The AICD flagship NFP Governance Principles get a major update, climate reporting legislation is before parliament and aged care reforms undergo further review.

    AICD’s NFP Governance Principles set the benchmark for governance practice and guidance for boards and directors across Australia’s diverse NFP sector and now the AICD has launched a completely updated edition.

    This third edition follows extensive review, with input from across the sector and the support of a director reference group (Virginia Bourke FAICD, Bruce Cowley FAICD, Fiona Payne FAICD) and oversight from the AICD NFP Chairs’ Forum.

    The Principles feature real-life case studies sourced from members, and include practical questions to support directors in the boardroom.

    The revision has seen the key principles consolidated into eight categories (from the previous 10) with new sections on governing for sustainability and governing organisational culture. A short resource on elevating client voice in board decision-making is also available.

    The latest edition reflects the major changes in governance practices and expectations for NFP directors from the past five years, taking into account changes in community expectations, significant regulatory reform, and disruption and lessons from Royal Commissions and the COVID-19 pandemic. The Principles also provide up-to-date guidance on cyber, culture and climate governance.

    This is a practical resource to support strong governance in NFPs and charities. Members have told us of different ways they apply and consider the NFP Principles, for example:

    • By allocating time in each board agenda to discuss one principle in depth, and to reflect on their organisation’s practices
    • In periodic governance and board effectiveness reviews
    • Reporting against the Principles in annual reports and governance statements, after board reflection
    • By developing internal checklists and referencing Principles as relevant in decision items.

    We welcome feedback and suggestions on resources or tools to support application of the Principles and use by sector directors and boards. Email Members can also access the free launch webinar here

    Climate reporting bill introduced

    In March, the government introduced its mandatory climate reporting bill — Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) — to the House of Representatives.

    Under the new regime, organisations (including NFPs, but excluding charities) will be required to disclose their current and anticipated climate-related risks over the short, medium and long term. Mandatory reporting is currently slated to commence for large companies and heavy emitters from 1 January 2025, with phased commencement for smaller organisations from July 2026 and July 2027.

    AICD supports the introduction of climate reporting, but this is a very complex reform. We have advocated strongly that liability adjustments need to be made, given the uncertainty and lengthy timeframes associated with climate disclosures. The government has responded to the concerns raised by AICD and other stakeholders on liability.

    The bill includes a significantly stronger three- year modified liability period of “regulator-only” enforcement (modified liability) and a qualified directors’ declaration process. In the first year, all forward-looking climate disclosures made for the purpose of compliance with a sustainability standard will be covered under modified liability.

    Scope 3, scenario analysis and transition planning disclosures will be covered for the first three years. Modified liability will also apply to subsequent publication of the same statements and/or updates or corrections made to comply with a Commonwealth law (such as continuous disclosure). This is a significant improvement on the exposure draft, which confined modified liability to scope 3 and scenario analysis only. The bill provides for a qualified directors’ declaration for the first three years, to confirm “whether, in the directors’ opinion, the entity has taken reasonable steps” to ensure compliance. At the time of writing, the bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 30 April. The AASB and AUASB are also working to issue the final sustainability standards and sustainability audit standards to support the regime. Members can access AICD’s Climate Reporting Guide to prepare. 

    ASIC director ID action

    Corporate regulator ASIC has commenced its first prosecution against a director for failing to comply with the obligation to have a director identification number (director ID). It is a legal requirement for all Australian directors to apply for a director ID. The penalty for failing to do so is $13,320. Criminal penalties can also apply. For a summary of how to apply for director IDs, click here

    Aged Care Act update

    Following extensive feedback on the exposure draft of the new Aged Care Act, the government has announced that it is taking time to consider and refine the legislation.

    The AICD has raised significant objections to the proposed new “responsible persons duty”. This would make directors and managers personally liable for failings of the provider in the delivery of care to residents and in-home clients. This new duty was not a Royal Commission recommendation.

    Both civil and criminal liability were proposed to apply. This would expose directors to risk of criminal prosecution as well as significant civil fines for the organisation’s delivery of care. The AICD views this as a punitive and unnecessary layering of duty in a sector undergoing profound change. We continue to engage with the sector and government on this issue and welcome feedback to

    Practice resources — supporting good governance

    Examples of the AICD’s contemporary governance practice resources for members:

    Cyber Incident Response Guide

    • AICD’s new Cyber Incident Response Guide, developed with the Cyber Security Cooperative Research Centre, provides practical guidance to directors and boards dealing with a cyber incident.

    Director Guide to Positive Duty

    Ethics in the Boardroom

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