Matt:

Hello everyone and welcome to today’s Webinar, which as you can see on the screen is titled managing conflicts of interest. My name is Matt Crichton, I’m from the education team here at the ACNC. And joining me to present today’s Webinar is Sarah Byers, who works in our compliance area. Hello, Sarah.

Sarah:

Hi, everyone.

Matt:

Just before we get into the presentation today, just a few housekeeping administration things to cover. First, if you’re having any troubles with the audio, you can try listening in through your phone.

When you registered for the Webinar you would have received a confirmation email which would have had some information about dialling a number in and entering an access code which you can then… with which you can use your phone to listen to the Webinar.

So that’s a solution if you are having trouble with the audio over your internet connection. Also, if you have any questions as we go through the Webinar, feel free to put them into the go-to Webinar control panel that you should have on your screen.

There should be a chat, not a chat, a question box there and our colleague Chris, what am I saying? Chris, sorry about that Chris. Chris is waiting patiently for your questions and he will answer them as they come through. But if we don’t get to your question, we will endeavour to get back to you via email later anyway. So even if you might not get an answer during the Webinar, you will get an answer later.

It’s a good thing to keep the questions a little bit broad I suppose. If you have something that’s really specific about your organisation, then it’s probably best to give us a call on 13 22 62 and have a chat to someone about the details of whatever you want to have a chat about, because it can give you a better service that way over the phone.

We are recording the Webinar as we do with all of our Webinars. So if you do have to leave early or your computer breaks down or something, never fear, it will be published on our website, it will be published on our website later on.

Whoops, I just got… sorry everyone, I’m just making sure you can see the screen. Just got a message that the screen wasn’t working. I hope everyone can see what they’re supposed to see now on their title screen.

I’m sorry for the interruption.

OK, there we go, looks like it’s working again. Yeah, as I was saying, if you do have to leave early or something happens, you can’t sit through the rest of it, we will publish the Webinar, the recording of the Webinar on our website in the next couple of days. And just on that, we will also send you a follow up email which will contain many of the links to the free resources that we mention throughout the Webinar. So sort of no need to frantically jot down notes and web addresses as you go through. You will get an email that has direct links to the resources that we mention.

OK. That’s all the admin stuff out the way. Let’s get into the presentation.

First, we’ll have a look at what we’ll cover today which is, as you say, conflicts of interest. We’ll first touch on the different types of conflicts of interest, the actual, potential, and perceived conflicts of interest. We’ll look at this concept called related party transactions and we’ll see how all of this ties back into the ACNC governance standards. And then we’ll have a look at the threats that can be caused by conflicts of interest to your organisation as well as ways to identify conflicts of interest to disclose them and of course maybe the most important, to manage them. OK.

So that’s probably enough from my voice for a little bit. I’m going to throw over to Sarah who is going to give us an overview of what a conflict of interest is.

Sarah:

Yeah, sure. So a conflict of interest can be described as a point where a person’s normal or everyday life intersects with their charity life. So this is demonstrated by the Venn diagram that is on the slide. So formally the ACNC defines a conflict of interest as when someone’s personal interests conflict with their ability to act in the best interests of the charity that they are part of. So a personal interest does not need to be your own interest, but it can also arise from the interests of your family, of your friends, or any other organisations that you’re involved with. It also includes a conflict between your duty to the charity and another duty that you have.
So for example, you may be on the board of the charity Downward Dogs, but you are also on the board of a non-charity entity called Pedigree. And Pedigree may donate money to Downward Dogs. There is a possible conflict of interest there.

Matt:

Yeah, right. Your role on Pedigree and your role on Downward Dogs coming into conflict with each other because you’ve sort of got a decision-making role in both organisations.

Sarah:

That’s right.

Matt:

But it’s important to know that conflicts of interest, as the slide says here, are not the end of the world, right?

Sarah:

Definitely. Conflicts of interest should definitely not be viewed as the end of the world. They’re incredibly common and a normal part of life. So conflicts can particularly crop up in small towns or rural and regional areas where individuals might be a part of many charities. They can also crop up in specialist interest areas or fields where there are a small number of involved or engaged people.

Matt:

Yeah, it’s sort of inevitable in situations like this. You can try your best but in many cases you just simply can’t avoid these conflicts of interest because, as you say, a rural area, a regional area might not have that many people involved in the organisations that have to work together and there will be people that sit in the crossover.

And similarly with, as you mentioned, the specialist interest areas by virtue of them being so specialised is that the number of people involved in decision-making roles for those sorts of organisations are likely to crossover or at least know people or colleagues and whatnot involved in both organisations. So yeah, it’s really important that people realise that conflicts are bound to pop up and you don’t need to view them as being necessarily a really negative thing.

