Emil Ford Lawyers

Good governance - makes a charity a better charity

Just as good governance is at the heart of any successful business, good governance is also essential for a charity to achieve its purposes and drive improvement, as well as maintain legal and ethical standing in the eyes of those it serves, regulators and the wider community. Governance isn’t simply a concern for large charities, but for every charity. A charity will be a better charity if it’s governed well.

And that’s why there is so much law and regulation directed at ensuring good governance in charities.

AICD Guidelines

The Australian Institute of Company Directors (AICD) released the first version of its Not-for-Profit Governance Principles in 2013. The Principles gave governors of not-for-profit organisations practical steps they could take to improve governance. In March 2019, the AICD issued a revised version of the Principles which contained some changes of which all governors of not-for-profits should be aware.

The Principles focus on 10 key areas.

  1. Purpose & Strategy – The organisation has a clear purpose and a strategy, which aligns its activities to its purpose.
  2. Roles & Responsibilities – There is clarity about the roles, responsibilities and relationships of the board.
  3. Board Composition – The board’s structure and composition enable it to fulfil its role effectively.
  4. Board Effectiveness – The board is run effectively and its performance is periodically evaluated.
  5. Risk Management – Board decision-making is informed by an understanding of risk and how it is managed.
  6. Performance – The organisation uses its resources appropriately and evaluates its performance.
  7. Accountability & Transparency – The board demonstrates accountability by providing information to stakeholders about the organisation and its performance.
  8. Stakeholder Engagement – There is meaningful engagement of stakeholders and their interests are understood and considered by the board.
  9. Conduct & Compliance – The expectations of behaviour for the people involved in the organisation are clear and understood.
  10. Culture – The board models and works to instil a culture that supports the organisation’s purpose and strategy.

To evaluate how effectively charities and not-for-profits are meeting and achieving results in each of these 10 key areas, the Principles encourage governors to ask themselves five questions in each area. It is important that governors accurately self-assess their progress in each of these areas. Questions include:

     Is the organisation’s purpose clearly articulated and communicated to stakeholders?

      How often does the board discuss culture?

     How effectively are conflicts of interest managed by the board?

The Principles are distinct from the ACNC Governance Standards. Charities must follow the five ACNC Governance Standards to be and remain registered with the ACNC. You can read about the Governance Standards here. The Principles, on the other hand, are not binding but are a practical and voluntary framework to help charities and not-for-profits understand and achieve good governance.

With the dramatic increase in public and media scrutiny of charities and not-for-profits, it is important that governors take all reasonable steps to maintain confidence and trust in the sector. We encourage all those involved in the leadership of charities and not-for-profits to read the Principles and assess whether their organisation is meeting the expectations of its stakeholders and its community.

You can read the Principles here.

If you have a concern relating to the governance of your organisation, please contact .

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