Not-for-profit school boards: What are my obligations as a voluntary board member?

So, you’ve been asked to volunteer as a member of a not-for-profit school board. You’re probably asking yourself: what responsibilities come with the role?

The simple answer is there are many responsibilities. However, provided you are familiar with them, take the time to properly carry out your duties and act with the best interests of the not-for-profit school in mind, you will be discharging your obligations.

What is a not-for-profit?

A not-for-profit is an organisation that does not operate for the profit, personal gain or other benefit of particular people (i.e. its members, the people who run it or their friends or relatives).

A not-for-profit doesn’t have shareholders but does have a set of defined objects that it pursues.

From a legal perspective, a not-for-profit is commonly structured as an incorporated or unincorporated association, company (generally, a public company limited by guarantee), trust, or entity established under letters patent.

Board member obligations

You may be a ‘board member’ of a not-for-profit school board but be called something different, such as a committee member, director, trustee or officeholder.

The legal structure of a not-for-profit school, as well as the terms of its governing document (i.e. constitution, rules or deed), will determine the obligations of its board members. Case law and legislation may also impact on the obligations of board members.

Generally, volunteer board members are treated the same as paid board members from a legal perspective.

In summary, the following is a list of the minimum duties placed on board members of not-for-profit schools:

• to act with due care, skill and diligence
• to act in good faith and for a proper purpose
• to avoid conflicts of interest
• not to misuse position or information to gain an advantage
• to take all reasonable steps to ensure the entity keeps financial records and prepares financial reports
• to prevent insolvent trading.

Additional or different duties may be imposed by the relevant governing document, applicable legislation or common law.

Generally, board members of not-for-profit schools are not personally liable for acts or omissions of the school. However, depending on the legal structure of the school and applicable legislation, there are some exceptions to this, for example:

• insolvent trading, fraud or criminal activity
• not complying with laws, such as laws in relation to workplace health and safety, tax and superannuation.

Charities

Where a not-for-profit school or one of its funds (e.g. a school building fund) is registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC), board members also need to comply with requirements imposed by the ACNC. These requirements may displace or be in addition to obligations under legislation or common law, depending on the legal structure of the not-for profit.

The ACNC uses the term ‘responsible person’ when discussing obligations imposed on boards. Members of the board, directors, officers, management committee members, trustees and directors of trustee companies are generally deemed to be a ‘responsible person’ for ACNC purposes.

Under the ACNC’s Governance Standards, a responsible person must:

• act with reasonable care and diligence
• act honestly and fairly in the best interests of the charity and for its charitable purposes
• not misuse their position or information they gain as a Responsible Person
• disclose actual or potential conflicts of interest
• ensure that the financial affairs of the charity are managed responsibly
• not allow the charity to operate while it is insolvent.

Good governance tips

While these responsibilities may seem overwhelming, there are strategies board members can implement to assist in meeting their obligations. As a board member you should:

• familiarise yourself with your organisation’s governing documents and consider any additional responsibilities that may be imposed
• declare conflicts of interests when they arise
• understand and stay up-to-date with the financial position your organisation is in
• ensure that the board is asking appropriate questions and providing appropriate oversight of management
• if the organisation is a charity, make sure you are aware of its charitable purposes to ensure you act with these purposes in mind.

Contact Cooper Grace Ward for advice on your responsibilities as a board member or for further information about not-for-profit organisations.