Fiscal Sponsor Organizations

Is this looking to be Model C or Model A? Generally speaking I would say that a Model A project cannot have multiple sponsors (since the project is actually your internal program). But, in theory a Model C project could since it really is essentially one Grantee having multiple Grantors - you would just need to really be sure they can track the funds you re-grant them as separate from the other Sponsor/Grantor.

@Josh Burgner Thank you for your quick reply! I agree a Model C would be most appropriate. In a Model C, does our responsibility end at 'reasonable oversight' (reviewing their reports/receipts for our specific grant), or are we legally exposed if their general internal bookkeeping is messy? How do others protect their liability when a project has multiple revenue streams from different sponsors?

@Amanda LaFleur -At a high level, your primary legal exposure sits in the areas of reasonable oversight, variance power, and due diligence. The core question is whether you’ve done enough to ensure funds are regranted responsibly and used in alignment with the charitable purpose.

You’re not inherently liable for a grantee having messy internal bookkeeping. However, the risk shifts if you are aware (or should reasonably be aware) of issues, e.g., disorganized records, misuse of funds, or inability to track grant-specific expenses, and still continue without adjusting your oversight. At that point, the concern isn’t “their books are messy,” it’s whether you are exercising sufficient control and diligence to ensure charitable funds are being used appropriately.

A useful gut check I often come back to:

What would a journalist find if they started asking questions?

Could we confidently explain our oversight approach to an auditor or the IRS?

Ultimately, it’s a balance - enough structure to demonstrate control and stewardship of funds, without creating unnecessary administrative burden. The level of oversight could scale with the level of risk you’re seeing.

As for us - we require projects to be able to report on the funds we grant them isolated from the rest of their books. So in theory we would not know the other revenue sources or they would at least not impact our work. We do a pretty in-depth Due Diligence up front on a Model C Grantee to confirm we feel good about regranting funds to their entity and then semi-annual reporting. As long as those reports substantiate use of funds then we feel we have had appropriate oversight.

Also looping back to the initial question around the Fiscal Sponsorship Agreement. I would say that the FSA would be only between you and the grantee. what relationships that Grantee has outside of their sponsorship with you is not really under your control and I would not ever do some tri-party FSA or end up getting connected to the other sponsor in any way. Look at what work the Grantee wants to do, confirm its charitable, complete your Due Diligence, sign and FSA, have proper oversight on the funds you regranted.