Beyond good intentions - The need for nonprofit compliance

The recent Africa Public Service Day on 23 June, and Nelson Mandela Month throughout July, are reminders of the importance of community service and helping people in need. This support is often channelled through non-profit organisations (NPOs), which can take various legal forms, and are usually dedicated to advancing social causes.

It is vital, however, that South Africans who manage NPOs, or are considering setting up such an organisation, are aware of the need for registration and regulatory compliance. This is according to Inyathelo, a non-profit trust established in 2002 to sustain and strengthen civil society organisations.

Registering an NPO with the Department of Social Development is a critical first step in ensuring its legitimacy and credibility. Many funders, grant-making institutions and government agencies require proof of registration before considering funding requests.

Abiding by regulations is equally important, as this confirms the NPO is accountable. All registered NPOs are required to submit an annual narrative report and annual financial statements to the Department of Social Development NPO Directorate, within nine months from the end of their financial year.

The South African Revenue Service has also introduced new requirements for approved Section 18A organisations to submit more tax-deductible receipt information, to promote transparency and prevent abuse. (Donations to Section 18A organisations may be deducted from the donor’s taxable income, up to 10% of their taxable income for that year.)

At present, many South African NPOs do not comply with regulations. There were 276 000 registered NPOs in July 2023, in terms of the NPO Act. However, by 19 July 2023, nearly 148 000 NPOs had not submitted their reports and statements. This amounts to a national non-compliance rate of nearly 60%.

The NPO Directorate has, in addition, noted that over 56 000 local NPOs, registered between 1998 and 2012, have never submitted any reports, and is taking steps to deregister those which are non-compliant.

Inyathelo executive director Feryal Domingo encourages NPOs struggling with administrative red tape to make use of Inyathelo’s services. The first step is booking a free one-on one advisory clinic session.

“Our clinic sessions usually take the form of face-to-face engagements, but the team also offers support by phone, email, virtual sessions and through our ASK Inyathelo website. Our clinic services are mainly in the areas of governance, operations, leadership, financial management and financial resilience.”

Inyathelo is housed in a Civil Society Hub in Woodstock, which NPO staff are encouraged to visit. The book lounge houses a collection of over 2000 books, publications, manuals, toolkits, magazines and directories, plus Inyathelo’s own publications such as Attracting Support Kit for NPOs and Effective Governance for Non-Profit Boards.

“We encourage NPO leaders to go beyond good intentions and ensure their organisations are compliant,” says Domingo. “This is the foundation for building a sustainable, impactful NPO that can drive positive change.”