CHARTERED ACCOUNTANCY PROFESSION CHARTER

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CHARTERED ACCOUNTANCY PROFESSION CHARTER
Ref 127520/hh
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INTRODUCTION
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INTRODUCTION

• History imbalances
• Economic and social requirements to open and
  expand SA economy
• Governments growth strategy
• Legislative support
• Business reality

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Codes of Good Practice
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OPPORTUNITIES THREATS

• Growth
• Industry charters
• Procurement forces
• Government work
• Partnerships and joint ventures
• Verification work

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INDUSTRY CHARTERS

• Maritime Transport Service
• Forwarding Clearing
• Information Communication Technology
• Mining
• Tourism
• Petroleum Liquid Fuels
• Financial Services

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Why a Charter for the Chartered Accountancy
Profession?
?
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SAICA members as at end May 2005 according to race
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SAICA Membership as at end May 2005 according to
gender
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BEE NEGOTIATING FORUM STAKEHOLDERS

• ABASA
• Academics
• Auditor-General
• AWCA
• Big 4 firms
• Black firm forum
• CI
• FASSET
• FSB

• IRBA
• Medium firms
• National Treasury
• SAICA
• Small practices
• Trainees from regions

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CONSULTATION
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Goodwill Cooperation
Goodwill

Cooperation
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ACCOUNTANCY PROFESSION CHARTER
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CHARTERED ACCOUNTANCY PROFESSION CHARTER

• SECTION A Background
• Objectives, scope and background information
• SECTION B Framework
• Interpretations, implementation and governance
• SECTION C Scorecards
• SECTION D Challenges
• Responsibilities and strategies
• Appendices

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VISION

• To grow the number of black people in the
  chartered accountancy profession to reflect the
  countrys population demographics, to empower and
  enable them to meaningfully participate in and
  sustain the growth of the economy, thereby
  advancing equal opportunity and equitable income
  distribution

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OBJECTIVE

• The overall objective of this charter is to
  promote economic growth and transformation to
  enable meaningful participation of black people
  so as to increase equitable income distribution
  and bring about equal opportunities.
• In real terms, and given that our profession
  is that of chartered accountancy, this objective
  should find expression in the achievement of
  chartered accountancy membership and sector
  composition that reflects the demographics of our
  country.

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SCOPE
Association of Certified Chartered Accountants
Chartered Accountancy (CA) profession
Institute of Internal Auditors South Africa
SAICA
CA sector / Public Practice (TIPP)
Members
Chartered Institute of Management Accountants
Accredited education institutions
Institute for Public Finance and Auditing
TOPP
Auditor-General
South African Institute of Professional
Accountants
OTHERS
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Subscribing to the full provisions of Charter

CA
Subscribing to the full provisions of Charter
Sector
Assisting black candidates to qualify through
innovative development programmes
Academics
TOPP
Training CAs and increasing capacity to train CAs
Training Outside Public Practice
Contribute independently to meeting of targets
through giving programmes etc.
General Membership
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TIMELINE
Beginning estimated 1 January 2007
Ending 31 December 2016
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GUIDING PRINCIPLES

• Reporting annually
• Measured ito actual level of compliance
• Adherence to economic principles
• Substance over legal form
• Uniformity in recognition and measurement
• Reliable information
• Completeness
• Timely reporting
• No transitional period

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CHARTER COUNCIL
A Charter Council will be established as an
independent body with a mandate to oversee the
implementation of the Charter
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COMPOSITION OF CHARTER COUNCIL

• Comprised of one representative from each of
  the following twelve stakeholders

Members
Small practices 1
Large firms 1
Medium size firms 1
BFF 1
IRBA 1
SAICA 1
ABASA 1
AWCA 1
Commerce and industry 1
Academics 1
Trainees 1
Auditor-General 1
Total 12
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CHARTER COUNCIL TERMS OF REFERENCE

• Address issues of principle
• Supply guidance on specific BEE matters
• Compile reports on status within sector
• Share information with national monitoring
  mechanism and approved agencies
• Ongoing monitoring

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REPORTING AND REVIEW

• Each entity will report annually to the Charter
  Council
• First report 31 December 2007
• Charter Council will report annually to Minister
  of Trade and Industry and BEE Advisory Council

• Report to cover
• Baseline indicators
• Aggregate scores
• Types of initiatives undertaken
• Other relevant information

