The Financial Reporting Council of Nigeria (FRC) is a body under the Federal Ministry of Industry, Trade and Investment. The council’s vision is to “be the conscience of regulatory assurance in financial reporting and corporate governance in Nigeria.”
Its mission, as stated on its website, is “to bring utmost confidence to investors, reputation to oversight and ensure quality in accounting, auditing, actuarial, valuation and corporate governance standards and non-financial reporting issues.”
The FRC says its main objectives, which are spelt out in the FRC Act 2011, include, among others, to protect investors and other stakeholders interest; give guidance on issues relating to financial reporting and corporate governance to professional, institutional and regulatory bodies in Nigeria; ensure good corporate governance practices in the public and private sectors of the Nigerian economy; ensure accuracy and reliability of financial reports and corporate disclosures, pursuant to the various laws and regulations currently in existence in Nigeria; harmonize activities of relevant professional and regulatory bodies as relating to corporate governance and financial reporting; promote the highest standards among auditors and other professionals engaged in the financial reporting process; enhance the credibility of financial reporting; and improve the quality of accountancy and audit services, actuarial, valuation and corporate governance standards.”
Codes of controversy?
According to Section 50 of the Financial Reporting Council of Nigeria Act, 2011, the Directorate of Corporate Governance of the FRC is required to, among other things, develop the principles and practices of Corporate Governance applicable in Nigeria. The National Code of Corporate Governance released by the council was to take effect from October 17, 2016.
Three codes were developed, including the Code of Corporate Governance for the Private Sector, the Code of Governance for Not-for-Profit entities and the Code of Governance for the Public Sector.
While the code for the private sector is mandatory, that of not-for-profits, which includes religious organizations and civil society groups, among others, has the caveat: “comply or justify non-compliance.” What that means is that the regulation must be complied with, or reasons must be adduced if the provisions would not be complied with by any non-profit organization.
The council noted that the third code, which deals with the public sector, would not be applicable immediately until the Federal Government issues an executive directive on it. “This is due to the fact that the enabling laws that set up most government establishments already carry some form of governance structure that will require an umbrella legislation to unify the different provisions of those laws to synchronize with this Code,” the FRC explained.
Not a code for only churches
The code for Not-For-Profit Organizations (NFPO) developed by the FRC is contained in a 29-page document that can be downloaded from the FRC website.
Organizations that qualify as non-profits, according to the FRC, are many and diverse.
Charitable: Groups under this include, homeless shelter, disability, youth empowerment, hospital, healthcare clinic, animals’ right group, human rights group, para-military (scout, brigade, etc.), emergency relief group, philanthropic organization and any other charitable organization.
Educational: Under this are schools (primary, post primary, tertiary, and vocational, etc.), childcare Centre, adult education Centre, conservation group, wildlife, museum, library and any other educational organization.
Professional and Scientific: Under this grouping, the FRC lists research Centre, group or foundation as well as professional group (environmental, engineering, medical, etc.)
Religious: Religious organizations that qualify as non-profits include the temple, church, mosque, synagogue, seminary or Bible college, relief or charitable group with religious base/principles, any other religious body, mission or society.
Literary/Artistic: Bodies under this grouping include concert Centre, theatre group, art gallery, music group and orchestra, artists, writers, poetry organizations, art theatre and any other literary organization.
Political /Administrative Grouping: Organizations under this group include political parties, political observers, political pollsters, lobbying groups and trade groups like Chambers of Commerce, Business Councils, and the like.
“The role of the Governing Board shall include: (a) determining, reviewing and maintaining the vision, mission and values of the NFPO; (b) approval of short and long-term strategies of the NFPO; (c) approval of the annual budget of the NFPO; (d) approval of expenditure over pre-specified limits; (e) appointment, performance evaluation and determination of the employment of the Chief Executive Officer and possibly other senior managers; (f) risk oversight; (g) providing a check on the integrity of external financial and non-financial reports; (h) any additional monitoring of the activities of the NFPO in order to satisfy itself that the NFPO is being properly managed; and (i) engaging with key stakeholders. The FRC code also speaks on the composition of management committees for the NFPO and the roles of the members of the committee.
“Where for any reason, a Founder or Leader of NFPO also occupies any of the three governance positions of Chairmanship of the Board of Trustees, the Governing Board or Council, and the Headship of the Executive Management (or their governance equivalents), the following provisions shall apply before the end of the organization’s financial year in which this Code takes effect.
“The Founder or Leader shall cease to occupy these three governance positions simultaneously. This is to ensure the separation of powers and avoid possible concentration of powers in one individual. “The Founder or Leader may, however, choose – subject to the agreement of the organization’s apex authority as expressed in the Annual General Assembly, Annual Meeting, Annual Stakeholder Engagement, Annual Conference, Annual Synod, Annual Fellowship Assembly or their equivalents – only one of these three governance positions subject to his current tenure. This is to ensure a clear division of responsibilities at the head of the organization between the running of the governing body and the executive responsibility for the management and fulfilment of the organization’s mission. “Where the Founder or Leader has occupied all or any of these three governance positions for more than 20 years, or is aged 70 years or above, the choice in section 9.2.2 above should only relate to the Board of Trustees as in section 9.4(c) below, except the constitution of the organization otherwise provides. “In the case of religious or cultural organizations, nothing in this code is intended to change the spiritual leadership and responsibilities of Founders, General Overseers, Pastors, Imams and Muslim Clerics, Presidents, Bishops, Apostles, Prophets, etc., which are distinguishable from purely corporate governance.