Governance Standard 2 only applies to charities with members. For example, incorporated associations, companies and unincorporated associations.
Other structures, such as trusts, do not have members.
Governance Standard 2 requires charities to:
- take reasonable steps to be accountable to their members, and
- allow their members adequate opportunities to raise concerns about how the charity is run.
Being accountable includes letting the members know about the charity’s activities and what the results of those activities are. It also includes allowing members to raise concerns and ask questions about how a charity is run.
Purpose of this standard
A charity’s members are its ‘owners’ and form an important part of any charity. Members are entitled to know how a charity is acting and using its resources (finances and any assets) on their behalf.
This standard helps a charity’s members to understand the charity's operations and also to raise any questions or concerns they may have about the way it is run. For example, members may want to know about the charity's financial position, or what a charity is focusing its future work on.
Charities must be open and accountable to their members. This standard helps members to understand their charity’s operations and raise questions about its governance. It provides an important level of accountability for those who operate the charity.
Ways to meet this standard
Common steps your charity can take to meet this standard are to:
- organise a meeting at least annually with members (such as an annual general meeting) with opportunities for members to ask questions and vote on resolutions
- provide information to members on your charity’s activities and finances, and
- have clear processes for appointing Responsible People (such as board or committee members) – this can include setting out the process in your charity's governing document (such as constitution, rules or trust deed).
The above steps are examples of common or minimum requirements only, and are in addition to what your charity is required to report to the ACNC. For example, even though a small charity does not have to submit a financial statement to the ACNC, its members should be able to ask for some financial information.
A larger charity with many clients and a significant reach may need to do more to meet this standard. For example, it may be appropriate to have more formal rules and processes on things such as:
- providing formal written notice of meetings and set periods of notice prior to meetings being held
- how items can be added to meetings for discussion or voting on (possibly requiring notice to be given before the meeting)
- providing an annual report to members, explaining your charity’s financial position, and
- nominating, appointing or electing Responsible People.
The steps that are reasonable depend on a charity’s specific circumstances.
Charities that are required by law to hold meetings and involve members
If your charity is an Indigenous corporation, an incorporated association or a co-operative and already meets its responsibilities to hold meetings and be accountable to its members under its incorporating legislation, it will be considered to be meeting this standard.
For companies registered under the Corporations Act, the obligations relating to member meetings under this Act no longer apply.
If your charity is a company, read more about the changes for charities registered with ASIC and ACNC.
Case studies
The Western Community Health Centre provides health services to disadvantaged people.
It is an incorporated association in Western Australia. As required under its state incorporated associations’ legislation, the centre holds an annual general meeting at which copies of its financial statements are provided to members. The treasurer provides a short report to the meeting and answers questions.
It has provided a copy of its rules to the ACNC and these rules require the centre to hold an election to choose new board members.
Tick icon The charity meets this standard.
The Parksborough Cat Home is a small charity that operates a shelter for unwanted cats.
The shelter is a company limited by guarantee with 30 members, mostly volunteers and donors. They decide to follow the same meeting procedures as before under Corporations Act and allow meetings to be called with only 14 days’ notice. They continue to provide members with a short annual report including financial information.
The members know that existing board members can appoint new board members to fill any vacancies.
Tick icon The Parksborough Cat Home meets this standard.
Rainbow House is a company limited by guarantee. Despite the meeting obligations under the Corporations Act not applying after 1 July 2013, Rainbow House decides to keep its meeting processes the way they are.
This includes presenting an annual report and a financial report, and holding an election for directors at an annual general meeting.
Tick icon These are good practices and will meet this standard.
The Lakes District Association does not hold any regular meetings with its members or provide any other regular information to its members, despite its rules requiring it to do so.
Cross icon The charity does not meet this standard.