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Uganda, Kenya & Tanzania Delegations

WELCOME08 July 2008

Nonprofit Organisations Directorate

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Content• Introduction & Profile of sector• The legal Framework

– Nonprofit Organisations Act • Registration process• Monitoring & Compliance• Access to Information • Capacity Building

• Research Projects– Impact Assessment on the NPO Act

• Conclusion

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A Profile of South African NPO Sector

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Defining an Nonprofit OrganisationEncompasses trusts, companies and other associations that are

“established for public purpose” and that “the income and property of which are not distributable to its members or office-bearers except as reasonable compensation for services rendered” (sec 1 of the NPO Act)

………in other words,

• community based organisations (CBOs)

• Nongovernmental Organisations (NGOs)

• faith based organisations (FBOs)

• civil society organisations (CSOs)

all collectively known as NPOs.

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NPO Sector Profile: Size

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Total income R14 billionGovernment provides R5.8 billion (42%) R500 million from overseas development

assistanceSelf generation (fees, sales, membership dues)

29%Private sector donations (25%)

NPO Sector Profile: Income

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NPO Sector Profile: Location

87% based in communities8.7% provincially based4.5% national

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NPO Sector Profile: Financial

11% no financial resources 77% had revenues of less an R250 K 8% had revenues between R250 K -

R1m 4% revenue exceeding R1m

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Nonprofit Organisations Act

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The Purpose of the Act• The NPO Act was enacted in 1997, it aims to

(section 2)-(a) creating an enabling environment within which

NPOs can flourish.(b) establish an administrative and regulatory

framework within which NPOs can conduct their affairs.

(c) encourage NPOs to maintain adequate standards of governance, transparency and accountability and to improve those standards.

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Cont… Purpose

• Repeals the Fund- raising Act of 1978– Regulated and control the funding of

organisations- • Particularly to ones that were considered

potentially subversive to then apartheid regime.

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Cont… Background to the Act

• South African Civil Society were highly involved in drafting the current legislation.

– Culminated from the September 1996 conference on- “An enabling framework for civil society in Southern Africa.”

– There were also other different interactive mechanisms and forums with the sector.

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Cont…Background to the Act• The Legislation is rooted in the fundamental principles

of human rights culture as reflected our country’s constitution-

– Right of freedom of-• Expression and of association;• Religions, belief and opinion;

• The legislation serves mainly- – To provide a Registration Facility for organisations that are

nonprofit in orientation and are not organs of the state;• Enables an organisation to establish itself as body corporate.• Regulates how this entity operates and account broadly to its

community and the public.

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Sec 21 Companies (Companies Act of 1973)

Trusts (Trust Property Control

Act of 1988)

Voluntary Associations (Common Law)

Nonprofit Organisations Act 71 of 1997(All have to meet the same compliance requirements)

Public Benefit Organisations(Tax Exemption Status incl. skills development levies)

Regulatory Framework on NPOs

Large, sophisticated predominately urban based with conventional Organisational Development Systems. Mostly have all relevant skills & capacity

Traditionally informal organisations rooted in communities. Often lack capacity & access to resources

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Functions of Directorate• The Department has established a Directorate in terms

of section 4 of the Act. • Main functions of this Directorate is to (sec 5)-

a) Facilitate the process for developing and implementing policy;

b) Determining and implementing programs, incl programs-(i) To support nonprofit organisations in their endeavour to register; and (ii) To ensure that the standard of governance within nonprofit

organisations is maintained and improved.

c) Liaising with other organs of state and interested parties; andd) Facilitating the development and implementation of multi-

sectoral and multi-disciplinary programs

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Organogram of DirectorateDIRECTORATE: NONPROFIT ORGANISATIONS DIRECTORATE

PURPOSE: To encourage and support non profit organisations in their contribution to meet the diverse needs of the population needs of the country

FUNCTIONS: Develop Institutional Capacity Building Programmes.Administer an efficient registration facility.Database management and stakeholder liaison.

SUB-DIRECTORATE: NPO CAPACITY BUILDING

PURPOSE: To develop capacity building programme.

FUNCTIONS:Institutional capacity strengthening.Improvement standards of governance.Benchmark good practices.Assist provinces and local government to support NPOs.

SUB-DIRECTORATE: NPO CAPACITY BUILDING

PURPOSE: To develop capacity building programme.

