THE ESTABLISHMENT OF A SINGLE PROFESSIONAL BODY TO SERVE PUBLIC FINANCE MANAGEMENT(PFM) PROFESSIONALS

Transcription

1 THE ESTABLISHMENT OF A SINGLE PROFESSIONAL BODY TO SERVE PUBLIC FINANCE MANAGEMENT(PFM) PROFESSIONALS PRESENTED BY DANIEL J DE LANGE ddelange@sbdm.co.za Cell phone Views expressed are not necessarily those of the Institute

2 Burning Questions How can professionalism be promoted in the Public Finance Management (PFM) sector and will a single professional body (SPB) for PFM for the whole of the public sector assist in this process? What functional /occupational categories should be included? Does IMFO have the recognition, support and influence to participate in the NT project to professionalise PFM? How will the SPB project be initiated bearing in mind that National Treasury (NT ) has the legal mandate over these matters?(reference group participation) How will the committee that will oversee the project be structured and who(bodies/departments) will be the members? How will the interim Board be structured? What is the current standard of professionalism in the public sector? What are the root causes of the poor financial management and poor audit outcomes at local government level?

3 Profession and Professionalisation Profession Professions are either self-regulated or regulated by the state through statute. The responsibilities for the regulation of the affairs and behaviour of members are typically delegated to professional bodies who assume the responsibility for setting relevant competence criteria for admission into the profession, overseeing the certification of professionals, and setting and enforcing ethical work practices and behaviour. (NT competency level requirements ) Professionalisation Professionalisationis a social process whereby a trade or occupation transforms itself into a true profession of the highest integrityand competence. This process tends to involve establishing acceptable qualifications, a professional body or association to oversee and regulate the affairs and conduct of members of the profession.

4 Professional Bodies In the scope of Public Finance Management (PFM )professional bodies and associations, will be expected to - Apply their Codes of Conduct and ensure that their members adhere to its provisions; promote and ensure continued professional development to ensure continuous professional development (CPD) and life-long learning; conduct on-going research and disseminate good practice amongst members; set and enforce ethical work practices and behaviour; set relevant competence criteria for admission into the profession and accreditation of educational programmes;

5 Professional Bodies (cont) oversee the certification and licensing of professionals, and assisting national and state level authorities in the setting of legally enforceable occupational standards; ensure that the supply and demand of technical and professional competence in key sectors are met; develop a clear set of norms and standards for the relevant occupational category in the public sector; establish minimum competence levels based on national competence frameworks and job profiles; and develop Recognition of Prior Learning (RPL) procedures, through which professional bodies can assist employees in obtaining accredited qualifications after the RPL process is completed.

6 Professional Bodies in SA- MEMBERS 2012 Currently, the following Professional Bodies could influence professionalization of PFM: AAT (SA)- Association of Accounting Technicians -273 ACCA (SA)- Association of Chartered Certified Accountants -399 CIBM-Chartered Institute of Business Management-481 CIMA - Chartered Institute of Management Accounts IAC - Institute of Accounting & Commerce -780 IIA (SA)- Institute of Internal Auditors SAIBA South African Institute of Business Accountants-1210 SAICA South African Institute of Chartered Accountants SAIGA South African Institute of Government Auditors-480 SAIPA South African Institute of Professional Accountants-7339 SAICSA-Southern African Institute of Chartered Secretaries and Administrators ICB-Institute of Certified Bookkeepers-3358 IMFO Institute for Municipal Finance Officers-1969

7 South Africa has implemented many reforms since 1994 that have strengthened corporate financial reporting systems. corporate financial reporting systems. All 2003 policy recommendations have been implemented. South Africa enacted the Auditing Profession Act, 26 of 2005, that establishes an Independent Regulatory Board for Auditors. The Board sets auditing and professional ethics standards, and registers and regulates auditors. The Companies Act, 71 of 2008, strengthens financial reporting requirements, including providing legal backing to financial reporting standards. National accounting and auditing standards are fully aligned to the International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA), respectively. South Africa is one of the earliest adopters of IFRS and ISAs. The country has also adopted principles of corporate governance in the King III Code and requires listed companies to prepare and issue annual integrated reports in place of an annual financial report and a separate sustainability report. These reforms have strengthened the institutional pillars that support the country s accounting and auditing practices: South Africa has been ranked first (out of 144 countries) in the past three years in the annual Global Competitiveness Survey, auditing and reporting standards category, conducted by the World Economic Forum(World Bank report 2013). The PFMA 1999 and MFMA 2003 and associated regulations and adoption of GRAP standards have set high standards in financial management and accounting in the Public Sector.

