Thousands of long-established South African nonprofit organisations, which have registered under the Nonprofit Act as “NPOs”, are being encouraged to ensure legal compliance with that Act, as the Department of Social Development (DSD) begins a process from the end of October to update its records.
Consequences of Non-Compliance
Organisations with NPO status that remain non-compliant may face deregistration from the NPO register. Those which depend on government funding may then have challenges with contracts and partnerships, reduced capacity to deliver services, staff layoffs, and even closure. This has dire implications for under-resourced communities that rely on the services and facilities provided by these organisations.
A sector representative body, the NPO Working Group, is urging organisations which want or need to retain their NPO status to take advantage of assistance offered by the DSD, and to get their affairs in order urgently.
The number of registered NPOs has grown significantly from 1997, when the Act was introduced, to 295,924 in October 2024, according to the DSD. Non-compliance reporting rates remain high, however. Some 64 000 organisations, registered as NPOs between 1998 and 2013, have never filed an annual report, according to a DSD official. This cohort will be the first to be deregistered.
Nonprofit Act
The NPO Act requires registered organisations to submit a narrative report of their activities, together with their financial statements and an accounting officer’s report, within nine months of their financial year-end, or face loss of NPO status. The financial statements need not be audited, but must include a professional accountant’s report.
There have been several attempts to update the NPO register since 2012, and deregister non-compliant NPOs, but these initiatives have faltered due to push-back from the nonprofit sector, and government directives.
Small and volunteer-driven organisations, in particular, have struggled to comply. They cite insufficient funds to engage professional expertise, and inability to interact with DSD systems.
In response to protests from the sector, the DSD implemented a range of interventions to help organisations understand and comply with requirements. However, the impact of these interventions was undermined as the DSD did not follow through and deregister non-compliant organisations as NPOs.
The push for NPO deregistration has gained traction since South Africa was placed on the Financial Action Task Force (FATF) grey list in February 2023. The FATF targets countries with insufficient controls on money laundering and terrorist financing, and there is the perception that an unregulated nonprofit sector has been a factor in grey-listing.
According to Nicole Copley, director of ngoLAW and a member of the NPO Working Group, this perception has increased pressure on the DSD to enforce compliance with the NPO Act.
DSD Enforcement and Deregistration Process
DSD enforcement is being undertaken in three phases. The phase one deregistration process starts on 31 October 2024. Dates for phases two and three will be announced next year. Deregistration takes place as follows:
1.Notices will be sent to non-compliant organisations, giving them a month to comply and file missing reports;
2.At the end of that month, organisations which have not filed reports will be sent a notice of final deregistration. They will have one month to lodge an appeal directly with the DSD against the deregistration;
3.Organisations that appeal, and lose, may approach the Arbitration Tribunal (a statutory body set up in terms of the NPO Act).
The DSD has stated that, because it is aware that notices may go to outdated email addresses, it will publish a list of names and NPO numbers of organisations to be deregistered in phase one, on its website.
Help with Compliance and Available Support
The DSD has run the #KnowYourNPOStatus campaign since 2020, to help NPOs meet compliance requirements. The process has been hindered by technology issues, forcing some organisations to resort to a slow, manual system.
The NPO Working Group has been assured by the DSD that any affected organisation which contacts the DSD and submits reports (or re-submits them, in the case of reports which have gone astray) will not be deregistered, says Copley.
“We at urge all nonprofits to act swiftly to ensure compliance with the NPO Act, to safeguard their operations and the communities they serve,” says Inyathelo acting executive director and chairperson of the NPO Working Group, Feryal Domingo. “Check the DSD website list for pending deregistrations and take immediate action if your organisation is listed.
“We understand that compliance can be challenging, particularly for smaller, volunteer-driven organisations. However, there is no better time to review internal controls and submit outstanding documentation.”
Ann Bown, NPO Working Group communications lead, says: “We encourage NPOs to explore all available support, including the option to submit affidavits in place of costly audited financial statements, to meet the DSD’s requirements and avoid deregistration.”
Register an organisation, check status and update documents: https://www.npo.gov.za/
