Governance and accountability
In this report:
Committees of the Executive Board
Governance challenges and issues
Governing principles
Institute of Chartered Accountants of New Zealand Act 1996
The New Zealand Institute of Chartered Accountants (the Institute) operates under the Institute of Chartered Accountants of New Zealand Act 1996 (the Act). The Act prescribes the functions of the Institute as:
- to promote quality, expertise and integrity in the profession of accountancy by its members in New Zealand
- to promote, control and regulate the profession of accountancy by its members in New Zealand
- to promote the training, education and examination of persons practising, or intending to practise, the profession of accountancy in New Zealand or elsewhere
- any other functions that are conferred on it by the Rules.
Conflicts of interest and Code of Ethics
Members of the Council and Executive Board are bound by the Code of Ethics of the Institute.
Councillors and Executive Board members declare any conflicts of interest they have and do not participate in discussion or voting on those matters. [See also note 21 on p25 in the Notes to the Financial Statements]
The Institute’s Code of Ethics can be downloaded from www.nzica.com/ethics
The Council
The functions of the Council are to:
- carry out the functions of the Institute
- set the Institute’s strategic objectives
- manage and control the Institute’s affairs.
The Council elects the Executive Board from the membership and may delegate to the Executive Board any of its functions and powers. Subject to any delegation to the Executive Board and with the agreement of the Executive Board, the Council may also from time to time constitute from its membership any committee of the Council to discharge any of its functions and powers, with any such committee regulating its meetings and passing its resolutions as it sees fit.
Councillors are elected by Branch members and hold office for three years, with no limit on eligibility for further terms.
The Council is constituted according to the Institute’s Rules, which can be downloaded from www.nzica.com/rules
Two full Council meetings were held during the year: one in October 2007 and one in May 2008. 39 councillors attended the October meeting; 37 councillors attended the May meeting. Council members made no decisions by circular resolution. Between meetings, communication between the Council and Executive Board was maintained through the Council/Executive Board regional group system outlined below under Executive Board.
Delegations
As empowered by Rule 7.2 the Council has delegated the following functions and powers to the Executive Board:
- administration, including planning and budgeting, performance and financial management
- oversight of activities
- public relations/marketing
- relationships with professional bodies
- relationships with government
- rules and legislation
- policy implementation
- quality control.
The Executive Board
The functions of the Executive Board are to:
- act as the executive body of the Institute, implementing the policy decisions of the Council and carrying out the functions delegated to it
- consider matters referred to it by the Council, the President or a Vice-President
- consider and action remits passed by the councillors at the National Conference
- appoint committees and their chairs
- be responsible for the financial affairs of the Institute and receive regular reports from the Audit, Finance and Risk Management Committee.
Under Rule 9.2, the Executive Board may delegate the performance of any of its functions and powers.
The Executive Board is constituted according to the Institute’s Rules, which can be downloaded from www.nzica.com/rules
Attendance at Board meetings
| Member | Meetings | Attended |
|---|---|---|
| Denise Bovaird* | 4 | 4 |
| Graham Crombie | 7 | 7 |
| Mike Hanaray | 7 | 7 |
| Dinu Harry | 7 | 7 |
| Fred Hutchings | 7 | 5 |
| David Jackson | 2 | 1 |
| Ross Jackson | 7 | 7 |
| Laurie Jordan | 3 | 3 |
| Terry McLaughlin** | 7 | 6 |
| David Osborne | 7 | 7 |
| Paul Pedofski | 7 | 6 |
| Sarah Taylor | 7 | 7 |
| Linda Turner | 7 | 6 |
| Garry Muriwai*** | 4 | 4 |
| Keith Wedlock**** | 4 | 3 |
*Term ended 31 December 2007
**Executive Board member to 29 June 2008; Chief Executive from 30 June 2008
***Chief executive to 31 December 2007
****Interim chief executive from 1 January 2008 to 29 June 2008
Executive Board/Council regional groups
Each Executive Board member is associated with a group of Councillors in his or her region. These groups meet regularly for feedback and discussion, so that the Executive Board member is able to hear the concerns and comments of members as expressed through the Councillors, and Councillors are kept informed of the activities and intentions of the Executive Board. There are currently five regional groups: South Island, Waikato-Bay of Plenty/International, Wellington, Auckland and a group comprising Wanganui/Taranaki/Manawatu/New Plymouth/Hawke's Bay/Gisborne.
