Fiscal Sponsorship FAQs
Fiscal sponsorship is an effective partnership offering a comprehensive shared services platform to mission-based organizations. TSNE has been providing fiscal sponsorship services to nonprofits for more than 60 years and is currently registered to do business in more than 35 states countrywide. Our comprehensive suite of services includes accounting, finance, legal, and human resources management supports that allow program leadership and staff to focus on achieving their goals.
Are there any other fees such as start-up or termination fees?
There are no additional start-up fees. However, there could be direct costs to projects that require supplemental insurance for activities not covered by our general liability policy.
Are there types of projects TSNE does not accept?
Due to the liabilities associated with the following activities, we currently do not support groups which engage in or which include the following criteria:
- Operation of a law practice: routinely litigates or regularly provides legal services to the general public, such as legal aid clinics
- Practice medicine: provides psychological services, or provides medical treatment services of any kind. No HIPPA covered entities
- Engage in animal testing or research, running animal hospitals or work with exotic animals
- Provide programming in residential or overnight settings, such as group homes or overnight camps, to vulnerable populations, including, people with disabilities, senior citizens, children under the age of 18 or other groups
- Own and maintain land, buildings, or other real estate
- Have more than 20% of staff that live outside of the United States
- Offer primary programming that primarily hosts high risk activities that could result in injury or death
- Deliver services and programs outside of the United States
- Produce ‘journaling’ or ‘reporting’ as your primary programming. Example: an online newspaper
- Are a benefit corporation or a corporation that generate profits in addition to providing a public benefit
- Conduct research on human subjects, other than research that is limited only to data collection and analysis
- Engage in political campaigning or electoral activities
Can an organization have more than one fiscal sponsor?
No, you can only have one fiscal sponsor at one time.
Can I use third party revenue collection systems like PayPal or others?
Yes, we accept third party revenue collection systems.
Does TSNE accept faith-based organizations?
We welcome applications from faith-based projects, as long as they do not:
- Require adherence to a particular religious faith or doctrine
- Make claims that a particular religion or religious tradition is the “one true religion” to the exclusion of all others
- Make claims or enact practices that privilege members of a particular religion or religious tradition, or discriminate against non-members of a particular religion or religious tradition
- Claim that one particular religion has replaced all other religions
- Require their staff and/or constituents to actively participate in religious rituals
- Have as a primary purpose the advancement of prescribed belief or observance
How long can I be fiscally sponsored by TSNE?
We ask for at least one year of commitment.
How long is the application review process?
It takes us a minimum of nine weeks to accept or decline an application. At this time we unfortunately cannot accept projects that need a shorter turnaround time.
My organization already has 501(c)(3) determination. Can I still apply for fiscal sponsorship under TSNE?
Yes. A number of established nonprofit organizations have chosen to make TSNE their home, appreciating a new operating structure that allows them to better focus on mission. Please indicate in your application that you already have 501(c)(3) status. If you are accepted for fiscal sponsorship with us, you will no longer be able to conduct business under that 501(c)(3) tax determination. If there are any outstanding liabilities under your 501(c)(3), you will not be considered for sponsorship until they are resolved.
My organization engages in lobbying and advocacy work, will TSNE still consider my application?
In most cases, yes, if it is an allowable 501(c)(3) activity, not in support of a political candidate, we are notified of your intention to engage in the activity PRIOR to carrying it out, and it is in alignment with our mission and values.
What accounting systems does TSNE use?
We use Sage Intacct as our enterprise resource planning/accounting platform. This is a flexible cloud-based system which provides our fiscally sponsored organizations with online access to key financial management tools such as financial reports and live dashboards.
What are the benefits to becoming a nonprofit through fiscal sponsorship instead of forming a 501(c)(3) nonprofit corporation?
Forming a new, independent nonprofit organization is like starting a new business and requires time, money, and energy to set up operations. The process of applying for nonprofit status and IRS tax exemption is expensive (typically requiring an attorney) and takes approximately 6-9 months. Fiscal sponsorship allows leadership and staff to focus fully on the mission, long- and short-term goals, and programmatic and fundraising efforts.
What are the fees associated with Fiscal Sponsorship?
