CPA missed major deadlines, business targets with SMSF licensing

CPA missed major deadlines, business targets with SMSF licensing

Missed major deadlines

CPA Australia Advice, established when SMSF advice licensing regulations changed, missed ASIC reporting deadlines, has lost $7.4m to date, and had a questionable remuneration structure in place.

A panel chaired by former auditor-general Ian McPhee, has 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 the panel is aware of. It also follows scathing preliminary findings into CPA Australia advice, which you can read more about here.

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 report also revealed the 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,” the panel said.

 

CPA missed major deadlines, business targets with SMSF licensing
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