Governance news & articles

Most recent news items issued from Chartered Accountants Ireland in relation to Governance is below. If you are looking for older news items please use the site search.

Governance, Risk and Legal

The fifth annual Good Governance Awards concluded on 19 November 2020 with the announcement of the winners of the annual report awards across six categories. These categories are based on turnover including a new category this year for very small non-profits with an annual turnover of less than €50,000. One of the main aims of the Governance Awards is to improve the overall standard of annual reporting in the charity and non-profit sector and to provide specific feedback to all entrants alongside guidance on how to improve their annual reports, including their financial statements and disclosures.   Each of the annual reports goes through a very rigorous assessment but underpinning the many assessments and checklists there are some key elements or features which are essential in the eyes of the assessors and judges. In the spirit of improving standards, we have compiled a summary of the top ten judges’ recommendations arising from their assessment of this year’s shortlisted annual reports. We have also included the top ten comments from our assessors in relation to annual reports that were not shortlisted. Top ten judges’ recommendations Ensure the annual report tells a story, in a way which is easy to follow and easy to navigate. Make the link between the charity’s purpose, objectives, and expenditure apparent throughout the report. Focus on clarity and conciseness. The length of some annual reports raised questions concerning the additional value being added with very detailed accounts of activity. Use metrics and key performance indicators (KPIs) to describe achievements. Provide context by disclosing the targets against which KPIs are measured and, where applicable, disclose the prior year’s KPIs. Including a trend analysis of KPI performance over, say, a three-to-five-year period, was highlighted by the judges as good practice. Report on the organisation’s governance structures and processes and describe how adherence to good governance is embedded throughout the board and the organisation. This should include disclosing board members tenure and the approach to board succession planning. Avoid generic risk reporting and emphasise the key and specific risks the organisation faces, how these are being managed and expand into detail on what the board consider to be the current fundamental areas of risk. Include a clear explanation of what reserves are held by the organisation, including an indication of whether these are high, low or within expectations of the board. Material movements between reserves should be explained. Provide clear explanation for a deficit, if it arises, including whether this position is likely to persist and what actions or measures are being taken to address the underlying cause(s). For charities and other non-profits organisations that work with vulnerable adults and children, ensure that safeguarding (measures to protect the health, well-being and human rights of individuals, which allow people to live free from abuse, harm and neglect) is addressed in the annual report.There were some excellent disclosures on safeguarding included in some of the shortlisted organisations this year. Disclose how the charity or non-profit organisation is addressing matters relating to sustainability, cyber security, data protection, diversity and inclusion. These matters are of increasing interest to the readers of these reports. Top ten assessor comments on annual reports that were not shortlisted Ensure that there is a link between the non-financial narrative and the financial statements in the annual report. They should not read as two standalone documents. Review the report for consistency. There were notable instances where the financial statements reported a deficit but there is either no mention of this in the narrative of the annual report or a deficit of a different magnitude is referred to in the narrative. Some reports included a very upbeat and positive narrative describing the organisation’s many achievements, with little or no mention of the challenges, but the financial statements presented a different story. Ensure basic governance disclosures are included, such as providing an explanation of the operation of committees and the recruitment, induction and qualifications of board members and their tenure on the board. In addition to describing the organisation’s activities, describe the key risks and challenges faced by the organisation during the financial period. Disclose the organisation’s mission, vision and values and link these with disclosure of the organisations objectives for the financial period, key performance indicators, etc. Ensure the annual report includes transparency in relation to the various sources of funding accessed by the organisation during the financial period. Ensure the income and expenditure account, or statement of financial activities (for those apply the Charities SORP (FRS 102)) is presented showing restricted and unrestricted funds separately. Review, before submission, the financial statement disclosures to ensure they are complete (required disclosures are included), consistent with the information presented in the financial statements and elsewhere in the annual report and provide any additional information necessary to assist the readers understanding of the organisations successes and challenges faced during the financial period. Prepare an annual report that includes both the non-financial narrative and the financial statements to facilitate readers getting a better understanding of the financial position and key drivers for financial performance. Opt-out of the right to prepare financial statements in accordance with Section 1A of FRS 102 or to file abridged or abbreviated financial statements. This is sub-standard to good governance practice for charities and non-profit organisations reliant on government grants, fundraising from the public or other sources of charitable or voluntary donations (e.g. philanthropy or people volunteering their time to help others). We hope that the above observations and feedback comments will help in improving the standard of annual reports, including financial statements next year. Diarmaid Ó Corrbuí, CEO Carmichael. Email diarmaid@carmichaelireland.ie    

Dec 08, 2020
Governance, Risk and Legal

Chartered Accountants Ireland congratulate the winners of 2020 Good Governance Awards, which took place last night, 19th November 2020, with over 220 online attendees. Chartered Accountants Ireland were delighted to partner with The Carmichael Centre and support this annual highlight for the Charity and non-profit sector in Ireland. 2020 winners are: Category 1 (volunteer only organisations with an annual turnover <€50k): Serve the City Category 2 (volunteer only organisations with an annual turnover between €50k and €250k): Sharing Point Category 3 (organisations with an annual turnover between €250k and €1m): Children’s Rights Alliance Category 4 (organisations with an annual turnover between €1m and €5m): BeLonG to Youth Services Category 5(organisations with an annual turnover between €5m and €15m): LauraLynn Ireland’s Children’s Hospice Category 6 (organisations with an annual turnover >€15m): Concern Worldwide Governance Improvement Initiative Award: NiteLine Dublin, Proudly Made in Africa, Canoeing Ireland, The Jack and Jill Childrens’ Foundation, and Royal College of Physicians of Ireland. Congratulations to all organisations that were shortlisted. As part of the mission to encourage and promote good practice in the area of annual reports and others areas of governance feedback is provided to all entrants. In addition, overall observations of what organisations did very well and areas for improvement is shared.

