The Professional Standards Council (PSC) of New South Wales has deferred a decision on the CPAA’s application for a new professional standards scheme while it investigates conflicts of interest arising from the establishment and structure of CPA Australia Advice, a financial planning business that former CEO Alex Malley set up as a subsidiary of the CPAA.
The regulator informed the body that it needed additional information last week, including about the CPAA’s governance structures.
Shortly afterwards, CPAA president and chairman Jim Dickson issued a statement announcing Malley’s departure. The board, he said, had decided to terminate his contract “in order to allow CPA Australia, CPA Australia staff and Alex to move forward”.
Yet less than two weeks before, Dickson had expressed strong support for the chief executive, stating that he had consistently exceeded the board’s expectations and the KPIs it had set for him. “For the record,” he said, “every board member during Alex’s tenure – all 23 of them – has unanimously endorsed his performance over time.”
Malley was given a contractual pay-off of AUS$4.9m (£2.9m) and Dickson thanked him for the “significant contribution” he made during his seven and a half year tenure.
“He has guided CPA Australia through a period of sustained growth. He brought an ambitious vision for our profession and was dedicated to supporting students and young leaders. Alex’s legacy is an organisation with a global footprint and an ambitious outlook,” he said.
He added that CPAA chief operating officer Adam Awty would act as interim CEO while the body looks for a new chief executive.
In the last year, the CPAA, its board and in particular the chief executive have become subject to increasing press attention. Earlier this month Malley said that he had been personally targeted in more than 100 negative articles with a range of claims and assertions.
Many of the press reports had focused on the size of his salary – $1.8m (£1m) – at the head of an organisation with only 160,000 members. (Interestingly, in the statement about Malley’s departure, Dickson made it clear that Awty has agreed to stay on his COO remuneration while he is interim CEO.)
But there was also discontent at grass roots membership level about the direction of travel he was taking the organisation in.
The personal attacks on the CPAA led to the resignation of seven board members and resulted two weeks ago in the board setting up an independent panel “to conduct a thorough review of all claims made in relation to CPA Australia”.
The panel comprises the former chief of the Australian Defence Force, air chief marshal Sir Angus Houston, and Ian McPhee, a former auditor-general for Australia, among others.
Dickson also announced that CPAA would increase its engagement with its membership. Having to tell them about the end of the limited liability scheme with nothing to replace it will not do much to improve the relationship though.
According to the CPAA, the application for the new scheme is still active and it is working with the PSC to sort out the issues. However, as a result of the timing, it warns, there will be a gap in the scheme in Victoria and “there is the possibility that other states and territories where a scheme is in place may also be affected”.
This could prove disastrous for the 6,963 current members of the Victoria scheme if they are sued for malpractice in the interval between the old scheme ending and a new one being put in place. Limited liability schemes place a cap on the amount of damages a firm has to pay through a series of monetary ceilings for specific accounting services.
The Victoria scheme members will also be forced to buy new stationery as on the day after the scheme lapses (8 October) they will no longer be able to use any letterhead or documentation that carry the statutory disclosure statements.
And they will have to advise their insurers of the change in circumstances related to limitation of liability. This means they could be forced buy new – and potentially more costly – insurance policies.
CPAA has issued guidance for members over what to do, including reviewing the level of their professional indemnity insurance.
Meanwhile, rival accountancy body Chartered Accountants Australia and New Zealand (CA ANZ), says that it is in discussions with regulators about what support it can provide to its members who are partners in CPAA firms and their clients if the limited liability scheme lapses.