Julia Irvine 19 Oct 2018 08:22am

ICAEW warns of potential £2m deficit for 2018

A highly successful student recruitment drive and the continuing investment in renovating Moorgate Place and transforming business systems across the organisation have resulted in ICAEW facing a potential budget deficit for 2018 after five years of surpluses

Instead of the predicted surplus of £200,000 out of a budget of £106m for the year, additional costs have pushed the figure to a deficit of just under £2m.

Chief operating officer Vernon Soare described the situation as “highly unusual”. He stressed the strength of ICAEW’s balance sheet and made it clear that the organisation was “not in financial crisis”.  

Much of the cost, he said, could be attributed to the “investment phase” which has covered extensive restructuring and updating of the Grade 1 listed Chartered Accountants’ Hall, as well as the ongoing digital transformation.

“Under the original business transformation programme, we envisaged phasing in the switch-over from the old systems to the new ones,” he explained. “We’ve now revised that plan to have one ‘go-live’ date in early 2020.

“The extra costs come from having to run two systems at a time when we thought we would be phasing out one system and phasing in another.”

He said the costs of holding computer-based exams had been exacerbated by the higher than anticipated number of candidates. “It’s partly a symptom of our successful recruitment efforts that we are having more students sitting exams. But, as a result, we have had to hire more specialist centres with enough computer consoles to enable them to do so.”

He added that ICAEW would not be seeking to cover the deficit by increasing member subscriptions beyond the usual annual rise. Nor will it result in staff redundancies.

“While it’s not ideal to have a variance like this, it is within the tolerances that you sometimes expect in investment phases. Yes, it’s unusual to be reporting to council at this time of year that we are heading for a deficit. But we do have a strong balance sheet and we have made surpluses in recent years, so in one sense we will be using those surpluses which have gone into balances for this period.”

Soare will be updating the ICAEW council at its next meeting in December when he will also be presenting the 2019 operational plan. By that stage, he will have a clearer idea of the size of the deficit – and also the amount of fines levied by the Financial Reporting Council which will be passed back to ICAEW. At this stage, that looks like a total of some £18m.