Helen Starke KDS Consulting 11 September

Definition A trust, company or other association of persons established for a common purpose and the income and property of which are not distributable to its members or office-bearers except as reasonable compensation for services rendered.

Legal status Voluntary association Trust Section 21 Company Nonprofit Organisation Common law Common law and Trust and Property Control Act 57/1968 Companies Act 61/1973 (to be replaced by Companies Act 71/2008) Nonprofit Organisations Act 71/1997

Governance implications Public benefit focal point Board performance measured against focal point Board risk-averse Directors seldom paid directors’ fees Directors almost exclusively non-executive Ultimate compliance officer is recipients of service

Importance in SA Economy Employ full-time 60% women and 81 % black Leadership 59% women and 73% black 1.5 million volunteers worth R5.1 billion Income of R14 million

Standard-setting in sector Issued in terms of Nonprofit organisations Act 71/1997 King III Code and Non-profit Practice Guides In most developed countries issued by both government and others by sector themselves

King III Applying code and principles to non-profit sector – waiting for practice guidelines

Issued in terms of Nonprofit Organisations Act 71/1997 Governing Body Staff Leadership Financial management Accountability and transparency Ethical and responsible behaviour

Small totally-underfunded organisations Governing Body - Volunteers who also deliver services, informal meetings held, minutes seldom kept Staff Leadership - Possibly employ one or two staff Financial management - Very basic – records kept by volunteer who usually has no bookkeeping training, annual financial statements not audited Accountability and transparency - Struggle to achieve basic level of accountability, seldom issue annual report Ethical and responsible behaviour – Varies considerably, much conflict of interest Don’t even achieve basic level of governance

Large well-funded organisation Governing Body - Skilled and well-informed board and management, Company Secretary, Effective Board/Management division, Compliance with registration legislation and constitution Staff Leadership – Executive Committee, well-qualified CEO member of Board, well structured management level(s), HR Department, Marketing/ Public Relations Dept, Research Dept Financial management - Good financial management (some employ CA), Risk Manager and internal audit, audited financial statements Accountability and transparency - Accountability to stakeholders, issue annual report and hold public AGM, Effective and efficient programme delivery, Programme evaluation, Compliance with most relevant legislation Ethical and responsible behaviour – Conflict of interest policies applied, Code of Ethics

Medium sized, reasonably funded Governing Body – Board with varying skills, usually meets regularly and keeps minutes, Board/Management division not always well-defined Staff Leadership – Number of staff varies but usually have a staff member to whom other staff report. “CEO” often not Board member and doesn’t attend Board meetings Financial management – Have finance staff with some qualification and treasurer is hands-on board member, Funders often complain of poor accountability for funds spent Accountability and transparency – Publishes annual report, holds public AGM, efficient, but not always effective, programme delivery Ethical and responsible behaviour - Dedicated volunteers

Importance of medium-sized organisations in the sector As a group attract large sums of corporate, government and public funding and this will continue This group need expertise to assist in improving most aspects of governance to improve sustainability Important role for corporate sector

Discussion CIS Programmes Role of corporate sector Role of government What can non-profits themselves do to improve governance?