Nov 19, 2020
Governance, Risk and Legal

Boards and Corporate Governance – Covid-19 Implications Last updated: 12 November 2020 Boards and their advisors continue to seek up to date information and insights on how the Covid-19 pandemic crisis continues to affect the governance and operations of their business including risk, internal controls, financial reporting, audit and assurance and other regulatory and corporate reporting requirements. The Covid-19 pandemic crisis continues to affect different businesses in different ways. The extent of the risk arising and the impact it may have will vary depending on the company’s specific circumstances and exposure. Since March 2020, much has been issued in terms of advice from regulators, and commentary, regarding various corporate governance considerations related to the spread of coronavirus. The challenge is to stay ahead of what is an evolving situation. We are regularly producing webinars and articles bringing relevant updates and expert insights to our members. We have assembled below some information, for UK and Republic of Ireland, that we have come across that may be of assistance to members. Commentary should not be taken as advice or as a comprehensive analysis of all aspects. When reading information at the links below, due care should be taken of the date of issue and any developments in the interim that may not be reflected in the material published, such as updated statements from regulators etc. Our members’ expertise, judgement and experience are now invaluable to guide each organisation on their unique journey through and beyond this crisis. We encourage all our members to remember that your first responsibilities are to yourself and ensure that you stay well. Take some time to review the member resources offered by Chartered Accountants Ireland in relation to wellbeing and building personal resilience at CA Support. In the meantime, remember that your Institute is here to help you. If there are specific issues where you need help, or if you want to share ideas or insights, please contact us at either ethicsgov@charteredaccountants.ie or +353 1 637 7382.   From the regulators: Link Ireland and UK – All entities applying accounting standards UK Financial Reporting Council (FRC), publish (July 2020) a report summarising the key findings of a thematic review of the financial reporting effects of Covid-19 for a sample of interim and annual reports and accounts with a March period end. The report can be particularly useful to Boards, Audit Committees, and executive directors as guidance for preparing their accounts. It identifies areas where disclosures affected by Covid-19 can be improved, as well as providing examples demonstrating the level of detail provided by better disclosures. FRC Covid-19 Thematic Review: Review of financial reporting effects of Covid-19. Ireland and UK – All entities FRC publish (May 2020) guidance for companies on Corporate Governance and Reporting. FRC - Guidance for companies on Corporate Governance and Reporting Ireland and UK – All entities FRC’s Financial Reporting Lab publish (March 2020) a summary of the five key questions investors want to know the answer to. FRC 5 current questions investors seek information on.. Ireland and UK – All entities applying accounting standards UK Financial Reporting Council (FRC) issue (14 April 2020) update and clarity on accounting and auditing standards requirements in relation to going concern and alerts for investors. This is important matter for boards to consider and further information is contained Chartered Accountants Ireland information hubs on financial reporting and statutory audit referred to further down in this table. FRC Covid-19 update regarding going concern UK – Listed and Regulated Institutions FRC, Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) announced a series of actions (26 March 2020) to ensure that information continues to flow to investors and to support the continued functioning of the UK’s capital markets. Includes forbearance measures for UK listed companies on publishing annual reports and preliminary results and guidance for UK banks on capital requirements and building uncertainty into expected credit loss calculations. Joint Statement UK and Ireland Listed entities UK FRC Guidance for companies on Corporate Governance and Reporting (Company Guidance Update March 2020 (COVID-19)) – contains guidance on corporate governance matters such as risk management an internal controls, management information, estimates and forecasts, dividends and capital maintenance, Directors/strategic report, viability statement and going concern and some key financial reporting considerations. Corporate governance and reporting guidance UK and Ireland Listed entities UK FRC publish Guidance for companies on Corporate Governance and Reporting. They highlight some key areas of focus for boards in maintaining strong corporate governance and provide high-level guidance on some of the most pervasive issues when preparing their annual report and other corporate reporting. Guidance for companies on Corporate Governance and Reporting UK and Ireland companies UK FRC publish (June 2020) Lab report providing examples for companies to follow when making going concern assessments, risk reporting, and producing viability statements.   Note: Podcast interview with Phil Fitz-Gerald, Director of the FRC Lab, discusses two new reports on investor disclosures during the Covid-19 crisis. Report on Covid-19 related going concern, risk and viability UK and Ireland companies UK FRC publish (June 2020) Lab report providing practical guidance and examples to companies to help meet the challenge of reporting to investors in times of uncertainty. The report focuses on company reporting in respect of their resources, action they are currently taking in response to issues and future objectives they expect to achieve.   