A fiscal sponsor is an organization that has already gone to the time, trouble, and expense to legally form a nonprofit, create a board, establish accounting records, establish operations, establish bylaws – all the admin stuff –

And when you do your fundraising, you have people donate to the sponsoring organization with those funds earmarked for your project.

That’s how their donations become eligible for being tax-deductible and also how donors have the experience of donating to a “legit” and accountable organization.

Then the fiscal sponsor passes the funds to you, minus an administrative fee. Amounts for this fee that I have heard are 6% and 10%. There could be other fee levels. It depends in part on what the organization is doing for you. The more they do (such as pay your vendors) the higher the fee.

A fiscal sponsor can either pay your authorized vendors directly or put the donated funds (less the admin fee) into a separate bank account that you have created for the exclusive use of this project. You’re required to report all of your project’s financial activities to your fiscal sponsor and you can get into h-u-g-e trouble if any of those funds are used for a purpose other than what was promised in your initial application for fiscal sponsorship.

A fiscal sponsor is obligated to report to you how much money has come in, and they are required to set aside those donations (less the admin fee) and they can get into h-u-g-e trouble if they use those funds for anything other than your project.

Fiscal sponsorship is an effective financial mechanism for good to be done in the world without red tape.

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