A new report proposes measures for the sustainability of owners’ management companies and lays the foundation for a more structured approach to managing apartment complexes or managed estates. By David Rouse In a professional audit or reporting capacity, Chartered Accountants may encounter owners’ management companies (OMC). Readers living in an apartment complex or managed estate may even have been asked to serve as an OMC director. OMCs, while in form incorporated typically as companies limited by guarantee (CLG), are in substance hybrid entities. They sit at a corporate crossroads between not-for-profit companies, property management businesses and residents’ associations (see Figure 1). Many readers will be familiar with the legacy construction and financial issues facing these companies. High-profile cases such as Priory Hall and Longboat Quay, as well as other less prominent estates, have featured in the press in recent years while corporate governance failings in OMCs receive periodic attention in court reporting. The country’s largest OMCs have multi-million euro annual service charge budgets. And yet, the stewardship of these companies is entrusted to unpaid, untrained directors (the term “volunteer director” is deliberately avoided, as in law, there is no such thing – a director is a director). There is as yet no firm handle on the number of OMCs in the country. However, it is estimated that the upper limit is likely to be about 8,000 companies. New report A recent independent report titled Owners’ Management Companies – Sustainable Apartment Living for Ireland considers issues that will be familiar to those with even a passing knowledge of managed estates and OMCs. The report was jointly commissioned by the Housing Agency and Clúid Housing. The Housing Agency works with the Department of Housing, Planning and Local Government, local authorities, and approved housing bodies (AHB) in the delivery of housing and housing services. Clúid is the State’s largest AHB, managing  just over 7,000 homes across the country. The inadequacy of annual service charges, failure to provide for building maintenance (sinking) funds, and the persistent problem of mounting debtors are just some of the topics assessed. International best practice is examined, and Ontario and New South Wales are among the comparator jurisdictions featured. The future demand for high-density housing is signalled in the context of new Government policy, such as the National Planning Framework and the Climate Action Plan. To audit or not to audit? Recommendations for reform across a range of relevant regulatory systems are proposed. Of interest to the accountancy profession will be the recommendation for the removal of the audit exemption currently available to OMCs, most of which, as noted earlier, are incorporated as CLGs. Companies Act 2014 provides the audit exemption for CLGs. In this way, small not-for-profit companies without shareholders may benefit from a reduced financial and administrative burden. (It should be noted that under sections 334 and 1218 of the Companies Act, any one member of the CLG may in effect demand an audit.) However, while OMCs are not-for-profit, they are responsible for multi-million euro property assets in the form of estate common areas. Considering the centrality of OMCs to property values, good title, and quality of living spaces, the value of an audit to members in terms of assurance, transparency, and governance cannot be overstated. Finance and governance The creditworthiness of OMCs in the context of current under-funding is also considered. Regulation over and above corporate compliance enforced by the ODCE is recommended. Dispute resolution outside of the courts is advocated, as are more cost-effective avenues for service charge debt recovery. Personal insolvency practitioners will be aware that OMC service charge debt is an “excludable debt” under the Personal Insolvency Act 2012. Only with the consent of the creditor (i.e. the OMC) may management fee balances be reduced or written off in a Personal Insolvency Arrangement. The report’s other recommendations include mandatory training for OMC directors, the standardisation of accounts to a format prescribed for OMCs, and enhanced insurance obligations. Reform may be some way off. In the meantime, practitioners should be aware that the Institute’s practice toolkit, Owners’ Management Company PQAs, was updated in 2018. This replaces the 2011 version. As the Institute’s product catalogue notes, and as may be recognised from sectoral weaknesses highlighted in this commentary, although OMCs can be small in size, they may be higher-risk clients. Future regulation of the sector could mitigate a number of the risks identified.   David Rouse FCA is an advisor with the Housing Agency, a director of the Apartment Owners’ Network CLG, and a director of one of the country’s largest OMCs.

Oct 01, 2019

Three years after its commencement, Construction Contracts Act, 2013 continues to provide a pathway to cash flow in the construction sector. By Pat Breen TD This innovative and important legislation for the construction sector, which was commenced in 2016, regulates payments and particularly the timing of payments under construction contracts. While many businesses in the construction sector are aware of this legislation, some businesses may not be fully aware of the detailed statutory protections and obligations set out in the Construction Contracts Act, 2013. One of the key objectives of the legislation is to provide payment certainty for subcontractors, who were considered vulnerable in the payment cycle in the construction sector. As the construction sector continues to expand, cash flow is critical and it is cash flow that is at the core of the Construction Contracts Act, 2013. Therefore, construction businesses should ensure that their payment practices comply with the terms of this legislation. I consider that members of the accountancy profession are uniquely placed to encourage construction businesses across the country to review their payment practices to ensure that they comply with this legislation. I welcome the opportunity provided by Accountancy Ireland to highlight this legislation, and a brief summary of the main provisions of the Act is set out below. Further information on the Act is available on the website of my Department at www.dbei.gov.ie. Applicability of the Construction Contracts Act, 2013 to construction contracts The Construction Contracts Act, 2013 applies to certain construction contracts entered into after 25 July 2016, but not to all such contracts. For example, it excludes: Contracts of a value of not more than €10,000; or Contracts that relate only to a dwelling of not greater than 200 square metres where a party to such a contract occupies, or intends to occupy, the dwelling as his/her residence; or Contracts between a State authority and its partner in a public private partnership arrangement. All other construction contracts must comply with the provisions of the Act and the parties may not seek to exclude a contract from the legislation under any circumstances, whether the contract is an oral contract or a written contract. Construction contracts to which the Act applies must provide for the following contractual terms: The amount of each interim and final payment, or an adequate mechanism for determining those amounts; The payment claim date for each amount due, or an adequate mechanism for determining it; and The period between the payment claim date and the date on which the amount is due. Main contracts and subcontracts Main contractors are at liberty to agree their contractual terms with their clients, subject to adhering to the mandatory provisions required by the Act as outlined above. However, if a main contract fails to fully incorporate the mandatory provisions, then the Act imposes the applicable contractual term or terms set out in the Schedule to the Act, terms which are also applicable to subcontracts. The Act stipulates that all subcontracts must at least provide the following payment claim dates: 30 days after the commencement date of the construction contract; 30 days after the payment claim date referred to above and every 30 days thereafter up to the date of substantial completion; and 30 days after the date of final completion. The date on which payment is due in relation to an amount claimed under a subcontract shall be no later than 30 days after the payment claim date. The Act permits the parties to a subcontract to make more favourable provision for a subcontractor than the above contractual terms. Payment claims An executing party – the party which carries out the work under a construction contract – is required to submit a payment claim notice to the other party no later than five days after the relevant payment claim date. If the other party disputes the amount claimed by the executing party, that party is required to respond to the executing party in writing no later than 21 days after the payment claim date setting out the reason(s) why the amount claimed is disputed and the amount, if any, that it proposes to pay to the executing party. It may be possible for the parties to reach an agreement on the amount to be paid to the executing party. However, if no such agreement is reached by the payment due date, the other party is legally required to pay the executing party the amount, if any, which the other party proposed to pay in its response to the contested payment claim notice from the executing party. This payment shall be made no later than the payment due date in accordance with Section 4(3)(b) of the Construction Contracts Act, 2013. Statutory adjudication of payment disputes The Construction Contracts Act, 2013 also introduced, for the first time in Ireland, a statutory right to refer a payment dispute for adjudication. A ‘notice of intention’ to refer a payment dispute for adjudication must be served by one of the parties to the payment dispute. The parties may then jointly agree to appoint an adjudicator of their own choice, within a five-day period. However, if the parties cannot reach agreement on who to appoint, an application may be made after the five-day period to the Chair of the Construction Contracts Adjudication Panel, Dr Nael Bunni, to request the appointment of an adjudicator to the dispute. The appointed adjudicator, whether appointed by agreement of the parties or by the Chair, is required to reach a decision on the dispute within 28 days. This period may be extended in certain circumstances.   Pat Breen TD is Minister of State at the Department of Business, Enterprise and Innovation.