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CHARTER COUNCIL - GOVERNANCE

• Chairperson independence will be a factor when
  selecting a chair
• Rotation one third each year
• SAICA to provide secretarial and administrative
  support
• Costs to be borne by SAICA
• Members serve on part-time basis and will not be
  remunerated

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CHARTER ADMINISTRATION

• Through SAICA
• Consolidate ratings
• Issue guidance notes
• Prepare annual reports based on submissions
• Submit reports to BEE Advisory Council on BEE
• Engage with government and regulatory agencies to
  promote Charter
• Prepare reports for Charter Council as relates to
  monitoring activities

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MID-TERM REVIEW OF TARGETS 2010(Based on
reports 31 December 2009)
The Charter Council will assess achievements and
consider additional actions necessary to achieve
targets
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SCORECARDS
Generic scorecard

• Qualifying small entities
• Turnover less than R10 million, and
• Less than 50 employees

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ELEMENTS OF SCORECARD

• Direct empowerment
• Human resource development
• Indirect empowerment

• Ownership
• Management
• Employment equity
• Skills development
• Preferential procurement
• Enterprise development
• Residual factor

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WEIGHTINGS
Ownership 20
Management 10
Employment equity 10
Skills development 20
Preferential procurement 20
Enterprise development 10
Residual 10
100
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APPLICATION OF CA SECTOR SCORECARD

• DIRECT EMPOWERMENT
• Ownership Effective ownership of enterprises
• Management Effective control of enterprises
• HUMAN RESOURCE DEVELOPMENT
• Employment equity Employment equity in
  workplace
• Skills development Initiatives implemented that
  promote
• competences of black people
• INDIRECT EMPOWERMENT
• Preferential procurement Procurement of
  products and services from enterprises that are
  BEE compliant
• Enterprise development Initiatives for
  assisting and accelerating the development,
  sustainability and financial and operational
  independence of beneficiary entities
• Residual Initiatives intended to provide black
  people with a means of generating income for
  themselves

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Direct empowerment - Ownership
The ownership element measures the effective
ownership of enterprises (CA sector) by black
people. It is measured on the basis of the
following indicator weightings
Code CA sector Targets for 2016
Exercisable voting rights in the enterprise in the hands of black people 3 3 25 1 vote
Exercisable voting rights in the enterprise in the hands of black women 2 2 10
Economic interest in the enterprise to which black people are entitled 4 4 25
Economic interest in the enterprise to which black women are entitled 2 2 10
Economic interest in the enterprise to which the following natural persons are entitled black designated groups 1 1 2,5
Ownership fulfilment 1 1
Net equity interest 7 7
Bonus points Involvement in the ownership of the enterprise of black new entrants black deemed participants of broad-based ownership schemes or black participants in co-operatives 3
For the CA sector this will be applied in respect of excess of target reached as relates to exercisable voting rights in the hands of black people 1 2 3 30 40 50
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Direct empowerment - Ownership
The ownership element measures the effective
ownership of enterprises (QSE CA sector) by black
people. It is measured on the basis of the
following indicator weightings
Code CA sector Targets for 2016
Exercisable voting rights by black people 5 5 25 1 vote
Economic interest in the enterprise to which black people are entitled 7 7 25
Ownership fulfilment 1 1 25
Net equity value 7 7 Year of target 1 10 2 20 3 4 40 5 6 60 7 8 80 9 10 100
Bonus Involvement in the ownership of the enterprise of black women (Code is different percentage of black people who are independent non-executive board members) 3 3 15
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Management
The management control element measures the
effective control of an enterprise by black
people. The measurement takes place through
indicator weightings which are as follows
Code CA sector Targets for 2016
Black representation at owner-manager level 20 20 25,1 owner-manager represent-ation
Bonus Black women representation at owner-manager level 3 3 15
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Human resource development - Employment equity
The objective is to measure initiatives targeted
to achieve employment equity in respect of all
measured entities (CA sector QSEs) in the
workplace by means of the indicators listed
below. A fundamental principle is to ensure
alignment with the Employment Equity Act
For purposes of this section the indicators /
criteria and weightings shall be as follows
Code CA sector Targets for 2016
Black representation at manager-controller level 6 6 40
Black women representation at manager-controller level 6 6 20
Black employees as a percentage of total employees 4 4 70
Black women as a percentage of total employees 4 4 35
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Skills development
The objective is to measure initiatives
implemented by the CA sector that are targeted
at the promotion of competencies of black people
within the organisation.
The criteria and weightings are as follows
Code CA sector Targets for 2016
Skills development Application submitted to the National Skills Fund 5 5 Yes
Quantifiable skills development spend on black employees in addition to Skills Development Levy as a percentage of leviable amount (including amount spent on learnerships) 15 15 2
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Enterprise development
The objective is to measure initiatives for
assisting and for accelerating the development,
sustainability and ultimate financial and
operational independence of such beneficiary
entities through the expansion of the financial
and / or operational capacity of those
beneficiary entities. The criteria and
weightings points are as follows
Code CA sector Targets for 2016
Enterprise development contributions made by the qualifying small enterprise as a percentage of turnover. Note for CA purposes turnover will be used in place of EBITDA. An appropriate percentage still needs to be agreed 20 20 ?
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Preferential procurement
The objective is to measure the extent to which
the CA sector QSEs procure products and services
from companies that are BEE compliant. This also
includes micro enterprises as well as qualifying
small enterprises.
The criteria and weightings points are as follows
Code CA sector Targets for 2016
BEE procurement spend from suppliers based on the BEE procurement recognition levels or deemed micro enterprise recognition levels as a percentage of total measured procurement spend 20 20 50
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Residual
The objective is to measure initiatives
intended to directly provide black people who are
natural persons with a means of generating income
for themselves. . The criteria and weightings are
as follows
Code CA sector Targets for 2016
Qualifying residual contributions made by the enterprise measured as a percentage of net profit after tax 20 20 2
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CA SECTOR SCORECARD vs DTI CODE