FUNCTIONS:Institutional capacity strengthening.Improvement standards of governance.Benchmark good practices.Assist provinces and local government to support NPOs.

SUB-DIRECTORATE: REGISTRATION FACILITY

PURPOSE: To maintain an efficient administrative facility for registration.

FUNCTIONS:Register Organisations in terms of the NPO Act..Monitor registered organisations in terms of the Act.Liaison with Law enforcement agencies for criminal investigations on non compliance offences.

SUB-DIRECTORATE: REGISTRATION FACILITY

PURPOSE: To maintain an efficient administrative facility for registration.

FUNCTIONS:Register Organisations in terms of the NPO Act..Monitor registered organisations in terms of the Act.Liaison with Law enforcement agencies for criminal investigations on non compliance offences.

SUB-DIRECTORATE: DATABASE MANAGEMENT & STAKEHOLDERS

LIAISON

PURPOSE: To create an environment within which the public access information on registered organisations. .

FUNCTIONS:Manage and maintain an efficient database of all registered organisations. Preserve documentations of registered organisations. Facilitate public access to records of organisations. Maintain an interfaced online public platform.Manage a call centre.

SUB-DIRECTORATE: DATABASE MANAGEMENT & STAKEHOLDERS

LIAISON

PURPOSE: To create an environment within which the public access information on registered organisations. .

FUNCTIONS:Manage and maintain an efficient database of all registered organisations. Preserve documentations of registered organisations. Facilitate public access to records of organisations. Maintain an interfaced online public platform.Manage a call centre.

Total number of 29 Staff members

Five Staff members

18 Staff member Three Staff members

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Conti…Organogram

NPO Registration & Compliance

NPO Capacity Building

NPO Directorate

NPO Database

Management

New Applications

Monitoring &

Compliance

Institutional Strengthening

Bench-marking

Online Database

Contact Centre

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Registration Process

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S.13 of NPO Act state that…. (1) A non profit organisation may apply for registration by –

(a) Filling in a prescribed form;(b) Two copies of founding document;(c) Any information to assist in determining whether the organisation meets the requirements.

Requirements for Registration

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Requirements for registration of NPOs (S12)

1. Any organisation that is not an organ of states may register.2. Unless the laws in terms of which an NPO is established make

provision for the matters in subsection 12(2), the founding document of the NPO that intends to register must have all required provisions as stipulated.

3. Written document (founding document) establishing an organisation. For example:- founding document (for voluntary association of persons) - memorandum and articles of association (for a Sec 21 company)

- trust deed (for a Trust)

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Registration Requirements (section 12(2))

New Applications are scrunitised: the application form

• the name of the organisation

• the physical address of the organisation

• the financial year end on the application form

• the particulars of the office bearers

• the details of the contact person including his/her signature

New Applications are scrunitised: the founding document

•Consistency with objects

•Composition of office bearers

•Dissolution undertakings

•Amendment Clause

•Legal Persona

•Property and Income Clause

•Financial Year End

•Decision making process

•Other relate conditions as stipulate in section 12 of the Act

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Act

ivit

ies

Key Actions The application

is record on central data by capturing the name of organisation and date on which it was received within the Department.

Quality ControlData Captured Assessment of

ApplicationSection 12

Recording of receipt of Application

Application is assessed against the requirements of section 12.

Applications declined are referred to back to the applicants & advising how to meet the requirements.

Those that meets the requirements are processed to the next level.

The information of organisations who have met the requirements are captured on the database. This include the list of the office bearers, the physical address of the organisation, the financial year end and the contact details of the contact person

Once all the information of the organisation has been captured on the database, the information is checked and the organisations status is changed to approved and send for the issuing of a certificate of registration.

The organisation is registered by issuing of the certificate of registration. The name of the organisation is added to the register of registered organisations. A certified copy of the founding document is also returned to the organisation.

Registration of Application Section 15

Registration Business Process

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Cont… Assessment of Applications

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Cont… Assessment of Applications

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Data capturing

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11082 10028

3097997

0

5000

10000

15000

Applicati

ons Rec

eived

Applicati

ons to be Proce

ssed

NPO's Reg

istered

Incomplete Applic

ations

Number of Applications

Data on New Applications

Of the Applications Assessed 80% (or 3097) were Accepted &

20% (or 997) were Rejected

Statistics are for the six month periodSeptember 2008 to February 2009

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MONITORING &

COMPLIANCE

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Compliance with the legislation

• NPO Act Sections 17 & 18 prescribes that:- all registered organisations must supply the

NPO Directorate with an annual report within 9 months of the end of its financial year.

