KMG FISCAL SPONSORSHIP

 

 

What is Fiscal Sponsorship?

In summary, fiscal sponsorship is a less-costly, faster, and more efficient alternative to launching your charitable activity than creating a nonprofit 501(c)(3) corporation. A fiscal sponsorship arrangement can give you time to evaluate if your idea works, and it can also provide confidence to potential funders who are often reluctant to provide support to a new nonprofit with no prior history or financials.

 

A fiscal sponsor can be any established 501(c)(3) that agrees to accept the financial responsibility for your project. But there is an advantage to being with an organization that is dedicated to fiscal sponsorship, and that has many projects in its portfolio. Such organizations can provide economies of scale when it comes to securing things such as insurance. They can provide valuable guidance about governance, help with the filing of reports, and keeping records.

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A fiscal sponsor can become an efficient and cost-effective back office support system for a new project while allowing it to focus on its mission and programs.

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How do I apply for fiscal sponsorship?

First, we encourage you to check other fiscal sponsors and compare them. Not all fiscal sponsors are the same, and not all projects are in alignment with the sponsor's mission and goals. When you are ready, complete our inquiry form and we will get in contact with you within 5 business days of receipt. Upon review of the inquiry form, we will contact you to schedule an exploratory call to discuss your project in detail to learn more about your needs.

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If you prefer, you can send an inquiry email to info@KMG.org to request more information, or call (770) 765-6815  and one of our representatives will return your call. You can also schedule a consultation by clicking here.

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After we apply for fiscal sponsorship, how long does the review/approval process take?

Depending on the time it takes to receive all pertinent information from you regarding your project and time to review/approve your application, it typically takes 24-48 hours. Once your application is approved, we present you with a proposal for review and upon acceptance, we provide you with a service agreement for your signature.

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How are donations received by the fiscal sponsor, what is the process?

We accept multiple forms of donation payments (checks, credit cards, cash, wire/ACH funds, and stock).  When donors pay by check, they are made payable to “Kingdom Mentoring Group" with the name of your project noted on the check (preferably in the note/memo section) so that it is clear that funds are restricted for your project. Donors can mail the checks directly to KMG or you can collect and forward it to us (please do not endorse or make any markings on the checks received before submitting to us. You are welcome to make a copy of the check for your records). 

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All donations are the possession of KMG and are restricted for the use of the Project noted.  Once we receive the donated funds, we deposit to your Project's unique sub-account held at our financial institution.  You are provided 24/7 viewing access to your account for full transparency.  In order for funds to be dispersed, you are required to complete a "grant recommendation request" with other supporting documents.  To pay vendors, we must receive an invoice and the vendor's W9.

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As a fiscally sponsored project, does this mean we are a nonprofit organization?

Receiving fiscal sponsorship from KMG does not make your project a “nonprofit organization.” However, it does make your Project eligible to receive donations and grants that are tax-deductible due to the fiscal sponsorship relationship with KMG. The only entity legally recognized by the IRS under a fiscal sponsorship is the sponsoring nonprofit 501c3 organization, in this case, KMG.

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How much does fiscal sponsorship cost?

Fees vary depending on the scope of work, length of sponsorship, services provided, and other factors. All projects incur a $2,500 start-up fee, depending on the need and urgency to start your Project. We charge a monthly flat-rate fee that starts at $2,500 per month for fee-based projects. For percentage-based projects (that are uncertain of their revenue e.g., a one-time fundraising event or campaign for example), we charge a fee between 5% - 15% of funds raised.  For government grants in which we prepare the response to the RFP and provide management of the project, we charge a flat fee that starts at $3,500 per month, plus an additional fee for services we provide as required and allowable by the grant awardee. 

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How are Fiscal Sponsorship fees paid to KMG?

Fees assessed are deducted automatically on a monthly basis from the Project's bank account by KMG. These fees are to help share sponsorship costs among all the projects and to subsidize KMG’s direct costs of administering your Project’s sponsorship. For percentage-based Projects, we subtract the percentage upon receipt of funds.

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How often does KMG disburse grants?

As donors earmark funds to KMG for your project, the contributions are placed in the Foundation’s restricted fund for your project. KMG will generally consolidate the contributions in its project-specific restricted fund and award lump-sum grants once per month, generally on or about the 1st of each month. At our discretion, KMG may elect to maintain a positive balance in the restricted fund for the Project, and in most cases, will require the project to maintain a balance that covers 3-months of service fees in the account at all times.

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Why does IPG require that I submit information regarding my Project activities?

Your Project needs to submit information to KMG about its activities because we have assumed liabilities to the IRS about the charitable nature of your activities. KMG has to maintain records that document its oversight ensuring that your Project is furthering the KMG's charitable mission and purpose. The only way KMG can maintain those records is if you keep us informed and up-to-date with your activities.

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What reports or materials do I have to send to IPG and how often?

