fiscal_sponsorship v1.0.0

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name: "fiscal_sponsorship" description: "Set up and run a fiscal sponsorship that holds up: choose among Colvin models A to F and the single member LLC variation with a worked comparison, test sponsor and project duties, price the fee on a stated rate and basis with a tested calculator, lock agreement terms that protect both sides with a clause checklist, and report on a monthly, quarterly, and year end pack a sponsor can file from. Use when a charitable project needs a sponsor, when a 501(c)(3) is asked to sponsor a project, when choosing or changing a model, or when a sponsorship is drifting on fees, control, or reporting."

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Fiscal Sponsorship

Purpose

Route charitable money through a sponsor that already has 501(c)(3) status, without turning the sponsor into a pass through or the project into a hidden program nobody governs. A fiscal sponsor is a nonprofit that provides fiduciary oversight, financial management, and other administrative services to a charitable project. The project gets to receive tax deductible gifts and grants that require exempt status. The sponsor takes legal responsibility for the funds. That responsibility is the product. Everything in this skill protects it.

This skill covers choosing a model, vetting both sides, pricing the fee, writing the agreement, and running reporting and exit. It is general information for the United States, not legal or tax advice. A sponsorship that handles staff, government grants, work with minors, or large sums needs counsel for the sponsor and, where interests differ, separate counsel for the project.

Workflow

1. Test whether sponsorship fits at all

Proceed only when all four are true:

• The project work is charitable and furthers the sponsor own exempt purposes. Identical missions are not required. A real fit is.
• The project could qualify for exemption on its own merits, even if it has not applied. Sponsorship is not a way to make a non charitable activity deductible.
• The sponsor has capacity to supervise: staff time to review budgets and reports, accounting that can track a separate restricted fund, and insurance that covers the activity.
• Both sides accept sponsor control in writing. If the project wants the sponsor name and deduction with no sponsor say over the money, stop. That is conduit risk, covered in step 3.

Consider plain alternatives first and say why they fail or fit: forming an independent nonprofit, a fiscal agency or back office contract with no exempt status passed through, a direct grant to an existing charity that will run the work itself, or doing the project inside a sponsor as its own program with no separate project identity.

2. Choose the model before discussing fees

Work through references/model-comparison.md. The model names come from Gregory Colvin, Fiscal Sponsorship: 6 Ways to Do It Right: Model A direct project, Model B independent contractor project, Model C preapproved grant relationship, Model D group exemption, Model E supporting organisation, Model F technical assistance. A single member LLC owned by the sponsor is a variation in current use.

Decide on the facts, not the label a party prefers:

• No separate entity, sponsor employs staff, sponsor holds all money and signs contracts, sponsor bears liability: Model A, also called comprehensive.
• Sponsor owns the project but a contractor runs it: Model B. Put classification and compliance ownership in the contractor agreement.
• Project keeps its own entity, staff, insurance, and books, and receives grants from the sponsor for approved charitable purposes: Model C.
• Chapters under a central organisation tax status: Model D. A charity created to support named charities: Model E. Back office help for a charity that already has exemption: Model F, which involves no sponsor discretion over spending and is sponsorship in name only for many practitioners.
• Higher risk activity that needs its own legal shell inside the sponsor structure: the single member LLC variation. For federal income tax an LLC with an exempt sole member is treated as part of that member, while it stays separate for liability if formalities are kept, and separate for employment tax and some state law points.

Record the choice and the facts that force it in one page. Most live arrangements are Model A or Model C, and most disputes start with a Model C letter over Model A facts, or the reverse.

3. Hold the control line that makes deductions work

Build every later step around the conditions that keep contributions deductible:

• Gifts and grants are made to the sponsor, a 501(c)(3) organisation, not to the project.
• The sponsor retains discretion and control over the funds. It can decline, pause, or redirect spending that does not further its exempt purposes.
• Funds are used for charitable projects that further the sponsor own exempt purposes.
• The sponsor maintains records that substantiate the use of funds for charitable purposes.

A sponsor that merely receives money and passes it on with no review is a conduit. Where those elements are missing, a contribution earmarked for the project risks being treated as a direct gift to a non exempt project, with deductibility lost and the sponsor exemption put at risk. Control does not mean the sponsor picks the program. The National Network of Fiscal Sponsors puts it this way in practice: the sponsor board holds legal oversight and fiduciary responsibility, while program decisions are normally delegated to the project advisory board and staff. Write that split down. Program judgment with the project, money judgment with the sponsor, and a stated path when they disagree.

4. Vet both sides

Project vetting the sponsor:

• Read the sponsor recent Form 990 filings and audited financials where they exist. A weak sponsor puts every project fund at risk.
• Ask how many projects it sponsors, who reviews reports, how fast disbursements move, and whether project funds are tracked as separate restricted funds in its accounting. The National Network of Fiscal Sponsors funder questions treat regular, timely, accurate accounting of sponsored funds as the test of a reliable sponsor.
• Ask for its sponsorship agreement, fee schedule, exit record, and references from a project that left. A sponsor that will not show its exit terms before entry is telling you the exit terms.
• Confirm insurance covers the project actual activities, not just the sponsor usual ones.

