Separation of Authority
A Good Governance Guide from the Governance Institute of Australia (3 of 4)
Posted on 24.11.2017
The third in a series of 4 articles focusing on governance in the not for profit sector.
The content is based on information from resources provided by the Governance Institute of Australia
Separation of authority between board and management
It is considered good governance for a not-for-profit (NFP) organisation to have clear guidelines determining the boundaries between the duties of the board and the managers of day-to-day activities of the organisation.
It is good practice for an organisation to adopt two documents to provide clarity regarding the delineation of board and management activities: a ‘statement of matters reserved for the board’ and a ‘delegation of authority’ policy. An organisation following good governance practice will also have a board charter or terms of reference accompanying these two documents.
Statement of matters reserved for the board
The statement of matters reserved for the board identifies those decisions which are to be made by the board and not delegated to management. This may include:
- holding responsibility for the overall leadership of the organisation and setting the direction, culture and values
- setting the risk appetite for the organisation
- approving strategic aims and objectives of the organisation as a whole
- read more
Delegation of authority policy
The ‘delegation of authority’ policy describes those matters delegated by the board to management, including the specific role those matters are delegated to as well as any limits on that delegation. It is important for the board to understand that, while it can delegate authority to make decisions, it cannot delegate its responsibility.
Policies generally can be stated in either of two ways; specifying what the delegate can do, or specifying what the delegate can’t do. It is good governance to clarify what can be done and preparation of a delegation of authority in tabular form is often a good approach to keep it simple and easy to understand.
A delegation of authority policy may include the following matters, depending on the size and complexity of the organisation:
- financial delegations
- authority to enter into material contracts
- approval of policies
- read more
Good Governance Guides
Governance Institute of Australia
For more information and resources on governance for your organisation go to GOVERNANCE
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