This is especially true if the sponsorship isn’t periodically renewed or revisited. Provides some limit to sponsor's liability despite owning the project. Do we have the expertise on staff to be a successful fiscal sponsor? Generally, the individuals associated with the grantee serve as agents of the grantee when working on the project. [1], Projects may seek fiscal sponsorship for various reasons: an anticipated short lifespan, improved access to funding, increased credibility, and low-cost financial and administrative services. Is our board and staff knowledgeable enough to ensure we’re operating our program according to IRS guidelines and best practices? to accomplish the ends described in the grant proposal. Fiscal sponsorship arrangements, if not handled carefully, can be vulnerable to the criticism that they serve merely as conduits for the transmission of deductible donations to entities not qualified to receive them. It typically involves a fee-based contractual arrangement between a project and an established non-profit. Should our organization solicit donations for our fiscally sponsored project(s)? While specific elements will vary depending on the type of sponsorship put in place, all good contracts will spell out the nature and term of the relationship, including model of fiscal sponsorship, ownership of intellectual property and dispute/indemnification clauses, list any fees charged, and outline the process for holding and disbursing funds. country, ranging from documentary film sponsors to public health research groups to separate corporations spun off by community foundations.[2]. This website uses cookies so that we can provide you with the best user experience possible. Project belongs to sponsor and is implemented by its employees and volunteers. Most fiscal sponsors charge sponsored projects a fee to offset the additional cost. But, sometimes nonprofits act as a fiscal sponsor without any stated intent of doing so. all legal and fiduciary responsibility for the sponsored project, its employees, and Get your nonprofit off to a strong start with Propel as a partner. Do we have the capacity to take on the extra administrative work and to exercise discretion and control over funding? Fiscal sponsors can also assist nascent projects in developing the necessary organizational capabilities to eventually spin off as independent non-profits.[1]. Thefiscal sponsor is the tax-exempt organization that agrees to share its tax-exempt status with another group for a specific project, grant, or event. Consistent with such expectation, the fiscal sponsor’s delegation of duties to the project leaders should follow only after sufficient due diligence of such individuals and their planned activities. over 700 nonprofit organizations on corporate, tax, and charitable trust law matters, and in 2016, he was awarded Outstanding Nonprofit Lawyer by the American Bar Association Nonprofit Organizations Committee. And a pre-approved grantee of a fiscal sponsor housing the sponsored (Model C) project is generally no different from a grantee of any nonprofit that elects to grant funds to an individual or nonexempt entity, which is a permissible form of grantmaking for any charity so long as it is done with appropriate restrictions on use. It may not cede its ultimate control and decision-making authority over the funds to the project leaders. Only as provided in affiliation agreement. does not necessarily maintain ownership of any part of the results of the You should also have clear criteria on when and why you would bring on a new project for sponsorship. The fiscal sponsor takes on the project, and all of its risks, because it advances the sponsor’s own charitable mission. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. Additionally, the fiscal sponsor should ensure it has appropriate policies to guide the project leaders’ actions, maintain oversight of the operations, and protect the charitable assets. Generally, this other sponsored groupis not incorporated and lacks its own tax exempt status, but is interested in s… Are we ok putting our organization’s 501(c)(3) status on the line to do this work? While the fiscal sponsor has the variance power to direct such funds to another organization to advance the same charitable purposes, it has a business reason not to exercise such power except under egregious circumstances. In a comprehensive fiscal sponsorship, the sponsor owns the project. sponsor simply assures itself that the project will use the grant funds received Typically, in light of all of the administrative burdens and costs associated with the project and to ensure its own organizational health, the fiscal sponsor charges an intra-organizational administrative fee to the restricted fund dedicated to the project’s charitable purposes. So long as the grantee has not breached the fiscal sponsorship agreement, the fiscal sponsor will ordinarily grant the funds raised for the project to the grantee, less some agreed upon amount it retains as an administrative fee. Fiscal sponsorship is an important and useful tool for the charitable community. This article was first posted online on January 19, 2016. This may occur when the fiscal sponsor acts as a mere conduit for contributions to flow to the individual or company without exercising the required control and oversight. for managing its own tax reporting and liability issues. But when they are fundraising for the project, they are doing so as agents of the fiscal sponsor. Propel Nonprofits is also a leader in the nonprofit sector, with research and reports on issues and topics that impact that sustainability and effectiveness of nonprofit organizations. In the pre-approved grant relationship model, the party entering into the fiscal sponsorship agreement with the fiscal sponsor is the sponsor’s grantee. A fiscal sponsor providing pre-approved grant relationship fiscal sponsorship can facilitate broader grantmaking to individual artists producing works to be introduced to the public for noncommercial purposes, nonprofits without an IRS determination of 501(c)(3) status, and discrete charitable programs of for-profit social enterprises. The sponsor accepts responsibility for the use of those funds and ensures their application toward charitable purposes, along with any additional donor restrictions. In contrast to the fiscal sponsor, the other party to the agreement is not a tax-exempt entity able to directly receive deductible charitable contributions and is likely not properly registered to solicit charitable funds or assets. But when done wrong, fiscal sponsorship may result in an individual or for-profit company inappropriately deriving a private benefit from charitable contributions. There are several models of fiscal sponsorship that an organization may follow. In a comprehensive fiscal sponsorship, the fiscal sponsor should have the appropriate infrastructure and resources one would reasonably expect of the legal operator of the project. Fiscal sponsorship has become a familiar term among many people who work in the nonprofit sector, but it’s still poorly understood and too often improperly structured and operated. The intended grantee is vetted and pre-approved by the fiscal sponsor prior to any fundraising for the purposes of the project. project's work. In addition, the sponsor So how do you know if your organization is acting as a fiscal sponsor?

A fiscal sponsor without sufficient capacity may also jeopardize the assets raised for each of its programs by misusing or misdirecting those assets to pay for its general administrative costs or other inappropriate expenses. Unlike with the comprehensive model, the project is owned by the grantee, not by the fiscal sponsor. Board members of sponsoring organizations must fully understand the role the organization is playing, its legal responsibilities and possible risks, and how to be a good steward and partner to its sponsored projects. The activities. Do we fully understand the requirements and implications of the model(s) of sponsorship we are offering. A portion of the funds raised to advance a particular project’s purpose is typically retained by the fiscal sponsor as an administrative fee. We are using cookies to give you the best experience on our website. While there will always be stories of abuses, as is the case in every field, the problem lies in the implementation and not the lawful practice of fiscal sponsorship done right. https://fiscalsponsordirectory.org/?product=fiscal-sponsorship-6-ways-to-do-it-right-3rd-edition, The examples and perspective in this article, Comprehensive fiscal sponsorship distinctions, Pre-approved grant relationship fiscal sponsorship distinctions, Learn how and when to remove this template message, "Fiscal Sponsorship: the state of a growing service", "Nonprofit Law Blog: Fiscal Sponsorship Basics", "Guidelines for Comprehensive Fiscal Sponsorship", "Guidelines for Pre-approved Grant Relationship Fiscal Sponsorship", https://fiscalsponsordirectory.org/?product=fiscal-sponsorship-6-ways-to-do-it-right-3rd-edition, https://en.wikipedia.org/w/index.php?title=Fiscal_sponsorship&oldid=938417396, Articles with limited geographic scope from March 2016, Creative Commons Attribution-ShareAlike License. Used by a non-501(c)(3) project, in order to raise tax deductible support from donors, private foundation or government grants.

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