Technical Assistance Consultant’s Report This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

Project Number: 37235 July 2007

Samoa: Strengthening State-Owned Enterprise Corporate Governance (Financed by the Japan Special Fund)

Prepared by

Vinstar Consulting in association with Broad Horizons Limited and KVAConsult Limited

Auckland, New Zealand

For Asian Development Bank Samoa Ministry of Finance

VINSTAR Consulting in association with

Broad Horizons Limited and

KVAConsult Limited

Final Report Volume I: Main Report

TA No.4513-SAM: Strengthening State-Owned Enterprise

Corporate Governance

Presented to

Government of Samoa

and

Asian Development Bank

July 2007

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Final Report Volume I: Main Report

Submitted by

Vinstar Consulting

Suite 5

21 Williamson Avenue

Ponsonby

Auckland

New Zealand

Phone: (64 9) 376 0041

Fax: (64 9) 376 0046

Email: [email protected]

www.vinstar.com

mailto:[email protected]

http://www.vinstar.com/

TA No.4513-SAM: Strengthening SOE Corporate Governance Final Report – July 2007 Contents

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Table of Contents Volume I

Abbreviations Executive Summary 1 Main Report: Introduction 6 Achievement of Planned TA Outputs 11 Conclusion and Recommendations 30 Attachment: TA Results Matrix Volume II

Annexes: Annex 1: SIOD Directors’ Folder Annex 2: SIOD Professional Development Programme Report Annex 3: SIOD Professional Development Programme Teaching Points Annex 4: SIOD Director Professional Development Course Guidelines Annex 5: SIOD Board Report on September/October 2006 Training Courses Annex 6: SIOD Course Sample Evaluation Annex 7: SIOD Market Research Report Annex 8: Programme and Recommendations from SIOD Retreat Annex 9: SIOD Best Practice Guidelines Update Annex 10: TA Team Advisory Memo to SIOD Board re SIOD Special General Meeting Annex 11: TA Team Advisory Memo to SIOD Board re SIOD Management Transition

Issues Annex 12: SOEMD Cabinet Paper with Recommendations to Amend SOE Legislation Annex 13: SOEMD Capacity Development Plan Annex 14: SOEMD Draft Financial and Non Financial Performance Indicators for SOEs Annex 15: SOEMD Financial and Non Financial Performance Measures for SOEs –

Calculation and Comments May 2007 Annex 16: SOEMD Revised Annual SOE Reporting Guidelines May 2007 Annex 17: SOEMD Revised Quarterly SOE Reporting Guidelines May 2007 Annex 18: SOEMD Mandate, Location and Reporting Discussion Paper Annex 19: TA Proposal for SOEMD for Ranges of Director Fees for Public Bodies Annex 20: SOEMD Cabinet Paper on Community Service Obligations Annex 21: SOEMD Community Service Obligations Workshop Annex 22: SOEMD Capital Expenditure Proposals & Decisions Workshop Annex 23: SOEMD Workshop on New Reporting Guidelines for all Public Bodies Annex 24: SIOD Audit Committees and Risk Management Workshop

TA No.4513-SAM: Strengthening SOE Corporate Governance Final Report – July 2007 Abbreviations

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Abbreviations ADB Asian Development Bank AGM Annual General Meeting BP Best Practice (Statements) CDA Domestic Capacity Development Adviser (Sala Epa Tuioti) CDS International Capacity Development Specialist (David Hutton/Graeme McNally) CEO Chief Executive Officer CFO Chief Financial Officer CGA Domestic Corporate Governance Adviser (Afoa Kolone Vaai) CGS International Corporate Governance Specialist & Team Leader (Juliet McKee) CSO Community Service Obligation DBDC Domestic Database Development Consultant (Christian Slaven/CSL) DDS International Director Development Specialist (Jane Huria) EA Executing Authority MOF Ministry of Finance PBA Public Bodies (Performance and Accountability) Act 2001 PD Professional Development PDP Professional Development Programme SGM Special General Meeting SOE State-Owned Enterprise SOEMD State-Owned Enterprise Monitoring Division (of the Ministry of Finance) SIOD Samoa Institute of Directors TOR Terms Of Reference TA Technical Assistance

TA No.4513-SAM: Strengthening SOE Corporate Governance Final Report – July 2007 Page 1

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Executive Summary Introduction The goal of this TA on strengthening corporate governance in the SOE and private sectors in Samoa was improved SOE contributions to economic growth and social development in Samoa. The TA was to do this by assisting the creation of a conducive environment for sound corporate governance in the SOE sector. There were three key outputs:

1. Assist the Samoa Institute of Directors (SIOD) to provide a valued continuous professional development programme (PDP) for directors;

2. Promote effective SOE board structure and composition; and 3. Strengthen the State Owned Enterprise Monitoring Division’s (SOEMD) role in

promoting SOE compliance with legislation. The TA commenced in late October 2005 and was scheduled to end in July 2007. The TA provided for a total of 10 months of international consulting time allocated between a Corporate Governance Specialist/Team Leader, a Capacity Development Specialist and a Director Development Specialist, and 11.5 months of domestic consulting time allocated between a Corporate Governance Adviser, a Capacity Development Adviser and a Database Development Consultant. The Executing Authorities were the newly established SIOD for Output 1 and the SOEMD of the Ministry of Finance for Outputs 2 and 3. SIOD TA activities and achievements for this output included the following: 1. Operational Establishment: The TA assisted with the initial launch of the SIOD in

November 2005, election of a Chair and Board sub-committees and recruitment of the first CEO (Tu’u’u Amaramo Sialaoa), who started in March 2006. A new CEO (Sealiimalietoa Melepone Isara) commenced in December 2006 and the TA provided support on management transition issues. The Team Leader was based at the SIOD during her two final visits to provide training and support to the new CEO and two new staff. A Professional Development Programme (PDP), Codes of Ethics, Best Practice (BP) Statements, Board Advisory Service and Director Accreditation/Qualification System were all developed by the TA for submission to the SIOD Board. Website development was also started.

2. PDP: An initial 12-month programme to April 2007 was delivered and included more than 20 courses, seminars and presentations with over 220 participants.

3. Market Research on meeting business and community needs was undertaken for the SIOD in early 2007 to guide future PDP development. A draft PDP for the remainder of 2007 through end 2008 was drawn up for Board consideration.

4. A manual of guidelines for delivering/administering PDP Courses was written and “Teaching Points” developed, providing guidelines for future presenters on the essentials to be covered in a range of courses. Resources developed for SIOD included a library of internationally recognised governance literature with publications from other Institutes of Directors around the world.

5. Board/Director Mentoring: Following considerable Board discussion facilitated by the TA, a proposed mentoring programme was developed and adopted by the SIOD Board as a Board Advisory Service.

6. Director Accreditation/Qualification System: The TA led a number of discussions in which the Board considered a range of international models of accreditation and opted


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for a specifically tailored accreditation/certification process involving three qualification options for members to choose from according to their requirements.

7. Best Practice Statements: Three BP statements were approved by the SIOD Board and published in 2006; two were approved and published in 2007 and at the end of the TA two more were ready for consideration by the Board. Continuing consultant support will be required to continue production of these statements in future given the technical expertise and experience in corporate governance required to deliver appropriate documents.

8. SIOD & SOEMD Databases of Directors: Following user needs assessments, software was designed, tested and implemented. Training of users was completed and manuals developed. The Minister of Finance launched the databases in March 2007. It will be some time until these databases are robust and Ministers have the confidence to make use of them.

9. Codes of Ethics: Two Codes of Ethics were prepared – one for the SIOD Board and one for SIOD members. These now require effective publication and promotion and visible adherence by the Board and members.

10. Advocacy: Extensive work was undertaken during each visit by the Team Leader and by the local consultants with GOS, stakeholders, SOE Boards and the private sector. The key has been ensuring that SOEs are aware of the PD programme and that their directors are obliged to join SIOD.

11. Membership: There were 30 Founder Members and 32 members of the Institute when the new CEO commenced. At the end of the TA in July 2007 the number of paid up members had reached nearly 150. This compares favourably with the Accountants Society with 160 members. The TA Team believes there is a potential membership of 200.

12. Towards a Sustainable SIOD: The Team Leader facilitated a strategic planning session with the SIOD Board in June 2007, which led to a clearer definition of steps towards a sustainable SIOD and a sense of optimism that with the new staff and a new commitment from the Board, the foundations could be developed for a sound operation.

SOE Board Structure and Composition Extensive analysis of Board structure and composition vis a vis legislation was undertaken and presented to Cabinet for guidance in November 2006. Subsequently Cabinet requested a formal submission, recommending drafting of amendments to SOE enabling legislation. This was completed in the first quarter 2007 and was endorsed by Cabinet in May 2007 with the request to provide the rationale and exact wording proposed for each amendment. The TA Team leader, with SOEMD and the legal adviser in the Ministry of Finance, worked closely with the Auditor-General’s office to progress each amendment. The challenge now is for SOEMD to lead this process and ensure legislation is amended and Cabinet directives on compliance are distributed. A proposal to vary remuneration for SOE directors according to size and complexity of their organisations had been developed for SOEMD prior to this TA. Cabinet had rejected the idea and there was reluctance to raise this issue within the timing of the TA given the tight budgetary constraints of the government. However an initial draft TA discussion paper was prepared, but not considered.


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SOEMD Extensive formal and on the job SOE financial and performance analysis training was delivered to SOEMD staff. The TA funded SOEMD staff attending SIOD courses. Capacity Development Plans for SOEMD were drawn up and the TA delivered relevant technical training. Key Performance Indicators for measuring SOE performance were drafted for consultation and agreement by SOEMD with the SOEs and SOE periodic reporting requirements reviewed. The KPIs were uniquely tailored to each SOE and a training session with the SOE CFOs on these was held in June 2007. An SOEMD Cabinet paper on Community Service Obligations was prepared for submission and a training session for the key SOEs and the SOEMD staff was held in May 2007 on valuing CSOs. Conclusion and Recommendations The TA has had a significant impact on developing awareness and understanding of the need for sound corporate governance in the public and private sectors in Samoa. It has raised the profile and capability of SIOD and SOEMD and highlighted action required to ensure legislative provisions and corporate governance practice are aligned. In terms of SIOD, the TA’s prime objective was to assist with provision of a Professional Development Programme for directors. The TA has assisted with operational establishment of the SIOD and constitution and operation of the Board. SIOD has established its credibility within 18 months of starting, has membership comparable with the Society of Accountants and is providing an increasingly well-attended Professional Development Programme, which the TA has facilitated. Knowledge products, a Board Advisory service offering and infrastructure and resources have been developed. The financial and operational sustainability of SIOD can only be determined over time based on its value proposition and meeting the needs of current and prospective members. Although a balanced budget is understood to have been proposed for the coming financial year, it is expected that revenues from membership and course fees may not yet cover costs and alternative revenue streams will depend on donor funding. The Board and management are aware of the need to pursue further commercial development and recover costs through training course fees to achieve financial sustainability and to reduce dependence on donor funding for ongoing training. The technical capability of SIOD is not yet developed sufficiently to sustain development and delivery of programmes, e.g. PD and Accreditation, and knowledge products. International trainers for PD courses are also required to provide profile and attract member support for SIOD. It is recommended that the SIOD is now given time to consolidate activities without donor funding for operational support, that ongoing periodic consulting support is provided to the Board and the CEO for the next 24 months to support technical development of programmes and knowledge products and for general mentoring support, and that further donor support is focused on funding specific training and PDP activities. In terms of SOE Boards, the TA’s objective was to facilitate effective Board structure and composition through Board Evaluations, reviews of Board structures and remuneration and with drafting of amendments to SOE enabling legislation. The TA’s impact was seen in a heightened GOS awareness of good practice in Board appointments and GOS acceptance of the need to align Board legislative requirements and Samoan practice. New precedents have been set with independent chairs taking over from Cabinet Ministers (of 24 Public Bodies, 5 are lead by independent chairs). The TA provided extensive inputs on suggested draft amending legislation and a paper on variable remuneration for SOE Directors but it was not


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considered appropriate to pursue the latter further during the TA. MOF also considered the undertaking of SOE Board evaluations during the TA premature. At the end of the TA, GOS appeared open to the need to review SOE Board remuneration policies. The issue of SOE Board structure and composition is now primarily being addressed through legislative amendments and new processes of selection using the director databases. It remains for the GOS to take action in this area to ensure that Samoa develops best practice in their boardrooms in accordance with relevant international standards and the local economy and culture. The transition to independent directors and removal of Public Servants and Cabinet Ministers from SOE Boards will take time. It is recommended that SOEMD complete the process of agreeing legislative amendments, GOS reviews the opportunity to introduce a variable remuneration policy for SOE Board memberships and that Board evaluations with consultant assistance become part of the annual work cycle of SOEMD. For SOEMD, the TA’s objective was to strengthen SOEMD’s role in promoting compliance with legislation, through skills development, development of an SOEMD director database and assisting with a GOS review of the SOEMD mandate. The TA’s positive impact has been in development of SOEMD into a more effective SOE monitoring unit through significant training and capacity development, enhanced relationships between SOEMD and SOEs at CEO and CFO levels and improved capability to undertake financial monitoring of SOEs. The status and profile of SOEMD has been elevated and it has met with Cabinet on SOE issues. Agreement on performance measures (KPIs) with individual SOEs and improved periodic SOE reporting arrangements have been established. The SOEMD database of Directors is operational, and the TA drafted a discussion paper for the GOS review of the SOEMD mandate. In consultation with the Chief Executive of the Ministry of Finance, finalising proposals on developing appropriate approaches to SOE Board evaluations, a policy submission on board structures and director remuneration, and discussing a GOS review of the SOEMD mandate with the MOF were put on hold. The capacity of SOEMD to engage with GOS and SOEs on SOE policy and strategic issues for SOEs remains constrained by the staffing mix and mandate. SOEMD has limited private sector and accounting experience necessary to provide value added analysis and advice for Ministers. The SOEMD role and independence per its mandate need to be considered, which will drive staffing and funding. SOEMD needs to further raise the quality and level of relationships with SOEs and Ministers to enhance its credibility and effectiveness with its key relationships. Recommendations include seeking swift agreement from MOF on the TA’s suggestion of seconding senior accounting expertise to SOEMD, a review of the SOEMD mandate, staffing and budget, using the TA discussion paper as a starting point, and continuing periodic consulting support to SOEMD to provide mentoring on SOE strategic and financial issues, including Audit Committees and Board Evaluations. This will enable SOEMD to take a more strategic role, in ensuring improved efficiency and effectiveness of the SOE portfolio, and improve the quality of monitoring of individual SOEs, by a stronger knowledge of their operations, focusing on the most risky SOEs and providing more in depth analysis. The TA has successfully contributed to the development of improved corporate governance in Samoa, raising awareness and understanding of the need to continue to move towards best practice. The TA Team has identified future action and responsibilities that, if acted on, will lead to consolidation of progress to date and a further improvement in the governance


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environment in Samoa. The capacity of both SOEMD and SIOD to fully absorb this TA has been stretched at times by a variety of start-up, organisation and workload issues in either case. Pacing of TA is very important. While another intensive and continuous TA is not seen as appropriate at this point, further short and sharply focused consultant mentoring support to SIOD and SOEMD over the next two years would be beneficial to focus on enhancing financial reporting standards, addressing strategic issues facing the Public Bodies, and promoting effective development of Audit Committees. It is now up to SIOD, SOEMD and GOS to demonstrate leadership in the further development of good governance in Samoa.


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Main Report

1. Introduction This Final Report presents the results of ADB TA No. 4513-SAM: Strengthening SOE Corporate Governance. It summarises consultant activities and achievements. The report describes issues that have been or need to be addressed in order to make further progress with reform of governance in public entities and the private sector, and where appropriate, suggests solutions to those issues. 1.1 Outline of TA Objectives The goal of the TA programme for Strengthening SOE Corporate Governance was improved SOE contributions to economic growth and social development in Samoa. The TA was to do this by assisting in the creation of a conducive environment for sound corporate governance in the SOE sector. With many directors on Public Body boards coming from the private sector, enhancing effectiveness in the SOE boardrooms would have a flow-on impact on performance in the private sector. 1.2 Planned TA Outputs The TA had three key outputs:

1. Assist the Samoa Institute of Directors to provide valued continuous professional development programmes for directors;

2. Promote effective SOE board structure and composition; and 3. Strengthen the SOEMD’s role in promoting SOE compliance with legislation.

Each of these outputs was divided into a number of sub outputs. These are listed in section 2 of this report and summarised at the end of this section. These outputs were specified in by the ADB at the outset of the project when it was agreed that the TA would work to these outputs and report against them. Output 1 was supported by the largest project component. The Institute was required to be established as a separate legal entity, with a clear governance structure and membership policy (see Rules of the SIOD in The Directors Folder Annex 1 s.9). Given an expected positive impact from a two-way flow of best practice ideas for corporate governance between the state-owned and private sectors, the Government of Samoa and the ADB agreed that the SIOD and the Project would address both sectors equally. The TA to SOEMD was designed to help the SIOD address outputs 2 and 3. The Executing Authorities for the project were the newly established SIOD for Output 1 and the SOEMD of the Ministry of Finance for Outputs 2 and 3. 1.3 Planned TA Inputs A total of 10 months of international consulting time and 11.5 months of domestic consulting time were allocated to this TA. Under the contract between the ADB and Vinstar Consulting, Broad Horizons Ltd and KVAConsult the TA commenced end October 2005 and completion was scheduled for 31 July 2007. The allocation of consulting time by TA team members was as follows:


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International Corporate Governance Specialist/Team Leader (Juliet McKee): 5 months International Capacity Development Specialist (David Hutton and Graeme McNally): 3 months International Director Development Specialist (Jane Huria): 2 months Domestic Corporate Governance Adviser (Afoa Kolone Vaai): 7.5 months Domestic Capacity Development Adviser (Sala Epa Tuioti): 3.0 months Domestic Database Development Consultant (Christian Slaven/CSL): 1 month 1.4 Mobilisation of Consultants The International Corporate Governance Specialist/Team Leader was scheduled for eight field visits to Apia between end October 2005 and June 2007. Four field visits were scheduled by the International Capacity Development Specialist (due to a retirement two Specialists were used) and five visits by the International Director Development Specialist. The CDS and the DDS both had to make more and shorter visits than the project allowed for in order to effectively deliver their outputs. Both SOEMD and SIOD lacked capacity to accommodate a few long visits, as envisaged by the project design. The international consultants also contributed inputs from home office providing ongoing support to SIOD and SOEMD between field trips. The domestic Corporate Governance Adviser and the domestic Capacity Development Adviser contributed on a continuous part time basis as required over the duration of the project and supervised the completion of outputs, the director databases, by the domestic Database Development Consultant. 1.5 Summary of Project Outputs A summary of the planned Project and TA Team Outputs, as advised by the ADB at the inception of the project, is as follows. The outputs are described in detail in section 2 of this report.

Project Outputs & Activities

Team Outputs (Plan) Final Status

1.0 SIOD providing valued continuous professional development for directors

1.1 Work with SIOD for operational establishment & sustainability

• A sustainable Institute • Operational establishment is complete and SIOD is developing into a credible body

• Financial sustainability remains to be proven but Management and the Board are aware of the challenge and are investigating solutions

• Strategic Planning session facilitated by TA June 2007 provided clearer understanding of path to sustainability (see Annex 8)

• Further focused consulting support to the Board and CEO (three weeks per quarter) is required for next 24 months


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1.2a Design & implement training programme & packages, seminar series

• PD Programme developed with SIOD

• Delivery of agreed training courses

• Technical reports on annual PD Programme

• Professional Development Programmes for 2006/2007 and 2007/2008 developed with Management and Board (see Annex 1 s.16)

• More than 20 PD courses/activities delivered to April 2007, with over 220 participants

• Technical Report on PDP produced March 2007 (see Annex 2)

• Further consulting support for technical development, using governance experts as trainers, is recommended for next 24 months

1.2b Board / Director

mentoring programme

• Board/Director Mentoring

• A Board Advisory Service was formulated by the TA with the Board as appropriate to Samoan culture (see Annex 1 s.18)

1.3 Consider &

implement, if agreed, director accreditation/skills recognition or qualification system

• Technical report on Issues and Options for Accreditation/Qualification

• Agreed and Operational SIOD Director Accreditation / Qualification System

• Technical report on Issues and Options for Accreditation / Qualification completed

• Consensus on an Accreditation/Qualification system was reached in Q1 2007 with final shape to be determined by new Board post the AGM in June 2007 (see Annex 1 s.19)

1.4 Help SIOD develop

best practice guidelines for Boards & directors

• Technical reports on Best Practice Guidelines

• Five Best Practice Statements were drafted by consultants, reviewed, approved and published and two more await SIOD Board approval (see Annex 9)

1.5 Develop &

maintain database of directors, including protocols

• Operational SIOD Director Database

• SIOD Director Database developed and implemented and now operational

• Manuals and training provided • Director data input and further

development required

1.6 Support development of national & SOE codes of ethics/good conduct

• Technical reports on National and SOE Codes of Ethics/Good Conduct and of Best Practice

• Two Codes of Ethics drafted and approved – one for SIOD Board, one for Members


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and best practice 1.7 Support Institute

advocacy • Raised awareness of

the role of the SIOD in the development of the Samoan economy

• Advocacy undertaken on all international consultant visits

• Ongoing advocacy by national consultants

2. Effective SOE board structure and composition

2.1 SOE Board Evaluations

• Commercial/Mutual SOE Board Evaluations

• Although raised a number of times, the EA considered it premature to undertake this during the TA given that the new approaches to corporate governance needed to be consolidated

• PM is now supportive of introducing this in 12 – 15 months’ time

• SOEMD will require specialist consulting support for this process, with a lead time of 6 months to prepare Boards

2.2 Assist SOEMD

with policy submission on board structure and remuneration

• Technical reports on board structure and remuneration as inputs to policy submission

• Oral and written reports submitted to SOEMD during TA but policy submission on remuneration not developed

• Structure and composition recommendations reflected in proposed legislative amendments

2.3 Assist with review

of director remuneration

• Technical report on review of director remuneration system

• As for 2.2 above

2.4 Assist with drafting of amendments to SOE enabling legislation on board composition

• Inputs on draft Amendment Legislation

• Extensive analysis of relevant legislation undertaken and inputs provided on draft Amendment Legislation

3.0 Strengthened SOEMD role in promoting compliance with legislation

3.1 Regular Programme of skills development for current and new SOEMD staff

• Training delivered • Capacity Development

plan for SOEMD & individual staff

• Technical report on skills development for SOEMD

• Extensive on the job and formal training, including workshops and seminars, delivered. SOEMD staff also funded on SIOD courses

• Capacity Development Plans and reports on skills development completed

• SOEMD needs to increase


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credibility. Ongoing mentoring support is recommended

• Secondment of high level accounting skills is important

3.2 Develop SOEMD

database on board composition, director skills

• Operational SOEMD Database.

• SOEMD Director Database developed and implemented and now operational

• Manuals and training provided • Director data input and further

development required • GOS needs to support concept and

utilise the database

3.3 Support GOS review of SOEMD mandate, reporting and location arrangements

• Technical reports as inputs to review

• At inception, EA suggested deferring this until late in TA. Discussion paper completed in May 2007. EA not able to discuss in depth prior to end of TA

• This would be considered in the ongoing review of MOF


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2. Achievement of Planned TA Outputs This section reviews each of the planned TA outputs and sub outputs and summarises actions taken, outputs produced, achievements and issues that will influence long-term success, and, as appropriate, recommended further action. These outputs were advised by the ADB at the outset of the project when it was agreed that the TA would report against them. 2.1 Work Programme Output One – Assisting SIOD to Provide Valued Continuous Professional Development Programme for Directors This Output was designed to provide support for the SIOD providing a valued and continuous professional development programme (PDP) for directors. The various sub outputs are detailed below. The SIOD was required to be established prior to the start of the TA (it was established at inception of the TA) and the TA provided assistance from its inception to help make it operational, develop its key service offering (a PDP for directors), and its other planned activities including creating a base of knowledge products (e.g. Best Practice Statements and Codes of Ethics), mentoring, developing a qualifications/accreditation system and delivering an operational database of director information. 2.1.1 Work with SIOD for operational establishment and sustainability

Actions Taken

The TA provided significant ongoing support to the Board of Directors and Management of SIOD. Major actions included the following: 1. The Team Leader facilitated the meeting with the Board members elected at the

November 2005 initial meeting to elect the Chair and Vice Chair and to establish board sub-committees.

2. The Director Development Specialist worked closely with the Board and CEO on all five visits to develop the PDP and knowledge products for the SIOD and gave the keynote speech at the launch of the PDP.

3. Two Advisory Memos were prepared by the ADB TA Team for the SIOD Board – in preparation for the Special General Meeting held 10 November 2006 (refer Annex 10) and on SIOD Management Transition Issues upon resignation of the first CEO (refer Annex 11).

4. The Team Leader was based at the SIOD for the duration of her March and June 2007 visits to support the new CEO, train new staff, and help with the hosting of the Four-Day Directors’ Course, the Audit Committee courses, preparation for the AGM and for a Strategic Planning Retreat (refer Annex 8 for Programme and Recommendations from the Retreat).

5. The domestic Corporate Governance Adviser provided regular and ongoing advice and support to the Board and Management during the TA.

Achievements

The Director Development Specialist and the Team Leader recorded the following achievements, in consultation with the Board and the CEO, and supported by the domestic consultants: 1. Professional Development Plans for 2006/2007 and 2007/2008 (refer Directors’ Folder

Annex 1 s.16)


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2. A Code of Ethics for the SIOD Board (refer Directors’ Folder Annex 1 s.5) 3. A Code of Ethics for the Members of the SIOD (refer Directors’ Folder Annex 1 s.20) 4. Best Practice Statements (refer Annex 9) 5. A Board Advisory Service (refer Directors’ Folder Annex 1 s.18) 6. Programme launch, courses and other events held in 2006/2007 (Refer Directors’ Folder

Annex 1 ss.16 & 17) 7. Progress towards a Director Accreditation/Certification programme (refer Directors’

Folder Annex 1 s.19) SIOD Market Research (refer Annex 7) and a full review of the PDP (refer Annex 2) were also undertaken to guide future development. The Team Leader facilitated a Strategic Planning session with the SIOD Board in June 2007, which led to a clearer definition of steps towards a sustainable SIOD and a sense of optimism for future development (refer Annex 8 for Programme and Recommendations from the Retreat).


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Recommendations

That ongoing periodic consulting support to the SIOD CEO and the Board is essential, and is provided for the next 24 months, to ensure a sustainable SIOD in the long term. It is recommended that up to ten days of consulting time per quarter, of home office and field time, would be appropriate, to include mentoring and delivery of training courses.

2.1.2a Design & implement a training programme and packages and seminar

series

Actions Taken

The Director Development Specialist and other team members assisted the SIOD with the development of an appropriate PDP for Samoa. Courses were held throughout the duration of the TA with presenters that included TA Team members, international presenters and local presenters (refer The Directors Folder Annex 1 s.16 for Programmes for 2006/2007 and 2007/2008 – the Programme until December 08 is in draft form and was to be developed by the incoming board after the AGM on 29 June 2007). The Team Leader and/or the Director Development Specialist attended most of the courses held to end June 2007 to assist with administrative matters and materials, to greet participants, and to introduce and support presenters. They also developed and presented courses and course materials including PowerPoint presentations, case studies, participant evaluation forms and summaries, and participant folders. They participated in expert panel discussions, and presented at various functions such as the launch of the PDP by the Prime Minister, Hon. Tuilaepa Lupesoliai Sailele Malielegaoi, on 8 June 2006, the corporate luncheon held on 20 July 2006 (addressed by the Director Development Specialist) and an evening social function in March 2007, which was addressed by a successful local businessman. Other actions included training course administration (e.g. answering course enquiries, completing registrations and issuing receipts, purchasing course supplies, photocopying) in the absence of SIOD capacity to handle this, and training programme briefings to the Board (including a written summary of participant evaluations of individual presenters from one course). Market research on the professional development programme was conducted in March 2007 (see Annex 7) seeking feedback from course participants and key stakeholders to inform future course planning and to ensure that the SIOD is responsive to members’ needs.


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Achievements

The TA Team recorded the following achievements: a) A Professional Development Programme, details of which are in The Directors Folder

(Annex 1 s.16). The programme to date has comprised more than 20 training activities including five SIOD ‘flagship’ 3 or 4 day Directors’ Courses, a number of one day and half day courses, and several corporate luncheon/evening functions, which involved governance presentations. Training included lecture style, case study work and course participant discussion opportunities.

b) Developed a Training Course Folder ‘Background Information’, which provides supplementary governance-related information for course participants, including: • Glossary of frequently used governance terms and references • Website references and corporate governance literature • Discussion papers: “Conflicts of Interest” and “Why do we need an Audit

Committee?” • Templates: Sample Board Letter of Appointment, Agenda, Board Work

Plan/Timetable, Outline of a Directors’ Folder (which includes director documents and information recommended for directorship on that board, such as the constitution; strategic and business plans; latest annual budget; delegated authorities; committees and terms of reference; register of interests; address and contact details for board members, the entity and key staff; etc).

c) Market Research Report (See Annex 7), which reports feedback from key stakeholders and course participant interviews on the Professional Development programme from June 2006 to March 2007.

d) A full review of the SIOD PD Programme was undertaken to guide SIOD in its future development and is reported on in Annex 2. A specific review of the September/October 2006 courses, requested by the SIOD Board, is included as Annex 5.

e) “Teaching Points” (see Annex 3), guidelines for future presenters on essential topics to be covered in each course.

f) “Course Guidelines (Lessons Learned)” (see Annex 4), guidelines for Professional Development course administration.

g) SIOD Resources: • Established SIOD Library of internationally recognised literature and publications (see

Annex 1 s.13 for Library resources) • Provided Governance Templates such as Board meeting templates (sample agenda,

CEO report, financial information etc) and sample Charter.


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Recommendations

That ongoing periodic consulting support is provided to the SIOD CEO and Board for a further 24 months for monitoring and assisting with development of the PDP. This would require up to one week of consulting time per quarter (field and home office time) working with the CEO to ensure that courses and their content have been planned, endorsed and are supported by the Board. The CEO does not have the background in corporate governance to negotiate with presenters the content of the courses and the importance of priorities in planning courses. With the right corporate governance expertise, this week of mentoring the SIOD CEO and Board could be combined with offering some Board Advisory services.

2.1.2b Board/Director mentoring programme

Actions Taken

The original TA brief was to develop a mentoring programme but there was considerable sensitivity and resistance to this concept. As a result the Director Development Specialist worked with the Board to develop a Board Advisory Service (See The Directors Folder Annex 1 s.18). Following board discussions on a series of papers provided by the Director Development Specialist, the board/director mentoring programme evolved into a Board Advisory Service, which the SIOD board believes is an appropriate outcome for Samoa. The CEO planned to have this initiative formally approved by the new Board after the AGM in June 2007.

Achievements

Outline of, and consensus on, a Board/ Advisory Service, for endorsement by the SIOD Board.


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Recommendations

That SIOD considers offering this service in conjunction with visiting international PDP presenters as part of SIOD’s developing programme of user pays services.

2.1.3 Consider and implement, if agreed, a director accreditation/skills

recognition or qualification system

Actions Taken

The Director Development Specialist worked with the SIOD board to develop a process for director qualification/accreditation (see The Directors’ Folder Annex 1 s.19). To provide recognition of director training, course participants received certificates of attendance. The final shape of the accreditation will be agreed by the new board after the AGM in June 2007.

Achievements

The Board discussed the adoption of various international models of accreditation and then specifically tailored an accreditation/certification process. The current iteration of this process is an offering of three qualification options from which members may select the one that best suits their requirements.

Recommendations

That ongoing periodic consulting support is provided to the CEO and Board so that the proposed Accreditation/Qualification process can be implemented and developed over time. This support would be combined with the mentoring and PDP development support recommended in ss. 2.1.1. and 2.1.2a above i.e. a total of three weeks support per quarter in total is envisaged.


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2.1.4 Help SIOD develop Best Practice guidelines for Boards and Directors

Actions Taken

The SIOD completed a series of Best Practice Statements prepared by the Director Development Specialist and by visiting international consultants, with inputs from the Team Leader and domestic consultants.

Achievements

See Annex 9 for an Update on Best Practice Guidelines. Published 2006/2007 • “The Role of the Board in Adding Value” - August 2006 • “The Role of the Board Chair” – November 2006 • “Understanding Financial Statements” – December 2006 • “Strategic Planning” - June 2007 (Drafter: Rick Bettle) • Audit Committees” - June 2007 (Professor Don Trow) Drafts awaiting approval by the Board: • “Conflicts of Interest” (Jane Huria) • “Meeting the Needs of the Board” (Jane Huria)

Recommendations

That SIOD provides budget allocations to ensure consultants can assist with drafts of Best Practice Statements in future. Board members need to be encouraged to take ownership of the drafts to ensure that they reflect local conditions and also that the SIOD board complies with the standards set in the statements.


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2.1.5 Develop and maintain database of directors, including protocols

Actions Taken

In order to improve the identification and selection of new directors, databases of existing or prospective individual directors were to be developed by the TA. The local consultants worked closely with the Database Development Consultant, SOEMD and SIOD to develop the databases for SOEMD and for SIOD. A questionnaire was developed to obtain appropriate director information required for the database.

Achievements

The databases were developed and then launched by the Minister of Finance at the end of the SIOD four day flagship Directors’ Course in March 2007.

Recommendations

That SIOD (and SOEMD) closely maintain and action further development of the databases in light of operational experience. It is important to attract credible and experienced directors so that Cabinet can have confidence in seeking names from the databases.

2.1.6 Support development of national and SOE codes of ethics/good conduct

and best practice

Actions Taken

The Director Development Specialist worked closely with the Board, with inputs from the domestic and other international consultants, to develop two codes of ethics – one for the SIOD Board and another for the SIOD members.

Achievements

The Board initially addressed possible Code contents on 12 June 2006 and subsequently discussed and reviewed their requirements on 17 July 2006, 6 October 2006 and 26 March 2007. By the end of June 2007, the Board had approved the draft Codes (See The Directors’ Folder Annex 1 ss. 5 & 20).


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Recommendations

That the CEO/Board publish and promote the Codes, demonstrate good governance through the SIOD’s own board procedures and develop an appropriate approach to getting existing SIOD members to acknowledge the requirements of the Codes.

2.1.7 Support Institute advocacy

Actions Taken

Advocacy on behalf of the Institute was undertaken on all visits of the International Specialists with support from the Domestic Consultants. The key concrete action has been ensuring that Public Body Boards are aware of courses and are obliged to become members of the SIOD. The CEO of Ministry of Finance distributed a directive requiring all SOE Board members to join the SIOD, which proved to be very successful.

Achievements

The membership of the SIOD increased dramatically following the MOF CEO’s directive to the SOE Boards to ensure their directors were members of the SIOD. The new CEO has the confidence of the CEO of the Ministry of Finance.

Recommendations

That the SIOD continues their programme of advocacy and publicity of the value of the SIOD.

2.2 Work Programme Output Two – Promoting Effective SOE

Board Structure and Composition Under this component, the TA was to provide assistance to develop effective SOE board structure and composition practices through Board evaluations, assisting SOEMD with reviews/policy submissions on board structures and remuneration and legal reform to SOE enabling legislation to align legal requirements and good practice. The practice of Ministers or senior public servants sitting on Boards, or chairing them, and government appointments to Boards, had long been viewed as at variance with best international practice in corporate governance. The results of the TA’s work on the sub outputs of this component are described as follows: 2.2.1 SOE Board Evaluations

Actions Taken

The subject of SOE Board evaluations was broached a number of times during the TA by the TL with the EA counterparts.


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Recommendations

That Board evaluations become part of the annual cycle of work in SOEMD with initial consultant support to conduct and monitor the board evaluation process. Consultant support of three days per board would be required across the 24 boards and the process would need to be conducted over a period of several years (a minimum of two weeks consulting time per quarter for two years) in order to ensure that the recommendations and analysis are taken on board and changes are implemented. It will be some time before confidence on the part of SOE Boards has built up to allow Board evaluations to happen with ease.

2.2.2 Assist SOEMD with policy submission on board structure and

remuneration

Actions Taken

Suggestions for board composition have been given both orally and in writing, but there has been a resistance to addressing the skill mix and competencies on boards with an analytical approach. A proposal to vary fees according to the size and complexity of the entity was rejected by Cabinet prior to the start of the TA. A TA discussion paper on Public Body director remuneration was prepared early in the TA with a three-tier proposal of fees (attached as Annex 19) but was not able to be progressed with SOEMD.


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Achievements

A TA proposal to vary the range of board fees was drafted and is attached at Annex 19.

Recommendations

1. That a Cabinet sub committee be established to make recommendations to Cabinet for SOE Board appointments; and

2. That SOEMD considers recommendations arising from a review of the remuneration policy. The TA proposal to vary the range of Board fees (refer Annex 19) can be used as a starting point for the remuneration policy review.

2.2.3 Assist with a review of director remuneration

Actions Taken

As for s.2.2.2. above, recommendations for remuneration were discussed on a number of occasions with the TA counterparts.

Achievements

A proposal to vary the range of board fees was developed for consideration at a later date - see Annex 19.


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Recommendations

That SOEMD consider recommendations arising from a review of the remuneration policy. The TA proposal to vary the range of Board fees (refer Annex 19) can be used as a starting point for the remuneration policy review.

2.2.4 Assist with drafting of amendments to SOE enabling legislation on board

composition The Public Bodies (Performance and Accountability) Act (PBA) has not been strictly complied with and some of the enabling acts go back to the early 1970s, which does not reflect current governance best practice.

Actions Taken

An SOEMD Cabinet Paper (refer Annex 12) containing recommendations to amend SOE enabling legislation was developed under the TA. Extensive consultations were undertaken with SOEMD, the TA Team and the Chairs and CEOs of the Public Bodies in October 2006. A presentation was given to Cabinet in November 2006 summarising the issues raised during the October consultations, which led to the recommendations to amend legislation. Cabinet was supportive of all the recommendations made and asked that a formal Cabinet submission be prepared. Further consultations were undertaken with the Chief Financial Officers and the CEOs in March 2007. The Team Leader and the Head of SOEMD met with the new Attorney General in March 2007 and briefed him on the requirements for amending legislation.

Achievements

The annexed Cabinet Paper was endorsed by Cabinet in May 2007. Principal legislative changes proposed include the CEO/GM not being a Board member and not being required to be Board Secretary, payment of meeting allowances for public servants being left to Cabinet’s discretion, removing references to ex-officio Board members, enhancing the appointment process through a sub committee of Cabinet, appointment of a


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Deputy Chair to run meetings in the absence of the Chair (and to promote succession planning), reducing Board numbers, a declaration of pecuniary interests to manage conflicts of interest and the application process for CSOs. Changes in Board practice proposed through issue of Cabinet directives include formal written notification of director appointments by the Responsible Minister, signing of CEO contracts by Board Chairs and the CEOs, Alternate Board Members receiving all board papers and sitting in on all meetings, Audit Committees being established and active for all Public Body Boards and Board Timetables being agreed by all board directors.

Recommendations

That SOEMD complete the process of agreeing legislative amendments in line with the proposals in the Cabinet Paper. The SOEMD Head is working with the Attorney General’s office to progress the updates in legislation in the Cabinet submission as agreed by Cabinet.


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2.2.5 Additional TA Inputs on Board Audit Committees Although this was not a specified output of the TA, the TA worked on and had a positive impact in the area of Board Audit Committees. At the start of the TA, resistance to board audit processes was high and the role of boards with regard to audit misunderstood.

Actions Taken

Over the period of the TA, the Audit Committee issue was re-iterated by the TA Team through three channels: 1. Cabinet presentation and consultations with SOE Chairs 2. SIOD Best Practice statements 3. SIOD Training

Achievements

On the last visit of the TA in June 2007, training on Audit Committees was introduced by SIOD, with TA support (refer Annex 24 for a copy of the presentation on Audit Committees and Risk Management). Registrations were high, interest grew and the role of Audit Committees is now starting to be recognized as important. At least five Public Bodies have set up Audit Committees with varied success but a willingness to learn.

Recommendations

That ongoing periodic professional accounting consulting support is provided to SOEMD to support SOE Board Audit Committees. Consultant inputs required would be for two weeks every four months over a two year period for a half day meeting with each Audit Committee. Over the two year period, the Audit Committees would have had three or four sessions of one-on-one advice and training.

2.3 Work Programme Output Three – Strengthening SOEMD’s Role

in Promoting SOE Compliance with Legislation The third component of the TA was designed to support a strengthened SOEMD role in promoting SOE compliance with legislation, especially in areas such as financial performance monitoring and reporting. This was to be achieved through a combination of training and


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capacity building, improved relationships with SOEs and developing and agreeing reporting and performance measures for SOEs. The TA was to develop a database of directors to facilitate improved appointment of new SOE directors and assist GOS to review the mandate and role of the division. The results of the TA’s work on the sub outputs of this component are described on the following pages: 2.3.1 Regular Programme of skills development for current and new SOEMD

staff

Actions Taken

The Capacity Development Specialists prepared draft plans for skills development – for the most recent refer Annex 13. This Capacity Development Plan has 5 sections: 1. Technical Skills 2. Computer Skills 3. Reference Materials 4. Knowledge of Client SOEs and Business 5. SOE Restructuring and Privatisation The plan captures activities needed to achieve improved capacity under each component section, identifies training completed and possible sources of additional training/development required and suggested timing for this training/development. In addition to the more formal programme for developing SOEMD capacity, a number of key actions have been undertaken to strengthen the SOEMD role in promoting SOE compliance with legislation, enhancing the relationships between Public Bodies and SOEMD and ensuring that Public Bodies operate as efficiently and effectively as comparable private sector entities. The TA activities have included: • Working with SOEMD to develop revised annual and quarterly reporting guidelines for

SOEs (see Annexes 16 and 17 for copies of revised guidelines) • Participating in a full round of SOE consultations with Chairs, CEOs and CFOs to identify

any governance issues, enhance relationships and communication channels and develop revised and customised financial and non-financial performance measures to be included in quarterly and annual reports (see Annexes 14 and 15 for copies of revised measures)

• A presentation to Cabinet providing feedback from the Chair and CEO consultations which resulted in Cabinet endorsing the proposal to update and amend enabling legislation

• Delivering a workshop to over 30 CEOs and CFOs of Public Bodies on the new reporting guidelines (see Annex 23 for copy of workshop presentation)

• Responding to specific reporting issues raised by SOEMD • Contributing to an SOEMD operations manual aimed at improving the consistency and

efficiency of the communications with SOEs


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Achievements

As summarised in the last TA Capacity Development Plan (Annex 13), significant TA inputs have been successfully provided in the areas of technical skills development, particularly in the areas of financial analysis, modelling and planning, key performance indicators and use of the Access based directors’ database. All members of SOEMD have attended SIOD Professional Development courses during the TA. The important development in the June 2007 final TA visit was agreement in principle with SOEMD on a TA suggestion to second senior accounting expertise to the SOEMD. This now needs to be formally agreed by MOF and implemented. The Division is limited in its ability to relate to CFOs and CEOs of Public Bodies as there is only one (junior) accountant and most of the SOEMD staff are, although very willing, junior economists without accounting expertise or business experience.


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Recommendations

That ongoing consultant mentoring is provided to SOEMD, to include: • Working with SOEMD to enhance the analysis and advice to Ministers from the quarterly

and annual reporting by SOEMD and the feedback to the Public Bodies. • Assisting SOEMD to provide an in-depth focus on a subset of Public Bodies that provide

greatest challenges in terms of performance. This may include closer working relationships with those Public Bodies and more in-depth quarterly and annual reporting. This will require strengthening the accounting expertise in SOEMD.

• Rebalancing the SOEMD workload away from processing quarterly and annual reports to focus on other strategic issues relating to the overall performance of the group of Public Bodies. These strategic issues may include opportunities to improve the business performance of individual Public Bodies as well as opportunities to improve the performance across a group of Public Bodies through shared systems, services and resources. This will require strengthening the SOEMD with officers with commercial experience and strong strategic thinking skills.

• Providing ongoing training to Pubic Bodies on planning processes and the importance of achieving integration and consistency across corporate planning, budgeting, financial reporting and financial management to improve timely and accurate reporting to the SOEMD and enhance the performance of Public Bodies.

It is envisaged that this mentoring, which would combine both local and international consultants, would be tailored around the SOE reporting cycles and may involve 10 – 20 days of mentoring support each quarter or six months over a period of two years, with a combination of home office support by email and site visits. Over this time the new reporting frameworks will be consolidated. It is considered that a series of TAs have addressed some of these issues and it is now appropriate to give SOEMD time to consolidate the TA assistance with arms length support. Without these actions, SOEMD will remain very dependent on external consultants e.g. for the current privatisation activities but also for all future strategic level activities relating to the SOE portfolio. It is also likely that SOEMD will remain as "information processors" and not move to be trusted advisors of the Ministers and to having positive partnerships with the SOE CEOs / CFOs.


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2.3.2 Develop SOEMD database on board composition, director skills

Actions Taken

As for the SIOD director database (refer s. 2.1.5 above), the SOEMD director database has been developed by the TA in consultation with all key users. The software has been loaded on to each of the computers in the SOEMD, training and manuals provided and the databases are operational.

Achievements a) Design, development, implementation of and training on the required database. Manuals

have been provided. b) Collection of SOE Director data, which provides the input to the database, through

circulation of tailored forms and questionnaires whose design was assisted by the TA, has commenced.

Recommendations

As for s. 2.1.5 above, that SOEMD (and SIOD) closely maintain and action further development of the databases in light of operational experience. It is important to attract credible and experienced directors so that Cabinet can have confidence in seeking names from the databases. The database is in its formative stage and will require the ownership of Ministers to ensure that the directors willing to submit their names are given the opportunity to sit on boards.

2.3.3 Support GOS review of SOEMD mandate, reporting and location

arrangements

Actions Taken

At inception the EA requested that consideration of this element be deferred until late in the TA. Accordingly discussion was initiated in 2007 but developed haltingly. A draft paper was prepared but constraints of timing and scheduling did not allow a full discussion with the EA. The draft paper is attached at Annex 18.


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Recommendations

That MOF reviews the mandate, reporting and location requirements of SOEMD to enhance its status, role and capacity. The draft TA paper for a review of the mandate (refer Annex 18) may be used as a starting point for progressing discussion on this issue.