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Accounting Records & Reports

Department of Social Department of Social DevelopmentDevelopment

(s17) Prescribes that: organisations must keep accounting records to

the standard of GAAP: Income and Expenditure (statements) Assets and liabilities (balance sheet)

Arrange written report compiled by an accounting officer.

Preserve each of its books of accounts, supporting vouchers, records of subscription.

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Duty to provide Reports and info

Department of Social Department of Social DevelopmentDevelopment

(s18) Prescribes that: organisations must; in writing provide:

1. Narrative report of its activities2. Financial statement

2.1 Accounting Officer’s report

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Duty to provide Reports and info

Department of Social Department of Social DevelopmentDevelopment

1. Narrative:

•Office bearers

•Contact details

•Id numbers

•Telephone numbers

•Number of meetings

•Annual General meetings

2. Financial:•Assets and Liabilities – balanced•Closing balance correspond with opening balance•Income and expenditure statement

3. Accounting Officer:• Expressed opinion on record keeping •Professional registration status

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Act

ivit

ies

Key Actions Database shows

organisations due to send reports

If the reports are not submitted within the 30 days.

the organization is deregistered and

a deregistration letter is sent to the organisation.

Appeal against De-registration

Sec 22De-Registration

Non-ComplianceSection 30

Monitoring

Letters of Non-compliance.

Notice allow for 30 months to compliance

Cancel the certificate.

Send-out cancellation letter and informing the organisation of its rights to appeal.

An organisation may refer the decision to be considered by arbitration Tribunal

Tribunal consider within 3 months and send a written notice of its decision.

Tribunal may uphold the appeal

ReinstatedAppeal denial.Organisation is

advice on corrective measures it ought to take.

Execute Arbitration Decision

Monitoring & Compliance

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Of the 2954 Reports Scrutinised Only 1179 (or 40%) of NPO’s

Were Deemed Compliant

44508

36570

7938

0

10000

20000

30000

40000

50000

NPO'sRequired to

SubmitReports

NPO's NOTSubmitting

Reports

NPO'sSubmitting

Reports

Number of NPO's

Data on Monitoring & Compliance

82% of NPO’s that are Required to Submit Compliance Reports have

Not Submitted their Reports

Statistics are for the six month periodSeptember 2008 to February 2009

That mean only 18% of NPO’s have Submitted theirCompliance Reports

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Voluntary Deregistration

(s23) An organisation may voluntarily deregister

by sending a written notice A report from previous financial year

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Access to Information

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Access to information

• Section 24 of this Act obligates the directorate to keep a register of:– all nonprofit organisations that have been

registered;– all nonprofit organisations whose registrations have

been cancelled; and– all nonprofit organisations that have voluntarily

deregistered or have been wound up or dissolved.

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NPO DBASE

• Information on registered organisations is captured on the dbase of NPOs.– Used as part of the business processes to registered

and monitor compliance to the Act.– Dbase runs on a SQL server, housed within the

Department and accessible via a centralized network server.

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Indexed Front Page

39Classification of NPO’s

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Steady Increase in NPO Registration

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UN Classification of the Registered NPO’s

ObjectiveNumber registered

Business and Professional Associations, Unions 163

Culture and Recreation 2469

Development and Housing 10504

Education and Research 6780

Environment 616

Health 5758

International 35

Law, Advocacy, and Politics 1132

Philanthropic intermediaries and voluntarism promotion 515

Religion 5290

Social Services 13786

Else where 3376

Total 50424

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Chart of Classification

Percentage

0.32%

20.83%

13.45%

1.22%

11.42%

0.07%

2.24%

1.02%

10.49%

27.34%

6.70%4.90%

Business and ProfessionalAssociations, Unions

Culture and Recreation

Development and Housing

Education and Research

Environment

Health

International

Law, Advocacy, and Politics

Philanthropic intermediariesand voluntarism promotion

Religion

Social Services

Else where

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Registered NPO’s per Province

Province Number registered

Eastern Cape 4309

Free State 3038

Gauteng 16350

KwaZulu Natal 9602

Limpopo 5426

Mpumalanga 3178

North West 2562

Northern Cape 1196

Western Cape 4763

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Chart of provincial registration

9%6%

32%19%

11%6%

5%2%

9%

0% 5% 10% 15% 20% 25% 30% 35%

Eastern Cape

Free State

Gauteng

Kwazulu Natal

Limpopo

Mpumalanga

North West

Northern Cape

Western Cape

Pro

vinc

esPercentage

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Future Plans• Intention is to upgrade current dbase into online accessible

dbase for-– Registered organisations;– The broader public;– Government regulators; and– Other agencies.

