G'day Justin Hogg here from Right Source, going through a series of videos on helping you set up
your not-for-profit, last couple of videos we've done we've talked about the planning process for
your not-for-profit and also the registration process with the ACNC, what we're going to go
through in this video is really talking in a bit more detail around the governance requirements
of your not-for-profit if you're registered with the ACNC and also a bit about the board and sort
of how that intertwines with governance, so governance is a very interesting topic and
it's a bit ethereal, it's hard to understand what is governance ,
well governance is basically how we do things here so the processes and relationships
that allow your organisation to run effectively and continue to run so that's
in a nutshell what governance is, so it's really just a way that you document your processes
the board in a not-for-profit is very important in this governance process because they're really
the top of the chain, they're the one who who set the processes for the organisation
so understanding what a board does is also helps understand the governance process from
a not-for-profit, so a board in a not-for-profit is really the body that's accountable for the
operations of the not-for-profit so that's that's their job they're the ones who make sure that
everything is done correctly so they do a lot of monitoring and making sure that the not-for-profit
remains compliant, they help set the strategy for the not-for-profit and the direction, with that
strategy obviously making sure the resourcing is in place to achieve that strategy so they're very
much the high level making sure the workings are happening for that not-for-profit to continue
to achieve the purpose that it's set up to achieve, so in setting up a board obviously it's made up
of people so you want to make sure that when you construct that board in a not-for-profit that it has
the skill sets that you require, the members who are there who are either bringing a skill set
or engaged in the purpose, hopefully both, also the bringing the culture that you want to the
organisation because the board and the board members are very important in setting up the
culture for the organisation that you want and that can be have a real impact in achieving your
purpose the other thing to understand with not-for-profits and boards is quite often
these people on boards, the directors, are donating their time, they're quite often especially in
Australia give their time for free so you want to make sure that they're, one: that they're giving
value to for the time that they're giving so that things are running efficiently but also that
they're there doing something they want to do so you want to make sure that engagement piece is on
on both sides of the fence, also being a director in an organisation whether it be a not-for-profit
or for-profit comes with a certain element of risk so if you if the governance processes of an
organisation aren't followed and if as you as a director don't follow the obligations that you have
in that position, there is an element that opens you up for personal risk, so being
aware of the obligations that you have acting as a director there's also a very important part
of understanding that when you start thinking of the whole structure of your not-for-profit .
So you've got a board well you've got the concept of a board and I suppose that's when when looking
to start up a not-for-profit, starting to put those feelers out and understand well who's going to be
on your board, you might be on the board to start with or maybe that's your end goal or maybe not
starting to understand those members that will make up the board it does take a bit of time and
you want to start working through that process when you're setting up you're not-for-profit .
So you've got a concept of of your board and how you might set that up, you then also then
get back to well how you how's that going to run? How's the organisation going to run? And that
talks back to that governance piece so how is your not-for-profit or charity how is
that going to be managed and what's important in that process? Now this is where the ACNC requires
charities to maintain good governance and they set out five particular categories of governance or
aspects of the governance of an organisation that they require charities to live up to or maintain
the first one of those is to have a purpose and to be acting as a not-for-profit entity
now we've spoken about this in the setup process and this is where it keeps coming back, if your board
is there they need to be acting in the best interest of your charity and they need to be
acting towards the purpose that the charity is set up for so that is key and number one in the
governance of your organisation is it should be set up in a way that achieves or looks
to achieve the purpose, the second point in your good governance is accountability to members so
depending on how your organisation is set up there is always going to be members to a degree and
this is really to give an accountability of the board to someone else to make sure that there's a
double check in place that the board is acting in its best interest of the of the purpose of the
charity but is also then accountable to someone to make sure that those processes are happening and
you are continuing to operate towards that purpose. Number three and this one may seem a bit obvious
but the third one is compliance with Australian laws now that's easy isn't it well it's actually
it is quite challenging because there's a lot of compliance obligations that are out there for
Australian law so you've got obviously the ACNC which is who you've registered with to start with
you've got the ATO you've got Workplace Health and Safety, The Corporations Act you've got
different requirements of your industry so if you're working in healthcare there may be specific
requirements you need to ensure that you're maintaining and laws that you're maintaining
the compliance to so making sure you understand all these obligations you have
and the board's aware of them and is ensuring that you are actually complying with them is a very
important part, another aspect that fits in with this compliance aspect is also the accountability
so part of the board's responsibility is to make sure that they know who's doing
what so when we talk about making sure you're compliant with all these laws and regulations
you're the only way to make sure that's achieved from a board perspective is to make sure you're
clear on who's accountable for doing these tasks so a very important aspect of a board is to make
sure that there's clear accountability both at a board level to understand if there's board members
or directors should I say that are are doing those tasks or if it's the executive in terms of the CEO
or the management team who's doing those tasks and that there's a clear method of reporting back to
the board to make sure that these obligations are met so the board can have confidence that
they're meeting the obligations that they have to the ACNC to continue to operate as a charity.
