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Fiscal Sponsorship Accounting: Model A vs Model C Entries, Fees and Reporting

Sherman Hsieh
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Fiscal Sponsorship Accounting: Model A vs Model C Entries, Fees and Reporting

Last updated: October 16, 2026 · Independent guide · We do not sell rankings or coverage.

Fiscal sponsorship accounting depends on which model the agreement sets up. In a Model A (comprehensive) sponsorship, the project is part of the sponsor, so every gift, salary and invoice is the sponsor’s own transaction, and gifts for the project usually sit in net assets with donor restrictions. In a Model C (preapproved grant) sponsorship, the sponsor records the contribution and then a grant expense when it regrants to the separate project, which keeps its own books. The administrative fee is an internal charge in Model A and a retained portion of the gift in Model C, and neither is outside revenue.

The rule and the journal entries

The rule is about control. Under ASC 958-605, a recipient that accepts a gift and agrees to pass it to a specified beneficiary acts as an agent and records a liability, unless the donor explicitly grants it variance power, the “unilateral power to redirect the use of the transferred assets to another beneficiary” (FASB Master Glossary, quoted by Forvis Mazars, September 8, 2025; see also PwC Viewpoint, no date shown, citing ASC 958-605-25-25 and 25-28). A Model A sponsor owns the project outright. A Model C sponsor must keep discretion and control over regranted funds, which is what lets it record the gift as its own contribution.

Account Debit Credit Note
Cash Gift amount Both models, entry 1: gift received, coded to the project.
Contributions, with donor restrictions Gift amount Restricted to the project’s purpose.
Program expenses (salaries, rent, supplies) Project spend Model A, entry 2: the sponsor pays project costs directly.
Cash or accounts payable Project spend Payment or accrual.
Grant expense Grant amount Model C, entry 2: recognized when the grant becomes unconditional.
Grants payable or cash Grant amount Payable if approved before it is paid.
Net assets released from restrictions, with donor restrictions Amount used Both models, entry 3: release as spend or grant satisfies the purpose.
Net assets released from restrictions, without donor restrictions Amount used Nets to zero across the two classes.
Project fund: fiscal sponsor fee (internal) Fee Model A, entry 4: internal charge between funds of one entity.
General fund: fiscal sponsor fee (internal) Fee Offsets entry 4 and eliminates in external statements.

If a donor gives to a Model C project without granting the sponsor variance power and the project is a named, separate beneficiary, the sponsor records a liability instead of revenue. The AICPA describes that arrangement as a fiscal agency, in which the agent “does not record any revenues or expenses for the activity” (AICPA & CIMA, September 27, 2026).

Worked example: the same $200,000 under each model

Illustration only. These figures are constructed for this example. A youth theater project raises $200,000 in one year from donors who give for the project’s work. The agreement and donor materials disclose a 10% fee for the sponsor’s support costs. The project spends $150,000 on staff and production.

Model A, step 1. Record the gifts. Debit cash $200,000 and credit contributions, with donor restrictions $200,000, coded to the project.

Model A, step 2. Pay project costs. The project’s staff are the sponsor’s employees. Debit salaries and other program expense lines $150,000 and credit cash $150,000. Release $150,000 from restriction with the paired release entries.

Model A, step 3. Charge the fee. Debit the project fund’s internal fee account $20,000 and credit the general fund’s internal fee account $20,000. When the sponsor incurs the shared costs the fee covers, release $20,000 from restriction.

Model C, step 1. Record the gifts with the same entry as Model A.

Model C, step 2. Approve and pay the grant. The sponsor approves a $180,000 unconditional grant, the gifts less the 10% fee. Debit grant expense $180,000 and credit grants payable $180,000. Release $180,000 from restriction when the grant is recognized.

Model C, step 3. Keep the fee. No fee entry is needed. The $20,000 stays in the sponsor’s project balance and is released when the sponsor incurs the support costs. In its own books, the project records $180,000 of grant revenue and its $150,000 of expenses.

Item in the sponsor’s books Model A Model C
Contribution revenue, with donor restrictions $200,000 $200,000
Project expenses by natural line $150,000 None (the project books them)
Grant expense None $180,000
Fee shown as external revenue None (internal, eliminated) None (retained, not billed)
Released from restriction $170,000 $200,000
Closing project balance, with donor restrictions $30,000 $0

In Model A the project’s unspent $30,000 stays on the sponsor’s balance sheet. In Model C it sits on the project’s books. Whether a restricted gift may cover the fee depends on the donor’s terms and what the solicitation disclosed, so agree the release policy with your auditor before year-end. Our guide to restricted funds accounting covers release triggers and the roll-forward in more detail.

The standards and rules behind it

Revenue and variance power. The FASB Master Glossary says a recipient acts as an agent if it “agrees to solicit assets from potential donors specifically for the beneficiary’s use and to distribute those assets to the beneficiary,” or if the beneficiary “can compel the recipient entity to make distributions” (Forvis Mazars, September 8, 2025).

Conditional grants. ASU 2018-08, issued in June 2018, applies to contributions made as well as received. A grant is conditional only if it contains a barrier and a right of return or release (FASB ASU 2018-08, June 2018). A Model C grant paid in tranches tied to milestones is expensed as each barrier is met, not when the agreement is signed.

Model definitions. In Model A the project’s people become the sponsor’s employees or volunteers. In Model C they become a grantee, and the sponsor keeps “discretion and control over the funds” (Adler & Colvin, no date shown).

