From Fiscal Sponsorship to Autonomous Operations: An Interview with Mariana Ruiz Firmat
This interview with Mariana Ruiz Firmat, Executive and Co-Founder of Kairos Fellowship and Kairos Action is the third in a series about fiscal sponsorship, organizational resilience, and autonomy. You can read the first article here and the second here.
The team at Cooperative Impact Lab has been working to stand up a project called the Fiscal Sponsorship Cooperative, an opportunity to provide the lived experiences, services and support for fiscally sponsored projects planning to establish their own independent operating entity.
This interview was conducted by Josh Wolf. an independent contractor and Operations Consultant for the Cooperative Impact Lab.
Listen to the audio of this interview here: (Note: Edited for length and clarity)
Josh Wolf (JW): Welcome! Thank you for making so much time to talk with us today. Before we dive in, would you describe your personal and professional journey to becoming a nonprofit executive director?
Mariana Ruiz Firmat (MRF): I’m Mariana Ruiz Firmat. I’m the Executive Director and co-founder of Kairos Fellowship and Kairos Action. I have been an organizer for the last 20 years, a decade of that was spent doing grassroots and union organizing. Then I went to MoveOn.org, which is where I met you a long time ago.
A few years later, I co-founded Kairos, in many ways to address issues of lack of racial and gender equity within the Digital First organizing realm. Our organization really focused on making sure that state power building organizations had the ability to organize online. Kairos really believes that if we want to have strong governance, not just in the United States, but globally, then we need to better govern the internet.
JW: That is quite a journey. The past few years have been increasingly impactful for Kairos Fellowship and Kairos Action. What work are you and your team advancing this year?
MRF: We’re concerned with anti-democratic movements and the global rise of authoritarianism and the way that the internet aids and abets the polarization we’re experiencing across the world. Kairos is focused on fighting back against authoritarianism and fighting for the soul of the internet.
This year we’re building out the field — we’ve launched a number of learning labs featuring state power building and issue based organizing groups who are focused on pushing back against disinformation around issues related to housing, abortion access and reproductive care, and policing. We’re going to release User Error Reports this year connecting the dots between tech companies and the way that they’re shaping some of the major issues impacting Black and brown communities in the US and globally .
JW: All of this activism organizing for justice and activity will occur under your newly formed tax exempt nonprofits — congratulations on accomplishing that significant feat. How did you make the decision to leave fiscal sponsorship?
MRF: I always think about this new infrastructure that we’re building as the thing that enables us to do exciting programmatic work. Part of the reason we wanted to spin off into our own entities was because we wanted more control and more say over the kind of work we were doing. We wanted more say over the kinds of benefits and structures we provided our team. We wanted better autonomy over our finances and more control over how we spent our resources, and to open up new streams of resources that weren’t available to us before.
JW: Thinking about those resources, a lot of times we think about them as not only philanthropic funding, but also opportunities for partnership. Did you communicate with your funders about transitioning? Did they offer any type of support?
MRF: I’ve been in a number of conversations with some of our core funders and have asked for more resources because the spinning off processes are expensive. Our organization is really focused on providing very high quality benefits and making sure that our benefits are aligned with our values. We’ve taken on more expense in terms of our benefits package.
So far, philanthropy hasn’t responded with more resources. I think that it’s possible that we are availing ourselves of some philanthropic dollars that are only provided to organizations that are getting to the next level as we are now. We’re in this financial moment as an organization where I think we’re on the precipice of being able to bring in more resources and in large part because of the spin out, but it hasn’t come from direct asks. It’s more about the fact that we are growing and institutionalizing.
JW: We hear quite often from groups who are transitioning from fiscal sponsorship that it has opened up new revenue streams because the spin out demonstrated maturity. We’ve also heard that it takes a lot of human resource capital to make this transition. Could you talk about how you started in fiscal sponsorship and what additional human resources you needed along the way to transition?
MRF: We needed a fiscal sponsor focused on anti-racism and combating anti-blackness to serve multiracial BIPOC fellows and our growing staff. We’ve been fiscally sponsored in a couple of different places. Our initial fiscal sponsor actually shut down their operation. At our current fiscal sponsor, we were spending money on fiscal sponsorship fees, we wanted to hire more staff, and wanted to have more autonomy. The process of spinning out has been hard and tiring.