Report on Covid-19 – reporting in relation to resources, action, the future. UK Financial Services UK FCA published a letter addressed to CEOs of firms providing services to retail investors (31 March 2020). The letter outlines some rule clarifications, temporary flexibility in the FCA’s supervisory function and guidance in relation to ensuring resilience during the Covid-19 crisis. FCA Letter to retail investor service providers EU Financial Services European Securities and Market Authority (ESMA), the EU securities markets regulator, issued (March 2020) a public statement Actions to mitigate the impact of COVID-19 on the EU financial markets regarding publication deadlines under the Transparency Directive. ESMA Public Statement EU Financial Services ESMA issued a public statement (9 April 2020) calling on National Competent Authorities to take into account the Covid-19 outbreak in respect of upcoming reporting deadlines for fund managers to publish yearly and half-yearly reports. ESMA Public Statement re Investment Funds EU Financial Services and other companies ESMA publish (November 2020) its second risk dashboard for 2020 which sees a continued risk of decoupling between asset valuations and economic fundamentals. This report is also useful for non-financial services companies looking for a reliable source of risk forecasting on factors such as macroeconomic environment, interest rate environment, political and event risks, etc. ESMA November 2020 risk assessment EU Financial Services European Banking Authority (EBA) have issued a statement (12 March 2020) on actions to mitigate the impact of COVID-19 on the EU banking sector. EBA statement of actions   Further possible actions announced (31 March 2020) EBA statement of actions 2 EU Financial Services EBA issue a statement (25 March 2020) calling on certain forbearance measures on consumer and payment issues to be granted by financial institutions. Statement on consumer and payment issues EU Financial Services EBA issued a statement (31 March 2020) urging banks to follow prudent dividend distribution, share buyback and variable remuneration policies, emphasising that any capital reliefs permitted by central banks are to be used to finance the corporate and household sectors only. Statement on prudent distribution and remuneration policies EU Financial Services EBA publish guidelines on treatment of loan repayment moratoria considering Covid-19 measures, clarifying circumstances in which a moratorium of this nature would not be classified as part of a forbearance or distressed restructuring by the bank. September 2020 update: As these guidelines are being phased out the treatment they set out will continue to apply to all payment holidays granted under eligible payment moratoria prior to 30 September 2020. Banks can continue supporting their customers with extended payment moratoria also after 30 September 2020, such loans should be classified on a case-by-case basis according to the usual prudential framework. Guidelines on treatment of loan moratorium in financial and credit institutions EU Financial Services EBA publish (May 2020) a report addressing the EU banking sector and insights into the Covid-19 impacts. EBA preliminary analysis of impact of COVID-19 on EU banks. Ireland Financial Services Central Bank of Ireland has issued a statement (19 March 2020) on several matters including reducing the counter cyclical buffer requirements for banks to 0% and expectations on payment breaks for businesses and consumers. Central Bank Statement 19 March 2020 Ireland Financial Services Central Bank of Ireland has issued a statement (27 March 2020) on its expectations of insurance firms to ensure customer-focused decision making throughout the crisis. Central Bank Statement 27 March 2020 Ireland Financial Services Central Bank of Ireland has issued a statement (31 March 2020) on its view as to what constitutes essential banking and financial services in context of the Irish governments public health measures to prevent further spread of Covid-19. Central Bank Press Release 31 March 2020 Ireland Financial Services Central Bank of Ireland launches an online Covid-19 information hub for consumers, SMEs and regulated firms CBI Covid-19 Information Hub Ireland Financial Services Central Bank of Ireland issue (August 2020) statement on the use of electronic signatures in regulatory documents and forms CBI - Statement on the use of electronic signatures in regulatory documents and forms Ireland Charities Charities Regulator (Republic of Ireland) have published answers to several frequently asked questions around regulatory reporting and governance matters affecting Charities during the Covid-19 crisis including forbearance in relation to annual reports due between 12 March 2020 and 15 December 2020, keeping records of meetings, considering charitable purpose in any pandemic relief activities and ensuring funds are not misspent, etc. Charities Regulator Frequently Asked Questions Northern Ireland Charities The Charity Commission for Northern Ireland have published updates on regulatory reporting, advice regarding charity meetings, serious incidents reports and accounting matters The Charity Commission for Northern Ireland update Ireland and Northern Ireland – Tax and general business Chartered Accountants Ireland are engaging with government agencies, regulators and the Revenue authorities, North and South, around the impact of the COVID-19 outbreak, and potential issues with filing deadlines, payments etc. Their responses and links to information are regularly updated on our technical and business updates section. Technical and business updates UK – All Companies UK Companies House published, and regularly updates, coronavirus guidance for companies in relation to several company secretarial requirements, e.g. filing documents, share buy backs, etc., and other information relating to their services, employees and suppliers. Guidance for Companies House customers UK – All