Transcript

Chris:

Hi and welcome our September ACNC webinar.

Today’s session focuses on some of the key information new charity board members should be armed with as they take their place on a charity’s board, as well as some of the things they should be aware of when stepping into the role.

My name is Chris Riches and I’m from the ACNC’s Education team. With me is my colleague April Kitchenham - hey April.

April:

Hi

Chris:

We’ll cover a number of topics today. We will

  • provide five quick questions new charity board members should ask
  • give a brief introduction to the ACNC – who we are and what we do
  • look at charities’ ongoing obligations to the ACNC, and ACNC Governance Standards
  • examine in detail key duties for Responsible Persons – including charity board members
  • provide other general tips for those new to the board

And we’ll wrap up with some quick Q&A.

April:

Now, before we start, to those of you joining us today who have decided to jump in and join a charity board we’d like to say two things.
“Congratulations”, and “thankyou”

So many of Australia’s nearly 55,000 registered charities rely on the contributions of people like you – board members who willingly give up their time (often without remuneration) to help an organisation they support.

Without volunteers, and volunteer board members, many charities would struggle to be as effective as they are; some may even cease to exist.

So we at the ACNC want to acknowledge all those great, engaged and involved charity board members, including the new ones.

Chris:

When you join the board, there’s a few quick questions you should ask right at the start.

We’ve listed five here on the screen, and some of these you’ve most likely already covered as you’ve prepared to jump onto a charity board.

None of them are formal ACNC requirements per se, but they are important in terms of ensuring good governance and a high-functioning board.

And of course every charity is different, so there might be some extra questions you’ll need to ask.

The ones we’ve listed are:

Clarify your role – ensure you are clear on your role on the board and what your responsibilities will be. A position or role description is handy here.

  • Induction pack – have you got yours? A properly inducted board member is a quickly productive board member, so if you haven’t received an induction pack, talk to your charity about ensuring you have the information and documentation you need in order to hit the ground running in your new role.
  • Handover – if you are taking over a specific board role, organising time with your predecessor to sit down and discuss the ins and outs of that role is a great idea. Adequate and documented handover processes are vital.
  • Meeting details – it might sound basic, but confirm when, where and how often meetings will be staged, as well as how you will receive meeting agendas and minutes.
  • Duties to the ACNC – a rundown of your charity’s duties to the ACNC should be part of a charity’s induction process or “welcome pack”, and all new board members should be clear on them.

We’ll cover elements of these points in more detail throughout the webinar. But right now we’ll take a quick look at who the ACNC is and what it does.

April:

The ACNC is the independent, national regulator of charities. Essentially, we have five functions:

  • We register charities.
  • We maintain an online database of registered charities – the Charity Register This is freely available, searchable and used by the public, donors, volunteers, grantmakers and government.
  • We also provide advice, guidance and education to charities on their obligations to the ACNC.
  • We monitor the compliance of charities with the requirements of being registered – such as meeting the governance standards and lodging an annual information statement. We also respond to concerns raised about charities by the public and other government agencies.
  • And finally, we have a responsibility in all of our work to try to reduce red tape for charities, by ensuring our processes are as streamlined as possible and by working with other agencies to try to harmonise reporting requirements.

To learn more about the ACNC and its work, here.

Chris:

Just on that last point, we have a handy guide up on the ACNC website which can help provide a solid introduction (or refresher) on the duties charities have to us.

The guide is called My Charity and the ACNC, and it provides an overview of the ACNC's functions, as well as information on things like charity reporting obligations – important for new board members to know.

It also contains a number of handy links and reference points to accessing your charity’s records on the ACNC Charity Register, as well as other useful checklists to refer to.

Visit the web address on screen to download it.

April:

If you download and read My Charity and the ACNC, you’ll see mention made of “Responsible Persons”.

“Responsible Persons” is a term the ACNC uses to describe those people who have ultimate responsibility for the way a charity is run, and who vote on decisions.

You're probably more familiar with them as your as board or committee members, directors, or trustees.

It is this group of individuals who together are ultimately responsible for overseeing the charity’s operations and making sure it is working towards achieving its charitable purpose.

