Top Auditor Puzzled By Everton Case Delay
The Premier League has not only questioned Everton, but the integrity of a top accounting firm, claims an experienced auditor.
The decision to delay a resolution on a key part of Everton’s PSR case for the 2022-23 accounts has left a top auditor non-plussed.
Colin Brown, a retired Partner at Deloitte, one of the ‘big four’ audit firms, was left puzzled by an Independent Commission’s decision to leave what he suggests is a simple issue to resolve to a separate hearing.
The issue revolves around the Premier League believing Everton to have been £23.2million over the allowable threshold, while they also took umbrage with the Toffees having capitalised interest payments on their new stadium to the tune of approximately £19m.
Everton disagreed, presenting — and admitting — a breach of £16.6m, but refuting the suggestion they had incorrectly capitalised the interest payments. The £6.6m difference between their figure and that of the Premier League, the club state, is accounted for in interest payments that are directly attributable to the stadium build and which were, as part of the club’s FY23 statutory accounts, capitalised retrospectively in FY21 and FY22.
Having rejected the Premier League’s application to amend its original complaint but, with Everton’s blessing, having accepted the Premier League’s renewed application in mid-March, the Commission elected to split this case into two parts — at least due in part to a lack of time as they rushed to meet the Premier League’s self-imposed deadlines for expediating these processes ‘in-season’.
This Commission felt it could not adequately settle these accounting differences in the allotted time. Instead, Everton will now face another hearing, in front of the same Commission, some time down the line, to settle whether their breach was in fact £16.6m or, as the Premier League suggest, higher. This hearing is expected to take place next season.
This issue essentially boils down to the Premier League questioning an audited set of accounts, but Mr Brown does not believe the Commission should have split the hearing into two parts for what he thinks is a relatively simple matter.
In an exclusive interview with Toffee TV, Mr Brown said:
“When I heard that the Commission had decided this was too difficult to decide quickly, quite frankly I couldn’t believe it. This is not a difficult area. It basically surrounds three international accounting standards. These are global standards that most countries follow. The UK has adopted them pretty much in FSR102, and that’s the standards that the auditors refer to in Everton’s accounts.
“One is IS16, which is property, plant and equipment. One is IS23, which refers to borrowing costs and how you can capitalise them. The other one, which is relevant to Everton is IS8, which covers changes in accounting policies. They’re the three of them. They’re not very long, not very difficult to understand and that’s why I find it difficult to believe they will take a long time to go into and resolve.”
Mr Brown is also surprised that the Premier League has elected to scrutinise Everton’s audited accounts in such a way.
Indeed, he suggests this is another example of the Premier League acting beyond its remit as a regulator.
“Honestly, I have no idea why [the Premier League] would not think this is appropriate. It’s gone through an audit process. The auditors are subject to their own audit regulation. They’ve disclosed what’s happened, it’s in the financials, it’s well within the accounting standards, so I can only think there’s another agenda. Certainly for the second [PSR case], where it means Everton shouldn’t have been sanctioned anyway, they don’t want to look like idiots, basically.
“The Chair of the parliamentary committee told them ‘They don’t know what they’re doing.’ To say that [Everton] can’t capitalise the interest – based on the information we’ve got at the moment, I just don’t see it.
“The Premier League are not managing Everton Football Club. There are several grey areas in accounting at times, and the auditor’s job is to guide you through those grey areas and you get to a resolution that is within those allowed standards.
“[Premier League CEO] Richard Masters and his cohorts have got nothing to do with how Everton are managed. It’s up to the Everton Board to sign off, it’s not up to Richard Masters. The accounting policies are in accordance with the UK accounting standards.”
What about the auditors?
Everton’s auditors for the FY2022-23 accounts were Crowe UK LLP, one of the nations top accounting firms.
Mr Brown is wholly confident Crowe will have been well aware of the sensitivity of Everton’s situation, but that the audit will have been carried out in a robust and rigorous matter.
“They would have been well aware this was a sensitive issue that they needed to have a good look at, and that they’re under regulatory inspection from the FRC anyway. I’m sure they would have gone through a robust process.
“If you look at Everton’s accounts, there are interest expenses in the income statement, so somebody has looked at these expenses and gone ‘Okay, that’s capital, that’s operational, etc’. The operational bit has been charged, the rest of it has rightly been capitalised in accordance with the standards.”
Indeed, Mr Brown suggests the Premier League has overstepped the mark massively and is in fact questioning the integrity of Crowe as an auditor, something which he feels is “unacceptable”.
“You’ve seen all the fury over what Nottingham Forest said, questioning the person who was in charge of VAR and his integrity. If I was Crowe, I’d be in the position that the Premier League are questioning the integrity of my firm.
“The Premier League has got no regulatory right over the audit profession. Crowe have signed off on the audit report, they’ve done their work, they’ve done it in accordance to audit standards, and they are subject to regulatory review. The Premier League sticking their nose in and trying to question what Crowe have done is just unacceptable.
“That’s the point of having auditors there. They sign off. Sometimes audits go bad but they are very rare occasions. Crowe will have been inspected by the FRC. I’ve got every confidence they’ve gone through a very rigours process to get the answer they’ve got to, and they’ve disclosed it in the accounts. It’s all within the accounting standards, the audit standards.”
Everton secured Premier League survival by beating Brentford on April 27th, ensuring they will be in the top flight next season, though reports subsequently emerged on Tuesday, April 30th that the club had called in advisors over the restructuring of debt payments, with these reports linking that to possible insolvency.
The Toffees are also still set to appeal their two-point deduction for a breach of the PSR in 2022-23. This hearing is anticipated to take place in the week commencing May 13th — the final week of the Premier League season.
However, More Than A Game understands a payment from 777 Partners — the American company hoping to purchase Everton — did in fact arrive into the club’s coffers.
By Patric Ridge & JohnB