Auspicing is a fairly common practice for unregistered or unincorporated non-profits in Australian such as informal groups or new organisations that may not have legal standing on their own. This type of agreement may be a good fit if a group of individuals or a local club want to run a project or host an event such as a festival or exhibition, a community pilot, a local study group or youth club, or a national sporting competition.
Auspice agreements are formal arrangements between registered and often more established organisations and groups of individuals who want to undertake a project but lack the necessary requirements for fundraising or receiving and managing grants. Both parties, (the auspicee and the auspicor) must meet certain obligations once they sign the auspice agreement, which is why you should be very sure you want to work with the auspicing body, and this type of arrangement is the best option for you and your group.
What is auspicing?
Auspicing is the process of providing support, sponsorship, or guidance to a less established and often unincorporated or unregistered organisation or group. Groups of individuals wanting to carry out a one-off project may not want to formally register as a charity or incorporate as a non-profit organisation. Auspicing is a good way to meet the requirements of funding bodies by working under an umbrella organisation that receives the money on their behalf.
The Arts Law Centre of Australia describes auspicing arrangements in the following way: “While the Group will be carrying out the project, the Auspicing Body will have the contractual relationship with the Funding Body and the legal responsibility for the financial and other commitments in the funding agreement” 1.
Some registered non-profits are open to receiving requests and may even solicit proposals from less established groups or associations as part of their ongoing work. They may offer support for funding applications and grant management or provide guidance or expertise to ensure the group completes the project successfully. When a request is approved and the arrangement moves forward, the two parties enter into a legal agreement whereby the more established organisation becomes the auspice body or auspicee and the unincorporated group becomes the auspicor. This agreement largely benefits the smaller or less established organisation.
Benefits of auspicing
The benefits of entering into auspice agreements vary from one arrangement to the other, with some auspicors agreeing to distribute funds directly to the group and others managing the project more closely by providing administrative or financial management support.
Unincorporated groups or associations often enter into an auspice agreement because they don’t have the organisational capacity to manage complex projects, are ineligible to apply for grants, or are unable to enter into legal agreements on their own. Under an auspice agreement, a group can benefit from lower administrative costs and responsibilities.
Auspicees can benefit from the expertise of the auspicor when they are inexperienced in the area they want to work in. This can include expertise in finance, access to infrastructure, insurance protection and other resources. In addition, the auspice body takes on all or most of the legal risks of running the project when they accept the funds on behalf of the group, reducing personal liability for the individuals running the project.
Before entering into an auspice agreement, both parties should consider several things. The agreement should always comply with their individual organisations’ legal standing, written rules and tax requirements. Generally, the process of developing auspice agreements includes the following steps:
Determine the process by which organisations can submit a request for auspicing.
Design clear evaluation and selection process and discuss what fulfillment would look like once the auspiced grant is approved.
Evaluate requests for auspicing based on a pre-determined eligibility criteria and principles.
Determine if the organisation submitting the request is a good fit and advise them of the decision regarding their auspicing request.
If selected, negotiate terms of the auspice agreement with the auspicee.
Auspice agreements should include a reasonable timeline for completing the project, a project description and expected outcomes, and a list of individuals, staff or volunteers involved in running and carrying out the project activities. The agreement should also contain an action plan for addressing any requirements by the funding body. In addition, agreements should include the auspicing body’s percentage fee, usually between 2 and 10%, though this may vary according to their level of involvement in the project 1.
The auspicing body is legally obligated to remain in compliance with the terms of the funding agreement once the money is received from the funding body. For example, the auspicing body has the obligation to track spending during the project life cycle. They will need to evaluate whether the financial and performance of the project are progressing as expected and include this in the acquittal report.
The auspicing body will need to provide the agreed upon services or support to the group as set out in the auspice agreement. They may control several financial aspects of the project and choose to distribute payments gradually to the group. Depending on the auspice arrangement, they may have a more expansive role such as liaising with the funding body or providing logistical or financial support.
