Get straightforward answers to the most frequently asked questions about nonprofit fiscal sponsorships.
Q: What is a fiscal sponsor?
A: A fiscal sponsor is an organization that offers the benefits of its legal and tax-exempt status to another person, group, or project that is conducting work in line with the sponsor’s mission. Specifically, a fiscal sponsor can accept tax-deductible contributions on behalf of a nonexempt project, essentially allowing a project that does not have tax-exemption to act as if they do.
Q: Who needs a fiscal sponsor?
A: New organizations that do not yet have their own government registration as a charity often rely on fiscal sponsors to get started. Sometimes, organizations that have their own valid registration will also use a fiscal sponsor to expand their capabilities or to help manage administrative processes.
Q: How do fiscal sponsorships work?
A: There are six widely accepted nonprofit fiscal sponsorship “models” that govern different relationships between a fiscal sponsor and its projects, defined by the variation in degree to which the project retains financial independence from their fiscal sponsor. This chart describes each of the six models.
Q: What do beginners need to know about the different fiscal sponsorship models?
A: Under some fiscal sponsorship models, referred to generally as comprehensive models, the sponsor fully absorbs the sponsored project, including its employees and administrative functions. Of the six models, the two most commonly utilized are Model A and Model C, or Comprehensive Fiscal Sponsorship and Pre-Approved Grant Relationship Fiscal Sponsorship. This resource describes these models in greater detail.
Q: What is required to maintain a responsible fiscal sponsorship?
A: There are several requirements for a fiscal sponsor relationship to avoid violating IRS guidelines. One of the most important aspects of a well-established fiscal sponsorship is regular reporting from the project to the fiscal sponsor on the status of their work in relation to the funds received. GlobalGiving helps projects in our online community fulfill this requirement through our regular project reporting requirements. These reports are important for both confirming that funds have been used for a charitable purpose (another requirement of a fiscal sponsor relationship), as well as keeping donors informed of how their contributions have been utilized. Other fiscal sponsors may require different or additional reporting.
Q: How do I find a fiscal sponsor if my organization is not registered as a charity?
A: One of the main requirements of a good fiscal sponsor relationship is that your project is in line with the fiscal sponsor’s mission. Identifying an organization that may be a good fit to serve as your fiscal sponsor will require being intentional about determining a fiscal sponsor that has a mission that includes the work that your project aims to address. A directory of U.S.-based organizations offering fiscal sponsorship is maintained here, and you are able to search for a fiscal sponsor using a keyword based on the key focus of your project.
Q: Are GlobalGiving projects fiscally sponsored?
Featured Photo: Empower & Transform the Lives of Those in Poverty by Opportunity International
A: Yes, but not many. Only projects run by organizations that have not yet been registered as a charity by their local government are fiscally sponsored. GlobalGiving identifies this requirement during our online application process. At present, less than 2% of organizations with active projects in our global community are fiscally sponsored.