This is going to be a huge pain for the 600 groups that this affects (few of which are open source projects - this is NOT the part of Open Collective that handles open source).
The key thing to understand here is what a "fiscal sponsor" is in the US charitable world.
If you want to accept charitable donations from people in the US you really need special tax status with the IRS. This involves a lot of bureaucracy and paperwork.
Or... you can find an existing 501(c)(3) that is willing to be your "fiscal sponsor". They handle the IRS paperwork and do things like provide a bank account for the donations to go into and make sure you are behaving correctly and legally.
They will generally do this for you because your cause matches with their mission - plus they usually get a small portion of your donations to help cover their costs (lots of accounting and legal work).
Once you've set that relationship up everything becomes massively easier for you... unless your fiscal sponsor dissolves itself, at which point you have to unwind that relationship and kick up a new one with someone else!
I learned about this because the Python Software Foundation occasionally acts as a fiscal sponsor.
Hi - I'm the executive director of Hack Club (https://hackclub.com). We are a nonprofit that helps tens of thousands of teenagers learn to code each year, and in 2018 we launched an in-house fiscal sponsorship program called Hack Club Bank (https://hackclub.com/hcb/), originally for our students.
Our sponsorship program has expanded and we now serve organizations of all mission types, including software, climate, and social movements. We sponsor over 1,500 organizations, most of them grassroots, and receive donations from funders including Ford Foundation, Gates Foundation, and many others for them.
We've been helping many OCF groups that need a new fiscal sponsor, and 3 have transferred over already. For any groups reading this - we would be happy to work with you and continue supporting your work.
Please email me directly at zach@hackclub.com and I can connect you with the right person on our team.
There are two unique things about HCB that sets us apart: 1) we are software-enabled, with a custom Rails app for financial management, which offers dramatically better UX than most fiscal sponsors (there is a demo if you click the screenshot on https://hackclub.com/hcb/), including the ability to have physical spending cards, and 2) we are a nonprofit ourselves, and any excess fees go toward making HCB free for high school students and supporting their education.
Just sent this comment to beehaw (fediverse instance). Open collective shuttering has them scrambling. Appreciate your willingness to help folks out with this!
Thanks for the headsup @BolexNOLA. Penguincoder here (of Beehaw) and we are tracking on this outreach. We definitely want to go with another well known and trustworthy fiscal host. Not sure that a Rails UX matters in this context but certainly nicer than some other banking front-ends...
HackClub.com purports to support Highschool coding clubs and building open source learning tools - I can't claim to know how successful this goal is, but it doesn't seem untoward or overly wasteful to me!
I have a general explainer about the OCF shutdown (not the OC, or OSC, or OSE, or OSNV!) over here, where I include more links to software foundations that might also act as fiscal hosts, like Conservancy, SPI, or NumFocus.
What we really need is a lawyer/accountant/tax person to write a focused guide for collectives and how to move their money. US tax law means that generally, 501(c)(3) public charity organizations can't just transfer the money anywhere - it'll most likely need to be another 501(c)(3) or equivalent. That's going to trip a lot of people up who want to go to OC (for-profit) or OSC (a 501(c)(6) business leage), because neither will qualify for accepting fund transfers (I think).
Also, if you have any offinity for Europe, look at the OCE - they are a charity, and they sound like they're seeing if they could accept fund transfers from OCF for projects that fit their model.
https://opencollective.com/europe/updates/regarding-the-anno...
Hi guys, my law firm Seton & Associates originally assisted in establishing this 501c3 fiscal sponsor Open Collective Foundation many years ago. I have been a law practitioner in the space of advising charitable structures for 25 years. We know the ins & outs of the world of fiscal sponsorship. In addition, I am the CEO, Founder & Chairman of the Edward Charles Foundation which is a 501c3 fiscal sponsor. We are registered in all 41 jurisdictions requiring such registration and also are audited each year by an independent CPA Firm. We can help. We also have relationships with many fiscal sponsors to refer you if we are not the right fit. Feel free to email at kseton@sblservices.com and I will respond promptly.
I've wondered about this for a long time - can't a 501(c)3 non-profit hire open-source developers as employees, or easier, employ or fund them as contractors and pay them through a 1099?
I'm sure that non-profits hire for-profit companies or contract out work in some way, wouldn't that model apply to supporting open source projects through a non-profit?
In a nutshell, yes, but there are very few FOSS nonprofits with funding that allows them to do this. The Linux Foundation pays Linus, and I know the OpenInfra Foundation has a few technical roles on staff, but most simply don't have anywhere close to the money to pay for actual development. It's not a particularly attractive venture for corporate sponsors, or at least hasn't been historically, because they can spend the same money on their own developers and have much more control over what features and bugfixes get prioritized.
It might be hard to justify the need for that software -- I don't think 501(c)3 orgs can do literally anything they want and keep their 501(c)3 status. The things they fund have to go towards a specific mission, and "putting more OSS into the world" might not be a valid mission (?).
