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Aquilla Informer: Issue 2010/31

I feel sorry for all the Springbok supporters. It seems this are a bit ruff in that engine. Business is not running smoothly, and pressure is starting to mount.

The same can be said with businesses in general after the Soccer World Cup. Some companies and individuals  utilised the opportunities and other lost out. Some tried and succeeded while others failed and had little or now success. I just wonder in the back of my mind how many opportunities where really created for the SMME sector during this World Cup, or whether only selected few International companies made any money from these events. Please let us know what is your opinion about the SWC.

We are working on a blog concept where we will publish the newsletter and all comments.

This week I am touching on the King III and it's impact on Non-profit organisations.
Please send any questions, concerns or comments to with a relevant subject description on the topic that you might inquire, contribute or have concerns about.

Wynand Louw
Aquilla Group



THE KING III and it's impact on Non-profit organisations (Part 4)

King III came into effect on 1 March 2010 – until then King II will apply. Until know the King Reports had  very little impact on the operations of the Non-profit sector and was mostly aimed at the JSE Listed Companies.

Unlike its predecessors, King III now applies to all entities regardless of the manner or form of incorporation or establishment.
This statement includes all non-profit organisations in South Africa. It would accordingly include a crèche formed as legal entity, a community-based sports club, a ratepayers association, a burial society, small scale co-operatives, faith-based organisations and political parties. Some of the principles contained in King III can, on the contrary, have a harmful effect on non-profits.

A lot of debate is ongoing between the Institute of Directors in Southern Africa (IoD) and the organised NGO sector.

The problem with King III in its present form is that in failing to mention specifically the role of governance in the NPO sector, it inadvertently views NPO activities within the same prism as that of the corporate sector. This is a mistake given the vast inherent differences between the two sectors.

The non-profit company is defined in the Companies Act of 2008 as a company incorporated for a public benefit or other object as required by item 1(1) of Schedule 1.  This definition is consistent with that found in the Nonprofit Organisations Act of 1997 which defines a nonprofit organisation as a trust, company or other association of persons established for a public purpose. The implication is that, except for mutual benefit organisations, nonprofit
organisations exists for a public purpose (not to profit for its members) and are accordingly accountable to the broader public.

Nonprofits are inherently accountable to a wide range of stakeholders. It has been pointed out by Robert Lloyd (2005)  that non-profits are: upwardly accountable to their donors (those who provide financial support); downwardly to their beneficiaries (those on whose behalf they speak), inwardly to themselves and horizontally to their peers.

The non-profit sector is commonly referred to as the ‘voluntary sector’ because board members ordinarily volunteer their time to serve on boards. Contrary to this well established practice in the non-profit sector, King III now recommends that South African non-profits should remunerate directors. I do not believe that this is a good idea and can lead to all sorts of issues. King III is effectively giving non-profit boards the freedom to pay themselves for serving on boards and attending meetings. This kind of governance practice in the non-profit sector would bear the risk of eroding donor confidence and would simply be harmful for the nonprofit sector.

According to  Ricardo G Wyngaard and Peter SA Hendricks (2010), King III clearly presents a number of dangers to the enabling environment for the non-profit sector:

1. Directing the course of CSI funding    
2. Further alienation of community-based organisations
3. Overburdening organisations
4. Mission drifting
5. Eroding democracy
6. Development of commercial-based legislation

Lloyd, R., (2005) The Role of NGO Self-Regulation in Increasing Stakeholder Accountability, Oneworld Trust
Wyngaard, RG (2010) Highlighting the need for a separate non-profit governance code, International Journal of Civil Society Law Volume VIII, Issue II (April 2010)

I will continue to discuss these implications in the next issue of the Informer.

Please let us know if you have any questions or need assistance in any way. Also discuss the implications for your organisations with you accountant, auditor or advisers.

Key Dates:

1 July 2010
Tax Season 2010 starting date

Deadline for eFiling/Branch submissions

26 November 2010:
Non-provisional: Individuals and Trusts

31 January 2011:
Provisional: Individuals and Trusts
Deadline for Postal submissions/SARS Drop box

30 September 2010:
Provisional and Non-provisional: Individuals and Trusts

Open Source Software Solutions
I found an exiting open source Enterprise Resource Management software comparing with that of SAP.  It is called OpenERP, and originated from TinyERP and is a total solution for most companies. For more information about this extensive resource, have a look at their website and play around with the variations of  the demo sites. more information can be found at: http://www.openerp.com/

Please let us know if you have any requests or need us to search for a particular open source software that you might need. Open source Solutions can be found for almost all proprietary software.

For training, information or assistance please contact us on:

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Thank you for sending in your questions. Please continue so, and we will answer them as best possible in our Q&A section.
Have a great week.
Aquilla Informer Team
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