Fiscal Sponsorship 101

What is fiscal sponsorship?

Fiscal sponsorship is an arrangement where an exempt organization, typically a 501(c)(3) public charity, furthers its mission by receiving and expending funds to support a mission-aligned “Project” while retaining discretion and control over the funds.  Depending on the model, fiscal sponsors may also share their legal home, back office, and other resources with their Projects. 

Unlike a traditional program carried out by a nonprofit, fiscal sponsorship arrangements are typically memorialized in an agreement that defines roles and responsibilities.  The leadership of the Project usually reserves the right to exit the relationship.

There are multiple “models” of fiscal sponsorship, each designated by a letter of the alphabet. The two most commonly utilized models of fiscal sponsorship are the Pre-approved Grant or Model “C” and Comprehensive Model” A” fiscal sponsorship.

Model “C” Pre-approved Grant Relationship

Model “C” relies on a re-granting relationship between the sponsor and a separate entity or person(s) carrying out a charitable Project, whereby the sponsor receives charitable contributions and re-grants funds to a third party for final expenditure and performance of the charitable activity. The sponsee then reports back to the sponsor on the uses of the funds.

Model “A” Comprehensive Fiscal Sponsorship

In contrast to Model “C”, under a Model “A” relationship, the Project becomes a part of the fiscal sponsor for the duration of the relationship. Under this relationship, the fiscal sponsor furthers its mission by sharing its legal home and back office infrastructure with mission-aligned projects while retaining the discretion needed to ensure compliance with applicable laws and regulations. Back office infrastructure includes though not limited to: tax and regulatory filings, financial and grants management, compliance, the ability to hire staff, asset management and liability insurance.

Basically the project becomes a program of the nonprofit but there are defined roles and responsibilities as to how the nonprofit supports the Project, allowing a high degree of independence in strategic and programmatic decision making, including the right to exit the relationship at the Project’s initiative.

Fiscal sponsorship can address a wide range of needs.