GOVERANCE

TOTTS INC

STANDARD NO 11

GOVERNANCE AND ACCOUNTABILITY

OVERVIEW

This standard is how the Board members ensure internal and external accountability for what the organisation does. It covers the election, induction and ongoing training of board members, together with processes for ensuring proper financial and asset management and for managing conflicts of interest when they arise.

1.0 Election or appointment of governing body and executive officers

The election or appointment of the governing body and executive officers is carried out in accordance with Rules of Incorporation of TOTTS INC. These rules set out the procedure to follow.

A member of the management committee may only be elected as follows:

1.1 Any two members of the association may nominate another member (the 'candidate') to serve as a member of the management committee.

1.2 The nomination must be:

1.2.1 in writing;

1.2.2 Signed by the candidate and the members who nominated him or her: and

1.2.3 Given to the secretary at least fourteen days before the annual general meeting at which the election is to be held;

1.2.4 A retiring officer shall be eligible for re-nomination;

1.3 Each member present at the annual general meeting may vote for any number of candidates not more than the number of vacancies;

1.4 If, at the start of the meeting, there are not enough candidates nominated, nominations may be taken from the floor of the meeting.

1.5 A list of the candidates' names in alphabetical order, with the names of the members who nominated each candidate, must be posted in a conspicuous place in the office or usual place of meeting of the association for at least seven days immediately preceding the annual general meeting.

1.6 If required by the management committee, balloting lists must be prepared containing the names of the candidates in alphabetical order.

2.0 Induction of governing body and executive officers.

2.1 Directors Orientation Compendium

The board is TOTTS ultimate leadership group.

The board protects the company's long-term future.

The board's job is to govern the company, not to manage, that is the job of the CEO.

The board is accountable to its owners, legal and moral.

Governance failures are less a problem of people, than one of processes.

2.2 Components of effective governance

There are five essential components to effective governance.

Set strategic direction for the company as the basis for all further strategic and operational planning.

Appoint, remunerate the CEO, and define CEO accountabilities and the results expected.

Develop policies to manage the risks faced by the company.

Monitor and evaluate company and CEO effectiveness.

Report to owners and other key stakeholders on the successes or failures of the company.

2, 3 Legal requirements of boards and directors

Company directors have a special duty of care to the company

·Directors must not exploit their position for personal gain

2.4 Directors' duty of care

Directors of companies (and associations) have a duty of care to the company/association.

Act honestly in the exercise of powers and the discharging of duties.

Apply a 'reasonable' degree of care and diligence in the exercising of their powers.

Make no improper use of their position, or the information gained by virtue of their position, to gain an advantage to themselves or others or cause detriment to the company.

Comply with all relevant statutory obligations.

2.5 Conflicts of interest

Three basic rules govern the issue

Directors must not have a personal interest in a matter failing within the scope of their service, or enter into any inconsistent obligation with a third party except with the board's fully informed consent (the conflict rule).

Directors must not use their position to gain an advantage for themselves or for a third party, except with the board's fully informed consent (the profit rule).

Directors must not misappropriate the company's property for their own or a third party's benefit (the misappropriation rule).

2.6 The Board - CEO relationship

The key building block to company success

The CEO is the company's operational leader

The CEO is the board's only direct employee

The CEO is charged with making reasonable interpretations' of the board's policies

The Board-CEO relationship is a partnership

The CEO is appraised against written policies

CEO appraisal is ongoing

2.7 Managing risk

The board sets the framework for risk management

There are both financial and non-financial risks

Policies are the vehicle through which the board sets its risk management framework

2.8 The Board's financial responsibilities

The Board's job is financial governance, the CEO's job is financial management

The board establishes the financial governance framework through the development of financial policies

Financial monitoring must be about more than the numbers on the report

2.9 The Board Chair's role at the board meeting

All agenda items and all discussion in terms of their policy relevance.

Given that the board's job is policy related, only policy matters should find their way onto the agenda and into the discussion.

The Chairperson is responsible for monitoring and directing the meeting and pre-meeting processes.

The Board Chair's role is to ensure the integrity of board meetings by testing

3.0 Training and development for governing body and executive officers.

3.1 Identification and review of priorities for training and development.

All board members should have a reasonable ability to govern a company or an incorporated not-for-profit business. This involves the understanding of risk, finance, strategic planning and a duty of care for the organisation. Should a board member not meet these criterions then they must undertake a study course to meet the standard to act responsibly towards the board. Training and development must include a Code of Ethics and Proper Practice Policy.

The board is committed to the adoption of ethical conduct in all areas of its responsibilities and authority. In doing so it binds its members to the same principles and practices.

3.1.1 Directors:

1 . Shall act honestly and in good faith at all times in the interest of the company and its owners/stakeholders, ensuring that all stakeholders, particularly those who are recipients of services, are treated fairly according to their rights.

2. Shall carry out their duties in a lawful manner and ensure that the company carries out its business in accordance with the law and the terms of its own constitution.

