Fiscal Sponsorship Agreement (Model A — Comprehensive)
Model A "comprehensive" fiscal sponsorship agreement — sponsoring 501(c)(3) takes a project under its tax exemption.
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FISCAL SPONSORSHIP AGREEMENT (MODEL A — COMPREHENSIVE) ═══════════════════════════════════════════════════════════════════════ SPONSOR Name: Civic Fiscal Sponsorship, Inc. EIN: 83-2741059 Address: 500 Public Square, Suite 800, Cleveland, OH 44113 PROJECT Project name: Lakefront Watershed Coalition Project leader: Maya Thompson EFFECTIVE DATE: July 1, 2026 ═══════════════════════════════════════════════════════════════════════ PROJECT MISSION AND ACTIVITIES The Lakefront Watershed Coalition educates residents and policymakers about Lake Erie water quality, conducts citizen-science water testing in 12 Cleveland-area tributaries, advocates for science-based stormwater policy, and hosts annual Watershed Summit (~250 attendees). The Project advances charitable and educational purposes within IRC §501(c)(3). ═══════════════════════════════════════════════════════════════════════ TERM Initial term of two (2) years from the Effective Date. Auto-renews for successive one-year terms unless either party provides 60-day written notice of non-renewal. ═══════════════════════════════════════════════════════════════════════ SPONSORSHIP FEE 8% of all project revenue (gross income, including grants, donations, and earned revenue). Standard market rate is 5-12%. ═══════════════════════════════════════════════════════════════════════ FUNDS HANDLING All project revenue is received by Sponsor in Sponsor's name and held in a restricted fund earmarked for the Project. Sponsor maintains separate accounting for project income and expenses; reports provided monthly. Disbursements made on Project Leader's authorization, subject to Sponsor's standard expense policies (receipts required, travel guidelines, etc.). Sponsor retains legal title to all project assets and is the legal recipient of grants and donations. Project funds may be re-granted to a successor 501(c)(3) if the Project transitions to independent status (see Section 8). ═══════════════════════════════════════════════════════════════════════ SPONSOR RESPONSIBILITIES Provide tax-exempt umbrella status (Project operates under Sponsor's 501(c)(3) determination). Receive and acknowledge all donations and grants on behalf of the Project; issue compliant donation receipts. Process Project disbursements per Project Leader's authorized requests within Sponsor's policies. Maintain books and records; file Form 990 reflecting Project activity. Provide monthly financial reports. Maintain general liability and D&O insurance covering Project activities. Review Project compliance with 501(c)(3) requirements. Provide governance support: bookkeeping, payroll (if employees), grants management, audit support. ═══════════════════════════════════════════════════════════════════════ PROJECT RESPONSIBILITIES Operate exclusively for charitable/educational purposes within IRC §501(c)(3). Follow Sponsor's policies (financial controls, conflict of interest, anti-discrimination). Submit annual budget and program plan to Sponsor for approval. Fundraise in compliance with state charitable-solicitation laws (Sponsor handles the registration in most states). Not engage in lobbying beyond IRS limits; no political-campaign activity. Provide quarterly program reports. Reimburse Sponsor for any direct costs above the sponsorship fee (specialized services beyond standard sponsorship). ═══════════════════════════════════════════════════════════════════════ LIABILITY AND INDEMNIFICATION Sponsor is the legal entity for the Project; Sponsor bears legal liability for Project activities. Project Leader and project staff (if any) operate under Sponsor's legal umbrella but Project agrees to indemnify Sponsor for losses arising from Project Leader's gross negligence, willful misconduct, or acts outside the scope of authorized activities. Sponsor's general-liability insurance covers Project activities up to policy limits ($1M typical). Project employees (if any) are Sponsor's employees for legal purposes (W-2, payroll, workers comp). All hires require Sponsor approval. ═══════════════════════════════════════════════════════════════════════ TERMINATION AND PROJECT TRANSITION 60-day written notice for either party to terminate. Upon termination, Sponsor may transfer Project assets and unspent restricted funds to: (a) another 501(c)(3) fiscal sponsor; or (b) a new 501(c)(3) successor entity formed by the Project. If no successor 