What is Fiscal Sponsorship?

If you’re considering taking the fiscal sponsor route for your project but don’t know if it’s right for you, Resilia can help. For some organizations, fiscal sponsorship can be an efficient way for your project to get the support it needs to come to life and have the greatest possible impact. 

Finding the right fiscal sponsor is kind of like finding the right partner. It takes time and it is worthy of thoughtful consideration. Before you decide what’s the right step for you, there are a few things you should know. 

We’ve compiled all that essential knowledge and experience in two blog posts that are easy to read and understand so you can focus your time and energy on what’s most important to you - your project’s mission.

What Does Fiscal Sponsorship Entail?

First, let’s talk about what fiscal sponsorship is. A fiscal sponsorship allows an individual or project to work with an existing 501(c)(3) under a formal agreement. Typically, a fiscal sponsor is a public charity exempt under Section 501(c)(3) of the Internal Revenue Code and a qualified recipient of charitable contributions that are deductible to the donor. Donors contribute funds to your sponsor, and then the sponsor then passes the funds to your project (usually with a five to 10 percent fee for administrative services). Fiscal sponsors can also provide back-office support, compliance guidance, and programmatic insights for your growing project or organization.

Finding a Sponsor

Now that you have a good understanding of what fiscal sponsorship is, the next thing to keep in mind is who are fiscal sponsors. Fiscal Sponsor Directory is a great resource with a map tool that identifies fiscal sponsors throughout the country, state by state. It’s published by the San Francisco Study Center, a thought leader in all things fiscal sponsorship. If you are exploring fiscal sponsorship, a good starting point is to look into what existing 501(c)(3)s in your community offer fiscal sponsorship. 

Fees and Types of Fiscal Sponsors

There are six tried and true fiscal sponsorship models, but these are the two most commonly used types:

• Comprehensive Fiscal Sponsorship (CFS) commonly known as 'Model A' is the most commonly practiced form of fiscal sponsorship. In this model, the project becomes a part of the sponsor, with no separate legal existence. All employees of the project become employees of the sponsor, and the sponsor’s payroll tax withholding, workers’ compensation insurance, unemployment benefits, and health and retirement plans offered all are applied to the project staff. It’s important to note that all tax reporting in this model is done by the sponsoring organization.

• Pre-approved Grant Relationship, also referred to as Model C. In the pre-approved grant relationship model, the party entering into the fiscal sponsorship agreement with the fiscal sponsor is the sponsor’s grantee. Unlike with the comprehensive model, the project is owned by the grantee, not by the fiscal sponsor. Accordingly, the project’s assets and liabilities belong to the grantee, which is responsible for its own tax and filing. 

Fiscal sponsorship can be a powerful and effective way to leverage existing resources and join forces to make the greatest potential impact for your project - and it can be a great option if you aren’t ready for an independent organization and its responsibilities. And if you are already working with a fiscal sponsor, and feel like it might be time to establish your own 501(c)(3), keep an eye out for our next blog post on when to take your fiscally sponsored project on its own. Yup, we’re in it for the long haul. 

To learn more about whether or not a fiscal sponsorship is right for you, sign up for our Office Hours and mailing list to learn more about how to create and build a thriving nonprofit.