Deloitte Barnacles Bonus Bill & PwC Lacks Maturity in MASSIVE Growth Surge

Bonuses Denied Despite Deloitte Growth

Australia’s fourth largest accounting firm by revenue, Deloitte, this year grew its income by an incredible 14 per cent. At that rate, the firm will have doubled its size in less than 7 years. Its an incredible proposition, really, given the wholesale diminution we’re seeing in property prices. The firm made revenue of $935million in 2010/11.

But let’s not forget that growth of this magnitude can only be achieved by the diligent workmanship of employees across the firm. It is thus critical for those employees who sacrificed their weekends and attendance at social engagements in order to grow the firm that they receive special recognition. Traditionally, this kind of recognition comes in the form of bonuses, although not, we’re informed, for Deloitte’s Corporate Finance group.

We received the following edited rumour from a Deloitte spy a few weeks ago:

P*ssed off does not describe the emotions around the [Melbourne Corporate Finance Group] at the moment. We’ve all just become aware of the fact that the group apparently missed budget by just a couple of hundred grand. It sounds like alot when you say it like that, but a couple of hundred K is chump change compared with the full year target and to come so close is incredibly frustrating since it means we are now ineligible for bonuses.

… Sure, some might say it is just bad luck, but I have unofficially heard that a bad debt of about $200,000 is the real reason we came in just under budget, with the partnership calculating that prosecuting and winning a claim for the debt would actually be of less value to the firm than having the debt paid, reaching budget, and therefore having to pay bonuses to staff.

GULP!!

If our tipster is to be believed, Deloitte had no incentive to chase up the debt because doing so would cause the Corporate Finance group to reach its budget threshold, therefore entitling staff to bonus payments that would exceed the satisfied debt. An easy decision, we would have thought, for a bunch of accountants, but to be sure, we sent Deloitte’s head of communications the following email:

—————————- Original Message —————————-
Subject: Request for Comment
From:    news@firmspy.com
Date:    Thu, August 25, 2011 1:12 am
To:      [name]@deloitte.com.au
————————————————————————–

Hi [name],

We have been advised that Deloitte’s Corporate Finance group missed its
budget target for FY 2010/11 by under $200,000 and, consequently, no staff
were eligible for bonuses.  We’re not sure if it was just the Melbourne
group or the entire Aust group. Controversially, we’ve been further
advised that the group in fact achieved its budget, but by reason of a bad
debt, the group marginally missed out. We’ve been informed that a
commercial decision was made by the relevant partners not to pursue the
debtor because the firm stood lose considerably more money in bonus
payments than it stood to gain if the debt were paid.

We’re intending to publish something on this tomorrow, so get back to us
in the next six hours with a comment, if any.

Regards,

FS

Despite affording the firm several days in which to respond, we’ve heard nothing back. What do you think? Would a group of corporate partners barnacle a bonus-bill so brazenly?

PwC Posts Huge Growth After Redundancy Ultimatum

On the topic of dodgy accounting, PwC retained its title as the country’s largest accounting firm by revenue in FY 2010/11, this year notching an increase in receipts of 14.7%. This took the firm’s revenue to $1.43billion, or approximately $330million more than the amount by which its audit partner, Stephen Cougle, underestimated Centro’s debt level in FY 2006/2007.

With such stellar financial results, one would be forgiven for second-guessing the commercial exigence that necessitated the firm’s decision to offer several Melbourne grads a cruel ultimatum in July. Yes, you’ll recall that PwC “offered” a group of Melbourne-based tax grads the “great opportunity” to relocate to another city. The trouble, of course, was that if the grads didn’t accept, they would apparently have been left jobless.

But before we too quickly condemn PwC for unjustifiably messing with the lives of its junior staffers, let’s address a likely response ahead of time – that the firm’s results aren’t actually as good in reality as they are on paper [PwC fudging the numbers? Who would have thought!].

According to the AFR (15/08):

A substantial portion of PwC’s perceived growth came from a restatement of its 2009-10 financial year earnings to take into account the sale of the PwC Indonesia practice, worth about $110million in fees, of which PwC owned 100%. Without this adjustment, PwC earnings would only be up 5 per cent.

Seems like an excellent result to us, given the state of the economy, but perhaps tax was specifically hit harder than other groups? Not so, according to the AFR:

Traditional tax and audit areas saw … growth of 5 and 2 per cent respectively

5% growth!?!?! With that number in mind, we remain utterly perplexed as to the justification, if any, that can be given to explain the firm’s vast overestimation of its staffing requirements. Even Chief Executive Mark Johnson made it clear that the tax group isn’t the kind of area that requires complicated staff forecasting, with the AFR reporting:

Mr Johnson admits that tax and audit areas are more mature business lines with less scope for expansion.

Sounds like someone in the recruitment department lacked the maturity to carefully consider PwC’s staffing requirements before sending out offer letters. What do you think?

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