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3. Conclusion and Recommendations The TA has had a significant impact on developing awareness and understanding of the need for sound corporate governance in the public and private sectors in Samoa. It has raised the profile and capability of SIOD and SOEMD and highlighted action required to ensure legislative provisions and local corporate governance practice are brought into line. The results of the TA in terms of the three components of SIOD, SOE Board Composition and Structure and SOEMD are reviewed as follows: 3.1 Assisting SIOD to Provide Valued Continuous PDP for Directors While the TA’s primary objective was to assist the SIOD to provide valued continuous professional development programmes for directors, the TA provided broad strategic and operational support to the Board and Management The TA assisted with constitution and operation of the Board, selection of the CEO and operational establishment. SIOD has established its credibility within 18 months of starting and GOS recognises the importance of director development and training. SIOD now provides valued Professional Development for directors with courses increasingly well attended. Membership approaching 150 is close to that of the Society of Accountants. The TA Consultants established PD programmes for the first two years, undertook market research to guide development of future SIOD offerings and drafted a Board Advisory Service offering. A consultant facilitated Accreditation/Qualification system was developed along with Best Practice Statements, Codes of Ethics for the SIOD Board and Members, an Operational Database of Directors, Course Administration Guidelines, Teaching Points and Governance Library Resources. Extensive SIOD advocacy with stakeholders and the business community was undertaken by TA Team Members. The financial and operational sustainability of SIOD can only be determined over time based on its value proposition and meeting the needs of current and prospective members. It is not certain that the SIOD is sustainable at this juncture because it is expected that revenues from membership and course fees may not yet cover costs and alternative revenue streams are yet to be developed. A balanced budget is understood to have been proposed for the coming financial year 2007 - 2008. The technical capability of SIOD is not yet developed sufficiently to sustain development and delivery of professional programmes, such as Professional Development, Accreditation and knowledge products. International trainers for Professional Development courses are required to provide appropriate practical Boardroom experience and also necessary profile for SIOD to attract and maintain member support. However this creates a cost structure that is not sustainable in the long term without ongoing donor funding. A TA facilitated strategic planning session with the SIOD Board in June 2007 led to a clearer definition of steps towards a sustainable SIOD and a sense of optimism over future development. The SIOD is expected to go from strength to strength with a new, committed CEO who has a good work ethic, is willing to learn from others and wishes to serve the director community. The TA has allowed a Professional Development Programme to be commenced but sustainability of the Institute will depend on enhancing revenue and managing costs. Development of a full range of knowledge products – Best Practice Statements - will depend on the willingness of local people to write guidelines and to identify a cadre of


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international consultants who are willing to contribute but who also have knowledge of the local Samoan regulatory framework. Recommendations • After a period of intensive TA assistance over some 21 months, it is recommended that

the SIOD is now given time to consolidate activities without donor funding to support its corporate operations (Responsibility: SIOD)

• However in order to support the continued development of the technical capability of SIOD to establish and deliver programmes (PDP and Accreditation/Qualification) and knowledge products and for specific Board/CEO mentoring support, it is recommended that ongoing periodic consulting support is provided to the Board and CEO for the next 24 months for three weeks per quarter (field and home office time) (ADB)

• It is also recommended that additional donor support be focused on funding specific training and PDP activities to enable international consultants to be engaged and for development of knowledge products with consultant assistance (ADB)

• The Board Advisory Service proposed by SIOD is offered in conjunction with visiting international PDP presenters, as part of SIOD’s developing programme of user pays services (SIOD)

• Budget allocations are provided by SIOD to ensure consultants assist with drafts of future Best Practice Statements (SIOD)

• The SIOD Director database is maintained and further developed in light of operational experience (SIOD)

• The Codes of Ethics are published and promoted by the CEO/Board, the SIOD Board demonstrates good governance through its own board procedures and an appropriate approach to getting existing SIOD members to acknowledge the requirements of the Code is developed (SIOD)

• SIOD continues its programme of advocacy and publicity of the value of the SIOD (SIOD)

3.2 Promoting Effective SOE Board Structure and Composition The TA’s objective was to facilitate more effective SOE Board structure and composition through Board Evaluations, reviews of Board structures and remuneration and with drafting of amendments to SOE enabling legislation. The TA’s impact was seen in a heightened GOS awareness of good practice in Board appointments and GOS acceptance of the need to align legislative requirements and Samoan practice. New precedents have been set with independent chairs taking over from Cabinet Ministers (of 24 Public Bodies, 5 are lead by independent chairs). At the end of the TA, GOS also appeared to accept the need to review SOE Board remuneration policies. The TA undertook extensive analysis on Board structure and composition practice compared with legal requirements and provided inputs to SOEMD and the AG’s office on suggested draft amending legislation. A TA Paper on Variable Remuneration for SOE Directors was drafted early in the TA but it was not considered appropriate by the MOF to consider this further during the TA. The MOF also considered undertaking of SOE Board evaluations premature during the TA. Consequently while some progress on more effective SOE Board structure and composition was achieved during the TA, increased focus on the need for change was achieved.


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A continuing issue is the SOE lack of compliance with legislation especially the Public Bodies Act. The Public Bodies Act is regarded as establishing worthy ideals but also as difficult to comply with in practice due to practices at variance with the legislation. While Cabinet has expressed willingness to update legislation relevant to the corporate governance of Public Bodies, and to review composition of boards, it will take sometime for the drafting of the amendments to come before Parliament. Compliance with the new legislation will continue to rely on Cabinet directives. Remuneration for board members is a sensitive issue not only from the perspective of Ministers and Public Servants receiving remuneration but also because of the limited budgets of the Public Bodies to cover any increases to attract more private sector directors. Recommendations • It is recommended that SOEMD complete the process of agreeing legislative

amendments in line with the proposals in the Cabinet Paper (Responsibility: SOEMD) • SOEMD considers recommendations arising from a review of the remuneration policy

(SOEMD). The TA paper drafted on this issue (Annex 19) is used as a starting point for the review

• It is also recommended that Board evaluations become part of the annual work cycle of SOEMD, with periodic initial consultant support (two weeks per quarter for two years) to conduct and monitor the board evaluation process (SOEMD/ADB)

• A Cabinet sub committee is established to make recommendations to Cabinet for SOE Board appointments (GOS)

• Ongoing consulting support (two weeks per four months for two years) is provided to SOEMD for support to SOE Board Audit Committees to enhance financial management in Public Bodies and improve financial reporting to SOEMD (ADB).

3.3 Strengthening SOEMD’s Role in Promoting SOE Compliance with Legislation The TA’s objective was to strengthen SOEMD’s role in promoting compliance with legislation, through skills development, development of an SOEMD director database and assisting with a GOS review of the SOEMD mandate. The TA has had a positive impact on SOEMD in key areas of its operation. There has been in significant progress in the capability of SOEMD to undertake financial monitoring of SOEs. The status and profile of SOEMD has been elevated and it has met with Cabinet on SOE issues. Other outcomes have included enhanced relationships between SOEMD and SOEs at CEO and CFO levels, performance measures (KPIs) being agreed with individual SOEs and improved periodic SOE reporting arrangements. The TA provided numerous outputs on this component including extensive formal and on the job financial and performance analysis training, SOEMD training at SIOD courses, capacity development plans, workshops on capital expenditure and costing of CSOs, financial and non financial Performance Indicators for all SOEs, revised annual and quarterly SOE reporting guidelines, guided development of SOEMD Operations Manual, an operational SOEMD database of Directors, an SOEMD Cabinet Paper on CSOs and drafted a discussion paper for the GOS review of the SOEMD mandate, reporting and location arrangements. At the end of the TA, the mandate issue could not however be discussed in depth with MOF as expected.


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Issues for consideration include the capacity of SOEMD to engage with GOS and SOEs on SOE policy and strategic issues for SOEs, as this is constrained by the staffing mix and the mandate. SOEMD has limited private sector and accounting experience necessary to drive value added analysis and advice for Ministers. The SOEMD role and independence per its mandate need to be considered, which will impact on its future staffing and funding. SOEMD needs to raise the quality and level of relationships with SOEs and Ministers to enhance its credibility and effectiveness with its key relationships. SOEMD needs to take a more strategic role, in ensuring improved efficiency and effectiveness of the SOE portfolio. This could include proposing mergers of SOEs, discontinuation and transfer of some activities, creating shared services, rationalising capital (e.g. buildings) and support services. SOEMD also needs to improve the quality of monitoring of individual SOEs, by a stronger knowledge of their operations, focusing on the most risky SOEs and providing more in depth analysis. Recommendations: • Formal agreement by MOF on the TA’s June 2007 suggestion of seconding senior

accounting expertise to SOEMD and swift implementation of this agreement is highly recommended (Responsibility: MOF/SOEMD)

• Continuing consultant support to SOEMD, in a combination of field and home office time (two weeks per quarter for two years), is recommended to provide mentoring on SOE strategic and financial issues, including SOE quarterly and annual reporting and performance monitoring and planning training for public bodies (ADB)

• The Director database is maintained and further developed in light of operational experience (SOEMD)

• A review of the SOEMD mandate, staffing and budget is recommended. The TA discussion paper (Annex 18) can be used as a starting point for this review (MOF)

In summary, the TA has enabled the SIOD to establish its Board and operations, deliver an extensive Professional Development Programme and knowledge products and build credibility to underpin a sustainable future. While ongoing consultant support is recommended for targeted activities to support further professional development of the SIOD and its offerings, the next phase requires the Board and Management to build on the support the TA has provided to ensure it consolidates and enhances its relevance and appeal to the public and private sectors in Samoa as the centrepiece of the further development of good governance. Ensuring sustainability will require development of additional revenues from commercial activities and carefully managing costs and obtaining aid funding for specific professional development activities but the Board and Management are conscious of theses challenges and are pursuing solutions. SOE Board composition and structure is now being addressed through proposed changes to legislation and utilising the new director databases to improve selection procedures. While reviews of remuneration policy (for example using the TA’s suggested three tier approach based on complexity and size of SOE organisation) and Board evaluations are recommended actions by the GOS in time, it remains for GOS to demonstrate its commitment to best governance practice by continuing to address the SOE Board composition issue and building on recent precedents for the introduction of private sector directors and independent chairs. SOEMD has made significant progress in its capability under the TA, particularly in areas such as financial analysis, performance monitoring and reporting and its relationships with SOEs. Secondment of accounting expertise and selected additional


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consultant assistance is recommended to continue to consolidate the capacity of SOEMD and allow it to engage on SOE strategic and policy issues while GOS commitment is also required to strengthen the role and structure of SOEMD through a pursuing a review of its mandate as proposed by the TA, and funding consequent staffing and budget issues. The TA has successfully contributed to the development of improved corporate governance in Samoa, raising awareness and understanding of the need to continue to move towards best practice. The TA Team has identified future action and responsibilities that, if acted on, will lead to a further improvement in the governance environment in Samoa. While another intensive TA is not seen as appropriate at this point, further short and sharply focused consultant mentoring support to SIOD and SOEMD over the next two years would be beneficial. It is now up to SIOD, SOEMD and GOS to demonstrate leadership in the further development of good governance in Samoa. The results of the TA in terms of impact, outcomes, outputs, issues and recommendations are summarised in the Attachment to this report.

TA No.4513-SAM: Strengthening SOE Corporate Governance Final Report – July 2007 Attachment Page 1

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Attachment: TA Results Matrix SIOD SOE Board Structure & Composition SOEMD

Impact • SIOD has established credibility within 18 months of its establishment

• GOS recognition of importance of director development & training through directing Public Bodies to pay SIOD membership fees for all their directors

• Heightened GOS awareness of good practice in Board appointments

• GOS acceptance of need to align legislative requirements and Samoan practice

• Significant progress in capability of SOEMD to undertake financial monitoring of SOEs

Outcome • SIOD providing valued ongoing PD for directors

• Operational SIOD • Membership approaching 150 • Increasing demand for Professional

Development Programme courses

• GOS awareness of need to review remuneration policies

• Newly established boards have independent chairs and in one Public Body a Cabinet Minister has been replaced by an independent chair

• Elevated status and profile of SOEMD and meeting with Cabinet on SOE issues

• Enhanced relationships between SOEMD and SOEs at CEO and CFO levels

• Agreed SOE performance measures (KPIs)

• Improved periodic SOE reporting arrangements

• Improved SOEMD role in promoting compliance with legislation

TA Outputs • Extensive Professional Development

Programme established in first two years (more than 20 courses delivered with over 220 participants)

• Technical Report on PDP • Market Research on demand for SIOD

offerings • Board Advisory Service offering

• Extensive TA analysis on Board structure and composition practice compared with legal requirements and inputs on suggested draft amending legislation

• TA Paper drafted on Variable Remuneration for SOE Directors reflecting size and complexity of entity

• Extensive formal and on the job financial and performance analysis training

• SOEMD training at SIOD courses • Capacity Development Plans • Workshops on Capital Expenditure and

costing of CSOs


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SIOD SOE Board Structure & Composition SOEMD • Accreditation/Qualification system • 5 Best Practice Statements plus 2 Draft

BP Statements • Two separate Codes of Ethics one for

SIOD Board and one for Members • Operational SIOD Database of Directors • Course Administration Guidelines,

Teaching Points and Governance Library Resources created

• Extensive SIOD advocacy with stakeholders and community

• Facilitated Strategic Planning Session June 2007

• Financial and Non Financial Performance Indicators for all SOEs

• Revised Annual and Quarterly SOE Reporting Guidelines

• Guided development of SOEMD Operations Manual

• Operational SOEMD Database of Directors

• SOEMD Cabinet Paper on CSOs • Draft discussion paper for GOS review

of SOEMD mandate, reporting and location arrangements

Gaps • Sustainability of SIOD, to be determined over time

• SOE Board evaluations yet to be undertaken due to EA concerns that they were premature

• Incomplete compliance with legislation especially Public Bodies Act

• Board remuneration policy not reviewed by EA due to budgetary constraints

• Mandate and role and consequent staffing and funding issues to be reviewed

Issues • Sensitivity over proposed Board/Director mentoring lead to development of a Board Advisory Service, a tailored training programme

• Public Bodies Act is regarded as establishing worthy ideals but also as difficult to comply with in practice due to practices at variance with legislation

• SOE Board evaluations considered premature during TA by EA

• Capacity to engage with GOS and SOEs on SOE policy and strategic issues for SOEs is constrained by staffing mix and mandate

• SOEMD has limited private sector and accounting experience


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SIOD SOE Board Structure & Composition SOEMD • Financial sustainability of SIOD yet to

be established: revenues from membership and course fees cover only basic overheads; alternative revenue streams yet to be developed

• Technical capability of SIOD not yet developed to sustain development and delivery of programmes e.g. PD and Accreditation and knowledge products

• International trainers are required to provide profile and attract member support for SIOD

• SOEMD role and independence per its mandate needs to be considered, which will drive staffing and funding

• SOEMD needs to raise quality and level of relationships with SOEs and Ministers to enhance credibility and effectiveness

Recommendations • Board is now given time to consolidate activities without donor funding support for corporate operations (Responsibility: SIOD)

• Ongoing periodic consulting support is provided to Board and CEO for the next 24 months for three weeks per quarter (field and home office) for mentoring and development of Accreditation/Qualification, and monitoring and assisting with development of the PDP (ADB)

• Complete process of legislative amendments (SOEMD)

• Review opportunity to introduce variable remuneration policy for SOE Board members (SOEMD)

• Board evaluations become part of the annual cycle of work in SOEMD with initial consultant support (two weeks per quarter for two years) to conduct and monitor the board evaluation process (SOEMD/ADB)

• Consulting support (two weeks per four months for two years) is provided to SOEMD for support to SOE Board Audit Committees (ADB)

• Formal agreement with MOF to second senior accounting expertise to SOEMD (MOF/SOEMD)

• Ongoing consultant mentoring is provided to SOEMD for SOE quarterly and annual reporting, performance monitoring and strategic issues and planning training for public bodies. Two weeks support per quarter field and home office time over two years (ADB)

• Director database maintained and further developed in light of operational experience (SOEMD)

• Review of mandate, reporting and location requirements of SOEMD, together with staffing and budget, using TA discussion paper as a base (MOF)


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SIOD SOE Board Structure & Composition SOEMD • Further donor support is focused on

funding specific training/PDP activities to enable international consultants to be engaged and for development of knowledge products with consultant assistance (ADB)

• Board Advisory Service is offered in conjunction with visiting international PDP presenters (SIOD)

• SIOD Budget allocations are provided to ensure consultants assist with drafts of future Best Practice Statements (SIOD)

• Director database maintained and further developed in light of operational experience (SIOD)

• Codes of ethics published and promoted, SIOD board demonstrates good governance through its own Board procedures and an appropriate approach to getting existing SIOD members to acknowledge the requirements of the Code developed (SIOD)

• SIOD continues its programme of advocacy and publicity of the value of the SIOD (SIOD)

• Cabinet sub committee to make recommendations to Cabinet for SOE Board appointments (GOS)

VINSTAR Consulting in association with

Broad Horizons Limited and

KVAConsult Limited

Final Report Volume II: Annexes

TA No. 4513-SAM: Strengthening State-Owned Enterprise

Corporate Governance

Submitted to

Government of Samoa

and

Asian Development Bank

July 2007

TA No.4513-SAM: Strengthening SOE Corporate Governance Final Report – July 2007 Volume II Annexes - Contents

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Contents Annexes Annex 1: SIOD Directors’ Folder Annex 2: SIOD Professional Development Programme Report Annex 3: SIOD Professional Development Programme Teaching Points Annex 4: SIOD Director Professional Development Course Guidelines Annex 5: SIOD Board Report on September/October 2006 Training

Courses Annex 6: SIOD Course Sample Evaluation Annex 7: SIOD Market Research Report Annex 8: Program and Recommendations from SIOD Retreat Annex 9: SIOD Best Practice Guidelines Update Annex 10: TA Team Advisory Memo to SIOD Board re SIOD Special

General Meeting Annex 11: TA Team Advisory Memo to SIOD Board re SIOD Management

Transition Issues Annex 12: SOEMD Cabinet Paper with Recommendations to Amend SOE

Legislation Annex 13: SOEMD Capacity Development Plan Annex 14: SOEMD Draft Financial and Non Financial Performance

Indicators for SOEs Annex 15: SOEMD Financial and Non Financial Performance Measures for

SOEs – Calculation and Comments May 2007 Annex 16: SOEMD Revised Annual SOE Reporting Guidelines May 2007 Annex 17: SOEMD Revised Quarterly SOE Reporting Guidelines May 2007 Annex 18: SOEMD Mandate, Location and Reporting Discussion Paper Annex 19: TA Proposal for SOEMD for Ranges of Director Fees for Public

Bodies Annex 20: SOEMD Cabinet Paper on Community Service Obligations Annex 21: SOEMD Community Service Obligations Workshop Annex 22: SOEMD Capital Expenditure Proposals & Decisions Workshop Annex 23: SOEMD Workshop on New Reporting Guidelines for all Public

Bodies Annex 24: SIOD Audit Committees and Risk Management Workshop

TA No.4513-SAM: Strengthening SOE Corporate Governance Final Report – July 2007 Volume II Annexes - Annex 1 Page 1

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Annex 1: SIOD Directors’ Folder

Samoa Institute of Directors

Directors’ Folder

Table of Contents SECTION

1. The Directors of the Institute

2. The CEO and Staff, Bank, Auditor & Lawyer

3. Board Committees – Audit, Remuneration, Premises, Brand & Marketing

4. Board Timetable

5. SIOD Code of Ethics for SIOD Board Members

6. Register of Interests

7. CEOs Employment Agreement [Not included in this report] and Performance framework

8. Expenditure Delegation Policy

9. The Rules of the Samoa Institute of Directors

10. Key Legislation of Relevance to Directors in Samoa

11. List of Acronyms

12. Frequently Used Terms and References

13. SIOD Library Governance Resources

14. Business Plan 2006-2007 [Not included in this report]

15. Annual Budget 2006-2007 [Not included in this report]

16. Professional Development Program 2006-2007

17. Example SIOD Course Programme: The Directors’ Course (Four-Day) 2007

18. Board Advisory Service

19. Issues and Options for Director Accreditation

20. SIOD Code of Ethics and Proper Practice for Members


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Section 1

The Directors of the Institute (Elected November 2005)

1. Papalii John Ryan Chairman Ph# : 7747123/24441(Home) Email: [email protected] / [email protected] 2. Papalii Grant Percival Vice Chairman

CEO, Director Natural Foods Ltd. Ph# : 7774325/20158 Email: [email protected]

3. Aliimuamua Kereti Petaia-Ahliki,

Manager Corporate Services, Bluebird Lumber and Hardware Co Ltd. Ph# : 7770591/21629 Email: [email protected]

4. Eleitino Michelle Meredith Chairperson Rhelm Ltd. Ph# : 25604 Email: [email protected]

5. Magele Arthur Penn

Partner Lesa ma Penn Ph# : 7770550/20321 Email: [email protected]

6. Matautia Rula Levi

General Manager, Housing Corporation Ph# : 7776066/24615 Email: [email protected]

7. Muaausa Joseph Walter

General Manager, Electric Power Corporation, EPC Ph# : 7516110/65404 Email: [email protected]










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Section 2

The CEO and Staff, Bank, Auditor & Lawyer

Chief Executive Officer Sealiimalietoa Melepone Isara (December 2006 - ) Ph# : 7785600 Email: [email protected]

• University of the South Pacific, Suva, Fiji BA (Economics & Manager) 1995 • Formally Assistant CEO of the Samoa Tourism Authority, Principal Planning

Officer, Ministry of Finance. • Married with three children • Rugby, soccer

Executive Assistant Nua Nefu (March 2007 - ) Ph# : 7767848 Email: [email protected]

• Educated in Aorere College, Papatoetoe, Auckland, NZ • Graduated from Transition Training Institute with a Certificate in Computing

and Office System, Level 3 • Formally Assistant Manager for Restaurant Brands, NZ • Formally Co-Manager for Wendco Ltd, NZ • Attended Malua Theological College • Happily married, recently moved to live at Malua Theological College • Volleyball & Squash

Office Assistant Alisha Tupu (March 2007) – Email: [email protected]

• Graduated from the Samoa Polytechnic, now called the Samoa Institute of Technology, in December 2006, with a Diploma in Secretarial Studies

• Educated in Leifiifi College, Malifa from 2000-2004 • Lives in Sinamoga • Volleyball & Rugby

Bank ANZ Bank Address: Beach Road, PO Box L1855, Apia Ph#: 69 999 Auditor Auditor: Fapiano Stowers Address: Togafuafua, PO Box 95, Apia Ph#: 24 668 Lawyer Lawyer: Richard Tapeni Faai’uaso LLB Address P O Box 95, Level 2, Maxkar house, Convent St. Apia. Ph#: 23 545 / 22 322





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Section 3

Board Committees – Audit, Remuneration, Premises, Brand & Marketing

(Elected November, 2005) Audit Committee Magele Arthur Penn (Chair) Papalii Grant Percival Matautia Rula Levi Remuneration Committee CEO Performance Framework and Contract Muaausa Joseph Walter (Chair) Matautia Rula Levi Premises Committee Matautia Rula Levi (Chair) Vacant Brand and Marketing Eleitino Michelle Meredith Papalii Grant Percival Vacant Website Design Papalii Grant Percival Magele Arthur Penn Muaausa Joseph Walter


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Section 4

Board Timetable (As at June, 2007)

The Board meets at 10am on the first Wednesday of every month.

DATE VENUE MEETING SPECIAL ITEMS 9th-10th June 2007 Aggie Grey’s Resort Board Meeting &

Strategic Planning AGM Planning Annual Report “Towards a sustainable Institute”

4th July 2007 SIOD Board Room Monthly Board Meeting

Review Audited Accounts Elect chairperson and appoint board committees

1st August 2007

“ “ Confirm Vision and Mission Statements

5th September 2007 “ “ Review Funding & Donor Applications

3rd October 2007 “ “ Review Half Year Accounts Set Board Timetable for 2008

7th November 2007 “ “ Board Performance Review 5th December 2007 “ “ CEO Performance Review 6th February 2008 “ “ Strategic Planning session

for the next five years 5th March 2008

“ “ Approval Annual Budget 2008 - 2009

2nd April 2008 “ “ Review Annual Accounts 2007 - 2008

7th May 2008

“ “ Preparation for AGM Plan Agenda, date, venue etc

4th June 2008 “ “ Review Audited Accounts for distribution to all members


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Section 5

SIOD Code of Ethics For the SIOD Board of Directors

Samoa Institute of Directors Code of Ethics and Proper Practice for the Board of the Institute March 2007 1. Introduction and Purpose This Code of Ethics and Proper Practice (the Code) is a policy statement which sets out broad ethical principles and behavioural standards expected by the Samoa Institute of Directors (SIOD) of the SIOD Board and employees. The Code is intended to provide guidance on what is honest and professionally right. This Code is to be read in conjunction with the regulations of the SIOD, including the Code of Ethics and Proper Practice for Members, the laws and regulations of Samoa. 2. Our Values We adhere to the following core values in all our undertakings: Samoan English

Tofa Respect for Samoan culture Respect for others Delivery of value to our members Leadership providing guidance, control and direction Honesty truthfulness, sincerity, frankness, openness Integrity honour, uprightness, reliability Transparency clear, lacking ambiguity, no hidden agendas Accountability answerable, taking responsibility Diligence hard working, focused on performance,

thoroughness Independent free from influence, self determining Stability steadiness, permanence

We also:

• Fully recognize our obligations to all those with whom we have a relationship, including our members and other recipients of our services and products, our employees, contractors and suppliers, and organisations affiliated to us

• Use our best endeavours to ensure the respect, trust and confidence of those with whom we deal.

3. Relations with Members We offer services of consistently high quality and value, in the areas of:

• Information and guidance on matters of relevance to directors and directorships • Director education and training • The protection and enhancement of directors’ interests; and


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• Other member services, benefits and facilities as notified to members from time to time

We ensure that our communications with members do not contain any misrepresentations and that our financial statements give a true and fair view of our affairs. We maintain the confidentiality of member information. 4. Relations with Employees We require that a there is a high degree of skill and care in our recruitment and employment policies and practices and we treat our colleagues with respect and dignity. 5. Relations with Suppliers and Other Business Contacts We act honestly and fairly in all our dealings with our suppliers, professional advisers and others having business with us. 6. Conflicts of Interest We have an obligation to ensure that our individual interests do not interfere, have the potential to interfere, or appear to interfere, with our organisation’s interests. We do not have any undisclosed and unapproved business relationships, that might impair or could be perceived to impair, the independence of any judgment that we make on behalf of the SIOD. We do not accept any gratuities or other inducements in the course of our business dealings on behalf of the SIOD. 7. Use of Organisation Assets and Property We use our best endeavours to protect our organisation’s assets and property from loss, damage, misuse, waste and theft. We use the organisation’s assets and property in our control and care only for the legitimate business purposes of the organisation, and do not use that property for any other purpose, including personal gain. 8. Use of Organisation Information We use our organisation’s business information only in the best interests of the SIOD and not for personal gain. 9. Compliance with Laws At all times we act honestly and in good faith, and comply with all applicable laws; including legislation, regulations, and local authority by-laws.


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10. Compliance with Organisational Policies At all times we behave and conduct ourselves in a manner that is consistent with the SIOD values expressed in this Code and in the Code for Members, and with the SIOD’s organizational policies. 11. Compliance with Code This Code has been set by the Board of the SIOD and binds board members and employees. The Code forms part of every employee’s conditions of employment and every contractor’s contract for services with our organisation. Failure to comply with the Code can result in disciplinary action including, where appropriate, dismissal. Compliance with the Code is also taken into account on a regular basis when assessing individual performance. If a board member becomes aware of a breach or suspected breach of the Code by a board member or the Chief Executive Officer they should report it to the Chairman. Any other person who becomes aware of a breach or suspected breach of the Code should report it immediately to the SIOD’s Chief Executive Officer. No action is taken against any individual reporting a breach or suspected breach by virtue of that report. Subject to any legal restriction and the circumstances of each case, the name of the person disclosing the information pertaining to the breach, or suspected breach, of the Code may be kept confidential. 12. Applicability of Code The Code applies to board members and employees of the Samoa Institute of Directors. Before accepting a board position or employment, potential board members and employees of the SIOD must be supplied with this Code of Ethics and Proper Practice. It must be clearly understood that they personally agree to take responsibility to act in an ethical and professionally responsible manner. 13. Compliance with Code The SIOD requires adherence to this Code of Ethics by all SIOD board members and employees. Compliance with the Code of Ethics and Proper Practice, individually and by the organisation as a whole, depends on each person’s knowledge of and voluntary compliance with this Code. Non compliance with this Code may result in dismissal. 14. SIOD Code of Ethics and Proper Practice As stated in S.12, it is intended that this Code specifically applies to the Samoa Institute of Directors board and SIOD employees. This Code is also to be read in conjunction with the board approved SIOD Code of Ethics and Proper Practice for Members. 15. Powers to Amend Code The Board of the SIOD may amend this Code from time to time


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Section 6

Register of Interests

SAMOA INSTITUTE of DIRECTORS (As at Board Meeting 2nd May 2007)

Name Current Commercial Interest and

Associations Related Commercial Interest

Previous Associations

Memberships

Papalii Ulumalautea John Ryan, Chairman

CEO, Shareholder, Director, Samoaniu Ltd Director – Samoa Polytechnic CEO/Director – Samoa Ports Authority Managing Director, Samoa Niu Ltd

Samoa Society of Accountants Chartered Institute of Logistics & Transport – London Samoa Institute of Directors

Papalii Gant Percival, Vice Chairman

CEO, Director, Natural Foods Ltd; MD Friendly Island Snackfoods Ltd; Director Samoa Qualifications Authority; Director Accident Compensation Commission; Director Research Development Institute of Samoa; Member Development Board of Samoa; Member Project Steering Committee; ADB Small Business; Executive Council Member of SUNGO.

Friendly Island Snackfoods Ltd; Vaigrant & Co Ltd; Motor Distributors (brother-in-law’s business)

MD Video Ezy Miramar, CEO Polynesian Airline; CEO Airport Authority

Samoa Association of Manufacturers & Exporters; Chamber of Commerce; Royal Samoa Country Club; Samoa Institute of Directors

Aliimuamua Kereti Ah Liki

General Manager, Blue Bird Lumber & Hardware


Eleitino Michelle Meredith

Chairperson, Rhelm Ltd Director, Samoa Broadcasting Corporation


Magele Arthur Penn

Partner, Lesa ma Penn Director/Treasurer, Apia Park & Sports Facilities Board Member, Audit Committee, Samoa Water Authority Member, Project Steering Committee, ADB Small Business Development Project

- Director, Price Waterhouse, Apia. Council Member, National University of Samoa

Samoa Institute of Accountants Samoa Chamber of Commerce Samoa Institute of Directors

Matautia Rula Levi General Manager, Executive Director, Housing Corporation


Muaausa Joseph Walter

General Manager & Deputy Chairman of the Board, Electric Power Corporation; Director – Research & Development Institute of Samoa; Director – Pacific Power Association

Institute of Professional Engineers in Samoa; Samoa Institute of Directors

Sealiimalietoa Melepone Isara

CEO SIoD - Manager – P&D Samoa Tourism Authority; Principal; EPPD Ministry of Finance

-


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Section 7

CEOs Employment Agreement and Performance Framework

[Employment Agreement not included in this Report]

DRAFT FRAMEWORK FOR PERFORMANCE MONITORING CHIEF EXECUTIVE OFFICER

Key Result Weight Goals Measure & Targets 1. Strategy

Development, Planning and Reporting

• Implement the Vision for the Institute and develop and define the core technical and marketing expertise.

• Taking a proactive role in the formulation of future strategic objectives and bringing them to the Board for input, discussion and decision as to ratification.

• Ensuring that strong strategic and annual planning processes are in place to produce effective plans for approval by the Board.

• Ensuring that all financial and non financial reporting requirements are met on a timely and regular basis.

• Ensuring that reporting to the Board is always totally ‘transparent’ and on a ‘no surprises’ basis.

• Service the Board of Directors to ensure the highest standards of Corporate Governance are maintained with timely and accurate reporting with no surprises.

Completed Strategic Plan and identified core strategies and tactics to achieve the mission and vision and achieved the strategic plan targets Completed annual review of the Strategic Plan Completed and have Budget approved prior to new financial year Provide monthly financial set of accounts with actual comparisons to prior year and budget comparisons; Trial Balance sheet; Statement of Income and Expenditure; Statement of Cash flow; Statement of Receipts and Payments; any notes; Bank reconciliation and Bank Statement for the end of month. Agenda agreed with the Chair 10 days prior to a meeting are to be delivered hard copy at least 4 working days before meeting. Compliance with the Rules of the SIoD Compliance with the Code of Ethics Minute book with signatures and interest register maintained up to date.

2. Relationship Management

• Developing and maintaining effective strategic relationships with key stakeholders including members, funders/donors, contract counterparties, other customers and partners.

• Developing a wide range of relationships and networks with local, national and international organizations with similar objectives.

• Ensuring the development of effective and innovative lobbying strategies to industry and government in order to promote the interests of the Institute.

No adverse reports or reactions from key stakeholders, members, funding agencies, donors, contract counterparts and partners Mainatin reports to the Board, SIoD members, the donors, the bank and Government of Samoa. Reply promptly and constructively to correspondence and emails to the highest professional standards. That 6 BPS are published annually with sufficient spares to be made available for all members and for dissemination during courses.


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Key Result Weight Goals Measure & Targets • Maintain the effectiveness of the

Board sub-committees

• Maintaining effective working relationships with the Chairman and other members of the Board.

Advocating for issues of interest to the institute and members Maintain at least 70% repeat membership. Organize meetings of the sub-committees to address issues facing the SIoD

3. Operational Management

• Build a team to ensure that the day-to-day operations of the organization are effectively and efficiently coordinated and implemented and conducted within the framework agreed to by the Board.

• Implement stringent project management processes to ensure the timely and cost effective development of the key activities undertaken

• Develop and manage performance based contracts for the achievement of agreed programs.

Recommend and employ staff as required to meet the objectives of the SIoD Ensure that the budget and fiscal policies are agreed between the board and the CEO and are carried out within the approved policies. No surprises Confirm the targets for each financial year with the Directors. For next budget period 170 members, 6 PDP courses, 6 lunchtime presentations

4. Staff and Contract Management and Leadership

• Building and maintaining a high performance culture through effective performance management, communication and coaching of staff and contractors.

• Provide clear leadership and promote and foster a team culture consistent with the organizations values and codes of conduct.

• Ensuring the recruitment of appropriately skilled staff to positions, and establishing appropriate remuneration levels and performance based conditions for staff within the framework agreed to by the Board.

Low turnover Office manned at all times Staff can be contacted at all times Office premises, computer files and filing systems maintained to highest professional standards Performance measurement and achievement of targets for all staff members reported to board every six months Performance review of CEO to be carried out quarterly

5. Compliance with Budget

• Achieves Revenue

• Maintains expenditure within budget

Achieved budgeted revenues and expenditures. Regular reports to the board on progress towards strategic goals Provide event profit and loss for each event.


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Section 8

SAMOA INSTITUTE of DIRECTORS EXPENDITURE DELEGATION POLICY

Status The Board has approved Expenditure Delegation Policy.

1.0 PURPOSE

The Board of SIOD has all the power and responsibilities conferred on it by its Rules / Constitution. This policy establishes the level of delegation to the Chief Executive Officer (CEO). 2.0 SCOPE

This policy covers all delegations within the Institute. 3.0 REFERENCES

Authority established within this policy is subject to the particular requirements of any statutory Policy of the Institute in existence from time to time. 4.0 RESPONSIBILITIES

All Directors and Employees of SIOD must comply with this Policy. The Chief Executive Officer is responsible for the administration of this Policy. 5.0 BOARD DELEGATIONS TO SIOD CEO

5.1 General

• The Board directs the CEO to operate the business of the Institute according to the Board approved Strategic Plan, Capital Expenditure Plan, Budget or any Board approved amendments thereto and within the overall approved budget.

• The CEO is authorised to approve all transactions "within the ordinary course of

business" subject to the limits contained in this document. • The CEO is authorised to initiate legal action against third parties in the interests of

protecting SIOD position. The CEO shall promptly advise the Board of any legal action initiated.

• The Board shall be fully involved in all appointments to and dismissals from

positions that report directly to the CEO.

• Unless a delegation is specifically established under this policy, authority rests with the Board.

• The CEO is an Authorised Person with respect to the execution of Deeds within

his delegated authority.


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5.2 Purchasing Agents

Purchasing agent responsibilities will be performed by CEO.

5.3 Revenue & Expenditure Contracts Authority

(Note: Values shown are for the total period of the contract excluding GST).

Revenue or Expenditure Contracts less than $20k in the normal course of business and within the approved budget.

Revenue Leases/Rental Agreements: 3 years and shorter and less than $20k per

contract in total.

Expenditure Leases/Rental Agreements: 2 years and shorter and less than $20k per contract in total.

Leased Equipment • Leasing is equivalent to borrowing money. It is therefore essential to

determine if the leasing option is more economic than purchasing the asset outright with borrowed funds.

• The lease/borrowing decision must be based on the lowest present value

of cash outflows, unless there are other economic factors to outweigh the cost of funds variance.

Intellectual Property

• Applications for, sale or transfer of Intellectual Property and any

associated Powers of Attorney require Board Approval. Financial Instruments and Borrowing

• No financial instrument transactions or borrowing are to be entered into

without the approval of the Board.

5.4 Personnel

• Approval of all budgeted staff appointments, dismissals and remuneration for other than the CEO. This delegation is subject to the right of the Board to participate fully in second level management appointments and dismissals.

• Approval of all allowances, staff relocations, leave and sensitive issues

other than for the Board or CEO.

5.5 Capital

The CEO may approve capital expenditure approved by the Board in the budget subject to:

Proposals greater than $10k require formal evaluation by management and approval by the board.

The approved capital expenditure process being followed.


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Between $10k and $20k the Chair can sign off, but $20k and over requires full board approval.

Unbudgeted items of $5k or less do not require Board approval provided

alternative budgeted capital expenditure is to be forgone (i.e. Substitution).

Unbudgeted Capital required for emergencies of $10k after consultation with Chair or other director.

Sale of Capital assets where any asset or series of linked assets is less than

$10k.

5.6 Acquisitions/Mergers

Board approval is required for the sale or purchase of any interest in any other business activity.

5.7 Operating Expenditure

• Purchase of raw materials or goods intended for resale that are expected to sell within the current season.

• All operating expenditure within Board approved budgets. • Legal settlements and ex-gratia payments (where no goods or services are

received) less than $5k. • Write-off of debts less than $2k. • All employee expense claims except CEO.

5.8 Cash Management

Surplus funds should be transferred to interest bearing accounts at major trading bank as approved from time to time by SIOD Board

5.9 Payments

Payments require one signatory who is not to be involved in the preparation of the payment.

Authorised signatories and policy are:

The CEO and Chairman or any member of the Audit Committee 6 0 HUMAN RESOURCES

• SIOD Board reviews the CEO’s expenses monthly.

• SIOD chairman approves Directors’ expenses • Audit Committee Chair approves Chairman’s expenses

7.0 RELATED PARTY TRANSACTIONS

Transactions may not be carried out between persons who are related by blood or have a close personal relationship. Where transactions are intended to be with a related party the transaction must be authorized by a member of the Board.


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Section 9


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Section 10

Key Legislation Relevant to Directors in Samoa As at January, 2007

1. Companies Act (NZ) 1955 2. Companies Act 2001 3. Public Bodies Act 2001 and its Amendment 2005 4. Public Bodies Regulations 2001 5. Public Finance Management Act 2001 and its Amendment 2005 6. Labour and Employment Act 1972 7. Enabling legislations of particular to each Public Body 8. Constitution of Samoa 9. Inland Revenue Act 10. Income Tax Act 1974 11. Fair Trading Act 1998 12. Foreign Investment Act 2000 13. Partnership Act 1975 14. Sale of Goods Act 1975 15. Trade, Commerce and Industry Act 1990 16. Tourism and Hotel Development Incentive Act 2003 17. Value Added Goods and Services Tax 1992/1993

Public Body Legislation Pubic Trading bodies

1. Agriculture Store Corp. 1975 2. Airport Authority 1984 3. Development Bank 1974 4. Electric Power Corporation 1980 5. Housing Corporation 1990 6. Polynesian Airlines Ltd. Companies Act 7. Ports Authority 1998 8. Public Trust Office 1975 9. Samoa Broadcasting Corporation 10. Samoa Tel (Communications) Companies Act 1955 11. Samoa Land Corporation “ 12. Samoa Shipping Corporation Companies Act 1955 13. Samoa Shipping Service “ 14. Samoa Trust Estates Corp. 1977 15. Samoa Water Authority 2003

Public Beneficial Bodies 16. Apia Park Board 1995 17. National University of Samoa 1997 18. Samoa Kidney Foundation 2005

19. Samoa Qualifications Authority 2005 20. Samoa Tourist Authority 2002

Three Mutuals

21. Accident Compensation Corporation 1978 22. Samoa Life Assurance Corporation 1976 23. Samoa National Provident Fund 1972


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Section 11

List of Acronyms

ACC Accident Compensation Corporation ADB Asian Development Bank AGM Annual General Meeting BP Best Practice (Statements) BPS Best Practice Statements CEO Chief Executive Officer CFO Chief Financial Officer CSO Community Service Obligation EPC Electric Power Company GDP Gross Domestic Product NBS National Bank of Samoa NUS National University Of Samoa PB Public Body PD Professional Development PDP Professional Development Program PSC Public Service Commission SDS Statement Of Development Strategy SGM Special General Meeting SOE State-Owned Enterprise SOEMD State-Owned Enterprise Monitoring Division of The Ministry of

Finance SIoD Samoa Institute of Directors SWA Samoa Water Authority TOR Terms of Reference TA Technical Assistance


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Section 12

Frequently Used Terms and References This is a brief introduction to the terminology and acronyms in common use in business, the public sector and in governance. If in doubt legal advice is necessary. The word “director” is used throughout this reference although the more correct terminology may be member, trustee, Commissioner, or board director etc. depending on the entity. Accountability – all directors are accountable to the owners of the entity on which they serve; all Public Body directors are accountable to their responsible Ministers or to Parliament depending on the governing legislation. Private sector boards need to keep their owners/family informed at all times of major expenditure decisions or deviations from plan. Public Body boards must advise in advance in their Statement of Corporate Objectives, what they intend to do and achieve, and at the end of each year report on and be held responsible for what they have done and achieved. See further Annual Report, SCO below. Ad hoc committee – a board committee set up for a particular purpose, for a specified short period of time. e.g. for a new office building project. Agenda – every meeting requires careful planning to ensure that objectives are met. The Agenda is prepared, usually by the Chair in consultation with the CEO, and circulated in advance. If there are other staffs or consultants who may add another dimension and knowledge to any Agenda items they should be invited in advance to attend the meeting for that item only. A well-prepared Agenda will set a sound foundation for effective decision making and succinct minutes with clear resolutions. Allowances and expenses – generally, directors should ensure that they are reimbursed for all direct and indirect expenses such as office, secretarial expenses, toll calls, accommodation and travelling expenses reasonably and properly incurred and expense claims submitted with receipts Usually Cabinet Directives prescribe fees and allowances for Public Bodies’ board members. Annual Report – all entities report to their owners/shareholders/Ministers results and operations over a period, which is usually twelve months. Annual Reports include financial statements prepared in accordance with accounting principles and the reports as well as other statutory information including a section on Governance detailing amounts earned by directors, attendance at meetings, composition of board committees etc. Audit – an opinion about whether the financial statements present a “true and fair view” – provided by an independent external auditor. Financial statements are given an unqualified (or clean) opinion, or a qualified opinion (which indicates some serious disagreement about the way the accounts have been prepared or presented). Internal audits can also be carried out to determine breakdowns in internal control systems or fraud, but these are separate from the annual audit opinion. The external auditor has a statutory responsibility to report on the truth and fairness of the accounts. Audit Committee – a sub committee of the board, which meets at least several times a year, to advise the board on the accuracy and integrity of the financial statements and that they comply with all relevant legal requirements and accounting standards. Key roles are overseeing the external financial reporting procedures, and the entity’s internal financial systems and controls, and meeting with the External Auditor to determine the scope of the annual audit and to make a recommendation to the board bout the auditor’s fees. The Auditor is appointed at the Annual General meeting.


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Casting Vote – when a board or committee votes on an issue and equal numbers vote for and against, the rules or constitution of the body may provide for the Chairman to have a “casting vote” to determine the resolution. The “casting vote” is distinguished from the chair’s right to a “deliberative vote” i.e. his or her vote as an ordinary director of the board. CE – Chief Executive or CEO Chief Executive Officer – a key role of the board is to appoint the Chief Executive and to ensure the CEO manages the organisation in accordance with the agreed Strategic Plan (or other accountability document). The Chief Executive is answerable to that board. When a Chief Executive becomes a director of the board, and can therefore take part in voting, they are called a Managing-Director or M-D. Other names for the operational head of a government entity may be Secretary, Director-General, Principal, General Manager, Vice Chancellor etc Civil Action – legal proceedings brought by an individual or organisation, including for the recovery of debt or damages for breaches of a private or civil wrong, or breach of contract. Code of Conduct – a set of rules to provide guidelines for entities covering ethical and legal duties and obligations. The Samoa Institute of Directors has prepared a Code Of Ethics for Directors. Compliance – action in accordance with request or legislation or regulations. Directors are liable if they do not comply with the legislation governing their particular entity and sector. (Refer further The Companies Act 2001.) Directors of bodies not registered under the Companies Act may not necessarily be liable depending on the provision of their legislation. Conflict of interest –directors must act in good faith, either, in the interests of the company, or consistent with the entity’s statutory functions. There is always potential for the director’s own personal interests to conflict with the entity’s interests, for example, the use by directors of confidential information received in their capacity as directors, in order to seek a tender for work in which they will benefit materially. This is particularly relevant if a director has an interest in a product or service which is required by the organisation. Procedures are clearly set out for participating in board decisions in which directors have a personal interest. If directors are unsure whether a conflict of interest exists they should discuss this with their chairman. Unless the conflict is material and ongoing, declaring the interest will not prevent the director from continuing to serve on that board Constituency – a body or class of people affected by the decisions of that entity; often voters who have elected a representative director to Parliament, or have elected a “representative” to sit on the board. Constitution – sometimes called “Rules”, provides the rules and regulations for the entity, meeting procedures, annual reporting, terms and conditions of appointment, AGM procedure etc. Corporate governance – a global term encompassing all the issues facing a board of directors in directing and controlling the activities of an organisation. Corporate governance has four pillars: strategy, performance, compliance and monitoring the CEO. See SIOD Best Practice statement “The Role of the Board in Adding Value” The word Governance is a more generic term and would apply to the governance structures of a country, for example, Parliament and the public service. Deliberative vote – a chair’s vote as an ordinary director of the board or committee compared with a casting vote if the voting is equal. Dissenting vote – a vote cast against a particular proposition; e.g. a vote against an increase of directors fees, a vote against expenditure when revenue is uncertain but all other members are keen to purchase the new equipment.


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Dividend – Directors are thus charged with maximising both the long-term value growth of the company, as well a providing the shareholder with an adequate return on the shareholders investment. In a Public Body context, when a company makes a trading surplus, the board will determine to invest some in the further development of the company and some is returned to the shareholders by way of dividend as a return on shareholders funds invested in the business. Due Diligence – during a sale and purchase process, or merger or acquisition, the prospective purchaser is often permitted to investigate the records, financial and legal, to assist in determining a valuation for purchase. Due diligence can also refer to when a director is considering an appointment and the process of due diligence will determine whether the director is willing to commit to the company and whether the rest of the board is willing to proceed with the invitation to the director to join the board. Evaluation – formal board evaluation is helpful both to identify skill gaps and areas for training but also to provide feedback on the appointment process. There are different approaches to evaluation but processes should assess the chair, the individual director and the board as a whole. Executive Director – Non-Executive Director - Independent Director, a director of a company who is also an employee is called an Executive Director. A Non-Executive Director is not an employee of the company but may have a material interest through investment of being a supplier to the company. An Independent Director is not an employee of the company nor has any material involvement in the company. Fiduciary - a relationship characterised by the reliance of one party upon another with trust. Governance - the system or process by which an organisation or country is directed and controlled. (See also Corporate Governance) “Good governance is the exercise of economic, political and administrative authority to manage a country’s affairs at all levels in a manner that is participatory, transparent and accountable. It is also effective and equitable and promotes the rule of law. Good governance ensures that political, social and economic priorities are based on broad consensus in society and the voices of the poorest and most vulnerable are heard in decision making over the allocation of developmental resources. It includes essential elements such as political accountability, reliable and equitable legal frameworks, bureaucratic transparency, effective and efficient public sector management, participatory development and the promotion and protection of human rights.” Source: Ministry of Foreign Affairs and Trade: NZODA’s interpretation of good governance. Indemnity - security against damage or loss, legal exemption from penalties etc incurred. A director may be indemnified or insured by the entity in certain circumstances but not in case of negligence or a criminal act. Induction and training - the formal introduction of newly appointed directors to their new position, providing comprehensive information on the structure, functions, philosophy, facilities etc of the body they have been appointed to, and the duties and responsibilities of a board director .Continuing training and development of skills and knowledge is an obligation of every director to ensure they continue to add value around the board table. Insurance – appointees should consider whether Directors’ Liability Insurance is necessary and, if appropriate, seek confirmation that it is available through the entity during the due diligence process. Intellectual property rights IP - the right to own and to exploit ideas or inventions, or literary or other works. Sometimes intellectual property rights are given a monetary value in financial statements, e.g. ownership of a patent to manufacture boat anchors, or, ownership of the score and text of a musical, or, software for a computer.


