7 tips to choosing a credible NPO to support

Image source: Joel Muniz from Unsplash

South African organisations prefer to use the term "philanthropy" rather than "charity", says Inyathelo acting executive director Feryal Domingo. This emphasises strategic, long-term investment in development and social change, rather than simply addressing immediate needs through one-off acts of giving.

Importance of good governance

The success of an NPO hinges on its governance, says Domingo. Responsibly managed NPOs are more likely to achieve their missions, leverage resources efficiently, and maintain the trust of donors, beneficiaries, and the broader public.

“Poor governance, on the other hand, can lead to financial mismanagement, mission drift, and even the closure of the organisation. For donors, selecting a well-run and effectively administered NPO is essential to ensure that their contribution has a meaningful impact.”

Tax deductions

Supporting a reputable NPO is crucial for tax purposes too, says Domingo. Only donations made to South African organisations with valid Public Benefit Organisation (PBO) status and Section 18A approval from the South African Revenue Service (Sars) are eligible for tax deductions.

These organisations are legally required to issue a Section 18A certificate, which you use to claim a deduction on your taxable income, thereby reducing your tax liability. This ensures that your donation is both impactful and tax-efficient.

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There were 276,183 NPOs registered with the Department of Social Development (DSD) by 30 June 2023, and 59,657 PBOs registered with Sars. In addition, some 60,000 non-registered voluntary associations are estimated to exist.

Domingo offers several tips for choosing a reputable NPO before making your contribution. Viewing an organisation’s website, which should include a link to its latest annual report, is a good starting point.

1. Verify registration and compliance. Ensure that the organisation is registered with the DSD and has PBO status.
   
2. Review governance structures. A reputable organisation has an experienced, diverse board of directors or trustees. The board should meet regularly and provide oversight to ensure the organisation’s strategic direction aligns with its mission.
   
3. Examine financial statements. External auditors are responsible for independently auditing, and reporting on, financial statements. A well-run NPO is transparent about its income, expenditure and resource allocation. It should also have a reserve fund, to ensure financial stability and the ability to continue operations during unforeseen circumstances or funding shortfalls.
   
4. Assess impact and outcomes. A reputable organisation has clear, measurable outcomes and reports regularly on its progress toward achieving its goals. Case studies, testimonials and third-party evaluations are valuable tools for assessing an NPO’s effectiveness.
   
5. Ensure ethical practices. Credible NPOs follow guidelines set out by the Independent Code of Governance for Non-Profit Organisations in South Africa.
   
6. Consider longevity and reputation. Established NPOs with a long history of service are often a safer choice, as they have proven resilience and adaptability. However, newer organisations should not be dismissed if they have strong governance measures in place.
   
7. Request referrals. Don’t hesitate to ask for recommendations from trusted sources, such as other donors, community leaders, or organisations that work closely with the non-profit sector.
   

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"Keep in mind that it matters where you direct your generosity,” concludes Domingo. “We encourage benefactors to take the time to research NPOs before making a contribution, whether it is a donation, endowment, sponsorship, bequest or other form of support.

“It’s also advisable to consult a financial advisor before making a significant contribution, for tax, estate planning, and regulatory considerations.

“On International Day of Charity, let's celebrate the power of philanthropy to create a more just and equitable South Africa. By supporting reputable NPOs, we can all contribute to a brighter future.”