In mid-August, Ronnie Lee Graham received an unexpected phone call from someone with whom he typically had little contact. It was his advisor with the Pikes Peak Community Foundation, calling to tell him his philanthropic project no longer could live under the foundation's financial umbrella.
Approximately 150 small local nonprofits have learned they face the same fate from PPCF.
"We were in total shock," Graham remembers of relaying the news to his colleagues at the Bike Clinic — a small, scrappy charity that since 1993 has been fixing bikes with and for people who can't otherwise afford them. Bike Clinic Too — a newer offshoot of the Westside original — isn't itself a tax-exempt nonprofit. But it operates just like one as a "fiscally sponsored fund" under PPCF's 501(c)3, until now.
"People seem to get thrown by the term 'fiscal sponsor' because maybe it implies they support us financially," Graham says. "But it's not like they supported our mission at all.
"To them we were just another line in accounting."
The relationship is outlined in a standard agreement showing PPCF took a cut of all incoming funds in exchange for administrative services like accepting and processing donations, providing tax receipts for donors and tracking fundraising information in quarterly reports.
For projects like the Bike Clinic without much money or manpower, fiscal sponsorship can be the difference between sinking and swimming. Now they'll have to find another way to float.
"This isn't happening overnight," assures Gary Butterworth, CEO of PPCF. "But our vision is that we get to a place where we have few if any fiscal sponsorships."
There's no hard and fast deadline by which all the funds need to be out; the transition process will vary, depending on specific needs. Some are already out and the rest are slated to move out over the next six months or so. And it's a "never say never" situation — Butterworth maintains "[fiscal sponsorship] is still a tool in our quiver" as for any 501(c)3 nonprofit.
Butterworth, brought on as interim CEO early this year before gaining permanent status in July, takes no credit nor blame for the decision to phase out fiscal sponsorships. It came from PPCF's board during a strategic planning process over the past year.
The given reasons are that the program had grown too big, became an administrative burden and deviated from the foundation's core mission "to connect people with causes that matter by advancing philanthropy, creating legacies, and fostering community stewardship."
Over the past decade, PPCF's fiscal sponsorship program has swelled to encompass about 150 projects from fledgling charities like Bike Clinic to more established causes, such as open-space conservation/restoration initiatives, memorial funds and recurring philanthropic events.
All pay 5 percent of their annual budget for the PPCF to assume fiduciary responsibility of their fund (for reference, the industry standard is more like 10 percent). Though rare, the foundation's approach was hailed as "innovative" by a Monitor Institute report on bright spots in community philanthropy.
"There are plenty of success stories; I'm not here to argue that. But the fact is it's very time- and resource-intensive," Butterworth says, adding that raising fees was never on the table.
Fund managers were not preemptively consulted; rather, they were invited to September workshops hosted by the Center for Nonprofit Excellence designed to inform them of their options. In barest terms, those options are to dissolve, find shelter under another 501(c)3 or incorporate.
The latter option usually takes months, lots of paperwork and around $1,000 in costs, including legal and accounting services.
"That's why we want people to be really well informed before they take the plunge," says Abby Sienkiewicz, CNE's deputy director, who's guiding PPCF's fiscally sponsored funds through this transition. "These are hard questions sometimes for people who are really passionate about the work they do."
With more than 2,400 nonprofits in El Paso County, charitable competition is a factor along with other business structures suited for social enterprise work.
"There's no blanket answer for everyone," Sienkiewicz says, "But we want to serve as an educational resource to help them all reach their specific goals — whatever that looks like."
PPCF paid for the September workshops and will spring for at least an hour consultation with CNE staff for each group's fund managers. PPCF will not cover costs of attaining new 501(c)3s, and CNE will not step into a sponsor role. A handout provided to fund managers at the workshops lists other organizations that offer sponsorships, only one of which is local.
Ken Jaray, an attorney who has managed four of PPCF's fiscally sponsored funds for nearly two decades, laments the change.
"It made it possible for community activists to mobilize public sentiment a lot quicker and start raising money to get going right away," he tells the Indy. "It's going to be more challenging now for those of us who do that kind of work. ... I'm hoping we can get a conversation going about finding another way to help various nonprofits do all the administrative work."
As the local charities set off on renewed soul-searching, PPCF is doing a bit of its own housekeeping. In an Oct. 3 memo to donors, Butterworth outlined the specifics.
First, the foundation is restructuring its staff. This month, 5.5 operational positions were cut and consolidated into a leadership team of three: director of donor services Nikki McComsey and director of finance Leslie Middleton, with Butterworth at the helm. Some new positions will be added later, the memo notes.
The foundation is also selling its Victorian headquarters on Nevada Avenue, hoping to find a bigger space more conducive to an open work environment and event hosting somewhere in the downtown area.
Lastly, the memo emphasizes that legacy assets remain a core priority.
That starts with Venetucci Farm, the city's oldest working farm, where sales have been suspended indefinitely since its well water for irrigation was found to contain perfluorinated chemicals at unsafe levels. As trustee of the farm, the foundation has exercised conservative decision-making, as Butterworth confirms, because so little is known about the contaminant. Preliminary test results by a Colorado School of Mines lab are encouraging, but public health officials haven't determined that Venetucci's produce is safe yet. More test results are still outstanding.
Whether the farm will operate next season or the foundation might pursue legal action remains to be seen.
"We're convening an advisory committee of stakeholders who know about urban agriculture far better than me," Butterworth says. "At this point, any option is on the table outside selling the farm."
Meanwhile, PPCF has picked up new designated funds, including one for the municipal airport and another for Olympic City USA. According to a release on PPCF's website, the latter branding initiative is an opportunity to leverage city assets and create "sustainable economic growth, enhanced civic pride, and increased revenue." Unlike a fiscally sponsored fund, designated funds use money raised through private donations to make payments, not grants.
Graham of Bike Clinic Too is all about raising the city's sports-related reputation. "I'm a full supporter of making Colorado Springs the Olympic City; I think that's great," he says. "But to me the odd point is the timing of it all. Taking on another endeavor as big as branding Colorado Springs is probably going to be an 'administrative burden' for them."
Although optimistic about his project, Graham is still is not satisfied with the foundation's explanation.
"All of us at that workshop [last month] walked out feeling pretty blindsided," he says. "It's frustrating to hear all about community philanthropy when now all these charities are orphans."
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