The Tribune

By MARIO SMITH

Last month, I had the opportunity to attend the Non-Profit Leaders Retreat hosted by One Eleuthera Foundation (OEF) at The Retreat Hotel on Eleuthera and to participate in a panel discussion on “Critical Trends for Sector Acceleration”.

This unique event included over 15 non-profit organisations and provided the perfect opportunity for non-profit leaders to learn, share, reflect and support the development and acceleration of the non-profit sector in The Bahamas. One of the growing trends identified in the panel discussion is the increased focus on governance with the introduction of the Non-Profit Organisation Act 2019 (“the NPO Act”).

The NPO Act was implemented in response to the Financial Action Task Force (FATF) Special Recommendation VIII and the Caribbean Financial Action Task Force (CFATF) 2007 Mutual Evaluation Report and subsequent follow-up reports of The Bahamas. These reports recommended that the Authorities identify organisations that fall within the definition of a non-profit organisation, review the adequacy of its laws and implement risk-based measures to protect the sector from terrorist financing abuse. In accordance with Section 7 of the Act, a NPO as defined by the Act, is required to be registered under the Act and this registration is valid for a period of two years. Further, the Act empowers the Registrar to cancel or suspend the registration of NPOs that are found to be in contravention of the Act and to conduct on-site inspections of NPOs to ensure compliance with the provisions of the Act. The Act also makes provisions for the imposition of administrative fines as outlined in Section 15.

NPOs can mitigate the risk of their organizations being used for terrorist financing activities by first identifying and documenting the risks inherent in the organisation and by ensuring the proper implementation of strong controls and good governance measures as outlined in the “FATF’s Best Practices Combating the Terrorist Financing Abuse of Non-Profit Organisations.”

Good governance is a hot topic in both the non-profit and for-profit sectors. It refers to the process by which organisations manage their operations and resources in a manner that protects the integrity of the organisation, promotes financial transparency and accountability, and is free of abuse and corruption. For the non-profit sector, this includes knowing your donors and partners and ensuring that programs are properly monitored. Oftentimes, when working with NPOs, I have found that we can be so eager to go into the community to do the great work we are passionate about that we sometimes neglect to put the same energies and focus on the administrative aspects of the organisation, which is equally important. At OEF, we have embraced the concept of good governance and have worked diligently to ensure that we implement and continuously learn more about good governance practices.

Protecting the Integrity of NPOs

The board of directors is critical to protecting the integrity of NPOs. They are responsible for safeguarding the organisation’s mission, providing oversight, and ensuring that the organisation is operating in accordance with its articles of incorporation and bylaws, and in compliance with local laws and regulations. As a result, it is important that directors have a good understanding of the organisation and that a proper structure is in place to ensure that board meetings are held on a regular basis, that reports are circulated in a timely manner ahead of meetings and that the minutes of each meeting are taken for record keeping purposes. As outlined in Sections 18 and 19 of the NPO Act, an NPO is required to keep records and maintain financial statements in sufficient detail to demonstrate that it is operating in accordance with its purpose and objectives. Board members also have a duty of care to ensure the proper use of all assets of the organization and that the organization has the capacity and the resources necessary, including employees, to successfully carry out its mission.

Financial transparency and accountability

In addition to being responsible for the direction of the organization, directors are also responsible for ensuring that strong financial controls and fiscal management policies are implemented to promote financial transparency and accountability in the organisation.

This includes establishing controls regarding signing authorities on accounts, ensuring that a budget is developed, followed, and approved by the board of directors and that proper financial records are kept in accordance with local laws. In addition, larger NPOs should consider having audited financial statements prepared so that the financial statements accurately reflect the financial position of the organisation and make these statements available on their websites. These actions can have a positive impact on donor contributions and volunteer engagement and strengthen the credibility of the organisation in the eyes of the public.

Know your donors and partners

Fundraising is critical to the success of NPOs, which makes it necessary for NPOs to identify their organisation’s donors. Knowing your donors and partners and their backgrounds and interests is not only important to the curation of the donor relationship, but it also assists in protecting the integrity of the organisation and mitigating the risk of the NPO being used for criminal activities. In addition, when forming relationships with other NPOs, government agencies, or private sector entities, a formal partnership agreement may be established to ensure that all parties are aware of their roles, responsibilities, expectations, and the limitations of the partnership. Questions that should be asked in relation to donors and partners include:

• Has the information provided by the donor/partner been verified?

• Where is the money coming from?

• Is the donation coming from a sanctioned individual or organisation?

• Is the donor/ partner operating from a sanctioned country or affiliated with an organisation in a sanctioned country?

• Does the mission and values of the partner align with those of your organisation?

NPOs should be mindful that accepting donations from sanctioned individuals or organisations can not only damage the reputation of the NPO but can also have legal repercussions in terms of administrative, civil, or criminal penalties.

Monitor programmes

Program monitoring and evaluation is another tool that may be used by an NPO to mitigate the risk of the organisation’s resources being used for fraudulent or criminal activities and to ensure that the intended beneficiaries are receiving the funds or services that have been approved for them.

A good practice would be to establish a budget specific to the programme and to establish the necessary financial controls and procedures regarding the delivery of the programme, the expenses associated with the program and the overall administration of the programme. Best practices also include ensuring that periodic reports and assessments are received, which detail the impact of the programme on the ground.

Conclusion

In conclusion, good governance is key to mitigating the risks of an organisation being used for criminal purposes and for the proper functioning of a non-profit organisation. It requires having the right mix of ingredients, which include ensuring proper board oversight, encouraging financial transparency and accountability, implementing internal controls, policies, and procedures to mitigate inherent risks, knowing your partners and donors, and monitoring and evaluating programs to ensure that the organisation is not used for criminal or fraudulent purposes.

One Eleuthera Foundation continues to reap the benefits from its focus on good governance measures, which has led to improved policies, procedures and financial controls, including ensuring that audited financial statements are prepared on an annual basis. Good governance requires a lot of care and commitment; however, with the right governance framework and a clear plan, NPOs can build trust among their stakeholders and ensure organisational stability and mission attainment.

• With roots in Hatchet Bay, Eleuthera, Mario is the Chief Compliance Officer for RBC Dominion Securities Global Limited (Caribbean) and Regional Compliance - Caribbean. He holds degrees from Acadia University, Canada and the University of Manchester, UK. Mario also serves as a Director of CTI, as a member of the Board of Rotary Bahamas Disaster Relief and is a Past Assistant Governor for Rotary District 7020.