The PHP Foundation collects donations to fund maintenance and improvement to the PHP language, which is their charitable goal.
As far as I know, when you start a nonprofit there's no requirement that your nonprofit be particularly efficient or socially useful. You want to run a hospital that pays its CEO handsomely? Build a church in a town that already has plenty of churches? Organise international exchanges of frozen horse semen for a rare breed of horses? Run a college that charges $50k/year tuition? Pay for monks to just kinda hang out and vibe?
The IRS doesn't seem to require and proof those monks are measurably good for your immortal soul, or that there's widespread public support for horse semen exchanges, or that the college would be destroyed if they didn't have a football coach. The charity can just say "yeah we think the football team is, uh, good for student engagement, which serves our charitable goal" and the IRS goes along with it.
If a nonprofit college can pay a football team coach, the PHP foundation can certainly pay developers to work on PHP.
As noted elsethread, there are several 501(c)(3)s that pay for software development, either via having their employees/contractors do it (directly or indirectly), or by providing grants or one-off funding for specific kinds of work. It really depends on the organization what their policies are.
The LF has plenty of employees who help code on their various sub-foundations in one way or another. Python, NumFocus, PHP, and some others have grant programs to help pay developers to work on specific code. And Conservancy and SPI are fiscal hosts that allow their independent projects to fundraise and pay for their own work.
On the other hand, the ASF explicitly does not allow funding to pay for project development, at least not in the context of the ASF itself. The ASF does have a paid infra staff/contractors who do write code, but it's all to run infra, not for project releases.
As noted elsethread, it's all about what the charity was setup to do.
the mission of the 501(c)3 is defined in the original application for status. It is correct that spending has to be documented and related to the mission. There are more than a million 501(c)3 in the USA and the vast majority are small operations that are mission focused, and they do have to document and play by the rules, or face penalties or closure. That said, there is a "one percent" of non-profits who operate completely (mostly secret) structures and have for decades upon decades.
A primary reason to have a fiscal sponsor 501(c)3 -- and pay ten percent or more of income -- is that the paperwork is non-trivial each year.
It also seems “Open Collective Foundation” is shutting down, and “Open Collective” is a super-organization which contains a lot of sibling organizations (“Open Source Collective”, “Open Collective Europe”). And most of the entities getting donations through OCF can simply move to other organizations (hopefully automatically keeping existing sponsors), although others have to find a non-OC organization because they have extra requirements? The whole situation seems strange and technical.
Seems to me pretty simple - the "for profit" company behind the foundation (read: the for profit entity that charges the foundation as much as it can) charged too much so the foundation dissolved.
>Unfortunately, over the past year, we have learned that Open Collective Foundation's business model is not sustainable with the number of complex services we have offered and the fees we pay to the Open Collective Inc. tech platform.
OpenCollective used to be much more transparent about how this was handled, but I don't think the math has actually changed much over the years:
Open Source Collective has a 10% fee. To my understanding, 5% of that used to go to OSC itself and 5% of it used to go to OpenCollective. OSC is stable, and still around, so I assume this math continues to work fine, but they simplified the view of it to just say "10% Host Fee" now, which includes both OSC and OC's portions.
However, you'll notice Open Collective Foundation is only charging 5%! That means, even assuming OCF was getting better pricing than OSC (another arguably internal fiscal host), there's almost no margin for OCF to operate.
It looks like OCF wasn't billing enough to cover what is otherwise probably a pretty reasonable platform cost.
The foundation paid a lot more for their own employees than for the platform https://opencollective.com/foundation#category-BUDGET so I don't think you can pin it solely on the company, the "complex services" performed by the foundation itself also cost money.
What confuses me about the budget breakdown is that the all-time expenses and contributions don't add up to the top-line disbursed and income amounts. Especially the income seems to be almost entirely opaque; maybe that was a large one-time grant that is now running out.
I don't know what happened, but this def is not the full story. Surely if the company had known it was squeezing the foundation to death it would have been in its best interest to offer a better deal no? I mean it's not like the company has hundreds of customers, and keeping the foundation alive even with reduced to maintain some income and avoid repetitional damage seems like a no-brainer.
So OCI inc, the for profit, creates OCF, the nonprofit. The nonprofit isn't viable because the "business model is not sustainable with the number of complex services we have offered and the fees we pay to the Open Collective Inc. tech platform." And then this blog post on OCIs page regarding OCF's decision to shut down indicates the announcement "came as a surprise to us."