Sarah:

Yeah, that’s right. And as the slide states, conflicts of interest are nothing to worry about. As long as your charity is aware of them and has proper policies and procedures to address them.

Matt:

Exactly. And that’s the key there, it’s the addressing less, more so than the existing of a conflict of interest that’s important. And we will get those aspects a little bit later on, on how to address them, identify and manage them. But first, let’s just have a look at the different types of conflict of interest. As I mentioned at the beginning, there are three that… we’ve broken conflicts of interest into three sort of broad categories. And the first one, Sarah, can you just give us an overview what we mean by an actual conflict of interest?

Sarah:

Yeah, sure. So an actual conflict of interest is when you are being influenced by a conflicting interest. So you are actually being influenced. An example of this is your charity is considering whether to give a grant to a kindergarten that your child attends. Now, you cannot make that decision impartially.

Matt:

Yeah, right. It’s clear that the circumstances of the situation make it obvious that your decision is not made objectively or impartially. What about this one? It’s a little bit more ambiguous I suppose and harder for people to pinpoint, but a potential conflict of interest.

Sarah:

Yeah, so a potential conflict of interest is where you could be or might be influenced by a conflicting interest. So an example of this is where you’ve taken up employment with another charity and you may at some point apply for funds as an employee of one charity and a board member of another. You could be influenced by a conflict of interest in this situation.

Matt:

Yeah, this is one where it might be that there isn’t, but again, the circumstances are such that is a likelihood that you’ll be influenced by that interest.

Sarah:

Yeah, you might be.

Matt:

The third one, again, is even a little bit more I suppose vague or nebulous when people are considering conflicts of interest because it’s just a perceived conflict. And this is subtly different from the first two that we mentioned.

Sarah:

Yeah, so perceived conflicts of interest are where you could be or somebody else might see it as you being influenced by a conflicting interest. So for example, you may be revealing quotes for a service and one of the potential providers is the employer of your sister.

Now, while you believe you might be able to make an impartial decision in the best interest of your charity, it could be perceived by somebody else that that decision is being made in your own interest as the employer employs your sister.

Matt:

Yeah, right. And that’s where this one does get a little bit tricky for people. Because there is this natural inclination for the people involved in the conflict to be sure that there is no conflict of interest and they can scream from the rooftops until they’re blue in the face that there is no conflict of interest, but the perception is there. And that in and of itself forms a type of conflict of interest.

Sarah:

Yeah, absolutely. It’s all about how other people perceive that conflict of interest, not whether there actually is.

Matt:

Yeah, and that can… we’ll get into some of the damages that conflicts of interest can pose to an organisation later. But just the perception alone can do a fair bit of damage to an organisation’s reputation. So it’s important to consider the perceived conflict of interest as seriously as you would an actual or a potential conflict of interest.

We’ve got another, we’ve got a phrase here I did mention at the beginning. We’ll have a look at this concept of related party transaction. And this is probably an unfamiliar phrase for many people out there but it’s one that would, the situation of the phrase would be fairly familiar to people involved in charities. Sarah, can you just give us an overview of what we mean by this?

Sarah:

Yeah, sure. So conflicts of interest are also linked to what are known as related party transactions. The ACNC doesn’t define what a related party is. However, the term is defined through the Australian Accounting Standards Board, and there is a big rundown about that which is available by the link at the bottom of that slide.

Now, from a charity’s perspective though, a related party is a person, organisation, or group that has a pre-existing relationship with the charity. The relationship might be, for example, through family ties or through a situation where a charity’s responsible persons hold a position in another business or organisation. Now, a related party transaction, that occurs when there are dealings between the two related parties.

Matt:

Right, OK.

Sarah:

So an example of that would be a charity is planning to launch a new website and one of the companies being considered to create the website is managed by the daughter of the director of the charity. Now, the rendering of this service could be identified as a potential related party transaction and a conflict of interest.

Matt:

Yeah, right. So important to note that the related part of related party transaction doesn’t related to the family relationships as in related to someone. It’s not necessarily restricted to simply sons, daughters, siblings, cousins and whatnot. It extends way beyond that to the connection and the relationships that a charity has with other individuals or organisations. And particularly, this, I’d imagine, as we said at the beginning how conflicts of interest are often unavoidable given the circumstances of a charity particularly in say a rural area or regional area, something like this would pop up fairly commonly in those areas because, as we said, that the populations are smaller, the businesses available to do the work for certain charities are less so. So the related party transactions again is a common thing that will pop up. It’s just something that really needs to be managed carefully.

