Corporate report

Thematic review by the Insolvency Service of monitoring by ICAEW, ICAS and IPA of redundancy payment work by Insolvency Practitioners

Published 28 April 2023

1. Overview

The Redundancy Payments Service, funded by the National Insurance Fund, received a number of claims in 2020-21 which were subsequently discovered to be fraudulent.

Investigations by both the Insolvency Service and by the respective Recognised Professional Bodies (RPBs), found that the actions of some IPs who submitted the supporting documentation for some claims was below that expected of them as Insolvency Practitioners.

In December 2020, the Insolvency Service reminded Insolvency Practitioners of the expectations regarding submission of forms to RPS, in particular form RP14A, by way of Dear IP Issue 117. The article further informed Insolvency Practitioners of indicators to bear in mind when considering whether a company’s formal insolvency may be being used to perpetrate fraudulent redundancy claims.

This thematic review was commenced to enable the Insolvency Service to understand how the Institute of Chartered Accountants in England & Wales (ICAEW), the Insolvency Practitioner Association (IPA) and the Institute of Chartered Accountants of Scotland (ICAS) approached the redundancy payments claims related work of their respectively licensed Insolvency Practitioners.[1]

2. Review findings: Summary

The primary findings of this review were threefold.

Firstly, when each RPB considered an Insolvency Practitioners’ redundancy payments claims work, this work was conducted at a level in line with the Insolvency Service’s expectations.

Secondly, there was variation in the volume of sampling undertaken by RPBs; and there were constraints in terms of sampling cases with profiles akin to those flagged in Dear IP 117.

Thirdly, further dialogue with RPBs has been useful and necessary on the detail, nature and scale of risk to the National Insurance Fund.

More detailed feedback has been provided to each individual RPB and the Insolvency Service, which is subject to further follow-up.

3. Review Approach: What did the review consider?

This review looked at

• the monitoring work of the RPBs,
• relevant complaints against IPs considered by each RPB and;
• how each RPB considered the RPS claims when risk profiling.

(i) Monitoring

Each RPB was asked to provide copies of monitoring case file documentation, including the checklists utilised by each of the RPBs’ monitors, in instances where the monitors[2] had identified and considered relevant employment claims matters.

ICAEW provided 33 case files, the IPA provided 4 case files and ICAS provided 3 case files.

(ii) Complaints

Each RPB was asked to provide information regarding complaints they had investigated since the commencement of 2020 concerning RPS claims.

ICAEW confirmed it had considered 3 such complaints, the IPA confirmed it had considered 4 and ICAS 1.

(iii) Risk Profiling

Each RPB was asked to provide information about any changes made to their systems or approach in relation to monitoring Insolvency Practitioner involvement in RPS claims following the concerns raised by the Insolvency Service in Dear IP 117.

All of the above documentation, and information, was then reviewed, providing the data from which the findings and recommendations of this report were formulated.

4. Conclusions

When RPBs conduct monitoring of, or considers complaints that have allegations relating to Insolvency Practitioners’ adherence to their statutory and/or regulatory standards when carrying out RPS claims, their work is, overall, conducted consistently, and achieves outcomes in-line with the regulatory objectives. This is welcomed.

However, reviewers did note the relatively low volume of RPS related case files that have been subject to monitoring and inspection in some cases.

Whilst each RPB has confirmed that it factored-in, or had previously factored-in, the issues raised within Dear IP issue 117 into its risk-based approach to monitoring, the reviewers recommend further dialogue in this area.

The Insolvency Service will also be following-up regarding targeted monitoring activity in relation to Insolvency Practitioner activity with companies whose corporate structures mirror the indicators of concern, as detailed within Dear IP 117.

When RPBs are considering complaints against Insolvency Practitioners relating to RPS claims, they are aided when intelligence and evidence is made available to them by the Insolvency Service, and this should be increased if possible through regularly dialogue between the RPS teams and the RPBs.

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[1] Redundancy payments and the regulation of IPs in Northern Ireland is a devolved matter and is not covered by this review. No IPs from Chartered Accountants Ireland had made claims in relation to companies in England, Wales and Scotland within the period of time covered by this review and as such no comments are detailed upon the work of CAI.

[2] The titles for RPB’s respective monitoring staff varies, and includes ‘Inspectors’ and ‘Reviewers’. We use the phrase ‘monitor’ here to include both.