13 things your Board must know about your NPO

Gabrielle Ritchie | Director, The Change Room | 21^st June 2017

Good governance is the foundation of a successful NPO. Governance can make or break your organisation – if it is great you can fly, if it is poor you can fail.  In NPOs, therefore, we should know as much as possible about the key features of our organisational governance.

But what are they key governance-related facts your Board should have at its fingertips:

Here are the 13 top things your Board must know about your NPO:

1. What kind of entity is our NPO?

In terms of the law: in South Africa, your NPO could be one of three kinds of entity – a voluntary association, a trust, or a non-profit company (ex-Section 21 company, an entity type which no longer exists)

2. What kind of founding document do we have?

If you are a voluntary association, you will have a constitution.  If you are a trust, you will have a trust deed. And if you are a non-profit company, you will have a Memorandum of Incorporation.  There are no other options.  Those three are it.  Your Board should know which kind of founding document your organisation has – and should refer to it in those terms.

3. Is our NPO registered as such with the Department for Social Development’s NPO Directorate?

For NPOs to be able to access all the legal and tax benefits of being a non-profit in South Africa, and in most cases to be able to access donor funding, they need to be registered with the NPO Directorate.  Successful application will result in you being issues with an NPO registration number clearly indicated on an NPO registration certificate issued by the NPO Directorate.  NPO – which stands for non-profit organisation – is a generic term for a non-profit or non-governmental entity in South Africa.  As such, your organisation is an NPO regardless of whether you are constituted as a voluntary association, a trust or a non-profit company. It is critical that your Board knows that should you not comply with the Directorate’s requirements – such as submission of annual audited financials – you can be deregistered as an NPO, which can have a number of negative knock-on effects (such as donors keeping a long barge pole between themselves and your organisation!)

4. What is our NPO registration number?

All of your Board members should have a copy of the NPO registration certificate somewhere in their Board manual, and should be able easily to access the NPO registration number.

5. Are we registered as a public benefit organisation (PBO) with SARS?

Being awarded PBO status as a non-profit means that SARS considers you a tax-exempt organisation. Which means you don’t have to pay tax on your income (there are limits to this untaxed income depending on how it is generated, and how it links to your overall NPO mission – but you’d need a tax or NPO finance specialist for that.  Ideally, you’d have one of those on your Board, but there are not a huge number of accountants around who are deeply familiar with NPO finance, law and tax matters!).  Being tax-exempt – and SARS will issue you with a PBO number in addition to your income tax number – does not exempt you from submitting tax returns, however.  Go to the SARS site to find out more about income tax returns for tax-exempt organisations.

6. Are we registered with any other entities or professional bodies?

Many NPOs register with professional associations in their sector, or may be part of broader sector networks.  Your Board should know about these memberships, whether there is a fee, and what benefit they bring to the organisation besides (as may be the case) a legal requirement and/or professional status.

7. What are the main laws governing our NPO?

All NPOs are subject to a few basic Acts in South Africa.  These include the Nonprofit Organisations Act, the Income Tax Act and a range of other Acts including the Basic Conditions of Employment Act.  Your Board must establish which other laws are pertinent to its work (eg. Acts relating to health, child welfare, criminal justice, education, rights and social justice, information).

8. How many board members does our founding document specify we must have?

An NPO founding document will somewhere specify the number of board members.  If the Board does not have this number, it should be recruiting for new members based on identified skills gaps on the board. Most South African NPO boards have between five and eight board members.  It should not be more than eight, including the organisational Director (whether ex-officio or, in the case of non-profit companies, as a full Board Director).

9. To whom does our NPO need to submit annual and/or other reports?

All NPOs need to submit annual audited financials to the NPO Directorate, to maintain their registration.  In addition, those NPOs who also have PBO status need to submit their annual audited financials to SARS.  Further, non-profit companies – all of which are registered through CIPC (Commercial and Intellectual Property Commission) – must submit annual audited financials to CIPC.  NPOs who receive funding from Department of Health, Education or Social Development are usually also required to submit monthly and annual reports. Your Board needs to know who must be reported to, how often these reports must be submitted, and whether these reports are being submitted timeously.

