How do Model A and Model C fiscal sponsorship agreements differ in contract language and control clauses?
Executive summary
Model A (Comprehensive/Direct) treats the project as part of the sponsor organization, producing contracts that integrate the project into the sponsor’s governance, payroll, and policies and therefore give the sponsor broad operational control and liability [1] [2]. Model C (Pre‑Approved Grant/Indirect) uses grant‑style contracts that preserve the project’s legal independence while expressly reserving sponsor discretion over fund regranting, reporting, and “variance power,” producing a relationship governed more by grant terms than by employment or agency clauses [3] [4].
1. How the parties are named and what that signals in contract text
Model A agreements commonly describe the project as a “direct project” or program of the sponsor and frame project personnel as employees or volunteers of the sponsor, language that collapses the project into the sponsor’s legal entity and triggers sponsor policies and HR clauses; multiple practitioners describe Model A as “nonprofit in a box” or the project becoming part of the sponsor for the relationship’s duration [1] [5] [2]. By contrast, Model C documents are drafted as grant agreements—terminology is grantor/grantee or sponsor/project—and that linguistic choice signals a retained legal separation and a contractual expectation of periodic grant reporting and reimbursement mechanics [4] [6].
2. Control clauses: operational authority vs. regrant discretion
Contract language in Model A explicitly vests operational decision‑making in the sponsor—program oversight, compliance, bookkeeping, HR, and often fundraising approvals are written into the agreement so the sponsor effectively runs the program [1] [7]. Model C contracts, while allowing less day‑to‑day management, almost always contain clauses preserving the sponsor’s final discretion to authorize payments, demand reports, and in many templates explicitly reserve “variance power” or equivalent language letting the sponsor redirect funds if grant terms aren’t met—this is control by financial checkpoint rather than by managerial takeover [3] [6] [8].
3. Liability and indemnity wording: who carries risk
Model A agreements usually include indemnity, insurance, and liability‑allocation provisions reflecting that the sponsor is performing the charitable activity and therefore assumes greater legal exposure—authors advise that Model A “involves more oversight and liability” and that staff may become sponsor employees [4] [2]. Model C drafters lean into language that limits sponsor liability by characterizing transfers as grants and including compliance and reporting obligations on the grantee, though lawyers warn that sponsors must still retain meaningful discretion to avoid tax‑exempt risk [8] [9].
4. Financial controls and accounting clauses
Model A contracts fold project revenue and expenses into the sponsor’s accounting system, with sponsors managing fundraising, recognizing revenue, and applying internal restrictions—contracts therefore include clauses about fund management, fee structures, and use of sponsor accounting systems [1] [7]. Model C agreements treat incoming funds as restricted grants; they specify reimbursement rules, reporting cadence, and recognition timing, and often contemplate deferred revenue or reimbursement mechanics in their grant language [6] [4].
5. Transition, termination, and variance: exit language that matters
Model A contracts typically include onboarding and transition clauses but presume the sponsor controls the termination and continuation of the program as part of its portfolio; Model C templates routinely include exit or transition language enabling projects to spin out to independent 501(c) status, but they also reiterate sponsor discretion to withhold or reallocate funds if grant conditions aren’t met [1] [4] [6]. Legal commentators flag that poorly drafted Model C language can create contradictions between tax‑law variance power and state charitable trust expectations, making precise drafting essential [6] [9].
6. What to watch for and where agendas show up in language
Providers marketing Model A emphasize convenience and access to services, which may downplay loss of autonomy and expanded sponsor control reflected in contract clauses; promoters of Model C stress independence and lower fees but may underemphasize the sponsor’s reserved discretion and reporting burdens that appear in grant language [1] [7] [10]. Practitioners and law blogs uniformly advise negotiating explicit language on fundraising approvals, state registration responsibilities, fee percentages, and variance power to prevent surprises—these are the battleground clauses where control and autonomy are decided [3] [9] [10].