Preparing for the new legislation

So, having completed the last of my compliance visits the week before Christmas, I have started working through the detail of the new Rules and the changes in the Act, in preparation for 1 April – two spreadsheets, three paper files, four sets of legislation and several hundred cups of coffee. By the end of next month, I expect to make available two things –

  • A rule by rule guide to the changes in the Insolvency (England & Wales) Rules 2016.
  • The first of a series of updated compliance checklists for each main case type and the new, common parts, which can be used as final checks to ensure that your documents and forms cover the most essential features of the rules.

More on those things in a later blog.

But there are some areas of the new processes that really need more explanation. ICAEW and others are running all sorts of webinars and I suspect they will be great, but being a little old fashioned, I intend to write a limited series of guidance papers on key areas of the new legislation.  The first titles are

  • CVLs and how to get appointed safely.
  • Decisions, decisions, decisions.
  • Progress and closing reports – what, why, when and where

In between, I expect to blog on a range of topics in an attempt to help you through the process.

Oh, and by the way,

Happy New Year


Strategies for casework (and fees)

One of the consequences of the imminent changes to the fees regime is to turn strategic planning from a nice idea into a practical necessity. First of all, the effective fee caps will mean that poor work execution will be even more costly than it was. Secondly, the RPBs will quickly penalise firms that aren’t able to demonstrate that their fee estimates are based upon a rational plan for the work.

Unfortunately, I don’t think many firms’ planning and review systems are fit to meet these new requirements successfully. The ones most at risk are those who have no standard planning documents at all, but even amongst those that have, most are still using “single issue” media – paper notes or word templates for both the planning and subsequent reviews, rather than flexible data systems like Excel where all information can be easily carried forward and updated as you go, in a single package.

For those of you who haven’t the time or inclination to work up your own such system I am, as always here to help; for those with the time, here are a few pointers –

  1. The initial strategy document should be in a standard form that includes all the usual case metrics – name, type, trade, introducer, principle contact – but also a summary of anticipated recoveries, investigation areas and close-review areas, such as trading, potential onerous property, tax investigations, etc.
  2. The initial strategy should also include a projected “budget” for the case. If designed in Excel, it can be linked to or be the basis of the estimated outcome statement that should be the backbone of any fees estimate, giving a projection of dividend prospects, if there are any.
  3. Crucially, you should be trying to complete the initial strategy in advance of appointment, at least to first draft stage. It can therefore provide a ready reminder to all staff involved in the case as to pre-appointment requirements (e.g. get the pre-appointment fees in, notify charge-holders, secure the books and records, complete pre-appointment due diligence, etc.) as well as what you expect to do post -appointment,  And you can also indicate the timings of critical elements of the work to be done, such as a review of accounts.
  4. The form should, as far as possible, be something that can be easily referred to in subsequent reviews, meaning that there is an available audit trail for all critical decisions in the case. This is where an excel based system will score heavily over paper or Word documents – figures from projections, initial and review comments can all be set up so as to feed into later documents.
  5. Put the strategy document wherever it can be easily accessed from the file – at the front of a paper file or in its own designated folder in a “paperless” system.

There are extra benefits to good strategic planning. These mainly revolve around that tricky business of delegating work to more junior members of staff. The test of a well-designed system will be the extent that it encourages your staff to take ownership of the case.  Try to get the administrator, rather than you or the manager, to fill in the strategy document perhaps in, or after a meeting with you. Once completed, either you or the manager can review, amend or add to it and then print off a copy for signature. From that moment forward, everyone in the team will be aware of all the things that need to be done and when. They will be that much more aware of the time available to spend on preliminary investigations, creditor claims and so on and they can directly populate their diary with key dates for specific tasks, well in advance of execution.  This shoud mean that more of the work is being done at lower charge-out rates, where the leverage to actual salaries should be greater, yielding better profits with (hopefully) less aggravation.

As you may gather, I am a real fan of this kind of system and have done work on two or three over the years and have developed a generic package that can be adapted to any practice.  To take things further or just have a chat about what’s possible, call or drop me an email.

Learning from my clients

Although it seems pretty obvious, now, I am fortunate that one of my first clients is both a) relatively easy going, b) not afraid to voice his opinion. Yes, I know, there are a lot of IPs of whom that could be said, but too many years as an ICAEW reviewer may have made me forget the “easy-going” side.

Anyway, I had been trying to avoid pestering A for his response to the report – I didn’t want to seem too needy, but two weeks on, I finally gave him a call. The conversation went something like this –

Me – “Hi A. How’s things? Did you get to read the report and are you satisfied with it?

A – “Fine and yes, but my staff haven’t yet had time to check through all the points.”

Me – “Well, that’s okay. Anything major you think might have been misinterpreted?”

