It has been far too long since the Firm Spy has received anything from its (formerly very lively) KPMG spies. Nothing really substantial, in fact, since we broke news that the KPMG Poo Poll had received Royal Assent from the requisite 70% of staff. The upshot of this was that if “market conditions deteriorated significantly”, KPMG partners would have the option of placing staff on a leave of absence on 30% pay, among other things.

Now, it appears KPMG partners have decided this deal was too generous. We received the following anonymous tip from a KPMG spy last night:

KPMG are offering “voluntary” work agreements over the christmas break. In effect, divisions which are still slow on work, have been encouraged to take leave under the same terms as the temporary work agreements, but you pick when you take the leave. Therefore, voluntary - and means PR wise, the firm never exercised it’s right to put people off on 30% pay. All the while other divisions are working overtime, and they refuse to allocate staff from other slow divisions, as even though there are staff doing nothing - this would allocate the income away from their cost centres. The staff in the busier divisions are disappearing at the hint of a better offer. Perhaps KPMG needs to be thinking about the whole more than the sum of its parts, especially while it’s falling to pieces.

Oh, we get it - if enough volunteers sign up for a Christmas “voluntary work agreement” - the old scheme of forcing people to take leave at 30% pay wont be invoked. Excellent number-crunching! … is a hoarded “good” banned KPMG audit partner responsible?

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It is a different kind of bickering emanating out of KPMG today. Usually we see employees lamenting their treatment at the hands of those superior to them, not those their equivalent. However, Firm Spy corporate bitching has been recast by the following sentiments received from an anonymous KPMG spy:

As a member of the KPMG Audit group - the group keeping the entire organisation above water - I find it difficult to digest the pay conditions levied against us… Im not alone in thinking that our pay reviews should be benchmarked against our performance in isolation, and not tied to how the firm travels more broadly… for example we should be paid more than tax and advisory…

Some of the more colourful comments have been edited. When harsh pay conditions and pay freezes are applied to an entire organisation, it is inevitable that some groups outperforming others will decry their remuneration and stigmatise the underperformers. But is it justified? Can anything less than fantastic employee remuneration be justified by the same Big4 accounting firm that:

• hoards ‘good’ banned employees;
• apparently saved $4,500,000.00 by reducing its graduate intake;
• is rumoured to force its staff to work ungodly hours; and
• implemented a laughable ‘Poo Poll’?

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In the current edition of BRW, KPMG national managing partner James Allt-Graham made the following comments:

We’ve gone to great lengths to hoard good staff… one of the realities in the medium term that we all recognised was that there’d continue to be an incredibly intense war for talent.

KPMG is the Great Southern Land

Are the three KPMG audit partners who were banned from auditing last week by the Companies Auditors and Liquidators Disciplinary Board some of the ‘good staff’ that KPMG has ‘gone to great lengths to hoard’?

Are these guys more worthy of being ‘hoarded’ by the firm than the hundreds of employees made redundant by KPMG in the last few months? Clearly the ‘war for talent’ wasn’t a major concern when the axe was swung in April and February.

It is disobliging, to say the least, that Mr Allt-Graham would impliedly characterise those now-redundant workers as not forming part of the ‘good staff’ worthy of being hoarded by KPMG. But to add insult to injury, Allt-Graham found it necessary in the same article to assert that partners (inlcuding, of course, the verboten audit partners) must be reumnerated well:

We need to strike an equitable split between what’s remunerated to partners and to staff… Partners are an important asset to the business and you don’t want to lose them. Corporations are able to use balance sheets to do that. No partnership can.

What else can corporations do, James? Let’s use Westpoint as an example!

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Three KPMG partners have been banned as registered auditors until at least mid-2010 following their involvement in the audit of the Westpoint group of companies.

As reported by the AFR (18/8):

Brett Fullarton, Robert Kelly and Jonathon Robinson have agreed to be banned for 2 years, 18 months and nine months respectively, rather than face the alternative of having a hearing before the Companies Auditors and Liquidators Disciplinary Board.

