Fiscal sponsorship is best defined as a situation where an existing 501(c)(3) public charity provides fiscal management and operational oversight to a charitable project, in order for that project to raise tax-deductible donation support without the need for forming their own 501(c)(3).
Yes and no. The sponsoring charity…in our case, Compass Charitable Partners…is responsible for ensuring that the program activities of all sponsored projects qualify as charitable under Section 501(c)(3) of the Internal Revenue Code. The degree of “control” really depends on the model of fiscal sponsorship being used. Models A and B require the most control, as there is little distinction between sponsor and project. Model C, which Compass uses, has much less control, as the sponsor and project are considered independent of each other. That said, the sponsor still must exercise fiscal oversight and the project must submit to fiscal accountability.
The project managers are responsible for fundraising and solicitation of donations for their project. Ideally, they will direct their donors to make their gifts directly to Compass so as to take full advantage of tax-deductibility. Compass does not fundraise on behalf of sponsored projects.
Assuming the donations are made payable to the Compass Charitable Partners, designated to the sponsored project, 100% of the amount of the gift is potentially tax-deductible to the donor.
Once donations are made to Compass on behalf of a project, the money is managed by Compass in a project account assigned to the project. Compass has custody of the funds until such time as a grant request from the project manager is submitted and approved.
To get money distributed to them out of their project account, the project managers will submit a grant request for a specific dollar amount, outlining their proposed use of funds. Upon review and approval by Compass staff, funds are sent electronically to the project’s own bank account. At least quarterly, the project manager will complete an expenditure accountability report to Compass detailing how the funds were actually spent.