Sponsorship is Unallocated Funds, End of Story

Sponsorship is Unallocated Funds – End of StoryI recently had an interesting question. 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, after all – they are way, way, WAY off base.

The beauty of sponsorship revenue

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. 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.

Your obligations

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.

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.

Don’t let sponsors create a rod for your back

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.

The upshot

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 making a rod for your OWN back.

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. You may also be interested in my white papers,  “Last Generation Sponsorship Redux” and “Disruptive Sponsorship: Like Disruptive Marketing, Only Better“. If you’re interested in a self-paced, online sponsorship training course, covering the whole sales process, with lots of inclusions, check out Getting to “Yes”.

If you need additional assistance, I offer sponsorship consulting and strategy sessions, sponsorship training, and sponsorship coaching. I also offer a comprehensive sponsorship capacity-building service for large, diverse, and decentralised organisations.

Please feel free to drop me a line to discuss.

Please note, I do not offer a sponsorship broker service, and can’t sell sponsorship on your behalf. You may find someone appropriate on my sponsorship broker registry.

 

© Kim Skildum-Reid. All rights reserved. To enquire about republishing or distribution, please see the blog and white paper reprints page.

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