Updated guidelines can strengthen not-for-profit board governance 

The Australian Institute of Company Directors (AICD) has updated its guidance for the not-for-profit (NFP) sector to reflect changes in the evolving governance environment. 

The new Not-for-Profit Governance Principles are intended to help support NFP directors by providing contemporary guidance into the likes of risk management, organisational culture and purpose, vision and strategy. 

Mark Rigotti, AICD Chief Executive Officer (CEO) and Managing Director, said the updated guidance was necessary as Australia has gone through a transformation process since the last revised edition was released in 2019.

“In that time, the NFP sector has experienced significant regulatory reform and disruption, as well as an increase in community expectations,” he said. 

“This has arisen, in part, from a series of Royal Commissions, the COVID-19 pandemic, and emerging risks such as cyber and climate.”

Key points 

• As of June 2022, 57% of residential aged care services and 68% of home care services were operated by not-for-profit organisations
• Not-for-Profit Governance Principles (Third Edition) features eight principles plus additional questions for directors for guidance and planning
• The Principles focus on detailing NFP board roles and responsibilities across the breadth of their organisation; this includes whether the board understands risk culture, what actions it takes to review its performance and how it demonstrates accountability and transparency to stakeholders
• Aged care-specific documents are also available, including Governing for quality aged care – A director’s guide and the upcoming refreshed short course Care Governance: Achieving Quality Outcomes

As explained by Mr Rigotti, AICD has responded to new focal points for NFP board members. This has resulted in the Principles being refined from ten to eight with the introduction of new principles on sustainability and organisational culture and a short resource on how to elevate the client voice into board decision-making.

The Principles also feature a governance checklist for smaller NFPs and real-life case studies from senior directors. 

“Given the diversity of size, scope and scale of the NFP sector, it will be a matter for each NFP board to carefully consider how best to apply the Principles within their own context,” Mr Rigotti added.

Many, if not all, of these Principles are highly relevant to aged care given the sector has its own regulatory framework and reporting requirements reflective of the key practices highlighted by AICD.

This includes whether the board has strong reporting and review mechanisms for transparency and accountability, how it encourages and supports stakeholder engagement and if it has up-to-date risk management frameworks. 

Elevating the client voice

Among the detailed resources available to board directors is a section on elevating the client voice. This resource has been specifically included to help NFP boards within the care economy, such as aged care, although it applies to many other sectors. 

Legislative reforms that resulted from the Royal Commission into Aged Care Quality and Safety led to requirements for aged care providers to consider feedback from consumer advisory bodies in board decision-making. Therefore, elevating the client voice is an essential everyday task for NFP providers and for-profit providers. 

AICD recommends that boards look for board members with lived experience to better understand client voices. This could be achieved through a quota or purely as part of the board’s overall vision and strategy.

Other practical tips include: 

• Board pack to include a short paragraph of a client’s experience (positive or negative)
• Board meetings include a client or representative to present feedback directly
• Formal and informal feedback through surveys, social media, focus groups, and interviews
• Employee and volunteer outreach, including local visits by board directors
• Clients providing advice on specific projects such as a community fundraiser or an employee recruitment panel
• Former client perspectives sought on service provision and areas for improvement

Click here to view all the Not-for-Profit Governance Principles resources, including the full document and a snapshot of the Principles.