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08 February 2017

Governance and BoardParticipation

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Third Sector Landscape - (Set the scene) NPO organisational structures –

(Understanding the difference) The concept of governance - (Explanation

and interaction) Roles and responsibilities and Standard of

conduct for directors - (Explanation andinteraction)

Board effectiveness - (Understand theboard performance expectation)

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“Give me now wisdom and knowledgeto go out and come in before thispeople, for who can govern thispeople of yours, which is so great?”

King Solomon

Source: MRB Bus ©

Responsible Governance

Vision Strategy

Funding Policy

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“Example is not the mainthing in influencing others.It is the only thing”. AlbertSchweitzer

Board ofDirectors

ResponsibleStewardship

GovernmentR --- Billion ?

IndividualsR --- Billion ?

Corporate SAR --- Billion ?

Lottery & otherR --- Billion ?

IMPACT - OUTCOMES

Sectors &Issues

4 : 1 (Social Return on Investment)

Stewardship

www.thirdsector.co.za

Responsible stewardship is being used more

frequently by informed social impact

investors

A new relationship begins when a gift is made

Donors like to know their gift has made an

impact

Donors like to hear from an organisation

between asks

Stewardship

www.thirdsector.co.za

Stewardship is a key step to the development

process – the one that ensures future gifts. This is

core critical to stakeholder engagement

Understanding donor motivation (giving back, peer

pressure, etc) can guide your stewardship

practices so that they fit the donors needs and

preferences

Board members are key players in stewardship,

and in all steps of the development process.

Third SectorLandscape

Set the scene

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That part of an economy or societycomprising non-governmentaland non-profit-makingorganisations or associations,including charities, voluntary andcommunity groups, cooperatives,etc.

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Type of Organisation

Number of RegisteredNPOs as indicated in

the DSD report 2012/13(March 2013)

Number of RegisteredNPOs as indicated in the

DSD report 2014/15(March 2015)

Number Percentage Number Percentage

Old Section 21 (New NPC’s) 3069 3 8187 6

Non-profit Trust 2046 2 1364 1

Voluntary 97182 95 126902 93

Total 102297 100 136453 100

Registered NPO’s as at 01/08/16

Current total registered 169 084

De-Registered NPOs 250

Total Applications in Progress640

MRB Bus ©Source: DSD State of NPOs report

2014/15 (March 2015)

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Source: DSD State of NPOs report2014/15 (March 2015)

NPOorganisational

structures

Understanding thedifference

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A Nonprofit Organisation (NPO) isdefined as: a Voluntary Association,Trust or Company:-◦ Established for a public purpose, and◦ the income and property of whichare not distributable to its membersor office bearers except asreasonable compensation forservices rendered.

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LEGAL ENTITY VoluntaryAssociation Nonprofit Trust Nonprofit

Company

OFFICE OFREGISTRATION No registration Office Master of High

Court

Companies andIntellectualProperties

Commission(CIPC)

REGULATINGLAW Common Law

Common Law &Trust Property

Control Act 57 of1988 as

amended (Non-profit Trusts)

Companies Act71 0f 2008

GOVERNANCESTRUCTURE

Steering/ManagementCommittee and/orGeneral Members

Board of TrusteesBoard of

Directors and/ormembers

REGISTRATIONREQUIREMENTS

A completed NPOapplication form andtwo signed copies ofthe Constitution

A completed NPOapplication form

and Deed ofTrust/Trust

Deed

A completedNPO application

form andMemorandum

ofIncorporation

FOUNDINGDOCUMENTS Constitution Deed of Trust Memorandum of

Incorporation

Regulatory Frame work

NGO/FBO/CBO/CSO

Traditional informalrooted in

communities &generally lack

capacity & access toresources.

Old Section 21 Companies and new NPC’s– (New Companies Act 71 of 2008)

Nonprofit Trusts- Common Law & Trust PropertyControl Act 57 of 1988 as amended (Non-profit

Trusts)

Voluntary Associations – (Common Law)

NGO/NPT/NPCGenerally larger

sophisticated urbanbased conventionalO.D. Systems & allrelevant skills &

capacity

Nonprofit Organisation Act 71 of 1997(All have to meet the same compliance

requirements)

Public Benefit OrganisationsSARS - Income Tax Act

(Tax exemption Including : Section 10(1)(cN) Trading Rules –Partial Taxation of Trading receiptsand Section 18 A)

The conceptof governance

Explanation andinteraction

Corporate SAR --- Billion ?