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Legislation - the Minister is responsible for determining whether any changes should be made to the basic legislative “rules of the game” under which the entity is established or operates. The Minister initiates changes by sponsoring legislation into the House of Parliament. The legislation impacting on entities is wide ranging, for example, the Companies Act, Financial Management Reporting Act, It is essential that directors are aware of their legal duties and responsibilities and that the entity has appropriate processes in place to ensure effective compliance at all levels. Liability –Directors are legally bound and answerable for the decisions they take. Directors have rights to receive indemnity and insurance covering directors or employees against all liabilities, defence costs and settlement costs with some exceptions. It is important to seek professional advice. Mandate - judicial or legal responsibilities defined by authority. Non-judicial function - an activity that is not related to the administration of the law. Parent company – a company that has subsidiaries. A subsidiary is a legal entity in its own right quite separate, except in very limited circumstances, from its parent organisation. Presiding Chair/person – whoever happens to be chairing the meeting, whether or not they are formally chair of the board. Probity - uprightness, honesty, integrity, crucial characteristics for appointees. Candidates must consider whether there is anything in their personal histories that may make their candidacy for the board inappropriate. This could be described to candidates as a test of probity, and is necessary to save the government and the board from potential future embarrassment. Public Bodies – legally defined as those listed in The Public Bodies Act. Public Bodies are state sector organisations that are not public service departments. See list at end. Quasi-judicial - as if done by a court of law, person exercising judge-like powers, including examining evidence on oath before making a decision affecting rights, powers or interests. Remuneration and Fees –fees are daily or annual depending on the entity. Cabinet sets the directors’ fees for Public Body directors. A chair might receive approx 200% of a director’s base fee and a Deputy chair 125%. The base fee is set to attract, motivate and retain persons having the high standards of ability and character necessary to carry out the duties of the appointment, taking into account level of hourly rates for each profession, hours spent in travel and preparation, size and performance of the company or entity etc. Each board sets guidelines for reimbursement of all expenses incurred through travel, accommodation, telecommunications etc. Board fees are usually related to the size and complexity of the entity. Some boards choose to pay “Meeting Fees”. Resolution – a procedural step taken by a group to record agreement for (or against) a particular proposal, passed by a simple majority. Revenue – a good performing board will ensure revenue exceeds expenditure. Many Public Bodies receive their revenue through a “Vote” with funds allocated annually in the government Budget. A trading entity derives its revenue from sales, during its ordinary course of business. Sanctions for breach – punishment or penalty for breaking an obligation.


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SCO – Statement of Corporate Objectives – tabled in Parliament by Public Bodies at the beginning of each financial year, defines the objectives, the scope of activities to be undertaken, and performance targets and measures and must include a range of other information. SOEMD State Owned Enterprise Monitoring Division , Ministry of Finance - provides up-to-date information to shareholding Ministers on the performance of Public Bodies, together with advice on how to maximise the benefit from state ownership of these companies. SOEMD advises shareholding Ministers on appointments to the boards of Public Bodies. Shareholders - the owners of the company, for Public Bodies the Responsible Minster and the Finance Minster are the two shareholders. Solvent – the state of a company which is able to meet all its debts as they fall due. Special resolution – a resolution which must be described as a special resolution passed by 75% of the people present and voting to be valid. Stakeholders – people who have an interest in the organisation at any level, or at any distance both internal and external e.g. customers, shareholders, clients, employees, landlords, board directors, suppliers, contractors, bankers, funders, donors. Standing committees - a continuing committee set up by the board with general authority to consider issues which fall within a particular area as they arise from time e.g. Audit Committee, Capital Expenditure Committee. But at all times the committees report to the full board and the board assumes ultimate responsibility. Statement of Responsibility – a note preceding the formal accounts of the organisation wherein the Chief Executive, Chief Financial Officer or Chair, as the case may, be accept responsibility for the form and substance of the accounts. Succession planning – for directors and CEO, CFO etc to ensure that people are identified and prepared to replace key players as their terms expire, recognised as good practice in considering the appointment of new directors and key staff to ensure continuity and appropriate skills are maintained for the entity as it grows. Term – the period of appointment of a director will vary depending on the purpose of the statutory body or company. Government appointments are usually for a set duration. Public Body board appointments are usually not more that two terms of three years. Board directors should only be appointed to a second term if the skills are still relevant and their performance is sound. The appointment is usually at the discretion of the shareholding Minister, or other appointing authority, and may be terminated without notice at any time. The Solvency Test - the solvency test must be satisfied in the view of the company’s directors before the company can enter into certain transactions, and, even more importantly, make any form of distribution to shareholders including distributions by way of dividend. The test does not require the directors to be satisfied that the company is solvent every day it trades but only when certain actions are proposed. All directors appointed to Public Bodies are expected to act in a financially responsible manner. Warrant – an authorisation from a statutory authority, e.g. a warrant for a board appointment.


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Section 13

SIOD Library Governance Resources

1 Inside the Boardroom; What Directors, Investor, Managers and Regulators Must Know about Boards

Richard Leblanc / James Gillies John Wiley & Sons 2005

2 Back to the Drawing Board Colin Carter / Jay Lorsch HBS Press 2004

3 The Wisdom of Crowds James Surowiecki Little, Brown 2004

4 Boardroom Magazine and Best Practice Papers New Zealand Institute of Directors 5 Anglo-American Capitalism and the Ethics of Business Barry, Norman (1999) NZ

Business Roundtable, Wellington 6 Perspective in Business Ethics Hartman, Laura Pincus 1998,

Irwin McGraw-Hill Publishers, Chicago

7 The Hard Problems of Management: Gaining the Ethics Edge

Pastin, Mark 1986, Jossey Bass Publishers, N.Y.

8 Understanding Ethics Preston, Noel 1996 The Federation Press Leichardt, NSW

9 The Director at Risk, Accountability in the Boardroom Henry Bosch, Pitman Publishing Australia 1995

10 The Fish Rots from the Head. The Crisis in our Boardroom: Developing the Critical Skills of the Competent Directors

Bob Garratt, Harper Collins Business 1997 and revised in 2003

11 Thin on Top: How to Measure and Improve Board Performance

Bob Garratt, 2003

12 Corporate Governance, A Directors Handbook Second Edition, CCH New Zealand

13 Board that Makes a Difference John Carver 14 The Corporate Citizen: Governance for All Entities Mervyn King 15 Nine Steps to Effective Governance – Building High

Performing Organisations SPARC ihi Aotearoa

16 Global Corporate Governance Forum Toolkit


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Section 14

SAMOA INSTITUTE of DIRECTORS BUSINESS PLAN

2006-2007

[Not included in this report]


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Section 15

Annual Budget 2006-2007

[Not included in this report]


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Section 16

Professional Development Programme 2006 - 2007

Duration Title Presenter Date No. of Participants

Lunch PDP Launch Prime Minister & Jane Huria

8th June 2006

1 One Day Role of the Board in Adding Value Jane Huria 9th June 2006 2 Seminar Success Factors for Top Performing Boards Jane Huria 20th July 2006 3 Three Day SIOD Directors’ Course Prof. Don Trow, Jane Huria,

Juliet McKee, Daryl Clarke & Don Cameron

18th -20th July 2006 18

4 One-Day Finance for Directors Prof. Don Trow 20th July 2006 18 5 One Day Best Practice in Meeting the Needs of the

Board Jane Huria 28th September 2006 10

6 Four Day SIOD Directors’ Course Prof. Don Trow, Jane Huria, Juliet McKee, Daryl Clarke & Don Cameron

3rd -5th Oct 2006 13

7 One Day Finance for Directors Prof. Don Trow 6th Oct 2006 6 8 Half Day

Seminar Recruiting and Retaining the CEO Juliet McKee 10th Oct 2006 3

9 One Day Board and CEO Relationships and Role of the Board/Company Secretary

Juliet McKee 12th Oct 2006 5

10 Lunch Corporate Planning Justina Sau 23rd Feb 18 11 5.30 – 7.30pm Reporting to the Shareholder Tuatagaloa Joe Annandale 2nd March 15 12 Four-Day SIOD Directors’ Course Prof. Don Trow, Juliet McKee,

Rick Bettle, Richard Westlake & Brenda Heather-Latu

6th – 9th March 2007 21

13 One Day Finance for Directors Prof. Don Trow 7th March 2007 4 14 Half - Day Why Boards Matter – How to be an

Effective Board Richard Westlake 8th March 2007 5

15 Two-Half Day Legal Responsibilities of Directors: Companies Act

Brenda Heather-Latu 27th 28th March 5

16 One day An Introduction to Directorship for New Directors

Joseph Thomas 17th – 19th April 5


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17 One day An Introduction to Strategic Planning for Directors

Joseph Thomas 18th April 5

18 One day Governance for Senior Management Joseph Thomas 19th April 8 19 One day Update on Corporate Governance for Senior

Directors Juliet McKee Tues 8th May 10

20 One day Recruitment and Retention of the CEO Juliet McKee Wed 9th May 13 21 One day Role of Board, Chairman & the Director Juliet McKee Fri 11th May 12 22 Half-day Audit and Risk Management Graeme McNally Wed 30th May 18 23 Half-day Audit and Risk Management Graeme McNally Thurs 7th June 17 24 Three day The Directors Three day course

Phillip Roth 26th – 28th June

Code of Conduct i) Public Sector [PSC] ii) Private Sector [NBS CEO] iii) Judiciary - Bad Conduct!! Chief Justice

Tues 17th July

Strategic Planning i) NUS ii) MOF iii) Private sector

Tues 14th August

(Funded by ICT) Introduction to Directorship ½ Day Strategic Planning 1 Day Finance for Directors 1 Day Legal Compliance ½ Day

Tues 23rd Oct Wed 24th Oct Thurs 25th Oct Fri 26th Oct

Performance Measures for directors – financial & non-financial

29th October

Role of the Chairman 6th Nov or 13th Audit and Risk Management 7th Nov or 14th Christmas Debate Leadership Lessons from

Santa

7th Dec 2007


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Section 17

Example SIOD Course Programme

MARCH 07 The Directors’ Course (4 Days) Times Day 1 Day 2 Day 3 Day 4 9 – 10.30am Welcome/Prayers

Principles of Corporate Governance - Richard Westlake

Legal Session Brenda Heather-Latu

Role of the Company Secretary - Dan Cameron

Risk Management – Juliet McKee

10.30-11am Morning Tea Morning Tea Morning Tea Morning Tea 11-12.30am Principles of

Corporate Governance - Richard Westlake

Strategy Development and Implementation Rick Bettle

Finance for Directors - Prof Trow

The CEO – Juliet McKee

12.30-1.30pm Lunch Lunch Lunch Lunch 1.30-3pm Effective Board

Practice - Richard Westlake



Directing in a Family Company Juliet McKee

3-3.30pm Afternoon Tea Afternoon Tea Afternoon Tea Certificates 3.30-4.15pm Effective Board

Practice - Richard Westlake



Complete day’s evaluation Course Conclusion

4.15-4.30 Complete day’s evaluation

Complete day’s evaluation

Complete day’s evaluation


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Section 18

Board Advisory Service Purpose of Paper: To establish and agree the arrangements for a Board Advisory Service To: The CEO, SIOD Subject: Board Advisory Service Date: 10 April 2007 Author: Jane Huria, Director Development Specialist, ADB Technical

Assistance Programme Introduction The purpose of this paper is to:

• set out the results of previous board discussions which verbally approved the concept of a Board Advisory Service to be offered by the SIOD

• incorporate board suggestions made during the informal board meeting held on 29 March 2007

• seek board guidance on the matter of payment for this service • seek board approval for the establishment of a Board Advisory Service.

Initial discussions were based on the concept of a Board mentoring service similar to the service offered by the New Zealand Institute of Directors however the SIOD Board has decided that:

1. a ‘mentoring programme is not appropriate at this time’ 2. a preferred option is a ‘Board Advisory Service’

Description of Proposed Board Advisory Service The first iteration of the SIOD Board Advisory Service was a service to provide confidential, objective governance support and advice which is tailored to individual boards who seek this support, in return for a fee. Support and advice is supplied by local and international governance advisors. Different opinions have been expressed about whether or not the SIOD should charge a fee for this service: some think that a fee should be charged to boards who use this service, and others think that entities who are members of the SIOD expect this service to be free and offered as a benefit of membership. In an earlier board discussion in October, board members discussed the fact that they and many others offer ongoing advisory services on an informal basis and that no fee is payable. During the recent market research undertaken in late March, some interviewees thought that the SIOD should approach their boards about tailored training services. When invited to suggest an appropriate fee, several were unsure as this is a new service and they did not know what to base their estimate on. A couple of other interviewees thought that SAT 500 to 1000 may be an appropriate fee for a board to pay for a 9am-3pm session.


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Benefits of Board Advisory Service • Provides governance support and advice to boards on their specific issues • Builds governance skills and knowledge and improves performance • Provides a service to meet needs of SIOD members • Generates revenue for SIOD Board Advisors While the SIOD may suggest board advisors suitable for each advisory project, each board using the service makes the final decision about whom they wish to engage. Board advisors may be visiting international governance practitioners who are assisting the SIOD with Director Development training courses and other activities, who are invited to undertake this work on an ‘as required’ basis. Board advisors may also be local people invited to assist the SIOD in providing this service. Board advisor requirements:

• Governance knowledge, experience and expertise • A degree of understanding of the legal framework and cultural environment in which

boards operate in Samoa • Able to observe strict confidentiality • Be respected • Prepared to share experiences • Prepared to take time, be able to listen and be open to new ideas • Be compatible with the client board • Be able to assist through advice, information, networks

Establishing the Service The CEO will be tasked with:

• setting high service standards through the development of Service Guidelines which cover

o the requirement for confidentiality o advisor briefings to enable the advisor to address key issues during the time

available o the need for clear and realistic expectations by both parties about what can

be achieved / the objectives in each case o other appropriate matters.

• developing an agreement template which is tailored to each case and which will help clarify the expectations of client, SIOD and/or advisor. The template includes fees (if payable), client to provide suitable venue, hours to be delivered under the agreement, no liability clause, etc.

• advertising the Board Advisory Service to ensure that there is knowledge in governance circles in Samoa about the service

• coordinating requests for the service with local service providers / visits from international governance experts

• quality check follow up communication with boards who use the Service for general feedback and improvement recommendations


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Service Reviews The SIOD board may review the Service from time to time. The purpose of the review is to

• conduct a cost/benefit analysis of the Service • obtain feedback about the Service • identify opportunities for improvement.

Costs The cost of a Board Advisory Service will include:

Establishment: Board time: consider board papers on the Service; review service guidelines and agreement template; assist CEO where required

CEO time: set up agreement template; Service promotion and administration

Production of promotional materials

Ongoing administration costs

Board time: receive reports on the Service from time to time from CEO; promote Service; request and receive review reports

CEO time: Service promotion and administration; undertake review from time to time RECOMMENDATION: That the SIOD Board

• Decides o whether or not fees are to be charged for the Board Advisory Service o if payable, what level of fees are suitable

• Agrees that the SIOD will establish a Board Advisory Service.


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Section 19

Issues and Options for Director Qualification/Accreditation Purpose of Paper: Board Information: Director Accreditation Date: 10 April 2007 Author: Jane Huria _____________________________________________________________________

1. Purpose of Paper The purpose of this paper is to provide information for further board discussion around the establishment of an SIOD accreditation scheme for directors in Samoa. This paper follows an initial Board discussion on October 6 last year and subsequent Board discussions - December 06 and an informal meeting March 07 – about an accreditation scheme for the Samoa Institute of Directors. March discussions included consideration of the director accreditation schemes operating in other countries (see Appendix One) and the possibility of Samoa Qualification Authority (SQA) registration for an SIOD accreditation-type process. The costs and benefits of SQA registration are to be researched by the CEO and will be reported to the board.

2. Background The establishment of an accreditation process for directors in many countries has grown from a perceived need to improve standards of corporate governance, particularly following the series of corporate collapses such as WorldCom, Enron etc where board failure was seen to be to some extent responsible. The purpose of accreditation therefore is to enhance standards of corporate governance through independent recognition of directors who have provided evidence that they are have governance experience, knowledge and referees. Although accreditation provides no guarantee or certification of competency, it offers an opportunity to reduce risks around unsuitable board appointments. Accreditation also gives directors an opportunity to show their commitment to professional standards.

3. Board Discussions to Date The SIOD Board has reviewed accreditation programmes in other countries and considers that an accreditation programme which is developed for and appropriate to Samoa is the preferred course of action. Board members noted:

the relative newness of the SIOD - ‘there is a need to get directors into the system’ (i.e. the directors of the SIOD expressed a wish to encourage membership and good governance standards rather than ‘put people off’ by implementing an unsuitable process)

their desire to ‘reward’ members who complete a set of professional development courses

4. Suggested Options

The CEO has suggested that a process consisting of a series of options be developed and offered to members who select which option, if any, they wish to pursue. These options might include:


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• Course attendance – completion results in an SIOD certificate of attendance for that / those course(s)

• Certification of directors • Accreditation of directors

NB All options have implied preconditions, being Samoa’s legal requirements for eligibility as a director, and those conditions required for membership of the Institute (e.g. a financial member of the Samoa Institute of Directors, a person of good character and integrity, etc). Option One – Course Attendance and Receipt of Attendance Certificate This option is for member directors who wish to undertake governance professional development from time to time and who receive a certificate for each training course completed. Option Two - SIOD Certification The option of certification is for directors who want independent formal recognition for their experience and training course completion. The Board may wish to consider and discuss suitable certification requirements, such as:

• Course completion: o A mandatory Directors’ Course, plus o A prescribed number of days of SIOD training - say 2 days (or

equivalent) of SIOD courses • Experience: A minimum number of years experience on boards of

organisations which meet certain criteria (e.g. revenue, staff numbers, etc) – say 3 years (?) out of the previous 7 years (?)

• Ongoing professional development: A commitment to a minimum time in annual director professional development. This might include 10 hours (?) per annum in governance related activities such as professional development training course / seminar / conference attendance, networking, reading, study, etc

Option Three - SIOD Accreditation This option targets those SIOD members who want to achieve the highest qualification and who:

• Course completion: Attend, within 18 months, a set of core courses which are prescribed by the SIOD for accreditation (e.g. The Directors Course, plus 3 (?) days equivalent of other SIOD training courses)

• Examination: Pass a written, open book examination, with unlimited options for re-try available, and exam answers after the test, in the event of a failure to pass

• References: Submit two written referee statements, one professional and one personal (both from non family members)

• Experience: Have a minimum number of years experience (say 5 years?) on boards of organisations which meet certain criteria (i.e. those criteria set for certification)

• Ongoing professional development: A commitment to a minimum number of days in annual director professional development. This might include 12 hours (?) per annum in governance related activities such as professional development training course / seminar / conference attendance, networking, reading, study, etc


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5. Objectives of Accreditation and Certification

The objectives of an SIOD process as outlined above are to: improve standards of governance through training and accreditation offer SIOD members the opportunity to show their commitment to professional

standards reduce risk around director appointments set expectations around governance knowledge through training provide shareholders and stakeholders with reassurance that accredited directors

have undertaken professional development training and met a set of criteria prescribed by an independent body

6. Further Issues for Board Consideration

Further issues for board consideration may include: • are there to be any additional benefits to members from accreditation (e.g.

special presentation ceremony? Being included on list of accredited members published by SIOD?)

• should certification require references for applicants? • will certification and accreditation require an application fee and/ or an

ongoing registration fee? • what are the criteria for qualifying company boards in the certification and

accreditation process? • what are the applicable legal and SIOD membership exclusionary criteria

(such as undischarged bankruptcy, etc)? • are there to be terms around expiry of certification and accreditation validity

and renewal requirements (e.g. ongoing attendance at formal governance-related professional development courses and / or a fixed number of hours informal development in reading business and professional publications and networking, to ensure currency)?

• will the SIOD publish the names of those who complete courses, those who become certificated and those who are accredited?

7. Certification and Accreditation Process

The process may involve • Board, through the CEO, promotes accreditation programme and the available

options • Board, through CEO, receives applications for accreditation and compiles and

maintains a Register of persons that the Board has certificated and accredited • Board refers any reports and complaints about the competence, behaviour or

professional conduct of certificated and accredited persons to a committee of the Board, which deals with breaches of the Code of Ethics and Proper Practice etc, with committee members appointed by the SIOD Chairperson as required

• The SIOD may pay committee remuneration and expenses, and indemnifies the Board committee against amounts, expenses or claims properly incurred by the Board.

• The SIOD CEO assists the SIOD Board and committee in the efficient carrying out of accreditation related functions of the Board.


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Recommendation That the SIOD board agrees further details around an appropriate accreditation programme and tasks the CEO with:

• Researching options around registration of SIOD certification and accreditation with Samoa Qualifications Authority

• Incorporating board comments and producing the next iteration of an appropriate accreditation process for board consideration and approval

_________________________________________________________________________APPENDIX ONE – OTHER ACCREDITATION PROGRAMMES New Zealand The development of an accreditation process for directors in New Zealand took several years and included a series of consultations with interested parties before it was formally implemented in mid 2005. Accreditation in New Zealand is intended to enhance corporate governance standards by establishing a register of directors who have provided evidence that they have sufficient knowledge and experience to be accredited and gain entry to the register. Accreditation Objectives The objectives of accreditation in New Zealand are to:

Enhance corporate governance through a registration process for directors who have met accreditation criteria, which includes levels of knowledge and skills and experience

Give members an opportunity to show their commitment to professional standards Provide shareholders and stakeholders with reassurance that accredited directors are

knowledgeable, experienced and committed to the profession Set expectations of behaviour and standards of conduct

Accreditation Process The accreditation process aims to meet these objectives through the following process

Verifying a director’s experience and knowledge through the receipt of a written application, on a standard application form, by directors who wish to achieve accreditation. The application form requires applicants to answer prescribed questions (such as their professional qualifications, their governance experience and professional development) and it must be accompanied by 2 written references and an application fee of NZD250.

Participation by the applicant in a panel interview to answer the questions of panel members who try to ascertain the level of knowledge of the applicant

Passing of judgment by the Accreditation Panel as to, whether or not in their view, the applicant meets the criteria for accreditation

Once granted, accreditation is valid for 2 years, after which it can be renewed by application to the Accreditation Board, subject to the applicant meeting continuing professional development requirements. In New Zealand these consist of a recommended formal 20 hours per annum professional development at workshops, conferences and seminars, plus 20 hours informal development in reading business and professional publications and networking.

An option exists for provisional accreditation for directors who have the requisite knowledge of the role and responsibilities but who do not have requisite experience. Provisionally accredited directors may re-apply for full accreditation after a 12 month period and must repeat the process.


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Accreditation Criteria Accreditation criteria in New Zealand includes:

An applicant for accreditation must be, and continue to be, a financial member of the New Zealand Institute of Directors and have been a member for a minimum period of 12 months

Qualification requirements are applicants must satisfy the Accreditation Board that

They understand the roles and responsibilities of directors in New Zealand They have sufficient and relevant practical experience as a director They are of good character

commit to comply fully with continuing professional development requirements commit to comply fully with the IOD Code of Proper Practice for Directors and

demonstrate an understanding of the Institute’s Best Practice Statements have good character, integrity and professional experience

Accreditation criteria also includes: New Zealand directors are only accredited if they are serving, experienced directors with a minimum of five out of the last eight years as a director of an entity of substance (substance being defined by size or being a public listed company). Accreditation Board An Accreditation Board receives applications for accreditation and compiles and maintains a Register of Accredited Persons. The Board also refers any reports and complaints about the competence, behaviour or professional conduct of Accredited (or Provisionally Accredited) persons to the Council. Members of the Accreditation Board, and the Chairperson, are appointed by the Board of the Institute. The Accreditation Board includes two Board members, and three other members of the Institute, and the term for each Accreditation Board member is three years, with reappointment possible for a further term of three years. The Institute may pay board members remuneration and expenses, and indemnifies the Board against all amounts, expenses or claims properly incurred by the Board. A Registrar (usually the NZIOD CEO) is nominated to assist the Accreditation Board in the efficient carrying out of functions of the Board. __________________________________________________________________________ United Kingdom In 1999 the IoD launched the Chartered Director programme. Their website notes that “‘Chartered Director’ is now widely recognised as the professional qualification for directors. It is particularly valued by those already professionally qualified in a vocational role, such as Chartered Accountants or Chartered Engineers, who are faced with a whole new set of broader challenges in the boardroom.... Legislation is becoming ever more onerous on the running of a business at all levels. The IoD’s Chartered Director initiative will go a long way to providing a common qualification to assist companies to benchmark senior executives outside their specialist skills set.”


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Chartered Director Process The first stage is to pass the IoD examination in Company Direction, which assesses the subjects covered in the IoD Company Direction Programme which are considered important to a director's competence:

Director duties, liabilities and responsibilities

Legal obligations

Finance

Setting strategic direction

Human resource strategy

Marketing strategy

Leadership

Strategic change

There are three routes to the exam:

Eligibility for Registration To register for Chartered Director, a director must be a full Member or Fellow of the Institute and be registered for or have passed the Diploma examination in Company Direction.

The length of experience in a director role or equivalent should be either:

• 3 full years’ experience in a director level role for holders of a recognised degree or professional qualification.

• 7 full years’ experience in a director level role, for those who do not hold a recognised degree or professional qualification.

For either period a director may have been working in a number of roles at director (or equivalent) level, including non-executive positions (NED positions must be consecutive).


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The board (or governing body) must have comprised three directors (including executive or non-executive directors).

The role, to qualify, includes participation in the direction of the organisation and a number of other role-related criteria. There are also criteria around participation in board activities, such as number of meetings, board focus, risk management etc. __________________________________________________________________________ Canada The ICD.D certification is granted by the Institute of Corporate Directors, the professional body representing the director community in Canada. The professional designation ICD.D is recognized both nationally and internationally.

An applicant or Certification candidate must:

• Successfully complete all 12 days of the ICD Directors Education Programme • Successfully complete the written examination • Successfully complete the oral examination* given by two ICD-appointed • examiners • Hold a university degree or a college diploma or have experience deemed similar • Pay upon receipt of invoice, the one-time ICD examination fee of $250 + GST

*Please note: To be eligible to sit for the oral examination, candidates must serve as a director for two of the past five years, on a board that meets at least four times per year, has a minimum of three directors, and is focused on governance.

A candidate’s knowledge-based competencies are assessed through a multiple-choice written examination. The skills and behavioural competencies are assessed through an oral exam, where a group of up to four candidates are given a case by a panel of Canada’s most experienced directors, in a simulated boardroom environment. Following the board simulation, each candidate receives a one-on-one interview with one of the examiners.

To receive from the ICD the right to be Certified and use the designation “ICD.D,” a Certified director must:

• Maintain an active ICD membership as a member in good standing • Serve as a director for two of the past five years, on a board that meets at least four

times per year, has a minimum of three directors, and is focused on governance • Sign the Certification Agreement • Comply with the ICD’s Code of Conduct • Participate in a minimum of 14 hours ongoing governance education annually, by

attending ICD alumni events, ICD breakfasts, seminars, conferences and/or other leading organizations that offer programs related to governance or have learning outcomes in an area directly related to governance

__________________________________________________________________________

United States The National Association of Corporate Directors confers the Certificate of Director Education. Director Professionalism is a nationally recognized continuing education curriculum and

http://www.icd.ca/AM/Template.cfm?Section=Code_of_Conduct1&Template=/CM/HTMLDisplay.cfm&ContentID=1971

http://www.icd.ca/Docs/FAQ_CEUs.pdf


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certificate program for board members who are committed to practicing engaged, effective, and ethical corporate governance.

The Institute offers a nationally-recognized continuing education curriculum and certificate program for corporate board members who are committed to practicing engaged, effective, and ethical corporate governance. Directors may earn the Certificate of Director Education by completing the 2-day Director Professionalism Course. The intensive curriculum for this course is based on three decades of NACD research and in-boardroom experience, as well as current legal developments, regulatory factors, and documented leading practices.

Certificates are maintained annually by attending eight hours of Continuing Education Programs. Directors may select from a comprehensive menu of high quality programmes that are offered by the Institute as well as by other providers such as leading universities. It is not necessary to obtain the Certificate of Director Education to participate in the Institute's continuing education programs. However, NACD recommends obtaining the certificate as a first step, since it provides a comprehensive grounding in governance. The Certificate programme can also help corporate governance leaders set and fulfil education goals for the whole board. ________________________________________________________________________ South Africa The Institute in South Africa is considering accreditation but does not yet have a process in place. __________________________________________________________________________

http://www.nacdonline.org/cdinstitute/obtain.asp

http://www.nacdonline.org/cdinstitute/objectives.asp

http://www.nacdonline.org/cdinstitute/cont_ed.asp

http://www.nacdonline.org/cdinstitute/cont_ed.asp


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Section 20

Samoa Institute of Directors Code of Ethics and Proper Practice for Members

March 2007

1. Introduction and Purpose

The purpose of this Code to provide guidance to SIOD members to assist them in carrying out their governance duties in accordance with high standards of ethical conduct and professional behaviour.

Membership of the Samoa Institute of Directors requires that members personally agree to take responsibility to act in an ethical and professionally responsible manner in accordance with this Code. The Code is binding on all members.

This Code is not exhaustive and should be read in conjunction with applicable laws, including legislation, regulations and local authority by-laws. Non compliance may result in withdrawal of membership. 2. Values We adhere to the following core values in all our undertakings: Samoan English

Tofa Respect for Samoan culture

Respect for others Leadership providing guidance, control and direction Honesty truthfulness, sincerity, frankness, openness Integrity honour, uprightness, reliability Transparency clear, lacking ambiguity, no hidden agendas Accountability answerable, taking responsibility Diligence hard working, focused on performance, thoroughness Independent free from influence, self determining Stability steadiness, permanence


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Principles SIOD Members shall

1. Act honestly, in good faith, in what they believe to be the interests of the organisation(s) they govern

2. Observe the duties of care, skill and diligence required of directors

3. Carry out their duties for a proper purpose, in a lawful manner and in accordance with this Code of Ethics and Proper Practice

4. Avoid conflicts of interest, actual or perceived, between personal and organisational interests. Where such conflicts arise, the person(s) concerned act within the terms of the board’s conflict of interest policy

5. Act in accordance with fiduciary duties, complying with the spirit as well as the letter of the law

6. Interact with the board and management in a positive and constructive manner

7. Be diligent by attending board meetings, spending sufficient time in preparation for board meetings, and keeping familiar with the business and the environments in which it operates, to allow for participation in the board’s decision making

8. Ensure that there is avoidance of deception, unethical practice or any other behaviour that is, or might be construed as, less than honourable in the pursuit of the organisation’s business

9. Observe the confidentiality of information disclosed to them as directors and not disclose to any other person confidential information other than as agreed by the board or as required under law or the constitution of the organisation

10. Be loyal to and supportive of the board and the organisation

11. Abide by board decisions once reached notwithstanding a director’s right to pursue a review or reversal of a board decision

12. Not do anything that in any way denigrates the organisation or harms its public image.

The board of directors shall 1. Lead the organisation by setting long term goals and by engaging with management

in the development, approval, monitoring and review of strategy for achieving the long term goals

2. Set ethical standards by articulating and fostering organizational values

3. Meet regularly to monitor performance against the achievement of strategic goals and

compliance with board approved policy, through timely accurate reporting to the board.

4. Ensure that there is an appropriate definition and separation of duties and

responsibilities between the board and the CEO, that the board and the CEO understand their respective roles, and that no one has unfettered powers of decision making


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5. Ensure that board meeting agendas provide appropriate balance for discussion of

performance, compliance and other matters

6. Ensure that there is full, free and frank discussion in board meetings and that independent views of directors are given due consideration and weight

7. Meet its responsibility to ensure that staff employed by the organisation are treated

with respect and are provided with a working environment and conditions that meet all reasonable standards of employment as defined in relevant workplace legislation

8. Ensure that the organisation fosters positive relationships with shareholders and

stakeholders, that they are provided with an accurate and balanced view of the organisation’s performance as required and as appropriate, and that their legitimate interests are recognized and respected

9. Ensure that the organisation has suitable internal controls and risk management

systems in place, in particular internal and external audit processes, which are regularly reviewed and updated

10. Regularly review its own performance as the basis for its own development and

continuous improvement of the board as a whole and individual directors


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Annex 2: SIOD Professional Development Programme Report 1. Introduction This report provides a high level summary of the SIOD Professional Development programme from June 06 when the current International Director Development Specialist (DDS) took up the role, to the end of March 07. The DDS reports to two key tasks 1. Design and advise on implementation of a Professional Development programme to meet Samoan director needs in a range of modules and formats 2. Study and report on sustainable approaches to accreditation and or recognition of qualifications or experience for company directors to be administered by the Institute This report includes key achievements and issues for further development in these areas. Further information is found elsewhere in this report and more detail is included in the DDS Visit reports which set out the activities of each visit as the project progressed. The DDS wishes to acknowledge the contribution and assistance of the previous and current CEOs, and the Chairman and SIOD board members during the term of this project. Both CEOs invited the Board to meet each time the DDS visited in order to progress ADB project related matters and they gave generously of their time and expertise. They are an capable group of people who will continue to play a key role in the success of the SIOD. 2. Context The total estimated population in Samoa in 2006 was 176,908, with 64% of the total population working in agriculture. In other words, there is a relatively small population base from which to draw members, as well as experienced governors who might also be SIOD governance teachers. There is a base of approximately 120 public body appointed directors and there are a number of private sector, mainly family, company boards of directors. Up to this stage in the development of the SIOD, fees generated from membership (86 current members) and training courses have been supplemented by additional funding. The CEO is aware of the importance of membership growth, training course fee generation, and additional funding, and is investigating options. An important element in ongoing sustainability for the SIOD has been government support and encouragement from the highest levels. The Prime Minister and Deputy Prime Minister have been vocal supporters of good governance practices for a number of years and the Ministry of Finance has recently asked that SOEs enrol their board members in the SIOD, and that they pay for board member attendance at SIOD training courses. The SIOD has been aware from its inception to tread a line between promoting internationally accepted best practice governance principles yet not transgressing against the strongly held traditional customs and beliefs that bind Samoan society. Many Samoans live within the traditional social system comprised of an extended family group (aiga) which is headed by a chief (matai). To be successful in a sustainable way in its mission to promote good governance, the SIOD must continue to be aware of and manage possibilities for conflict with traditional foundations of Samoan life.


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3. Key Issue Overview Key governance issues in Samoa are similar to those found in other Commonwealth countries in which the DDS has had governance development experience. These issues do not apply to all boards and organisations in Samoa, however overcoming these issues where they do exist is key to the success of the SIOD:

• Some board members and management lack knowledge about the governance role and its responsibilities

• Board and management may not understand the importance of organisational strategy and board ownership of that strategy

• Some organisations lack robust accurate timely board reporting • A number of board members do not understand financial information • Many organisations lack process and adherence to process around the management

of conflicts of interest Key issues affecting the SIOD in terms of this project include:

o A relatively small population base from which to draw SIOD members and trainers o Limited governance professional development expertise “on-island” o Ongoing need for generation of external funding, in addition to membership and

course fees, in order to continue to offer the current training programme o The CEO does not yet have significant experience in the area of governance

professional development 4. Achievements 4.1. Design and advise on implementation of a Professional Development programme to meet Samoan director needs in a range of modules and formats 4.1.1 2006/07 Professional Development Training and Event Programme Following the televised launch of the Professional Development Programme (PDP) in June 2006 by the Prime Minister, which included a Key Note Address by the DDS, a series of training courses and governance related events were run by the SIOD. See Annex One. A strong start was made with a significant number of events taking place during the period covered by this report (June 06 – March 07) which raised the profile of both the SIOD and the importance of good governance principles. Several events initially planned for 2006/early 2007 did not happen due to the resignation of the previous CEO. The SIOD director professional development programme to end March 07 has included:

• a comprehensive series of governance training courses presented by both local and international personnel, and a number of social events, such as a sponsored corporate lunch and an evening function, both of which included a governance related address

• a Training Course Resource folder “Background Information” which provides supplementary governance-related information for course participants, including: Glossary of frequently used governance terms and references; Website references and corporate governance literature; Discussion papers - “Conflicts of Interest”, “Why do we need an Audit Committee?”; Templates - Sample Board Letter of Appointment, Agenda, Board Work Plan/Timetable, Outline of a Directors Folder (which includes director documents and information recommended for directorship on that board - such as Constitution, strategic and business plans, latest annual


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budget, delegated authorities, committees and terms of reference, register of interests, address and contact details for board members and key staff etc)

• publication by the SIOD of a series of best practice papers, with additional drafts on further topics written and awaiting board consideration in due course

• establishment of a Board Advisory service framework • development of a Course Administration Guide • development of Teaching Point Guidelines to ensure course consistency and

coverage of governance principles • sourcing of library and reference resources

See Annex 18 for a report on individual presenters and their training courses held September/October 2006, which was requested by an SIOD Board member. With regard to future courses, the Board has received a draft programme to end December 08 (developed by the CEO, the Team Leader and the DDS), to discuss and approve. See Annex 1. A degree of programme flexibility will be needed to accommodate presenters, funding opportunities, and other factors. At the end of this period, the DDS expects that the CEO will be conversant with governance training, and will have visited the NZIOD to establish a relationship and to have discussions, to develop ongoing programmes. From time to time he may benefit from an international perspective on the course programme to ensure its currency. 4.1.2 Course Promotion Courses were initially mainly promoted by newspaper and through word of mouth. The televising of the PDP opening also resulted in participant interest. Word of mouth remains an important source of course promotion. SOE CEOs have more recently played an increased role in course promotion by offering the opportunity for their board members to attend (as requested by the Ministry of Finance) on a fees and daily stipend paid basis. The new CEO has used some television advertising and is alert to the need to let people know well in advance about what courses are coming up, particularly in order for board members to gain approval for course funding. He is aware of the ongoing importance of timely promotion in order to achieve satisfactory attendance levels. He has a number of ideas about how and when it is appropriate to do this promotion, and the market research undertaken in March 07 has highlighted further useful avenues for consideration. 4.1.3 International Calibre of SIOD Courses During the period to end March 2007, training courses were developed according to the professional development programme approved by the SIOD board and in accordance with international best practice governance standards. The SIOD board and the CEO are insistent that the calibre of courses in Samoa is consistent with the standard of courses offered by the Institutes in New Zealand and Australia. The need to ensure this consistency has been assisted to date by the following:

• each international presenter engaged was also an experienced and respected presenter for the NZIOD

• course programme and contents are similar to those offered by the NZIOD Director Development courses

• local presenters were experts in their fields • the Samoan legal system is based local customs and on English law (as is the

system in New Zealand).


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Training courses were presented by a mix of local and international personnel. The international presenters engaged for the courses to end March 07 were seen as adding an important international perspective to SIOD courses, in terms of:

• their knowledge of international best practice governance • their knowledge of NZIOD training methods and course content gained through

working with the NZIOD as professional development experts • their practical experience as directors and chairs in a wide range of organisations

Local expertise was particularly useful in the legal area, with the SIOD having been fortunate to have the services of the previous Attorney General and Assistant Attorney General to present on legal duties, liabilities and changes required under the new Companies Act. Local expertise was also very useful around presenting on the changing role of the Company Secretary in Samoa. The DDS and the Team Leader also spent considerable time developing and presenting a number of training courses, including power point presentations, case studies, resource references and templates. Part time assistance was provided through the SIOD however the DDS and Team Leader were required to undertake administrative and course material production duties. They were capably assisted in these tasks by the SOEMD team. In return for staff assistance and photocopying, the SOEMD negotiated governance training course placements, which was an ideal arrangement. Being based during her visits in the SIOD offices in the Lotemau Centre and in the absence of office staff, the DDS also assisted with telephone messages, visitors to the office, course enquiries, enrolments and payment receipting, stationery purchases, and other administration matters. 4.1.4 Attendances Attendances were steady, with the flagship 3 day Directors’ course numbering between 14 and 18 participants, and one day courses between 4 and 24 participants. Many participants from previous courses went on to complete further courses, and a number attended based on word of mouth recommendations from previous course participants. Course numbers have reduced in the most recent courses however the CEO believes that this is largely due to a lack of proper promotion and he has determined on a course of action to recruit participants in a more timely and effective manner. The Ministry of Finance directive to SOE CEOs to send board members to courses and pay for them will assist his endeavours. The ongoing supply of new board members appointed to public bodies should also ensure a steady supply of training course attendees. 4.1.5 SIOD Membership and Course Fees The market research report showed that most interviewees were not concerned about the level of course fees. The research illustrated that many of those interviewed felt that fee levels for both SIOD membership and training course fees were appropriate however it must be noted that many did not pay their own membership or course fees as these were paid for by the public bodies on whose boards they served. An opportunity may exist for the SIOD to run more courses which are of shorter duration and are less expensive in key areas of need, such as understanding financial reports. Reduced fees and shorter courses may give SOE CEOs the ability to send more of their board members along, and may result in increased numbers of individuals attending who pay their own course fees.


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4.1.6 Teaching Method Despite an initial caution that Samoans prefer lecture style to more participative forms of teaching, case study participation was very high. Participants expressed their enjoyment of case study work undertaken in break out groups and case studies gave participants an opportunity to have discussion in Samoan. There were a number of requests for increased case study utilisation in future. Translation of course materials into Samoan was requested by several SIOD board members however this did not occur until the new CEO arrived (except in the case of some of the Team Leader presentations for which she organised translation of key points). See Annex One Market Research report for feedback ideas on how to teach corporate governance in Samoan language. Further market research showed that the ideal course duration for many was a half day, and that for longer courses a series of half days was preferred as this enabled participants to attend to their other responsibilities in the afternoons. Course evaluations completed by participants rated the courses, including presenters and materials, very highly. See Annex 19 for an example of the participant course evaluation spreadsheet. 4.2 Best Practice papers, including Code of Ethics and Proper Practice 4.2.1 Best Practice Papers Three best practice papers were developed, worked through by the Board and published: Prepared by The Role of the Board in Adding Value - August 06 Jane Huria The Role of the Board Chair – November 06 Jane Huria Understanding Financial Statements – December 06 Professor Don Trow There are currently three draft best practice papers with the Board which the CEO anticipates will be approved by the board in May: Prepared by: Strategic Planning Rick Bettle Conflicts of Interest Jane Huria Meeting the Needs of the Board Jane Huria A further best practice paper “Audit Committees” by Professor Don Trow has been drafted and awaits presentation to the Board for comment and approval in due course. Input into various best practice paper drafts was provided by the SIOD CEO, local consultants (Kolone Vaai) and the TA Team Leader. The CEO wishes to discuss with the Board the process of a board subcommittee set up to work on best practice papers. 4.2.2 Code of Ethics and Proper Practice The SIOD Board has had a series of discussions on a Code of Ethics and Proper Practice. They have decided that two codes are appropriate – one for the SIOD itself as a membership body with staff, and one for individual members of the Institute. The process has been slowed to accommodate new members joining the board. There have been numerous discussions around the values to be incorporated into the Codes and the latest iterations are


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included as Annex 6 of this report. The new CEO wishes to have further discussion around the use of Samoan language in the articulation of values to apply to the SIOD and to its members. Further discussion also is needed by the board around the implementation of sanctions implied by the establishment of the Codes. 4.3 Board Advisory Service The idea of mentoring services for boards and board members received very mixed responses from the SIOD board and advisors. The result of a series of board discussions was board agreement to offer a Board Advisory Service. The Service is available to boards and individual SIOD members, using the services of international and local specialists on an as-required basis. See Annex Three. 4.4 Course Guidelines The Course Guidelines were developed based on experience gained from SIOD governance courses held during 2006 and were written as an information resource for course administration, in particular timetabling of course related activities. The Guidelines are intended to assist SIOD personnel with the organisation of SIOD director development courses and to operate as a checklist for required tasks and timings. See Annex 16. 4.5 SIOD Course Teaching Points The purpose of the Teaching Points is to

o provide continuity between current SIOD Director Development Courses, and with SIOD best practice papers

o emphasise key topics such as the roles of board and management, and conflicts of interest

Teaching Points are updated as new courses are developed. See Annex 15 4.6 Library and Reference Resources The Team Leader and DDS organised books for and contributed to the library collection (see Annex 17). They also supplied a number of reference resource documents (e.g. bound copy of a board charter, various governance templates). 5. Issues Training Course Issues

• Local trainers: The size of the population in Samoa will continue to create issues around sourcing legal and accounting practitioners in Samoa who combine the availability, the desire and the skill to teach on SIOD courses. The CEO has identified a small number of qualified respected individuals whom he is approaching to present finance training for board members, and the previous Attorney General has indicated her willingness to continue to present training on legal matters for the SIOD, however he needs have sufficient numbers to avoid over utilisation of key presenters. This may mean an international presenter for the finance course from time to time.

• International trainers: The cost of international presenters engaged to end March 07

is thought by some to be relatively expensive, despite fee reductions from each compared to their daily rates in New Zealand. The SIOD board however is adamant that it wishes to continue offering an international perspective to their courses through engaging the services of off shore presenters. ADB funding for one or two international presenters for each Directors Course, who are also able to offer a one or


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half day specialist course during their stay, would be very helpful. Their expertise may also be harnessed in the Board Advisory Service and in the development of best practice papers. The DDS is compiling a list of possible presenters from New Zealand who may be prepared to work for travel and accommodation expenses i.e. pro bono.

International trainers need briefing about:

o Key issues in the Samoan environment relating to governance (e.g. progress

on the passing of the Companies Act, the importance of traditions and Samoan culture, appropriate behaviour in certain circumstances, etc)

o How to communicate key course content in Samoan language. The market research showed that participants thought that it is highly desirable that SIOD courses contain Samoan language or are taught in Samoan language. A number of suggestions were received, including dual presentations, ten minutes in each hour for discussion in Samoan, and translation of key points on slides.

o The popularity of relevant case studies where participants divide into break out groups for discussion in Samoan then report back on their discussions

• Lack of financial expertise: The lack of financial expertise among many governors

requires an ongoing, regular (and possibly cheaper priced) programme of finance-related governance training courses. These courses need to be well funded to ensure adequate publicity and a high calibre of presenters to attract participants and to overcome barriers to learning about financial reporting.

