Charities may want to provide gifts or honorariums to people – including current or outgoing Responsible People, members, staff or volunteers – as a gesture of gratitude and appreciation for their services.
A gift is something given to someone without obligation, and may be in the form of money, goods or other property. For charities, a gift is typically given in recognition and appreciation of a person's service to the organisation.
An honorarium is an honorary payment made to someone without obligation in recognition of their professional service. For charities, an honorarium is typically a payment made to honour an individual for their service to the organisation.
Some charities refer to these types of payments as ‘allowances’ or ‘ex-gratia payments’. The considerations outlined in this guidance still apply.
The decision to provide gifts or honorariums comes with some important considerations. Charities should approach this issue with care and diligence.
If your charity is thinking about providing gifts or honorariums, your Responsible People need to properly consider any issues or concerns in the specific context of your charity so they can fully understand and evaluate their decision.
Any decision to provide a gift or honorarium should be made with the best interests of your charity at the forefront of your thinking.
In addition:
- your charity’s governing document may include rules around gifts and honorariums that need to be followed
- your charity must be aware of the ACNC’s expectations in this area, as well as any relevant legal considerations.
The ACNC generally expects that any gifts or honorariums a charity may offer are of a token nature.
Gifts or honorariums should not provide any individual with a sizeable or significant personal benefit.
If your charity provides a gift or honorarium of significant value, it may be at risk of not complying with ACNC Governance Standard 1, which states a charity must be not-for-profit and work towards its charitable purpose.
It is up to your charity’s Responsible People to determine an acceptable value for any gift or honorarium offered.
In doing so, Responsible People should consider your charity’s financial position and its ability to carry out its charitable purposes.
Keep in mind that Responsible People also have duties under Governance Standard 5, including the duties to act honestly and fairly in the best interests of their charity, disclose conflicts of interest, and manage their charity’s financial affairs responsibly.
Your charity also needs to consider the legal implications of providing a gift or honorarium.
To remain registered as a charity with the ACNC, your organisation must continue to meet the eligibility criteria, including being a not-for-profit, being for the public benefit, and meeting the Governance Standards.
Charities must make sure that their decision to provide a gift or honorarium does not place them at risk of breaching these requirements.
Your charity needs to ensure its decision to provide a gift or honorarium does not place it at risk of breaching any of these requirements.
Charities also need to consider the implications of gifts and honorariums under employment and taxation law.
Private benefit
A gift or honorarium of significant value could result in a private benefit to the recipient. This may breach the requirement to be a not-for-profit entity, and may not be consistent with the charity pursuing its charitable purposes.
Lack of transparency
A lack of transparency about gifts and honorariums – especially if they are of significant value – may mean a charity is not being accountable to its members.
Not acting in good faith
Failing to properly consider all factors before providing a gift or honorarium could indicate a failure to act in good faith in the charity’s best interests and to further its charitable purposes.
Conflict of interest
Providing a gift or honorarium to a charity’s Responsible People or their relatives is a conflict of interest. While this doesn’t necessarily mean the gift or honorarium isn’t allowed, failing to disclose the conflict of interest is likely to be a breach of ACNC Governance Standard 5.
Improper financial management
Excessive gifts or honorariums could indicate that the charity’s financial affairs are being irresponsibly managed, particularly if the payments impair its ability to carry out its charitable purposes.
Your charity's Responsible People must determine if it is in the charity's best interests to provide a gift or honorarium.
Some questions you may want to ask before deciding on providing a gift or honorarium are:
- Does your charity’s governing document allow it to provide a gift or honorarium?
- How should your charity determine the value of the gift or honorarium?
- This may be a topic for discussion among your Responsible People or management, or you might wish to consult with other similar charities.
- Will the payment of a gift or honorarium affect any current funding arrangements?
- Are there conditions on funding that specify funds must be used in a particular way, or that limit the provision of a gift or honorarium?
- What will supporters or the public think of your charity providing a gift or honorarium?
- Are there reputational risks to doing so which could impact donations, volunteering and other forms of public support?
- Is the gift or honorarium going to be a one-off?
- If not, it might not be a true gift or honorarium, especially if recipients are expected to do something in return or if it is made in exchange for services. There may be implications for this under employment and tax law.
- Is your charity considering the gift or honorarium because its governing document prevents it from offering remuneration?
- If so, questions may be asked about if your Responsible People are acting in good faith and in your charity’s best interests, particularly if the person receiving the gift or honorarium could be regarded as an employee or contractor.
- Is your charity considering making a gift or honorarium to cover an individual’s out-of-pocket expenses – for example, travel costs to attend a board meeting?
- If so, consider reimbursing those individuals for the actual costs incurred instead, if allowed by your charity’s governing document.
- Is your charity providing a gift or honorarium on a regular basis to recognise an individual for their services?
- If so, consider if it is more appropriate to recognise them as an employee or contractor instead.
- Is your charity providing a gift or honorarium to a Responsible Person?
- If so, make sure there is a proper process for decision-making and determining a reasonable value. You should consider how the Responsible People will be accountable and transparent – this may include consulting with members, or putting the matter to them.
- Any Responsible Person who is potentially to receive a gift or honorarium must not be involved in any deliberations, discussions or formal decision-making processes on the topic.
Having a formal policy will guide your charity by setting out the circumstances in which gifts and honorariums can be provided, and the approval process required to do so.
Charities that prepare financial statements may also need to disclose gifts or honorariums to certain individuals (such as Responsible People) in accordance with the Australian Accounting Standards Board Related Party Disclosures standard (AASB 124).
The Annual Information Statement asks medium and large sized charities:
- whether they have any related party transactions, and
- whether they have documented policies or processes about related party transactions.
Related parties include a charity's Responsible People and senior management, as well as their close family members. Other people or organisations that can influence a charity’s decision-making are also related parties.
For more information, see our guidance about related party transactions.