Why produce a governance report?

At first blush, a governance report only appears to create another layer of paperwork for not-for-profit (NFP) organisations.

But for any NFP to gain the confidence of the public and promote its cause, mandatory disclosure of basic governance information is essential.

Simply put, accountability, transparency, stewardship and ethical decision-making are fundamental principals for all NFPs.

Minimum standards of governance disclosure can ensure that donors, members, suppliers, volunteers and anyone who deals with the organisation can see not only the financial position of the NFP and who sits on the governing body, but also that it’s being responsibly managed and that public or member funds are being dealt with appropriately.

What information should be disclosed?

NFP governance framework must be straightforward but it must also contain the right information.

This does not mean reporting complex risk management or financial information. Rather, it simply involves providing basic, practical information so that anyone can determine at a glance if the organisation is being managed well, the financials are sound, the use of resources is aligned with the organisation’s values and objectives, and there are safeguards to ensure that the personal interests of directors do not override the interests of the organisation.

For example, a short-form governance report for the under-tens local football club could include information such as who sits on the management committee, what happened to the funds raised in sausage sizzles and trivia nights, and how much money was spent on new netting and soccer balls. It should also disclose whether there were any financial transactions between the club and persons on the management committee and if the club has public liability insurance.

Disclosure is integral to NFP reform

The Federal Government has begun a process of reforming the regulation of the NFP sector. With consultations under way on governance arrangements and on the functions of a new regulator, the Australian Charities and NFP Commission, the sector can expect sweeping changes in coming months.

This solid regulatory framework will boost confidence in the NFP sector, which plays a crucial role in Australia’s community and commercial landscape.

Adopting a grassroots approach to governance in the form of a short-form report will ensure anyone dealing with an NFP anywhere in Australia will have access to critical information about how well the organisation is run and how effectively it operates.

Governance report checklist:

• Statement of the NFP’s objectives
• Amounts and sources of funding
• How funds are spent, including administration and marketing activities
• Processes in place to ensure the proper management of all activity and expenditure
• Details of directors and secretary, including their remuneration
• Disclosure of all related-party transactions.