Non-profit Organisation Act

Introduction to NPO Act

 Act is a result of lengthy process of policy and legislative reform negotiated between State and civil society organisations  Came into operation on 1 September 1998  Hopes to achieve objectives of  creating an enabling environment for NPOs  setting and maintaining adequate standards of governance, accountability and transparency  creating an environment within which public may have confidence in dealing with NPO’s

Philosophical Principles (1)

     Social development is a product of the efforts of social groups.

The efforts of social groups are manifest   in different levels and scales - local, regional and beyond in different sectors - political, religious, social, sporting etc The SA constitution recognizes this and thus entrenchment of right to Freedom of Association Apartheid SA in contradistinction sought to restrict and control such freedom. It did so inter-alia through the Fund-Raising Act. The Act prohibited raising funds from the public unless consent obtained from authorities. Such consent was not always forth coming.

NPO Act changed this. It places no prior state authorization requirement to enable organisations to operate legally. All required is a compact between like-minded people.

PHILOSOPHICAL PRINCIPLES (2)

 The establishment of institutions and intricacies of their workings in many ways mirror the level of development or stated intention of the people who administer or are served by such institutions.

 In SA years of development and neglect, uneven development, cultural deprivation, etc have expressly or tacitly had the effect of excluding people from the formal process of institution building. Legal and regulatory processes have consequently become alien, expensive and complex to manage.

 At the time of drafting the NPO Act, there was great demand to create a new and more simplified form of organization to ostensibly cater for weaker and less resourceful groups.

PHILOSOPHICAL PRINCIPLES (3)

 This move was however rejected, as it would create more complications. We already have voluntary associations, Trusts, s21 companies etc. It would create more confusion to create another type of organisation. People have underestimated the value of simple voluntary associations .

 The retort was that people did not take voluntary associations seriously. But this is a problem that revolves around good governance and not organizational form.

 The NPO Act comprehensively embraced this reality by creating a registration system that embodies extensive corporate governance requirements.

 The Registration system though is voluntary, thereby permitting organizations to choose the level at which they wish to operate.

PHILOSOPHICAL PRINCIPLES (4)

 Organizational development and institutional capacity building is not a static process.

 There is a constant quest for improvement and advancement and taking such steps often gives rise to administrative complexities which requires expertise and resources.

 Given our history, many communities and social groups do not have access to such expertise and resources.

 The NPO Act recognizes this by creating an

administrative and regulatory framework that enables responsible giving and empowers people to responsibly manage public funds.

PHILOSOPHICAL PRINCIPLES (5)

 Permissive Legal Environment / decriminalization  Voluntary compliance with standards of good governance  Enabling / Empowering Framework

Creation of Enabling Environment

 Every organ of State must determine and co-ordinate implementation of policies and measures in a manner designed to promote, support and enhance capacity of NPOs to perform functions  Directorate for NPOs established  Functions of Directorate  facilitate process for developing and implementing policy  determining and implementing programs to support non-profit organisations

Who are non-profit organisations?

 Trust, company or other associations of person  established for public purpose; and  income and property of which are not distributable to members or office bearers except as reasonable compensation for services rendered

Benefits of registration

 Minister may prescribe benefits or allowances applicable to registered NPOs  Currently, in order to obtain tax exempt status under s30 of Income Tax Act, must be a registered NPO

Requirements for registration

 Mandatory provisions in constitution  name  main and ancillary objects, and powers  state that income and property not distributable to members  organisation is a body corporate with identity and existence distinct from members and office bearers  deal with organisation’s continued existence  specify organisational structure and mechanisms for governance

Requirements for registration (2)

 Mandatory provisions in constitution  set out rules for convening and conducting meetings  determine manner in which decisions made  provide that financial transactions must be conducted by means of a banking account  set out financial year  set out procedure for winding-up or dissolution  provide that upon winding-up or dissolution, remaining assets must be transferred to another NPO with similar objectives

Requirements for registration

 Voluntary provisions in constitution  qualifications for and admission to membership  circumstances when member no longer entitled to benefits  provide for termination of membership (including related procedures)  provide for membership fees  provide for appointment of office bearers  provide for making investments  determine purposes for which funds may be used  provide for acquiring and controlling assets

Application for registration

 Must submit to Director  completed form  2 copies of constitution   further information required by Director Director must consider application within two months of receipt  If not satisfied that requirements met, Director must send written notice to applicant, providing applicant with one month to comply  If applicant complies timeously, Director must register the applicant

Appeals against refusal to register

 Organisation may appeal within one month of decision  Determined by Arbitration tribunal

Post-registration obligations

 Must keep accounting records in accordance with generally accepted accounting principles  Draw up annual financial statements  Within two months of drawing up financial statements, must arrange for written report to be compiled by accounting officer concerning financial statements, accounting policies and compliance with Act  Must preserve all relevant financial documents for a prescribed period  Must provide financial statement to Director (public has access to these documents)

Non-compliance with constitution and obligations

 Director must send compliance notice  Director must refer NPO to SAPS for investigation if satisfied that non-compliance would constitute office  If fail to comply with notice, registration may be cancelled

Offences

 False representations concerning registration  Transferring remaining assets of NPO (in process of winding-up) otherwise than in accordance with Act and constitution