CEO Report: Towards a vibrant NFP sector

  • Date:01 Oct 2011
  • Type:CompanyDirectorMagazine
John H C Colvin discusses a new study that throws light on NFP governance and provides input into the debate on regulation of the sector.

 

As chairman of a health-related charity, Can Assist, I witness first hand the vital role that not-for-profit (NFP) organisations play in the Australian economy and society and it is pleasing to see the sector remains a key focus of the Federal Government.

Company Directors shares the Government’s vision for an efficient, transparent, productive and vibrant Third Sector, and supports the general approach outlined in the Scoping Study for a National Not-for-Profit Regulator, released in July 2011.

We welcome the Government’s initiatives, including the establishment of the Not-for-Profit Sector Reform Council and the formation of the Australian Charities and Not-for-profits Commission (ACNC), which will become active from July 2012, and support a move towards a national NFP regulator taking over the role of state regulators.

As noted by the Productivity Commission, there are about 600,000 NFP organisations in Australia and this figure has continued to grow at an estimated eight per cent per year over the past decade. The sector is comparable with many of Australia’s key industries, contributing $43 billion to GDP – and directors play a critical role in overseeing the success of these NFP organisations.

Following our inaugural Directors Social Impact Study in 2010, which surveyed members in New South Wales and Victoria, we expanded the study nationally this year to build on our understanding of the contribution made by directors to Australia’s NFP sector. The study examined the governance activities of NFPs compared with for-profit organisations and helps us better understand the challenges faced by NFP directors.

We were delighted to partner the Centre for Social Impact (CSI). Its core mission is to create beneficial social impact through teaching, research, measurement and the promotion of public debate and we thank it for its support.

Results reveal NFP non-executive directors dedicate, on average, the equivalent of almost seven working weeks per year to governance of their NFP organisations, with the vast majority of these offering their services for little or no remuneration.

This significant voluntary contribution is vital to the continuing success of the sector, as many of these organisations struggle with limited resources and funding. The study highlights the extensive contribution the director community makes to this sector, not only in their roles as directors, but also in building capability, such as mentoring staff.

The study also examined the current application of governance principles across the NFP sector compared with the for-profit sector. There is a view held by some policy makers that governance of the NFP sector has failed to keep pace with the for-profit sector. However, this view was not supported by the results of the study. To the contrary, the time NFP directors spend in their roles, the duties they perform and their level of continuing education is broadly comparable with their for-profit counterparts.

The results demonstrate there is no significant difference between the commitment of the different types of directors to education and professional development relating to governance matters. This reinforces the critical importance of continuing professional development in any industry. Education plays a vital role in ensuring NFP directors are well equipped for their important role in the governance of their organisations.

As we noted in our February 2011 submission to Treasury on the Scoping Study for National Not-for-Profit Regulator: "Ensuring currency of knowledge in areas such as director duties and responsibilities, financial literacy, risk management and oversight, compliance, organisational performance and leadership is critical for all governing bodies in the context of today’s economic climate and the complexities of social and economic reform."

This position remains at the forefront of our professional development offerings.

The study provides a timely reminder to government of the importance of good governance for the sector, particularly during this period of reform. Any reforms need to be mindful of the significant number of volunteers working for these organisations, including directors, and regulatory changes should not discourage this contribution.

The results of the study will add further weight to the representations we have been making to government and policy makers and will help us to continue to support the professional development of our members.

I would like to thank those members who responded to the survey and to the significant proportion of our membership who are involved in, and contribute to, the Australian economy and society through their role as NFP directors.

In this month’s magazine, there are a number of NFP-related articles, including coverage of our Directors Social Impact Study 2011 (p40), an interview with Susan Pascoe, chairman of the Implementation Taskforce for the ACNC (p14) and a "vox pop" of NFP directors on their participation in the sector, their insights on governance and some of the challenges they face (p44).

John H C Colvin FAICD
CEO and managing director, 
Australian Institute of 
Company Directors