MISSION-SHIFT in the time of COVID
MISSION-SHIFT in the time of COVID
The times are a’changin, and it looks as though we will have to reset to a ‘new normal’ for the foreseeable future. At ngoLAW we are helping our clients adjust and this ngoLAW Brief deals with a current adaptation taking place: NGOs who need/want to shift their focus and embark new sorts of work/projects (Our next newsletter will deal with the practical question of looming AGMS: how do organisations comply with legal obligations while protecting their members?)
Before we get into the detail of the mission-shift question, I would like to refer you to a recent article by our friend, strategic consultant Marcus Coetzee, on decision-making at this time. It has been immensely helpful to us https://www.marcuscoetzee.co.za/recent-events-have-made-our-decisions-simpler-but-not-easier/.
I would also like to share with you a distillation of some insights from Mike Saunders, author of Human Centric https://mikesaunders.com/.
Mike’s observation is that the usual role of leaders is to drive progress and change in their organisations by pushing their people out of the comfort zones of the known and the stable, and into some of the chaos which is required for creativity and growth. However, at this time of pervasive, wide-ranging and (often) terrifying uncertainty, the people who we lead need just the opposite from us – they require stability and routine so that they can settle, focus and be productive. Mike advises that we prioritise creating for our teams a dependable work rhythm and predictability in these turbulent times, so that we all feel that we have some solid ground under us, some comfort from the familiar. Our work is all about people, and we need to remember that it is done by the people we lead and that they need to be able to function and deliver.
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MISSION-SHIFT- CAN WE CHANGE WHAT WE DO?
We are regularly getting calls from clients that go something like:
- We are set up to deliver sanitation systems, but are now wanting to deliver food parcels; or
- We generally fund bursaries but now want to set up online learning platforms or buy laptops, can we do this?
Non profits are good in a crisis, and used to pivoting to meet new challenges (and access new funding sources!) and if your organisation has built a network and has employees with expertise but no way to send them out fulfilling your usual mission, then the temptation (or the need) to diversify might be compelling. This is especially when you are in direct contact with real and immediate needs/threats to be dealt with.
Before you change track, however, there are some legal and strategic questions which need to be answered, to determine whether you can go in a new (or additional) direction and these are:
- Do grant agreements/other agreements with donors or stakeholders permit the shift?
- Does our founding document allow us to carry out the new or added activities? and
- Is the shift a wise move, looking at the history, focus, strategy, sustainability and structure of the organisation?
GRANT AGREEMENTS AND OTHER CONTRACTS
Many organisations have in place grant agreements which are project-specific: the funds are paid over but only drawn against delivery of defined projects and activities. These are what we call ‘restricted’ funds’. They do not belong to the organisation until they are spent and, if not spent in accordance with the grant agreement, they must be returned.
Organisations also often enter into service agreements with government or other NGOs. Here again there is specified work to be done and payment is only made if that work is performed.
In both of these circumstances the funds may only be used or allocated for the agreed purpose and, if the organisation wishes to use any part of the funds for emergency response or poverty relief or any other work not agreed on, the donor or other party will have to agree to the change and this agreement generally has to be in writing. The first step therefore, is a conversation with the donor/other contracting party, to explain the deviation and request written consent.
NASCEE (National Association of Social Change Entities in Education) has done some collaborative research on this and has put out this very useful guide https://nascee.org.za/resources/nascee-guidelines-for-unrestricted-grants.pdf which gives input on this conversation with donors. The Independent Philanthropy Association of South Africa has issued the following ‘best practice’ guide for donors, http://ipa-sa.org.za/newsletter/ipasa-best-practice-guidelines-during-covid19/ which may also be helpful in managing these relationships.
WHAT ARE THE LIMITS IN OUR FOUNDING DOCUMENT?
Every founding document defines the objects/mission of the organisation and 98% of founding documents will say that the efforts and the funds of the organisation may only be expended in pursuit of that defined object. This echoes the Income Tax Act requirements for tax exempt entities: activities and expenditure are strictly limited to those which further and support the objects of the organisation.
The first step, then is to find your constitution/ trust deed/ memorandum of incorporation and have a close look at the objects clause.
If your objects are fairly widely phrased and the new/additional work you intend falls within them, then you can go ahead. If, however, this is not the case, then you cannot proceed without first amending your founding document as those who serve the organisation are literally only empowered to do so in pursuit of the objects and any actions taken which fall outside of the pursuit of the objects will be unauthorised and could be called into question and be classed as a breach of duty by the individuals involved.