The Project must provide KMG with advance copies of all fundraising solicitations and budgets for pre-approval. The project must also prepare reports for funders and the cost of any reports or other compliance measures required by funding sources of the Project. The Project should always send copies of any major work products or widely disseminated materials to KMG.  Remember, in many instances, you may be required to receive KMG’s pre-approval before distributing these materials to third parties.

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What are some of the standard materials KMG requires from Projects?

• Strategic plan for the Project

• Budget for the Project

• Copies of any fundraising solicitations, including all grant requests and reports to funders

• Brochures, Action Alerts and other flyers

• Any legal documents pertaining to the Project, its vendors, contractors, consultants, etc.

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Does a fiscal sponsorship term out?

Not with KMG. We will typically review and amend the terms of our service agreement on a case-by-case basis within six (6) months of an initial agreement or as-needed. This provides an opportunity to modify the agreement, if necessary, to accommodate your Project’s growth or if your Project is going into a brief hiatus (dormant status).

 

Some fiscal sponsors state that I receive "immediate tax exemption status." Is that true?

 

This can be confusing. Under a fiscal sponsorship agreement, the work that your Project performs is supposed to further the fiscal sponsor's charitable mission. When accepted as a fiscally-sponsored project, KMG sets up a special restricted fund for the support of your Project, and donors may make tax-deductible contributions to KMG in order to support your project. Your Project does not receive "tax exemption status," however, donors can make a gift to KMG to support your project which in turn, provides tax deduction benefits to the donor.

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Please keep in mind that since your Project is functioning under the charitable status of KMG, we maintain all control of funds and its record-keeping. We maintain this control because we must be able to justify your Project’s actions as furthering our own charitable purposes.

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Is my project a part of MCG?

Yes, the "Project" is a part of the family of KMG's fiscally sponsored projects. However, you are not an agent or legal representative of KMG. The Project owns its own work products and equipment. The Project's staff and volunteers do not work for KMG, but are employed by KMG. Project correspondence should not be on KMG letterhead unless the correspondence is sent directly from us. Collectively, all the Projects to which KMG makes grants comprise a significant part of the Foundation’s overall program. In that sense, your project is part of the overall KMG organization.

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How do I express the fiscal sponsorship relationship to funders and others?

Your project is an independent entity, conducting business under the fiscal sponsorship of IPG with separated assets. We provide you with a “tax letter” upon the on-boarding process that explains the fiscal relationship. We also provide you with a copy of our IRS Determination Letter (or Affirmation Letter), W9, and any other information required for those that inquire about your status.

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Do you only sponsor local (Los Angeles) or regional (California) projects?

No. While it is great to have projects located in our headquarter city of Los Angeles, we serve and support projects located throughout the country and internationally.

 

Do I need to form a Board as a fiscally-sponsored Project?

No. Since KMG is the legal entity, our Board is the governs over our work. You are encouraged, however, to create an Advisory Board to help with your fundraising, capacity building, and awareness of your Program to the general public and stakeholders alike.

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DONOR ADVISED FUND (DAF)

To be clear, KMG is NOT an investment firm. We partner with investment firms like Charles Schwab, Fidelity, Vanguard and others to help you with your philanthropic needs.

 

What is a Donor Advised Fund?

Generally, a donor-advised fund (DAF) is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. We partner with DAF providers such as Charles Schwab, Fidelity, Vanguard, JP Morgan Chase and others to help you create your donor advised fund.

 

How do we get started with setting up a DAF with KMG?

Please complete this inquiry form as the first step and one of our advisers will contact you within five (5) business days. We also offer a free 1 HR consultation. Please click here to schedule an appointment. We partner with reputable investment firms to help you receive the best and most experienced support possible when creating a DAF.

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Where do the funds originate and who legally owns the funds?

Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the sponsor has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.

 

Who can contribute to a DAF?

Inclined individuals, families, and businesses can make an irrevocable gift to a public charity that sponsors a DAF and take an immediate tax deduction. Most DAFs accept cash equivalents, securities, and other assets.

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What is the donation process?

Donors make an irrevocable, tax‐deductible contribution of cash, long‐term appreciated securities, or other assets to a charity that sponsors a DAF program.  The sponsor in turn creates an account in the donor’s name. DAF donors may choose from a variety of investment options and proceeds are put into an account from which donors may make "grant recommendations" for funds to be dispersed.

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What is the structure of the sponsoring DAF organization?

Sponsoring organizations of DAFs are nonprofit 501c3 organizations recognized by the Internal Revenue Service.

 

Who can receive grants from a DAF?

The sponsor vets all charity organizations that the DAF recommends to receive funding. Vetting requires several checks and balances, however, the first step is to check the charitable organizations' status as tax‐exempt under Internal Revenue Code (IRC) Section 501(c)(3) and public charities under IRS Section 509(a). Grants can also be given to private operating foundations or state or local government organizations qualified to receive tax‐deductible charitable contributions, such as institutions defined in Internal Revenue Code Section 170(c)(1).

