Fees for Auditors/Administrators/Liquadators

kippy

One of the main articles on RTE.ie this morning is about the fees paid in relation to the administrations of Lcarom.
Article here:
http://www.rte.ie/news/2012/1012/480-hourly-fee-for-icarom-administrator-reduced-business.html

The President of the High Court today cut by 25% the €480 per hour fees sought by the administrator of insurance company Icarom.

The administration has lasted almost 30 years and is expected to conclude shortly.
It also cut the average €330 hourly fees for his staff after noting "a great deal of public disquiet at the level of fees charged for this type of work".
The fees sought had not been objected to by the Central Bank.
Icarom was formerly the Insurance Corporation of Ireland which collapsed in the 1980s leading to an insurance levy being imposed.
The administration has lasted almost 30 years and is expected to conclude shortly.
Some €10m was paid back to the State's Insurance Compensation Fund out of the administration last year.
Donal O'Connor was appointed Icarom administrator in 1990 and, after he retired in 2008 as a partner in accountancy firm PricewaterhouseCoopers in 2008, the Department of Finance agreed he would continue in that role with the assistance of PWC staff.
Mr Justice Nicholas Kearns said today, because he must be satisfied the fees sought were not in excess of the norm approved by the court, he would not approve these fees and was cutting them by 25%.
In addition to the €480 fee claimed by Mr O'Connor, he was told the average hourly fee of other staff of PWC involved in the administration was €330. That average, the judge noted, took into account the lower rates of "footsoldiers".
The court heard the hourly rate of partners in PWC was €580 but Mr O'Connor was not seeking that and was instead seeking €480 an hour.
In calculating the hourly rates, Mr O'Connor said in an affidavit he applied the same method of charging and basis of charging used by PWC for any other commercial client.
The rates charged for PWC staff in the period January to December 2011 ranged downwards from €580 for a partner, €470-€390 for directors, €480-€355 for senior managers and €105-€148 for assistants.
The judge approved without alteration the fees sought by Deloitte as auditors to Icaram, which he was told averaged out at €180 an hour.
The firm will receive almost €50,000 for their work for Icarom in 2010 and the judge reappointed it to audit the company for the years 2011 and 2012.
The Central Bank had indicated in a letter to solicitors for the administrator this week it had no objection to the fees application.
In his affidavit seeking approval for the fees, Mr O'Connor said, following transfer of Icarom's Irish business to another insurer in July 1990, Icarom's activities have been concerned with the orderly run off of all the liabilities of the remaining business.

Why exactly are the fees paid for this type of work so high and does anyone know what the total fees paid for this business are (bearing in mind it's been around since the 80's and is still costing us in our insurance)?

As an hourly rate these have to be among the highest in any profession. It is interesting that the auditors fees are close to €200 an hour. The same auditors who failed miserably in the auditing of the books of many big business's and banks in the Celtic Tiger years.

johnnyskeleton

What do you think the fees should be? Bearig in mind overheads like rent, electricity, phones, secretary/support staff, insurance etc and also that if difficult professional jobs only paid minimum wage atthe top end no one would do it?

I suppose they could have gone to a smaller accountancy firm who would charge a lower rate, but if anything went wrong people would complain that they cheaped out on it.

kippy

johnnyskeleton wrote: »

What do you think the fees should be? Bearig in mind overheads like rent, electricity, phones, secretary/support staff, insurance etc and also that if difficult professional jobs only paid minimum wage atthe top end no one would do it?

I suppose they could have gone to a smaller accountancy firm who would charge a lower rate, but if anything went wrong people would complain that they cheaped out on it.

It's a general query as opposed to hammering these companies for getting the "cheaper option".

Does anyone here think that some of the hourly rates mentioned in that article are in any way "reasonable" for the services provided?

I can well understand that business' have a lot of costs to cover but I cannot understand why some of these business who have failed badly in the past can still justify their hourly rates.

johnnyskeleton

kippy wrote: »

johnnyskeleton wrote: »

What do you think the fees should be? Bearig in mind overheads like rent, electricity, phones, secretary/support staff, insurance etc and also that if difficult professional jobs only paid minimum wage atthe top end no one would do it?

