Fiscal Sponsor Organizations

Interesting topic and curious to see what others think. This is probably a place where the letter of the law (ultimate discretion and control over an internal program or restricted fund) and the spirit of the law (collaborative ownership/operations) diverge.

My non-lawyer take on it all:

The countersigner to the FSA is not the project for a reason this attorney said. The project (Model A) or Restricted Fund (Model C) is really just an internal program/fund of the Sponsor and as such cannot sign a contract… Just like a Marketing Department could not sign a contract with the Accounting Department, they are both the same org - just different depts/programs.

Our countersigner for Model A is an Individual as a Project Founder or an unincorporated nonprofit association (to represent a founding group of people) and in Model C it is the Grantee - All exist outside of us as the Sponsor as their own “entity”. The FSA is stating that the Sponsor has established a Project or Restricted Fund and that a Project Founder wishes to have delegated authority to manage that program. I feel like that countersigner is essentially accepting delegated authority to do certain tasks in support of the project and the Sponsor is making certain commitments to support the purpose of the project via various administrative functions (HR, Finance, re-granting, etc).

In termination, I could see an argument that the countersigner is essentially terminating their delegated authority, not really terminating the project and in all reality is not forcing the Sponsor to do anything… since the Sponsor owns the Project and holds ultimate discretion over its operations and assets

All that said - I would agree that in all reality an FSA is pretty one sided to protect the Sponsor and the Sponsor hold ultimate control, ownership, and discretion (just like it also holds all risk) associated with the project activities/assets.

Thanks, Josh. All that said, the Sponsor is always and ultimately responsible to the donors/funders. That is my understanding, anyway. So, Whitney, that lawyer who made the handshake comment is pretty much correct. (given letter vs. spirit, etc.)

The above is complete nonsense, though much rests, of course, on the quality of the agreement itself. Fiscal Sponsorship Agreements (FSAs) are indeed with a legal counterparty, ranging from an individual natural person, to actual legal entities, to unincorporated associations, which is the most frequent default. There can be breach of contract disputes, as we are seeing such being threatened in the case of a failed fiscal sponsor situation we’re involved in. Breach of contract could range from material/transactional matters covered by the agreement, to broader breach of fiduciary duty issues related to the sponsor’s stewardship of project funds. The latter would likely not entail private damages to the project staff and vendors, unless loss of funds led to the breach of other vendor or employment agreements. Beyond those private matters, failure of the sponsor would likely become a fiduciary matter.

@Thaddeus Squire Get ‘em Thaddeus!

@Thaddeus Squire So if our contracts are signed by the project lead, then it is a legal document between our 501c3 and that individual person?

It might be, but if there is no legal formation associated with the project or that individual, it would still be better to make the agreement with an unincorporated association, IMO. You can download free agreement templates here: https://www.socialimpactcommons.org/member-library