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After a bout of bad governance in charities and not-for-profit organisations in Ireland, trust in the sector is at an incredible low. For charities to continue their work, they need to build back the public's confidence. Diarmaid Ó Corrbuí explains how accountability and transparency can achieve that goal. Only 50% of the public trusts Irish charities, according to recent research by nfpSynergy. This is below the level of trust in our schools (74%), the Garda (62%), the EU (55%) and the civil service (53%). Some consolation might be taken from the fact that trust in charities was above that of the banks (41%), but our banking institutions are on the long journey of trust-recovery after the banking failures 10 years ago. Back in April 2012, charities were getting a trust score of 74% but they fell to a low of 43% in November 2016 after the fallout from the Console scandal, and upward progress has been ever since. Charities need to continually work on generating and building back public confidence. Major failures in corporate governance by charities, such as Console and not-for-profits like the Football Association of Ireland, are extremely damaging for the sector as a whole, particularly given the criticality of public trust for charitable organisations and their sustainability. Restoring the public trust To restore and build public trust, charities need to be strongly committed to the principle of accountability and transparency – one of the six core principles in the new Charities Governance Code. Grappling with change and implementation of a new governance code is not always easy, especially with limited resources. The Charities Regulator itself has said that 2019 will be a year of learning before registered charities are expected to fully comply with the Code in 2020, or report on it in 2021. Taking the steps to apply the six principles of the Code will make its implementation – and, in turn, building the public trust – that much smoother. Luckily, there is a good range of guidance available from the Charities Regulator that can assist, as well as a number of resources from other organisations (e.g. Carmichael, The Wheel, Chartered Accountants Ireland, etc.) that can help charities develop and embed good governance practices. Charities could also consider entering the Good Governance Awards. Investing time and effort in such an initiative can really build the public’s confidence while showing the charity’s commitment to improving its organisation’s accountability and transparency. The charity and not-for-profit sector has long been an important backbone of our society and communities across Ireland. The selfless desire to help others is core to what they do as trustees, volunteers and staff working in the sector. Through good governance and transparency, those within the sector will earn back the trust they deserve. Diarmaid Ó Corrbuí is the CEO of Carmichael. Carmichael established the Good Governance Awards for Charities and Not-for-profits in 2016. The 2019 awards are now open for entries, closing date 13 September. For more information, see the awards website at www.goodgovernanceawards.ie.

Jul 05, 2019
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While cybercrime tends to hog the headlines in this digital age, low-tech fraud continues to be a risk for most organisations, says Teresa Campbell. Virtually all business owners encounter fraud at some stage. While technology enabled scams like invoice redirection and telecom fraud tend to grab the headlines, traditional low-tech scams have not gone away. Here are some common examples of low-tech fraud, along with some tips on how to guard against them. Payroll fraud Payroll fraud can be very costly, especially if issues go unnoticed for a long period of time. Some examples of payroll fraud include: Staff members lying about hours worked or commissions earned; Payroll operators keeping a former employee on the payroll and diverting the salary to their own account; and Staff members asking for a pay advance and not repaying it. Having good internal controls with robust approval procedures that are consistently applied, along with checking payroll reports to verify payments, can help protect your organisation against payroll fraud. Expense account fraud There are various ways in which a dishonest employee can fiddle business expenses – from submitting forged receipts to double-claiming for expenses, or staying in cheap accommodation but submitting expenses for an expensive hotel. Again, the best way to protect against this type of fraud is to implement appropriate checks and approval procedures before reimbursing employee expenses. Theft Theft doesn’t always involve loss of cash. Misuse of company facilities such as photocopying or taking stationery for personal use, inappropriate use of company vehicles, theft of customer information, stock or intellectual property are all examples of theft that can cost your business money. Regardless of whether it’s situations like these, or stealing from petty cash or messing with accounts, theft by employees can be very difficult and time consuming to deal with. As is always the case, prevention is better than cure. Strong policies and good communication can help prevent problems arising. Employees should be aware of your expectations regarding honesty and integrity, your disciplinary code, and the consequences of failing to adhere to company policies. Supplier fraud This can occur where a supplier invoices for an amount in excess of the agreed price for a product or service. Supplier fraud sometimes involves collusion with an employee. For example, where VAT is paid to a non-VAT registered supplier or an employee accepts an inducement from a potential supplier. Implementing robust procurement procedures is the best way to protect your business against these types of fraud. Customer fraud Customers can attempt to defraud your business by claiming that a delivery has not arrived or that a product is faulty, returning a product that they did not purchase from you or even attempting to return a product that they stole from you. While it is difficult to eliminate these types of fraud, policies such as requiring receipts can help to protect your business. Other ways to protect against low-tech fraud Depending on your business, there are various other tactics you can use to spot problems and defend against fraud. These include: Daily/weekly bank reconciliations; Robust approval/authorisation procedures for payments; Security training for staff; Shredding confidential waste paper; and Controlling visitors entering your premises, e.g. requiring them to sign in at reception. Think about where the fraud opportunities exist in your business as this will help you work out what protective measures need to be put in place. It’s a good idea to seek professional advice as there can be potential pitfalls in areas such as breaching privacy rights or failing to comply with legal requirements. Teresa Campbell is the People and Culture Director at PKF-FPM Accountants Limited.