Sarah:

Yeah, absolutely. It’s all about the management of that particular transaction. So if a related party can cause a conflict of interest to arise or could cause a charity or its staff to act improperly and without transparency, then there is an issue that must be addressed.

Matt:

Excuse me. And just tying all this back to a charity’s obligations to the ACNC brings up the ACNCs governance standards. These are a set of core minimum standards of governance that the ACNC requires of registered charities. And they touch on a few areas of charity operations and charity governance. But there’s one in particular that gets at the heart of conflicts of interest. Do you want to give us an overview, Sarah?

Sarah:

Yeah, sure. So governance standard five makes it very clear that a charity must take reasonable steps to ensure responsible persons do the right thing. Now, a number of the points mentioned in governance standard five either directly or indirectly relate to conflicts of interest.

So those that indirectly relate to conflicts of interest include, act with reasonable care and diligence, not to misuse the position of responsible persons, and not to misuse information obtained in performing duties. Now, the points that directly apply to conflicts of interest are to act honesty in the best interest of the charity and for its purpose, and of course the last point on the slide which is the really important one, to disclose any actual or perceived conflicts of interest.

Matt:

Yeah, and we will get into that aspect of disclosing a little bit later on. But as the point mentions there, any actual or perceived. So it does bring in that concept of the perceived conflict of interest. And I think that’s an important thing to take away from this Webinar, that a conflict of interest does go beyond the actual clear conflict where you can point to the aspects of a situation where someone does have a conflict of interest. It does extend to the perception from people on the outside looking in at the operations of a charity.

Sarah:

Yeah, absolutely.

Matt:

Before we do get into the business of managing a conflict of interest, including the requirement to disclose them, we thought we’d just take a quick look at some of the threats that can be caused to a charity by conflicts of interests. And this is not to say that a conflict of interest will necessarily cause this sort of threat or damage to a charity, it’s in the case where they’re not managed properly, not managed appropriately, that these are some of the ramifications, some of the knock-on effects that can happen.

So it’s important to think about the management of the conflicts of interest to avoid these threats. But let’s go through them. The first one, as people can read on the screen here, Sarah, is a reputational risk.

Sarah:

So firstly, do not underestimate the importance and value of your charity’s reputation. Charity board members have the key responsibility towards ensuring that your charity’s reputation is not compromised by unmanaged or poorly managed conflicts of interest. They can cause others to question whether decisions made by the board have been made in the best interest of your charity or whether the board members have the necessary expertise for their role.

Matt:

Yeah, you don’t want to let something like a conflict of interest eat away at the reputation of your charity. Particularly when you’ve got a good name in the community. And sometimes reputation can takes years, even decades, to build up. Something as simple and as common as a conflict of interest shouldn’t be the thing to destroy the reputation.

Sarah:

Yeah, absolutely. It would be a really disappointing way to go if a conflict of interest was what damaged your reputation.

Matt:

Yeah. And that can lead to problems with trust in the community and funding and that sort of thing because if people don’t, as the points say here, if people don’t think that the board members have the necessary expertise or that the decisions made by the board aren’t in the best interests of the charity, it’s likely that people will start pulling their support for the charity.

Sarah:

Yeah, definitely.

Matt:

How about the next one? We’ve got here risk to good governance.

Sarah:

Yeah, so we’ve got a couple of risks to the governance to discuss in relation to conflicts of interest. So the first one is failing in your duty to act in the best, in its best interest, which takes it back to the points under governance standard five.

So the most important responsibility of any board is to ensure that it always acts in the best interest of the organisation it governs. It could be suggested that the failure to manage conflicts of interest indicates that the charity’s board or some members of it are not acting in the charity’s best interest.

This can seriously impair a board’s ability to make decisions that benefit the charity, and can ultimately undermine the long-term sustainability of the organisation.

Matt:

That last point’s a really good one and it’s something that often slips the minds of people when they are considering conflicts of interest in their charity at the moment and in the immediate short-term future because it’s something that you don’t think will have a long-term effect on the sustainability of an organisation, but by keeping that aspect in mind it can also sort of sharpen your senses to the effects of a conflict of interest and the importance of managing it properly.

Sustainability is really difficult in the charity sector sometimes, particularly financially and conflicts of interest are not such a difficult problem as to allow it to effect sustainability for charities. OK, and here we’ve got the risks to accountability and transparency.

