Realizing the Power of PAOs: IFAC’s Capacity Building Agenda
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Presentation by Deborah Williams, PAODC/PAIB Committee/CICPA Joint Session, Beijing, China, October 15, 2013
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Realizing the Power of PAOs: IFAC’s Capacity Building Agenda
- 1. Realizing the Power of PAOs: IFAC’s Capacity Building Agenda Deborah Williams Chair, IFAC PAO Development Committee October 2013 Beijing, China Page 1 | Confidential and Proprietary Information
- 2. PAOs are Important! Page 2 | Confidential and Proprietary Information
- 3. Why are PAOs Important to the Profession? • Act in the public interest • Develop and produce competent accountancy professionals • Promote strong professional and ethical standards • Act as a resource to government, regulators, donors, mentors, and regional and international organizations • Further the quality of financial reporting Page 3 | Confidential and Proprietary Information
- 4. Why are PAOs Important to the Economy? • Attract Foreign Direct Investment (FDI) • Promote growth and development of the Small- and Medium-sized entities (SME) sector • Enhance transparency and accountability in the use of public funds • Improve the design and delivery of vital public services Page 4 | Confidential and Proprietary Information
- 5. IFAC’s Mission IFAC's mission is to serve the public interest by: • Contributing to the development, adoption and implementation of high-quality international standards and guidance • Contributing to the development of strong professional accountancy organizations and accounting firms, and to high-quality practices by professional accountants • Promoting the value of professional accountants worldwide • Speaking out on public interest issues where the accountancy profession’s expertise is most relevant Page 5 | Confidential and Proprietary Information
- 6. How Does IFAC Support PAO Development? Page 6 | Confidential and Proprietary Information
- 7. IFAC’s Support to PAO Development An Overview Compliance Program PAO Development Committee Guidance and Outreach SMOs MOSAIC Capacity Building Page 7 | Confidential and Proprietary Information
- 8. IFAC’s Support to PAO Development The Statements of Membership Obligations SMO1 Quality Assurance SMO2 International Education Standards SMO3 International Standards on Auditing SMO4 International Code of Ethics SMO5 International Public Sector Accounting Standards SMO6 Investigation and Discipline SMO7 International FinancialBuilding Standards Capacity Reporting Page 8 | Confidential and Proprietary Information
- 9. IFAC’s Support to PAO Development The Compliance Program Capacity Building Page 9 | Confidential and Proprietary Information
- 10. IFAC’s Support to PAO Development The PAO Development Committee Developing the capacity of the accountancy profession • Development of good practice guidance • Technical assistance to PAOs Awareness building and knowledge sharing • Representation of Committee at regional events • PAO development knowledge exchange workshops Fostering development partnerships • Implementation of MOSAIC • Collaboration with donor representatives at the regional level Page 10 | Confidential and Proprietary Information
- 11. IFAC’s Support to PAO Development The PAO Development Committee Integrated Communications Regional Collaboration Awareness Raising Tools and Guidance Knowledge Sharing MOSAIC Regional Implementation Strategic Initiatives Collaboration with IFAC Boards and Committees SMO Workshop in Accra, Ghana around the Second Africa Congress of Accountants Realizing the Power of PAOs workshop in Hanoi, Vietnam Focus on success factors for the Middle East at Dubai PAODC meeting Joint IFAC, IASB and IAASB event for standard-setters and PAOs of the CIS and Baltic States CReCER Page 11 | Confidential and Proprietary Information
- 12. IFAC’s Support to PAO Development Publications, Guidance and Outreach • • • • • • In-person engagement with over 100 PAOs in 2012 Discussions with PAO Boards and staff around good practice, IFAC membership requirements and the SMOs Meetings with government, regulators and other national stakeholders to reinforce importance of PAOs Partnering with regional bodies to bring together PAOs from across the region Technical sessions on developing strong professions and sustainable PAOs Practical knowledge- and information-sharing events between PAOs Page 12 | Confidential and Proprietary Information
- 13. IFAC’s Support to PAO Development Memorandum of Understanding to Strengthen Accountancy and Improve Collaboration (MOSAIC) Nov 2011 MOSAIC signed by 11 organizations Feb 2012 MOSAIC Steering Committee leadership appointed October 2012 Two new signatories added, totaling 13 October 2013 Global Development Report Published Page 13 | Confidential and Proprietary Information
