ICAEW heads for £2m potential deficit
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.
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.