Commitment 7.4:
We have responsible and independent governance mechanisms.
Compliance Indicators
Compliance with the Commitments will be assessed against the following Compliance Indicators. All of the applicable Compliance Indicators must be met by every ACFID Member to be considered compliant with the Code. Each of the Compliance Indicators has one or more compliance Verifiers. Verifiers are the description of evidence that is required to substantiate compliance with each Compliance Indicator. Guidance is also provided.
To demonstrate compliance, members will have all of the Verifiers in place, commensurate with their size and the nature of their work. Members will also ensure that their policies, processes and guidelines are implemented and subject to regular review.
7.4.1 Members have a governing body.
A governing instrument, charter or policy that meets ACNC governance standards and sets out:
- The processes for selection, appointment and induction of Responsible People and any provisions for termination.
- Clear term limits and number of consecutive terms a responsible person may serve.
- A requirement for the majority of the Responsible People to be non-executive.
- The approach to remuneration and expense reimbursement of Responsible People.
Guidance
The link to the ACNC Governance Standards can be found in the Resources Section below.
7.4.2 Members establish their membership and define how the organisation is governed and operates.
A governing instrument that sets out:
- The organisation’s basic goals and purposes.
- The not-for-profit nature of the organisation.
- Membership of the organisation, as applicable, and members’ rights and obligations.
- Governance structure and processes of the organisation.
- Frequency and processes for meetings of members (at least annually).
- Rules for meetings of the governing body, including the frequency of meetings (at least two a year) and quorum for meetings.
- Powers and responsibilities of responsible persons including a statement of the overall responsibility of the governing body.
- Strategic controls to be exercised by the governing body.
- Financial controls to be exercised by the governing body.
- Power of the governing body to delegate authority to officers, staff and others.
Guidance
The ACNC also provides a template constitution for a small company limited by guarantee with charitable purposes which can be found in the Resources Section below.
7.4.3 Members manage conflicts of interest with responsible people, staff, volunteers and third parties relating to all activities undertaken by the organisation.
A conflict of interest policy that includes:
- A definition of ‘conflict of interest’.
- A requirement for responsible people, staff, volunteers and third parties to disclose perceived, potential and actual conflicts of interest.
- A requirement to document and review disclosed perceived, potential or actual conflicts of interest.
- Procedures for the prevention, management and remedy of conflicts of interest, and their potential impact, including open and fair procurement of goods and services (or reference made to a relevant policy, see 8.1.3).
Guidance
ACFID has uploaded a number of useful guidance documents in the resources section below, that outline what could be included in your conflict of interest policy and how to apply it in your organisation. Of particular merit is the ACNC ‘Managing Conflicts of Interest Guide” and the Practical Introduction produced by the CCIC (these are the top two links). Members will also find links to the conflict of interest policies of other members by looking at their websites. Members will also find links to the conflict of interest policies of other members by looking at their websites.
7.4.4 Members governing body is informed of and responds to serious incidents in accordance with their mandate and responsibilities.
- Policy and/or procedure for the reporting of serious incidents to the governing body.
- Safeguarding is a standing agenda item for governing body meetings.
Guidance
Requiring the governing body to systematically and regularly consider safeguarding, elevates the importance of safeguarding within an organisation ensuring the governing body is providing leadership on safeguarding and PSEAH. This requirement should be documented within the mandate or list of responsibilities of the governing body and in documented reporting protocols to ensure it is institutionalised. The governing body as the leadership of the organisation, should be accountable for serious incidents. Involving the governing body will assist in fostering a leadership and culture in the organisation that promotes safeguarding.
7.4.5 Members governing body has an organisational-wide risk management approach
- A documented organisation-wide risk management approach
- Regular reporting to the governing body of key risks and controls
Guidance
Members must have a risk management policy, framework, procedures and/or documented practices in place for the effective identification; review; rating; mitigation; reporting; and escalation of organisational–wide risk.
Members’ policies need to demonstrate your organisation-wide approach to risk management in planning, decision-making and operations. The policy could be supported by your organisational Code of Conduct, PSEAH, Child Protection, Complaints Handling, OH&S, international travel advice, as well as Anti-Fraud policies.
Procedures need to be well documented to outline the distinct roles and responsibilities of the Board, governance committee(s), members of leadership team(s), as well as staff and contractors. All personnel in the organisation are required to receive training on the risk management and incident/risk reporting process for your organisation.
Members must have risk as a standing agenda item at senior management meetings, and use risk register to document risk analysis, ratings, and controls. Risk reviews must also be undertaken at the Board meetings, with significant incidents and risks are reported to the Board in a timely manner. The Board has oversight of the overall risk management of an organisation.
Guidance and frameworks for developing a documented organisation-wide risk management approach is listed in the Resources Section below.
Templates for compliance registers are also listed in the Resources Section below.
Good Practice Indicators
The following Good Practice Indicators describe a higher standard of practice than that set out in the Compliance Indicators. While Members do not need to meet the Good Practice Indicators to be considered compliant with the Code, they will self-assess against these indicators once every three years. This provides a clear pathway for Members to strengthen and improve practice over time.
- Provide information or training to Responsible People on their duties to refresh their knowledge (e.g. webinars from ACNC and governance professional bodies)
- The governing body Chair does not also occupy the position of Chief Executive Officer, or equivalent.
- The member’s governing instrument, charter or policy sets maximum term limits.
- Periodic reviews of the effectiveness of organisation governing body are undertaken.
- A Register of Interests is maintained, ‘conflict of interest’ is a standing agenda item at governing body meetings, and there are clear procedures or consequences for responsible persons’ failure to disclose
- Members seek out gender and safeguarding expertise as desirable skills and experience when recruiting new persons to the governing body.