The number four, number four, so the next one is the suitability of board members now this has a
number of aspects again, the first one is when you appoint a director to your not-for-profit
to make sure that they are eligible to act as a director and they haven't been disqualified as a
director so you know making sure there's a check done to make sure that they're still they haven't
been penalised in a different role and been banned from being a director but can also be things like
a Police check, potentially might also be doing a Blue Card check or other checks that are required
just to make sure they meet the the level of expectation you have on the directors that are
working for your organisation. The other aspect in terms of making sure you've got directors that
are suitable for your organisation is also making sure you've got the right skills mix so the skills
matrix can be done or looking at well what skills do I need in my not-for-profit to help it run
well at the board level and then making sure that when you go and recruit directors that you're
trying to look at the skills that they're bringing to not-for-profit and that they supplement what's
already there and add to what is needed for your not-for-profit to run successfully and then
lastly which is actually in a lot of respects the biggest area that you need to look at in terms of
of the board and the governance of the board is the duties of the board members so being clear on
what their duties are now this comes a little bit back to accountability but also back to the actual
obligations under the corporations act in terms of acting as directors so this means things like
acting in the best interest of the charity, not using your position or information that you
receive for your own personal interest, making sure conflicts of interests are disclosed and
managed appropriately, making sure you maintain financial records and that you don't trade
while you're insolvent, making sure you act with care and diligence in executing your role as a
director, so making sure that you actually read the papers that you receive and that you apply
your experience and knowledge to decisions that you make, these obligations or duties as
directors are consistent across any organisation that has a board. Probably the aspect that I
like to harp on a little bit more is how you manage conflict of interest because it's one that
my experience in working with boards and not-for-profits and setting up boards for not-for-profit
is that when people start looking at conflict of interest they can get quite nervous about it now
let me talk you through an example with this, when you set up a board for a not-for-profit
quite often you might get people with skills in that you want to help your not-for-profit because
they're acting as a director for free and there might be some skills that will benefit
your not-for-profit that if you don't have to pay for, well that's great, so things quite often
like an accountant, a lawyer, maybe someone who looks after H.R or safety, fundraising, those type
of skills are really useful for your organisation that if a director has them well that's great you
don't necessarily have to pay for them, what then happens then is okay so you set up your board
then maybe you've got someone who looks after I.T. and you have an I.T. problem in your organisation
and you're going to get a director to help, it's such, I suppose a piece of work that
the director or you feel that you want to pay that director for the work they're going to do now
all of a sudden people say oh well there's a conflict of interest here well
maybe maybe we shouldn't have that director doing work in the organisation because they're a director
or maybe they can't be a director if they want to do work in the organisation
you've sort of gone a step too far, really what's happened is well
what you need to do first of all is recognise there's a conflict of interest so what that
conflict of interest is, if you get a director to do work in the organisation, if the board is then
needing to make a decision about one: engaging that director or two: the work that's performed
that director can't be involved in the decisions the board is making about that work,
that's all, so by disclosing there's a conflict of interest that's the main thing you need to do
so that everyone's aware of it, because then it can be managed, what does managing a conflict
of interest mean? That means that if there's a decision that comes up that it involves the work
or that director's conflicts of interest, that that director steps out of the conversation so the best
way to do that is they leave the room, they leave the meeting while that piece of that decision is
being made and the directors who do not have a conflict of interest are the ones that make the
decision, that's how you manage a conflict of interest because as a not-for-profit you want
people on your board who want to contribute to you not for profit so you're always going to have
conflicts of interest, what you just need to do is be aware of them and manage them and everything
is fine. That's the good governance guide and in a nutshell now that you can access this on the ACNC
site and you can go through at your own time again having someone to work through that with you and
understand how you want to put that together for your organisation is important and the way you
do that can often be with a company secretary or someone with governance experience and when it's
actually operating really the three cornerstones I think of good governance really are one: a chair
who's invested in good governance so the person who's chairing your board is driving that good
governance, having a company secretary can really help because they're the ones who are helping make
sure the framework's up to date and things are maintained and that things aren't missed.
And then finally having a document that contains a lot of these processes and procedures so that if
anyone's in doubt or when you're looking to bring on a new director they can go to and refer to this
document, governance manual, so that everyone's consistent and everyone's clear on how it works
and it can be handed down as the organisation continues to evolve. So that's really a snapshot
of good governance and and what it involves at a not-for-profit, how that fits in then obviously
with the ACNC requiring you to maintain that level of good governance, to maintain
your status as a charity or not-for-profit and then obviously that fits into the planning stage
which we've talked about previously in terms of how you want your charity to operate and
what their purpose is so therefore that all ties together with the governance as well.
If you do need any help definitely feel free to reach out, if you've got any questions about all
this because there are a lot of things and a lot of permutations that go along the way,
feel free to chuck a comment down below, happy to get back to you because quite often there'll be
questions others might have as well so happy to share that with the community at large.
If you are interested in more videos around the not-for-profit and how you set that up obviously
we're doing our series of four but we do have a number of other videos on our YouTube channel so
feel free to subscribe, get updates as they come along, but also check out the channel and check
out other videos that might be helpful in your journey in setting up your not-for-profit, but
otherwise thank you for your time today and it's Justin Hogg from Right Source.