Create Your Sponsorship Invoice Template Word for NPOs Effortlessly

Sponsorship invoice template word for NPOs

there are times when people who are wanting to start a charitable program don't really want to start a full-blown nonprofit now there's all kind of reasons why they may be but for many it's that they don't want the overhead of a board of directors in corporation getting 501c3 status tax filings the whole gamut so if that's the case what do they do well fiscal sponsorship is a great option and that's what we're going to talk about today what is it how does it work what are some best practices there's lots of stuff I'm going to cover and it will really help you out if you're interested in this topic oh and make sure you stick around to the end because we have an exciting announcement to make you don't want to miss [Music] it hi I'm Greg McCrae founder and CEO of foundation group and welcome back to our 501c3 University Channel where we strive to make nonprofit issues understandable today we're diving into fiscal sponsorship now I've got a lot to cover and this will be a longer video than usual so let's get right to it so what is fiscal sponsorship well it usually involves an existing 501c3 nonprofit the sponsor offering to provide its tax exemption and Associated benefits to another group usually a charitable project of some sort the Project's purpose now it should be generally aligned with the overall mission of the sponsoring charity donors who want to support the project give directly to the sponsoring organization designating their gift to the project now again the sponsor has 501c3 status so that allows the donor to give to the project tax deductible even though the project itself does not have 501c3 status got it good so here's an example to help out let's say Sarah wants to start a community project providing an afterschool program to kids who are struggling to read at grade level Sarah is a teacher and is passionate about kids learning to read proficiently but Sarah doesn't really envision this idea expanding Beyond her local area and also doesn't expect a ton of Revenue to come in she's looked at everything that's involved with starting her own nonprofit and feels like it's overkill for what she's wanting to do surely there's a better way for Sarah fiscal sponsorship would allow her to conduct her program raise donor support plus be able to get started almost immediately without having to formalize a corporate 501c3 and all that entails what are some other use cases short-term programs are great candidates for fiscal sponsorship many times these projects are small community- based activities that are temporary in nature and it doesn't make a lot of sense for them to go through the formality of incorporating at the state level then applying for 501c3 status for a project that's going to wind down within 3 years or less it could easily take a year or more just to get Incorporated receive an IRS letter of determination and register at the state for fundraising in such a situation those managing the project they may seek out the assistance of an existing nonprofit to to provide fiscal sponsorship the sponsoring charity will not directly operate the project but it is responsible for reasonable oversight donors to the project give to the sponsor for tax deductibility and the sponsor manages those funds on behalf of the project another great use case is what we call micr Charities now there's not really a universally accepted definition of a micr charity what we mean by that is an ongoing charitable activity that is intended to be operated indefinitely but it's small enough that those OP operating it would prefer not to formalize their own nonprofit organization now examples of this could include a married couple moving abroad to operate a religious missions project or a small neighborhood program like Sarah's tutoring program the potential benefit of fiscal sponsorship it's not limited to microchipping and let somebody else handle the tax and compliance concerns we're convinced that a pretty decent number of people who start nonprofits might have chosen a fiscal sponsorship opportunity had they known it was an option for them our final use case involves an organization that is actually seeking its own 501c3 status that wants to begin operations prior to IRS approval now this is an often overlooked opportunity for launching faster than the process would seem to allow now technically the IRS doesn't forbid Incorporated nonprofits from operating prior to getting 501c3 determination but there's no guarantee the IRS is going to approve your 501c3 application and that translates into a lot of uncertainty about the tax deductibility of gifts by donors who give before the IRS status is granted plus Most states require a nonprofit to have 501c3 status prior to initiating any fundraising activity here again a good solution is fiscal sponsorship founders of a nonprofit can temporarily come up under fiscal sponsorship while the 12 to 18month process of finalizing their own 501c3 status plays out it's a pretty clever strategic move that allows the organization to launch fundraising and operations quickly so let me shift gears for a minute and talk about the requirements for the 501c3 that's providing fiscal sponsorship Services the decision by an existing nonprofit to provide fiscal sponsorship services to a group or project or maybe to several groups or projects it's not to be done without careful consideration legally the sponsor is the organization that the Project's donors are financially supporting there are several important things to keep in mind here number one the fiscal sponsor is fully responsible for all money donated to a sponsored project number two the fiscal sponsor is who gives a receipt to the donor number three the fiscal sponsor has some accountability for the actions of the project now that varies by the model of fiscal sponsorship used and we'll get into that in a minute number four the sponsor must have sufficient oversight of the project to ensure that it's operating in a manner consistent with 501c3 requirements and number five money designated by a donor to a project must be accounted for by the fiscal sponsor as restricted funds now if you don't know what restricted funds are watch our video on that topic there's a link in the description below it's important for those operating the project they've got their own end of the bargain to uphold as well here's some things they need to consider number one in order to benefit from a compliant fiscal sponsorship Arrangement the project is considered subordinate to the sponsor now even though most sponsors don't exercise a ton of control over their projects those operating the projects must understand that they don't have quite the same level of control as they would if they chose to start their own 501c3 organization number two any funds passed through the sponsor that is used for personal compensation is subject