Prior to accepting any position as a Director for a Not for Profit organisation there are a number of issues that you need to be aware of. Being a Director for a Not for Profit organisation has many rewards as often these organisations are community based, a charity or focus on a cause or activity that may not normally be possible for a For Profit organisation. Some of the issues that you should consider are detailed and summarised below:
• Legal Compliance: ASIC provides an extensive amount of information on duties as a Director such as:
o Duty to act in good faith and with care and diligence;
o Duty to act in the best interest of the organisation as a whole;
o Duty not to misuse information or misuse your position; and
o Duty to not trade while insolvent.
• Governance Framework: You must have a set of policies and procedures that provide a framework as to how the organisation operates. These will usually provide limitations and criteria about key aspects of the organisation.
• Financial Accountability: As a Director it is your responsibility to ensure your organisation keeps accurate and up to date financial records and that they comply with a number of legal obligations that include taxation laws, accounting and audit standards, OH&S laws and ASIC reporting requirements. In addition, as a Director you must understand the Finance Reports presented at Board Meetings and be able to satisfy yourself that they are an accurate representation of the organisation including being able to pay debts when they are due.
• Strategic Plan: One of the key responsibilities of a Board and therefore the Directors is to ensure the organisation has a Strategic Plan that will incorporate a Vision and Mission. The Strategic Plan sets out the main objectives for the organisation and how they will be achieved. In addition, the Strategic Plan is also linked to a budget that determines how resources are to be used as well as provide a framework to determine how the organisation has performed.
• Fundraising: Most Not for Profit organisations rely on government funding through grants, sponsorships from other organisations and donations. As a Director it is important that:
o Any grants are used as detailed in the funding agreement and that an acquittal is submitted.
o Sponsorship agreements are complied with as detailed in the contract.
o Any fundraising activities complies with both State and Commonwealth laws, they are used for the reason they have been raised and you can justify costs that may have been incurred to obtain the donations.
• Board Meetings: As a Director you need to ensure that Board meetings provide you with all relevant information that helps you make informed decisions and allows you to discharge your responsibilities as a Director.
Never underestimate the implications and responsibilities of being a Director because if you do not discharge your responsibilities there can be significant ramifications. If your organisation trades while insolvent there are significant civil and criminal penalties including the exposure to your own personal assets. Furthermore, as a Director you must ensure compliance occurs. Therefore, you need to ask yourself two questions:
1. Is the organisation compliant with all the requirements? While it may be easy to assume the organisation is compliant because you get the required reports at each Board meeting, how do you know if they are correct and accurately reflect the operations of the organisation. Hence the second question.
2. As a Director can you prove that your organisation is compliant? If you cannot provide an affirmative answer to that question then you need to ask yourself why and immediately rectify that situation.
If you are not sure how to do that then contact us so we can assist.
