Solvency - an Issue of Good Governance

So many Not for Profits rely on sponsorships as part of their budget planning but the issue of solvency is a crucial one for Governing Councils and Boards in the light of recent local and overseas events.

Carey Cox is from the Australian Institute of Company Directors who specialises in the duties, obligations and liabilities for Not for Profit Board Members.

It’s estimated that about $3 million dollars in corporate sponsorships is out of the market following the collapse of Ansett. The sponsorship of the Pre-season AFL competition (the Ansett Cup) is just one example. The late withdrawal of funds sees the competition now in doubt. Many other Ansett sponsored projects have also been left wanting.

Carey Cox says it is sometimes unforeseeable events like these that Boards have to factor into their advance planning to make sure there are contingency plans if the cash doesn’t come in.

He says cutting expenditure is a first response and then cutting back staff may have to be a last response.

He says the experience from the US shows this in a dramatic way.

The US e-Philanthropy Foundation reports that the combination of a slowing economy and terrorist attacks has created a double blow that few charitable organisations (not involved in direct relief programs in New York and Washington) are in a position to weather.

As direct mail appeals from other areas of the sector are put on hold and Foundations built on large stock portfolios watch their endowments dwindle, organisations report having to slash budgets and cut staff.

The Australian Institute of Company Directors says these events overseas make solvency for Australian Not for Profits a pointed issue for Board Directors.

The Australian Institute of Company Directors is the only body in Australia specifically established to assist directors with anecdotal evidence to suggest that well over half of the membership serve on NFP boards in some capacity.

The AICD has produced a New Director Checklist covering the 8 key areas every newly appointed director should examine. If you would like a copy of the booklet just e-mail us your postal address to probono@probonoaustralia.com.au.

The AICD offers a number of Company Director professional development courses. Details are included in the booklet or you can check out the web site at www.companydirectors.com.au.