A – “Yes. We don’t agree on xxxxxxx and on the VAT thing, we are pretty sure you missed an email, but we haven’t yet had the time to find it.”

Me – “Mmmm – that could change the balance of the report quite a bit. Maybe you should let me have your findings when you’ve got them and I’ll look at a re-draft.”

A – “Well that is what happens with the ICAEW reviews, but I don’t want to have to pull people off other stuff for a couple of days to find these things right away. I’ve got a practice to run, too.”

The conversation went on, exploring what we could do that would not involve disrupting his staff and also wouldn’t involve endless and therefore costly meetings with me to deal with things I hadn’t seen, or with differences of opinion. The result is a really good improvement for my reporting process which I intend to incorporate wherever there is time to do so[1].

  1. Instead of issuing a final report within three working days (as I have done up to now) I’ll issue a draft.
  2. The firm will then have four to six weeks in which to – check for what I may have missed or misunderstood – rectify the most immediate errors on cases – draw up a plan for dealing with changes to systems. This not only avoids the disruption involved in dealing with everything more urgently, but will also give the IP the chance to do remedial training with the staff, on their live files, which is always going to be more effective than a purely class-room seminar will be.
  3. The firm will let me have a summary of those three things (my mistakes, their corrections and any longer term plans) at the end of that six weeks, to incorporate into a final report.

Of course, if there are very few issues and they are all pretty simple, the extra time finalising the report won’t be much. But if it does require an extra couple of hours to redraft, it will still be worth the extra cost for a more complete report to the RPB. At the least, it should void that opening comment I heard so often as an RPB reviewer,”I know it says that in xxx’s report, but we later found yyyy and zzzz, to show they’d misinterpreted it.” This is not just awkward – the reviewer will usually need to see the relevant papers and he/she may have to alter the plan for the visit, which is not a great way to start.

Thanks, A.

[1] Different RPBs have different rules on when they need to see the evidence of a review and there may be issues that need urgent discussion and resolution, so this may not always be possible.

Compliance by the numbers, 2

One of the things which I have always felt we reviewers could handle better is the guidance we give on the seriousness of our findings in compliance visits. The problem is that an RPB compliance visit doesn’t just look at the findings on any one file in isolation – context is everything.  A few late reviews in one practice, where there are no other significant issues might only attract a plea to be more consistent – but if it’s a recurring problem with other issues, the licensing authorities will feel start to worry about what else might go wrong at a practice – rightly in my view.

So, it is important to deal with all compliance issues that are raised in any review. Equally, I don’t think it is right to treat all compliance issues with the same priority. IPs in smaller practices can’t simply drop everything to address all systemic issues together. And while RPBs tend to understand that, I think IPs can still lose a great deal of time and energy working on things that don’t need such immediate all-out attention.

“So, why don’t the RPB reviewers give more guidance?” I hear you ask. Well, some will make some limited comments, but an RPB reviewers’ main priority is to point out the issues. He or she only has limited time at your practice and will only get a limited understanding of your systems and staff and resources in that short time. In any case, their chief concern will be to write up a clear report for the licensing committee; after all, it is only the committee that has the power to decide. This is also why RPB reviewers are generally quite reluctant to leave anything out of a report or to vouch too much of their own opinion in case the RPB takes a different tack.

But as a compliance advisor, I think you should be able to expect me to give pretty clear indications on seriousness and priority, at least to start you off. On a first visit, I may not get to know a lot more about your systems than an RPB reviewer but you are my client….. So, I have developed my own grading system to help make my reports that much more helpful. I found it a refreshingly clear way of organising my thoughts and, so far, at least, my first clients seem happy, too –

Grading Explanation
Dangerous Any exception(s) to the Rules or SIPs which raise serious questions about the actual or perceived integrity, capability or fitness of the IP. Anything actionable against the IP; findings which are likely to lead to action by the courts, the regulator or both.
Significant Exceptions or systemic issues which threaten the effectiveness or quality of outcome for key-stakeholders (real or perceived); things which, could well lead to regulatory action even if no dangerous exception arises.
Worrying Exceptions which may put doubts into the mind of a third party, over the quality, thoroughness or reliability of the IP’s work – generally related to systems or methods of practice. Again, left unaddressed, they will lead to worse problems.
Minor Exceptions which appear isolated and have no significant effect on the outcome of the work, but which should receive attention to ensure they don’t get worrying.
Good stuff! These are things which you are doing that I think raise the bar on common standards or procedures.


By grading it this way, I like to think that my clients will understand the immediate implications of my findings more readily and be able to prioritise their remedial work accordingly.