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Does the Sponsor dictate where DAF funds are donated?

No. DAFs are self‐directed in their charitable giving. The sponsor will conduct their due diligence to vet the organization that the donor recommends to fund. If there are any issues with the receiving charity, such as nonprofit status, current standing with the IRS, etc., the sponsor will discuss with the donor and provide alternative solutions.

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Is there a minimum donation amount that has to be made from a DAF?

The requirement depends on the investment firm, but the minimum fee is typically $10,000 and up. 

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What is the process to donate funds from a DAF to a charity?

Typically, the donor completes a grant recommendation form that is reviewed. Upon completing the review, the sponsor creates a grant acceptance form that is sent to the receiving charity to make them aware of the grant, grant amount, any restrictions on the grant, timeline of payment, reporting schedule of how funds were used (if required), and for what purpose the grant is given. The receiving charity, in turn, agrees to the terms of the grant and returns a signed copy to the sponsor. Upon receipt, along with the charity's IRS Determination Letter and W9, the sponsor issues a check and donation check letter confirming the donation.  If a grant report is requested, the receiving charity typically has 6 months to a year to provide details of how funds were used.

 

How does IPG work with my DAF and is there a fee?

We work hand-in-hand with DAFs to help manage programs, events, campaigns, and initiatives that your DAF fund may be supporting.  For example: You may set up a DAF with Fidelity while also creating a community-focused project at KMG.  We will work directly with Fidelity to ensure the recommended funds are processed according to schedule and that the project that is funded is managed to your specifications.  Think of the DAF as your "savings account" for the project(s) you want to support and KMG as the facilitator working on our behalf to ensure the funds and project is completely managed, taking all of the stress off of you so you can focus on the bigger picture.

 

Can we fundraise through a DAF?

No.

 

Can securities be donated to a DAF?

Yes. Typically, securities that a donor has owned for more than one year are best to consider for gifting purposes. The donor will avoid any capital gains tax on the securities and will receive the highest income tax deduction available - even better than those of a private foundation. The investment firm(s) that we work with can explain this in greater detail.

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Can I pay for a pledge or auction item with my DAF account?

No. By IRS rule, DAF's are not allowed to fulfill a "pledge" or "promise to pay."

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What does IPG do when it receives my donated funds?

When a contribution is received from your DAF, KMG will deposit the proceeds of the contribution into your respective fiscal sponsorship account that is created to support the program for which the funds are intended.  

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Can my DAF's interest income earned qualify for an additional tax deduction?

No.

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Why does it state that I "recommend" where my donated funds go?

Tax laws for donor-advised funds require that you relinquish ownership and control over contributed assets. As a donor adviser, you retain the privilege to advise and recommend on how your fund is named, invested, granted, and even plans for the fund upon your death. 

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Five things you may not know about DAF's:

1) DAFs have a lower regulatory and tax burden than private foundations

Donors have higher limits with DAFs when giving appreciated assets, and giving to DAFs is also eligible for immediate tax deductions. DAFs are not subject to tax on net investment income – unlike private foundations, which pay between 1 and 2%. In addition, DAFs are not subject to the same distribution requirements each year as private foundation giving.

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2) DAFs provide an avenue for philanthropic flexibility

Donors who establish DAFs give more to philanthropy overall, and given the flexibility around disbursement requirements, donors who are uncertain about their charitable plan can begin by contributing funds to a DAF and deciding where to donate later on. F

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3) Charitable organizations can work together to leverage DAFs

A large share of DAF giving is for local charities, but these funds are often held and disbursed by large national groups. To thrive under these circumstances, community foundations and other local charities need to be proactive. Developing an outreach strategy for DAF advisors is essential. Some community-level, charitable organizations, and other smaller philanthropic groups are going a step further and working directly with financial planners who advise these donor funds to help guide giving. KMG works directly with these advisors to help you have a successful philanthropic plan that can live on throughout the generations.

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4) DAFs are an excellent vehicle for family philanthropy

Many DAF donors have spouses and children who are involved in their charitable causes, and for those donors with younger children whose engagement with their parents’ philanthropic endeavors is still growing, setting up a DAF can be an excellent way to begin the process. Family members can begin to play an advisory role in the fund as appropriate without the full burden of managing a family foundation or the need to begin disbursing funds immediately.

 

5) Partnerships with DAF advisors are important for organizations

One attraction DAFs hold for potential donors is the opportunity to work directly with an investment adviser to learn more about philanthropic options and guide the donation process. The introduction of these intermediaries into the philanthropic process can present a challenge for organizations that are accustomed to direct giving. 

 

However, because they aggregate philanthropic donor pools, these advisors can also be a gateway to new clients. KMG also works with organizations to help them develop an outreach and networking strategy for these advisors, as well as prepare materials that help advisors understand the unique value offered by the organization.