8 Government Finance Officers Association(United States and Canada) Government Finance Officers Association( About GFOA The Government Finance Officers Association (GFOA), founded in 1906, represents public finance officials throughout the United States and Canada. The association's more than 18,000 members are federal, state/provincial, and local finance officials deeply involved in planning, financing, and implementing thousands of governmental operations in each of their jurisdictions. The GFOA 's mission is to enhance and promote the professional management of governmental financial resources by identifying, developing, and advancing fiscal strategies, policies, and practices for the public benefit. The GFOA has accepted the leadership challenge of public finance. To meet the many needs of its members, the organization provides best practice guidance, consulting, networking opportunities, publications including books, e-books, and periodicals, recognition programs, research, and training opportunities for those in the profession

9 Chartered Institute of Public Finance and Accountancy About CIPFA( CIPFA is the only professional accountancy body exclusively dedicated to public finance in the world. CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. Our 14,000 members work throughout the public services, in national audit agencies, in major accountancy firms, and in other bodies where public money needs to be effectively and efficiently managed. They include the benchmark professional qualification for public sector accountants as well as a postgraduate diploma for people already working in leadership positions. They are taught by our in-house CIPFA Education and Training Centre as well as other places of learning around the world.

10 No Dedicated Professional Body for the whole of PFM. There is a mandatory, non-negotiable legislative responsibility for National Treasury in terms of PFM. Competent on-job performance across PFM requires National Treasury to define a robust framework of outcomes, qualifications required to deliver such outcomes, and methods to continuously improve performance. Professionalisationin and of PFM is one mechanism amongst many current solutions being explored and interrogated for implementation at National Treasury. Part of the process includes mutually beneficial relationships with various stakeholders, including Education, Training & Development (ETD) providers at the various levels of the National Qualifications Framework (NQF), and across formal qualifications, in-formal and non-formal courses and Professional Bodies. While regulation exists for the audit regulator, none exists for professional accountancy organizations. The proposed legislation should provide the mandate to create an institution (regulatory body) that would be responsible for (a) defining and categorizing the education and training (frameworks) requirements for different accountancy services (e.g., audit, independent review, accounting officers, bookkeepers) and aligning the PAO qualifications to these respective categories; (b) 4 South Africa Accounting and Auditing accrediting, registering, monitoring, and sanctioning the professional accountancy organizations One of the key insights driving this professionalization project is the fact that there is no dedicated Professional Body for PFM.

11 The Professional Body Disciplines/Fields/Branches/Specialist areas The Professional Body must have appropriate capacity and should be sustainable. This means that the body can plan with confidence for the future, and can acquire the resources it needs to carry out its work and pursue its mission. Professionalism would refer to the competence, work practices, ethos, behaviour and attitudes typically displayed by members of such a profession. In the PFM domain, these can encompass the disciplines of Management accounting (planning and budgeting) Revenue management Expenditure management Asset management (movable and immovable) Financial accounting Supply chain management Enterprise risk management Internal audit.

12 Objectives of the Professional Body A well organized and respected professional body is an essential part of a fully functioning accountancy profession. The main objectives of a professional accountancy body include: Protecting the public interest by ensuring observance by its members of the highest standards of professional and ethical behaviour Determining the eligibility criteria for membership of the body Regulating members in public practice Promoting the interests of its members Determining the entry requirements for students Promoting the education,training and certification of accountants (including continuing professional development and practical experience) Developing good relationships with government, other national professional accountancy bodies and regional groupings

13 EXAMINATIONS AND PRACTICAL EXPERIENCE As part of its admission requirements, a professional body needs entrance examinations and training requirements. These should follow the International Education Standards (IES) issued by the International Accounting Education Standards Board (IAESB) under the auspices of International Federation of Accountants(IFAC). The IES cover: Entry requirements to a program of professional accounting education Content of professional education programs Professional skills` Professional values, ethics and attitudes Practical experience requirements Assessment of professional capabilities and competence Continuing professional development Competence requirements for audit professionals

