The International Federation of Accountants has received £4.935 million ($8.256 million) in funding from the United Kingdom’s Department for International Development, or DFID, for the purpose of strengthening professional accountancy organizations around the world.
The funding will be concentrated in 10 DFID focal countries within four regions (Asia, the Caribbean, the Middle East and North Africa, and Sub-Saharan Africa), to indicate DFID’s recognition of the need to improve accounting globally and its understanding that better accounting can grow and stabilize economies by maintaining organizational control and sustaining capital markets.
IFAC and DFID are signatories of MOSAIC: Memorandum of Understanding to Strengthen Accountancy and Improve Collaboration, which sets out the basis for improving cooperation and collaboration between IFAC, international donors, and the international development community to increase the capacity of PAOs and improve the quality of financial management systems in emerging economies.
The programs will build the managerial, financial and technical capacity of professional accountancy organizations, or PAOs, in developing countries so they can drive improvements in professional and ethical standards.
IFAC CEO Fayez Choudhury said the group has yet to select which countries’ accounting organizations will receive the funding.
“We’ve got a long list of countries based on a preliminary assessment,” he said in an interview last week. “One of the early stages of the project will be to do a diagnostic to see which countries have the capacity and appetite for the program. The specific list of countries has yet to be determined. We do have a working list, but that’s not in the public domain yet until we’ve gone through some of the initial phases of the evaluation. The need is obviously far greater than 10, but 10 was a manageable number to start off with.”
Choudhury sees a need to develop professional accounting organizations from the ground up to ensure a healthy private sector and public sector.
“You need a flow of private sector accountants to ensure that the private sector grows in a sustainable way, and you need trained public sector accountants because obviously they are important for the stewardship of public funds,” he said. “Basically you need accountants, and you need accountants who earn that label by having imparted to them the requisite level of expertise and operating in a framework of standards which lets their work achieve that label of expert and is also consistent with global standards worldwide. Those include what IFAC calls the Statement of Membership Obligations,’ which is an obligation to comply with local standards but also with international standards. There are also issues like having the right disciplinary processes, the right ethical enforcement processes and the right quality standards, so that you don’t get people calling themselves accountants who are not subject to that overall framework of professional regulation and discipline.”
Choudhury sees the PAO as the entity that can do that by developing individual accountants in various countries in a way that is consistent with global standards and results in experts who are subject to regulation. He acknowledged that professional accounting organizations are more mature in some countries than others, but IFAC has a way of dealing with that.
“We’ve developed a pretty comprehensive methodology, first of evaluating a PAO and putting it on a capability maturity spectrum,” said Choudhury. “We also have detailed from start to finish what are the processes that a PAO needs to have in place to meet the institutional requirements of a high-functioning PAO. First of all, we place somebody on that capability maturity spectrum and then, depending on where they enter into that soup to nuts development, the assets and attributes, so we’ll be able to put them in the right place and develop a program which is consistent with where they are now.”
One of the advantages of this approach, according to Choudhury, is that IFAC is deploying a consistent methodology across all countries.
“It makes sure that everyone progresses together,” he said. “It avoids the fragmentation that happens when you have a specific methodology developed for a specific country, but the wheel is being reinvented by someone else in a different country the next time around. So you have a consistent methodology which is subject to learning loops. You can learn from experience. You can fine-tune the process, depending on that learning, and it also facilitates PAO-to-PAO learning networks. They’re all operating off the same plan. There’s a tremendous opportunity for peer networks where they can learn from each other, and not just be dependent on the more mature PAOs. After the initial period, it lets them move away from that technical assistance to more of a shared learning model.”
IFAC’s role will be to provide coordination, consistency and overall supervision. “The detailed work will definitely have to be done by people who have the expertise and the capacity to put the boots on the ground, as I call it,” said Choudhury. “There will be a process of selecting the expertise, which will be an open and transparent process. Then anyone will be welcome to bid for that work. But I would expect that the more developed PAOs will have a more significant advantage in terms of being able to demonstrate the skills and experience required to do the work.”
The organizations likely to emerge as mentors for the others may come from the more established accounting organizations in a particularly region, or they might not. “I don’t think we want to prejudge that,” said Choudhury. “People will bid and their bids will be evaluated according to their merits. As a broad model, once we get a PAO a significant distance up that maturity model chain, I think that’s when we would hand off to the peer PAO-to-PAO learning, and that wouldn’t necessarily be dominated by the most quote-unquote sophisticated’ PAO, but it would be a genuine exchange among probably regional PAOs to work together to learn from each other and develop more local solutions to the particular issues they face.”