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Governance in the non-profit sector. Helen Starke KDS Consulting 11 September 2009 Definition.

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governance in the non profit sector

Governance in the non-profit sector

Helen Starke

KDS Consulting

11 September 2009


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
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
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
Importance in SA Economy
  • Employ 645 316 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
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
King III
  • Applying code and principles to non-profit sector – waiting for practice guidelines
issued in terms of nonprofit organisations act 71 1997
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
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
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
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
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
  • CIS Programmes
  • Role of corporate sector
  • Role of government
  • What can non-profits themselves do to improve governance?