The UK’s audit regulator is facing a cash crunch that could affect its ability to finalise its budget for the coming year due to government delays in signing off its pay proposals.
According to minutes from a March meeting of the Financial Reporting Council’s (FRC) board, the leadership expressed “continued disappointment that the pay settlement had not yet received ministerial approval despite the FRC’s efforts”.
The board warned that continued delays could have “detrimental financial implications for some staff” that the FRC, as a public body, would be unable “to provide financial compensation to anyone who might be affected”.
The issue comes as the FRC prepares to transition into the Audit, Reporting and Governance Authority (ARGA), the UK’s new audit regulator. The creation of ARGA was put forward as one of the main recommendations of the Kingman Review into the future of the FRC.
The meeting minutes also showed that the FRC planned to press the UK government to be granted “sufficient flexibility over recruitment given the staffing increase required to implement the Kingman recommendations”.
The UK business minister Greg Clark announced the Kingman Review in April last year under the leadership of former senior civil servant Sir John Kingman, to conduct a thorough review of the FRC’s role and functions.
In August 2017 IPE revealed how the FRC had fought a long-running campaign opposing attempts to classify it as a public body.
The topic of FRC staff pay first emerged in a series of parliamentary questions tabled last year by Sharon Bowles, a former MEP and now a lawmaker in the UK parliament’s upper chamber, the House of Lords.
According to one response from the government dated 18 July , 13 FRC employees were earning more than the UK prime minister’s salary of £150,402 (€167,592).
A separate parliamentary answer revealed that FRC chief executive Stephen Haddrill earned £378,831 in 2016, more than double the prime minister’s salary.
FRC to reconsider actuarial regulation, dividend rules
Meanwhile, the FRC board also questioned whether it was the most appropriate organisation to supervise the actuarial profession.
The FRC is currently responsible for setting and maintaining technical actuarial standards as well as overseeing the Institute and Faculty of Actuaries’ supervision of the actuarial profession.
According to the minutes, the FRC’s board also concluded that “it would be more appropriate to develop a more comprehensive consultation on the issue of distributable reserves”, from which companies can pay dividends.
The Local Authority Pension Fund Forum (LAPFF) – which represents the majority of local government pension schemes in the UK – has lobbied hard on the question of dividend payments over the course of the past decade.
The LAPFF believes that accounts prepared under international financial reporting standards do not deliver a fair picture of a company’s financial position, putting the business at risk of paying out dividends from shareholder capital rather than retained earnings.