What’s a fiscal sponsor? Excellent question! Below, we’ve compiled the most frequently asked questions about fiscal sponsors and provided some answers.
What is a fiscal sponsor?
A fiscal sponsor is an organization that agrees to accept and be responsible for grant funds on your behalf.
Why would I want to designate a fiscal sponsor?
Unless you designate a fiscal sponsor, The NEA Foundation will make the grant payable directly to the lead applicant as an individual. In this case, the IRS may consider the grant personal income and therefore taxable.
The Foundation, by law, must issue you a 1099 (reporting form for miscellaneous income) at the end of the year. A copy of this form also goes directly to the IRS.
As an individual, you’ll probably have to pay taxes on your grant. Fiscal sponsors, on the other hand, are usually non-profit organizations that can accept the funds without tax liability.
The NEA Foundation is not qualified to give tax advice, and makes no recommendations about whether or not you should designate a fiscal sponsor; the choice is up to each applicant. We suggest you consult with a tax advisor or accountant if you are unsure.
Who can serve as a fiscal sponsor?
This varies. Generally speaking, your school, school district, school board, institution's grants administration or development office, or local union may serve as a fiscal sponsor.
How do I designate a fiscal sponsor?
This depends mostly on the administrative structure of your school district, college, or university. If you aren’t sure of the procedure, talk to your principal, someone from the central office, your dean, or someone from your institution's sponsored research office. You may also want to speak to colleagues who have previously received grants to find out about their experience.
A representative of the organization you designate as fiscal sponsor must sign the applicant data sheet. This person must be authorized to represent and act in the name of the organization, specifically in the receipt, disbursement, and oversight of grant monies.
In addition, you should verify that the address of the fiscal sponsor on the form is the correct and complete mailing address to which a check may be sent.
What are the responsibilities of the fiscal sponsor?
The fiscal sponsor is responsible for receiving and safeguarding your grant funds. Legally, the fiscal sponsor is obligated to:
- maintain its own records of disbursements related to the grant
- keep receipts for at least three years following receipt of the grant
- make financial records available to The NEA Foundation upon request
- disburse funds in accordance with the purpose of the grant application
- disburse funds solely at the direction of the grantee
What happens if I designate a fiscal sponsor and the check is lost?
As a grantee, your job is to follow up with the fiscal sponsor to make sure you receive your funds when you need them.
If a check issued by The NEA Foundation (either to an individual or an organization) does not arrive within a reasonable period after award notification and appears to have been misplaced or lost in transit, you should contact the Foundation. However, you’ll have to wait at least 60 days before the NEA Foundation can stop payment on the original check and issue a new one.
Are there any disadvantages to designating a fiscal sponsor?
There may be some disadvantages to designating a fiscal sponsor. For example:
- You will not have direct control over the funds, but will need to deal with one or more intermediaries at the fiscal agency when you want to use your grant funds.
- Since most fiscal sponsors are large, complex organizations, there could be delays in accessing funds.
- Changes in personnel at the fiscal agency could result in delays or miscommunication.
It will be your responsibility to identify and follow up with the appropriate representative of the fiscal sponsor organization to ensure that you receive your grant in a timely fashion.
Do I need to appoint a fiscal sponsor now, or can I decide to do so after I receive a grant?
If you wish to have a fiscal sponsor accept the grant in the event that your proposal is approved, you must designate the sponsor at the time of your original application. The NEA Foundation will not consider requests to appoint a fiscal sponsor after an award has been made.
Who is responsible for financial reporting to the NEA Foundation at the end of the grant period?
Whether or not you designate a fiscal sponsor, all grantees are personally responsible for submitting a complete and accurate account of all grant expenditures by the deadline specified in your award letter. If you have a fiscal sponsor, you should arrange to obtain an accounting of expenditures for the final report several weeks prior to its due date.
DISCLAIMER: The above should be considered general information rather than specific tax advice. We recommend you consult a tax specialist or accountant with any questions about your situation.