• Objective - to keep as close to Code as possible
• Definitions and interpretations tailor scorecard
  for CA sector
• Bonus points differences
• Residual specific areas identified but not
  limited to
• CSI projects (poverty alleviation, wealth
  creation)
• Nation building public sector capacity building

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QUALIFYING SMALL ENTITIES (QSE)

• QSE may elect to be measured using FIVE of the
  SEVEN elements
• Entities with no employees cannot use employment
  equity indicator
• If QSE uses more than 5 elements, BEE status
  measured on 125 BEE points
• Ownership will be multiplied by 1,25 where a
  minimum of 20 points is achieved

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CHALLENGES

• Forum has identified existing challenges and a
  variety of desirable future outcomes

Specific activities recommended to effect
transition (Not intended to be exhaustive)
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IDENTIFIED CHALLENGES

• Black professionals leaving public practice
• Black partners play disproportionate role in
  business development
• Lack of career awareness and inadequate subject
  choices
• Inconsistent standard of education
• Poor pass percentages at university
• HDIs not accredited
• Poor pass percentages in QE
• Perceived lack of transparency at QE level
• Black trainee perceptions
• White trainee perceptions
• Working conditions and opportunities
• Skills development / Indirect empowerment /
  Enterprise development / CSI

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Who is responsible?
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CA Sector Responsibilities
Direct empowerment
Ownership
Management control
Indirect empowerment
Preferential procurement
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Human Resource Development

• SAICA
• Secondary education
• Engage with universities
• Training environment
• Training capacity
• Qualifying exam

• CA Sector
• Career awareness
• Bursaries
• Training programme
• Mentorship
• Administrative support training

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Enterprise Development

• Development and assistance of black firms in
  practice CA Sector
• Technical assistance - SAICA

Focus on start up and small business development
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Corporate Social Investment
CA Sector - bursaries
SAICA create platform for small and
medium practices to participate
hope factory
entepreneur programme
thuthuka
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Some of the Risks taken into account
Certain constituencies may not support Charter
Charter may not be gazetted as a sector code and
may not have legal status
Charter only addresses CA profession
Impact of new corporate legislation on training
capacity
Possible interference From geographic and
discipline charters eg tax
Targets are challenging
Increasing complexity could lead to higher costs
Verification agencies may not understand professio
n
Can turnover be used rather than EBITDA for
measurement purposes?
Time it takes to qualify as CA may blunt efforts
Long period of training pipeline
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The Draft Charter will be signed on 10 August 2006
The Draft Charter will be signed on 10
August 2006
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Conclusion