Oct 01, 2019

C-suite executives deploying 4IR technologies have a tough ethical terrain to navigate. Putting in place a policy for ethical usage of technology could benefit their businesses – and society. By Timothy Murphy, Swati Garg, Brenna Sniderman and Natasha Buckley Leaders are increasingly demonstrating that they want their organisations to do well by doing good, and with reason. Doing good can be good for business, especially in an intensifying economic, social, and political milieu that is challenging organisations to reinvent themselves as social enterprises. Deloitte Global CEO Punit Renjen’s Success Personified in the Fourth Industrial Revolution report, released at the World Economic Forum conference in Davos, Switzerland, earlier this year highlights that leaders are putting a greater focus than ever on advancing society through their technology efforts. In fact, leaders rated “societal impact” (including income inequality, diversity, and the environment) as the number one factor in assessing their organisation’s annual performance, ahead of financial performance, customer experience, and employee satisfaction. This view manifests in their actions as well – more than 73% of the surveyed organisations have developed or changed a product in the past year to generate positive societal impact through Fourth Industrial Revolution (4IR) technologies. But as organisations strive to take society forward with 4IR solutions, they are often confronted with a host of ethical issues, which can have societal as well as business ramifications. Examples of ethical “missteps” by companies abound in the media these days. One issue highlighted in the news regularly is that of data privacy, and it has left consumers understandably worried about how their data is captured, saved, and used. Another emerging threat is algorithmic bias, where biased data manifests itself in biased recommendations, but we’re yet to fully understand the ramifications of algorithmic bias. Even lack of inclusivity in technology design can negatively impact consumers, as seen in some smart city designs where people in wheelchairs are unable to access eye-level retina scanners as they require the person to be standing. These ethical issues, and others, have led to product recalls, public backlash and/or lost revenue for companies. In this technologically and ethically complex environment, organisational values matter more than ever. If leaders don’t formulate and implement policies on the ethical usage of technology, it will likely become difficult for them to navigate the Fourth Industrial Revolution. More importantly, it could inhibit innovation and financial growth at their companies. Our survey data from this year’s study reinforces the link between ethics and organisational growth (see the sidebar, “Methodology”), providing further rationale for why companies should care about ethically using 4IR technologies. The study found a positive correlation between organisations that strongly consider the ethics of 4IR technologies and company growth rates (Figure 1). For instance, in organisations that are witnessing low growth (up to 5% growth), just 27% of the respondents indicated that they are strongly considering the ethical ramifications of these technologies. By contrast, more than half (55%) of the respondents from companies growing at a rate of 10% or more are highly concerned about ethical considerations. Ethical concerns don’t always translate into action Most executives responding to our survey were concerned about ethical usage of 4IR technologies. More than 30% of the respondents strongly agreed that their organisations are highly concerned about ethical technology usage and another 50% indicated a moderate concern. Yet when it comes to action, this number dropped significantly – just 12% of the respondents strongly agreed that their companies are actively exploring related policies or already have them in place. So, what’s preventing leaders’ ethical concerns from being translated into ethically driven actions? The answer may lie in the dynamics of the C-suite. Our survey found that concern over ethically using 4IR technologies is not consistent across the organisation (Figure 2). Starting at the top of the C-suite, only 15% of CEOs and presidents expressed strong concern about ethical technology usage (considerably less than the 30% average across the C-suite). The chief information officer (CIO), a role often charged with managing these technologies, averaged only 16%. Contrast this with roles like the chief sustainability officer (CSO) and the chief operating officer (COO) who indicated strong ethical concerns at 50% and 41% respectively, and a clear disconnect emerges between the CEO/CIO’s line of thought and that of the CSO/COO. Given that reputation and social impact are critical aspects of the CSO’s role, executives in this role are more likely to care about ethics. The COO, who oversees enterprise-wide operations, is likely to be more aware of how work is executed and, therefore, have greater awareness of potential ethical issues. However, those with more influence on the 4IR strategy – the CEO and, to a lesser degree, the CIO – seem to be disproportionately swaying organisational policy. Only 12% of the organisations whose executives were surveyed have policies in place or are actively exploring the implementation of policies (tracking closer to the level of concern conveyed by the CEO and CIO) on ethical usage of technology. Extending ethical thinking across the organisation While 4IR technologies offer immense opportunities, they also bring many ethical challenges as they’re poised to transform the way we live, work and interact with each other. As a result, leaders at the helm of companies looking to benefit from these technologies need to navigate a complex ethical environment. Organisations could benefit from ensuring that proper policies are in place and are adhered to. The following steps can help leaders move forward in this direction: Set the tone at the top: if the CEO doesn’t consider ethics a priority, it will likely be difficult to get the rest of the organisation to do so. Not only should the CEO emphasise the importance of ethical considerations in the usage of technology, they should also encourage other members of the C-suite to express their concerns. The CSO and COO, by virtue of their roles, have a unique line of sight into the importance of ethics in supporting growth initiatives. This knowledge-sharing between the CSO and COO and the rest of the C-suite can empower executives in the organisation to tailor their solutions with ethics as a top-of-mind design consideration; Cultivate an ethical culture: ethics is not only an issue for C-level executives to consider, but it is also of prime importance to an entire organisation. It starts with clearly messaging ethical policies and guidelines – and leading by example – but it also includes giving your workforce a voice in the discussion. As senior executives work out strategies to integrate these technologies into every facet of the workforce, it’s important that they provide other employees with avenues to express ethical concerns about their usage; and Iterate the policy: 4IR technologies are rapidly changing and accordingly, policy too should change. Just as government regulation is trying to keep pace with autonomous vehicles and smart cities, organisations should establish constant touchpoints to ensure that their ethical policies keep pace with the rapidly changing technology environment. For CEOs and other C-level executives, integrating the ethical considerations of employees across the organisation and other stakeholders into their day-to-day operations also makes good financial sense. The organisations that set the tone at the top are the ones that are likely to be best positioned to help their businesses – and society – flourish. This article was originally published by Deloitte Insights. View the article at www.deloitte.com/insights/industry-4-0-ethics Methodology This research is an extension of the Success Personified in the Fourth Industrial Revolution report, which is based on a survey of 2,042 global executives and public sector leaders conducted by Forbes Insights in June–August 2018. Survey respondents represented 19 countries from the Americas, Asia and Europe, and came from all major industry sectors. All survey respondents were C-level executives and senior public sector leaders including CEOs/presidents, COOs, CFOs, CMOs, CIOs and CTOs. All the executives represented organisations with revenue of US$1 billion or more, with half (50.1%) coming from organisations with more than US$5 billion in revenue. 65% of the public sector leaders represented organisations and agencies with budgets of US$500 million or more.

Oct 01, 2019

The most successful managers and leaders help their teams learn from mistakes in an atmosphere of respect and acceptance. By Annette Clancy Your doctor tells you that you will need to undergo major surgery for a life-threatening condition. Fortunately, you have private health insurance, which will allow you to choose the hospital in which the procedure will take place. There is little difference between the hospitals apart from one issue. Of the three covered by your insurance, Hospital A reported making 100 clinical errors in the past year; Hospital B reported 75 and Hospital C reported just 20. Which hospital would you choose for your surgery? On the face of it, Hospital C seems to be the obvious choice. Fewer errors might suggest that this is a safer place in which to have surgery for a life-threatening condition. Any hospital making five times that number of mistakes must be doing something wrong, surely? Not quite. Amy Edmondson, Professor of Leadership and Management at Harvard University, started out thinking precisely that when, as a graduate student, she undertook research on medical team errors. The data initially didn’t make sense. Why would the best medical teams have the highest rate of reported errors? Edmondson studied the data in more detail to explore exactly how the teams communicated about errors. She discovered that the teams with the highest rate of reported errors were the ones that talked frequently about their mistakes in order to learn from, and reduce them. To do this, they created an atmosphere Edmondson termed “psychological safety”. Anxiety zone vs comfort zone Psychological safety can be defined as “being able to show and employ one’s self without fear of negative consequences of self-image, status or career”. In psychologically safe teams, there is a shared belief that the team is safe for interpersonal risk-taking. As a result, team members can learn from mistakes in an atmosphere of respect and acceptance. In psychologically unsafe teams (or organisations), members are afraid to speak out, particularly to authority figures who may question their credentials or status. Edmondson gives an example of a nurse who suspects that a patient may have been given the wrong dose of medicine but doesn’t call the doctor to check because the last time she did, the doctor questioned her competence.  Psychologically unsafe teams don’t speak up about errors and as a result, mistakes are made – some of which may have enormous repercussions. Edmondson cautions managers and leaders against holding employees accountable for excellence without creating psychological safety, as this creates an unhealthy anxiety zone. The opposite – creating psychological safety without accountability – creates a comfort zone, which is not high-performing. A good balance between the two is what is required, and this can be created through dialogue and discussion. Practical solutions How can team leaders and managers help to create psychological safety? Edmondson has some suggestions. Frame the work as a learning problem rather than an execution problem, thereby highlighting the uncertainty and interdependency required of the team. Frame the project as something that is new¬; as something that has not been undertaken before. No one person can deliver the project, therefore every person’s input is required. Establish that learning is an ongoing and necessary part of the project from beginning to end. Admit your fallibility as the team leader or manager. You cannot anticipate and solve all problems that will arise, and this will create safety for speaking up. The more you admit you don’t know, the more each individual on your team will be encouraged to admit their own fallibility. And finally, model curiosity. If you ask questions, you will create a culture in which others will feel safe enough to do so. Asking questions creates dialogue, and out of dialogue comes learning. Dr Annette Clancy is Assistant Professor at UCD School of Art, History and Cultural Policy. Annette’s research focuses on emotions in organisations.

