Define who controls funds held for a fiscally sponsored project

A project can use a sponsor's donation page while its organizers handle day-to-day activity. That description leaves essential questions unanswered: who accepts the gift, who approves spending, who employs the workers and who owes a refund if the project stops? Obtain the signed sponsorship agreement and donor-facing terms before setting up a project balance in the ledger.

Do not assume every arrangement called fiscal sponsorship has the same legal or accounting structure. Ask counsel and the accounting reviewer to identify the actual parties and obligations. A project code helps track activity after that analysis; it cannot establish ownership or turn an informal understanding into an approved agreement.

IRS Revenue Ruling 68-489 addresses an exempt organization distributing funds to nonexempt organizations while retaining control and discretion over charitable use and keeping records of that use. It supports examining real oversight, rather than treating the sponsor as a name placed on a donation form. The ruling does not approve every possible sponsorship contract.

Create an authority record showing who can accept restricted gifts, approve budgets, authorize payments, suspend activity and decide what happens to unused money. Record any donor or project consent required. If practice differs from the agreement, flag the difference for resolution. An undocumented promise that organizers may withdraw all funds on demand deserves attention before another receipt is accepted.

For employees, suppliers and beneficiaries, retain the contract or approval establishing who owes the amount. A sponsor paying a supplier directly and reimbursing a separate project organization may create different evidence needs. Keep the approved purpose, invoice recipient, payer and ultimate use visible so the reviewer can follow the arrangement without guessing from bank descriptions.

Record sponsorship fees using the agreed basis, including whether a percentage applies to gross receipts, particular grants or spending. For illustration, a stated 6% fee on a qualifying $20,000 receipt is $1,200. That arithmetic does not decide whether the receipt is contribution revenue, a liability or another balance under the applicable reporting framework.

Provide the agreement, donor restrictions, named beneficiaries, rights to redirect funds and any repayment terms. Ask for a written conclusion addressing the sponsor's and project's records. The analysis should identify which entity recognizes the relevant receipts, expenses, assets and obligations, rather than copying every movement into both organizations' revenue.

FASB's contribution guidance distinguishes exchange value from public benefit and separates contribution conditions from restrictions. Those questions may arise alongside the sponsorship structure, but the arrangement still requires review under the current relevant guidance. Keep the accounting conclusion separate from the legal assessment of the sponsor's charitable control; neither should be inferred solely from the bank account used.

Agree how open commitments, unspent restricted amounts, equipment, donor reports and records will be handled if the sponsorship ends. Reconcile the project balance to those obligations before discussing a final transfer. Retain the authorization and recipient of any permitted transfer, along with unresolved restrictions. A closing statement should explain what the sponsor still owes or must oversee, not simply show that the project bank balance reached zero.