Get the Money: Fiscal sponsorship and other ways to receive and administer grants and donations

The Event Fund at Code for Science and Society hosted a panel discussion entitled "Get the Money: Fiscal sponsorship and other ways to receive and administer grants and donations'' in early April 2022. The seminar aimed to provide information on the operational work involved in running a grant-funded project, and to answer questions from current and future Event Fund grantees looking to establish an operational configuration best suited for receiving their funding.

Panel speakers included Danielle Robinson, Jessica Hardwicke, and Moni Awolesi of the CS&S Fiscal Sponsorship Program, Ben Nickolls from Open Collective, and Gilbert Beyamba from Pollicy, a previous Event Fund grantee. A recording of the presentation portion of the event is available for public viewing and this article summarizes some of the key points raised during the event.

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What is “Fiscal Sponsorship”? Who might consider using a fiscal sponsor?

Oftentimes, it is difficult for grant organizations to fund groups that are not designated as a charity or nonprofit under the U.S. tax code. Fiscal sponsorship is a system which overcomes these constraints, enabling a project to work with another nonprofit organization that already has the necessary infrastructure in place to facilitate grant reception and administration. This system is often useful for smaller groups, organizations that are just emerging, or those which aim to use a grant for a specific, short-term project, i.e. in situations where the project may not want to go through the trouble of forming and subsequently liquidating a nonprofit corporation. In short, working with a fiscal sponsor allows a project to take on the structure of a nonprofit without having to register as a nonprofit organization.

There are two common models of fiscal sponsorship. A Model A Fiscal Sponsorship Agreement is a contract in which a project becomes part of the sponsoring non-profit organization, which takes on the burden of financial administration, overseeing accounting, bookkeeping, and financial reports. A Model C Fiscal Sponsorship Agreement, also known as a regrant model, is where a non-profit sub-grants out to another organization, which performs its own individual administration and bookkeeping. Beyond organizational support like sending and receiving money, human resources, strategy and business development, contracting, and grant management, a fiscal sponsor might also offer opportunities for peer mentorship and networking through their community of other fiscally sponsored projects in their program.

Learn more about fiscal sponsorship through this video, this article in the Open Source Alliance for Open Scholarship Handbook, and compare examples of Model A and Model C Fiscal Sponsorship agreements.

What should I look at when comparing different fiscal sponsors?

The following list was prepared by Jessica Hardwicke, CS&S FSP Senior Program Manager:

1. Ask about the kinds of projects an organization wishes to sponsor. Do they have a limited scope in determining who to support? Do they have a specialized area of expertise or topical focus?
2. Ask about the application process, and timeline to ensure that it aligns with any deadlines or constraints your project will have.
3. Ask about their costs and fee structures. How high are their fiscal sponsorship fees? Is it a fixed fee structure, or does the organization use sliding scales? Do applicants need to have a certain budget size? What is the range of budgets that the fiscal sponsor usually works with?
4. What is included within the overhead costs? It’s important to make sure that financial administration, bookkeeping, and reporting is covered in the overhead costs being paid.
5. Ask what the accounts payable process looks like for a sponsored project. Are there any limitations in hiring domestic or international employees and contractors? Is it possible to make small payments or honoraria? How long does it typically take to pay people?
6. Ask if there are any limitations on crowdfunding, accepting donations, or working with volunteer labor.
7. Ask if there is any legal support provided by the fiscal sponsor (e.g. liability insurance coverage, IP and copyright policies).
8. Ask what the onboarding process looks like, and what you should expect when first starting out with a fiscal sponsor.
9. Ask what the off-boarding process looks like, and if there is any support a fiscal sponsor can provide for a project interested in becoming a non-profit or independent organization.
10. Ask about the experiences of other projects who have been sponsored by an organization you’re interested in working with. Connecting with other projects will allow you to gain a better understanding of whether your project is a good fit in working with a certain sponsor.

How does sponsorship work for non-U.S. based organizations?

Some U.S.-based philanthropic organizations are unable to legally give money outside of the U.S. They can fund a separate organization, which can then sub-grant money out to prospective grantees. It’s important to consider local tax laws. Some countries allow you to receive a grant as an individual without being taxed, while in other places it makes more sense to have the grant go through a local non-profit or charity, and be paid via contract.

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This seminar was designed for an audience of individuals who are about to receive their first grant, and are looking to learn more about how to best receive those funds. If you are interested in the process of obtaining a grant, you can find additional resources below.

How do you secure a grant?

• A webinar on developing a strong grant seeking strategy.
• An overview of the process of becoming a CS&S project.
• Advice on securing a grant from a private funder.
• A list of simple guidelines to follow when applying for a grant.
• A book on grant-seeking techniques for those interested in securing public or private grants.

How do you begin looking for potential sponsors?

• A list of other fiscal sponsors who work with projects in the open data, open source digital infrastructure, and open knowledge ecosystem.
• A database to search for tax-exempt nonprofit organizations.
• A weekly newsletter on funding opportunities in tech
  

Featured Photo by Damir Omerović on Unsplash