Governance standard 5: Duties of responsible persons
This standard requires charities to take reasonable steps to make sure that the following duties apply to responsible persons and that they follow them. The duties can be summarised as follows:
- to act with reasonable care and diligence
- to act honestly and fairly in the best interests of the charity and for its charitable purposes
- not to misuse their position or information they gain as a responsible person
- to disclose conflicts of interest
- to ensure that the financial affairs of the charity are managed responsibly, and
- not to allow the charity to operate while it is insolvent.
Generally, the duties mean that responsible persons should act with standards of integrity and common sense.
Attention:You need to know! Read more about the duties of responsible persons.
Purpose of this standard
A charity must make sure that its responsible persons are required to meet a set of legal duties. This ensures that they act in the best interest of the charity and in a way that doesn’t endanger its work. Responsible persons have a responsibility to put the interests of their charity above their own personal interests. Generally, they need to be careful and conscientious in their roles and act with standards of common sense and integrity.
The purpose of this standard is to give the public confidence that your charity’s responsible persons are managing the charity well and meeting these duties.
Ways to meet this standard
Steps your charity can take to meet this standard are to:
- bring these duties to the attention of responsible persons (such as providing them with a copy of this guidance or other resources) or outline their duties in a letter of appointment or by setting them out in a board or committee charter
- regularly provide information or training to responsible persons on their duties to refresh their knowledge (such as by advising of ACNC webinars on relevant topics, such as Welcome to the board)
- encourage responsible persons to attend, prepare for, and participate at meetings
- have processes for the responsible management of money
- have processes in place to manage conflicts of interests, and
- take action if your responsible persons are failing to meet their duties.
Other laws on the duties of responsible persons
Your charity’s responsible persons may already be subject to duties under other laws that apply to it. For example:
- equivalent duties exist in state or territory incorporated associations legislation – if your charity and its responsible persons comply with these duties, your charity will meet this standard
- for companies under the Corporations Act 2001 (Cth), the governance standards replace most requirements relating to director duties under this Act. However, some criminal offences under this Act and similar duties under common law continue to apply. Read more about the changes for charities registered with ASIC and ACNC, and
- trustees will generally have higher duties (for example, under the common law).
For more information, read our:
You may also like to refer responsible persons to the following guidance on duties:
Return to the governance standards
Bounce Back is a charity providing drug and alcohol services. The committee of management at Bounce Back is made up of volunteers, many of whom also use the charity’s service, and none of the members have had experience as committee members before. Bounce Back provides committee members with a letter explaining their responsibilities and a copy the ACNC’s guidance on the duties. Committee members can also access training to help them with their responsibilities if they request. As far as Bounce Back is aware, all of its committee members are carrying out their duties. Bounce Back meets this standard.
Careful Care is a large social service provider that offers services to thousands of people who have complex needs. The board of Careful Care is made up of 12 highly-qualified individuals, many with formal qualifications in directing companies and all with significant experience on boards. When new members join the board, Careful Care provides them with an induction process that outlines their responsibilities, conducts an annual review of board performance and acts on any identified areas of need. As far as the board members are aware, all of them are carrying out their duties. The charity meets this standard.
Darling Downs, an educational charity, has a board member who runs a consultancy providing training on online education. This was disclosed before he joined the board, therefore meeting the requirement to disclose conflicts of interest in governance standard 5.
Darling Downs has decided to expand into this area and is considering different training packages, including one developed by the board member’s consultancy.
- If the board asks the board member to leave the room while they are discussing the proposal on its merits and he does not vote or participate in the decision about who to award the work to, Darling Downs meets this standard.
- If the board member discusses the proposal and votes, Darling Downs does not meet the standard.