RICS Scandal - Senior figures quit but “no fraud or crime” says QC

The independent QC leading a review into the governance scandal at the RICS says there was “no fraudulent or criminal misbehaviour” at the organisation.

Alison Levitt QC wrote a 467 page review of the organisation’s governance following media revelations earlier this year concerning failures by RICS senior figures to act on a report by accountancy firm BDO.

The BDO report said that two years ago RICS was at risk of “unidentified fraud, misappropriation of funds and misreporting of financial performance.” 

BDO’s report also gave the lowest possible 'no assurance' rating for the effectiveness of RICS’ financial controls - something which Levitt has described as being “the most significant criticism an auditor can make” of an organisation.

Other allegations have been swirling this year regarding four RICS non-executive directors who wanted the organisation to act on the BDO report’s concerns, but who instead had their appointments terminated.

In a news conference yesterday attended by Estate Agent Today, Levitt and Nick Maclean - RICS’ temporary chair of the governing council - confirmed that the institution’s chief executive Sean Tompkins was “stepping down”  as was president Kath Fontana, her predecessor Chris Brooke, and management board chairman Paul Marcuse.

Meanwhile the governing council of RICS says it accepted all of the recommendations and criticisms put forward by Levitt. 

The report concludes that the four non-executive board members, who raised legitimate concerns that the audit had been suppressed, were wrongly dismissed, and it has apologies publicly and privately to them. 

The report finds that the origins of what went wrong lay in the governance architecture of RICS. 

A lack of clarity about the roles and responsibilities of the boards, the senior leadership and the management left cracks within which the chief executive and his chief operating officer had become used to operating with little effective scrutiny.

The report concludes that this was not a cover-up as much as a power struggle. 

The executive used the governance structure as a fig leaf for its actions and showed a collective failure of common sense in allowing the situation to escalate unnecessarily. RICS was not well served by its lawyers who should have given objective advice but saw their role as being to protect the executive.

The BDO audit, which raised serious concerns about financial controls, was received by the chief operating officer in December 2018, but not shared with the management board until seven months later.

And the governing council was unaware of the report’s existence until it learned of the non-executives’ dismissal in November 2019. 

Because the constitution and structure are the root cause of what went wrong in 2019, the report says there is a real risk that if it is not dealt with something similar could happen again.

Levitt's recommendations are here.