The role and duties of the management committee
Membership of a management committee is not necessarily onerous, but does carry a number of significant responsibilities. These responsibilities fall into two categories: those of the committee acting as a group and those held by its members as individuals.
In practice, each member should consider every group responsibility as an individual responsibility. As discussed later, when it comes to any failure to meet a responsibility, the Act places the liability on the individual not the group.
The role of the committee is to manage the association in accordance with the purposes or objects as stated in its rules. In undertaking this role, the committee must fulfil a number of legal responsibilities, including ensuring the association complies with:
- its obligations under the Act (separately highlighted in a table at the end of this chapter);
- its rules and any funding agreements or other contracts;
- its legal responsibilities to any employees, such as complying with employment awards or agreements, paying tax and superannuation and providing a safe working environment (dealt with in later chapters);
- its legal responsibilities to members, volunteers and any clients or customers who may use the association’s services;
- an assessment has been made whether insurance cover is required and to what extent;
- any other relevant laws or regulations are complied with; and
- specific financial responsibilities include making sure that:
- there is compliance with requirements under the Act in relation to financial accounting and reporting to members;
- the association can pay all its expenses (it may assist to develop a budget annually);
- the conditions of any funding agreement are followed;
- the accounts are audited or reviewed if required by the association’s law, the members, rules or funding agreements; and
- good risk management procedures are in place.
For example, a requirement that two authorised signatories sign off on any association cheque and that another member or employee completes cheque account reconciliations.
Depending on the size and nature of the association other areas of responsibility may include staff management, development and implementation of policies and procedures and provision of quality services to members and/or clients.
Duties of officers
Association committee members owe the same duties to association members as company directors owe to members of a company. These duties apply to committee members and other persons who influence the management committee but who do not hold a formal committee position e.g. senior employees or past committee members who are still actively involved in the association and influencing the decisions of the committee.
The term ‘officer’ is defined as meaning any of the following:
- a member of the management committee of the association;
- a person, including an employee of the association, who makes, or participates in making, decisions that affect the whole, or a substantial part, of the operations of the association;
- a person who has the capacity to significantly affect the association’s financial standing;
- a person in accordance with whose instructions or wishes the management committee of the association is accustomed to act.
When committee members exercise their powers and responsibilities to act on behalf of the association, they must:
- exercise their powers with due care and diligence;
- ensure that any business decisions are made in good faith and in the best interests of the association;
- act in good faith and in the best interests of the association;
- not make improper use of information or their position for personal profit;
- avoid any conflicts of interest;
- exercise powers in accordance with the rules of the association; and
- not allow the association to incur a debt when the association is insolvent or there are reasonable grounds to believe that by incurring the debt the association will become insolvent.
Duty of care and diligence
While discharging duty of care and diligence a committee member or officer should:
- be prepared for meetings (reading any papers and the financial statements);
- broadly understand the financial position of the association;
- follow up on action items;
- keep informed about the association’s operations and activities;
- ask questions; and
- take steps to ensure that the association meets its obligations under other laws. For example occupational health and safety, taxation and employment.
Duties relating to insolvency
A committee member has a duty to prevent an association incurring debts while it is insolvent or in situations where the debt would cause it to become insolvent. This duty is breached if:
- an association incurs debt while it is insolvent or it becomes insolvent by incurring the debt;
- before incurring the debt there were reasonable grounds to expect that the association was already or would become insolvent by incurring the debt; and
- the person was a member of the committee at the time the debt was incurred.
Allowing an association to trade while insolvent is a serious matter with a high penalty. It should also be noted that a breach of this duty would not make a committee member personally liable for the association’s debt.
To fulfil their duty committee members should all work to ensure:
- that accounts are kept of the transactions, financial position and performance of the association; and
- the association’s solvency status is monitored on an ongoing basis.
These duties set the basic standards of acceptable conduct. A breach of a duty is a rare event and is usually accompanied by a significant degree of deliberate wrong doing or gross negligence.
Duty offences under the Act require deliberate misconduct and are only applicable in the case of serious and wilful abuse of the officer’s position.
If a committee member or officer makes a business judgement in good faith for a proper purpose they will not be liable for an offence even if the outcome for the association is not ideal.
Committee members must ensure they are fully informed about the association by keeping up to date with matters, attending meetings, reading agendas and minutes and asking questions. In the event of a problem, dispute or legal challenge committee members cannot claim they 'did not know' about the rules and activities of the association.
Individual committee members’ responsibilities
Complying with the rules
The management committee is responsible for implementing the association’s rules and ensuring that it meets its obligations under the Act. Committee members must comply with and act within the rules at all times.
