Center for Transformative Action

CTA provides fiscal sponsorship to innovative, non-profit social entrepreneurs in New York State

Fiscal sponsorship is a common means by which individuals and organizations can start new, nonprofit programs without establishing a separate 501(c)3 organization. This alternative allows you to seek grants and solicit tax-deductible donations under your sponsor’s tax-exempt status. There are several forms of fiscal sponsorship (see Greg Colvin’s Fiscal Sponsorship: 6 Ways To Do It Right), but in every case, the fiscal sponsor is required to ensure that all funding received on behalf of your project will be utilized for tax-exempt, charitable purposes as defined in the internal revenue code.

CTA offers two forms of fiscal sponsorship: 1) the Comprehensive Direct Project Fiscal Sponsorship (Model A), where CTA assumes all legal and fiduciary responsibility for your project and your project has no separate legal standing, and 2) the Pre-approved Grant Project (Model C), where CTA re-grants funds received from a donor to your project and is not legally responsible for your project’s operations or programs. The Model C arrangement requires that your project be incorporated as a nonprofit organization in New York State.

Frequently asked questions

Why seek fiscal sponsorship?

Establishing and maintaining an independent 501(c)3 can be expensive, confusing, and time-consuming. Being fiscally sponsored is not only extremely cost effective but eliminates the worry and hassle associated with the required filing and record keeping of a 501(c)3.  This means that you can focus on testing new approaches to resolve difficult social problems, establishing a viable financial model, and supporting volunteers and staff to implement the programs. In an environment where funding for all nonprofits is scarce, fiscal sponsorship is an efficient and economic way to reduce the cost of running an organization and still benefit from a highly qualified and experienced infrastructure. CTA’s Model A projects benefit from a wide array of business services including accounting, payroll, grants management, contract management, liability insurance, and mentorship. Our Model C projects benefit from being able to accept tax-exempt donations and grants while they are waiting for their own 501(c)3 application to be reviewed and approved by the IRS.


What is a 501(c)3 organization?

The term 501(c)3 refers to a subsection of the United States Internal Revenue Code that lists the types of nonprofit organizations exempt from certain federal taxes. Section 501(c)3 is one of the tax law provisions granting exemption from the federal income tax to nonprofit organizations that exist for religious, charitable, scientific, literary, or educational purposes, among others.  CTA has been a designated 501(c)3 nonprofit organization since 1971. 


Does a fiscal sponsor provide funding for my project?

Fiscal sponsorship is not a funding relationship. As with most fiscal sponsors, CTA requires that the fiscally sponsored project raise its own funds.


Does CTA charge a fee for its services?

CTA does charge a fee to cover the shared administrative costs associated with our services; the fee is a percentage of the project’s income. For Model A projects within Tompkins County, the fee is 8% of income. For Model A projects outside of Tompkins County, the fee is 10% of income. For Model C projects, the fee is set between 4% and 8% depending on the number and type of transactions for which CTA will be responsible.


Does it matter where I set up my project?

Yes. All of CTA’s projects must be headquartered in New York State.


How can I become a CTA project and how long does it take?

Please read the information under step-by-step application process.


What mission must my project have?

CTA is chartered as an educational organization and requires that its projects undertake activities that have a transformative focus and fall within the scope of CTA’s mission.


What obligations come with being a fiscally sponsored project?

Upon agreeing to be a project of CTA, you will be accepting the terms of our Model A or Model C affiliation agreement. As part of that agreement, you accept responsibility to undertake activities only in accordance with the express purposes stated in your project proposal as approved by the CTA board of directors. Any substantive changes in project activity or purpose will be subject to re-evaluation.


Who bears the legal responsibilities for my project’s activities?

In a Model A relationship, CTA bears full financial and legal liability for the activities of your project. In a Model C relationship, CTA is only responsible for the financial administration of a restricted fund, and makes grants from the fund to support your project at your discretion. Your project must use these funds solely for the intended grant purposes. All other authority and responsibility related to your project rests with you, the grantee — including the preparation of grant reports to your funders, tax reporting and liability issues.


Do the funds we raise for our project belong to the project or to CTA?

All funds received and raised by you for the express purpose of operating your project are the property of CTA since CTA is the tax-exempt 501(c)3 entity to whom the funds are given. However, under the fiscal sponsorship agreement (Model A or Model C), CTA is obligated to restrict those funds to your project with the exception of administrative expense fees used to cover shared costs for CTA’s services. As the project leaders, you and your advisory board give CTA direction on how to disburse the funds we hold on your project’s behalf.


If CTA is the recipient of donations and grants, how does my project maintain control of it’s funding?