TSNE charges an indirect rate of 14% of your expenditures for model A fiscal sponsorship for the first year. This indirect rate is reassessed after your first year but it will not fall below 10%. This 14% administrative fee covers the costs of legal, HR, and the financial management services. In addition to the administrative fee, there is a fringe rate which covers benefits, workers compensation, and the costs of any additional insurance for your activities. Read more about fringe rates here.
What are the funding requirements for fiscal sponsorship?
All organizations seeking fiscal sponsorship under TSNE must have enough cash on hand to cover 2-3 months of operating expenses. An exception may be made for guaranteed funding that consists of cost reimbursement awards. We expect a multi-year (minimum of 2 years) fundraising or business development plan to be submitted as part of the application process.
What are TSNE’S fiscal sponsorship services?
Our seamless suite of back-office services includes:
Human Resources Management
- Strategic human resources planning
- Benefits administration
- Payroll administration, time & attendance, tax filing
- Recruitment management
- Onboarding and offboarding
- Employee relations
- Human resources risk management
- Employment policies and procedures development and administration
- Labor laws and regulations compliance and reporting
- Employment verification
- Performance management
- Compensation strategy and plan design
- Training and development
- Employee data management
- Coaching and consulting (additional rates may apply)
- Internship and volunteer program design
- HR forms and templates
- Revenue and expense accounting
- Cash flow projections and assistance
- Grants and contracts management
- Monthly financial statements and reports
- Purchasing and bill payment
- Corporate financial audits and sub-audits for an additional fee
- Annual budgeting
- Grant Proposal Budget Development
- Assistance with grant proposal submissions
- Financial analysis and planning
Legal and Compliance
- General compliance
- Insurance coverage (additional insurance coverage beyond TSNE’s standard insurance offerings at FSO’s expense)
- Contract drafting and review
- General legal advice on intellectual property, nonprofit law, labor & employment, and dispute resolution
What can my organization expect from its relationship with TSNE?
A successful fiscal sponsorship depends on maintaining clear roles and responsibilities for both the sponsor and the fiscally sponsored organization. As the fiscal sponsor, TSNE is responsible for acting as the legal entity. This means TSNE ensures that the organization’s activities meet all relevant legal requirements and maintains final decision-making authority over financial, legal, and human resources matters. The fiscally sponsored organization or the organization under sponsorship is responsible for understanding and conducting ethical business practices consistent with IRS regulations, all applicable laws, funder restrictions, and TSNE’s policies and procedures.
TSNE’s core roles and responsibilities as the fiscal sponsor:
- Provide fiduciary, legal, compliance, and ethical accountability as the legal entity
- Retain control and discretion of the use of funds, maintaining records demonstrating that funds were used for 501(c)(3) exempt purposes and according to funder requirement(s)
- Establish and maintain processes that promote robust communication between TSNE and the sponsored organization. Ongoing communication between TSNE and the sponsored organization is critical to ensuring that the partnership goes smoothly and that any challenges that arise are resolved quickly
- Work in collaboration with the fiscally sponsored organization to deliver shared administrative financial management, human resources management, and compliance and risk management services
The fiscally sponsored organization’s core roles and responsibilities:
- While TSNE retains full legal and fiscal control, projects will work in partnership on any dispute resolutions. TSNE will work fairly and equitably to resolve all disputes
- Maintain a clear understanding of their current financial situation and work with TSNE staff to ensure the accuracy of all financial reports, including working with TSNE staff to create and manage fiscal year budgets
- Adhere to TSNE’s policies and procedures
- Work in collaboration with TSNE to assure funders receive timely and accurate reports on the project’s activities
- Maintain and manage an advisory board that will oversee the work of the Project Director and serve as a resource to the Project Director and TSNE regarding any major strategic decisions or financial commitments
What does it look like when I get fiscal sponsorship with TSNE?
Your organization becomes a part of TSNE under model A, which means that you agree to all TSNE policies and procedures. The typical TSNE team that works with your organization, which includes a grants and finance manager, an accountant, and HR business partner, is assigned to work with 12-15 FSO at a time. You can expect to meet with the grants and finance manager and fiscal sponsorship accountant on at least a monthly basis. Communications is key to our team-based approach, and we rely on you to clearly discuss your needs with your TSNE team.
