Fiscal Sponsors: A Main Source of Foundation Fog

Part 2 on the Need to Make Foundations Transparent

In translating Florence Autret’s excellent investigation into the dark alliances and backroom dealings of the European Climate Foundation, I came across an interesting remark from one of the NGO leaders commenting on the foundations’ tactics. He said that in the last decade, there has been a “professionalization” of foundation activities. Normally “professionalization” would seem like a good thing, especially in the management of billions of dollars, but the implication is that foundations have now become not just more efficient, but ruthless and tactical in implementing their objectives.

In other words, foundations have started bringing consultants and operators in to run the show with KPIs, ROI and corporate campaign strategies. Foundations were no longer helping where it’s most needed but rather creating alliances and platforms to get the best bang for their buck by maximizing their influence and reach.

Time was that a wealthy individual would retire and focus on philanthropy as a way of giving back to society (arts, education, alleviating poverty…). A foundation or trust would be established (usually in the philanthropist’s name as it was more about legacy than changing the world), with certain thematic parameters defined to guide the giving. Then a small organization would start to examine proposals within those objectives. The bulk of the bequeathed funds would be invested in markets to ensure that the foundation could continue to address the selected causes in perpetuity (or at least until the next generation blows all of the funds on some pet project). It was slow, cumbersome, but worthwhile.

But in the last two decades, there has been a flood of wealth creation the likes of which the world had never experienced. Four main technology revolutions (the Internet, Web 2.0, crypto and AI) created an unprecedented number of billionaires who have taken the Giving Pledge. As most of these reluctant tech scions don’t have the time or the interest to bother with running a philanthropic organization, they employ consultants to manage their newly minted foundations. Soon an ecosystem of charity professionals emerged to manage the task of giving away other people’s money. See the Firebreak’s analysis of these bottom feeders.

Smart, well-networked, politically-driven and opportunistic, it did not take long before these activists used the billions at their disposal to enforce their political agenda. Foundation boards were soon stacked not with well-meaning philanthropists committed to advancing the arts, education and poverty reduction, but rather with activists campaigning to stop climate change, biodiversity loss, conventional agriculture and capitalism.

Foundations have not only been professionalized, they have profoundly changed their objectives and tools at their disposal to dominate stakeholders, the media and policy agendas. As tent cities choke urban spaces in America while schools struggle to provide children with lunches, American billionaires find their foundations obsessing over climate change, trace nano-plastics and DEI initiatives. One such tool responsible for this professionalization perversion is the fiscal sponsor mechanism.

This is Part 2 of The Firebreak’s investigation into how foundations are not transparent. Part 1 showed why the rules need to change and how some foundations are misusing the present system, pulling strings from the shadows. This part will look at how fiscal sponsors are used to create a wall to distance the foundations from the activist campaigns. Part 3 will examine how donor-advised funds are used to hide special interest groups who transfer money through foundations to support campaigns anonymously.

Politically-Driven Fiscal Sponsors

A corporate tool that has been introduced to foundation management is known as a fiscal sponsor. Interpreted widely, a fiscal sponsor is a person or office that operates as an intermediary between the foundations and an agenda. They offer a wide variety of services, advice, staff and networks to support both foundations in their giving and activist groups in their receiving. Some fiscal sponsors can be quite large, like the Rockefeller Philanthropy Advisors, with a team of operators that resemble a law firm (with the fees to match) to small individual consultants with a network of insiders and foundation board members. Flipping through the Rockefeller Philanthropy Advisors website, their values and culture are very corporate.

The Skyline Foundation is a good example of a tech billionaire leaving a fiscal sponsor to manage their philianthropy. It was founded by David and Angela Filo, building on their Yahoo! billions. The charity used to be called the Yellow Chair Foundation but as the years went by, they changed their name and left the operations to be managed by the Pacific Foundation Services fiscal sponsor. Flipping through their website, the values and culture of PFS are very “rainbows and butterflies”. In an earlier assessment, the Firebreak could not help but notice how the shares and funds that Filo’s foundation invests in still include many polluting corporations, but they now claim they are trying to address that. Perhaps that’s why the Pacific Foundation Services fiscal sponsor does not admit on their website that the Filos are a client ... Ouch!

Source. Is this just an innocent administrative service?

Fiscal sponsors can appear sometimes as very innocent administration and support services, with an option of providing grant management and advice, but they also offer strategic services to direct the funding campaigns.

One of the secrets that will never come out on the IRS 990 forms is how much commission fiscal sponsors take. How much is discretion worth if you’re a billionaire? Enough to leave us guessing.

Lifting the Dark Veil

To understand the murky operations of fiscal sponsors, I put together a simple graphic of the most common operations today.

Fiscal sponsors seem to be offering everything, and this allows for some curious cases of rule bending and going beyond merely foundation services.

It is important to see how a fiscal sponsor can take an idea and market it to a bundle of foundations. Rockefeller Philanthropy Advisors (not part of the Rockefeller family’s bouquet of foundations) refer to this as “Collaborative Giving” and reflects the corporatist approach of multiplying donors, who then use their networks to promote coordinated projects.

