ACCA has had the privilege of working with several partners, globally, to support the development of their strategy, strategy implementation, and sustainability plans, through both the UK government funded IFAC Capacity Building Program and more broadly. Ensuring the right people are in place to deliver a strategy has been a key theme of this work, and central to that is the governance of a PAO.
A strong governance structure is critical to the implementation of a PAO’s strategy—and to fulfilling IFAC’s membership requirements—as it permits those members that volunteer their extensive skills and experience to support the PAO to focus their time commitment to maximum effect. Much of what is shared here will likely be familiar — but circumstances can differ tremendously. Therefore, we hope that this brief look at some of our collaboration in this area as well as ACCA’s own governance journey can provide some new or continued learning and insight.
Any governance model should be tailored to a PAO’s unique circumstances, considering, and ensuring that:
- it capitalises on the existing resource and support volunteered from within its membership.
- the model meets international good practice, while having its basis in the national legal framework and legislation; and
- that any impending changes, or ambitions, are considered in a holistic way.
The CAPA Good Governance Guide, a valuable resource on PAO governance, highlights how central good governance is to the success of any institution - a principle that has formed the basis of our enduring approach to this work:
‘The growth and sustainability of any organisation depends on the application of good governance principles – a professional accountancy organisation (PAO) is no different. A PAO’s ability to serve its constituencies over the long term depends largely on the quality of its governance’.
A PAO’s ultimate strength comes from its membership — drawing on that to form an effective governance body that is truly representative is a great opportunity to leverage a wealth of talent.
The key is matching relevant experience, skills, and personal attributes to the right committees in tandem with providing clear and consistent objectives and expectations to all committee and board members. In one recent collaboration, ACCA worked with the partner to ensure that key committees were established, dividing oversight responsibilities between a Nominating and Governance Committee, a Resource Oversight Committee, and an Audit Committee, with all these reporting into the Board. We always prefer keeping a simple and straightforward approach (‘minimal effective dose’) to ensure that committee work is an enabler to an agile, cohesive, and unified governance style, rather than creating an unsustainable model that is too heavy on resource or slows down the speed of effective decision-making.
Over the years, ACCA has seen and learned from times when there was a less consistent approach to management of committees, resulting in potential duplication of effort, or even conflicting decisions and actions. The ability to share knowledge and experiences from jurisdictions around the world has been positive for both ACCA and our partners. The common factor has always been the dedication shown by those in voluntary and elected positions which furthers collaboration and swift progress in defining the approach and optimum new structure.
Taking a long-term view to ensure sustainability is an ethos that also sits at the heart of ACCA’s approach to our work with partners and is equally important in our approach to governance reform. Therefore, the feasibility of any new arrangement should be considered in light of the resource available within the institute both at the current time and in the future. The objective is to develop an effective approach that does not create an untenable administrative burden.
We also take a principles-based approach to ensure flexibility to meet the needs of the partner’s environment and situation. This includes ensuring that governance is not ‘over-engineered’ – i.e., with a focus on being fit-for-purpose, simple and effective, but with the right foundations and globally accepted best principles in place to ensure success.
IFAC’s guide Focusing on Performance: Principles for Effective PAO Governance highlights how fundamental good governance is to ensuring that a governing Council remains effective and aligned with the institute’s internal resource over time. The governing body should have remit over key and strategic decision-making that supports the development of the profession in an ethical way and that protects the public interest. This has proven to be crucial for ongoing engagement with IFAC and a nascent PAO’s journey to IFAC membership:
‘Attention on PAO governance structures and practices continues to increase as its critical role in underpinning well-functioning, sustainable PAO operations becomes increasingly clear. Effective governance is a “make or break” factor for PAOs as they strive to adopt and implement international standards and practices.’
A PAO’s governance journey should be continuous - and its approach should evolve as the PAO grows and matures; bearing this in mind, the following sequencing gives an example of where a PAO might consider a governance review as part of a broader strategy refresh.
ACCA has found it important to evolve our own governance approach over time. We have learned that:
- Consistency of approach is vital. ACCA uses standard agenda templates for each committee and a standardised template for each committee to report on its outcomes after each meeting. This means each committee conducts its meetings in a consistent manner, all committee members enjoy equality of experience, and the Board has consistent visibility of committee decisions.
- Work plans are only indicative. Any committee may identify additional items of work during the year and add these to its work plan. However, each committee is expected to cover all scheduled items of work if possible, and report at the end of the governance year on its performance against all items of work in the plan.
Once the overarching governing model is in place, a key next step is the adoption of the Board’s standing orders that set out how the Board will operate. The standing orders illustrate how the Board has codified its governance arrangements; they are designed to be iterative, and evolve with the PAO’s changing needs, again putting governance arrangements into practice in a sustainable way. In closing, we can offer some ‘do’s’ and one essential ‘don’t’ from our experiences:
- Test and learn as you go: Governance reform takes time and implementation may not always be smooth sailing.
- Take time to review: Review how things are going after the first year or so and adjust the standing orders or committee terms of reference if needed.
- Be consistent: Commonality of experience creates cohesion for board and committee members; therefore, we recommend being consistent across boards and committees in terms of meeting administration, reporting and the expectations placed on committee members.
- Be disheartened! Decision-making might seem to slow down initially as the new arrangements bed in – it will be worth it in the long term.
See more from ACCA on PAO Sustainability on IFAC's 'Building Resilience & Value during Uncertain Times: Taking Your PAO from Crisis to Recovery' webpage - designed to help PAOs in strategic discussions with leadership, governance, and management. ACCA has shared their case study on Developing a Financial Model for Strategic Planning & Financial Sustainability. The case study explores the value of effective future scenario planning. Focusing on revenue sources and sustainability is key to good strategic planning. The case study is accompanied by the financial model Excel that organizations can download for their own use.