By Jonathan Salant, Associate

Collaboration can provide not-for-profits (NFPs) with opportunities to leverage the expertise, perspective, size and other capabilities of partnering organisations to deliver projects, strategies or initiatives that may otherwise be unavailable to them. This article will explore some options available for collaboration and the associated risks and benefits.

Memoranda of Understanding (MOU)
MOUs create a framework for collaboration and their primary benefit is flexibility and informality. MOUs provide organisations with opportunities to get to know one another, test the waters and either cease working together or enter into more formal arrangements.

Generally, parties to MOUs intend them to be nonbinding. However, because they are drafted to reflect the informal nature of the collaboration, they can be ambiguous and lacking in detail, leading to disputes. The other common issue with MOUs it that parties may get used to dealing with one another informally and fail to manage risk by recognising when it is more appropriate for a binding contract to be drawn up (and then doing so). This risk can be managed by including review periods in the MOU where parties can consider if more formal arrangements should be entered into.

Alliances, Joint Ventures and Consortia
Alliances are informal “handshake” understandings between organisations for working together. While they are easy to establish and allow entities to leverage complimentary skills, resources and expertise they can be risky because of their informality.

Joint ventures and consortia are typically more formal and defined either through contracts or the creation of a new entity specifically for the purpose of the initiative. While they are an effective mechanism to manage risk, they can be expensive to establish.

Auspicing Agreements (AAs)

AAs involve an organisation providing funding, support or sponsorship for another (often unincorporated) entity and are a good way for established organisations to provide mentoring to new or less established NFPs. AAs are generally used in the grant funding context, because sometimes an auspicing agreement is the only way that a NFP can access funding. It is often a condition of government funding that an organisation be a registered body corporate.

However, for the auspicing entity, because they are legally responsible to the funding provider for grant acquittal, there is an increased administrative burden and need for adequate insurance and risk management.

Mergers
A merger occurs when two or more organisations are fully combined.

Mergers allow organisations to increase their reach through increased size and can reduce competition in their sector for resources or members.

Once implemented, mergers are difficult to undo. If not implemented carefully, they can also be responsible for a loss of organisational identity or purpose, leading to dysfunction amongst any (or all) of the board, staff and members.

Careful due diligence is essential before proceeding with a merger and consideration must be given to the compatibility of the participating NFPs’ objects and culture; impact on charity status; viability of collaboration; reputation and financial risk.

Amalgamations
Amalgamations are a kind of merger, available to associations (or “Incs”) incorporated in the same State or Territory. Amalgamations occur pursuant to the incorporated associations’ legislation in that State, accordingly how they can be effected is not flexible because they are subject to statutory process.

The process is available in all jurisdictions in Australia except the Northern Territory, where a statutory transfer process can be used instead.