Responsibilities of a Fiscally Sponsored Project

The fiscal sponsor relationship requires ongoing active participation from both parties. Regular communication, attention to detail, and holding each other accountable are critical. A project under sponsorship is responsible for understanding and conducting ethical business practices consistent with IRS regulations, all applicable laws, funder restrictions, and fiscal sponsor policies and procedures. Projects typically carry out programmatic activities that contribute or relate to the mission of the fiscal sponsor. If a project’s mission changes, it is imperative that the new mission also have a charitable purpose that remains compatible with that of the sponsor.

Projects are responsible for managing the day-to-day operations of their project and are typically responsible for fundraising to sustain their work. Projects share responsibility for careful financial management of their project. When monthly financial statements are provided, it is the project’s responsibility to read them carefully and make sure there are no errors. While fiscal sponsors handle insurance differently, most will require projects to participate in and contribute to business and liability insurance coverage under the fiscal sponsor's plan.

Projects and their fiscal sponsors must communicate openly and directly, transfer information in a timely and complete manner, and develop systems that are compatible and mutually-supportive. Regular communication and full disclosure of project activities are critical to risk management. The relationship between the project and the fiscal sponsor continues only when both the project and the fiscal sponsor agree that it is mutually beneficial to continue the relationship. Clear communication is also key at the end of the relationship—projects must let a sponsor know as soon as they are considering closing down or spinning off their project.