The UK Financial Reporting Council (FRC) wants to tap large private companies and public sector organisations to help fund its responsibilities for regulating accounting, auditing and corporate governance.
The regulator has released a new funding proposal following the UK government’s announcement in February 2008 that these costs should be funded largely by market participants. At present, the government pays about a third – approximately £3.5 million ($7 million) a year.
The FRC said its funding costs should be met by the major groups of market participants that are subject to, or have regard to, the regulatory requirements which it sets, influences, monitors or enforces.
It intends to replace the government grant through a combination of expanding the group of market participants who contribute to its costs and increasing the contribution from existing contributors.
Large private companies and public sector organisations are two groups the FRC has identified that are subject to its regulatory requirements but do not currently contribute to its costs. The FRC has estimated the size of the contribution from these two groups if they were subject to its levy on publicly-traded companies, basing the contributions from private companies on turnover, and from public sector organisations on expenditure.
The proposal applies discounts to both groups to reflect the fact that not all the FRC’s regulatory activities apply to them. For private sector companies, a 50 percent discount has been proposed; for public sector organisations it is 75 percent, which reflects the fact that although the FRC is not responsible for setting public sector accounting and audit standards, the public sectors has regard for FRC standards when it sets its own.
On the basis of its 2008/09 budget of £11.9 million for its core activities in relation to accounting, auditing and corporate governance, the FRC estimated private companies would contribute 11 percent of its funding (£1.3 million) and public sector organisations 5 percent (£500,000).
The two existing groups of contributors – the professional accountancy bodies on behalf of the accountancy profession and publicly traded companies – would see their shares of funding contributions rise from one-third to 42 percent each.