Fiscal Sponsor Organizations

We’ve said yes (at least hypothetically, we’re not through the process yet) to a Model A being sponsored by another org for an opportunity we’re not eligible for. We offered either for the Model A project to spend down their funds at the other sponsoring org (sounds like that’s not an option in this case), or to receive the funds to our org after they go through the other sponsoring org. I might not be understanding the issue with option B, that seems legit to me.

Wow - that’s a doozy! Just to clarify, @Shava Lawson, in option B, are you saying that essentially the Model A project/Seattle Parks Foundation becomes a sub-grantee to carry out the work of the grant?

If so, I think that makes more sense than option A, b/c SPF is a c3 itself so it’s not really Model C — and it should theoretically be less complicated/less risky to the funder since both SPF and the other org are 501(c)(3)s.

As always, I’m not a lawyer and this is definitely not legal advice.

@Andrew Schulman HA, right? Yes, that’s my thought as well. I’m just not sure if we would need to create an agreement with the other sponsor, or if the agreement the project has with them suffices. It feels complicated, but at the same time, seems like we it’s more straight forward by doing B. Thinking about who is reporting the income to the IRS is what gave me pause, that means it gets reported twice, right? Once by sponsor 1, & another time by sponsor 2. (My brain hurts.)

Hmmm…

Since it’s a model A project, isn’t the agreement that the project has with the other org, actually with SPF? If not, I’d think you’d want one since SPF (via the project) will be responsible for carrying out the work.

If the other org does their accounting correctly, I believe they would acknowledge the grant funds coming in and then acknowledge them being regranted out and then SPF would accept those same funds and track how they are used. So yes, they would get reported twice, but isn’t that how you’d do it for any sort of regrant from SPF to another c3?

Separate question - do both orgs take an admin cost out of the grant funds? I’ll assume the other org has a NICRA - so do you split that evenly?

Great questions/comments. Thank you. Other org charges a %, I believe, but I will explore how they are managing the grant. They assumed agreement would be with Project, not SPF, sounds like we need to discuss that as well.

Hi Shava!

There are a few items to consider in this scenario:

1) Given that this is a government grant, they must identify you or the project as a subrecipient and explain why you or another entity are chosen, not anyone else. The sub-award management expectations will be the fiscal sponsor's responsibility, including managing and overseeing you and the project.

2) The other aspect to consider is budget. In either of these scenarios, the budget will have only two lines (sub-award and indirect costs). The fiscal sponsor will ask the sub-awardee to create the budget under which it will report. The official government budget will have only two lines as the other fiscal sponsor will receive and re-grant funds. And yes, I have not seen too many government-funded grants that expect and allow all of the funds to be subcontracted to another entity except for the indirect costs. Still, if the funder wants to fund this opportunity, they might. I would look into any limitations in the funding opportunity regarding the amount of re-granting you intend to initiate using this approach. Another approach would be to work with the fiscal sponsor and ask them to directly manage certain large parts of the costs to mitigate the appearance of all costs being re-granted.

3) Indirect costs. I suggest looking into this further, but from the guidance I have seen, the fiscal sponsor without negotiated NICRA will only be able to recover up to 15% on the first 50K of your sub-award. Then, your FS rate would apply to the funds that are re-granted. One must consider the overall G&A costs vs. the overall opportunity and commitment to work.

4) Option A implies the project is building entirely new infrastructure (if they are a model A project with you now). Please consider the additional cost that it might take to manage federal funds, and they will need to establish themselves with the government authorities and what is the long-term use of it. See if that still fits within the indirect costs, as they will probably not have the NICRA rate either.

5) Your current agreement. I want to ensure that, whatever you choose, you also amend the current agreement to document this particular exception.

Those would be the areas that I would look into! I hope this is helpful! And please do not hesitate to reach out to me with further questions.

BTW: One of the federal guidance on the sub-award management is below:

https://www.ojp.gov/tfsc/subrecipient_monitoring_guide_sheet_508

Just dug into the grant info more and it turns out this is state funding, not federal, my mistake. I believe that changes some of the concerns. Thanks for your thoughts on all this, Asta, Andrew and Anne!