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Not for profit Responsible Person
All registered Australian not for profit organisations and associations must meet a set of governance standards as set out by the Australian Charities and Not-for-profits Commission (ACNC).
These standards help to promote public trust and confidence in the not for profit sector and must be adhered to for the life of the organisation.
Within the ACNC standards there are specific references to the role of a not for profit Responsible Person. Today, we take a closer look at this information and highlight what you need to know.
Who is a Responsible Person?
The role of Responsible Person within a not for profit organisation is extremely important when registering with the ACNC. They are different from the managing director or CEO and they aren’t just a nominated contact person.
The reason the ACNC requires someone to be the Responsible Person is to ensure that the NFP is not controlled by individuals who may jeopardise the organisation’s financial position or interfere with the pursuit of its non-profit work.
“A Responsible Person is someone who is responsible for governing a charity. Generally, a charity’s Responsible Persons are its board or committee members, or trustees (including insolvency trustees or administrators).
The ACNC requires charities to meet Governance Standards. Under Governance Standard 4 charities must make sure its Responsible Persons are suitable, and under Governance Standard 5 they must ensure their Responsible Persons are aware of their duties and comply with them.”
Governance Standard 4
Governance Standard 4 requires that an NFP take adequate steps to make sure that its Responsible Persons are not disqualified from:
- managing a corporation under the Corporations Act,
- being a Responsible Person by the ACNC Commissioner, within the previous 12 months.
If the organisation is unable to confirm this information, it must not finalise the Responsible Person appointment. Or if the person is already appointed, they will need to be removed from the position. The Governance Standards note:
“For charities to operate effectively, it is important that its members, the people it serves (its beneficiaries) and the public have confidence in the suitability of their responsible persons.”
In order to meet the Standard, an organisation can:
- search the ASIC Disqualified Persons Register
- search the ACNC Register of Disqualified Persons, (please note: as at this article’s publishing date, the ACNC has not yet disqualified any Responsible Persons)
- require its Responsible Persons to sign a declaration relating to disqualifying offences. The ACNC has a template for suggested declaration text.
The ACNC recommends that an NFP also performs these steps for existing Responsible Persons.
Governance Standard 5
Governance Standard 5 states that an NFP organisation must “take reasonable steps to make sure that the following duties apply to Responsible Persons and that they follow them.
These duties are:
- 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 actual or potential 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.”
Essentially, these duties highlight the fact that Responsible Persons should act with high standards of integrity and general common sense.
The most straightforward way for an NFP to meet this Standard is to:
- advise the Responsible Person of these duties – provide them with a copy of the guidance from the ACNC website or include the details in a letter of appointment if they are newly nominated,
- encourage Responsible Persons to be involved in organisational meetings,
- have processes in place to manage conflicts of interests,
- take action if it becomes apparent that a Responsible Person is not carrying out their duties in accordance with the Standard.
More information on Governance Standards
We have only discussed two of the ACNC Governance Standards as they relate to not for profit Responsible Persons. But there is much more information available about the rest of the Standards on the ACNC website. There is also a self evaluation tool that can help assess whether an NFP is meeting its regulatory obligations. Visit their website to learn more.
If you have any questions or would like to find out about our not for profit accounting services please contact our team today.
Read more not for profit governance articles.
