Fundholding is when one organisation holds money on behalf of another group, project, or kaupapa.
It is also sometimes called fiscal sponsorship, auspicing, umbrella-ing, or being under an umbrella organisation. The terms are used slightly differently in different places, but the basic idea is usually the same: an established organisation receives and manages funds for a group that does not want, need, or yet have its own legal structure, bank account, or charity registration.
Fundholding can be a simple, practical way for grassroots groups to receive funding without setting up a whole new organisation. But because money can strain even the strongest relationships, it is worth taking the time to be clear about how the relationship will work.
Good Numbers good tip:
If you're not ready to establish your own organisation, the Gift Collective provides an excellent fundholding service to receive grants and donations.
In this guide:
Many funders, donors, and grant makers cannot pay money directly to an informal group or individual. They may require the recipient to be a legal entity, such as a charitable trust, incorporated society, company, or other recognised organisation. Some funders may also require the recipient to be a registered charity.
This can create a problem for groups doing good work in their communities but which are not yet ready to become a formal organisation.
For example, a group might be:
In these situations, a fundholder can make it possible for the group to receive funding and get on with the work.
In a fundholding arrangement, the fundholder receives money into its own bank account and holds it for the agreed project or group.
The fundholder is usually a larger or more established organisation with:
The smaller group or project usually remains responsible for doing the actual work. The fundholder’s role is normally to hold the money, pay expenses or release funds as agreed, and keep appropriate records.
The exact arrangement can vary. In some cases, the fundholder is simply holding and paying out money. In others, the fundholder may also provide advice, mentoring, governance support, employment support, insurance cover, or other infrastructure.
That is why it is important to be clear from the beginning about what the fundholder is and is not responsible for.
Good Numbers is designed mainly for legal organisations, such as charitable trusts and incorporated societies, that need to keep records and report under their XRB obligations.
Informal groups that are not legal entities usually do not have the same reporting requirements. But they still need good financial information.
If someone else is holding your money, you should still be able to answer basic questions like:
Even if your group is informal, the money still needs to be tracked clearly.
This is probably the most common type of fundholding.
A smaller group asks a larger or more established organisation to hold money for them. This often happens because there is already a relationship between the two groups, or because they work in the same community or sector.
For example, a school might hold funds for a student group. A community organisation might hold funds for a local collective. A larger rainbow organisation might hold funds for a new rainbow initiative while it gets started.
This kind of arrangement can work really well where there is high trust, shared values, and clear communication.
However, organisations that only occasionally hold funds for others may not have special systems for fundholding. They may find it harder to provide regular reporting, track balances by project, or respond quickly to payment requests.
That does not mean the arrangement is a bad idea. It just means both parties should be realistic about what is involved. Working through our Fundholding Memorandum of Understanding (MOU) Template is a great way to prompt the necessary discussions: Fundholding MOU - Template
Some organisations are set up specifically to provide fundholding or fiscal sponsorship.
The Gift Collective, for example, provides fundholding for groups whose work aligns with its charitable purpose. Specialist fundholders usually have more formal systems for receiving funds, tracking balances, requesting payments, and reporting what has been spent.
This can be especially helpful if your group expects to receive multiple grants or donations, or if you want a more formal arrangement from the beginning.
Specialist fundholders usually charge a fee for this service (Gift Collective charges 8% of funds received). This is normal, because fundholding involves real administration, compliance, finance, and risk management work.
One reason fundholding is useful is that some funders and donors can only give to registered charities.
There are a few reasons for this.
A donor may want the donation tax credit that comes from giving to a registered charity. A funder may have rules that only allow it to fund registered charities.
If your group is not a registered charity, a fundholder that is a registered charity may make it possible for funding to be received.
However, this is not automatic. The funder must be comfortable with the arrangement, and the fundholder’s charitable purposes need to align with the work being funded.
A registered charity should not hold funds for work that sits outside its own charitable purposes. Fundholding is still something the charity does in pursuit of its own purposes.
Before setting up a fundholding arrangement for a particular grant, check the funder’s rules.
Some funders are very comfortable with fundholding and even provide their own fundholding agreement templates. Others may have specific requirements about who can be a fundholder. Some may require the fundholder to be a registered charity, an incorporated society, Māori-led, or already registered in the funder’s grants portal.
The funder may also need the fundholder to:
Do not assume that any fundholding arrangement will be accepted by every funder. Check first.
Start with the practical question.
Will this fundholding relationship actually solve the problem you are trying to solve?
For example:
If the answer to any of these questions is unclear, check before you apply for funding.
Fundholding is not just about receiving money. It is about keeping track of money.
