INTRODUCTION

The Not-For-Profit Sector in Nigeria has been actively engaged in various forms of charitable causes over the years and has now progressed to more organized acts of philanthropy through corporate social responsibility programs. Philanthropists and other well-meaning individuals and organisations primarily use foundations and other non-profit forms to contribute their resources to addressing social problems involving poverty alleviation, provision of free education and healthcare, youth and women empowerment, prevention of drug abuse, etc.

A Code of Corporate Governance for the not-for-profit sector is necessary to put in place transparent and accountable frameworks, improve performance of non-profit organisations, and elevate public trust and confidence particularly among citizens, beneficiaries of these organisations, donors, volunteers and other key stakeholders.

THE NOT-FOR-PROFIT GOVERNANCE CODE 2023

The Not-For-Profit Governance Code 2023 (“NFPGC” or the “Code”) is the outcome of deliberations of the Technical Working Group (“TWG”) constituted by the Honourable Minister of Industry, Trade and Investment on Thursday, February 9, 2023.

The Code comprises twelve (12) Principles and Recommended Guidelines that apply to all Not-For-Profit Organizations (“NFPOs”) in Nigeria, whether registered or not. These organizations include charitable, educational, professional and scientific, religious, literary, artistic, political/administrative, social and recreational clubs and associations, and trade unions. However, the application of the Recommended Guidelines by NFPOs may vary based on their status and size, which are defined in terms of gross annual receipts or total expenditure as follows:

• Micro: Not more than ₦10 million in average annual gross receipts or total expenditure for the last two years of operations.
• Small: Above ₦10 million but not more than ₦100 million in average annual gross receipts or total expenditure for the last two years of operations.
• Medium: Above ₦100 million but not more than ₦1 billion in average annual gross receipts or total expenditure for the last two years of operations.
• Large: Above ₦1 billion in annual gross receipts or total expenditure for the last two years of operations.

The Code is elective and operates on the basis of “Apply or Explain.” Micro NFPOs that elect to adopt the Code are encouraged to apply the code, while Small, Medium, or Large NFPOs that elect to adopt the Code are enjoined to apply the Recommended Guidelines that are applicable to them under each Principle of the Code or explain why they have not applied the relevant recommendation and the alternative they have adopted.

NFPOs that elect to adopt the Code should include an Annual Governance Statement in the form of a short narrative within their Financial Statements or Annual Report. This statement should explain their utilization of the Code, confirming their commitment and undertaking to continue adhering to the Principles and Guidelines relevant to their operations.

The following are the key principles of the Code:

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‍1. Vision, Mission and Objectives:

NFPOs exist to fulfill particular purposes usually outlined in their vision, mission, and goals. The Code requires these purposes to be clearly stated in the Founding Instrument or Charter (i.e., the NFPO's constitution) and communicated to stakeholders. Board members must understand and commit to these purposes.

The Board of the NFPOs (“Board”) is responsible for regular reviews of the organization's vision, mission, and objectives to ensure ongoing validity and must conduct strategic reviews to drive positive change and innovation across all aspects of the NFPO's work.

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2. Adherence to Law:

The Code mandates the Board to ensure that all aspects of their NFPO’s activities align with the laws of the Federal Republic of Nigeria and other applicable regulations. It requires the Board to seek professional advice and assurances regarding relevant statutory compliance obligations when necessary.

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3. Effective Governing Board:

The Board should be adequately sized to effectively undertake and fulfill its responsibilities, encompassing the oversight, monitoring, direction, and control of the NFPO’s activities in alignment with the scale and complexity of its operations. Maintaining an appropriate mix of Executive and Non-Executive Directors is crucial, with a preference for a majority of Non-Executive Directors. For Large NFPOs, it is desirable that not less than one-third of their members be Independent Non-Executive Directors. Furthermore, the positions of the Chairman of the Board and the Chief Executive Officer/Head of Management or Executive Committee should be separate to ensure that the two offices are not held by the same person. To ensure thorough oversight, the Board should establish Committees responsible for:

i. Finance and General Purpose;

ii. Nomination and Governance; and

iii. Audit and Risk Management.

