Fiscal Sponsorship Agreement Template

In plain language: Identifies both parties by legal name, confirms the sponsor's 501(c)(3) status, describes the sponsored project's charitable purpose, and defines key terms used throughout the agreement.

Common mistake: Describing the project's purpose loosely or differently from the sponsor's IRS determination letter. If the project's activities fall outside the sponsor's exempt purpose, donations may not be tax-deductible and the sponsor risks its own tax-exempt status.

In plain language: Defines exactly which activities, programs, and geographic areas fall under the fiscal sponsorship umbrella, and explicitly excludes activities the sponsor will not backstop.

Common mistake: Defining scope so broadly that the sponsor unknowingly backstops activities outside its exempt purpose — exposing the sponsor to IRS scrutiny and potential excise taxes.

In plain language: States that the sponsor owns and controls all donated funds, how they are held (segregated account vs. general fund), what accounting records must be maintained, and how the project director requests disbursements.

Common mistake: Allowing the project director to receive donor checks directly or control the bank account. Under Model A sponsorship, the sponsor must have actual legal control of all funds or the IRS may treat the arrangement as a mere conduit, voiding the charitable deduction.

In plain language: Sets the percentage of gross receipts the sponsor retains as compensation for its overhead, accounting, compliance, and administrative services, and specifies when and how the fee is deducted.

Common mistake: Agreeing verbally on the fee without documenting it in the contract. Undocumented fee changes create disputes and, if the sponsor charges less than fair market value, may create a private-benefit issue for the sponsor's board.

In plain language: Establishes how donations and grants are solicited and accepted — who signs grant applications, whose name appears on donor acknowledgment letters, and how grant award letters are reviewed for compliance.

Common mistake: Allowing the project to issue its own tax acknowledgment letters. The IRS requires that the sponsor — as the legal recipient of funds — issue all written acknowledgments for contributions above $250. Project-issued letters do not satisfy this requirement.

In plain language: Allocates ownership of work product, content, branding, and other IP created under the sponsorship — distinguishing between materials the sponsor retains and materials the project may take upon departure.

Common mistake: No IP clause at all. When the sponsorship ends — especially acrimoniously — disputes over who owns the film footage, website, curriculum, or brand are extremely common and expensive to resolve without prior written agreement.

In plain language: Requires the project to provide financial and programmatic reports to the sponsor on a regular schedule so the sponsor can fulfill its own IRS reporting, grant compliance, and board oversight duties.

Common mistake: Setting reporting obligations but specifying no consequence for non-compliance. Without a stated remedy — suspension of disbursements, or termination — sponsors have no practical enforcement mechanism when projects go dark.

In plain language: Allocates legal liability between sponsor and project, requires the project to indemnify the sponsor for claims arising from the project's own activities, and sets minimum insurance requirements.

Common mistake: No insurance requirement in the agreement. If a project event causes injury and the project carries no insurance, the claimant may pursue the sponsor as the legally recognized entity — and the sponsor's general liability policy may not cover project-specific activities.

In plain language: States the conditions under which either party may end the agreement, the notice period required, and what happens to remaining funds, grants, and property — specifying that assets must go to another exempt organization, not to the project director personally.

Common mistake: No successor sponsor provision. If the project exits and there is no agreed process for transferring remaining funds to another exempt organization, the sponsor must use them for its own purposes — which may conflict with donor intent and trigger donor disputes.

A fiscal sponsorship agreement is a legally binding contract between a tax-exempt 501(c)(3) nonprofit (the fiscal sponsor) and a project or program (the sponsored project) that allows the project to receive tax-deductible donations and apply for grants under the sponsor's tax-exempt umbrella. The agreement defines how funds are managed, what administrative fee the sponsor charges, what the project must report, and what happens when the relationship ends.

In a Model A arrangement, the sponsored project becomes a program of the fiscal sponsor — all donated funds are legally owned and controlled by the sponsor, and the project operates as an internal initiative. In a Model C arrangement, the sponsor acts as a conduit, making pre-approved grants to an independent project that retains operational control of its own funds. Most foundations require Model A. Model C is more flexible but offers fewer legal protections to the sponsor.

Yes. Without a signed agreement in place, donations received under a sponsor's name may not be legally attributable to the sponsor, putting the tax-deductibility of those contributions in doubt. Institutional funders typically require a copy of the signed fiscal sponsorship agreement before they will process a grant application. Execute the agreement before any solicitation begins.

Administrative fees typically range from 5% to 15% of gross donations and grants, depending on the sponsor's size, the complexity of the project, and the services included. Community foundations and large umbrella sponsors often charge 8–10%. Smaller sponsors covering payroll, HR, and benefits administration may charge 12–15%. The fee should be documented in the agreement and approved by the sponsor's board.

Under a Model A arrangement, work product created with sponsored funds is typically owned by the fiscal sponsor during the term of the agreement. Upon termination, the sponsor may license or assign specific IP to the departing project by written agreement. Without an explicit IP clause, disputes over ownership of films, curricula, websites, and trademarks are extremely common. Always negotiate and document IP allocation before signing.

Yes, most agreements allow either party to terminate with 30–90 days' written notice, and the sponsor typically retains the right to terminate immediately for cause — such as illegal activity, mission drift, or material breach. The critical issue on early termination is what happens to remaining funds and any active restricted grants. The agreement must specify a clear asset disposition process to avoid funder disputes and IRS issues.

No statute mandates a written fiscal sponsorship agreement in most jurisdictions, but operating without one exposes both parties to significant legal and tax risk. The IRS expects sponsors to exercise full control over donated funds, and an oral arrangement provides no documented evidence of that control. Most institutional funders require a written agreement as a condition of any grant where a fiscal sponsor is the applicant of record.

Remaining unrestricted funds in the project account are typically transferred to a successor fiscal sponsor, granted to another 501(c)(3) designated by the project, or retained by the sponsor for its own exempt purposes. Restricted grant funds require individual funder approval for any transfer or reallocation. The agreement should specify this process in detail — projects that exit without addressing active grants can leave the sponsor in breach of grant agreements.

For straightforward single-project arrangements with an established sponsor, a high-quality template reviewed by the sponsor's board is typically sufficient. Engage a nonprofit attorney when the project involves significant restricted grant funds, cross-border activities, employees or contractors, commercially valuable IP, or when the sponsor is onboarding multiple projects under a standardized program. A 1–2 hour attorney review typically costs $300–$800 and is worth it for any arrangement involving grants above $50,000.