D.3 Governance

Signatory organisations vary considerably in their legal status and formal structures. Each will have specific legal requirements that they must meet.  Others will have obligations to their parent organisation or controlling body. This section sets out what is expected of member-based democratic organisations which makes up the majority of Code signatory organisations.

Where there are legitimate reasons for a signatory organisation to vary from these expected standards, the ‘if not, why not’ principle will apply. In this situation signatory organisations should provide details of the reasons for variation and indicate how the intent of the Code is met by the alternate arrangements (either in their application or their annual Compliance Self-Assessment as appropriate).

Section D.3 of the ACFID Code of Conduct includes four sets of Standards each with respective Principles and Obligations. Standards D.3.1 and D.3.2 address the requirements for signatory organisations to have a governing instrument and a governing body. Standards D.3.3 and D.3.4 deal with the practices of the governing body through the conduct of an Annual General Meeting and governing body policies.

Browse Topics

D.3.1 Governing Instrument

Principle

Signatory organisations will have written documentation (called a governing instrument in the Code) that sets out the goals and purpose of the organisation and defines how it operates.

Obligations

  1. A signatory organisation's governing instrument will set out:
    1. The organisation's basic goals and purposes;
    2. The membership of the organisation and members’ rights and obligations;
    3. The governance structure and processes of the organisation;
    4. The frequency and processes for meetings of members (at least annually);
    5. The method of appointment/election of governors, their terms of office, any provisions for termination and, where applicable, the basis for their remuneration (details may be specified in a separate policy);
    6. The rules for meetings of the governing body, including the frequency of meetings (at least two a year) and the size of a quorum;
    7. The powers and responsibilities of the governing body including a statement of the overall responsibility of the governing body;
    8. The strategic controls to be exercised by the governing body;
    9. The financial controls to be exercised by the governing body;
    10. The power of the governing body to delegate authority to officers, staff and others.
  2. The governing instrument will be readily accessible to members and supporters.
  3. The governing instrument will comply with the relevant Australian (Commonwealth and State/Territory) legislative requirements.

Why

It is important for organisations to comply with all necessary statutory requirements, to clearly describe its governance structure and mechanisms, and to convey this to stakeholders. This ensures good governance, transparency and accountability, and is a basic and standard part of being an organisation. 

Values

This standard reflects the Code of Conduct’s commitment to:

  • Accountability to all stakeholders for performance and integrity
  • Honesty and transparency in all dealings.

Practical guidance

Here are some practical suggestions on what type of governing instrument may be appropriate for your organisation, and suggested content:

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

  • Refer to this standard’s Obligations above for the minimum content required, including:
    • Objectives
    • Definition of membership
    • Governance structure including its operational processes, membership and roles and responsibilities
    • How your not-for-profit and voluntary status is ensured (see below)
    • Requirements for members meetings and audited financial statements
    • How you manage conflict of interest
  • 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.
  • 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 a website or on request

Resources

Cross-references to other standards

1 others found this useful.

Contact Us if you have any questions, comments or anything to share about this page.

D.3.2 Governing Body

Principle

Each signatory organisation will have a governing body that has ultimate responsibility for all aspects of the organisation and to whom the organisation is accountable. 

Obligations

  1. A signatory organisation's governing body will be elected or appointed by members from within the organisation’s body of membership and/or supporters and will be accountable to them.
  2. The governing body must have a majority of non-staff (non executive) members.
  3. The governing body may delegate authority to staff or others, but may not delegate its overall responsibility.
  4. Where authority is delegated to management or others, there will be clearly defined lines of authority between the governing body and those granted the authority.
  5. The respective roles and responsibilities of the governing body, staff and management will be clearly set out and communicated to all concerned.

Why

All aid and developments organisations must have a governing body: a group of people who represent the organisation, its membership and/or stakeholders with shared responsibility for the organisation’s accountability, performance and regulatory compliance.

The governing body is the authority ultimately responsible for governance over all aspects of the organisation’s activity and compliance with the Code of Conduct.

Values

This standard reflects the Code of Conduct’s commitment to:

  • Accountability to all stakeholders for performance and integrity
  • Honesty and transparency in all dealings.