• Lack of understanding about and implementation of strategy: As is the case above,

this is a further area requiring significant attention through SIOD training courses. Best Practice Paper Issues There is a lack of local expertise at this stage for the development of future best practice papers. Future international presenters might be asked to develop additional papers as part of their assignment. __________________________________________________________________________ 2. Study and report on sustainable approaches to accreditation and or recognition of qualifications or experience for company directors to be administered by the Institute As has been noted elsewhere in this Report, the design and establishment of an accreditation process for directors took at least two years in New Zealand. The SIOD has had a number of discussions on this topic and has made considerable progress in the 10 months that the DDS has worked with them. After an initial review of international accreditation schemes, the SIOD identified that offering qualification options, which are selected by directors in Samoa according to their own preferences and needs, is the preferred approach. See Annex Five. In summary, options discussed to date include:

• Course attendance – completion results in an SIOD certificate of attendance for that / those course(s)


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• Certification of directors, which requires mandatory core course completion, suitable governance experience, and commitment to ongoing professional development

• Accreditation of directors, which requires mandatory core course completion within a specified time frame, passing a written open book examination, provision of 2 written referee statements, suitable governance experience, and commitment to ongoing professional development

All options have implied preconditions, such as Samoa’s legal requirements for eligibility as a director, and those conditions required for membership of the Institute (e.g. a financial member of the Samoa Institute of Directors, a person of good character and integrity, etc). The SIOD board has a number of decisions to make to progress this programme, including the number of courses / training days required for certification and accreditation, and what constitutes “suitable governance experience”. The CEO has a clear picture of what might work in a programme such as this and good ideas which will inform board discussions and decisions. The CEO has commenced an investigation into the process, costs and benefits to be gained from offering a Samoa Qualifications Authority approved qualification. CONCLUSION The SIOD board has overseen the development and implementation of a creditable professional development programme to date and has made significant progress towards an appropriate accreditation scheme for Samoa. The new CEO appears to be meeting the expectations of the board and the DDS believes that, despite limited experience in the area of governance professional development, he is both competent and committed to the success of the SIOD. She has indicated to him her willingness to offer assistance should he need it on an ongoing basis, be it an email enquiry or the sourcing of library books, etc. She looks forward to seeing the SIOD grow and prosper in the years ahead.


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Annex 3: SIOD Professional Development Programme Teaching Points


Professional Development Programme Teaching Points

April 2007 _____________________________________________________________________ Purpose of Teaching Points The purpose of these Teaching Points is to

o provide continuity between current SIOD Director Development Courses, and with SIOD best practice papers

o emphasise key training areas such as the roles of board and management, and conflicts of interest

Teaching Points are updated as new courses are developed. ____________________________________________________________________ To be Included in Courses as appropriate

• Differences between governance and management roles – Board is responsible for organisation and provides leadership, management is responsible for day to day operations

• Board members must understand what their role and responsibilities are • Identification and Management of Conflicts of interest

_____________________________________________________________________ Best Practice in Meeting the Needs of the Board


• Board leads and is responsible for organisation • Board is supported in this role by good governance policy and processes, and capable

management • Board members must:

o understand their role o plan their own work o maintain a positive board/CEO relationship o have access to board documentation and reporting o participate in well managed board meetings

• Management adhere to board approved values, implement board approved strategy and report regularly to the board


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_____________________________________________________________________ Recruiting and Retaining the CEO

• Differences between governance and management roles – board understands role and responsibilities

• Role of CEO, particularly in relation to achievement of board approved strategy • Recruitment / selection of / succession planning for CEO (process, who does what) • Importance of CEO position description and performance agreement, including

performance measures • Board support, mentoring and evidence based monitoring performance of CEO • Successful relationship qualities – trust, openness, confidentiality, objectivity, respect

etc _____________________________________________________________________ Risk Management


• Key board responsibility to ensure is risk measurement and management plan • Importance of risk management planning – results in better business decisions • Risk management process involves

o identification and prioritization of risk – internal and external o measurement of risk – impact, probability o plan/strategy/action for managing, minimizing or avoiding risk o regular reporting to board on risk management

• Regular risk review process • Risk management includes

o addressing physical, financial and other risk issues o compliance with statutory, common law and organisation’s foundation

document (e.g. Constitution, deed) requirements • Risk management also includes

o setting standards (e.g. Code of Conduct, Conflicts of Interest policy) o addressing issues of probity and accountability for public funds (where

applicable) • Role of Audit and Risk Committee, internal / external auditor

_____________________________________________________________________ Board Secretary – Duties, Responsibilities and Liabilities

• Difference between Governance and Management roles and where Board Secretary role fits


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• Role of Board Secretary, including statutory obligations o confidentiality requirements of role o knowledge of statutory and common law duties (e.g. Companies Act 2001 and

duty of care) o assistance with developing board meeting agenda o knowledge of board meeting procedure o board paper preparation o attendance at board committee meetings o signing of legal documents o custody of company seal o filing statutory returns o reports to shareholders / shareholder meetings o maintenance of company registers o dealing with shareholder enquiries

• Induction for new board members • Delegations • Statutory Obligations of Board Secretary

Strategy Development and Implementation for the Board Differences between governance and management roles – Board is responsible for

organisation and provides leadership, management is responsible for day to day operations

Explanation of ‘strategy’: a map or plan of action to achieve a purpose Plan timeframe varies, could be 3 or 5 year plan

• Board provides leadership and ‘adds value’ – does not ‘rubber stamp’ • Roles of governance and management include

o Board Understands organisation and environment, maintains a future focus

and is alert to new opportunities Sets high level organizational vision / purpose and values Sets long term goals to achieve the vision or purpose Sets strategies to achieve goals Ensures are resources to achieve goals Monitors management progress towards achievement of strategy,

including compliance and risk reporting Ensures stakeholders and shareholders are informed Regularly reviews and challenges strategy and internal/external

environment Keeps up to date, process of continual learning

o Management is responsible for achieving board approved purpose and goals through day to day

operations reporting performance regularly to board


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• Strategic Plan sets out financial, operational and other targets (Key Performance Indicators – KPIs) agreed on between board and management

• Key Performance Indicators: critical for performance measurement • Strategic Plan feeds down into a series of annual plans • Strategic planning process – may include but is not limited to:

o agreement on roles / responsibilities / timeframe for plan development / key information inputs

o board/management planning workshop which results in agreed strategic direction, around which management drafts plan for board approval)

o board / management workshop - may use independent facilitator, hold off site, include opportunity for free ranging discussion, discussions informed by management /expert papers / presentations

o use planning tools e.g. SWOT, Porters Five Forces analysis o ask Key Planning Questions (about market, competitors, products / services,

pricing, service, shareholders, workforce, etc) _____________________________________________________________________ Role of the Board in Adding Value


• Corporate governance is about performance and compliance • Board adds value by:

o Defining the purpose of the organisation –setting strategy with measurable goals, time frames, required resources and accountabilities

o Creating a strong governance culture – board and management know their roles and that their first duty is to the organisation have relevant skills and experience use a team approach and have successful relationships with each other,

shareholders and key stakeholders adhere to honesty, confidentiality, transparency, manage conflicts of interest have high quality board papers prepare for meetings and participate have accurate minutes plan for board succession participate in regular board evaluation

o Holding management accountable Ultimate responsibility for organisation remains with the board Board delegates operational functions to management and hold them

accountable for successful implementation of strategy Board ensures are well defined performance measures in place for the

organisation and for the CEO Board ensures is regular, robust performance evaluation of CEO


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CEO is link between the board and management – selection of CEO is a key role of the board

Management report accurately and in a timely manner – ‘no surprises’ Board has positive relationship with management – supported by good

communication and adherence to organisation’s values, such as honesty and transparency etc

o Effective Compliance Board ensures compliance with legal, regulatory and foundation

documents applicable to organisation (e.g. statutes, company constitution, banking covenants, etc)

• Compliance achieved through o Identification of compliance requirements o Implementation and reporting of policies and procedures

in place to ensure compliance o Accurate timely financial and other information from

appropriately qualified management o Board competency to participate in audit process o Board asks questions about solvency and sustainability

_____________________________________________________________________ Finance for Directors


• Financial planning as part of corporate planning • Financial information for Decision Making – targets and financial ratio analysis • Understanding Company Financial Statements – Profit and Loss statement, Balance

Sheet, Cash flow • Board monitoring of financial and performance reports • Evaluating capital expenditure proposals • Policy for controlling credit, accounts receivable, inventory, Loans • Foreign Exchange Exposure • Compliance with legislation • Community Service Obligations – justification, costing and performance • Reporting to the shareholder • Role of audit committee • Financial delegations


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_____________________________________________________________________ Community Service Obligations

• Leadership role of Board • Legislative requirements for State Owned Enterprises to be commercially successful

vs. providing non commercial or social services as required by the Government • Government ‘purchases’ non commercial or social service (Community Service

Obligation - CSO) through formal process • Measuring benefits of CSOs • Measuring costs of CSOs (including stand alone cost, fully distributed cost, average

cost, marginal cost, avoidable or incremental cost) • Costing CSOs involving capital expenditure • Expressing CSOs in unit cost terms • Performance measurement and reporting for CSOs • Competitive bidding for CSOs • Annual timetable and approval process • Good practice for CSOs in Samoa

_____________________________________________________________________ Legal Responsibilities of Directors

• Aim and purpose of Companies Act reform (to update, simplify, facilitate commerce) • Note whether or when Act is in force (if required) • Outline Companies Act contents, including Part 5 Directors and Part 7 Company

Administration • Ongoing relevance of common law • General responsibilities of Directors - Sections 65, 66, 67 (Act honestly, Exercise

reasonable care and skill, Be diligent, Be aware of and understand their fiduciary duties, Act in good faith and interests of the company as a whole, Exercise powers for proper purposes, Not fetter future exercise of directors powers, Manage conflict of interest)

• Qualities required of Directors - confidentiality, loyalty, honesty, diligence, reasonable care, common sense, exercise good judgment

• How to meet specific obligations of Companies Act (including but not limited to: transparency/interests disclosure/conflicts register; compliance/good reporting/audits; undertake responsibilities with reasonable care diligence and skill/regular meetings/understand financial status of company; etc)

• Other legislation such as: Income/Tax, NPF, ACC, Fair Trading, Labour and Employment Legislation; Public Bodies (Responsibility and Accountability) Act 2001, Public Finance Management Act 2001

• Insolvency and Reckless trading • Director personal liability


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_____________________________________________________________________ Principles of Corporate Governance


• Board effectiveness = composition, competence, conduct • Roles of Board, Shareholders, Management • Basic legal duties of a director – Companies Act 2001 and Companies Amendment

Act 2006, Public Bodies (Performance and Accountabilities) Act 2001, enabling legislation specific to each public body, Public Finance Management Act, and others

• Requirements of a director (objectivity, strategic perspective, commitment, intellectual capacity, understanding of the business, independent thinker and team player, etc)

• Functions of effective board • Role of independent Chair • Functions of CEO • Meeting frequency and agenda • Board papers • Board committees • Conflicts of Interest • Induction, Due Diligence, Continuing Development • Board evaluation


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Annex 4: SIOD Director Professional Development Course Guidelines

SAMOA INSTITUTE OF DIRECTORS

Director Professional Development Course

Guidelines

March 2007

These Guidelines have been written as an information resource for the Samoa Institute of Directors Professional Development Programme courses. They have been based on SIOD courses held during 2006. The Guidelines are intended to: Assist SIOD personnel with the organisation of SIOD director development courses Operate as a checklist for required tasks and timings


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Timeline

Action Date Action Required

One year prior

• Develop funding / sponsorship plan • Confirm course programme, budget and dates

with Board • Publish annual course programme • Organise translator(s)

Six Months prior

• Book venue(s) • Contact potential presenters to check availability • Follow up with letter or email confirming

date/timings, topic, presentation format, course key themes, fees / expenses, airfares / accommodation, reimbursement policy, participant evaluations will be sought

• Invite presenters to submit their paper minimum of 3 weeks ahead of the course

• Invite presenters to include practical tool / templates

• Report progress to Board

Six weeks prior to course

• Confirm venue • Place ads in newspaper / other publicity measures

(to give Boards time to approve board member course attendance)

• Inform CEO and Minister of Finance (about course so they remind Chairs in Cabinet to discuss SIOD courses with their boards)

Confirm in writing to presenters: • Paper/presentation required 3 weeks prior course

(for translation/preparation of materials) • Confirm time, venue, etc • Request bio of 150 words (if not already received) • Request presenter equipment needs • Send one or more course presentations to

facilitate linkage / consistent messages. • Confirm that participants complete evaluation form

which is confidential to the SIOD but available if requested

• Invite presenters to join the course for lunch / morning / afternoon tea

Action Date Action Required

Five weeks prior to course

• Review risk plan (equipment / presenter backup) • Invite MP / SIOD Chairman or Deputy Chairman /

or other dignitary to open / close course / present certificates

• Organise someone to introduce presenters • Report to Board on budget

One week prior to course

• Consider further publicity • Organise catering • Prepare course folders • Remind MP / SIOD Chairman / Deputy Chairman /

dignitary about course opening / closing / presenting certificates

• Invite someone to open course with prayers

During week prior to course

• Stock up on stationery / marker pens, etc • Prepare thank you letters and gifts / gratuities /

fees for speakers • For 3-day course, invite presenters to the

Certificate ceremony

Day before course

• Prepare desk name plates / personal name badges

• Include participant list in course materials • Organise presenter payments (where appropriate)

Day of course

• Put up signage, organise seating, and equipment • Water for presenters / participants • Table for presenter materials • Distribute and collect evaluation forms • SIOD representative greets participants /

presenter (s) • SIOD chair/CEO/or other invited person

introduces course / presenter(s) presents certificates

After the course

• Send thank you letters / pay fees • Collate evaluation sheets into spreadsheet format • De-brief: Course content, administration etc • Follow up where participant organisations have

not yet paid


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Course Folder Presentation and Contents • Stationery can be sourced from stationery shop in Lotemau Centre (below SIOD offices). They

have SIOD account. They do not keep large stocks so may need to order, for example if more than about 10 folders are required. They have another outlet so may be able to obtain extra supplies overnight

• Always prepare at least 2 extra course folders as participants may arrive without prior notice

• Prepare folder cover page

- SIOD logo middle top of page - Course name - Date(s) - Presenter name where one presenter only; otherwise list course contents and presenters

inside front of folder (company, university etc) with SIOD logo - Include SIOD contact details across bottom of page (e.g. SIOD office location, telephone

number, email address, postal address, website)

• Produce course materials, presenter bios, presentations (including translation of key points into Samoan), evaluation sheets

• 3 or 4 day course folders include programme with dates, presenter topics and times, venue(s)

• Prepare cover page for each topic section which includes SIOD logo, date and name of the course, and presenter name

• Insert standard Governance Information Packs for SIOD Director Professional Development course participants into last divider in the folder:

- Legislation relevant to Directors in Samoa - Conflicts of Interest - Why Do We Need An Audit Committee? - Outline For Letters Of Appointment For Board Directors - Bibliography of Literature on Corporate Governance - Useful Websites on Corporate Governance - Glossary of Reference Terms - Samples of Agenda - Samples of Board Timetables - Samoa Institute of Directors Professional Development Programme Brochure


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Appendix One: General Information Number of Participants The appropriate number of participants for a directors’ professional development course will vary according to the course length, style of training and venues available. Lecture style training can accommodate greater numbers however many presenters and participants prefer some interaction for improved learning outcomes, particularly if the course runs for longer than a few hours. For a course of more than several hours, an interactive style is generally preferable to a straight lecture format. As a guideline, an interactive style generally works best with around 15 or fewer participants, to a maximum of 25 participants. Venues Venue options include but are not limited to:

• Level 6, Central Bank building • the SamoaTel training room • the large fale at the Kitano Tusitala

The first two venues do not comfortably accommodate 25, with 15 or less being preferable for comfort in both venues. The large fale is open and catches a pleasant breeze and can accommodate about 200 people seated. Other options include the National University of Samoa and the conference room downstairs at Aggie Greys in town. Level 6, Central Bank Building The Central Bank room is large and comfortable, with incredible views and a pleasant outdoor area where participants congregate (and smoke) at breaks. There is one very large board table in the centre of the room which is not moveable and which seats 15 people comfortably. It is advisable to leave the tablecloth on the board table as the table is heavily marked. For breakout sessions, participants position themselves around the room. There are many extra chairs around the edge of the room which can be used for breakout sessions and several trestle type tables are available. A small coffee table is available on request for presenter materials. One trestle table against the wall near the kitchen is generally kept free for serving meals and another is available upon request for the other side of the room for break out sessions / observers / extra participants, and for extra course materials, evaluation forms etc. The air conditioning on the inland end of the room can be too cold for participants however there are two independent controls, one for each end of the room, so this can generally be fixed. Lupe is in charge of the kitchen and she is very capable and helpful and can assist with air conditioning. Water for participants is brought out at the start of the course to avoid it warming too quickly. There is a lectern, a data show projector and a large whiteboard available upon request however presenters should take their own pens and a duster (although a serviette from the kitchen can suffice as a duster). Extension cords are available, as is assistance with the data show projector if requested. All kitchen cupboards are locked if Lupe is not present.


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SamoaTel Training Facility The SamoaTel facility is new and offers several comfortable breakout rooms. It has a long narrow training room with tables that can be arranged to suit. The air conditioning broke down on the first day the SIOD used the room. There are sun blinds on the windows however the sun heated the room to an uncomfortable temperature with no airconditioning. Hotel Kitano Tusitala This venue offers a large roofed fale suitable for lecture style / lunch meetings for large numbers (e.g. 200). The breeze is welcome however papers must be weighted down, and a microphone is required. A stage and a lectern are available. Hotel Accommodation The availability of rooms is important if the SIOD decides to organize a residential course. Benefits of a residential course can include an opportunity for participants to break with day to day matters in order to focus on governance, and to network with each other. The downsides include increased costs, and the fact that potential participants may be unwilling to be away from their homes and businesses. When participants travel from Savai’i or American Samoa to attend SIOD director development courses, to date they have been making their own arrangements. Course Rules and Regulations Ensure that participants are aware of expectations around the course. These may include a No Smoking policy indoors, cell phones turned off, full attendance being necessary to qualify for the course certificate. SIOD Personnel Course Involvement The Chair or CEO or other appropriate person attends the beginning and end of each session to cover course safety and administration information at the outset, and to introduce and thank each speaker. The presence of a senior SIOD person: • Reinforces the importance that the SIOD places on director development through SIOD courses • Acknowledges the seniority of course participants and presenters • Ensures that the programme stays on schedule and keeps things on a positive note. It has proven useful to have someone else ‘on duty’ to assist at each session. Their duties may include organizing technical assistance if required, producing name plates for unexpected attendees, helping to hand around lunch, refilling water jugs, distributing and collecting evaluation forms, etc. Course Dates and Timings When planning courses, it is advisable to start planning early, say 6-8 months in advance, particularly if the course is residential. Be aware of conflicts with other events, including holidays or religious observances, other courses and training opportunities, etc. Mondays and Fridays may not be good days for courses as some people may leave early on Fridays, and some may prefer to go into work on Monday to catch up with their work after the weekend. SIOD courses have generally commenced at 9am and end around 4.30pm. The final day of the Directors’ Course has ended at 4pm. Thirty minutes is scheduled for morning tea and for afternoon tea, and one hour for lunch. Lunch is a cooked lunch, served to each participant and eaten sitting down.


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Course Budget A course budget is prepared by the SIOD CEO and the Board is kept informed about budget in timely manner. One person needs to be accountable for and control the budget, whether it is the CEO or a course coordinator. This person approves payment of all budget expenses and is accountable for the course budget to the CEO / SIOD board. Residential Course Details Key information for SIOD files: • Name of hotel / venue contact person and contact details • Venue and address • Booking reference • Course title • Official dates of course, participant arrival and departure dates, plus early and late requirements • Anticipated number in attendance • Participant special needs (e.g. smoking or non smoking rooms, internet access, etc) Finding Good Presenters

A potential source of off shore course presenters are those who have presented for the New Zealand and the Australian Institutes of Directors and who are highly regarded. Other potential sources for Presenters: • National organisations and associations • Local associations • Visiting dignitaries, CEOs, well known people who may speak authoritatively on governance

related matters, etc • Government organizations • Presenters and stand-out attendees from previous courses • Recommendations from previous course presenters. • Presenters from courses sponsored by others, such as the Chamber of Commerce and National

University of Samoa. (May be useful to create a file of brochures/articles which publicise other related courses).

• Journals, local papers, and magazines. Once a prospective Presenter is identified, the next step is to have a ‘no commitment’ discussion with them (without presenting a firm invitation) by phone to discuss the course, date and other information. When the final choice is made on which presenter(s) are preferred, contact them again and if they agree to participate in the course, follow up with a letter or an email. Please see Appendix Three for a sample invitation letter which should include: Between five and two weeks before the course, send the Presenter a reminder with updated information such as any program changes that could affect the Presenter, accommodation arrangements (if any), where the Presenter will be greeted and by whom (particularly important where presenter or participants are coming from overseas), the SIOD office telephone number and CEO cell phone number, and names of other presenters and any appropriate background information


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Travel Arrangements Ensure there is sufficient time allowed for international flight bookings. The SIOD may wish to set a policy which states that the SIOD will arrange and pay for travel and accommodation, or which states that presenters make their own arrangements, within specified expense limits, and are reimbursed by the SIOD. If presenters are booking their own flights, the SIOD may wish to offer to make accommodation bookings for them. It can be helpful if a taxi is sent to meet and collect presenters from their flights. Course Basics It may be useful to make up a basic pack to take along to each course as the venues do not supply basics such as: Qty Equipment Tacks, pins, tape / blue tack

Stapler, staples, and staple remover Scissors Paper clips SIOD pens Extra Paper Receipt book for those who arrive with a cheque for course attendance Laptop computer as backup for breakdowns Calculator Blank personal name badges and desk name plates, copies of course outline, copies of annual SIOD director development programme


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Appendix Two: The Course Course Signs Place signs with the name of the course and the course room near the building entry and on the door of the room. For example, in the Central Bank Building a sign is useful beside the foyer ground floor lift and on the door of the course room. Ensure someone has responsibility for signage. Seating Plan Describe the seating plan to the presenters in advance of the course. Registration While in practice many participants register in advance of a course, some may arrive on the day and wish to be registered. Registration should be a fast and simple process, and may consist of the participant writing down their title, name, role and organisation. (Name plates can be written up based on this.) The SIOD may also wish to consider online registration at some future date. For advance registration:

• Request participant title, name, role and board/organisation, and confirm course and date being registered for

• Advise participants when they register of the name of an SIOD contact person and phone number to answer any ongoing questions they may have

• Record all inquiries – (they may usefully be followed up later.)

• Indicate all cheques are made payable to the Samoa Institute of Directors

• Confirm registrations with a receipt

• Establish SIOD policy for Refunds, how money is to be physically handled, and the process for collecting course fees from participants or their organisations.

Changes to the Programme • Changes to the agenda may be unavoidable and adjustments must be accommodated when

required. • Stay on schedule however even when the agenda has been changed. • When possible, announce changes either in the confirmation letter sent to participants, or at the

commencement of a course Menus Ensure there is plenty of fresh fruit, water and juice available at all times for participants. Evaluation Evaluation can give a qualitative measure of any or every component of the course. It can also be a valuable tool in planning the next course. It includes verbal feedback (debriefing) from participants, presenters, SIOD board and staff members, and other interested parties. It can also include a written evaluation form. The form is a questionnaire which asks participants to rate the course venue, and presentations in terms of professional delivery, content, relevance, materials, etc. Collect completed evaluation forms at the end of the session.


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Establish at an early stage which sections will be evaluated - completing too many evaluation forms can annoy and distract participants and take up too much time. Certificates A sample of an SIOD course Certificate which is awarded to participants who have completed the course is attached as Appendix Four:


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Appendix Three: Example - Presenter Invitation Letter / Email (LOGO)

Talofa (name) As discussed previously with you, we are very pleased that you have agreed to speak at one of our SIOD courses. Our course participants benefit greatly from the expertise and experiences of our presenters and we look forward to your involvement. This is a formal invitation to you which includes further details about your session. Date, Time and Duration: Venue: Session Topic (attach course outline/copy of course publicity): Key Course Themes: Equipment available upon request (please advise us of your needs):

- Data projector for power point presentation - Overhead Projector for transparencies - Whiteboard - Flipchart - Lectern - Colour TV and video or DVD player - CD player

Honorarium / Fee / Expenses (as applicable, attach expenses policy, reimbursement policy, who is to do travel and accommodation bookings, etc) We ask that presenters have their session materials to us three weeks before their presentation, along with an overview of key points, to enable us to complete translation into Samoan language of the key points, and to produce course materials. If you will be using jargon for your session which is not already included in the attached Glossary please let us know your preferred definitions and we will ensure the updated Glossary is included in the Course Materials Folder. Would you please forward a biography of approximately 150 words introducing yourself to our participants. We ask course participants to complete course evaluation forms. This information is confidential to the SIOD, with specific evaluations available to individual presenters should they want them. We intend to use the information in a very general way to identify participant areas of interest and how we might better improve the course. We invite you to the end-of-course function when certificates will be presented to our participants. This will be held on ..... at ...... etc We look forward to receiving your confirmation that you are available and we thank you for your time. (name) Chief Executive Officer


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Appendix Four: Example - Course Certificate


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Appendix Five: Legislation Relevant to Directors in Samoa

To be included at back of course folders

LEGISLATION RELEVANT TO DIRECTORS IN SAMOA

As at 26 January 2007

18. Companies Act (NZ) 1955 19. Companies Act 2001 20. Public Bodies Act 2001 and its Amendment 2005 21. Public Bodies Regulations 2001 22. Public Finance Management Act 2001 and its Amendment 2005 23. Labor and Employment Act 1972 24. Enabling legislations of particular to each Public Body 25. Constitution of Samoa 26. Inland Revenue Act 27. Income Tax Act 1974 28. Fair Trading Act 1998 29. Foreign Investment Act 2000 30. Partnership Act 1975 31. Sale of Goods Act 1975 32. Trade, Commerce and Industry Act 1990 33. Tourism and Hotel Development Incentive Act 2003 34. Value Added Goods and Services Tax 1992/1993

Public Body Legislation Five SOEs are under the Companies Act with no empowering legislation. The Public Bodies Act over rules the enabling legislations of Public Trading Bodies, the Public Finance Management Act, the Companies Act and the Articles of the Company (applying only to those SOEs registered under the Companies Act 1955). This provision is provided in the Public Bodies Amendment Act 2005. Pubic Trading bodies

24. Agriculture Store Corp. 1975 25. Airport Authority 1984 26. Development Bank 1974 27. Electric Power Corporation 1980 28. Housing Corporation 1990 29. Polynesian Airlines Ltd. Companies Act 30. Ports Authority 1998 31. Public Trust Office 1975 32. Samoa Broadcasting Corporation 33. Samoa Tel (Communications) Companies Act 1955 34. Samoa Land Corporation “ 35. Samoa Shipping Corporation Companies Act 1955 36. Samoa Shipping Service “ 37. Samoa Trust Estates Corp. 1977 38. Samoa Water Authority 2003


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Public Beneficial Bodies 39. Apia Park Board 1995 40. National University of Samoa 1997 41. Samoa Kidney Foundation 2005 42. Samoa Qualifications Authority 2005 43. Samoa Tourist Authority 2002

Three Mutuals

44. Accident Compensation Corporation 1978 45. Samoa Life Assurance Corporation 1976 46. Samoa National Provident Fund 1972


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Annex 5: SIOD Board Report on September/October 2006 Training Courses

To: The Board of Directors, SIOD Subject: Course Report 28 Sept, 3-5 Oct, 6 Oct Date: 8 October 2006 Author: Jane Huria Purpose of Paper: Board Information ________________________________________________________________________

1. Background This paper follows a board request on October 6 for a report on the training courses held from 28 September to 6 October.

2. Overview Recruitment has been successful with good attendance numbers at every course. The interactive style of our presenters is both popular and effective and means that course numbers up to a maximum of 20 are suitable, with 15 or less being optimal. A course of 15 participants is very comfortable in the Central Bank venue. Level 6 of the Central Bank Building is an excellent venue in that it is centrally located, offers a spacious room, has visual presentation equipment available, and tremendous views. It is pleasing to see that some people are attending more than one course (e.g. in the Finance for Directors course on 6 October, there were 4 participants who had attended other courses). It is also pleasing to hear some of the thoughtful questions that participants have been asking local guest speakers, such as the Deputy Prime Minister and the Chairman of the PSC (e.g. one question was why does Cabinet approve the appointment of an SOE Chief Executive when the SOE board has responsibility for the CEO performance?). Participant course evaluations recorded that courses or sessions met their expectations and that they would recommend them to others. All presenters received high ratings of 4 or 5, with the exception of one person who some felt spoke too quickly, and which we are addressing. Participants’ comments included: “well organized” “more courses in future” “every board member should attend” “I enjoyed this session thoroughly” “I learned a lot about accounting and monthly statements”.

3. 28 September “Best Practice in Meeting the Needs of the Board”, Jane Huria

There were 15 participants on this one day course. It seemed to take longer than previous courses for participant to make comments and ask questions however by lunchtime people seemed more relaxed and participation levels grew. It was suggested that other courses had experienced board members attending whereas this course included many new directors who had limited experience and much of the


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course content was completely new to them. The fact that several participants made the comment during the day that “This is all new to me” probably confirms this suggestion.. The Chairman of the PSC presented an interesting and relevant paper at lunchtime on the role of the board and other matters. A learning from this initiative was the difficulty experienced by participants in maintaining focus and sitting from after the morning tea break through to the end of the speaker’s talk. After he had spoken we had a 10 minute break however this was not long enough and participants asked if they could finish earlier than planned which we accommodated by working through afternoon tea with participant agreement to do so. This course in future could usefully be a 9am – 3pm course.

4. 3-5 October “Directors’ Course”

Course participant numbers varied between 18 and 15 on the 3 day course (e.g. on Day Three, the two participants from American Samoa left after morning tea to catch their return flight). The course was opened by the Chairman of the SIOD. . Day One – 3 Oct “Governance Principles, Board Management and Effective Board Practice”, Jane Huria In the first 3 day course in July, Jane Huria presented all day, setting basic governance principles in place for the next two days sessions. On this course, the Attorney General spoke during the usually challenging after-lunch session. A different after-lunch speaker is highly recommended to ensure that energy levels are maintained with both presenters and participants. The Attorney General spoke about Legal Duties of Directors, with a focus on the new Companies legislation which she noted should be passed in November, and the consequent increase in liability that would attach to directors. Her presentation was clear, very interesting, held the attention of participants and prompted many questions. Her presentation was also accompanied by a sizeable set of comprehensive notes on the topic. Day Two – 4 Oct

“Financial Reporting”, Professor Don Trow Professor Trow is popular with both those who are experienced in financial matters and those who are inexperienced. His many years of university teaching and his experience as a board member have resulted in a relevant, simple but effective, step by step approach to this course. Some participants who had little or no financial expertise expressed a degree of trepidation on Day One about attending his financial session, however his personal style of respect for all, patience and humour appeared to overcome any initial nervousness. Some participants clearly struggled during this session however many noted in their evaluations that they had learned a lot. A comment was made that there was ‘something for everyone’ in Professor Trow’s session and his evaluations included many positive comments.

“Working with the CEO”, Juliet McKee


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Juliet brings knowledge, experience and enthusiasm to her sessions and this one was no exception. Participants benefited in particular from her international governance experience through her use of real life examples to illustrate different governance principles. Participant evaluations scored this presentation very highly and included comments such as “Examples used clearly outline the importance of the issues” “Presentation is very interesting” “Like to hear more from the presenter in future” “…helpful...”

Day Three – 5 Oct

“Strategic Planning and Implementation”, Jane Huria It was pleasing to see that nearly everyone who started on Day 1 on the 3 Day course turned up for this first session of the third day. One participant said “I am a bad boy who never stays more than a couple of hours at a course however I have found this too interesting to miss”. Links were made between strategy, and the corporate plan and Statement of Corporate Objectives required of SOEs. Participants were relaxed and participative and evaluation comments included: “definitely a great one day course topic” “Very helpful for me in how to prepare a plan for the Corporation” “This is informative to others, especially the CEO of the Corporation” “Glad to hear from you presenter in the future”.

“Role of the Company Secretary” Dan Cameron, Company Secretary, SamoaTel Dan Cameron described previous roles he had held, how the Company Secretary role differed with each organisation and how the role did not exist in law in New Zealand any more, despite increased legal requirements for company secretary-type functions. He also spoke about the increased responsibilities on directors under the new Companies Bill in Samoa. Three participant evaluations noted that Dan spoke too quickly, and other participants “Very good presentation and interesting” and “Very well prepared”. Risk Management, Juliet McKee Juliet encourages a great deal of participation, both to stimulate participant thinking, and to gather information about their key issues which are then discussed during her session. Participants learn both from the presentation of planned session contents, and from the tailoring of the session to address their issues. Course comments included: “Very informative” “I learned so much…” “Very helpful to improve organisations as well as our general life in terms of risk management”. Conclusion of Three Day course A Minister (of religion) who was a course participant said the concluding prayer and course completion certificates were handed out by the Deputy Chairman of the SIOD.

5. 6 October “Finance for Directors” Professor Don Trow

Nine participants of varying degrees of knowledge and experience attended this one day course. Although some attendees were already knowledgeable in the financial


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area, several others appeared to have some difficulty during the course, despite some one-on-one attention. The Auditor General gave a lunch address on his role and responsibilities and some of the issues he is facing, as well as director responsibilities around financial reporting. The long time sitting for participants resulted in a lack of attention to this speaker by some. A break of 30 minutes was given before the session recommenced which appeared to refresh participants sufficiently. The Deputy Chairman of the SIOD attended to sign and present completion certificates. Participants scored Professor Trow’s course on nearly every aspect of the course with the top score of 5. The few who did not rank 5 for every aspect of the course gave the next highest ranking of 4 to several criteria. “Professor Trow’s presentation was clear and simple. Now I can ask a lot of questions during our board meeting when financial statements are tabled.”

General Note – Preparation of Course Materials The SOEMD team have provided a great deal of assistance with preparing course materials and other course related tasks. Although the SOEMD is able to send people to SIOD courses in recognition of the use of their equipment and the assistance of some staff, this is not an ideal situation as staff have their own priorities and cannot be expected to assist indefinitely. The SIOD board has requested the employment of a administration person and this person should take on the responsibility of preparing course materials. They will also need (or have access to) a colour printer, a photocopier and a sturdy punch hole machine, which are not currently available in the SIOD offices.


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Annex 6: SIOD Course Sample Evaluation Key: Y=Yes, N=No, NR=No Response

SIOD Evaluation Summary 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Summary

Did this course meet your expectations? Y or N

Y Y Y Y-well presented Y Y Y Y Y-very clear

explanation Y

Y-especially for me as a

no-accountant

Y

Very informative and easy to understand

added considerably to

existing knowledge

Y-helping to improve

knowledge of financial analysis as I

expected

Y

Y-it is more useful to

extend my knowledge

on the Financial reporting

Y = 16 N=0

Comments

Would you recommend this course to others? Y or N

Y Y Y

Y-especially

finance officer /

CEO

Y Y Y Y

Y-especially for our Board

meeting

Y

Y-I will definitely due to the way Don presented

this section in a very

simple way.

Y

Y-especially Directors with

little or no knowledge in Accounting &

financial reporting

Y-to spread out the

knowledgeY

Y-it is well prepared and

very informative

to others

Y = 16 N= 0

Comments

What other topics within professional development would interest you?

Y Y Working Capital

egs -

Preparation & Financial Statements

N Y - Y-all topics - - - - Y-more

about ratio analysis

N

Y-it how to value shares

and the contribution

to the financial

Y = 6 N= 2

NR = 6 - Working Capital

egs - Preparation &

financial statements

Did the venue meet your expectations? Y Y Y - - Y Y Y - Y - Y Y Y Y Y

Y = 12 N= 0

NR = 4


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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Summary

On entry to the course I had (1-some: 5-comprehesive knowledge

5 1 4 4 - - 5 5 5 5 - 5 3 - 4 5

Comprehensive Knowledge - 5 = 7

4 = 3 3 = 1 1 = 1

NR = 4 Content: I found the content and subject matter of this session

1-Not comprehensive to 5-comprehensive - 5 5 5 5 5 5 5 5 5 5 5 4 5 5 5

Comprehensive – 5 = 14 4 = 1

NR = 1

1-Not relevant to 5-very relevant - 5 5 5 5 5 5 5 5 5 5 5 4 5 5 5

Very Relevant – 5 = 14 4 = 1

NR= 1 1-Was not well structured to 5-well structured

- 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Well Structured –

5 = 15 4 = 1

1-Did not meet my expectations to 5-exceeded my expectations

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Exceeded

Expectations – 5 = 16

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Summary Presenter: I found the presenter

Was not professional, 1-5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Professional - 5 =

16

Paced too slow/fast, 1-5 - 5 5 5 5 5 5 5 5 5 5 5 4 5 5 5

Fast - 5 = 14 4 = 1

NR = 1


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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Summary

Lost my interest, 1-5 - 5 5 5 5 5 5 5 5 5 5 5 4 5 5 5

Kept Interested – 5 = 14 4 = 1

NR = 1

Did not allow participation, 1-5 - 5 4 5 5 5 5 5 5 5 5 5 5 5 5 5

Participation Allowed - 5 = 14

4 = 1 NR = 1

Course Materials: I found the course materials

Did not add value to session, 1-5 5 5 5 5 5 5 5 5 5 5 5 5 5 4 5 5

Added Value - 5 = 15

4 = 1 On completion of the course: I have

1-some knowledge of topic: 5-comprehensive knowledge of topic

5 5 5 4 4 5 5 5 5 5 5 5 4 5 5 5 Comprehensive

Knowledge 5 = 13 4 = 3

Any general comments: -

More Courses in future for Directors

- - - NO -

I recommend this course of this kind

and the presenter be

make available in the future

and will be very pleased to attend if required.

Hope to have this kind of people

teaching accounting

to our Country.

I learned a lot about

accounting and monthly statements

I want to be Don's

student in another 2

years time to make sure

I've learned something from his lecture

Prof. Trow's presentation

was clear and simple. Now I can ask a lot of

questions during our

Board Meeting when

Financial statement are

tabled

- -

I found this presentation

most professional in Financial

reporting and so

simple to understand

It is well prepared

and it brings me

a lot of financial

issues

Y = 8 N = 1

NR = 7


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Annex 7: SIOD Market Research Report 29 March 2007 Jane Huria, DDS, ADB TA Project Background A key focus for the SIOD is the continuous improvement and development of corporate governance in Samoa. Director development training courses are an important aspect of SIOD activities and courses have been offered since the Professional Development Programme was launched in June last year (2006). The CEO has requested a review seeking feedback on training activities to date and information has been sought from the market for consideration in planning the Institute’s 2007 – 08 Director Professional Development Programme. No recommendations have been included in this report on the basis that the CEO will consider the information gained from interviews and decide what is appropriate as the programme progresses. Research Objectives The objectives of this research are to:

Gather feedback about recent courses to inform course planning for 2007-08 Check if the course programme to date has met the needs of directors and members in

the public and private sectors Communicate to members the importance of their feedback to the SIOD and that the

SIOD is responsive to member needs Provide information for

the ADB Technical Assistance programme report, and future funding applications from donors

Method The method for conducting this research and the selection of interview participants was set by the CEO and Juliet McKee. Participants included two SIOD board members, five private sector interviewees, five public sector interviewees, and two key public servants. Another key public servant and one private sector person were unable to participate. A total of fourteen face to face interviews of approximately 30 minutes were undertaken by Jane Huria (ADB TA) and Nua Nefu (SIOD) over a period of three days (23,26,27 March). See Appendix One for list of interview participants. All interviewees appeared to speak frankly. An interview guide was developed by Jane Huria and approved by the CEO. The first three interviews piloted the guide, after which several amendments were made as follows:


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Deletion of a question which generated similar answers to a previous question and elicited no new information

Addition of a request for suggestions about additional services interviewees may like to see offered by the SIOD

Comments about training courses were generally based on attendance at the March courses: the 4 day Directors’ Course, Professor Trow’s one day Finance for Directors Course and Richard Westlake’s Why Boards Matter half day session. Two interviewees also referred to training undertaken during 2006. Overview of Results A number of comments were made about the importance of the SIOD maintaining high standards, both in the presentation of itself as an institute and in its training activities. The provision of regular information about training courses being offered by the SIOD and clear communication about the benefits of membership were seen as key tasks for the SIOD. Many interviewees thought the level of training course fees was “about right” – several thought they were cheap, and four thought they were too expensive. Interviewees offered high praise for SIOD training which they believe had added ‘a lot’ to their knowledge and improved their ability to be a director. Interviewees saw benefits in courses targeted at specific groups however many preferred a mix in course composition, particularly a mix of public and private sector participants, which they thought enabled them to learn more from participants. The course duration preferred by most was a 5 day course made up of half days of training. All but one interviewee thought that presentation of training in Samoan was a good idea and that there should be translation of English presentations of international presenters. Opportunities to speak in Samoan, such as ten minutes at the end of each session, and small group case study work were seen as beneficial for many participants. Results This section of the report sets out the results of the research.

Pre Course Advertising A number of people expressed an interest to be kept regularly informed about the training programme. Several interviewees requested that upcoming courses are publicized early to enable them to make time free for attendance. Another noted that he had had two days notice for the course that he attended however this was not a problem for him. “The SIOD training programme should be widely publicized and plenty of notice given before courses.”

Effectiveness of Training Interviewees were unanimous in their response that their governance training was a good use of their time and that they would recommend SIOD training to others, with several


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stating that they have done so already. Nearly all said that it had added ‘a lot’ to their governance knowledge and greatly improved their ability as a director. The practical aspects of the training and presenters talking about their own governance experiences to illustrate points were very well received. “Always something new to learn – I thought I had nothing to learn as I had read all the documentation sent to me when I was a new director but this training put a different perspective.”

Standard of Training Interviewees thought that the overall standard of SIOD training was excellent and that the level of difficulty was about right or met their expectations. A comment was made about one session where the presenter’s back was often to the participants “which was not good” and this interviewee requested that presenters stand still, rather than move around.

Course Presenters Course presenters were rated overall as excellent. Interviewees spoke highly of most presenters however Professor Trow was most often referred to in the highest terms. “Professor Trow made the subject easy to understand and his session was the highlight" “It is expensive to get these presenters but they talk from experience. They use examples from actual practice which helps with overall understanding.” One interviewee who attended a course last year thought that one of the local presenters was “too complicated” in his presentation and that she had expected more from another local presenter whom she felt should have linked his presentation more into those of others.

Course Materials Course folders and presentation materials were rated as excellent by most, with all who had attended course at the minimum satisfied with the materials. Several interviewees volunteered that they had referred to their course materials since the course.

Course Venue The Central Bank venue was thought to be a good teaching environment. Many interviewees were critical of the Kitano Tusitala venue, complaining of mosquitoes, a hole in the ceiling, inadequate air conditioning, repetitive food. One interviewee said that the venue was “absolutely unacceptable” and another had a bad headache at the end of the course. Several complained about the air conditioning in the Chamber of Commerce Conference room. One interviewee suggested the Sinalei, although not on a residential basis and noted that using a University venue “might put people off”.


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Course Duration Many interviewees felt that a 5 day course comprised of half days was their preferred option as it was difficult to take a block of time away from work. This option enabled them to go to their work in the afternoon. Another suggestion was that in order to include most of the current content of the Directors’ Course, the SIOD might run a 6 day course of half days, including Saturday. Shorter courses, for example half day courses on How to Read Financial Statements would not be so expensive and would encourage busy people to attend. One person noted that a 5 full day course should not be a problem as “many directors are not in full time work”. Another appreciated a break from work and the opportunity to focus, and suggested that some training is held away from Apia. Many interviewees expressed an opinion that there was not enough time allowed in the training course(s) that they had attended. Four suggested that Professor Trow’s course should be longer and several said that Brenda Heather-Latu, Rick Bettle and Richard Westlake’s presentations should be allocated more time. The number of questions asked in Brenda’s session suggested to one interviewee that her session required more time.

Small Group Work Interviewees who attended the March Directors Course and Richard Westlake’s 3 hour session said that they did not participate in small group work using case studies. Although several people preferred not to participate in group work because they wanted to use the entire time hearing from the trainer only, most people preferred a mix of lecture style presentation and small group discussions. They said that small group work provided an opportunity for:

participants to learn from the views and experiences of other course members private sector and public sector people to interact more reserved people to feel comfortable about participating in discussion in the

smaller groups participants to speak and interact in Samoan.

“Case study work is a great opportunity to hear what everyone thinks and share ideas and methods.”

Course Presentation in Samoan Language Translation of the English sections of the courses and materials into Samoan language was thought to be a good idea by all but one private sector person who said that the education system was in English so teaching on these courses in English is no issue. Several interviewees noted that there are some translation difficulties because there are no Samoan words for some governance terms. Accounting and legal duties were subjects for local presenters but overseas presenters brought international experience and were preferable for topics such as boardroom dynamics.


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Suggestions about adapting current course materials from English to Samoan included:

a one, or one and a half day course on, say, key corporate governance principles taken from the 4 day Directors’ course presented entirely in Samoan language

course slides are presented in bullet points, each point in both Samoan and English; or course slides are split with Samoan on one side and English on the other

governance presentations are ‘orchestrated’ using co-trainers. One presenter makes a point in Samoan and the other makes the same point in English. An example was given by the interviewee of an evangelical address presented in this manner which the interviewee thought was highly successful in that they conveyed the same emotions and appeared to have rehearsed to achieve the effect. The increased cost of two presenters was noted.

Some think that presenting one session in English and the next in Samoan was acceptable and said they would find it confusing to hear points presented alternatively in Samoan and in English

Several said that if sessions are presented in English, all discussions or plenary sessions should be facilitated by a local person in Samoan language, with the general trend of discussions communicated to English speaking presenter

A suggestion was made that a person with limited English attends a course with a person who is fluent and who can translate.

One person suggested that the materials include a glossary where English governance terms are translated into Samoan language

“Little understanding of English for some means hard to follow” “I know of someone who accompanied another board member to training in order to translate who found this very frustrating as she wanted to hear the complete presentation but was constantly interrupted”

Cost of Training Most interviewees commented that they think that the cost of training was ‘about right’. This included all public sector directors who have their fees paid for them and who may receive attendance fees. One said that “for the level of presenters…the cost was cheap”. Another said that fees could be increased by 50% more - he also said however that the existing fee was too expensive for individuals but acceptable for companies. “The money is nothing compared to having the skills and knowledge from this course. It was good value. The Corporation paid my fees but they got great value.” Four interviewees said that they think the cost of training is too expensive. Only two of those who commented that the cost was too expensive would suggest a more appropriate fee:

SAT225 for course attendance for members and SAT475 for non members, and SAT 100 or SAT 200 for non board members “would mean we could have more

board members going on the courses”. One person who thinks that the cost of training is too expensive is finding it difficult to pay SIOD membership for board members and send them on courses, having not


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budgeted for this and having had the organisation’s budget cut recently by 30% by the Government. This person has requested that other organisations who have some of her board members on their boards share the cost of training fees for those board members. Another person said a suggestion has been put to Treasury that they allocate funding for director training following the Cabinet Directive as this item as this item has not been budgeted for. Several noted the additional expense in bringing people from overseas however they believe that the SIOD must offer a high quality product using excellent presenters and that this had been achieved to date. One person suggested that training is a new industry for Samoa and that the SIOD might work in collaboration with other organisations, such as Samoa Tourism who might offer accommodation to presenters in return for course places.

Suggested Future Courses Governance for CEOs – Working with the Board

“The SIOD needs to remember it is there to train board members first, not CEOs”

CEO Reporting to the Board on Finances – i.e. How to make sure the Board understands the Financials

Minute Taking Ministers as Chairs

“This course would be supported by the PM and Deputy PM” Courses specifically targeted for:

Church Leaders Non Government Organisations Community Leaders, such as village mayors Family businesses Youth (19-35)

“…I cannot see merit in training for village leaders at this point – would not be effective exercise as they have their own ways and different laws” Women interviewees were prompted about whether a course specifically for women was a good idea. Only one woman, a government employee, thought that it was a good idea. The others said that they felt it was unnecessary, that women did not hold back in training courses with men, that there were plenty of other training opportunities for women and that they preferred mixed governance training. One woman said that governance was not gender based and thought the idea reflected a poor view of women. A course for youth was suggested as they are future leaders and some already hold various leadership roles.