- 14. IFAC’s Support to PAO Development MOSAIC PAO Global Development Report (GDR) Ten key findings: – Undertaking PAO development comprehensively – Strengthening legal and regulatory foundations – Monitoring and providing support to fragile states – Support internal strengthening of PAOs – Developing PAO education and certification capacity – Broadening PAO membership bases – Furthering implementation of international standards – Supporting PAO orientation to the public sector – Strengthening Regional Organizations – Facilitating PAO mentoring relationships Page 14 | Confidential and Proprietary Information
- 15. IFAC’s Support to PAO Development Looking Forward We still have work to do! Page 15 | Confidential and Proprietary Information
- 16. Resources Statements of Membership Obligations (SMOs) • www.ifac.org/publications-resources/statements-membership-obligations-smos-1-7-revised PAO Development Committee • www.ifac.org/about-ifac/professional-accountancy-organization-development-committee Compliance Program • www.ifac.org/about-ifac/membership/compliance-program PAIB Committee • www.ifac.org/about-ifac/professional-accountants-business SMP Committee • www.ifac.org/about-ifac/small-and-medium-practices-committee IFAC Member Body Development Contact • Marta Russell Technical Manager, Member Body Development – Asia-Pacific MartaRussell@ifac.org Page 16 | Confidential and Proprietary Information
Editor's Notes
- IFAC believes that well-functioning PAOs, such as CICPA, have the power to support the production of high-quality financial information, contributing to public and private sector development, economic growth, and the effectiveness of international aid.
- PAOscontribute to the profession. They:Protect the public interest as proponents of good corporate governance and consistent global standards.Promote and develop knowledge, skills and competence througheducation, certification and CPD programs. Produce capable professionals.Through adoption and implementation of international professional and ethical standards they set the bar for behavior and practice of accountancyprofessionals, enhancing public trust.Assistwithsound public policy guidance and advice on accountancyrelatedtopics by acting as a center of knowledge and expertise.Further the quality of financialreportingthroughreview, investigation, and discipline of professionals.
- Looking at the bigger picture, PAOs also contribute to the economy.They Attract Foreign Direct Investment (FDI) – The development of capital markets requires credible and reliable financial information to build investor confidence, further sound economic and financial management, and increase the attractiveness of a country’s investment climate, which facilitates FDI and business development. Promote Growth and Development of the SME Sector – According to the Organisation for Economic Cooperation and Development (OECD), small- and medium-sized entities (SMEs) account for over 60% of gross domestic product (GDP) and 70% of total employment in low-income countries. These businesses require high-quality financial information to support business planning, facilitate access to credit, and expand operations; thus, enhancing their ability to thrive and grow. Enhance Transparency and Accountability in theUse of Public Funds – High-quality financial information in the public sector enables assessment of the impact of fiscal and monetary policy decisions; assists external reporting by governments to electorates, taxpayers, and investors; and aids internal management decisions in resources allocation (planning and budgeting), monitoring, and accountability. Improve the Design and Delivery of Vital Public Services – Utilizing the information provided through high-quality financial reporting, policymakers and others in positions of authority can improve the efficiency and effectiveness of government programs, better achieve the objectives of their design, and successfully deliver vital public services to those in need.
- So, supporting the establishment and maintenance of strong, effective PAOs is a key part of IFAC’s overall mission.
- IFAC believes that well-functioning PAOs, such as CICPA, have the power to support the production of high-quality financial information, contributing to public and private sector development, economic growth, and the effectiveness of international aid.
- In summary, IFAC’s work with PAOs around the world includes providing technical assistance and guidance focused not only on supporting efforts to address the SMOs and implement international standards but also on approaching broader issues that affect accountancy, such as establishing appropriate legal frameworks, developing sound institutional governance, and establishing effective public policy mechanisms. In-country outreach is conducted with both national and regional stakeholders to raise awareness with governments, regulators, and donors and to facilitate knowledge sharing among PAOs and other stakeholders through regional workshops and training sessions. Many of you are, I am sure, familiar with the terms on the slide. I’d like to talk a little more about each of these areas and the role they each play in building the capacity of the accountancy profession around the world.
