{"id":4750,"date":"2024-02-06T15:00:24","date_gmt":"2024-02-06T15:00:24","guid":{"rendered":"https:\/\/wildapricotlive.local\/?p=4750"},"modified":"2025-05-12T05:29:35","modified_gmt":"2025-05-12T05:29:35","slug":"nonprofit-fiscal-sponsorship","status":"publish","type":"post","link":"https:\/\/www.wildapricot.com\/blog\/nonprofit-fiscal-sponsorship","title":{"rendered":"2024 Guide to Nonprofit Fiscal Sponsorship: Models, Agreements &#038; More!"},"content":{"rendered":"<p><span data-preserver-spaces=\"true\">In the nonprofit landscape, the rising tide lifts all ships. Looking for the best way to support fellow charitable causes and organizations? Then fiscal sponsorship might be for you!\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In this post, we\u2019ll explore:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">What nonprofit fiscal sponsorship actually means for sponsors and projects<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The 3 most common fiscal sponsorship models<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The pros and cons of sponsorship<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">How to become a fiscal sponsor<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Let\u2019s get started!<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">What Is Fiscal Sponsorship for Nonprofits?<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Fiscal sponsorship is a relationship between an established nonprofit and another organization or project that doesn\u2019t have its own tax-exempt status just yet. In this arrangement, the fiscal sponsor provides administrative support that lets the sponsored project operate under its sponsor\u2019s nonprofit status.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Organizations that might seek fiscal sponsors include:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Emerging arts or cultural festivals with\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/blog\/how-to-start-a-nonprofit-organization-with-no-money\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">a tight budget<\/span><\/a><\/li>\n<li><span data-preserver-spaces=\"true\">Small programs led by individuals<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Projects that are one-time, or expected to last for under 3 years<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Niche microcharities<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Fiscal sponsorship lets younger, smaller initiatives benefit from the infrastructure of an established nonprofit. Instead of getting sucked into the process of starting an organization from scratch, they can focus entirely on their mission and decide if going the full nonprofit route is right for them.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Sponsors and their organizations often have similarly aligned missions, meaning the cause can only benefit!<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">How Does Fiscal Sponsorship Work?<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Where\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/blog\/corporate-sponsorship-nonprofits\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">corporate sponsorships<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0provide financial support to nonprofits, fiscal sponsorships center knowledge and administrative resources.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">A nonprofit fiscal sponsorship provides sponsored projects with:<\/span><\/p>\n<ul>\n<li><strong><span data-preserver-spaces=\"true\">The perks of tax exemption. <\/span><\/strong>Even though sponsored organizations aren\u2019t\u00a0<a class=\"editor-rtfLink\" href=\"https:\/\/www.irs.gov\/charities-non-profits\/applying-for-tax-exempt-status\" target=\"_blank\" rel=\"noopener\">tax-exempt<\/a>, having a sponsorship means all donations will be tax-deductible for donors. Sponsorship also opens the opportunity for these organizations to receive grants!<\/li>\n<li><strong><span data-preserver-spaces=\"true\">Administrative support. <\/span><\/strong>Financial management, legal compliance and other paperwork-heavy things can be overwhelming for small projects or young organizations. Sponsors help cover the technical stuff so projects can focus on their mission.<\/li>\n<li><strong><span data-preserver-spaces=\"true\">Mentorship opportunities. <\/span><\/strong>Every nonprofit has a story about the hard lessons they had to learn. Being able to learn from colleagues gets projects started on the right foot!<\/li>\n<li><strong><span data-preserver-spaces=\"true\">Financial oversight. <\/span><\/strong>Keeping the numbers clean is essential when it comes to fiscal sponsorship. Larger nonprofits take responsibility for making sure both organizations stay transparent and accountable.<\/li>\n<li><strong><span data-preserver-spaces=\"true\">Visibility. <\/span><\/strong>When nonprofits pair with new projects, they\u2019re basically making an introduction to their entire supporter base! This is an excellent way for new organizations to make their mark.<\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Fiscal sponsorship can be temporary or ongoing, depending on the goals and structure of the sponsored project. Some projects may eventually seek their own tax-exempt status, while others may continue to operate under the fiscal sponsor.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">3 Common Nonprofit Fiscal Sponsorship Models<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Different organizations have different needs, which is why there are several different fiscal sponsorship models! Here, we\u2019ll go over the three most common models.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">As you read this section, we\u2019ll refer to sponsored projects or organizations exclusively as \u201cprojects\u201d to avoid confusion!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Comprehensive Fiscal Sponsorship<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Comprehensive sponsorship essentially means that the nonprofit sponsor adopts the project as one of its own programs. This means that anyone involved in the project is considered a staff member.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In this model, the sponsor receives all donations and grants for the project and reports them on their taxes. They\u2019re responsible for all the project\u2019s financial management, including government forms, fund disbursement and all reporting.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">As a result,\u00a0<\/span><strong><span data-preserver-spaces=\"true\">the sponsor has control over all of the project\u2019s funds.<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0This is an excellent option for projects led by people who would prefer to pass off the financials and focus entirely on the mission.<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Independent Fiscal Sponsorship<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">While independent fiscal sponsorship still gives sponsors fiduciary responsibility over the project, the sponsor\u2019s staff does not run projects. This model frames projects more like\u00a0<\/span><strong><span data-preserver-spaces=\"true\">independent contractors\u00a0<\/span><\/strong><span data-preserver-spaces=\"true\">than child organizations. Independent sponsorship also increases projects\u2019 access to certain grants!