IT project “cost overruns” have contributed to the Law Society budgeting for a £10m deficit this year, it has emerged.
The 2011 accounts, which will be presented to the society’s AGM today, also reveal that chief executive Des Hudson received a 6.8% pay rise last year and now receives total salary and benefits, including pension contributions, of £407,000.
In all the society would have reported a £16.8m surplus on its £143m income in 2011 but for an £82.5m exceptional loss resulting from the disposal of its pension scheme. This move will, however, settle the future liability of the society under the pension scheme and remove the risk of solicitors having to bail it out.
“The approach we have taken to cost management has enabled us to reduce [practising certificate] fees by 22% for 2011/12,” outgoing Law Society president John Wotton wrote in the annual report. “However, there have been significant cost overruns in certain major IT programmes and the council has approved a deficit of £10m in the budget for 2012.”
A spokesman explained that IT projects overrunning their schedule had the dual impact of costing more and delaying the income benefits they are meant to realise. The deficit also reflects the repayment of £5.6m in practising fees that were over-collected in 2010/11, as well as some capital expenditure on the new single site for the Solicitors Regulation Authority (SRA), which is leaving its offices in Redditch and Leamington Spa for The Cube in Birmingham.
He stressed that the society has substantial reserves with which to cover the deficit.
One of the IT programmes that has overrun is the SRA’s IT upgrade, which had well publicised problems late last year when dealing with practising certificate renewal. However, executive director Samantha Barrass told yesterday’s meeting of the SRA board that the online nomination system for compliance officers is working smoothly.
The annual report includes a very prominent apology from the Law Society for the problems with the practising certificate renewal exercise last year.
Mr Hudson’s pay rise was less than the 14% he saw in 2010 – but is still more than the typical Law Society staff pay rise last year. The 2007 accounts, Mr Hudson’s first full year as chief executive, had him on a package worth £230,726, meaning it has risen 76% in the subsequent four years.
The package for Solicitors Regulation Authority chief executive Antony Townsend has seen a 33% increase in the same time, from £172,713 in 2007 to £230,000 in 2011. He received a 3.6% increase last year, having seen his package fall in value the year before.
The Law Society spokesman said: “The chief executive’s annual total emoluments are inclusive of all benefits and bonuses as approved by the [Law Society] council. His reward and the criteria by which it is determined are also considered by an independent remuneration committee.
“This year’s total reflects the invaluable contribution he has made in leading the Law Society and delivering improved value to the profession in a changing legal landscape and challenging business environment.”
The annual report also said the society is evaluating its London properties – the main Law Society building on Chancery Lane, and 60 Carey Street just around the corner, the president’s ‘grace and favour’ accommodation which is also used for other functions.
It said £1.7m of “investigative works” are being undertaken “to fully evaluate long-term planning and use potential of the London freehold estate”, whose open market values are estimated to be £18.8m for the main building and £5.8m for Carey Street.