Fiscal Sponsorship: funding a project through a host organisation

What is fiscal sponsorship?

Fiscal sponsorship is an arrangement in which an established tax-exempt organisation receives and administers funds on behalf of a project that does not have its own tax-exempt status. Through the sponsor, that project can accept grants and tax-deductible donations it could not otherwise receive.

It is a common way for new or short-lived initiatives to get started without the time and cost of forming their own legal entity. The sponsor lends its status and handles the compliance, while the project focuses on its work.

‍

What is the sponsor's role?

The sponsor is the legal recipient of the funds and carries the responsibility that comes with them: receiving the money, ensuring it is used for charitable purposes, and handling reporting. Depending on the model, it either runs the project directly or re-grants the funds to it.

This is the crucial point for a funder: when money goes to a fiscally sponsored project, the sponsor is legally accountable for it. The sponsor's own governance and controls, not the project's, are what underwrite the grant.

‍

How is a sponsored project different from a normal grantee?

Under fiscal sponsorship, the legal grantee is the sponsor, not the project doing the work. A standard grantee holds its own tax-exempt status and receives funds directly. A fiscally sponsored project receives them at one remove, through its sponsor.

For a funder, this changes where due diligence should focus: on the sponsor's capacity to administer the funds, as much as on the project itself. The two common structures are the comprehensive model, where the project sits inside the sponsor, and the pre-approved grant model, where the sponsor re-grants to a legally separate project.

‍

Managing sponsored funding in a platform

Funding a sponsored project means tracking who legally received the money versus who is delivering the work. A grant management platform records that distinction and keeps the fund disbursement trail clean for audit.