Jul 05, 2019
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With Brexit on the horizon, should Ireland rely on the UK for corporate governance guidance, or should we take responsibility for our own framework? Now that the Brexit train wreck is well under way with no end in sight, it poses the question from a corporate governance point of view: should Ireland still rely on the UK for future corporate governance guidance, or should work with the other 27 EU member states to take responsibility for charting our own corporate governance? Ireland’s current approach to corporate governance could be described as a patchwork quilt of codes made up of: Financial Reporting Council – The UK Corporate Governance Code April 2016 as modified for Ireland by the Irish Corporate Governance Annex; Corporate Governance Code for Credit Institutions and Insurance Undertakings; Governance Code for Community, Voluntary and Charitable Organisations Charities Governance Code; and Code of Practice for the Governance of State Bodies 2016. All the above emerged from different but well-intentioned sources, which have helped raise the awareness of corporate governance in Ireland. However, the UK Corporate Governance Code only applies to a relatively modest number of plcs on the Irish Stock Exchange. Ireland has no codes for SMEs or, indeed, FDI organisations who may have to adhere to their own corporate governance codes or rules from their country of origin.  Framework for Ireland’s economy We need to stand back and take a good hard look at what type of corporate governance framework and codes are appropriate for an economy that relies on SMEs, FDI, a small number of plcs, a large number of micro-businesses, voluntary organisations and, of course, the State. Our ambition should be to have a corporate governance framework that is pro-business but also strikes the right balance between holding directors and companies accountable and an overly burdensome compliance regime. Europe does not have an EU Federal Governance code as of yet. It has relied on the UK’s ‘comply or explain’ soft-law approach. Whether this will stand the test of time remains to be seen. EU regulators may question the voluntary nature of the ‘comply or explain’ approach and seek to move to a more rules-based system as they use in the US. (It should be noted, though, that the US’s rules-based approach did not prevent the Enron scandal.) Ireland must take the lead Above all, Ireland should not stand around and wait to see what happens. We should take the lead on this and work with the EU to ensure that we create a fit-for-purpose corporate governance framework supported by the appropriate codes and rules that work for Ireland Inc. A government-led initiative will send a very powerful message to organisations in Ireland, Europe and the world of inward investment that we are seeking to create a corporate governance framework that is cohesive, structured, coherent, consistent and strikes the right balance to support the economy. David W. Duffy is founder of The Governance Company and author of A Practical Guide for Company Directors and A Practical Guide to Corporate Governance.

Jul 05, 2019
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Speaking at the joint ESAs Consumer Protection Day 2019 hosted by the Central Bank of Ireland at the Mansion House in Dublin, Derville Rowland, Director General, Financial Conduct, set out the Central Bank's strong support for enhanced supervisory convergence across Europe. She said: "We have seen some progress on Capital Markets Union while the development of Banking Union also represented an important step in the institutional architecture of the EU. But in a post-Brexit Europe we need to do more and to continue to increase consumer and investor confidence to make informed investment decisions. We should build on the momentum to offer consumers and investors high-quality options and suitable choices to help them to provide for themselves and their families, both now and in to the future. "Recognising the progress made but accepting more work is required, there is a real need to further simplify and improve the PRIIPS disclosures to support better informed consumer decisions. "In relation to environmentally sustainable finance, our work in the European Supervisory Authorities (ESAs) grapples with these [complex] issues by completing the taxonomy and disclosure requirements for investors. In this way, we work to support making European sustainable finance a reality. For if consumers are empowered to make an informed choice to buy sustainable products, we will have taken another important step on the road to tackling the urgent problem of climate change. "The Central Bank of Ireland strongly supports moves towards enhanced supervisory convergence. However, as regulators we should be clear that this combination of increasing mandate, greater complexity and a degree of uncertainty as to how markets are going to evolve, means we have to adopt an increasingly rigorous, risk-based approach to where we devote our finite resources." Published: 28 June 2019. Source: The Central Bank of Ireland.