- Members seek out diversity and representation in their leadership and governing body, which reflects the Australian community and the communities they serve.
- Members report publicly on the diversity and representation of their leadership and governing body.
Good Practice Guidance
Here are some practical suggestions for your organisation to further deepen and improve practice over time.
Type of governing instrument
- Ensure that your organisation understands the concept of a governance or governing instrument, which is formal written documentation on your goals and purpose and how you operate.
- Examples of a governing instrument include constitutions, articles of association, rules, trust deeds and charters. The will vary according to the organisation. For example:
- An incorporated association is governed by rules, statements of purpose and rules or articles of association.
- A company limited by guarantee under the Corporations Act 2001 is governed by a constitution, which was previously known as a memorandum or articles of association.
- A trust is governed by a trust deed.
- Unincorporated associations are usually governed by ‘rules’.
- The governing instrument should be signed and dated by the appropriate authorities, whether directors, members or the equivalent.
- Whichever document governs your organisation, ensure someone with legal expertise checks it over to ensure compliance with any regulatory requirements.
Content of the governing instrument
- If you wish to comply with the Australian government’s Overseas Aid Gift Deductibility Scheme (OAGDS) as well as DFAT NGO accreditation requirements, you must demonstrate your not-for-profit and voluntary status through your governing instrument.
- According to the OAGDS eligibility guidelines, to establish the not-for-profit and voluntary status of your organisation, your governing instrument should state that:
- Members of the governing body are not remunerated for their role on the governing body (i.e. they act in a voluntary capacity) NB: some governing body members may also be paid staff members.
- Profits or surplus will be applied to the objectives of the organisation and not distributed among the governing body or members (i.e. they will not profit from the revenue or gains of the organisation).
- If the organisation is wound up, any remaining assets will be distributed to a similarly structured organisation.
- The ACNC website has good templates which may be useful for you to develop a governing document, or to compare with your existing one.
- The governing instrument should be made available to your members, your constituency, supporters and the general public through your website.
Governing body responsibilities
- It may be difficult to change your governing instrument to include the Code’s requirements regarding documented protocols for the reporting of serious incidents to the governing body and that safeguarding should form a standing agenda item for governing body meetings. Alternatively this could be documented in a Board Charter or governing body roles and responsibilities document and also within your PSEA policy.
- However you choose to document this requirement, it should include a definition for serious incident and how this information will be reported to the governing body.
- Provide governing body members with training on PSEA, child protection and complaints processes to ensure they fully understanding their responsibilities and accountabilities. This should include training on legal, regulatory and contractual obligations in this regard including any mandatory reporting to external entities such as the police and the ACNC and to DFAT if your organisation receives DFAT funding.
- To assist with governing body meetings, develop a template agenda with all standing items listed i.e. those that are on the agenda at every governing body meeting such as conflicts of interest and PSEA. This ensures they are not forgotten. It will also serve to increase governing body members awareness and prioritisation of these issues.
Conflict of interest
A conflict of interest arises when a person participating in decision-making, gains or is perceived as gaining an advantage (or avoiding a disadvantage) for themselves or for another organisation or person in which they have an interest, due to access to privileged information or from the outcome of the decision. Here are some practical suggestions for your organisation to strengthen its management of real or perceived conflicts of interest:
- Review your governing instrument and any legislation that applies to your organisation to understand your legal duty to prevent and manage conflicts of interest.
- If your organisation is a company limited by guarantee make sure you promote and develop your governing body’s understanding of directors duties (including the duty to avoid conflicts and to act in the best interests of the company) under the Corporations Act 2001 and the common law.
- Include a clause in your governing instrument outlining the obligations of your governing body to prevent and manage conflicts of interest.
- Document in more detail the procedural arrangements for managing conflicts of interest in a board charter or procedures document.
- Create and document a conflict of interest policy, approved by the governing body that is applicable to directors, staff and any volunteers with decision-making authority over your partners, activities or resources. The policy should outline the following:
- Who is responsible for implementing the policy for staff, volunteers and governing body members.
- What is the process for reporting on, reviewing and updating the policy.
- What are the consequences (e.g. paying restitution, resigning) for those who fail to comply with the policy.
- Create and document procedures for implementing the policy and ensure that governing body members and staff are well familiar with them. The procedures should outline the following:
- Your organisation’s definition of conflict of interest.
- The requirement by directors to disclose potential and actual conflicts of interest, such as directors sitting on the governing bodies of other NGOs or funding bodies, or being employed by specialist firms that provide goods or services to your organisation.
- Inclusion of conflict of interest as a standing agenda item on all governing body meetings.
- Where an actual or potential conflict of interest exists, the director or staff person may remove themselves from the discussion and decision-making process. The governing body or other committee determines whether this is required.
- The procedure for addressing perceived, potential, actual conflicts of interest, including those that have already occurred.
- Procedures to ensure open and fair procurement of goods and services (or reference made to a separate relevant policy).
- Governing body members and staff to disclose actual or potential conflicts of interest, and following this, your organisation to create a documented register of them.
- Document responses to the conflict of interest agenda item in the meeting minutes to ensure rigour and provide evidence that it was systematically considered in cases of perceived or actual conflict of interest. Records should include attendance and voting on agenda items.
- If your organisation makes loans to members of the governing body, a documented policy must clearly describe how the loans operate. All loans or transactions with members of the governing body are to be included in your full financial reports and be publicly disclosed.
- Provide training for all your directors and staff to ensure their understanding of conflict of interest situations, for example, how to avoid being placed in a situation of perceived obligation or indebtedness, and dealing with gifts and hospitality.
- Establish procedures to ensure fair and open procurement practices.