FRC publishes its draft 3-year Plan and Budget for 2022-25

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19 Jan 2022

The Financial Reporting Council (FRC) has published a consultation on its 3-year plan and budget for 2022-2025. Comments are requested by 1 March 2022.

The 3-year Plan acknowledges the FRC’s continued commitment to being an effective and transparent regulator as it prepares to transition to the Audit, Reporting and Governance Authority (ARGA). It contains a detailed breakdown of intended expenditure for 2022-23 and a summary of the expected trajectory of overall costs and headcount for the following two years.
 
In setting out its plan, the FRC have considered how, and when, it will need to increase the capacity to adapt to new powers and responsibilities. In 2022/23 overall costs are budgeted to increase by £9.1m with similar growth anticipated in 2023/24, being the year in which ARGA is expected to be created, followed by a period of stability and consolidation from 2025 onwards.

In line with this, headcount is expected to increase in 2022/23 from the current budgeted number of 417 in March 2022, to 489 at March 2023 with similar growth forecast in 2023/24, followed by smaller growth in 2024/25.

The plan details the FRC’s high-level assumptions on key divisional priorities across its four divisions which are: Regulatory Standards, Supervision, Enforcement and Corporate Services.  It also sets out the FRC's strategic priorities for 2022/23 in these areas as follows:

Regulatory Standards and Codes

  • Development and maintenance of standards and codes, including the periodic review of FRS 102, adoption of ISA (UK) 500 and ISA (UK) 600, and post-implementation review and revision of technical actuarial standards.
  • Alignment of its Corporate Governance & Stewardship monitoring and evaluation programme.
  • International influencing of auditing and ethical standards, and significant contribution to non-financial reporting developments in the UK and internationally.
  • Preparation for ARGA’s local audit systems leader role.
  • Activities focused on improvements and innovation to support high quality reporting and audit quality.
  • Promoting the use of technology throughout its policy areas
  • Supporting its objectives and activities through increased stakeholder engagement with impact and influence, including an overhaul of planned publications focused on collective impact.

Supervision

  • Deliver a full programme of high-quality Audit Quality Review (AQR) inspections, Corporate Reporting Review (CRR) reviews and professional oversight visits and publish associated reporting, including thematic reviews.
  • Carry out ISQC inspection work and prepare for ISQM1.
  • Increase supervision of audit firm culture.
  • Assess audit firms’ adoption of operational separation principles.
  • Implement Public Interest Entity (PIE) audit registration decision-making.
  • Increase intensity of forward-looking supervision of audit firms, with more ‘joined up’ regulation of firms’ actions on quality.
  • Negotiate mutual recognition agreements resulting from EU Exit.
  • Perform equivalence and adequacy assessments.

Enforcement

  • Fair, robust, and timely case closures or conclusion through focus of investigations, prioritisation, training, and recruitment.
  • Upskilling and training to respond to changes in AEP from January 2022 and implement future powers arising from regulatory reform.
  • Publication of the Annual Enforcement Review, driving improved behaviours through messaging case outcomes.

Corporate services

  • Develop a statutory funding model for ARGA.
  • Develop and implement an integrated information management strategy, including a medium-term IT strategy and enhanced data analytics and reporting.
  • Enhance cybersecurity risk management.
  • Appropriate workforce planning, aligned with the business planning cycle and designed to incentivise, reward, and retain key skills.
  • Strengthen support infrastructure, including in finance and procurement systems, internal controls, and IT.
  • Legal support for regulatory reform and legal and operational support for the UK Endorsement Board (UKEB).

The draft 3-year plan also covers other areas such aa governance, risks and challenges and KPIs. The FRC also sets out its proposed budget for 2022/23 for expenditure and funding.

The press release and draft 3-year Plan and Budget 2022-25 are available from the FRC website.

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