Governance and COVID-19

How does an organisation's governing body continue to act in the best interests of the organisation during COVID-19?

• continuing the organisation’s activities to the extent possible
• the organisation’s finances
• acting within the law, and 
• looking after the interests of many stakeholders (such as employees, volunteers, clients, participants and donors)

We have considered governance issues in the COVID-19 environment below.

For more detailed information on governance, you can also refer to our webpages on who runs an organisation, governance and office holders' legal duties, whistleblower protection laws, rules and constitutions, documents and records, and holding meetings.

We have answered the following questions:

1. As a board member, what should you know about the organisation's finances?
2. How can you protect existing funding?
3. Can you secure additional or emergency funding?
4. How can you reduce costs? 
5. How can you make sure you can retain your employees?
6. What is a COVID-19 policy and do you need one? 
7. What is a business continuity plan and what should it include?
8. Should your board change the way it meets during COVID-19?
9. Can your not-for-profit organisation hold its AGM remotely or should you postpone the meeting?
10. Could your organisation be required to repay membership fees if your usual operations or activities cease because of COVID-19? 

1. As a board member, what should you know about the organisation's finances?

• whether your organisation is a registered charity (see note 1 below) or
• if your organisation is not a registered charity, what your legal structure is (see notes 2 and 3 below)

Note 1 - As a board member of a registered charity, what help is there if you are worried about not being able to pay your debts during COVID-19?

• in the ordinary course of business
• during the period of 25 March until 31 December 2020, and
• before any appointment of an administrator or liquidator

• ensure that its Responsible People (which includes its directors) were aware of the issue, and have an achievable aim for their charity to return to viability after the COVID-19 crisis has passed, and
• must continue to follow relevant federal and state legislation, particularly where the charity is not a company limited by guarantee

Note 2 - As a board member of an incorporated association, what help is there if you are worried about not being able to pay your debts during COVID-19?

Note 3 - As a board member of a company limited by guarantee, what help is there if you are worried about not being able to pay your debts during COVID-19?

If you require further information about how this protection may apply to your organisation, submit an enquiry on our website.

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2. How can you protect existing funding?

You should consider whether you can access any existing funds to carry the organisation through the short to medium term.  If you are thinking about using existing funds, give careful consideration to whether these funds must be used for a specific purpose or are subject to certain conditions. 

You may be eligible to apply for a government grant or be able to obtain accommodation on current grant funding.  A number of government departments which provide grants (such as the Commonwealth Department of Social Services (DSS)) are continuing to process new grant applications and manage current grants while seeking to extend flexibility on grant conditions. More information is available at the Australian Government's Community Grants Hub.  

It’s also important that boards deliver a clear and considered messaging to retain donors.  For larger donors, the board may consider regular and customised communication, including providing frequent updates and seeking donor input.  Smaller donors may require monthly newsletters or report updates.  You could send a COVID-19 newsletter to keep donors informed. 

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3. Can you secure additional or emergency funding?

The SME Recovery Loan Scheme may help not-for-profit organisations access finance. Under this scheme, the Federal Government is guaranteeing 80% of new loans issued by participating lenders to eligible organisations. Loans under the scheme are available from 1 April 2021 until 31 December 2021. See the Treasury website for more information on the scheme.

The Government has also agreed to guarantee loan amounts for eligible creative economy businesses in the cultural and creative sector. The Office for the Arts website has further information on this and other support packages.

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4. How can you reduce costs?

You may need to consider cost reduction across all areas of the organisation's operations.

If your operations have stopped or are seriously impacted, consider reviewing all your contracts with clients, suppliers and government departments.  You should consider the potential implications of those contracts and whether your not-for-profit can meet the obligations now that circumstances have changed. By having conversations with suppliers, your organisation can also try to extend terms of trade where needed or terminate contracts where possible.  You will need to be mindful of any wrongful termination provisions in the contract if a party's right to terminate under force majeure is disputed.

For more information about your organisation’s options if it can’t comply with contractual responsibilities because of COVID-19, see our webpage on contracts, insurance and COVID-19.

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5. How can you make sure you can retain your employees?

The Australian Government's JobKeeper scheme was available to assist not-for-profit organisations or charities that have experienced a decline in turnover by providing access to a government subsidy to continue paying eligible employees. Eligible employees included full-time, part-time and long-term casuals who have been employed on a regular basis for at least 12 months. The JobKeeper scheme comprised three stages and ended on 28 March 2021.

Note - the Australian Government and its agencies, state and territory governments and their agencies, foreign governments and their agencies, local governments and wholly owned corporations of these bodies were not eligible for the JobKeeper payment.