10. When is our financial year-end?

Board members must have a good grip on the NPOs financial management, including when the NPOs financial year-end is.  In most cases it will either be end-Feb or end-March in any given year.  Your Board needs to know this, as it impacts on planning and timing around the preparation of annual audited financials, the Board signing off on the statements, and the submission of these financials to the relevant bodies indicated in (9) above.

11. Are we able to issue Section 18A tax deduction certificates to our donors, where applicable?

Section 18A status, which allows an organisation to offer a tax benefit to its donors, must be specifically applied for, and is only granted to organisations working in areas of the public benefit activities (PBA) specified by SARS.

12. When is our NPO AGM?

While it might be a matter of good governance practice to hold annual general meetings every year, it is not a requirement – unless this is specified in your founding document.  Voluntary associations hold annual general meetings, and non-profit companies with members (aka shareholders in the for-profit sector), but trusts do not have members and generally don’t hold AGMs.  Some organisations, regardless of entity and/or requirements per founding document, like to hold annual meetings as a way to engage their communities, friends, supporters, donors and – where relevant – government departments with a vested interest in the success of the organisation.  Your board members must know what is required of your NPO in terms of an AGM.

13. Have we signed on to the Independent Code of Good Governance for Nonprofit Organisations in South Africa?

This Code of Good Governance outlines the key principles, values and practices of good governance in nonprofits – and shines a spotlight on the key responsibilities of any NPO board member.  This Code provides a “sign-on sheet” which facilitates the Board of an NPO to declare that it has adopted the Code to guide its governance practices.  This Code has no legal standing and is an in-principle commitment which is self-regulated, providing an excellent guide for monitoring one’s organisational governance.  More information can be found at www.governance.org.za.  PS  – if you Board signs on, you also get to display the Independent Code logo on your organisational platforms and marketing materials. It looks good to donors – and it’s a great logo.

For insights into whether your Board is fundraising-fit, and why it needs to be, see my blog on this at https://philanthropediasa.wordpress.com/2016/06/03/507/

To support your Board, alert them to the great governance-focused resources at:

1. Ricardo Wyngaard’s site nonprofitlawyer.co.za
2. The Inyathelo resources site askinyathelo.org.za

 

 

 

The easy approach to producing your non-profit annual report

Gabrielle Ritchie| The Change Room | 19^th June 2017

It’s that time of year again when everybody is likely scrambling to get their annual report conceptualised, written, designed and published.  In fact, most of us are probably just trying to get it written.

But the development of your organisation’s annual report does not have to be a massive mission.  What it does need is to be well thought through, properly conceptualised, attractively designed, and timeously published.  Amongst South African non-profits, our reports need to be submitted to the NPO Directorate within a few months (maximum 6) of our financial year-end.  Our continued status as a registered non-profit depends on the timeous submission of annual audited financials and a narrative report on your organisation.  For those organisations registered as public benefit organisations (PBO), you also need to submit your report to SARS, and for non-profit companies you will need to submit yours to CIPC.

Why else would we produce such a time-consuming piece of work?

Well, for a few reasons, actually.  These include that:

1. A good annual report makes an excellent marketing tool, to share with donors, friends, supporters and beneficiaries
2. Your annual report communicates your major achievements over the previous period
3. It is an opportunity to share your financial status with anyone who cares to look, promoting transparency about the organisation’s state of financial affairs
4. It is an important reflection of a well-functioning and expertly governed organisation
5. It is a great opportunity to share stories, images and infographics of your work and of the difference you make in your community (however that may be defined).

So what makes a “good annual report”?

The answer to this is relatively straightforward – and you could simply follow the tips and steps outlined below.  The key questions that need to be asked in approaching the development of your annual report are detailed below and can be used as a discussion guide, with responses serving to shape an action plan.