I suppose they could have gone to a smaller accountancy firm who would charge a lower rate, but if anything went wrong people would complain that they cheaped out on it.

It's a general query as opposed to hammering these companies for getting the "cheaper option".

Does anyone here think that some of the hourly rates mentioned in that article are in any way "reasonable" for the services provided?

I can well understand that business' have a lot of costs to cover but I cannot understand why some of these business who have failed badly in the past can still justify their hourly rates.

Well to assess whether they are reasonable you have to look at their overheads etc. You also have to look at their competitors. Maybe to handle such a big job there are only a few firms large enough and they all charge similar rates etc.

Head The Wall

johnnyskeleton wrote: »

I suppose they could have gone to a smaller accountancy firm who would charge a lower rate, but if anything went wrong people would complain that they cheaped out on it.

It's not like going with the big expensive prestigious firms turned out any good the last few years, maybe it's time to let other players a chance.

What the hell are the doing in this company anyway if they could pay back 10 million last year. Could they not just wind it up because if seems liek they have enough funds collected and stop collecting the levy from insurance customers.

Geuze

The hourly rate for partners of PriceWaterhouse Coopers is 580 per hour.

Donal O'Connor, now retired from PWC, asked for just 480 per hour.

How generous of him.

The Judge refused, and cut the rate by 25% to 360 per hour.

Geuze

Before we cut the min wage or pensions, we need to first cut:

legal fees
accountancy fees
audit fees
commercial rents
medical costs
legal claims costs

It's these protected groups that have been over-charging, and so driving up the costs of doing business.

sock puppet

Geuze wrote: »

Before we cut the min wage or pensions, we need to first cut:

legal fees
accountancy fees
audit fees
commercial rents
medical costs
legal claims costs

It's these protected groups that have been over-charging, and so driving up the costs of doing business.

How can you cut audit fees? And what makes you think they're high by international standards?

Head The Wall wrote: »

It's not like going with the big expensive prestigious firms turned out any good the last few years, maybe it's time to let other players a chance.

I don't think the likes of BDO or Grant Thornton are any cheaper.

Red Crow

Geuze wrote: »

Before we cut the min wage or pensions, we need to first cut:

legal fees
accountancy fees
audit fees
commercial rents
medical costs
legal claims costs

It's these protected groups that have been over-charging, and so driving up the costs of doing business.

How do you cut auditors fees?

Typically audit fees are cheap as companies like PwC, KPMG, Ernst & Young, Deloitte etc. make their money from taxation, fraud services, advisory services, transaction services and sell the audit at 'below cost'. The EU are looking to regulate the industry further but not the way of costs more along the lines of the monopoly involved. eg. The EU are trying to stop firms from auditing the accounts and providing other services like tax advice etc. at the the same time.

You can't just cut legal fees and general accountancy fees further. These are expert services and are remunerated as such. 99% the costs are just and equitable. The work load involved and the legal implications are severe. If we can't provide assurance in the accounts due the cutting of fees then we may as well not bother auditing at all becuase it will serve no purpose if Ireland or the EU is viewed as being backward in the finance industry. If you cut the costs at the ground level then the assurance goes along with the experts.

From your post I imagine you don't have knowledge of the area at all. Why don't we start cutting directors fees? Why not decrease VAT? etc. etc. We can make blanket statements without really thinking about their consequences very easily. The last thing we need to do is start lowering costs for services that are far too discrepant to even consider puting a ceiling on them in the first place.

If the state imposes a blanket €200 fee per audit per year then your tax services replace the cost of the audit. It's not feasible and it's a silly suggestion at the time when we need confidence and assurance in our business.

Cookie_Monster

€30m over the last 30 years, not bad money if you can get it.
€1m a year to administer a defunct company is ridiculous, never mind other staff rates on top.

Geuze

http://www.competitiveness.ie/media/15102012-Dublin_Economic_Workshop-Paper.pdf

See p12 of the above recent paper by the head of the National Competitiveness Council.

While acc fees have fallen (good), legal fees haven't budged much.

The IMF have warned us to tackle these proctected sector to drive down business costs.

Geuze

In the Icarom case, see above, audit fees were just 180 per hour.

The administrator was looking for 480 per hour.