While NPOs play a vital role in addressing social and environmental issues, many struggle to meet the stringent compliance of NPO Act requirements. However, by following a process that has been simplified by the Department of Social Development they can continue to safeguard their operations and continue to make a positive impact in the communities they serve.
South Africa, (30 October 2024) – Whether they’re championing the rights of animals, saving the planet, helping children reach their potential or feeding the hungry, non-profit organisations play an important role in supporting the lives of many and society at large.
We at Good Things Guy are fans of the incredible and invaluable work done by the selfless individuals who run these organisations that bring so much goodness to those who need it most.
However, to continue spreading goodness, these NPOs need to be compliant with the Non-profit Act.
A sector representative body, the NPO Working Group, is encouraging long-established South African non-profit organisations, which have registered under the Non-profit Act as “NPOs”, to ensure legal compliance with that Act, as the Department of Social Development (DSD) begins a process from the end of October to update its records.
The importance of this is emphasised as organisations with NPO status that remain non-compliant may face deregistration from the NPO register.
What happens if an NPO gets deregistered?
Organisations that depend on government funding may then have challenges with contracts and partnerships, reduced capacity to deliver services, staff layoffs, and even closure.
According to the NPO Working Group, this has dire implications for under-resourced communities that rely on the services and facilities provided by these organisations.
Organisations which want or need to retain their NPO status are encouraged to take advantage of the assistance offered by the DSD and to get their affairs in order urgently.
The DSD revealed that 295,924 NPOs have been established to date since the Act was introduced in 1997. However, non-compliance reporting rates remain high.
About 64,000 organisations, registered as NPOs between 1998 and 2013, have never filed an annual report, according to a DSD official. This cohort will be the first to be deregistered.
Complying with the NPO Act
The NPO Act requires registered organisations to submit a narrative report of their activities, together with their financial statements and an accounting officer’s report, within nine months of their financial year-end, or face loss of NPO status.
The financial statements need not be audited but must include a professional accountant’s report.
There have been several attempts to update the NPO register since 2012, and deregister non-compliant NPOs, but these initiatives have faltered due to push-back from the non-profit sector, and government directives.
Small and volunteer-driven organisations, in particular, have struggled to comply. They cite insufficient funds to engage professional expertise, and an inability to interact with DSD systems.
In response to protests from the sector, the DSD implemented a range of interventions to help organisations understand and comply with requirements. However, the impact of these interventions was undermined as the DSD did not follow through and deregister non-compliant organisations as NPOs.
Moreover, South Africa’s placement on the FATF grey list in February 2023 has increased pressure on the government to tighten regulations on non-profit organisations.
The FATF is concerned about countries with weak controls against money laundering and terrorist financing, and the perception is that an unregulated non-profit sector could contribute to this risk.
According to Nicole Copley, director of ngoLAW and a member of the NPO Working Group, this perception has increased pressure on the DSD to enforce compliance with the NPO Act.
The deregistration process
DSD enforcement is being undertaken in three phases. The phase one deregistration process starts on 31 October 2024. Dates for phases two and three will be announced next year.
Deregistration will take place as follows:
- Notices will be sent to non-compliant organisations, giving them a month to comply and file missing reports;
- At the end of that month, organisations which have not filed reports will be sent a notice of final deregistration. They will have one month to lodge an appeal directly with the DSD against the deregistration;
- Organisations that appeal, and lose, may approach the Arbitration Tribunal (a statutory body set up in terms of the NPO Act).
In the case that notices are sent to outdated email addresses, the DSD will also publish a list of names and NPO numbers of organisations to be deregistered in phase one, on its website.
Help with compliance
The DSD has run the #KnowYourNPOStatus campaign since 2020, to help NPOs meet compliance requirements. The process has been hindered by technology issues, forcing some organisations to resort to a slow, manual system.
The NPO Working Group has been assured by the DSD that any affected organisation which contacts the DSD and submits reports (or re-submits them, in the case of reports which have gone astray) will not be deregistered, says Copley.
“We at Inyathelo urge all nonprofits to act swiftly to ensure compliance with the NPO Act, to safeguard their operations and the communities they serve,” says Inyathelo acting executive director and chairperson of the NPO Working Group, Feryal Domingo.
“Check the DSD website list for pending deregistrations and take immediate action if your organisation is listed.
“We understand that compliance can be challenging, particularly for smaller, volunteer-driven organisations. However, there is no better time to review internal controls and submit outstanding documentation.”
Ann Bown, NPO Working Group communications lead, encourages all NPOs to explore all available support, including the option to submit affidavits in place of costly audited financial statements, to meet the DSD’s requirements and avoid deregistration.
To register an organisation, check NPO status and update documents visit: https://www.npo.gov.za/
Sources: NPO Working Group and Inyathelo
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