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. 

7.4.1 Members have a governing body.

Verifier

A governing instrument, charter or policy that meets ACNC governance standards and also sets out:

  • The processes for selection, appointment and induction of responsible persons 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 persons to be non- executive.
  • The approach to remuneration and expense reimbursement of responsible persons.

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.

Verifier

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 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 persons, staff and volunteers relating to all activities undertaken by the organisation.

Verifier

A conflict of interest policy that addresses:

  • A definition of ‘conflict of interest’.
  • A requirement by responsible persons, volunteers and staff to disclose perceived, potential and actual conflicts of interest.
  • A procedure for addressing and recording perceived, potential and actual conflicts of interest, including those that have already occurred.
  • Procedures to enable open and fair procurement of goods and services (or reference made to a relevant policy).

Guidance

ACFID has a policy template to assist signatory organisations to develop a conflict of interest policy, which can be found in the Resources Section below. Members will also find links to the conflict of interest policies of other members by looking at their websites. 

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.

  • The governing body Chair does not also occupy the position of Chief Executive Officer or equivalent.
  • Periodic reviews of the effectiveness of organisation governing body are undertaken.
  • A 'Conflict of Interest' register is maintained and  ‘conflict of interest’ is a standing agenda item at governing body meetings. 

GUIDANCE AND RESOURCES 

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 

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