What’s in a Name? Grants, Sponsorship, and Fiscal Sponsorship
Fundraising for projects is more of an art than a science in more ways than one—including the way people refer to the funds they’ve received or hope to receive. Becoming familiar with some basic terms will help you make sure you’re making the right request to the right person:
“Restricted” vs. “Unrestricted”: Any kind of cash donated to a project is going to be one of these two things, and fortunately, they mean just what they sound like! Restricted gifts MUST be used for their intended purpose from the donor. If someone gives you $100 for supplies, you need to spend it on supplies and nothing else, even if you have a much greater need elsewhere. Unrestricted funds (or “general operating support”) don’t have that restriction, so you can spend it where you need it (though it still needs to be spent on the project in some way). When accepting a gift, you should always be clear with the donor as to whether it is restricted or unrestricted. Having a donation form can help with this!
In-Kind Donation: An in-kind donation is a gift of tangible goods or services that the donor otherwise would charge for. Donors may request a receipt showing the value of their donation; if your organization is a 501c3 nonprofit, or has a fiscal sponsor, you can offer them a tax-deduction. Direct donations are some of the best ways to get what you need—much easier than trying to raise cash to buy something outright.
Grant: A grant is a cash gift from a private foundation or government agency (like the Missouri Arts Council or Regional Arts Commission) expressly given for a project purpose and often as part of a proposed budget. Grants almost always require an extensive application and final report.
Sponsorship: A sponsorship is a marketing transaction, where cash is exchanged for benefits like logo recognition, social media posts, or other exposure associated with a program, project, or organization. Sponsorship is not restricted to nonprofits or charitable programs. Coca-Cola signs at Busch Stadium are an example of sponsorship.
Fiscal Sponsorship: Fiscal Sponsorship is neither a grant nor a sponsorship! Fiscal sponsorship is a formal arrangement (with a contract) in which a 501c3 public charity sponsors a project that may lack exempt status. This allows the individuals behind the project to apply for grants and offer donors a tax deduction for their contribution. The sponsor may take a fee for their administrative expenses.
Fellowship: A fellowship (like the RAC Artists Fellowship, a Fulbright Fellowship, Guggenheim Fellows, and more) is often awarded in recognition of past work completed by an individual, and given in support of future research or activity without the fellow needing to state exactly what that will be. Fellowships may have applications, or may be awarded spontaneously.
Donation: Any gift to a project can be considered a donation. However, only gifts to organizations recognized as 501c3 are considered tax-deductible. (That’s why when you pre-ordered your friend’s band’s new album from Kickstarter, you couldn’t include it in your charitable donations when you did your income taxes this year.) Even if your project isn’t under that umbrella, you should ALWAYS send a thank-you note to your donors!