Coming soon: New AICD NFP Governance Principles

The AICD is currently finalising its revised Not-for-Profit Governance Principles. The revisions reflect the major changes in governance practices and expectations for NFP directors since 2019 and are intended to ensure the Principles remain a key source of guidance for those involved in governance of Australian not-for-profits (NFPs) and charities. The Principles will be launched at a webinar on 18 April 2024. Register here (complimentary for all).

Over the last nine months, the AICD has undertaken a review to update its NFP Governance Principles to cover developments in Australian governance practices and emerging issues. It has been over a decade since the first version of the Principles was released in 2013, with the second version published in 2019. Since that time, the sector has seen increased community expectations and significant regulatory reform and disruption. This has arisen in part from a series of Royal Commissions, the COVID-19 pandemic, and emerging risks such as cyber and climate.

The Review

Supported by our Director Reference Group, comprised of Virginia Bourke FAICD, Bruce Cowley FAICD, and Fiona Payne FAICD, we have been speaking with directors and governance practitioners around Australia about how we can shape the Principles to best support NFP directors to achieve good governance. The revised Principles will be published in mid-April and will be freely available on the AICD website.

Key themes from the review

• Community expectations – Consultations highlighted the increased expectations from key stakeholders such as clients, funders, and regulators on the governance and performance of NFPs. These changes are also reflected in the results of the AICD’s most recent annual AICD NFP Study where close to half of survey respondents (47 per cent) are spending more than three days per month on governance of their NFP.
• Regulatory obligations – Directors noted the impact of significant regulatory reform and disruption on the NFP sector, including the Aged Care and Disability Royal Commissions and COVID-19 pandemic. The recent annual AICD NFP Study also found that around 20% of respondents identified their organisation had been the target of a cyber-attack within the last 12 months.
• Accessible guidance – Directors expressed desire for the new Principles to be more accessible and streamlined in length, especially for newer NFP directors. Directors supported the inclusion of real-life case studies where possible and checklists to assist directors of smaller NFPs.

Key changes to the NFP Governance Principles

• Consolidation – Ten principles are being consolidated into eight, with new principles on Sustainability and Organisational Culture. Existing Principle 3 (Board composition) and Principle 4 (Board effectiveness) are being merged, and likewise for Principle 6 (Performance) and Principle 7 (Transparency and accountability). Current AICD Director Tools and guidance around cyber, culture, stakeholder governance and climate change, are being signposted within the Principles for further reference.
• Case studies – Consistent with feedback and AICD’s broader approach to guidance, the new Principles feature real-life case studies with reflections and rich insights from senior directors on how NFP boards can practically apply each of the eight principles.
• Client voice – The new Principles feature a short resource on how to elevate the client voice into board decision making. Recruiting directors with lived experience is one mechanism to ensure the client voice is considered around the board table, although it is not the only way.
• Culture – The new Principles provide expanded guidance for directors providing greater oversight on organisational culture, not just conduct and compliance. This includes a greater focus on volunteers, the backbone supporting many NFPs in delivering on their purpose, vision and strategy.