CPA Australia Independent Review: Preliminary Report
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CPA Australia Independent Review Preliminary Report 14 September 2017 Independent panel: Ian McPhee AO PSM Su McCluskey Maryjane Crabtree Professor Bob Baxt AO (expert advisor) Preliminary Report CPA Australia Independent Review | 14 September 2017 This Report has been prepared for CPA Australia in accordance with the Terms of Reference dated 3 July 2017 and available at https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/announcements/terms-of-reference- v2.pdf?la=en. The information, statements, statistics, material and commentary (together the “Information”) used in this Report have been prepared from publicly available material, from information provided by CPA Australia and from discussions held with, and information provided by, a range of members and other stakeholders identified in Appendix B to the Report. The Review Panel has relied upon the accuracy, currency and completeness of the Information provided by CPA Australia, members and stakeholders, and takes no responsibility for the accuracy, currency, reliability or correctness of the Information and acknowledge that changes in circumstances after the time of publication may impact on the accuracy of the Information. The Information may change without notice and the Review Panel is not in any way liable for the accuracy of any information used or relied upon by a third party. Furthermore, the Information provided for the purpose of the Report has not been independently validated or verified and the content of this Report does not constitute an audit of any of the Information contained herein. The Review Panel has prepared this Report solely for the benefit of CPA Australia and disclaim all liability and responsibility (including arising from its negligence) to any other parties for any loss, damage, cost or expense incurred or arising out of any person using or relying upon the Information. | i | Preliminary Report CPA Australia Independent Review | 14 September 2017 Contents 1 Executive summary ............................................................................................................................ 1 2 Acknowledgments ........................................................................................................................... 11 3 Glossary of key terms ...................................................................................................................... 12 4 Introduction ..................................................................................................................................... 13 5 Governance ...................................................................................................................................... 21 6 Remuneration .................................................................................................................................. 42 7 Marketing strategy and expenditure ............................................................................................... 63 8 Strategy and performance of member services and engagement .................................................. 89 9 Strategy and performance of CPA Advice ...................................................................................... 101 Appendix A Terms of reference ................................................................................................ 107 Appendix B List of stakeholder consultations ........................................................................... 109 Appendix C Survey response analysis ....................................................................................... 111 | ii | Preliminary Report CPA Australia Independent Review | 14 September 2017 1 Executive summary Introduction to this Review CPA Australia is a large, international member-based professional accounting organisation. In 2016 it had more than 160,000 members and annual revenue of more than $180 million. Its membership includes public practitioners, members working in industry, academia, the public and not-for-profit sectors, and student members that are studying accounting, a related discipline or for their CPA qualification. CPA Australia’s members are based in some 118 countries and it plays an important global role in accounting and business practice. The core services CPA Australia provides to members are accreditation, education, training, technical support and advocacy.1 On 3 July 2017 CPA Australia released Terms of Reference2 and named members of an Independent Review Panel (Review Panel) and an expert governance adviser. The Review Panel was asked to consider a range of claims that have tarnished the reputation of CPA Australia. The Review Panel has applied judgement on how this Review considers these claims, generally conducting a review of each of the main identified areas of concern to assist the cohesion of the report rather than addressing claims on a case-by-case basis. The Terms of Reference also provided for the Review Panel to examine CPA Australia’s Constitution, by-laws and policies, to assess whether the current governance framework and policies of CPA Australia align with best practice and member expectations, and to make recommendations for improvement. The scope of this Review includes five topic streams and areas of activity at CPA Australia. These are: governance remuneration marketing strategy and expenditure strategy and performance of member services and engagement strategy and performance of CPA Advice. In undertaking its review, the Review Panel has undertaken consultation, research and analysis to build an evidence base within each stream of work. The Review Panel notes that many of the issues subject to review have evolved over a period of time and under the governance of various Boards. The Review Panel has: consulted with members of CPA Australia and its key stakeholders – over 25 stakeholder group consultations, detailed written submissions from the majority of Divisional Councils, and more than 1,770 submissions recorded through the website reviewed internal CPA Australia documents and data – desktop review and analysis of CPA Australia’s internal documents, as well as financial and operational data requested by the Review Panel researched a number of comparable organisations – research, analysis and benchmarking of the strategy, practices and performance of comparable professional membership organisations. 1 CPA Australia Limited, ‘About Us’, <https://www.cpaaustralia.com.au/about-us> 2 See Appendix A | 1 | Preliminary Report CPA Australia Independent Review | 14 September 2017 Scope of the Preliminary Report This Preliminary Report provides findings and preliminary recommendations. The Review Panel was asked to provide a preliminary report by 15 September 2017 with the timing of the Final Report subject to the Review Panel (likely by December 2017). It is the intention of the Independent Review in this report to provide an assessment of CPA Australia in the defined areas for the Review, with preliminary recommendations for moving forward. In some instances, information which has been provided to the Review Panel has not been disclosed in this report because it had not been otherwise publicly disclosed and was considered to be commercial-in- confidence and/or subject to third party contractual arrangements. This Preliminary Report does not offer definitive conclusions to all of the matters listed above. Nevertheless, preliminary recommendations have been developed for findings that are indicative of the direction improvements should take. Final recommendations, including option analysis where relevant, will be set out in the Final Report. Themes from the Review The message from members of CPA Australia is clear: members expect CPA Australia to be run professionally, progressively, and in a way that supports its members to deliver professional services and meet their responsibilities to a high standard. This reflects member views about their own professional organisation being at the forefront of good governance practice, against the background of changing legislative standards and community expectations. The Board of CPA Australia has received a range of negative comments from respondents. This is due to its role in sanctioning and oversighting the strategies that have caused the damage to the brand. In the eyes of many, the Board has allowed the organisation to lose focus on its role of supporting members and the services they provide. In this context the former Chief Executive Officer (CEO), while recognised as a person with acknowledged leadership qualities, was seen as having largely unconstrained influence on the direction of the organisation. It is fair to say that, over time, the Board and the then CEO lost touch with a large cohort of the membership of CPA Australia, particularly (but not exclusively) public practitioners. There was no particular single defining moment in this change. Rather, an accumulation of factors resulted in many members, Divisional Presidents, Councillors and senior staff feeling powerless and without any real voice in the organisation and its direction. Communication, as well as strategic and operational direction, was seen as one-way: from the top down, with little interest in genuine engagement with the membership base. The other notable observation of the Review Panel is that, when under pressure, the Board and CPA Australia has commonly defaulted to the minimum standard of disclosure. This has occurred in response to significant issues raised by members and the media,