companies UK Companies House publishes (July 2020) guidance on temporary changes to Companies House filing requirements arising from (Filing Requirements) (Temporary Modifications) Regulations 2020 that were signed into law following enactment of the Corporate Insolvency and Governance Act 2020. Guidance on temporary changes to Companies House filing requirements Ireland – All Companies Ireland’s Companies Registration Office (CRO) regularly provide updates on services and various company secretarial requirements, e.g. official document submissions, electronic filing, etc., and where to direct any queries. CRO–Update on Services Available Ireland – All Companies The Office of the Director of Corporate Enforcement (ODCE) published a series of FAQ’s in relation to general meetings. ODCE – GAQ re General Meetings Ireland – All organisations The Department of Business, Enterprise and Innovation issued protocols designed to support employers and workers to put measures in place that will prevent the spread of COVID-19 in the workplace when the economy begins to slowly open up. Return to work safely protocol UK – Public Sector UK National Audit Office publish a guide for Audit and Risk Committees on Financial Reporting and Management during COVID-19. Guide for Audit and Risk Committees on Financial Reporting and Management during COVID-19 Ireland and UK – All organisations Organisation for Economic Co-operation and Development (OECD) publishes policy measures to consider in order to avoid corruption and bribery in the COVID-19 response and recovery. Policy measures to avoid corruption and bribery in the COVID-19 response and recovery From professional bodies/organisations   Ireland and UK – Financial Reporting Chartered Accountants Ireland have assembled some information relating to the financial reporting implications of Covid-19. This may be of assistance to board members, audit committees, finance committees and advisors. Financial reporting implications of Covid-19 Ireland and UK – Statutory Audit Chartered Accountants Ireland have assembled some information relating to the audit implications of Covid-19. This may be of assistance to board members, audit committees, finance committees and advisors. Audit implications of Covid-19 UK – All organisations Chartered Institute of Personnel and Development (CIPD) collated guidance and protocols issued from the UK Government on returning safely to the workplace. Covid-19: Returning to the workplace Ireland and UK – All companies ICAS and ICAEW publish SME guidance on going concern. Directors are required to assess whether the business is a going concern when drawing up their annual accounts, and this should cover a period of at least 12 months from the date of approval of the accounts. Coronavirus has had a dramatic change on the performance and prospects of many businesses, leaving some under threat, and accounts will have to reflect its impact. This guidance is designed for owners and directors of SMEs to assess the prospects of their business in the wake of COVID-19. Covid-19 and Going Concern Guidance for Directors of SMEs Ireland and UK – All organisations ICAEW have published a short article titled “Assets and values – the fall-out from COVID-19”. It offers a viewpoint on valuing assets in the COVID and post-COVID environments and how it will engender more questions than answers, especially given the impact of various government interventions on returns. It is a useful thought-provoking article for Boards and Directors that may be assessing the value of assets in their organisations. Assets and values – the fall-out from COVID-19 Ireland and UK – Audit Committees International Federation of Accountants (IFAC) and Institute of Internal Auditors (IIA) produced an insightful article on Implications for Audit Committees Arising from COVID-19. Implications for Audit Committees Arising from COVID-19 UK – AGM’s Annual General Meetings (AGMs) UK: Guidance issued on guidance on Annual General Meetings (AGMs) in the UK and impact of Covid-19 The guidance was produced by law firm Slaughter and May and The Chartered Governance Institute, with the support of the Financial Reporting Council, GC100, the Investment Association and the Quoted Companies Alliance. Covid-19 AGM Guidance UK Note update re Corporate Insolvency and Governance Act 2020: FRC AGM guidance Ireland – AGMs and other company secretarial matters Annual General Meetings (AGMs) Republic of Ireland: Specific requirements under Companies Act 2014 and the organisations own constitution need to be considered in respect of holding AGMs (virtually or physically, in or outside the state, etc.), notifications to members, resolutions required, etc. The Chartered Governance Institute have collated several sources of guidance on AGMs in Republic of Ireland. Covid-19 AGM Guidance ROI Ireland and UK – all organisations Articles and other resources to assist boards and their advisors are available on Chartered Accountants Ireland’s Governance Resource Centre and Webinars microsite Governance Resource Centre   Webinars Ireland and UK – all organisations Webinar: Responding to COVID-19: Advice to Boards and Organisations (Thriving in Uncertainty). Advice to boards and organisations Ireland and UK – all organisations Webinar: How Boards Operate in Times of Uncertainty (including useful company secretarial insights and advice). How boards operate in uncertainty Ireland and UK – all organisations Governance Webcast Series: Ten-minute interviews with CEOs, executives, non-executives and key business advisors on experience to date and advice on dealing with Covid-19 crisis. Governance webcast series UK – all organisations Article summarising key corporate governance aspects of Corporate Insolvency and Governance Act 2020. New Act updates Corporate Governance in Great Britain and Northern Ireland Ireland and UK – all organisations Accountancy Europe published (20 March 2020) Coronavirus crisis: