RICS’ governing council has decided not to seek an independent external review of its governance and treasury management functions, despite growing pressure from the organisation’s members for more scrutiny.
The governing council, chaired since December 2019 by former RICS president Chris Brooke, convened at 5am on 8 January for a two-and-a-half hour virtual meeting before reaching the decision.
The meeting came less than 48 hours after a group of past presidents wrote to Kathleen Fontana, the organisation’s president, calling for more transparency over events in 2018 and 2019 relating to an internal audit report.
Simon Pott, a former RICS president acting informally on behalf of a number of previous postholders, told EG the group sent a letter to Fontana on Wednesday (6 January) seeking an independent review into a “number of matters” – mainly the circumstances leading to the departure of four non-executive directors in late 2019.
Fontana said the council is “satisfied the audit committee properly discharged its responsibilities when looking at the integrity and effectiveness of RICS’ treasury management functions and controls”.
“We looked again at the work of the external independent auditors, BDO and EY, and that was all considered in full,” she said. “The real outcome from that is the governing council absolutely agree that our governance processes in 2018, 2019 and 2020 were followed absolutely correctly at all times.”
However, she said the feedback from the council was that “the communication could have been a bit better”.
“Like all organisations, we are always looking at how we can improve,” said Fontana. “As a result of those original conversations that we had around 2019, we have implemented improved engagement between the different boards, improved reporting.
“We absolutely accept that communication could have been better back in 2019 and we have put [mechanisms] in place to deal with it.”
Fontana said that since late 2019, RICS is undertaking reviews on governance and engagement practices, with the latter becoming a standalone in early 2020. The governing council is conducting both, supported by two executive members: Richard Collins, executive director for the profession, is leading the governance review, while Matt Harrison, chief markets officer at RICS, is heading the engagement review.
An independent consultant is also advising on the governance review, although its name was not disclosed.
Fontana said both reviews are “ongoing” and expected to complete in “a few more months”, ideally by May.
“We are implementing some of the recommendations already,” she said, highlighting that frequent meetings between chairs are now taking place to improve engagement between the chairs’ boards, and that “certain reports from certain boards” are being provided as a matter of course, regardless of content, to the governing council.
Former RICS presidents push for transparency
The past presidents’ letter to Fontana urged “complete openness of what has happened”, said Pott.
“What has happened may be difficult or it may not be, if the very best intentions were in place at the time, but we believe that clarity in all these things will be the best answer at this stage,” said Pott.
Pott said the organisation has “become a little estranged” from its 134,000 members. “We wish to be put back together again and to have a situation where there is an understanding of what is done… [and] how the process works,” he said.
“If it has changed, we are not saying that is necessarily wrong, but we want to know who is in charge, who is making those decisions, and if a number of people are dismissed from positions, why has that happened?”
He added: “We are not looking to be difficult or awkward with RICS. We are merely saying that clarity will set our minds at rest as to what has happened.
“[More] action at this stage would be late but nevertheless correct in order to understand what was known and by whom, in terms of the governing council and the management board, but it is clarity we seek on all those aspects.”
He emphasised that a potential review should be led by an individual with credibility within or outside the profession, rather than individuals that were promoted in the existing organisation.
“We require a clear response from the president on how this has arisen, what will now happen and any changes that need to be made,” said Pott.
“The governing council is comfortable with the way we are moving things forward”
Fontana, who stepped into the role of president in November last year, said she and Brooke have been engaging with Pott over the past few weeks to discuss the situation.
She expressed her “shock” at Pott’s latest stance, saying: “I hope now, as a member of RICS, that [Pott] will be satisfied that governing council has indeed reviewed this matter once again today, and I hope that he will feel that we are acting in the best interests of all the members and that perhaps we can now move on to talk about things that are a bit more constructive. We have got huge challenges in the profession and the industry to deal with, many external factors influencing our members.”
She added: “If we take the treasury [management and controls] piece, we have had BDO, EY and Grant Thornton look over that. The governing council has confirmed it is satisfied that our responsibilities were properly discharged. At this point in time, it is not governing council’s judgement that external, further independent external scrutiny is needed.
“In terms of governance matters, we are already tackling those internally. We have an independent consultant working with us on that. Again, at this point, the governing council’s view is that we don’t need any further independent scrutiny or support to that.”
How the situation unfolded
These events come after The Sunday Times reported last month that findings by accountancy practice BDO, which gave RICS a “no assurance” rating for the effectiveness of its financial controls in 2018, were not satisfactorily disclosed internally.
A quartet of non-executives were dismissed in November 2019, according to the paper, after the group sought answers for why the report was not shared beyond the audit committee.
Brooke stated last month in response to the paper’s column: “RICS is financially sound, as evidenced by unqualified audit reports for the last two financial years from our external auditors.”
He said at the time: “The governing council of RICS received all appropriate assurances at the time, had oversight of the handling of the issue and has been kept informed of all of the actions that were taken both then and as part of appropriate follow-up.”
Fontana did not provide any further comment today on those questions relating to executive board decisions and remuneration, which she said fell outside her remit as president of RICS.
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