13 things your Board must know about your NPO

Gabrielle Ritchie | Director, The Change Room | 21st 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)

  1. 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.

  1. 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!)

  1. 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.

  1. 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.

  1. 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.

  1. 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).

  1. 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).

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

Code 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

 

 

 

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

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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?

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 Gabrielle Ritchie, Director: The Change Room

9th 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