In early 2011, Makinson d’Apice commissioned independent researchers and management consultants to conduct an Australia wide study of the legal landscape facing charities and other NFPs in Australia today.
There were approximately 250 responses from NFPs across Australia. We issued a Bulletin in April 2011 with some snapshot findings from the research study.
We have undertaken a further consideration of the study and want to offer observations on three areas identified in that study:
Legal Knowledge at Board Level
The survey indicates a real lack of understanding regarding NFP legal issues and compliance obligations at Board level. Our respondents were largely senior managers within the sector and many reflected on the lack of knowledge their Board Members possessed about their legal and fiduciary rights and obligations.
It was clear from the survey that there was increasing knowledge and expertise of these issues at senior management level particularly over the last five years. However, there is scope for further education at Board Level.
- “Better informed, more legally aware executives who can better deal with issues and disputes would make a difference.“
- “Setting up a course that people who were on Board of Management and Committees were made aware of their responsibilities as a Board Member. They should have to do a test before they can legally become a Board Member.“
- “We currently have a conflict of interest issue with one of our Committee Members but the Committee is struggling to understand and manage properly. Despite this the Committee are unwilling to access advice or training….“
- “Lack of awareness or knowledge of compliance issues. Attracting new Board Members due to the penalties imposed for non-compliance.“
- “…we are a small organisation – only one full-time worker – so we don’t have time to think these issues through we just have to deal with the outcomes.“
A lack of foresight and ability to adequately risk manage potentially adverse situations at a high level means when a real problem occurs there is often a big sting that is more than just avoidable legal costs. There is also broader impacts, like serious reputational damage.
NFPs Biggest Risk and Greatest Fear — Lack of Funding
Many in our research sample were concerned that in the wake of the GFC and recent natural disasters, direct fundraising of the public would be difficult with givers suffering “compassion fatigue“.
- “…resourcing to meet ongoing commitments v potential donor fatigue with recent demands for support following natural disasters.“
- “Shifting attitudes within the public regarding charity impact of one-off events on sustainable and repeatable fundraising eg Tsunami, Christchurch, Floods in Queensland.“
However, the majority of our sample noted that most of their direct income was from government sources and were operating sometimes national charities with budgets of less than $3 million per annum, many on as little as $500,000.00.
At least half of the NFPs surveyed feared their ability to cope and maintain services with a reduced amount of funding.
The survey highlighted that NFPs considered they had weaknesses in management of legal issues. One-third of respondents rated their management of property legal issues as either weak or very weak. 30% of respondents rated their organisation’s relationships with external lawyers as weak or very weak. Whilst only 25% of respondents characterised their relationship with external lawyers as strong.
In addition, a quarter of respondents rated their organisation’s ability to take advantage of tax concessions as weak or very weak. This is a considerable concern for the sector as maximum advantage should be taken from tax concessions to then maximise funds available for the charitable purposes of the NFP.
- “At times the external lawyer does not understand the business fully or the regulatory framework for NFP therefore advice may be based on a corporate view and not accounting for NFP issues.“
- “(Not)…understanding the complexity and uniqueness of our regulatory framework and Church structures.“
- “The response time of lawyers if they are working pro-bono their lack of knowledge of specific not-for-profit issues.“
- “As they do the work pro-bono – ability to have them turn work around in our timeframe.“
The overwhelming majority of respondents (90%) agreed that the “right” legal advice from highly skilled lawyers in the NFP sector would have “some positive” or a “great positive” impact on their organisations.