implications on reporting and auditing, exploring going concern, post balance sheet events reporting, impact on estimates and judgements and implications for the audit report. Coronavirus crisis: implications on reporting and auditing Ireland and UK – all organisations Accountancy Europe published (27 March 2020) five key steps for accountants to guide Small to Medium Sized Enterprises (SMEs) through the crisis. This is a useful read in context of SME governance. Accountancy Europe 5 key steps for SMEs Ireland and UK – all organisations Accountancy Europe published (10 April 2020) an overview of EU country responses to the implications of the coronavirus on reporting including going concern, key accounting standard considerations, filing deadlines and more. Note: article also references Chartered Accountants Ireland’s Covid-19 guidance for boards and corporate governance. Coronavirus crisis: country responses to the implications on reporting Ireland – Funds Industry The Irish Funds Association (Irish Funds) have published an online repository of announcements, updates and guidance on Covid-19 implications for the funds industry. Irish Funds Covid-19 online resources Ireland and UK – all organisations The Institute of Risk Management (IRM) published an online support page outlining some risk considerations for business and risk managers during the Covid-19 crisis. In addition to some UK specific references the risk considerations for organisations outlined and additional resources provided are relevant to organisations in Ireland and UK. Risk considerations for business during the Covid-19 crisis Other related information   Ireland - Charities Ireland’s national association of community and voluntary organisations, charities and social enterprises, The Wheel, have compiled details of several fundraising resources for Irish non-profits and community groups. Fundraising information and resources for non-profits during Covid-19 Northern Ireland - Charities Northern Ireland Council for Voluntary Action (NICVA) have published an online Covid-19 information hub providing supports and advice to the voluntary and community sector on coping with the crisis. NICVA Covid-19 Information Hub Ireland and UK – All organisations Financial Executives International (FEI) publish insights to how ESG issues are being discussed in the boardroom amid the COVID-19 pandemic ESG in the boardroom amid COVID-19 Crisis.  

Nov 12, 2020
Sustainability

[This article was originally published in the December 2017 issue of Accountancy Ireland and can be found in PDF form in the Accountancy Ireland archive. Judith Wylie, author, is also a member of the Chartered Accountants Ireland Expert Working Group on Sustainability]  Chartered Accountants can add significant value to an organisation’s CSR activity. In this article, we explain how with examples from NI Water.Corporate social responsibility (CSR) has escalated up the policy agenda in Ireland in recent months with the enactment of the European Union (Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings and Groups) Regulations 2017. This regulation requires large public interest entities and certain organisations with over 500 employees to include a non-financial statement in the director’s report and a diversity report in the corporate governance statements for financial years starting on or after 1 August 2017.Irrespective of the new regulations, the Irish Government has, for a number of years, seen CSR and other non-financial disclosures as an opportunity to support its objective of “building a strong economy and delivering a fair society so that businesses and communities thrive throughout Ireland”. The Government has stated that it wants “Ireland to be recognised as a centre of excellence for responsible and sustainable business practices”. To this end, the Tánaiste and Minister for Enterprise and Innovation, Frances Fitzgerald T.D., launched Towards Responsible Business: Ireland’s Second National Plan on Corporate Social Responsibility 2017-2020 in June 2017. This plan follows the first National Plan on CSR (2014-2016) in which the Government first indicated its support for CSR activity and reporting.The National Plan is not mandatory and hence, for the majority of businesses in Ireland, CSR activity and reporting are voluntary and supported though several business initiatives including the Business Working Responsibility Mark from Business in the Community Ireland, Chambers Ireland’s Annual CSR Awards and the government-sponsored CSR stakeholder forum. The CSR stakeholder forum has an online CSR tool for SMEs and it hosts a CSR hub that enables companies to disseminate best practice. Do Chartered Accountants need to know about CSR?We would argue that they do, particularly in light of the recent shift in EU regulation towards mandatory disclosure of non-financial information in the annual reports of large undertakings and groups. Moreover, ISA (UK and Ireland) 700 applies to all audits. Under ISA 700, auditors have to read all financial and non-financial information in the annual report of any undertaking being audited to identify material inconsistencies with the financial statements. In addition, they have to identify information in the annual report that is apparently materially incorrect, or materially inconsistent, with knowledge acquired by the audit team in the course of performing their audit. Therefore, if they discover that the CSR disclosures in the annual report do not reflect CSR activities as identified during the course of their audit, they need to consider this when drafting their audit report.CSR is considered to be intrinsically linked with value creation. Chartered Accountants acting in an assurance role or in an advisory capacity must therefore have an appreciation of CSR and its virtues and to advise companies on developing a CSR strategy as well as best practice for reporting on CSR activities. The same is true for Chartered