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We were asked by an organization that does not have an 501(c)(3) status if we would be a fiscal sponsor. Do you recommend this business opportunity for our non-profit?


The BIDaWIZ Team's Answer:

If your non-profit becomes a fiscal sponsor, you will likely be responsible for all activities of the other for profit entity. This includes the responsibility to comply with the terms of the grants awarded and all operational activities. In addition, all of the financial activities of the initiative would have to to be reported on the fiscal sponsor's 990.
It is important to note the type of arrangement in place with the fiscal sponsor. There is the Model A, which essentially means that the fiscal sponsor will control all aspects of financial reporting and personnel. The Model C keeps the two organizations very separate and requires significant reliance on each other's financial reporting systems. However, the fiscal sponsor is ultimately responsible for all actions.
In many cases, the fiscal sponsor will charge a fee as a % of gross receipts or a flat fee.
These engagements typically make sense when the two entities know each other well and their mission is similar. If there isn't a shared vision or infrastructure in place, then it can be trouble. The non-profit could be at risk to lose their non-profit status if this is not the case.
References: IRS Publication 557 & IRC Section 501(c)(3)
State: New York

The BIDaWIZ Team



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