This collation includes links to best practice guides, codes of conduct, and the related different obligations of NPCs, Trusts, and NPOs.
COMPANIES (incl. NPC)
Duties of company directors
(Summary by Deloitte):
Related Deloitte article, to share with non-affected colleagues (to assist colleagues to support one another):
Obligations of Trustees
Trustee obligations universal to all Trusts in South Africa:
Code of Good Practice for South African NPOs
(Issued by the Department of Social Development, 2001):
“Supports the CEO and reviews his or her performance: The head or chief executive officer (CEO) of a non-profit organisation, whether it be a volunteer or full-time position, has to report to the governing body. The CEO is expected to make regular reports on progress of the organisation’s service and fundraising activities, the administration and financial management processes and the implementation of the organisation’s plans. The CEO needs the moral and concrete support of the governing body…
Ensures effective organisational planning: Governing body members must be involved in the planning processes of the organisation; defining its desired future and the means to bring it about. They are responsible for deciding and reviewing the organisation’s mission, and what result/s the organisation aims to achieve to fulfil its mission; selecting the functions and specific programmes, both service and support, the organisation will need to implement to achieve these results…
In order to do this the governing body should ensure that: There are values that guide the organisation; there is a long-term vision for the organisation’s future; there is a clear definition of the work the organisation does; there is a description of the results expected from the organisation’s work over the planned period; there is an annual operating plan and budget (both income and expenditure) in place; the progress towards implementing the plan is monitored and regularly evaluated. Large NPOs might appoint a planning committee to take responsibility for this activity.
Ensures the organisation has adequate resources: A non-profit organisation is only as effective as it has resources to meet its purposes. Providing adequate resources is a governing body responsibility. In larger organisations the fundraiser might not be a governing body member, but the body gives full support to the fundraising processes. It is through the governing body that large potential donors are influenced. Members should be able to provide contacts in areas of the market with funding potential. To do this effectively they themselves must be financially committed to the organisation. They must establish an annual income plan; monitor the income progress regularly…
In order to fulfil this responsibility the governing body members should be informed about the organisation’s markets – beneficiaries, clients, supporters etc. In larger NPOs this could mean taking an interest in market research, market planning, product development, packaging and distribution, pricing, promotion, sales, communications and public relations.
At the very least the governing body should know how effectively and efficiently the organisation is serving or reaching these markets. They should ensure that an annual report is prepared.”
B: The Independent Code of Governance for NPOs in South Africa
(Published by the Working Group on The Independent Code of Governance for Non-profit Organisations in South Africa, c/o Inyathelo – The South African Institute for Advancement, 2012):
Ensuring good leadership in six key areas:
- Vision, purpose and values
- Accountability and transparency
- Fundraising, sustainability and risk management
- Collaboration and synergy
- The Board and other governance structures; and
- Procedural governance.
“To acknowledge the existence and importance of other Codes, including the Department of Social Development NPO Code, the King IV Code, and the South African NGO Coalition Code, insofar as they may be relevant to particular organisations.
“While affirming the critical responsibility of the Board, there are other stakeholders of an NPO who also bear a share of responsibility, and they too must play their part in ensuring that effective governance takes place. These stakeholders include an NPO’s members (where applicable); employees; volunteers and donors.”
SARS: Public Benefit Organisations
The (annual reviewable) registration of Public Benefit Organisations (PBOs) by the SA Revenue Service (SARS) is usually in addition to other forms of registration held by that entity.
PBO status can be lost if any of the other applicable registrations are not in good standing.
SARS have made the PBO-registration requirements easy to work through in these guides:
Tax Exemption Guide for PBOs in South Africa:
The recommendations of the “King Committee” of the Integrated Reporting Committee of South Africa, Institute of Directors SA, were published in January 2011 and subsequently updated.
These reporting proposals helped to further standardise public reporting by both public entities and private companies in SA.
This “integrated reporting” leads entities to “comply or explain”, and it is aspirational.
COMPANIES and King IV
- A set of voluntary principles and leading practices.
- Drafted to apply to all organisations, regardless of their form of incorporation.
Sector supplements explain how the King IV Code should be applied by certain organisations/sectors.
- Proportionality is explained and advocated.
- King IV focuses on outcomes. The King IV Code’s principles and practices are linked to desired outcomes, therefore articulating the benefits of good corporate governance.
- The Code differentiates between principles and practices. Principles are achieved by mindful consideration and application of the recommended practices.
