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Monday Morning Accounting News Brief: Deloitte Goes Big in Boston; Advisory Readies For Pain | 7.10.23

Dog with a flower in its mouth

Good morning! Things are still a bit quiet out there what with it being summer and all. Alas the news must go on, here’s what I was able to dig up.

Deloitte has signed what’s believed to be Boston’s largest office lease of the year:

Deloitte has signed a lease with MP Boston — an arm of Millenium Partners — for 138,000 square feet of office space at the 50-story Winthrop Center in Boston.

It’s purportedly the largest office lease signed in the Greater Boston area this year, according to a press release.

The financial services company will move all 3,100 of its employees from 200 Berkeley Street in the Back Bay to the new space, located near the Seaport at 115 Federal Street, in the fall 2024.

Crain’s Chicago Business wrote about out-of-town employers and gave us some numbers on Big 4 headcount in the Windy City:

Out-of-town employers barely saw growth in their Chicago workforces last year. On average, these 25 employers, which are headquartered outside the city, only saw local employment grow by 0.3% in 2022.

New to Crain’s top 25 is New York-based KPMG. The audit, tax and advisory services firm reported a 6.4% increase in its Chicago workforce, with 2,863 local employees.

Other leading accounting firms such as New York-based Deloitte and Ernst & Young also reported upticks in their Chicago headcounts. Deloitte now ranks No. 12 on the list with nearly 7,000 local employees, almost an 11% swell since 2021. And Ernst & Young comes in at No. 21 with 4,572 local workers, about an 8% increase in the same period.

The Telegraph wrote about advisory work drying up across the pond and warns that PwC cheaping out on bonuses is only the beginning.

Riding high after an “exceptional” 12 months for its consulting arm, partners at PwC UK last year took home a record seven-figure payout, while its rank-and-file staff were handed a 9pc pay bump before bonuses.

Twelve months later and the outlook for Britain’s consultants looks markedly different as economic uncertainty hits demand for advisory work.

Last month, the Big Four firm warned its 25,000 UK staff to expect smaller pay rises and bonuses this year amid a slowdown. With inflation remaining stubbornly high at 8.7pc in May, some staff are expected to experience real-term pay cuts.

The firm’s junior auditors have been told that the pay band for one cohort would be frozen while others would increase by just 3pc or 6pc. PwC said this was owing to “challenging” market conditions.

But industry sources fear that the firm’s warning on pay is only the beginning of a painful period for an industry that has expanded rapidly in recent years.

The Telegraph article goes on to say that a cooling down in advisory is going to mean a lot of extra people twiddling their thumbs on the bench, a phenomenon we know is already happening.

A survey published last week by the Management Consultancies Association (MCA) spelled out the problems for Britain.

While the report forecasts that the consultancy sector will grow by 13pc in 2023, this will still represent a significant slowdown on record growth of 23pc in 2022.

Tamzen Isacsson, chief executive of the MCA, also points out that headcount in the sector has ballooned by 16pc in recent years amid a surge in demand that is now cooling off.

The significant increase in employees risks leaving firms overstaffed in certain areas where demand has dropped, such as M&A advisory work for private equity clients.

In lighter news, Withum has added 19 new partners, 11 of whom are based in New Jersey, bringing the firm’s partner total to 225. “I’m excited to introduce this year’s new partner class,” Pat Walsh, managing partner and CEO, said. “To get to this level takes an incredible amount of grit, passion and determination. This group is comprised of dedicated individuals who have a deep understanding of what it takes to succeed and thrive in business and life. The accomplishments of each individual are evidence of a larger trend — that of professionals going above and beyond, never ceasing to learn, create and innovate to better the future of our firm and the entire accounting industry. I am proud to call them my partners.” Congrats to all, you made it!

Guess what? Peter Collins wasn’t the only partner at PwC Australia sharing tax information he wasn’t supposed to. From AFR this morning:

A partner at accounting giant PwC shared confidential information with others at the firm about a 2015 government requirement for multinationals to disclose key tax details, while discussing with them how to influence the Tax Office to gain benefits for PwC’s clients.

The unnamed partner spoke to a senior tax officer in July 2015 on a confidential basis, and minutes later emailed details of the conversation to all PwC’s Australian tax partners and tax directors.

The partner described it as “an opportunity to feed in suggestions [to the ATO officer] which may help influence definitional/interpretation aspects and/or free or defer certain clients from some or all” of the new measures.

“Most off the record so pls [sic] be discreet,” the partner said of the tax officer’s briefing.

Related: The Canberra Times crunched some numbers and revealed Big 4 consulting firms commenced 844 contracts with the Australian federal government between July 1, 2022 and June 30, 2023 worth a total value of $813.2 million ($540.9 million USD).

The data, which is published online by each government agency, shows KPMG won the most amount of contracts and for the biggest sum at $257.8 million for the year.

Deloitte, PricewaterhouseCoopers and EY trailed behind with totals of $212.2 million, $189.6 million and $153.6 million respectively.

The firms’ biggest customer was the Department of Defence from which the four received a total of $396.8 million across 211 contracts.

Speaking of the PwC Australia tax scandal and the attention it’s bringing to government reliance on outside consultants, hopefully you aren’t completely sick of it because I’m working on something cool related to it. Stay tuned.

ICPAS SUMMIT23 is coming up on August 22-23 in Rosemont, IL and yours truly will be there covering it so if you are going, come find me and say hi. There’s a virtual attendance option as well if you prefer that. What to expect:

The keynote, “State of the CPA Profession: Embracing the Possibilities,” presented by ICPAS President and CEO Geoffrey Brown, CAE, and ICPAS Board of Directors Chairperson and KPMG Partner Jonathan Hauser, CPA, will highlight the trends and challenges impacting certified public accountants (CPAs) and discuss navigating the profession’s future and ensuring its continued relevance.

Other keynotes include “Techs, Trends, and Disruptors” by technologist Roman Kepczyk, CPA, CITP, CGMA, LSS BB, director of firm technology strategy at Right Networks; “All Eyes on the Economy” by Derek Sasveld, CFA, director of investment strategy and research at Busey Wealth Management; and “Running a Business in a Chaotic Environment” by Dorri McWhorter, CPA, CGMA, CIA, MBA, president and CEO of YMCA of Metropolitan Chicago.

That’s all I have for now. Should you stumble across something worth sharing in your adventures across the internet this week do let me know. Have a good week, and I mean that with all sincerity. I honestly have no idea why that sounds so condescending. Be good!