Mr McPhee’s review recommended a “skills matrix” be established for CPA Australia Advice to select directors who possess the required skills to oversee a dealer group.
This will likely fall short of member expectations, many of which have called for the licensing arm to be wound up – a fact of which the panel is aware. The preliminary report to the review recommended a post-implementation review of CPA Australia Advice, which some members found was an insufficient recommendation given the scale of losses so far.
The panel also found that the timing and lodgement of CPA Australia Advice’s financial statements was 14 days late to ASIC. It lodged a profit and loss statement, balance sheet and audit report with ASIC ahead of deadline, but a full copy of the financial report was required to be lodged with ASIC.
“This oversight was due to it being the first time that these ASIC forms were submitted pursuant to CPA Australia Advice’s AFSL. While the review panel accepts this was an oversight, it does not reflect well on CPA Australia Advice and CPA Australia, both of which have an obligation to uphold the high standards of the accounting profession,” the panel said.
The final report was unable to meet member demands for total transparency of the CPA Australia Advice business case, putting it to the board to make that decision.
It did reveal that original business plans estimated the licensing arm would generate a loss for the period 2015-18, wouldn’t be profitable until 2019 and wouldn’t provide an overall return on investment until 2023.
It also estimated that there would be 250 authorised representatives by 2017, well short of the 27 it had at June this year, and expected growth to 1,360 authorised representatives by 2019.
As a result of faltering on these key projections, in the year ending 31 December 2016, CPA Australia Advice incurred a loss of $5.7 million for the year and a combined trading loss of $7.4 million since inception.
The business case also identified that it may be difficult to obtain insurance as an authorised representative of CPA Australia Advice, due to a number of providers withdrawing from the market place, leading to significant cost increases.
The final report found members have concerns that CPA Australia Advice was established to “unjustly enrich former directors and executives” and was not established in the best interests of the association and its member base.
There is no evidence of ulterior motives to the establishment of CPA Australia Advice, the panel found, but the remuneration structure is questionable.
“CPA Australia Advice board appointment and remuneration did not have the same procedure as CPA Australia,” the panel found.
“Candidates and remuneration were recommended by the former CEO in a meeting in February 2015. The former CEO ‘outlined the recommended candidates for the appointment to the board’. The CPA Australia board, excluding those directors who were to sit on the CPA Australia Advice board, then approved the appointment of five existing directors and remuneration of.”
Achieved barely 10% of their AR target, what were they doing with the other 90% of their day?
“There is no evidence of ulterior motives to the establishment of CPA Australia Advice, the panel found, but the remuneration structure is questionable.”
And that’s how you make a pretzel.
Wow !!…this would have to be Alex Malley’s pinnacle ” sell ” job…….just take a look at his history and you cannot fathom how he was able to manipulate his way into the role at CPA and then blatantly use the opportunity to promote ” Brand Alex” at the expense of the CPA.
Unfortunately, we have seen it all before with other associations, whose CEO’s have left a trail of destruction and loyal member’s left to pick up the pieces.
Maybe I am completely naive but I would have called on the CPA Board to resign and if they did not I would find a way to force them to do so.
I would then look at existing staff members and assess their culpability and dispatch the guilty ones publicly.
This isn’t a $74 loss it is $7.4 million.
In fact a stealth group was established to do just that, and that is allegedly why many of the Board resigned in September. (Not before pushing through an amendment to the company’s rules so that directors of CPA Advice would have their legal fees paid by CPA Australia if legal action was taken….tsk tsk). This option – essentially to appoint a liquidator – remains on the table.
Seriously? Disgusted FCPA member!
Having read the review findings I don’t believe the issue of CPA Australia Advice as been adequately addressed. I am not sure how the $7.4 million loss is going to be recovered as their projections of the take up of new Authorised Representatives is totally unrealistic. The pricing does not match the market. I note with horror the staffing levels they were working on. Brings back memories of the Stockford disaster where they built an empire of people which could not be sustained based on anticipated revenue.
We run a successful licensee with 24 ARs and we certainly don’t have that level of staff and costs to do this.
In my view the Advice business should either be wound up or sold to another licensee as this is going to be throwing more good money after bad.
Very bad use of CPA Australia member funds. I have on more than one occasion expressed my view that a Professional Association should not be running a business which is in direct competition with businesses run by its members.
What a mess. An elite accounting body that can’t even get their accounting lodged correctly…..