It is worth noting that Responsible Persons may employ staff to carry out some of the day-to-day tasks of a charity. If that occurs, the staff are responsible to – and would report to – the organisation’s Responsible Persons.

We have a useful factsheet on Responsible Persons at: acnc.gov.au/responsiblepersons.

Chris:

My Charity and the ACNC provides a useful reference point for new charity board members when it comes to understanding their charity’s obligations to the ACNC.

Charities which are registered with the ACNC must meet five ongoing obligations:

  • Keep charity status: to remain eligible to be registered, charities must continue to be not-for-profit and pursue their charitable purpose or purposes.
  • Keep records: Including correct and accurate financial records and statements
  • Report annually: By submitting an Annual Information Statement (and, for medium and large charities, a financial report) every year.
  • Notify the ACNC of changes: This includes changes to the charity’s legal name, Address For Service, governing documents and Responsible Persons
  • Meet Governance Standards: a set of standards that charities must meet to be registered, and remain registered, with the ACNC.

Those who are running a registered charity need to ensure their organisation complies with these obligations.

April:

As Chris mentioned, one of the ongoing obligations of registered charities is meeting the ACNC’s Governance Standards.

The Governance Standards are a set of five minimum standards which deal with how a charity is run. This includes a charity's process, activities, governance and compliance.

Under the Governance Standards, charities are required to:

  • Demonstrate that their purposes and character are not-for-profit, that it works towards its charitable purposes, and provides information about its purposes to the public.
  • Take reasonable steps to be accountable to its members and provide them with adequate opportunities to raise concerns about how the charity is governed.
  • Not commit a serious offence (such as fraud) under Australian law or breach a law that may result in a penalty of 60 penalty units or more.
  • Take reasonable steps to ensure that its Responsible Persons are not disqualified from managing a corporation, or disqualified from being a Responsible Person of a registered charity.

And finally, the fifth standard covers the duties of Responsible Persons – including board members – which they must fulfil. For new charity board members, familiarity with these seven duties is a must, and we’ll cover them in detail through the next few slides.

More on these standards can be found at the ACNC website – acnc.gov.au/governancestandards – as well as in our Governance for Good publication – acnc.gov.au/governanceforgood.

Chris:

The seven duties set down in Governance Standard #5 sets directs a charity’s Responsible Persons to:

  • act with reasonable care and diligence
  • act honestly and fairly in the best interests of the charity and for its charitable purposes
  • not misuse their position as a responsible person
  • not misuse information they gain in their position as a responsible person
  • disclose conflicts of interest
  • ensure the charity’s financial affairs are managed responsibly
  • not allow the charity to operate while insolvent

As a new charity board member, these seven duties provide you with a firm starting point to guide your actions and behaviour when carrying out your duties.

And any charity registered with the ACNC must take reasonable steps to ensure that the people running the organisation know and understand these duties and comply with them.

We’ll now explain each of those responsibilities in more details and what you can do to comply with these standards.

April:

The first duty is for charity board members to act with reasonable care and diligence.

As a charity board member, you’ll be tasked with fulfilling a number of different duties. This is a significant responsibility – not only to the charity, its members and those it works with, but to the wider community.

This first duty reinforces this responsibility, and the importance of exercising care and diligence in your roles.
It involves playing an active role in guiding and monitoring the charity’s development and management, and being aware of your obligations.

You also need to stay informed about the charity – such as its work, its finances, and the state it is in. And being informed isn’t just knowing about or being aware of these things, it is crucial you also understand them.

For example, if a responsible person receives key financial information about their charity, it is not enough just to read or look at the figures. There needs to be a level of understanding that goes along with that.

As a general point, you need to be an informed and engaged board member.

Other ways to comply with this standard are to read any board papers, ensure you are appropriately informed about any matter on which you need to make a decision, and attend board meetings on a regular basis.

Be aware that missing several board meetings in a row without a compelling reason to do so, might be seen as a breach of this duty.

It’s also important to remember that you can always ask for help or seek the knowledge of a professional or even the expertise of another responsible person – for example, the treasurer when dealing with a charity’s financial reports – but you should always carefully consider any advice you are given and ask questions to ensure that you understand it.