- Firstly,IFAC’s Statements of Membership Obligations (SMOs). These provide globally recognized benchmarks for credible and high-quality PAOs. The IFAC Member Body Compliance Program requires that PAOs demonstrate their commitment to meeting SMO requirements, which cover the international standards issued by the independent standard-setting boards as well as the implementation of external quality assurance and investigation and disciplinary mechanisms. The SMOs add value:To the global accountancy community: Setting clear benchmarks for PAO development The SMOs provide the framework for a strong accountancy profession. With direct connections to international standards, they are globally recognized as a benchmark for PAOs working, in the public interest, to develop, continuously improve, and monitor high-quality professional accountants. To the profession: Enabling high-quality performance by professional accountants and driving sustainable development of the accountancy profession Effective PAOs protect the public interest as proponents of consistent global standards and good corporate governance. Through adoption and implementation of international professional and ethical standards, PAOs set a high bar for behavior and practice of accountancy professionals, enhancing public trust. In short, the work of strong, effective PAOs results in credible and reliable financial information and furthers sound economic and financial management in both the private and public sectors. To PAOs: Giving PAOs the power to grow and continuously improve IFAC members and associates are required to address the SMOs by developing, executing, reviewing and regularly updating their SMO Action Plans. The design and implementation of SMO Action Plans require considerable time and effort to identify and carry out the actions aimed at (a) achieving or (b) maintaining the fundamental focus of a PAO on continuous improvement in the service of professional accountants and the public interest. As PAOs undertake the SMO Action Planning process, they identify their individual roadmap to addressing the SMO requirements. Their SMO Action Plan serves as a tool to ongoing internal planning and progress monitoring. It also promotes understanding by all relevant national and international stakeholders of the accountancy environment and the PAO’s priorities and capacity. Finally, they may also serve as a communication tool to highlight capacity development needs.
- IFAC is in frequent contact with its 173 members in 129 countries and jurisdictions and the developing profession in countries around the world. Implementation of the Compliance Programallows the team to gather a range of information related to the profession within a country. This includes an overview of the regulatory framework, the status of adoption and implementation of international standards and statistics on the national PAO’s membership base. The information is disseminated via the IFAC website to inform development efforts and track progress, and used to determine the most appropriate approach to addressing the SMOs within each jurisdiction.
- The IFAC PAO Development Committee consists of individuals from both developed and developing nations who focus on identifying solutions to challenges facing the development of strong, sustainable PAOs around the world. The Committee meets twice a year in a variety of locations around the world and has a practice of involving donors, regional bodies, and national PAOs at every meeting. The Committee’s three goals are highlighted above. By way of overview, the committee:Raises awareness of the success factors and challenges associated with the establishment and development of PAOs and the core elements of a strong accountancy profession. Tools and guidance are developed to highlight good practice and outreach is conducted to engage with the profession and better understand regional and country contexts. Guidance developed by PAOs, regional organizations, and others is actively promoted and disseminated.Encourages and facilitates knowledge sharing around the practical aspects of establishing a strong profession and the solutions to challenges in implementing international standards. This includes workshops and discussion sessions around committee meetings that allow committee members, national and regional stakeholders, and donors to provide input into the work of the committee, share success stories and contribute to case studies. One of the committee’s core programs focuses on promoting effective knowledge exchange between PAOs.Due to the committee’s focus on collaboration and support of the developing profession around the world, PAO Development Committee members also represent IFAC on the MOSAIC Steering Committee.
