Fiscal Sponsorship (Model C) Letter to Vendors

This letter could be important in the event that a Model C fiscal sponsor disburses grant funds for the benefit of a grantee, not by cash grants to the grantee, but by writing checks directly to the grantee’s vendors. This happens a lot in the arts, where projects often want their sponsors to relieve them of financial admin and do their bill-paying. We suggest that a Model C sponsor directly paying vendors send out this letter with the first such check to each vendor.

— Greg Colvin, Adler & Colvin (10/09)

M_. ______________________

Re: Great City Arts Fund Sponsorship of  XYZ Project

Dear ______________:

The XYZ project (“XYZ”) has informed me that you are one of its vendors. You may also have received payments from Great City Arts Fund (“GCAF”) on behalf of XYZ. The purpose of this letter is to make clear the nature of the relationship between XYZ and GCAF.

GCAF and XYZ entered into a Fiscal Sponsorship Grant Agreement in [month, year]. Under that agreement, GCAF makes grants to XYZ from time to time, depending on the funds GCAF receives to support the XYZ project. The agreement states that GCAF is not responsible for the accounts payable of XYZ and that XYZ assumes full and complete responsibility for all liabilities to third parties. GCAF is not a party to any contracts XYZ may have with its vendors.

Therefore, please be advised that XYZ is solely responsible for any bills, invoices, debts, claims, or other obligations arising in connection with any goods or services you have provided or may provide to XYZ. XYZ is a separate legal entity and incurs liabilities, expenses, and obligations on its own behalf.  If GCAF has issued or in the future issues checks directly to you related to such goods or services, please understand that GCAF does so only as a convenient means of disbursing grant funds for the benefit of XYZ and not under any legal obligation to you.

GCAF believes that XYZ is making efforts to raise funds to pay its vendors, but all payments by GCAF are voluntary and subject to the availability of revenues deposited at GCAF and designated for the purposes of the XYZ project. No one is authorized to commit GCAF to any direct obligation to pay any XYZ vendor except me, as the Executive Director of GCAF, and I have not done so.

By accepting disbursements from GCAF, you acknowledge your understanding and acceptance of the foregoing. Please contact me if you have any questions.

Very truly yours,

Cover of the 3rd edition of Fiscal Sponsorship: 6 Ways To Do It Right


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