Oct 01, 2019

Large customers are good for business, but can stretch your cash flow.  By Peter Brady Have you recently received a ‘polite letter’ from your US multinational corporation (MNC) customer advising of a stretch in your credit terms from 30 days to 90 plus? Or, indeed, from any of your MNC customers? In recent years, the extension of MNC credit terms has become business as usual across the globe but for SMEs, it is anything but business as usual. Think about it. How would an extension of credit terms impact on your cash flow and projections this year? And what are the implications for your growth strategy in 2020 and beyond? Winning a contract with a large MNC is a measure of success for established SMEs. However, an extension of credit terms can feel like a double-edged sword as it puts excessive strain on cash flow. Why does it matter? A strain on your cash flow can have many implications, all of them negative. The first impact is on your suppliers – they expect payment in 30 days. There is an immediate gap in cash flow and you are unlikely to have sufficient sway with your suppliers to realign. This could mean: You are not in a position to fund the initial costs of fulfilling contracts; Pressure is placed on your existing supplier relationships in the form of increased risk around quality, timely delivery and higher prices; Capacity to deliver on-time to customers is affected; and Ability to grow the business at pace is limited. The lost opportunity  It may seem obvious, but having cash tied up in debtors with long credit terms is a fundamental challenge for most SMEs. If SMEs could access this cash early, it would give a distinct competitive advantage when negotiating terms with key suppliers. Think of what you could do if your invoices were paid on day one, not day 90. First, you could pay your suppliers early, enhance the relationship and ultimately secure better terms. Second, you could deploy funds into driving new customer acquisition and fund new business tenders with the comfort of cash flow certainty. So what do you do? You have two options: 1. You could try to negotiate: know where you stand in your customer’s eyes. Do your products or services play an important role in their success? Is your product or service critical to their delivery? Even so, unless you are the sole producer of a key strategic element, there’s another company out there to potentially replace you. Alternatively, your customer might offer softer credit terms in exchange for a pricing discount – but cutting margins is an extremely expensive source of finance and unlikely to be recovered. This course of action doesn’t make good business sense, as it is a race to the bottom. 2. Look at funding options to bridge the gap: the financial market is developing all the time to reflect the needs of business. For decades, when Ireland’s SMEs needed to fill the cash flow gap left by extended credit terms, they had limited choices – commercial overdrafts, short-term lending or an invoice discounting facility. That may have been adequate in the past but such is the success, ambition and global reach of Irish SMEs across all sectors today, this range of funding options falls short of their requirements. Commercial overdrafts are harder to secure and are generally seen as an unreliable method of funding, not directly aligned to the changing requirements of a business. Similarly, short-term lending is onerous to put in place and comes with significant levels of conditionality. An invoice discounting facility continues to plug the cash flow gap for many SMEs in Ireland. However, invoice discounting facilities are operationally clunky and carry significant fixed and hidden costs and limitations. They are therefore not really fit for purpose for today’s SMEs. Many SMEs often have a small number of key strategic customers in their sales mix. Supported by government bodies such as Enterprise Ireland, Ireland’s SMEs have a global footprint. Exporting is crucial to scalable business success, and not just to Western Europe. SMEs are securing contracts across the globe – US, Canada, EMEA and Asia. Invoice discounting facility For years, the invoice discounting facility has serviced working capital funding requirements. However, the facility comes with three major limitations: The facility limit; Geographical restrictions; and Debtor concentration risk limits. The facility limit At the outset, SMEs are subjected to a long and onerous process to get approval for the invoice discounting facility. Fair enough, you may say, as this is effectively a loan and it follows that the bank providing it decides how much the facility is for. SMEs must enter into a long-term commitment, often saddled with non-usage charges or exit fees. SMEs must also pay credit insurance and sign a personal guarantee – something entrepreneurs have grown to fear. Geographical restrictions Exporting to the UK? Great. Exporting to United States (US)? Not so great. Country risk and the law of the land plays a major role in how traditional lenders assess the risk and granting of facility limits. If the country in which your customer is located is outside of what is considered in banking terms to be palatable, funding limits and exclusions will apply. Debtor concentration risk limits The most common reason for restricting funding under an invoice discounting facility remains customer or debtor concentration. It applies when an SME becomes over-exposed to a single debtor. The debtor could be a large household brand name, but traditional lenders must impose facility limit restrictions. For SMEs, it is somewhat ironic that the more business you do with a key customer, the more your funding is limited. So, back to your US multinational extending its credit terms. You’ve worked tirelessly to win this business, but you can’t sustain 90 days’ credit and this customer accounts for over 60% of your debtor book. Your business needs: Consistent certainty of funding, without any limit relating to geography or debtors; Funders who recognise the strength of your business model and the substance of the underlying transactions; and Access to working capital to scale your business globally. Market and product innovation Invoice, purchase order and recurring revenue trading are collectively known as “receivables trading”. Receivables trading ticks all the boxes. It enables SMEs to leverage their customer relationships. By selling invoices and future invoices (purchase orders) to a pool of capital market funders, SMEs can access finance when they need it. What difference do capital market funders make? The funders are capital market institutional funders, pension funds, corporates and sophisticated investors – and there is a large pool of these funders. The fact that there is not just one entity, but a pool of funders purchasing the receivables (invoices or purchase orders) eliminates the requirement for imposing concentration or geographic limits on the SME. It extinguishes the need for any commitment, lock-ins or fixed costs. At no stage is there an ask for a personal guarantee. This funding solution puts control back into the hands of SMEs and allows them to decide when they need to access funding on their terms – a liberating benefit. How does it work? Receivables trading is available via an online platform. A pool of institutional funders (the buyers) are members of the platform. SMEs (the seller) uploads their invoice or purchase order and the buyers purchase them. The model is ideally suited to established SMEs with MNC or sovereign debtors. The SME can use the online platform in conjunction with their existing facility by carving out specific debtors from the invoice discounting facility. In conclusion Business is constantly changing and working capital funding has caught up. Alternative funding where sellers and buyers connect directly via an online platform is fast becoming the norm. With this funding solution, SMEs can tender for business of any scale globally – confident that they can fund the upfront costs. It’s a gamechanger for most. According to the Central Bank Survey of SMEs, which was published in January 2019, the top two reasons for credit applications were working capital, and growth and development. ISME’s quarterly business survey reveals that 70% of Ireland’s SMEs still rely solely on traditional bank funding. In Europe, it’s only 30%. Alternative funding is the future of funding. Peter Brady FCA is Co-Founder and CFO at InvoiceFair.

Oct 01, 2019

When it comes to finance process outsourcing, how do we keep up with industry trends? By Sinead Donovan Whether an organisation uses an in-house shared services centre (SSC) or external service provider, outsourcing has become a familiar concept to many of us in industry and professional services settings. It is no longer a new idea when it comes to finance and non-core process solutions. Long gone are the days when terms such as SSC and business process outsourcing (BPO) were treated as an innovation. Rather, it has become a finance strategy staple for most mature and growing multinationals. The first outsourced centre in Ireland opened its doors in 1995 – an SSC of a large US multinational. Others quickly followed suit and there was an explosion of SSCs across Ireland supporting multinational organisations globally. Many have since moved away from the Irish market, or made a complete turnaround by transforming their services in the last number of years. This is a natural progression in the lifecycle of outsourcing and service transformation. Coinciding with this evolution, a new era of outsourcing has emerged which is a very interesting and indicative trend. Traditionally outsourced services concentrated on high volume and low complexity, non-value-add processing tasks – be that booking of accounts payable invoices or entering pre-approved journal vouchers. A typical offering comprised of three main functions: accounts payable (AP), accounts receivable (AR) and general ledger (GL). While you may have occasionally found other support functions (think of master data management), this was not standard practice in the early days. Business partner Some 20 years on, the situation is rapidly changing. SSCs and BPOs are now expected to remain relevant while delivering valuable services to the parent company or clients they serve. With the increase of automation and technology, there is decreased need for support of high volume, low complexity tasks. Instead, there is an increased requirement for higher value-add analytical services. System transitions and implementations, process improvement and historical issue resolution are among the services now provided by BPO teams across professional services and SSCs alike. Additional value-add supports sought by the parent company or client now include financial planning and analysis, advice on enterprise resource planning (ERP) and business combinations. If we were to sum up this trend in one sentence, ‘a move from processor to business partner’ seems the most fitting. From a business perspective, what do companies look for when transforming their finance function? It seems that demands placed on service providers have evolved from what they would have been some 20 years ago, when the main consideration was which finance process could be outsourced using a straightforward ‘lift and shift’ model. Today, this approach has changed. Many businesses are undergoing systems and process transformation. Thus, shared services providers need to take that into account and adjust their solutions to add real value and innovation. This is often done by utilising technology, robotic process automation (RPA) or artificial intelligence (AI) to tackle all the repetitive and high volume tasks while allowing employees to concentrate on process improvement, in-depth analysis of big data, and key risk areas instead. Looking to the future With this trend, it is easy to see that the key to success for any SSC or BPO service provider – especially those in a professional services environment – is to remain relevant and to continue looking for new ways to improve efficiency, add value and innovate. Exactly how to stay relevant is, of course, a bigger question. It can be easy to get lost in multitudes of considerations, trying to keep up with changing attitudes and demands. While there is no doubt that continuous improvement and development is important to successful client-provider relationships, there is another more subtle – but equally important – aspect that should be given just as much attention. Indeed, it is especially relevant in the professional services setting. Mutual trust in the relationship between provider and client can be the deciding factor in the success or failure of a project. Both parties should be committed to the mutually beneficial collaboration that allows BPO providers to continue adding value and evolving to support clients or parent companies – all with a view to remaining relevant in this dynamic market. Sinead Donovan FCA is a Partner in Financial Accounting and Advisory Services at Grant Thornton.

