How well an organisation deals with its delegations is fundamental to its efficiency to maximise opportunities and minimise risk. From a practical management perspective it is necessary in every organisation to devolve decision-making from the central source of authority downwards. This enables decisions to be made at the coal-face, by employees or committees with the required specialised knowledge, and in a timely way. However, decisions made without proper legal authority can put your organisation at financial and legal risk.
What is a Delegation?
Delegations empower employees and committees with the authority to make legally binding decisions on behalf of their organisation. Delegations are a function of administrative law expressed, in ordinary terms, as ‘who can legally do what’.
Delegations are the formal authority:
- given from a legally authorised source of power;
- to an individual or committee by the source of power;
- to make enforceable decisions that commit and/or incur organisational liabilities; and
- for which the specific individual or committee will be held accountable.
Source of authority
The source of authority depends on the type of organisation:
- companies - Corporations Act 2001 (C’th) and its Constitution;
- government departments and agencies – the relevant enabling Act; and
- statutory corporations – the relevant enabling Act and Constitution;
- universities - the relevant enabling Act, or its Constitution if not created by legislation.
An organisation must act within the boundaries of its Act and/or Constitution. Understanding the source of authority is important – for example, in the University of Western Australia v Gray1 the Full Federal Court held the University exceeded its source of authority when it purported under its Act to make regulations affecting the property of others (intellectual property of academics), when its Act gave authority only to manage and control its own property.
How is authority delegated?
The authority to delegate is contained either in the enabling Acts or the Constitution which contain specific provisions authorising the governing body (e.g Board of Directors, Senate or Council) to delegate to employees and committees.
Many organisations have Delegation Frameworks at varying levels of sophistication that consolidate and list delegations, enabling employees and the outside world to identify decision-makers and the extent of authority.
For government organisations and statutory corporations there are provisions in the State and Commonwealth Interpretation Acts2, which provide for delegations. It is important to note in these cases, a delegation cannot be sub-delegated unless there is an express statutory power to delegate, there is an express statutory power to appoint an authorised officer or there is an implied power to authorise.3
- Delegates must exercise their own discretion – a specific direction authority source that a decision must be made in a particular way is not a delegation.
- Delegations can be general or specific but must be in writing.
- Delegations cannot be sub-delegated unless the enabling legislation specifically states otherwise.
- The exercise of a delegation is deemed to be the act of the body granting the delegation.
- Delegations are hierarchical and can always be exercised ‘upwards’ in the chain of command.
- Delegations can always be revoked.
- Delegations are generally conferred on positions and not individuals.
- Delegations can be to future positions.
- A delegation needs to identify the delegate with sufficient certainty.
AUTHORISATIONS (in the public sector)
Authorisations in the public sector concern the power of a Minister to devolve decision-making power downwards within their department.
What is an Authorisation?
An authorisation in the public sector, is a legal mechanism developed by the courts permitting a delegate under a statutory delegation of authority conferring a right on a subordinate to exercise specific powers given to that delegate - it is referred to as the Carltona principle5 and operates on the basis that a delegate can appoint an agent to perform his/her functions under certain specific situations.
An authorisation is not a delegation. This is because ultimate accountability for the exercise of the decision-making rests with delegate not the person authorised. Authorisations need not be in writing although it is advisable to do so.
A delegate cannot ‘authorise’ an individual to exercise all powers of the delegate. An authorisation should not be made where:
- significant rights of an individual would be affected; or
- the delegation instrument clearly anticipates a personal decision from the delegate.
It is important to note from court decisions, that the boundaries of what can be legally authorised is unclear and that all legal decisions relating to authorisations are to-date in the government sector.
Benefits of Delegations and Authorisations
- They decentralise decision-making and reduce red-tape.
- They relieve senior officers from routine decision-making.
- They encourage personal initiative and promote a wider skills base.
- They can promote a better risk appetite.
- They allow staff to know at all times ‘who can do what’.
- Decision-making can be done more quickly and with less formality.
- Decision-making can be done by those with specialised knowledge.
Pitfalls to avoid
- Devolution without care and supervision can result in misuse of power creating risks.
- Too complex a system can promote a red-tape culture.
- They may fail if there is no institutional culture of accountability.
- Lack of regular training can mean misalignment of decision-making especially where temporary positions are involved.
- Failure to update can result in invalid decision-making.
- The inherent nature of particular organisational environments may mean delegations and authorisations are difficult to manage.
To maximise effective decision making, organisations must develop a strategic context for decision-making, ensuring that policies and decision-making processes are up-to-date, transparent and readily accessible to all. A well-constructed set of policies and delegations framework together with an appropriate system to oversee and monitor are all necessary. It is also important that all employees understand who can make decisions within their organisation and that the decision-makers are well trained in the principles governing delegated powers.