Sponsor vetting the project:

• Read the project purpose, budget, lead people, prior funding, and any prior entity or compliance history.
• Test the charitable purpose on paper: who benefits, how eligibility is decided, what a typical expense looks like, and what private benefit, if any, flows to founders. Reasonable pay for real services is workable. Open ended benefit to insiders is not.
• Check capacity: who keeps receipts, who writes reports, who covers the work if the lead leaves.
• Decide approval at the level the sponsor bylaws require, often the board or a delegated committee, and minute the approval, the model, and any conditions before funds move.

5. Price the fee from scope, in numbers

Never quote, accept, or publish a single standard rate. Published sources disagree because scope disagrees:

• The National Network of Fiscal Sponsors project guidance gives a general range of 9 to 15 percent, calculated as a percentage of project revenues or of expenses, and notes a higher percentage is common for government grants.
• Its funder guidance says allocations range from a token amount to 25 percent, with an average around 10 percent, taken in some houses on receipt and in others as expenses are incurred.
• Hartford Foundation Fiscal Sponsorship 101 puts a regrant only Model C fee at under 5 percent in some cases, and Model A at 5 to 15 percent, because the sponsor provides more and carries more risk, with extra charges possible for insurance, legal advice, benefits, and other services.

So price from a scope list: bookkeeping and fund accounting, donor acknowledgment, grant reporting, payroll and benefits, insurance, audit and Form 990 share, contract and legal review, disbursement review, and staff time for supervision. For each item mark sponsor, project, or outside vendor, then set the rate, basis, minimum, and flat charges that cover the sponsor items.

Run every proposal through the calculator and attach the output to the agreement as a schedule:

python3 scripts/fee_calc.py charge 200000 --rate 9 python3 scripts/fee_calc.py compare 200000 --rates 5,9,15 python3 scripts/fee_calc.py charge 8000 --rate 9 --minimum 1200 --onetime 500

The worked examples in references/reporting-pack.md cover a revenue basis fee, a pass through excluded from the fee base, a minimum that raises the effective rate on a small project, and a published sponsor rate on an expenses basis. A small project lives or dies on the minimum and flat charge case, not on the headline rate.

In a funder proposal, budget the fee as a visible line with its rate and basis, in the same words as the agreement. A fee a funder discovers later reads as a hidden cut, even when it is fair.

6. Lock the agreement before any money moves

Work references/agreement-checklist.md line by line. No fundraising in the sponsor name and no spending before signature and the start date.

Terms that protect both sides, and that cause the most damage when missing:

• Model, purpose, and activities in and out of scope, so later spending can be tested against words both sides signed.
• Sponsor discretion and control, donor rules, and the restricted fund definition.
• Fee clause as numbers: rate, basis, timing, minimum, flat charges, government grant rate if different, fee change notice, and treatment of fees on unspent funds at exit. There is no uniform field practice on that last point, so the agreement has to carry the answer.
• Employment and classification, contracts and signing authority, insurance, and the compliance split, including who owns Form 990, audit, state charitable solicitation registration, and each grant report. The sponsor is grantee of record for grants made to it.
• Intellectual property and assets. Under comprehensive sponsorship the sponsor is owner during the relationship, and a well drafted agreement holds assets for the exclusive benefit of the project and moves them with the project on an approved exit to an independent 501(c)(3) or a new sponsor. Under Model C, intellectual property typically stays with the project. Silence here is the most common source of exit fights.
• Interest on fund balances, bank account position by model, deficit rule, reporting calendar, sponsor remedies short of termination, notice period, immediate termination triggers, and exit mechanics, including where remaining funds may go. Remaining funds go only to a qualified charitable successor that can carry the purpose, or stay with the sponsor for its charitable purposes. They never revert to founders personally.
• Existing contracts and grants: assignment or termination on entry, and funder permission where unspent grant funds move to a new sponsor on exit.

7. Set up the fund and the first 30 days

• Open the restricted fund in the sponsor accounting with the project code, approved budget, fee rule coded as written, and disbursement approvers named.
• Issue the project a one page money guide: how to request a disbursement, what document proves what, payment timing, what never to commit before approval, and who to call about a doubtful expense. Most control failures are process failures by people who were never told the process.
• Give donors and funders one correct payee instruction: legal name of the sponsor, fund or project designation line, and where to send it. Correct any project material that names the project as the recipient or calls the project itself tax exempt. A sponsored project is not exempt. Its sponsor is.
• Calendar every grant report, sponsor report, registration renewal, and insurance date from the agreements, with an owner for each.
• Under Model A, complete payroll setup, worker classification review, volunteer screening, and insurance confirmation before work starts, not after the first incident. Classification is a matter of law, not a preference the parties can choose.

8. Run the sponsorship month to month

Follow references/reporting-pack.md.