But, we sought consultant help — we worked with you (Josh) because of the operations work that you accomplished at MoveOn where we were both staff members. Your approach has been to coach our staff and develop our team, which is what we were looking for. We wanted to learn and develop our team as we went along. We didn’t want someone to just come in and make decisions for us, but to talk them through with us. We hired another consultant who helped us ask more questions and really dig into the things that you don’t think about unless you’ve had the experience of running your own shop. We wanted to make sure that if we were working with consultants, the knowledge was shared both with consultants and with our team.
I think the emotional toll is really about constantly asking the question: What could go wrong? It’s the risk assessment. You have to ask risk assessment questions about everything in infinite ways if you want to make sure that your organization can stand up to the kind of scrutiny that a 501(c)(3) or 501(c)(4) may receive. We’ve taken that job really seriously, it’s why we’re very tired!
JW: How long did it take you from the decision to spin out to establishing your own independent entity? What would you say were one or two challenges that you and your team faced and overcame through the transition?
MRF: We started thinking about this at the end of 2019 and taking steps toward it in 2021. We filed (the articles of incorporation) in November of 2021 and (the tax-exempt application in February 2022). We received our tax-exempt status a few months later, but that’s the easy part of the process, in part because we had amazing support from you and because we worked with a firm to help us establish both the 501(c)(3) and 501(c)(4). We put resources aside towards making sure that we would have a strong, successful spin off. By halfway through 2022, it became clear we were ready to start thinking about the next phase — building the infrastructure.
One of the challenges of fiscal sponsorship is that you don’t have a window into the liabilities that the fiscal sponsor holds. When you’re spinning off your understanding of the finances that you need to cover all your liabilities, grows and evolves. In traditional fiscal sponsorship (you) lack control over your own dollars, (lack) knowing how much you have in the bank to project out two years — it’s very hard to have a sense of what it means to truly run your organization.
During the spin off there are many, many decisions you make, but how you talk about it with your staff is really important. The biggest challenges we’ve faced have been around having staff all over the country. We’re registered in many different states across the country to make sure that Kairos is compliant with all labor laws and all compliance laws in each state.
It’s been hard to talk about the process of spinning off with our team. It’s been hard to fully capture the thought process that goes into every little detail. There’s always going to be a gap because no one knows that you’ve spent 30 hours talking about regulations in one state related to PTO (paid time off), for example, and that you’ve done that because you care so much about your team. When you’re communicating to your team and sharing with them all the options, the 30 hours of reflection and discussion don’t come through. It might feel to them that they are stuck with the options you came up with. But we feel like we created something possible where there wasn’t something possible before. So finding ways to communicate effectively is really important and always a work in progress.
JW: It sounds like even though you’re learning compliance, the laws, the regulations, there was tension with your spirit of innovation and your values of caring for your team members.
MRF: Definitely — we had to really think about how we democratize our values. Because we’re still small and growing, you think about individuals on the team when you’re putting benefits together. You want to make sure that what this person has, everyone can have.
We have to really think about what the implications are for everybody. If we offer one person one thing we’re not offering to everyone else, then we’re not creating real equity.
JW: When you’re fiscally sponsored, you don’t generally have any decision making around those matters. That’s happening in the conference room by your fiscal sponsor. Now, as an individual leader leading two entities, you now have that opportunity to make those decisions. When leaving fiscal sponsorship, we’ve talked about creating mechanisms and operations. You talked a little bit about liabilities. Were there any other challenges when you were transferring assets or liabilities from your fiscal sponsor to your new entities?
MRF: Certainly. At the beginning of the year, we had multi-year grant agreements and our fiscal sponsor counted money that we hadn’t yet received, as received. Some money was double-counted. Even though we’d had conversations with our fiscal sponsor at the end of last year about all the grants and money coming in, our fiscal sponsor didn’t bring these multi-year grants into the conversation. It didn’t come up again, until about two months before the transfer, and really at my insistence because I was trying to clarify our final numbers. But this only furthers the point that with traditional fiscal sponsorship you don’t really have a clear understanding of what is in your account — because you don’t get to set up the process for tracking.
I started going through the books and realized that they were double counting money and I’d already received that money in our new bank accounts and our new entities. We were able to rectify it and it didn’t cause a problem for us financially because we’ve been very diligent about how much money we have in the bank.
But in the moment, it created a bit of uncertainty on our team and anxiety about whether or not we could fully trust our fiscal sponsor to have our best interests in mind — not of anything nefarious, but because they have their liabilities and we have our liabilities and we need to be sure what is most important to us as we’re spinning off. I realized it is really, really important for organizations that are being fiscally sponsored to know what they don’t know, and to have a sense of the kinds of questions they should be asking.
