Governance is a term which you have probably heard thrown around a lot at corporate level, but what does it actually mean?

Good governance allows a group, such as a non-profit, to meet its responsibilities. Common responsibilities include reporting income and tax obligations correctly, as well as being able to meet whatever needs the group has targeted within their community.  Governance allows groups to fully anticipate and manage risk and protect their reputation. Good governance is also vital to the long term success and viability of any non-profit group.

The Social and Economic Impact When Non-Profits Fail Due to a Lack of Governance

The news is full of the reports of non-profits whose ultimate failure can be traced back to a failure in governance.  Consider the story of the popular Kony 2012 campaign by the non-profit group, Invisible Children. Worldwide, over 3 million people pledged to support the campaign. This includes a donation of over $1 million given by the organisation, Humanity United, and $2 million donated by the Oprah Winfrey Foundation.

While many factors contributed to the group’s downfall, a lack of good governance played a central role in its failure. By failing to have practices in place that could track the group’s donations and how they were spent, the reputation of this non-profit suffered, and the campaign ultimately failed. Sadly, this story is not an isolated incidence, and many non-profits continue to fail due to lack of governance.

Some may overlook the work that is completed by non-profits, and consider their failures as insignificant, but to disregard their social and economic impact is a grave mistake. The work that non-profits do is important, and has implications that reach far past the non-profit’s local community.

According to a report by the Australian Charities and Not-for- Profit Commission, Australia alone has over 600,000 non-profits that contribute over $43 billion to Australia’s GDP.  How well a not for profit is governed then is a concern for everyone, and not just the individuals who directly benefit from the NFP’s activities and work.

In our next post we will look at how to make sure your governance is up to scratch.