Understand the Expectations
In this post Malcolm Boyd of Third Sector Insights takes us through the roles, responsibilities and standard of conduct for an NPO governing body
Non-profit organisations need strong, active and committed governing bodies. These play a critical role in ensuring financial sustainability and accountability to internal and external stakeholders.
In fact, it is a strongly held belief that governing body members of NPOs should hold themselves to a higher standard. Although it’s admirable to accept a position on an NPO governing body, experience over the years shows that up to 80% of these individuals may not have served on a governing body (board) before… this is an onerous decision!
Before agreeing to serve on a governing body, do your homework. Be aware of the expectations of you as a governing body member. Such an opportunity to serve is great, but be sure to gain a solid understanding of your role and responsibilities, fiduciary requirements and legislation etc.
Good governing bodies protect the organisation’s values and resources, and there should be clear demarcation between the roles and responsibilities of CEO and board.
Roles of governing bodies and management
The governing body is not there to run the NPO nor get involved in the day-to-day management of the organisation – this is a function for management and staff. A recent article on directors’ duties says:
“In South Africa, directors’ duties as set out in our common law and in the Companies Act include the fiduciary duty to act in good faith and for a proper purpose in the best interests of the company and also acting with due care, skill and diligence.” – Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa (IoDSA)
Apart from the law, the governance code in South Africa, King IV, sets out the expected governance best practice, and contains specific principles and practices around ethical conduct, good corporate citizenship, compliance with laws, rules, codes and standards, as well as fraud, corruption, risk and tax governance.
So, when deciding to accept an invitation to serve on a NPO’s governing body take the following into account:
Common law duties
Members must satisfy common law and statutory requirements by always acting in good faith (doing what is believed to be in the best interests of the organisation) and within the laws of the country (knowing which laws govern their activities) with the upmost care, diligence and skill.
Here, the Governing Body must satisfy three principles:
- The Governing Body and its members should avoid conflict of interest.
- A Governing Body member should not be involved in making a decision that he or she has vested interests in as this would bias his / her decision.
- A Governing Body member should not profit from being a member of the NPO nor use the organisation’s resources as collateral for his or her personal gain.
Providing strategic direction
Whereas the management team is responsible for operations; the Governing Body is responsible for the long term strategic direction of the organisation. Although in most organisations, the process of establishing the vision, mission and strategy is a joint one involving both the Governing Body and management; in some cases driven by the CEO. Ultimately, the Governing Body is responsible for creating an environment which is conducive to good governance.
Formulating policies and providing direction
The Governing Body is central to determining which key challenges and opportunities the organisation should respond to. Members are expected to read and respond to the environment and be able to develop and approve the relevant policies needed in the organisation.
Provide standards and control mechanisms
The Governing Body should ensure proper management structures, systems and procedures are in place and functioning properly. It should regularly review these to ensure effectiveness of its internal system of control for accuracy and informed good decision-making. In addition, it ought to monitor and evaluate the programmes as well as financial sustainability of the organisation.
The overall responsibility of the Governing Body is to ensure sustainability of the organisation through successful resource mobilization and management strategies. Its financial responsibilities include improving the financial reporting, accounting systems, and budgeting processes (ensuring annual auditing takes place), appointment of auditor, designing their terms of reference and setting tender procedures.
Protecting the organisation
Members have the responsibility of shielding the organisation from external threats, ensuring its survival to serve its purpose. This also means meeting the requirements of stakeholders such as the government, donors, members and beneficiaries.
Some serious food for thought before serving on a NPO governing body!