Strategy& – formerly Booz & Company and now newly formed strategy consultancy PwC – has been paid a hefty $600,000 to report to CPA Australia on the financial viability of the accountancy accreditation body’s CPA Australia Advice professional service. While details of the report were confidential, a one-page letter from Strategy& outlines the strategy consulting firm’s position on the subject; cut your losses.
CPA Australia, one of the world’s leading accountancy, financial services and business professional organisations, has been told by PwC’s strategic advisory arm Strategy& that its advisory business is no longer viable. A Big Four consultancy has concluded that there is no sustainable demand for CPA Australia Advice.
CPA Australia Advisory has operated at a loss in the recent past, reporting just $217,000 in revenue over the past year. However, during the same period, the firm lost more than $3.8 million due to the fact that it only had 37 planners operating under their licenses.
CPA Australia has been in a world of controversy due to both the lack of revenue generated and excessive payments to senior staff. One vocal member, Brett Stevensen of CPA Australia, said the firm had run up $7.5 million in debt over the past 19 months, with more than $1.5 million going to CPA Australia directors.
CPA Australia president and chairman Peter Wilson wrote to PwC earlier this year to ask the firm to “provide our assessment of the approach CPA Australia has taken in setting its fees for its board from 1 October 2017”. That’s because before Wilson took the top job at the firm, CEO Alex Malley was fired in a member revolt that also purged the CPA board.
With a shutdown board and a new CEO at the helm, the firm has been trying to offset costs, particularly those related to senior management pay. But it wasn’t enough. The company was still hemorrhaging dollars and sought the help of a consulting firm to shut down the consulting operations. The firm reviewed the situation and agreed positively; CPA Australia Advice would not become profitable anytime soon.
“Member demand for the CPA Australia Advice offering in its current form has been insufficient to ensure financial viability and we have found no evidence to suggest that future demand for the offering in its current form will increase to a financially viable level. recommend that CPA consider discontinuing CPA Australia Advice in in its current form,” PwC partner Anthony James wrote in the letter.
However, this advice came against the backdrop of another issue CPA Australia members had with management. Excessive spending. The $600,000 cost of the report is said to add to a total loss bill of more than $13 million in less than two years. “I think PwC’s review of CPA Australia Advice essentially completes a professional clean-up of all the wrongdoing uncovered at CPA Australia,” Stevenson said.
“There are also no details of the actual financial budgets that allowed this to happen. It must have been the stuff of fairy tales. After all the matters exposed at CPA Australia and this subsidiary, no one has been held accountable and the new board is being pushed for virtually absolute power with an even more disinterested and apathetic membership,” Stevenson said.
While the report may not include any names of those who got their hands dirty, nor show blame, it does provide some constructive feedback. “The CPA should undertake a detailed examination of the most appropriate model for providing support to members who provide advice on financial products and we believe there are a number of potential models that should be considered.”
However, the exact advice given has not been made public due to the sensitive nature of the information. However, CPA Australia accepted the advice they had hoped to receive from PwC and terminated CPA Australia’s consultancy practice. “In light of these findings, CPA Australia has decided to discontinue CPA Australia Advice, although we recognize that the role of accountants in providing high quality independent service fee advice remains important to Australians,” their website states.
“CPA Australia Advice has today announced the decision to all of its existing authorized representatives and employees. CPA Australia Advice will work with all authorized representatives to transition out of business before the end of the calendar year.”