Is it for us? Where do we begin?
Are you considering entering into a fiscal sponsorship relationship? Whether you want to sponsor other organizations, or be sponsored yourself, there are questions for both sides to consider.
Below are questions to think about as you embark on the process of preparing for such a partnership.
Questions for sponsors:
- Is the project prepared to raise and budget funds for the implementation of programs?
- Does the project meet the financial break-even point for independent status versus fiscal sponsorship at a $2 million budget size?
- Has the project determined if it wants sponsorship for an interim period, or indefinitely? How does this align with your goals?
Questions for projects looking for sponsors:
- Does the fiscal sponsor follow the National Network of Fiscal Sponsors’ (NNFS) guidelines for best practices?
- Does the fiscal sponsor's Board of Directors accept responsibility for legal oversight and fiduciary responsibility of sponsored projects?
- Is the fiscal sponsor financially sound and does it follow the appropriate standards of financial management, transparency, and integrity?
- Is the sponsor able to maintain internal control and compliance systems in order to comply with terms of grants and contracts, as well as laws, regulations, and accounting standards?
- Does the sponsor have a clear policy based on IRS and state guidelines to determine whether individuals working on the sponsored project should be paid as a benefited employee or an independent contractor? What is it?
- What is the sponsor's process for intake and spin-off of projects?
Questions for both parties:
- Is there alignment between the mission of the project and the mission of the fiscal sponsor?
- Is the fiscal sponsor and/or project seeking sponsorship willing to undergo lengthy and careful due diligence to ensure logical partnerships with reputable parties?
- Are the implications of the chosen model of fiscal sponsorship fully understood by both parties, including legal relationships, liabilities, ownership of results, and tax filing responsibilities?
- Does the project have existing contracts and grant funds that need to be terminated or transferred to the sponsor?
- Is there a written agreement or MOU between the project and the fiscal sponsor? Does it clearly and thoroughly address the following areas:
Reporting & Accounting
- How the fiscal sponsor will provide programmatic and financial oversight of the project to ensure that it is being carried out according to the agreement and any other contracts with funders?
- How revenues and expenses for the project will be accounted for within the sponsor's accounting system?
- If the sponsored project will receive regular reports on the financial accounting of the sponsored funds, and how often?
- If the fiscal sponsor will track, submit, and maintain files of grant reports with the project's grantors?
- Who takes ownership of all assets, including intellectual property, for the duration of the sponsorship? Who takes ownership once the sponsorship ends?
- If the sponsor is responsible for strategic and programmatic decisions, or if that will be left to the project's Advisory Board and staff?
- Who will be responsible for adhering to regulations, requirements, and other issues related to volunteers, interns, and students?
- What services to the project are to be included? What services, if any, would be available for an additional fee?
- If there is interest on advance funding that isn't spent down right away? What the sponsor's policy is on its use?
- What the fiscal sponsor will charge for the administration fee? Which services this fee will cover, and which will be an additional cost? If the fee is higher for government grants?
- The possibility of the project eventually becoming an autonomous nonprofit organization?
- What type of notice is required by either party to terminate the agreement?