What is a Fiscal Sponsor Agreement Review?
A fiscal sponsor agreement is a legal contract between a sponsor, or tax-exempt nonprofit company, and a sponsored project. How it works is that the sponsor lets the project make use of its tax-exempt status to get tax-deductible donations, in return for having control and ownership of the funds being donated.
This contract is usually required when a charitable project wants to receive tax-deductible donations or apply for grants despite not yet having a tax-exempt status.
If a fiscal sponsor agreement has been drafted, you should review it carefully to ensure all its terms are fair and accurate, especially because this contract is legally binding.
What are Key Terms to Review in a Fiscal Sponsor Agreement?
A fiscal sponsor agreement usually contains the following key terms that you should check for clarity.
- Recitals and donations. Both parties’ legal names must be included and the sponsor’s tax-exempt status must be stated.
- Scope. Outline the activities and programs being sponsored, as well as what activities are excluded. This prevents ambiguity and disputes.
- Fund management. The agreement should state that the sponsor has full ownership of donated funds and how they are held.
- Admin fees. It’s common for the agreement to mention that the sponsor will keep some of the money for admin fees. Clarify how much and explain all costs.
- Acceptance. Check what approval criteria for donations and grants are required.
- Reporting and compliance. It’s key to establish that financial reports must be submitted to the sponsor regularly for compliance.
- Liability and indemnification. The project must indemnify the sponsor for claims as a result of the project’s activities.
- Insurance. Not having insurance requirements mentioned in the agreement can create disputes, such as if a claimant goes after the sponsor because the project doesn’t have insurance.
What are Key Terms to Review in a Fiscal Sponsor Agreement?
When reviewing a fiscal sponsor agreement, there are some things to bear in mind so that you protect both parties’ interests.
Check Non-Compliance Provisions
It's crucial to consider what happens if reporting obligations aren’t met, along with remedies for non-compliance. Remedies can include disbursement suspension to protect the sponsor if something goes wrong.
Confirm Intellectual Property (IP) Ownership
It’s erroneous to neglect an IP clause as there could be content created during the sponsorship, such as websites, brand elements, and video footage. If it’s not clearly stated which party owns the IP, it can cause costly legal disputes after the agreement is terminated.
Clarify Parties’ Roles
To ensure a smooth process, the agreement must specify what both parties are responsible for during the term. This can include the sponsor tackling all legal compliance and tax filing duties, while the sponsored party or project taking over fundraising activities.
Review the Financial Terms
Make sure that all financial terms are clearly outlined in the fiscal sponsor agreement, such as how the grants and donations will be disbursed to the sponsored party.
All details about the fiscal sponsor fee must be included and what it’s for, such as if it will cover legal compliance or bookkeeping costs.
The fiscal sponsor agreement should specify the fundraising process for clarity, such as if the project can solicit donations directly and how funds will be allocated.
Consider the Agreement Purpose
It’s important to specify the program being sponsored and ensure it’s aligned with the sponsor’s purpose. If there are any changes made to the program, how these can be approved should be included.
Do You Need a Legal Review of Your Fiscal Sponsor Agreement?
A fiscal sponsor agreement is detailed and must avoid vague language to protect both parties against disputes. Hiring a lawyer to conduct a legal review of it can help you in various ways.
During a contract review, a lawyer will:
- Identify the agreement's purpose and scope. They’ll explain exactly what the fiscal sponsor will do to benefit the project, such as receiving and distributing funds.
- Check legal responsibilities. A lawyer will check that the agreement clarifies the sponsor’s legal duties so there’s no confusion over what they need to do to remain compliant. They’ll also ensure that the project provides information the sponsor requires for reporting and regulatory obligations.
- Consider how funds are used. They’ll explain how the fund money can be spent, along with listing approved expenses.
- Consider responsibility. A lawyer will help you to understand which party is responsible for something that goes wrong and include clear liability and indemnification clauses.
- Clarify what happens post-termination. They’ll review all contract termination rights and notice periods. This includes how outstanding tasks and remaining funds are allocated to prevent disputes.
Where to Find a Lawyer for a Fiscal Sponsor Agreement Review
If you’d like to find and hire a lawyer to review your fiscal sponsor agreement, you don’t have to call traditional law firms in your area. Using an online legal platform such as ContractsCounsel makes the process easy.
ContractsCounsel is one of the biggest online legal marketplaces where clients can quickly connect with lawyers who have been vetted on the platform. All lawyers are professional and reputable, giving you peace of mind that all the agreement terms are clear and detailed.
To request that a lawyer on ContractsCounsel reviews your fiscal sponsor agreement, follow these steps:
- Go to the ContractsCounsel marketplace, where it’s free to post your project.
- Include a few details about your project, such as why you require a review of your contract. This will help you to match with the most suitable lawyers.
- Wait to receive bids. Lawyers on the platform will send you bids to work on your project.
- Review the lawyer data. You can access a range of information about lawyers on the platform, such as their location, field of expertise, years of experience, and client ratings for previous projects completed on the platform.
- Use the lawyer information to select a suitable lawyer and hire them to review your fiscal sponsor agreement for a flat fee.