Additionally, the Board should institute a system for conducting evaluations, at least every two years, to assess its own performance, that of its Chairman, Members, and Committees. It is important to note that Micro and Small NFPOs are not obligated to undergo this evaluation. The Code also recognizes the potential existence of a separate Governing Board or Council from the Board, where desirable for an NFPO.

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4. Diversity, Equality and Non-Discrimination:

The Code mandates the Board to establish a clear organizational approach for integrating gender and disability policies, as well as promoting equity and diversity in all its programs and activities. This approach should align with the organization's aims, strategy, culture, and values.

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5. Disclosure and Transparency:

NFPOs should disseminate accurate information to their stakeholders and the public regarding their vision, mission, structure, operations, activities, finances, and governance practices. The Board, within the constraints of public disclosure and data protection laws, should ensure the availability and accessibility of financial information and the annual report. This includes details about programs, activities, audited financial statements, Board members, executive management, and progress against strategic objectives throughout the year. Such information should be made accessible through the NFPO's website, newsletters, and/or other appropriate means.

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6. Stakeholder Engagement:

The Code mandates NFPOs to conduct stakeholder analysis to identify their key stakeholders and devise strategies to satisfy them in a manner that creates public value and advances the common good. This may include holding annual general meetings in accordance with their governing documents, providing stakeholders with the opportunity to express their views about the organization's work.

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7. Ethics, Integrity, and Conflict of Interest:

The Board should demonstrate a top-down commitment to ethical conduct by establishing and periodically reviewing the organization's Code of Conduct and Ethics. It is imperative for the Board to ensure that all Board Members, staff, and volunteers adhere to the Code of Conduct and Ethics, and that breaches are consistently and effectively sanctioned. This responsibility may be delegated to the Committee responsible for nomination and governance. Furthermore, all Board Members should declare any conflict of interest upon appointment and annually thereafter. In the event of discovering a potential conflict of interest at any other point, they should promptly disclose this to the Board. Actions following disclosure should be in accordance with the organization’s conflict of interest policy. No person who has served at the directorate level or above in a relevant regulatory institution, upon leaving the services of that institution for any reason, should be appointed as a Board Member or Top Management staff of an NFPOs directly supervised or regulated by the said regulatory institution until three years after the disengagement of such Executive or Senior Management staff from that regulatory institution.

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8. Sustainability:

The Board should regularly assess the sustainability of its income sources and their impact on achieving objectives in the short, medium, and long term. This includes promoting long-term success and sustaining projects by engaging volunteers as a valuable human resource for performing activities.

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9. Fundraising and Reserve Management:

The NFPO should ensure transparency and ethical conduct in all fundraising activities by offering detailed explanations to its funders regarding how, when, and for what purposes the funds will be used. However, the identity of the funders or information on funders should not be disclosed without prior permission.

The use of a third-party fundraiser, its rationale and fee arrangements must be approved by the Board and disclosed to potential funders. NFPOs should also develop a reserves policy and disclose it in their annual report.

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10. Financial Management:

The Board should ensure the proper and adequate recording of all financial transactions of the NFPO, and that the annual financial statements are prepared in accordance with the approved framework of accounting and financial reporting issued by the Financial Reporting Authority. After review and approval by the Board, the annual financial statements will be published. Additionally, all assets should be insured and registered in the name of the incorporated or registered NFPO.

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11. Assurance:

NFPOs should establish adequate and effective assurance mechanisms to enhance the safety and security of their assets, thereby improving their ability to fulfill their mission and objectives. These mechanisms include, but are not limited to, establishing a risk management framework, whistleblowing framework, and conducting periodic audits of the NFPO's processes and systems.

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12. Leading People:

NFPOs must clearly communicate the roles of everyone working for them, whether on a voluntary or paid basis.

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CONCLUSION

In conclusion, the development of the NFPGC aims to instill public trust within the Not-For-Profit Sector by empowering NFPOs to achieve accountability and effective management in fulfilling their missions and positively impacting the communities they serve. This, in turn, will ensure that they are well-positioned to respond to changing conditions and emerging issues in our rapidly evolving social and economic landscape. The application and impact of the Code should be closely monitored by all stakeholders to ensure its effectiveness in achieving its laudable goals.

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