Accountants working in business. They need to be able to assist the board in its decision-making in respect of CSR. Furthermore, some professional services firms specialise in providing CSR assurance in addition to the statutory audit report. Indeed, two thirds of the world’s largest companies provide assurance over their CSR information.This article aims to highlight the importance of CSR and CSR reporting for Chartered Accountants. We also aim to provide a brief summary of the breadth of CSR activities implemented by a company we consider to be a trailblazer for CSR strategy – Northern Ireland (NI) Water. Our scrutiny of this company forms part of a wider research project that investigates the CSR communication strategies of Irish companies. Our research involved analysing the CSR disclosures on its website, annual reports and Twitter feed followed by interviews with a number of key staff throughout the organisation, including Chartered Accountants. The ripple effectIn the words of UN Secretary, Ban Ki-moon in 2016, “Water is central to human survival, the environment and the economy… the basic provision of adequate water, sanitation and hygiene services at home, at school and in the workplace enables a robust economy by contributing to a healthy and productive population and workforce”. NI Water is one of Northern Ireland’s largest companies and is responsible for delivering clean, safe drinking water and taking away wastewater, which it treats before returning it to the environment. Given the nature of its main commodity, it is no surprise that NI Water can be hailed as a beacon for good CSR practice and the hope is that the activities identified in this article will have a ripple effect and inform CSR strategies in other companies.A strategic imperativeNI Water’s CSR strategy is evident at all levels of its business, from being part of the company’s strategic vision to being encouraged at operational level. In commenting on CSR in NI Water, Head of Corporate Governance and Risk, George Ong FCA, stated that CSR is “the lifeblood of the organisation, it is part of everything we do”. NI Water has a dedicated CSR committee comprised of key staff from across the organisation. The CSR committee adopts a proactive and reactive approach to the development of the organisation’s CSR strategy. For example, when NI Water created its long-term strategy (2015-2040), it did so after extensive engagement with customers and other key stakeholders. The strategy includes a vision “to be a valued and trusted provider of one of Northern Ireland’s most essential services; an organisation our customers and staff are proud of”. The strategy outlines eight strategic priorities that support the company’s achievement of their vision, four of which are CSR objectives and relate to social, environmental, ethical and philanthropic issues.NI Water has a formal system in place to record, measure, monitor and report on its CSR activity. A quarterly CSR report is prepared, which identifies each CSR activity’s overall objective, aim and progress during the quarter along with any supporting evidence on the impact or outcome of the activity. The CSR committee meets quarterly and includes representatives from the executive committee. The committee is tasked with ensuring that CSR is integrated into NI Water’s operations, processes and core business strategy. Examples of the breadth of CSR activity within NI Water are outlined under the CSR committees’ three reporting streams.Environment: NI Water is aware that many of its impounding reservoirs are located in areas of outstanding natural beauty. The company is sensitive to visual pollution and takes design steps to minimise the impact that infrastructure can have on beauty spots. The company also adopts a multi-agency approach to sustainable land management. For example, it recently collaborated with Irish Water, the Agri-Food and Biosciences Institute (AFBI), Ulster University, The Rivers Trust and East Border Region to apply for €40.2 million of EU Interreg funding for cross-border projects. The projects involve engagement with local communities to increase awareness of the importance of protecting drinking water supplies; piloting best practice forestry measures; restoring peatland on riverside stretches formerly used for forestry and introducing a land incentive scheme to reduce the entry of contaminants such as pesticides and sediments into watercourses. NI Water is also engaged in a number of renewable energy programmes including solar installations, and it utilises intensive treatment solutions that require less energy. One such solution called an integrated constructed wetland resulted in a 100% reduction in electricity usage in comparison to the former wastewater treatment process. The company has also committed to reducing carbon emissions and is working with other water companies through Water UK to help develop a common accounting methodology that will allow for the more robust reporting of carbon emissions.Colleagues: NI Water has a policy of supporting health and well-being activities for their staff. The cornerstone project is a volunteering programme called Cares Challenge, under which employees are encouraged to undertake volunteering activities during working hours to help benefit the greater community with key staff, including the Chief Executive, Sara Venning, getting involved. The company estimates that NI Water employees contribute over 1,000 volunteering hours per annum to a wide range of projects from painting, decorating and gardening for local community groups and charitable organisations to nature and wildlife projects such as creating pathways in the Mourne Mountains and helping protect wildlife on Rathlin Island.Community: NI Water has several initiatives aimed at educating the public about how they can help keep water clean and safe, including resourcing NI Water educational centres and getting involved in numerous community