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THE ESTABLISHMENT OF A SINGLE PROFESSIONAL BODY TO SERVE PUBLIC FINANCE

MANAGEMENT(PFM) PROFESSIONALS

PRESENTED BY DANIEL J DE LANGE

email [email protected]

Cell phone 0825572064

Views expressed are not necessarily those of the InstituteInstitute of Municipal Finance Officers & Related Professions

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?

Institute of Municipal Finance Officers & Related Professions

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

Professionalisation is a social process whereby a trade or occupation

transforms itself into a true profession of the highest integrity and

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.

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;


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.


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 -1655

• IAC - Institute of Accounting & Commerce -780

• IIA (SA) - Institute of Internal Auditors -8278

• SAIBA – South African Institute of Business Accountants-1210

• SAICA – South African Institute of Chartered Accountants -34104

• 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 -2486

• ICB-Institute of Certified Bookkeepers-3358

• IMFO –Institute for Municipal Finance Officers-1969

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.

Government Finance Officers

Association(United States and Canada)

Government Finance Officers Association( www.gfoa.org/about-gfoa)

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


Chartered Institute of Public Finance and

Accountancy


About CIPFA(www.cipfa.org)

• 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.

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. Professionalisation in 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.

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.


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


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


SAICA Education Model-

Qualifications/Training/Exams


New SAICA Education Model


SAIPA Membership Criteria within the

Competency Framework


Municipal Finance Education Model


Municipal Finance Education Model COMPARISON BETWEEN IMFO MEMBERSHIP REQUIREMENTS AND NT COMPETENTY LEVEL REQUIREMENTS FOR CHIEF FINANCIAL OFFICERS Municipalities with Annual Budgets of

below R500 million Municipalities with Budgets equal to or above R500 million

Qualifications Prescribed by National Treasury Competency Level Requirements

1. Higher Education Qualification NQF Level 6 In fields of Accounting Finance or Economics

OR Certificate in Municipal Financial

Management SAQA Qualification ID No. 48965

2. Work Related Experience 5 years 3. Core Managerial and Occupational

Competencies

1. Higher Degree Qualification Level NQF Level 7 In fields of Accounting Finance or Economics

OR

CA 2. Work Related Experience 7 years 3. Core Managerial and

Occupational Competencies

Training Prescribed by IMFO

No Formal Programmes No Formal Programmes

Registration at Municipality

No Formal Registration No Formal Registration

Competency Assessment in terms of COGTA Regulations

Competency Assessment Competency Assessment

Flow Chart of Alignment to NT Competency

Requirements & Certification Process


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


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.

• To achieve success in that regard, it is important for members of the founding group to

be the primary liaisons with government.

• It is also important for those members to have the assistance of a qualified, well-

regarded lawyer in drafting or reviewing the required legislation.


Financial Management Legislative Framework


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.


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.


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


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


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

•Institute of Municipal Finance Officers & Related Professions

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.


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)


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


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.


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

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)Institute of Municipal Finance Officers & Related Professions

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


The IMFO Board Members


That’s it -Thank You For Your Attention


IMFO

Member Category Statistics


IMFO Vision Mission Objectives


Vision

To be a recognised professional 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.

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