In this not-for-profit sector Insight, we look at one of the most critical elements for any NFP: its leadership. Specifically, this Insight explores the the specific roles and responsibilities for Directors, Chairperson, Secretary and Treasurer in a charity’s board.
Different charity structures have different governing bodies, and whether it be a board of directors, an executive committee or group of trustees, a charity’s governing body generally holds the power to manage and conduct the financial and general affairs of the organisation.
In being tasked with the overall superintendence of the organisation including its operational performance and compliance/conformance, the board must ensure the development and implementation of strategies and supporting policies to enable the charity to fulfil the objectives set out in the organisation’s constitution or governing documents.
The board ensures the development and implementation of systems, processes and procedures to enable compliance with its legal, regulatory and industry obligations. Through appropriate risk management, the board ensures the charity’s assets and operations are not exposed to undue risks.
“A company in many ways may be likened to a human body. It has a brain and a nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company and control what it does”
– Lord Justice Denning, HL Bolton (Engineering) Co Ltd v TJ Graham and Sons Ltd, 1957
In most organisations persons occupying key leadership roles will have specific responsibilities as ‘Responsible Persons’ under the Australian Charities and Not-for-profits Commission Act 2012 (Cth).
Directors and Company Secretaries also have specifically defined legal obligations as officers of the company under the Corporations Act 2001 (Cth). Directors also have duties under the general law.
Comments made about governance responsibilities in this article may be relevant to small charities with a Company Limited by Guarantee under the Corporations Act 2001 (Cth) (Corporations Act) or an incorporated association structure under relevant state and territory legislation.
The role of the incorporated association’s Management Committee and its Public Officer have specific responsibilities under the Associations Incorporations Act 2009 (NSW), and associations legislation in other states and territories.
Like the role of company secretary, the role of company director has specific legal obligations defined under the Corporations Act. A director is a person validly appointed to be director of an organisation. The directors of an organisation form the board and ultimately have the collective responsibility for the company. A director’s roles and responsibilities can be summated to four main legal duties:
- The duty to act in good faith in the best interests of the organisation and for a proper purpose;
- The duty to act with reasonable care, skill and diligence (including the duty to prevent insolvent trading);
- The duty not to improperly use information or position; and
- The duty to disclose and manage conflicts of interest.
The director’s must undertake the activities required as a director as well as contribute in a professional, informed and timely manner to Board meetings.
A chairperson refers to the person who leads and manages the business of the board.
The role of the chairperson is generally not set out in law. However, an organisation’s governing documents may set out requirements such as how the chairperson is appointed and what their responsibilities are.
- The chairperson is a director and is elected by the other directors to chair the Board.
- In the board meetings, the chair has a number of responsibilities such as facilitating discussion, ensuring that agenda items are dealt with in sufficient detail and that decisions are made appropriately.
- The chair also has a number of responsibilities outside the boardroom including overseeing an appropriate flow of information to the board and maintaining a close link between the board and management.
- The role of the chairperson is often characterised as managing the business of the board because they are generally responsible for board’s operations, including setting its agenda and approving board papers.
- Where the charity has employed staff with management responsibility, the Chairperson is required to act as the conduit between the rest of the Board and management, often via a salaried Chief Executive Officer. It is important that there is a strong, collegiate relationship between the chair and the CEO.
The specific responsibilities for the secretary is set out in the organisation’s governing documents. Company Secretaries and Public Officers have specific responsibilities under the Corporations Act and Associations Incorporations Act respectively.
The Secretary facilitates corporate governance processes and supports the operation of the board. The Secretary may be a director, but some organisations appoint an employee of the organisation to perform the role. The Secretary holds the responsibility for coordinating board minutes and papers, as well as monitoring compliance of the board and its committees with the law, the organisation’s governing documents and internal policies.
The role of Treasurer is not a defined in legislation. Typically, The Treasurer focuses on the organisation’s financial management, working with the rest of the board members to safeguard the charity’s finances. Having a Treasurer does not excuse the other directors from responsibility for financial matters. The Treasurer usually has responsible for the general financial oversight, funding, fundraising and sales, financial planning and budgeting, financial reporting, banking, bookkeeping and record keeping as well as the control of fixed assets and stock.
We recommend that all charities inform their board members of their respective roles, duties and responsibilities to ensure the organisation’s smooth operation. It can be helpful to have the specific roles identified in a separate document such as a Board Charter, and to have a letter of appointment in place for each director, so that each director/responsible person understands the respective roles and responsibilities.
Get in touch
We have assisted countless charities in developing and improving their governance and clarifying roles of leaders. If you would like to discuss your charity’s roles and responsibilities for board members or you are interested in preparing a Board Charter for your organisation, please get in touch with our NFP team (02) 9018 1067.