A registered NPO's annual report and its financial part
What a South African registered NPO submits as its annual report, when it is due, and how a firm prepares and agrees the financial report with the board.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa
The treasurer of a soup kitchen phones months after year-end. The organisation's annual report to the Department of Social Development is due, the bookkeeper has left, and the bank statements are in a carrier bag. Could the firm "just do the financials"?
Many accounting firms have some registered nonprofit organisations on their books, often taken on as a favour, and the annual report is the job that keeps them in good standing. This article explains what the report consists of, when it is due, how an NPO's obligations differ when it is also a non-profit company, and how to prepare the financial part so the board can stand behind it.
Two parts: narrative and financial
The government's page on registering a nonprofit organisation says a registered NPO must submit its annual report, made up of a narrative report and a financial report, nine months after its financial year-end.
The two parts are written by different people. The narrative report describes what the organisation did during the year: its programmes, the people it served, and how its governance worked. That is the board's document, usually drafted by the chairperson or programme manager. The financial report is where the firm comes in.
Keep the two consistent. If the narrative says the organisation ran feeding sites in several neighbourhoods all year, the financial report should show the costs of running them. A reviewer at the Department who reads both will notice if one describes an organisation the other does not pay for.
Nine months goes quickly
Nine months sounds generous until the work is broken down. Records have to be collected, the books written up and reconciled, the statements drafted, reviewed and approved by the board, and the narrative report finished. Board members of small organisations are volunteers with day jobs, and meetings to approve statements are hard to schedule.
A workable timetable counts backwards from the due date:
- board approval meeting, booked several weeks before the due date;
- draft statements to the treasurer before that meeting, with time for questions;
- books written up and reconciled before the draft;
- records requested from the organisation in the first month after year-end.
The last step is the one that slips. Ask for the records as soon as the year closes, not when the reminder arrives.
When the NPO is also a non-profit company
Many registered NPOs are incorporated as non-profit companies, and then they carry both sets of obligations: the NPO annual report to the Department and the company's own obligations under the Companies Act.
The government's page on registering a non-profit company says an NPC's income and property may not be distributed to its incorporators, members, directors or officers except as reasonable compensation for services, and that all its assets and income must advance its stated objectives. That rule shapes the financial report. Payments to directors, officers or their relatives need to be identified, explained and shown to be reasonable payment for services actually rendered, and the board should be ready to explain them.
For a voluntary association or trust registered as an NPO, the founding document governs instead. The government's page says an NPO's founding documents must meet section 12 of the Nonprofit Organisations Act 71 of 1997, and the financial report should be read against what that document says the organisation exists to do.
Preparing the financial report
The financial report is usually a set of annual financial statements suited to a non-profit: a statement of income and expenditure, a statement of financial position and notes explaining restricted funds, grants and significant donations. Whether it also needs an audit or independent review depends on the organisation's founding document, its funders and, for an NPC, the Companies Act tests; the audit question for South African non-profits explores that.
In Achekam, the starting point is the non-profit statements template. Achekam's templates include one for non-profits alongside templates for companies, trusts, body corporates and other entity types, and their wording is written for South African practice. Statement templates by entity type shows how to pick between them.
From a mapped trial balance, the Studio builds a draft set of annual financial statements with every figure calculated in code, including the directors' report, the primary statements, policies, notes and a detailed income statement. The practitioner's report follows the level chosen: audit, independent review, compilation or none. If someone edits a block of wording, that edit is kept when the draft is rebuilt, so the treasurer's explanation of a grant is not lost when a late invoice changes the figures.
Getting the board's approval on record
Small organisations often approve statements by e-mail chain or not at all. A cleaner route: the client receives a link to a frozen copy of the draft statements, where they can comment, confirm or ask for changes, and their decision moves the set on or back.
Two conditions apply. The link goes only to the client's authorised review contact, so record the treasurer or chairperson as that contact. And it is sent through the firm's own mail connector; if none is set up, nothing is sent and the record says so. Once the authorised contact confirms, the set moves on, and the board minutes can refer to that approval.
Long before the nine months run out
Put each NPO client's year-end and the nine-month date in the firm's diary at the start of the year, and request records in the first month after year-end. The government's page on registering a nonprofit organisation explains registration with the Department of Social Development and its timeframes and forms, including the annual report; share it with new board members so they understand why the firm asks so early.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
