Fiscal Sponsorship

What is Fiscal Sponsorship?

Fiscal sponsorship is a mutually beneficial arrangement where a nonprofit organization (the fiscal sponsor) provides administrative support and oversight to a project, program, or emerging nonprofit (the sponsored project) that has not yet obtained its own tax-exempt status from the IRS. Essentially, the fiscal sponsor acts as the legal and financial umbrella for the sponsored project, enabling it to receive tax-deductible donations and grants.

How does fiscal sponsorship work?
The fiscal sponsor extends its tax-exempt status to the sponsored project, allowing it to receive charitable donations and grants.

The fiscal sponsor manages financial transactions, provides accounting services, and ensures compliance with legal and regulatory requirements on behalf of the sponsored project.

The sponsored project retains programmatic control and independence while benefiting from the fiscal sponsor’s infrastructure and expertise.

What are the benefits of fiscal sponsorship?
Immediate access to tax-deductible donations and grants, enhancing fundraising capabilities.

Administrative support, including financial management, compliance oversight, and access to resources such as insurance and human resources.

Credibility and legitimacy associated with partnering with an established nonprofit organization.

What should I consider when selecting a fiscal sponsor?
Alignment of mission and values between the sponsored project and the fiscal sponsor.

Track record and reputation of the fiscal sponsor, including its financial stability and organizational capacity.

Clarity on the terms and conditions of the fiscal sponsorship agreement, including any fees or administrative charges.

Is fiscal sponsorship a long-term arrangement?

Fiscal sponsorship can be temporary or long-term, depending on the goals and needs of the sponsored project.

Some projects may transition to independent nonprofit status once they have established sufficient capacity and infrastructure.

What are the typical responsibilities of a fiscal sponsor beyond financial management?
Fiscal sponsors often provide additional support beyond managing finances. This might include offering guidance on fundraising strategies, providing access to networking opportunities, or assisting with program development and evaluation.

Are there restrictions on the types of entities that can seek fiscal sponsorship?
While many types of entities can benefit from fiscal sponsorship, some fiscal sponsors may have specific focus areas or mission priorities. It’s essential for entities to align with the fiscal sponsor’s mission to ensure a successful partnership.

How do fiscal sponsorship fees typically work, and what do they cover
Fiscal sponsorship fees can vary depending on the fiscal sponsor and the services provided. Understanding what these fees cover, whether it’s administrative support, insurance coverage, or other resources, can help entities budget effectively and assess the overall value of the partnership.

What steps should I take to prepare for entering into a fiscal sponsorship agreement?
Before entering into a fiscal sponsorship agreement, it’s essential to do your research. This might include researching potential fiscal sponsors, clarifying your entity’s goals and needs, and seeking legal advice to ensure you understand the terms of the agreement fully. Additionally, having a clear project plan and budget in place can facilitate discussions with potential fiscal sponsors.

Fiscal sponsorship offers a flexible and cost-effective pathway for emerging nonprofits and charitable projects to pursue their missions effectively while leveraging the support and resources of established organizations. If you’re considering fiscal sponsorship for your project, reach out to potential fiscal sponsors to explore how this arrangement can support your goals and advance your impact in the community.