Directors often complain about how much time they spend on compliance when they would prefer to focus more on strategy. For other boards, there is debate about how much time is spent on operational matters.
The board oversees the full range of risks to the organisation, so legislative and regulatory compliance is one element for them to look at.
Ensuring that you have an adequate compliance program in place is one important part of risk management.
In my experience, one of the matters that Directors struggle with is finding the right balance in knowing that the important compliance matters are attended to.
It can seem demanding that Directors are responsible for creating a safe workplace environment when they might only go in to that workplace a couple of times a year. Or, Directors can be held personally liable for unpaid superannuation but don’t see the regular transaction reports to verify that this is taking place.
In my work with different organisations, I have seen numerous failures in basic compliance activities, including:
- One NFP organisation where three years’ worth of financial statements and the last two versions of the Constitution approved by the AGM had not been submitted to state government authorities as required under the local Associations Act.
- Another NFP that was using the wrong ABN and the stamp of their company seal did not match the company’s legal name.
- Grant conditions not met and grant funds needed to be handed back.
So what is the right level of involvement and oversight for a Director to make sure these matters are being attended to, but without having to do it all themselves? I believe that it starts from Directors having a reasonable understanding of what is required compliance-wise, what is important and why.
It can be difficult for directors of not for profits to keep up with all the myriad requirements on them and the organisation, and we have seen how some (e.g. Aged Care and NDIS standards) are continually changing.
The best example I have seen is where the CEO/CFO/Company Secretary include a table in the management report to the Board which lists key legislative requirements and comments on what is being done against each item. I’ve seen one other organisation do it more like a calendar where they show month by month what needs to be done.
The table below provides an example for a not for profit.