It was once commonly held that governance of not-for-profits (NFPs) is generally poor compared with the for-profit sector, but side-by-side testing has repeatedly shown that this is not the case. In fact, in many ways the complexity of NFP governance, due to the need to achieve both mission success and financial strength, means that the performance of boards arguably outstrips that of other sectors, once this degree of difficulty is taken into account.

Many NFP organisations have actively invested in improving governance in response to increasing pressure from funding and regulatory bodies and a growing awareness of the importance of governance to organisational success. However, there are some areas in which there is opportunity for further development. Directors across the sector consistently express concerns about financial sustainability, a lack of time and resources for strategic planning, performance measurement and relationships with government, according to the Australian Institute of Company Directors’ (AICD) 2016 NFP Governance and Performance Study.

To assist directors as they face these challenges, the AICD has developed a set of complimentary NFP Director Tools, specifically targeted to address the critical issues in NFP governance. The tools have been developed in response to the findings of the NFP Governance and Performance study over a number of years, particularly that many NFPs are seeking support to build financial strength.

The tools will help boards to prioritise where they spend their time while also providing practical guidance on how to address some of the key governance challenges facing NFPs.

“Financial strength is absolutely critical to NFPs for organisations to achieve their long-term missions. And it’s something that directors are acutely concerned about. That was something we identified in this year’s NFP Study,” AICD NFP Sector Leader Phil Butler said. “The NFP Director Tools we have developed have come out of that work. One of the aims of these tools is to help directors have the right conversations about financial strength and the sorts of questions they need to ask before signing off on the financial statements.”

From there, the project has grown to encompass all areas of NFP directorship and governance, with the tools designed by the AICD’s experts based on their experience as well as the AICD’s research over a number of years. The first set of tools addresses the fundamentals of the role of the NFP board, including financial literacy and fundraising, as well as strategic planning, considerations for appointing a new director, right down to the nitty gritty of drafting an audit committee charter. The AICD’s NFP team plans to release new tools quarterly to add to this initial roll out.

The tools will help boards to prioritise where they spend their time while also providing practical guidance on how to address some of the key governance challenges facing NFPs.

“Some of the tools will be used as conversation prompters,” Butler said. “Boards will be able to go through one-by-one and make sure that they’re ticking off what they need to cover. Other tools take the form of templates; for example, if an NFP is establishing a board committee they’ll be able to download a guide and a charter that they can alter to their specific needs.”

The tools will become a vital resource for NFP directors as well as executives, according to Butler. “The nature of NFPs is that boards and executives work very closely on both governance and performance. Our director tools will be useful in helping executives understand the needs and expectations of their boards to align the leadership across the organisation.”

The tools are available as a free download from the AICD’s NFP Resource Centre. If there is an issue or area that you would like to see addressed in the AICD Director Tools program, email Phil Butler on pbutler@aicd.com.au.