March 2026 

Implosions and near-implosions of fiscal sponsors made headlines in 2025, underscoring the impact of the failures and the need for reflection, reparations, and reform.  

In Philadelphia, the Inquirer reported that the Federation of Neighborhood Centers (FNC) – a Philadelphia fiscal sponsor with 104 projects under its umbrella that was supposed to be helping community groups manage grants and providing other supports – could not make payroll, and now cannot 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 the fall of 2025, and before that the collapse of Fusion Partnerships in Baltimore in March 2025, after the 2021-2023 shuttering 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 get it right.  

Projects 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 that depend on sponsors – and, in turn, hit hard the communities and individuals supported by sponsored projects. The toll is not just financial, but emotional and psychological. These failures consume precious time and other resources of project leaders, who are working with thin margins and often very limited capacity (the driving reasons they may have turned to fiscal sponsors in the first place). The impact of fiscal sponsorship failures hits especially hard for grassroots initiatives, pilot projects, and 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 of our communities that benefit from the efficiencies and cost-sharing benefits that fiscal sponsorship arrangements offer.   

As each fiscal sponsor struggles or shutters its operations, public trust in fiscal sponsorship erodes. Clearly there is a need for some behavioral change.  

  • If you are a 501(c)(3) organization and you are considering sponsoring a project, you’ll want to be sure to understand the risks and rewards involved.  
  • To help your organization assess risk and understand the obligations of being a fiscal sponsor, check out our Due Diligence Checklist: Things to Know & Questions to Ask before Sponsoring a Project.  
  • See also our template fiscal sponsorship agreement.  
  • 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.  
  • Review our overview on Fiscal Sponsorships to understand how they can be structured – and our Choosing a Fiscal Sponsor: Due Diligence Checklist. 
  • See also our template fiscal sponsorship agreement.  

Also Trending: Calls for Reform 

There is currently no Pennsylvania law governing these specific types of arrangements, though accountability is so critical – and the impact of these 2025 demises 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 an opinion commentary piece published by the Wall Street Journal on December 10, 2025 (free link), a blog post (dated 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. Any legislative or regulatory reform should: 1) remain focused exclusively on considering what essential measures must be in place to help to curb bad behavior and ensure the accountability of any organizations that choose to become fiscal sponsors, and 2) be approached with a mindset that presumes that these arrangements are largely beneficial, as they leverage economies of scale and help incubate important new ideas and initiatives.