MPs grill auditors over why Carillion’s accounts were signed off
Pension Regulator and auditors face fierce questioning from MPs over their role in the firms’s collapse.
Officials from the Pensions Regulator and the auditors of Carillion faced fierce questioning from MPs on Thursday over their role in the collapse of the construction giant.
Members of the Work and Pensions, and Business Committees believe they have a “growing pile of evidence” that those involved with Carillion, including investors and hedge funds, saw warnings of its demise.
Frank Field, who chairs the Work and Pensions Committee, asked why the Pensions Regulator did not take action to make company executives address the growing pensions deficit.
Lesley Titcomb, chief executive of the regulator, and Mike Birch, director of case management, told MPs that Carillion was threatened with action and had agreed to pay an extra £85 million into pensions.
But Mr Field complained that the money would be paid over 15 years, with nothing paid for two years.
The officials were asked by MPs how many pension schemes were allowed to spend so long putting recovery plans in place, but could not give a figure.
Rachel Reeves, who chairs the Business Committee, said many people in their 20s and 30s were not saving into a pension, partly because they were worried about whether it would be paid in full later in life.
She said the regulators’ lack of answers about the detail MPs wanted should send “shock waves”.
Ms Titcomb said the regulator was up on the detail, adding that it dealt with 6,000 schemes, engaging with around 200 every year.
Mr Field said directors of Carillion had received “mega-dividends” at the same time as being allowed not to pay any extra money into the pension scheme.
“Why did you not use your powers to get money to pensions?” he asked.
Ms Titcomb said threatening action was often enough to ensure action was taken, but acknowledged that “difficult judgements” were made.
Carillion's annual reports were worthless as a guide to the true financial health of the company Rachel Reeves MP
Michael Jones of Deloitte, an internal auditor at Carillion, told the MPs he did not attend a meeting of the company’s audit committee which agreed a write down figure, saying it wasn’t unusual not to attend every meeting.
Ms Reeves said: “It might not be unusual, but I find it quite surprising.”
Mr Field said it was “extraordinary” that the company was coming up with a write down figure which was then accepted.
Ms Reeves said: “Carillion’s annual reports were worthless as a guide to the true financial health of the company.
“The fact that it was impossible to get a true sense of the assets, liabilities and cash generation of the business raises serious questions about Carillion’s corporate governance.”
More than 1,000 former Carillion workers have lost their jobs since the company went into liquidation last month.
KPMG is already facing an investigation by the Financial Reporting Council.
Mr Field said after the meeting: “We imagined that regulators regulate, and auditors audit. I suppose the employees, suppliers and pensioners of Carillion, and the public, did likewise.
“We were told this morning, however, that these highly paid individuals are mere spectators, commentators at best, certainly not referees, at the mercy of reckless and self-interested directors.
“I fear it is not only Carillion that is built on sand: it is our whole system of corporate accountability.”
Ms Reeves said: “Auditing is a multi-million-pound business for the Big Four. On this morning’s evidence from KPMG and Deloitte, these audits appear to be a colossal waste of time and money, fit only to provide false assurance to investors, workers and the public.
“We heard from auditors who don’t attend audit meetings, fail to visit projects which they themselves say are at risk, and who provide clarity only about what is not included in an audit rather than what is.
“Carillion staff and investors could see the problems at the company but those responsible, auditors, regulators, and, ultimately, the directors, did nothing to stop Carillion being driven off a cliff.”