Working with NPOs can be very rewarding. “At the moment, I work in a non-profit that rescues abandoned babies,” says Alice Jones, who was speaking at CIBAs Practice Management Conference (PMC) at Maropeng. 

However, the sector is also complex, explains Jones. “There are a lot of acronyms, which can be confusing, but you need to understand them.” Jones has worked as an accountant in the sector for the last 28 years. 

If the complexity of compliance in the sector is challenging for accountants, it can seem positively daunting for those running non-profits. “Without a doubt, CIBA has to help our members understand how compliance works. Some members are illiterate and don’t have good qualifications,” Jimmy Gotyana, president of the  NPO Alliance, told the conference. 

Compliance challenges in the sector

These complexities include Section 18A of the Income Tax Act. This section of the act allows taxpayers to deduct a donation made to a SARS approved non-profit from their taxable income (up to 10%). This deduction is a crucial incentive for many non-profits. 

To obtain Section 18A status, a non-profit must meet specific requirements and remain compliant. Jones points out that, due to noncompliance, SARS may deregister the non-profit. This can lead to problems if someone makes a donation expecting to be able to list this deduction in their tax return, only for SARS to disallow it. 

Jones notes that often NPOs rely on people who aren’t qualified. “You get people who volunteer at NPOs who are willing but not able.” This leads to a downward spiral when compliance tasks aren’t met.

This reliance and the resulting risk can come from a lack of funds. However, Jones explains that she does charge for her services. A fee, even a reduced one, formalises the business relationship. It also allows the accountant to cover their expenses. 

Should accountants welcome proposed legislative changes? 

The discussion at the PMC comes during a period when the government is trying to drive through legislative amendments as part of its efforts to avoid greylisting.

This includes the registration of all NPOs, which Jones considers a good idea to prevent people with bad intentions from using a non-profit structure as a front. She also welcomes the change, which will provide grounds for the disqualification or removal of NPO office bearers. 

“I think once the legislation has been tweaked and tidied up, there can only come benefit from it,” says Jones.” 

If passed, the legislation will add more compliance to the sector, increasing the need for accountants.  

CIBA has signed a memorandum of understanding with the  Department of Social Development and offers its members a specialised license to enable them to service the non-profit sector. 

Accountants have a crucial role to play in this space, according to Gotyana “We hope and wish that you will come on board so we can do something better in the NPO sector.”