Oct 01, 2019

Work-life balance can have enormous value in any organisation,  but meeting the needs of a broad spectrum of employees is more art than science. By Ed Heffernan For well over a decade now, work-life balance has been part of the conversation. The 2019 Leinster Society Salary Survey cited, perhaps unsurprisingly, that 86% of respondents said it was a key factor when considering an external move. Surprisingly, however, some 52% of respondents cited they would sacrifice up to 10% of their financial reward for better work-life balance. What is this mysterious, evasive thing that the majority of accountants would take a pay cut for? How is work-life balance defined? Sometimes things are more easily defined by what they are not, rather than what they are. Here’s an example: Work-life balance does not mean equality between work hours and non-work hours; Work-life balance does not necessarily mean working fewer hours than you are working now; Work-life balance is not a one-size-fits-all matter; it means different things to different people and will have a varied meaning over time for each individual; and Work-life balance means different things to different generations; for some, it’s a nice-to-have while for others, it’s an expectation. More often than not, work-life balance comes down to three things – flexibility, achievement and enjoyment. Flexibility is doing your job at the times that work for you. We all have different commutes and different responsibilities outside of work; the employers that recognise this as a fact of life are the ones who retain their people for longer and get more return for their people’s time. For example, some employers will: Allow some degree of flexibility on start and finish times to allow for commutes, family responsibilities, sports commitments or even to make sure that when someone needs to finish a little early, they feel that they can; Allow people to work from “not the office” and trust that they will. Numerous studies suggest that the worst possible place for employee productivity is the workplace – there are just too many distractions. Enabling certain types of work, especially the type of work that requires uninterrupted focused activity, to be conducted outside of the office can lead to substantial  increases in productivity; and Giving a little can mean gaining a lot. If one of your team has a medical appointment or another one-off event, allowing them the freedom to be away from the desk without deducting the time from their holidays, or stating that they have to make the time up, can have enormous reciprocal effects in the future. Small, random acts of kindness are more powerful than any policy. There is a catch, though. Even if a company does manage to create a flexible working environment, it is still not going to please all of the people all of the time. When it comes to flexibility, some people at certain stages in their life will need a little more; others a little less. Implicit to the flexibility component of work-life balance is that it means different things to different people at different stages. Companies that create a culture of flexibility as opposed to enforcement often get the best results. Achievement is the cornerstone of human ambition. Everyone needs to have a clear understanding of what they need to achieve in their role and to be recognised when this achievement occurs. This can be weekly, monthly or even annually. It must be measurable in some way and it must be recognised, either intrinsically (for example, a simple ‘thank you’ for a job well done) or extrinsically (for example, some type of financial reward – a token, an unexpected gesture, a bonus, or even a salary increase). Everyone needs to feel that they are achieving something in their role and it is ultimately up to their direct manager to ensure that achievements are recognised. Those who feel they are achieving something tend to feel like they have work-life balance and in many cases, they feel this way regardless of the hours they work. Enjoyment is a less tangible, but equally important, part of work-life balance. Enjoyment does not just mean having fun – that’s only part of it. Enjoyment has a much wider definition when it comes to work-life balance. It’s how you feel about what you do; it’s how it feels to work in your team; it’s feeling that you are working towards a shared goal; it’s respecting and learning from the people you work with; it’s celebrating success and learning from failure with your colleagues; it’s the opportunity to help others learn; it’s the opportunity to work in a business that you believe in for a cause you admire; and it’s a whole lot more. Flexibility and achievement are the easy ones to define and create a policy for – enjoyment is the piece that is really personal, and the piece that many managers often get wrong. Work-life balance can have enormous value in any organisation. Get the mix of flexibility, achievement and enjoyment right, and your people will work harder, be happier, be more productive and will stay longer. Get it wrong these days, and you will end up with the opposite. It’s that easy. Why authentic leaders listen For some people, it isn’t the work component that creates the imbalance; it’s the life component. At certain times, we all come under stresses that have nothing to do with work. Some people make work the escape from these stresses; other people bring these life stresses into the workplace with sometimes devastating consequences. People don’t change without reason. If someone on your team begins to submit work that isn’t up to their usual standard, uncharacteristically misses multiple deadlines or just seems ‘off form’ in the office, don’t get annoyed – get curious. Sometimes it might just be listening; sometimes it might be arranging some extra flexibility or a reduced workload on a temporary basis. Regardless of the situation, every time you engage and, where you can, offer to take action, you will not only make a difference for that person, but you will create longer lasting, deeper bonds between yourself and your team. You can create the space your people need when life causes an imbalance. And from experience, that’s where the real magic happens. It’s easy to ignore the problem, but it takes bravery to ask the question. Which type of leader are you?   Ed Heffernan is Managing Partner at Barden Accounting and Tax.

Oct 01, 2019

The provision of environmental reporting clearly aligns to our profession’s core values, so we can all play a role in the drive for sustainability. By Kate van der Merwe Since the 1970s, the influential Business Roundtable has exclusively represented CEOs of the most prominent US companies. In August 2019, 181 CEOs issued a new mission for the group and the companies they represent. No longer singularly focused on maximising shareholder wealth, the mission proposes to benefit “all stakeholders – customers, employees, suppliers, communities and shareholders”. This represents a significant shift in how a company’s purpose is understood. Reporting business performance was traditionally one-dimensional, with an annual presentation of structured figures delivered primarily to shareholders. Over time, this has proven insufficient as it doesn’t explain “how” a company achieves its financial results. In response, the content of reporting has transformed. The increasing demand for, and provision of, non-financial reporting within the external reporting cycle is part of a broader shift. Corporate Social Responsibility (CSR), Environmental Social and Governance (ESG) and integrated reporting won’t be new concepts to readers, having been previously covered in this publication. Reporting continues to evolve, recognising the value of social responsibility, ethics, and diversity equity and inclusion (DEI) to tell a fuller, more meaningful story and in doing so, making the numbers three-dimensional.Companies’ impact on the environment is increasingly being scrutinised, driven by the visibility and awareness of the climate crisis coupled with the current expectation of corporates to be “responsible citizens”. We can see this manifesting in the investment trends of both personal and institutional investors. For the personal investor, investing increasingly requires value-alignment, with impact investing prioritised with younger investors in particular. Both pollution/use of renewables and climate change were two of the top five areas of importance for personal investors in 2018, according to Schroders. Meanwhile, 52% of young investors (18–34) always/often invest in sustainable investments instead of those that aren’t considered sustainable or contributing to a sustainable society, with at least a further $12 trillion estimated to pass to these potential investors over the next decade. Diverse institutional investors, similarly, continue to shift towards impact investing. The Global Impact Investing Network (GIIN) values the impact investment market at $502 billion while its 2019 Impact Investor Survey found that 56% of investors target both social and environmental impact objectives, with a further 7% specifically targeting environmental investments. Meanwhile, fossil fuel divestment is approaching a valuation of $10 trillion across 1,100 entities including nation states, banks, universities, NGOs and faith groups. As Jim Yong Kim, a former president of the World Bank, put it: “Every company, investor and bank that screens new and existing investments for climate risk is simply being pragmatic”. With such appetite, the need for deep understanding of the relationship between business and the environment is clear. Such environmental information exists in a number of forms – as part of non-financial reporting (such as ESG reporting); independent accreditations or affiliations (from the Forest Stewardship Council (FSC) to Certified B Corporations); award recognition (for example, the United Nation’s (UN) Champions of the Earth); and, finally, less formal self-assessments. This environmental information informs reporting and has significant benefits for the relationships with stakeholders, including employees and consumers. As environmental reporting develops, there are several players attempting to define a standard, yet relevant, framework to capture environmental performance. Multilateral bodies such as the UN and European Union (EU) have issued guidance; the Swedish government, for example, has introduced prescribed reporting; and independent organisations have issued frameworks to further this agenda. However, development has been fragmented and criticised for a lack of maturity. Two key criticisms are the lack of comparability (given the array of frameworks to choose from) and the lack of prescription or detail (succumbing to either greenwashing, or irrelevance due to a lack of nuance). The need for clarity in this area is highlighted by a Schroders investor survey, which notes that 57% of people held back from investing or investing more in sustainable investments due to information gaps. While investor appetite represents a significant carrot, the sticks of regulation and public relations (PR) penalties must also be considered. The direction of regulation can be seen with the EU’s Technical Expert Group on sustainable finance (TEG), established in 2018, whose remit includes defining metrics for climate-related disclosure. Irrespective of the current maturity of environmental reporting, there is increasing pressure to get it right. Both Ireland and the UK recently announced commitments to invest in “green” projects and infrastructure. With companies, governments and individuals looking to invest in sustainable businesses, projects and infrastructure, it becomes ever-more important for every business to be able to tell their sustainability story with credibility and depth. Accountants have an opportunity to leverage their complementary skills and experiences to aid the transition to meaningful environmental reporting. Furthermore, the provision of environmental reporting clearly aligns to our core values and serves the common good by meeting public expectations and ensuring transparency and accountability. Environmental reporting is an immature but growing area that is here to stay. It is best viewed holistically, as part of a bigger shift to intersectional environmental information. It is central to our values not just as human beings, but as accountants, finance professionals and business leaders. All businesses, whether multinationals or small- or medium-sized enterprises (SMEs), should embrace this as an opportunity to tell an authentic, winning story to an extensive audience as the absence of information will inevitably generate its own noisy static. As accountants, we have an exciting opportunity to play an integral part in solving a problem for the common good.Kate van der Merwe ACA is responsible for Global gFA Reporting Optimisation at Google.

