Fiscal sponsorship is one of the most useful tools in the grantmaking toolkit — and one of the least well understood. It allows community groups, projects, and initiatives that don't have their own charitable registration to receive grant funding through an established sponsor organisation that acts as the legal and financial intermediary.
For funders committed to reaching grassroots and informal community groups, understanding fiscal sponsorship is essential. Without it, eligibility requirements that mandate formal charitable status systematically exclude the newest, most community-embedded, and most innovative organisations from grant funding.
A fiscal sponsor is an established, legally registered charitable organisation that agrees to receive grants and donations on behalf of a project or group that lacks its own charitable status. The sponsor:
The sponsored project benefits from the sponsor's legal infrastructure — accessing funding it couldn't otherwise receive — while operating with significant day-to-day autonomy.
Reaching grassroots communities: Many of the most effective community initiatives are informal — neighbourhood groups, mutual aid networks, cultural projects, emerging advocacy initiatives. Requiring charitable registration before funding excludes these groups, concentrating funding in established, institutionalised organisations.
Supporting new organisations: Starting a charity takes time — incorporation, registration with Charities Services, governance establishment. Fiscal sponsorship allows a new initiative to access funding during the period before formal registration, supporting the early, fragile stage of development.
Funding projects, not organisations: Some valuable work doesn't need a permanent organisation — a community event series, a one-off research project, a short-term advocacy campaign. Fiscal sponsorship allows project-based funding without requiring the creation of a full charitable entity.
Reducing sector overhead: New charitable organisations have overhead — governance, compliance, administration. If every good initiative requires its own registered charity, the sector accumulates unnecessary organisational overhead. Fiscal sponsorship allows good work to happen without creating that overhead.
Comprehensive sponsorship (Model A): The sponsor has full legal control over the project. The project is effectively a programme of the sponsor organisation. Donations are made to the sponsor and are fully tax-deductible. The sponsor is fully responsible for the project's compliance.
Pre-approved grant relationship (Model B): The sponsor and project have a contractual relationship where the sponsor pre-approves grants that come in to support the project. The project retains more independence but the sponsor is still responsible for ensuring proper use.
Independently contracted staff (Model C): The project operates independently but its staff are contracted through the sponsor. The sponsor acts as employer of record.
For grantmakers, comprehensive sponsorship (Model A) provides the clearest accountability structure and is the most appropriate for significant grants. Pre-approved grant relationships may be appropriate for smaller, lower-risk grants.
Allow it explicitly: If eligibility requirements specify that only registered charities can apply, fiscal sponsorship cannot be used. Explicitly allowing applications from unregistered groups with a named fiscal sponsor opens up the full range of community activity.
Assess both sponsor and project: The sponsor organisation takes on legal and financial responsibility for the grant. Grantmakers should assess the sponsor's governance, financial management, and track record with fiscal sponsorship, not just the project's work.
Understand the sponsor's role: Verify that the sponsor genuinely understands and accepts its responsibilities — not just signing as a formality to help a friend organisation get through an eligibility requirement.
Set clear accountability: Grant agreements with fiscal sponsors should specify: how funds will be remitted to the project, what reporting the project must provide to the sponsor, what reporting the sponsor must provide to the funder, and what happens if the project fails to perform.
Allow overhead recovery for sponsors: Fiscal sponsorship has administrative costs — financial management, compliance, reporting. Sponsors typically charge the sponsored project 5-15% of grant funds for this service. Grantmakers should allow this overhead to be included in budget proposals rather than requiring that 100% of the grant go directly to project activities.
Risk: The sponsor loses control of funds: If the project is poorly managed or acts in ways that violate grant conditions, the sponsor — not the project — is legally responsible to the funder. Sponsors need to understand this exposure and have controls in place.
Mitigation: Require the sponsor to produce a fiscal sponsorship agreement with the project that specifies reporting requirements, fund remittance conditions, and the sponsor's right to suspend or terminate the arrangement.
Risk: The sponsorship is a formality: Sometimes sponsorship is arranged nominally — a registered charity agrees to be named as sponsor but has no real oversight of the project.
Mitigation: Assess whether the sponsor has a genuine relationship with the project and has understood and accepted its responsibilities. A site visit or conversation with the sponsor helps assess this.
Risk: Double counting or misuse of funds: Funds passing through a sponsor can be subject to more complex accounting and create opportunities for misuse if oversight is weak.
Mitigation: Require clear financial reporting that shows the flow of funds from funder to sponsor to project, with documentation of expenditure at the project level.
Sophisticated community grantmakers often cultivate relationships with established organisations willing to act as fiscal sponsors for emerging community groups. This might mean:
When an existing grantee is asked to fiscally sponsor an emerging group, supporting both the sponsor's time and the sponsored project's activities is a legitimate use of grant funds.
Tahua's grants management platform supports grant programmes that allow fiscal sponsorship — with flexible applicant types, dual-organisation tracking, and reporting frameworks that accommodate the sponsor-project relationship structure.