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Funders see savings in outsourcing

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Private foundations that outsource the management of their back-office functions can see savings of 22 percent to 50 percent depending on their size, a new study says.

Foundation Source, which provides support services for foundations, compared the operational expenses of 273 of its own clients to IRS data from foundations that manage their own operations.

Overall, as a percentage of total assets, operating costs at foundations that outsource their back-office, technology and support services to Foundation Source are 26 percent lower than at foundations that manage their own administrative functions, the study says.

The savings are greater for smaller foundations, the study says, with funders with assets under $50 million saving 50 percent, and those with assets over $50 million saving 22 percent.

The 273 foundations included in the study that outsourced their administrative functions to Foundation Source saw combined savings of $4 million in 2006, compared to their peers.

Projected across all foundations filing with the IRS, the study estimates combined savings from outsourcing could approach $1 billion annually.

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