• Sponsor sends a monthly fund statement with a rollforward, the fee as its own line with rate and basis, restricted balances by grant or donor, and pending disbursements with reasons. Reproduce the rollforward with: python3 scripts/fee_calc.py rollforward --beginning 12000 --receipts 200000 --fee 18000 --disbursed 164000
• Project sends its narrative and financial report on the agreement schedule, with budget against actual, grant by grant balances, an evidence index, and compliance notes, including fundraising in any new state and any doubtful expense flagged by the project itself.
• Sponsor review is a real step with a name and a date: reviewer checks charitable purpose, budget line, documents, and fund balance, then approves, queries, or declines. File the decision. A Model C sponsor does not release the next grant tranche before the prior tranche is reported, unless a timed exception is written in the agreement.
• Hold a quarterly review covering reconciliation to the sponsor ledger, forecast to year end, deliverables against every open grant, and one named risk with the step already taken against it.
• Escalate early and in the order the agreement states: added reporting, added approvals, spend pause, then termination. A sponsor that jumps to termination for a first late report, or that never escalates at all, will lose good projects or keep bad ones.

9. Handle changes without rewriting history

• New activity, new state, new funder type, first employee, first vehicle, work with a new vulnerable group: each is a change notice to the sponsor before it starts, with an insurance and compliance check and a written approval or decline.
• Budget changes follow the ladder in the agreement. Move money inside the approved latitude freely, record it in the next report, and get approval first outside it.
• Fee or model changes are amendments: signed, dated, and applied from a stated date forward. Never apply a new rate to money already received under an old rate unless the signed agreement clearly allows it and counsel has reviewed that clause.
• If the project applies for its own exemption, tell the sponsor at the point of filing, not at approval. The National Network of Fiscal Sponsors treats ease of entry and exit as a benefit of sponsorship, and experienced sponsors have intake and spin off processes. Use theirs.

10. Exit clean, or renew on purpose

Start exit work at least one full reporting cycle before the end date:

• Choose the successor test first: independent exemption obtained, a new sponsor signed, the sponsor absorbs the work as its own program, or the project winds down. Remaining funds may move only to a successor that can carry the charitable purpose, with funder consent where grant terms require it.
• Set final dates: last receipt, last disbursement request, final project report, final sponsor statement, and the transfer date for funds, assets, intellectual property, data, and lists as the agreement provides.
• Close the people side under Model A: final payroll, benefits end dates, accrued leave treatment, and contract assignment or termination, each in writing.
• Keep records access alive for the survival period in the agreement. The sponsor may need project records for an audit or a grant report long after the project has left.
• If renewing instead, re run the agreement checklist, re price the fee from current scope and volume, and sign a dated renewal. A sponsorship that continues on an expired agreement continues with expired protections.

Output Contract

A sponsorship set up or repaired with this skill produces:

• A one page model decision note: facts, model chosen, models rejected and why, dated and signed by both sides.
• A vetting record for both sides, with the documents read and the conditions set at approval.
• A signed agreement that passes every line of references/agreement-checklist.md, with the fee worked example attached as a schedule.
• A fee calculation for the expected first year revenue and for a small revenue case, run with scripts/fee_calc.py, showing rate, basis, minimum, flat charges, net to project, and effective rate.
• A one page money guide for the project and a correct payee instruction for donors and funders.
• A reporting calendar and a current monthly fund statement and project report in the form in references/reporting-pack.md, reconciled to each other.
• A change and exit file: change notices with decisions, and at the end, final statements, transfer records, and a records access note.

Operating Rules

1. This skill is general information, not legal or tax advice. Get counsel before signing, before a model change, before handling government grants or staff under a new model, and before any disputed exit.
2. Never describe a sponsored project as tax exempt, and never let a donor write a check, grant agreement, or acknowledgment in the project name when the sponsor is the recipient. The deduction runs through the sponsor or it does not run at all.
3. Never present a fee range from one source as the standard. Rates in this skill are tied to their sources and to scope. Quote a fee only as rate plus basis plus minimum plus flat charges, for a named sponsor and project.
4. Control must be exercised, not just written. A sponsor that cannot show reviews, decisions, and records for a project does not have discretion and control over it in any sense that will help with a regulator or a funder.
5. Keep project funds restricted as directed. Do not blend grants, do not borrow across projects, do not cover a deficit in one fund with a surplus in another, and do not spend past a fund balance.
6. Label every example. The projects, people, and amounts in the references are fictional worked examples, except the named published sponsor rate in references/reporting-pack.md, which is identified by sponsor and source. Never present a worked example as a real sponsorship.
7. No election campaign intervention through sponsored funds, no private benefit beyond reasonable pay for real services, and no spending outside the signed purpose. Flag a doubtful expense before it is paid, not in the report after.
8. Write plainly in every sponsorship document. No em dashes. If a project lead cannot explain the fee, the control clause, and the exit terms back in their own words, the documents are not finished.