Fiscal Sponsors vs Sponsored Project Responsibilities in Model B
With Model B fiscal sponsorship responsibilities, both the fiscal sponsor and the sponsored project have specific responsibilities, particularly concerning accounting and reporting. Here’s an explicit breakdown of their respective roles:
|Fiscal Sponsor Responsibilities||Sponsored Program Responsibilities|
7. Retain the right to withdraw support if the project deviates from agreed-upon purposes or fails to comply with the laws.
7. Maintain a clear and open communication line with the fiscal sponsor.
Responsibilities of the Fiscal Sponsor:
- Donation Acknowledgement:
Since contributions are made in the Fiscal Sponsor’s name, it is responsible for accounting for the donations and reporting them to the IRS on its Form 990. This means the sponsor is responsible for sending gift acknowledgements documenting all tax-exempt donations. Using Ribbon, this happens automatically.
- Fiduciary Oversight:
The fiscal sponsor assumes fiduciary responsibility for the funds received on behalf of the sponsored project. This means they are legally and financially accountable for ensuring that the funds are used for the intended charitable purposes and in compliance with all relevant laws and regulations.
- Accounting and Financial Management:
The fiscal sponsor is responsible for maintaining accurate and transparent financial records for all funds received and disbursed on behalf of the sponsored project. This includes tracking income, expenses, and any other financial transactions related to the project. The sponsor is responsible for fund balance changes, not transaction accounting. Using Ribbon, this happens automatically.
- Financial Reporting:
The fiscal sponsor must provide regular financial reports to the sponsored project. These reports should outline the financial status of the project, including the balance of funds, itemized expenses, and any additional relevant financial information. The frequency and format of these reports should be determined in the fiscal sponsorship agreement. Using Ribbon, this happens automatically.
- Monitoring and Compliance:
The fiscal sponsor is responsible for ensuring that the sponsored project complies with all legal and regulatory requirements. This includes monitoring the project’s activities, financial practices, and use of funds to ensure they align with the agreed-upon charitable purposes. Using Ribbon, reports are generated automatically.
- Tax Reporting:
The fiscal sponsor is responsible for filing all necessary tax forms and reports related to the sponsored project’s financial activities. This may include IRS Form 990 or other relevant tax filings, depending on the fiscal sponsor’s tax-exempt status. This also includes issuing a 1099 to the fiscally sponsored project. Using Ribbon, reports are generated automatically.
Responsibilities of the Sponsored Project:
- Project Management:
The sponsored project is responsible for carrying out the activities and initiatives outlined in its mission and proposal. They have autonomy in the day-to-day management and execution of their programs including hiring and managing employees; issuing appropriate tax forms (e.g., W-2s, 1099s); ensuring necessary insurance coverages are in place for operations, employees, and liability; and adhering to all relevant employment laws and regulations.
- Budget Preparation:
The sponsored project must work collaboratively with the fiscal sponsor to create a budget for their initiatives. This budget should outline the expected expenses and how the funds received from donors will be utilized.
- Financial Transparency:
The sponsored project must handle transaction-level accounting, such as keeping detailed records of revenue, donations, and grants received along with purchases, expenses, invoices and receipts. This transparency helps ensure funds are used appropriately and that the project is accountable for its financial decisions. Using Ribbon, this happens automatically.
- Compliance with Fiscal Sponsor Policies:
The sponsored project must adhere to any policies or guidelines set forth by the fiscal sponsor regarding financial management, reporting, and compliance. This may include restrictions on certain expenses or requirements for approval before significant financial decisions are made. Using Ribbon, this happens automatically.
- Financial Reporting:
While the fiscal sponsor is responsible for overall financial reporting, the sponsored project may also be required to provide specific financial reports to the fiscal sponsor as outlined in the fiscal sponsorship agreement. These reports may include updates on budget-to-actuals, project-specific expenses, or other financial metrics. Using Ribbon, reports are generated automatically.
- Tax Reporting:
The program is responsible for filing all necessary tax forms and reports related to the sponsored project’s financial activities. This includes issuing 1099s to all subcontractors. Using Ribbon, this happens automatically.
Model B fiscal sponsorship responsibilities establishes a collaborative relationship between the fiscal sponsor and the sponsored project. The fiscal sponsor provides financial oversight and support, while the sponsored project maintains a level of autonomy in managing its initiatives. Clear communication, transparency, and adherence to agreed-upon financial and reporting procedures are essential for implementing Model B fiscal sponsorship successfully.