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Pre-approved Grant Relationships<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Of all the fiscal sponsorship models, pre-approved grant relationships are the most hands-off for sponsors. The sponsor still has some financial oversight to ensure the project complies with IRS rules, but mostly it\u2019s there to\u00a0<\/span><strong><span data-preserver-spaces=\"true\">receive and disburse grant funds<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0to the project.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">How to Become a Fiscal Sponsor in 7 Steps<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Interested in having your organization become a fiscal sponsor? Here are seven steps to simplify the process!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Pick your fiscal sponsorship model<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Above, we reviewed three of the most common types of fiscal sponsorship models. If you\u2019ve decided to try out fiscal sponsorship, it\u2019s important to figure out what the logistics would look like for your organization!<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">When you review this idea with your\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/blog\/nonprofit-board-responsibilities\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">board of directors<\/span><\/a><span data-preserver-spaces=\"true\">, put these questions on the table:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">How involved do you want your organization to be?<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Do you have the resources to take on a new program?<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">How much are you comfortable being liable for?<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Do you want this sponsorship to be short- or long-term?<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Finally, oversight has to be run by members of your team. Doing a check-in about who wants to own this project early on will help everyone stay accountable!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Set your administrative fees<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">There is time, energy and some financial burden that goes into being a fiscal sponsor. Including administrative fees in your fiscal sponsorship agreement (more on that below!) helps you cover those costs.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Administrative fees will look different depending on the level of support you\u2019re providing, and can be structured in a few ways:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Percentage of income<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Flat fee<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Tiered fee structure<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Fees for specific expenses (payment processing, legal services, etc.)<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Custom models, depending on the project<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Knowing your fees will help interested organizations figure out if your organization is a good fit as a fiscal sponsor.\u00a0<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Formalize an application process<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Just like you\u2019d set up a\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/blog\/membership-application-form\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">membership application form<\/span><\/a><span data-preserver-spaces=\"true\">, put together an application process for interested projects or organizations! We recommend using a form so you can get all of the necessary information in one place.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Include some data fields like:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">The name of the project<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The people involved<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">A description of the goals and mission<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Rough timelines<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">What they hope for in a sponsorship<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Why they reached out to your organization<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">To build up your credibility and have interested sponsors find you, consider joining the\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/fiscalsponsordirectory.org\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Fiscal Sponsor Directory<\/span><\/a><span data-preserver-spaces=\"true\">!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Research the organizations you&#8217;d be sponsoring<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">The information you receive in the applications is essentially a\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/blog\/how-to-write-a-sponsorship-letter\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">sponsorship letter<\/span><\/a><span data-preserver-spaces=\"true\">. Just like sponsors would assess your organization before offering support, you\u2019ll want to assess prospective projects closely.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Your credibility (and finances!) will be tied to the projects you sponsor, so ask yourself:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Do the people seem professional and good to work with?<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Does the mission sound solid and aligned with my nonprofit\u2019s?<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">How will my own nonprofit benefit from this partner?<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Am I excited to work on this project?<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Don\u2019t be afraid to do some research on social media and LinkedIn, or check in with folks in your network. When it comes to fiscal sponsorship, it never hurts to have more information!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Hold a board vote<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Once you have an idea of who you\u2019d like to sponsor, bring the information to a\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/blog\/board-meeting-agenda\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">board meeting<\/span><\/a><span data-preserver-spaces=\"true\">. This is one more chance to iron out your logistics and make sure that absolutely everyone is on board. Plus, once the sponsorship is set, they can join you in giving the project leaders a big welcome!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Create a fiscal sponsorship agreement<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Contracts, contracts, contracts! Once you\u2019ve confirmed interest with the applicant, it\u2019s time to hand over your fiscal sponsorship agreement for signing. We highly recommend having as much on paper as possible to prevent future legal disputes.