Oct 01, 2019

The Institute’s new guide, a five step approach to considering organisational culture,  serves as a useful starting point for a board, or those in executive or senior management positions. By Níall Fitzgerald The Business Roundtable is a group of influential CEOs from America’s leading companies, and it recently renewed its “statement of purpose”. Having spent 22 years following a shareholder-first philosophy, the group has adapted to societal expectations for better business behaviour by expanding its fundamental commitment to deliver value to other stakeholders including customers, employees, suppliers and communities. It is hard to imagine how this commitment will be honoured without changes to organisational culture by the 181 CEOs who pledged to lead their companies for the benefit of all stakeholders. Closer to home, the UK Corporate Governance Code was revised by the Financial Reporting Council (FRC) in 2018. Its original source from 1992, The Financial Aspects of Corporate Governance (otherwise known as The Cadbury Report), outlined the importance of a principled corporate governance code “for the confidence which needs to exist between business and all those who have a stake in its success”. The only stakeholders mentioned in that version, and successive ones, were institutional investors and shareholders. Twenty-six years later, the Code not only refers to “a wide range of stakeholders” but also formalises the board’s role in aligning an organisation’s culture with its purpose (vision), values and strategy (mission). Reflecting this trend, investors and business analysts are ramping up their cultural assessments of organisations. A study conducted in 2015 by global culture organisation, Walking the Talk, with Stamford Associates in the UK, revealed that 94% of investment managers based mainly in the United States (US) and UK include culture as an important consideration in their investment decisions. In January 2019, State Street Capital, one of the world’s largest asset managers, wrote to the chairs of more than 1,100 organisations in the S&P 500, FTSE 350 and similar organisations in France, Germany, Australia and Japan, calling on them to review their culture and explain its alignment with their strategy. Investors are voting with their feet, which was evidenced by the dramatic fall in Barclays’ share price in 2017 following CEO Jes Staley’s attempt to identify an internal confidential whistleblower, which went against the organisation’s espoused values and culture. Institutional investors are also taking a more active role in driving change by making their expectations clear – not just around the rate of returns, but also on the organisational culture they wish to align with. The Japanese Government Pension Investment Fund (GPIF), one of the largest pension funds in the world, implements an environmental, social and governance (ESG) investment decision-making methodology. This methodology considers factors such as the quality of a company’s culture as well as management, risk profile and other characteristics. They are not alone, with many other institutional investors following a similar approach. In producing Chartered Accountants Ireland’s Concise Guide for Directors: A Five-Step Approach to Considering Organisational Culture, we identified a consensus that organisational culture plays an increasingly important role in influencing behaviours in an organisation. Given the importance of organisational culture, several questions were raised during the production process. Four of the most common are outlined below: 1. Who is responsible for organisational culture? The board has overall responsibility for ensuring that an organisation’s vision, mission and values are aligned with the culture of the organisation. In the same way the board is responsible for approving the strategy of the organisation, it is also responsible for agreeing on what the target culture of the organisation (i.e. the culture the organisation should aspire to) should be. Each member of the board, executive or non-executive, has a responsibility to lead by example and promote the target culture; this involves ensuring that adequate time is allowed on the board agenda for discussions on organisational culture. 2. Who influences organisational culture? It depends. This is where the phrases “the tone at the top” and the “echo from the bottom” comes into play. Unlike strategy, culture is an organic and fluid ecosystem, and while a target culture will be agreed by the board, the process of shaping and realising it is gradual. It involves leadership from the top of the organisation (top-down) and engagement from the bottom of the organisation (bottom-up). Who has the greater influence in shaping organisational culture will differ from one organisation to the next. For example, it may be the director(s) in a small owner-managed family business, the CEO in a multinational, the founder in a not-for-profit organisation or the legacy staff in a government department. It isn’t just internal people or politics that influences the target culture. It will be influenced by many other internal and external factors including, but not limited to, regulatory landscape; political environment; social norms; trade union participation; the history of the organisation; leadership capability within the organisation; level of ambition of people to lead change; common values shared across the organisation; and both internal and external drivers of change (e.g. digitalisation). The organisation’s culture ultimately influences and shapes the interactions with all stakeholders. 3. What are the best organisational culture traits to have? There is no one-size-fits-all. What works for one organisation may not work for another in a different stage of development or in a different sector. The objective is to determine common cultural traits that can be embedded across the entire organisation, while recognising and accepting that sub-cultures also exist. For example, larger organisations may have subcultures in different geographies or in various departments or business units. To be effective, cultural traits should be realistic and counterbalanced. Promoting a culture of collaboration and collective responsibility, for example, should be balanced with ensuring that people are individually accountable for their contributions and actions. It is also important to acknowledge that organisational culture is dynamic; it is constantly changing in response to internal and external influences. Culture risks exist, like any other risk, and organisations will need to manage accordingly. Mitigation measures include ongoing communication and reinforcement of the organisation’s core values and behaviours, combined with risk-based culture audits or reviews. Internal controls with early warning systems are useful for alerting management to behavioural changes that can negatively impact culture – for example, where a production line debriefing identifies that downtime is being recovered by taking shortcuts to stay on schedule. 4. Where do I start when considering organisational culture? The five-step approach to considering organisational culture is presented in Figure 1. This approach serves as a useful starting point for a board, or those in executive or senior management positions, to consider organisational culture. It is designed to work in tandem with the vast reservoir of tools and methodologies for assessing, defining and shaping organisational culture. The steps can be summarised as follows: Assess current culture: every journey has a starting point and it is important to understand the current culture of the organisation before agreeing the path forward. Evaluate effectiveness: determine what works well with the current culture, and what doesn’t. Are there opportunities for quick, positive change for better business behaviour? And what will require more effort? Define/refine target culture: what influences the organisation’s target culture? And does it clearly align with the business purpose (vision) and values? Identify gaps: identify, prioritise, risk-rate and cost the gaps between the target culture and the current culture in order to inform the organisation’s cultural change programme; and Close gaps: prepare the change programme to shape the organisation’s culture. Throughout the journey, it is important to communicate the changes, evaluate whether the implemented changes are having the desired effect, and reinforce the reasons for change and how they align with the organisation’s vision, mission and values. Organisations are investing more in getting their culture right. The various roles that Chartered Accountants play within organisations involve a level of influence in assessing, defining and shaping organisational culture. While this influence may not seem obvious at first, it becomes more apparent when you consider that many Chartered Accountants hold positions that provide a strategic, overarching view of what is happening in their business unit or across their organisation. By applying their analytical and reporting skills, Chartered Accountants can use their access to information and insights, as well as their opportunities to observe behaviours across the organisation, to significantly support the development of a healthy culture. Whatever role you play within an organisation, consider how you can positively influence and shape a healthy organisational culture.   The Concise Guide for Directors: A Five-Step Approach to Considering Organisational Culture is available to download from Chartered Accountants Ireland’s Governance Resource Centre. Níall Fitzgerald ACA is Head of Ethics and Governance at Chartered Accountants Ireland.

Oct 01, 2019

Brian Keegan considers the poignant parallel between Brexit and New Zealand in the 1970s. "Earthquake? Best thing that ever happened to us.” This isn’t the best response to the damage done to the city of Christchurch in New Zealand in the wake of the terrible earthquake in 2011. My man had the grace to acknowledge as much after he remembered the appalling loss of life and limb from this particular natural disaster. Nevertheless, as someone who was deeply involved in the New Zealand construction industry, he was all too happy to see the opportunities created by the devastation. It isn’t the first time that New Zealanders suffered due to powerful circumstances outside their control. While the memories of the 2011 earthquake are clearly fresher, there is also a folk memory among New Zealanders of the economic damage caused to them when the United Kingdom joined the European Union in 1973. For a country largely dependent on agriculture exports to its former Commonwealth headquarters, the British accession to what was then the European Economic Community some 40 years ago was a disaster. The economic disruption of 40 years ago is comparable to the threatened damage from Brexit to the food industry of Ireland – north and south. In the 1970s, New Zealand’s main exports were butter and lamb. Despite being on the other side of the world, the UK was a key market for these goods and, in fact, accounted for some 30% of New Zealand’s exports. Being members of the Commonwealth, New Zealand had preferential access to UK markets. That access was to be a casualty of Britain’s accession to the EU. In fact, so great was the problem for New Zealand that London committed to doing what it could to protect New Zealand’s vital interests in the course of negotiating the British accession treaty. The so-called Luxembourg agreement guaranteed limited access for New Zealand produce for a five-year transition period. The idea was to give New Zealand breathing space to negotiate free trade deals with other markets and diversify its export offering, but the economy tanked nevertheless. If all this sounds familiar, that may be because we are witnessing history repeating itself in a way that would have considerable entertainment value if the issues weren’t quite so serious. Leo Varadkar’s mischievous remark that Westminster should offer pay-per-view wasn’t that far off the mark. We may, however, be watching the wrong channel if we are to learn from this repeat – it’s the New Zealand experience we should focus on. In the 1970s, New Zealand wine was virtually unobtainable in Europe and kiwi fruits were a rarity. Now they are mainstream. 40 years on, New Zealand’s export destinations are Australia, China, the United States (US) and Japan in order of importance. The country’s volume of trade with the UK has declined by over 60%. Our Brexit discussions must now move on from brinkmanship and dead-in-a-ditch rhetoric. We are going to have to figure out how to co-exist and trade with our nearest neighbours, culturally and geographically. Business will have to work out how to diversify and establish new markets, and hopefully avoid a repeat of the worst aspects of the 1970s suffered in New Zealand. I doubt very much that any of us will ever be exclaiming, however thoughtlessly like my earthquake man, that Brexit was the best thing that ever happened to us. That’s because there’s one other point about the New Zealand experience. Even though it was clear for about a decade that the trading relationship with the UK would inevitably change in 1973, the New Zealanders seem to have done precious little about it until the hammer fell. Sometimes it takes a crisis to deliver change. Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