Chris:

If you are in a position of responsibility at a charity, your first priority must be to the charity.

Decisions that you make must be made from the viewpoint of the charity’s best interests, and what would further its work and charitable purposes.

These charitable purposes are often set out in an organisation’s governing documents. We’ll speak more about governing documents later in the webinar.

Any personal interests, or interests of other organisations, need to be set aside. When you are acting in your role as a charity board member you need to step into your “charity board member headspace” and view your actions from the perspective of “what would be best for the charity in this situation?”

When making a decision at a board meeting, for example, be diligent and don’t just “follow the crowd”. You should always do what you think is best for your charity, even if sometimes it means taking a different view to other board members.

Your duty as a responsible person of a charity is to do the best you can on its behalf – to guide and shepherd it so it can be the best it can be.

April:

Duty #3 is linked to #Duty2 – part of acting in a charity’s best interests as a board member is to ensure you don’t misuse your position as a Responsible Person.

Any actions which clearly run counter to Duty #3 are a misuse of your position of responsibility.

An example of a breach of this duty would be when someone running a charity uses their position to pay a company owned by friends or relatives, when there really is no reason to make such a payment – no goods or services have been provided to the charity, for example.

Your role as a charity board member isn’t about providing benefits to yourself or others, it is to ensure the charity is doing the best it can to further its purposes and assist its beneficiaries.

Misusing your position in this way will not only result in a breach of the ACNC’s Governance Standards, but can lead to other serious, or even criminal, charges being laid.

Chris:

As a charity board member, you’ll be most likely privy to a range of information, some of which may be sensitive or even confidential.

Any Responsible Person has a duty that sensitive or confidential information relating to the charity and its operations they help run remains “in-house” and is not misused.

And the definition of “sensitive information” is most likely wider than many new charity board members would initially think.

This type of information doesn’t just cover the obvious stuff – financial information, contracts, tendering, project management or personnel issues. It can also cover information about your charity’s operations, future direction … what happened at last Tuesday’s board meeting.

All of this information should be handled with discretion and respect. Sensitive charity information can carry as much value as money. It needs to be used properly. Not doing so can put your charity at risk or damage its reputation.

April:

Board members need to become skilled at partitioning their role with their charity; “separating” it from the rest of their everyday life. Doing so helps guard against any conflicts of interest.

After all, there’s always cross-overs between different parts of our lives – for example, cross-overs between the personal and professional or work parts of our lives.

But anyone who serves as a Responsible Person for a charity needs to take care that the intertwined parts of their lives don’t improperly impact on the charity they serve.

Now, for a charity’s Responsible Persons, having a conflict of interest doesn’t necessarily need to be a bad thing. The key is how they are managed.

As part of their duties, Responsible Persons should properly address any actual or perceived conflicts of interest.

This means a clear and open disclosure of any conflict between their duty to act for the charity and their personal or private interest, as well as making sure they are not part of any discussions or decision making on a matter where there is such a conflict. You can remove yourself from the room when these discussions take place, for example.

You should also ensure that your charity has a policy on conflicts of interest and even maintains a register of interests.

Importantly, this type of approach should also be followed even if the conflict of interest is perceived rather than actual – a conflict should be disclosed whenever an independent observer could doubt that a responsible person is acting in the best interests of the charity.

For new charity board members, it is a good idea to find out whether your charity holds a Register of Interests document in which board members can publicly disclose their interests to ensure transparency and good governance.

The ACNC has a great guide on managing conflicts of interest, which can be downloaded via the link on your screen – acnc.gov.au/conflictsofinterest

Chris:

Of course, financial management is an important component of charity board members’ duties.

But for new charity board members (or those considering jumping onto a board), the ACNC’s emphasis is clear – you don’t have to be a financial genius to be on a charity board … but you do need to be aware of, and willing to ask questions about, your charity’s finances.
And you should be able to at least grasp the basics of a financial statement.

It is perfectly reasonable, even acceptable, for charity board members to ask questions of their treasurer or financial officer if they are not sure about something. In fact, it should be encouraged.

Ultimately, a good approach when considering financial matters is to consider how any decision you make could impact on the charity’s financial health.