All committee members should be supplied with an up-to-date copy of the association’s rules and be familiar with its main and most-used provisions. It may also be beneficial for committee members to bring the rules with them to every meeting. As a minimum, the Secretary should ensure that a copy of the rules is on the table at each meeting.
Conflicts of interest
Committee members must not put themselves in a position where there is a conflict between their duties and responsibilities to the association and their personal interests.
The Act requires members of the committee to disclose any material personal interest they may have in any contract, or proposed contract, entered into or being considered by the committee. A committee member has a material personal interest when that member has a personal interest in a matter which could be seen to compromise their ability to act in the interests of the association and make an impartial decision. The interest may be financial or non-financial. The interest may be financial or non-financial.
Examples of material personal interests include:
- the committee member owns a business an association is seeking to contract with to supply it with goods or services;
- a relative of the committee member submits an application for employment with the association; and
- the committee member serves on the committee for two associations that are competing for the same tender or grant.
In a small, volunteer run association, it can seem difficult to manage these obligations while providing effective management, but members are entitled to expect that committee decisions will reflect the interests of the association rather than the personal interests of its committee members.
It must be remembered that not all personal interests are ‘material’ in the context of the decision being made and common sense should apply.
For example, in a junior sports club, committee members are likely to have children who participate and, as a result, an interest in matters such as team selection, coaching and scheduling of matches. That would not ordinarily be a situation requiring declaration of an interest, but in the event that a committee member has a child who has been singled out for potential disciplinary action or for consideration for a substantial prize or sponsorship, then it would be appropriate for the committee member to declare a conflict of interest with regard to any consideration of that matter.
Disclosures must explain the nature and extent of the interest and be made as soon as the member becomes aware of it. Failure to declare an interest as soon as possible is a criminal offence and could result in a fine if convicted.
Brian sits on the management committee of an association. The association is planning to give small grants to local groups for tree planting programs. Brian is the president of the local tree planting co-operative which wants to apply for the funds. As the co-operative is a potential benefactor of the grant, Brian must tell the management committee of his involvement in the co-operative.
If a committee member declares an interest in a contract or proposed contract, the Act requires that:
- the disclosure must be recorded in the minutes of the meeting;
- the committee member with the conflict of interest must not discuss or vote on the contract; and
- the committee member with the conflict of interest must leave the meeting while the matter is being considered. If there are not enough members remaining to form a quorum, a special general meeting must be called and a resolution on the matter passed by the members.
In addition to the above, the member with the conflict of interest must also disclose the nature and extent of their interest in the matter at the next general meeting of the association.
A useful way to help committee members comply with these requirements is to make ‘disclosures of interest’ a standard item on the committee meeting agenda. In most cases there will be nothing to note, and will serve as a reminder to members of the need to remain aware of conflicts of interest.
Roles of particular office bearers
The Act does not assign specific responsibilities to individual committee members. It is up to the association to decide what the role and responsibilities of each committee member will be, and to ensure that these are correctly set out in the association’s rules. The roles of some common office bearers are summarised below:
Chairperson (sometimes called the president)
The chairperson is usually the formal 'voice' of the association and is responsible for the overall coordination of the activities of the association.
The chair is responsible for:
- chairing meetings;
- signing documents on behalf of the association;
- ensuring all relevant information is made available to committee members;
- ensuring the association is run according to its rules and any other strategic plan that has been agreed to;
- resolving disputes and grievances;
- initiating projects;
- overseeing activities and projects; and
- representing the association at external meetings and events.
In the chairperson’s absence the vice-chairperson can represent the association and preside over meetings. See Meetings for the role of the chairperson in meetings.
The treasurer is responsible for managing the finances of the association. This involves:
- maintaining all financial records;
- monitoring the income and expenditure of the association;
- keeping committee members informed of the financial position of the association;
- preparing and presenting financial statements to the Annual General Meeting;
- allocating funds;
- developing budgets for new projects;
- making payments and bank deposits;
- preparing and managing the budget;
- representing the association on funding applications; and
- maintaining custody of all securities, books and documents of a financial nature.
The secretary is responsible for day-to-day administrative tasks which include:
- maintaining the register of members;
- arranging meetings;
- assisting the chairperson to prepare the agenda;
- sending out notices for meetings;
- keeping minutes and records;
- attending to correspondence;
- making sure all letters and other documents are properly filed;
- organising activities and events;
- preparing newsletters; and
- maintaining custody of all books, documents, records and registers of the association.