Updated: May 28, 2021
Engaging a fiscal sponsor has its pros and cons. If you are a nonprofit leader or serve on a Board of Directors and are thinking about engaging a fiscal sponsor, you need to know the ins and outs of how to do it.
Here are the eight things you need to know before seeking a fiscal sponsor.
#1. What is a fiscal sponsor?
As shared in the Fiscal Sponsorship: a 360 Degree Perspective created by a Trust for Conservation Innovation, a fiscal sponsor is "a nonprofit organization that provides fiduciary oversight, financial management, and other administrative services to help build the capacity of charitable projects."
This means if you are applying for a grant, fiscal sponsors are generally the lead applicant and are ultimately responsible for the grant.
#2. What are the fiscal sponsors
responsibilities? The fiscal sponsor assumes responsibility for the grant. They receive the proceeds and sign the grant agreement with the funder. They complete all grant reports and any other obligations required by the funder.
#3. What would be the responsibilities of our organization?
The relationship between your organization and the fiscal sponsor is outlined in a memorandum of understanding or MOU. An MOU is a written agreement outlining the terms of the relationship and signed by representatives from your organization and the sponsoring organization. Most MOU’s address details such as how funding will be distributed between your two organizations, marketing and branding, and each organization’s responsibilities in executing the project.
#4. How do I find a fiscal sponsor? Generally, a fiscal sponsor is another
organization in your field doing similar work, although it does not have to be. You can find a fiscal sponsor within your network or through affiliations. Connecting with a fiscal sponsor is a simple as contacting the organization, sharing the potential project, and assessing their availability and interest in serving as a fiscal sponsor. Remember, they would be agreeing to take on the responsibility of the grant and would need to consider any risks involved.
#5. Where does my organization fit in as far as writing a grant?
Well, funds are distributed to the fiscal sponsor, and then the fiscal sponsor distributes the funds to your organization as described in the MOU. This information should also be included in the grant agreement between the fiscal sponsor and the funder. Most funders will refer to your organization as a "subawardee" or "sub-recipient.” Generally speaking, when you complete the reporting for your
program, you would forward your report to the fiscal sponsor who will add their reporting (depending on their role - not all fiscal sponsors participate in program delivery) and forward a combined report to the funder, although this varies.
#6. What situations would warrant engaging a fiscal sponsor?
The number one reason to engage a fiscal sponsor is your organization doesn't have a letter of determination, better known as a 501(c)(3). In this case, you would find a fiscal sponsor with a 501(c)(3) so that you are eligible to apply. Another reason is to show the funder you have the capacity to execute and, more importantly, administer the grant by having an organization with more experience in these areas to provide this support.
#7. What are the pros of engaging a fiscal sponsor? Engaging a fiscal can make your
application more competitive by demonstrating improved capacity through a more experienced organization. It can open the doors to grant opportunities that your organization may not previously be eligible to apply.
#8. What are the cons of engaging a fiscal sponsor?
Some fiscal sponsors can charge a fee of as much as 10% in exchange for the time, energy, and staff hours to manage the grant. Fiscal sponsor relationships can go south for various reasons, so be sure to engage a potential organization you trust.
Overall, fiscal sponsor relationships can be beneficial and work well after considering all of these factors. Now you and your organization are equipped with the tools to make a sound decision.
Shavonn Richardson, MBA, GPC is Founder and CEO of Think and Ink Grant Consulting™. She is a grant professional, an active speaker, and serves on the Board of Directors for the Grant Professionals Association.
Shavonn earned a BBA from Howard University and an MBA from Emory University. She earned the GPC (Grant Professional Certified) credential from the Grant Professionals Certification Institute in 2020.
Learn more at www.thinkandinkgrants.com