Open Collective Official Statement – OCF Dissolution
blog.opencollective.com
blog.opencollective.com
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.
https://communityovercode.com/2024/02/open-collective-founda...
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...
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?
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.
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.
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.
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.
You know the projects “hack club” sponsor are going to be a particular “type”, and probably very weird and wasteful.
And depending on the state, you may need a board of directors. Which is a huge pain for really small projects. Like say one or two developers.
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.
>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.
It states it right there.
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.
Last year was $1.3m for 5 "number of expenses" (high but not insanely so depending on what it covered) and $400k for the platform.
You can go into detail: https://opencollective.com/foundation/transactions?kind=EXPE... and I'm not sure how they classify employment versus various other things.
It may be that the for-profit company gave the foundation a ball of money to start, and it was to get self-sufficient by now, and failed to do so.
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.
EDIT: Actually, even crazier, it looks like OCF became 5% because OpenCollective gave OCF free service starting in 2020: https://blog.opencollective.com/open-collective-platform-is-...
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
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.
> 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.
-- "Open Collective Foundation Dissolution Announcement" https://docs.google.com/document/d/1odj1zfwqZgIyGOeBhv5QZxYH...
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
Open Collective's statement can be found here: https://blog.opencollective.com/open-collective-official-sta... —
And if you have any questions for Open Source Collective (OSC) you can reach us at hello@oscollective.org
Open Collective will (presumably) experience a further drop in revenue as they lose the "platform fee" they collected from OCF
“”” 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. “””
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.
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:
https://fossfunding.com/#how-are-individual-projects-or-main...
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/
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.