Being Fiscally Sponsored: Understanding Your Fiscal Sponsorship Agreement

As instability and attacks continue, we expect to see an increase in groups either becoming a fiscal sponsor or looking to be sponsored.

In even the most simple sponsorship situations, we’d recommend an agreement between both parties. It’s a legally binding document that sets expectations between you and your fiscal sponsor and, in this post, we’ll cover key areas of the agreement as a primer. We’d also recommend getting legal support in finalizing the agreement to ensure all areas are covered (including any state or local considerations).

Note: With some fiscal sponsors, there may be an admin manual (documenting procedures for setting up contracts, credit cards, etc.) for sponsees along with the agreement. It would be wise to ask to review any other admin manuals/procedure documents if you are exploring fiscal sponsor options.

Purpose & duration of the relationship

• What is the mission or program being sponsored?
• How does it align with the sponsor’s mission?
• How do changes or updates to the program get communicated to the sponsor?
• What’s the term of the agreement or relationship
• How often the agreement is reviewed & updated

Legal Status and Control

• Details the type of fiscal sponsorship – whether it’s a pass through, full control or some combination
• Make sure it’s clear who owns the work, name, and intellectual property.
• Board set-up guidelines – if you need your own independent board or advisory board
• Any cost sharing set up for c3/c4 or other related entities

Financial Management & Reporting

• How are donations and grants reported and grant agreements signed?
• Who is responsible for signing contracts for vendors, leases, etc.
• What’s the employment, payroll & benefits structure (if applicable)
• What are your required cash levels and how are those monitored?
• What’s the standard reporting package and how often do you receive them?

Fees and Administrative Support

• Details of your fiscal sponsor fee and how often it’s assessed
• Know what services this fee covers (e.g., bookkeeping, HR, contract, insurance, compliance)
• Any additional or special situations for extra fees
• How often are fees reviewed & adjusted

Fundraising Guidelines

• Can your project solicit donations directly, and how is this communicated to the sponsor?
• How should checks be written and funds allocated?
• Who is responsible for submitting proposals and/or any reporting/thank you letters to funders?

Insurance and Liability

• Is your project covered under the sponsor’s insurance?
• What liabilities are you protected from—or responsible for?

Termination Clause

• Under what conditions can the agreement be ended?
• How does the transfer of remaining funds or assets happen if the relationship ends?

Final Tips

• Ask questions. If anything in the agreement is unclear, don’t hesitate to check with your sponsor or a legal support.
• Keep communication open. A good relationship with your fiscal sponsor is just as important as the agreement itself.
• Keep good files. Maintain clear records of communications, donations, expenses, reports, your projections.
• Plan for the future. If you hope to become your own nonprofit, think through your timeline and check with your sponsor about what that transition might look like.