• Digitize current records of all organisations.• As part of this initiative more than 1.8 million pages of

registered organisations records have been scanned and digitized.

• We are currently having a trial run on www.npo.gov.za

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Capacity Building

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Institutional Capacity Building • Section 5 (b) of the Act mandates

determine and implement programs- – Support organisations in their endeavour to

register; and – To ensure that the standard of governance

within NPOs is maintained and improved.

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Objectives of the trainingThe objective of the training is to strengthen and support organisations in the development of viable and appropriate governance and accountability structures through: -

•Supporting organisations to access the NPO registration facility

•Enabling organisations to comply with their obligations under the Act

•Ensuring that the standard of governance within NPOs is improved

•Capacitating CDPs to be able to support organisations

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Target groups for the training

The training is targeted at:

• Networking structures - so as to maximise impact

e.g. SANGOCO, CORN-SA, FAMSA etc

• Community Development Practitioners (CDPs): to enable them to interact effectively when supporting organisations

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Training workshops conducted for NPOs cover issues including:-

•Understanding the NPO sector (what is an NPO and how it operates)

•Legislative framework on NPOs (options for the legal structures of NPOs)

•Other pieces of legislation and international treaties affecting the NPOs and to which they must comply

•Process and procedure to register organisations

Aspects covered in the Training

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Multi-sectoral partnershipsDesigned multi-sectoral training programs in partnership with:

•Provinces through CDP Train- a-Trainer Programme

•National Youth Service- Unemployed graduates in line with EPWP

•SARS TEU (PBO and Income Tax Act)

•Department of Trade and Industry (Cooperatives)

•Support programs for Networking structures (ECD Congress, CORN-SA funding projects)

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Benchmark good governance practices

The Codes of Good Practice for the South African NPO sector was published in 2001

The need has arisen to review these Codes, owing to

•The dynamism and growth of the sector

•Low levels of good governance and accountability within organisations

• Need to align to the International and national norms and models of good practice

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Assist provinces and local government to support NPOs.

Assistance to provinces and local government is in the form of:

•Conducting capacity training for NPOs upon requests

•Conducting Train-the-Trainer workshops for CDPs

•Providing Database and other forms of information on all organisations registered, cancelled, deregistered and those that need assistance to comply

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Research Projects Impact Assessment on the NPO Act completed in 2006. Evaluation of a training programme for provincial department workers to support organisations.

• Benchmarking good governance and management practices within NPOs due for completion this financial

year.

• Assessment of structural composition of national bodies and networking organisations in respect of good

governance and management practices due for completion this financial year.

• Assessing the potential risk of terrorist financing posed within the NPO sector in South Africa to be completed this financial year.

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NPO Act Impact Assessment

• To assess whether the Act makes a difference to the sector.

• Five key themes drawn from the five objectives of the Act were used to frame the assessment.

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Key Findings• Fragmented Regulatory Framework.

• Government capacity to implement the NPO Act.

• Institutional capacity of organisations to access and maintain registration

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Fragmented Nature of the Act

• One of these challenges is the fragmented regulatory framework as it requires too many registration processes to comply with.– Even for a sophisticated and well-resourced

organisation, the numerous registration processes and compliance procedures are frustrating.

• ‘One size fit All’ approach

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Government Capacity

• The financial resources allocated for the implementation of the Act are insignificant when compared to the size, scope and vibrancy of the NPO sector on the one hand and the complexity of the NPO Act on the other.

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NPO Sector Capacity Constrains

Threat to efforts to maintain

high standards across the

sector

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Small CBOs often unable to meet minimum requirements set out by the Act – struggle to maintain compliance (capacity & cost)

Difficulty in meeting reporting requirements - limited levels of narrative and financial reporting

General lack of capacity within NPOs to manage own affairs, and to deliver quality services

Sector Capacity Constraints

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THANK YOU!

Questions Sessions