Governance Standard 5 requires charities to take reasonable steps to make sure that the following duties apply to Responsible People 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 People should act with standards of integrity and common sense.
Read more about the duties of Responsible People.
Purpose of this standard
A charity must make sure that its Responsible People 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 People 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 a charity’s Responsible People are managing the charity well and meeting these duties.
Ways to meet this standard
Steps your charity can take to meet this standard:
- bring these duties to the attention of Responsible People (such as providing them with a copy of this guidance or other resources)
- 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 People on their duties to refresh their knowledge (such as by advising of ACNC webinars on relevant topics)
- encourage Responsible People to attend, prepare for, and participate in meetings
- have processes for the responsible management of money
- have processes in place to manage conflicts of interests, and
- take action if Responsible People are failing to meet their duties.
Other laws on the duties of Responsible People
A charity’s Responsible People may already be subject to duties under other laws that apply to the charity. For example:
- equivalent duties exist in state or territory incorporated associations legislation – if your charity and its Responsible People 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)
- trustees will generally have higher duties (for example, under the common law).
Case studies
Bounce Back is a charity providing drug and alcohol services. The committee of management at Bounced Back is made up of volunteers, many of whom also use the charity 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 of the ACNC's guidance on their 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.
Tick icon 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.
Prior to the appointment to the board, Careful Care undertakes checks of the Disqualified Persons Register and requires the signed declaration. Register checks and signed declarations are then required annually for each board member. As far as the board members are aware, all of them are carrying out their duties.
Tick icon This charity meets the standard.
Darling Downs, an educational charity, has a board member who runs a consultancy providing training on online education.
He disclosed this before he joined the board, which meets 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 of member's consultancy. They have sought quotes from multiple vendors.
Tick icon 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.
Cross icon If the board member discusses the proposal and votes, Darling Downs does not meet this standard.