This document will help you understand what the legal terms of the Fiscal Sponsorship Agreement actually mean, in plain English.
Please contact James Carlson at firstname.lastname@example.org or 414-215-0215 with any questions you may have.
|Legal Agreement||What it means|
|1. Grantee’s separate legal existence, for all purposes including tax reporting, is established by the Grantee as an individual person, acting as a sole proprietor, or as non-stock corporation registered in the State of [STATE]. Grantee is responsible for all tax reporting and filing related to monies paid to Grantee by Grantor.||You are your own entity--either acting as yourself or as a corporation. This means you should incorporate in your state as a non-stock corporation so you can protect yourself from individual liability. You're on the hook to file any tax-related documents (i.e. tax returns) for money you receive through our organization, such as if you pay yourself with that money. In other words, once we give you the money, it's up to you to account for it.|
|2. Grantee shall use the grant solely for the project described in the proposal, and Grantee shall repay to Grantor any portion of the amount granted which is not used for that project. Any changes in the purposes for which grant funds are spent must be approved in writing by Grantor before implementation. Grantor retains the right, if Grantee materially breaches this Agreement, to withhold, withdraw, or demand immediate return of Grant funds, and to spend such funds so as to accomplish the purposes of the project as nearly as possible within Grantor’s sole judgment. Consistent with Interpretation No. 42 of Statement No. 116 issued by the Financial Accounting Standards Board, Grantor retains the unilateral power, without approval from any funding source, from Grantee, or from any other interested party, to redirect use of grant funds away from Grantee to another beneficiary capable of fulfilling the purpose of the project. Any tangible or intangible property, including copyrights, obtained from third parties or created by Grantee as part of this project shall remain the property of Grantee. The amount and date of each disbursement of grant funds to Grantee shall be within the discretion of Grantor.||You have to use the money you raise through our sponsorship for the project and only for the project. For example, once you get a donation from someone for your project, you can't use the money for something else. If you decide you want to use it for something else you have to ask our permission first.|
If you don't use the money for the purpose you originally claimed, we can demand that you pay back the money so it can be used for the proper purpose. If you drop out and stop doing the project, we can find someone else to do it and give them the money, so it gets done.
Also, you own the rights to anything you create, any property you generate.
|3. Grantee may solicit gifts, contributions, and grants to Grantor, earmarked for the purposes of the project. Grantee’s choice of funding sources to be approached, and the text of Grantee’s fundraising materials, are subject to Grantor’s prior written approval. All grant agreements, pledges, or other commitments with funding sources to support this project shall be executed by Grantor. The cost of any reports or other compliance measures required by such funding sources shall be borne by Grantee. Grantor shall be responsible for the processing, acknowledgment, and deposit in the restricted fund of all monies received for the project, which shall be reported as the income of Grantor for both tax purposes and for purposes of Grantor’s financial statements.||You can ask people for money or gifts for your project. Who you approach, and how you ask is something we can either approve of or disapprove of. (For example, if you tell people that you'll give them the moon in exchange for their money, we can say, "No.") We'll take care of all the paperwork once you get the gift or money.|
If filing the paperwork costs money, you have to pay for it. We're on the hook to make sure all the paperwork gets done, however. If something goes wrong, it's our liability.
We'll claim whatever you raise through us as our income and on our financial statements display that income. (Note this doesn't preclude you from doing the same.)
