NPO governing body
29 Jun
  • By Malcolm Boyd
  • Cause in

Understanding NPO Governing Body and Committee

The optimum size for an NPO governing body varies.

In South Africa the Companies Act, 71 of 2008 s66 specifies that non-profit companies require at least three directors, but sets no maximum number.

Stakeholders of a small NPO with a tightly focused organisation might regard a large Governing Body as an expensive luxury, while a large NPO with diverse and complex operations would almost certainly overstretch the resources of a small Governing Body. The absence of a handful of Governing Body members can make it impossible for a small Governing Body to raise a quorum. Existence of too large a Governing Body can slow down decision-making and increase the risk of bureaucracy.

It’s critical organisations have a detailed skills mix matrix of the Governing Body aligned to the strategic direction of the organisation and viewed in line with their succession plan.

Each organisation should determine the appropriate size for its Governing Body based on the considerations outlined below and other relevant factors of diversity and demographics. Factors determining the number of seats at the Governing Body table include the evolving circumstances and needs of the organisation.

The King IV code of good practice ©, (Institute of Directors in Southern Africa) recommends the appropriate mix of executive and independent non-executive members. In the case of NPO’s, the norm is that 90 – 95% of the Governing Body be independent non-executive (Voluntary).

When it comes to sub-committees, organisations should avoid the temptation to form too many. To be effective (and to avoid burnout), Governing Body members should generally not serve on more than two committees.

Depending on the size and level of programme activity of the organisation, and in terms of their founding document, the Governing Body should determine which committees are required by assessing key risk areas for the organisation. Examples of committees that could be established include:

  • audit, finance,
  • business development and fundraising,
  • human resources,
  • social and ethics and risk;
  • or a combination of some of these.

 

King IV – Chapter 3. Governing Structures and Delegation

Principle 3.3: The Governing Body should consider creating additional governing structures to assist with the balancing of power and effective discharge of responsibilities, but without abdicating accountability.

The purpose of establishing committees of the Governing Body is to alleviate its workload and function more effectively due to its composition of smaller groups focusing on key areas.

  • The content of the terms of reference/charters of Governing Body and audit committees.
  • These must set out the composition and rotation of membership, the overall role and associated responsibilities of the committee.
  • The delegated authorities (including the extent of the committee’s decision-making powers), tenure, resources and access to information and meeting procedures.

The Governing Body may appoint any number of Governing Body committees and delegate to each committee any authority of the Governing Body. Governing Body committees may include non-directors but they will not have a vote. The delegation to any committee does not in itself relieve the director of the director’s duties. In relation to standards of conduct and liability, all members of the Governing Body committees are deemed to be directors. Some core committees are:

 

An Executive Committee (ExCo)

ExCo assists the Executive/Senior Manager by managing the organisation when the Governing Body is not in session.

  • Subject to the statutory limits and Governing Body limitations on delegation of authority to the Executive/Senior Manager.
  • ExCo acts as a medium of communication and co-ordination between the organisation and the Governing Body.
  • ExCo is generally granted all powers conferred upon the directors by the founding document.

 

The Audit Committee

  • Is an advisory body without executive powers.
  • Consists of independent non-executive directors.
  • Focuses on the risk management of the organisation
  • Meets at least twice a year, before commencement of the annual audit and after completion of the external audit.
  • Makes recommendations to the Governing Body for the retention or replacement of external auditors.

 

The Remuneration Committee

  • Is an advisory body without executive powers.
  • Consists of non-executive directors
  • Meets at least twice a year, before finalisation of annual increases and bonuses.
  • Makes informed recommendations, not management decisions.

 

Additional Committees can be set up on an ad hoc basis to undertake tasks for the Governing Body, such as:

  • Short term projects
  • Feasibility studies
  • Investigating proposals and making recommendations

 

So, following on from the last post about serving on a NPO Governing Body – do your due diligence before accepting a seat on a sub-committee.

Read more insightful and informative posts from Malcolm Boyd here.

 

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Malcolm Boyd
Founder and Managing Partner of Third Sector Insights.

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