Read more about the JobKeeper payment.

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6. What is a COVID-19 policy and do you need one?

• a 'positive action plan' that sets out what measures employees and volunteers should follow to reduce their exposure to COVID-19 and what happens if they develop symptoms or test positive for COVID-19
• working from home strategies to protect employees and volunteers
• a communication strategy that sets out how you will be communicating with each stakeholder, ensuring the board considers opinions and concerns of key stakeholders during this crisis, and
• providing mental health support to volunteers and employees, and ensuring the board has a clear understanding of the duty of care required in relation to changing work arrangements and the importance of ongoing communication

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7. What is a business continuity plan and what should it include?

A business continuity plan (BCP) prepares your organisation to carry on ‘business as usual’ if there is an incident, crisis or disruption.  When a crisis occurs, boards and management must be aligned in terms of preparation required for the short and long term.  A BCP facilitates this and allows you to provide a considered and effective approach to restoring and resuming operational normality during the crisis.  

Your organisation may already have a BCP in place under its risk management procedures, disaster planning procedures or general emergency management. The size and complexity of your BCP will depend on the nature of your not-for-profit, the services it provides and its overall functions.

We recommend you establish a BCP (or update your existing BCP) to set out how you continue 'business as usual' during a pandemic.  This may include considering alternative supply resources due to border restrictions, considering the availability of laptops and telecommunication data for working from home and enforcing data privacy policies.  Your COVID-19 policy will also set out many of these measures.

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8. Should your board change the way it meets during COVID-19?

Boards should meet more frequently with management and employees and aim to establish a rhythm of regular meetings, for the duration of the crisis. You may also consider establishing a crisis management team, which reports back to the board on the organisation’s response to the crisis.  

A structured agenda becomes important during times of uncertainty, as they channel the direction of your meetings and provides a clear plan.

Agendas are also particularly useful when boards are adjusting to meeting electronically for the first time.  Make sure all directors have access to electronic platforms so the board can function electronically.  There are a number of platforms that provide cost-effective meeting technology including Zoom and Microsoft Teams. Be mindful of using appropriate security and privacy measures for online meetings such as protecting passwords and meetings IDs.

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9. Can your not-for-profit organisation hold its AGM remotely or should you postpone the meeting?

In light of physical distancing and occasional shutdown requirements imposed during the COVID-19 pandemic, you may need to decide if your not-for-profit organisation can hold its AGM remotely through the use of technology or if you could postpone the meeting. 

Whether your organisation can hold general meetings remotely will depend on your rules, the law in your state, and the approach of your regulator. While this may be confusing, the most important thing you can do during this time is to act in good faith and be clear in your communications with your members. Regulators are likely to take a facilitative approach in the current circumstances.

• Victoria
• New South Wales
• Queensland
• Australian Capital Territory
• South Australia
• Western Australia
• Tasmania

10. Could your organisation be required to repay membership fees if your usual operations or activities cease because of COVID-19?

This depends on your organisation’s constitution or by-laws.

Membership of a not-for-profit is not the same as a contract between a consumer and a supplier for the supply of ordinary goods or services. It is governed ultimately by the constitution (rules or by-laws), which defines and regulates the organisation’s relationship with its members (and between the members themselves). Typically, membership fees in the not-for-profit context are fees paid to further the overall purpose of the organisation and not to provide a person or group paying the fee a direct benefit.

Usually, the constitution of a not-for-profit doesn't promise the supply of any goods or services. In certain circumstances, it may give rights to members to use the organisation’s facilities or services, but only when those facilities or services are available to be used, not for example in the middle of the night and not, for example, in times of war or pandemic – including government mandated lockdown.

It is very unlikely that a decision by a not-for-profit to cease operations or provide a limited service, because of COVID-19 would be a ‘breach of membership contract’ requiring compensation (such as repayment of membership fees).

Despite uncertainty about the impact of COVID-19 on your organisation’s service offering or activity, your organisation can still seek annual membership payments for the financial year 2021-2022 with little risk that a member is entitled to ask for membership fees to be repaid (once again, this will depend on your constitution or by-laws).

It’s important to be clear with your members about:

• the need for membership fees to ensure service continuity (if this is the case)
• the uncertain impact of COVID-19 on the organisation’s service or activities for the foreseeable future (that is, you are unsure about what you will and will not be able to offer in FY21-22), and
• what it means if membership fees are not paid (generally that the person or group is no longer a member)

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If your organisation needs legal assistance about operating your not-for-profit in the time of COVID-19, you can submit an enquiry on our website.