But what if they just choose to accept the penalty? There's a famous freakanomics study to do with a daycare where they found that introducing a fine on late pickups actually had the effect of increasing the number of parents who were late. The fine simply became a legitimate "price" that they could choose to pay in exchange for an extra half-hour. Wheras without that fine, the main incentive was that running late delayed the end of work for the carers - meaning that you were being a dickhead to the people looking after your kids.
Similarly, putting a ÂŁ10 fine on not supplying flags simply makes that a cost/benefit decision that some managers will make. Maybe they've left the flags at home, realise half way to the ground and decide to just take the penalty rather than turn round, arrive late and throw off all their other pre-match prep. Maybe they even make a conscious decision not to spend the money to buy a set at the start of the season (or to replace them if they're lost), gambling that the vast majority of ref's won't bother to report it and they'll end up spending less in fines than they would on a decent ÂŁ30-ÂŁ40 set of flags.
Either way, I think we all know that the correct thing to do in this situation is to report the lack of flags, then pull your own out and get on with the game. I'd argue that lack of flags goes alongside corner flags as a "spirit of the game" issue, in that it shouldn't really be causing a delay of game. I've seen matches where a sub runs along a line with a bib to wave - it looks awful and shouldn't be needed at the level where you're using NAR's, but if none of the officials have taken a common sense approach and turned up with your own flags, I think you should just get on with it in that manner.