Lottery & otherR --- Billion ?

Board ofDirectors

Sectors &Issues

ResponsibleStewardship

GovernmentR --- Billion ?

IndividualsR --- Billion ?

IMPACT - OUTCOMES

4 : 1 (Social Return on Investment)

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It relates to decisions that defineexpectations, grant power, or verifyperformance. It consists either of aseparate process or of a specific partof management or leadershipprocesses.In the case of a business or of a non-

profit organisation, governance relatesto consistent management, cohesivepolicies, processes and decision-rights for a given area of responsibility.

(Wikipedia)

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Since governance is the process ofdecision-making and the processby which decisions areimplemented, an analysis ofgovernance focuses on the formaland informal actors involved indecision-making andimplementing the decisions madeand the formal and informalstructures that have been set inplace to arrive at and implement thedecision.

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Outreach: scanning for trends, needs,expectations, problems

Stewardship: ensuring vision and evolution Oversees operational structure and

operations: ensuring accountability,responsibility, policy implementation, operationaleffectiveness, financial sustainability

Ambassadorial and legitimising: promotion,networking, representation

Self-reflection and assessment: internalreviews, trust-building

Source: Bradshaw, Hayday & Amstrong

Roles andresponsibilities

and Standard ofconduct ofDirectors

Explanation andinteraction

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Vision

Mission

Strategic Priorities

Goals

Operations

BOARDAdopts/Owns

MANAGEMENTImplements

NB. Board and Management work together to define strategic priorities, which are owned by theBoard and implemented by Management, within the Executive limitations (Policy, procedures,

approval frameworks, delegation of authority etc), set by the Board .

Based on the Carver model

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Determine mission and purpose Set the strategic priorities Select the chief executive Support and evaluate the chief executive Ensure effective planning Monitor and strengthen programs and

services Ensure adequate financial resources Protect assets and provide financial

oversight Build a competent board Ensure legal and ethical integrity Enhance the organisations public standing

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Ensures that thecompany/organisation operates withinits objectives and powers.

Is ultimately responsible for theOrganisation.

Is appointed by Incorporators at theAGM. (if incorporated with Members)

Must retain full and effectivecontrol over the company.

Must ensure that material mattersremains in the hands of the Board.

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The Board meets regularly and all directorsto attend

Ensure that a Company Register, notices,Agenda and Minutes to be used for meetings

Quorum and voting protocol is set out inMoI, Trust deed, Constitution

Collectively the Board is responsible for:o The strategic plan including budget and

operation’s plano Adequate funds for the Company’s plans

and operationso The annual financial statements and

Trustee/Director’s report

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Adequate system of operational and financialcontrols

To appoint a Senior Manager with adequatepowers of authority & approval frameworks

Ensure that the company operates responsiblyand within the spirit and letter of theCorporate Governance Code

Provide effective leadership based on anethical foundation

Identify internal and external stakeholdersand develop an appropriate communicationspolicy

Meet the fiduciary requirements of the PublicFinance Management Act, etc. (If required)

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Adequate system of operational and financialcontrols

To appoint a Senior Manager with adequatepowers of authority & approval frameworks

Ensure that the company operates responsiblyand within the spirit and letter of theCorporate Governance Code

Provide effective leadership based on anethical foundation

Identify internal and external stakeholdersand develop an appropriate communicationspolicy

Meet the fiduciary requirements of the PublicFinance Management Act, etc. (If required)

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CORE DOCUMENTS & POLICIES(Uphold. Recommend and Approve / Endorse)

RISK

OVE

RSIG

HT(A

ppro

ve /

End

orse

Top

Ris

ks, ,

Mon

itor &

Rev

iew)

STRATEGY(Input, ‘Ownership’, and Approve / Endorse)

ACCOUNTABILITY(Approve / Endorse Plans , M

onitor,Uphold Decision

Rights)

Management cango anywhere

within theparameters,

withoutinterference from

the governingbody

If managementbreaches any ofthe parameters,the governing

body must takeeffective

remedial action

The governingbody and

managementmust respect and

support thedistinct role of the

other

Boardeffectiveness

Understand theboard

performanceexpectation

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King III, Principle 2.22: The evaluation of theboard, its committees and the individual directorsshould be performed every year.

