Directors are dedicating more time to meeting their board responsibilities.

Directors’ skills are in demand on not for profit boards, a new report reveals.

And not for profit directors are committing more and more time to the role as the sector grapples with multiple challenges, including tighter regulations and profitability issues.

More than half — 55 per cent — of respondents to the Australian Institute of Company Directors (AICD) Not-for-Profit Governance and Performance Study 2022-23 said they are spending between one to five days per month on governance for their NFP, while a further 20 per cent are spending more than six days per month. 

Thirty-two per cent said they were spending “somewhat more” time in their director role compared to the previous year, and 12 per cent said they were spending twice as much time or more.

The poll of 2347 non-executive NFP directors from across Australia also reveals the remuneration status of NFP directors.

Half of respondents said board directors of their organisation are unpaid, and 26 per cent are unpaid but have expenses covered. Twenty-two per cent were paid, an increase from 14 per cent five years ago and a new record for the survey. The average pay rate of almost $23,000

According to the responses given, NFPs in the development and housing sector are most likely to be paid, followed by health and residential aged care.

The ramifications of COVID-19 continue to be felt, but more than a quarter of respondents — 26 per cent — said their organisation had not been impacted by the pandemic.

Half said they expected profits to return to pre-COVID levels from between six months to five years’ time.

But the sector’s financial viability remains a problem and according to the survey has declined, with about 50 per cent of organisations making a loss or breaking even in the 2021-22 financial year.

Finding funding

The top source of funding listed by respondents was government block funding, and the top priority for most respondents was diversification of income sources.

AICD managing director and CEO Mark Rigotti said not for profits should “bring that degree of professionalisation” to their fundraising efforts in order to help raise more money for the organisation.

“What’s good for one organisation might not be good for another organisation,” he said.

He added that philanthropy could be a good source of capital in future.

“As we start to mature as a nation and as we start to accumulate more wealth, it would be good for some of our own personal wealth to be recycled back into not for profits in the same way as it does in other jurisdictions like the [United] States,” he said.

See more: Workplace giving could help reach philanthropy goal

Good governance…

Sixty-eight per cent of those surveyed said their organisation is mostly, or highly effective in achieving its purpose.

As far as measuring effectiveness goes, most organisations relied on CEO reports or business metrics collected through management systems.

The Aged Care Royal Commission recommended that aged care organisations implement care governance committees to assist the board to understand the level and appropriateness of care provided to clients.

But according to the survey, just 16 per cent of health and residential aged care, and 12 per cent of social services organisations reported using care committees as their primary information source for boards. Larger organisations were more likely to make use of the committees.

Rigotti said strengthening management and lifting the level of professionalism of an organisation is vital in the face of tighter regulation.

For directors, this means “you’ve got to be able to bring the sort of skills to it that are required, and that level of required skills is going up,” he explained.

Funders, governments and philanthropists also increasingly want to know how the dollars they give are delivering on an organisation’s mission and purpose, he added.

Highly efficient organisations with professional governance should be able to lead a NFP to “less money being spent on administration and more money available for purpose”, Rigotti said.

A majority of respondents — 29 per cent — spend between nine and 19 hours on directorship duties each month, and 26 per cent spend 20-40 hours.

“A lot of the reason for the extra time is because of the increased regulatory burden, and so I think the policy issue is as all this regulation gets added, is that making it harder to be a director on a not for profit board? Are you effectively impeding the talent pool and the service delivery by adding layer upon layer of regulation?” Rigotti mused.

He said new directors need to go into the role with “eyes wide open”.

“It’s not a part time role. It’s something you need to take seriously and… it’s probably going to involve a little more time than you expect it to.”

The majority of respondents to the survey are over the age of 50, and Rigotti said bringing younger people into boards would “bring different perspectives and… a bit more freshness and energy”.

Young people in particular might be able to bring much-needed experience in technology and digital transformation.

See more: Charities more vulnerable to cyber attacks than private and public sector

“It’s not a bad thing to put the toe in the water in your thirties,” he said, adding that board experience can enhance a person’s career and skills. 

Prominent priorities

Over half of respondents don’t have a Reconciliation Action Plan (RAP) and 46 per cent said governance of climate change never appears on their board’s agenda — but sixty-one per cent of respondents somewhat or strongly agree their board should increase attention to climate governance. 

Rigotti said for many NFPs, focus on such issues came down to a matter of resources.

“I don’t think it’s the lack of awareness or lack of desire; it’s a lack of resources which is holding them back from shuffling those [issues] up the agenda. And it goes to this overarching point, which is… we’re trying to maximise the services that the not for profits deliver. [Doing] more on climate is a good thing for the planet, but it mightn’t be a good thing for the service delivery,” he explained.

Merger matters

According to the survey, talk of mergers remains low, with just 19 per cent saying their boards would have a discussion about mergers in the next 12 months.

Just five per cent said they were currently undertaking a merger.

The most commonly cited reasons for undertaking or considering a merger or winding up were to broaden the range of services, to better meet the NFP’s mission, and to increase the number of people served.

Rigotti said mergers could sometimes make sense, offering a way of consolidating for efficiency — “so you can spend more money on your services and less money on compliance and running the organisation”.

But for many in the NFP sector, their organisation is a “passion project”, and ceding control of that can be difficult, he added.

Read the full report online.