Charities should also have processes in place to manage their money responsibly and to protect themselves against financial mismanagement or fraud.

April:

A key part of any board member’s efforts to ensure effective and proper financial management in their organisation is the duty to not allow a charity to operate while insolvent.

Insolvency is when an organisation cannot pay all of its debts when they fall due.

If a Responsible Person reasonably suspects that the charity cannot pay all of its debts when they become due, then the Responsible Person should take all reasonable steps to prevent a charity from taking on more debt.

In addition, a charity’s board should regularly review its financial position and ensure there is enough money to pay for its activities.

Chris:

The last seven or eight slides have covered the duties that charity board members – Responsible Persons – have to the ACNC.

But there are a number of other general good governance tips new charity board members should take note of.

And when we speak about governance, we refer to the actions a charity and its Responsible Persons take to ensure it is effectively and properly run.

April:

We've already touched on this already, but we do recommend that new charity board members ask after and actively seek out an induction pack or welcome pack to prepare them for their new role.

An induction pack should include information about your charity's obligations to the ACNC and any other regulator, your charity’s governing documents, its annual and financial reports and information which allows you to access key charity information, accounts or the organisation’s listing on the Charity Register.

It can also include step-by-step descriptions covering key charity processes – like registering new members, for example.

And if you are taking over a specific board role from someone else, pursue a co-ordinated handover process where you can chat with your predecessor about the role and what it requires.

Chris:

We’ve also already touched on charity governing documents, but it is important for responsible persons to ensure they are familiar with what these documents say and contain.

Generally, governing documents are formal documents which set out:

  • the charity’s charitable purpose or purposes – what it does, who it works with or helps
  • that the charity operates on a not-for-profit basis, and
  • the way that the charity’s board or committee makes decisions and consults any members

New board members should seek out their charity’s Governing Document and familiarise themselves with it. And once you do so, don’t just stash this document away somewhere to gather dust – ensure it is regularly updated and is a “living, breathing” relevant document.

Remember, the ACNC needs to be notified of any changes you make to your governing documents, as well as receiving a copy of the changed documents. Read more in our Factsheet here.

April:

Meetings are a prime example of good governance practice by ensuring your members are kept informed about your charity’s activities.

Each charity will organise and run board, committee or sub-committee meetings in subtly different ways depending on all sorts of variables – its work, stakeholders and partners for example. There are even times of the year where meetings may have to be held more often to ensure things are still on track.

A key component towards a well-run, productive meeting is a good agenda. Your agenda should include:

  • what is to be discussed at the meeting and the likely time for each item
  • who is responsible for leading the discussion on each item
  • and the purpose of the item being discussed – does a decision need to be made or does it just need to be noted, is it just for information, is advice being sought or is the matter for discussion only?

Taking the time to prepare a good agenda will help ensure you invite the right people to the meeting to provide information or advice, that any support material for items on the agenda is prepared and board members are well informed in advance.

There’s a couple of links to resources on holding meetings and agendas on the ACNC website. There are also a number of great resources from other organisations like the Governance Institute, Justice Connect or Our Community.

Chris:

Annual General Meetings represent another important good governance practice. An AGM basically sees organisations present a report to their members about how the organisation is travelling financially and what it has been doing over the past 12 months.

A charity might use its AGM to make changes to its governing documents or even its name. In addition, most groups also have their board elections at their AGM – meaning a charity’s responsible persons may change at this time.

Those running a charity need to be aware that if they use the AGM to change its legal name, alter its governing documents or change its responsible persons, the ACNC must be notified.

And that’s all done through the ACNC Charity Portal with your user name and password – which you should all have, but if you not you can reset it on line or give us a call and we can help you.

There is no specific requirement under ACNC legislation to hold an AGM, however holding an AGM might be a good way for your charity to demonstrate that it is accountable to its members under Governance Standard #2.

There is also no requirement for charities to advise of the date of your AGM or register your upcoming AGM with the ACNC.

However, you will still need to follow any requirements around holding an AGM as set out in your governing documents, model rules or articles of association.

Charities might have a number of obligations to other Commonwealth, state or territory agencies around the staging of an AGM; that might be due to your legal structure, for example. If that’s the case, be aware of these requirements and continue to follow them if applicable.