DSD’s Code requires the governing body tomeasure its own performance and more specificallythat ‘every two or three years the governingbody should give itself an opportunity to examineits own progress and performance. This is mosteffective if each governing body member joins theorganisation with an agreed standard ofperformance or job description in place.

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Refers to the quality of performance of the Boardnot only in meetings, but also in their term of office.

Board effectiveness begins with selection andappointment of the right people, with the right skills,for example finances, HR and business.

Motives such as self-promotion, visibility ornetworking will not be sufficient reasons.

Selection of Directors must be planned and wellmanaged by the Members.

Board Directors will only be effective if they do notrepresent the interest of participating organisations butonly focus on the aims and objectives of theCompany.

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Attend all meetings Positively address matters before them Fully participate in deliberations Continuously strive to be fully informed on

any matter/issue relating to the Company Abstain from political behaviour, including

Party-, Local-and Corporate Politics Act with utmost sincerity and integrity Open up their sphere of influence to

enhance the development and fundraisingefforts of the organisation

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Respect the value of democratic butresponsible contribution by others

Respect the role of the Chair as guardian ofthe process

Avoid personalising debates Place a high value on trust Respect the right of the Chair to manage

priorities Honour and abide by final decisions of the

Board, even if a person does not agree withthe decision

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Progress can be measured at an evaluationworkshop, or by interviews with eachmember conducted by the chairpersonand/or the CEO. Minimum criteria againstwhich performance can be measured couldinclude: knowledge of the organisation;commitment to the organisation; influencein the client or donor community; ability togive; willingness to work.’ A peer and selfevaluation process could also beimplemented.

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Considerations5

VeryGood

4Good

3Ave.

2Fair

1Poor

1board has full and common understanding of the rolesand responsibilities of a board

2board members understand the organization's missionand its products / programs

3structural pattern (board, officers, committees,executive and staff) is clear

4board has clear goals and actions resulting fromrelevant and realistic strategic planning

5board attends to policy-related decisions whicheffectively guide operational activities of staff

6board receives regular reports on finances/budgets,products/program performance and other importantmatters

7board helps set fundraising goals and is activelyinvolved in fundraising (nonprofit-specific)

8board effectively represents the organization to thecommunity

9board meetings facilitate focus and progress onimportant organizational matters

10board regularly monitors and evaluates progresstoward strategic goals and product/ programperformance

11board regularly evaluates and develops the chiefexecutive

12board has approved comprehensive personnel policieswhich have been reviewed by a qualified professional

13each member of the board feels involved andinterested in the board's work

14all necessary skills, stakeholders and diversity arerepresented on the board

Source: Carter McNamara, AuthenticityConsulting.

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Way forward

This session was prepared with you in mind: the‘fundraisers of non-profit organisations that wants toimprove the Boards engagement and it’seffectiveness in fundraising.

As you implement the techniques and discuss itsconcepts along with the information shared fromtodays other sessions, consider it all, as theplatform for building this essential boardfunction.

www.thirdsector.co.za

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Is your organisations governing bodyready to actively support its businessdevelopment and fundraising strategy?

Are there critical governance issuesrequiring attention before this happens?

Have you identified the key stakeholdersyou wish to engage with?

What unique value proposition will yourorganisation offer donors/funders?

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What is the primary objective for yourorganisation to raise funds?

What is your funding stream profile? Does your governing body skills matrix

and succession plan cater for this?

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www.dsd.gov.za/npo/ www.npo.gov.za www.cipc.co.za www.iodsa.co.za www.thirdsector.co.za www.nonprofitlawyer.co.za www.sangoco.org.zaIMPORTANT:

The information contained in this presentation does not necessarily represent theopinion of Third Sector Insights NPT (TSI), MRB Bus, or the authors. The contents do notconstitute advice on the topics covered. While reasonable care has been taken to ensurethe accuracy of the information, TSI and MRB Bus expressly disclaims all and any liabilityto any person, relating to anything written or omitted to be written or to theconsequences thereof in reliance upon the contents.