Ask what systems, tools, and processes the fundholder has for:
A specialist fundholder may have a platform where you can see your balance and request payments. A friendly local organisation may be using a spreadsheet and a separate tracking code in its accounting software.
Either can work. The important thing is that everyone understands the process.
Values alignment matters.
The fundholder is receiving money in its own name, so it needs to be comfortable with the source of the funds and the purpose of the project.
For example, some charities will not apply for or receive money from gaming machines or other gambling sources. If your project wants to apply for a grant from that kind of funder, you need to know whether your fundholder is comfortable receiving it.
Likewise, the fundholder needs to be comfortable that your project genuinely aligns with its charitable purposes, values, and reputation.
Fundholding requires trust in both directions.
The smaller group needs to trust that the fundholder will keep the money safe, track it properly, provide updates, and release funds as agreed.
The fundholder needs to trust that the smaller group will use the money for the agreed purpose, provide the required records, and not create confusion by implying that it is acting on behalf of the fundholder in ways that have not been agreed.
This is easier where there is an existing relationship, but even then, it is best to write things down.
Good relationships are helped by clear agreements.
Fundholders may charge a fee for holding and administering funds.
This is normal. Fundholding takes time, systems, accountability, financial processing, and sometimes legal or compliance risk.
Fees can vary. Some fundholders charge nothing, especially where there is a close relationship or the arrangement is simple. Others may charge a percentage of funds received. Fees from 0% to 12% are not unusual, depending on the arrangement and level of service.
Some funders may cover fundholding fees as an additional cost if you ask for them clearly in your budget.
Make sure everyone understands:
This is one of the most practical things to agree upfront.
If the group needs to pay a supplier, reimburse a volunteer, or book a venue, how long will the fundholder take to process the payment?
For example, will payments be made:
Slow payment processes can create real stress for small groups, especially when volunteers are paying costs upfront. Agreeing on timing avoids frustration later.
The fundholder and the group should agree who has authority to request payments.
This might include:
The fundholder will usually need enough information to show that spending is consistent with the purpose of the funds.
The group should be able to see how much money is left.
Agree how often the fundholder will provide financial updates. For example:
The report does not need to be complicated. At minimum, it should show money received, money spent, and the remaining balance.
If there are several grants or restricted funds, the report should show these separately.
It can feel awkward to talk about this, but it is better to agree in advance.
What happens if:
These situations are much easier to deal with if the agreement already explains what should happen.
Fundholding is sometimes used as a stepping stone while a group sets up its own legal entity or waits for charity registration.
But it does not have to be temporary.
Some projects operate for years through fundholding arrangements. Some handle significant amounts of money this way. There is nothing wrong with that if the arrangement is transparent, the fundholder’s purposes align with the work, and everyone understands their roles.
For some groups, fundholding may be simpler, cheaper, and more sensible than setting up and maintaining a separate organisation.
Running a legal entity comes with ongoing responsibilities: governance, financial reporting, bank authorities, annual returns, officer changes, meetings, policies, tax, Charities Services reporting, and more.
Not every good kaupapa needs its own organisation.
Even where there is high trust, it is wise to put a fundholding arrangement in writing. This could be a simple memorandum of understanding, sometimes called an MOU, or a more formal fundholding agreement. Check out the Good Numbers MOU template for fundholding here: Fundholding MOU - Template
A good agreement should cover:
The point is not to make the relationship bureaucratic. The point is to protect the relationship by making expectations clear.
If you are applying for funding using a fundholder, allow extra time.
You may need the fundholder to:
Do not leave this until the day the application is due.
It is also good practice to tell the fundholder what you are applying for, how much you are applying for, what the money will be used for, and what reporting will be required if the application is successful.
Fundholding can be a really practical way to support community-led work.
It can help smaller groups receive funding, avoid unnecessary administration, and focus on the mahi. It can also help funders support groups that might otherwise be excluded because they do not have a legal entity, bank account, or registered charity status.
But fundholding works best when everyone is clear.
Before entering a fundholding relationship, talk openly about expectations, fees, values, reporting, payment timing, and what happens if things change.
A good fundholding relationship is not just about holding money. It is about trust, clarity, and making it easier for good work to happen.
This article is general information only and is not legal, accounting, tax, or financial advice. Fundholding arrangements can have legal, tax, charity, and accounting implications depending on your specific circumstances. If you are setting up or entering into a fundholding arrangement, you should talk with a lawyer, accountant, or other professional adviser who understands your situation.
Ask Duncan anything — big or small. He’ll get back to you ASAP, and your questions will help improve the information here for everyone.
