BT admits £3.7m Ofcom accounting blunder
15 Aug 2019
BT has rung up a £3.7m bill with Ofcom, after the regulator found that accounting errors made by the telecom giant meant it had been under-paying the administrative fees due over a five-year period
15 Aug 2019
Ofcom is part-funded by administrative charges payable by each communications operator it regulates, based on information in an annual turnover return provided by each company. The regulator publishes yearly tariffs for the fees, and the tariff applicable to each company is a percentage of their relevant turnover in the charging year in question.
In November 2017, BT informed Ofcom that the information it had provided for calculating the charging years 2013/14 to 2017/18 was inaccurate and contained errors. More details of the under-estimates were given in May of last year, and there was another re-submission of the figures earlier this year.
In response, Ofcom launched an investigation into how the errors occurred. This found that problems were first flagged up in September 2017, when the recently appointed BT group CFO asked to review the returns. As part of the new governance arrangements that were put in place, the BT group CFO raised a number of questions in relation to the return, and asked for additional assurance processes.
These identified that the team responsible for preparing the annual turnover return had incorrectly classified a number of sources of turnover, leading to a reduction in the amount of turnover classified as relevant.
In its explanation, BT s said that ‘we believe our staff preparing the return misunderstood the data sources used, and as a result used the data incorrectly.’
BT has taken a number of steps to rectify this, including commissioning a review from PwC of the appropriateness of BT’s classification on nonrelevant turnover for the relevant turnover years, and undertaking a detailed review by BT’s group internal audit (GIA) team of all sources of turnover classified as non-relevant or of mixed-relevance, to consider whether the classification of turnover was correct. It has put in place additional assurances intended to prevent a repeat of the classification errors, including requiring the financial controller and CFO of each customer facing area of the business to endorse the classification of sources of turnover as relevant or non-relevant.
At the end of last month, BT confirmed that it accepted its liability to pay to Ofcom the principal amount which had been under-paid plus simple interest to the date of payment at the Bank of England base rate +1%. The total amount that BT was required to pay Ofcom is £3,727,330.
In its report, Ofcom stated: ‘BT’s cooperation with Ofcom in relation to this investigation has been extensive and productive. Upon discovery of its error, BT informed Ofcom and committed to remedying the consequences of its error.
‘BT has also undertaken extensive work to ensure that its final resubmitted turnover is complete and accurate; had Ofcom had to carry out this work itself, it is likely to have required significant resource and time to complete.’
A BT spokesman said: ‘BT notified Ofcom that it had mis-calculated its relevant turnover between 2011 and 2015, which resulted in BT underpaying its administrative fees owed to Ofcom for those years.
‘We have now paid the full amount outstanding. Ofcom has not imposed any penalty, recognising that we have cooperated and proactively engaged, and that we have put in place several steps to ensure the same miscalculations – which were made in error – are not repeated.’