This guidance explains what working with a partner means, as well as your charity's legal obligations, potential risks and issues, and the steps your charity should take to ensure a partnership is effective and successful.
There are also additional resources available, including a working with partners assessment and a list of considerations, as well as a partnership review template for your charity's use.
Working with a partner
Partners are third parties that a charity might work with on services or programs.
An arrangement to work with a partner may be formal or informal, but it is more than a simple customer-supplier relationship.
There are many types of partners, and each has its own considerations and benefits. Some examples include:
- Corporate entities: a charity might receive funds, goods or services, and the corporate partner receives benefits of being associated with charitable work and meeting obligations of social responsibility.
- Other charities: working with other charities or not-for-profits might involve joint fundraising or collaborating on a project.
- Government entities: a charity may become a partner for the purpose of implementing a government project.
- Suppliers of goods and services: although most relationships with suppliers might be relatively simple transactions or contracted services, some charities might have a broader, more collaborative arrangement. Activities might include, for example:
- working with fundraising agencies on fundraising campaigns
- mandatory compliance services that the charity may need, such as the work of an auditor or a lawyer
- other services that a charity does not have the resources to manage, such as an IT system.
Ways to work together
Charities can work with other organisations in several ways, with varying levels of formality and independence. Often, charities will cooperate or partner through a memorandum of understanding (MOU) or other forms of written agreements. Or, there are more formal ways to collaborate, such as through a formal partnership or a joint venture.
The way charities work together depend on the purpose of the collaboration and the resources required. Being open to a range of methods will allow to you to consider the best option for your charity – but, in considering the options, remember what your charity is trying to achieve.
Legal obligations
All charities registered with the ACNC must continue to be not-for-profit and pursue charitable purposes. They must also keep financial records, and report information annually – including financial information.
Most charities must also comply with the ACNC Governance Standards and, for charities operating overseas, the External Conduct Standards. Aspects of these obligations contain elements that are relevant to working with partners. Among other things, the Governance Standards cover duties for Responsible People and the External Conduct Standards cover conduct with third parties overseas.
Depending on the location and nature of your charity’s operations, there may be other state, federal or overseas legislation with which your charity must comply. You should consider getting legal advice to fully understand what legal obligations there may be for your charity.
Risks and possible consequences
Risks that come with working with partners can include:
- the partner organisation has a vision, a mission or values that do not align with those of your charity
- the partner organisation has different expectations of the purpose and operation of the partnership
- conflicts of interests
- fraud and corruption
- problems in the supply chain, such as exploitation and abuse
- a lack of transparency between partner organisations
- the partner organisation is incapable of doing what the agreement requires
- disputes.
There can be significant consequences of risks. These might include:
- adverse effects on beneficiaries
- damage to your charity’s reputation
- cost
- litigation
- negative effects on staff
- failure to achieve the mission and aims of the partnership.
Protecting your charity from partnership risks
Partnerships can be a powerful way to increase your charity’s reach, effectiveness and efficiency, and ability to meet the needs of beneficiaries.
But it is important to consider the risks of working with a partner carefully.
While everyone involved in a charity has a role to play in managing risks, the ultimate responsibility for a charity is with its Responsible People.
It is the Responsible People who must consider the circumstances of their charity and make sure that they can identify and manage relevant risks involved in working with a partner.
The ways to manage risks will vary significantly between charities. However, thinking through the risks in four stages – stages that reflect the lifecycle of an arrangement to work together – can be a helpful way for your charity to approach its risk management.
These stages are:
- Catalyst and identification
- Entering an agreement
- Monitoring the relationship
- Renewal or exit
If your charity works with partners often, using standard procedures and systems can help provide consistency to the process.
Standard procedures and systems might include a partnership policy, a procedure to assess the suitability of a partner, a checklist for your background research and checks, and a partnership risk assessment.
Identify the need for working with a partner
Ensure your charity is clear about its goals and how working with a partner might support them. Importantly, the Responsible People must endorse the need.