JW: You’ve mentioned starting financial conversations early, ensuring you have a good grasp on not only cash on hand, but liabilities, total assets, total net assets, and a budget. If you were coaching another executive director just beginning the transition from fiscal sponsorship, what other advice would you give them?
MRF: I would say make sure that you spend money wisely on resources and external support. Set aside a budget that’s just focused on the spin off itself. I don’t mean the parts about the extra costs (benefits, accounting, and all of that stuff) that you’re going to incur, that’s just a part of the process.
Set yourself up by hiring smart and experienced people around you who can support you and then really support your team to develop a strong internal team. You need at least four people who are really dedicating a large percentage of their time to the spin off for the six months where you’re researching benefits and then actually building the infrastructure, and managing the process of the spin off. We’ve been under-resourced on this — we lost a staff person in the middle of this transition. I’d also recommend having a conversation a year out with your fiscal sponsor about the liabilities — don’t do it by yourself. Do it with your operations consultant or with a lawyer so that you catch the big stuff and the small stuff.
Anticipate that something big will go wrong and budget extra time on the front end so that you can address it. We had a big issue about PTO that didn’t come up until right at the end. If a year ago we said to our fiscal sponsor, “Here’s the liability concerns that we have, what are yours?” it would have been less of a headache. You’re in a contractual relationship with your fiscal sponsor. It’s fine to bring an attorney in early on and have them really lay out what the possible liabilities are so that you can go to your fiscal sponsor and say, “I want to make sure that these are not problems or tensions that come up later.”
JW: That’s really interesting, lifting up the need for legal advice that represents the interests of your entities. When you’re fiscally sponsored, your lawyers are their lawyers. But once you spin off, you do have to start thinking — not in a combative way — but just in the best interest of your organization by having that representation. When you think about the ecosystem of fiscally sponsored projects organizing for racial justice, economic justice, climate justice, reproductive justice, and your experience transitioning from fiscal sponsorship to independence — are there services and systems you wish had been available to support you and your team?
MRF: Definitely. One of the benefits of having worked with you, Josh, is getting a sense of what it would feel like to spin off — for example starting to better understand finance and how finance tracking will shift. These are not things that you think about when you’re fiscally sponsored, because you don’t have enough access to the finances to really even be able to imagine the complexity it would require. That is not the same thing as working with a CPA (Certified Public Account) to manage your accounts and making sure that you’re compliant every month. Although this is part of it. It’s about knowing the liabilities related to finance and planning for them on the front end. Something that would be really helpful is the idea of holding more of that liability as a fiscally sponsored project in a light way.
Look at employment law if you have an organization like ours, where you have staff all across the country, you need to know how to get set up in each state and each state is different. As an entity we carry different liability based on state to state. If you’re holding that lightly in fiscal sponsorship, you might understand more the employment law and the impacts from state to state.
Another thing that I would say is it’s really important to retain counsel, even as a fiscally sponsored project. For us, it’s been very helpful at times when we’ve wanted or needed that extra support. I think having a sense of what it means to manage a board from a procedural way: What is the realm of input that an executive director has with regards to a board? What do we go to a board for beyond governance? What other ways would we want to be engaged with a board?
JW: Do you have any parting words for an executive director who is on the precipice of transitioning?
MR: Move into your own entities when you feel like you have the capacity to wrestle with complicated questions over and over and over again, and that you’re okay with spending hours with those kinds of questions. The largest percentage of the work that I have done in the last six months has been engaging in complicated questions and doing the what-if, then-what scenario thinking. If you don’t have the ability to do that, for example if you’re running into an electoral cycle, let’s say, or you have a really big campaign you’re working on, that is not the time to do a spin off like this.
Don’t just leave your fiscal sponsor. There are some groups that have to because there’s not enough oversight over fiscal sponsorship. Some organizations have to leave their fiscal sponsors in haste, because they’re not getting even the basics of the contractual agreement. But if you have good enough fiscal sponsorship then work with your fiscal sponsor to set up a longer timeline and take the time to make smart decisions. Really weigh the costs and benefits. The process of spinning off is labor intensive and difficult and challenging. You’re going to want to know that you’re doing it for the right reasons, not out of haste or frustration, but (for) your own vision for your work and where you want to be in the future.
JW: I can’t thank you enough for making it through your transition (!) but also for providing this insight and expertise and sharing your experience with the community. We really appreciate it.
MR: Thanks, Josh. I appreciate you.
