The government’s proposed single ombudsman will face the same structural issues that have caused problems for CPA Australia, says the Credit and Investments Ombudsman.
In a submission to Treasury distributed to the press yesterday, the CIO argued that the government’s proposed Australian Financial Complaints Authority (AFCA) will be toothless to prevent financial scandals and stamp out poor cultural practices in the sector.
The CIO – which would become redundant under the government’s plans – also points to governance issues faced by CPA Australia as a potential hurdle for the success of AFCA, as both are examples of problematic “not-for-profit member-based monopolies”.
“To appreciate the kind of allegations that can be levelled against a not-for-profit member-based organisation that enjoys a monopoly (in the same way that AFCA will), one only has to look at recent media reports about the board and management of CPA Australia, a company also limited by guarantee,” the submission states.
AFCA directors will be appointed by its board, not its members, making it susceptible to similar governance and member conflicts experienced by the accounting body.
“What would prevent AFCA directors from giving themselves hefty or undeserved pay increases? How would directors be removed for poor performance where there is no possibility of directors being voted out? What incentive would the board have to keep costs down and operate the scheme efficiently in circumstances where its members have no say as to how the budget is framed or how the scheme is run?” the submission asked rhetorically.
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