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Fiscal Sponsorship – Are You Ready, Willing and Able?

Last week we talked about the role fiscal sponsors play in the nonprofit world and why they are the right model for some organizations. Today, we’re exploring the world of being a fiscal sponsor. Should your organization think about serving as a fiscal sponsor?

Has your organization or agency been asked to serve as a fiscal sponsor?

Are you thinking about it but you don’t know how to do it or how to assess if you’re ready?

If the answers to these questions are yes, let us help you determine your readiness and willingness to assume this important role by using our handy-dandy step-by-step guide.

First, you will need to see if you are ready to take on fiscal sponsorship by assessing the capacity of your own administrative staff to handle the additional work. Ask yourself these 2 questions:

  • Does your current administrative staff have the time and skills required to manage a whole new set of bookkeeping and document reviewing tasks?
  • Does your current administrative staff have the skill set necessary to manage relationships with a variety of people from the potential fiscally sponsored project who may be new to bookkeeping and administrative tasks?

If the answers are no, then you are not ready to assume this responsibility.

If the answers are yes, then ask yourself these 3 questions about your own accounting practices:

  • Are you able to produce and review an accurate balance sheet and budget to actual report monthly?
  • Do you have clear policies in place for staff to request checks and reimbursements?
  • Are your procedures in writing so they can be easily communicated to a potential fiscally sponsored project?

A no answer means that you may not be ready now to assume this responsibility, but you could if you completed these tasks.

If you answered yes, you get to move on to the next steps. (Note: Here’s where the staff capacity question comes into play.)

As the fiscal sponsor, do you and your administrative staff have the capacity to:

  • Segregate the fiscally sponsored projects’ money from yours and from each other in your accounting system
  • Develop a method of maintaining an ongoing balance for each fiscally sponsored project
  • Communicate the ongoing balance to each fiscally sponsored project
  • Provide monthly reports of income and expenses to each fiscally sponsored project
  • Decide who is responsible for issuing grant reporting, you or the fiscally sponsored project
  • Inform the project of your decision about this responsibility
  • Be flexible about changing the chart of accounts if it would make reports to the fiscal sponsorship project more useful and useable
  • Decide if you will allow the groups to lobby
  • Develop a system to stay within IRS defined legal lobbying limits, if you will allow lobbying,
  • Inform the projects of your decision about lobbying

If you and your staff don’t have the capacity now to undertake these tasks then go no further. But if you are able to develop the capacity then you could be ready in the future.

If you can do all of the tasks listed above, these last few questions can help you decide if you are willing to take on this new role.

  • How are you going to make sure that your fiscally sponsored projects don’t get into debt?
  • How do you make sure you can monitor their budgets?
  • Do you have a contingency plan?
  • Can you cover their cash flow problems?

If you can answer these questions by developing best practices and processes then congratulations you are ready, willing and able to be a fiscal sponsor. Aren’t you glad you asked?

If you need help to get ready, Fun with Financials is here to assist. All you have to do is ask.

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