Later in the article it is reported that KPMG national managing partner of audit Peter Nash said:

the three would remain in the audit division, where there was a range of work they could undertake for the firm, such as consulting or other accounting work.

Presumably they wont, therefore, simply continue auditing and have a fellow KPMG audit partner rubber stamp their work. The 4000 aggrieved Westpoint investors, each of whom is on average $90,000 lighter in the pocket, would be entitled to consider the bans as a hollow punishment in that case.

Justice served? Send the Firm Spy your news and views!

Despite the successful take-up of the Poo Poll ‘Temporary Work Arrangements’, huge redundancies over two waves, a tenancy reduction and a hiring freeze, KPMG has found it necessary to reduce graduate pay.

In the current edition of BRW, KPMG National Partner of People James Allt-Graham is quoted as saying that graduate

salaries:

had got to a point where it was quite high … This year’s [salary] offers are a couple of thousand dollars less than previous years.

This year KPMG has a total graduate intake of 378, a reduction of 18% on last year. That is a loss of 72 graduate positions across the country. Assuming graduates were paid $50,000 on average last year, and that new graduate salaries will be reduced by $2,500, then, according to our rudimentary calculations, this will net the partnership a saving of …

$4,545,000

Do KPMG partners have an unfair monopoly over all the cash?

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It was with thanks to a courageous KPMG insider that we reported last week that the venerated Poo Poll resulted in an emphatic assent to the ‘Temporary Work Arrangements’. We will now give you the second installment to that post.

Again, these comments are allegedly an excerpt from an email sent by Duncan McLellan, Partner-in-Charge of Audit 2:

“Firstly - it’s no news that this year was difficult for the economy, the business world and KPMG. Our Group has performed very well in this environment with a real focus on finding new work, getting paid better for overruns, improving efficiencies and being flexible with our resourcing. We’ve won many new audits, had people working on significant acquisition and equity market transactions, earned over $1.2m of fees from client secondments, kicked off significant climate change work and the Advisory Group income is somewhere near $3m, well up from last year. Importantly, keeping everyone busy meant we did not need to go down the path other less busy group did with redundancies. That too was assisted by the way we managed staff numbers. Numbers have fallen by 20-30 over the course of the year through the hiring freeze (secondees/contractors), a few less grads and by not extending all the secondee contracts as would usually be the case. We are cogniscent that this places some extra workload on existing staff but this year has shown it is manageable. I expect people resources will also be tight in 2010.

Hmmm… ‘managing staff numbers’, ‘less grads’, a ‘hiring freeze”, a couple of dozen less staff and an expectation that ‘people resources will be tight in 2010’. Perhaps it is time to update the ‘Frequently Asked Questions’ section on the KPMG website:

Q. What are your work hours like?

Full-time KPMG employees work 7.5 hours per day, plus one hour for lunch.

Will KPMG workers keep their jobs if they clock on at 9am and clock off at 5:30pm?

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Thanks to the KPMG spy who responded to our post yesterday. We will divide your courageous revelations into a few posts. To all our followers, please also send us your news, anonymously if you so choose.

The anonymous KPMG spy alleges the following is an excerpt from an email from Duncan McLellan, KPMG Partner-in-Charge of Audit 2:

Pleasingly, we have now passed the 70% mark for the Temporary Work Arrangements sign up. A big thank you for all who signed up - it is great to know there is added flexibility during 2010 should the market conditions deteriorate significantly from that expected. At this point I have no plans to

have they bought a lemon?

implement TWA as our projected utilisation is high. On the overheads side of things we ended up the financial year about $1m better than budget. This primarily came from rent savings (due to the delayed move off Level 14) but also through travel and training savings. Overall, I expect that when the full year results come out next week we will be about $1.5m ahead of budget with $0.5m being revenue based and the rest overhead based. Labour costs for the full year are in line with budget. This is a result we should all be very proud of in an environment where many parts of the Firm are below budget.Importantly too, these results are well up on 2008.

