What is a Fiscal Sponsor?
A 501(c)3 organization, also called a non-profit, is a tax designation. It means the organization is exempt from federal income tax.
A fiscal sponsor is an arrangement between an established 501(c)3 non-profit organization and an individual, group or entity who needs administrative support regarding fiscal/financial needs: typically monetary donations and/or grants.
Generally, a fiscal sponsoring organization will support individuals & groups that align with their mission and vision through the following activities:
- Providing use of their 501(c)3 tax-exempt status to sponsored group to accept tax-deductible donations or apply for grants
- Accepting and administering donations on behalf of the sponsored group
Sometimes, the sponsoring organization will serve as the administrative “home” for the sponsored group and offer back-end organizational administrative support with things like website hosting, bookkeeping, and other capacity building needs.
The sponsoring organization may take a small percentage of donations or grant monies to compensate its administrative support. This is not always the case, but you should clarify this with the sponsoring organization. Sometimes, the sponsoring organization is simply happy to support groups that align with their mission and help them succeed without financial compensation.
Why have a Fiscal Sponsor?
Having a fiscal sponsor allows an individual and/or organization to accept tax-deductible monetary donations using their sponsors tax-exempt status and to apply for grants.
Without a fiscal sponsor, people can still make monetary donations to your efforts, but they won’t be tax-deductible. Generally, only nonprofit organizations are eligible to apply for grants unless they are designated for individuals.
Having a fiscal sponsor also allows a group to focus on their work in the community and not spend time creating another legal entity that requires management and oversight. Fiscal sponsorship can be temporary if a group intends to formally become its own nonprofit, but it can also be a long-term arrangement. This model is especially useful to all-volunteer organizations with limited capacity.
Sponsored groups may also benefit from affiliation with their Fiscal Sponsor when applying for grants, fundraising, or in other community efforts.
How to find a Fiscal Sponsor?
Southern Vision Alliance (www.southernvision.org) offers a comprehensive fiscal sponsorship program that includes supporting grassroots groups with legal accountability, finance support, administrative support, and operations support for community, educational, and/or charitable projects that align with our vision and mission but do not have their own 501(c)3 status. SVA provides both long-term and short-term/temporary fiscal sponsorship.
Becoming an SVA fiscally sponsored project:
- Must be located in the US South
- Must have an organizational or a distinct project budget
- Focus on organizing, activism, and long-term social change (not social service work)
- A clear understanding of the root causes of the problem you are working to resolve
- A priority for developing leadership from within the affected community
Otherwise, consider making a list of local non-profits who have a similar mission/vision as your project or program. When you approach your prospects make sure to have the following information:
- A clear explanation of your project: why is it needed, what are your goals, budget, etc.
- Why it would benefit the organization to work with you or how would it help their mission
- Clarity on what you are asking from them
- Propose an MOU (informal agreement on paper) to solidify your agreements