Ensuring your organisation abides by its Fiduciary Responsibilities
Fiduciary responsibilities rest with the directors of an organisation.
It is the responsibility of directors to act honestly and in good faith
and to the best of their ability in the best interests of the
organisation or company.
It is also a director's duty to ensure the organisation acts in
accordance with the Corporations Law and all other laws governing an
organisation opearating in your State or Territory and acts honestly
and credibly in all dealings with the organisation and its stakeholders
Given the recent debate about corporate governance and fiduciary duties
in the wake of numerous corporate disasters, there is a greater focus
on the need for directors of all organisations to carry out their
What are some examples of fiduciary responsibilities?
Directors hold a position of trust. They make decisions that affect the
future of an organisation. Large amounts of money can be involved with
various appointments, grants and contracts, making it vital for
directors to act and make decisions that do not suit their own agendas,
but are made in good faith and with the primary duty being to the
organisation. The community should be confident that a director will
act in good faith and always in accordance with the law.
They should also:
- not take advantage of their position to further their own needs;
- be honest and industrious;
- never use information gained through their privileged position to
advantage a friend/associate outside the organisation;
- provide adequate information to authorised persons or members
when requested and not mislead them in any way;
- disclose any potential conflict of interest;
- act with care and diligence;
- maintain confidentiality of information that is only made
available to the decision makers;
- never knowingly place the organisation in a potentially litigious
- ensure all decisions made are to the advantage of the
organisation or group, not the individual or any particular interest
- ensure they act according to the constitution of the organisation.
As a board or committee member am I liable for losses?
Please note: When it comes to being
sued, or being held personally liable for some action or lack of action,
legal counsel should always be sought. The information below is
provided simply as a guide and should not be relied upon as legal
Just like any company, incorporated community groups are subject to the
law. These take various forms but there are responsibilities for
directors at both commonwealth and state level. If there are breaches of
these laws, financial and other penalties can be leveled against the
organisation and directors may also be held personally liable.
If community groups or associations register to be incorporated, then
there are certain legal advantages providing the group accepts certain
legal responsibilities. Incorporation is a system of state or territory
government registration. It is voluntary and enables registered groups
to be recognised as a separate entity to its members. It therefore
offers some protection for those in decision-making roles from any debts
or liabilities sustained by the group. Although to be protected as an
incorporated association, the organisation must not make a profit for
its members – a surplus is allowable but that surplus should not be
able to be disbursed to any individual instead this would be held as
retained earnings and/or invested back into the organisation.
Incorporation covers the organisation; if an individual member acts
illegally or negligently they can still be personally sued for losses
All organisations need to abide with the relevant legislation of the
commonwealth and the state, which include:
- occupational health and safety
- trade practices
- equal opportunity
- fair trading
- environment protection
What can I do to ensure that we meet our fiduciary
For community groups to ensure they are run legally, responsibly and
ethically, they need a clear and defined organisational structure and a
clear and defined mission and all Board members need to be clear about
Board members should be open and accountable and put the needs of the
organisation before their own.
To ensure fiduciary responsibilities are met:
- implement guidelines detailing appropriate behaviour for board
members and outline penalties for any breaches;
- ensure board members are aware of all relevant commonwealth and
state laws that govern the organisation;
- review the board's performance to ensure the group sticks to its
- make sure there is accurate and clear financial reporting - and
that your finances are audited each year in accordance with legislative
- ensure the board has complete information on which to base
financial and other decisions.
- set values and ethical guidelines;
- determine long-term goals, and make the board account for changes
in strategic direction;
- provide board handovers and training for new board members; and
- try to ensure that there is a broad range of skills at board
Being a director does not simply mean abiding by state and commonwealth
laws. These days, people are also measured by their ethical standards.
Some actions may fall within the law, but that does not necessarily
mean they will be accepted as "good" decisions by an organisation or by
society in general.
This is why is important to clearly state the organisation's mission
and decide very early on what actions the community group will take to
achieve its goals. Is money from any source OK? Can any group/person
hire your facility and promote their cause on site? There are numerous
ethical issues that while not illegal are a major part of deciding if a
director is working in the best interests of the organisation.
You can't prepare for every possible ethical dilemma that your
organisatoin might face, but by implementing strict organisational
guidelines and being clear about what is - and isn't acceptable - you
can broadly define what your community group will and won't accept on
the ethical front.