1. Who will be part of preparing the report? Which staff/ board members/ contracted service providers need to be involved?
2. Should we engage an external freelancer (writing and/or design)? Do we have someone you use already?  Or someone in mind whose work we like?
3. Will the Executive Director write the introductory overview, or would we prefer the Board Chair? Or both?
4. Have we been gathering photos all year, and do we have easy access to these for use in the publication? Are they all ours or do we need permissions to use some of the images?
5. Do we have an accurate, up-to-date, spelling-corrected donor list from the previous period, covering all donations? Are we going to mention all donors?  Do we have specific donor categories depending on donor-type or donation size?  What needs to be done to develop such a list?
6. What will be our annual report’s theme? [There are many resources online to help you think through what kind of theme might suit your organisation, your work, and your annual report]
7. Will we distribute in print and/or online? Both? What format will work best for us? Who is our audience and what works best for them?
8. What are our best stories to share in this annual report?
9. What are our key organisational messages, and where will we include them?
10. Should we use video in our report?
11. When will we launch or distribute our annual report?
12. What are our three major accomplishments/achievements for the past year? And how can we ensure these link to the key messages?
13. Who is going to triple-check our reported financials and donor list to ensure 100% accuracy?
14. What calls to action should we include?

Answer those questions, and you will have the beginnings of a plan!

Key components of your report

Once you have a plan in place, you can consider the key components of your annual report.  Traditional components are based broadly on a Letter from Chair, an overview  from the Executive Director, a programme report from the Programme Director, perhaps some staffing and HR information on skills development  etc, the financial report, and a donor acknowledgement section.

A shorter, sharper approach could be (but not necessarily in this order):

1. Table of Contents
2. Executive Director letter (include mission: what you do and why)
3. Accomplishments/Achievements (past year only)
4. Stories (profiles) to highlight successes
5. Photos all the way through the report
6. Donor list
7. Financials
8. Board of Directors / Trustees
9. A call to action

And use your report to THANK people: your donors and funders, your supporters, your partners – and your beneficiaries who have trusted you and your work!

If you need any advice on how to make this happen, drop me a line or ask a question here in the comments section.  Write well and make your annual report ROCK!

Top 5 nonprofit issues in South Africa: sustainability, governance, voluntarism, and others

Gabrielle Ritchie | Director | The Change Room – 16th May 2017

As I was training my brain this morning by coming up with ten ideas (for anything at all, no limits, no judgement), I started thinking about all of the issues that continuously come up in running/ working in/ managing/ being on the board of an NPO in South Africa.  So I made a list of the Top Five nonprofit issues as one of my lists for the day.  Here they are:

1. Sustainability: NPOs are constantly under pressure to become sustainable, but what does this really mean?  Does it mean self-sustaining?  And if so, what is the difference between a for-profit and a non-profit?  Or does it mean that an NPO is sustainably able to attract funding support and to generate income into the future.  I am going with the latter.  So stop telling NPOs they have to sustain themselves.  If you don’t qualify what you mean, then the premise makes no sense and it is just confusing and – in my opinion – rubbish.
2. Volunteers: There are so many people out there with the skills, the time and the will to offer their support to NPOs.  Yet I am increasingly hearing of qualified professionals (never mind unqualified but willing people), well-qualified to offer support in (for example) accounting, marketing, report-writing, fundraising, HR management, strategy development, and other areas, who are being given something of a cold shoulder by organisations. But we know that NPOs are usually too under-capacitated even to manage volunteers.  Its a lose-lose and something needs to shift. I am going to focus on this issue in a future blog, since it warrants a discussion.
3. Board Directors: in South Africa we promote the ethics of good governance in accordance with the Independent Code of NonProfit Governance for South African NonProfit Organisations – and we promote the international standards around avoiding conflict of interest at a board and staff level.  This is with particular reference to remuneration/ compensation for Board members’ time for Board business, and with regard to Board members tendering / pitching for work as providers/ suppliers in response to organisational needs.  What is not taken into account in our particular socio-economic structure is that Board members are often from within the NPO’s direct community, yet are unemployed and are usually in need of income.  To adhere to codes and ethics and good practice, do we simply not have unemployed people on the Board (where there is a distinction between retired/ not working and unemployed)?  See this blog for some thoughts on Boards and fundraising.
4. Entrenched Boards:  this is a big, sticky one!  Board members should serve a term of three years, and might – under certain circumstances – serve a second three-year term.  But Board members MUST NOT stay on a board endlessly.  Even if the organisation feels like your baby.  If you have been on a board for more than six years, you are starting to hinder the organisation. Yes, really.  Your thinking is stale, your resistance to change and new initiatives is damaging, and you are starting to treat the organisation as if things must be done a certain way “because that’s how we do things here”. No, Board members.  Move on.  You are doing your organisation a dis-service.  It is your job as a Board to ensure that new, suitable, energetic and committed Board members are identified, stewarded, invited to be Board members, and are then inducted and trained thoroughly in what it means to be a Board member of that NPO and what is required of Board members. So if you are thinking you need to stay because there is nobody to take over, you have failed.  Ensure there are strong candidates lined up – because life happens and you never know when you might need to recruit new Board members. Know who your next board members are!
5. Donors: some fundraising models will tell you that fundraising is all about relationships.  Does that then mean that community-based organisations which are English-second language, and rural (and are marginalised in other ways as well) won’t be able to raise funding?  Or do we relegate these organisations into the “cold-calling/ spray-and-pray” bucket and wish them luck?  Since it is overwhelmingly challenging for such organisations to build relationships with well-resourced and wealthy business people and other professionals, what are the key routes to attracting funding for community-based organisations? See this previous blog for thoughts on the challenges faced by so many NPOs, and this blog for insights into what donors are looking for in an application/ proposal.

The top five issues impacting your NPO will depend on your geographic location, the size of the organisation, the effectiveness of your board, the resources you already have to invest in scaling up your fundraising work, and your organisational capacity to host, support and leverage the value offered by volunteers.

Feeling challenged? What are your top five issues right now? Post them here and I would be happy to provide quick pointers in response 🙂

The South African NPO Funding Crisis – again?

quote from www.resourcingphilanthropy.org.za

Gabrielle Ritchie, Director, Change Room

4th May 2017

If you think that the South African NPO sector is in a particularly tight and horrible funding crisis right now, battered from all sides by events impacting negatively on funding sources, that’s understandable.  You will have been bombarded with a range of tweets, blog posts, articles and chat around which latest local, national, regional or global event is going to make it harder for us to raise funds – and how or why it might make it harder.

I kind of have news for you, though.  Raising funding in support of your non-profit work has never been an easy task. It takes incredibly hard work, and consistent excellence in the practice of a few fundraising basics.  While it isn’t rocket science, it does take commitment, and it requires investment – in whatever way your organisation is able to invest.  This might be budget, for a staff post, a marketing campaign, the implementation of a donor CRM database, or the development of a 5-year strategy and operation plan for attracting funding.  It might be staff time, to conduct 1 hour of prospect research every day, or to staff fundraising events, or to contribute to your organisation’s public profiling efforts.  It might be your volunteers, your board members, or a series of video stories.  However your organisation is able to define “resource”, your organisation will not attract funding without some well-planned resource investment.

So is there a crisis?  Is it getting worse?  Do we need to be on constant watch for what Zuma said at #WEF2017, or Trump’s bulldozing efforts to cease foreign funding (or at least significantly contract existing funding programmes). How impactful was Zuma’s Cabinet Reshuffle, and how will those impacts play out? Does non-profit funding at a local level require economic confidence at a global level?

For every action, there is a reaction.  Basic physics, really. And funding streams have not been predictable for South African non-profits for quite some time, if ever. Since 1994, and no doubt prior to that, non-profits have been hit with one or other “latest funding crisis”.  In 1994, foreign donors decided to channel their funding through the new government’s RDP initiative, rather than fund non-profits directly. These crises have continued emerging, and will definitely continue to do so.  Change is the only constant!