Source

The point to collaborative giving is for the fiscal sponsor to massively increase impact and resources. A million to run an environmental activist campaign can be sufficient to drop a few bombs in the media. Grouping together a couple dozen foundations to raise a hundred million can buy off the media and most NGOs. This would make any campaign go nuclear.

Buying off the media …

People need to take the time to look for tell-tale signs of this collaborative fiscal sponsoring. If an issue is dominating the narrative and saturating the media and policy environment in an unexplained manner (net-zero emissions, salmon aquaculture, nano-plastics, PFAS…), there is very likely a fiscal sponsor in the shadows pulling the strings on behalf of a number of large foundations.

Some media organizations, aware of the excessive amount of money sloshing around looking for a cause have, perhaps accidentally, become fiscal sponsors, linking donors to investigative reporting groups. Scrolling down the endless stream of “project specific” special funding links on the Pulitzer Center’s donor page, it is clear that every news story seems to have a foundation paying for the ink (but no one seems to ask how they the billionaires are benefitting from the media influence). Other groups, like The Guardian, have shifted to redistributing tens of millions of dollars in foundation funding as an existential solution, publishing articles that meet the funders’ interests (but then they claim that they are not captured by business interests).

… while protecting the foundations

At the same time, a fiscal sponsor managing and redistributing the funds, creates a shadowing effect to not expose the foundation’s direct involvement, should the project become controversial. A good example of this is how the New Venture Fund takes funding from at least seven large foundations to fully finance the tort law firm, Sher Edling, for the purpose of filing obstructive climate nuisance cases against fossil fuel companies. This group is spending millions on influencing policy-makers while aiming, if nothing more, to create negative PR against the oil industry.

When the Senate investigation exposed the improper behavior of the law firm, the foundations were protected from being implicated in the ethical transgressions. The Senate only looked at donations made by the fiscal sponsors, sparing any criticisms of the foundations directing the show.

Source But their question should have been: Who is paying the New Venture Fund?

The Firebreak has been reporting on this ethical trainwreck, how Sher Edling’s business model was originally the brainchild of a fund manager in the Leonardo DiCaprio Foundation, getting together with other foundation directors, a politically-connected activist academic, Ann Carlson, and the ever-infectious Naomi Oreskes (both of whom have since been receiving payouts from Sher Edling). While the New Venture Fund does not declare who is funding this project, Sher Edling’s litigious activism was previously managed by the Resources Legacy Foundation (which set up the Collective Action Fund for Accountability, Resilience, and Adaptation - a fund with no website or contact information).

Source Had it not been for the excellent research by Influence Watch, this foundation funding (of a tort law firm to simply be a menace to industry) would not have been revealed.

Sorry, further information is unavailable as the foundations prefer to operate on this one from the shadows and no journalists seem interested in digging deeper. And there is a lot here to dig into. For example, it is unknown who donated to the Sher Edling lawsuits via the Chicago Community Trust (and how much). They take dark, donor-advised funds (see the next chapter of this series) and Cook County, the famed judicial hellhole, lies within their remit. The Chicago Community Trust’s homepage has claimed to have moved $1.6 billion of special interest money … one billion, six hundred million dollars.

Replacing the NGO campaign with a vertically integrated fiscal sponsor campaign

One of the important consequences of this “professionalization” of foundations with the fiscal sponsor tool is that they can avoid having to get involved with the political and historical baggage that many NGOs bring with them into any relationship. The fiscal sponsor can create an organization, install staff and run campaigns themselves.

They walk like an NGO, they talk like an NGO but they have unlimited access to funds and less need for accountability.

The New Venture Fund explains the advantages of working directly with a fiscal sponsor like them rather than an NGO.

Source. There is no need for NGOs. Foundations can band together to work directly with non-profit entrepreneurs via their fiscal sponsor

With hundreds of millions, fiscal sponsors can set up other fiscal sponsors to redistribute funds and run complementary campaigns. Take for example, the Firebreak exposé into Covering Climate Now. This group claims to support and train journalists on how to report the news on climate events but their main mantra is that every news story is a climate story. They are essentially paying journalists to research and report on how climate change is affecting everything. But their fiscal sponsor here is rather curious.

Covering Climate Now is funded and managed by the Fund for Constitutional Government, a foundation originally set up by Stewart Mott, an heir to the General Motors fortune. He set it up to attack Richard Nixon in the 1970s but it soon fell dormant. Long after Mott’s death, the fund has now moved into the business of redistributing funds from other foundations. It no longer has an office, but works from a mailbox in the office of its executive director, Ian Gary, who, ironically, works as a transparency campaigner in other companies.

Source

The most recent Fund for Constitutional Government IRS filing revealed that the top directors of Covering Climate Now were actually paid by the fiscal sponsor and not by the NGO, implying that these actors created the organization but remain tied to the fiscal sponsor (and perhaps other projects they are funding on behalf of a large number of climate-oriented foundations).

Sub-Granting: When a Fiscal Sponsor starts to look and act as a Foundation?