- This diagram summarizes the way in which the PAO Development Committee’s global strategy is implemented at the regional level. To ensure that the Committee’s global initiatives are taken forward in the most appropriate way, it is important to recognize the unique factors affecting development of the profession and of PAOs in each region. Five Regional Strategies have been developed (Africa; Americas and Caribbean; Asia Australasia-Oceania; Europe and Central Asia; and the Middle East). These identify some of the key success factors and challenges in each region and provide focus to Committee and IFAC MBD Staff efforts at the national and regional level. You can see from this slide just a few examples of how our global initiatives have been translated into tailored, tangible activity in each region. For example in May 2013 the Committee met around the Second African Congress of Accountants in Accra, Ghana. The Committee Chairwoman Deborah Williams, IFAC Executive Director Russell Guthrie and IFAC President Warren Allen all spoke at the congress. Additionally, in collaboration with the Pan African Federation PAFA, IFAC was able to host a half-day workshop focused on the SMOs, which was attended by a number of PAO representatives from across the continent. This event not only provided an insight into the revised SMOs and the direction of the Compliance Program, but also allowed for important knowledge exchange between participants around specific SMO areas.In case anyone asks or you prefer to use a different one, here is an overview of the other examples:Realizing the Power of PAOs, Vietnam: Realizing the Power of PAOs seminar in Hanoi, Vietnam, brought together more than 50 individuals representing IFAC, the World Bank, and regional organizations and professional accountancy organizations (PAOs) from across the East Asia Pacific region and beyond, including IFAC members and those working toward membership. The event was hosted by the Vietnam Association of Certified Public Accountants and supported by the Confederation of Asian and Pacific Accountants (CAPA) and included presentations from World Bank and IFAC experts. Presentation topics included the global and regional scenes, recognizing the importance of the accountancy profession and the role of PAOs, and development successes and challenges of PAOs in the context of East Asia Pacific. The event included a workshop that allowed PAO representatives to share experiences, exchange ideas and focus on their achievements and/or future challenges. Focus on Middle East at Dubai Meeting: At the February 2012 Professional Accountancy Organization (PAO) Development Committee Meeting in Dubai, UAE, the committee held discussions on the development of PAOs throughout the Middle East region. Committee members, observers, and guests from national, regional, and global stakeholders participated in these discussions. Points made during the course of the meeting have been refined into informal high-level guidance titled “PAO Development Committee Perspectives – Middle East” available on the IFAC website.Joint IFAC/IASB/IAASB event for CIS and Baltic States standard-setters: For the second time, representatives from national professional accountancy organizations (PAOs) and regulators from former Soviet republics in Europe and Central Asia gathered in London at a two-day conference convened jointly by IFAC, IAASB, and IASB. The first event was held in November 2011. The 2013 event, hosted by the Association of Chartered Certified Accountants (ACCA), brought together more than 70 representatives from 20 organizations with responsibilities relating to the adoption or implementation of International Standards on Auditing (ISAs) and International Financial Reporting Standards (IFRS). IFAC members, who play a critical role in the implementation of international standards and the development of professional accountants, also provided updates on key projects relating to the IFAC Statements of Membership Obligations (SMOs). The MBD staff also carried out a second set of country meetings after the main event for those countries who wanted to discuss broader issues impacting adoption and implementation and seek advice from MBD staff. MBD staff also held an interview with the 2013 applicant from Uzbekistan.CReCER: IFAC, along with the World Bank, the Inter-American Development Bank, and the Global Public Policy Committee, recently held the seventh Conference for Accounting and Accountability for Regional Economic Growth, or CReCER (Contabilidad y Responsabilidadpara el CrecimientoEconómico Regional), in Cartagena, Colombia. IFAC member body the InstitutoNacional de ContadoresPúblicos de Colombia hosted and executed the 2013 CReCER event. Themed Integrating Approaches to Financial Reporting to Advance Regional Economic Growth: An Exchange between Public and Private Sector, the conference drew more than 350 attendees and speakers and covered national and regional initiatives to advance adoption and implementation of international standards; global perspectives on the evolving role of auditors and accountants; recent capital market developments to support investment; and the future of business reporting, including integrated reporting.