Funding received for our projects is restricted for the purpose of engaging in the activities of the project as stated in its mission and approved by the CTA board of directors. Project funding received from grants is restricted by the conditions under which the grant was made. Within these parameters, you and your advisory board give CTA direction of how to disburse the funds we hold on your project’s behalf.

If I seek fiscal sponsorship, should I avoid seeking 501(c)3 status for my project?

No. In fact, having a fiscal sponsor can help you progress more quickly toward becoming a viable non-profit agency. CTA offers help in working through the process of becoming an independent organization if that is your ultimate goal.


Are projects under fiscal sponsors nonprofits?

Our Model A projects are not separate nonprofit agencies. They are projects of our organization and are not legally separate; they are units of CTA. Our Model C projects are separate legal entities because they have incorporated as non-profits in New York State. Most of them are applying right away for their own 501(c)3 tax exempt status.


How and why may the relationship with CTA end?

Projects end their work with CTA for various reasons. They may:

  • Complete their work and spend down all their funds. 
  • Transfer to another 501(c)3 organization that will serve as the fiscal sponsor.
  • Become their own 501(c)3 entity. The project’s new tax-exempt organization assumes responsibility for its own operation.

Regardless of the reason for ending the relationship with CTA, any intellectual property created by the project while under CTA belongs to and goes with the project.

Model A Info and Application

The Model A relationship is also called Comprehensive Direct Project Fiscal Sponsorship. In this arrangement, your project and CTA are legally one and the same. CTA assumes total liability of your project’s activities, controls your project’s funds, and all of your project’s employees become at-will employees of CTA, subject to the same personnel policies and benefits of all other CTA employees. Charitable donations are made to CTA for the benefit of your project, CTA spends these funds in accordance with your plans and the donors wishes, and CTA files all government forms (e.g., 1040, 1099, 990, payroll tax returns). Your project must organize an advisory board of at least five members, which works with the project director to oversees your project’s staff, implement programming, make decisions about how to allocate funds and undertake fundraising.

In the Model A relationship, CTA supervises (via the project director and advisory board) all programmatic operations of your project, and offers training and mentorship to help your project build a vibrant and sustainable organization. Our projects often view CTA as an incubator—a supportive space where they can focus on developing a highly effective and financially viable organization, while CTA handles the business and reporting side of things. All projects benefit from the cost sharing opportunity offered by our structure. 

Eligibility

Applicants must meet the following criteria to become a Model A Project:

  • Project must be located in New York State, although programming can occur outside of the state.
  • Project does not have 501(c )3 status for proposed work under CTA.
  • Project must demonstrate an innovative approach to addressing a social issue.
  • Project must manifest the principles of Transformative Action, through its programming and/or organizational approach.
  • Project must have a not-for-profit purpose.

Assessment Criteria

Your application will be evaluated to assess both the strength of your team as well as the strength of your project idea. Here are the main components of the assessment:

  • Purpose / Passion: Applicants exhibit strong passion and commitment for the program area in which they plan to work, as well as personal integrity.
  • Resilience: Applicants have demonstrated ability to overcome obstacles.
  • Leadership: Applicants have demonstrated leadership potential
  • Ability to attract resources: Applicants are capable of attracting money, people and other resources to cause.
  • Innovation: Project is innovative and demonstrates a new approach.
  • Importance: Project addresses a serious social problem.
  • Transformative: Project will be a manifestation of the principles of Transformative Action.
  • Inclusive: Those who experience the problem being addressed inform the project idea and implementation.
  • Potential for bold impact: Project has clear potential for tangible impact to the beneficiary population.
  • A good organizational model: Project has a clear and compelling mission and objectives, and has given real thought to program development and delivery, ways to measure success, raising money, and other key factors indicating potential for sustainability.

Benefits and Responsibilities

Below is a detailed list of the benefits and responsibilities of our Model A projects. Policies and procedures are provided to new projects on orientation.

