PracticeConsultingAnalysis: Financial turmoil at the Dome

Analysis: Financial turmoil at the Dome

The leaked PricewaterhouseCoopers report into the finances of Dome owner the New Millennium Experience Company contained a litany of failures of financial control in a finance function that it regarded as being 'under acute stress'.

These findings alone – aside from the parlous financial state of the tourist attraction – put pressure on FD Neil Spence and forced him to resign.

PwC found that NMEC was failing the two statutory tests of insolvency in that, ‘for an extended period’, it was unable to pay its debts as they fell due – 61% of the purchase ledger was aged four months or more – and that net assets were expected to show a shortfall compared with current liabilities by 31 December 2000.

In September, ‘company doctor’ David James was appointed as executive chairman but also became ‘chief accounting officer’ in charge of all financial affairs. Earlier this week, the NMEC claimed Spence would remain on the board and keep his title ‘director of finance’.

Despite yesterday’s announcement, Spence will continue working for the NMEC until the end of the year although he will no longer be on the board and will report to John Darlington, the accountant brought in by James to unravel the financial chaos exposed in a report by PwC.

The PwC report – codenamed Project Mozart – noted that:

  • There is no integrated financial model to link income and expenditure forecasts with cashflowforecasts.
  • NMEC has not been able to reconcile the 31 December 1999 balance sheet with that of 31 July 2000 and the p&l account.
  • Accruals worth £21m at end-July mean that up to three months of purchases have yet to reach the purchase ledger.
  • The purchase ledger had debit items aggregating to £5m, seemingly raising concern that entries that have been reversed may be paid anyway: the report warns against ‘double payments’.
  • Many departments are unable to quantify spending commitments.

PwC was particularly concerned about the prevailing culture at NMEC which was geared towards ‘not exceeding the current budget’. The investigators would have preferred to see ‘more emphasis…on the likely costs to be incurred, rather than the amount of the budget remaining’.

Unfortunately Spence was one of a number of senior executives who were on holiday while the report was being prepared. Financial controller Tony Kockelbergh was of ‘particular assistance’ to PwC, the report claims.

The Sunday Times obtained a copy of the report, published on the Web at www.sunday-times.co.uk

This article will appear in the next issue of Financial Director magazine.

Additional reporting by AccountancyAge.com.

Links

Dome FD Spence resigns

E&Y defends Dome audit role

Extent of Dome crisis revealed

Millennium Dome FD tipped to resign

Nomura pulls out of Dome bid

Dome saviour blasts NMEC board

Dome Focus: Millennium Commission

PwC report slams troubled Dome

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