My understanding is that books and payroll/finance can in fact be outsourced, and this is common practice. In the US, there are charitable accounting services (like Jitasa) that do all books and file most/all required financial filings for charities (this still requires some work on the charity’s end). There are PEOs (like JustWorks and Insperity) that in some cases run all of HR (and are legally responsible for it). To my understanding PEOs can be used with charitable organizations.
I think there may be some efficiency gains from centralization, like covering fixed costs (such as ~$10,000/year to pay a legal firm to register to fundraise in all US states) but they’re small or insignificant when you reach a multimillion-dollar scale. I’d imagine the all-in gains in avoiding fixed costs to be in the low tens of thousands of dollars.
At a larger scale, becoming independent could even be a cost savings! Administering lots of tiny projects can be operationally burdensome for a fiscal sponsor. There are also benefits of being independent, like being able to use your own operational processes, having a separate legal existence, etc.
That’s why fiscal sponsorship services , e.g. what’s provided by EV and RP, are usually offered to small/burgeoning or temporary projects in the broader charitable world, rather than being used by massive organizations. Accumulated funds at a fiscal sponsor can be easily donated to the new entity, although the later the spin out, the larger the operational complexity I’d imagine.
These days, setting up a company or charity is as easy as filling out a website, no formal legal firm required if it’s pretty standard. Stripe Atlas and Clerky are popular for for-profit startups, and Resilia is one such service for nonprofits.
Speaking for the US:
My understanding is that books and payroll/finance can in fact be outsourced, and this is common practice. In the US, there are charitable accounting services (like Jitasa) that do all books and file most/all required financial filings for charities (this still requires some work on the charity’s end). There are PEOs (like JustWorks and Insperity) that in some cases run all of HR (and are legally responsible for it). To my understanding PEOs can be used with charitable organizations.
I think there may be some efficiency gains from centralization, like covering fixed costs (such as ~$10,000/year to pay a legal firm to register to fundraise in all US states) but they’re small or insignificant when you reach a multimillion-dollar scale. I’d imagine the all-in gains in avoiding fixed costs to be in the low tens of thousands of dollars.
At a larger scale, becoming independent could even be a cost savings! Administering lots of tiny projects can be operationally burdensome for a fiscal sponsor. There are also benefits of being independent, like being able to use your own operational processes, having a separate legal existence, etc.
That’s why fiscal sponsorship services , e.g. what’s provided by EV and RP, are usually offered to small/burgeoning or temporary projects in the broader charitable world, rather than being used by massive organizations. Accumulated funds at a fiscal sponsor can be easily donated to the new entity, although the later the spin out, the larger the operational complexity I’d imagine.
These days, setting up a company or charity is as easy as filling out a website, no formal legal firm required if it’s pretty standard. Stripe Atlas and Clerky are popular for for-profit startups, and Resilia is one such service for nonprofits.