FRC delivers £3.3m budget saving

THE FRC demonstrated its budgetary prudence by coming in under budget for 2014/15, the latest annual accounts from the UK reporting watchdog reveal.

It spent £29.1m over the year, some £3.3m under its budget expectations.

However, its audit quality review costs rocketed by almost a third (30%) from £3.3m to £4.3m over the same period, driven by a beefed up team and an increase in the number of reviews it conducted as the body sought to implement the CMA recommendations following its audit market review.

The increase in core costs was partly attributed to moving offices to 125 London Wall from Aldwych House in a bid to avoid a substantial hike in rent, while staff costs at £1.6m fused with travel expenses and the financial impact of hosting the FRC’s first annual conference, were also factors.

During the year, the FRC’s revenue grew by £2.8m, but expenditure rose by more – some £3.1m. Its general reserves fell by £198,000, almost three times its budgeted figure of £65,000.

A further £300,000 was spent on legal and professional fees as part of an ongoing review of the effectiveness of its CRR and AQR activities carried out by McKinsey.

Gross expenditure on accountancy and actuarial disciplinary case costs remained static at £5.6m across both years, while recovered costs hit £2.25m in 2013/14, before almost halving to £1.15m in 2014/15.

Total revenue for 2014/15 was £28.8m against a projected budget of £32.4m.

Sir Win Bischoff, chairman of the FRC, said: “Our primary mission is to maintain an effective regulatory framework for corporate governance and reporting in the public interest; one that supports the needs of investors and supports boards and the professions in meeting the necessary high standards. We measure success by the impact we make, not by our level of activity”.

Having listened to its audience, Bischoff said there are areas where the watchdog still needs to make more progress, among them promoting “investor stewardship, clear and concise corporate reporting and the quality and value of audit”.

“We also need to avoid imposing unnecessary burdens on those we regulate, developing non-regulatory solutions wherever possible, and being particularly mindful of the needs of small growing companies.”