The Webcast

The ICAEW has just released a webcast, outlining their rationale for the takeover of CIPFA, it can be viewed via this link webcast.

I would like to address the issues raised in the webcast:

Increased Influence

The ICAEW state that the merged body will bring about increased influence and provide a stronger voice, with regulatory bodies, for the membership.

However, the proposal to takeover CIPFA will add only another 13500 members to our numbers, that represents a mere 11% of our current membership. An 11% increase in the size of the ICAEW will not dramatically alter the status quo, or increase our standing within the financial community.

Sir John Bourn, Chairman of the Professional Oversight Board for Accountancy and a member of the Financial Reporting Council, is quoted in April’s Accountancy (p 41) as saying:

"existence of different professional bodies servicing either different geographical or technical needs has supported the strength and depth of the UK profession.."

Expanded Expertise

The ICAEW argue that, by including those with expertise in the public services, the takeover of CIPFA will add value to the ICAEW.

At first sight, this may seem to be fair comment; adding another body of people with different skill sets and experiences can, in theory, add value. However, it is not at all clear that the two bodies are compatible.

The private and public sectors are dissimilar, it is doubtful that the combination of CIPFA and ICAEW will give rise to any synergies

Prestige Preserved

The ICAEW claim that they will maintain a dual qualification approach, and that ICAEW and CIPFA designatory letters will remain. We are reassured that the two groups will be equal.

Quote:

"There will be no change to the separate routes to qualification for existing students of the ICAEW and CIPFA. Any future changes to these arrangements will be subject to a special majority of the new Council and only in response to the needs of members and the market."

I am afraid that this promise is no more than a short term "political sop", designed to allay the fears of the membership.

How can both parties be equal, if they have not had the same training?

At some stage the question of designatory letters, and a common training programme will have to be addressed.

To fail to address this issue will leave a two tier membership in place. A two tier membership will be both confusing to the membership, and the outside world, and impractical to administer.

There will have to be one unified brand.

Those that claim that Council will not renege on their promise to maintain the dual qualification approach should read the proposed constitution of the new body.

Quote:

"Any future changes to these arrangements will be subject to a special majority of the new Council and only in response to the needs of members and the market."

I would also remind you that a vote was passed a few years ago, to reduce the membership of Council from approximately 90 to under 40.

Council have ignored that vote, and they will ignore their promise re the dual qualification approach as well.

Enhanced Resources

Much is made of the acquisition by the ICAEW of the CIPFA regional training facilities. If these facilities are really so desperately needed, would it not have been simpler and cheaper to outsource these from a third party rather than to takeover another professional body?

The Name

The ICAEW state that they are already discussing the proposed new name of the new body, the Institute of Chartered Accountants, with the Privy Council. Have they forgotten, or are they ignoring, the fact that ICAS have promised to fight this perceived "infringement" of their trademark?

See Ian Robertson’s, President of ICAS, letter in May’s Accountancy (p 22).

This oversight shows that the proposal has not been properly thought through.

Revenue

The ICAEW emphasise the revenue enhancing features of the takeover. Yet if this is one of the key motivations for the takeover, why have the larger ACCA not been invited to join?

I note that the ICAEW are pressing for a 9% rise in subscriptions for 2006, does this need to raise subs not contradict their argument as to the beneficial revenue effects of the merger?

Demographics

I note that up until now the ICAEW has made much of the demographic issues facing us, ie the declining and aging membership; they have stated, when CIMA was also expected to join, that a merger would address these issues.

Now the issue of demographics has been dropped.

Council

The ICAEW propose increasing the size of Council from its current unwieldy level of around 90, to 115.

This proposal is absurd.

I believe that if the ICAEW is to successfully address, and respond to, the challenges facing it in the 21st century then cutting the size of Council should be its number one priority.

"The purpose of Council, as defined in the 2003 accounts, is to consider, review and approve the overall Institute Strategy and Strategic Plan, including the Institute budget. Council scrutinises policies, policy changes and budgets proposed by The Board and the Directorate Boards in support of the Strategy. It also reviews the activities and performance of the Directorate Boards.

It represents, and articulates, the views of members on all these matters and otherwise delegates the powers and authorities conferred on it by the Charter and bye-laws. Council members take decisions in the best interests of the Institute as a whole."

There are currently around 90 or more Council members. This, to my view, is excessive; it is a hindrance to effective and rapid decision making.

I believe that a leaner, more focused, decision making body would best serve the membership in the 21st century.

I propose that the current arrangement, whereby members are elected from 22 regional constituencies, be abolished and replaced with elected representatives from the Lines of Business (LOB) of the membership.

The LOB's would be:

-Tax
-IT
-Finance
-Audit (Practice)
-Audit (Internal)
-Students
-Retired

In order to keep the size of Council manageable, there would be no more than two posts available for each LOB. Thus an elected Council of no more than 14 members would be created.

In my view this would be a significant step forward to making the ICAEW "best in class" in the 21st century.

A motion to reduce the number of Council members to below 40 was raised, and indeed passed, a number of years ago.

Yet it has been ignored by Council!

Questions that need to be addressed

• Why have ACCA and ICAS not been invited to join the merger?



• How much will the merger cost if it goes ahead?



• How much has been spent so far, eg the free edition of April’s Accountancy, in trying to persuade the members as to the merits of the proposal?



• The ICAEW is meant to represent the interests of its members, yet it is ignoring the membership; why?