NFP governance study reveals: consolidation on the cards for many

The study found that more than 30 per cent of not-for-profits (NFP) have discussed mergers over the past year as a means to improve efficiency and expand services offerings to stakeholders.

The NFP Governance and Performance Study conducted by research firm BaxterLawley on behalf of the Australian Institute of Company Directors surveyed more than 2,700 directors of NFP organisations with a combined income of $15 billion during 2013-14.

The study revealed the push for consolidation is greatest among NFPs with income above $10 million or those operating in social services. Around one-quarter of boards that have discussed a merger believe the process will be complete within two years.

“The results of our study show that NFP boards have extremely high standards of governance that allow directors to pursue the strategies that will achieve the best outcomes for their organisations and stakeholders. Around 80 per cent of non-executive directors who participated in the study believe the quality of governance in the sector is better than it was three years ago,” says John Colvin, CEO and Managing Director, The Australian Institute of Company Directors.

Other key findings:

• Many NFPs are struggling to determine the impact of reforms, or proposed reforms, to government policy and legislation.
• 78 per cent of respondents called on the government to clarify its direction and create stability in operating environments within the next three years.
• 84 per cent per cent of non-executive directors don’t receive an income from their roles. The average amount of time devoted to a directorship from this group is 20 hours per month.
• Only 50 per cent of non-executive directors believe their organisations measure overall performance effectively. Many would like more non-financial indicators to determine if the organisation is achieving its purpose.
• 62 per cent of respondents identified maintaining or building income as a high priority over the next 12 months as they seek to diversify their organisations’ income streams and reduce their reliance on government funding.

“NFP boards, like those in other sectors, require stability in government policy to be confident that the decisions they make will not be compromised. Uncertainty about potential reforms has a significant impact on an NFP’s ability to plan for the future, to secure appropriate resources and to maintain the required number and composition of staff,” says Colvin.

Sarah Harding

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