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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Ten things you might not know about South African Philanthropy: South African PhilanthroFacts 3

Gabrielle Ritchie | Director, The Change Room | 23rd May 2017

Many multiple months have passed since I wrote South African Philanthrofacts 1 and 2 (no need to check back!) – but better late than never is one of my life mottos, and it applies here too.  So this is South African Philanthrofacts 3!

PF 1 was about the common knowledge that “little is known about South African philanthropy” – so I provided ten possible sources that could be consulted and pursued so that we could find out more about this terrain.

PF 2 was about the politics of philanthropy and who benefits from the ever-changing and whimsical sympathies of the benefactors.  That piece looked specifically at summer fire-fighting in the Cape Peninsula area, and the politics of an incredibly successful radio appeal for funding support for fire-fighting.

The focus for South African Philanthrofacts 3 is TEN things you might not know about South African Philanthropy:

  1. The first-ever Chair in African Philanthropy has been established at the Wits Business School. Acknowledgement loudly goes to Dr Bheki Moyo and Southern Africa Trust, and Wits Business School, for pulling this initiative together.
  2. I am the first PhD student (actually, I might be the first student!) under the new Chair (Professor Alan Fowler). It is also the first Chair in Philanthropy on the continent.  Big FIRSTS.
  3. The Social Justice Initiative has been established to provide a smooth mechanism for South Africans (and others) to support social justice work with their philanthropic giving – including work around gender-based violence; women’s economic empowerment and other issues central to South Africa’s social development.
  4. There are a number of different estimates around the ZAR scale of private philanthropy in our country. The Independent Philanthropy Association of South Africa (IPASA), when it was still the Private Philanthropy Circle based at Inyathelo: The South African Institute for Advancement, estimated that it represented around R1.5billion (in 2014) in annual grant spend.  It is not possible to extrapolate this out because, although IPASA represents somewhere between 25 and 35 philanthropic entities, the number of formal donor foundations in South Africa is completely unknown.  I have been told verbally in passing (and am not able to reference this), that recent research has revealed that private philanthropy in SA is worth over R40billion annually – but I am reserving my right to see this as a bit of a stretch and I really look forward to being able to unpack that number.
  5. South Africans with disposable income don’t give enough. We don’t give enough. I often wonder what we are holding on to.  If we are not investing in our own social development, then who on earth is going to?
  6. There are ENDLESS incredible projects to support. If you have disposable funds or are thinking of investing some money in social development, let me know.  I would be delighted to point you in some right directions.  There is superb work happening in job creation and support for micro-entrepreneurs – such as The Big Issue (declaration: I am the Chair of the Board!); in education – for example, Partners for Possibility; in health – health-e news is one such project; working to expose and end corruption – such as Corruption Watch; to develop community-based health care projects – like NACOSA is doing nationally; standing for our rights as citizens to be able to access information – such as Right to Know and Amabhungane.  Really endless, people.  It is not hard to find a project or a cause.  But if you are struggling to decide where to invest, I would be more than happy to provide information and find you some good, reliable, dependable, hardworking, effective projects to support!
  7. While many speak of things changing rapidly in the philanthropy space, this is not really the case. There is mention, for example, of the potential for incredibly exciting shifts and wild innovation such as consulting directly with communities and activists on the ground.  Yes, apparently this is new and wildly innovative.  It is also something that has been discussed for years, and for which calls have been made by the very people living in communities and working on the ground.  So perhaps it is “new” because the philanthropists are finally hearing it?  Come, people – there needs to be a far smaller gap between what how we do philanthropy and how we KNOW we should do philanthropy.
  8. There are very few people talking much at all locally about philanthropy, funding, grantmaking, social justice and social development. To listen to those who are sharing their pearls, follow these folk on Twitter:  @RAITHFoundation | @SocialJusticeSA | @BerthaFN | @OtherFoundation | @Tshikululu | @bheki_moyo | @shelaghgastrow | and me on @philanthropiSA | If you know of others, please share!
  9. Personal philanthropy is still not much of a discussion topic, not amongst traditional white wealth in South Africa anyway. I think we might be stuck a bit in the British tradition of “we don’t discuss money… it’s impolite”.  But how grand would it be if we all spoke about what we invest socially, why we chose those causes and/or organisations, whether others know of good projects needing support, how we decide as individuals whether projects are support-worthy, what we think we can achieve with our particular investment choices.  Wouldn’t it be great? Wouldn’t it?!
  10. South African philanthropy is part of a much broader philanthropy space across the whole continent. As such, it is part of a growing conversation about practice, process, people, and pathways in giving money in support of a bigger social project.  It is exciting stuff – and these times will become ever-more interesting as our understanding of the breadth of practices of different kinds of philanthropies becomes more and more evident on the continent.

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 🙂

Cellphones, philanthropy and activism – legal rights, safe practice and backlash

 

cellphones philanthropy activism rights

Cellphones, philanthropy and activism

Gabrielle Ritchie, Director: The Change Room

10th May 2016

Its “Top Trend Tuesday” – so what is my top philanthropy trend for today? And are global trends reflected in local South African trends?

Let’s me establish up front that I take my lead from Lucy Berhnolz in terms of global philanthropy trends. Lucy Bernholz (Twitter @p2173) is a leading trends expert and produces an annual Blueprint for Philanthropy – an industry forecast.

A key trend in civil society, which impacts directly on philanthropy and grantmaking programmes, is the widespread use of cellphones. Lucy says in her Blueprint for 2016 that while internet-connected cellphones might be the key tool for filming injustice and for spreading activist messages and mobilising communities around a cause, it is clear that there are areas of knowledge and practice that must catch up with this. These include: knowledge about legal rights, safe practice and backlash, and also include an understanding and practice of ethical, safe and just use of such channels.

The question, then, is: how does/ will this affect philanthropy focus, grant areas, and donor practice? And are these same issues prevalent in South Africa?

Firstly, yes – the cellphone issue is global, and their use continues to grow as a tool for activism. Secondly, the lack of knowledge about rights, practice and the potential for backlash is just as applicable. The right to film police action, for example, is constantly being re-established by members of the public who get their phones confiscated on filming police action.

With regard to ethical, safe and just use of such channels – across social media – we have witnessed a spate of public idiocy in 2016, resulting in the vilification of a number of idiots who have thought it appropriate to share their racist vitriol on social media channels. The most recent example (that emerged on Sunday 8th May 2016) is the #Mabel Jansen/ #Gillian Schutte saga around Judge Jansen’s racist diatribe regarding rape.  In this instance, different to the many other examples, questions have been posed around the ethics of and agenda in sharing a “private facebook conversation”. This might be the wrong question – or at least an unfair one – because while Jansen has said the conversation was private, Schutte has said the conversation was very much a public facebook conversation.

If one’s activist agenda is to expose racism, though, what are the ethics around sharing conversations if one party believes the conversation is being held privately – even if that conversation exposes brutal social prejudice?  I don’t know the answer to this question, so if anyone has answers or thoughts or more questions, please share!

On the original question about what activists and funders know, in South Africa, about safe practice, legal rights and the spectre of backlash around the use of such comms tools – I don’t know the answer specifically, but I suspect that Lucy Berhnolz’s take for the USA applies in South Africa too: not enough.  It is time to learn, and to take this forward as a key public information-sharing knowledge area in South Africa.

For your own peek at Lucy Bernholz’s Blueprint for 2016, look here:

http://www.grantcraft.org/assets/content/resources/blueprint_2016_final2.pdf