Consider the processes that would be affected by working with a partner. What are the opportunities, but what are downsides? How will your charity manage them?
Define criteria for a new partner
Be clear about what your charity is looking for in a partner, as well as what it is not.
Examine your charity’s plans and operations and identify its needs and gaps. Use this to develop the criteria for a partner.
Identify potential partners
Sometimes the ideal partner is already nearby, but it is worth searching for the best match for your charity. When considering possibilities, ask these questions:
- Is this organisation a good fit for us and our plans?
- With our size and capabilities, is the size of the partner organisation appropriate?
- Does the organisation have a real interest in the success of the partnership?
- Do the skills and capabilities of the organisation match our needs?
Clarify the mutual benefits for partners
A clear understanding of the value to both sides is important.
First, it helps to ensure that risks do not become incidents later on. Second, it provides a benchmark for measuring success. And third, it recognises that the value of the agreement may be different on both sides – this can help to inform decisions.
Carry out proper checks on the potential partner
Due diligence is the process of doing background research and checks to identify issues or risks. It does not need to take lots of time, people or money to do – there is a lot of information available, often free, that can help you with this.
Considerations might include:
- conflicts of interest
- values, aims, work or relationships that do not align with those of your charity
- integrity issues such as bribery, fraud and corruption
- unfavourable financial history.
Areas for review might include:
- corporate structure and ownership
- technical capabilities and business support capacity
- reputation and legal history
- the organisations in a partner’s supply chain (the ‘fourth’ and ‘fifth’ parties)
- annual reports and submissions
- perspectives of senior executives, managers and staff
- social media presence.
The extent of your due diligence should depend on the risk to your charity and the type of working arrangement that is proposed. For example, your charity may go through a lighter due diligence process for a simple cooperative arrangement than it would for a larger more formal partnership.
Take a proportionate, risk-based approach to due diligence.
Finding something during research or background checks does not necessarily have to stop a potential relationship. The important thing is to determine what your charity can manage, and what it cannot. For example, a conflict of interest is not necessarily a problem if it is managed properly.
Consider the law and the terms of the arrangement
Ensure the arrangement will help your charity deliver its purpose and is it in its best interests. It is important that your charity understands the arrangement, which may include both formal documents and informal verbal agreements.
Useful questions to ask include:
- Do the appropriate people in your charity understand the arrangement (including any written agreements) fully?
- Has your charity received legal advice? Does it need legal advice?
- Will any existing arrangements be affected by this new one?
- Is your charity confident that it can meet its obligations?
- Are extra agreements (such as a non-disclosure agreement) necessary?
Consider the exit strategy
Developing an exit strategy in the beginning helps to protect your charity from being locked into a partnership that no longer works for its goals. It also helps to keep the performance of the partnership tied to its original purpose.
At what point will your charity end a partnership?
Consider processes to:
- address situations where a partner does not meet the agreed requirements
- conduct reviews of the arrangement to address issues, or identify irreconcilable ones
- allow for reconsideration, renegotiation, or termination.
Negotiate openly and frankly
Successful negotiation should conclude with a written agreement setting out the relationship and enabling each party to achieve their desired outcomes.
During this process, consider:
- how you align the goals of your charity, the partner, and the partnership
- keeping records of the discussions for future reference
- the value of a forum to discuss ideas, issues and concerns openly and transparently.
Get expert advice and support
Honestly assess your charity’s capability. External support such as legal or financial advice may be necessary.
Keep up to date with relevant legislation
Different partners, as well as the partnership itself, may be subject to different legislation and different regulators.
Keep detailed records
This is important not just to satisfy your charity’s legislative or regulatory requirements, but to protect your charity with an audit trail in case things go wrong.
Conduct periodic reviews
Relationships and circumstances change over time, and it is important for your charity to review the partnership regularly – there may be developing risks or opportunities.
Consider reviewing the:
- performance of the partnership against its aims and objectives
- performance of processes or functions within the partnership
- effect of the partnership on other functions and processes
- way partners are complying with the agreement
- risks of the partnership and how they are being managed
- satisfaction of all partners.
