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ICAEW heads for £2m potential deficit

25th Oct 2018
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The ICAEW has warned that the added costs of a recruitment drive and the refurbishment of its headquarters may lead to a predicted surplus of £200,000 for 2018 dropping to a deficit of just under £2m.

The professional body representing 150,000 accountants raised the issue to council members last week, but stressed that the organisation was “not in financial crisis”.

ICAEW chief operating officer Vernon Soare admitted the situation was “highly unusual” but insisted that the figures were “an operating result that we can live with” and played up the strength of body’s balance sheet. The ICAEW has cash reserves of more than £74m and predicted revenues of £108m in 2018.

Soare added that the ICAEW would not seek to cover the deficit by increasing member subscriptions “beyond the usual annual rise” – a fear discussed by AccountingWEB members – or by making existing staff redundant.

“While it’s not ideal to have a variance like this,” said Soare, “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,” he continued, “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.”

Last year the body posted an operational deficit of £300,000 after running a surplus for the four years previous.

The ICAEW also ran into similar difficulties in 2001 when it reported a £2m deficit brought about by the costs of regional restructuring and, as with last week’s warning, improvements to its Moorgate headquarters.

Transformation programme

Soare ascribed much of the cost to the renovation of their Grade 1-listed headquarters in Moorgate Place, London, as well as the body’s digital transformation programme.

He added that the ICAEW had also been a victim of its own successful recruitment campaign. As a result of a higher-than-expected number of students sitting its exams, the body has had to hire more specialist centres with enough computer consoles to enable them to do so.

Soare will update the ICAEW council at its next meeting in December when he will “have a clearer idea of the size of the deficit”.

The ICAEW is also expected to receive fines levied by the Financial Reporting Council totalling around £18m, which are passed to them. These fines are not counted as operational income on the balance sheet as they are ring-fenced for investment in public interest projects.


Replies (15)

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By Julian Stafford
26th Oct 2018 10:04

I thought Chartered Accountants were supposed to be proficient at Financial Planning and anticipating the knock-on effects of proposed expenditure?

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By jonnybennett
26th Oct 2018 10:18

It is somewhat galling to stump up £400 a year to maintain a piece of architecture in London.

Still - it could be worse. ACCA members have to fund two head offices.

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Replying to jonnybennett:
By djn
26th Oct 2018 18:48

ACCA are still cheaper than ICAEW even with 2 offices so Morgate must be like a palace.

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simson jones
By simsonj
26th Oct 2018 10:25

Not the best advert for our brand "Chartered Accountant"

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By kenfrost
26th Oct 2018 10:27

The ICAEW would not be seeking to cover the deficit by increasing member subscriptions beyond the usual annual rise.

Which is all very well and jolly, but I would ask why is it group think within the ICAEW bunker that we have to have a rise every year anyway; as though it is written into stone the membership are milch cows for the milking?

Regarding the refurbishment of the ICAEW bunker in London, that is all very nice too; but I wonder what the membership who don't reside/work in/near London feel about that?

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Replying to kenfrost:
By k743snx
26th Oct 2018 21:23

Same with CIMA.

I always vote against sub increases, but it always seems pretty cut and dried.

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By tedbuck
26th Oct 2018 10:56

Absolutely and entirely what I would have expected from the ICAEW and any other similar body like HMRC or HMG.

They all look at the pretty picture or the good idea and look no further forward than that which is why they are all pretty dysfunctional.

Anyone who can produce an FRS which is complete gibberish for the most part isn't going to be able to manage a refurbishment project effectively - they are just like Northampton County Council with their new Council offices.

Never mind the reserves will pay for it. Actually why have they got such huge reserves which we poor mugs have paid for?

Oh, silly me, it's in case they can't manage projects properly. Let's just hope they don't spend/waste it on yet another meaningless FRS which will be replaced after a few years when it falls apart at the seams like most of its predecessors. There used to be a time when Joe Public had a reasonable chance of being able to understand accounts but nowadays he doesn't have a hope. Oops, sorry, meant to include Josie Public as well although she probably has a better chance these days.

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By AndrewV12
26th Oct 2018 10:57

Its a bit worrying as these days Company's/ organisations/ businesses that deliver poor results always explain its due to one off costs and restructuring, for a lot of Company's its the begging of the end.
Mind you members may see there subscriptions rise to create a buffer.

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By bilthompson
26th Oct 2018 11:58

I have been a member for 50 years. Living and working in Newcastle upon Tyne I have never had the need, time or spare cash to go to Moorgate Place and feel that I have paid for it all myself.

As far as I am concerned my Institute could live anywhere that is cost effective and has a good broadband - suggest Newcastle or any other location in the UK that needs the jobs. We don't need a palace or the expense that goes with it.

Wake up ICAEW and meet the real business world where results are more important than fancy/expensive surroundings.

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By k743snx
26th Oct 2018 21:21

Its easy for me (CIMA) to snigger, but then there's the saga of CIMA getting into bed with AICPA in the States, the equivalent of selling their soul to the devil, and giving us the worthless designation "CGMA" - terrific!

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By dbowleracca
26th Oct 2018 22:08

It’s nice to see the ICAEW having such a positive cash reserve so it can comfortably afford this expense.

The question I would ask is why do they need so much cash? If I was a member I would suggest I am being overcharged and the surplus cash could be reflected in a reduced subscription....

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By Marlinman
27th Oct 2018 07:32

Did you hear the one about the constipated accountant? - he can't budget.

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By Marlinman
27th Oct 2018 07:32

Did you hear the one about the constipated accountant? - he can't budget.

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Replying to Marlinman:
By k743snx
29th Oct 2018 09:50

Even though he tried to work it out with a pencil.......

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By acornman
27th Oct 2018 12:22

Last week I delivered my Honorary Treasurer's report to a charity's AGM. During my report on the annual accounts I went to great pains to explain in detail to the members the purposes for which unrestricted reserves were being held and the methodology for the calculations used. It seemed correct to explain why these weren't being used in the short term to further the aims & objectives of the organisation.
I'm sure we all await with interest a similar detailed report from ICAEW. I'm happy to supply a template, either on a voluntary basis or as part of any monies set aside in their reserves for consultancy fees.

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