Sarah:

Yeah, sure. So another risk to the governance, as you say, is risking accountability and transparency. When organisation demonstrates transparency, it is open and honest about the work including, well its work, including about its decisions, operations, and transactions.

Transparency also means communicating the results of these actions in a way that your audience, whether it be the board, members, or the general public can easily understand. Now, on the other hand, accountability relates to board members being held responsible by the people who have an interest in the charity.

So this is staff, members, beneficiaries, funders, and again, the general community. In a practical sense, this means that explaining what actions you have taken and accepting the responsibility for their results.

So for example, if a board member fails to disclose a conflict of interest, they’re not being open, frank, and honest about their personal interests in a decision before the board. Therefore, there is no transparency. This in turn prevents interested stakeholders such as members or even other people on the board from being able to scrutinise their decision and hold that director accountable for it.

Therefore, there is no accountability.

Appropriately identifying and managing conflicts of interest is essential in promoting accountability and transparency in your charity. So as the slide states, you cannot have accountability without transparency.

Matt:

And they’re two things that I think people, the general public I mean, expect of charities. That there is some sort of accountability and transparency, it’s often the public money that charities are operating, whether that be donations or grants or whatnot.

But transparency is held up as a really important principle on which charities operate and it’s something that carries over into the way a board manages internal affairs, such as conflicts of interest. And how about the charities, the dynamics of the charity’s board, conflicts of interest can have a real damaging effect on this, too, can’t it?

Sarah:

Yeah, unmanaged conflicts of interest can definitely have a negative effect on board dynamics. So a charity board’s ability to function effectively as a group can be undermined if conflicts of interest are not managed. So a hallmark of an effective governance is a board’s ability to have impartial and open discussions as part of the thorough examination of a charity’s affairs. So if a board member has failed to disclose a personal interest or it isn’t managed appropriately, this process can be hampered. Boards make decisions as a collective.

So if a conflict of interest has not been appropriately managed then the integrity and the effectiveness of its decision-making process can be put at risk. Board members should be able to rely on their colleagues always acting in the best interests of the charity and participate in open and honest discussion. Poorly managed conflicts of interest can undermine the confidence of board members to do this and can damage trust between them.

Matt:

Yeah, that’s right. And I think that point up the top there, boards make decisions as a collective, is a really important one. Because if the collective isn’t working together or isn’t, particularly doesn’t trust, if there’s no trust within that collective, it’s really difficult to make decisions.

And of course, you can just imagine the knock-on effects for a charity’s work and then it’s sustainability in the future if the board can’t make decisions effectively and if they can’t get along. If there’s no trust amongst the members of the board then it’s really difficult to manage a charity effectively.

Let’s have a look at some of the important aspects of dealing with conflicts of interest now. So we’ve gone through what they are, what damage they can do to your charity if you don’t manage them properly. Now, let’s have a look at the three aspects of managing them.

Which, we’ll go through those one at a time. And the first one being identifying the conflicts of interest. Sarah, what would you say to people in charities out there who are, you know, struggling to think about conflicts of interest with their own organisation that are wondering about this concept of identifying them?

Sarah:

OK. Well, the first thing I would say when identifying conflicts of interest is that it’s really important to have an attitude of honesty and open disclosure. So you need to consider your interests, whether it be financial or personal, and then think about situations where these may lead to potential, perceived, or actual conflicts of interest.

So there are a couple of ways that a charity can identify a conflict of interest. The first one is, ask the question, would a reasonable person who is properly informed about the nature of your personal interests believe that you might be influenced by your personal interests when making a decision on behalf of the charity?

And if the answer is yes, there is an issue that the charity will need to deal with. So another way is to step outside your own organisation and look at it from an outsiders perspective. You need to consider what would an unbiased individual think? If it looks suspect then it probably is.

Now, even if you feel that there is no conflict of interest present, but that an outsider is likely to see it as an issue, the situation needs to be managed. As the slide states, you need to put a charity hat on rather than your personal hat.

Matt:

Yeah, and that one gets at that third concept of a conflict of interest, again. That perceived conflict of interest. So as Sarah said, even if you feel there is no conflict of interest, but when you do put yourself in the shoes, actually we’re use the analogy of a hat, when you do put yourself, put the other hat on it looks like there might be, then that’s something that needs to be managed in the same way that you would have to manage an actual conflict of interest. It’s important to remember that perceived conflict of interests are also in effect conflicts of interest.

Sarah:

Yeah, and just as damaging as an actual or a potential conflict of interest.

Matt:

Yeah. How about disclosing? We did mention a few slides back, a few minutes ago when we were talking about how this applies to the ACNC governance standards that there is a requirement to disclose conflicts of interest. What does that mean and what can people do?