Your charity can use our partnership review template as a starting point.
Decide whether to end or renew the partnership
If the partnership is working well, your charity can continue the agreement or adjust it to pursue new goals. But knowing the right time to wind up a working relationship is important.
Reasons for termination might include:
- the relationship has achieved its goals
- it has come to the end of its set time period
- the original intent or structure of the agreement has shifted.
If your charity is ending a partnership, use the exit strategy that was written at the outset to guide you through.
Examples of things to include as part of the winding-up process:
- audits and reviews to make sure your charity understands its position, including financially
- new partnership opportunities that may be opening up following the success of this one
- reflections on what worked and what did not work so well, and the lessons your charity can take from this.
Case study: Partnership with a software company
A charity that advocates for people affected by violent crime campaigns for tighter restrictions on dangerous weapons. To broaden its work from advocacy to practical assistance, the charity thought it would be a good idea to develop a smartphone app.
Two of the charity’s Responsible People know a few people at an Australian software engineering company, so they suggest that company as one for the charity to partner with to develop the app. Besides knowing a few people that work there, the charity’s Responsible People thought of the company as having a strong corporate social responsibility agenda. And they knew that the company had once worked with a well-known charity on a website and app.
Before approaching the company with the proposal, though, the charity did some background research. They checked the Australian Securities and Investments Commission (ASIC) registers and discovered that the software company had recently been purchased by a multinational armaments company.
The charity felt that this was not compatible with its values and mission, and they decided to not proceed with the partnership.
Without these checks, the charity could have signed a partnership agreement with a partner that had values incompatible with its own. This might have had significant consequences for its reputation and support in the community.
Case study: Partnering overseas
A charity that promotes public awareness of certain medical conditions received a generous donation, and decided it wanted to expand its work to an African country where the medical conditions were very common. The charity’s leadership thought that the best way to do this effectively was to work with a local partner.
Before looking at potential partners, the charity conducted a partnership risk assessment to identify all the things that could go wrong and to consider how it would minimise any risks. The charity then made a list of criteria with which to consider potential partners, and used its network to identify organisations that may be a good fit as a partner.
When considering the potential partners, the charity used a partnership checklist to evaluate each organisation’s structure, operations and experience. The charity asked organisations for evidence of similar work it had done in the past, and even took references where they were available.
Before deciding on the partner, a couple of representatives of the charity travelled to the African country to look at the conditions and the work being done there. This trip gave them an important insight into how things work on the ground and helped them think about their own planned work.
Following the process of due diligence, the charity decided that a local organisation, registered as a charity in the UK, was a good fit as a partner.
The charity negotiated a clear agreement with the local organisation. The agreement included details about:
- the funds and other support the charity would give to the local organisation
- the ways the funds were supposed to be spent
- the results that the partnership was aiming for
- the way the partnership would be monitored
- the partnership's timeline
- audit rights for the charity
- ways in which the partnership may be terminated.
To help run the partnership, the charity recruited volunteers with experience in international program management. It also got specialist advice about the implications of working overseas.
The partnership was successful. The charity was able to show its supporters the results of its work in Africa, and both organisations learned much from each other. Both organisations collaborated on a review at the end of the partnership, which helped develop the capability and confidence of the charity based in Australia.
Not only did the charity choose to renew the partnership when it first ended, but it also went on to launch more international projects in other areas.
Working with partners resources
After reading this guide, you can check your understanding by taking our working with partners assessment. We also have a list of considerations that your charity should think about when working with partners.
You do not need to submit the assessment or list of considerations to the ACNC – they are optional resources designed to help you measure your understanding of working with partners, and to identify areas for further training or improvement.
We also have a partnership review template that your charity can use as a guide.
Downloads
More information and resources
- Corporate partnerships and charities, ACNC
- Related party transactions, ACNC
- Working with fundraising agencies, ACNC
- Working with other organisations, Not-for-profit Law
- Work with other charities, Charity Commission of England and Wales
- Joint working agreements, National Council of Voluntary Organisations (UK)