Both parties should agree to and sign a contract or memorandum of understanding, detailing the responsibilities of each one. See File 2-2 at www.wiley.com/go/nonprofitkitfd6e for a sample fiscal sponsorship agreement.
The fiscal sponsor customarily charges a fee for sponsoring a project. The fee is usually between 5 percent and 15 percent of the project’s annual revenues, depending on the services it provides to the project.
Some fiscal sponsors provide additional services. These might include payroll services, bookkeeping, office space, group insurance coverage, and even management support, if needed. Be sure to ask whether these additional services are included in the fiscal sponsor’s fee.
Contributions to the sponsored project should be written to the sponsor. Add a note instructing that they be used for the project.
Finding a fiscal sponsor
You may be able to find a fiscal sponsor near you by using the Fiscal Sponsor Directory (www.fiscalsponsordirectory.org). Another place to search is at your local community foundation. Community foundations have wide connections in the areas they serve and likely are aware of qualified fiscal sponsors.
You don’t want to go with just any fiscal sponsor. You have to do your homework to find one that fits your needs. First determine whether the sponsor’s mission covers the type of program you’ll be offering. Then do a little research to find out whether the sponsor is trustworthy and financially healthy. For example, you can perform an Internet search for the fiscal sponsor’s name. Does its name appear in news stories detailing nonprofit misconduct or other skullduggery? Ask others in your community, including individuals who are knowledgeable about nonprofit activities in your town. While you’re at it, read its 990 tax form posted on GuideStar by Candid (www.guidestar.org) to see whether it’s financially sound.
When you’re vetting a fiscal sponsor, ask the sponsor these questions to determine whether it’s a good fit for your project:
Do your board of directors and accounting and legal advisors approve of each fiscal sponsorship?
Do you charge for specific services, such as access to insurance programs, over and above your basic sponsorship fees? What additional services do you offer?
Do you allow sponsored projects to hire salaried employees, and do you provide payroll services and access to health insurance?
Do you provide coaching and mentoring in nonprofit management and fundraising?
How frequently do you write checks to pay bills? What’s the frequency and format of financial reporting for the sponsored program?
Do you require projects to maintain a minimum annual income?
Do you formally acknowledge gifts and donations?
Do you help sponsored projects raise funds through your website?
www.fiscalsponsors.org) has developed guidelines for best practices in fiscal sponsorship. If you’re considering using a fiscal sponsor, we suggest reviewing these guidelines to help you make a choice about which fiscal sponsor is best for your project.
Chapter 3
Prioritizing Building Your Board of Directors
IN THIS CHAPTER
Most nonprofit founding visionaries don’t prioritize the task of first getting their governing board onboard with their vision. The board isn’t formed after the founder has written the mission and vision statements for the new nonprofit — the board needs to be involved in the creation of these two items when members are starting to develop the new nonprofit’s first strategic plan document (see Chapter 4).
Here’s a story about a nonprofit visionary who did not prioritize building a board of directors upfront. Jeffery decided to create a nonprofit organization — to help women who are single, pregnant, and homeless get off the streets, learn better parenting skills, and enter the workforce by the time their child is old enough to start kindergarten. Working alone, he wrote his mission and vision statements. He also drafted a strategic plan for the new nonprofit. By the time he started trying to recruit board members, he had set the mission, vision, and organizing documents in stone without input from any board members.
What’s wrong with this picture? Well, no board member wanted to buy into Jeffrey’s dream without having the ability to work as a team to create the mission, vision, and strategic planning documents. Jeffrey forgot that board members are vested stakeholders who should be recruited, trained, and included from day one of a new nonprofit start-up process. He failed to make forming his board of directors, upfront, a priority. Now he faces dealing with a lack of trust and a high degree of animosity between him and his new board, all of which could have been prevented if the board members had been onboard first and involved in the year-one strategic plan for the new organization.