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Monitoring Your Fiscal Sponsor

February 14, 2012 Posted by The Law Firm for Non-Profits, P.C. in Accountability, Fiscal sponsors
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Fiscal-sponsored programs are often heavily scrutinized by fiscal sponsor organizations before they are accepted as programs of the fiscal sponsor. But today’s news about the alleged misuse of funds by the 501(c)(3) fiscal sponsor International Humanities Center highlights how important it is for sponsored programs to vet and monitor their fiscal sponsors.

At the outset, new programs that seek to be under the umbrella of a fiscal sponsor should request and obtain copies of the sponsor’s IRS exemption application (Form 1023) and copies of its last three information returns (Forms 990). These can be requested directly from the fiscal sponsor, and it is obligated by law to provided copies on request. They also can be downloaded from organizations such as Guidestar.

In addition, obtain copies of the sponsor’s annual report and, if it has one, certified audit. (In California and many other states, copies have to be provided on request.) Also review its state charity regulatory filings such as California’s Form RRF-1. And talk to the people who run other programs under the sponsor’s umbrella.

Read all of these documents carefully. Ask questions about things that concern or don’t make sense to you. If any forms are missing, or the sponsor won’t provide them, seriously consider whether the fiscal sponsor is one you should work with.

Once the relationship is established, ask for and read copies of the sponsor’s annual Form 990 and audit, and request quarterly, if not monthly, reports of the funds it holds on behalf of your program. Carefully scrutinize the documents for inconsistencies.

The fiscal sponsor should fully cooperate with your requests. If it doesn’t – or there are inexplicable anomalies or inconsistencies in the documents that are provided – consider moving your funds and program to a different fiscal sponsor or becoming an independent 501(c)(3).