President and other office bearers
At every National Conference, the following office bearers are elected from the College of Chartered Accountants by the Council and hold office until the next election:
- President
- 1st Vice-President
- 2nd Vice-President.
In the event of a casual vacancy, the Council will elect one of its members to fill the vacancy as soon as practicable after the vacancy occurs.
The eligibility, nomination and election procedures are contained in the Institute’s Rules, which can be downloaded from www.nzica.com/rules
Council and Executive Board operating costs
The direct operating costs of the Council and Executive Board were $684,257.
Members of the Council and Executive Board are reimbursed for travel and accommodation at an agreed rate, detailed in the Institute’s travel policy.
Council and Executive Board members receive no compensation for their time, except for office bearers and the Chief Executive. Honoraria for the presidential year commencing January 2008 are:
- President $145,000 (2007 $140,249)
- 1st Vice-President $30,000 (2007 $26,729)
- 2nd Vice-President $15,000 (2007 $13,364).
Performance of the chief executive
Key performance indicators for the chief executive are set and assessed each year by the outgoing and the incoming Presidents in conjunction with the Executive Board. This year, the key performance indicators have been set in the form of a balanced scorecard based on the framework and key performance indicators for the members of the executive management team.
Committees of the Executive Board
Audit, Finance and Risk Management Committee
The Audit, Finance and Risk Management Committee (Audit Committee) is responsible to the Executive Board for reviewing and commenting on all financial reporting, non-financial reporting, corporate governance and corporate control matters. The committee oversees all aspects of financial control as it deems appropriate, and defines and analyses risk, with a view to minimising risk where possible.
The members of the committee are Graham Edwards, Fred Hutchings (chair) and Ross Pritchard. The chief executive and chief financial officer are required to attend meetings of the committee as directed by the chair, and have speaking rights but not voting rights. The committee met five times during the year.
Authority of the Chair
The chair is responsible for authorising expenditure incurred by the President, and expenses incurred by the chief executive if the President is unavailable.
Functions
Some functions of the committee are to:
- identify and recommend to the Executive Board the appointment of the external auditors, their remuneration and the terms of their engagement
- enquire of management and the external auditors about significant risks of exposures and assess the steps management has taken to minimise such risk to the Institute
- consider, in consultation with the external auditors, the audit scope and plan
- review the business plan, budget assumptions and the Institute’s budget prior to Executive Board approval
- review forecast methodology and review forecasts conducted during the year
- develop, implement and monitor a risk management process
- monitor compliance with ethics, policies and rules by the Institute, its volunteer members and senior staff.
- receive and review the conflicts of interest register.
The Audit, Finance and Risk Management Committee is constituted according to the Institute’s Rules (Audit Committee), which can be downloaded from www.nzica.com/rules
Remuneration Committee
The Executive Board has established the Remuneration Committee to determine and review compensation arrangements for the Chief Executive and senior employees. The committee also reviews the remuneration process of all Institute employees.
The members of the Remuneration Committee are Graham Crombie, Linda Turner and Dinu Harry. The committee met once during the year.
Governance challenges and issues
The role of the Institute
The Institute must balance its role under its governing Act as the New Zealand professional body for accountants and its role as a representative organisation for members. The Council and Executive Board achieve this balance by recognising that the interests of the profession, and therefore of members, are best served when the Institute works in the public interest as required by the Code of Ethics. This philosophy forms a touchstone for specific decisions, including decisions about which activities the Institute should properly engage in.
The role of consultation
The Institute undertakes extensive consultation with members when considering changes that affect membership conditions or professional practice. During the 2007/08 year, members were consulted on:
- proposed changes to accounting and professional standards (both international and national) specifically, consultation on IFRS for SMEs and guidance for members providing financial advice
- proposed changes to the professional competence programmes
- preliminary consultation on proposed changes to the CA and ACA admissions policy
Fit for the Future Review
In May 2008, an external firm (Effective Governance Ltd) began a review of the Institute’s governance arrangements. The purpose of the review is to ensure that the Institute is best placed to meet its strategic direction and future challenges. The review focuses on Council, Executive Board and the Institute’s national committees, considering the following aspects of these bodies:
- functions, roles and responsibilities
- operation
- administration
- accountability and performance management.
The review included:
- consultation with stakeholder groups, including Council, Executive Board, committees, branches, Institute staff and external stakeholders, on how well the current system is working
- a review of national and international best practice.
The review continued into the 2008/2009 financial year, with an online survey for the wider membership in July 2008, followed by collation of stakeholder feedback and a report to Council in October 2008.