Half of nonprofits don’t obey the law
The Department of Social Development (DSD) says only half of the more than 250,000 registered nonprofit organizations comply with legal requirements.
In one declarationthe department said there had been an increase in public complaints about conflicts with the board of directors and leaders of nonprofit organizations and about financial mismanagement.
“To ensure good governance, accountability and transparency, nonprofit organizations are required to maintain financial records and submit annual reports,” the DSD said.
During a virtual compliance chat on Wednesday, DSD’s Mpho Mngxitama reminded organizations that reporting is required by the NPO Act.
Mngxitama said many organizations have failed to maintain adequate standards of governance, transparency and accountability in terms of law.
Nazeema Mohamed, executive director of Inyathelo – which provides governance training to nonprofits – said she found many board members did not understand their role.
She said insufficient attention was paid to risk management and boards often did not build up financial reserves or assess their own performance.
“There is a confusion of roles, so councils become operational when they should only have a supervisory role, and this leads to conflicts. The various portfolio holders in the boards also do not fully understand their responsibilities,” Muhamed said.
She said members “often don’t realize that there are real-time commitments to serving on a board.” Therefore, the main responsibilities are often carried by one or two people.
Tania Lee of the South African Institute of Business Accountants (SAIBA) said: “It is the fiduciary duty of the board to be fully aware of the income and expenditure of the organization. If the board doesn’t know where the funds are coming from and where they’re going, they should be fired,” Lee said.
During a “Know Your Nonprofit Status” campaign in November 2020, DSD Minister Lindiwe Zulu announcement that the delisting of non-compliant NPOs would take place in four phases, starting in April 2021.
GroundUp and the Limpopo Mirror have frequently reported how non-profit organizations are used in corrupt deals involving the National Lottery Commission.
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