and all the rest, and there's more demand than ever because of all of the cutbacks.
01:10:32:16 - 01:10:53:22
Unknown
Even still, you've got to sort of now re shape things. And rather than thinking like, let's work really hard so we can have things like they were five years ago, you've got to be thinking, how do we take what we have now and move forward with that based on this new playing field? Because it's not going back to the way it was five years from now.
01:10:53:22 - 01:11:21:12
Unknown
Everything has changed. That's right. Not just the not just the government. Technology has changed. Kind of the employee issues have changed. Our health and mental health has changed. Like there's so many changes and change is only going to exponentially just continue moving faster and forward. And we've got to be adaptable. We've got to build systems that are adaptable, to be able to advance our missions continually.
01:11:21:13 - 01:11:50:02
Unknown
We can't just look back and say, let's rebuild what we lost. That's a losing proposition. Yeah, the acceleration that I feel we're all feeling that like really intensely right now, just the acceleration that we're all going through. But I do want to just restate what you said. Get your house in order, right. Doesn't matter what size you are, but the larger you are, I'm certain you probably already have the muscle built to keep your house in order, but you need to get your house in order.
01:11:50:03 - 01:12:17:21
Unknown
Your registrations need to be there. Your compliance, your document management, all of that needs to be there. And the, excuse me, the medium size orgs you start to have more more of a budget and budget management process, allocate funds for legal, ongoing legal support and oversight and guidance. I think there's something to be said about, and I was actually chatting with our mutual friend Oliver about this.
01:12:17:21 - 01:12:44:02
Unknown
Better to live another day, right? And if you have legal support built into your budget, odds go up, right, that you're going to be doing things right and that you're going to have the right support at your side to whether any problems ahead. This is really sage advice, Gene, what do you think the year ahead looks like for nonprofits?
01:12:44:02 - 01:13:18:06
Unknown
What are you what we already told me about what you're what's keeping you up at night? But what are you maybe excited about? Or what are the things that you have are finding joy or optimism in. So I think what I'm excited about is community building. So there are definitely some bumps and bruises to for for organizations and for communities and networks and movements to build this muscle where there's more community voice in what organizations are doing.
01:13:18:08 - 01:13:45:05
Unknown
But I'm seeing more organizations do do that. I'm trying to incorporate those voices. Sometimes they're like little town halls with with their supporters there. They can start off small, but the fact that people are reaching out to their community and some organizations are building kind of their management and governance systems to include community voices in their decision making, I think is a really good thing.
01:13:45:08 - 01:14:19:12
Unknown
Collaboration amongst organizations at a time when there's a common enemy, if you will, where the federal government that's hostile to some of their missions is forcing organizations to join together and think about things together and sign on advocacy statements together. I think that is another sort of beneficial thing beyond this moment, that just to have organizations feel like, well, collaboration is kind of a natural thing that that we should always be thinking about.
01:14:19:12 - 01:14:50:01
Unknown
We don't live in silos. We don't live in isolation. I'm really a proponent of a form of governance called purpose driven board leadership, and it's sort of championed by a group called Board Source and Disclosure here. I'm a board member of board source. That is kind of a system that really emphasizes its mission and purpose and values ahead of the organization's own sustainability in decision making.
01:14:50:01 - 01:15:25:05
Unknown
So that allows for things like, well, a private foundation can have a limited lifespan. It doesn't have to aim to exist forever. It can spend down right. It allows for organizations to merge in a collaboration with another organization, even if they are not financially kind of at the end of the game, they can merge when they still have strength and when they still could do do great things, but they feel like they would be able to advance their mission even further by merging into another organization.
01:15:25:07 - 01:15:55:06
Unknown
And that is definitely those things are permissible, and that is because it is appropriate to to sort of say when we're acting in the best interests of the organization, that's in light of the mission and values of the organization. And the other thing about purpose driven board leadership is it relies on that principle. And three others. The others are respect for the ecosystem because we are all interdependent.
01:15:55:07 - 01:16:21:07
Unknown
And I've made the broad argument that that includes the physical environment. So I am one that says may not be your mission to to fight climate change, but you should know that if climate change continues the way it does, that your mission is going to be impacted and your beneficiaries are going to be impacted, and your employees are going to be impacted and your investments are going to be impacted.
01:16:21:07 - 01:16:58:02
Unknown
So maybe it's okay for you to send out messaging that encourages or develop policies that encourage things to address climate change within your own system, even if you are not an environmental organization. So respect for the ecosystem. I think an equity mindset is the third thing. And then authorized voice and power. So if we are going to deliver services, if we had only been delivering services to neighborhoods we historically had served, maybe we have always missed out on these other neighborhoods that are within our grasp.
01:16:58:07 - 01:17:41:03
Unknown
We just haven't reached out to them because we never had before. That could result in these great systemic inequities, usually disadvantaging marginalized communities. And that's something that I think governance really needs to address, especially if that is a value of the organization and authorized voice and power is like, you can't address any of the things that I said unless you have representation on your leadership teams from those communities that you are serving, it doesn't mean that you have to have like all of a sudden everybody serve has to be on your board, but you have to know, you know, how are you hearing those voices?
01:17:41:05 - 01:18:07:18
Unknown
Like, how do you know what they need? And do they have solutions to the problems that they are experiencing? And we're going to make sure to link all the things that we discussed, including links to purpose driven board leadership from board source. Gene, this has been an eye opening conversation. I appreciate you so much as an individual who is one foot in front of the other for years and years, making sure we understand this work and still doing it.
01:18:07:19 - 01:18:25:13
Unknown
I learned a lot from you today. I'm sure others will learn a lot from you as well. Thank you so much for making some time. Thank you so much and thank you for everything you're doing out here and really appreciate the podcast. Thank you. Gene, next time let's do it in person okay. That's great. Okay. Thanks, Gene.