Governance and Control 2A 2018

GAC02A2 / GAC2B01

FINAL ASSESSMENT OPPORTUNITY - SCENARIO

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QUESTION 1 59 MARKS
(71 MINUTES)

UPLIFT NPC (Non-Profit Company) (hereafter UPLIFT) aims to provide opportunities that will
enable young people to rise out of poverty in the Pimville community. They were established in
2010 and have been growing ever since.

They seek to develop young and dynamic individuals who are willing to contribute effectively for
the betterment of their community.

Their tutoring, athletic, and arts programs provide light to the children in their communities. The
children of their community should not be defined by survival, but by the ability to be active
community members, to have dreams, and most of all to have hope about the future.

UPLIFT is registered as a Public Benefit Organisation (PBO) with SARS. A PBO is any
organisation that has the sole objective of providing one or more of Public Benefit Activities (PBA).
These include conservation and animal welfare; education and healthcare; land and housing;
religion, belief and philosophy; research and consumer rights; and sports, welfare and
humanitarian activities in a non-profit manner. Approved PBOs have the privilege and responsibility
of spending public funds, which they derive from donations or grants, in the public interest on a tax-
free basis. In short, UPLIFT’s PBO status means that they are exempt from income tax and that a
tax deduction is available for any donation made to them.

UPLIFT has committed to comply fully to the King IV code for corporate governance in South Africa
after the NGO supplement was released.

The governing body consists of the following individuals:<6>

Name & Surname More information

Nomzamo Mukina Ms Mukina is the founder of UPLIFT
programmes and still operates as the
managing director. She was voted top of
class at the Gordon Institute of Business
Science (GIBS) Social Entrepreneurship
Program in 2017.
Shirley Ndlovu Ms Ndlovu is the Business Development
Director for UPLIFT and is responsible for
funding and grant applications. Shirley
worked on the other side of the grants
application for the Bill & Melinda Gates
Foundation for 7 years after which she
relocated back to South Africa.
Jennifer Dowan Ms Dowan is the Education Manager of
UPLIFT and is in charge of running the
tutoring program on a day to day basis. She
holds her Masters in Education and has
operated as a consultant in the education
NPC space for 16 years.
Sweetness Matima Ms Matima is an executive director at Spark
Schools, a network of independent schools.
After registering with the IIA (Institute of
Internal Auditors), she was involved in
internal audit in the bank sector for 5 years
prior to that.

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Neo Madondo Mr Madondo is employed as the full time
compliance officer of FUNDi, UPLIFT’s
biggest funder for the last 3 years.
He has been in the compliance industry for 3
years with USAID funding experience.

The donations or grants may be received from the general public or directly or indirectly from the
State. It is therefore important to ensure that exempt organisations use their funds responsibly and
solely for their stated objectives, without any personal gain being enjoyed by any person including
the founders and the fiduciaries. <9>

Approved PBO’s must continue to comply with the Act and related legislation throughout their
existence- this includes the submission of annual income tax returns. If they do not comply, they
might be at risk of being deregistered as a PBO. UPLIFT has been so busy with the day to day
activities of the organisation that they have not submitted the tax returns for the last two years. <1>

UPLIFT receives relatively big amounts of foreign currency donations <2> from tourist that make
their way to visit the UPLIFT premises. Currently, if a visitor wishes to make a donation, they
simply hand the cash to the individual who had taken them on the tour through the organisation.
That individual is expected to hand over the cash to the finance manager who will put it in the petty
cash box. No receipts are offered to the tourist unless they specifically ask for it. <3>

The organisation is very dependent on donations to fund their activities <4>. Most of their
donations are once off.

Another organisation, with similar activities, has been founded in the same area as UPLIFT. This
has resulted in much less tourists stopping at UPLIFT. <8>

Main operations at UPLIFT

Feeding Scheme

The feeding scheme employs two full time staff members to prepare two meals a day for
approximately 300 children. Meals consist of pre-prepared sandwiches for the mornings and a
cooked meal for lunch. UPLIFT receives donations in the form of food from stores in the
community. Every now & again they make sandwiches with processed meat like polony. They
prepare the sandwiches the day before to be ready for pick-up by the children on their way to
school. They have realised that their polony supplier has been in the news recently for certain
health risks. <5>

Tutoring Program

The tutoring program incorporates a big online element. Specialised software has been created to
meet the very specific needs of UPLIFT. These programs are dependent on a strong WIFI
connection and the service providers have failed in this area. Their connectivity is very intermittent
<7> which jeopardises the education program and also the impact of the organisation.

A SAIPA registered accountant has contractually volunteered time (free of charge) to keep the
accounts of UPLIFT to date on their system. It was noticed that this accountant came to the
organisation less and less. When he was requested to provide up to date accounts for the
purposes of a fund application, he was not able to provide one. UPLIFT is unsure whether he was
actually in compliance with the SAIPA code of conduct. Further investigation noted that the
accountant had been asked to provide other service for a company at high payment. He then
neglected UPLIFT services and was quoted to say that “this was a charity organisation-what do
you expect?” <10>

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<11> Overall

QUESTION 1

YOU ARE REQUIRED TO: MARKS

Identify and explain the business risks that UPLIFT NPC faces as evident from
(a) the scenario.

Please structure your answer in the format below: (34)

Risk Indicator Explanation of risk

(b) From your list of risks identified in (a), identify and explain which risk would
(3)
require the most attention from UPLIFT.
(c) Identify the reporting requirements with regards to the risk management of
(2)
UPLIFT.

TOTAL MARKS (55)

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