During the last 12 months, 15 940 new registrations were approved by the National Department of Social Development. Whilst there are multiple reasons for organisations wanting to acquire an NPO number, it is important to remember that the purpose of the NPO Act, passed in 1997, was not only to create an enabling environment for NPOs, but also to set and maintain adequate standards of governance, accountability, and transparency.

Therefore, it is expected that any organisation with an NPO number upholds the values of good governance, accountability, and transparency.

It is required that all registered NPOs must annually submit a Narrative Report and Annual Financial Statements to the National DSD NPO Directorate, within nine months after the end of their financial year. By submitting these reports annually, an organisation is demonstrating good governance, accountability, and transparency. As of 19 July 2023, 147 903 NPOs have failed to submit their reports and statements. This amounts to a 58.5 % non-compliance rate nationally.

Furthermore, the NPO Directorate has identified 56 787 NPOs, registered between 1998 -2012, that have never submitted any reports.

The Know Your NPO Status Campaign encouraged organisations to comply with the requirements of the NPO Act. Once a notice has been served to organisations and they fail to address their non- compliance matters, the NPO Directorate is legally compelled to deregister an organisation.

The non-compliance and subsequent deregistration of NPOs may have a negative impact on the sector. One of the biggest concerns would be the ability to raise or access funding, as well as the sustainability and credibility of NPOs.

The immediate impact of non-compliance and deregistration would be the legal implications of being in contravention of Section 18 of the NPO Act. In addition, the organisation would have entered into various legal and contractual agreements with banks, donors, companies and government departments, where most likely the other party agreed to enter into an agreement with the NPO on the notion that they are registered and compliant. Now all these legal and contractual agreements may be compromised.

The Independent Code talks about the board’s responsibility in “Ensuring Legal and Fiscal Compliance”. By an organisation not complying, the board is not upholding a key performance area in terms of its roles and responsibilities. Due to the due diligence processes of donors, many organisations may eliminate themselves from the funding process due to non-adherence to NPO legislation.

Secondly, credibility and confidence are compromised when organisations fail to comply. On a macro level, NPO non-compliance damages the credibility of the sector as a whole and paints everyone with the same brush.

The ultimate consequence of non-compliance would be the reduction or loss of service delivery. NPOs were founded to fulfill a critical need and when an NPO is unable to attract and maintain resources, it may negatively impact its service delivery and leave many more South Africans vulnerable.

In conclusion, whilst the quick answer is to say non- compliance and deregistration will result in funding losses, it is important to remember that this impact goes beyond rands and cents, it impacts credibility, reputation, legal compliance, confidence, and trust. Non-profit boards have the ultimate responsibility to ensure that the NPO is well looked after and that board members equip themselves with the knowledge and skills to do their job effectively. If board members require support with NPO compliance, they must contact their closest NPO Support Service in their province.

 This article was first published in Inyathelo's 2023 Annual Report.