talks and events. The most successful initiative under this scheme is probably the famous Waterbus. The Waterbus visits over 19,000 pupils in primary schools each year. It provides interactive activities to engage and educate pupils on the importance of the water cycle, and its resources are designed to link with the national curriculum. NI Water’s philanthropic activities extend beyond engaging with local communities and include corporate support for the global charity, WaterAid, whose aim is to create a world where everyone everywhere has safe water, sanitation and hygiene. Fundraising and the promotion of this charity by NI Water within Northern Ireland generates around £75,000 for WaterAid per year. ConclusionsThe example provided by NI Water shows how important a formal approach to managing and reporting on CSR activities has become. Although the focus to date has been on public listed companies and large companies, the fact that the CSR stakeholder forum commissioned an online CSR toolkit for SMEs is indicative of policymakers’ belief that SMEs need to formally recognise that their responsibilities extend beyond the internal business and that the formal recognition of CSR activities has its benefits.Most SMEs undertake CSR activities on an ad hoc basis – for example, providing sponsorship to a local sporting team, encouraging staff to save on electricity or engaging in fundraising activities for charity. Chartered Accountants will increasingly have an important role to play here in advising how these activities can be effectively captured and reported on, in order to integrate them into a value-creating business strategy.Judith Wylie is a lecturer of Accounting at Ulster University. Anne Marie Ward is Professor of Accounting at Ulster University.

Jul 31, 2020
Sustainability

  The Prince’s Accounting for Sustainability Project (A4S) are providing free content to support organisations in understanding the role of finance in creating resilient business models and a sustainable economy.  A4S AcademyApply for the A4S Academy 12-month core programme (for senior finance professionals) to gain the knowledge and skills needed to embed sustainability into your organization’s decision-making process.For more information on the Academy and how to register, click here. Webinar programmeBenefit from bite-size learning sessions through the A4S webinar programme (open to all). The interactive webinars will explore topics looking at the role finance professionals can play in creating resilient business models, with insights from leading businesses.For more information and how to register, click here. Podcast seriesListen to the Financing our Future podcast series featuring interviews and discussions with leading figures in finance from organizations across the globe. For more information on the series and how to download, click here. Chartered Accountants Ireland is a member organisation of the A4S Accounting Bodies Network. In February 2020 Institute CEO Barry Demspey signed a global pledge, led by A4S, along with 13 other professional accounting organisations to combat climate change. A4S is Prince Charles’ Accounting for Sustainability Project and was established in 2004 with the aim of promoting sustainable decision-making in business.   

Jul 30, 2020
Ethics and Governance

Níall Fitzgerald explains how boards can use the current crisis to take stock and, where appropriate, reflect new priorities.While the COVID-19 crisis continues, organisations are preparing for the uncertainty ahead. This process presents an opportunity for organisations to rethink their priorities, how they deploy resources, and the way they do things.In the months ahead, boards will face new challenges that can give rise to major concerns. This article examines some of those challenges, the responsibility of boards in facing them, and questions board members can ask to help focus on what is important.Going concernIrish and UK company law requires directors to act in the best interests of the company, which includes promoting its success and ensuring that it continues as a going concern. Past corporate collapses have revealed instances where directors failed in this duty. Failures attributed to directors include having unquestioning optimism rather than a challenging mindset and succumbing to groupthink.Given the current uncertainty, threats to going concern are more likely to feature higher on the risk register in many organisations. Oversight is a key role of the board, and this requires directors to have a questioning mindset, apply their skills, experience and knowledge to challenge management appropriately on their judgements, and ensure that they have sufficient evidence to support those judgements. Having a range of skills, experience and knowledge (in addition to diversity in other forms) on a board will help ensure that a range of perspectives and practicalities are considered. Basic good governance practices such as reviewing meeting papers in advance, arriving to meetings prepared, and an effective chair who allows sufficient time for discussion will make a big difference to the quality of the decisions or actions arising.In June 2020, the Financial Reporting Council (FRC) published COVID-19 – Going Concern, Risk and Viability: Reporting in Times of Uncertainty. The paper highlights how challenges that would normally relate to building resilience and flexibility (e.g. sourcing short-term cash resources) have pivoted as a result of the pandemic to threats relating to survival and, therefore, going concern.Other examples of current threats and challenges to going concern include:further restrictions that limit the return to normal operations;restrictions placed on government (or other) capital;timing and continuation of government schemes and support packages;short-term impacts of pricing changes to revenue and expenses; andimpacts on human capital.An Institute article titled Going Concern