Practical guidance

This guidance pertains to both the general membership of your organisation, the membership of your governing body and good practices. Here are some practical suggestions for your organisation to develop an appropriate governing body:

Organisational membership

  • While there is no regulatory requirement for organisations to have a formal membership of a large or specified number, there should be at least some membership from which to form the governing body
  • Membership structures of signatory organisations will vary. It is necessary to distinguish between formal members and other supporters and donors. This can be challenging, but here are some common distinguishing features.
  • In general, members:
    • Are defined by an organisation’s governing instrument
    • Have a formal status and are registered by the organisation
    • Have certain rights (e.g. participation in meetings of members, voting for office-bearers)
    • Have certain responsibilities towards the organisation (e.g. must pay a membership fee).
  • In general, supporters:
    • Have a less formal status than that of membership, although they may be registered as a volunteer or donor
    • Have limited or no obligations to the organisation
    • Are not necessarily defined in the governing instrument
    • Contribute in time or money.
  • A larger membership generally improves representation, community involvement, transparency and accountability and is considered good practice.
  • Member responsibilities and privileges include invitations to the Annual General Meeting, receiving an annual report and audited financial statements, and nominating and electing governing body members.
  • For member-based organisations there should be some emphasis on the fairness, transparency, and legitimacy of the governance processes and the role that members can play within this.  This would include the provision of a notice of meetings, what number attending a meeting constitutes a quorum, access to information and the voting entitlements of members. 

Governing body membership

  • The governing body should include people who represent the broader constituency of the organisation.
  • Establish a skills-based governing body so that it includes a range of skills – legal, financial management and fundraising – important to the oversight and leadership of your organisation. A skills-based governing body is considered good practice.
  • Ensure there is a good gender and ethnic balance on the governing body as a reflection of the values of your organisation and as good practice
  • The majority of the governing body should be non-executive directors i.e. those that are not also paid staff members. Most good practice governing bodies have very few or no executive directors. Restricting the number of executive directors who are on the governing body balances the interests of paid staff and the interests of the members in pursuing your organisation’s aims 
  • Special care must be taken when governing bodies include members of the same family, which is sometime the case for small or new organisations. There should be a clear separation of roles and transparent decision-making processes to avoid conflicts of interest. Extra transparency and accountability may be necessary to demonstrate to other governing body members and the organisation’s broader constituency.
  • Membership of the governing body should be renewed on a regular basis, balancing the need to facilitate members to meaningfully contribute to the organisation over a sufficient length of time, but not so long as to diminish accountability and transparency by having governing body members in entrenched positions.   

Governing body practices

  • Governing bodies can create committees to report to and advise them. The roles of committees could include risk and audit, program advice, nominations to the governing body, and issues analysis. Such structures provide additional expert advice, can enhance rigour, and increase transparency and accountability.
  • Membership of committees could be limited to governing body members or could include external experts.
  • Governing bodies should focus on governance functions rather than the operational functions of the organisation. This may be difficult for small organisations, where members of the governing body or committees may be involved in both.
  • To address this, the separation of functions should be noted in meeting agendas, minutes, role descriptions and other critical documents
  • Governing bodies oversee how authority is delegated in an organisation. This should be documented, either in a simple record of decisions or more comprehensively in a schedule that describes the powers delegated to different levels of management and reserved for the governing body.
  • Decisions on delegation authority should specify and document:
    • The nature of the authority granted
    • Limits to that authority, such as spending limits, methods of payment and other required signatures
    • Reporting required, such as related to a business plan, program or particular line item
    • When the delegation expires or must be renewed (sometimes called the ‘sunset’ period).
  • The governing body should periodically review and renew the delegations of authority. This could be a standing agenda item.
  • Governing bodies should produce documentation explaining the division of responsibilities between staff/volunteers, management and the governing body.
  • This should be widely accessible and provided during induction for those new to the organisation.
  • The role and responsibilities of the governing body should be outlined in the governing instrument and other relevant policies. This document should be available to all staff, members and the public, including on your website (see Standard D.3.1 Governing instrument and D.3.4 Governance Policies).
  • The documents noted above could be included in a comprehensive Governance Manual (or similar) to assist the governing body and the organisation to clarify their respective obligations and appreciate the separation between the governing body and the operations.
  • Governing bodies should periodically review their own performance and practices through a structured and documented process, which could involve self-assessment or employing an external advisor. 

Resources

Cross-references to other standards

1 others found this useful.

Contact Us if you have any questions, comments or anything to share about this page.

D.3.3 Annual General Meeting

Principle

Signatory organisations will hold an annual general meeting (AGM) of their members as defined in the governing instrument.

