By Tony Attwood
Now I want to make it clear that this article, which deals with regulating football club auditors and the like, takes me beyond my normal field of writing, so if I have got some detail wrong in what follows, I apologise and would be glad if you could correct my error with a reference to a reputable source. To be clear there are various letters I am entitled to put after my name, but none of them qualify me as an accountant!
So, to begin. The Financial Reporting Council “regulates auditors, accountants and actuaries,” and it sets “the UK’s Corporate Governance and Stewardship Codes.”
And that is most interesting for the likes of me as we now have a report that says that “The Financial Reporting Council has confirmed it is examining Manchester City’s financial statements and the work of its auditors, BDO, following the Premier League commission’s findings.”
We are told that “The UK audit regulator has confirmed it is leading inquiries into accounting irregularities at Manchester City.” Which of course does not mean anything is amiss, but that the regulatory bodies are simply looking into things. Which is what they are paid to do.
Now among other things that “The Financial Reporting Council confirmed in a letter to the House of Commons business select committee it had taken over ‘regulatory consideration’ of the case from the Institute of Chartered Accountants in England and Wales on 30 September.”
Which is not to say a formal investigation has been initiated, but rather the Council is looking to see if it should be involved since obviously organisations such as the Council don’t start investigations unless they have good reason to feel that there might be something to discover. And “might” is the key word. My understanding is that the FRC is making what might be called “initial enquiries”. If anything does not look right, they might go further – but just enquiring does not imply rules have been broken.
Now what has triggered this is the fact that the club has been found guilty of breaking Premier League financial regulations between the 2009-10 and 2017-18 seasons, and the finding includes the notion that as the result of some misreporting they have artificially inflated the financial position of the club by rather a lot. But I stress, that’s a “notion” not an allegation.
It appears from what I have read that the club are resisting the requirement to reveal all the relevant documents (but again I have no proof of this). But it is interesting that the issue has reached the Financial Reporting Council because this is the relevant regulatory body and quite simply, they are the regulators. So as I understand it, this is an organisation that is used to looking at slightly unusual matters within company accounts and reports, with (again as I understand it) the prime aim of ensuring that the good name of the UK limited companies is maintained. It’s a bit like going through a speed check in a 30mph zone. Just because you are checked it doesn’t mean you’ve broken the law.
As I think I have mentioned several times before, prior to my retirement I was chair of a small public limited company and during that time we had some engagements with the various regulators – not because we had done anything amiss, but as part of their checking procedures. We were always shown to have done everything by the book, but I am interested here because I have never heard of these guys looking into a football club before. Maybe they do regularly and I’ve missed it, but for the moment it looks a bit unusual.
As I understand it, the Financial Reporting Council are just looking at what the football club’s auditors have been up to, and how vigorous the audit has been – but of course I’m only picking up information from newspapers etc.
Now with this I am pretty much on the edge of my knowledge of how these things work, since the plc I chaired was very much on the small side but it appears that Manchester City have BDO as their auditors, which is an international network of public accounting, tax and advisory firms. So the club can bring in the big-time agencies.
Now this is absolutely not to suggest that Manchester City FC nor BDO nor anyone else has done anything wrong. But all I can say, having run a comparatively very tiny plc, even when nothing is amiss, such an investigation can be quite disruptive and disquieting. There was absolutely no suggestion my company had done anything amiss, and it could well be that this is exactly the situation with ManC. We were in fact found utterly blameless in every regard, I would add, and obviously I have no reason to believe that ManC have done anything wrong.
But I have seen it reported that “The independent commission which looked into Manchester City found that the club gave a “misleading impression” of the scheme used to disguise the origin of shareholder funds injected into the club to its auditors, who were “unaware” of the scheme.” But the club has announced its intention to appeal so again there may be nothing amiss at this point. We now must wait for the final ruling by the independent commission and if it is not to laden with legal terms I don’t understand, I’ll try and write a brief summary for a subsequent article.
