Fiscal Sponsor Organizations

Hi @Mariana Velazquez - Just to clarify for everyone is this a Model A project, a Model C project or something else? I’m definitely curious to hear how others have handled this kind of challenge, but I’ll share some initial thoughts…

If Model A, the truck almost certainly has to go in your organization’s name, since there’s no other entity to own it. Same goes for the insurance. And yes, all of those potential issues would fall back to your org.

If Model C, the truck and the insurance (and all of the potential issues) should be held by the project entity. Your org’s role is just to re-grant those restricted grant funds to the project so they can purchase the van. But from then on, they’d pretty much be on their own with it.

Hello Haley,

We currently have a project that has a van that we own and we take on those responsibilities. We track and make sure to pay the registration each year, add it to our insurance, and be clear on additional cost that the project may have to pay.

We worked with our insurance to get the best coverage, be clear on who can drive the van, number of passengers, etc. We don’t pass this cost on to our project, but include it in our insurance.

As far as tickets, tolls, and registration fees; I would be clear with the project that they would be responsible for paying those and work with us to get those paid.

Happy to chat about it some more.

Daniel

daniel@movementstrategy.org

@Andrew Schulman We do Model C, but not all of our projects are registered entities in their own states. This particular project is not. Our attorney suggested adding a Model A-type addendum to our agreement. @Daniel Parada I really appreciate your insight! I think with a project like this - they’re brand new, this grant is their first and only grant, the only way we’d feel comfortable taking on the risk is if we took the responsibility for registration and insurance. I’ll email you!

Not sure how/why a sponsor would own a vehicle for a Model C project. In theory, there is a legal entity that is the Model C grantee. Is that a sole proprietor in this case? Also, not exactly sure what a “Model A-type addendum” means. Do you mean a sort of services agreement where you agree to own things for the Model C project? I think anything is possible with good agreements/contracts but it would, I think, be somewhat strange for a Model C sponsor to do this (not that it’s wrong!)

Correct me if I’m wrong but I suspect Daniel is referring to a Model A project?

This project is not its own entity, it’s just two people doing good work in their community. But our attorney said that’s fine for Model C, and structured our agreements in a way that takes into account that not all of our projects are their own entities. “Model A-Type Addendum” were the words out of his mouth, where we would agree to own the vehicle for them.

Hi @Mariana Velazquez - Understood. And yes, many Model C projects are just individuals (or unincorporated groups of individuals) and that, in and of itself, is very common.

The messy part comes in when your organization starts taking on liabilities for what is, essentially, a grantee.

As it’s been explained to me by those in the legal community (I’m not an attorney and this isn’t legal counsel), is that once you start doing more Model A-type activities for Model C projects (especially like owning things), if there’s ever legal action related to this project, it’s likely that the court will see the project as a Model A because of the additional activities (beyond just regranting).

I have no doubt that a good attorney could come up with an addendum/agreement to allow your org to hold certain assets/liabilities, but it really comes down to a risk assessment on your end.

@Mariana Velazquez It is generally fine for the Model C grantee to be a non-corporate entity (individual for instance). From a tax perspective that is still an “entity” that you are granting funds to and is responsible for the funds and any tax-implications therefore.

As for the “model A” type language where you own it for them. I personally would be very cautious of this type of setup. You are taking on all the risk with none of the control and mudding the waters between the project being a Grantee of your org and the Project being an “internal program.”

I think you could own the vehicle and that vehicle could be used for the Restricted Charitable Purpose as fulfilled by the Grantee (in this case the individuals) but I would think it should be a separate legal document that outlines the restricted charitable purposes of the use of that vehicle along with who owns the risk, insurance, etc. If you own it and let them use it you are essentially “renting” it out to them or Granting them the use of that vehicle for a time-period and for specific purposes. At least that is the way I see it and I think you will want a more in-depth agreement between you and the Grantee outlining the terms of you allowing them to use your Sponsor owned vehicle.

@Josh Burgner thank you! Our attorney did just draft up a separate document speaking to a lot of your points!

Side question @Andrew Schulman as we typically always treat incorporated entities as a Model Cs if they are housing the project and unincorporated as Model As without a home (I.e., corporate identity) to house it in. So interesting to read this!

Also, thank you as well @Daniel Parada for your answer. This is helpful!