to tax either as an employee or as an independent contractor depending on the model of fiscal sponsorship we're talking about number three donations given straight to the project that bypassed the sponsor they're not tax deductible and the donor must be alerted to that fact now there is a Model F Arrangement that may be an exception to this rule but those are rare and complex and not going to get into that today number four should a fiscal sponsor decide for any reason to no longer provide fiscal sponsorship service to your project the project no longer has tax exempt coverage most projects in this situation they're either going to seek another sponsor or start their own 501c3 I want to talk now about the models of fiscal sponsorship because there's several actually I'm going G to covers the tomb host common models A and C under a Model A Arrangement the project is considered to be under the direct operation of the sponsor itself meaning there's not really any legal separation between sponsor and project if any individual is involved with the project are compensated it's going to be usually as an employee of the sponsor and since there's little legal distinction there's also less control allowed to the project manager and considerably more liability on the sponsoring charity now there are several pretty large fiscal sponsor Charities out there that use model A for their sponsored projects I'm personally not a fan of this arrangement I think it's the worst of Both Worlds but others like it so there you go the model we prefer around foundation group is model C the model C fiscal sponsorship is considered a grantor grantee relationship with the sponsor being the grantor and the project being the grantee now there is considerable legal separation between the parties as the project it's really considered its own entity while the sponsor still maintains oversight responsibility for program operations and funding the program retains much more flexibility and is considered independent of the sponsor there's also less legal liability for the Project's actions that are resting on the sponsor and like Model A there's quite a few large fiscal sponsorship Charities out there that use model C for their projects we see more of this in Model A for reasons that are probably pretty clear let's look now at Best Practices there are many ways to structure fiscal sponsorship arrangements so that they pass legal muster however there is a framework that works best to ensure compliance and accountability let's start with donor relations acknowledging and thanking donors is essential to continued financial support some sponsors are pretty slow to respond to project supporters and that shouldn't be best practice is for the sponsor to send a written or electronic thank you to each donor now it's okay for the project leaders to also acknowledge that gift as long as the letter makes it clear that the sponsor is the 501c3 providing tax deductibility for the gift next up is cash flow it is perfectly legal for a fiscal sponsor to pass through dollar for dooll the money designated by donors to the project but that's not the best way for a number of reasons including transparency accountability potential tax issues for those operating the project and more the better way is for the sponsor to set up a fund for each sponsored project the money is retained by the sponsor until requested in writing for a specified Purpose By the project then fund funds can be dispersed in a controlled manner for known reasons this is model C defined really lastly let's look at reporting the project operators should provide an expenditure accountability report back to the fiscal sponsor detailing exactly when and for what purposes the money was spent because the sponsor is accountable for expenditures these periodic reports will assist in preparation of the sponsor 990 at the end of the year ideally the sponsor is going to provide a template report to the project on a monthly or quarterly basis bis at least a semiannual basis annual reporting can work but it doesn't really provide the visibility truly necessary for compliant oversight we can't leave this topic without talking about cost one of the reasons a new charity may choose fiscal sponsorship over starting their own 501c3 is cost and that's a legitimate reason overall fiscal sponsorship does Cost Less at least in the near term but it's not usually free most fiscal sponsors will charge some sort of onboarding fee to new projects to cover the cost of getting them well onboarded Provisions have to be made in the sponsors accounting system online donation capabilities are usually involved it's a lot but it's almost always a fraction of the cost of a full 501c3 startup next most fiscal sponsors will hold back a percentage of every donation to a project to cover the cost of ongoing fiscal management now most often you'll see that percentage be somewhere between 8 and 15% most common around 10% this is where the cost benefit an analysis has to come in though some projects grow to the point that their revenue becomes enough annually that the percentage hold back gets a little bit too high that's usually a good time for a project under sponsorship to consider coming out from under that and getting their own 501c3 status well that was a lot I hope that helps you understand this issue a lot better I promised you at the beginning that I had a big announcement and I do coming in the next few weeks Foundation group is launching its own fiscal sponsorship nonprofit Compass charitable partners we've been working behind the scenes now for two full years to get this ready to roll out to the public and we are so so close pretty soon we will have a great option for those seeking fiscal sponsorship to get set up quickly and easily and managed by the best and most knowledgeable team in the nonprofit Community utilizing technology that will allow us to serve hundreds even thousands of projects there's a link below in the description to the new Compass website so check that out if the link doesn't work yet it means we haven't launched the website yet in that case book market and check back we've got dozens of potential projects waiting in the wings for us to open the doors and we couldn't be more excited about it well thanks for hanging with me for a very long video today I hope it helped you out a lot if you're interested in fiscal sponsorship stay tuned for our Compass charitable Partners launch coming really soon thanks for watching now go serve your community hey do me a favor and don't navigate away just yet we would really appreciate it if you would hit the like button below as it really helps get our content recommended to more more people subscribe if you haven't already as we have great content coming your way on a regular basis finally you can click the little bell icon to be notified of new content when we post it to learn more about Foundation group you can visit us on the web at .501.com [Music]