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  • Straight from the source – November 2019

    Operating an NFP is tough. There’s a lot to achieve with limited resources. This is why good governance and risk management is a no brainer.

    I still remember the first NFP I was involved in. My sister in law had sickle cell and thalassaemia major. Management of these blood disorders has historically been treated with monthly blood transfusions which cause iron overload. Meticulous preparation to remove the excess iron is required, which involves getting the medication ready from three separate vials into one and then releasing it into a pump. There had to be a better way! The US had already discovered and developed a quicker and easier technology, the only catch was that it cost a lot of money. Money the hospital did not have. Working with the dedicated team of volunteers, we raised the funds to buy the machine and well the rest is history. Transfusion management has been improved exponentially with life expectancy increased.

    This is the story of many NFPs, particularly start-ups. They are generally created for a good cause and deliver services that improve community well-being. We started up in our cousin’s lounge room and like most NFPs we assigned roles and responsibilities, we discussed decision making, office bearers, transparency of finances and risks. We also enlisted the support of pro bono accounting, medical and legal experts. While in hindsight, I admit we were novices, the hallmarks of good governance and risk management were a key part of our plan.

    Good governance and risk management are fundamental to instilling trust and confidence in an entity’s operations. The governance arrangements put in place will depend on the sophistication, scale and scope of operations.

    It is good practice for all NFPs to review arrangements annually. Not only does this ensure correct entitlement to concessions, it also focusses the entity to think about whether it is still operating for the purpose it was established. An additional benefit of an annual review is that NFPs can take a holistic view of their obligations particularly those that apply to employees and volunteers. But that is not the only reason NFPs should review their details.

    Every year as we approach the summer season, we are reminded of the support NFPs provide to emergencies and disaster situations both by way of relief and support. Keeping ABN details up to date allows government agencies and emergency services to easily make contact with NFPs if needed.

    Key areas to consider in an NFP annual review include:

    • Income and assets are applied solely for the purpose for which the NFP was established, and that private benefits are not provided to members.
    • Entitlement to FBT exemptions particularly where gifts and meal and entertainment expenses are provided to employees.
    • Updating ABN details on the ABR regularly especially contact details.
    • NFPs with employees are reporting through Single Touch Payroll (STP).
    • For private ancillary funds (PAF), that 2019 PAF guidelines are being applied.

    Whilst this is not an exhaustive list, it does provide a start to good governance and risk management. This helps strengthen trust and confidence that NFPs are contributing to a level playing field.

    Jennifer

    Last modified: 28 Oct 2019QC 60481