Defined Benefit  

Whistleblower warned Carillion about accounting errors

Whistleblower warned Carillion about accounting errors

Carillion's former finance director tried to expose accounting irregularities at the now collapsed company almost three months before the full scale of its problems were made public.

Board minutes published today (27 February) by MPs show that upon Emma Mercer's return from Canada in April 2017, and just six weeks into the job as financial director of construction services in the UK, Ms Mercer was raising concerns about the accounts she found.

However, apparently not satisfied with the response she got from then chief executive Richard Howson or group finance director Zafar Khan, she took them up with human resources director Janet Dawson.

Article continues after advert

Her concerns, which focused on how profits were booked at nine major projects, were then discussed in board meetings in May.

Alison Horner, chair of Carillion’s remuneration committee, “noted that Ms Mercer appeared to be a whistleblower who did not feel she was listened to”.

After unsuccessful talks with its lenders and the UK government, Carillion went into liquidation in January 2018, 

As a result, the defined benefit (DB) pension schemes of Carillion, one of the UK government's biggest contractors, have all either been pushed in the retirement fund of last resort, the Pension Protection Fund (PPF), or will soon enter it.

Carillion has 13 final salary schemes in the UK with more than 28,500 members, and a deficit of £587m at the end of July, according to the company's results.

Carillion, which employs about 43,000 people, had been struggling for several months, issuing a profit warning last year that sank its share price – which has fallen from more than £2 a year ago to about 14.2p just before it went into administration.

After the concerns flagged by Ms Mercer, Carillion’s board was forced to consider whether its accounts for the previous year were still valid, and commissioned a review of the figures.

Andrew Dougal, chair of Carillion’s audit committee, said KPMG – the contractor’s auditor - had not picked up the “sloppy accounting” when carrying out the audit of the company’s books.

However, Carillion’s board rejected carrying out an independent review, instead asking KPMG to take a second look at the books as part of a review of contracts.

The three-tier review concluded that the 2016 year-end position did not need to be restated.

MPs on the work and pensions committee and the business, energy and industrial strategy (BEIS) committee have been grilling the accountancy firms over their role in the process which lead to Carillion’s liquidation.

KPMG is also currently being investigated by the Financial Reporting Council (FRC).

According to Labour MP Frank Field, chair of the work and pensions committee which has been holding a joint inquiry into Carillion’s collapse, Ms Mercer “took just six weeks to spot and pull the thread that began the entire company unravelling”.

He said: “That the next chief financial officer had to go through whistleblowing procedures to get her concerns about accounting irregularities taken seriously by the Carillion board is extraordinary.