- Both the IFAC MBD staff and Committee members commit to engaging directly with national PAOs, regulators, governments, and regional bodies that play a role, or indicate a willingness to play a role, in accountancy reform towards international good practice. Direct interaction with regional and national PAOs and other country stakeholders allows: Input of those regional and national stakeholders in the work of the Committee, increasing its awareness of specific accountancy development-related issues and providing opportunities to fine-tune projects and guidance. This is exceptionally important to ensure that our support remains relevant.Associated targeted outreach to pivotal stakeholders to encourage accountancy reform and stress the importance of PAOs. This is often crucial in the early stages of PAO development and therefore key to delivering the Committee’s strategy.Coordination with, and support for, third party regional events, including provision of technical speakers and/or trainers.One of our key pieces of guidance is the Establishing and Developing a Professional Accountancy Body document - a comprehensive “one-stop shop” covering the range of issues to consider when building up a successful PAO, from legislation to financing, advocacy, licensing members and putting in place the foundations to begin addressing each of the SMOs.The Unearthing brochure, which we have provided copies of today, covers some of the Committee’s key messages around the essential role played by PAOs in improving the quality of financial reporting and thereby strengthening country economies.Our newest publication focuses specifically on establishing good governance within PAOs. It is a concise piece that expands on the elements covered in the previously mentioned Establishing and Developing a Professional Accountancy Body guidance, such as council, board and committee structures and the important role of the CEO, and also provides practical case studies that bring the guidance to life.
- Signed in November 2011Facilitate cohesion across the development communityIncrease capacity of PAOs to improve public and private sector accountancy and financial managementEnhance efficiency of donor assistance to more effectively contribute to economic growth and a reduction in poverty Signatories:African Development Bank (AfDB)Asian Development Bank (ADB) Inter-American Development Bank (IDB)World Bank UK Department for International Development (DFID) Finnish International Development Agency (FINNIDA)United States Agency for International Development (USAID)Swedish International Development Cooperation Agency (SIDA) Global Alliance for Vaccines and Immunisation (GAVI) New Zealand (NZAid)The Global Fund to Fight AIDS, Tuberculosis and MalariaAustralian Agency for International Development (AusAID)IFACSteering Committee Co-Chaired by IFAC (DW) and WB (JT). GDR – major accomplishment. Co-financed by ADB, AfDB IADB, WB. Provides an assessment of professional accountancy organization (PAO) development at the global, regional, and national levels, facilitating mutual understanding and providing the MOSAIC initiative with a foundation on which to build. Through its 10 key findings, the report establishes the success factors and challenges associated with building a strong, sustainable accountancy profession supported by an effective PAO.
- Giving form to this report are the 10 essential elements of PAO development.These elements, identified by GDR consultants, are based on existing donor diagnostic tools, resources on accountancy development, the IFAC Statements of Membership Obligations (SMOs), and IFAC membership criteria. Essential elements draw heavily from the SMOs, as SMO requirements serve not only as a means for attaining and maintaining IFAC membership but are generally accepted as a framework for developing PAOs in-line with international standards and best practices (e.g., use of these SMOs in describing the development of the Mauritius profession as part of the World Bank AA ROSC). The Essential Elements which form the structure of this report include things like legal and regulatory foundations (PAO Enabling Environment), PAO organizational capacity, support for adoption and implementation of international standards (including SMOs), and support for public financial management. Now on to the ten key findings of the report. These are:1.Undertaking PAO Development Comprehensively Due to the strong links between PAOs and other components of national financial infrastructure, efforts to improve and strengthen PAOs must be undertaken comprehensively, in a manner that takes into consideration the many moving pieces that influence the core functions of a PAO. Technical assistance must be oriented to support development within the greater national contexts of sound financial sector legislation, professional accountancy capacity building, and regulation of the financial sector. 2. Strengthening Legal and Regulatory Foundations Additional support is needed for developing accounting and auditing legislation that embodies international standards and establishes clear institutional arrangements for regulation and enforcement of such standards. Such legislation provides clear mandates for PAOs and recognizes the unique position these organizations hold within the financial infrastructure of a country. 3. Monitoring and Providing Support to Fragile States Additional support is needed to monitor the development of the profession in fragile and early emerging economies. This includes maintaining dialogue and relationships with local leaders of the profession and providing development assistance that can be absorbed and managed by recipients, which will enhance the likelihood of success and focus donor resources. 