On remedial work, I think the key principles are speed, effectiveness and robustness. With anything “dangerous” I would say to you, “drop everything – get this sorted”. If remuneration has been overdrawn, pay it back right now; don’t wait for the time costs to accrue – the RPB will think that you are showing insufficient care. If you discover an ethical problem has been overlooked, talk to me or a good insolvency solicitor about meaningful ways of addressing it.

With anything “significant”, you need to act with similar speed to anything “dangerous” but you also need to take the time to find out how deep the problem goes and whether it lies in systems or training, or specific personnel. If, for example, a review has raised concerns about the standard of work on a house sale, check any similar cases to see how deep the problem goes and then go to work on preventative measures.

What if you can’t overhaul a system straight away? At least put in a temporary fix and ensure all your staff know about it – then, diarise the time for a more complete work-over later. RPBs aren’t ogres (at least not most of the time) and their committees are peopled by fellow IPs who know what it is like. They will allow time for improvements to be carried out, providing there is a rational and targeted programme.

For worrying issues, I would still advise that you take a closer look quite soon, after you have dealt any other, more significant issues. As for minor or isolated issues, I think it is fine to give these a low-ish priority, but it would still be wise to look at these points again on say, your next review, to make sure they really were isolates.

And if in doubt about what to do and how fast, don’t hesitate to ring your compliance advisor. The more experienced will probably have seen your problem somewhere else and have a good idea of both how to fix it and what priority to give it.

I hope that helps, but if you have any questions or comments on the gradings, suggestions for better words, etc. please get in touch.

Compliance by the numbers (part 1)

Generally, I prefer to frighten myself, rather than make it a public affair; less embarrassment, less hassle and less likelihood of personal injury. But on this occasion, I really think I ought to share.

It started with wanting to prepare a template for my first visit reports, next month – how can I make them easy to read, succinct and informative? In particular, I have become a fan of the report that starts with a summary of the findings, but I worry that such summaries can leave the priorities unclear. And then, I had this great idea – why not set it out in a grid – with all the case types across the top and all the areas of interest down the left hand side?

“What a good idea”, I thought.

I have just counted it all up and, after discounting the areas that don’t apply (e.g. SIP 2 in IVAs) and Petitioner’s costs in MVLs (actually, I did see that once, but I won’t bore you) – 270 areas. Plus another eleven practice-wide areas, like PII and WIP controls. And that’s just the areas – it’s not the individual questions in each area – that’s a lot of stuff.

Of course, the old JIMU style inspectors had to do just that, reviewing every active case-type in a practice, plus additional reviews, focused on specific areas of interest. No wonder visits could take around a week to complete, even at a smaller firm. Thankfully, the current approach at ICAEW allows you to plan a rolling programme over a number of years, but it does show the importance of a) planning your compliance programme ahead and b) sticking to it. Incidentally,  it’s also important not to leave it to your reviewer to decide for you. Advise and recommend – yes; decide – no.

So, while I continue working on my ideas for the report template, here are the four principles I would apply to designing a satisfactory rolling programme.

  • Make sure you are visiting your main case types frequently enough to make sure that familiarity does not breed carelessness.
  • Visit the rarer appointments regularly to make sure they are also being done properly.
  • Give a regular focus to key areas of control; remuneration protocols, clients account controls and case progression, etc.
  • Include some kind of follow-up on steps you have taken to correct issues in previous years.

For example, for a two partner, single-office firm that majored in CVLs and MVLs, did a couple of ADMs a year, had a small stream of BKYs and WUCs, and one or two C/IVAs, I might suggest the following cycle[1]

Year Main case types Rare case types Systems / other
1 CVL CVA Fees, SIP 9, follow-up on previous period.
2 MVL ADM Follow up year 1, cashiering and clients monies[2], SIP 16
3 BKY WUC Case reviews, follow-up year 2, creditor reporting, SIP 2, SIP 8
4 CVL IVA Follow-up year 3, time and WIP, claim and distribution protocols.
5 MVL Progression, test continuity from years 1 and 2, cashiering and client monies.
6 BKY ADM Follow-up from year 4, pre-appointment work.

But all this would depend very much on the IP and their priorities, as well as the work done by previous reviewers and the demands of RPBs. Nonetheless, carefully managed, I would like to think that a programme like this should keep review time on site to two days or less.

In part 2 of this series, I will report on my efforts to find a more user-friendly and proportionate way of approaching issues that do get raised, from how they might be graded to the kind of remedial work that should be considered, and why some things seem to draw much more fire from RPBs than you might expect.

[1] Please treat this as what it is – an illustration – a full programme would carry more detail, but also more flex.

[2] Some general systems’ features like clients’ monies, PII and bonding should actually be checked every year, but I recommend a more in-depth examination of these money handling systems at least once every three years.