14 SAICA Education Model- Qualifications/Training/Exams

15 New SAICA Education Model

16 SAIPA Membership Criteria within the Competency Framework

17 Municipal Finance Education Model Municipal Finance Education Model COMPARISON BETWEEN IMFO MEMBERSHIP REQUIREMENTS AND NT COMPETENTY LEVEL REQUIREMENTS FOR CHIEF FINANCIAL OFFICERS Qualifications Prescribed by National Treasury Competency Level Requirements Municipalities with Annual Budgets of below R500 million 1. Higher Education Qualification NQF Level 6 In fields of Accounting Finance or Economics OR Certificate in Municipal Financial Management SAQA Qualification ID No Work Related Experience 5 years 3. Core Managerial and Occupational Competencies Municipalities with Budgets equal to or above R500 million 1. Higher Degree Qualification Level NQF Level 7 or In fields of Accounting Finance Economics OR CA 2. Work Related Experience 7 years 3. Core Managerial and Occupational Competencies Training Prescribed IMFO Registration Municipality by at No Formal Programmes No Formal Registration No Formal Programmes No Formal Registration Competency Assessment in terms of COGTA Regulations Competency Assessment Competency Assessment

18 Flow Chart of Alignment to NT Competency Requirements & Certification Process

19 Support of members The professional body should aim to support its members by: Identifying and providing access to relevant professional support services, including insurance or IT support Supporting networks of active members, as a basis for sharing information, issues and ideas Providing technical guidance and advice Providing access to an up-to-date accounting information resource (e.g. professional library and associated databases) Providing access to relevant career planning and development resources

20 Legal and Regulatory Framework For the profession to flourish and obtain public recognition there needs to be an appropriate legal and regulatory framework governing the profession. That framework must, of course, be consistent with basic governmental regulatory philosophies. At the same time, every effort should be made to avoid excessive regulatory burdens on accountants or unnecessary or inappropriate limitations on the authority of the professional accountancy body. The group forming a new professional accountancy body should begin at a very early date to work closely with government to develop an appropriate framework. Toachievesuccessinthatregard,itisimportantformembersofthefoundinggroupto be the primary liaisons with government. It is also important for those members to have the assistance of a qualified, wellregarded lawyer in drafting or reviewing the required legislation.

21 Financial Management Legislative Framework

22 Working with government to protect the public interest Supporting economic growth and protecting the public interest are objectives shared by governments and professional accountancy bodies. Where the professional body seeks to meet the needs of accountants, auditors, budget staff and others involved in public financial management in the public sector, as well as attract members from the private sector, then government will have an additional interest in the establishment and development of the body. Regardless of sector, government will also have an interest in ensuring that the profession is properly regulated, and that its structure and governance reflects the public interest. In working with the government, the group forming the professional body should therefore keep in mind this range of common interests. Additional considerations include the scope of the mandate the government has in forming the professional body, where government is being proactive in establishing the body, and from where that mandate comes.

23 Working with government to protect the public interest The group must also consider how to work with other key stakeholders such as representatives of the business and investment community, the third sector and, where development of the profession forms part of wider sector or institutional development programs, development partners. Working effectively with government and other stakeholders is more likely to lead to the development of a professional body that meets the needs of the government, the profession and the broader public interest.

24 The Accounting Qualifications of most accredited Universities focus on Accounting and Auditing in the Private Sector. There is minimal inclusion of public sector subjects in the curriculum an aspect that is considered critical in order to develop the required financial skills to serve the public sector. In fact the number of professional and technician accountants working for public sector remains low. WHY?(high risk,high turnover at senior management, no permanent employment contracts,political dynamics ) To address the training needs and capacity shortage in the public sector, it is imperative for professional accountancy organizations and tertiary institutions (in partnership with government) to start including or increasing the use of public sectors modules in their curricula and also creating incentives to motive both students and the providers

25 Governance Structure The main governing body of a professional organization is its Board. This consists of a small number of senior members,who should be qualified to international standards. Board members are normally elected by the membership at large. They are generally elected for a three year term which can be renewable one or more times. The Board usually led by a President who may have a Deputy President and a Vice President. They serve for fixed terms and are elected by their fellow Council members. Board may appoint Committees and Task Forces to assist it in its activities. These Committees and Task Forces often include: Regulatory and Disciplinary Committees Functional Committees (e.g. Finance) Task Forces for ad hoc assignments

26 Appropriate Legal and Organizational Structure for a New Professional Body Some of the factors to be considered in determining the most appropriate legal and organizational structure for a new professional body are: The purpose behind the establishment of the professional body The existing legal framework, if any, for the regulation of the profession The number of qualified accountants in the country and the general nature of their qualifications, including the type(s) of designation they typically possess The legal protection, if any, for certain professional titles (e.g., statutory auditor, accountant, etc.) The nature of the tasks, if any, which are reserved in statute or regulation for professional accountants How the profession and the government are likely to interact, including the amount of government involvement in the day to day activities of the professional body

