Are you new to not-for-profit governance?

The Incorporated Societies Act 2022 recently came into effect, replacing the 114-year-old Incorporated Societies Act 1908. The aim of the new Act was to address the many gaps and deficiencies under the old Act, and put in place a modern framework of basic legal, governance and accountability obligations for incorporated societies and those who run them.

The new legislation provides a foundation for not-for-profit organisations (NFPs). But do all board or committee members of NFPs understand their obligations under the Act, and what good governance looks like? A new book by Pierre Woolridge, Getting to Grips with Not-for-Profit Governance, can help guide those involved in the sector.

There are some 45,000 NFPs in New Zealand: 24,000 incorporated societies, and 28,000 charities (7,000 of which are also incorporated societies).

An NFP entity can take many forms, including any society, association or organisation (incorporated or not):

• that is not carried on for the profit or gain of any member, and
• whose rules do not allow money, property or any other benefit to be distributed to any of its members.

The purpose of each NFP varies. In general, charities tend to focus on community activities, often where government support is not readily available, and incorporated societies tend to focus on the needs of their members.

They may all face funding issues and difficult financial constraints. They are often predominantly run by volunteers.

Regardless of the organisation’s purpose, governance is at the heart of being a registered charity or an incorporated society. Governance is about leadership at the board or committee level. It sets the direction of the organisation and ensures that it is fulfilling its mission. More specifically, it’s about:

• strategic direction
• policies and procedures for the smooth running or the organisation
• risk management
• financial nous
• meeting regulatory requirements
  

Pierre Woolridge is an experienced director with many years of governance experience. His book Getting to Grips with Not-for-Profit Governance, published in October this year, is a guide for people considering becoming involved, as well as for existing committee/board members looking to refresh and upskill.

Woolridge argues that some of the biggest challenges an NFP can face include:

• attracting members to their organisation
• prudent and responsible financial management
• resourcing, including funding from donors, members (as in subs), events and trading activities

In addition, in volunteer-lead organisations it can be problematic:

• finding and encouraging people to be on the board
• ensuring there is the right mix of skills, knowledge, and possibly industry experience
• ensuring board diversity in terms of age, gender, and ethnicity

An ongoing focus on the “frontline” can lead to an underestimation of the value that good governance can add. The role that directors and committee members play is sometimes undervalued by NFPs, and even by the directors or committee members themselves. Boards are in the unique position of being able to think ahead to the medium and long term, drawing on their collective knowledge – a viewpoint that other parts of the organisation might not have. They can offer vital support and advice to the management team when issues are on the move and inundating the organisation. 

New to Not for Profit Governance?  These insights might help.

Key insights from Woolridge’s book include:

-Governance is all about oversight – from what you want your organisation to achieve, to being aware of risk, and having the accounts in order.

-It’s important to have a vision for the organisation.

-Trust and integrity are paramount.

-Ethical behaviour is critical.

-The board’s role is to guide and support the CEO in the implementation of the organisation’s strategic direction.