Reviewing, releasing and monitoring grants to organizations and campaigns is time consuming and burdensome. The administrative efficiencies of fiscal sponsors morphed into the process of sub-granting, where the sponsor is closer to the network of campaign organizations on the ground than the foundation. It became easier for fiscal sponsors to take a large grant, bundled from multiple foundations, to redistribute to a collection of activist NGOs.

But why stop there? If there are a number of foundations with the same objectives (like fighting climate change), the fiscal sponsor can create a program, contact a large number of foundations and offer to do the sub-granting for them (to a platform they are now managing). As a one-stop shop for the givers and the takers, the funding levels can get very big, very quickly. The fiscal sponsor then starts to look and act as a foundation.

They walk like a foundation, they talk like a foundation but they have unlimited access to funds and less need for accountability.

Take for example the European Climate Foundation. On the surface they look and act like a foundation but they have no historical source of funds. Their last Dutch tax declaration, in 2023, showed they received €275 million in grants from foundations, to distribute (re-grant) to NGOs, consultants and influencers involved in their campaign for net-zero carbon emissions. They employ high-level political leaders to ensure they dominate the climate policy arena, pay off most NGOs who then populate platforms they create to pressure regulators and use communications consultants to control the media and dominate the narrative.

The European Climate Foundation is not actually a foundation but a very large fiscal sponsor. They are not at all transparent about who funds them or how much they fund other organizations and NGOs but it appears they have funded every climate activist group in Brussels, run multiple campaign platforms and have their tentacles in every policy organization. €275 million a year, accumulated from more than a dozen large foundations, is evidently enough to buy Brussels and control the policy debate, while they remain largely in the shadows. See the five-part Firebreak translation of Florence Autret’s investigation into the dark, murky affairs of the European Climate Foundation.

What Autret’s investigation also revealed was that often when the European Climate Foundation was funding a project or campaign via a platform or organizations they created (and pushing the NGOs they are funding into membership on these platforms), many of the foundations supporting this fiscal sponsor were also members or funders of the same platforms. It is not clear if this is just financing earmarked via the fiscal sponsor or separate donations.

“It is not clear” because they are not transparent.

A good fiscal sponsor can make or break a campaign. Take for example the Agroecology Fund. For more than a decade, they were earning and distributing about one million dollars a year. The Firebreak revealed how, in 2021, they changed their fiscal sponsor to the Global Greengrants Fund, and within two years, increased the amount raised to over $100 million.

What Global Greengrants did was try to reposition agroecology practices as a means to mitigate climate change, arguing that these peasant agricultural techniques were more climate resilient than conventional agriculture, their technologies and innovations (they are not). This opened the Agroecology Fund up to a new funding market: technology billionaires. These philanthropists were charmed by the idea of funding subsistence farmers in developing countries (although most of the money goes to lobbying against conventional agriculture and the ag-tech industries).

If you have noticed more media attention and louder political campaigns against the capitalist system, against conventional food and agricultural practices, against fossil fuel companies, against the use of chemicals and plastics … then the power of fiscal sponsors, moving hundreds of millions of dollars around activist and media pockets behind the scenes, has been making a difference. They have provided the oxygen for groups to dominate the narrative while staying out of public view and scrutiny.

The Need for Transparency on Fiscal Sponsors

Most people do not understand what fiscal sponsors are and how they work because, quite frankly, they are rarely transparent. Light needs to be shone on these businesses as they are changing how foundations operate and quite often tilting the balance in the policy arenas. These consulting groups are getting very rich, very influential and very powerful while still hiding their operations in the shadows.

What follows are some suggestions on how to start making the fiscal sponsors behind foundations transparent.

• Make the fiscal sponsor organizations publish detailed accounts of where the funding is coming from, how much and how it is redistributed.

• Remove the possibility for non-profit organizations to file any income received as “Restricted” in their IRS 990 form or other tax declarations.

• Provide a ceiling as to how much a third party actor like a fiscal sponsor can receive and regrant, to limit the risk of such consultants dominating policy debates with hundreds of millions of dollars.

• The fiscal sponsors must reveal how much they retain in fees from the foundations they serve. The board members, NGOs and the public should be made aware of the wastage, graft and corruption going on in the shadows of these organizations.

• Remove the tax deductibility status for fiscal sponsors. Any donation to an organization operating as a consultancy or administrative support service should be taxed for what it is: a corporate business.

• Fiscal sponsors and the foundations that fund them should be held liable when the projects and campaigns they fund break the law, lie or act unethically.

This is the first step in making the political activism of foundations more transparent. While I would like to see the abusive, dark lobbying tactics of fiscal sponsors completely banned, I understand that their support of American political campaigns would make such decisions practically impossible. But in demanding transparency and limiting the tax benefits, hopefully such actions would help to control the massive expansion of dark foundation funding and suspicious activist manipulation.

It would entail political courage to slay a beast that has fast become far greater and more powerful than any other institutions. It would need civil society groups that fight for transparency, like Corporate Europe Observatory, to take a stand. But sadly, groups like CEO are, hypocritically, also on the fiscal sponsor take. Part 3 will therefore have to try another means to make foundations more transparent.