Legal eagle's bird's-eye view of the sector

Posted on 10 Feb 2019

By Rebecca Lambert-Smith, team leader, not-for-profits, Moores

Lambert Smith Rebecca

Lawyer Rebecca Lambert-Smith from Moores, Our Community's legal partner, advises charities and not-for-profits on getting established, structural issues, tax, governing documents, regulations and much more. With a keen eye on the regulatory environment, she takes a holistic look at how this year will pan out for the not-for-profit sector.

This could get tricky: Top issues facing NFPs

The increasing governance burden requires greater sophistication

Community directors, particularly in smaller organisations, are often volunteers chosen primarily for their connection to the organisation's mission rather than for their governance experience.

However, good governance requires increasingly sophisticated skills and understanding. In 2019, community directors may need to consider the impact on their organisation of matters as diverse as recommendations from the banking royal commission; the new ACNC external conduct standards; changes for deductible gift recipients that are not registered charities; and a potential change in government.

Your organisation should consider whether the level of experience of your committee or board is appropriate for the complexity of the organisation and the regulatory environment in which it operates. It may be appropriate to provide professional development to current community directors or recruit additional community directors with specialist governance qualifications.

Managing culture is a governance responsibility

Recent royal commissions have caused significant reputational damage to organisations and the individuals responsible for their governance. Those investigations found that almost invariably, it was cultural failures that allowed misconduct to thrive.

The lesson for community directors is not only that culture is important, but that the public considers that setting and overseeing the culture of an organisation is a key part of good governance. Culture is no longer a solely operational issue - if it ever was. Community directors need to ensure that their organisation's values meet changing community expectations and translate into day-to-day operations.

Demographic changes afoot: The cresting baby boomer wave

Baby boomers make a disproportionately large contribution to the bottom line of many community organisations, via donations and other forms of support. But the boomer wave is cresting. By the end of 2019, almost half of baby boomers will have retired, and will no longer be earning a regular income.

The window of time within which community organisations can engage with their most rusted-on and generous donors is starting to close. Community directors need a strategic, segmented fundraising strategy to engage with retiring boomers, Generations X and Y and the emerging Gen Z workforce.

Options for organisations wanting to get onto the front foot

Telling your story can energise your efforts

Many organisations are so focused on what they do that they fail to step back and consider why they are doing it. Worse, they fail to articulate the "why" to their internal and external stakeholders. Yet most people are far more energised by authentic branding than by annual reports. Great community directors will ensure not only that their organisation's story is told well and often, but that it informs and guides the organisation's values, mission and operations.

Collaboration: Work with others for more impact

Collaboration with other organisations can create benefits including economies of scale, increased opportunity to attract government funding, and shared know-how. Mergers continue apace in the sector but are not always necessary, or appropriate. Strategic alignment through activities such as joint ventures, co-branding or co-location can offer many of the same benefits as mergers. They can also provide a good opportunity to investigate cultural "fit" for a potential future merger.

Strengthen yourself by protecting the vulnerable

Vulnerability can affect any stakeholder in an organisation, from the single mother receiving services, to the employee with a physical disability or the community director with depression. Both community and for-profit organisations risk a severe backlash if they fail to engage compassionately with vulnerable individuals. This may not be an opportunity in the traditional sense, but it is fast becoming an imperative.

For registered charities, the protection of vulnerable beneficiaries is an ACNC compliance focus for the period 2017-2019. It is also an express requirement of the new external conduct standards.

Community organisations that get this right have an opportunity to differentiate themselves in a crowded marketplace. But the real reason to protect vulnerable individuals is not risk management or branding: it is simply that it is the right thing to do. Community directors do well to remember that the line that separates us from poverty, illness or disability is paper-thin and could be crossed by any of us at any time.

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