  • Tax-exemption for your individual donors
  • Capacity to receive foundation and government grants
  • Federal, state and local tax and informational returns
  • Eligible for tax-deductible donations and grants
  • Acknowledgment of donations larger than $250, as required by the IRS
  • Stock and on-line donation capability
  • Monthly financial statements
  • Financial record-keeping
  • Financial oversight of expenditures
  • Checks processed weekly
  • Deposits processed weekly
  • Check processing, W-9s, 1099s
  • Payroll tax remittance and filings
  • Independent audit 
  • HR consultation
  • Hire/termination process
  • Full payroll service
  • Employee health plans
  • Retirement savings plan offered
  • Maternity, Paternity, and Adoption leave
  • Maintenance of I-9 information as needed
  • Independent contractor templates and advice
  • Maintenance of employee personnel records and documentation
  • Regulatory compliance (ERISA, FLSA, EEO, and other federal and state regulations)
  • Workers’ compensation administration
  • NYS statutory short-term disability
  • Grievance handling and administration 
  • Performance management coaching
  • Conflict resolution and mediation
  • Compliance related training 
  • Legal referral where needed
  • Assistance in applying for government and foundation grants
  • Tracking of grant reporting
  • Assistance in billing government grants
  • Programmatic oversight
  • Mentorship as needed
  • General liability, property, umbrella, accident, crime insurance
  • Certificates of Insurance
  • Use of meeting rooms in Cornell’s Anabel Taylor Hall 
  • Presence on CTAs website, social media, email newsletter, and print PR materials

Benefits of our affiliation with Cornell University

The Center for Transformative Action is an affiliate of Cornell University. As an education-based 501(c)3, CTA complements the university’s mission by providing educational programs, experiential learning, and engaged research in the areas of social entrepreneurship, transformative action, and creating just, equitable, and sustainable communities. Our projects can play an important role in this work by collaborating with university staff, students and faculty. To facilitate this partnership, Cornell University offers CTA core and project staff an affiliate staff ID card, net ID, and a TCAT bus pass. These give access to Cornell’s campus, its library system, Wellness Program, and grant databases. CTA and its projects can also hire Cornell students with federal work-study awards, at a rate of 30% of their wages or less. 

Project Responsibilities:

  • For projects outside of Tompkins County the shared administrative fee is 10% of the first $1 million of income and 6% thereafter
  • For projects within Tompkins County the shared administrative fess is 8% of the first $1 million of income and 6% thereafter
  • The administrative fee for government grants will be approximately 15% depending on negotiation with the granting agency
  • Submit brief programmatic reports on January 15 and June 15 of each year
  • Submit a proposed annual budget in advance of the next fiscal year
  • Projects with employees must monitor cash flow so that they maintain enough funds to cover two months of operating costs at all times. Failure to do so could result in employee layoffs.
  • Stay with CTA for a minimum of 2 years
  • Attend new project orientation and orientation for new staff
  • Maintain the project’s nonprofit purpose
  • Maintain an advisory board of at least five people
  • Send monthly advisory board meeting minutes to CTA staff
  • Inform CTA promptly of changes in contact information for advisory board and project director
  • Alert CTA promptly of potential risks (e.g., pending layoffs)
  • Alert CTA immediately of accidents or incidents in the project
  • File grants reports in keeping with funders’ deadlines
  • Provide CTA with all communication with funders (proposals, letters of inquiry, etc.)
  • Adhere to CTA’ s processes and procedures, including use of attribution and logo on project materials
  • Refrain from entering into contracts; CTA enters into all contracts on the project’s behalf
  • Review monthly financial statements in a timely manner
  • Forward any individual donations received by the project to CTA for deposit in a timely manner
  • Abide by all CTA policies
  • Respond to CTAs requests in a timely manner
  • Attend an in-office exit interview should your project leave CTA or terminate
Model C Info and Application

In the Pre-Approved Grant Fiscal Sponsorship, or Model C, arrangement, your project is a separate legal entity, incorporated in the state of New York as a nonprofit organization whose purpose is aligned with CTA’s mission and purposes. Because your project is legally independent, you are responsible for managing the project’s tax reporting and liability issues. While your project awaits review by the IRS of its application for 501(c)3 tax-exempt status, CTA can accept tax-deductible donations and grants on behalf of your project and will re-grant these to you. CTA’s responsibility is to assure that your project uses the grant funds in accordance with the grantor or donor’s wishes.

Benefits of Model C Fiscal Sponsorship

As recommended in the National Network of Fiscal Sponsors Guidelines, CTA:

  • Acts as the legal and ethically accountable organization that maintains a restricted fund for the benefit of the purposes of your project.
  • Commits to timely reporting on the restricted project funds to your project leaders.
  • Seeks to assure that project funders receive the timely, accurate and comprehensive reports on project performance that they require, in partnership with project leaders.
  • Communicates as necessary and appropriate with your project’s donor(s), institutional grantmakers, or funding agency(ies) in ways that supplement your project leader’s communications.
  • Establishes and maintains processes for ensuring frequent communication between our administrative staff and your project leaders.
  • Facilitates a process for gathering candid assessments of the quality of our services from your project leaders and other key stakeholders, using the results to improve our service.
  • When terminating or separating your project, we will consult with the original donors where appropriate or required; transfer remaining restricted funds and/or project assets to a successor charity; and/or otherwise reach a responsible decision about disposition of remaining your project assets that concurs with the original purposes for which they were acquired.