27 Disciplinary Procedures Once a code of ethics and other relevant professional requirements have been established, it is critical to ensure that members are aware of them and remain in compliance with them. In countries where licensing is a governmental function, governmental or regulatory bodies usually have the power to impose the most severe disciplinary actions. Even when that is the case, a professional accountancy body still needs to have an effective disciplinary process for investigating and disciplining its members(individual members, and if local laws permit, firm members)for breach of the rules, gross professional negligence and other relevant types of misconduct and, where appropriate, to assist governmental and regulatory bodies. Thus a professional accountancy body will need to consider how disciplinary investigations should be conducted, what due process should be followed, what disciplinary structure should be established, what standards of evidence and proof should be required, what sanctions might be recommended, and what appeals should be permitted.

28 Critical Institutional Capabilities A professional body requires key institutional capabilities to be able to meet its objectives and further develop. A new professional body will soon need a staff of, at a minimum, a Chief Executive and a Secretary, and have the capacity to: Manage office administration Keep an accurate and up to date register of members and students by using Information Technology; identify those members who are qualified to carry out public audit and distinguish them from those who are not Organize Council, Committee and Task Force meetings, which should use agendas and minutes Organize members services, communications, and national and international relations Organize students, examinations and records of training Organize Continuing Professional Development (CPD)

29 Critical Institutional Capabilities (cont) Organize technical services for members Create a library Handle legal and technical issues and projects Handle public and press relations as well as promotion activities (e.g., seminars, conferences) Establish and manage institutional relations with other professional bodies, government,development agencies and other stakeholders Access translations of international accounting, auditing and ethics standards and guidance Investigate and discipline the activities of its members

30 Challenges And Risks in Professionalising PFM No single professional body for PFM Obtaining agreement of types of membership, designations, membership requirements, and a professional evaluation examination The establishment and operating of the professional body will require significant amounts of funding -Financial support for establishing and operating such a professional body may not be available National and provincial government does not have legislated competency requirements for finance officers GRAP accounting standards not fully implemented by national and provincial government departments There may be different qualification requirements for municipal and other spheres of government and there is a need for inclusion of public sector subjects in the curriculum of universities Competition from other professional bodies such as SAICA and SAIPA WHICH HAVE WIDE RECOGNITION IN THE PRIVATE SECTOR.

31 Advantages of a Single Professional Body Improved services and promotion of best practice to finance professionals in the whole of the public sector Standardisation of qualification and competency requirements for finance officers in the public service Single code of conduct and an effective disciplinary process for investigating and disciplining its members Standardised training programmes and continued professional development programmes One professional body for the public sector would reduce administration costs of PB Annual conference programmes would reflect the whole of the public finance sector improving networking,teambuilding and coordination Improved working relationships between national,provincial and local government finance officers Increased membership numbers and improved financial viability of professional body Professional body can assist NT with financial reforms programmes in public sector

32 Immediate Next Steps Set up meeting with NT and propose that a joint committee be formed consisting of IMFO members,nt and GOGTA to develop proposals to establish a single professional PFM Body and develop an appropriate legislative framework for such professional body detailing membership requirements and its powers and functions Decide on which functional areas will be included in the PFM professional body Determine the types of membership Confirm membership requirements for functional areas (e.g. CFO,S,INTERNAL AUDITORS and PF Officers) for the Public Service bearing in mind NT competency requirements Develop proposals on how the PFM Body will be organised taking into account the specialised areas of municipal finance and national and provincial government finance( the constitution could provide for a Board consisting of representatives from the municipalities and government bodies and two sub-structures one which specialise in municipal finance the other which specialises in national and provincial government finance)

33 Immediate Next Steps (cont) Develop a draft constitution(moi) for the PFM body which must include the establishment of provincial branches catering for public finance(municipal as well as provincial and national government finance officers) Draft a business plan for the establishment of the PFM body and a medium term budget Establish a PFM task team to discuss proposals with NT and other government bodies

34 The IMFO Board Members

35 That s it -Thank You For Your Attention

36 IMFO Member Category Statistics

37 IMFO Vision Mission Objectives Vision To be a recognisedprofessional body for the development and promotion of municipal finance and governance practitioners in the public sector Mission Providing, within the statutory framework, effective financial accounting advice, as well as setting and maintaining high financial standards and controls in public finance and governance, to all levels of government and stakeholders, to benefit the community. Objectives Further the Interests of Local Government in the Financial and related areas by: Advising institutions, commissions and other bodies and person. Training and advancing of knowledge of members of the Institute, and Promotion of the interests of the profession of municipal finance officers.