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Memorandum 16
INTRODUCTION
ACCA (the Association of Chartered Certified Accountants) welcomes the inquiry into the Funding for Equivalent or Lower Qualifications (ELQs) and for the opportunity to submit written evidence. ACCA would be delighted to provide oral evidence into this inquiry.
EXECUTIVE SUMMARY
· Current proposed exemptions to the ELQ policy proposed by the Government should be widened to include those qualifications which are designed to give students access to professions with established demand in the UK economy.
· Specifically, there should be an exemption for the study of accountancy given the skills shortage in this area and its importance to the economy and wider society.
· The effect on accountancy training if the funding for ELQs are withdrawn will be potentially significant - it will impact on the number of mature students obtaining a qualification which enables them to contribute positively to the UK economy.
· To help address the specific impact on mature students, there should be an extension to the exemption for students who received their awards more than five years ago and part-time students.
ABOUT ACCA
1.1 ACCA (the Association of Chartered Certified Accountants) is the largest and fastest-growing international accountancy body with 296,000 students and 115,000 members in 170 countries. We work to achieve and promote the highest professional, ethical and governance standards and advance the public interest.
1.2 ACCA provides qualifications to people pursuing careers in accountancy, finance and management. We do this in partnership with many organisations and support students and members throughout their careers. Our mission is to provide opportunity and access to people of ability around the world and to support our members throughout their careers in accounting, business and finance.
1.3 ACCA has recently won its fourth Queen's Award for Enterprise, this time in the category of International Trade, in recognition of its significant contribution to global business.
EXEMPTION FOR ACCOUNTANCY
Access to the professions
2.1 ACCA understands the Government's goal to withdraw funding for ELQs which do not add to the overall skills base of the UK. However, ACCA believes that sector and role specific degrees, such as accountancy, which lead directly to employment within the professions should be made exempt from the ELQ funding proposal.
2.2 Current proposed exemptions to the ELQ policy by the Higher Education Funding Council for England (HEFCE) cover subject areas such as undergraduate medicine and dentistry, social work and teacher training. These degrees all lead to professional occupations. These exemptions should be widened to all sector and role specific degrees which lead to professional occupations where there is a demonstrable skills shortage and/ or societal need. Accountancy qualifications are one such example of this type degree and a skills shortage has been identified (see section 4). Therefore, an exemption for accountancy should be made.
ACCA Qualification
3.1 As highlighted in the Leitch Review of Skills in England, bridging the gap between vocational and academic learning, engaging employers with learning and providing qualifications for competence in the workplace must all be addressed. The accountancy profession, and ACCA in particular with its integral links to employers, is meeting these challenges and providing a bridge between universities and employers.
3.2 To qualify as a professional accountant with ACCA, students must, in addition to passing 14 exams and completing a Professional Ethics module, undertake relevant practical experience over a minimum of three years. Therefore, a key component of the ACCA Qualification is gaining relevant practical experience. The ACCA Qualification will prepare individuals for a challenging and demanding career as a professional accountant and, like all professions, it is not sufficient to solely rely on theoretical knowledge developed through an exam process to help achieve this. The ACCA Qualification is designed by and for accountants to provide the accounting knowledge, skills and professional values which will deliver finance professionals who are capable working across all sectors, industries and services.
3.3 ACCA works closely with UK universities to ensure there is close articulation between the accountancy degrees and the professional qualification. There are 48 Universities in the UK which have designed their accountancy qualification to meet the needs of the accounting profession and are awarded maximum exemption from the ACCA examinations. This means that of the 14 examinations students are required to pass in order to become a professional accountant, nine can be satisfied by a first degree in accounting from one of these Universities. The diagram below illustrates this relationship between the UK Universities and ACCA. A further 10 UK Universities also teach students directly for the ACCA Professional level examinations.
Skills shortage in accountancy
4.1 There is a skills shortage in accountancy. The Big Four accounting firms are recruiting internationally to meet their staffing demands, despite the fact that almost 34,000 professional accountants qualified between 2000-5 in the UK[1]. The Association of Graduate Recruiters reported in their winter survey 2006 that despite increased numbers of graduates in the UK, there were significant skills shortages in certain sectors and therefore employers were facing difficulties filling vacancies - with one in four vacancies in accountancy and professional services[2].
4.2 In March 2006 the Financial Reporting Council in the UK issued a report titled 'Review Of How Accountants Support The Needs Of Small And Medium-Sized Companies And Their Stakeholders'. This identified that some accountants, particularly those in smaller practices, reported a shortage of 'good quality' bookkeepers. 'Good quality' was defined as having appropriate skills in accountancy and bookkeeping systems together with a basic level of business acumen. If businesses are forced to employ the services of unskilled finance staff, the quality and integrity of financial information relied upon by investors may be jeopardised, which will have a significant negative impact on UK PLC.
4.3 Looking globally, the skills shortage in accountancy is a result of a number of factors which includes increases in world trade and regulation; employee mobility and the emergence of new economic markets such as Brazil, Russia, India and China; and the need to handle increased risk, scrutiny and compliance within business has created demand for professionally qualified accountants. Supply has not met the demand and this has led to a shortage of finance professionals required to support the growth of the world's major economies. This issue is likely to continue for some time and will be exacerbated by the impact of an age demographic across most developed economies, leading to further skills shortages.
Possible effect on accountancy if funding for ELQs are withdrawn
5.1 Accountancy skills are vital for the growth of the economy. ACCA believes that the withdrawal of funding of ELQs will have a negative effect on the number of students who will study for accountancy unless an exemption is made. This is because accountancy has proved a particularly attractive choice for mature students. In the UK, ACCA has 71,000 students. 76% of ACCA's students are over 25 years old and 45% are over 30 years old.
5.2 Withdrawal of funding creates a further obstacle to prevent mature students from obtaining a qualification which will enable them to contribute positively to the UK economy. An extension of the exemption to students who received their awards more than five years ago and part-time students would help to mitigate the impact on this group.
5.3 ACCA has not been able to undertake full research on the probable effect of the withdrawal of funding for ELQs. However, there are some key facts which indicate the effect that possible withdrawal of funding for ELQs will have on accountancy in the UK. Research by the Professional Oversight Board[3] in 2006 provides figures of graduate entrants to training with the six Chartered Accountancy bodies in the UK, and breaks this figure into the number of students holding a degree and those holding a 'relevant' accounting degree (as defined by the accountancy bodies). Using ACCA as an example, from an intake of almost 60% of students held a degree with nearly 40% holding an accounting degree.
5.2 ACCA has to date been contacted by Manchester Metropolitan University, Northampton University and The Open University who all expressed concern at the possible effect of the withdrawal of funding for ELQs on accountancy training. ACCA can commit to undertake full research on this issue should this be requested.
RECOMMENDATIONS
· Current proposed exemptions should be widened to include qualifications which are designed to give access to professions with established demand in the UK economy.
· There should be a specific exemption for accountancy given that the skills shortage in this area and the importance to the economy and wider society.
· There should be an extension to the exemption to students who received their awards more than five years ago and part-time students.
January 2007 [1] Professional Oversight Board, Key fact and trends in the accountancy profession, November 2006 [2] AGR Winter Survey 2007 http://www.agr.org.uk/
[3] Professional Oversight Board, Key fact and trends in the accountancy profession, November 2006 |