What's going on here? The google doc with the foundation's announcement (https://docs.google.com/document/d/1odj1zfwqZgIyGOeBhv5QZxYH...) puts the blame on OCI's fees but OCI claims "The exact specifics of OCF’s decision to dissolve are not known to us. We have to trust that OCF had a good reason to do this." It sounds like OCI was making revenue off this nonprofit that they started by charging them an unsustainable rate and then is trying to not confront that directly in their statement. 600 groups affected by this dealing with implications with the IRS and tax paperwork - this is not a confidence inducing post from OCI or OCF
Very tragic. We have GitHub sponsors of course but that's also obviously tied to a specific vendor that I'm sure many or some would like to avoid for various reasons.
Beyond the fact that I'm sure everyone currently receiving long running donation support is likely going to see massive drops in funding after finding a new provider.
Its just one financial host that is closing down. Most open source is on a different host called "Open SOURCE Collective". The platform still stays and there is no need to migrate to something else for open source projects.
If OCF couldn't afford the fees paid to OCI, is there related risk to the other Open Collective entities (OSC, OCE, etc.)?
> Unfortunately, over the past year, we have learned that Open Collective Foundation's business model is not sustainable with the number of complex services we have offered and the fees we pay to the Open Collective Inc. tech platform.
Hi all, I'm Lauren Gardner, the Executive Director of Open Source Collective (OSC). I wanted to share my gratitude for all of the conversation and help supporting the projects in flux after the announcement that OCF is dissolving.
To clarify: only OCF is closing down. This does not impact all the FOSS and OSS projects hosted in the Open Source Collective. While OCF hosts several projects that need c3 status, the bulk of the projects are hosted on the c6 OSC and are supported and can receive contributions as usual. The maintainers of the projects employed by OSC have not been impacted.
Because OSC is a c6, projects currently hosted by OCF (a c3) can not transfer their funds to us, so I'd like to re-share a message from Pia, the co-founder and CEO of Open Collective.
---
Ask: We have built a matching tool to connect collectives in OCF to potential fiscal hosts (on AND off the open collective platform) and a CRM to track their status and support. We are asking all fiscal hosts who can take on some of these groups to reach out so we can add them to the matching tool. We are tagging collectives based on locale, mission, and size at the moment, but we can expand to language (python, javascript, etc) for example or other tags.
Please reach out to support@opencollective.com directly with resources or questions
“””
over the last three years, the source of funds on the platform shifted majorly from small donations to added funds. A mechanism that was originally an unplanned “add-on” became the main source of our revenue, shifting our incentives and, slowly, our strategy, in a way that we did not plan for, and I failed to predict. As a result of this movement to direct-to-hosts large grants and funds (with their increased compliance and opex); the cost to hosting collectives while equally sharing the fee on the transaction became untenable for the fiscal hosts.
“””
Too bad, I always saw Open Collective as one of the few options open-source developers (who are not supported by Big Tech) had to self-fund their work.
Curious what people think are the best alternatives now? I can think of GitHub Sponsors as well as creator-friendly tools like Patreon, Locals etc.
Naming things is hard, as software engineers know. It's only OCF that's shutting down, not OC, or OCE, or OSC, or even OCNZ (I just found out about that one today).
In any case, there are plenty of other funding models/sites out there, the trick is finding one that really fits how your FOSS project works:
Its just one financial host that is closing down. Most open source is on a different host called "Open SOURCE Collective". The platform still stays and there is no need to migrate to something else for open source projects.
Open Collective isn't shutting down - open-source funding is unaffected. The Open Collective _Foundation_ (OCF) appear to be part of the funding structure for open collective sponsorship of charitable but not necessarily open source organisations in the US, and only groups using the OCF to host their finances are affected.
Is there a list of the 600 "collectives" that need to migrate to continue accepting donations? Do any of them already have alternative donation methods?
That's a LOT of groups! This page here indicates they were raising $13m a year back when they had 300, so it could be double that now: https://opencollective.foundation/
Early on, I had 'Drupal St. Louis' (a local meetup group) on the platform, and it was a huge help in our ability to put on a large-ish annual gathering. There's no other way we could've done it short of a very benevolent for-profit local company putting up all the resources.
Alas, that group slowly disbanded over the past few years, so luckily this announcement doesn't hurt us. But I have pulled out the last bit of funding we had left, and will donate it to a local tech foundation.
The key thing to understand here is what a "fiscal sponsor" is in the US charitable world.
If you want to accept charitable donations from people in the US you really need special tax status with the IRS. This involves a lot of bureaucracy and paperwork.
Or... you can find an existing 501(c)(3) that is willing to be your "fiscal sponsor". They handle the IRS paperwork and do things like provide a bank account for the donations to go into and make sure you are behaving correctly and legally.
They will generally do this for you because your cause matches with their mission - plus they usually get a small portion of your donations to help cover their costs (lots of accounting and legal work).
Once you've set that relationship up everything becomes massively easier for you... unless your fiscal sponsor dissolves itself, at which point you have to unwind that relationship and kick up a new one with someone else!
I learned about this because the Python Software Foundation occasionally acts as a fiscal sponsor.