Rather than a predicted surplus of £200,000 out of a budget of £106m for the year, the institute faces a deficit of around £2m, chief operating officer Vernon Soare has told the ICAEW council in an update.

Soare said ICAEW had a strong balance sheet and was ‘not in financial crisis’, with cash reserves totalling £7m and predicted revenues of £108m in 2018. He cited the body’s ‘investment phase’ which has covered extensive restructuring and updating of the Grade 1 listed Chartered Accountants’ Hall in London, as well as the ongoing digital transformation, as the main drivers of the increase in costs.

The institute has incurred extra charges for hiring specialist examination centres for computer-based student exams, as applicant numbers have risen. It has also updated its business transformation programme from a phased approach to having one ‘go live’ date in early 2020. 

Soare said the institute was not considering a hike in membership fees or staff redundancies to cover the expected loss.

‘While it is not ideal to have a variance like this, it is within the tolerances that you sometimes expect in investment phases. Yes, it is 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,’ he said.

ICAEW is in line to receive around £18m in fines issued by the Financial Reporting Council (FRC) as a result of investigations under its accountancy scheme. The final figure is likely to be known by December, when the ICAEW council holds its next meeting, at which Soare is expected to offer an update on the size of any deficit.

Report by Pat Sweet