The Australian Charities and Not for Profit Commission standards include the following standard "Accountability to members":
"A charity that has members must take reasonable steps to be accountable to its members and provide them with adequate opportunity to raise concerns about how the charity is governed."
For most boards, this happens once a year at an Annual General Meeting with varying degrees of success. A healthy board will looks for ways to communicate with members during the year, not to invite them to do their job for them, but rather to provide communication to inform members of the key items of strategic direction and development of the organisation as they use their delegated authority to govern the organisation.
Another form of accountability that is less common for boards to undertake is an external governance review or appraisal.
Performing external board reviews is crucial for best practice governance for several reasons:
Objectivity and Independence: External board reviews provide an unbiased and independent assessment of a board's performance. This objectivity is essential to identify areas for improvement that might not be apparent in internal reviews due to potential conflicts of interest or biases. Boards assessing themselves are akin to students marking their own exams, which can lead to conflicts and less rigorous evaluations.
Enhanced Accountability and Transparency: By involving external parties, boards can demonstrate a commitment to accountability and transparency. This is important for maintaining trust with stakeholders, including association or company members and the wider community. External reviews can ask challenging questions and provide demanding recommendations that facilitate self-reflection and improvement. Increasingly, board appraisals are becoming a requirement of funding agreements or regulations which reflects a growing appreciation for the importance of a high standard of governance being reviewed and maintained.
Benchmarking and Best Practices: External reviews allow boards to benchmark their governance practices against industry standards and peers. This comparative analysis helps identify strengths and weaknesses and encourages the adoption of best practices. Staying informed about industry trends and regulatory changes ensures that governance practices remain relevant and effective. Consider linking reviews to external standards such as the ACNC, Australian Institute of Company Directors (AICD) or Christian Ministry Advancement standards and principles of good governance - all of these organisations have a focus on for not for profit organisations to varying degrees.
Customised and Rigorous Evaluation: Unlike generic internal reviews, external assessments can be highly customised to suit the specific needs, stage and context of the organisation. This tailored approach ensures that the review is rigorous and covers all necessary aspects of governance, from board dynamics to strategic focus and meeting efficiency. Reviews can also be tailored or new boards to help provide a roadmap for professional development and growth.
Regular Evaluation Cycle: Best practices recommend that external board reviews occur every two to three years. This regular evaluation cycle helps keep the board's performance in check and provides ongoing opportunities for improvement.
Overall, external board reviews and regular member communication are vital tools for enhancing the effectiveness and accountability of board governance, ensuring that boards can fulfil their responsibilities effectively and align with best practice standards.
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