In comparison, the group (auspicee) is obligated to follow the timelines, project description, and budget outlined by the funding agreement and the auspice agreement. The group must successfully complete the project according to the agreement and is responsible for ensuring the quality of the results. They should be open to receiving guidance from the auspicing body if they fall behind in the work or are facing delays and challenges in delivering the project activities.
DGR Status and Tax Concessions
Grant programs often expect recipients to be incorporated and registered as charities, meaning that organisations will have access to tax concessions or Deductible Gift Recipient status. Entering into an auspice agreement can provide access to these financial benefits when a group is not yet incorporated or is newly incorporated and has not received these tax endorsements. This may improve their capacity to fundraise and solicit grants from government programs and private foundations and donors. To learn more about DGR status and tax concessions read Better Boards’ information sheet.
A DGR charity is sometimes set up for a specific purpose, to provide a tax-deductible umbrella to groups that wish to remain unincorporated and not interested in becoming a registered charity. The Australian Sports Foundation was formed by the government to help sporting organisations collect more funds from the private sector. They distribute funds to sports projects and help local clubs, schools and communities improve facilities and host major events. Another example is the Foundation for Rural and Regional Renewal, an organisation that sponsors projects in Australia’s rural communities.
Auspicing may not always be the right choice. If your group is already incorporated and able to enter into its own agreements or has received DGR status, an auspice agreement may not be necessary. These arrangements are legally binding contracts that involve legal obligations from both parties and firm roles and responsibilities. An auspicing partnership could restrict your ability to fundraise and manage a grant you receive independently since the role of auspicing organisations is to manage money and monitor financial activities. You may also be required to comply with auditing procedures. If you don’t need an auspicing body, it’s probably better to seek funding on your own.
When is auspicing a good option?
Funding and accepting donations may be difficult without having a legal entity status. When a group of individuals wants to carry out a one-off project and may not want to register as a charity or formal non-profit organisation such as a co-operative, company, or incorporated association, an auspice arrangement can work to its advantage. In other cases, your group may not have the expertise needed to manage a particular project and seeking out an auspicing body may be a good option.
How are auspice projects typically evaluated by auspicing bodies?
While the evaluation process for selecting an auspice project may vary, most organisations will want to consider whether it is aligned with their strategic plan and provides value for money. The potential for cooperation, accountability and transparency from the group should also be considered. Other questions may include whether the project addresses the needs of the group it plans to serve and there are systems in place for reviewing and evaluating its progress.
What happens when an auspicee is not meeting the obligations of an auspice agreement?
Since the original agreement contains a plan for addressing all legal requirements, including those of the funding body, when obligations are not met, the auspicing body has several legal options. They include working with the group to amend the existing agreement, terminating the agreement if resolution is not possible, or entering into a dispute resolution process to end the arrangement.
Is there anything the parties signing auspice agreements should avoid?
The auspicing body and the group members should not fall into an employment relationship or partnership. This can sometimes happen as a natural progression of the working relationship and can add unwanted obligations and burdens for each party. The issue can be avoided by acknowledging in writing that the agreement does not create a relationship of partnership or employment between the two parties. In addition, both parties should avoid agreements that don’t comply with their written rules or constitutions, or the legal obligations associated with running their non-profit organisation.
What is an acquittal report?
Acquittal is the process of evaluating and reconciling the financial and performance aspects of the project, documenting progress and submitting a report after the project is completed. Funding bodies usually require grantees to submit a final report outlining how they’ve met their obligations under the funding agreement. The auspicing body is responsible for monitoring and tracking spending and submitting an acquittal report to the funding body describing the final results and outcomes.
This fact sheet is intended as a simple overview. Non-profit law is incredibly complex and there are many components, allowances, restrictions, exceptions and important qualifications that are not described above. Dedicated legal advice should be sought from a legal practitioner before taking action.
Better Boards connects the leaders of Australasian non-profit organisations to the knowledge and networks necessary to grow and develop their leadership skills and build a strong governance framework for their organisation.