April:

Duty #6, which we covered earlier in this webinar, looked at how charity board members need to ensure their organisation’s financial affairs are managed responsibly.

This type of responsible financial management stretches to the need for Responsible Persons to ensure their charity can not only gather the resources required for the organisation to do its work, but safeguards those resources and ensures they are used in an efficient and lawful way.

This covers issues like reserves, budgeting, spending and other elements of financial management.

As we mentioned earlier, board and committee members should have enough financial knowledge to be able to make informed decisions on their charity’s finances.

This might mean your charity’s responsible persons undergo some financial literacy training – there are plenty of courses around. In addition, the ACNC’s guide on Managing Charity Money can be found here.

Chris:

It is important that those running a charity know what their recordkeeping obligations are, and who it needs to report to.
ACNC recordkeeping obligations include your charity:

  • keeping certain written financial and operational records – and there are examples of each up on the slide on screen right now.
    • You can keep the records in any format you choose, as long as they are easy to find (including in electronic form), and you can develop your own system or process to keep those records as well
  • keeping the records for seven years
  • keeping the records in English, or in a form that can be easily translated to English

However, your charity does not have to provide records to the ACNC unless asked. Keeping proper records can help your charity:

  • show it is continuing to be run as a not-for-profit and working towards its charitable purposes (and so should remain eligible to be registered as a charity)
  • understand whether your charity is in good financial health
  • assess whether the right kinds of decisions are being made (operational and financial)
  • communicate about your charity’s activities and finances
  • prepare reports to meet your reporting obligations to the ACNC, other government regulators, donors/funders and members (if relevant), and
  • otherwise show that your charity meets its obligations under the ACNC Act, tax and other relevant laws.

The ACNC’s resource on keeping charity records can be found at acnc.gov.au/ACNC/recordkeeping. A useful recordkeeping checklist can be found here acnc.gov.au/ACNC/recordkeepingchecklist.

April:

Most charities and charity board members will experience a difference of opinion or internal dispute at some stage.
Such disputes can be across the board table, between volunteers, staff members or others.

Now not everyone has to get along like best mates. There are all manner of personalities which co-exist inside charities.

However, what is important is to remember that the work of the charity – its charitable purposes – is what is paramount. People can co-exist, and perhaps not get along all the time … but once this starts to impact on the charity as a whole, or puts the charity at risk of breaching the ACNC Act – then the situation isn’t good enough.

It is a good idea to set in place policies on how to handle disputes – how to arbitrate them, as well as dispute resolution procedures and techniques.

Those running a charity should be familiar with any procedures. But they should also be prepared to intervene where required (or refer things onwards to other authorities)

Finally, don’t run into trouble with related issues like bullying or harassment – this can see your charity hit legal trouble and its reputation take a hit too.

The ACNC has a guide on dealing with internal disputes; we’ll include the link in the follow-up email we will send out after the webinar.

Chris:

While the ACNC is the charity regulator here in Australia, there are a number of other regulators – at state, territory or Commonwealth level – to whom your charity might have obligations.

Here on the screen you can see a list of some of these bodies. Charity board members should at least be aware that their organisation may have obligations to regulators who aren’t the ACNC.

For a comprehensive rundown, visit the ACNC’s “Other Regulators” page here.

April:

We’re nearing the end of our formal presentation today.

Up on the screen we’ve got a list of useful links around the ACNC website which can help new charity board members with their responsibilities. Don’t worry about madly scribbling them down, we’ll send a list of these links and others out in a follow-up email in the next day or so.

Of course, what we’ve covered today isn’t an all-encompassing list … though we have tried our best! But it is a good starting point for new charity board members of things to be aware of.

Many new board members might find themselves at charities with their own unique and individual requirements. If this is the case, being aware of general good governance practices and having access to useful resources can be a big help.

Having a solid foundation of knowledge, policy/procedure and an awareness of your responsibilities can go a long way towards helping new board members fulfil their roles successfully and in a way which helps your charity achieve its aims.

Chris:

That’s about all we have time for today. Thank you everyone for taking the time to join us today

Resources mentioned during the webinar

Other useful websites include:

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