by Marie Palacios
Today we are going to jump in and talk all about fiscal sponsors.
Is your vision for a special community program coming to life?
Are you ready to take that leap of faith and partner with a local church or established nonprofit?
Last week we outlined the pros and cons of starting a new nonprofit and suggested that prospective founders explore forming a strategic partnership instead of blindly diving into a new nonprofit endeavor. Check it out here: Seeking Nonprofit Status for a New Ministry
It is important to note the word “EXPLORE.” In the nonprofit sector, “one size does not fit all!” Funding for Good strives to offer a variety of educational resources that are practical and based on best practices, but at the end of the day each of you must exercise due diligence and determine what path your organization will take.
If you are hoping to secure a fiscal sponsor for your program it is important that you understand what a fiscal sponsor IS and what one DOES!
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.
Since churches already hold 501(c)(3) status and are passionate about expanding their ministry beyond their own walls, they are often willing to become a fiscal sponsor for an outreach program that may lack exempt status. This is often a great alternative to launching your own nonprofit and allows you to seek grants and solicit tax-deductible donations under your sponsor’s exempt status.
Fiscal sponsorship is not a step to be taken lightly since both parties present a potential liability for the other.
Implement the following strategies to reduce the risk of conflict and increase the probability of a successful partnership:
1. Explore the shared vision of the sponsor and sponsee.
- Do you share core values?
- Do you share a common vision for the community?
- How will the program be marketed in the community? (As an outreach ministry of the church or with an independent logo and program name?)
- Who will unofficially “own’ the program? In other words,…if the partnership doesn’t work out, will the church continue to the claim the program or are you free to take the program you birthed elsewhere?
2. Determine the capacity of both parties
- Do both parties have qualified personnel who can collaborate and complete the administrative duties required?
- Are both parties willing to dedicate the time and energy to maintaining an effective partnership?
- Who will be responsible for managing the program? (volunteer, paid staff)
- Who will provide oversite for the program? (a special advisory board, the church board, or a combination of both)
3. Clarify financial responsibilities and restrictions
- Do both parties have a realistic operating budget and defined revenue streams?
- How will grants and contributions to the “program” be managed? (Grants will have to be submitted under the fiscal sponsors’ name, using their budget, which means communication is key!)
- Who is responsible for proposing and approving the program budget?
- What happens if the program doesn’t meet fundraising goals? (Will the church offset some of the admin or assist with cash flow or not?)
- How will you ensure that the fiscal sponsor distributes all restricted program funds in a timely manner? (grants, contributions, sponsorships, etc.)
- How will the fiscal sponsor and program managers collaborate on outreach/fundraising efforts? (messaging, donor prospecting, acknowledging contributors, etc.)
4. Evaluate goals and objectives of both parties.
- Will both parties establish joint or overlapping annual goals?
- How will both parties contribute to data tracking and reporting processes?
5. Implement Policies and Procedures to Protect both Parties
- Will the fiscal sponsor need to purchase additional insurance coverage to cover program activities? (transport, services, events, etc.)
- How will program staff and volunteers be screened, hired, fired, trained, and evaluated?
- Who will process program complaints, potential allegations, etc.?
- How will program and/or conflicts between both parties be resolved?
At the end of the day, merging a new program into an existing organization is a marriage of sorts. Both parties should walk in with eyes wide open and seek to establish effective communication so that the relationship can thrive.
Finally, a written fiscal sponsorship agreement is a MUST!
Be sure to outline the roles and responsibilities of both parties, fiscal management policies, operating principals, shared goals, key expectations, conflict resolution policies, and a clear process to dissolve the fiscal sponsorship agreement and distribute program assets should it become necessary.
Keep in mind that all contributions…whether they be financial, materials, equipment, or property that are gifted to a tax-exempt organization must remain in a charitable organization, so you might not be able to take everything with you if you walk away from the partnership!