Sarah:

Sure. So look, we do have an expectation that all charities would have a conflict of interest policy. So this is a policy that unambiguously addresses conflict of interest, declaring and disclosing them, how to do so, and where to do so. However, having a policy is great but that policy needs to be implemented and be effective. So it’s really important to keep that policy up to date and ensure that it’s current. The charity also needs to make sure that people are aware of the policy. They need to know where to find it and how to use it.

A really good way to implement this is as part of an induction programme for new board members and staff. And then to use it as a continued training or by reviewing annually. And also the policy needs to be practical in that people can easily take steps to comply with it and disclose their conflicts of interest.

Matt:

Yeah, that’s a really good point. It’s sort of useless to have this policy that no one knows about, no one knows where to find, and even if they can find it no one understands it when they try and read it, because it’s not going to help anyone actually manage the realities of a conflict of interest.

So if you do have a conflict of interest policy, and as Sarah said, the ACNC would expect that a well-run organisation does, it should meet those sort of broad requirements that it’s up to date, people know where to find it, and when they do read it that it’s clear, they understand it, they know what they have to do, they know what the ramifications of, you know, not declaring stuff is, and the organisation broadly is familiar with it. So a policy, yeah, needs to be practical, not just an academic exercise.

Sarah:

That’s right, it definitely needs to be practical. And another element that we would expect a charity to have is a conflict of interest register. So a conflict of interest register is where the actual, perceived, and potential conflicts are formally disclosed and placed on the record. This is basically a document that records all the conflicts of interest.

So like the policy, the register needs to be kept up to date. And the charity needs to decide on who has access to this register and who can update it. However, in some circumstances charities may ask those with conflicts to ensure that the board is aware of them as well, that they aren’t just written on a register, that they are presented to or put before the board at a meeting.

So a really good way to do this is to make it a regular, standardised item on the agenda so the register is kept up to date at every board meeting.

Matt:

Yeah, and again, with the register, it doesn’t need to be anything fancy. Sometimes the word register might scare some people off and they think they have to have some fancy document drawn up by a lawyer or something like that, it’s not really the point of it.

The point is, as Sarah mentioned, that you can record conflicts that have been disclosed and then that record is kept by the charity and is available to the people that need to be able to see it.

And Sarah mentioned the board, that’s an obvious group. And there may be other senior staff or management that need to be able to see it, too. It’s just, if you think about it as, yeah, a formal record keeping exercise that jots down what the conflicts are and how they’ve been managed.

And again, it’s got to be up to date and practical. It’s no good just keeping it on a shelf somewhere and no one knows where to find it. Or hidden away in a file on a computer somewhere, it needs to be actually useful for people.

Sarah:

Yeah, to be honest, it could be just an Excel spreadsheet or you can add the disclosures to your meeting minutes. It doesn’t need to be an onerous exercise that causes frustration and stress.

Matt:

Yeah, yeah. And the… actually, just before we get to the attitude of disclosure, it sort of ties in with the attitude, but that point of making it a regular agenda item at meetings is a really good one. Because it sort of helps you form the habit of checking the register.

And before you know it, everyone in the organisation is familiar with that as a step in the process and knows what’s involved with it and what they have to do. It’s a good habit to sort of…

Sarah:

It’s a really simple and effective way to keep an eye on disclosures of conflicts of interest.

Matt:

Yeah. And back to the screen here, so attitude of disclosure.

Sarah:

Yeah, so the attitude of disclosure, what… organisational culture is key. So it would be really important for your charity to have an attitude which encourages disclosure and a culture that sees your charity welcome disclosure and openness. So when charity… when individuals join the charity, ask them to disclose any conflicts.

And again, convey the attitude that people shouldn’t be embarrassed to declare a conflict of interest. As we’ve stated many times, conflicts of interest are inevitable and most members of the board will encounter a conflict of interest or several at some point. And you should be able to feel confident to declare and manage it responsibly.

Matt:

Absolutely. It may sound a bit trite, this last point, just in attitude and let’s all have a great attitude. But it really does get to the heart of being able to manage this confidently. If everyone in the organisation knows that conflicts of interest pop up, they’re normal, but they can be managed and that’s the way in which you deal with them professionally and maturely, then it lends itself to, you know, easier dealing with them in future if the culture and the attitude is there. You don’t need to be scared of them, I think, is the short translation of that.

Now, managing conflicts of interest. This is an important thing for I reckon most people that are here in this Webinar. What are the tips and what are the things that people who are involved in charity should know if they are to manage conflicts of interest appropriately?