501(c)(3) is identified within 90 days of termination, Sponsor may direct unspent funds to its general charitable purposes consistent with donor restrictions. Project IP, name, and operational materials transfer to successor on terms negotiated in good faith; Sponsor may retain a perpetual license for archival purposes. For-cause termination (Project violations of 501(c)(3) requirements, ongoing material breach): immediate effect with Project funds frozen pending Sponsor review. ═══════════════════════════════════════════════════════════════════════ GOVERNING LAW This Agreement is governed by the laws of the state of Sponsor's incorporation. Disputes resolved by mediation, then binding arbitration under American Arbitration Association rules. ═══════════════════════════════════════════════════════════════════════ EXECUTION _______________________________ Date: ____________________ Authorized signer for Civic Fiscal Sponsorship, Inc. (Sponsor) _______________________________ Date: ____________________ Maya Thompson, Project Leader for Lakefront Watershed Coalition
About this template
Fiscal sponsorship is the arrangement by which a 501(c)(3) organization (the "fiscal sponsor") accepts donations and grants on behalf of a project that does not have its own 501(c)(3) status. It enables charitable activities to begin (and receive deductible donations) without the months-long process of incorporating and obtaining IRS recognition. Two primary models from "Fiscal Sponsorship: Six Ways to Do It Right" by Gregory Colvin (the foundational legal text): Model A (Comprehensive / Direct Project) - the project is part of the sponsor; sponsor employs project staff; sponsor is legally responsible. Model C (Pre-Approved Grant) - sponsor receives donations and re-grants them to an unrelated entity; lighter relationship. Most fiscal sponsorships are Model A. Why use fiscal sponsorship: (1) Speed - donors and grants can flow within weeks, not months; (2) Cost - sponsorship fee (5-12%) is much cheaper than $5K-$15K legal cost of forming a 501(c)(3) plus $275-$600 IRS user fee plus 6-12 months wait; (3) Compliance support - sponsor provides bookkeeping, audit, payroll, governance; (4) Test-drive - allows the project to validate concept before committing to full incorporation. Critical legal points: (1) Sponsor must exercise REAL CONTROL - the IRS treats sham fiscal sponsorships (where the sponsor is just a conduit) as inurement, jeopardizing tax exemption; sponsor must approve budget, retain authority over funds, and have legitimate review/control of project activities; (2) Donor intent - donations are legally to the sponsor for the project; sponsor has fiduciary duty to use funds for the donor-restricted purpose; (3) Variance power - sponsor must retain the right to redirect funds if the project ceases or violates 501(c)(3); (4) Project IP/assets - sponsor owns assets unless contract specifies transfer on termination; (5) Successor planning - most projects eventually graduate to independent 501(c)(3); termination clause must address asset transfer to a qualifying successor. Standard fees: 5-12% of project revenue. Larger sponsors (Tides, Community Initiatives, Third Sector New England) typically charge 7-10%. Smaller community-foundation models charge 5-8%. Fees may include or exclude payroll, audit, and grant-administration costs. Contractual essentials: term and termination, fee structure, scope of authorized activities, fundraising controls, lobbying limits, indemnification, asset-transfer procedure on graduation. State law: New York and California impose specific charitable-trust rules on sponsors handling donor-restricted funds. International sponsorship adds OFAC, FCPA, and 990 Schedule F complexity.
When to use it
- Project wants to fundraise from grants/donations before incorporating.
- Time-limited project that doesn't justify forming a separate 501(c)(3).
- Pilot/incubation phase of a new charitable initiative.
- Religious, educational, or cultural project hosted by an established institution.
- Project transitioning from fiscal sponsorship to independent 501(c)(3) (transition agreement uses similar form).
What to include
- Identification of sponsor (with EIN) and project leader.
- Project mission and 501(c)(3)-aligned activities.
- Term and renewal/termination provisions.
- Sponsorship fee structure (typically % of revenue).
- Fund-handling protocol — who controls accounts, signs disbursements.
- Sponsor and project responsibilities (with audit, governance).
- Liability, indemnification, and insurance provisions.
- Termination and asset-transfer clauses.