Navigating the NPF Legal Landscape - Study

Above: Makinson & d’Apice law partner, Bill d’Apice

Australian Not for Profits believe their legal and operating environment is becoming increasingly complex with many admitting to weaknesses in bequest management, fundraising and property issues, according to a nation-wide study.

In early 2011, Sydney Law firm Makinson & d’Apice commissioned independent researchers and management consultants to conduct an Australia-wide study of the legal landscape around the Not for Profit sector.

Makinson & d’Apice law partner, Bill d’Apice, says many of the results around legal issues were surprising and show a clear need for education within the sector.

Around 50% rated their organisation’s ability to attract and manage bequests as very weak, and their ability to fundraise as weak or very weak. One third stated that the management of property legal issues was also weak or very weak.

Some 75% of Not for Profits however, rated their governance as strong or very strong and 60% rated their business management as strong or very strong.

The survey represents 250 responses from NFPs across Australia, with 70% from NSW and Victoria. Some 66% of organisations had DGR status, 50% had incomes over $3 million annually and just over one third of respondents had an income of under $500,000; and 19% had an income of $1 million to $3 million.

Law firm partner, Bill d’Apice says one of the interesting observations was the relationship between organisations and their legal advisers, with a majority saying it was weak or very weak.

D’Apice says a large number of respondents provided extensive commentary regarding external lawyers centring on cost, lack of NFP knowledge or understanding, communication issues around the briefing of lawyers and the timeliness, quality and appropriateness of advice on pro bono issues.

He says this highlights a need for more experienced lawyers in the sector, given the changing landscape.

What did surprise him, he says is that just under half of respondents were unaware of the then proposed National Not for Profit Regulator. Of those who were aware of the proposal:

• 58% believed that it would be a positive step
• 38% were neutral
• 4% saw it as a negative move.

He says an area of concern is the feedback regarding the lack of legal knowledge at Board level.

He says while senior management appear very up-to-speed on legal issues, there are gaps at Board level where members are not fully aware of their legal and fiduciary obligations.

He says there appears to be a lack of expertise at this level and an ability to risk manage.

The survey found that most rated their NFP as “somewhat sophisticated”, or “sophisticated” in business terms, compared with five years ago when two thirds rated their NFP as “very unsophisticated” or “unsophisticated”, indicating rapid progress in this area.

More than 90% agreed that the legal and operating environment was increasingly complex with areas needing attention spanning:

• planning and funding
• bequests
• governance
• board matters
• business management.

Bill d’Apice says the next big issue for the Not for Profit sector will be tax changes.

A snapshot of the survey findings can be found at http://www.makdap.com.au/docs/Snapshot%20findings%20-%20final1.pdf

The survey results will be analysed in more detail and published on the Makinson & a’Apice website at www.makdap.com.au