Auspicing Agreements

What is an auspice agreement?

An auspice agreement is an agreement where one organisation (‘the Principal Organisation’) agrees to apply for funding on behalf of a second organisation (‘the Auspiced Organisation’). If the funding application is successful, the Principal Organisation then receives, holds and administers the funding to the Auspiced Organisation, so that the Auspiced Organisation can complete the funded project or activities.

Another way to think of an auspicing arrangement is that it is a bit like a sub-contracting arrangement: the Principal Organisation applies for funding for a project, and then sub-contracts the project to the Auspiced Organisation. 

An auspice agreement is a legally binding contract. It sets out the legal obligations of both the Principal Organisation and Auspiced Organisation toward each other in relation to the administration of funding.

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When is an auspice agreement used?

Auspice agreements are often used to help certain community organisations to access funding for their activities.

There are various bodies that provide funding (grants of money) to community organisations. These include government department and agencies, philanthropic organisations, and private businesses. Sometimes, these funding bodies will only provide funding to community organisations that have certain characteristics. Some funders will allow auspicing arrangements, others will not.

For example, some funding bodies will only provide funding to community groups that are incorporated. Also, some funding bodies will only provide grants to community organisations with a certain tax status (for example, organisations that are income tax exempt or have deductible gift recipient (DGR) status). For more information about incorporation, see Getting Started > The incorporation decision. For more information about tax, see Getting started > Tax Issues.

If a community organisation wishes to apply for funding, but is not eligible (i.e. they do not have the right characteristics that the funding body requires), they can ask an organisation that is eligible to apply for funding to help them. The two organisations can enter into an auspice agreement. In general, the agreement is that the organisation that is eligible for funding (the Principal Organisation) will apply for funding and, if successful, will receive and become responsible for administering the funding to the ineligible organisation (the Auspiced Organisation).

However, the obligations of each organisation can vary greatly, depending on the terms of the auspice agreement, In some agreements, the Auspiced Organisation may be required to undertake nearly all of the work, and the Principal Organisation’s role is limited to administering the funding only. In other agreements, the arrangements will be more akin to a shared project, where both the Principal Organisation and the Auspiced Organisation will work together to complete the funded project or activities.

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Should our community organisation agree to auspice another organisation?

If your not-for-profit community organisation is incorporated, or has a certain tax status (e.g. income tax exempt or DGR - deductible gift recipient - status), you may be approached by other organisations wanting to enter into an auspicing arrangement.  

Be careful - although a proposed auspicing arrangement may seem like a good opportunity to work with and help another organisation, there are a lot of important legal issues that a Principal Organisation should consider. In certain circumstances, entering into an auspicing agreement may jeopardise your organisations ongoing eligibility for tax concessions or endorsements (for example, its DGR status). You may need to seek legal advice prior to entering into an auspicing agreement, to understand its legal implications for your organisation. 

In general, before agreeing to auspice another organisation, you, as the Principal Organisation, should:

• Ensure your organisation is satisfied that the project or activities for which the funding is sought for the Auspiced Organisation, furthers the mission of your organisation in some way;
• Check your organisation’s constituent documents (constitution, rules, by-laws) to ensure that entering into the auspicing agreement is consistent with the objects and powers of your organisation. For example, you should check that the organisation’s constitution does not have any rules that restrict it from entering into arrangements or providing funding to other organisation;
• Check whether entering the agreement will affect your organisation’s tax status (see further below);
• Make enquires about the Auspiced Organisation so that you are satisfied it can meet all of the requirements of the auspice agreement and the relevant provisions of the funding agreement (so, check references, financial statements, ability to deliver project or services, evidence of record-keeping practices, meet with personnel to ensure good working relationship etc.);
• Review the proposed auspicing agreement and ensure that your organisation can comply with its terms and that it adequately protects your organisation; and
• Ensure that the member of the Board or Committee of Management of your organisation clearly understand the legal implications of entering into an auspicing agreement (for example, that as Principal Organisation, you will have legal obligations to the funding body under the funding agreement, as well as to the Auspiced Organisation under the auspice agreement).

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What are the tax implications of an auspicing agreement?

