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Duty of care

When you agree to be an office bearer on the board or committee of an incorporated association such as a sporting club, you will have a duty of care. Under common law, this means you have the same duties as directors and share responsibility for the effective management of the club on behalf of its members. You also owe fiduciary and statutory duties to the club.

As a general rule, an office bearer must:

  • Take all reasonable steps to monitor the management of the club
  • Acquire a working knowledge of the business of the club
  • Keep informed of the clubs activities and assess the safety of club practices
  • Be familiar with the financial status of the club by regularly reviewing financial statements
  • Make enquiry into matters revealed by financial statements where necessary or prudent.

Breach of these duties can personally result in serious repercussions for the office bearer. The courts take a dim view of dishonest and reckless conduct by imposing heavy fines, awarding damages, and, on occasions, imprisonment.

Duties

Duty of good faith and honesty

Office bearers are given broad discretion to manage a business under the constitution of the incorporated association.  An overarching duty of good faith applies to the exercise of this discretion.   Like most common law duties, the duty of good faith and honesty arises at common law because office bearers are regarded as being in a position of trust with respect to their incorporated association.

This duty requires office bearers to consider the interests of the members of the club as a whole.  In circumstances of insolvency or near insolvency, the duty to act in the best interests of members is overridden by a duty to act in the best interests of creditors.

Duty to act for a proper purpose

Since office bearers are fiduciary agents, powers given to them can only be exercised for the purposes for which they are given.  In particular, office bearers may not exercise their powers to obtain private advantage.

Duty of care, skill and diligence

Breach of duty occurs when an office bearer is reckless in exercising his or her office.  Proper performance is dictated by several circumstances, including the type of club, its size and nature, the composition of its board and the distribution of work between office bearer and other officers and volunteers.  Background, qualifications and management responsibilities are also taken into account when determining whether an office bearer has complied with their duties. 

Duty to avoid conflict and to disclose interests

An office bearer should not allow a conflict of interest to compromise their position in the club.  Personal interests or other duties, such as a shareholding or being an office bearer of another company, mustn’t be brought into conflict with their duty to the club.  This overlaps with the duty to act in good faith and for a proper purpose.

Some situations which give rise to conflicts of interest are:

  • Office bearer taking advantage of opportunity - an office bearer may not use their position to make a profit.  If they do, they must account to the club for the profit made.
  • Office bearer taking advantage of an opportunity where the club is unable – an office bearer must not profit personally from their position as office bearer.  It may be a defence that the profits were made with the informed consent of the club.
  • Office bearer contracts with the club - these are voidable at the option of the club.  This includes contracts in which office bearers have an indirect interest.  The fairness of the contract is irrelevant, and this is applied as a strict rule.  The contract may be validated by ratification at a general meeting, provided there is full disclosure.
  • Conflict of external duties with office bearers – if an office bearer holds an office or property with duties in conflict with their duties as office bearer of the club, they should declare these once they are aware of the conflict at the next board meeting

Financial duties

Financial management is not the sole responsibility of the Treasurer. All office bearers have a role and duties vary according to the size of the club, whether it’s affiliated or not, if the workforce is paid or volunteer and the range of activities offered.

Financial reporting

All clubs should produce a profit and loss, showing monies in and out over a set period, as well as a balance sheet,  showing assets and liabilities.

How often should reports be prepared?

These should be produced monthly, but if that’s impractical, then quarterly or biannually.  While banks, government and suppliers will usually only need to see annual financial statements, preparing reports more frequently means your club has access to up-the-date figures for decision-making and planning. Infrequent reporting can result in cash shortfalls, loss of source records and even fraud.

Keeping good data

Reports are only as good as the data entered. For instance, if a club contracts a tradesperson to build a shed but no payment has been made, the amount should still appear on the financial statements as a liability. Not including it, will make the club’s cash position look more favourable and the money could be spent, leaving a shortfall.

Preparing and reviewing financial statements

Time constraints and difficulty in finding an experienced bookkeeper can result in minor errors on the financial statements.  When preparing or reviewing financial statements, check that you:

  • Include all expenses – even those not yet due for payment
  • Enter all unbanked cash – record as cash on hand and update the petty cash
  • Check items on the balance sheet last year compared to this year. Perform any necessary accounting processes, such as clearing previous creditors or depreciating assets. Go through each balance sheet item and make adjustments, or seek assistance from a bookkeeper or accountant.

More information

Legal issues and grassroots sport - a collection of sport and the law articles by Play by the Rules.