Getting to Grips with Not-For-Profit Governance

1. Why would you want to be a director?

Organisational information
Incorporated Societies Register. https://is-register.companiesoffice.govt.nz/

What value can you add?
Financials. “How to read financial statements” https://www.business.govt.nz/business-performance/strategic-finance/how-to-read-financial-statements/

2. On becoming a director

No website links.

3. Oversight of organisational performance

China Brief: The state of the economy. March 2019 https://www.mckinsey.com/featured-insights/china/china-brief-the-state-of-the-economy

4. Who does what

"the balance of control between the stakeholders, managers, and directors of an organization" https://www.dictionary.com/browse/corporate-governance

Terms of reference
Finance and audit committee. Corporate-Governance-Handbook, 2018, Page 14 https://www.fma.govt.nz/assets/Guidance/180228-Corporate-Governance-Handbook-2018.pdf

Behaviours
Embattled Hutt councillor will be forced to make public apology after 7-hour meeting, 9 Oct 2020. https://www.stuff.co.nz/dominion-post/news/hutt-valley/123032517/embattled-hutt-councillor-will-be-forced-to-make-public-apology-after-7hour-meeting

Remuneration of the CEO
See the Stuff article ''Shareholder activism needed to curb excessive executive pay" https://www.stuff.co.nz/business/opinion-analysis/300165769/shareholder-activism-needed-to-curb-excessive-executive-pay

5. Here’s to the future

No website links.

6. Risk management and mitigation

Organised as a matter of course
Cyber security. See for example “Principle 5 - Storage and security of personal information”. www.legislation.govt.nz/act/public/2020/0031/latest/LMS23376.html

External auditor
The most common example is the annual audit/review…https://www.legislation.govt.nz/act/public/1993/0105/latest/whole.html#DLM6041560

7. Financial information

How to read financial statements
The business.govt.nz website https://www.business.govt.nz/business-performance/strategic-finance/how-to-read-financial-statements/

8. Reporting back to members

No website links.

Appendices

1. Types of incorporated societies
Charities. Which may also operate under the Charities Act 2005: www.legislation.govt.nz/act/public/2005/0039/latest/DLM344368.html

Racing clubs. Which may also operate under the Racing Industry Act 2020 www.legislation.govt.nz/act/public/2020/0028/latest/LMS291924.html

2. Not-for-profit and incorporated societies
“What leaders of incorporated societies need to know about the new Bill” https://www.iod.org.n/resources-and-insights/policy-and-legal/policy-and-bills/what-leaders-of-incorporated-societies-need-to-know-about-the-new-bill/

“… to be distributed to any member.” www.ird.govt.nz/income-tax-for-non-profits-and-charities

3. Constitution
Under the 1908 Act www.legislation.govt.nz/act/public/1908/0212/latest/whole.html

and the 2022 Act www.legislation.govt.nz/act/public/2022/0012/latest/whole.html

…a transition period. is-register.companiesoffice.govt.nz/law-changes-for-societies/

… incorporated societies in New Zealand.www.iod.org.nz/resources-and-insights/policy-and-legal/policy-and-bills/what-leaders-of-incorporated-societies-need- to-know-about-the-new-bill/

…the Companies Office has provided a tool called the Constitution Builder https://isb.companiesoffice.govt.nz/constitutionbuilder/startscreen/

5. The difference between an audit and a review
… the Government’s charities website. www.charities.govt.nz/reporting-standards/new-statutory-audit-and-review-requirements/

7. Useful sources of information
Regulatory Aspects
1. The Government’s website for Incorporated Societies: https://is-register.companiesoffice.govt.nz/

The website includes helpful hints and tips, for example a “Sample financial statement”: https://is-register.companiesoffice.govt.nz/help-centre/keeping-society-details-up-to-date/filing-annual-financial-statements/sample-financial-statement/

2. Financial Markets Authority for all things financial:https://www.fma.govt.nz/especially the PDF article “Corporate governance in New Zealand - Principles and guidelines”, 2018 https://www.fma.govt.nz/assets/Guidance/180228-Corporate-Governance-Handbook-2018.pdf

The earlier edition was published in 2014. So maybe a new edition is due sometime soon.

3. Charities often operate under the Charities Act 2005: https://www.legislation.govt.nz/act/public/2005/0039/latest/DLM344368.html

4. Racing clubs also operate under the Racing Industry Act 2020: www.legislation.govt.nz/act/public/2020/0028/latest/LMS291924.html

Other Useful Websites
5. Governance New Zealand Inc. a professional body “...dedicated to providing leadership in the areas of governance, compliance and risk management.” The website is: www.governancenz.org/. More to the point it offers:

• online courses: www.governancenz.org/Calendar?Action=View&Calendar_id=4
• online training videos: www.governancenz.org/Category?Action=View&Category_id=715

to all – not just members.

6. Institute of Directors New Zealand website is www.iod.org.nz/. It’s a professional body that supports and enables “directors to add value to their organisations and wider communities and prepare them to positively transform the future.” The organisation has a section (hub) on not-for-profit governance at www.iod.org.nz/nfp/. This includes “courses, events, webcasts and governance services geared towards the not-for-profit sector”.

7. Business.govt.nz with the website www.business.govt.nz/, has been created for small businesses. Nevertheless, much of the advice is applicable to the not-for-profit sector as it provides “Tools and expert advice from government and industry, designed to help Kiwi businesses save time and succeed”.

More particularly the website has an area devoted to governance. Again, much of what’s contained here is relevant to not-for-profits: https://www.business.govt.nz/business-performance/governance/governance-overview/