Now, amending your founding document is a pretty, well, foundational thing to do, and will require:
- In the case of a voluntary association or an NPC with members, a vote by members and with a higher percentage of agreement required than ordinary resolutions (typically 75%);
- In the case of a trust, the Master will require all of the trustees to agree; and
- For a no-members NPC, the directors (and any other stakeholders who may be given powers to vote on this decision) will have to vote, and usually also 75% in favour is required.
The practicalities of voting and signing are one current impediment, and will be dealt with in the next newsletter but a really important question is how soon is the decision effective, ie, how soon can the organisation start doing the new/added work?
|Nature of change||When is it effective?||Note: Reporting requirements|
|The constitution of a voluntary association is a contract between the members of the VA. Changes are made by agreement, in terms of the rules set out in the document (notice period, quorum, votes required).||The change will take effect from the date that the agreement is reached, or from any other agreed date. (Where an organisation may, by agreement of members, already have embarked upon the new work and now are following up with the formalities, the resolution to amend the objects clause could record the date upon which the members actually but informally consented to the change as the actual date of the change, if necessary)||If the organisation has tax exempt status, a copy of the minutes/resolution and of the amended document must be sent to SARS Tax Exemption Unit (TEU). If the voluntary association is a registered NPO, then a copy of the amended constitution must also be lodged with the NPO Directorate along with proof of how it was validly adopted.|
|Trust||The trust deed is an agreement between trustees and named beneficiaries who have vested (enforceable) rights. Most charitable trusts do not name individual beneficiaries or, if they do, do not give that beneficiary an ongoing enforceable right to benefits. Therefore the trust deed is usually amended by the unanimous agreement of the trustees. It should be noted that, even where trust deeds record that a lower percentage of trustees may agree to changes, the Master still enforces the law on this and requires 100% vote in favour.||Although the amendment to the deed must be registered with the Master, it is effective from the date agreed by the Trustees and, as with the voluntary association, that resolution could record a past date upon which consensus was actually reached and which is the effective date of the change.||All trustees must sign an original amended deed and an original deed of amendment (resolution to amend) and these must be lodged with the Master of the High Court. Once the Master has confirmed that the amended deed is on record, a copy of that letter, the amended deed and the resolution should be sent to SARS TEU and to the NPO Directorate.|
|NPC||The Memorandum of Incorporation (MOI) of an NPC is a statutory document which is governed by the Companies Act. Any change to the MOI must be made in accordance with the procedures set out in the Act as well as any permitted variations from the Act which are contained in the existing MOI of the Company. The change is adopted by special resolution.||The amended MOI is effective from the date that the amended document and supporting forms and documents are lodged with CIPC.||Amendments to the MOI must be lodged with CIPC. It usually takes about a week or so for the amendments to be noted and registered. This notice from CIPC, the amended MOI and supporting documents should be lodged with SARS TEU and the NPO Directorate.|
IS IT A GOOD IDEA TO CHANGE/ADD THIS WORK?
As Marcus’ article points out, your options at this time may be limited. If the survival of the organisation is at stake and you must shift focus in order to access funding, pay staff and ensure that the organisation comes out of the other side of the pandemic, then this may be one of those really tough but simple decisions.
However, if you do not have to change your mission to survive, then you need to consider whether the services you currently provide, even though they may not seem to be meeting the pressing needs of the day, are ones which should continue intact. And even if you do have to shift focus for a season, it is still important, for your staff, your board and your donors that the dream that they signed up for does not die.
My local Hospice sent around an email with this message, which I like: “Keep the main thing the Main Thing”.
So, if you can hold on, don’t let your vision die. Hope and stability are needed in a time of crisis. For your organisation, try to do first what is important and not what feels urgent.
And if you and your people feel a need to engage with the crisis, and this is not part of your core mission, investigate the option of working with or volunteering for another organisation which is already established and engaging in disaster relief work. The connections we build between organisations at this time could be some of the most useful and enduring outcomes of this crisis.
Thanks to the Highway Hospice for permission to use their “main thing” pic.
Keep the questions coming!
At ngoLAW we will be continuing our work and will research and draw together information and advice to assist you with thinking through and making some tough decisions over the next while. Watch this space for our correspondence and conversations and please forward this email to anyone who may benefit.
To submit your questions, visit our website, hit the ‘contact’ tab, and enter your question into the ‘Contact Form’ space provided.
Stay safe, keep calm and carry on- A Luta Continua!
Nicole, Lize, Bandile, Janice, Lisa and Dorothy