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A one day course in Samoan which presents key governance principles which is targeted at board members with limited English was thought to be a good idea by many. Although many saw benefits to tailored courses which focus on specific groups, they themselves preferred ‘mixed courses’ which included participants from a range of sectors. “A mix is more interesting” . “There should be closer bonds between public and private sectors. These courses are good for breaking down barriers and lack of understanding between public and private sectors”.

Suggested Course Topics Business ethics Ethics of being a Director Conflicts of Interest Board Succession The Grey Area between CEO and the Board More time and clarity on the role of the board, the chair and the company secretary “It was like chop suey with everything thrown in together- clearer distinction is needed in teaching about roles.”

Suggested Other SIOD Activities Networking Functions “People like a social function” “I would attend if I know the topic is relevant Research – Two interviewees suggested that the SIOD undertakes research projects. Topics for study might include an impact study on the effectiveness of SIOD training, and research into how community governance models compliment corporate governance models Newsletter – Most thought that a newsletter would be a good idea. One person suggested that quarterly publication was suitable and that it could be included on an SIOD website. A newsletter could also include a list of members and information about upcoming training courses. Another said that he may read a newsletter but not do anything such as enrol in training as a result.

Institute and Course Promotion One interviewee said that the IOD should do radio advertising. Someone from the private sector expressed an opinion that the private sector need to get feedback about what benefits the Institute offers members or they will not renew their membership. A welcome package upon joining the Institute was suggested, as well as promotional SIOD calendars and pens.


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The SIOD needs clear identification and branding. Members are not just directors, they are part of a professional association. Several suggested that the SIOD should have a website.

Tailored Inhouse Board Training In response to a suggestion about whether the SIOD might approach their board and offer in house training for a fee, many said that they thought it would be of great benefit. (Appendix One - Interviewee list marks these organisations with an asterisk.) One interviewee thought the SIOD should provide an avenue for customized group programmes targeted at a particular sector which shared common interests e.g. Samoa Computer Services/Samoa Broadcasting/SamoaTel; and Development Bank/National Provident Fund/SLAC

Connecting with the Private Sector Suggestions for how and where the SIOD can ensure it connects with the private sector included:

Profile at: the golf course; bars such as Millennia, The Lounge Specific invitations to and targeting the private sector Promoting the benefits of strategic and business planning, succession planning and the effects of accountability and transparency on the bottom line Social functions with a draw card speaker

“Keep the private sector in touch with courses and how about offering courses on tax, customs duties and banking?” “The private sector feels it cannot release people for training so the Institute must be clear about the benefits and target owners

How Interviewees heard about SIOD training CEO / Chair of board 2 Word of mouth 3 Recommendation Newspaper 1 TV 1 Leaflet, publication Other:

Government policy 1

General Comments “There is a need to ensure that the right people who can benefit from the course attend. Certificates are very useful in future government appointments and would put people who attend at an advantage even if they are not the right people. Is there a way of restricting who comes to the courses?”


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Another person suggested that a community person attends SIOD training, accompanied by a tertiary trained person who can interpret where needed. Putting less into courses and allowing 10 minutes at the end of each session would enable these people to catch up and would encourage people to ask questions and discuss the issues. “The role of the SIOD is about building directors, research and publishing and providing an advisory service.” “Stability for the Institute will come from the private sector. There is less ownership and commitment if the Government pays.” “Membership of the IOD is expensive.” “The Institute needs to look at how it develops its local platform – should be all about quality. The Institute offices and training facilities should be in the same building, if not beside each other. The Institute should look at proper remuneration of directors on an annual fee basis, not just allowances for meeting attendance, as governance should be looked at as a profession.” “The role of the Institute is critical right now… where is the accountability…?” “A special body, not the SIOD, could be set up to look at director performance, for example investigating conflict of interest situations and public complaints. This body would also have power to nominate directors to boards and the SIOD may play a part in suggesting nominations. This may take a long time to come in but the aim is modifying the system to achieve good governance. Samoa has done a lot about reforms but not in this area of director selection.. Good governance should be the Number One priority of the Government and it should support the SIOD in its role in improving corporate governance. Good corporate governance comes to Samoa with the same principles that this country was founded on.” “Not all board members attend these courses – there needs to be more opportunities for more board members to attend.” “Members are encouraged to revisit good governance principles in their lives with members encouraged to act as leaders in the community in decision making and fair judgment in the family, community and work place. Good governance can have huge impacts on the community.”


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Appendix One – Interview Programme

Schedule of Interviews

March 2007 Ms Jane Huria; Director Development Specialist

Friday, 23rd March 2007 1.00 pm Seumanufagai Pueleo – Samoa Shipping Corporation* 1.45 pm Matautia Rula Levi – Director SIOD and CEO Housing Corporation* 2.30 pm Tupuola Siaosi Hunt – Director Westpac Bank* 3.15 pm Hinauri Petana – CEO Ministry of Finance (Not available) Monday, 26th March 2007 9.30 am Ali’imuamua Kereti Petaia – Ah-Liki – Director SIOD and Director,

Samoa Tourism 10.15 am Taua Latu Lome – Director Agriculture Store* 11.00 am Apulu Lance Polu – Director Le Samoa Newspaper* 2.15 pm Maria Westerlund-Hunter – Director National Health Service 3.00 pm Corey Keil – Director Radio Polynesia* 3.45 pm Gatoloaifaana Tilianamua Afamasaga – Director Parliamentary Pension

Scheme Board Tuesday, 27th March 2007 9.30 am Francis Craig – Director Craig Construction (was off island) 10.15 am Fepuleai Sinapi Moli – CEO Samoa Qualification Authority 11.00 am Papalii Matuitasina Tugaga – Director Colonial Insurance 2.00 pm Faamausili Matagialofi Luaiufi – CEO Public Service Commission 3.30 pm Justina Sau, SOEMD Department Head, Ministry of Finance * marks those who said that the SIOD might approach their organisation to offer specifically targeted training


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Annex 8: Program and Recommendations from SIOD Retreat


“TOWARDS A SUSTAINABLE SIOD” Saturday 9 June 2007: 6.00pm Check in 6.30pm Drinks & Dinner 8.00pm Welcome by SIOD Chairman ADB Report (as this is their last visit) By ADB TA Team Leader – Mrs Juliet McKee Strategic Planning towards a sustainable SIOD - Brainstorming Exercise Sunday 10 June 2007: 8.00am Breakfast 8.30am SIOD Board Meeting 12.00pm Lunch 1.30pm Strategic Planning – Vision, Mission, Objectives

Where are we now

Determining where we want to go

Determining how to get there

What resources do we need

5.00pm Conclude session 6.00pm Check out & Departure


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Recommendations Arising from the Strategic Planning Session held on Sunday 10th June, 07

Following the Board’s retreat on Sunday 10th June 2007, the following list of recommendations are submitted for the Board to endorse: Annual General Meeting:

1. The AGM be held on Friday 29th June at 5pm, at the Kitano Hotel Samoa 2. The Notice of Meeting be inserted in the newspaper on Friday 15th June

(Rules, clause 20) 3. Clarification be sort regarding clause 20b as to the delivering of the AGM

package to 150 members and the need to include some of the recommendations for amending the Rules.

4. An agenda item added “Amendments to the rules of the Samoa Institute of Directors (INC.)

5. The CEO with Eleitino Michelle Meredith seek legal advice on updating amendments to the Rules, including the following clauses:

• 4(a)7(j) Interpretation of Board secretary • 7(a) Election of directors • 7(e) Replacement appointment – Departure Mandy/ Kereti • 8(a) Clarification of staff roles • 9(c) (ii) Board secretary? • 9(e) (iv) Financial Reporting • 13b (ii) Lending money? • 14b Appointment of Treasurer • 18e(iii) “officers” replaced by the word “directors” • 18e(iv) delete.. determine his her/his remuneration • 18e(v) clarify, whether to determine the remuneration of directors

and not the staff? • 20b Email?

Board Timetable:

6. The Board endorse the Board Timetable attached (section 4 – Directors folder)

7. The Board Timetable be updated at each Board meeting Strategic Plan:

8. The Board finalize the Vision & Mission at their July 2007 meeting, 9. The Board endorse the attached SWOT with the actions proposed.


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Director’s Folders:

10. The Board endorse the following contents for the Director’s folders, and that be updated regularly

Database:

11. The Board review the questionnaire used by the SOEMD for their database, for providing to all members of SIOD to develop the database of Directors.

Best Practice Statements:

12. The Board approve the printing of all BPS up to date including the new BPS on Strategic Planning

13. The Board approve for publication the draft BPS on Audit Committees Website:

14. The Board endorse in principle the recommendation of the Interview Panel to award the design and construction of the SIOD Website to the CSL Company Ltd, at a cost of SAT$XXX to be paid from the EU fund.


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Annex 9: SIOD Best Practice Guidelines Update To: The Board of Directors, SIOD Subject: Best Practice Statements An Update Date: Board Meeting 1 March 2007 Author: Juliet McKee Purpose of Paper: To agree four sub committees to critique drafts of

four Best Practice Statements 1) Three Best Practice Statements are now published and four are in the pipeline: Published 2006 The Role of the Board in Adding Value (out of print) – Aug 06 The Role of the Board Chair – Nov 06 Understanding Financial Statements – Dec 06 Drafts for consideration by a Board Sub Committee: Prepared by: Strategic Planning Rick Bettle Conflicts of Interest Jane Huria Meeting the Needs of the Board Jane Huria Audit Committees Professor Don Trow. [the first three are expected to be considered by SIOD Board at its May 2007 meeting] 2) Financial Implications Preparation: The statements prepared by Jane Huria are covered by the costs of the ADB TA Strengthening Corporate Governance. Professor Trow was paid a fee for preparing the Best Practice Statement “Understanding Financial Statements” in 2006. Rick Bettle said he would develop the Strategic Planning paper as part of his course fee so no additional payment required. Professor Trow is yet to be paid a fee for Audit. Publication: New print runs of the first three statements are required if they are to be distributed at the SIOD courses. 3) The Board is invited to: i) Note that Professor Don Trow will be paid a fee for preparation of Audit Committees as part of the payment with accommodation, airfares etc for his visit for The Directors Course in March 2007. Rick Bettle’s course payment will cover Strategic Planning. ii) Suggest two names to review each draft Best Practice Statement prior to submitting to the full Board for comments. It is important that each Statement reflects best practice and culture in Samoa.


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Appendix

Strategic Planning DRAFT Page 2 Conflicts of Interest DRAFT Page 5 Meeting the Needs of the Board DRAFT Page 9 Audit Committees DRAFT Page 16


BEST PRACTICE STATEMENT

DRAFT Strategy Development And Implementation For The Board

An organization’s strategy must be appropriate for its resources, environmental circumstances, and core objectives.

Strategy formulation involving the Board.

The Board will utilise management and at times contracted outside resources to analyse the situation of the organisation both internal and external on a micro and macro level.

The Board needs to define the purpose of the Business, Public Body or Mutual. The strategic intent and objectives as a business enterprise and its values.

Concurrent with this assessment, objectives are set. This involves crafting:

A vision statement: The long term view of a possible future.

The mission statement: The role that the organization gives itself in society.

The overall corporate objectives (both financial and strategic).

The strategic business unit objectives (both financial and strategic), and tactical objectives.

These objectives should, in the light of the situation analysis, suggest the basis of a strategic plan. The plan provides the details of how to achieve these objectives.

This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there.

An organization’s strategy must be appropriate for its resources, environmental circumstances, and core objectives.


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Strategy implementation involves:

The board allocating sufficient resources and involving itself in the debate.

The Board needs to add value to the organisation and in order to do so it must utilise the resource it has available within management and outside if necessary (financial, personnel, time and technology) to develop a strong flexible strategy.

Effectively the Board should determine the purpose and values and ask management to develop a strategy to achieve the purpose while implementing the values.

It must then debate the proposed strategy and agree the trade off of any one opportunity against another. Trade offs are inevitable in any strategic plan as are risks which must be carefully evaluated.

Strategic risks mainly fall into four categories.

Financial risks such as commodity prices, credit, interest rate or currency

Operational risks such as capacity, information systems, supply chain problems or inventory.

Hazard risks such as property, casualty, political, regulatory or environmental

Organisational risks such as governance gaps, wrong organisational structure, talent gaps or merger integration problems.

However the rapid rate of technology development has added a new layer of strategic risks from new distribution channels, to new IT project failure, to stock obsolescence.

The board must assign responsibility for specific tasks or processes to specific individuals or groups. It must also manage the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, ensuring management is controlling for variances, and making adjustments to the process as necessary.

External benchmarking and monitoring of key performance indicators such as; customer satisfaction, product or service quality and brand strength all help the board to look for early warning signs.

The Board and the CEO need to agree on key performance indicators which will allow the board to monitor and motivate management to achieve the desired strategic outcomes. They need to have a long term target, a value proposition and a distinctive value chain that they can see is working

It is the role of Board to continually monitor, review and challenge the strategy. To keep asking management the questions, where are we headed? What risks and opportunities do they see?


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Shareholders expect the board to understand those risks and opportunities as well as the capital requirements for a growing company or public body and therefore presentations and discussions on strategic topics need to happen on a regular basis at each Board meeting and shareholders need to be kept well informed through regular formal meetings.

Strategy formulation and implementation therefore, is an on-going, never-ending, integrated process, requiring continuous reassessment and reformation. Strategic management is dynamic as it involves a complex pattern of actions and reactions which will be partially planned and partially unplanned because strategy is both planned and emergent, dynamic, and interactive. There are critical points at which a strategy must take a new direction in order to be in step with a changing business environment.

Through all of this the board needs to maintain focus on the mission, vision, the strategic plan and long term consistency of direction.


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SAMOA INSTITUTE OF DIRECTORS BEST PRACTICE STATEMENT

DRAFT Conflicts of Interest

Introduction Best practice governance requires that company directors act in good faith in the best interests of the company. Directors’ personal obligations, interests and relationships may have the potential to influence a director against acting in the best interests of the company. When this occurs, and whether or not the director acts on that influence, the director has a conflict of interest. What is a Conflict of Interest? A conflict of interest arises where two different interests meet. Where a person’s duties or responsibilities to a particular entity could be affected by some other separate interest or duty that he or she may have, there is a conflict of interest. The existence of this risk, or a likely perception of this risk, is what creates the conflict of interest. Whether or not the person would actually compromise him or herself is irrelevant. In deciding whether a conflict of interest exists, consideration is given to whether a reasonably informed objective observer would think that the person’s judgement is likely to be influenced against the company’s best interests. A conflict of interest can arise from a financial interest, or a non-financial interest or association. It can be professional or personal. Examples of how conflicts of interest can arise include: employment with another organisation

involvement in another business

family or close personal relationships

professional or legal obligations owed to someone else

investments and property ownership

strong political or personal beliefs

holding another office

membership of another organisation

beneficial interests in trusts

gifts and hospitality

debts

The standard for assessing whether a conflict of interest exists may relate to potential or actual financial loss of the entity concerned. Assessment of conflict of interest may also relate to the potential for public money or shareholder funds or organisational resources or time being used by someone to advance their own private interests or the interests of an associated person (for example, the interests of a family member). Activities funded by public money or undertaken in the public interest result in strong expectations about honesty

http://www.oag.govt.nz/2004/cpit-cool/

http://www.oag.govt.nz/2004/cpit-cool/


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and integrity from taxpayers. Both media and the public take interest when they think taxes are being spent irresponsibly or misused for private gain.

What is a CONFLICT of INTEREST?

• A conflict if interest exists in a situation if a reasonably informed objective observer answers ‘yes’ to the question:

Does the issue create an incentive for the person to act in a way that may not be in the best interests of the company?

Management of Conflicts of Interest Conflicts of interest may not be avoidable. Where conflicts of interest exist, they must be identified, disclosed and managed in a planned way. Directors must have an understanding about:

• what a conflict of interest is and when/if it applies to them • the entity’s rules around avoiding or managing conflicts

Managing conflict of interest issues requires consideration of relevant laws and organisational policies, and the ethics of the situation. There are no “one size fits all” definitions or rules for identifying and dealing with conflicts of interest. As well as being aware of relevant legislation, each entity must develop a conflict of interest policy and process which fit its own circumstances. The ethical dimension involves issues such as integrity, honesty, transparency and good faith and a high standard of behaviour is expected of those involved in public life or entrusted with public assets and resources.

DEALING with a CONFLICT of INTEREST

• Managing conflict of interest should be according to an entity’s legislation, ethics, policy and process. The process involves two key aspects:

Identification. A conflict of interest needs to be identified and disclosed to the necessary people in a timely and effective manner. Management. Decisions need to be made about what, if anything, needs to be done to adequately avoid or mitigate the conflict of interest. • Entities need to establish policies and procedures to recognise and

deal with conflicts

Procedure The concept of conflicts of interest can be complex. Board approved policies and procedures which provide clear rules are an important starting point. Each entity needs to develop its own policies and procedures, taking into account the


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nature of its structure and functions, values and activities, and any applicable legislative requirements. Policies and procedures should ideally: • Set out the principles or values that reinforce the entity’s commitment to addressing

conflicts of interest (for example, honesty and transparency); • Establish rules around acceptable and unacceptable actions (for example, no • Establish the most appropriate mechanism (such as an interests register) for recording

ongoing interests that commonly give rise to a conflict of interest, including a procedure for putting this into effect and updating it on a regular basis;

• Set out the process for identification of conflicts of interest as and when they arise; • Set out the process for managing conflicts of interest that arise (including disclosure of

conflicts, who makes decisions, and the principles, criteria, or options that will be considered);

• Provide a mechanism for handling breaches of the policy and specify potential consequences of non-compliance.

If directors are unsure whether a conflict of interest exists they discuss the issue with the chairperson. Legal advice can also be sought where appropriate. In the event that clarity is not reached, the matter should be treated as a conflict. Where a conflict is identified the steps to be taken require careful assessment and judgement of factors such as: the type or size of the person’s other interest; the nature or significance of the particular decision or activity being undertaken by the entity; the degree to which the person’s other interest could affect, or be affected by, the entity’s decision or activity; and the practicability of options for avoiding or managing the conflict. The range of options for avoiding or managing a conflict of interest include: • enquiry by the Chair as to whether all affected parties will consent to the person’s

involvement; • withdrawal of the conflicted person from discussing or voting on a particular item of

business at a meeting; • exclusion of the conflicted person from a meeting, or a committee or working group

dealing with the issue; • re-assigning certain tasks or duties to another person; • placing restrictions on access to certain confidential information; • resignation or dismissal of the conflicted person from one or other position or entity. The onus is on the individual with the conflict of interest to identify and disclose the nature and extent of their interest to the board. Best practice is that the conflicted director generally does not participate in discussions on conflict related matters and that that the conflicted member should volunteer to absent themselves from a vote.


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Checklist of PROCEDURES

• Set clear company policy and process about the identification,

disclosure and management of board member conflicts of interest • Ensure the policy and process aligns with the company

Constitution, values and applicable legislation • Establish and regularly review a conflict of interest register which

identifies potential conflicts of interest for directors

Appendix - Sources of guidance on conflicts of interest Websites that contain guidance about some types of conflicts of interest include: • New Zealand State Services Commission, Code of Conduct Resources: Walking the Line

www.ssc.govt.nz/display/document.asp?navid=277 • Securities Commission New Zealand, Corporate Governance in New Zealand Principles

and Guidelines: A Handbook for Directors, Executives, and Advisers (March 2004) www.sec-com.govt.nz/publications/documents/governance-principles/index.shtml

• New South Wales Ombudsman, Public sector agencies fact sheet No 03: Conflict of

Interests www.ombo.nsw.gov.au/show.asp?id=146

http://www.ssc.govt.nz/display/document.asp?navid=277

http://www.sec-com.govt.nz/publications/documents/governance-principles/index.shtml

http://www.ombo.nsw.gov.au/show.asp?id=146


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BEST PRACTICE STATEMENT

DRAFT Meeting the Needs of the Board

Introduction The Board leads and is responsible for the organisation. Board members are supported in this role by a sound framework of good governance policy and process. This framework ensures efficient, effective board functioning, and allows the board to focus on its governance role and responsibilities. Good governance also relies on the support of capable management, and board members who: Understand the role of the board Plan the work of the board Maintain a positive board / management relationship Have access to appropriate, relevant board documentation Participate in well managed board meetings Management play a key role in meeting the needs of the board through adherence to board approved values and implementation of strategy, as well as regular accurate reporting to the board. The Role of the Board Purpose / Vision and Strategy Setting the purpose or vision indicates the long term view of where the board wishes the organisation to be in the future. This is a key board responsibility. Setting the long term purpose or vision requires informed board members who are up to date with both the organisation and the environment in which it operates, and who are able to create a picture or vision for the future of the organisation. Management play a key role in keeping the board informed. The board then works with management to develop a Strategic Plan which sets out how the purpose and vision will be achieved. The strategic plan may cover a 3 to 5 year period and identifies measurable strategies for action. Measures may be in the form of Key Performance Indicators (KPIs). The Board monitors performance towards achieving strategic goals by means of management progress reports. Shorter term goals and outcomes are defined and reviewed in an annual or business plan which sets annual goals and measures for operational activity during the year. Chief Executive The chief executive as day to day leader of operations is responsible to the board for the operational success of the organisation and thus the ability for the board to ultimately achieve their vision. Ensuring the appointment of a suitable person to manage operations is a key board responsibility.


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The board defines the key attributes required for the chief executive, and develops a position description that sets out the duties of the chief executive role. A robust performance measurement framework is essential to allow the board to monitor the performance of the chief executive against the achievement of strategy. After consideration of potential candidates, and appropriate reference checks for preferred candidates, the board finalises an employment agreement that clearly sets out the terms and conditions of employment and the board’s expectations around performance of the chief executive. Ethics Maintenance of the highest standards of ethics and integrity, both personally and throughout the organisation, is a responsibility of board members. Acting ethically requires board members to maintain sound judgement and ensure their actions are, and are seen to be, appropriate at all times. Standards of behaviour expected by the board are articulated in the organisation’s values and may be set out in a code of conduct. Conflicts of Interest The position of board member is a position of trust. Board members must not abuse this trust and must follow transparent and accountable processes in all decision making. Regardless of whether a board member is appointed, or elected to represent a particular group, their duty as a board member is to serve the interests of the organisation, over their own personal or representative group interests. Managing Risk Identification and management of potential risks that may prevent the organisation from achieving its purpose or vision is a board responsibility. Board members ensure that there are processes in place within the organisation to identify, plan for, manage and mitigate risks which, if they eventuate, may have an adverse effect on the organisation. It is important for board members to be aware of their organisation’s foundation documentation (e.g. trust deed or constitution) and relevant legislation and to ensure that the organisation complies with these. Communication and Reporting Boards ensure an appropriate level of openness and accountability. Stakeholders may have the right to clear, regular information regarding the organisation’s vision and performance. Delivery of full and accurate financial statements setting out the organisation’s financial position is also an essential responsibility for board members.

http://governance.tpk.govt.nz/docs/tools/employmentagreement.doc


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ROLE of the BOARD Checklist

Set Purpose / Vision and Long Term Goals Set Strategies to Achieve Vision / Long Term Goals Appoint and monitor the Chief Executive Foster High Ethical Standards Ensure Risks are Managed Ensure Appropriate Communication and Reporting

Planning the Work of the Board Establishing a board work plan sets out the routine work of the board over an annual period. The board work plan assigns board tasks to dates and includes meeting dates for board / board committee / annual general meetings, strategic and annual planning, board evaluation, stakeholder events, Chief Executive performance review, and other board tasks. This allows the board to manage priorities and increase their overall effectiveness. A work plan also enables management to prepare for meetings. The board should set aside time in the work plan for regular self-evaluation of their own performance. This provides an opportunity for the board to check that it remains on track, and to identify any opportunities to make positive changes in the way they interact and go about their role as board members.

PLANNING the WORK of the BOARD Checklist

• Establish an Annual Work Plan for board tasks • Assign regular board Self-Evaluation sessions

Board / Management Relationship A good board demonstrates a strong understanding of the line between management and board responsibility. The board and chief executive work in partnership, with the board establishing organisational direction, and management carrying out the day-to-day operations. The board is not directly involved in daily operations – it is their role to make sure the organisation is well-managed. Board / management relationships benefit from clear organisational strategy, and agreed relationship protocols. Relationship protocols help to define the respective roles and responsibilities of board and management, and to clarify rules for engagement between one another. Relationship protocols may include:


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• Role definitions set out in a Board Charter or Governance Manual • A governance Code of Conduct • Conflict of Interest policy and process • Clear articulation of Board expectations of management • Policy regarding Board member contact with / access to staff

BOARD / MANAGEMENT RELATIONSHIP Checklist

• Direction is set by Board and Day-to-day Running of the

organisation is left to Management • Mutual Understanding of and Respect for Board and Management

Roles • Relationship Protocols Established and Agreed

Board Papers Board papers provide board members with the information required to make sound decisions, and to monitor and lead the organisation. The board provides guidance to management regarding specific information they wish to receive and management ensures that this information is up-to-date, accurate and is received by board members in time to give it proper consideration. Board papers generally consist of one of the following: Key Strategic Area Reports Financial Report Chief Executive Report Board Committee Reports Key Strategic Area Reports Key strategic reports include information, discussion and decision papers. o Information papers reflect the direction of the organisation and update the board on

performance towards achievement of key performance indicators (KPIs) set in the strategic plan.

o Discussion and decision papers address areas of strategic relevance that require specific board discussion and / or decision. Papers include: • clear reasoning • recommended options, with reasons for options • relevant research • sufficient information that enables the board to analyse options and risk, understand

key issues and make informed decisions which are in the best interests of the organisation

• avoidance of jargon or too much technical information Financial Report The financial report provides the board with commentary on: o Monthly overview of income and expenditure (actual vs. budget)


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o Year to date overview of income and expenditure (actual vs. budget) o Variance to budget reporting o Projected year-end financial position o Debtor reporting o Cash flow status o Other financial matters (as relevant) Chief Executive Report The chief executive report includes: o Market / environmental analysis o Risk management and compliance update o Human resources update, including current and budgeted staff numbers; personal

grievances; and safety / injury report o Information technology update o Communications report o Stakeholder / Shareholder relationship management progress report Board Minutes and Committee Reports Board meeting minutes are the legal record of a board meeting. Minutes give a brief, accurate record of board discussions and decisions made. Board members receive minutes for review as soon as possible after board meetings. Minutes of previous meetings are confirmed by those present as an accurate record at the meeting immediately following and then signed off by the Chair. Board committees assist to spread the workload of the board thereby increasing board effectiveness. The full board retains responsibility for the organisation therefore committees tend to make recommendations to the full board, rather than to make decisions. Committee reports provide the full board with a summary of committee discussions and where required, make recommendations to the Board for decisions. Reports may be provided in written or verbal form. Board committees are established with terms of reference which generally require committee meetings to be minuted and which set out committee composition, terms, functions, delegated authorities (if any) and reporting requirements.

BOARD PAPERS Checklist

• Management provide board papers which are accurate, timely

and received in time to allow board members to consider them properly before the meeting

• Board papers provide sufficient information to give the Board an accurate picture of the organisation and to allow the Board to make informed Decisions

• Board papers include reporting on organisational progress towards achievement of Key Performance Indicators (for example, revenue, expenditure, production, etc)

• Financial Report provides commentary on Financial Status and Outlook


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• Chief Executive Report presents an Overview of External factors and organisational activity

• Committee Reports summarise Committee Activity and make recommendations where required

• Accurate concise Meeting Minutes are available as soon as possible after meeting

Board Meetings Effective board meetings are key to the board fulfilling its governance responsibilities. Factors to consider regarding effective board meetings include: Meeting Structure A board meeting agenda is designed to maintain the board’s focus on strategic issues and governance level policy. The Chair is responsible for setting the agenda (which may be developed in collaboration with the Chief Executive / Company Secretary). The most important issues for board consideration are scheduled early in the agenda, with monitoring and compliance issues covered later in the meeting. Decision-Making Process Board members come prepared to meetings and remain open-minded. They combine independent thought and judgment with the ability to work as team members. They participate in consensus decision making as often as they feel they can without compromising themselves. Because all board members are collectively responsible for board decisions, they need to be willing to support some decisions, even if these were not their first choice. Frequency There are no rules on how regularly a board should meet. Boards are guided by the need for them to do justice to their governance role. The less often a board meets however, the more difficult it is to provide leadership, to remain up to date and to maintain continuity of thought. Boards should not place the Chair and / or Chief Executive in a situation where, through infrequent board meetings, they are required to ‘fill gaps’ and potentially exercise more autonomy than the Board is comfortable with. Duration As with frequency, there are no rules on how long a board should meet. Meetings should provide sufficient time for board members to fully discharge their governance responsibilities. Long meetings may be ineffective and result in poor decisions through tiredness or too much board involvement in operational detail. Venue Comfort and accessibility are key venue factors to consider. Boards should be provided with a quiet, comfortable and private environment that is easy to access.


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BOARD MEETINGS Checklist • Meeting Focus is on Strategic Issues and Governance Level

Policy • Agenda developed by Chair in consultation with the Chief

Executive/Company Secretary • Timing Planned – most important issues dealt with early in

meeting • Aim for Consensus Decision-Making • Suitable meeting Venue, Frequency and Duration


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SAMOA INSTITUTE OF DIRECTORS BEST PRACTICE STATEMENT

DRAFT Audit Committees

Introduction The establishment of an Audit Committee is strongly endorsed by the Institute. It is essential that there be an Audit Committee where the share capital of the company is held by the State on behalf of the public, or where the shareholding is held by more than a small number of shareholders, or where the company has borrowed funds from the public or a financial institution. If the company has a board of less than six members, the board may decide that the board itself will assume all the functions and activities of the Audit Committee. The functions of the audit Committee. The Audit Committee will attend to all or some of the following matters. All these matters are part of the over-all responsibility of the board, for the governance of the company: 1. Ensuring that accounting records are maintained up to date and that the annual

financial statements are prepared promptly at year end. 2. Ensuring that the annual financial statements present (as prescribed by statute) a “true

and fair view” and comply with “Generally Accepted Accounting Practice” (GAAP). 3. Ensuring that a budget is prepared for board approval, before the commencement of

the financial year. Then comparing budgeted with actual results throughout the year. 4. Setting procedures in place that will both prevent and detect any occurrences of fraud

or error in the company’s operations (i.e. install and monitor the operation of an effective system of internal control).

5. Reviewing all aspects of the company’s activities to ascertain the exposure to risk for

the company, whether it is risk of loss of assets from theft, fire or disaster, risk of loss of reputation as a good corporate citizen or risk of exposure of employees to unhealthy or dangerous circumstances. Other risks to consider will be risk of loss of computer records, and risk of loss arising from employees acting on behalf of the company without the authority to do so. Then ensuring that procedures are in place to minimise the likelihood of loss or harm from each of the identified risks.

6. Reviewing any matter of ethical conduct by directors or staff, or legal compliance, that

may be referred by the board to the committee. Then prescribing principles of good conduct when these may be required.


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7. Discussing with the auditor the plan for the audit of the year end accounts, and agreement to the terms of the auditor’s Letter of Engagement and the audit fee proposed.

8. Recommending to the board whether the incumbent auditor should be reappointed for

the coming financial year. (If no action is taken, the auditor is automatically re appointed under the terms of statute).

9. Deciding on the propriety of any non audit services to be provided to the company by

the company’s audit firm (i.e. ensuring that the independence of the external auditor is not compromised by involvement in providing advice to the management of the company).

Preparation of constitution for the Committee The board should prepare a constitution for the Audit Committee to clearly specify the matters (from those listed above) that are the responsibility of the Committee. The constitution will refer to the required membership of the Committee and the quorum required for meetings. The constitution should also require the Committee to undertake an annual self review of its responsibilities and of its terms of reference. Membership of the committee and meetings The Audit Committee is a committee of the board. It will normally comprise up to three members of the board who are non executive directors. The chief executive officer and the chief financial officer should attend all meetings of the Committee. Most meetings will also be attended by representatives of the auditors. As nearly all the matters to be considered by the Committee require specialist knowledge of accounting matters, it is desirable that the Chairman of the committee (or at least one member of the Committee) is a chartered accountant or a person well versed in commercial matters. It is preferable that the chairman of the board is not also the chairman of the Audit Committee. However, it is acceptable (and likely to be desirable) that the chairman of the board should also be a member of the Committee. Members of the board, who are not members of the Audit Committee, should be able to attend any meeting of the Committee, if they wish to do so. The Audit Committee should meet on at least three occasions during the year. As the board as a whole has responsibility for all the matters that will be over-seen by the Audit Committee, minutes from each meeting of the Committee should be forwarded to all members of the board.


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The review of the annual financial statements The main occasion when the auditors will attend the Committee meeting is when the year end financial statements are being reviewed (in accord with item 2 in the list of responsibilities). Before the meeting commences, it is important that all members of the Committee are conversant with the Institute’s Best Practice Statement on “Understanding Financial Statements”. Items of interest and concern can then be raised with the auditor, and vice versa. It is essential that there be an easy dialogue and questioning between the Committee members (responsible for the content of the financial statements) and the auditor (responsible for providing an opinion on the fairness of the financial statements) without the potential for the meeting being dominated or controlled by the chief executive. At the end of this meeting, as part of normal procedure, the chief executive and chief financial officer should be asked to leave the meeting. This will allow the auditor to have unrestricted dialogue with the members of the Committee, and to report any matters of serious concern that the board should know about. A copy of any “Management Letter” that is prepared by the auditor at the end of the audit should be passed on to all members of the board. The proper conduct of these procedures for the review of the year end financial statements is critical to the success of the process for good corporate governance. If properly implemented by all companies, there is enhancement of the quality of governance in the whole business community. The likelihood of mis-stated financial statements is minimised - and this in turn generates greater confidence in the capital markets and the economy as a whole. Further liaison with the auditors It is obvious that there will be liaison with the auditors when attending to items 7, 8, and 9 in the list of responsibilities. Discussion with the auditors will also be most useful in respect of item 4 on the list of responsibilities. This is because the auditor is most likely to use a review of the strengths and weaknesses of the company’s system of internal control as the basis for the audit examination. It must be remembered, however, that this does not lessen in any way the over all responsibility of the board for prevention and detection of fraud and errors that arise from the company’s operations, and the need for the board to ensure that the quality of the company’s controls is constantly being monitored. To assist the board with this over all responsibility, it should be understood that the auditor will promptly pass on to the company any information on weaknesses in internal control that the auditor observes during the audit examination.


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Other activities of the Audit Committee The Committee will need to ensure that all other items in the list of responsibilities (as listed in the constitution) receive proper attention. It is likely that the Committee will delegate the necessary work procedures to personnel in the management of the company (or maybe to an internal auditor). Regardless of delegation, the Committee must review the nature of any work completed on their behalf and ensure that the matter under scrutiny has received proper attention.


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Annex 13: SOEMD Capacity Development Plan Aspect Activity Possible source and timing

1. Technical Skills 1.1 Governance concepts 1.2 Business strategic planning 1.3 Financial planning 1.4 Financial modelling 1.5 Financial analysis 1.6 Key performance indicators 1.7 Capital expenditure project assessment 1.8 Cost accounting methodology for CSOs

1.1–1.2 External seminars 1.3–1.6 Training material provided by current ADB TA 1.7 Training material provided by current ADB TA 1.8 Discussion papers on CSO costing, seminar on CSOs November 2006

1.1–1.2 SIoD or other external seminars as available 1.3–1.6 TA training provided December 2005, material available for future use by SOEMD 1.7 Seminar November 2006 1.8 TA training planned for

November 2006. Reference material available for future use.

2. Computer skills 2.1 Office software – e-mail, Word, Excel 2.2 Access Database – Directors data base

2.1 External training, especially

advanced Excel 2.2 External training

2.1 Polytechnic or external seminars – as available. 2.2 CSL training.

3. Reference material 3.1 Legislation 3.2 SOE policy 3.3 Annual work timetable and work allocation 3.4 Checklists for reviews of SOEs 3.5 Report contents guidelines 3.6 Standard letters 3.7 Technical reference material

3.1- 3.6 Gather existing reference material to build a manual. This would include legislation, checklists, SOE policy papers (e.g. Cabinet papers that include the approved policies), the annual work programme, work allocation, etc. Both paper and electronic files should be created. 3.7 TA training material (1.3-1.8)

3.1- 3.6 Head of SOEMD by September 2006. 3.7 Electronic and paper files.

4. Knowledge of client SOEs and business

4.1 Permanent File for each SOE 4.2 Knowledge of client SOEs 4.3 Knowledge of business issues

4.1 Each SOE analyst to create file 4.2 Each SOE analyst to visit SOE clients 4.3 Attend Chamber of Commerce meetings, attend external seminars

4.1 Target completion by September 2006. 4.2 Ongoing, but needs to be built into work. 4.3 Ongoing, but needs to be built into work, external seminars as in section 1.

5. SOE Restructuring and Privatisation

5.1 Knowledge of SOE restructuring 5.2 Knowledge of Privatisation

Methods & process 5.3 Valuation and Negotiation

5.1 External seminars and courses 5.2 External seminars and courses 5.3 External seminars and courses

5.1 – 5.3 Overseas training by institutions by June 2007. 5.2 Ongoing with TA.


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Annex 14: SOEMD Draft Financial and Non Financial Performance Indicators for SOEs NAME OF PUBLIC BODY: AGRICULTURAL STORE CORPORATION

Frequency of Reporting Quarter Reports Name of Performance Measure Calculation of Performance Measure Comments on Performance Measure

1/4 2/4 3/4 4/4

Annual Report

(Attachment)

FINANCIAL PERFORMANCE MEASURES

Revenue Total revenue as reported in the profit and loss statement.

Expenses Total expenses (including operating expenses, depreciation and financial expenses, but excluding income tax) as reported in the profit and loss statement.

Total expenses should exclude income tax and focus on operating and financial expenses of the Public Body.

Net profit after tax Difference between total revenue and the sum of total expenses and income tax as reported in the profit and loss statement.

To be reported by all Public Bodies classified as “trading” – irrespective of whether they have an income tax obligation.

Gross profit as % revenue Gross profit (or gross margin, i.e. sales less cost of sales) expressed as a % of total revenue reported in the profit and loss statement.

Public Bodies required to report this measure may be required to estimate their inventory levels at the beginning and end of the reporting period. The estimation approach should be agreed with SOEMD and then used consistently.

NPAT as % revenue Net profit (after tax) expressed as a % of total revenue – as reported in the profit and loss statement.


Return (NPAT) on equity Net profit (after tax) – as reported in the profit and loss statement, expressed as a % of the total equity as reported in the balance sheet.


Current ratio Total current assets compared with total current liabilities as reported in the balance sheet – expressed as a ratio, i.e. 1.7:1.0.

Both current assets and current liabilities should include the totals in the balance sheet.

Accounts receivable days outstanding

Accounts receivable (as per the balance sheet) divided by (credit sales for the reporting period / number of days in reporting period) – expressed in days.

The accounts receivable reported on the balance sheet at the end of the reporting period is divided by (the credit sales for the reporting period / the number of days in the reporting period) – expressed as a number of days. If credit sales cannot be identified total sales will be used, but this will have an impact on interpreting the result.


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NAME OF PUBLIC BODY: AGRICULTURAL STORE CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Inventory days 365 days divided by (cost of sales / ending inventory) – as reported in the profit and loss statement and balance sheet.

This measures the average number of days required to turnover the inventory held for resale. 365 days is divided by (the cost of sales for the reporting period / the inventory at the end of the reporting period) – expressed as a number of days. A consistent estimation process is required for cost of sales and inventory when Public Bodies cannot obtain this information directly from the accounting system. Agreement of SOEMD is required for the estimation process.

NON FINANCIAL PERFORMANCE MEASURES


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Name of Public Body: ACCIDENT COMPENSATION CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)





Net profit before tax Difference between total revenue and total expenses as reported in the profit and loss statement.

To be reported by Public Bodies classified as “trading” – irrespective of whether they have an income tax obligation.



Admin expense as a % total revenue

Total administration expenses expressed as a % of total revenue as reported in the profit and loss statement.

Administration expenses is to include all operating and financial expenses reported in the profit and loss account excluding the expenses of meeting claim payouts and policy payouts.

A

Investment income / total funds invested

Total income (revenue) earned from investments – as reported in the profit and loss account expressed as a % of the total funds invested (at end of reporting period) as reported in the balance sheet.

Total investment income must relate to the group of funds included in “total funds invested”.

A


Number of claims received Total number of claims received. Total number of claims received should be adjusted for any claims that are received but are not accepted as eligible.

Value of long term claimant liability

Value of the liability to long term (as defined by ACC) claimants.

Value of long term claimant liability needs to reflect ACC approach to defining what is a long term claimant.

(SOEMD – need to discuss and agree this with ACC.)

A


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Name of Public Body: DEVELOPMENT BANK OF SAMOA


1/4 2/4 3/4 4/4

Annual Report

(Attachment)













Gearing (debt : equity) Total debt compared with total assets expressed as a % as reported in the balance sheet.

Total debt is the total of current and non current liabilities and total assets is the total of current assets, investments and fixed assets – both as reported in the balance sheet.

A

Doubtful debts as % loans Total doubtful debts (provided for) expressed as a % of total loans (to borrowers) as reported in balance sheet.

Total doubtful debts is the total amount provided against the possibility of full or partial default by borrowers in meeting interest or loan repayments. Loans are the total amount of loans made to borrowers – as at the end of the reporting period.

A


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Name of Public Body: DEVELOPMENT BANK OF SAMOA


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Interest margin (spread) (Total interest revenue / total investments generated interest revenue [at end of reporting period]) LESS (total interest expenses / total borrowings and loans incurring interest [at end of reporting period]).

This measure is to determine the % difference in the average interest rates being paid on borrowings by the Public Body and the average interest rates being earned on deposits, investments and loans to customers.

(SOEMD – check how interest margin is calculated for reporting to Central Bank and international lenders – to ensure consistency.)

A


Overall market share of lending institutions

Market share of DBS lendings as a % of total lending by all lending institutions.

This needs to be consistent with information that DBS uses internally.

(SOEMD – need to discuss and agree with DBS how they will calculate this performance measure.)

A


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Name of Public Body: ELECTRIC POWER CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)











Return (NPAT) on assets Net profit (after tax where applicable) – as reported in the profit and loss statement, expressed as a % of the total assets as reported in the balance sheet.






A


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1/4 2/4 3/4 4/4

Annual Report

(Attachment)




Fuel costs as % total expenses Total fuel expenses expressed as a % of total expenses as reported in the profit and loss statement.

Total expenses includes operating expenses (including fuel), depreciation and financial expenses as shown in the profit and loss statement.

CSO revenue as % total revenue Total CSO revenue as reported in the profit and loss account expressed as a % of the total revenue as reported in the profit and loss account.

Total revenue includes the CSO revenue.


MWH generated Total generation of electricity measured in MWH. This needs to be consistent with EPC calculation of MWH generated.

(SOEMD – need to discuss and agree with EPC.)

MWH sold Total electricity “sold” measured in MWH. This needs to be consistent with EPC calculation of MWH “sold” during the reporting period.

(SOEMD – need to discuss a timeframe for introducing this performance measure. Also need to discuss with EPC how it is calculated.)

Line loss % Loss of electricity in line transmission expressed as a % of generated electricity.

Reporting line loss % is dependent on EPC having systems in place to measure “line loss”.


A

Passenger load factor Total number of passengers carried as a % of the available capacity to carry passengers.

Total number of passengers carried refers to “fare paying” passengers. “Available capacity” should be the total capacity adjusted for capacity that cannot be used because of weight and other


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1/4 2/4 3/4 4/4

Annual Report

(Attachment) restrictions.

Passenger revenue kilometres Total number of paying passengers carried multiplied by kilometres carried.


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Name of Public Body: POLYNESIAN


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

















A



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Name of Public Body: PUBLIC TRUST OFFICE


1/4 2/4 3/4 4/4

Annual Report

(Attachment)















A

Actual loan collection / budget loan collection

Total loans actually collected divided by the total loans budgeted to be collected – expressed as a %.

Loan collection refers to outstanding (overdue) loans that have actually been collected or were budgeted for collection.


Number of wills written Total number of new wills written and existing wills amended.

Amendments to existing wills refers to those wills for which changes have been made to the terms and content of the wills.


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Name of Public Body: PUBLIC TRUST OFFICE


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Total “bank” of wills Total number of wills in custody of PTO. Total wills in “custody” is to be interpreted as the total number of wills for which PTO is responsible for or have been lodged with PTO.

A

Number of new estates managed Number of new estates being managed by PTO. Number of new estates in the reporting period which PTO is managing. A


VINSTAR

Name of Public Body: SAMOA AIRPORT AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

















A


VINSTAR

Name of Public Body: SAMOA AIRPORT AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)





Total passenger movements Total volume of inbound and outbound passengers.

This is the combined total of inbound and outbound passengers.

Total aircraft movements Total number of inwards and outwards aircraft movements.

This is the combined total of inwards and outward aircraft movements.


VINSTAR

Name of Public Body: SAMOA BROADCASTING AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

















A

CSO revenue as % total revenue



VINSTAR

Name of Public Body: SAMOA HOUSING CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

















A




VINSTAR

Name of Public Body: SAMOA HOUSING CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Interest margin (spread) (Total interest revenue / total investments generated interest revenue [at end of reporting period]) LESS (total interest expenses / total borrowings and loans incurring interest [at end of reporting period]).




Number & value of new loans Number of new loans approved and the total value of the new loans approved.

The number of new loans approved during the reporting period and the total value of new loans are to be reported separately.

Number & value of continuing loans

Number of loans in existence at the end of the period and the total value of loans existing at the end of the period.

The number and total value of “continuing” loans refers to the total number of separate loans that exist at the end of the reporting period and the total amount of those loans.


VINSTAR

Name of Public Body: SAMOA LAND CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)















Lease income as % land value leased

Total lease income (revenue) as reported in the profit and loss account expressed as a % of the total value of the land leased, as reported in the balance sheet.

Total lease income must relate to the land included in “value of land leased”. A

Land debtors in days of revenue



VINSTAR

Name of Public Body: SAMOA LAND CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Number of leases reviewed during the year

Number of existing leases whose terms and conditions have been reviewed.

The number of leases to be reported is the total number whose terms and conditions have been reviewed – irrespective of whether changes have been made to the existing terms and conditions.


VINSTAR

Name of Public Body: SAMOA LIFE ASSURANCE CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)









Admin exp as % total revenue Total administration expenses expressed as a % of total revenue as reported in the profit and loss statement.


A




A

Total policy bonus / total premiums paid

Total bonus amount added to policies expressed as a % of the total premiums paid on policies as reported in the profit and loss account.

Total policy bonus added to policies is the annual amount “declared”. A

Policy payout (death & maturity) / total policy payout

Total amount paid out on policies as a result of policy maturity / death expressed as a % of the total amount paid out on all policies.

Policy payout (death and maturity) includes all policies that have reached “maturity”. Total policy payout also includes policies that have been terminated or lapsed for reasons other than death and maturity.

A


VINSTAR

Name of Public Body: SAMOA LIFE ASSURANCE CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Total increase in value of investments

Total increase in the value of investments (i.e. increased value of investments / value of investments at the beginning of the reporting period) expressed as a %.

The increase in value of investments will include both additional investments occurring during the reporting period and the increase in the value of investments existing at the beginning of the reporting period.

A


Total annual premium growth Total premium revenue for the current year, expressed as a % of the total premium revenue for the previous year.

A

Policy premiums / policy claims Total policy premiums divided by total policy claims, expressed as a %.

The policy claims refers to the total claims that have been made by policy holders and accepted as valid claims.


VINSTAR

Name of Public Body: SAMOA NATIONAL PROVIDENT FUND


1/4 2/4 3/4 4/4

Annual Report

(Attachment)









Admin expense as % total revenue



A



A




A


Interest rate paid on member accounts

Total interest paid on member accounts. A

Total active members Total number of active members expressed as a % of the total members, at the end of the current year.

