What is a not-for-profit organisation? Not-for-profit organisations operate in many areas of Australian society and may be defined as an organisation where business is not carried on for the profit or gain of the organisation s individual members. Typical features of a not-for-profit organisation include: It has a constitution or a set of rules, which contain clauses demonstrating it s not-for-profit charter Any profit must be used to further the objectives of the organisation and cannot be distributed to individual members If wound up the organisation s assets and remaining funds must be distributed in accordance with its charter or distributed to similar organisations P a g e 1
Overview of the not-for-profit sector There are as many as 700,000 not-for-profit organisations operating in Australia. While approximately 380,000 or these organisations are incorporated, most are small organisations operated by volunteer members. They offer a range of services to the Australian community, including: Social Services Education and Research Culture and Recreation, including sports and registered clubs Religion Business and Professional Associations and Unions The Australian Bureau of Statistics deems 41,008 non-for-profit organisations to be statistically significant and reports that these organisations contributed $43 million (or 4.1% of the gross domestic product) to the Australian economy. Additionally, these organisations: Received income of $76.6 billion, with primary funding ($25.5 billion) coming from federal, state and local government, and funding of $7.2 billion from donations, sponsorship and fundraising Added industry value of $35.9 billion and capital expenditure of $8.8 billion Employed 889,919 people (41.4% permanent full-time, 34.3% permanent part-time, 24.3% casual) Used the services of 2,182,476 volunteers, who in turn contributed 623 million hours of services. This equates to 317,200 full-time equivalent jobs, with an economic value estimated to be $14.6 billion. Sources: Australian Bureau of Statistics 8106.0 Non-for-profit Organisations, Australia, 2007-07 (Re-Issue), 5256.0 Australian National Accounts: Non-Profit Institutions Satellite Account, 2006-07; National Roundtable of Nonprofit Organisations, The Nonprofit Sector in Australia: A Fact Sheet, 4 th Edition 2009 P a g e 2
The not-for-profit Board In Australia, all incorporated organisations, including not-for-profit organisations are required by law to appoint a governing body. Most unincorporated not-for-profit organisations (although not required by law) will also usually put in place an overseeing body to guide the organisation s vision and mission. There is no correct model or structure of a governing body, its makeup will be dependent on the type and size of the not-for-profit organisation, whether it is run by volunteers or paid staff and the type of work it does. For example a small community group may have board members made up of only volunteers, whereas a larger organisation my pay board members to complete specific duties. It is important to note that in Australia governing bodies, or what are commonly referred to as are known by a variety of names, including: of Management (usually comprising board members or directors) Committees of Management (usually comprising committee members) Governing Councils (usually comprising councillors) Trusts (usually comprising trustees) Typically however, governing bodies will be made up of group of people with assigned roles who provide purpose, leadership and overall strategy for the organisation. They typically include: Role Chief Executive Officer Board Chair Board Vice Chair Board Secretary Duties The CEO is the paid head of a not-for-profit organisation. Reporting to the Board the CEO is responsible for the day-to-day activities of the organisation as well as ensuring that the strategic and business plans of the organisation are implemented within budget. Typically, the Board Chair serves as the Board s figurehead and usually acts as a link between the Board and the CEO. The roles carried out by the Chair will vary depending on the not-for profit organisation and may include working out policy to writing the annual report. At a minimum however, the Chair will be responsible for leading the Board and chairing Board meetings. Not all appoint a Vice Chair and they are more likely to be found in larger not-for-profit organisations. They are expected to play leadership role and fill in for the Board Chair when absent All incorporated not-for-profit organisations must appoint a Secretary. They are not necessarily Board members in their own right and in larger organisations this role is often conducted by a paid employee. Among other things the Secretary is responsible for preparing and distributing Board meeting agendas, taking and distributing minutes of the meeting, ensuring that all legal P a g e 3
Role Board Treasurer Public Officer Ordinary Board Member Committee Chair Duties requirements of the incorporation are carried out. The Treasurer s role is to monitor the not-for-profit organisation s financial processes, keep financial records and ensure reporting obligations are met. They are also responsible for liaising with external auditors for the preparation of financial statements. Not all not-for-profit organisations appoint a Public Officer; it largely depends on the organisation s requirements of incorporation. A Public Officer is responsible for keeping a record of board members, notifying relevant authorities of changes to the organisations affairs, including its financial position as well as providing an annual statement. In smaller not-for-profit organisation it is not uncommon for this role to be undertaken by the Secretary. In larger not-for-profit organisations Ordinary Board Members may be appointed. They usually do not have any specific duties beyond ensuring the Board is carrying out its duties efficiently and effectively. They may at times be required to server on Board committees or carry out other duties requested by the Board. There are times when not-for-profit organisations establish specialist committees for example, fundraising committee, public relations committee, budgeting committee, etc. When this occurs the Committee Chair is responsible for managing committee meetings and ensuring the committee carries out its role effectively, reporting to the Board on committee matters and decisions requiring approval by the Board. P a g e 4
Role of not-for-profit Board and Board Members Not all not-for-profit organisations are the same; they differ in size, purpose and work and their are often structured differently. As a minimum the Board is responsible for setting the direction of the organisation through strategic planning and ensuring the strategy is implemented through business and operational planning. The following provide an overview of how can ensure not-for-profit organisations run efficiently, effectively and are successful in their mission and goals. Mission and Vision Strategy Accountability Chief Executive Officer Fundraising Marketing/Advocacy Meetings Self-evaluation Overview of Board roles The mission and vision of an organisation defines who it is, what it does and where it wants to be in the future. The Board plays a leading role in setting the mission and vision for the organisation as well as ensuring that it is implemented. Strategy plays an important role in all organisations because it sets the direction the organisations will take. The Board s role is to look at the potential future of the organisation and devise a strategy for ensuring this future is realised. All are accountable to the organisation they serve and its members. In addition to this the Board must meet legal and financial accountabilities specific to their constitution, incorporated status, and to the State in which they operate. The Board has a role in recruiting the best and most appropriate person for the role of CEO. In addition to this they must play a role in monitoring the performance of the CEO. Most not-for-profit organisation need to raise funds to meet their goals and objectives. Typically this is done through grants, donations and sponsorships. The Board plays a role in setting the direction for fundraising activities and for identifying any potential grants and sponsors. In order for the organisation to achieve its mission people must know what it does. The Board is usually the link between the community and the organisation s member. It has a role in ensuring that the organisation s message is promoted in the community as well as communicating the community s needs to the organisation. All are required to hold regular meetings, with the timing usually determined by the organisation s constitution. The Board has a role in ensuring the meetings are productive as well as ensuring that the organisations members has access to the meeting outcomes. For a Board to be successful it must regularly evaluate what it does and how well it does it. This evaluation can be ad hoc and informal where Board members provide feedback to each other, P a g e 5
or it can be formal where an independent third party provides an assessment. The role of an individual Board member is to ensure that the not-for-profit organisation they are serving remains effective, efficient and successful in meeting its mission and purpose. The following matrix explains some of the roles undertaken by individual Board members. External Internal Accountability Report to relevant parties Comply with statutory and regulatory processes Review audit reports Management Review key executive performance Review program results Monitor and review budget control and corrective action Contribute to discussion and resolution of issues at meetings Short Term Strategy Review and initiate strategic analysis Formulate strategy Set the direction of the organisation Policy Review and approve budgets Lead culture of the organisation Review and approve organisation s operational plans, business, marketing, etc. Long Term Adapted from Strictly Board Room by Frederick G. Hilmer (1993) P a g e 6