National Network of Fiscal Sponsors – Hot Topic Call: Legal

dog on the phone

Yesterday, I had the pleasure of hosting a Hot Topic Call on legal issues for the National Network of Fiscal Sponsors. If you’re interested in viewing the accompanying slide deck, you can download it by clicking Hot Topics in Comprehensive Fiscal Sponsorship (pdf).


The focus of the call was on comprehensive fiscal sponsorship (also referred to as Model A) and it covered intake, exits, and the existence of a separate entity operated by a project’s leaders. The call also touched on a new model of fiscal sponsorship involving a single member LLC owned by a fiscal sponsor (also referred to as Model L).

In a comprehensive fiscal sponsorship, generally, the fiscal sponsor owns the project and the sponsor is responsible for any project liabilities (including any that the sponsor was unaware of until the project leaders disappeared). Additionally, the sponsor is responsible for how the project fundraises and raises earned revenues. Sufficient due diligence must be exercised at the front end to help assure that the project will further the sponsor’s exempt purpose and not jeopardize the sponsor’s overall operations. And, as an internal project, the sponsor must exercise reasonable oversight over it (e.g., regular financials and program reports prepared by the project leaders at least annually but possibly more often, and combined with site visits and interviews, depending on the circumstances).

Sponsors must be absolutely clear themselves on what comprehensive fiscal sponsorship is if they expect the project leaders to understand it. Sponsors must be particularly careful of marketing too aggressively by promising not to interfere with management of the project; sponsors may have to interfere if there’s a compliance problem.