The definition of active members is consistent with that used by SNPF. (SOEMD – confirm the definition used by SNPF.)


VINSTAR

Name of Public Body: SAMOA PORTS AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)



















A


VINSTAR

Name of Public Body: SAMOA PORTS AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)





Number of vessels handled Number of vessels to which port services have been provided.

Total number of vessels to which SPA has provided port related services in the reporting period.

Cargo discharged & cargo loaded Total tonnes of cargo discharged or loaded. A combined total tonnage – of cargo discharged and loaded is to be reported.

Number of containers handled Total number of containers handled. A combined total of containers handled by SPA is to be required.

Proportion of revenue not from wharfage fees & port charges

Total revenue NOT FROM wharfage fees and port charges expressed as a % of total revenue.

The total revenue NOT FROM wharfage fees and port charges is to be reported as a % of the total SPA revenue for the reporting period.

(SOEMD – discuss and agree with SPA the scope of activities that do not relate to wharfage and port charges.)

A


VINSTAR

Name of Public Body: SAMOA SHIPPING CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

















A

Gross profit on vessels as % revenue

Total gross profit relating to the operation of vessels expressed as a % of revenue generated by vessels.

Gross profit on vessels is calculated after deducting the direct costs of vessel operations from the vessel revenue.


VINSTAR

Name of Public Body: SAMOA SHIPPING CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)


Number of ferry trips Total number of ferry trips from all ports. The number of ferry trips is to be the total number of ferry departures from all ports with ferry services.

Number of passengers carried Total number of passengers carried on all ferry trips.

The number of passengers carried is to be the number of fare paying passengers.

Freight carried (a) tonnes of freight (b) number of vehicles

Total number of vehicles carried and total tonnes of freight carried.

Both the total tonnes of freight carried and the total number of vehicles carried are to be separately reported.


VINSTAR

Name of Public Body: SAMOA SHIPPING SERVICES


1/4 2/4 3/4 4/4

Annual Report

(Attachment)















A

Profit by business segment Net profit (pre tax) attributable to each major business segment expressed as a % of the revenue generated by each major business segment.

Net profit (pre tax) for each business segment may not be calculated after allocating the full range of corporate expenses, but limiting expenses to those reasonably attributable to each segment. This needs to be agreed with SOEMD.

(SOEMD – agreement is required about which business segments will be reported and the scope of expenses to be attributed to each business segment.)


VINSTAR

Name of Public Body: SAMOA SHIPPING SERVICES


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Cash position Total of cash on hand, cash deposits and short term cash borrowings as reported in the cash flow statement.

Debt servicing (interest cover) Net profit before income tax and interest expense expressed as a % of interest expense, as reported in the profit and loss statement.

Interest expenses are added back to the net profit (or surplus) before income tax expense.


Market share – cargo & sea freight

Cargo and sea freight handled by SSS as a % of total cargo and sea freight.

The cargo and sea freight is to exclude cargo that is being off loaded and reloaded between vessels. Confirm the calculation with SOEMD.

(SOEMD – confirm the basis for calculation and agree the source of data for total cargo and sea freight.)

Total seafarers Total number of seafarers engaged at end of reporting period.

The total number of seafarers is to be the number who are actively engaged at the end of the reporting period.

(SOEMD – confirm how the measure is calculated.)


VINSTAR

Name of Public Body: SAMOA TRUST ESTATES CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)















A

Lease income as % land value leased


Total lease income must relate to the land included in “value of land leased”. A


VINSTAR

Name of Public Body: SAMOA TRUST ESTATES CORPORATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)


Total land area (a) leased (b) not actually used (c) in agricultural production

Total hectares of land that are (a) leased (b) not in use (c) in agricultural production.

The “land leased” is the land which is “leased out” to third parties, the land not actively used is land which is currently not actively productive and the land in agricultural production is land which is in active use.

A


VINSTAR

Name of Public Body: SAMOA WATER AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

















A


VINSTAR

Name of Public Body: SAMOA WATER AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)




CSO revenue as % total revenue Total CSO revenue as reported in the profit and loss account expressed as a % of the total revenue as reported in the profit and loss account.


Cash flow from water customers / water revenue

Cash received from water customers expressed as a % of water revenue as reported in the profit and loss statement.

(SOEMD – I have doubts about the usefulness of this performance measure – and suggest it be discussed and possibly deleted.)


Proportion of population supplied with water

Proportion of population supplied with water as a % of the total population.

The proportion of the population is to be calculated as the number of household, dwelling or commercial units which are supplied with water.

(SOEMD – check how this is to be calculated.)

A

Volume of water sold Total volume of water sold.

Proportion of water “unaccounted” for

Total water volume “billed” divided by total water volume pumped / supplied.

The proportion of the water unaccounted for is a comparison of the water volume pumped / supplied to consumers and the water volume that those consumers are “billed for”.

A


VINSTAR

Name of Public Body: SAMOATEL


1/4 2/4 3/4 4/4

Annual Report

(Attachment)















A





VINSTAR

Name of Public Body: SAMOATEL


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Profit by business segment Net profit (pre tax) attributable to each major business segment expressed as a % of the revenue generated by each major business segment.




Number of (a) land line connections (b) cell phones

Total number of (a) landline connections (b) cell phone connections.

The number of landline connections and cell phones refers to the number in each group at the reporting period for which connection and other charges are payable.


VINSTAR

Name of Public Body: APIA PARK BOARD


1/4 2/4 3/4 4/4

Annual Report

(Attachment)





Surplus of revenue over expenses Difference between total revenue and total expenses as reported in the profit and loss statement.

To be reported by all Public Bodies classified as “mutual” or “beneficial”.

Government revenue as % total revenue

Government revenue (or funding) expressed as a % of total revenue reported in the profit and loss statement.

Government revenue (funding) is to exclude any CSO revenue. (SOEMD – should this exclude or include CSO revenue??)

A

Surplus as % revenue Surplus (i.e. revenue less expenses) expressed as a % of revenue as reported in the profit and loss statement.






Number of event days Total number of events using APB facilities multiplied by the number of days for each event.

Number of event days is the number of days (irrespective of whether it is a full or part day) on which events are held. Multiple events on any day are counted as the number of different events.


VINSTAR

Name of Public Body: NATIONAL KIDNEY FOUNDATION


1/4 2/4 3/4 4/4

Annual Report

(Attachment)










A






Number of patient contacts (a) dialysis treatment (b) renal failure (c) screening

Number of patient contacts during the reporting period for (a) dialysis treatment (b) renal failure (c) screening.

(SOEMD – confirm that data can be obtained for these three categories of patient contacts.)


VINSTAR

Name of Public Body: NATIONAL UNIVERSITY OF SAMOA


1/4 2/4 3/4 4/4

Annual Report

(Attachment)










A





Costs per EFTS A


Student numbers Total number of students who were enrolled in one or more courses / programmes during the reporting period.

An enrolled student is only counted once irrespective of the number of courses / programmes that they are enrolled in during the reporting period.

A

Student EFTS Total EFTS value of the students enrolled during the reporting period.

The EFTS value is determined by the number of students enrolled and the combined EFTS value for all of the courses / programmes in which they are enrolled.

A

Number of course completions Total number of courses successfully completed by students during the reporting period.

Reporting of this measure will need to coincide with the NUS cycle for course completions. It may only be reported in the quarters in which semesters and examinations are completed.

A


VINSTAR

Name of Public Body: NATIONAL UNIVERSITY OF SAMOA


1/4 2/4 3/4 4/4

Annual Report

(Attachment)

Number of graduates Total number of students who became eligible to graduate from their course / programme of study.

Reporting of this measure will need to coincide with the NUS cycle for eligibility to graduate. It may only be reported in the quarters in which semesters and examinations are completed.

A

Number of staff FTE Total number of staff employed at the end of the reporting period and the FTE value of those staff.

This measure is to report the total number of academic and support staff, together with the FTE value of those staff employed at the end of the reporting period.

A

Proportion of teaching staff with a qualification to teach

Number of teaching staff with a completed teaching qualification as a % of the total number of teaching staff.

A


VINSTAR

Name of Public Body: SAMOA QUALIFICATIONS AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)










A







VINSTAR

Name of Public Body: SAMOA TOURISM AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)










A






Total visitors (a) bona fide (b) visiting overseas resident Samoans

Total number of bona fide visitors and the total number of visiting overseas resident Samoans.

This measure is to separately report the total number of visitors in categories (a) and (b).


VINSTAR

Name of Public Body: RESEARCH & DEVELOPMENT INSTITUTE OF SAMOA


1/4 2/4 3/4 4/4

Annual Report

(Attachment)










A







VINSTAR

Name of Public Body: SAMOA FIRE AUTHORITY


1/4 2/4 3/4 4/4

Annual Report

(Attachment)










A







VINSTAR

Public Bodies – Proposed Financial & Non Financial Performance Measures

Public Trading Bodies Public Beneficial Bodies Mutual’s

Financial Performance Measures

Agric

Sto

re C

orp

Dev

Ban

k of

Sam

oa

Ele

c Pow

er C

orp

Poly

nes

ian

Public

Tru

st O

ffic

e

Sam

oa

Airport

Auth

Sam

oa

Bro

adca

st

Sam

oa

Housi

ng

Sam

oa

Land C

orp

Sam

oa

Port

s Auth

Sam

oa

Ship

pin

g C

orp

Sam

oa

Ship

pin

g S

erv

Sam

oa

Tru

st E

st

Sam

oa

Wat

er A

uth

Sam

oaT

el

Apia

Par

k Boar

d

Nat

Kid

ney

Fdn

Nat

Uni of

Sam

oa

Sam

oa

Qual

Auth

Sam

oa

Touri

sm

R&

D I

nst

of

Sam

oa

Sam

oa

Fire

Auth

ority

ACC

Sam

oa

Life

Ass

ur

Sam

oa

Nat

Pro

v Fu

nd

1. Revenue ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ 2. Expenses ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ 3. Net profit before tax ¼ ¼ ¼

4. Surplus of revenue over expenses ¼ ¼ ¼ ¼ ¼ ¼ ¼

5. Net profit after tax ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼

6. Government revenue as % total revenue A A A A A A A

7. Gross profit as % revenue ¼ ¼

8. NPAT as % revenue ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼

9. Surplus as % revenue ¼ ¼ ¼ ¼ ¼ ¼ ¼

10. Return (NPAT) on equity ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼

11. Return (NPAT) on assets ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼

12. Current ratio ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ ¼ 13. Gearing (debt : equity) A A A A A A A A A A A A A

14. Accounts receivable days outstanding ¼ ¼ ¼ ¼ ¼ ¼ ¼

15. Inventory days ¼

16. Admin exp as % total revenue A A A

17. Fuel costs as % total expenses ¼


VINSTAR



Financial Performance Measures

Agric

Sto

re C

orp

Dev

Ban

k of

Sam

oa

Ele

c Pow

er C

orp

Poly

nes

ian

Public

Tru

st O

ffic

e

Sam

oa

Airport

Auth

Sam

oa

Bro

adca

st

Sam

oa

Housi

ng

Sam

oa

Land C

orp

Sam

oa

Port

s Auth

Sam

oa

Ship

pin

g C

orp

Sam

oa

Ship

pin

g S

erv

Sam

oa

Tru

st E

st

Sam

oa

Wat

er A

uth

Sam

oaT

el

Apia

Par

k Boar

d

Nat

Kid

ney

Fdn

Nat

Uni of

Sam

oa

Sam

oa

Qual

Auth

Sam

oa

Touri

sm

R&

D I

nst

of

Sam

oa

Sam

oa

Fire

Auth

ority

ACC

Sam

oa

Life

Ass

ur

Sam

oa

Nat

Pro

v Fu

nd

18. Doubtful debts as % loans A A A

19. Interest margin (spread) A A

20. Investment income / total funds invested A A A

21. Lease income as % land value leased A A

22. CSO revenue as % total revenue ¼ ¼ ¼

23. Land debtors in days of revenue ¼

24. Total policy bonus / total premiums paid A

25. Policy payout (death & maturity) / total policy payout A

26. Total increase in value of investments A

27. Gross profit on vessels as % revenue ¼

28. Profit by business segment ¼ ¼

29. Costs per EFTS A

30. Actual loan collection / budget loan collection

¼

31. Cash position ¼

32. Debt servicing (interest cover) ¼

33. Cash flow from water customers / water revenue ¼


VINSTAR



Non Financial Performance Measures

Agric

Sto

re C

orp

Dev

Ban

k of

Sam

oa

Ele

c Pow

er C

orp

Poly

nes

ian

Public

Tru

st O

ffic

e

Sam

oa

Airport

Auth

Sam

oa

Bro

adca

st

Sam

oa

Housi

ng

Sam

oa

Land C

orp

Sam

oa

Port

s Auth

Sam

oa

Ship

pin

g C

orp

Sam

oa

Ship

pin

g S

erv

Sam

oa

Tru

st E

st

Sam

oa

Wat

er A

uth

Sam

oaT

el

Apia

Par

k Boar

d

Nat

Kid

ney

Fdn

Nat

Uni of

Sam

oa

Sam

oa

Qual

Auth

Sam

oa

Touri

sm

R&

D I

nst

of

Sam

oa

Sam

oa

Fire

Auth

ority

ACC

Sam

oa

Life

Ass

ur

Sam

oa

Nat

Pro

v Fu

nd

1. Number of claims received ¼ 2. Value of long term claimant liability A 3. Overall market share of lending

institutions A

4. MWH generated ¼ 5. MWH sold ¼ 6. Line loss % A 7. Passenger load factor ¼ 8. Passenger revenue kilometres ¼ 9. Number of wills written ¼ 10. Total “bank” of wills A 11. Number of new estates managed A 12. Total passenger movements ¼ 13. Total aircraft movements ¼ 14. Number & value of new loans ¼ 15. Number & value of continuing loans ¼


VINSTAR




Agric

Sto

re C

orp

Dev

Ban

k of

Sam

oa

Ele

c Pow

er C

orp

Poly

nes

ian

Public

Tru

st O

ffic

e

Sam

oa

Airport

Auth

Sam

oa

Bro

adca

st

Sam

oa

Housi

ng

Sam

oa

Land C

orp

Sam

oa

Port

s Auth

Sam

oa

Ship

pin

g C

orp

Sam

oa

Ship

pin

g S

erv

Sam

oa

Tru

st E

st

Sam

oa

Wat

er A

uth

Sam

oaT

el

Apia

Par

k Boar

d

Nat

Kid

ney

Fdn

Nat

Uni of

Sam

oa

Sam

oa

Qual

Auth

Sam

oa

Touri

sm

R&

D I

nst

of

Sam

oa

Sam

oa

Fire

Auth

ority

ACC

Sam

oa

Life

Ass

ur

Sam

oa

Nat

Pro

v Fu

nd

16. Number of leases reviewed during the year A

17. Total annual premium growth A

18. Policy premiums / policy claims ¼

19. Interest rate paid on member accounts A

20. Total active members ¼

21. Number of vessels handled ¼

22. Cargo discharged & cargo loaded ¼

23. Number of containers handled ¼

24. Proportion of revenue not from wharfage fees & port charges A

25. Number of ferry trips ¼

26. Number of passengers carried ¼

27. Freight carried (a) tonnes of freight (b) number of vehicles ¼

28. Market share – cargo & sea freight ¼

29. Total seafarers ¼

30. Total land area (a) leased (b) not actually used (c) in agricultural production A


VINSTAR




Agric

Sto

re C

orp

Dev

Ban

k of

Sam

oa

Ele

c Pow

er C

orp

Poly

nes

ian

Public

Tru

st O

ffic

e

Sam

oa

Airport

Auth

Sam

oa

Bro

adca

st

Sam

oa

Housi

ng

Sam

oa

Land C

orp

Sam

oa

Port

s Auth

Sam

oa

Ship

pin

g C

orp

Sam

oa

Ship

pin

g S

erv

Sam

oa

Tru

st E

st

Sam

oa

Wat

er A

uth

Sam

oaT

el

Apia

Par

k Boar

d

Nat

Kid

ney

Fdn

Nat

Uni of

Sam

oa

Sam

oa

Qual

Auth

Sam

oa

Touri

sm

R&

D I

nst

of

Sam

oa

Sam

oa

Fire

Auth

ority

ACC

Sam

oa

Life

Ass

ur

Sam

oa

Nat

Pro

v Fu

nd

31. Proportion of population supplied with water A

32. Volume of water sold ¼

33. Proportion of water “unaccounted for” A

34. Number of (a) land line connections (b) cell phones ¼

35. Number of event days ¼

36. Number of patient contacts (a) dialysis treatment (b) renal failure (c) screening ¼

37. Student numbers A

38. Student EFT A

39. Number of course completions A

40. Number of graduates A

41. Number of staff FTE A

42. Proportion of teaching staff with a qualification to teach A

43. Total visitors (a) bona fide (b) visiting overseas resident Samoans ¼


VINSTAR

Annex 15 SOEMD Financial and Non Financial Performance Measures for SOEs – Calculation and Comments May 2007 Financial Performance Measures Calculation Comments

34. Revenue Total revenue as reported in the profit and loss statement.

35. Expenses

Total expenses (including operating expenses, depreciation and financial expenses, but excluding income tax) as reported in the profit and loss statement.


36. Net profit before tax Difference between total revenue and total expenses as reported in the profit and loss statement.


37. Surplus of revenue over expenses Difference between total revenue and total expenses as reported in the profit and loss statement.


38. Net profit after tax Difference between total revenue and the sum of total expenses and income tax as reported in the profit and loss statement.


39. Government revenue (funding) as % total revenue



40. Gross profit as % total revenue

Gross profit (or gross margin, i.e. sales less cost of sales) expressed as a % of total revenue reported in the profit and loss statement.



VINSTAR

Financial Performance Measures Calculation Comments

41. NPAT (net profit after tax) as % revenue

Net profit (after tax) expressed as a % of total revenue – as reported in the profit and loss statement.


42. Surplus as % revenue Surplus (i.e. revenue less expenses) expressed as a % of revenue as reported in the profit and loss statement.


43. Return (NPAT) on equity

Net profit (after tax) – as reported in the profit and loss statement, expressed as a % of the total equity as reported in the balance sheet.


44. Return (NPAT) on assets

Net profit (after tax where applicable) – as reported in the profit and loss statement, expressed as a % of the total assets as reported in the balance sheet.


45. Current ratio Total current assets compared with total current liabilities as reported in the balance sheet – expressed as a ratio, i.e. 1.7:1.0.


46. Gearing (total debt : total assets)

Total debt compared with total assets expressed as a % as reported in the balance sheet.


47. Accounts receivable days outstanding




VINSTAR


48. Inventory turnover days

365 days divided by (cost of sales / ending inventory) – as reported in the profit and loss statement and balance sheet.

This measures the average number of days required to turnover the inventory held for resale. 365 days is divided by (the cost of sales for the reporting period / the inventory at the end of the reporting period) – expressed as a number of days. A consistent estimation process is required for cost of sales and inventory when Public Bodies cannot obtain this information directly from the accounting system. Agreement of SOEMD is required for the estimation process.

49. Admin expenses as % total revenue



50. Fuel costs as % total expenses

Total fuel expenses expressed as a % of total expenses as reported in the profit and loss statement.

Total expenses includes operating expenses (including fuel), depreciation and financial expenses as shown in the profit and loss statement.

51. Doubtful debts as % loans

Total doubtful debts (provided for) expressed as a % of total loans (to borrowers) as reported in balance sheet.



VINSTAR


52. Interest margin (spread)

(Total interest revenue / total investments generated interest revenue [at end of reporting period]) LESS (total interest expenses / total borrowings and loans incurring interest [at end of reporting period]).



53. Investment income / total funds invested



54. Lease income as % value of land leased


Total lease income must relate to the land included in “value of land leased”.

55. CSO revenue as % total revenue

Total CSO revenue as reported in the profit and loss account expressed as a % of the total revenue as reported in the profit and loss account.


56. Land debtors outstanding Total outstanding debtors (relating to sale and lease of land) as reported in the balance sheet.

The outstanding land debtors are defined as those debtors whose payments are overdue – using the agreed terms of payment.

57. Total policy bonus added / total policy premiums paid

Total bonus amount added to policies expressed as a % of the total premiums paid on policies as reported in the profit and loss account.

Total policy bonus added to policies is the annual amount “declared”.


VINSTAR


58. Policy payout (death & maturity) / total policy payout

Total amount paid out on policies as a result of policy maturity / death expressed as a % of the total amount paid out on all policies.

Policy payout (death and maturity) includes all policies that have reached “maturity”. Total policy payout also includes policies that have been terminated or lapsed for reasons other than death and maturity.

59. Total increase in value of investments

Total increase in the value of investments (i.e. increased value of investments / value of investments at the beginning of the reporting period) expressed as a %.

The increase in value of investments will include both additional investments occurring during the reporting period and the increase in the value of investments existing at the beginning of the reporting period.

60. Gross profit on vessels as % vessel revenue

Total gross profit relating to the operation of vessels expressed as a % of revenue generated by vessels.

Gross profit on vessels is calculated after deducting the direct costs of vessel operations from the vessel revenue.

61. Profit by business segment

Net profit (pre tax) attributable to each major business segment expressed as a % of the revenue generated by each major business segment.



62. Total expenses per EFTS

Total expenses, as reported in the profit and loss account divided by the total number of student EFTS in the reporting period.

Total expenses includes operational expenses, depreciation and financial expenses. EFTS is the total number of EFTS relating to the reporting period.

63. Actual loan collection / budgeting loan collection

Total loans actually collected divided by the total loans budgeted to be collected – expressed as a %.

Loan collection refers to outstanding (overdue) loans that have actually been collected or were budgeted for collection.


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64. Net cash position Total of cash on hand, cash deposits and short term cash borrowings as reported in the cash flow statement.

65. Debt servicing (interest cover)

Net profit before income tax and interest expense expressed as a % of interest expense, as reported in the profit and loss statement.

Interest expenses are added back to the net profit (or surplus) before income tax expense.

66. Cash flow from water customers / water revenue

Cash received from water customers expressed as a % of water revenue as reported in the profit and loss statement.

(SOEMD – I have doubts about the usefulness of this performance measure – and suggest it be discussed and possibly deleted.)


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Calculation Comments

44. Number of claims received Total number of claims received. Total number of claims received should be

adjusted for any claims that are received but are not accepted as eligible.

45. Value of long term claimant liability

Value of the liability to long term (as defined by ACC) claimants.

Value of long term claimant liability needs to reflect ACC approach to defining what is a long term claimant.

(SOEMD – need to discuss and agree this with ACC.)

46. Overall market share of lending institutions

Market share of DBS lendings as a % of total lending by all lending institutions.

This needs to be consistent with information that DBS uses internally.

(SOEMD – need to discuss and agree with DBS how they will calculate this performance measure.)

47. MWH generated

Total generation of electricity measured in MWH.

This needs to be consistent with EPC calculation of MWH generated.

(SOEMD – need to discuss and agree with EPC.)

48. MWH sold

Total electricity “sold” measured in MWH. This needs to be consistent with EPC calculation of MWH “sold” during the reporting period.



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49. Line loss %

Loss of electricity in line transmission expressed as a % of generated electricity.

Reporting line loss % is dependent on EPC having systems in place to measure “line loss”.


50. Passenger load factor

Total number of passengers carried as a % of the available capacity to carry passengers.

Total number of passengers carried refers to “fare paying” passengers. “Available capacity” should be the total capacity adjusted for capacity that cannot be used because of weight and other restrictions.

51. Passenger revenue kilometres Total number of paying passengers carried multiplied by kilometres carried.

52. Number of wills written Total number of new wills written and existing wills amended.

Amendments to existing wills refers to those wills for which changes have been made to the terms and content of the wills.

53. Total “bank” of wills Total number of wills in custody of PTO. Total wills in “custody” is to be interpreted as

the total number of wills for which PTO is responsible for or have been lodged with PTO.

54. Number of new estates managed Number of new estates being managed by PTO.

Number of new estates in the reporting period which PTO is managing.

55. Total passenger movements Total volume of inbound and outbound passengers.

This is the combined total of inbound and outbound passengers.

56. Total aircraft movements Total number of inwards and outwards aircraft movements.

This is the combined total of inwards and outward aircraft movements.


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57. Number & total value of new loans Number of new loans approved and the total value of the new loans approved.

The number of new loans approved during the reporting period and the total value of new loans are to be reported separately.

58. Number & value of continuing loans

Number of loans in existence at the end of the period and the total value of loans existing at the end of the period.

The number and total value of “continuing” loans refers to the total number of separate loans that exist at the end of the reporting period and the total amount of those loans.

59. Number of leases reviewed during the year

Number of existing leases whose terms and conditions have been reviewed.

The number of leases to be reported is the total number whose terms and conditions have been reviewed – irrespective of whether changes have been made to the existing terms and conditions.

60. Total annual premium growth Total premium revenue for the current year, expressed as a % of the total premium revenue for the previous year.

61. Policy premiums / policy claims Total policy premiums divided by total policy claims, expressed as a %.

The policy claims refers to the total claims that have been made by policy holders and accepted as valid claims.

62. Interest rate paid on member accounts Total interest paid on member accounts.

63. Total active members

Total number of active members expressed as a % of the total members, at the end of the current year.

The definition of active members is consistent with that used by SNPF.

(SOEMD – confirm the definition used by SNPF.)

64. Number of vessels handled Number of vessels to which port services have been provided.

Total number of vessels to which SPA has provided port related services in the reporting period.


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65. Cargo discharged & cargo loaded Total tonnes of cargo discharged or loaded. A combined total tonnage – of cargo discharged and loaded is to be reported.

66. Number of containers handled Total number of containers handled. A combined total of containers handled by SPA is to be required.

67. Proportion of revenue not from wharfage fees & port charges

Total revenue NOT FROM wharfage fees and port charges expressed as a % of total revenue.

The total revenue NOT FROM wharfage fees and port charges is to be reported as a % of the total SPA revenue for the reporting period.

(SOEMD – discuss and agree with SPA the scope of activities that do not relate to wharfage and port charges.)

68. Number of ferry trips Total number of ferry trips from all ports. The number of ferry trips is to be the total

number of ferry departures from all ports with ferry services.

69. Number of passengers carried Total number of passengers carried on all ferry trips.

The number of passengers carried is to be the number of fare paying passengers.

70. Freight carried (a) tonnes of freight (b) number of vehicles

Total number of vehicles carried and total tonnes of freight carried.

Both the total tonnes of freight carried and the total number of vehicles carried are to be separately reported.

71. Market share – cargo & sea freight

Cargo and sea freight handled by SSS as a % of total cargo and sea freight.

The cargo and sea freight is to exclude cargo that is being off loaded and reloaded between vessels. Confirm the calculation with SOEMD.

(SOEMD – confirm the basis for calculation and agree the source of data for total cargo and sea freight.)


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72. Total seafarers

Total number of seafarers engaged at end of reporting period.

The total number of seafarers is to be the number who are actively engaged at the end of the reporting period.

(SOEMD – confirm how the measure is calculated.)

73. Total land area (a) leased (b) not actively used (c) in agricultural production

Total hectares of land that are (a) leased (b) not in use (c) in agricultural production.

The “land leased” is the land which is “leased out” to third parties, the land not actively used is land which is currently not actively productive and the land in agricultural production is land which is in active use.

74. Proportion of population supplied with water

Proportion of population supplied with water as a % of the total population.

The proportion of the population is to be calculated as the number of household, dwelling or commercial units which are supplied with water.

(SOEMD – check how this is to be calculated.)

75. Volume of water sold Total volume of water sold.

76. Proportion of water “unaccounted for”

Total water volume “billed” divided by total water volume pumped / supplied.

The proportion of the water unaccounted for is a comparison of the water volume pumped / supplied to consumers and the water volume that those consumers are “billed for”.

77. Number of (a) land line connections (b) cell phones

Total number of (a) landline connections (b) cell phone connections.

The number of landline connections and cell phones refers to the number in each group at the reporting period for which connection and other charges are payable.


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78. Number of event days

Total number of events using APB facilities multiplied by the number of days for each event.

Number of event days is the number of days (irrespective of whether it is a full or part day) on which events are held. Multiple events on any day are counted as the number of different events.

79. Number of patient contacts (a) dialysis treatment (b) renal failure (c) screening

Number of patient contacts during the reporting period for (a) dialysis treatment (b) renal failure (c) screening.

(SOEMD – confirm that data can be obtained for these three categories of patient contacts.)

80. Student numbers

Total number of students who were enrolled in one or more courses / programmes during the reporting period.

An enrolled student is only counted once irrespective of the number of courses / programmes that they are enrolled in during the reporting period.

81. Student EFT

Total EFTS value of the students enrolled during the reporting period.

The EFTS value is determined by the number of students enrolled and the combined EFTS value for all of the courses / programmes in which they are enrolled.

82. Number of course completions

Total number of courses successfully completed by students during the reporting period.

Reporting of this measure will need to coincide with the NUS cycle for course completions. It may only be reported in the quarters in which semesters and examinations are completed.

83. Number of graduates

Total number of students who became eligible to graduate from their course / programme of study.

Reporting of this measure will need to coincide with the NUS cycle for eligibility to graduate. It may only be reported in the quarters in which semesters and examinations are completed.


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84. Number of staff FTE

Total number of staff employed at the end of the reporting period and the FTE value of those staff.

This measure is to report the total number of academic and support staff, together with the FTE value of those staff employed at the end of the reporting period.

85. Proportion of teaching staff with a qualification to teach

Number of teaching staff with a completed teaching qualification as a % of the total number of teaching staff.

86. Total visitors (a) bona fide visitors; and (b) visiting overseas resident Samoans

Total number of bona fide visitors and the total number of visiting overseas resident Samoans.

This measure is to separately report the total number of visitors in categories (a) and (b).


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Annex 16 – SOEMD Revised Annual SOE Reporting Guidelines May 2007

STATE OWNED ENTERPRISE MONITORING DIVISION

Ministry of Finance

GUIDELINES FOR ANNUAL REPORTS The Public Bodies (Performance and Accountability) Act (2001) requires all Public Bodies to submit annual and quarterly reports. The Annual Report is required to be submitted to the Minister of Finance no later than four months after the end of the financial year, by October 31 each year. It requires:

• Information necessary to enable informed performance assessment of a Public Body, including comparisons with the Statement of Corporate Objectives, Corporate Plan and prior financial year;

• Compliance with matters required under the Public Bodies Act and Companies Act (where relevant);

• Statement of the dividend payable for the financial year to which the report relates. SOEMD has developed these guidelines on the contents of Annual Reports. The guidelines do not limit information that may be included in the annual report and their purposes are: to assist entities to produce informative and user friendly Annual Reports; and to improve the overall standard of annual reporting by Public Bodies. It should be noted that Public Bodies are also required to provide the Ministry of Finance (SOEMD) a separate confidential commentary on their operational and financial performance at the time their Annual Report is submitted. This analysis and commentary is to include: all of the performance measures (for quarterly reporting) agreed between the SOEMD and Public Body; a table of the performance measures which includes the actual performance for the current financial year, the previous financial year and the corporate plan; and a brief comment on each performance measure – focusing on the differences between:

• this year and last year; • this year and the corporate plan.

A comment should also be made on whether the corporate plan performance measures are expected to be achieved in the next financial year. Further information on this requirement is attached at the end of these guidelines. (Annex 3)


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Contents of the Annual Report The annual report should contain sections for:

• Contents Table • Statement to Parliament • Chairman’s Report • CEO’s Report • Auditors Report • Audited Financial Statements

1. Contents Table This lists the sections of the Annual Report and the page where each section commences. 2. Statement to Parliament The Responsible Minister’s statement relating to the presentation of the Annual report in Parliament. It should provide:

• an introduction to the Annual Report • Legislative provision for the presenting of the Annual Report in Parliament • Vision and Mission Statement, and Objectives of the Public Body as provided in

the Statement of Corporate Objectives 3. Chairman’s Report The Chairman’s report is provided on behalf of the Directors and is expected to provide a broad strategic overview of the performance of the public body and issues faced by the entity, together with information relating to governance of the Public Body. The Chairman’s report may be organised into the following sections:

- Activities and Performance of the Entity - Principal activities undertaken by the entity - Overview of operating and financial performance – in relation to previous

financial year and this year’s plan - Events since balance date which could significantly impact the future

activities and performance of the entity - Overview of expected performance in the next financial year.

■ Capital and Dividend Information Shares, or options to purchase shares, issued during the year

- Significant loans entered into or repaid during the year - Significant investments made during the year


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- Dividends paid, or proposed for the year. ■ Director Information Names of directors during the year, together with their directors fees, their director expenses and payments for other services provided to the entity Number of Board meetings during the year and attendance of each director at Board meetings Board committees, their membership and the number of meetings held for each committee. ■ CSO Obligations Overview of progress with achieving CSO obligations. ■ Other Information As required to be disclosed by the Public Bodies Act and Companies Act (where relevant). 4. Chief Executive’s Report The Chief Executive’s Report should link the actual operating and financial performance for the current year to the Statement of Corporate Intent, and Corporate Plan and explain both changes from the previous financial year and whether the Corporate Plan and budget targets have been achieved. It is recommended that the CEO Report follow a similar structure to that used by the Public Body in its quarterly reporting. 4.1 Structure of the CEO Report It is suggested that the CEO Report be structured into the following sections:

- Highlights of the quarter and year to date. - Overview of operating performance and results. - Overview of financial performance and results. - Progress with the Corporate Plan. - Capital expenditure and projects. - Outlook for next year. - Future risks and uncertainties. - CSO implementation (where appropriate).


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■ Highlights for the year What are the key achievements? What are the key issues that have arisen? ■ Overview of operating performance and results for the year What has been the level of business activity? (Where possible use KPIs that show the volumes of activity). What changes have occurred in the operating performance and business activity compared with last year and targets in the Corporate Plan and budget. Why have these changes occurred? ■ Overview of financial performance and financial results for the year What are the major items of revenue and expenses that differ from the previous year and targets in the Corporate Plan and budget For each major item of revenue and expenses explain what has caused the differences to have occurred? Comment on changes in the operating cash inflows and outflows Comment on changes to capital structure – including borrowings and equity injections. ■ Progress with implementing the Corporate Plan for the year

- Overview of progress with implementing the corporate plan. - Summary of progress with the key objectives, strategies and performance

measures included in the corporate plan. - What changes have occurred in the activities, operations and environment since

preparing the corporate plan and how will they impact on achieving the corporate plan, objectives, strategies and performance measures?

■ Capital expenditure and projects for the year

- List the major items of capital expenditure. - Comment on the progress with major capital projects which the Public Body is or

has undertaken. Include: o Comments on any material delays and changes in the expected costs of

completing any projects. ■ Outlook for next year

- Outline the overall level of business activity expected for next year by the Public Body and identify whether this differs from the assumptions used when preparing the Public Body corporate plan.

- Summarise the reasons for possible changes in future business activity and comment on their importance.


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■ Future risks and uncertainties - What are the major risks and uncertainties that the Public Body is facing over the

next two years? - Comment on the possible impact of each major risk and uncertainty that is

identified. - What would be required to reduce the impact of each risk or uncertainty?

■ CSO implementation (where applicable)

- Briefly describe each CSO for which the Public Body has funding. - Identify the revenue and expenses relating to each CSO. - Outline progress made in achieving the objective / purpose for granting the CSO.

5. Auditors Report The auditors report should comply with generally accepted auditing guidelines. 6. Audited Financial Statements Financial Statements should be prepared in accordance with International Accounting Standards and where appropriate, comply with the Companies Act. The financial statements must include:

- Profit and loss statement - Balance sheet - Cash flow statement - Statement of changes in equity.

The financial statements must include:

- Information relating to the current financial year - Comparative data for the prior financial year.

Notes to the accounts must comply with the International Accounting Standards. The principal purposes of disclosure in the financial statements and notes are to:

- Assist the Ministry of Finance (SOEMD) provide advice to Ministers about the financial performance and results of all Public Bodies.

- Enable Parliament to undertake an appropriate review and scrutiny of each Public Body.

For these reasons, a greater level of disclosure than the minimum required to meet the International Accounting Standards and the requirements of the Companies Act (where applicable) is encouraged. However, it is recognised that for the small number of Public Bodies operating in a competitive environment, the level of financial disclosure needs to


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balance achieving the above purposes with a need to protect competitively sensitive financial and operating information. A suggested breakdown of information within the financial statements is provided below. [Note: This is the same as suggested for quarterly financial reporting.] Profit and Loss Statement

- Revenue – a breakdown of revenue into major sources of revenue (including Government, trading and CSOs) or into the revenue from different types of business and other activity undertaken by the Public Body.

- Expenses – a breakdown of expenses into major categories of expenses. These may include: o Purchases (for resale) or cost of sales o Salaries and wages o Communications (including telephone, fax, courier etc) o Utilities (including electricity and water) o Depreciation o Directors fees and expenses o Motor vehicle and IT operating expenses (e.g. repairs and maintenance, rental

and lease, service contracts) o Occupancy expenses (i.e. expenses relating to building occupancy) o Marketing and sales (including advertising, selling, marketing and promotion) o Financial expenses o Audit o Other expenses

However, the most appropriate breakdown of expenses will reflect the business activity and operation of each Public Body. IAS provides guidance about classifying expenses into the functions of the expenses or the nature of the expenses. Balance Sheet

- Current Assets – a breakdown into the major types of current assets. These are likely to include: o Cash on hand o Cash deposits o Debtors / accounts receivable o Stock / inventory o VAGST receivable

- Non Current Assets – a breakdown into the major types of non current assets. These are likely to include: o Land o Buildings o Plant, machinery, and equipment o Office and computer equipment


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o Furniture and fittings o Motor vehicles o Investments (a breakdown into the major types of investments).

- Current Liabilities – a breakdown into the major types of current liabilities. These are likely to include: o Accounts payable o Short term borrowings o Unearned revenue o Provisions.

- Non Current Liabilities – a breakdown into the major types of non current liabilities.

- Equity – a breakdown into the major types of equity. These are likely to include: o Reserves (including asset revaluation) o Retained earnings (accumulated profit / loss) o Capital (and equity instruments).

Cash Flow Statement The cash flow statement should provide for cash flows relating to operating, investing and financing activities. Notes to the Financial Statements These should comply with International Accounting Standards and be complete so as to assist in the interpretation of the financial statements. Note, in accordance with convention and IAS is a note on accounting policies. Annex 2 of this Guideline should be followed with respect to the application of specific accounting policies and the appropriate wording of the accounting policies note.


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ANNEX 1: FINANCIAL STATEMENTS (Illustration of required layout)

Balance Sheet Notes Current Year Previous Year

Actual Budget Actual Budget ASSETS

Current Assets

Cash on hand Cash deposits Debtors / accounts receivable Stock / inventory VSGST receivable

Non Current Assets

Land Buildings Plant and equipment Office and computer equipment Motor vehicles Furniture and fittings Investments

Total Assets

LIABILITIES

Current Liabilities

Accounts payable Short term borrowings Unearned revenue Provisions

Non-Current Liabilities

Total Liabilities

EQUITY Reserves Retained earnings Capital and other equity


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Profit and Loss Statement – Illustration only

Current Year Previous Year Notes Actual Budget Actual Budget

Revenue: Government contribution Community service obligations

Revenues from major business activities

Expenses: Purchases / cost of sales Salaries and wages Communications Utilities Depreciation Directors fees and expenses Motor vehicle & IT operating expenses

Occupancy expenses Marketing and sales Financial expenses Audit Other expenses Net Profit Before Tax (1) Income Tax Expense (1) Net Profit After Tax (1) Transfer to Accumulated Funds

(1) Note: For Public Bodies that are beneficial or mutual the net profit will be replaced with surplus and income tax expense will not be applicable.


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Cash Flow Statement – Illustration only

Current Year Previous Year Actual Budget Actual Budget Operating Activities: Cash received from customers Cash received from government (grant or CSO)

Cash paid to suppliers and employees Net operating cash inflow (outflow) Investing Activities: Proceeds from sale of fixed assets Fixed asset purchased Other Net financing cash inflow (outflow) Financing Activities: Proceeds from term loan Loan repayment & interest Finance lease repayments Net financing cash inflow (outflow) Net increase/(decrease) in cash Opening Balance (cash and cash equivalents)

Balance at end of Quarter Represented by: Overdraft at Bank Petty Cash Balance


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ANNEX 2:

NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted are stated to assist in a general understanding of these financial statements. These policies have been consistently applied except as otherwise indicated. (a) Basis of accounting

These financial statements have been prepared on the basis of historical costs using generally accepted accounting principles consistently applied. These financial statements comply with International Accounting Standards. Revenue is recognised in the period in which the sale transaction occurred and accrual accounting is used to match revenue and expenses in the same reporting period. The financial statements are prepared on the going concern basis in the belief that the company will continue trading in its current business activity for the foreseeable future and will not dispose of or realise any material part of its assets or operations.

(b) Current assets

Stocks are valued at the lower of cost and estimated net realisable value after accounting for any provision due to obsolescence. Debtors are stated net of any provision for any doubtful debts after writing off all bad debts identified during the period.

(c) Property, plant and equipment

Property, plant and equipment are depreciated using the straight-line method over their estimated useful lives using the following rates: Buildings and (e.g. wharves etc) 2.5% - 5% Plant & Machinery 10% - 20% Office furniture and fixtures 10% - 20% Office Equipment 25% Motor Vehicles 25% Profits and losses on disposals of property, plant and equipment are taken into account in determining the results for the period. Property, plant and equipment are included in the financial statements at cost unless otherwise stated. It is not the policy of ABC Limited to revalue property, plant and equipment. Any decision to calculate and include revalued property costs in the financial statements is fully documented in note xxx and has only been made after full consultation with experts and shareholders.


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(d) Foreign currency All amounts are expressed in Tala. Transactions in foreign currencies have been converted to Tala at rates approximating those ruling at the date the transaction was incurred. Assets and liabilities in foreign currency have been converted to Tala at rates approximating those ruling at the balance sheet date. Exchange gains and losses are brought to account in determining the profit for the year.

(e) Leased assets

Assets acquired under finance leases are capitalised. The initial amount of the leased asset and corresponding lease liability are recorded at the present value of minimum lease payments. Leased assets are amortised over the life of the relevant lease or, where it is likely the company will obtain ownership of the asset on expiration of the lease, the expected useful life of the asset. Lease liabilities are reduced by the principal component of lease payments. The interest component is charged against operating profit. Operating leases are not capitalised and rental payments are charged against operating profit in the period in which they are incurred.

(f) Taxation

Income tax has been brought to account using the liability method of tax effect accounting. Income tax on profit comprises current and deferred tax and is recognised in the profit statement. Provision for current tax is the expected tax payable on the earnings for the current year, using tax rates enacted at the balance sheet date, plus any adjustment to tax payable in respect of prior years. Deferred tax provides for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

(g) Provision for employee benefits

Provision has been made in the financial statements for benefits accruing to employees in relation to such matters as annual leave and long service leave.

(h) Borrowing costs

All borrowing costs and interest payable are calculated to apply to the respective loans in the period of account and are charged as an expense item against profits for the period

(i) Grants, aid and donations

Monies received by way of grants, aid or donations are disclosed separately in the accounts from monies received as loan or equity finance. By definition grants, aid or


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donations are gratuitous receipts and not subject to repayment. Any caveats associated with the grants, aid or donations governing the use of the money are disclosed in note xxx Grants aid or donations are treated as revenue in the period in which they are received.

(j) Comparative figures

Where necessary, comparative figures have been adjusted to conform with presentations adopted in the current year.


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ANNEX 3: ANALYSIS OF FINANCIAL AND NON FINANCIAL PERFORMANCE MEASURES 1. Background The quarterly reporting by Public Bodies to SOEMD (Ministry of Finance) forms the basis of advice given to Ministers. The primary focus is on comparing actual operating and financial performance for the reporting quarter and year to date with the budgets and performance measures for the quarter and year to date. To complement this reporting, Public Bodies are required to provide a confidential attachment to their Annual Report that focuses on:

- The agreed set of financial and non financial performance indicators - Comparison of performance for the current year with the previous financial year

and with the Corporate Plan. 2. Presentation of the Analysis ■ Table of Key Performance Measures

Performance Measures This Year – Actual

Last Year – Actual

Corporate Plan – This

Year

List the key performance measures agreed with the Ministry of Finance

■ Comments on each Key Performance Measure (KPIs) It would be useful to provide your comments in a table as outlined below. For each KPI: Limit your comments to two to four sentences for each of those measures. Performance Measures

Comments on Differences

List the performance measures agreed with the Ministry of Finance

- Include comments for key each performance measure. - Focus comments on why has this variance occurred and

what action is being taken to eliminate the (negative) differences.


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Annex 17: SOEMD Revised Quarterly SOE Reporting Guidelines May 2007

STATE OWNED ENTERPRISE MONITORING DIVISION

Ministry of Finance

GUIDELINES FOR QUARTER REPORTS The Public Bodies (Performance and Accountability) Act (2001) requires all Public Bodies to submit annual and quarterly reports. The quarterly reports are required to be submitted to the Ministry of Finance no later than one month after the end of each quarter.

QUARTER DUE DATE One 30 October Two 31 January Three 30 April Four 31 July

The purpose of the guidelines is to assist entities to produce informative and user friendly Quarterly Reports. However, it is also expected that entities ensure that their quarterly reports reflect their unique characteristics. The quarterly report should contain: CEO’s Report Analysis of Key Performance Indicators Full Financial Statements 1. Chief Executive’s Report Chief Executive’s Report should link the quarterly report to the Statement of Corporate Objectives, the Corporate Plan and budget, and explain whether the targets for the quarter and year to date have been achieved. 1.1 Structure of the CEO Report It is suggested that the CEO Report be structured into the following sections:

Highlights. Overview of operating performance and results. Overview of financial performance and results. Progress with the Corporate Plan. Capital expenditure and projects. Outlook for remainder of the year.


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Future risks and uncertainties. CSO implementation (where appropriate).

■ Highlights for the quarter and year to date

- What are the key achievements? - What are the key issues that have arisen?

■ Overview of operating performance and results for the quarter and year to date

- What has been the level of business activity? (Where possible use KPIs that show the volumes of activity).

- What changes have occurred in the operating performance and business activity and why have these changes occurred?

■ Overview of financial performance results for the quarter and year to date

- What are the major items of revenue and expenses that differ from the budget? [Note: 1: Refer to the statement of financial performance to identify the major items 2: Only include items where the variance is 10% or more for the quarter and/or 5% or more for the year to date]

- For each major item of revenue and expenses explain what has caused the differences from budget to have occurred? Include comments on whether you expect differences to continue for the remainder of the year.

- Comment on changes in the operating cash inflows and outflows where they differ from budget by at least 10%

- Comment on changes to capital structure – including borrowings and equity injections.

■ Progress with the Corporate Plan for the quarter and year to date

- Overview of progress with implementing the corporate plan. - Summary of progress with the key objectives, strategies and performance

measures included in the corporate plan. - What changes have occurred in the activities, operations and environment since

preparing the corporate plan and how will they impact on achieving the corporate plan, objectives, strategies and performance measures?

■ Capital expenditure and projects for the quarter and year to date

- List the major items of capital expenditure for the quarter and comment on significant variations from budget and unbudget items of capital expenditure.

- Comment on the progress with projects which the Public Body has been undertaking. Include: o Comments on any material delays in progress o Comment on any significant changes in the expected costs of completing any

project.


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■ Outlook for remainder of year

- Outline the overall level of business activity expected for the remainder of the year by the Public Body.

- Identify whether this differs from what was expected at the time of preparing the Public Body corporate plan and budget.

- Summarise the reasons for possible changes in future business activity and comment on their importance.

■ Future risks and uncertainties

- What are the major risks and uncertainties that the Public Body is facing over the remainder of the year and the next two years?

