Last week we discussed different organisational forms. This week we will spend more time specifically on NGOs.
There are many different definitions of and viewpoints on NGOs. To start with, let's look at three definitions;
“A NGO is a non-profit, citizen-based group that functions independently of government. NGOs, sometimes called civil societies, are organized on community, national and international levels to serve specific social or political purposes, and are cooperative, rather than commercial, in nature.” 1
“… a not-for-profit organization that is independent from states and international governmental organizations. They are usually funded by donations but some avoid formal funding altogether and are run primarily by volunteers.”2
“… any non-profit, voluntary citizens' group which is organized on a local, national or international level.”3
In South Africa, the term NPO is the formal term used when referring to organisations that have a not-for-profit motive. One of the reasons for using NPO is that the South African Government created a number of organisations that function as “NGOs” but with government support. Internationally and in general discussions however, the abbreviation NGO (non-government-organisation) is used when referring to such organisations. The South African use of the term NPO does create some confusion, as there is also a formal South African NPO registration.
As the purpose of NGOs is usually described as “doing good”, “addressing a community need” or “not doing things for the money”, it is commonly thought that NGOs do not have to adhere to the same rules, regulations, standards and modes of functioning that a for-profit company should. This is incorrect! You are
In South Africa, there are three acts governing the functioning of organisations that operate with a not for profit objective. These acts are;
§ The Companies Act (Act No. 61 of 1973 as amended) regulates an organisation referred to as a Not for Profit Company (NPC).
§ Trust Property Control Act (ActNo. 57 of 1988) regulates the functioning of trusts.
§ The Non-profit organisations Act (Act No. 71 of 1997)which further regulates not for profit trusts and voluntary organisations.
Registration with Department of Social Development
If certain conditions are met, any form of NGO, whether it a Trust, Voluntary Association or NPC, may register as a NPO (Not for Profit organisation) with the Department of Social Development.Registration under the Not for Profit organisations Act 71 of 1997 is not mandatory, nor is it a precondition for the legal existence of any organisation. However, there are certain benefits to registering as an NPO. including:
§ Any NGO applying for government funding must be registered in terms of the NPO Act.
§ Only registered NGOs are eligible to become grant recipients of the National Lotteries Commission, the National Development Agency (NDA), the Independent Development Trust (IDT), local and provincial authorities, and various other public and private fundingagencies.
§ Registration as an NPO improves the credibility and funding opportunities of the NPO.
§ It is easier for a registered organisation to open a bank account and comply to FICA (Financial Intelligence Centre Act(38 of 2001) criteria.
§ Registering as NPO allows the organisation to apply for, and possibly obtain, tax incentives.
The Certificate of Registration serves as proof of the legal existence of theorganisation.
Next week we will discuss registration as apublic benefit organisation (PBO) with the South AfricanRevenue Services (SARS) in terms of section 30(1) of the Income Tax, No 58 of 1962 and the implications of Sec 18A.