Sarah:

Yeah, so as the slide demonstrates, meetings are a really effective way of managing conflicts of interest. So in every board meeting, ask if there are any conflicts to disclose, take careful minutes, record any conflicts that are disclosed, who is present for the discussion, and record who did not vote on which items due to their conflicts.

Now, before participating in a decision on any issue where you may have a conflict of interest, you need to declare your interest first. So this may not automatically remove you from the decision-making process, but it will allow others to determine if your involvement is appropriate. So another thing is, if you are out of the decision-making process because you have a conflict of interest, then it’s really important to follow the rules.

Most charities will have people leave the room if there is a conflict of interest. This is a symbolic visual thing that says, they are not going to be part of the decision-making process in this particular instance because they might have a conflict of interest. Now, finally, when someone leaves the room under these circumstances, it is really important to note this in the minutes. Good record keeping is crucial when dealing…

Matt:

Yeah, can’t be overstated. Sorry to cut you off there, Sarah. I was just going to… maybe I feel so passionately about this point. But good record keeping can’t be overstated. And the funny thing with record keeping is that it’s so easy. I mean it’s just a step that doesn’t take much effort or knowledge or expertise or anything like that. And it’s just a really effective way of being able to manage, not only conflicts of interest, but a whole range of things that may pop up in the lifecycle of a charity. Yeah, so just take careful minutes. It’s a pretty simple but really effective step.

Now, just getting back to a policy and how a policy can be used to manage conflicts of interest. What are some of the points that people should know?

Sarah:

Sure. So as we said earlier, having a policy is great, but that policy needs to also be effective. But that policy also needs to be complied with. So your conflict of interest policy needs to also explain what will happen if you don’t comply with the policy. So in our template policy on the ACNC website, which we should have referred to earlier but there is a great conflict of interest policy template on our website and there’s also another one on the Our Community website. So they’re both great if you’re looking for…

Matt:

We will send you the links to those two so you don’t need to worry about jotting that down now. But yes, there is a template. And Sarah, as you were saying about the template?

Sarah:

Yeah, so in our template it states, if the board has a reason to believe that a person subject to the policy has failed to comply with it, it will investigate the circumstances.

So if is found that this person has failed to disclose a conflict of interest, the board may take action against them.

Now, the board as a collective needs to determine what the most appropriate action to take when a breech occurs.

So the person who did not disclose their conflict of interest, the board may see that in that particular situation a warning would be fine. However, for more serious misconduct that individual may be removed from the role.

Matt:

Yeah, right. And it’s important to note that templates are good, too, but also they should be tailored to your organisation. Not every single case is exactly the same.

Sarah:

Yeah, it should definitely be a case by case basis.

Matt:

Yeah. And it may mean that, yeah, some even ostensibly similar instances of conflicts that are undisclosed when you dig a little bit deeper are pretty different and therefore need to be dealt with differently.

So it is important to have a policy framework that guides the way in which your organisation will deal with them. And it’s pretty clear to everyone what the rules are and how the organisation will go about it. But also know that not every single conflict is exactly the same and it does need to be dealt with on a case by case basis.

OK. And again, that last point, culture, we’ve mentioned it before but yeah, try and work on that. Again, it’s a little bit more abstract. It’s nothing something that you can just make a culture policy and just everyone immediately has that culture. But it’s something that’s worth working on because it will make dealing with these sorts of things much easier in the long run if you get it right.

OK. We went through a lot today but we’ll just go over some of the key points to remember. We’ve distilled them into six. And we’ll go through them one by one. The first one is that conflicts of interest come in different guises and they can be actual, potential, or perceived.

And even though your charity’s approach to them should be similar, as we just mentioned with the policy framework, you should also know the subtle differences between them and understand that not all of them will be exactly the same. You’ll need to deal with them in different ways. How about the second key point, Sarah?

Sarah:

So the second key point is that the ACNC governance standards make it clear that a charity’s responsible persons must disclose conflict of interest. But there is also that added element that responsible persons need to act honestly and in the best interests of the charity and for its purposes by managing conflicts of interest.

Matt:

The third one is that conflicts of interest can cause damage to the reputation, to the operations, and to governance related aspects of a charity if they’re not disclosed and managed properly. In and of themselves, it’s not going to cause damage. Just having a conflict pop up, it’s the way in which the charity manages or fails to manage it is where the damage is done. How about the fourth one?

Sarah:

So the fourth point is the big question. You need to consider the reasonable person test, when weighing up whether something might be a conflict of interest. So you need to ask, what would a reasonable person think? What would an unbiased outsider think?

