Governance guide for troubled NPO sector

The Institute of Directors in Southern Africa (IoDSA) has launched a just in time initiative that may strengthen the South African Non-Profit Organisations (NPO) sector by releasing a Practice Note on the Application of King III corporate governance principles for the sector.

The release comes a few days after the NPO sector was pushed into a serious governance crisis. This is after news that the department of social development, a defector regulator of the sector, had deregistered 36488 NOPs and listed a further 35204 as non-compliant. The department said its action was caused by non compliance to governance regulations but there were counter claims from the sector that government was engaged on a campaign to silence critics from the sector.

Government’s act was likely to cause thousands of NGO’s who are engaged in critical social and community development work to be non fundable, as donors will be reluctant to deal with unregistered entities.

In a statement announcing the King III Practice Notes for the sector, the IoDSA said NPOs play an important role in addressing the poverty and inequality that continue to plague South Africa. “The IoDSA wanted to help it (the NPO sector) benefit from the integrated governance framework proposed in King III. It was also clear that the non-profit sector faced unique challenges”.

“We undertook this project because the non-profit sector is so important in a developmental state like South Africa,” said Prof Mervyn King, chairman of the King Committee. “King III has a vital role to play in helping non-profit organisations secure vital funding: donors are increasingly demanding that organisations receiving funding adhere to accepted standards of good governance.”

The IoDSA added that “Uniform governance standards also facilitate the assurance procedures by auditors that donors insist on prior to making donation decisions”.

The organisation said the King Code for Governance for South Africa 2009, has achieved international recognition for providing South African business with an integrated governance framework that will help it manage better the wide range of risks in today’s integrated business environment. This new Practice Note gives NPOs clear guidance as to how they too may benefit from King III’s principles to achieve sound governance, and so discharge their mandates more effectively.

The orgasination said the Practice Note makes it clear that King III is aspirational and that perfect implementation is expected to be a journey. “Non-profits have considerable flexibility when it comes to deciding which principles would advance their goals—the option exists to explain why they cannot, or do not wish to, apply individual principles. This flexible approach also takes into account the reality that the sector spans a wide range of organisational types, from well-funded multinational organisations to informal community groups. The key is to use King III in a way that advances each organisation’s goals”.

“Non-profit organisations should not see this Practice Note, nor King III for that matter, as a compliance hurdle, but rather as a tool that they can use to improve their ability to source funding and support for their causes,” Ansie Ramalho CEO of the IoDSA concludes.

The Practice Note was produced after the King III Committee appointed a sub-committee to research the matter and consult extensively. The draft Practice Note was then released for public comment in August 2012, and the final version takes into account the feedback received.

The Practice Note makes references to other codes, including the South African National NGO Coalition’s Code of Ethics for Non-profit Organisations (1997), the Department for Social Development’s Code of Good Practice for South African Non-profit Organisations (2001), and the Independent Code of Governance and Values for Non-profit Organisations in South Africa (2012). “As a result, it provides extensive guidelines that are geared to the specific governance and risk management needs of the non-profit sector”.


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