A fiscal sponsor agreement is a contract between a fiscal sponsor (defined below) and a fiscal sponsee (also defined below). This contract is very important for the fiscal sponsee because without which the sponsee literally owns nothing as the sponsor would “own” the charitable initiative. Also, like any other business relationship, a sponsee needs to have total clarity on its rights so that in the event of a dispute, one can simply refer to the contract for guidance. That being said, in our opinion, a contract such as this should cover all kinds of topics including, but not limited to, services rendered, compensation to sponsor, financial reports, costs, insurance, indemnities, warranties and representations, protocols for the funds and disbursements, termination, intellectual property provisions,etc.

Services should be clear. They should be listed in numeric order and be specific. To say, simply that the sponsor is providing “fiscal sponsor services” would be grossly inadequate. A list of services may include terms related to the following:

Sponsor maintains all bank accounts of sponsee.
Sponsor issues all checks, wires and ACH.
Sponsor monitors all income, funds and contributions and notifies sponsee of any significant funds received by wire and check, daily, to the extent received.
Sponsor issues all charitable receipts.
Sponsor provides sponsee with a profit and loss statement monthly and year to date as well as a balance sheet, within a certain number of days of the close of the month.
Sponsor does all payroll.
Sponsor does all 1099s.
Sponsor reports all income of the Fund on its IRS Form 990 annual tax return.
Sponsor has an online portal to receive online donations on behalf of sponsee.
Sponsor stores all back up and accounting data for Sponsee in a secure Cloud.
Sponsee may need insurance for any specific activities. For example, if sponsee puts on an event, event insurance must first be obtained. Sponsor will assist in obtaining quotes.
If sponsee conducts an event in a state in which Sponsor is not registered (for charitable solicitations), Sponsor will prepare and submit the necessary paperwork to that state to become registered free of charge to sponsee, except for any out-of-pocket expenditures including registration, renewal and mailing fees.

A section on compensation should include exactly the calculation of fees, whether there are variations in fees depending on size of donations, the frequency of the fee and whether or not there are any annual or start up fees as well. Any costs incurred should also be disclosed that are “passed” onto the sponsee such as bank fees, insurance fees, etc.

Likely, any contract for fiscal sponsorship services will include an indemnity clause. Usually, the sponsor will require that it is indemnified against any damages caused by the sponsee. This is not unusual. The sponsee should also require that an indemnity is mutual. In other words, in the event that it suffers any damages caused by sponsor, the sponsee is held harmless and indemnified.

Each party should warrant and represent that have the power and authority to enter into the contract and will not enter into conflicting obligations.

Sponsee should always have the right to terminate and transfers funds and property to another entity that is a recognized public charity. Further, sponsee should insure that all intellectual property belongs to sponsee in the case of any conflict.