Directors and trustees in the Not for Profit sector must perform at the same level as their counterparts in the public and private sectors.
This is one of the findings of a survey by Grant Thornton of 416 Not for Profit organisations in Australia and New Zealand - one of the most comprehensive studies of its type undertaken on an Australasian-wide basis.
Less than half (43%) of New Zealand organisations surveyed said all of their directors and trustees understood how they were expected to perform, compared with 65% of Australian organisations.
Grant Thornton New Zealand Partner, Michael Stewart says the findings are an improvement on previous years, but there is still a need for board member education within the sector.
“This continues a trend that has been apparent for some years now. New Zealand has introduced new reporting standards with more on the way together with new requirements for an annual audit or review,” Stewart says.
“Given this, and the greater accountability and expectations of independent directors, there is more pressure on Not for Profit organisations to proactively rethink the composition of skills, experience and ways of thinking around their board table.”
Simon Telfer, Founder of Appoint Better Boards observes: “We are starting to see boards wanting to replace passionate volunteers with commercial expertise, especially in the sports sector. This not only helps boards navigate increasing legal risks, but also addresses greater funding challenges as donors with the deepest pockets are seeking greater evidence of sound governance and business practices.”
The survey showed board members of larger organisations with higher turnovers were seen as having a better understanding of their legal responsibilities. Smaller organisations particularly in the culture, sport and recreation sectors were most likely to think that board members did not understand their legal responsibilities.
However, even in the highest turnover category, the percentage of organisations where all board members were seen to understand their legal responsibilities was a low 57%.
The Grant Thornton report says the complexity of the modern governance environment is a good reason for consolidation within the Not for Profit sector.
Stewart adds: “Our survey shows that small Not for Profits are more likely to struggle in the governance sphere.”
“While there are exceptions to this, the general trend is clear. We expect to see the average size of Not for Profits increase in coming years through mergers, creation of alliances and outsourcing, and a trend towards more boards run by suitably qualified professionals.”
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