A shared services agreement refers to a contractual arrangement between two or more organizations that share resources and services in order to achieve their missions more effectively. This practice has become increasingly popular among nonprofit organizations as a means of improving efficiency, reducing costs, and expanding services.
Nonprofits may choose to enter into a shared services agreement for a variety of reasons. For example, two organizations with complementary missions may combine their efforts to provide more comprehensive services to their clients. Alternatively, one organization may have excess capacity in a certain area and could provide that service to another organization in need.
Shared services agreements can take many different forms. For example, one organization may provide administrative support services such as accounting, human resources, and legal services to another organization. Alternatively, two organizations may share facilities or equipment in order to reduce costs associated with maintaining their own individual infrastructure.
One important consideration when entering into a shared services agreement is the potential impact on each organization`s status as a nonprofit. Nonprofits must be careful to ensure that any fees or reimbursements being paid for shared services do not exceed fair market value for those services. Additionally, any income generated from shared services must be related to the organization`s exempt purpose.
Another important consideration is the potential impact on each organization`s brand and reputation. Nonprofits must be careful to ensure that any shared services are consistent with their respective missions and values. This may require careful planning and communication to ensure that stakeholders understand the rationale behind the agreement and are supportive of the arrangement.
Overall, shared services agreements can be a useful tool for nonprofits looking to improve efficiency and expand services. However, it is important to carefully consider the potential impact on each organization`s nonprofit status and reputation before entering into any such agreement. By doing so, nonprofits can maximize the benefits of shared services while minimizing any potential risks.