Our subcommittees are acting like independent nations
In this help sheet series, Our Community’s resident agony uncle, Chris Borthwick, offers answers to frequently asked questions about issues not-for-profits are facing.
Dear Agony Uncle,
We are an incorporated association. We have a situation where we have two subcommittees of our main committee running separate bank accounts from the main bank account. One of the subcommittees handles all its own money and doesn’t report any monies to the main committee. The other one does report money to the main committee each year. There isn’t anything in the constitution about this issue and the subcommittees form themselves from our members.
The issue I have is that I don’t feel this is a lawful way to conduct the financial affairs of the society. I think it would be better to run all the monies through the one account so accounting could be made simpler and transparent. Can you offer some advice on whether we should combine the accounts? Or if not, should we separate from those subcommittees altogether and charge them to use our events as their avenue to make income?
Prudence Papertrail, South Australia
Agony Uncle’s response:
I can certainly say that that's one hell of a way to run a railroad.
This may sound like a silly question, but if the subcommittees appoint themselves, handle their own money, and don't report to anyone else, how do you know that they are in fact part of your organisation at all? It sounds more as if they're separate (unincorporated) associations.
Subcommittees should be set up with precise terms of reference, have clear reporting lines, and be appointed by the board. If they're not subcommittees but rather independent organisations, they should certainly be labelled as such rather than as subcommittees. Whether that involves a single bank account is a matter of administrative convenience, but all expenditures by the organisation must be authorised by the board, and all income must be received by the board, and the board has to be responsible for the business of the association, including its subcommittees.
I think the situation as you describe it does present a range of dangers and vulnerabilities if anything does go wrong – it's not clear whether the board's insurance would cover the subcommittees, or who would get sued, for example.
Beyond that, whether you combine or separate is a matter for you.
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