Oct 01, 2019

Brexit deadline The 31 October Brexit deadline is fast approaching and clarity on the issue is as far away as ever. At the time of writing, many options seem possible, including a Brexit delay and a UK general election, but perhaps the most likely prospect is a no-deal or limited-deal Brexit. Both the Irish and British governments have urged businesses to prepare for Brexit, particularly those that import, export or transport goods, animals or animal products. It seems that the UK government is operating on the assumption that a hard border will return to the island of Ireland, as revealed in a UK no-deal contingency document codenamed ‘Operation Yellowhammer’, which was eventually published in mid-September after leaks to the press. The document warns of potential unrest in Northern Ireland along with road blockades, job losses and disruption to the agri-food sector, as well as an increase in smuggling and the potential for disruption to electricity supply. We must hope that this is a dire overestimation of a worst-case scenario. Meanwhile, in Dublin, Institute President Conall O’Halloran recently met with Minister for Finance, Public Expenditure and Reform, Paschal Donohoe TD, to discuss the post-Brexit scenario as well as the Institute’s 2020 Budget submission and other business issues. Brexit support Our Institute will do everything it can to support members and member firms at a time of great uncertainty. You can read our latest updates on www.charteredaccountants.ie, particularly in our Brexit Web Centre and our page dedicated to no-deal Brexit planning. We are encouraging businesses across Ireland and the UK to ensure that they can continue to trade with each other post-Brexit. Applying for a customs registration (an EORI number) is just the first step in the process. Getting an EORI number takes between three and five minutes and can be completed online. While some traders have experience in the customs formalities required to import and export outside of the EU, it will be a first for many – particularly smaller enterprises. Businesses need to upskill in the area of customs using Government supports. They should also assess whether they have gaps in customs knowledge. Revenue estimates that customs declarations are expected to increase from 1.4 million to 20 million per year post-Brexit. HMRC estimates that declarations will grow five-fold to around 250 million. It’s best to be as prepared as possible. New academic year As we move into October, our Institute is about to welcome a new crop of students following a campaign to recruit the brightest and best to the profession. A new programme of specialist qualifications covering areas as diverse as corporate finance and cybersecurity are also getting underway. A central part of our strategy is to train the very best business professionals so that they can make a significant contribution to the economy on the island of Ireland, and further afield. We’re working hard to ensure that whatever the economic climate, we’re providing high-quality Chartered Accountants who will make a valuable contribution to firms and businesses. On behalf of my colleagues in the Institute, I’d like to offer our best wishes to all of our new students as they start out on their Chartered journey. Barry Dempsey Chief Executive

Oct 01, 2019

Charities in Northern Ireland may have to provide more detail to the Charities Commission in the near future, but any initiative that restores the public’s trust is to be welcomed. By Angela Craigan On 27 August 2019, the Charity Commission for Northern Ireland opened a public consultation in respect of new questions charities must answer in their annual returns plus additional information that organisations applying for charitable registration online must answer. The proposed questions cover topics such as safeguarding, data protection, loans and payments to related parties, and the use of commercial fundraising partners. The Charity Commission NI advises that the questions are designed to help it gather important information on individual charities and the charity sector as a whole. The format of the proposed new questions requires each charity to reveal if any trustee owes money to it, whether any of the charity’s assets are leased from a trustee, and whether a trustee has been paid for carrying out their role. These questions are already asked in the annual monitoring return, but will now be asked when applying for registration. The Charity Commission NI also intends to ask charities if they have reported a data breach to the Information Commissioners Office in the past year. It will also collect information on what percentage of charitable expenditure relates to charitable purposes for organisations of less than £250,000 a year. All of the new and revised questions Charity Commission NI propose to include in the registration application and the Annual Return Regulations 2019 are available to view in the consultation document. The public consultation will focus on the most significant questions, and will allow an opportunity to voice opinions on the proposed changes. The consultation process will run for eight weeks, closing on Tuesday 22 October 2019. The changes will be of particular interest to members working in the charity sector and those who are trustees of Northern Ireland charities. The consultation has arisen as a result of increased risks within the charity sector including safeguarding, cybercrime and fraud. These increased risks have had a negative impact on the public’s perception of the charity sector. A key role of the charity commission is to increase public trust and confidence in charities. The commission is of the opinion that the additional questions will increase transparency and, as a result, public confidence in charities. The recent safeguarding failures in some high-profile charities have highlighted the importance of trustees being aware of their responsibilities and the safeguarding standards expected of them. The commission has added questions in relation to the ‘expression of intent’ form that is completed by those waiting to be called forward for registration. The commission also proposes to add more questions to the classification section of the charity registration form. In this section, applicants describe their charitable purpose, the focus of the charity and the beneficiaries of the organisation. It is important that trustees understand their responsibilities in respect of the information filed with the Charity Commission. Trustees may delegate the task of submitting an application or annual monitoring form, but they cannot delegate the responsibility of making sure they are accurate and submitted on time. If an annual monitoring form is late, the register of charities shows them as being in default. Once submitted, the register will read “Due documents received late”. This is of increased importance as funders are now using the register to check if forms are being returned late and will look less favourably on charities that file late when awarding grants. As an advisor to a large number of local charities, and as a trustee of Action Mental Health and New Life Counselling, I firmly believe that this sector is invaluable. I therefore welcome any move to increase public confidence in the charity sector.  Angela Craigan FCA is a Partner with Harbinson Mulholland, the accountancy and business advisory firm.

Oct 01, 2019

Claire Fitzpatrick FCA looks back on her career, from trainee auditor to the frontier of blockchain technology innovation. What’s wrong with me?” For someone who has enjoyed a varied and successful career in professional services and large corporations, it might come as a surprise to learn that Claire Fitzpatrick asked herself that very question in her 30s as she watched her peers move into senior roles. “You just need to get on the track,” she was told – a less than subtle reference to the perceived linear path to CFO/CEO roles. But as Claire readily admits, this isn’t how she operates. The Dublin native has made serendipitous career moves since leaving PwC in 2000 to work with one of her audit clients, Point Information Systems, but the draw has never been status or salary. Instead, her career has been guided by two things – people and culture. Venturing out While working as a PwC Audit Senior with Point Information Systems, Claire saw the culture she wanted to work in – ambitious, fast-changing and transformative. “I remember coming back after a year and the company had changed completely, whereas some other companies I audited would be the same year-on-year,” she said. “It was evolving at pace and the energy there just stood out for me.” Claire joined the company and her role expanded her knowledge base in a variety of new disciplines from engineering to sales and marketing. This diverse exposure would be of great benefit to her later in her career, not least when she returned from a working holiday with Nestlé in Australia and New Zealand to a role in O2. The company was in expansion mode at the time and Claire managed to experience the full life-cycle from early adoption to the sale of the business, which she was centrally involved in. From there, Claire moved to Wayra, Telefónica’s start-up accelerator, to accelerate digital embryonic businesses. As Claire recalls, it was a move that raised some eyebrows at the time. “A lot of my peers thought it was a step down for me in career terms, but I really wanted to get involved in the innovative digital space,” she said. “It reminded me of the energy and pace I felt in Point Information Systems and I had experience of both start-up and corporate environments, so I was able to bring a lot to the table.” Start-up life In her first three weeks in Wayra, Claire met with hundreds of entrepreneurs and developers across the tech ecosystem and this intensity continued unabated for three years. The hub was a success, investing €6 million in the Irish start-up ecosystem including 33 equity investments while returning the same amount. “For early-stage start-ups, that’s a great return,” she said. However, following the sale of O2 to Three in 2014, Telefónica ultimately closed its Wayra hub in Ireland and Claire decided to take on a new challenge.  The idea of starting her own business had never entered her mind, but the closure of Wayra meant that Claire and her two colleagues faced a fork in the road. “We saw real value in what we were doing at Wayra, and we were good at it,” she said. “So, we decided to set up Red Planet and to flip the accelerator model on its head. We started with the corporate to understand the problem it was trying to solve, and then sourced the best start-up talent to solve that particular problem.” The venture was successful and it achieved what Claire describes as “the holy grail” for start-ups – being sold to a large corporate. Red Planet was acquired by Deloitte in 2017 and Claire continued to work with the firm for 18 months. “Selling our start-up was a tough decision, but the right one. Deloitte was really good at the strategy piece and identifying the challenges facing their clients, while Red Planet was able to find the solutions in the start-up world and develop them to scale. We were very good at curating diamonds in the rough.” Blockchain calling At this stage in her career, Claire faced an inflection point. Not content to simply go with the flow, she began plotting her next move when an opportunity arose to join a new blockchain venture headed by the co-founder of Ethereum, Joseph Lubin. The company was founded in 2014 and was at the forefront of Ethereum blockchain technology innovation. It needed someone to establish its base in Dublin and build its team, and the company ultimately chose Claire as its Director of Strategic Operations. The Dublin hub, which is known as ConsenSys Ireland, is developing the products that will enable society and enterprises to advance to the next level of blockchain adoption. Claire is very excited about the bigger picture. “In the future, you won’t even know you’re interacting with blockchain. It will be just like the Internet where nobody really thinks about or considers the infrastructure or protocols – they just see the applications,” she said. “Blockchain will be as transformational as mobile telecommunications was 25 years ago. We are part of a new industry, a new technology, new products, and a market which we have to create and educate. That’s a big challenge, but a very exciting one.” Leadership style But amid the excitement and potential lies ambiguity, and it takes a certain type of person to thrive in an ambiguous environment according to Claire. “Given the nascent nature of blockchain technology, we’re continually refining our vision and new industries are constantly wanting to explore new directions with the technology. So, although everyone in the company has goals to achieve, some are set in stone and some evolve to meet the needs of our clients,” she said. “That’s no different to a traditional organisation but we do differ in that we could have to tell staff to drop projects and pivot in a new direction at a moment’s notice – and some people find that challenging.” Luckily for Claire, working in a maturing industry adds to the allure of her new role in ConSensys – one she believes will contribute to a decentralised, democratised future for individuals. “It’s a rollercoaster, but with experience and age comes perspective and balance,” she said. “And the most important thing for me, throughout my career, has been the people I work with. My colleagues today are not necessarily wired like me but we work well together in the good times, and the challenging times, to make something great happen. That’s what it’s all about.”   Claire’s advice for Chartered Accountants Chartered Accountants will have a central role in the deployment of blockchain technologies and rather than wait for mass adoption, Claire believes the time to upskill is now. “The conversation around blockchain has moved from proof of concept to pilot schemes so when we’re talking to clients, we’re discussing real systems as opposed to hypothetical ideas,” she said. “So, I wouldn’t recommend waiting to start blockchain projects because we will reach the point of mass proliferation quicker than most people expect.” “The first step for all Chartered Accountants is education. There are free educational resources through ConsenSys Academy and Blockchain Ireland is working to raise awareness of what’s coming down the tracks,” Claire added. “But it’s vital that Chartered Accountants realise that anyone can quickly become a laggard in this dynamic environment.” “Finally, I would stress the point that Chartered Accountants don’t need to worry about losing their heads in the weeds trying to understand the programming and coding side of things,” she said. “They should educate themselves with regard to the characteristics and applications that they can see for blockchain in their business.”