This means that non-profits cannot EVER take funding for granted.  This is a serious and difficult challenge, because all organisations are focused on doing the work they were set up to do – and if funding seems to be taking care of itself, then little attention is paid to building new relationships and identifying new prospective funding sources.  For example, many social justice organisations in South Africa are funded in most part by a well-known group of social justice-focused funders.  My advice?  Do not take your eye off the ball.  We know there are no guarantees that funding will continue to come in from those same sources, but we often ignore this basic funding rule in the interests of being able to get on with the work.  Unsurprising.  But, just like in most for-profits where the next contract/ customer/ client is being sought or pitched to or chased, so too in non-profits we need to identify potential partners and pursue with vigour and commitment to bringing in that next funder, to support us in driving our work forward.

If only the funding crisis would just settle already. It isn’t going to. So is it indeed a crisis?  It feels like it for organisations struggling to find support for their work, but it has levelled out into the “existing state of affairs”. The funding terrain has its peaks and troughs, it’s easier times and rougher times – but if you had to ask any non-profit who has successfully attracted sufficient funding and support to cover overheads, “programme” costs, and growth, you will find an organisation with a strong focus on profiling their work, identifying funders, networking, building relationships – by any means necessary.  And even then, it ain’t easy.

In short, then, it is almost guaranteed that any morning news headline could be argued to have a potential impact on South African non-profit funding.  So keep your eye on what is happening out there, but definitely keep focused on building your organisational profile, ensuring excellence in organisational governance, and don’t stop looking for opportunities in their multiplicity of forms.

 

 

Board members – do you know your organisation, do you know your Board?

Gabrielle Ritchie, Director: The Change Room

30th June 2016

This one is for board members.  It is easy to say “Yes, thanks, I accept nomination to your Board”, but board positions come with a lot of responsibility that many of us may not know about.  Here is a quick quiz for you and your fellow board members – you should at least know the answers to these questions below.  In fact, all organisational staff and board members should know the answers – and there are many more that could be added.

Use these questions to hold a quick quiz with your board and with the organisational staff team:

1. what type of entity is your organisation?
2. what type of document of formation/ founding document does the organisation have? (what is it called)
3. what is the legal governing authority or registration body for your organisation?
4. what other state institutions/ government departments is your organisation accountable to?
5. what other registration documents does your organisation have or need to get?
6. when was the organisation founded?
7. who is the Chair of your board?
8. how many board directors/ members/ trustees do you have?
9. who are they, and what particular skills do they bring to the board?
10. what official registration of directors/ trustees is required, if any?
11. how long is a board member’s term of office in your organisation?  What are the rules on this in terms of the kind of entity?
12.  who was your most recent funder?
13. who are your organisational accountants/ auditors?
14. what is your key responsibility as board member?
15.  when last did the board sign off on a set of audited annual financials?
16. how many paid employees does your organisation have?
17. what is the name of your organisation’s flagship project or core programme?

For information on core governance practice, values and ethics go to www.governance.org.za for South Africa’s Independent Code of Governance for Nonprofit organisations.  For additional tips and information on governance more generally, go to www.nonprofitlawyer.co.za for great resources.

For past blog pieces on governance and whether your board is fit for philanthropy, go to https://philanthropediasa.wordpress.com/2016/06/03/507/

Financial sustainability on a shoestring: possible or not?

 Gabrielle Ritchie, Director: The Change Room

9^th June 2016

A couple of weeks ago I addressed the (long) short list of key factors for NPOs to develop  fundraising fitness.  The thing is … it looks like you have to spend money to make money (ain’t that Rule No. 1, then) – and you really don’t have any of that.

