More than half of NPOs registered with government are non-compliant

The Department of Social Development has revealed that 56.6% of its total non-profit organisations (NPOs) are non-compliant with the NPO Act.

This was revealed in Parliament on Wednesday.

The department currently has 295,052 registered NPOs, of which 167,103 were deemed non-compliant.

These organisations failed to submit financial and narrative reports as requested by the department, and as stipulated in the Act.

Future NPO funding uncertain

Non-compliance was not the only issue brought up before the committee.

Member of the Executive Council (MEC) for Social Development in Gauteng, Faith Mazibuko said the NPO sector in Gauteng was experiencing a severe funding crisis. Many organisations have reportedly operated without funding for up to six months of the 2024/25 financial year, according to provincial authorities.

Mazibuko described the situation as “unfathomable,” revealing that some NPOs only received funding in the third quarter of the financial year.

She said the department may also face challenges in funding new NPOs due to a decision to base funding allocations on the 2023/24 financial year framework.

Mazibuko indicated that future funding decisions would depend on provincial treasury confirmations.

“As soon as our provincial treasury can confirm the budget we will be able to check the budget vis-à-vis how much we have received as part of the adjustment and cut this pie amongst all those who qualify,” she stated.

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NPO contract terminations and compliance issues

The crisis has been compounded by the termination of 31 Service Level Agreements with NPOs in the 2023/24 financial year, according to Solly Ndweni, Director of NPO Development and Support.

Various factors led to these terminations, including governance issues, fund mismanagement, expired registration certificates, and board member resignations.

Organisations suspended for governance issues and mismanagement of funds were required to undertake remedial actions, with suspected fraudulent cases referred to legal authorities.

Ndweni said the department had worked to address compliance issues through engagement with municipalities and by providing temporary condonation periods ranging from one to three months for organisations with expired registration certificates.

Additional measures include implementing board member rotation policies and strict financial reporting requirements to maintain funding eligibility.

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Current funding statistics

Despite the challenges, the department said it had maintained some level of support for the sector, funding 806 NPOs in the first quarter through 4,925 transactions.

As of October 29th, the department had disbursed R1,283,393,000.00.

Some organisations hold multiple contracts with the department, and those failing to reach their 80/20 beneficiary targets have faced budget reductions.

Watch the briefing by the Department of Social Development below:

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