WHAT IS A FISCAL SPONSOR?
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. (Source: National Council of Nonprofits)
WHAT DOES A FISCAL SPONSOR DO?
The role of the fiscal sponsor can include performing many different administrative functions on behalf of the sponsored organization or program, including taking on the responsibility of receiving and administering charitable contributions on behalf of the sponsored organization. Some fiscal sponsors do a lot more, such as performing back-office functions.
The fiscal sponsor charges an administrative fee for its services, which is usually a percentage of the budget of the sponsored organization or program. Using a fiscal sponsor satisfies IRS requirements as long as the fiscal sponsor maintains the right to decide, at its own discretion, how it will use contributions. Maintaining control over the donated funds is a requirement of a legitimate fiscal sponsor arrangement. (Source: National Council of Nonprofits)
WHY CHOOSE FISCAL SPONSORSHIP?
Fiscal sponsorship is often used by newly formed nonprofits that need to raise money during the start-up phase, before they are recognized as tax-exempt by the IRS. Using a fiscal sponsor enables a program or organization that does not itself qualify as tax-exempt to attract funding for its operations that will -- through the fiscal sponsor - be tax-deductible to donors. Therefore, fiscal sponsor arrangements benefit organizations or programs that are not tax-exempt by providing a flow-through pathway for revenue that the organization may not otherwise be in a position to receive.
• Donors are not able to claim a tax deduction unless they itemize deductions and donate to an organization that is recognized by the IRS as tax-exempt pursuant to IRS Code Section 501(c)(3). See IRS Publication 557.
• Additionally, the guidelines of most private foundations explicitly require grantees to be recognized as tax-exempt by the IRS. Consequently, groups that are not formally recognized by the IRS as tax-exempt are generally not eligible for grants from private foundations.
• Fiscal sponsorship might be chosen by a newly formed nonprofit that seeks to test-drive its ideas to determine whether there is a market or a desire among the public to fund the end product.
• Some organizations/programs remain in a fiscal sponsorship relationship for a long time, deciding that their mission can be achieved in that structure without creating a new entity.
• Some organizations - including those that are tax-exempt - find that utilizing a fiscal sponsor to outsource administrative responsibilities, whether back-office tasks, or those relating to fundraising and disbursement of funds, is the right business model for them. This structure might be particularly well-suited for all-volunteer organizations.
(Source: National Council of Nonprofits)
WHO CAN APPLY?
• The applicant must be a Fresh Arts member and must keep their annual membership up to date. Unincorporated artist-driven projects may join as individual artist members; all others are required to join as organization members.
• All fiscally sponsored projects must have some legal entity (e.g. a person, a corporation, a partnership, an LLC, etc.) which is responsible for the project and which is the legal recipient of all distributed funds.
• You must complete an application form (available here).
• Your project must align with the mission of Fresh Arts.
HOW MUCH DOES IT COST?
Fresh Arts charges a 7% administrative fee for grants or donations up to $50,000 if the donation is made by cash or check, or a 10% administrative charge if the donation is made by credit card or online (the higher rate covers costs incurred by credit card fees).
WHAT KINDS OF PROJECTS DOES FRESH ARTS SPONSOR?
• Arts educators and/or arts education programs
• Arts organizations that have applied for 501( c )3 tax exempt status and are awaiting IRS approval
• Emerging arts groups
• Independent creatives from all creative disciplines
• One time projects – like a festival or special event
• Small but stable arts organizations that are under-resourced and have minimal staff
• Mix of all or some of the above in any creative discipline
HOW LONG DOES IT TAKE TO BE FISCALLY SPONSORED?
Applications that are submitted by the 1st of the month will typically be reviewed and approved/denied by the end of the same month. (You must be a member of Fresh Arts to apply.) You can review the preliminary fiscal sponsorship application here. (Sign up for updates about the fiscal sponsorship program here.) For more information, please see our Fiscal Sponsorship FAQs or contact us at firstname.lastname@example.org
HOW AND WHEN WILL I RECEIVE THE FUNDS THAT I HAVE RAISED?
All funds received on behalf of your organization are kept in a restricted fund by Fresh Arts. When you need to access your funds, you will simply fill out a disbursement request form online. Requests are reviewed and disbursed bi-weekly.