So how do you tackle your organisational sustainability on a shoestring?  Surely being financially constrained doesn’t mean a non-profit dead end?  The good news is, it definitely does not mean a dead end … necessarily.  The bad news (for some, perhaps) is that it requires solid, hard, knuckling-down kind of work.  And if you don’t yet have staff, or your complement is small, then that’s what the Board is for.  After all, we got into this because of our commitment to social change, right? That we would do what is required to achieve the organisation’s goals, yes?

Rule 1 on being fundraising-fit is:

There are no shortcuts in raising money. No quick fixes. No cutting corners.

Moving on from that, let’s look at what the options are for a no-budget fundraising endeavour:

1. Governance: your NPO board members will have come on board because they believe in the mission of the organisation and are prepared to put in the effort to achieve it.  You will have to accept/ expect that board members are on board to provide voluntary input, support, and expertise. Which requires time. Kind of a deal-breaker. Not negotiable.  The more cash-tight you are, the harder the board will have to work (so if you are recruiting new board members, make sure they know this up front!).
2. Planning: is non-negotiable.  The primary resources for this are time and skills. You will have to have had both to start your non-profit, so you should be able to do this without additional expenditure.
3. Financial management: there isn’t a no-budget option here, unless one of your board members is a finance expert. You will have to spend money here.  For annual audited financial statements, there isn’t any way around this, so you have to accommodate for this in your initial budgeting.
4. Fundraising skills: if you don’t yet have the staff, you must use the skills available through your board and/or other volunteers. These skills include
   • leadership;
   • project planning and management;
   • information management and data-mining;
   • communications;
   • networking and relationship-building;
   • writing (proposals/ reports etc);
   • financial management;
   • fundraising (donor prospecting, stewardship, relationship management, budgeting, proposal writing, donor reporting, donor acknowledgement, understanding the fundraising cycle, maintaining long-term donors, building an annual fund, legacy fundraising, campaign development and implementation and others).
   • if you don’t have access to such skills without having to insource skills at a cost, then  be realistic and manage what you can: focus on donor identification and relationship building, and proposal development.  Keep it simple. And plan your approach to raising the required resources.  Planning. Planning. This can be done without funding, but it has to be done properly and with commitment to the end goal of achieving the organisational change objectives.
5. Communications and marketing: If you don’t do anything else, make sure you build your profile.  This is much easier to do than it used to be, with far less money.  Developing a facebook page, and a twitter account would suffice to start – and they provide you with the freedom to publish your own content according to your own schedule and deadlines.  That said, there are some ground rules – and it is more effective with a bit of money invested into your channels.  But not having money does not need to prevent you from starting.  There are great online resources to guide and advise (see below).
6. Information management: one thing you must get right is to capture and maintain your stakeholder contact data, and – if they are donors – their record of support.  You don’t need fancy software for this.  Excel is a perfectly adequate system to start, and will serve you well.

The most important skill, which costs no additional money, is your capacity to speak passionately and expertly about your work and what you seek to achieve.  This will take you a long way to achieving your resourcing goals, while costing very little.

In short, with some good volunteers with an effective spread of skills (because a key component of people becoming board members, right, is the skills they bring to the organisational party), you should be able to get up and running without incurring huge costs and needing significant resources to get going.

Focus, attention to detail, commitment to the end goals, and dogged determination – plus a host of free resources online and offline – will definitely get you to where you want to go.  It might seem easier with a whole big fundraising budget – but it is not a non-profit dead end if you don’t have the money.

But remember: the goal is to raise funding to include budget for fundraising.  Remaining in a frugal mindset will ultimately cost you.  Read here on the cost of being too frugal, and of remaining in that paradigm.

FREE RESOURCES

www.nonprofitlawyer.co.za – for resources on governance and non-profit law: Excellent set of short videos and articles to guide you

www.nonprofit-network.org – a fantastic set of resources for non-profit social media and communications

www.askinyathelo.org.za – a whole site of tips, tools, guidance and resources covering the key skills areas for organisational sustainability

www.ngopulse.org/about – a great portal of information and resources in support of South Africa’s non-profit sector; almost a meeting place – with articles, issues, resources, jobs and opportunity listings and  more