Sooner or later somebody wants to give you money, and you discover that a group of volunteers with a GroupMe thread cannot accept a grant. This is the wall most new response groups hit second, right after the cost of kits.
We want to be honest about the limits of this page. We are an infant feeding organization, not nonprofit-formation experts. We can tell you what we did and what it cost us to learn. We are not in a position to advise you on your own legal structure, and anyone who tells you there is one right answer has not met enough small nonprofits.
What a fiscal sponsor actually does
A fiscal sponsor is an existing 501(c)(3) that agrees to receive and hold funds on behalf of a project that does not have its own tax-exempt status. Grants and tax-deductible donations go to them; they hold the funds for your project and disburse against your expenses, usually for an administrative percentage. You get to accept grant money in week three of a response instead of week thirty.
The alternative — incorporating and filing for your own 501(c)(3) — takes months you do not have when a disaster has already happened. Most groups that respond to something end up sponsored first and independent later, if at all.
What we have done
Breastfeeding Family Friendly Communities serves as fiscal sponsor for the Birthstone Center for Appalachian Perinatal Resilience. That is a real, ongoing arrangement, not a hypothetical, and it is how we know the shape of the thing from the inside.
We would consider doing it again, case by case. We are not running an open sponsorship programme and we cannot promise capacity, but if you are standing up infant feeding work in an emergency and the money is the thing blocking you, talk to us and we will tell you honestly whether we can help or whether you need somebody bigger.
What to ask a prospective sponsor
If you are approaching an organization in your own state — a coalition, a community foundation, a larger nonprofit that already knows you — these are the questions worth settling in writing before money moves.
- What percentage do they take, and does it come off grants, off donations, or both?
- How fast can they actually reimburse you? In an active response this matters more than the percentage. A sponsor that takes 8% and pays in three days is worth more than one that takes 5% and pays in six weeks.
- Who signs grant applications, and how much notice do they need?
- Whose insurance covers your volunteers, and does that change anything about who may do what?
- What happens to unspent funds if the project winds down or leaves?
- Who owns what you produce — the materials, the curriculum, the name?
- How do you exit? Agree this while everybody is fond of each other.
Put the answers in a written agreement. It does not have to be elaborate, and having one is what makes the relationship survive a disagreement.
Where to learn this properly
There are people who do nothing but help small nonprofits with governance, boards, money and the mess in between, and they are better at it than we are. The one we point people to is Joan Garry, whose blog, book and podcast — all under the banner Nonprofits Are Messy — are written for exactly the person reading this page: someone running something real with not enough money, staff or sleep. Start there rather than with us.
For the legal and tax specifics of your own state, you want a nonprofit attorney or an accountant who works with 501(c)(3)s. That is not a cost we can save you.
This page describes our own experience and is general information, not legal, tax or financial advice. Structures, obligations and state requirements differ, and decisions about your organization should be made with a qualified professional.
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