The ICAS Annual Review and Consolidated Financial Statements 2017
Highlights of the Year
ICAS Council set the strategy “Building the leading professional community” for the period 2015 – 2018 and identified three key drivers to shape the strategic direction over this period – Diversity, Digital and Global. To deliver this, we have four key strategic goals - Be Relevant, Be a Community, Be Trusted, Be Influential.
In 2017 ICAS invested heavily in our Digital Transformation Programme with a focus on our student experience and administration. We also invested in bringing high quality, relevant content directly to members, launching new digital magazines for Financial Services, Practice, Tax and North America.
We continue to be influential on behalf of our members, and in the public interest, with prominent activity led by our Brexit Advisory Group and the continued growth of our leadership in ethics with the Power of One. In addition to this ICAS Tax team has had a strong voice following the roll out of HMRC’s Making Tax Digital.
A memorandum of understanding was signed in 2017 between ICAS, the National Association of State Boards of Accountancy (NASBA) and the American Institute of Certified Public Accountants (AICPA) leading to a mutual recognition agreement (MRA) in February 2018. The MRA is the first to be agreed between a UK accountancy body and the US and will have a very significant, positive impact on the mobility of ICAS members who want to work in the US and vice versa.
Looking ahead to 2018 we plan to continue significant investment in Digital Transformation, accelerating as we widen the Programme to transform our regulation processes and data. We will explore the impact of wider technology changes on the profession and our members. Meeting the needs of our increasingly diverse membership across many geographies and sectors will remain a key challenge and we plan to target investment to supporting community engagement and supporting the practice community.
2017 saw Group revenues grow by 6% to £17,813k, and ICAS revenues by 4% to £17,263k. For ICAS this increase was driven by growth in education and in membership revenue, with the Group figures also reflecting a successful year for ICAS Foundation fundraising.
The Group returned a surplus of £38k (2016 - £365k) whilst the ICAS results show a deficit of £109k (2016 - £405k surplus). The ICAS deficit includes a provision of £376k for further costs of FRC cases partially offset by a refund of costs of £184k by the FRC. Staff costs increased by £951k in 2017 compared to 2016. £300k of this was due to non-recurring staff costs related to the Digital Transformation Programme, with other increases coming from investment in key roles and initiatives, increase in executive costs, compensation for loss of office, as well as inflationary increases. During 2017 ICAS continued to invest in digital transformation, spending £998k, with £567k of this being charged to the income statement. Before charging digital transformation costs the Group surplus in 2017 was £605k, and the ICAS surplus was £458k. Investment in digital transformation will continue during 2018 as delivery accelerates.
Net Group assets fell to £9,687k (2016 - £10,062k) and ICAS net assets to £8,275k (2016 - £8,978k). The reduction in assets is largely attributable to the impact of the pension valuation which saw an increase in deficit from £2,215k to £2,939k, principally due to changes in the discount rate. Excluding the impact of the pension valuation, net Group assets rose slightly by £349k and ICAS net assets by £121k. Group cash and fixed term deposits at year end were £10,365k (2016 - £8,963k) of which £9,502k (2016 - £8,273k) related to ICAS.
As a Chartered Body, ICAS governance arrangements are set out in its Charter and Rules. Although the FRC’s UK Corporate Governance Code (The Code) does not apply to ICAS, Council is committed to good practice in corporate governance and seeks to comply with the principles of The Code where they are relevant and proportionate to a Professional Membership Body.
ICAS is governed by Council which has responsibility for ensuring that the objectives set out in the Royal Charter are achieved and for setting the strategic direction of ICAS. Council is supported in its leadership of ICAS by a range of Boards and Committees.
Four Operational Boards are responsible for the key activities of ICAS and the Oversight Board has delegated responsibility to monitor the ICAS strategy, financial performance and the effectiveness of the Operational Boards. The day to day management of ICAS business is delegated to the Executive Team, comprised of the Executive Directors and chaired by the Chief Executive (Bruce Cartwright – from April 2018).
The composition of Council comprises 16 electoral seats, 6 open seats; 8 co-options seats and 4 public interest members.
Ensuring diversity and that the composition is representative of the segments of the membership continues to be central to ongoing succession planning. During 2017, 3 members represented our international communities with members from Hong Kong, the US and Switzerland.
ICAS operates a rigorous system of risk management to identify and assess risks and to ensure appropriate mitigating actions are put in place in line with the risk appetite. Council closely monitors the status of the principal risks and any mitigating actions.
|Risk||Mitigation and Link to Strategy|
|Financial risks of unpredictable events|
ICAS faces financial risks of unpredictable events, in particular the potentially high and volatile costs associated with public interest discipline and the inherent risks of the closed Defined Benefit Pension Plan.
