Home » Not For Profit (NFP) Board Update 2021: Lessons from 2020

Not For Profit (NFP) Board Update 2021: Lessons from 2020

Posted by Hannah Rose | 27 January 2021 | Corporate Finance

The events of the Australian bushfires in 2019 followed by the global COVID pandemic in 2020 have highlighted how pivotal it is for Not For Profit (NFPs) organisations to improve their governance processes and diversify their funding sources, both of which have a material impact on the ultimate success of the NFP.

2020 was more than just a difficult year

To say 2020 was a difficult year would be an understatement. The year began during an unprecedented bushfire season, which heavily impacted many regional communities and ended with trade wars and a global pandemic. All boards have been considering both how to manage the impact of these events whilst trying to future proof their operations in a new socioeconomic landscape, much of which has changed the way we work forever.

On the positive, the bushfires caused a rush of national and international charitable support, generating a flood of donations of money and goods, with everyday people in affected communities suddenly having to decide how to best utilise these donations to rebuild and support individuals who had suffered so much loss.

As a result, new NFP and charitable entities were (and continue to be) created in bushfire-affected communities to help make the most of the public and government funding. There was for example a significant injection of funds into existing wildlife care and benevolent relief charities. These organisations had to grapple with the compliance and governance standards required to manage this new and substantial funding.

As the bushfire ash started to cool, the pandemic impacted Australian organisations in ways that many boards had not envisioned.

Lessons learnt in 2020

As COVID escalated in March 2020, boards began to ask themselves:

  • How will COVID restrictions impact our organisation and the delivery of our services, programs and any overseas operations?
  • How do we continue to operate if we predominately deliver face-to-face services and programs, including those that are not considered ‘essential services’?
  • What are the implications for our existing contractual arrangements?
  • How will our funding be impacted and what does this mean for our organisation?
  • Will our organisation be able to remain solvent?
  • How do we ensure the health and safety of our staff and clients?
  • How do we meet our ongoing legal obligations to regulators and members?

Throughout 2020, boards worked on overdrive, continually reassessing the level of oversight and involvement required and working with CEOs and management teams to devise (and continually revise) suitable approaches to respond to each new COVID-related development.

The information directors needed to ensure they were fulfilling their duties differed at each stage of the crisis. During the initial response to COVID, many boards met with management more frequently, with a number establishing a COVID Crisis Management Team to closely monitor the situation and report back to the board.

In the early stages of the pandemic, the Government assisted many organisations, ensuring they could continue to operate, by such things as:

Throughout the remainder of 2020, there were periods of some stability in some states in Australia as COVID cases began to decline. During these times, boards were afforded the opportunity to turn their minds towards recovery efforts. Mission statements, strategies, operating plans and forecasts were re-assessed to ensure they remain relevant in a COVID and post-COVID environment.

Similarly, existing risk management frameworks, crisis management plans and business continuity plans were reviewed and updated to capture lessons learned and reflect new requirements. Boards turned their minds to managing ‘key person risk’ and succession planning, which are not often prioritised by NFPs.

Opportunities for 2021

Looking towards the new year ahead, boards should reflect on what temporary and agile governance arrangements proved to be effective during the pandemic and transition these arrangements to business as usual, such as holding meetings via video conferencing technology.

COVID has most certainly highlighted to NFPs and charities the importance of good governance and, as outbreaks will most likely continue throughout 2021, proven that boards need to be both ready and quick to adapt business operations to meet the needs of those they serve.

Boards should also take stock of strategic opportunities which have arisen because of these crises, for example:

  • Are there new or better ways of delivering your goods or services?
  • Can technology be used to increase your organisation’s impact and reach more people?
  • How will you engage donors moving forward and are there any new donor groups to be considered?
  • Is your organisation positioned to merge with or acquire any other aligned organisations?
  • What opportunities are there to capitalise on any changes made to your workforce and how will you design your workforce of the future?

Looking forward, boards should invest time to understand how Governments, regulators, clients, partners and other key stakeholders have responded to the pandemic and consider how their own responses may change over time. COVID has highlighted how pivotal it is for NFPs to diversify their funding and the impact that tied funding can have on the success of an NFP organisation.

Conclusion

With the uncharted waters of 2021 and COVID still ahead, it is imperative that boards continue to be future focused and consider how their organisation can best adapt and meet environments and stakeholder expectations which can change overnight.

Boards should ensure solid governance processes are in place and a system of monitoring their organisation’s ongoing compliance with legislation, so they do not need to address these issues during a crisis when their attention is better focused on tackling the issue at hand.

Click here to download this article as a briefing note. 

For compliance or governance support for your NFP or charity, or for support exploring any opportunities which have arisen from the past year,
please contact Nexus NFP legal expert
Group Principal Hannah Rose on nfp@nexuslawyers.com.au

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 This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.

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