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Does the not-for-profit sector lack governance skills?

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The research was undertaken through a series of surveys and direct observation of board practices over a six month period.

The findings indicate that:

  • 72 per cent of associations are at risk of a corporate governance breach
  • 63 per cent of associations do not have a corporate governance policy or adequate checks and balances to avoid a financial disaster
  • 61 per cent of association board members have little or no understanding of corporate governance issues and/or their role as directors
  • 78 per cent of association board members and 59 per cent of executive directors cannot identify their roles and responsibilities in terms of corporate governance and/or their legal and compliance responsibilities
  • 89 per cent of association board members do not undertake any board induction course or regular training.

The findings reveal that many associations are either choosing to ignore corporate governance practices or are not aware that governance is just as applicable to not-for-profit organisations as it is to the commercial sector.

At one particular charity-based association six out of ten newly elected board members could not answer the following three questions:

1. Can you name your association’s auditors?
2. Does your association have an overdraft?
3. What is the name of your association’s legal advisers?

There are strategic solutions to overcome these board-level issues, which include some if not all of the following:

  • A yearly induction after each annual general meeting for the board of directors
  • A board policies and procedures manual
  • An annual board performance evaluation
  • A regular corporate governance audit.
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