3. Shall avoid conflicts of interests in as far as this is possible. Where such conflicts arise, the director/s concerned must act within the terms of the board's Conflict of Interests policy.

4. Shall be diligent, attend board meetings and devote sufficient time to preparation for board meetings to allow for full and appropriate participation in the board's

decision making.

5. Shall observe the confidentiality of non-public information acquired by them in their role as directors and not disclose to any other person such information that might be harmful to the company.

6. Shall act in accordance with their fiduciary duties, complying with the spirit as well as the letter of the law, recognising both the legal and moral duties of the role.

7. Shall interact with the board and the company in a positive and constructive manner.

8. Shall be loyal to the board, abiding by board decisions once reached.

9. Shall not do anything that in any way denigrates the company or harms its good name.

3.1.2 The board:

10. Shall meet regularly to monitor the performance of management and the company as a whole. To do this the board will ensure that appropriate monitoring and reporting systems are in place and that these are maintained and utilised to provide accurate and timely information to the board.

11. Shall ensure that there is an appropriate separation of duties and responsibilities between itself and CEO and that no one has unfettered powers of decision making.

12. Shall ensure that the independent views of board members are given due consideration and weight.

13. Shall ensure that owners are provided with an accurate and balanced view of the company’s performance including both financial and service provision.

14. Shall regularly review its own performance as the basis for its own development and quality assurance.

15. Carry out its meetings in such a manner as to ensure fair and full participation of all board members.

16. Shall ensure that the company’s assets are protected via a suitable risk management strategy.

3.2 Budgeting

It is increasingly common for board members to attend training programs on their roles and responsibilities, often focusing on specific aspects of their job, so that they and the board are better informed about the requirements for good governance.

To facilitate such a training and development program it is recommended that the board should establish and manage its own budget. It is also recommended that the board should develop and review a 'Cost of Governance' policy aimed at designing, costing and carrying out the board's annual work and professional development program.

With such a policy and budget, the board no longer has to dip into the CEO's operational budget to find money to support its governance activities - a budget which is, or should be, carefully designed to meet the operating costs for the delivery of the company's services.

4.0 Conflict of interest.

The Board places great importance on making clear any existing or potential conflicts of interest. All such conflicts of interest shall be declared by the member concerned and documented in the Board Conflicts of Interest Register. A Board member who believes another Board member has an undeclared conflict of interest should specify in writing the basis of this potential conflict.

Procedure

4.1 Members shall declare any conflicts of interest either at the start of the Board meeting concerned or when a relevant issue arises. The nature of this conflict of interest should be entered into the meeting minutes. The interest should also be documented in the Conflict of Interest Register.

4.2 Where a conflict of interest or potential conflict of interest is identified and/or registered, the Board member concerned shall leave the room as soon as that item comes up for discussion. The concerned Board member shall not vote on that issue, nor initiate or take part in any Board discussion on that topic (either in the meeting or with other Board members before or after the Board meetings), unless expressly invited to do so by unanimous agreement by all other members present.

4.3 If a person declares themselves to have existing or potential conflict of interest confidentiality will be respected. If a person alleges that another person has a conflict of interest, whether existing or potential, and if the Board cannot resolve this allegation to the satisfaction of both parties the matter shall be referred to the Ethics Sub-Committee. This Sub-Committee will make a recommendation to the Board as to what action shall be taken.

Examples of conflict of interest

· When a Board member or his/her immediate family or business interests stands to gain financially from any business dealings, programs or services of TOTTS INC.

· When a Board member him or herself offers a professional service to TOTTS INC.

· When a Board member stands to gain personally or professionally from any insider knowledge if that knowledge is used to personal advantage.

· Where a Board member or the ex/officio member of the Board has a role on the governing body of another organisation, where the activities of that other body may be in direct conflict or competition with the activities of TOTTS INC.

5.0 Asset management.

TOTTS INC owns several assets such as computers, monitors, telephones, furniture and motor vehicles. Each must be recorded in an asset register and depreciated at the appropriate rate each year. Vehicles must be serviced regularly and kept clean at all times. Any major repairs should be attended to immediately.

6.0 Financial management and delegations.

The Financial Manager is responsible for the preparation of the budget for the next year which must be approved by the Board in the last quarter of the financial year so that Development and Operations Managers may proceed with their plans at the commencement of the new financial year.

During the current year the Financial Manager must discuss with Development and Operations Managers their planned costs for the forthcoming budget preparations.

During the current financial year the Financial Manager must prepare a report to the Board in order for the Treasurer may present it for discussion and approval.

The Financial Manager or their delegated representative must collect all incoming moneys either cash or cheque and prepare it for banking and inserting the amount in MYOB. All accounts must be paid as soon as possible so as to give an accurate record of the organisations financial position.

7.0 Budget.

The budget must show the financial strength at the end of each month to show the true strength of the organisations finances as the year progresses. It must include a break down of all expenses so that assets can be disposed as they start to show an acceptable expense. Any finance received through grants must be segregated and accredited before the requested date