- Comment on the possible impact of each major risk and uncertainty that is identified.

- What would be required to reduce the impact of each risk or uncertainty? ■ CSO implementation (where applicable)

- Briefly describe each CSO for which the Public Body has funding. - Identify the revenue and expenses relating to each CSO. - Outline progress made in achieving the objective / purpose for granting the CSO.

1.2 Length of CEO Report There is no standard length for the CEO report – it will depend on the size and complexity of the Public Body and the issues it is facing. As the year progresses, it is expected that the CEO report will cover a broader range of issues and include more information. As an indication only, a typical quarterly CEO report is likely to have the following length. Suggested Section Suggested Length 1. Highlights of quarter and year to date 1 or 2 short paragraphs 2. Overview of operating performance and results ½ - 1 page 3. Overview of financial performance and results ½ - 1 page 4. Progress with the Corporate Plan ½ - 1 page 5. Capital expenditure and projects 1 or 2 paragraphs 6. Outlook for remainder of the year ½ - 1 page 7. Future risks and uncertainties ½ - 1 page 8. CSO implementation (as appropriate)

Total 3 – 6 pages


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2. Analysis of Key Performance Indicators (KPIs) This section requires an analysis of key financial and non-financial performance measures agreed to between the Ministry of Finance and the Public Body. There are two requirements for this section of the quarterly report: A table that includes the calculated KPIs for the quarter and year to date – both budget and actual; and Comments on each of the KPIs – when the actual result is more than 10% different (from the budget) for the quarter or 5% different for the year to date. These two requirements are outlined below. ■ Table of Key Performance Measures

This Quarter Year to Date Performance Measures Actual Budget Actual Budget

List the key performance measures agreed with the Ministry of Finance

■ Comments on each Key Performance Measure (KPIs) It would be useful to provide your comments in a table as outlined below. For each KPI: Only include a comment if the actual KPI differs from the budget by at least 5%; Limit your comments to two to four sentences for each of those measures. Performance Measures

Comments on Differences

List the performance measures agreed with the Ministry of Finance

Include comments for key each performance measure. Focus comments on why has this variance occurred and what action is being taken to eliminate the (negative) differences.

3. Financial Statements (see Annex 1) Financial Statements should be prepared in accordance with International Accounting Standards and where appropriate, comply with the Companies Act. Quarterly financial statements are not required to be audited, although it would be useful for the Board’s Audit committee (if the Public Body has an audit committee) to review and endorse these statements before they are submitted to the Ministry of Finance.


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A set of financial statements: Profit and loss statement; Balance sheet; and Cash flow statement; are required – as set out in the Guidelines below and Annex 1. The financial statements should include information on: The current quarter (actual and budget); and The year to date (actual and budget). Notes to the financial statements are required as set out in the Guidelines. To assist the Ministry of Finance with its review of the financial statements, it is expected that the financial statements will provide a reasonable breakdown of information. Examples of the type and level of breakdown expected are provided below: a) Profit and Loss Statement

- Revenue – a breakdown of revenue into major sources of revenue (including Government, trading and CSOs) or into the revenue from different types of business and other activity undertaken by the Public Body.

- Expenses – a breakdown of expenses into major categories of expenses. These may include: o Purchases (for resale) or cost of sales o Salaries and wages o Communications (including telephone, fax, courier etc) o Utilities (including electricity and water) o Depreciation o Directors fees and expenses o Motor vehicle and IT operating expenses (e.g. repairs and maintenance, rental

and lease, service contracts) o Occupancy expenses (i.e. expenses relating to building occupancy) o Marketing and sales (including advertising, selling, marketing and promotion) o Financial expenses o Audit o Other expenses

However, the most appropriate breakdown of expenses will reflect the business activity and operation of each Public Body. IAS provides guidance about classifying expenses into the functions of the expenses or the nature of the expenses. b) Balance Sheet

- Current Assets – a breakdown into the major types of current assets. These are likely to include: o Cash on hand


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o Cash deposits o Debtors / accounts receivable o Stock / inventory o VAGST receivable

- Non Current Assets – a breakdown into the major types of non current assets. These are likely to include: o Land o Buildings o Plant, machinery, and equipment o Office and computer equipment o Furniture and fittings o Motor vehicles o Investments (a breakdown into the major types of investments).

- Current Liabilities – a breakdown into the major types of current liabilities. These are likely to include: o Accounts payable o Short term borrowings o Unearned revenue o Provisions.

- Non Current Liabilities – a breakdown into the major types of non current liabilities.

- Equity – a breakdown into the major types of equity. These are likely to include: o Reserves (including asset revaluation) o Retained earnings (accumulated profit / loss) o Capital (and equity instruments).

c) Cash Flow Statement The cash flow statement should provide for cash flows relating to operating, investing and financing activities. d) Notes to the Financial Statements These should comply with International Accounting Standards and be complete so as to assist in the interpretation of the financial statements. Annex 2 should be followed with respect to the application of specific accounting policies and the appropriate wording of the accounting policies note. [Note: It is expected that these notes to the financial statements are unlikely to change from quarter to quarter and hence most Public Bodies will be able to attach a standard set of “notes to the accounts”. However, should significant changes occur, these must be identified to assist in the interpretation of financial statements.]


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ANNEX 1: FINANCIAL STATEMENTS (Illustration of required layout) Balance Sheet

Notes Quarter Year-to-date Actual Budget Actual Budget ASSETS

Current Assets

Cash on hand Cash deposits Debtors / accounts receivable Stock / inventory VSGST receivable

Non Current Assets

Land Buildings Plant and equipment Office and computer equipment Motor vehicles Furniture and fittings Investments

Total Assets

LIABILITIES

Current Liabilities

Accounts payable Short term borrowings Unearned revenue Provisions

Non-Current Liabilities

Total Liabilities

EQUITY Reserves Retained earnings Capital and other equity


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Profit and Loss Statement – Illustration only

Quarter Year-to-date Notes Actual Budget Actual Budget

Revenue: Government contribution Community service obligations

Revenues from major business activities

Expenses: Purchases / cost of sales Salaries and wages Communications Utilities Depreciation Directors fees and expenses Motor vehicle & IT operating expenses

Occupancy expenses Marketing and sales Financial expenses Audit Other expenses Net Profit Before Tax (1) Income Tax Expense (1) Net Profit After Tax (1) Transfer to Accumulated Funds

(1) Note: For Public Bodies that are beneficial or mutual the net profit will be replaced with surplus and income tax expense will not be applicable.


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Cash Flow Statement – Illustration only

Quarter Year-to-Date Actual Budget Actual Budget Operating Activities: Cash received from customers Cash received from government (grant or CSO)

Cash paid to suppliers and employees Net operating cash inflow (outflow) Investing Activities: Proceeds from sale of fixed assets Fixed asset purchased Other Net financing cash inflow (outflow) Financing Activities: Proceeds from term loan Loan repayment & interest Finance lease repayments Net financing cash inflow (outflow) Net increase/(decrease) in cash Opening Balance (cash and cash equivalents)

Balance at end of Quarter Represented by: Overdraft at Bank Petty Cash Balance


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ANNEX 2: Appropriate Accounting Policy Note for Public Bodies NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted are stated to assist in a general understanding of these financial statements. These policies have been consistently applied except as otherwise indicated. (a) Basis of accounting

These financial statements have been prepared on the basis of historical costs using generally accepted accounting principles consistently applied. These financial statements comply with International Accounting Standards. Revenue is recognised in the period in which the sale transaction occurred and accrual accounting is used to match revenue and expenses in the same reporting period. The financial statements are prepared on the going concern basis in the belief that the company will continue trading in its current business activity for the foreseeable future and will not dispose of or realise any material part of its assets or operations.

(b) Current assets

Stocks are valued at the lower of cost and estimated net realisable value after accounting for any provision due to obsolescence. Debtors are stated net of any provision for any doubtful debts after writing off all bad debts identified during the period.

(c) Property, plant and equipment Property, plant and equipment are depreciated using the straight-line method over their estimated useful lives using the following rates:

Buildings and (e.g. wharves etc) 2.5% - 5% Plant & Machinery 10% - 20% Office furniture and fixtures 10% - 20% Office Equipment 25% Motor Vehicles 25%


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Profits and losses on disposals of property, plant and equipment are taken into account in determining the results for the period.

Property, plant and equipment are included in the financial statements at cost unless otherwise stated. It is not the policy of “Public Body” to revalue property, plant and equipment. Any decision to calculate and include revalued property costs in the financial statements is fully documented in note xxx and has only been made after full consultation with experts and shareholders.

(d) Foreign currency

All amounts are expressed in Tala.

Transactions in foreign currencies have been converted to Tala at rates approximating those ruling at the date the transaction was incurred. Assets and liabilities in foreign currency have been converted to Tala at rates approximating those ruling at the balance sheet date. Exchange gains and losses are brought to account in determining the profit for the year.

(e) Leased assets

Assets acquired under finance leases are capitalised. The initial amount of the leased asset and corresponding lease liability are recorded at the present value of minimum lease payments. Leased assets are amortised over the life of the relevant lease or, where it is likely the company will obtain ownership of the asset on expiration of the lease, the expected useful life of the asset. Lease liabilities are reduced by the principal component of lease payments. The interest component is charged against operating profit.

Operating leases are not capitalised and rental payments are charged against operating profit in the period in which they are incurred.

(f) Taxation

Income tax has been brought to account using the liability method of tax effect accounting.

Income tax on profit comprises current and deferred tax and is recognised in the profit statement. Provision for current tax is the expected tax payable on the earnings for the current year, using tax rates enacted at the balance sheet date, plus any adjustment to tax payable in respect of prior years. Deferred tax provides for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and


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the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

(g) Provision for employee benefits

Provision has been made in the financial statements for benefits accruing to employees in relation to such matters as annual leave and long service leave.

(h) Borrowing costs

All borrowing costs and interest payable are calculated to apply to the respective loans in the period of account and are charged as an expense item against profits for the period.

(i) Grants, aid and donations

Monies received by way of grants, aid or donations are disclosed separately in the accounts from monies received as loan or equity finance. By definition grants, aid or donations are gratuitous receipts and not subject to repayment. Any caveats associated with the grants, aid or donations governing the use of the money are disclosed in note xxx.

Grants aid or donations are treated as revenue in the period in which they are received.

(j) Comparative figures

Where necessary, comparative figures have been adjusted to conform with presentations adopted in the current year.


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Annex 18: SOEMD Mandate, Location and Reporting Discussion Paper

1. Background

a) The TOR for TA no 4513-SAM provides for support to a GOS review of the mandate, location and reporting of SOEMD.

b) This issue will be addressed in detail in the final visit of the international consultants in June 2007. In the consultations with Public Body Chairs and CEO’s in October 2006, feedback on the SOEMD was sought.

Mandate of SOEMD – The Act and Regulations

a) The mandate for the SOEMD is implicit in the Public Bodies (Performance and Accountability) Act 2001 and the associated Regulations 2002 and the Public Bodies (Performance and Accountability) Amendment Act 2005.

The Act provides the following references to the type of activities undertaken by SOEMD but does not refer to it by name, i.e. it uses the “Financial Secretary” as the surrogate term.

Section 22 Corporate Plan - the Board of each Public Body shall forward a copy of the Corporate Plan to the Financial Secretary etc prior to the commencement of the financial year.

Section 23 Financial Reports, Accounts and Information – each Public Body shall prepare financial reports, accounts and information etc and forward a copy to the Financial Secretary etc.

Section 24 Performance Audit – the Financial Secretary may require the Controller and Chief Auditor to conduct a performance audit of a Public Body.

Section 26 Undertake Assessment of Performance – the Financial Secretary may undertake an assessment as to the performance of a Public Enterprise and its capacity to meet its obligations under relevant legislation.

Section 28 Support by Financial Secretary - the Financial Secretary shall provide any Shareholding Minister or Board of a Public Body (including):

Advice and assistance concerning Corporate Plans, Statements of Corporate Objectives and financial reports.

Analysis, advice and information concerning the performance of any Public Body.

Advice to shareholding Ministers on expenditure, advances, credit support and guarantees in relation to a Public Body.

Appointment and performance of Directors of Public Bodies.

Information and advice relating to best practice – to encourage efficiency and service delivery.


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The Financial Secretary will be responsible for monitoring the performance of Public Bodies and providing advice on the Government’s investment in Public Bodies.

b) The Regulations make the following references to the types of activities undertaken by the SOEMD.

Section 5 (Corporate Plan) - 5.4.1 The Financial Secretary shall review and advise Shareholding Ministers on the draft Corporate Plan (which is required three months before the financial year).

Section 6 (Financial Reports, Accounts and Information) - 6.1/ 6.2 Sets out the requirements of each Public Body to report to Treasury – but does not make any references to the role of Financial Secretary in relation to that reporting.

[Note: Section 2 (relating to Community Service Obligations) sets out the need for Treasury to provide a report and advice on LSO applications.

2. Issues Relating to SOEMD Mandate

a) The Act (by referring to the Financial Secretary) describes the scope of SOEMD as:

Reviewing and providing advice on corporate plans.

Undertaking analysis and monitoring of Public Body performance (through the receipt of quarterly and annual reports and accounts.

Initiating a review on performance audit of any Public Body.

Providing advice on best practice.

Advising on expenditure, advances, credit and guarantees relating to a Public Body.

Providing information on the appointment and performance of Public Body directors.

b) The scope of SOEMD appears to be a reasonable portfolio of responsibilities and roles for a monitoring body. However, in reviewing SOEMD’s capacity and performance, three questions about such a mandate need clarification:

• The operational statement of scope / mandate of SOEMD

• An appropriate ‘balance’ across the portfolio of activities undertaken by SOEMD

• The appropriate level of resourcing and skill mix for SOEMD to undertake its mandate.

(i) The operational statement of scope / mandate of SOEMD

o Improving relationships with Public Bodies, as their Boards and Senior Managers change over time. During the Chair CEO consultations in October 2006 and the CFO consultations in March 2007, there was considerable feedback about the


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importance of such consultations to develop these relationships. Enhanced communication between SOEMD and the Public Bodies would assist in clarifying expectations between the Shareholding Ministers and the Public Bodies.

o Is SOEMD a vehicle for transferring information to the Minister or are they experts in commercial entities providing substantive advice?

o Communication channels need to be clarified and Ministers educated as to how they can benefit from the SOEMD and so improving the understanding of Parliament and Ministers about SOEMD.

o Clarification of the scope would assist with recruitment and retention of staff to SOEMD.

(ii) An appropriate ‘balance’ across the portfolio of activities undertaken by SOEMD. Although a number of its activities are ‘demand driven’, in an environment of limited resources, there is a need to ensure that SOEMD maximises the value it contributes to the Government of Samoa objectives relating to efficient and effective Public Bodies.

For example:

o Does SOEMD allocate sufficient expert resources to the draft Corporate Plan review process? This document fundamentally ‘sets the scene’ for what each Public Body will achieve and provides indicative financial performance for the next three years. Expert feedback from SOEMD is important as it establishes its credibility with the SOEs

o Is the quarterly reporting requirement too resource intensive and does it meet a cost – benefit test in relation to monitoring Public Body performance?

o Should SOEMD devote more resources to the component of its mandate relating to improving efficiency and service delivery? For example, to consider solutions that may involve multiple Public Bodies and the integration, standardisation and sharing of Public Body resources and internal services.

o Does SOEMD appropriately fulfil its role in relation to Public Body Directors – so that it contributes to the core role of strengthening Public Body governance?

(iii) The appropriate level of resourcing and skill mix for SOEMD to undertake its mandate. A stronger basis to establish the level of resourcing required and the skill mix of the SOEMD needs must be defined through job sizing in the context of a clearly defined role. Currently the SOEMD is staffed with four economists and only one accountant, without experience in the commercial sector.


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For example:

o The importance of financial analysis relating to quarterly and annual reporting by Public Bodies, reviewing Corporate Plans, providing advice on credit, advances and guarantees does not appear to be matched by the resources within SOEMD This anlysis requires strong finance and accounting expertise and experience.

o The need for SOEMD to have a role in commercialisation / privatisation and in the efficiency / service delivery of Public Bodies requires a range of business and financial expertise. Whilst the former is episodic and can be contracted in, it is more likely that the latter is an on-going requirement to consider both single and multiple Public Body opportunities to increase efficiency and improve service delivery. This requires strong business analysis experience across a range of opportunities.

o The level of resourcing within SOEMD to effectively carry out its mandate is problematic. A refocusing of some of its activities may ‘free-up’ some resources from existing activities, but may require different resources and experience to strengthen its role in other activities.

As a general observation, the ADB Team has a view that SOEMD resourcing is stretched if it continues ‘business as usual’ and is unlikely to be able to accommodate a greater involvement in some areas of its mandate – which may warrant more financial accounting resource and commercial experience at the time of assessing the quarterly reports..

3. Location of SOEMD

a) The location of SOEMD within the Ministry of Finance, with its manager at an Assistant Secretary level provides a positive location for SOEMD to carry out its mandate. Other options could be a stand-alone entity which would require increased resourcing, a location in the MCIL or the Prime Ministers Department.

b) A number of criteria can be considered in evaluating the ‘optimal’ location for SOEMD. These include:

Synergy between the mandate and the mandate for the host Ministry / Agency.

Capacity to give independent unfettered advice to Shareholding Ministers and Parliament within the scope of its mandate.

Ability to easily access the most senior levels of Government managers.

Efficiency of operation as a result of sharing the corporate head office support services of, for example, staff development, HR and financial accounting, which are embedded in the host Ministry / Agency.

Attractiveness of employment in the SOEMD and the capacity to progress a career across units within a Ministry / Agency.


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In summary, it is important to balance ‘freedom’ to provide independent and unfettered advice to Shareholding Minister with the need to have a host environment which ensures both efficient operation and ‘incentivises’ high quality individuals to become SOEMD staff.

c) The options for locating SOMED are predominantly:

Establishment as an independent agency providing its advice directly to Shareholding Ministers.

Incorporation into the Office of the Prime Minister to reflect the Government ownership of the Public Bodies.

Ministry of Commerce Labour and Industry

Using the criteria in (b) above to evaluate the other location options above leads to initial conclusions that other options are not significantly better than the existing location of SOEMD within the Ministry of Finance.

Should there be a strong case to increase the independence of SOEMD, but protect the other benefits of its current location, the relationship between SOEMD and the Ministry of Finance could be formalised into an internal service agreement. Such an agreement could more explicitly define the mandate and the operational aspects of the relationship with the Ministry. This could incorporate the reporting lines for specific types of advice and provide an opportunity for alternative advice to come from the Ministry, for example whether earnings should be retained or paid out in dividends. There might be situations where the Ministry of Finance’s budgetary requirements conflict with the SOEMD’s mandate to support sustainable businesses.

4. Reporting By SOEMD

a) The Act and accompanying regulations make a number of references to reporting by the Financial Secretary (i.e. SOEMD). In particular, Section 28 refers to the Financial Secretary ‘provide any Shareholder Minister, Director and Board of Directors of a Public Body with’:

Advice and assistance concerning Corporate Plans and financial reports.

Analysis, advice and information concerning the performance and compliance of any Public Body.

Financial, commercial and public policy advice.

Advice on the appointment and performance of Directors.

Information and advice relating to best practice by Public Bodies.

The Financial Secretary shall be responsible for monitoring the performance of Public Bodies on behalf of Shareholding Ministers etc.

b) A literal interpretation of the above section suggests that SOEMD may provide information, advice and assistance in relation to some aspects of its mandate to a Director or Board of Directors as well as any Shareholder Minister.


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c) The expectation is that SOEMD is acting on behalf of the Shareholder Minister and therefore, it should not have a role of providing advice and assistance to a Director or Board of Directors.

d) A residual issue to be considered is whether in relation to a single Public Body, a cluster of Public Bodies or the whole group of Public Bodies, SOEMD is able to report to or provide advice to a Minister with an overarching responsibility for Public Bodies or to Parliament. Whilst the latter may be less likely, the former may be advantageous.

The above note is a starting position for considering etc mandate, location and reporting by SOEMD.

Graeme McNally and Juliet McKee


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Annex 19: TA Proposal for SOEMD for Ranges of Director Fees for Public Bodies

SOE Director categories Juliet McKee has suggested that there should be categories for SOEs that are used for setting remuneration based upon size and complexity. She requested comment on the basis upon which this might be done. This paper is a first attempt at creating a structure. The following table sets out one possible approach:

IndustryRevenue Complexity Risk Total Category

Public Trading BodiesCommercial SOEs

1 Agricultural Store Corporation 1 2 2 5 B2 Development Bank of Samoa 2 3 2 7 A3 Electric Power Corporation 3 3 3 9 A4 Polynesian (March 2005) 3 3 3 9 A5 Public Trust Office 1 2 2 5 B6 Samoa Airport Authority 2 2 2 6 B7 Samoa Broadcasting Corporation 1 2 2 5 B8 Samoa Housing Corporation 1 2 1 4 C9 Samoa Land Corporation 1 2 1 4 C10 Samoa Ports Authority 2 3 2 7 A11 Samoa Shipping Corporation 3 2 3 8 A12 Samoa Shipping Services 2 2 2 6 B13 Samoa Trust Estates Corporation 1 2 2 5 B14 Samoa Water Authority 2 3 3 8 A15 SamoaTel 3 3 3 9 A

Mutuals16 Accident Compensation Corporation 2 1 1 4 C17 National Provident Fund 3 3 2 8 A18 Samoa Life Assurance Corporation 2 2 2 6 B

Public Benefit Bodies19 Apia Park Board 1 1 1 3 C20 National University of Samoa 2 2 2 6 B21 Samoa Polytechnic 1 2 2 5 B22 Samoa Tourism Authority 1 1 1 3 C

Combined University/Polytechnic 3 2 2 7 A

Definitions of assessment classificationsA. Revenue: Points

Over $10m 3Between $5m and $10m 2Under $5m 1

B. Industry complexity3

Several sites, moderate complexity 21

C. RiskHigh risk of losses, high public visibility 3Moderate risk, moderate visibility 2Low risk, low public profile 1

Evaluation of the size and complexity of SOE director's responsibility

Competitive market, widespread operations, complex products

No competition, single site of operations, few products


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I started with the assumption that a relatively simple structure was preferable for Samoa, and that there should not be many categories. My suggested structure uses three categories. To categorise the 22 SOEs, I thought three assessment classifications would be useful: size, industry complexity and risk. Within each classification, I thought there should be 3 levels (3 the highest, 1 the lowest) so the range of “points” would be from 3 to 9. Here are comments on the assessment classifications: Size There are some SOEs with significant assets but with low levels of activity so Revenue seemed to be the better measure of size. Only 4 SOEs have revenue of over $50m pa with a fifth if $10m is taken as the cut-off. The next logical break-point is $5m. Industry complexity This is a subjective evaluation based upon consideration of the complexity the directors face. Some of the suggested factors are:

• Competition – competitors versus network monopoly • Spread of operations – widespread locations, a few outlets, versus a single site • Complexity of products – financial services (investment, lending) or high technology

(e.g. airlines, telecom) versus simple products Risk This is a combination of business risk (e.g. of making losses) and public visibility if something were to go wrong. So, loss makers in need of improvement got a higher rating. So did SOEs with widespread retail customer bases (electricity, water, ferries, airlines). Ratings were assigned, then the totals calculated. I then used the combined university/polytechnic rather than the existing two entities and these gave the following spread of “points”.

Rating Spread

0

1

2

3

4

5

3 4 5 6 7 8 9 This spread suggested three categories: A (7-9 points), B (5-6 points), and (C 3-4 points). The points assigned are partly subjective, but this seems to give a tiered structure that feels right. David R Hutton, CDS


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Annex 20: SOEMD Cabinet Paper on Community Service Obligations

COMMUNITY SERVICE OBLIGATION POLICY FOR

PUBLIC TRADING BODIES

I. BACKGROUND Prior to 2002, there was no systematic approach to control and monitor Public Trading Bodies (PTBs) to undertake non-commercial activities. In most cases, this has severely affected the good performance of the corporation. A number of PTBs were incurring trading losses due to undertaking community service obligations (CSOs) from their own resources without appropriate authorities, funding and controls on the non-commercial activities. The enforcement of the Public Bodies (Performance and Accountability) Act 2001 (hereafter referred to as the ‘Act’) provided the requirement that PTBs are to operate as successful businesses and to be as profitable and efficient as comparable businesses that are not owned by the State. The inclusion of the provisions for CSOs in the Act was to ensure that PTBs are able to comply with this requirement of the Act. The State Owned Monitoring Division (SOEMD) of the Ministry of Finance (MOF) is tasked with the enforcement of the Act, and also the administration of CSOs. Since enforcement, both MOF and PTBs have experienced a few implementation and budgetary problems of requirements and procedures currently stipulated in the Act. The experience of pervious years, and with consultations with PTBs, suggests that it would be useful to have a more detailed policy framework for CSOs to achieve:

1. greater clarity on strategic social objectives or outcomes to be achieved from goods and services provided under the framework

2. all applications to fit in with the Government’s budgetary process 3. simple application process that facilitates reimbursements of PTB for CSOs provided

Current practice does not provide an effective and practical process for monitoring of CSOs. Monitoring is an important aspect of any activity, so this aspect of the CSO framework should be strengthened. II. LOGIC FOR PTBs TO UNDERTAKE CSOs The Act specifies that the principal objective for a PTB is to be a successful business and to be as profitable and efficient as comparable businesses that are not owned by the State. To achieve this objective, a PTB should not undertake non-commercial activities or provide social services as these would be detrimental to its commercial performance. However, if Government wish a PTB to provide non-commercial services, Government is obliged to pay the PTB to provide these services in order for the PTB to be a successful business as required by the Act. In this way, the Government also fulfils its social obligations to alleviate hardship.


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III. LEGISLATIVE FRAMEWORK The legislative framework for CSOs is provided in Part III of the Act. The relevant sections are recited below. Section 9: Definition of a CSO 1. CSO means:

a) The provision of a good or service by a PTB to a consumer on any commercial terms other than normal commercial terms applying from time to time; or

b) The entering into an agreement by a PTB on any terms other than normal commercial terms from time to time; or

c) The forbearance by a PTB to exercise a right or entitlement other than on normal commercial terms applying from time to time; or

d) The forgiveness or reduction by a PTB of a debt or an amount of money owed to the PTB other than on normal commercial terms applying from time to time.

2. Nothing in this part shall prevent a PTB from exercising a commercial judgment to

make donations to worthy causes or to price goods and services at or below the cost of their production.

The definition suggests that anything that is non-commercial is a CSO. It could include a loss incurred from providing a purely commercial transaction that was non-commercial due to inefficiencies and abuse of resources. The definition can be strengthened to avoid such misinterpretations as perceived by some PTB. The definition also seems to be general in the sense that it included goods and services provided for economic development rather than pure ‘social’ community. Some examples of goods and services for economic development which were approved to be funded as CSOs are the electrification of the Aggie Grey’s Resort, installation of streetlights for the Faleata Sports Complex and the installation of streetlights for the Apia Park Sport Complex. Apart from these that have been approved, there were many other development projects which applied for funding under the framework but declined. A summary of CSOs applications received from PTBs and those approved are provided in attachment 1. In total, the overall amount of funding Government has injected into its PTBs under the CSO framework is substantial and has been increasing. This is summarized in the table below.

PTB 2003-04 2004-05 2005-06 2006-07 EPC 2,400,000 2,670,704 1,100,000 10,707,845SBC 600,000 500,000 310,000 285,384SWA 2,000,000 3,000,000 5,308,840 2,984,100Total CSOs Funding 5,000,000 5,470,704 6,718,840 13,977,329


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Given the substantial amount of money the Government is paying out to PTBs under the current CSO framework, the outcome of these CSOs are all different and are mainly aimed at the development of the economy. It would be best if all CSOs are aimed at a single outcome, and for that outcome to be stipulated in the Act as part of its definition. As perceived by the words ‘community service obligation’, the best objective for CSOs is to aim at ‘Alleviating Hardship in Samoa’. This will also limit the scope for CSOs applications. Section 10: Minister may direct CSO Subject to Part III, the Responsible Minister may direct a PTB to provide a CSO if the performance of the obligation is necessary to ensure:

a) That there is access to a necessary good or service; or b) The promotion of a policy vital to the national interest as declared by the

Head of State acting on the advice of Cabinet; or c) That there is a proper and timely response to a local, regional, national or

international emergency; or d) The correction of an injustice as declared by the Ombudsman.

This section provides for the Legislative Authority in which a good or service can be declared a CSO under the Act. (a) Access to a necessary good or service All CSOs that have been approved in the past, including the current financial year, are considered to fall under this Authority. However, as highlighted earlier, some of these CSOs may not be considered ‘a necessary good or service’ in the sense that the community can live without these goods or services. (b) Promotion of a policy vital to the national interest as declared by the Head of State CSOs declared under this Authority are those of ‘national interest as declared by the Head of State’. Some CSOs provided in the past, such as rural electrification and water supply can also be considered under this Authority, however, they would be required to be declared by the Head of States before they can come under the framework. Thus, in our view, this provision proves to be unnecessary. Almost all of Government’s policies are vital to the national interest. Policies for promoting national interest are set out in the Strategy for the Development of Samoa (SDS). For example, the growth of the agricultural sector is considered be to of national interest, and a policy for providing subsidies on all products and chemicals use in farming may not qualify under this framework, in the sense that the beneficiaries would only be the farmers, excluding fishermen, manufactures and other specialized sectors and communities. If subsidies are given to one sector, the other sectors are disadvantage. However, the SDS rank agriculture as a priority sector and policies for promoting this sector are in the SDS. (c) Proper and timely response to a local, regional, national or international emergency This Authority provides for CSOs as a response to a local, regional, national or international emergency. This Authority provided the opportunity for Public Trading Bodies to capture non-budgeted activities which are considered ‘emergency’, and posing a lot of issues. Firstly,


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this section broadens the scope of the CSO framework to not only to local emergencies but regional and international. Secondly, the term ‘emergency’ is not defined in the Act; thus making it even more broad to include any kind of emergencies. Thirdly, it should be noted that the words ‘local’ and ‘national’ are both used, implying that this section was most probably based on an overseas experience but many not apply in the Samoan context. And last, it raises the question whether the Act is the appropriate avenue for this provision, or would it be more appropriate to be included in the Public Finance Management Act 2001. Currently, in the Public Finance Management Act 2001, any emergency is immediately funded from the Unforeseen Expenditure on the approval of Cabinet. It appears that it makes more sense for this provision to be removed from the Act. It should also be noted that the Act does not provide for an application process in such circumstances. If Cabinet wish for this section to be retained in the Act, a possible application process for CSOs under this Authority is in attachment 2. This is in accordance with the Part III and Schedule 2 of the Act. (d) Correction of an injustice as declared by the Ombudsman This Authority provides for CSOs to correct an injustice as declared by the Ombudsman. Like the previous Authority, it broadens the scope of the CSO framework to also include any injustice declared by the Ombudsman. A definition of ‘injustice’ in the context of PTB should have been included in the Act to limit the scope to only injustices related to PTBs. However, the Authority as it is stipulated in the Act would include any injustice that may not be directly related to a PTB. Again, it raises the question whether the Act is the appropriate avenue for this provision, or would it be more appropriate to be included in the Public Finance Management Act 2001. Currently, the Public Finance Management Act 2001 could provide for such correction under its provisions for Unforeseen Expenditure on the approval of Cabinet. It appears that it makes more sense for this provision to also be removed from the Act. It should also be noted that the Act does not provide for an application process in such circumstances. If Cabinet wish for the provision to be retained in the Act, a possible application process for CSOs under this Authority is in attachment 3. This is in accordance with the Part III and Schedule 2 of the Act. Section 11: Minister to follow procedure concerning CSO In performing any power or duty under Part III, the Responsible shall follow the procedures

provided in Schedule 2 concerning the issuing of a direction to provide a CSO. Any direction under Part III which fails to follow the procedures provided in Schedule 2 shall

be null and void. In our view, the procedural requirements provided in the Schedule are very cumbersome and complicated. Past experiences proves that the current application and approval process takes


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up to at least 4 months for a PTB to be reimbursed for services already provided under the CSO framework. The three main causes of delays with regards to the actual process are:

Lack of proper costing of proposed goods and services, and identification of potential revenue from these goods or services

Cabinet approval for the Responsible Minister to issue a direction to a PTB for CSOs already screened by MOF and approved in the overall Government Budget.

Preparation of the Directive and Contract for CSOs already approved by Cabinet to be provided

The current process in Schedule 2 also requires an assessment report by the PTB (who will be providing the CSO) to the Responsible Minister. It also requires an independent review and advice of the CSO application by MOF to the Responsible Minister. This has not been followed in the past for the following reasons:

All applications come from the PTBs themselves so there is no logical reason for requesting an assessment report from the PTB requesting for CSO. Their advice would be not different from what has been provided in their application.

CSOs are screened in the same process as other Ministries and Agencies of Governments. At the end of the day, it is based on what Government can afford to provide and priority, instead of whether or not it falls within the CSO framework.

There is still a lack of understanding of this process as it is too complicated and could not be fully implemented within the current working and budgetary environment of Government.

The process stipulates for all application to be subject to performance budgeting process and submitted to Treasury at a time necessary for the application to be considered in the Main Estimates, but no later than 3 months before the end of the Government’s financial year. That is, the MOF should receive the application by 31st March each year for it to be considered in the main estimates. However, this is contradicted by a later provision requiring the MOF to provide an independent review to the Responsible Minister one month after the date of submission of the application. The later provision requires MOF to provide its advice, without the application being subject to the normal budget screening process by the Planning and Budgeting Committee of the MOF and Audit Office. In our view, the application process should be amended to allow for a view by this Committee. Given the problems identified above, it provides a ground for amending Schedule 2 to allow the process to be simple and less cumbersome to ensure that the following outcomes are achieved:

Sole objective of the CSO is to ‘alleviate hardship’ in Samoa. Submission prior to finalization of the Government Budget. Proposed CSO is clearly scoped, described and costed, including any revenue to be

collected, beneficiaries and the expected outcome of the CSO CSO is in line with Government priorities as described in the Strategy of the Develop of

Samoa. Budgetary allocation requirements of the MOF are satisfied.


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Reducing the time required for submission, review, Cabinet approval and actual disbursement of funds to the PTB, so that the cash flow of the PTB is not strained by the late payment of CSOs by Government

Delivery of the CSO is properly and effectively monitor by the relevant Ministry (technical and sector policies) and MOF (proper use and disbursements of funds)

Section 12: Procedures for issuing of Direction The procedures to be followed by concerning the issuing of a direction to a PTB to provide a

CSO are provided in Schedule 2. Schedule 2 may be amended from time to time by regulation by the Head of State acting on

the advice of Cabinet. Any amendments to the regulations shall be laid before the Legislative Assembly. If the procedures are to be amended, it is still important to retain this direction by the Responsible Minister, subject to funds for the CSO being approved in the Annual Government Appropriation. Section 13: Offence to unlawfully direct Director or Board of Directors Any person who knowingly directs or attempts to direct a Director or the Board of Directors

of a PTB to perform a CSO other than in accordance with the provisions of the Act is guilty of an offence and shall be liable to a fine of up to 100 penalty units (ST10,000).

Any person who, whilst acting in the capacity of a Director of PTB, knowingly makes or takes part, or attempts to make or take part, in the making of a decision to perform a CSO, other than in accordance with the provisions of the Act, is guilty of an offence and shall be liable to a fine of up to 100 penalty units.

This section of the Act is very important and vital for ensuring that the CSO framework is not misused or abused. It must be maintained. Schedule 2 of the Act Schedule 2 set out the procedures to follow when applying for CSOs under the following cases:

Procedures for issuing of a direction applied for by the Board of Directors of a PTB or a Minister (other than the responsible Minister)

Procedures for issuing of a directions applied for by the Responsible Minister These procedures are demonstrated in the flow charts below provided in attachment 4. Clause 2.3.1(g) provides the requirement for signing an agreement between Government and the PTB for the CSOs to be provided by the PTB. This clause was included to provide the legal enforcement if the PTB fail to provide the CSO in accordance to the standards expected by Government. The current operating environment of Government would not allow for such enforcement. In reality, Government would not take its PTBs to court if the CSOs are not provided in accordance to the requirements agreed to. In the view of the Ministry of Finance, the more practical mechanism to ensure that CSOs are provide and up to the standards


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expected by Government, is through monitoring by both the Ministry of Finance and the relevant sector Ministry. If Government is not happy with the provision of CSOs, it can withhold payment until it is satisfied. There is also the option for public tender if the CSO can be provided by a private provider. (Discussions on monitoring and reporting are provided in a later section of this paper.) As explained earlier, this procedure is very cumbersome and complicated. It is recommended above that this procedure should be changed. A flow chart of the proposed new application and budgeting process is provided in attachment 5. Transitional arrangements for PTB Schedule 2 section 2.4 provided a deadline of 12 months from the date of the Schedule coming into force (i.e., April 2003), for all PTBs to either embody these services within the CSO framework or have these services delivered under an alternative arrangement. When the Schedules came into force in April 2003, PTB were invited to submit any good or service being performed, at that time or in the past, which could come under the CSO framework. Only particular services provided by SWA, EPC and SBC came under the framework. Given that this section is not relevant anymore, it is suggested that this section of Schedule 2 is deleted. IV. A THEME TO ‘ALLEVIATE HARDSHIP IN SAMOA’ In the Strategy for the Development of Samoa 2005 – 2007, the National Vision is “For every Samoan to achieve a better quality of life”. Government should ensure that people’s choices are enhanced and that they are not restrained from access to the basic necessity of life. In the context of CSOs , the following are identified as ‘basic necessities’ after consultations with Chairperson and Chief Executive officers of Public Bodies in October 2006:

Food Water Shelter Electricity Safety

In an overall view, it was agreed that the theme and objective for CSOs should be to:

“Alleviate Hardship in Samoa” “Hardship’ has been defined in many ways by different groups of people. The Asian Development Bank conducted a study in 2002 on hardship in Samoa. What was clear from that study was that hardship does exist in Samoa, and still is today. Hardship exists in communities due to lack of money, lack of access to some basis services (education, health and clean water), and lack of jobs and business/credit opportunities. In this context, the objective for CSOs as provided in the Act is considered too broad in the sense that it would cover goods and services for communities to economic development.


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Currently, Government is providing a lot of its support to communities through its Ministry of Health, Ministry of Education, Ministry of Women Affairs and Youth, National Health Services, National Kidney Foundation, National University of Samoa and etc. The Government is also providing a lot of support for economic development through its Ministry of Works and Infrastructure, Ministry of Labour, Industry and Commerce, South Pacific Games Authority, Apia Park Board, Samoa Tourism Authority. The goods and services that should be considered to be brought under the CSO framework should only be those in which the Government cannot provide through its current Ministries and Public Beneficial Bodies. These could be the basic goods and services that some rural communities are missing out from enjoying the benefits. It should be noted that the proposed theme for CSOs will mean that broadcasting of religious programmes will not fall within the framework. Such programmes should be encouraged to be funded by the different churches and religious organizations, should these services be required. V. PRIORITISATION OF CSOs FRAMEWORK In line with the theme for ‘alleviating hardship in Samoa’, and given the limited resources of Government, the following prioritization is proposed for the CSO framework:

Sectoral Strategy for the Development of Samoa (SDS) – it is important that CSOs

proposed and approved are in line with the overall strategy of Government and in accordance with sector policies and plans.

Annual Budget Envelope – it is important that CSOs are considered together with other commitments and plans of Government during the budget preparation.

Hardship Alleviation

Basic Needs 1. Food and Water 2. Shelter 3. Electricity 4. public safety

Development

Rural Development Tourism Agriculture Manufacturing Environment Communications

Priority is first assessed on the sector where priority is given to with regards to the SDS at the time. A budget allocation for CSOs is determined during the budget preparation in line with the overall budget envelop each year. After determining these two aspects for the CSO


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framework, applications will be then rank in accordance with the priorities in 2. In this process, Cabinet approval of these CSOs are considered together with other commitments, and there should not be a need for a separate Cabinet approval for these CSOs once allocated and approved in the Main Estimates. The Minister’s Directive will be required after the budget is approved in Parliament. VI. STOCK-TAKE OF POSSIBLE CSO POLICY DECISION The Ministry of Finance has taken a stock take of possible CSO Policy decisions for Cabinet based on applications submitted to the Ministry since the Act was implemented in 2003. These are: Water Free water entitle entitlement to allow access to water by low income groups Powering of water boreholes in rural communities Fire Hydrants Provision of water to the gate of each approved resort developments under the Tourism and

Hotel Development Act 2003 Electricity Rural electrification to ensure that public universal access to electricity regardless of

geographical location Installation/repairs/maintenance and electricity bill for street lights - to ensure public security

and safety along road networks is enhanced. Special projects

Provision of power supplies to sports venues for SPGA Provision of power to the gate of each approved resort developments under the

Tourism and Hotel Development Act 2003 Broadcasting Extension of TV Broadcasting to Rural Areas – ensuring access to TV telecasts regardless of

geographical location Education Broadcast - provision of educational broadcasting lessons to support and maintain

minimum subject standards for rural based schools Aviation Fire fighting services – provision of fire fighting services by the SAA to neighbouring

villages Rural Based Airports – maintenance of rural airports at Maota and Asau to maintain air links

with isolated rural areas in Savaii Upper Air Space – provision by SAA of navigational facilities to enable Government to

deliver obligation under regional Upper Air Space Services. Banking Establishment and operation of rural agencies in Upolu and Savaii Charge low interest rate for customers


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VII. REGISTRY OF CSO POLICES Whilst Cabinet has over time made decisions to allow certain PTBs to undertake CSOs in the past. There has been no formal registry of the CSO policies to date. Therefore, the revised policy paper on CSOs provides a stock take of implied CSOs approved by Cabinet. Register of CSO Policies Water Free water entitle entitlement to allow access to water by low income groups Powering of water boreholes in rural communities Provision of water to the gate of each approved resort developments under the Tourism and

Hotel Development Act 2003 Electricity Rural electrification to ensure that public universal access to electricity regardless of

geographical location Installation/repairs/maintenance and electricity bill for streetlights - to ensure public security

and safety along road networks is enhanced. Provision of power supplies to sports venues for SPGA Provision of power to the gate of each approved resort developments under the Tourism and

Hotel Development Act 2003 Broadcasting Religious Programmes – provision of stipulated minimum number of religious services for

public consumption Education Broadcast - provision of educational broadcasting lessons to support and maintain

minimum subject standards for rural based schools This register will be reviewed and updated on a regular basis. It is propose that this register will be used in rationalizing funds allocated for CSOs each year, in accordance with priorities criteria as discussed earlier. VIII. PARAMETERS FOR COSTING OF CSOs In accordance with the Act, PTBs are to be profitable compared to other similar business not owned by the State. The purpose for including the provision for CSOs it to ensure that this objective is achieved even if the PTB is providing non-commercial services or goods directed by Government. As highlighted earlier, a proposed CSO is to be clearly scoped, described and costed, including any revenue to be collected, beneficiaries and the expected outcome of the CSO. Past experience implied the need to strengthen this aspect of the application. The main problems as experienced over time are: CSOs for capital expenditure (e.g. rural electrification) seek funding for 100% of the initial

capital cost, yet the Public Body may theoretically earn profits once the initial


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installation become operational. Thus, paying 100% of the costs to the public body could be viewed as over paying. However, this makes the assumption that such a service provision is profitable. In the example above this is unlikely since maintenance costs will preclude profitability. Full capital costs are therefore eligible for CSO reimbursement.

Many CSO applications seek reimbursement for the average cost of operations.

Conceptually, they could be reimbursed for the extra (incremental) costs, not costs that would be incurred even if the CSO was not provided. An example of such cost is paying for airtime for broadcasting religious programmes. However, such a view fails to recognize the opportunity cost to a PTB of providing a CSO. If a PTB devotes its resources to providing a CSO, such resources cannot be committed elsewhere. In the broadcasting example above the choice is between a commercial programme earning advertising revenue and a religious CSO programme that earns no income.

SOEs are expected to be commercial businesses. If they are asked to provide a CSO, they

should be entitled to earn a reasonable profit from providing the CSO. This has not been applied on past approved CSOs.

To avoid these problems from reoccurring, a guideline for CSO costing is proposed as follows: CSOs for capital expenditure should be paid in full. CSOs for operating costs should use average costs. It is recommended that this guideline be adopted by all PTBs when applying for CSOs. IX. MONITORING, REPORTING AND AUDIT OF CSO SPENDING It is vital that the monitoring of the effectiveness of the CSO, and reporting of CSO spending and delivery by Public Trading Bodies are done properly and on a timely manner. Government will need to know what has been achieved under this framework in terms of outcome. It would be ideal provide a macro level review of the framework every 2 years to ensure that it is working and the objective is achieved. Currently, the requirement for reporting is included in the Contract, and an acquittal statement of the funds dispersed in the previous period is provided to MOF before the next payment is released. Proper inspection of CSOs provided has only been done in 2004 and 2006 due to staff shortage, however the should be frequent inspections to ensure that the quality of CSOs provided are in accordance with the requirements in the Contract. The proposed reporting of goods and services provided under the CSO framework is to be done on a quarterly and annual basis. It should be included as part of the overall quarterly report by each public body submitted to the Ministry of Finance under the Act. Disbursements for CSOs constitute a separate line item of revenue. Expenses relating to CSOs should also be provided in the notes to the account, and if possible, a separate line item of expenditure.


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The Ministry of Finance, through its SOE Monitoring Division, should be responsible with the financial monitoring of CSOs and disbursements of payments. Assistance from the relevant sector Ministry should be requested if there are technical aspects of monitoring involved as well as sector policies. Given that the proposed change would not require a Contract, it is proposed that the Responsible Minister’s Directive should detailed the description, cost, beneficiaries, outcome and performance measures for each CSO. These will be the criteria in which MOF will assess whether to pay the PTB or not to pay. Monitoring will involve site inspections, progress reports from the relevant public trading body, as well as public survey where possible. The Ministry of Finance will need to prepare a report to Cabinet on CSOs at least 2 months after the end of each financial year. This report will include the registry of CSOs and any changes to the register, progress, on site inspections, weaknesses of delivery, benefits realized (where possible) disbursements issues, and any relevant matter relating to CSOs that should be included in the report. Auditing of CSOs spending by public trading bodies must be done by the external auditor, as part of the audit process, during the normal audit period of the public body. Where the public trading body has an internal auditor, an internal audit of CSOs revenue and expenditure should be done on a quarterly basis, and should be included in the quarterly report to the Ministry of Finance. X. RECOMMENDATION It is recommended that Cabinet:

Approve this paper as the basis for a Policy on CSOs Approve “Alleviating Hardship in Samoa” as the theme and objective for the CSO

framework Approve establishing the register of CSO Policies, and for the register to be updated on a

regular basis and resubmitted to Cabinet for approval Approve the new application process for CSOs Approve the prioritization framework for CSOs Approve the guidelines for costing of CSOs

Approve the monitoring, reporting and auditing framework for approved CSOs

Direct the Office of the Attorney General and Ministry of Finance to proceed with the

preparation of required Amendments to the Public Bodies (Performance and Accountability) Act 2001 and Schedule 2 of the Act, to ensure that this policy fits in with the legislation.


