Fiscal Sponsorship
Fiscal Sponsorship
Sometimes startup organizations may not have the time or infrastructure needed for complying with the administrative and legal requirements of being a 501(c)(3) public charity, and would benefit from the support of another organization. Fiscal Sponsorship may be a good option in these cases, as Fiscal Sponsors are able to provide oversight or administrative assistance for different projects or startup organizations. Additionally, certain international organizations may be interested in working with a Fiscal Sponsor in the US if they are interested in pursuing expanded funding in the US. If you are interested in pursuing Fiscal Sponsorship, reach out to an organization whose mission is compatible with your project, and discuss with them your desire to seek Fiscal Sponsorship.
We recommend you read more to develop a basic understanding of Fiscal Sponsorship, and consult with your legal counsel.
Any grant made to a Fiscal Sponsor will not be earmarked for a third-party grantee because a Fiscal Sponsor must retain full discretion over the use of the funds and implementation of the project.
Fiscal Sponsors cannot serve as pass-throughs or conduits for earmarking funds for a third party. Such an arrangement would be termed “Fiscal Agency.” Fiscal Sponsors must retain full discretion and responsibility over the use of the funds and provide oversight for the project. The Fiscal Sponsor may choose to work with another organization in order to implement the project. However, the Fiscal Sponsor is ultimately responsible for making sure that the project is carried out, and may redirect funds to another organization if the sponsored organization is not able to complete the project.
The Fiscal Sponsor and the sponsored organization typically have a mutual, written agreement detailing the responsibilities and expectations of both parties. Learn more about what a typical agreement includes below.
A typical Fiscal Sponsorship agreement should include the following and be signed by executive staff from both organizations:
- A statement that the sponsored organization’s project is compatible or consistent with the sponsoring organization’s mission or purpose.
- A statement that the sponsor retains full discretion and control over the use of such funds and may redirect funds if necessary to a different beneficiary to accomplish the purpose of the program, if the sponsored organization cannot.
- A statement that the sponsoring organization is responsible for complying with the terms of the grant, and that they will provide oversight on the project and use of funds, to assure the funds are used for the designated charitable purposes.
- An explanation or detailing of fees charged by the fiscal sponsor.
- A clear definition of the structure and role of the sponsored organization’s board of directors (if any), project advisory group (if any), and staff members.
- Clearly defined “effective dates” for the agreement.
Parents & Subsidiaries
A Parent organization holds ownership over other subsidiary entities, sometimes referred to as chapters. Alternatively, a Subsidiary is under the common control or ownership of a parent group. A Parent may either list its subsidiaries as part of their group exemption on their IRS 501(c)(3) determination letter or simply recognize the entity as a chapter under its main organization. Sometimes a Subsidiary will have its own EIN but other times it does not.
A Subsidiary organization does not have an IRS determination letter in its own name but will either:
- be named as part of a group exemption on another organization’s IRS 501(c)(3) determination letter, or
- will be recognized as a chapter of another organization who has its own IRS 501(c)(3) determination letter.
The fillable worksheet is designed to help accommodate grant seekers who prefer to prepare their submission outside of the portal. The worksheet is for preparation purposes only, as the data must be transferred to the portal for consideration.
When submitting a request, proof will need to be provided which substantiates the relationship, as well as provides appropriate permissions to apply and directions for payment.
- All grant requests require a parent letter which details the nature of the relationship and provides specific payment instructions.
- Additionally, if possible, it is ideal to include the IRS determination letter of the Parent organization accompanied by an official list provided to the IRS listing the Parent organization’s subsidiaries.