4. Supporting Internal Strengthening Of PAOs Currently, many PAOs lack a coherent operating model that directs the organizational, financial, technical, and overall development of their organization, defines key activities, and provides indicators to facilitate measurement of progress. Additional support for PAOs in developing a sound system of governance, appropriately structuring operations, and utilizing strategic planning techniques will aid in positioning PAOs to take a greater role in furthering financial sector and economic growth. 5. Developing PAO Education and Certification Capacity At the moment, many national PAOs lack systems of certification that includes appropriate entry criteria, professional accountancy education, assessment, and practical experience and continuing professional development (CPD) requirements in line with International Education Standards (IESs). Although many PAOs have made significant gains in this area, additional assistance is needed to target weaknesses, build human capacity in the area of accountancy, and provide higher-quality financial information to both government and business. 6. Broadening PAO Membership Bases A broad-based profession that offers different education requirements, assessment, and practical experience suited for different areas of emphasis within the profession provides personnel who are “fit for purpose” with the opportunity to enhance the profession. A broad-based profession also offers opportunities to build the membership base of PAOs, which allows for self-sustaining operations. Although there has been movement in some regions toward developing PAOs with broad membership inclusive of different areas of the profession (e.g., auditor, management accountant, and accounting technician), additional awareness building and support is needed to support these PAOs, either at the national or regional level, in designing and delivering such offerings. 7. Furthering Implementation Of International Standards Although many countries and PAOs have adopted international accountancy standards (e.g., International Standards of Auditing, International Financial Reporting Standards, International Public Sector Accounting Standards, and the Code of Ethics for Professional Accountants), the adoption of older versions of the standards, inappropriate modification of standards by many national governments, and serious deficiencies in the application of standards by practitioners reduces their international comparability, consistency, and cross-border understanding. Development assistance supporting the creation of formal systems to undertake the process of translating and incorporating updates to international standards on a timely basis is needed. Additionally, support directed toward the design, development, and operation of PAO systems of certification, quality assurance, oversight, and investigation and discipline will further the implementation of international standards and enhance realization of their benefits. 8. Supporting PAO Orientation To The Public Sector Although some PAOs maintain a strong public sector membership and undertake services and activities to support public sector accountancy and financial management, many PAOs struggle to identify how they can support the public sector. Development assistance focused on developing guidance and support to PAOs in orienting themselves toward the public sector may be effective in enhancing the capacity and involvement of PAOs in this area. 9. Strengthening Regional Organizations and The Services They Provide Regional accountancy organizations can have a strong impact on the development of national-level PAOs. By combining knowledge, expertise, and ability at the regional level, they offer opportunities for mutual support and assistance to national-level efforts in PAO development. Although these organizations have had strong impact on regional PAO development, the demand for their support greatly outweighs their current capacity. Development assistance that supports strengthening regional accountancy organizations and their initiatives can have a significant impact on improving the capacity of national-level PAOs. 10. Facilitating PAO Mentoring Relationships In recent years, the donor community and PAOs have recognized the value of mentoring between PAOs as an efficient and effective method of sharing knowledge and transferring sustainable expertise from one organization to another. Development assistance efforts focused on facilitating PAO mentoring relationships offer an opportunity to build PAO capacity and establish a lasting, supportive relationship between PAOs that will continue to strengthen and enhance PAO operations.The GDR was finalized in October 2013.
- As we enter the next ten years of capacity development, there is a need to deliver on multiple objectives. Increase understanding of the unique success factors and challenges faced by countries— governments, regulators, and PAOs—in applying international standards. Provide relevant, effective support to jurisdictions in which there is no PAO or where a PAO is less established. Continue to harness the expertise of those working to strengthen the profession to produce quality tools and guidance relevant to both the technical and the practical aspects of PAO development. Maximize the potential of development partnerships with the donor community, IFAC members, regional bodies, and other stakeholders to further a collaborative approach to PAO development globally. Maintain strong links with IFAC’s Recognized Regional Organizations and Acknowledged Accountancy Groupings to facilitate ongoing knowledge sharing and contribute to their capacity building efforts.