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ATTACHMENT 1: CSOs Applications Received and Approved 2003-2004 2004-2005 2005-2006 2006-2007 PUBLIC BODIES and Services Bid Approved Bid Approved Bid Approved Bid Approved Electric Power Corporation Distribution Line Construction 2,552,500 937,862.00 4,357,819 Installation and consumption of streetlights

607,375 1,210,000 377,438 873,044 9,527,845

Repairs and Maintenance Street Lights

913,750 966,531 698,908

Consumption Streetlights 602,000 1,742,614 2,973,257 SWA 137,500 - Taumeasina Hotel - 250,000 250,000 Vavau Hotel - 200,000 400,000 HOS - Installation of Security lights

36,287 -

Rural Electrification for previous financial year

2,400,000

Rural Electrifications for financial year 2001/02

126,028

Rural Electrifications for financial year 2002/03

720,761

Rural electrification for financial year 2003/04

613,915 650,000

Faleolo Development Project (Capital Works)

- 455,200 450,000 13,112

Apolima photovoltaic Project 537,500 500,000 500,000 500,000 Installation of Street Lights of the Faleata Sports Complex for SPGA

3,216,068 650,000

Afulilo Hydro Project 2,000,000 - Installation of Street Lights for the Apia Park Sports Complex for

30,000


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2003-2004 2004-2005 2005-2006 2006-2007 PUBLIC BODIES and Services Bid Approved Bid Approved Bid Approved Bid Approved Apia Park Board

Arrears written-off (prior years) Streetlights consumption

2,674,817

Salelologa Township underground electricity

650,000 650,000

- 00,000 7,386,912 2,670,704 9,295,713 1,100,000 13,390,956 10,707,845 Samoa Broadcasting Corporation

Sunday Church Services - TV 523,643 494,362 400,000 578,880 248,000 79,907 Sunday Church Services - Radio 79,680 115,200 62,000

250,560 205,476

Daily Evening Services - TV 175,200 105,637 100,000 302,400 300,720 Morning Devotional Services - Radio

70,848 117,600 50,640

Live Broadcasting for Education 72,000 120,000 Extension of television service to Tiavea tai, Fagaloa & Samusu

481,800

Fiber Optic annual leasing fee for Lepa transmitting site

42,000

921,371 600,000 - 500,000 1,114,080 310,000 1,245,720 285,384 Samoa Water Authority Electricity for boreholes 1,378,200 1,878,600 1,194,000 2,137,150 4,208,840 2,256,600 1,656,000 Ground maintenance 66,060 70,000 75,000 50,000 Land Compensation 119,340 100,000 150,000 30,000 123,600 Free water entitlement 1,428,847 698,959 700,000 920,000 700,000 904,200 704,500 Fire Hydrants 25,000 36,000 36,000 36,000 20,000 Capital Works 2,042,000 700,000 200,000 1,700,000 300,000 920,000 500,000 Water Systems 1,300,000 2,078,760 Ministerial Committee 240,000 Uncommercial rural water 295,327


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2003-2004 2004-2005 2005-2006 2006-2007 PUBLIC BODIES and Services Bid Approved Bid Approved Bid Approved Bid Approved Unrealised revenue due to unsettled village disputes

109,538

Lost revenue 1,598,508 7,117,420 2,000,000 4,877,719 2,300,000 5,018,150 5,308,840 4,080,800 2,984,100 Samoa Land Corporation Golf-Royal Samoa Country Club $27,800 declined 27,800 Samoa Shipping Services Local maritime-foreign-going vessels training

284,590.28 declined

- - - - 284,590 - 474,050 - Samoa Ports Authority Construction of jetties 378,172 - Installation of markers at channels

22,600 -

- - - - 400,772 - - - Samoa Housing Corporation Charge Low Interest Rate 436,823 declined Establish an office in Salelologa 190,300 declined - - 436,823 - - - 190,300 - Samoa Tel LDC 104 - tide gauge, Matautu Wharf

LDC 276 - voice circuit, 64k to Pago Pago

LDC 265 - data circuit located at Mulinuu, 64k to Pago Pago

costs not provided

- - - - - - - Development Bank of Samoa Operations of rural agencies in Upolu & Savaii

1,592,952


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2003-2004 2004-2005 2005-2006 2006-2007 PUBLIC BODIES and Services Bid Approved Bid Approved Bid Approved Bid Approved Siumu, Leulumoega & Asau Lease 12,570 Salaries 110,337 Overnight allowance 11,856 Groundsman wages 2,970 Vehicle expenses 10,708 Interest on borrowing 107,701 Electricity 2,761 Telephone 3,183 Water Rates 432 Provision 250,125 Depreciation 44,627 Other expenses 34,682 Average annual cost of operation 530,905 - Agriculture Store Corporation Export of taro, taamu, dried cocoa beans & coconuts

840,000 -

Polynesian Airlines Limited Domestic operation (Upolu & Savaii)

474,050 Declined

TOTAL 8,066,591 5,000,000 12,701,454 5,470,704 16,113,305 6,718,840 19,381,826 3,977,329


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ATTACHMENT 2: Process Flowcharts for CSO Responses to Emergences

Response to Emergencies1. Emergencies proclaimed by HoS (Part X of Constitution)

2. Declaration of Disaster (Section 10 of the Disaster Management Bill2006

Action* Proclamation of

emergencies1. Application2. MoF (SOEMD) independent review.3. PTB assessment report4. MoF (Budget) report on

availability of funds.5. Approval of CSOs6. Direction for

performance of CSOs.

MoF(Ministry of Finance)

Responsible Minister

CABINET

Public Trading Body

6

12

1,2,3

4

3

1

5

HoS *


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ATTACHMENT 3: Process Flowchart for CSOs linked to Ombudsman’s Declarations of Injustices

CSO Process – Correction of an injustice declared by the Ombudsman

Ombudsman

• Review complaint

•Conclude that there’s an injustice

Parliament

Declaration of injustice

Cabinet

• In accordance with priorities

•Approve declaration of injustice

• Direct performance of CSOs as per Schedule 2 of the Public Bodies Act 2001.

MoF/ PTB

• Appropriate payment into Budget



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ATTACHMENT 4: Application for CSOs Process Flowcharts

Process - Application by Ministers Process Action

PTB Board Minister

ResponsibleMinister Key

1. Application If Cabinet approves 2. PTB’s assessmentResponsible Minister 3. MoF(SOEMD independent review of application)issues direction to PTB 4. MoF(Budget) advice on availability of funding

5. Direction to PTB to perform CSOs

MOF

Cabinet

12

11

4

3

51,2,3


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Application by Responsible MinisterProcess

Action

1. Application2. MoF (SOEMD) independent

review.3. PTB assessment report4. MoF (Budget) report on

availability of funds.5. Approval of CSOs6. Direction for performance of

CSOs.MoF

(Ministry of Finance)


CABINET

Public Trading Body

6

121,2,3

4

3

1

5


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ATTACHMENT 5: Proposed New Application Process for CSOs Flowchart

Proposed New Application ProcessProcess

Action

1. Application2. Ministry of Finance:

- Budget Division allocation for total CSO funding.

- SOEMD review in accordance with register, prioritization guidelines and budget allocation.

3. Cabinet: Annual Budget Approval together with CSOs

4. Direction for performance of CSOs.

5. Monitoring Implementation6. Reporting

Ministry of Finance(approve total CSOs funding)

CABINET

Public Trading Body

2

1, 6

3


4

3

5


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Annex 21: SOEMD Community Service Obligations Workshop

Community Service Obligations (CSOs)A Workshop on Understanding & Costing CSOs

Presented by Graeme McNally

Agenda

1. Introduction to Workshop

2. Review of the Policies & Principles Relating to CSOs

3. Costing CSOs• Overview• Options for CSOs

4. Issues Relating to Robust Costing of CSOs

5. Discussion & Questions


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1. Introduction to Workshop (1)

• Objectives and structure of the workshop:– Improve understanding of CSO policies and principles– Improve the robustness of costing CSOs– Discuss issues that have arisen in costing CSO applications

• Overall context:– All governments have social policies that require them to provide specific “goods

and services” to their communities – Governments frequently establish “public” (commercial) enterprises as

“commercial” organisations – which should be as efficient and profitable as comparable organisations not owned / operated by the state

– Many governments “direct” their “public” enterprises to deliver those goods and services – often because there is no other potential provider

– This creates the dilemma of directing “public” (commercial) enterprises to provide goods and services which the public enterprises cannot justify on “commercial” criteria

– Without explicit funding to provide those “non commercial” goods and services –the fundamental objective of the public commercial enterprise will be compromised

1. Introduction to Workshop (2)

• A number of issues have been identified:– Lack of clear definition about the scope and size of CSOs resulting in:

o Subsuming them within the public enterprise overall operations and failing to recognise their “non commercial” nature

o Lack of transparency of the cost of CSOs (to the Government and the public enterprise) and their impact on groups in the community

– Lack of identification and costing / valuing CSOs resulted in:o Problems in evaluating commercial performance of public enterprises

– Lack of monitoring of CSO performance has created problems with evaluating the benefits / performance of the CSOs

o Did they achieve the objectives intended?

• Focus across many governments when reviewing CSO policies has been to:– Adopt explicit guidelines for identifying and costing CSOs– Adopt explicit approaches to “funding” the public enterprise to deliver CSOs– Ensure robust monitoring of CSO performance

• These actions enable public enterprises to be more robustly measured using commercial criteria and benchmarks applicable to comparable non government enterprises


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Agenda






2. Review of the Policies & Principles Relating to CSOs (1)

• Background:– The Public Bodies (performance and accountability) Act 2001 establishes that

Public Trading Bodies (PTBs) are to operate as successful businesses – to be as efficient and profitable as comparable businesses not owned by the state

– CSOs were included within the Act – to ensure that PTBs are able to comply with the Act

– SOEMD administers the CSOs and experience suggests that the policy framework for CSOs needs to be strengthened including:

o Greater clarity on strategic social objectives or outcomeso Fitting applications within the Government budgeting cycleo Simplifying the application and reimbursement processo Ensuring more robust and consistent costing of CSO applications o Enhanced monitoring of CSOs

– PTBs should not undertake non commercial activities or provide social services –except if the Government directors the PTB and “funds” the PTB at a level which enables the PTB to be evaluated as a successful business


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2. Review of Policies & Principles Relating to CSOs (2)

• Nature and extent of CSOs– Table below shows the applications and approvals for CSOs and the increasing

levels of Government funding provided for CSOs

13,977,3296,718,8405,470,7045,000,000Total CSOs Funding2,984,1005,308,8403,000,0002,000,000SWA

285,384310,000500,000600,000SBC

10,707,8451,100,0002,670,7042,400,000EPC

2006 – 072005 – 062004 – 052003 – 04PTB


• Nature and extent of CSOs (continued) – An overriding theme and objectives for CSOs should be:

Alleviate Hardship in Samoa– Prioritisation for consideration of CSO applications is:

1. Sectoral– CSO applications and approvals must be aligned with overall Government strategy – CSO applications should be considered within the Government budget envelope

and process2. Hardship Alleviation

a) Basic Needs b) Development1. Food and water 1. Rural Development2. Shelter 2. Tourism3. Electricity 3. Agriculture 4. Public safety 4. Manufacturing

5. Environment6. Communications


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• Experience (within Samoa) relating to costing CSOs includes considering:– Whether CSO capital expenditure should be fully funded – when that CAPEX may

earn operating surpluses in providing the CSO goods and services– Whether CSO operational costs should be the average cost (incurred within the

PTB) or the unique / incremental costs (incurred within the PTB) relating to providing the CSO goods and services

– Whether CSO costs should include or allowance for the actual (or target) rate of return – profitability element relating to the PTB

Agenda







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3. Costing of CSOs (1)

• Overview– Experience (within Samoa) suggests that a lack of proper costing of CSO goods

and services – together with a lack of understanding of the potential revenue from such goods and services contributes to delays in CSO decision making and reimbursement

– PTBs need robust costing of CSOs to ensure that undertaking CSOs does not detract from their profitability and efficiency objectives

– Ministry of Finance (SOEMD) needs to ensure CSO costing is robust and does not cross subsidise weak performance in PTB commercial activities

– Across a range of Governments – CSO costing continues to be a significant issue because:

o Different costing methods are approved / usedo Not all CSOs are well definedo Different options are used for funding CSOs


• What are the costing options?– In practice the net cost of a CSO should be the difference between the change in

PTB costs and the change in the PTB revenue – that result from the Government direction to provide the CSO

– It is this net cost that should be funded by Government – Estimating the change in PTB revenue is relatively easy – as the revenue directly

relating to providing the goods and services is (or should be) identifiable – Estimating the change in PTB costs is more complex – at least three major costing

options exist:1. Fully allocated / distributed costs2. Avoidable costs3. Stand alone costs

– Options 1 and 2 are used across a number of Governments – although the preferred approach to costing CSOs is usually “avoidable” cost – as it best reflects “net cost”


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• Fully allocated / distributed costs– Apportions the total costs of the PTB to all of the different PTB activities (including

CSO activity) – This typically requires all of the identifiable groups of costs within the PTB to be put

into three clusters – each with its own “method” for apportioning to PTB activities (including CSOs):

Will be caused by the majority (or all) of the PTB activities and will be allocated across all activities using a “proxy” or surrogate to establish how much cost each activity should bear

Allocated

Will be caused by two or more specific PTB activities and can be shared across those activities – based on their relative “usage”

Attributed

Will be caused by and relate to specific PTB activities and can be identified as relating to each activity Directly Identifiable

METHOD FOR APPORTIONING TO ACTIVITIES GROUPS OF COSTS


• Fully allocated / distributed costs (continued)– The three groups pose different fully allocated costs of an activity (including CSOs)

o Directly identifiable – will be caused by and relate to specific activitieso Attributed – will be shared across activities based on their usageo Allocated – will be allocated across all activities using a “proxy” or surrogate

– Key issue with this option is the risk of overestimating the CSO costs – because it “assigns” allocated and attributed costs which would be incurred with or without the CSO

– That is, the CSO funding may be at a level that compensates the PTB for costs which existed without the CSO

– But some Governments support the use of this option when the CSO involves discounting the prices charged to specific customer groups, i.e. the CSO funding will be based on compensating for the loss of revenue from commercial levels to the discounted levels


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• Stand alone costs– Determines the cost of providing the CSO – goods and services in isolation from

other activities of a PTB i.e. as if the PTB had no other activities – Usually overstates the CSO cost – as it ignores economies of scale– Not a preferred approach to costing CSOs


• Avoidable costs– Identifies the net change in costs (of the PTB) associated with providing the CSO

goods and services. Combines both the extra operating costs and the additional capital costs – that result from providing the CSO (goods and services)

– Need to think about avoidable costs as:o Relating to the longer term change in costs – over the life of the CSO o What costs would be avoided – if the PTB did not provide the CSO o Incorporating capital costs (both CAPEX and a rate of return) and operating costs

– Pure application is dependent on PTB accounting / costing systems providing robust data on the avoidable costs relating to the CSO – this is often lacking

– When CSOs are a significant proportion of a PTB total activity:o Recognition of joint / common costs may be requiredo Fully allocated costs may approximate avoidable costs

– This may result in the compensation for the PTB being greater than the avoidable costs, i.e. an allowance may be made for joint / common costs, even if they do not change with the CSO


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3. Costing CSOs • Overview• Options for CSOs



4. Issues Relating to Robust Costing of CSOs (1)

• Clarify the key financial performance measures (and targets) which the PTB needs to achieve with and without the CSO

– Assumed to be return on equity (net profit / equity) – are any other measures of “commercial” success important?

– Should the target be 8% or the rate currently being earned by the PTB

• Should the PTB receive funding (from Government) for CAPEX and working capital relating to the CSO

– PTB could use “spare” cash and it merely swaps cash for CSO assets – may be foregoing interest earned on spare cash

– PTB may borrow the cash required and / or the Government may provide cash equity to purchase the CSO assets

– Do not forget any increase in net working capital that is required for CSO– Increase in total PTB assets – will create a need for PTB to pay interest (on

borrowings) or achieve a rate of return (on equity)


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• Do existing PTB costing systems and processes provide robust data for costing CSO? This is essential!

– Does the PTB currently identify its major activities, goods and services and cost these activities, goods and services?

– That is, does it charge direct expenses to those activities, goods and services? Does it attribute, allocate expenses? Without established systems or agreed methods – costing CSOs is unlikely to be robust!

– CSO to be costed may be a project may be a project / activity that is not aligned to PTB accounting (chart of accounts) or organisation structure. This creates issues with being able to identify costs that relate to the CSO

– Does the PTB collect volume / activity data – to allocate / attribute costs to goods and services? Both the allocation and attribution of costs to activities, goods and services requires data on hours of usage, staff employed, space used, equipment utilised etc.


• How do fully distributed (average) and avoidable costs differ. It depends

• When a high percentage of a PTB costs are direct expenses and vary with levels of activity, there will be a higher similarity between FAC and AC

30%

80%

% of Direct Expenses

% of Direct Expenses

Similarity of FDC and AC

LowHigh


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• What is included in operating expenses:– Direct expenses

o Staffing related expenseso Consumables and inventoryo Purchases of services

– Attributed expenseso Energy and utilities o Equipment usage

– Allocated expenseso Building usageo Corporate services

• What about rate of return compensation – Necessary when CSO requires additional assets / working capital – What about when no additional assets are required?

• Estimate CAPEX, operating expenses and rate of return compensation for each year of the CSO

Directly caused by the existence of an activity or goods / service

Shared by two or more activities, but the usage byeach activity can be reasonably measured

Usually incurred on behalf of all PTB activities and allocated out using agreed “rules”


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Annex 22: SOEMD Capital Expenditure Proposals & Decisions Workshop

Capital Expenditure Proposals & Decisions A workshop for SOEMD May / June 2007

Presented by Graeme McNally

2

Topics

1. Characteristics of CAPEX Proposals and Decisions

2. Cost – Benefit Analysis of CAPEX Decisions

3. Developing the Components of Cost – Benefit Analysis

4. Improving the Quality of CAPEX Decision Making


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Characteristics of CAPEX Decisions

• Uncertain outcomes at time of the decision – future is uncertain

• Often have a major impact on PB performance

• Potential impact on PB from three to thirty years

• Commitment of scarce capital funds and management time

• Often have a high reversal (bail out) cost – if the wrong decision is made

4

Scope of CAPEX Decisions

Decision on the level and type of services to be provided with economic / financial implications

Policy and initiative development

Decisions to sell assets, replace or relocate facilities or operations and whether to contract out services

Use or disposal of existing assets

Decisions to purchase the delivery of services or goods Major procurement decisions

Decisions to undertake a project, its scale and location, timing –e.g. vehicle replacement, information technology and property projects

Description

New or replacement capital projects

Type of Decision


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Topics





6

Cost Benefit Analysis of CAPEX (1)

• One of five stages of preparing a spending or policy proposal: 1. Define the capital or policy proposal and objectives 2. Identify the feasible options for achieving the objectives of the capital or policy proposal 3. Analyse the options (using CBA) 4. Assess how the preferred option will be implemented 5. Present the overall assessment.

• Cost Benefit Analysis – a generic approach for evaluating the “merits” of proposed capital spend or policy proposals

• CBA – quantifies (in monetary terms) all relevant costs and benefits of a capital spend or policy proposal and to:

– Rank alternative proposals – Compare status quo with a proposal – Consider competing proposals


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• CBA is only one part of preparing a capital spend / policy proposal

• CBA comprises a series of steps: 1. Confirm the desired outcomes of the proposal(s) – these generate the benefits 2. Establish the assumptions underlying the analysis 3. Decide an appropriate period for the appraisal / evaluation 4. Identify and list all significant benefits and costs 5. Assign monetary values to the benefits and costs 6. Discount the benefits and costs to present values 7. Assess risk and uncertainty – of the proposal 8. Consider the effect of any intangible costs and benefits – on the proposal 9. Select the preferred option – when options exist

8


1. Establish the Assumptions and Scope of Analysis • What is the perspective for the CBA? (the entity / PB considering the proposal or a

national perspective?) – Entity / PB perspective is appropriate when no external impact of the proposal, e.g. purchase of

a building – National perspective is appropriate when impacts on other PBs, individuals or nation – e.g.

expand on activity within a PB that requires tax increases for funding

• What are the contingent investments, e.g. investing in a computer system requires telephone system upgrade

• Incorporate all tangible and intangible costs and benefits – which can be reliably measured

2. Time Period of Analysis • Generally the useful life of the proposal – how long will costs and benefits occur?• For “infinite” life proposals – usually limit to 20 years • Need to incorporate residual value at the end of the analysis time period


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3. Determine the Costs and the Benefits• What are benefits?

– What is the perspective – i.e. national / economic or entity / financial? – Benefits from a national / economic perspective – are difficult to assess and easy to get wrong – Benefits from an entity / financial perspective are more straight forward to assess – Focus on incremental benefits arising from the proposal

• Categories of benefits?

Increase in staff skills, improvement in education and health status

Lower number of customer complaints, reduction in the number of road accidents

Operating cost reduction

Example

Qualitative Non-monetary

Quantitative Monetary

Quantitative

Type

Non-monetary

Benefit

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3. Determine the Costs and the Benefits (cont’d)• What are the costs?

– Focus on incremental costs relating to the proposal– Caution about using accounting costs – may not relate to resource usage – Cash flows more clearly reflect resource use

• Categories of costs:

Include both a fixed and variable component (building maintenance, where there is usually a degree of planned maintenance, and a degree of responsive maintenance)

Quantitative –Semi-Variable Costs

Vary according to the volume of activity / production (e.g. electricity costs are likely to increase as the number of staff increases)

Quantitative –Variable Costs

Reduced staff skills

Increase in the number of customer complaints, or, road accidents

Remain constant over different volumes of activity / production (e.g. rent for an office building)

Example

Qualitative Non-monetary

Quantitative –Fixed Costs

Monetary

Quantitative

Type

Non-monetary

Cost


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3. Determine the Costs and the Benefits (cont’d)• Frequently included costs and benefits in CAPEX analysis include:

– Direct project costs (e.g. staff, information technology, rent etc) – Purchase of project fixed assets – Indirect project costs (e.g. other overheads) – Direct project benefits (e.g. reduced operating costs) – Indirect project benefits – Release of funds from project for other uses – Residual values of fixed assets – Positive or negative changes in broader outcomes (e.g. reduced traffic accidents)

12

Topics






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Developing the Components of Cost – Benefit Analysis (1)

1. Estimating the “value” of the costs and benefits • All relevant costs and benefits must be identified – before estimating “values”

• As far as practicable – all costs and benefits should be valued in $ terms except: – If cannot be reliably measured – Not significant to influence the decision

2. Options for valuing the costs and benefits • Using accounting estimates of costs and benefits

– Can create distortions in timing of resource usage (i.e. costs and benefits) – Can create distortions in level of resource use (i.e. costs and benefits)

• Using cashflow estimates of costs and benefits – Consistent with timing and level of resource usage (i.e. costs and benefits) – Consistent with recognition of timing impact on value of costs and benefits

• Clear preference to use estimates of cashflow for CAPEX proposal evaluations

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3. Understanding the cash flows (costs and benefits) to be “valued”• All cash flows can be considered as either:

– Cash inflows – Cash outflows

• For many CAPEX proposals projects to be evaluated it is useful to consider cash flows as:

– One-off “investment” cash flows, e.g. investing in building, equipment, investing in working capital

– Continuing “operating” cash flows, e.g. cash outflows to sustain the project and cash inflows derived from the project

– End of project cash flows (residual value) – usually inflows

4. Basis for estimating the cash flows • Real (constant) or nominal (including inflation) measure of cash flows • Real cash flows are usually preferred 5. Intangibles – using qualitative assessment


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6. One off “investment” cash flows • Investment cash flows for capital projects usually occur near the beginning of the

project (to get it established) – but may also occur during the project – to maintain or extend the project

• CAPEX proposal investment cash flows relates to cash flows to initiate the proposal• Many capital projects also require an investment in additional working capital (e.g.

inventory, accounts receivable). Net working capital requirement is an investment • Often investment and working capital is thrown off by capital projects – near (or at

end) of project life • Only incremental investment cash flows should be included – i.e. those caused by the

proposal 7. Continuing “operating” cash flows relating to CAPEX proposal • Continuing “operating” cash flows occur throughout the project • Only incremental operating cash flows caused by the proposal must be included • Ensure depreciation and interest expense are excluded from operating cash flows –

are built into “discounting” methodology

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8. “Valuing” cash flows using discounting methodology: • Based on the principle that a $1 in 2007 is more “valued” than a $1 in 2008

• Discounting later cash flows is not about recognising risk (or inflation) – it is to recognise that investments need to earn a rate of return

9. What discount rate is appropriate? • This is desired rate of return (annually) for the investment in the CAPEX proposal

• Usually is what an investor could earn on another proposal of similar risk

• Calculated by estimating the weighted average cost of capital applicable to the entity– Combines the average interest rate required by lenders and the rate of return required by the investor

(owner) – Will be influenced by capital structure and tax status

– Example:

• Ensure that discount rate is real (i.e. without inflation) to match cash flows

(8%) - Equity $9m

(8.25%) $12m

(9%) - Debt $3m


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Developing the Components of Cost – Benefit Analysis (5) 10.What cash flow discounting methodology? • Net present value (NPV) is most frequently used methodology • Uses estimated cash flows (and their timing over project life) and rate of return

(discount rate) for the entity / PB • Illustration of NPV methodology:

• Positive NPV means that project is achieving (earning) a rate of return greater than the minimum required by the entity / PB

Year 0 Year 1 Year 2 Year 3 Year 4

PROJECT INVESTMENT (Cash Outflow)

$55,000

$16,363

$74,733

$14,591

$12,977

$14,274

$16,528

PROJECT OPERATINGNET CASH INFLOWS $18,000 $20,000 $19,000 $19,000

Year 5

$23,500

PRESENT VALUE OF OPERATING CASH

INFLOWS

TOTAL PV

Discount Rate 10%

Discount Rate 10%

Discount Rate 10%

Discount Rate 10%

Discount Rate 10%

NET PRESENT

VALUE $19,733

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Topics






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Improving the Quality of CAPEX Decision Making (1)

1. Quantifying the “hard to measure” benefits • Risk that a number of key benefits that are “hard to measure” will be ignored – will disadvantage

a CAPEX proposal • Avoid quantifying benefits that are too intangible and lack robustness – in an endeavour to justify

a proposal • Need to explicitly recognise the qualitative benefits and include in the overall proposal evaluation

– Service quality improvement – More rapid customer response – Access to “core” facilities

2. Incorporating project risk and uncertainty (“what if”) • The future is uncertain – but the impact of future uncertainty varies – depending on the specific

type of cost and benefit being considered – Level of investment cash flows – Level of operating cash flow “benefits” – Level of operating cash flow “costs” – Timing of operating cash flows – Changes in rate of return requirement

• Identify a small number of “variables” that are most uncertain – in relation to a proposal • Establish a range of “values” from each variable• “model” the proposal – incorporating sensible combinations of “what if” data • Interpret the potential impact of the risk and uncertainty

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3. Ensuring consistency and standardisation in cost – benefit evaluation of proposals • Develop a project analysis form:

• Support project analysis with business case – for major projects. Business case should include: – Executive Summary – Description – Investment Objectives and Strategic Assessment – Alternatives / Options – Benefits – Financial Analysis

– Health & Safety and Other Compliance Issues– Risk Analysis – Supporting Comments – Project Plan – Implementation Management

- Revenue Generated $ - Incremental Indirect Costs $

Key Issues with Proposal:

Key Benefits:

Alternative Options:

Other Impacts and Information:

- Direct Costs $ - Additional Overhead Costs $ Financial Evaluation:

Operating Cash Inflow / Outflow – by year:- IT $ - Working Capital $- Equipment $ - Building $CAPEX – Cash Flow Summary:

- Name - Type of CAPEX Proposal Information:


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4. Establish a procedure for post implementation review of selected CAPEX projects

• What was the planned and actual project investment? Why have differences occurred?

• What were the planned and actual project operating cash flows – what differences have occurred in the level and timing of cash flows?

• What lessons have been learned to improve future CAPEX planning and evaluation? 5. Focus on what will make a real difference • Estimates of CAPEX project investment • Estimates of operating cash inflows and outflows – and their timing • Estimates of the life of the CAPEX project


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Annex 23: SOEMD Workshop on New Reporting Guidelines for all Public Bodies

1

New Reporting Guidelines for all Public Bodies (PBs)

SOEMD, Ministry of Finance6th June 2007

SOEMD, 6th June 2007 2

Introduction• The PBA 2001 requires all PBs to submit

annual and quarterly reports. • Annual Report - due no later than four

months after the end of the financial year, by October 31 each year.

• Quarterly reports - due no later than one month after the end of each quarter

» Quarter 1 – 30 October» Quarter 2 – 31 January» Quarter 3 – 30 April» Quarter 4 – 31 July


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IntroductionReports requires:• Information necessary to enable informed

performance assessment of a PB, including comparisons with the Statement of Corporate Objectives (SCO), Corporate Plan (CP) and prior periods & with budget.

• Compliance with requirements of the PBA and Companies Act (where relevant)

• Statement of the dividend payable (only for PTBs) for FY to which the report relates


Introduction• Guidelines do not limit information that

may be included in these reports

• Purposes are– To assist entities to produce informative and

user friendly reports– To improve the overall standard of quarterly &

annual reporting by PBs


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ContentAnnual Report

? Contents Table? Statement to Parliament? Chairperson’s Report? CEO’s Report? Auditors Report? Audited Financial

Statements

Quarterly Report

? CEO’s Report? Analysis of Key

Performance Measures

? Full Financial Statements

6

Annual Report


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Contents Table• List of the sections of the Annual Report

• The pages where each section commences


Statement to Parliament• Responsible Minister’s statement relating

to the presentation of the Annual Report in Parliament.

• Should provide:– An introduction to the Annual Report– Legislative provision for the presenting of the

Annual Report in Parliament– Vision and Mission Statement, and Objectives

of the Public Body as provided in the SCO


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Chairperson’s Report• Provided on behalf of the Board of Directors• Expected to provide:

? a broad overview of the performance of the PB? Issues faced by PB? Information relating to governance of the PB

• Recommended sections:? Activities & Performance of the entity? Capital & Dividend Information? Director Information? CSOs? Other information


CEO’s Report• Should link actual operating and financial

performance for the current year to the SCO and CP

• Explain changes from previous YF and whether the CP and budget targets have been achieved

• Recommended sections:? Highlights for the year.? Overview of operating performance and results.? Overview of financial performance and results. ? Progress with the Corporate Plan. ? Capital expenditure and projects. ? Outlook for next year. ? Future risks and uncertainties. ? CSO implementation (where appropriate).


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Auditors Report• Should comply with generally accepted

auditing guidelines.


Audited Financial Statements• In accordance with International Accounting

Standards• Comply with Companies Act (where appropriate)• Financial Statements must include

? Profit & Loss Statement? Balance Sheet? Cash Flow Statement? Statement of Changes in Equity? Notes to the accounts (comply with IAS)? Information relating to the current financial year? Comparative data for the prior financial year


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Financial StatementsDisclosure• Level of disclosure require

? is to provide enough information for MOF to provide advice to Ministers on performance and results;

? Enable Parliament to undertake an appropriate review and scrutiny of each PB.

• Level of detail & content to comply with IAS


Financial Statements• For PB operating in a competitive

environment, level of disclosure required needs to balance achieving the above purposes with a need to protect competitively sensitive financial & operating information.

• Examples of breakdown are provided in guideline


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Quarterly Report


CEO’s Report• Should link actual operating and financial

performance for the current year to the SCO, CP & budget

• Explain changes from previous YR and whether the CP and budget targets have been achieved

• Recommended sections:? Highlights of the quarter and year to date.? Overview of operating performance and results.? Overview of financial performance and results. ? Progress with the Corporate Plan. ? Capital expenditure and projects. ? Outlook for remainder of the year. ? Future risks and uncertainties. ? CSO implementation (where appropriate).


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Analysis of Key Performance Measures

• Analysis of key financial & non-financial performance measures agreed to between MOF and the PB

• Two important requirements:? Table that includes the calculated KPIsfor the quarter and YTD – both budget and actual

? Comments on each of the KPIs – when actual results is more that 10% different for quarter, and 5% different for YTD


Table of KPIs

List the key performance measures agreed with MOF

BudgetActualBudgetActual

Year to DateThis QuarterPerformance Measures


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Financial Statements• Not required to be audited• Useful for Audit Committee to review &

endorse them before submission to MOF

• Include:? Profit & Loss Statement? Balance Sheet? Cash Flow Statement? Notes to the Financial Statements

• Actual & Budget for quarter & YTD


Financial Statements

• Level of information require to provide a reasonable breakdown of information.

• Examples of breakdown provided in guideline


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FAAFETAI


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Annex 24: SIOD Audit Committees and Risk Management Workshop

Audit Committees & Risk Management An SIOD workshop 30 May 2007

Presented by Graeme McNally, M.Com (Hons) FNZIM

2

Workshop Agenda

1. Setting the Scene for an Effective Board

2. Understanding Audit Committees

3. Risk Management and the Role of the Board

4. Closing Comments and Discussion


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Setting the Scene for an Effective Board

• Three drivers of an effective Board:

Scope of theBoard

FunctionsEffective

Board

Systems & Processesto Support the

Board Functions

Effective Structure &Operation to Undertake the

Board Functions

1

2

3

4

Scope of the Board Functions

• Includes: – Influencing and approving the strategy, business plan and budgets – Monitoring performance in implementing strategy, business plans and budgets – Approving significant capital expenditure, including asset disposal – Ensuring appropriate accountability to stakeholders (investors, owners etc) – Ensuring that major “business” risks are identified and managed – Appointing and evaluating the CEO – Ensuring compliance with legislation and reporting requirements – Operating audit and control systems to safeguard assets and to ensure accuracy and

transparency of information


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Systems and Processes to Support the Board Functions

• Include: – Risk management system – Internal audit and controls – Legislative and regulatory compliance process – Internal board and management policies – CEO performance planning management processes – Strategic analysis and business planning – Budgeting and budget reporting systems – Performance planning and performance measurement

6

Effective Structure and Operation to Undertake the Board Functions

• What is the appropriate structure: • What is the best balance between “whole of Board” and specialised Board committees?

• What Board committees are appropriate, their terms of reference etc?

• What influences the effective operation of the Board:– Focus of discussions and meetings – Availability of required information – Council – CE relationships – Membership composition and skills – Chair leadership and conduct of meetings


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Workshop Agenda

1. How do Audit Committees and Risk Management Contribute to an Effective Board?




8

Understanding Audit Committees

• Why have Audit Committees emerged? • What are their core roles and responsibilities?

• Establish an Audit Committee Charter

• Membership of Audit Committee

• Meetings, Agendas and Reporting of the Audit Committee

• Key Challenges to be Addressed


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Why have Audit Committees Emerged?

• Almost all organisations have one or more committees within their Board governance structure and the establishment of a Board Committee usually reflects: – The need for specialised and detailed input to a Board function / responsibility – The mission critical nature of a specific activity within an organisation – The need to explicitly meet investor (owner) expectations and confidence

BUT Board committees should be the “exception” rather than the “norm” for addressing Board roles and responsibilities

• Audit committees are the most common Board committee and frequently the only Board committee. They are the result of: – A number of failures which have arisen from weak compliance, risk, control, and oversight at a

Board level – in relation to financial information and reports – The need to restore investor (owner) confidence in financial information and the systems /

processes that support that information – Increasingly complex financial / accounting reporting requirements / standards and more

complex operating environments

10

Overview of Core Roles and Responsibilities of Audit Committees

• Responsibilities of an audit committee include:

• Actual responsibilities within each of these may vary to reflect: – Size, nature and complexity of the organisation – Nature of the overall governance arrangements – Experience and capability of committee members

• BUT – It cannot ignore its core responsibilities – if it is to assist the CEO and the Board – It is not a “catch all” committee that has a range of ad hoc tasks. It needs to be independent and

focused to assist the CEO / Board

Internal Audit Internal Audit

Risk Management

Risk Management

Internal Control

Environment

Internal Control

Environment

External Audit External Audit

Legislative ComplianceLegislative Compliance

Integrity of Financial Reporting

Integrity of Financial Reporting

Role & Responsibilities of Audit Committee

Role & Responsibilities of Audit Committee


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Understanding the Scope of the Roles and Responsibilities (1)

1. Risk Management – Is there a comprehensive risk management system that effectively identifies and manages

financial and business risks? – Is there a sound approach to developing risk management plans for large projects? – Is there effective business continuity planning – including disaster recovery?– Is there a sound approach to capturing and investigating potential fraud?

2. Internal Control Framework – Is there a sound approach to maintaining an effective internal control framework for protecting

the entity assets and ensuring robust financial reporting?– Does the CEO have in place policies and procedures to ensure appropriate control within the

entity and are these periodically reviewed? – What steps have been taken to ensure a culture of ethical and lawful behaviour? – How sound is the establishment and exercise of management delegations?

3. Integrity of Financial (and other ) Reporting to Third Parties – How robust are the financial statements included in Annual Reports to Parliament? – Have the financial statements appropriate management sign offs? – Do appropriate internal systems / processes exist to implement Parliamentary / Ministerial

reports / requirements? – Is the performance management framework is linked to organisation objectives?

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Understanding the Scope of the Roles and Responsibilities (2)

3. Legislative Compliance – Ensure that management considers legal and compliance risks – as part of its risk management

systems – Is there an effective system for monitoring compliance with relevant laws, regulations and

government policies?

4. Internal Audit – Provide a linkage between CEO / management and Board on internal and external audit – Review the internal audit coverage and annual work plan – Advise on the adequacy of internal audit resources – Review all internal audit reports – Monitoring implementation of internal audit recommendations

5. External Audit – Provide input to the external audit work programme– Review all external audit plans and reports – Provide advice to CEO / Board on significant issues raised in external audit reports (including

Management letters)


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Audit Committee Charter

• This is the Committee Terms of Reference agreed by the Board and CEO: – Important for ensuring focus on key roles and responsibilities

• Typical Charter will include: 1. Overall Purpose and Objectives

– Assist the Board in discharging its oversight responsibilities 2. Authority delegated by the Board

– What authorities does it have to conduct its operation / activity? 3. Membership

– How are members selected and who is eligible? 4. Committee Meetings

– How do the meetings operate and who may attend? 5. Roles and Responsibilities

– What are the specific roles and responsibilities of the committee?

• Needs to be periodically reviewed to ensure the Committee is meeting the Charter

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Membership of Audit Committee

• Size of Committee: – Typically three to five members – Depends on:

– The specific activities within its roles and responsibilities – The size and complexity of the organisation – The availability of relevant expertise

• Qualities and Experience of Committee Members: – Members with the right qualifications and experience are critical to the effective performance of

the Committee – Should attempt reasonable diversity across the members. Key qualities and experience include:

– Attitude that is independent of management – Understanding of the organisation and its risks / controls – Ability to read financial statements – ask questions and evaluate the answers, i.e. financially literate – Working knowledge of accounting and auditing standards – Understand internal and external audit – Familiar with major accounting issues – Ability to “inquire” and to give honest / direct opinions – Personal integrity – Capacity to devote the time and energy

– Not all members will have all attributes – and some may need to be learned “on the job”


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Membership of Audit Committee

• Independence of Members is Essential – Committee is responsible for oversight of critical areas to investor (owner) confidence. May

need to challenge management and take different positions – must be independent – Chair of Board – usually would not usually Chair the Audit Committee. CEO / CFO – would not

be members of the Audit Committee. Should exclude any Executive (Management) Directors from being members

• Education and Support for Committee Members – Organisation needs to provide opportunities for Audit Committee members to be briefed on

emerging business issues and risks – Board needs to support Audit Committee member education. To strengthen their capability to

contribute and to enhance the effectiveness of the Committee

• Committee Chair – Chair must have the key attributes expected of any Committee Chair – BUT also ability to lead discussions with internal and external audit and with CEO / CFO – May not be expected to have the strongest financial expertise on the Committee

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Audit Committee Meetings & Reporting

• Committee Meetings – Frequency of meetings will be influenced by the organisation complexity and the scope of the

roles and responsibilities – Usual for Audit Committees to have three or four meetings each year

– Meetings to align with key phases in audit and financial reporting cycle, e.g. external audit plan, draft financial statements, external audit opinion, establishment of internal audit plan etc.

– Important that each meeting has a clear agenda – with papers available before the meeting

• Committee Minutes and Reporting – Clear and concise, with a summary of actions and timeframes – Minutes need to be timely and reported to management, internal audit and external audit – as

appropriate

• Attendance at Committee Meetings – Usually invite internal audit and external audit representatives – for specific parts of the meeting – Usually expect CFO to attend and invite the CEO.


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Challenges to be Addressed

• Staying focused on core roles and responsibilities: – Be clear about its roles and responsibilities – Not a “catch all” committee to take on all tasks delegated from the Board – Clarify that this is not a finance committee – Consider phasing in the full scope of the roles and responsibilities – rather than everything “once

over lightly” • Ensuring the appropriate expertise is available:

– May result in a smaller Audit Committee – Consider “seconding” non Board members to obtain the required expertise – Maintain the “independence” requirements for all members – Provide opportunities for member education and development

• Getting Board acceptance of the Committee’s importance to an effective Board:– Education the Board about the need – Ensure Board sign off of its Charter (TOR) – Provide for regular reporting to the Board

• Ensuring that robust internal systems and processes exist to support the work of the committee

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Workshop Agenda

1. How do Audit Committees and Risk Management Contribute to an Effective Board?





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Risk Management and the Role of the Board

• What is risk?• What is risk management?

• Understanding the risk management framework

• Portfolio of risk management systems and processes

• Improving business risk management

• Roles of the Board and management in risk management • Challenges to effective risk management

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What is Risk? (1)

1. Description of Risk • Risk arises out of uncertainty

– It is inherent in the activities of all organisations – For many organisations the uncertainty they face and hence their riskiness is increasing

• Risk creates an exposure for any organisation to: – Fraud and regulatory non compliance – Organisation reputation and performance impairment – Damage or loss of physical assets

• Risks cannot be eliminated – but they can (and must) be managed


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What is Risk? (2)

2. What Types of Risk do Organisations Face?

Organisation Risk Environment

Organisation Risk Environment

Strategic Risk

Strategic Risk

FinancialRisk

FinancialRisk

Legal & Compliance Risks

Legal & Compliance Risks Business RisksBusiness Risks

OperationalRisk

OperationalRisk

InformationRisk

InformationRisk

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What is Risk? (3)

3. Examples of Business and Legal Risks ? Business Risks

? Legal and Compliance Risks– Compliance with legislation and regulations – Conformance with internal policies

Risk that relates to doing the wrong thingsRisk that relates to doing the wrong thingsStrategic RiskStrategic Risk

Risk that relates to doing the right things, the wrong way

Risk that relates to doing the right things, the wrong wayOperational RiskOperational Risk

Risk relating to inaccurate / unavailable information and unreliable systems

Risk relating to inaccurate / unavailable information and unreliable systemsInformation Risk Information Risk

Risk of losing financial resources or incurring unacceptable liabilities

Risk of losing financial resources or incurring unacceptable liabilities Financial RiskFinancial Risk


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What is Risk Management?

1. Description of Risk Management

DevelopRisk Response

Identify Risks

Assess &Prioritise

Risks

Implement Risk Management

System

Monitor Risk Implementation

Establish theContext

BUSINESSRISKS

Strategic

Financial

Information

Operational

“Systematic application of management policies,

procedures and practices to the tasks of identifying,

analysing, assessing, treating and monitoring

risk”

“Systematic application of management policies,

procedures and practices to the tasks of identifying,

analysing, assessing, treating and monitoring

risk”

2. Establish a Risk Management Framework

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Understanding this Framework (1)

• Establish the risk management context – Organisations vary in their willingness to accept risk – Need to establish the values, targets and initiatives for achievement and how risk management

will contribute

• Risk identification – All organisations face a large number of minor and major risks – A systematic process is required to identify risks – Frequently organise risk identification by broad types, e.g. strategic, operational, financial and

information or into internal (people, capability, equipment, technology, policies etc) and external (e.g. economic, social etc)


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• Risk assessment and prioritisation

• Assessment of all identified risks will provide a prioritisation for risk management

Risk In

tensit

y

High

High

Low

Low Potential Impact on Organisation

Likelihood ofOccurring

TrivialTrivialLowModerateSignificantRare

TrivialLowModerateSignificantMajorUnlikely

LowModerateSignificantMajorHighModerate

ModerateSignificantMajorHighSevereLikely

SignificantMajorHighSevereSevereAlmost Certain

Negligible LowMediumVery High Extreme

Potential Impact Likelihood

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• Develop Risk Response – A register of risks to be managed provides a tool for tracking risks – their potential impact and

planned actions – Example of information in a risk register includes:

• Implement the Risk Management System – Need to incorporate risk management into the organisation’s way of doing business – Begin the incorporation by considering the risks relating to plans and initiatives and how these

will be mitigated • Monitor Risk Implementation

– What progress is being achieved against the information about each risk included in the risk register?

What is the risk grouping?What is the risk grouping?

What is the description of the risk to be managed? What is the description of the risk to be managed?

What is the estimated impact and what is the likelihood of the risk occurring? What is the estimated impact and what is the likelihood of the risk occurring?

What are the likely impacts should the risk materialise?What are the likely impacts should the risk materialise?

Who is responsible and by when will the actions be completed? Who is responsible and by when will the actions be completed?

What are the proposed risk management / mitigation actions? What are the proposed risk management / mitigation actions?


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Portfolio of Risk Management Systems and Processes

RiskEvaluation

RiskEvaluation

Internal ControlsInternal Controls

External AuditorsExternal Auditors

InternalAuditorsInternalAuditors

CorporateGovernanceCorporate

Governance

Audit Committee

Audit Committee

Risk &ControlRisk &Control

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Importance of Key Systems / Processes

0 10 20 30 40 50 60 70 80

Control Self Assessment Process

Fraud Management Function

Self Review Process

Programme or Project EvaluationFunction

Com pliance Management Function

Risk Management Function

Internal Audit or Internal AssuranceFunction

Audit Committee

Percentage


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Improving Business Risk Management – Overview (1)

• Climb the risk management continuum

• Adopt a more strategic focus

Reacti

ve

High

High

Low

Low Extent Integrated / Embedded

ValueContributed

Tactic

al

Strateg

ic

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Improving Business Risk Management – Overview (2)

• Balance compliance and improved business performance

Business Performance

Risk Management

Tactic

al

ComplianceCompliance

Improvedcontrols

Integrated risk management

Improvedprocesses

Processes transformed

Compliance

Enhanced Value &Business Performance


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Roles of the Board and Management in Risk Management (1)

• Board Roles:

– Establish the “tone at the top” towards risk management

– Determine the organisation appetite for “risk” and “control”

– Embrace its governance roles relating to risk management

– Operate an effective audit committee

– Ensure its annual work plan includes:

– Sign off of internal audit plan

– Completion of business risk evaluation

– Obtain reports from audit committee and CEO on risk management

– Embed risk management into decision making systems / processes

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Roles of the Board and Management in Risk Management (2)

• CEO and Management Roles:

– Develop and implement risk management systems and processes

– Ensure existence and operation of internal controls

– Operate internal audit system / process

– Obtain timely reports on key business risks

– Incorporate “risk analysis” into key decisions

– Ensure KPI’s include key risk drivers


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Options to Manage Risks

• Four key risk management options

Transfer Avoid

Accept Reduce

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Challenges to Effective Risk Management (1)

• Getting an acceptance from the Board and CEO / managers that risk management is important – Ensuring compliance / legal risk management is a starting point – Robust business risk management will improve performance and add value

• Establishing a robust – but non bureaucratic risk management system – Ensure that it adds value – Avoid attempting to manage too many minor business risks – Overcome any lack of clarity about roles and responsibilities

• Focusing on the risk analysis and no on the actions to mitigate and manage risks


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Challenges to Effective Risk Management (2)

• Consider these questions:– Is there an ongoing risk assessment process for likelihood and impact?– Are there clearly defined accountabilities for risks?– Is there an effective system of control to ensure compliance?– Do priorities focus on key business risks of the organisation?– Do effective information / reporting systems exist for risk related decisions?– Is the external or internal audit scope and focus appropriate to the business risks?– Is the tone at the top right?

Documents

Technical Assistance Consultant’s Report This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot