Sponsorship is Unallocated Funds – End of Story

Money BoxI had an interesting question a couple of days ago. A charitable organisation was advised by their lawyers that they were obliged to spend sponsorship income only on the event or program that was being sponsored, and it could not be used for general operating expenses. The question was whether this was true or not.

Without denigrating the lawyers’ abilities – this is a pretty specialised field – they are way off base.

One of the reasons sponsorship is such prized income for non-profits is that it is unallocated funds. That is, it isn’t pinned to any specific program or expenditure. This is unlike a grant, where money is provided for a specific purpose, and which must be acquitted at the end. Some donations are also project/program specific. No, sponsorship doesn’t need to follow those rules, and for many organisations, sponsorship is what keeps the lights on, pays for marketing campaigns, and pays staff.

The crux of the matter is that when you sell sponsorship, you are selling marketing rights and assets. As long as those rights and assets are delivered, as contracted, how the money is used is up to the charity.

The crux of the matter is that when you sell sponsorship, you are selling marketing rights and assets. As long as those rights and assets are delivered, as contracted, how the money is used is up to the charity.

Think of it this way… When a television station sells advertising for a show, there is no requirement that the money raised go into the production of that particular show. Just like a charity selling sponsorship, they are selling marketing assets, not asking marketers to underwrite specific costs.

If you sell sponsorship, and the sponsor has requested that the funds go to a specific project, you need to pull them up on it. Explain that sponsorship is the acquisition of specific marketing rights and assets, which may be centred one one program, but which are owned by the organisation, as a whole. You could offer to structure the relationship so that part of the fee is sponsorship (unallocated funds) and part of it is a targeted philanthropic donation, but what you want to try to avoid is selling marketing rights and assets, and then being told how to spend the money.

If you really need the money, I understand that you will do almost anything to get that sponsor to commit, and if the sponsor is insisting, you may make that choice, even though it’s out of step with standard practice. But don’t, under any circumstances, create an internal policy that limits your ability to pay the bills with money that 95% of sponsors know is unallocated funds. That’s just shooting yourself in the foot.

Need more assistance?

For all you need to know about sponsorship sales and servicing, you may want to get a copy of The Sponsorship Seeker’s Toolkit 4th Edition.

If you could use some additional support, I provide sponsorship coaching, sponsorship consulting, sponsorship training, and if you need a fast, cost-effective start, you might look into the Jump Start program. If you’re interested in any of these services, please review the materials and drop me a line to discuss:

Kim Skildum-Reid
admin@powersponsorship.com
AU: +61 2 9559 6444
US: +1 612 326 5265

 

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