Matt:

Exactly. The unbiased outsider test is a really important one. The fifth point is one we just mentioned a minute or so ago, have clear policies and procedures and methods for managing conflicts of interest, include a register which formally notes the interests and therefore you can then see which might become potential, might become actual conflicts of interest which are potential or perceived.

But it’s really important to have these effectively just documented rules so that the people within the organisation know how these sorts of things are managed. And the last point that we want people to remember?

Sarah:

So the last point is make the handling of conflicts of interest a key part of charity board meetings and decision-making processes. So as we stated earlier, it’s really easy to make the disclosure of conflicts of interest a standardised, regular item in board meetings so there’s no room for those disclosures not to be made. And to also manage those disclosures when they arise.

Matt:

Alright, they were the… start that again. They were the main points to take away from today’s Webinar. Of course the whole thing’s great, but if you want six main points then they were the ones.

We do have a couple of questions that have popped through as we’ve gone on. So we thought we’d… we’ve taken a few of them that we thought might be useful for everyone and we’ll answer them now.

And as we mentioned though, if you do have any more questions send them through. We have our colleague Chris answering questions and also we can get back to you via email if we need to later. But one that we did have come through, Sarah, was about managing potential conflicts of interest and it’s with clients.

So the question is, how do you manage potential client conflicts when you work across the sector providing services to multiple organisations?

So maybe this person in their job, the nature of their job is that they do encounter lots of different organisations across the sector and it seems like there are a lot of potential client conflicts.

How would you manage those?

Sarah:

Yeah, OK. So understandably this can be a challenge to get right. Especially if you have a number of potential or actual or perceived conflicts of interest. But clearly the same basic principles that we’ve already discussed throughout the Webinar can apply here.

So firstly, as we’ve said multiple times, be aware of the pontifical conflicts of interest that you might have. So if you have worked or are working with one organisation in the field and then you begin work with another organisation in the same field, you need to be open and honest with that organisation about your other work and any potential conflicts that might arise.

So sometimes though you might end up taking a client due to your good work with a similar organisation in the field. So this could be based on a recommendation or referral. If you end up simultaneously working with clients in a similar field, you need to make clear the possible conflicts to those you are working with.

So you need to make clear that any key decisions or deliberations must be done in a way where other parties are present so that there can be no claims of hidden decisions or hiding conflicts of interest.

Key decisions should also be discussed and made in the presence of all parties with detailed notes, there’s that record keeping again, taken each time to ensure things are properly recorded.

Matt:

So it’s that principle of disclosure and record keeping that really underpins much of the way this person would be able to manage their potential conflicts of interest?

Sarah:

Absolutely. The disclosure and the record keeping are key elements to how this would be managed. But the individual would also need to almost mentally be able to separate these different sections of their work.

So by keeping them separate and doing any deliberations in isolations. Almost in a way where you might know what is going on across a number of clients, you can’t let it influence your deliberation in each specific case.

So you can’t let your knowledge about one client influence your decision-making about another client, even though you know a lot about both clients.

So it’s really important to be self-aware and be extremely aware of any potential perceived or actual conflicts of interest.

Matt:

OK, so it’s, yeah, disclosure, awareness, and record keeping. We can’t overstate that. Record keeping is really important and will go a long way to help you manage these ones.

Sarah:

And to be open. It’s really important to be open about your conflict of interest, you need to be transparent, and you need to be accountable. So if you find yourself in a situation where you’re uncomfortable or you feel like the conflict of interest may compromise your decision-making, then you need to stop, step back, and make that honest appraisal about where you stand in this situation.

Can you make that decision transparently and can you be accountable for it?

Matt:

Yeah. We have another question, but I just, one final point on that I suppose would be also to make sure you don’t think of a conflict in and of itself as a bad thing. And I think that’s where this all starts.

If someone thinks a conflict’s a bad thing, then it makes it difficult to be open, to disclose things, to take proper notes and all that thing. Remove the baggage that comes with the word conflict and view it as it is, a thing that’s going to pop up in the course of working for or volunteering for charities, and deal with it from there. So in and of itself, a conflict is not a bad thing.

The second question I thought we’d cover, someone’s asked about hiring paid staff.

So the question is, how do you hired paid staff that are known to people on the board of a committee or senior management? And I suppose this, again, the answer to this falls on, is built on the same principles that there’s no rule to say that you can’t hire people that you know, of course.

But similar to the previous question, you’ve just got to make sure you’re open about the process by which the person was hired and can demonstrate that, that the conflict or the perceived conflict was, one, recognised, it was identified, and it was managed.

