Fiscal sponsorship has evolved as an effective and efficient mode of starting new nonprofits, seeding social movements, and delivering public services. Fiscal sponsorship generally entails a nonprofit organization (the “fiscal sponsor”) agreeing to provide administrative services and oversight to, and assume some or all of the legal and financial responsibility for, the activities of groups or individuals engaged in work that relates to the fiscal sponsor’s mission.
Fiscal sponsors are tax-exempt, charitable ventures that, according to a recent IRS report "have the ability to receive charitable contributions for specific projects, the infrastructure to ensure compliance with applicable federal and state laws and adequate internal controls to ensure that the funds will be used for the intended charitable purposes." Simply stated, fiscal sponsors place responsibility for implementing programs in the hands of project leaders while ensuring appropriate fiduciary oversight.
Some nonprofits engage in fiscal sponsorship activity on an occasional basis. This practice carries certain inherent risks. Nonprofits should engage in fiscal sponsorship only if their executive leadership and boards of directors are fully aware of the obligations and liabilities they legally assume as fiscal sponsors.
Fiscal sponsors assess an administrative fee based on a percentage of a project's revenue or expenses. These fees can range based on the services that are provided and the complexity of grants to be administered.