Oct 01, 2019

With Budget 2020 fast approaching, what – if anything – could be on the table from a tax perspective? By Peter Vale & Oliver O'Connor At the time of writing, the Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD, had already flagged that we can expect little by way of tax cuts in the upcoming Budget. So, from a tax perspective, are we looking at a damp squib or could there be a mix of tax cuts and increases that net to zero? And if so, who are the winners and losers likely to be? Income tax In the authors’ view, we will see some modest tax cuts next month benefiting primarily lower and middle income earners, with higher earners likely to see some of this cut back – perhaps via a restriction in tax credits. Depending on the scale of the adjustment for higher earners, this could mean they see a net decrease in take-home pay with all other taxpayers seeing a modest increase. So, in summary, we don’t expect to see much either way in terms of income tax adjustments, with lower and middle income earners likely to be the main beneficiaries of any cuts. We also don’t expect to see any longer term statement committing to a reduction in our high marginal tax rates of 52% and 55% for employees and self-employed respectively. Nor should we expect to see a broadening of the tax base; indeed, successive budgets have taken more and more people out of the tax net. The concept of broadening the tax base was a recommendation of the Commission on Taxation report almost 10 years ago, but it has not been embraced by governments since. While the idea of more people paying a little has merits, it is unlikely to be a vote winner. Pensions and investments On the investment side, we are all aware that deposit rates are derisory at present and unlikely to increase any time soon. We are also very keenly aware (as is the Government) that there is a potential pensions time-bomb in the coming decades. The auto-enrolment regime, planned for the early 2020s, is a step towards ensuring that people are more sufficiently funded from a pension perspective and thus, not as dependant on State support in their later years. To this end, it is crucial that the current pension rules are not adjusted (downwards) but rather, that all are maintained at a minimum. A possible concession, which would be of long-term benefit to all, would be to increase the net relevant earnings from the current €115,000 to even €125,000. Entrepreneurs Entrepreneurs would ideally like to be given an increase in the Entrepreneur Relief from €1,000,000 to a more substantial figure. As importantly, they would like to know that there is a roadmap over the coming three to five years to bring this relief more in line with our near neighbours, which is 10 times greater than our current level. We pride ourselves in being the best small country in which to do business, enabling this crucial economic grouping to thrive and create yet more economic prosperity for the country as a whole. Corporate tax We know for certain that new transfer pricing legislation will be introduced in October. The new provisions will implement 2017 OECD guidelines into Irish law and also make certain other changes. While the nature of the other changes is still uncertain, it is very likely that transfer pricing will be extended to non-trading transactions, in particular where tax is being avoided. Certain grandfathering provisions for arrangements in place in 2010 will be removed while it is also possible that transfer pricing will be extended in some form to SMEs. Ireland is also obliged under EU law to bring in anti-hybrid legislation on 1 January 2020, which broadly prevents deductions for payments that are not taxed elsewhere. A further change required under EU law is to restrict tax relief for interest to 30% of a company’s EBITA. At the time of writing, it is still unclear whether this legislation will be in place at 1 January 2020. It should be noted that there will be a de minimis limit (expected to be roughly €3 million), group provisions and certain other carve-outs from the scope of the new legislation. Other changes We don’t expect to see significant changes in the VAT space. There isn’t the fiscal space to provide a VAT reduction to a specific sector (similar to the lower rate previously provided to the hospitality sector), while our headline rate is already relatively high and hence not likely to be used as a revenue-raising measure. It would be positive to see some targeted tax reliefs introduced in the Budget, despite the negative press that some of these reliefs have received in the past. However, sensible tailored reliefs have a role. Improvements to some of the existing reliefs should also be considered. Overall, it is possible that this Budget will be seen as a damp squib. But the devil will be in the detail and there is an opportunity to make changes that will bolster key sectors of our economy. Peter Vale FCA is Tax Partner at Grant Thornton. Oliver O’Connor FCA is Partner, Private Client and Wealth Management at Grant Thornton.

Oct 01, 2019

Paul Duffy, Ding’s new Head of Finance, discusses his move from practice to industry and life in an entrepreneur-led environment. What enticed you to move from practice to industry? I spent 10 years at PwC. I worked in the audit practice in Dublin for five years, specialising in the technology and telecommunications industries. I then spent the next five years working in the deals practice in Boston, advising private equity and corporate clients on their M&A deal execution. Although I thoroughly enjoyed my time there, I felt a move to a new industry would provide a fresh challenge. I’ve always wanted to work for an entrepreneur-led company in the technology sector and, preferably, one going through a period of accelerated growth. Ding seemed like a good fit all round. What does your new role at Ding entail?  As head of finance, my role covers a wide remit. My colleagues in finance are much more than retrospective number-counters at Ding. The team is central to how Ding functions. It is a complicated machine, due in no small part to the number of jurisdictions in which it operates. I also oversee the financial operations function, which comprises a team of 15 employees in Dublin, London, Barcelona, Paris, New Jersey, Florida, Dubai and Dhaka. Our financial operations team acts as a business partner to our business development team, so the tasks can vary from on-boarding and negotiating with new mobile operators to implementing new systems to support business growth. What do you find most challenging about your role? It is probably the demands that come with having such an international business. Ding operates in more than 140 countries and works across multiple time zones, in over 100 currencies, and across a myriad of complex regulatory environments. This brings its challenges. It’s been an adjustment just getting used to the various time zones and holiday schedules alone. We sell operator airtime so we hold stock for over 500 operators around the world, which the finance team manages. To facilitate this, we buy and sell in multiple currencies every day, and we need to forecast demand to determine stock levels.  Describe your typical day. Given the international nature of our business and the demands that brings, no two work days are the same. I try to start off the day with a quick gym session, then to the office. I tend to catch up with our CFO mid-morning to discuss the status of ongoing finance projects and the latest business performance. Each day, I try to speak with our various teams around the world so I have to work within the time zones. Before lunch, I usually have a video call with Dubai to chat through any issues or ongoing projects. In Ding, we try to promote collaboration across different business functions. I’m a believer in doing things face-to-face where possible and we have an in-house barista and coffee bar, so it’s a nice place for regular meetings with colleagues. In the afternoon, I could be working through the key commercial terms of a new customer agreement with legal, or meeting with business development to discuss things like banking and tax requirements for a new region. In the evening, I usually log on to answer emails from our US team, who are often on the road meeting potential new customers. What traits do you value most in your colleagues? Intellectual curiosity, which isn’t always encouraged as people come up through the ranks in finance. In today’s business world, speed and efficiency are often a key focus but possessing an intellectual curiosity encourages critical thinking and ultimately yields better results for the business. Flexibility is another trait that I value. In a fast-paced environment such as Ding, deadlines and targets change frequently and having the ability to be flexible and agile is important. It makes for a better team player, and a better partner for customers. What is your best piece of business advice? Build a meaningful network.