The ICAS strategy requires maintenance of sufficient liquid reserves to provide resilience to financial risks. ICAS also has power to levy members in respect of public interest discipline costs – currently, no levy has been raised since 2012.
|Changes in the profession|
ICAS faces challenges to ensure ongoing relevance to members as the profession changes apace. Changes arise from the growing diversity of members’ careers and, increasingly, from the potential impacts of technology, such as artificial intelligence, and the growing importance of analytics
The ICAS strategic goals seek to directly address this risk with a focus on member engagement and global relevance. Our focus on digital during 2018 will include exploration of the potential impacts of technology on the profession. We will continue to invest in digital transformation.
Political and regulatory uncertainty continues to pose risks and opportunities to ICAS. The general business environment remains uncertain and a range of current factors influence our key activities - key examples include Brexit and the future funding of the FRC.
ICAS mitigates against the risks of uncertainty by focusing on maintaining relationships and influencing government and other key bodies such as Treasury, HMRC and FRC. We monitor closely the debate over the changing political landscape and consider the opportunities which may arise.
|Competitive and market risks|
ICAS faces competitive and market risks, particularly in relation to securing strong student numbers. The training landscape is changing, with the emergence of apprenticeships and the impact of digital on the profession. The nature of the profession also results in the concentration of student training revenue from a relatively small number of firms.
The ICAS strategy aims to continue to open new routes to entry and widen our portfolio. We take great care with our key relationships and are constantly working to expand the group of firms who train with us. We closely monitor developments in the training environment and consider mitigations and opportunities arising.
Additional details of how ICAS is governed are published on the ICAS website.
- The Governance of ICAS
- How we comply with the UK Corporate Governance Code
- Register of interests
- Code of Conduct for Council Members
- Council profiles: Who we are
- Diversity at ICAS
There are 30 public interest members working within ICAS on the various boards and committees. Their role is to ensure that the Institute fulfils its public interest responsibilities. Four of the public interest members sit on the ICAS council, together with many of the boards and committees, and this report is intended to demonstrate how ICAS has discharged its public interest responsibility
PUBLIC INTEREST MEMBERS ANNUAL REPORT 2017
Our report for 2017 is set against the background of perceived challenges in building and maintaining public trust in the professions, including finance and accountancy. Safeguarding trust is central to the ethos of ICAS and requires good governance of the Institute coupled with effective systems of regulation and discipline.
The regulatory role of ICAS is of fundamental importance in upholding the integrity and standards of the accountancy profession in challenging times. We welcome the review of the disciplinary system completed in 2017 and the appointment of Dame Elish Angiolini as Chair of the ICAS Disciplinary Board.
We commend the Institute for the very good work done in the field of professional ethics during 2017. The publication of the report “The Power of One” should help to enhance ethical standards across the profession, and we welcome the strengthening of the teaching and testing of ethics in the syllabus.
The reputation of ICAS is based not only on the effective operation of the regulatory and disciplinary functions but also on the sound governance of the Institute. The procedures of the Presidential Nominations Committee and the Nominations Committee have been improved, and we welcome the review of the overall governance arrangements started in the latter part of 2017 by the recently appointed Secretary. We would particularly mention the importance of ensuring that the role of the Remuneration Committee and its accountability to the Council are further strengthened and described.
In November 2017, ICAS signed a memorandum of understanding with NASBA and AICPA. This is a historic achievement which should be of great value to many members of the Institute by opening up professional opportunities in the USA, to the benefit of the economy as well as members
In our opinion, the ICAS Foundation is now providing a service which makes an important contribution to the public interest aims of the Institute. The Foundation is proving to be remarkably successful in providing bursaries to students, providing support for about 120 students and awarding £960,000 in bursary funding.
Over the past year, ICAS has made a significant contribution to informing the BREXIT debate across the UK. Two papers, “Accountancy in the Brexit Negotiations” and “CETA, Brexit and Beyond” were produced in 2017, and there were a number of meetings with decision-makers, influencers and accountancy and business interests. We commend ICAS for its committed engagement with the most important issue currently facing our society and our economy.
Audited Annual Report and
Consolidated Financial Statements 2017
The members of Council are responsible for preparing the Annual Report and Consolidated Financial Statements in accordance with applicable law and regulations.
Audited Annual Report and Consolidated Financial Statements