Sounds like The Poo Poll was passed - the Hummer sold! But more than that, if this excerpt is authentic, it amounts to a strong corroboration of several stories the Firm Spy has exclusively broken. Namely, there was a flexible-working scheme to save jobs, it required a 70% take-up rate and the firm is presently reducing tenancy space.

The Firm Spy; Your Fly on the Wall

We reported in June that KPMG workers were being forced to vote on a scheme which the firm said would help save jobs. We justifiably likened that scheme to the financial plight of failed tennis player Mark Phillipoussis; the Poo isn’t the only Australian that blew all their cash when times were better - KPooMG seemingly did too!

We are still yet to hear from any KPMG spies on the fate of the scheme (please email us!), but we can reveal that an

additional ‘option’ is rumoured to have been added; workers able to choose to take 4 weeks of additional annual leave at 50% pay. This option is rumoured to have been in addition to the other “options”.

We can also reveal that if the affairs of Mark Phillipoussis are an indication of whether the scheme will be approved by workers, it seems certain KPMG workers will give it the thumbs down. As reported in The Age (5/07):

Mark Phillipoussis suffereda set-back in his fight to pay off more than $1.3 million in debts when his Williamstown home failed to sell at auction. The … townhouse attracted only three bids yesterday and was passed in at $775,000 after being listed for sale at $950,000-plus… [the Poo] was forced to put it on the market after Pepper Homeloans launched legal action against him in May when he failed to meet the mortgage repayments.

Will the Poo Poll save jobs? Should Mark Phillipoussis ask for a job at KPMG to pay down his debt? Send the Firm Spy your news and views!

As KPMG staff head to the Poo Polls in the next few days, the latest rumour floating about the office is apparently that, if partners are

unable to implement the planned leave of absence/4-day week scheme, more workers will face the sack.

This from a KPMG spy earlier today:

After the second wave of redundancies, most of us thought the intention was to get the national number of employees down from 4500 to 4000. So far 200 have gone. It has been made pretty clear that if the partners dont get the 70% [ed: which is required to implement the scheme], more people will be sacked. the rumours around here are that it could be as many as 300 more.

This sounds alot like the ‘optional’ leave of absence scheme implemented by PwC.

Although unverified, this rumour does seem to eerily accord with comments from another KPMG insider published in the AFR (12/06) in relation to claims the firm is ‘managing’ people out of jobs :

Usually you would get told [in performance reviews] you’re doing well… now you feel that if there’s another wave of redundancies, you’ll be shoved out the door.

How many workers do you think will face the sack if KPMG partners dont get 70% of employees supporting the initiative?

Mark Phillippoussis is apparently not the only half-wit who blew all his cash when times were better. The Firm Spy has been informed that much like the Poo, who begrudgingly sold his Hummer to repay debts, the KPMG partnership has also been forced to take extraordinary measures to stop the rot.

This from a KPMG spy earlier today:

…all workers, partners included, have been asked to vote in two weeks on a scheme designed to save jobs. The options are -

1. agree to take a 20% pay cut in exchange for a 4-day working week;
2. agree to take a sabbatical of up to 3 months on 30% pay
3. or do nothing

It is a ‘vote’ in the sense that if more than 70% don’t vote in favour of it, there will be no mandate to implement it. However, if a mandate is given, there will not be a broad implementation of it, but rather a new discretion in the partners to implement it on an ad hoc basis. If no mandate is given, it is speculated that the first to be sacked (if required) will be those who did not vote in favour of it.

It almost beggars belief that an institution whose entire reason for existence is to advise on matters of fiscal prudence could so gravely have miscalculated the number of workers it would need. Not once, not twice, but thrice. On three separate occasions now the KPMG partnership has been forced to revise its employee numbers. First there was the KPMG KO, in which dozens were sacked without warning. Then there was the second wave of redundancies, taking the figure to a total of 200 sackings.

Will the third cut be the deepest? Send the Firm Spy your news and views!