Oct 01, 2019

While you might be the best candidate for a role, if your CV isn’t up to snuff, you could easily be overlooked for your perfect position. Dearbhla Gallagher describes the ideal CV to get a potential employer’s attention. The presentation of your CV can determine whether employers will look at it, let along read it. Even the best candidates are often let down by how their CV looks and reads, and are often overlooked because of a poorly presented CV. Your CV is intended to outline your skills and abilities to potential employers and differentiate you from other candidates. A strong CV makes a good impression and boosts your chances of getting an interview, so it’s essential to take time to consider the content and overall presentation. So, what does a stellar CV look like? Concise Keep it short and to the point. Ideally, your CV should not be longer than two A4 pages. The information should be logical and in date order with more recent experience at the top. Include personal information at the beginning of your CV but don’t go overboard. For example, include your name, email address and phone number, but you don’t have to provide your gender, your date of birth or photographs (although this may differ outside of Ireland). This is just enough to allow the HR person to make contact with you and invite you for an interview. Personal profile Include a personal profile at the beginning. Employers want to hear about what you can bring to a firm, and this is the place to do it. A short introductory paragraph will give potential employers an overview of who you are. If there’s no evidence in this paragraph that you have the needed skills for the role, it’s likely they will simply move on to the next CV, so it is essential to get this right. Factual Keep it real. If the information is on your CV, be prepared to be asked about it by an interviewer. Know every aspect of your CV, from your academic history to your work experience to your other interests. Employers are not just looking for someone ‘technically’ capable of doing a role; they also want candidates who will fit with the overall culture of the firm so they will dig deep into all aspects of your CV. I am always amazed at the number of candidates who are ‘avid’ readers but are unable to discuss the current book they are reading. Tailored Tailor your CV for every role you apply. Make sure to read the job description carefully, identify the skills required by the prospective employer and highlight them prominently in your CV. If you don’t possess the exact skillset needed, consider how your current skillset can apply to the role. Spelling and grammar Read your CV and then read it again to eliminate spelling and grammatical errors. Even better, ask someone else to read it for you. All too often, HR managers read a claim of ‘excellent attention to detail’ on a CV – which is excellent, except when it’s littered with spelling and grammar mistakes. While these types of errors might seem insignificant, they can result in your CV, and your job opportunity, to be thrown away. Dearbhla Gallagher is the Learning & Development Manager at Baker Tilly.

Sep 29, 2019

The Prospectus Regulation is in full force and replaces Directive (2003/71/EC) (as amended). Garry Wynne breaks down what you should know. The Prospectus Regulation ((EU) 2017/1129) has been in full force since Sunday 21 July 2019 and replaces Directive (2003/71/EC) (as amended). Broadly, it requires issuers of transferable securities to the public to obtain approval of their prospectus from the Central Bank of Ireland. It also introduces a new Universal Registration Document, summary requirements, a simplified disclosure regime and a Growth Prospectus. According to the Central Bank, the Regulations apply to people: seeking admission of securities to trading on an EEA regulated market, including the Irish Stock Exchange plc, trading as Euronext Dublin; or making an offer of securities to the public within the EEA, albeit not seeking admission to trading on an EEA regulated market. Four things you should know Universal Registration Document An issuer of securities admitted to an EU-regulated market or recognised multilateral trading facility can now make use of a Universal Registration Document. The Universal Registration Document forms part of the prospectus and must contain legal, business, financial, accounting and shareholding information on the issuer. Once the Central Bank of Ireland approves the Universal Registration Document for two consecutive years, a subsequent Universal Registration Document does not require further approval.  Summary requirements Under the new summary requirements, an issuer's prospectus must contain a concise and plain language summary of the key information pertaining to the issuer, securities and offering. It must not be any longer than seven A4 pages and cannot list more than fifteen risks. The requirement to disclose only material information provides greater flexibility to issuers than under the previous law.  Simplified Prospectus Secondary issuers that have their securities listed on an EU-regulated or an SME growth market for at least eighteen months can avail of a simplified prospectus. This requires the issuer to publish a summary, a specific registration document, a specific securities note, the risk factors, information pertaining to the Market Abuse Regulations and financial information from the previous year. Growth Prospectus SME and other qualified issuers can issue an EU Growth prospectus: a proportionate disclosure document, written in plain language that contains a summary, specific registration documentation and a specific securities note. The Growth prospectus aims to make it easier for these companies to raise capital in the EU.  Garry Wynne is on the financial services team at LK Shields.

Sep 29, 2019

A no-deal Brexit Budget 2020 is inevitable. Susan Kilty recommends a cautious approach to the minister in the run-up to Budget Day. In recent years, Ireland has enjoyed strong economic growth. Despite this, Budget 2020 arrives just three weeks shy of an unprecedented challenge to the economy in the form of Brexit. Minister for Finance, Paschal Donohoe, is facing the unenviable task of setting a budget and making a series of complex and challenging economic choices for the year ahead with no clear certainty on what may arise both in the run-up to, and post, 31 October. On foot of this uncertainty, the Minister has announced that he will frame the Budget on the presumption of a worst-case scenario: a no-deal Brexit. In this regard, Minister Donohoe recently outlined his priorities for Budget 2020 at PwC’s Tax Summit 2019: to deliver certainty to businesses and individuals on the Government's preparedness for a no-deal Brexit, to safeguard the hard-won progress of recent years in stabilising the public finances, and to avoid making decisions in the Budget which may need to be reversed in the near future. A cautious approach The need for Budget 2020 to deliver a cautious approach is also evident from the broader macroeconomic landscape. In its Summer 2019 Economic Forecast, the European Commission reported that Ireland's economic outlook remains "clouded in uncertainty", particularly when it relates to the terms of the UK's withdrawal from the EU and changes in the international tax environment. With employment levels at their highest ever rate and production nearing capacity, the Commission is predicting that Ireland’s GDP growth may see a decline in the coming years. While Brexit, and the political uncertainty in the UK, hangs large over Ireland's economy in the run-up to Budget 2020, what is beyond doubt is that Brexit has the power to undo the economic progress Ireland has made in recent years. Although Ireland’s public finances are now back to surplus, the Rainy Day Fund will likely be further bolstered come Budget Day. This bolstering has the knock-on impact that personal and income tax changes will be minimal and targeted. While any wider tax or spending changes will need to be considered in the context of how significantly a no-deal Brexit will impact particular sectors and the economy as a whole, provisions will need to be made to ensure that the most impacted industries and businesses—such as agrifood and SMEs who trade with the UK—are protected. A priority in achieving these goals will be to continue to focus on the competitiveness of the economy and to reaffirm Ireland as the place to do business. The theme of the National Economic Dialogue this past June may have been "Building on Progress at a Time of Change", but in this time of economic headwinds, strengthening foundations is perhaps a more appropriate theme for this Budget. Ireland needs both stability to face the future and certainty that our economic progress does not change. It is with this backdrop that the Minister ensures the country is ready for every eventuality. Susan Kilty is a Partner in PwC. Chartered Accountants Ireland is again offering a Budget Summary service to members, with print and digital options available. Click here to order.

Sep 29, 2019

On Friday 27 September 2019, the European Commission launched its Europa Connectivity Forum – an innovative multi-stakeholder international conference aimed at fostering dialogue and strengthening ties between governments, financial institutions, and private sector actors in Europe and beyond. Building on the already close cooperation between the EU and its Asia-Pacific partners, this first edition of the Forum will be held under the theme EU-Asia Connectivity: Building Bridges for a Sustainable Future. You can read more about the Europa Connectivity Forum here. (Source: The European Commission)

Sep 27, 2019

According to Economic & Social Research Institute's Quarterly Economic Commentary 2019, the Irish economy looks set to perform well in 2019, with the headline GDP rate forecast to increase by 4.9%. In 2020, the economy is expected to grow by 3.1%. These forecasts are subject to the technical assumption that the UK’s continued membership in the EU will effectively remain in place after October 2019. However, there are a number of considerations concerning the growth outlook to bear in mind. First, certain internal transactions of a few multi-national firms are likely to cause a divergence between the growth in headline output and the growth in underlying output in the economy for the present year. While headline growth figures are strong, data for consumption and modified investment would suggest that the rate of output growth has actually slowed somewhat during the year. Second, the risks from the international environment are increasing due to continued uncertainty over Brexit and the growing evidence of a slowdown amongst some of Ireland’s most important trading partners. If a no-deal Brexit occurs in late 2019, it is not inconceivable that the Irish economy could contract in 2020. (Source: ERSI)

Sep 26, 2019

Due to construction on the IPSASB website, the call for comment on the Consultation Paper, Measurement, and Exposure Draft (ED) 68, Improvements to IPSAS, 2019, has been extended to Monday, 14 October. If you are submitting comments between 28 September and 7 October, you must do so by emailing the project manager directly. For comments about Consultation Paper, Measurement email DaveWarren@ipsasb.org. To comment on ED 68, email AmonDhliwayo@ipsasb.org. You will not be able to submit comment letters online during this time.  Updated comment deadlines are reflected on the IPSASB website. (Source: IPSASB)

Sep 26, 2019
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