Fiscal Sponsorship

Infographic from the National Council of Nonprofits. Infographic link here.

Questions to ask of potential sponsors:

• Is there alignment between the project and the mission of the sponsor?
• Do they have experience w/ fiscal sponsorship?
• Are there adequate resources (staff, systems) to ensure adequate oversight?
• What is the board of directors’ approach to fiscal sponsorship?
• How will risk and liability be handled?
• Do they have adequate insurance coverage?
• How would they manage closing the sponsorship?
• Can you have an advisory board? Attend board meetings in a non-voting capacity?

Questions to ask of potential nonexempt community projects:

• Does the project advance your mission?
• Will the project be carried out by volunteers or will salaries for staff need to be raised?
• What, if any, relationships do they have with potential donors/funders?
• How long do they anticipate needing fiscal sponsorship?
• Do they have a goal of establishing their own 501(c)3 organization?
• How might this relationship either enhance or negatively impact our reputation?
• Is taking on this project worth any potential risks it may present to our 501(c)3 status?
• Do we have the administrative capacity to provide proper oversight and discretion over funding?
• Are there any conflicts of interest?

Content - Fiscal Sponsorship: Setting Up for Success, Shannon Rauen, CFRE, MA

Remember that fiscal sponsors to ensure nonexempt community projects are acting in accordance with all applicable local, state, and federal laws.

• Projects will have to regularly communicate, submit reports and records
• The fiscal sponsor does retain control and discretion over the use of funds

Fiscal sponsors must also follow all applicable laws and regulations

• To include receiving, booking, and acknowledging all contributions in accordance with GAAP and IRS requirements

Negotiating these relationships takes time

• Expect that a legal document like a memorandum of understanding (MOU) or another type of agreement will need to be put into place
• This document should spell out expectations for both sides
• It should also clearly identify how the sponsorship will end and how remaining funds will be managed; it is always best to begin with the end in mind

A fiscal sponsor will likely charge some form of an administration fee.

Here’s why:

• Accounting systems, bookkeepers, 990 & state/local filings
• Staff time for overseeing and managing the program
• Liability insurance
  • No set amount but typically ranges between 5-10% of all funds held on behalf of the sponsored community project

Content - Fiscal Sponsorship: Setting Up for Success, Shannon Rauen, CFRE, MA