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">A few things to have in your agreement include the:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Introduction and background, identifying the sponsor and sponsored project<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Terms of the agreement<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Start date and duration<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Scope of services provided<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Financial arrangements (including the fee structure!)<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Budget and reporting information<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Compliance and legal obligations<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Intellectual property<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Amendment processes<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Termination clause<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Confidentiality and data protection agreements<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Insurance requirements<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Dispute resolution processes<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Representation and warranties<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Acknowledgement of entity<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Miscellaneous provisions<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Signatures<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">We highly, highly recommend seeking legal support when you draft your fiscal sponsorship agreement! This will help you make sure it\u2019s aligned with local laws and regulations, and adequately protect both parties.<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Keep communicating &amp; stay compliant!<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Check ins are the way to go when it comes to your relationship with sponsored organizations. Circumstances and needs change sometimes, and hearing about those changes early can help you amend your agreement as necessary.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Remember: it\u2019s the fiscal sponsor\u2019s responsibility to keep both parties legally compliant, or you can risk losing your own tax-exempt status. A\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.lawyers.com\/all-legal-issues\/all-cities\/all-states\/law-firms\/?s=nonprofit\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">nonprofit lawyer<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0or legal counselor is good to have on hand for any questions and concerns that arise!<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">Benefits &amp; Risks of Fiscal Sponsorship for Nonprofits<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">If you\u2019re still uncertain about whether nonprofit fiscal sponsorship is right for your organization, we suggest weighing a few pros and cons.<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Benefits<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">While it might seem like fiscal sponsorships are mostly for the sake of sponsees, there are several benefits for nonprofits.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Becoming a fiscal sponsor can help your organization:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Expand its network and build partnerships with the leaders of the future.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Enhance the impact of its mission\u2014and without directly managing it, if you go the independent route.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Strengthen the health of the nonprofit sector as a whole by sharing resources.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Attract your own financial sponsors with your community impact.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Gather some extra revenue through administrative fees.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Become leaders in your field and gain visibility.<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Ultimately, nonprofit fiscal sponsorship is its own charitable initiative. If you have the time and resources, this is an authentic way to make an impact!<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Risks<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Fiscal sponsorship has plenty of benefits, but it also comes with its own risks, including:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Legal and financial liability for any challenges that arise.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Damage to your reputation if any controversies arise from the sponsored project.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The loss of your tax-exempt status if any\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/blog\/501c3-violations\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">501c3 violations<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0occur.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Financial losses on the part of your organization if funds are mismanaged.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Mission drift between the sponsor and sponsored project.<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">While all of these risks exist and have real consequences, there are many things you can do to prevent them from arising. Clear legal agreements, strong communication, financial transparency and due diligence before accepting a sponsored project can mitigate most risks.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">Supporting Your Community as a Sponsor<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Nonprofit fiscal sponsorship is one of the most significant gifts you can give to emerging nonprofit organizations. Whether you\u2019re supporting a one-time project or helping a young organization take its first steps, sponsorship extends your community impact for years to come.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Curious about the tools that can help you manage sponsorships (and beyond!) more efficiently?\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wildapricot.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Connect with us<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0today to learn about how WildApricot\u2019s award-winning membership management software can reduce administrative burden as you continue to grow!<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the nonprofit landscape, the rising tide lifts all ships. Looking for the best way to support fellow charitable causes and organizations? Then fiscal sponsorship might be for you!\u00a0 In this post, we\u2019ll explore: What nonprofit fiscal sponsorship actually means for sponsors and projects The 3 most common fiscal sponsorship models The pros and cons&#8230; <a class=\"read-more\" href=\"https:\/\/www.wildapricot.com\/blog\/nonprofit-fiscal-sponsorship\" aria-label=\"Continue reading 2024 Guide to Nonprofit Fiscal Sponsorship: Models, Agreements &#038; More!\">Read More<\/a><\/p>\n","protected":false},"author":33,"featured_media":4006,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[4],"tags":[],"class_list":["post-4750","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fundraising"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>2024 Guide to Nonprofit Fiscal Sponsorship: Models, Agreements &amp; More! - WildApricot<\/title>\n<meta name=\"description\" content=\"Nonprofit fiscal sponsorship supports emerging projects and organizations. 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