Why are we updating the Fiscal Sponsorship Grant Agreement, Hybrid Addendum, and Lobbying Agreement and what’s different?

Periodically, Fractured Atlas will audit the contractual documents that are the backbone of our fiscal sponsorship program. The last time we made edits to the Fiscal Sponsorship Grant Agreement was in 2019, and the hybrid addendum and lobbying agreement have not been revised since their launch in 2014. The purpose behind these changes is to make all three documents clearer and to better protect both Fractured Atlas and our projects against potential risks.

In addition to this, our previous system was set up so that the person that signed up for membership also signed the Fiscal Sponsorship Grant Agreement on behalf of the fiscally sponsored project without regard to whether they were legally allowed to do so. We've been advised to change this system to ensure that a signatory from the fiscally sponsored project's legal entity signs the Fiscal Sponsorship Agreement. Thus, we've updated our systems to allow for someone other than the member of record to sign the agreements in cases where the signatory and the member are not the same. Unsure what a signatory is, see below! 

What’s a signatory? The signatory is an individual who is able to sign contracts on behalf of a legal entity. For example, the authorized signatory could be you if the legal entity on file is your name and social security number, it could also be your collaborator if the legal entity on file is an LLC owned by them, or it could be your organization's board member if the legal entity on file is a corporation. If you are unsure who your signatory is, ask yourself "Who is authorized to sign a contract on behalf of the legal entity I've listed here?".

Please note, Fractured Atlas staff members are not able to provide legal advice or guidance. If you have questions about signatories, legal entities, the incorporation process, contracts in general, etc., please contact an attorney. You can find some helpful resources here.   

What’s different about the fiscal sponsorship grant agreement?

There are several updates that have been made to the agreement. The biggest change is the signatory - we are ensuring that the person signing the contract and entering into a legally binding agreement with Fractured Atlas is the person authorized to sign for the legal entity on file, the entity who Fractured Atlas issues any tax documents to.

Fiscally sponsored projects are not allowed to use funds raised through Fractured Atlas’s fiscal sponsorship program to support lobbying efforts without Fractured Atlas’s written consent. If the project does use funds raised through Fractured Atlas’s fiscal sponsorship program to support lobbying efforts without Fractured Atlas’s written consent, they promise to repay said funds to Fractured Atlas.

The new agreement adds a clause stating that the project agrees to give archival materials to Fractured Atlas for inclusion in Fractured Atlas’s archives, and for use in Fractured Atlas’s promotional and programmatic efforts. Additionally, Fractured Atlas retains the right to reproduce any finished product or products created by the project using funds raised and released through Fractured Atlas’s fiscal sponsorship program in furtherance of Fractured Atlas’s tax exempt purposes.

The new agreement adds a clause stating that the project agrees to keep copies of all relevant books and records and all reports to Fractured Atlas for at least four (4) years after completion of the use of the funds raised and released through Fractured Atlas’s fiscal sponsorship program

The new agreement adds a clause stating that Fractured Atlas may require the project to procure and maintain insurance. 

The new agreement has removed section 15. No Donor-Advised Fund of the current agreement.

What’s different about the hybrid addendum, which allows investors?

The biggest change is the signatory - we are ensuring that the person signing the contract and entering into a legally binding agreement with Fractured Atlas is the person authorized to sign for the legal entity on file.

What’s different about the lobbying agreement?

We’ve been advised to more specifically track and understand how projects use funds raised through fiscal sponsorship to engage in lobbying activities. Firstly, the IRS delineates lobbying into two categories:

• Direct – to member(s) of a legislative body
• Grassroots – to member(s) of the general public & encourages the recipient to take action

Secondly, the IRS allows 501(c)(3)’s to spend the following amounts on lobbying activities:

• 20% of first $500,000 of EPE
• 15% of next $500,000 of EPE
• 10% of next $500,000 of EPE
• 5% of remaining EPE (up to $1 million in total lobbying)
  • Exempt Purpose Expenditures (EPE): generally include all amounts an organization spends to accomplish its exempt purpose
• Grassroots expenditures – 25% of total lobbying expenditure limit

In order to ensure that Fractured Atlas and our projects abide by the IRS’s lobbying restrictions, we are now implementing the following changes:

1. Projects must sign the lobbying agreement each fiscal year that they plan to use funds raised through Fractured Atlas’s fiscal sponsorship program to engage in lobbying activity.
2. When projects sign the lobbying agreement, they must declare whether they are engaging in Direct or Grassroots lobbying. We are unable to support projects who would like to use our program to engage in both types of lobbying. 
3. We have created a per fiscal year, per project cap on funds raised through Fractured Atlas’s fiscal sponsorship program used towards lobbying activities.
4. When projects submit fund release requests, they must note whether they are using said funds towards lobbying activities.
5. If a project notes that funds will be used for lobbying activities, they must include accompanying documentation.