Obligations

  1. The AGM of the signatory organisation will:
    1. Deal with substantive matters including reports from the governors and managers, receiving the annual audited financial statements and appointing an independent auditor for the subsequent year/s;
    2. In accordance with its governing instrument, provide members with every reasonable opportunity to attend and engage with the governors and managers of the organisation;
    3. This will include providing advance notice of the meeting to all members and providing reasonable access to any relevant information.

Why

An annual general meeting is a statutory requirement and governing mechanism and to ensure transparency and accountability to members. Your organisation must comply with the necessary statutory requirements if you are legally structured as a company. This Principle is intended to be consistent with and not duplicate any legislative or parent organisation obligation to hold an Annual General Meeting. 

Values

This standard reflects the Code of Conduct’s commitment to:

  • Accountability to all stakeholders for performance and integrity
  • Honesty and transparency in all dealings. 


Practical guidance

The following practical guidance is provided in the interests of enhancing transparency, accountability and constituency engagement. It goes beyond government regulatory compliance requirements.

Here are some practical suggestions for your organisation to hold its AGM in a way that enhances transparency, accountability and engagement with your constituencies:  

Communication

  • Ensure adequate notice is provided to all formal members of the organisation of the AGM by mail, regular newsletter, email or other communication.
  • The governing instrument of your organisation should specify the manner for calling an AGM and how notice will be provided to members
  • Where members who are entitled to attend and vote at an AGM do not have email access, they should receive written notice.
  • Encourage wide attendance at your AGM 

Conduct

  • If your organisation has a large formal membership, you can use your AGM to engage with members and to inform them of your achievements and challenges
  • Consider and establish ways to engage your members, involve them in decision making and hear their feedback.
  • At a minimum, AGMs should cover the following:
    • Receipt of the previous year’s AGM minutes 
    • Receipt of the audited financial statements
    • Appointment of the auditors
  • The AGM would normally also receive nominations for governing body positions and office bearers, and conduct the election or appointment process.
  • Allow adequate time for members to ask questions of directors. 

Reporting

  • Minutes of AGMs should be readily available, at a minimum, to all formal members, but the broader the distribution, the higher your transparency. 

Resources

Cross-references to other standards

1 others found this useful.

Contact Us if you have any questions, comments or anything to share about this page.

D.3.4 Governing Body Policies

Principle

Signatory organisations will have written policies covering appointment, induction, termination and, where applicable, remuneration of members of the governing body for their work as governors, including reimbursement for expenses and any loans.

Obligations

  1. To the extent that appointment and termination of members of the governing body are not covered by the governing instrument(s), a written policy will set out the processes for selection, appointment and induction.
  2. There will be documented governing body policy setting out the signatory organisation approach to reimbursement of expenses by members of the governing body.
  3. Where applicable, there will be a documented policy with respect to any remuneration by the signatory organisation of members of the governing body.  This policy must be approved by the Annual General Meeting of the members of the organisation.

Why

Your governing body must have integrity. It must be fully transparent and accountable, and reflect the qualities of your organisation. To do this, it must have formal, documented policies that cover key issues.

The formal, legal processes and authorities for the governing body of your organisation will normally be found in your governing instrument. Supplemental policies that cover the key terms and conditions for your governing body to ensure its integrity and that both the body and members are beyond reproach will further enhance transparency, accountability and good governance.

Values

This standard reflects the Code of Conduct’s commitment to:

  • Accountability to all stakeholders for performance and integrity
  • Honesty and transparency in all dealings.

Practical guidance

Here are some practical suggestions for your organisation to strengthen its good governance: 

Policy and procedures

  • Review your governing instrument to determine which clauses may need further elaboration through a related policy.
  • Develop a governance charter or similar documents which outline in more detail the following:
    • Reimbursement and remuneration for governing body and committee members- in the interests of integrity and to ensure that the governing body and its members are beyond reproach, you should have documented policies covering the key terms and conditions for members of the governing body.
    • Board composition including the election and appointment process for the governing body
    • Standing agenda items for general meetings and the AGM
    • The terms of reference for any committees which may advise or report to the governing body, such as finance, audit or programs committees
    • The way in which conflicts of interest are defined and managed
    • How risk will be recognised and managed
    • The optimal range of skills required for your governing body
    • The process for regular review of the performance of your governing body.
  • Make relevant governing body policies readily available to governing body members, staff, members and the public, on request or publicly, such as through your website
  • Inform governing body members and staff of the practices outlined in such documents as part of their formal induction 

Resources

Cross-references to other standards

1 others found this useful.

Contact Us if you have any questions, comments or anything to share about this page.