|4. Grantee assumes the risk that any funding source may exercise the discretion to not grant or not appropriate funds to Grantor for support of the project. Any amount advanced by Grantor to Grantee, with the expectation that a pending grant request will be approved by a funding source, shall be treated as an obligation to be repaid by Grantee to Grantor, either from monies deposited in the restricted fund or from Grantee’s assets, upon demand by Grantor.||If someone promises to give you money, and you go spend a bunch based on that promise, and they renege on the deal, that is your problem. If you get money from us in advance, and the grant doesn't come through, that's your problem too and we'll withhold future funds until we're paid back whatever we gave you.|
|5. Any interest earned on the restricted fund shall be retained in Grantor’s general fund.||If we get money and hold it for you for any reason, we'll keep the interest.|
|6. Grantor shall not be responsible for the community programs, public information work, fundraising events, accounts payable and receivable, negotiation of leases and contracts, insurance, day-to-day disbursement of project funds, or other matters related to activities conducted by Grantee. Grantee shall assume full and complete responsibility for all liabilities to third parties incurred in connection with the project including but not limited to any and all claims whether asserted or unasserted while this Agreement is in effect. Grantee may select subgrantees to carry out the purposes of this grant, and Grantor retains full discretion and control over the selected subgrantees.||We don't do the work of making sure that you get the money, run your business, negotiate your lease, or do the day-to-day operations of your project. If you make promises to people, you need to follow through on them. If you pay other people with the money you get through us, you need to manage them. It's up to you to decide if you want to share the money you get through us with someone else, but we get a chance to review who you choose--just to keep us both safe.|
|7. Nothing in this Agreement shall constitute the naming of Grantee as an agent or legal representative of Grantor for any purpose whatsoever except as specifically and to the extent set forth herein. This Agreement shall not be deemed to create any relationship of agency, partnership, or joint venture between the parties hereto, and Grantee shall make no such representation to anyone.||You aren't a legal representative of our company. You can't tell people you work for the School Factory or make contracts on its behalf. This agreement is only about the money we collect on your behalf and not about the marketing around our relationship.|
|8. Grantee shall submit a full and complete report to Grantor as of the end of Grantee’s annual accounting period within which any portion of this grant is received or spent. The initial report shall be submitted by Grantee no later than sixty (60) days after the end of such period. The report shall describe the charitable programs conducted by the Grantee with the aid of this grant and the expenditures made with grant funds and shall report on the Grantee’s compliance with the terms of this grant.||Every year you need to tell us what you did with any money we gave you, within the first 60 days after the year ends. You should itemize what you spent the money on anyway, for your own reasons, so this shouldn't pose a problem and will help us make sure the IRS doesn't get upset.|
|9. This grant is not earmarked to be used in any attempt to influence legislation within the meaning of Internal Revenue Code Section 501(c)(3). No agreement, oral or written, to that effect has been made between Grantor and Grantee.||You can't use the money to lobby politicians.|
|10. Grantee shall not use any portion of the funds granted herein to participate or intervene in any political campaign on behalf of or in opposition to any candidate for public office, to induce or encourage violations of law or public policy, to cause any private inurement or improper private benefit to occur, nor to take any other action inconsistent with Section 501(c)(3) of the Internal Revenue Code.||You can't use the money to get someone elected or prevent someone from getting elected. No political fundraisers, no outspoken support for a particular candidate.|
|11. Grantee shall notify Grantor immediately of any change in (a) Grantee’s legal or tax status, or (b) Grantee’s executive staff or key staff responsible for achieving the grant purposes.||If you start out as a non-stock corporation (non-profit) and then become an LLC or something else, you have to tell us right away. If you quit, or find someone else to run the show, you have to tell us right away.|
|12. Grantee hereby irrevocably and unconditionally agrees, to the fullest extent permitted by law, to defend, indemnify and hold harmless Grantor, its officers, directors, trustees, employees and agents, from and against any and all claims, liabilities, losses and expenses (including reasonable attorneys’ fees) directly, indirectly, wholly or partially arising from or in connection with any act or omission of Grantee, its employees or agents, in applying for or accepting the grant, in expending or applying the funds furnished pursuant to the grant or in carrying out the program or project to be funded or financed by the grant, except to the extent that such claims, liabilities, losses or expenses arise from or in connection with any act or omission of Grantor, its officers, directors, trustees, employees or agents.||If something goes wrong with your project, you cannot blame us for it and we are not responsible--unless our actions caused you to fail. For example, if your space burns down and a member decides to sue you, that's your problem. On the other hand, if we screw up in a way that screws up your situation, that's our problem.|
|13. Either Grantor or Grantee may terminate this Agreement on thirty (30) days’ written notice to the other party, so long as another nonprofit corporation which is tax exempt under IRC Section 501(c)(3), and is not classified as private foundation under Section 509(a) (“a Successor”), is willing and able to sponsor the project. The balance of assets in Grantor’s restricted fund earmarked for the project shall be transferred to the Successor at the end of the notice period or sooner if all parties so agree. Grantee shall be eligible to be a Successor itself so long as Grantee has received, no later than the end of the notice period, a determination letter from the Internal Revenue Service indicating that Grantee meets the qualifications for a Successor stated above.||Within a month either of us can quit this agreement (in writing) as long as there is someone else to take any money that we have received (and issued a tax deduction for) who can take on the project. Whatever money we have been promised or have received on your behalf will then go to that person. If you become a 501c3 on your own, then you can be the entity that gets that money.|
|14. In the event of any controversy, claim, or dispute between the parties arising out of or related to this Agreement, or the alleged breach thereof, the prevailing party shall, in addition to any other relief, be entitled to recover its reasonable attorneys’ fees and costs of sustaining its position.||If we have a legal battle, whoever wins gets their attorney fees paid by the loser.|