Eligibility

Applicants must meet the following criteria to become a Model C Project:

  • Project must be located in New York State, although programming can occur outside of the state.
  • Project must be incorporated in the State of New York as a nonprofit organization.
  • Project must have applied or be prepared to apply for 501(c)3 tax-exempt status from the IRS
  • The project’s mission and purposes must be closely aligned with CTA’s mission and purposes.
  • The project must retain a bookkeeper to provide an accurate account of our re-granted funds.

Responsibilities

  • The fee associated with Model C fiscal sponsorship is set between 4-8% and is based on the number and kinds of transactions for which CTA is responsible.
  • Manage your project’s tax, HR, filing and liability issues
  • Provide CTA with all communication with funders (proposals, letters of inquiry, etc.)
  • Provide a detailed budget to support quarterly request of funds.
  • Provide CTA with a financial record of how these re-granted funds were used
  • File grant reports in keeping with the funder’s deadlines
  • Inform CTA promptly of changes in contact information
  • Respond to CTAs requests in a timely manner
Step-by-Step Application Process

If you believe your project is aligned with CTA’s mission and purposes, and you have read about our Model A or Model C fiscal sponsorship services, we encourage you to submit an application! However, please review the following steps carefully before applying. We encourage projects led by people of color, people with disabilities, people from the LGBTQ community and veterans to apply.  If you have any questions about our application process, please contact us at 607-255-6202 or ctaoffice@cornell.edu.

1. First study our FAQs, the eligibility requirements, and the applications materials for Model A or Model C projects. We hope that the answers to many of your questions are contained in these materials.

2. Make an initial inquiry.


If, after reviewing the materials in Step 1, you wish to apply for fiscal sponsorship or have additional questions, please contact us at 607-255-6202 or ctaoffice@cornell.edu. We can answer your questions and help you determine if your project is a fit for our organization. We ask that you do not submit an application without contacting us first. 

3. Submit a draft application for fiscal sponsorship and schedule a meeting with us.


It is to your benefit to submit a draft application and to schedule a meeting by phone, skype or in person before we forward your final proposal to our board’s program and finance committees. We can provide feedback that could improve your project’s chances for approval and address any questions you may have. While some of this can be done by email, we find that a person-to-person meeting helps you get a better understanding of our organization, its culture, and how it functions.

4. Submit a final application by the upcoming deadline.

Once your application is in its final form, submit it to Anke Wessels at akw7@cornell.edu by one of the following deadlines: September 1, January 2, and May 1. Anke will review your application before sending it to the CTA board of director’s program and finance committees for their review. They are likely to raise questions or seek clarification from you. Once these have been addressed, the proposal goes to the full board of directors for consideration. The board meets monthly.

5. Await approval from the CTA board of directors. 


The board will approve or decline your application or request additional information.

  • If your project is approved for fiscal sponsorship, we will notify you and send you a draft affiliation agreement to review prior to your orientation.
  • If the board requests more information, your application will be reviewed again at its next meeting.
  • If the board of directors declines your project, we will make every effort to refer you elsewhere or suggest a next step.

6. For approved Model A projects: sign our affiliation agreement, attend an orientation meeting with our operations’ staff, and take our tutorials. Once the CTA board of directors approves your project application, your project director and all members of your advisory board will read and approve CTA’s Model A project affiliation agreement. The chair of the project advisory board and the project director will sign the affiliation agreement to begin operations under CTAs 501(c)3. This should occur within one year of acceptance. After the agreement has been signed, an orientation with CTA’s operations’ staff is scheduled. During the orientation, which takes about two hours, you will be given an orientation packet with detailed information about how we operate and how CTA and its projects assume joint accountability. Because of the importance of this initial information session, it is very important that you schedule adequate time. We also encourage you to include members of your leadership team so that they gain a direct understanding of your project’s relationship with CTA. Finally, your leadership team and your advisory board members are required to complete several tutorials that review information provided in our written orientation packet.

For approved Model C projects: sign our affiliation agreement and attend an orientation meeting with our operations’ staff. Once the CTA board of directors approves your project application, your executive director and all members of your board of directors will read and approve CTA’s Model C project affiliation agreement. The president of your board and your executive director will sign the affiliation agreement. Thereafter, an orientation with CTA’s operations’ staff is scheduled where you will be given detailed information about how we operate and our mutual responsibilities.

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