It also depends on the circumstances. You may have the board member or the senior staff members not participate in the decision to hire the person that they know. Maybe they step out of that decision-making process and leave it to someone else.

Sarah:

Yeah, they can abstain from the voting process or they can, yeah, just leave the room.

Matt:

Yeah. That’s a really good one. Maybe in a smaller organisation that’s a little bit difficult. Maybe there aren’t that many people in a position to make decisions on hiring or in, as we mentioned earlier, a regional area or rural area with fewer people in the town.

Well, in those cases, and in all cases, really, documenting the process is important. And these documents can be used to explain how the situation was managed if anyone was to raise the question about there being a potential conflict.

So in the specifics of hiring someone, you could clearly document the attributes that you are looking for in a potential staff member and the requirements of the position and then measure that against how that particular person, in this case the person that you know, how that person matched up to those attributes and requirements of the position.

As we mentioned, conflicts will arise. So trying to avoid them at all cost is futile and it’s really more about the processes that you use to manage the conflicts that makes all the difference. And again, that magical question of what will this look like to an outsider is a good one to keep in mind.

Sarah:

Yeah, it’s a key question that should be asked frequently. It’s all about the outsider’s perspective.

Matt:

We’re sort of pushing close to the hour mark now and I reckon many people will be thinking about lunch. So let’s go for one more. We don’t want to keep you too much longer, but this one I thought was useful for much of the audience. How about some advice on how to point out a conflict of interest to a follow committee member or board member in a tactful way?

Sarah:

Sure. So firstly, as we’ve mentioned previously, having a culture that encourages openness and disclosure really helps to prevent conflicts going unmentioned. Also having a policy that everyone is aware of is also a really effective way in dealing with this so that people can use it as a resource to help them manage these situations.

So a tactful way to bring it up, just bring it up politely. Bring the conflict up politely and point out the requirements to disclosure conflicts under the policy. But also direct them to the ACNC governance standard and show how it applies to their situation. And then ask the individual to add it to the conflicts of interest register and advise that it will be brought up at the next meeting so it can be managed appropriately.

So it’s really important to… this is the perfect example of where it’s really important to have an effective policy where people know where it is and how to use it and what the guidelines are and to refer to it in this conversation.

Matt:

Yeah. These sorts of conversations are tricky and understandably people sort of don’t really want to do it. But if you’ve got a policy there with the set of rules that make it clear, it does make it a lot easier to deal with.

OK. That is probably enough for the moment. We are also trying to get to all of your questions that are coming through still. And we will hang around for a little bit after the formal presentation of the Webinar to keep answering the questions that are coming through. But if we don’t get to yours, we will email you.

We do have some more information. Many of these URLs, these website addresses will be put in the follow up email. We’ve got a conflicts of interest guide, some information about conflicts of interest, and also a podcast episode which covers this topic, too.

So a Webinar’s a little bit longer, but if you wanted to listen to that episode, I think off the top of my head it’s probably about seven, eight, maybe nine minutes. That covers many of the important points, too.

Also some resources on other websites, the Our Community website and the not-for-profit law website, that’s Justice Connect, an organisation called Justice Connect. They have the website not-for-profit law. They have some information as well. But you can click on those links from the follow up email.

And that’s about it for the formal presentation today. We will hang around to answer some of your questions, but stay in touch, you can get much more guidance on the website and we’ve got video content, Webinars and whatnot.

Or if you’ve got something specific for your organisation, give us a call on 132262, one of our advice services staff will be able to talk you through the specifics of your organisation’s issue.

Or send an email advice@acnc.gov.au. And we’re pretty active on social media, too, if you want to follow. Just before we do go at the end of the Webinar you will have a screen pop up that asks you if you want to participate in a survey. It’s really short, I think it’s two, three questions off the top of my head. It doesn’t take more than maybe 20 seconds to do. If you would like to do that it would be really appreciated because we get a lot out of the surveys, the survey results. They’re a good way to make sure that we improve our Webinars and do the sorts of things that people would like us to do. So filling in that survey would be greatly appreciated.

OK. Thank you everyone for your participation today. Thanks, Sarah.

Sarah:

No worries.

Matt:

Thanks to Chris. And we will hang around for a little bit to answer some more questions as they’re coming through. And if we don’t get to yours, as I said, we’ll send you an email.

But in any case look out for the follow up email which will contain links to the resources we mentioned in this Webinar and a link to the recording of this Webinar, too.

Thanks everyone, we look forward to seeing you for the next Webinar.

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