Fees. Gene Takagi writes that the Model A “administrative fee” is “actually an internal charge” and “not income to the fiscal sponsor” (Nonprofit Law Blog, March 27, 2022, modified May 17, 2024). The Fiscal Sponsor Directory reports that 96% of its 376 listed sponsors charge a percentage of project revenue (Fiscal Sponsor Directory, updated May 2024).

Common mistakes

  • Booking the Model A fee as revenue. Fee income plus a matching project expense inflates both totals on your statements and Form 990.
  • Mixed signals in Model C. Recording gifts as revenue while the agreement lets the project demand its money fails the variance power test.
  • No project-level balance. If restricted net assets are tracked only in total, you cannot show what each project has left, and overspent projects are quietly funded by the sponsor’s general fund.
  • Missing Schedule I. Model C regrants over $5,000 to one domestic recipient must be listed on Schedule I.

How to report it

Financial statements. In Model A the project’s revenue, expenses, assets and liabilities are the sponsor’s own, and the AICPA notes that contributions for the project are usually reported as an inflow to net assets with donor restrictions (AICPA & CIMA, September 27, 2026). Disclose restricted balances by purpose. In Model C the sponsor shows grant expense and any grants payable, while the project reports the grant as revenue in its own statements.

Form 990, Model A. Project activity appears in the sponsor’s Part VIII revenue and Part IX functional expenses, and project staff are on the sponsor’s payroll. HBK notes the sponsor “bears the responsibility for tax compliance and reporting for the project” (HBK, Fall 2024).

Form 990, Model C. Regrants appear in Part IX as grants. A sponsor that reports more than $5,000 of grants to domestic organizations on Part IX, line 1 answers yes on Part IV, line 21 and lists each recipient that received more than $5,000 on Schedule I, Part II (IRS Instructions for Schedule I, revised December 2024).

Coming changes. On April 23, 2026, Treasury said the IRS plans to revise Form 990 to improve transparency on fiscal sponsorship, noting that congressional oversight has raised concerns that “some fiscal sponsorship arrangements may be used to obscure who is operating a project” (US Treasury, April 23, 2026). Proposed regulations and a comment period come first, and no timeline was announced (Journal of Accountancy, April 24, 2026). Clean project-level records will make the new questions easier to answer.

How accounting systems automate it

The setup that matters most is a project dimension on every transaction, kept separate from the restriction dimension, with a chart of accounts that separates program expense lines, grant expense and internal fee accounts. Our nonprofit chart of accounts template maps those accounts to Form 990. Jericha Senyak, an accountant who works with fiscal sponsors, says systems such as Mazlo and Sage Intacct “provide some solutions, but almost all have to be tailor-made” for sponsors (Fiscal Sponsor Directory, November 27, 2023).

Sage Intacct. Since the 2024 R1 release, Sage Intacct can create a restriction release journal entry automatically from the purpose, revenue parameters and qualified expense information you enter, and it attaches a snapshot of the numbers and transactions used (RSM, April 26, 2024; RSM runs a Sage Intacct consulting practice).

Blackbaud Financial Edge NXT. Blackbaud lists tracking of “revenue and expenses by project, grant, and endowment” and reimbursable grant management (Blackbaud, July 29, 2026). The page does not publish pricing.

QuickBooks Online. Class tracking, available in the Plus and Advanced plans, can carry the project code (Intuit, September 22, 2026). Senyak calls configuring it for sponsors “a heavy lift.”

Open Collective. Built for fiscal hosts, it applies a host fee, set as a percentage in the host’s settings, to donations made to its Collectives through the platform (Open Collective docs, no date shown). Compare full ledgers in our nonprofit accounting software guide.

How we researched this

We read the top-ranking pages for fiscal sponsorship accounting, including the AICPA & CIMA overview, the Fiscal Sponsor Directory, HBK and two vendor blogs. None gave entries for both models. We checked FASB glossary terms through CPA firm summaries, IRS instructions, the Treasury release and vendor documentation on October 16, 2026. The worked example is an illustration, not client data.

Related guides

Frequently asked questions

Is a fiscal sponsor’s administrative fee revenue?

In Model A, no. The fee moves money from the project’s fund to the sponsor’s general fund inside one legal entity, so it eliminates in external statements. In Model C, the sponsor simply grants less than it received, so the fee never appears as separate revenue.

Does a Model C project need its own bookkeeping?

Yes. In Model C the project is a separate entity that records the sponsor’s grant as revenue and pays its own expenses.

Should fiscal sponsorship gifts be recorded as restricted?

Usually, yes. Gifts given for a specific sponsored project are generally reported in net assets with donor restrictions and released as the project spends them or as the sponsor makes the grant. Board-designated amounts stay in net assets without donor restrictions.

What happens if the sponsor has no variance power?

If the donor names a separate project as beneficiary and the sponsor cannot redirect the money, the sponsor is an agent. It records the cash with an offsetting liability and no revenue or expense, other than any fee for its agency services. The AICPA notes that gifts under that kind of fiscal agency are deductible only if the other party is tax exempt.

How much do fiscal sponsors charge?

The Fiscal Sponsor Directory reports that almost half of sponsors charging a percentage use flat rates of 5% to 10%. Some charge up to 15% or more, usually for government-funded projects, which can require higher federal audit standards.

Sources

Sherman Hsieh

CEO & Editor-in-Chief, Business-Software.com
Independent analysis of enterprise software — ERP, CRM and more
Sherman Hsieh is the founder, CEO, and editor-in-chief of Business-Software.com. He leads the site's independent, buyer-focused coverage of ERP, CRM, and other business systems, including vendor-neutral comparisons, pricing analysis, and implementation guidance. Before founding Business-Software.com, Sherman was an executive at Siebel ...

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