Note: This is not one of Cathy Keeps Books’s areas of expertise. Re-read our disclaimer at the bottom of the page, and consult a lawyer.
Fiscal sponsorship is a way for an established nonprofit, which glories in the posesssion of its own IRS 501(c)(3) tax-exempt designation, to help a smaller and/or newer organization with its fundraising. In effect, the established nonprofit “lends” its 501(c)(3) status the the smaller org, which then can legally fundraise, offer tax deductions to donors, and (often) meet funder requirements. Here are some important things to know about fiscal sponsorship:
- The missions of the two organizations should align.
- The sponsor typically charges a fee, often a percentage (e.g. 3%) of income received.
- The sponsor is the legal recipient of the funds and retains control over their use.
I was going to post a bunch of links, but here’s pretty much the only one you need: Fiscal Sponsorship for Nonprofits, at the National Council of Nonprofits.
EDIT, July 2019: Since fiscal sponsorship is becoming more and more pertinent in my own practice, here are some other awesome links!
Fiscal Sponsorship: Six Ways To Do It Right—A Synopsis (pdf) This is basically the ur-text of fiscal sponsorship.