- ‘Apply and explain’ regime (as opposed to ‘apply or explain’ regime in King III).
- ‘Corporate governance’, for purposes of King IV, has now been defined.
Key new or enhanced features of King IV relate to:
- Fair, responsible and transparent organisation wide remuneration
- Responsible and transparent tax strategy and policy
- Balanced composition of governing bodies and independence of members of the governing body
- Delegation to management
- Delegation to committees
- Corporate governance services to the governing body
- Performance evaluations of the governing body
- Audit committee disclosures
- Risk governance
- The combined assurance model
- Social and ethics committee
- Performance evaluations
- Responsible institutional investors; and
- Technology and information.
TRUSTS and King IV
Again, King Committee reporting guidelines and logic should inform public reporting of Trusts, where those Trusts are charitable trust for a public benefit.
NPOs and King IV
Although the King Code is wide enough to deal with the most complex of corporates, it may also be usefully employed as a tool by NPOs to:
- Assess their governance processes against best practice standards
- Assess potential risk
- Develop strategies to build organisational resilience; and
- Provide assurance to funders that governance principles have been considered and implemented, where appropriate.
Institute of Directors of SA – points to consider in integrated reporting:
- Does the governing body ensure that the organisation has implemented a system of review and authorisation designed to ensure the truthful and factual presentation of its financial position?
- Does the governing body include commentary on the organisation’s financial results in the annual integrated report? Does the governing body disclose in the organisation’s annual integrated report whether the it is a going concern and will continue to be a going concern in the year ahead; and if there is concern about the going concern status, the reasons therefore and the steps the organisation is taking to remedy the situation?
- Is a remuneration report included in the annual integrated report?
- Does the organisation disclose whether the chairperson is an independent non-executive governing body member, and if not, the reason for this?
- Does the report disclose the nature of the organisation’s dealings with stakeholders and the outcomes of these dealings?
- Does the report disclose an overview of the appraisal process of the governing body, governing body committees, individual governing body members; the results of this appraisal process; and action plans emanating from results of the appraisal?
- Does the governing body disclose the number of meetings held each year by the governing body and each governing body committee; and which meetings each governing body member attended (as applicable)?
- Does the report disclose whether the governing body committee has satisfied its responsibilities for the year in accordance with the formal terms of reference?
- Does the report disclose the names and qualifications of all members of the governing body committees during the period under review, and the period that each member has served on the committees?
- Does the report include a statement on whether the governing body is satisfied that the auditor or independent reviewer is independent of the organisation?
- Does the report include commentary on the financial statements; the accounting practices; and the internal financial controls of the organisation?
NPO reporting: accountability and transparency
(Institute of Directors SA, addressing NPOs):
“A critical responsibility of the Board is to ensure commitment to accountability and transparency. The way in which an organisation addresses this basic responsibility is an important indicator and barometer by which it will be evaluated and judged.
“The Board must ensure that there is effective and transparent financial reporting; and it must satisfy itself as to the existence of adequate financial systems and controls. Within a reasonable time (not exceeding six months) following the end of each financial year, an organisation should prepare, publish, and present its annual financial statements, which should be either professionally audited, or at least reviewed by an independent person, in the way described in the Companies Act.
“Such statements should include, as a minimum, a statement of financial position; a statement of comprehensive income; a statement of changes in reserves; and a statement of cash flows (with comparative figures for the preceding financial year). For small organisations, a statement of financial position accompanied by a statement of income and expenditure (with comparative figures for the preceding year) may be adequate. However, in the absence of an audit, an independent review of financial statements is essential.
“The Board’s duty of accountability and transparency is not restricted to the financial situation of an organisation, but includes its duty to give an account of its programmes and activities, including the way in which it has sourced and applied its funds; the measure of its impact, including both failures and successes; and its plans and proposals for the future. It should also be concerned with respect to the organisation’s environmental impact, and its compliance with relevant laws and regulations. This duty requires open and honest communication with stakeholders…
“Part of the Board’s responsibility is to ensure that the organisation communicates effectively with its various stakeholders, including donors and members. Depending on the size of the organisation, the nature of its activities, and the extent of its resources, this may require periodic project and programme reports; the establishment and maintenance of a website; the publication of newsletters; and the prompt and efficient handling of correspondence and other communications…”
- Compiled by WHAM! Media, February 2020. This collation provides a limited introduction to elements of governance and reporting in the social development field.