Considerations for Members Preparing or Auditing Financial Statements in the Context of COVID-19 is available on the COVID-19 Hub on Chartered Accountants Ireland’s website.Social responsibility, and public and employee welfareDirectors have a duty under company law to have regard to the interests of employees and will therefore be involved in making important decisions in relation to workforce policies and practices. In addition, corporate governance codes (e.g. the UK Corporate Governance Code) and sustainability frameworks (e.g. an environmental, social and governance (ESG) framework) highlight how a board’s consideration of all stakeholder interests, including societal impact, is important to ensure the organisation’s long-term success.The COVID-19 crisis forced many organisations to rapidly transform the way they work. In many cases, anticipated obstacles to business continuity either did not arise or were overcome with adjustments to how work and people are managed, as well as investment in ICT infrastructure, connectivity and cybersecurity. In April 2020, The UK’s Office for National Statistics (ONS) released statistics revealing that 49% of adults in employment were working from home. In May 2020, an Irish survey of remote working during the COVID-19 crisis by the Whittaker Institute at National University Ireland Galway and the Western Development Commission revealed that 51% of respondents never worked remotely before the COVID-19 crisis. Of these, 78% would like to continue to work remotely.As public health restrictions are lifted, boards – or board chairs, at least – should engage with CEOs and executive management to support the restoration of operations and plan the safe return to the workplace of employees, suppliers and customers. Executive management and boards should be aware of, and follow, national and local government protocols issued on returning to the workplace.No plan survives the battlefield, so expect adjustments along the way. Updating the board and seeking direction at every turn is not practical, however. It might, therefore, be wise to establish an oversight working party with regular executive engagement and delegated responsibility for overseeing the implementation of plans to restore operations. Decision-making authority should be clearly defined to ensure issues are, where appropriate, referred to the board for a decision. As boards plan for the return to the workplace, directors should consider the following:what work can be done remotely?do certain internal policies need to be rewritten to support new or future ways of working?are there opportunities for automation or digitalisation?what impact could remote working have on organisational culture, and what changes are necessary to align it with the organisation’s mission, vision and values?Boards also have an opportunity to consider how their organisations can have a greater positive social impact. During the crisis, some organisations went further with social responsibility by redirecting their resources to provide support, services and products to the fight against COVID-19. Charities and other not-for-profit organisations excelled in meeting the social needs of many vulnerable people affected by the crisis. Many organisations incentivised staff to get involved in volunteerism to help with, or raise funds for, good causes. In fact, organisations such as Volunteer Ireland and the Royal Voluntary Service reported a surge in registrations, resulting in a surplus of volunteers.Sustainable ‘reset’An important principle set out in the UK Corporate Governance Code is for a board “to promote the long-term sustainable success of the company”. This involves considering how the organisation generates and preserves value, and contributes to wider society over the long-term. It also involves considering the sustainability of the business model – weighing up resilience with efficiency to achieve long-term success. In times of uncertainty, some efficiencies may be sacrificed to achieve resilience. A board’s macro perspective can make a significant contribution in helping the organisation achieve a balance between these two factors.As part of pre-recovery planning, many organisations will engage in horizon scanning to anticipate changes, sources of uncertainty, and future threats and opportunities. While the effect of the COVID-19 crisis on operations may dominate risk perception, organisations also have a unique opportunity to consider how they can rebuild better, greener, and for a more resilient, sustainable world. Boards are well-positioned to lead and encourage innovation on how organisations can adapt to expectations of sustainability from key stakeholders such as investors, customers and regulators. These expectations are apparent in changing social behaviour (e.g. support for global climate protests), investor conditions (e.g. ESG goals or investors’ adoption of Principles for Responsible Investment), and regulator mandates (e.g. the development of standards for ESG disclosures for financial market participants, advisers and products).The 17 UN Sustainable Development Goals (SDGs) provide a blueprint that can be used to define an organisation’s sustainability objectives. The World Economic Forum refer to this opportunity as the ‘great reset’. We all have a vested interest in averting further global crises. When boards are resetting their agenda to focus on new priorities, sustainability must be a key consideration in more ways than one.ConclusionOrganisations can expect further challenges in the months ahead. This is not ‘business as usual’ and boards are adapting as the situation unfolds. Whether an organisation is struggling or thriving in the uncertainty, key priorities for any pre-recovery strategy must include going concern, social responsibility, employee and public welfare, and sustainability.Níall Fitzgerald FCA is Head of Ethics and Governance at Chartered Accountants Ireland.

Jul 30, 2020