Jul 05, 2019
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The UK Government has announced its Green Finance Strategy, which recognises the role of the financial sector in delivering global and domestic climate and environmental objectives. In response, the FRC has issued a joint statement with other financial regulators, including the PRA, FCA and the TPR which can be viewed here, while the FRC's statement is below. The boards of UK companies have a responsibility to consider their impact on the environment and the likely consequences of any business decisions in the long-term. They should therefore address, and where relevant report on, the effects of climate change (both direct and indirect). Reporting should set out how the company has taken into account the resilience of the company's business model and its risks, uncertainties and viability in both the immediate and longer-term in light of climate change. Companies should also reflect the current or future impacts of climate change on their financial position, for example in the valuation of their assets, assumptions used in impairment testing, depreciation rates, decommissioning, restoration and other similar liabilities and financial risk disclosures. The FRC assists companies, their Boards and investors to fulfil their responsibilities as follows:   The new UK Stewardship Code will require investors to integrate stewardship and investment, taking into account material environmental, social and governance issues, including climate change; The updated UK Corporate Governance Code requires boards to discuss how the matters (including environment matters) set out in Section 172 of the Companies Act 2006 have been considered by the company and report on how opportunities and risk to the future success of the business have been considered and addressed; The Strategic Report requires companies to report on their principal risks and environmental matters when material. The FRC's Guidance on the Strategic Report has been updated to encourage better reporting on non-financial matters and the requirement for companies to report on the responsibilities of directors under Section 172 of the Companies Act, that includes how they have regard to the environment in their business operations; and Through the Joint Forum on Actuarial Regulation, the FRC highlights the risks to high quality actuarial work arising from climate change in the annual Risk Perspective. The FRC will monitor how companies and their advisers fulfil their responsibilities as follows: The FRC will continue to review whether companies are complying with the statutory disclosure requirements of the strategic report (which includes reporting on principal risks and uncertainties) as well as any financial statement implications of climate change; and The FRC's audit monitoring will include consideration of the adequacy of the auditors' work on principal risk disclosures, including climate risk and the financial statement implications of climate change. The FRC's Financial Reporting Lab will provide practical guidance later this year on how companies can best consider and report on climate related risk and opportunities. The FRC's project on the Future of Corporate Reporting will also consider the need for improved non-financial/sustainability information from companies. The FRC will itself be publishing a climate adaptation report under the Climate Change Act. Published: 2 July 2019. Source: The Financial Reporting Council (FRC).

Jul 05, 2019
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The world's leading financial and non-financial corporate reporting frameworks have the same common foundations, based on the key objectives of transparency and accountability, according to a position paper published by the framework providers. The position paper sets out the seven key principles report preparers should follow for achieving such transparency and accountability. Participants of the Corporate Reporting Dialogue – an initiative convened by the International Integrated Reporting Council bringing together the major international reporting frameworks – identify transparency and accountability as critical to achieving high-quality governance mechanisms and empowerment of stakeholders in modern societies and markets. Furthermore, such transparency and accountability enables better decision-making by market parties and serves the public good. In the paper, entitled Understanding the Value of Transparency and Accountability, CDP, the Climate Disclosure Standards Board, the Global Reporting Initiative, the International Accounting Standards Board, the International Integrated Reporting Council, the International Organisation for Standardisation and the Sustainability Accounting Standards Board set out seven principles of transparency and accountability that they commonly believe are fundamental to corporate reporting: materiality, completeness, accuracy, balance, clarity, comparability and reliability. The paper states: "These common principles are a reminder that the Dialogue participants have similar expectations from companies in preparing and disclosing information. This implies an alignment at the fundamental level of the frameworks." The position paper acknowledges a commonly agreed need for companies to go beyond disclosure and demonstrate accountability to stakeholders, stating: "...transparency needs accountability in order to drive effective behaviour or performance: disclosing in itself is not enough if those holding to account do not have the power to influence the behaviour or performance." Participants of the Dialogue have committed to promoting the application of these principles for the wider reporting landscape in future interactions or partnerships, as part of their commitment to providing greater clarity to the reporting landscape on how to use the individual frameworks of Dialogue participants to achieve effective, holistic reporting. The paper can be downloaded from the IIRC's publications section.   Published: 2 July 2019.   Source: The International Integrated Reporting Council (IIRC).

Jul 05, 2019