Model C is for organizations who are separate legal entities and are only looking to accept a grant from a specific funder. In this model, your TSNE team is composed of a grants and finance manager and an accountant, who again manage a portfolio of other FSOs (both model A and C). The finance services offered in model C are limited to compliance for the specific grant. For more information about model C, please look at this resource.
What does it mean to be a part of TSNE?
- All new fiscally sponsored organizations (FSOs) will be required to adopt a July-June fiscal year
- All projects under Model A legally become part of TSNE, which means that you have to adopt all TSNE policies and procedures, such as following our employee handbook. If you have any further questions about this, please email email@example.com
- FSO directors and/or senior managers are expected to understand financial reports, and take finance training as needed
- You cannot apply for funds or do any other business under any other 501(c)(3) entity while your organization is fiscally sponsored by TSNE
What happens after we complete the application?
Applications are rigorously reviewed by our staff, with the process officially starting once a completed application is sent to TSNE. Final determination of sponsorship is made by TSNE’s board of directors. Once an application is submitted, the process can take about 3-6 months, depending on the complexity of the project.
What happens to my employees when they join TSNE?
You would all become employees of TSNE. If you have any further questions about this, please email firstname.lastname@example.org.
What is a Concept-Stage Organization?
TSNE’s fiscal sponsorship services are designed to support organizations which are growing or have started on working towards their mission. Organizations in the concept stage are not a right fit, at the moment, for our services.
A concept-stage organization is one without:
- paid staff or a plan for paid staff in the immediate future
- a clear idea of who will be on the board
- funding, a fundraising plan, and/or cash reserves
- an operational plan
If you find yourself in this phase, we at TSNE encourage you to look in the directory of fiscal sponsors to find those that specialize in helping concepts.
What is Fiscal Sponsorship?
Fiscal sponsorship is a less-costly and more efficient alternative to a nonprofit 501(c)(3) corporation. Fiscal sponsorship allows a nonprofit to reap the benefits of 501(c)(3) status through its relationship with its fiscal sponsor’s active 501(c)(3) status.
A fiscal sponsor can provide a suite of administrative and financial supports, allowing staff to focus on the execution of their mission and programs. The fiscal sponsor is the legal and financial umbrella able to accept charitable contributions and grants that can only be awarded to 501(c)(3) organizations. Both new charitable activities and long-established organizations are eligible to become fiscally sponsored organizations.
What is the eligibility criteria?
You must have all four of the following:
- Need to have committed funding:
- Your organization must have at least one major source of revenue. This would be reflected either in your budget or funder commitment letters
- At least two months of operating reserves:
- You must have enough cash to cover two months of operating expenses for your organization
- Have a two year (24-month) budget:
- Could be with salaries, contractors, and include revenue expenses
- If you are a new organization, we encourage you to schedule an informational call with us by emailing email@example.com
- We can provide a sample budget for you to look at
- Have at least one person in your organization (either staff or board) who will act as the point person between your organization and TSNE:
- This must be a person who can commit to monthly meetings with TSNE and other duties as needed. For more information, feel free to schedule an informational call with TSNE
- Never operated under ‘for-profit’ status that is looking to transition to nonprofit status:
- If you have further questions about this, please consult a nonprofit lawyer as TSNE does not provide legal consulting
What models of Fiscal Sponsorship does TSNE offer?
TSNE currently offers Model A and Model C Fiscal Sponsorship.
Learn more about fiscal sponsorship as a practice:
What reporting responsibilities do you have? What does TSNE do?
Fiscal sponsorship requires shared responsibility between TSNE and your organization. Your grants and finance manager takes the lead on providing financial reports, while you take the lead for progress reports. We will discuss reporting responsibilities in more detail with you once you have submitted an application.
When are applications for fiscal sponsorship due?
Applications for sponsorship are accepted on a rolling basis.
Why do I need an advisory board if TSNE’s board provides the legal governance structure?
All projects under TSNE’s fiscal sponsorship must have an advisory board that provides oversight and guidance. The advisory board does not hold legal and fiduciary responsibility for the project (which is TSNE’s board of directors’ role), but it typically fulfills many of the roles usually held by boards of directors, including annual review of the director, fundraising and expansion of supporter and community partner networks, serving as ambassadors, and providing program and financial oversight. The size of your board should be manageable for a newly fiscally-sponsored organization; three to five members is recommended.