If your organisation has been approached to be a Principal Organisation in an auspice agreement because it has a certain tax status, your organisation should be careful to ensure that the arrangement is consistent with the requirements of the applicable tax laws and the Australian Taxation Office (ATO). 

An organisation with DGR status can potentially jeopardise its DGR status by entering into an Auspice Agreement that breaches the tax law and ATO requirements for tax deductible donations. 

For example, an advocacy organisation that does not have DGR status may request another organisation that does have DGR status, to conduct an appeal on its behalf. This is to encourage donations which may be tax deductible to the donor. The Principal Organisation (with DGR status) must be careful not to enter into an auspicing arrangement that may not further its own objectives and / or may jeopardise its DGR status.

For further information about tax, see Getting Started > Tax Issues. You may need to seek specific legal advice about this issue.

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Our organisation is thinking of asking another to auspice us – what should we do?

If your not-for-profit community organisation wants to apply for funding, but does not have the required incorporation structure or tax status, (or some other required characteristic required by the funding body), you may wish to think about approaching another organisation about entering in to an auspicing arrangement.  

In general, before approaching another organisation, an organisation that is looking to be auspiced should:

• Have a clear idea about the funding you would like to apply for, and the project or activities you would complete with the funding. It is a good idea to have the projected documented;
• Ensure that the people involved in your organisation understand that an auspice agreement is a legally binding contract. Your organisation should be fully aware of its rights and liabilities under such and agreement. In particular, you should be aware that the funding for the project will be provided to and administered by the Principal Organisation; 
• Think carefully about which organisation(s) you will approach about an auspicing arrangement. You should ensure that they are eligible to apply for the funding (for example, they have DGR status if required). You should also be confident that you can form a good, mutually beneficial working relationship with the organisation. Remember, they will be the organisation that receives and administers the funding for the project, so you will need to be able to work closely with them;
• Be aware that the organisation you are approaching may have concerns about how the auspicing agreement will affect their ongoing eligibility for tax concessions or endorsements (see above). You may need to provide a clear explanation as to how the project or activities, for which you are seeking funding, are in line with the objects and powers of their organisation;
• Be prepared to prove to the Principal Organisation, that you are able to complete the project or activities for which funding is sought. You may need to provide references, financial statements and evidence of the level of record-keeping and risk management policies in your organisation; and
• Review the proposed auspicing agreement carefully and ensure that your organisation can comply with its terms. It may have some terms that impose significant costs or liabilities on your organisation. For example, the agreement may have terms that require you to agree to fully indemnify the Principal Organisation for any loss arising out of the project, or that you take out certain, sometime costly, insurances. You should be sure that your organisation can meet these requirements.

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What are the alternatives to auspicing?

Auspice agreements can be complex, and may not suit your organisation. It may be difficult to find a suitable Principal Organisation that is willing and able to auspice your organisation. It also may not suit your organisation to have another organisation administering funding as it may mean less independence and control for your organisation. 

An alternative is to look broadly for funding opportunities that your organisation can apply for in its own right. For example, some State government, local government and corporate grants programs provide funding to unincorporated groups, and some philanthropic foundations provide funding to organisations without special tax concessions.  Check their grant guidelines first - because auspicing involves an extra step - it is often used as a ‘last resort’.

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What should an Auspice Agreement cover?

Because of the diversity of community organisations and the projects those organisations undertake, there is no ‘one size fits all’ agreement.

An auspice agreement may be quite simple and deal only with the application for and distribution of funding with the Auspice Organisation. On the other hand, the agreement may be quite detailed and may specify projects to be undertaken with the funding and what the obligations of each party are in relation to the particular project.

In the end, the agreement should represent a 'win-win' situation. The Principal Organisation undertakes a new project consistent with its mission and partners with. The Auspiced Organisation has the benefit of contributing to the project with the comfort of knowing that the legal and administrative obligations for the project will be shared with the Principal Organisation.
 
For an idea of the kinds of issues that may be covered in a more comprehensive auspicing agreement, see the Checklist: Issues to cover in an Auspice Agreement below.

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Checklist: Issues to cover in an Auspice Agreement

This table sets out a brief explanation of some of the main clauses that you may wish to have in a comprehensive auspice agreement, where both organisations work together on a project to be funded by a grant.

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