Fiscal Agents

Nonprofit Q&A

A service of Jeane Vogel and Fund Raising Innovations

June 21, 2004

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Here is this week’s question:

We just hired staff after years of being volunteer-led. We have applied for our nonprofit status and need to apply for some grants. Our lawyer suggested we get a fiscal agent. How does that work? Who should we look for?

A fiscal agent is an organization that manages the finances for another organization, generally until the second organization gets on its feet. It can be a wonderful, coaching relationship, or a predatory relationship, or anything in between.

Basically, what happens is that the agency acting as fiscal agent applies for funding under the auspices of its nonprofit status and passes the funding through to the second organization. Generally the new nonprofit does the grant writing and other fund raising work.

If you want to set up a fiscal agent relationship with another nonprofit, here are a few guidelines:

	Get approval from both boards first and set the terms of the relationship in writing. This might seem basic but too often one or both boards are in the dark. There could be fiscal ramifications for both organizations. Starting with a legal contract is the best way to properly steward both groups through the process.
	Establish the rules of fund raising. A fiscal agent should not dictate policy – that’s the board’s job – but a good agent will share expertise and experience with the younger group and help it understand diversified fund raising plans, board fund raising responsibilities and buildings relationships with funders. The best fiscal agent will be a mentor and coach.
	A fiscal agent should not request a percentage of every dollar raised or put limits on fund raising. A negotiated management fee is not unheard of, but most organizations act as fiscal agents for free. They see it as a service provided to a sister organization. And fiscal agents certainly should not tell an organization not to apply for a grant just because it interferes with the agent’s fund raising efforts.
	Look for an organization that is willing to mentor you and act as fiscal agent. A simple “pass-through” relationship will not help you for very long. Also look for an organization whose mission and vision complements yours. If you and the fiscal agent address different aspects of the same mission, they might be willing to share donor information or collaborate on a project to introduce your “uniqueness” to the community. For example, an established homeless shelter might be fiscal agent for an upstart community housing group.
	Make sure that all your materials and grant applications clearly identify the fiscal agent, explain the relationship, and outline your plan to become independent.
	Write your contract so that checks can be made out to your organization, not the fiscal agent. You want to establish yourself as an independent organization with donors as soon as possible.

All that being said, I’m not a huge fan of "fiscal agent" relationships unless there's a natural fit with an established organization that has a compatible mission and is willing to mentor you. Sadly, I’ve seen too many of these arrangements turn sour. But there are successes, if the planning is in place and everyone understands the rules.

The other part of fund raising is board involvement. You don’t need a fiscal agent to get your board moving now! Most start-ups fail because the board expects someone else to come in with the money and ideas and work.

Your board must provide the start-up money. I know, I know -- no deep pockets. But they can give, and give generously. Don't let them tell you that their time is worth more -- it's not. You need their time AND their money AND their contacts AND their willingness to ask for contributions.

If your board feels like they're begging then they haven't been well trained and

they haven't given generously themselves. Board members feel like they're begging when they're not fully invested --mind, body, soul and bank account. Board members who ARE invested don't feel like beggars, but feel like they are asking others to join them in creating something wonderful and worthwhile.

The difference in attitude is astounding!

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Nonprofit Q&A

Here is this week’s question:

Send mail to jeanevogel@earthlink.net with questions or comments about this web site. Last modified: 09/27/07

Send mail to jeanevogel@earthlink.net with questions or comments about this web site.
Last modified: 09/27/07