THE collapse of General Practices Division of Western Australia highlights a problem in the way some not-for-profit organisations account for their funds.
PPB partner Simon Read, liquidator of GPDWA, said some of the organisation’s problems stemmed from the way it "netted off" its funds.
GPDWA received its money from both the State and Federal governments. Those funds were attached to various health programs.
Mr Read said the funds coming into the organisation were all put into one account and monies were paid out as they were needed for things such as the programs or administrative needs such as rent or wages.
Of course, the financial situation was only part of GPDWA’s problems. It angered the medical practitioners it represented because it entered into a contract with the WA Government to manage four bulk-billing after hours clinics at major metropolitan hospitals.
This led to the doctors, angry at their representative body entering into a contract to run Government-funded competition to their practices, spilling its board.
The new board sought financial advice.
That advice indicated the organisation could face liabilities of between $400,000 and $1.2 million because of the ‘netting-off’ and that led to GPDWA being put into liquidation.
Legal advice indicates that the State and Federal Government contracts GPDWA entered into do not allow any form of netting off.
Mr Read said this problem of netting-off seemed to be more widely spread than just within GPDWA.
"I suspect a number of not-for-profit organisations are doing the same thing," he said.
One not-for-profit industry source said she had seen the practise used in some organisations.
"Corporates putting money into not-for-profit programs need to specify where they want their money to go," she said.
However, WACOSS executive director Lisa Baker denied the process of netting off was widespread within the not-for-profit sector.
She said the battle for funds meant that the sector had to be more transparent than most businesses.
"Most not-for-profit organisations know that they have to account for where their funds are going," Ms Baker said.
"When you go for funding you have to say what your administrative recouping will be. That’s the amount it costs to have the project run out of your organisation.
"Most funding arrangements will include tight constraints on how much of the funds can be used for administration, or travel or training or whatever."
Ms Baker said WACOSS did a lot of work training not-for-profit organisations in areas such as corporate governance.
"We help organisations set up their policy and project manuals."
