IT company Phoenix Group discovers accounting abnormalities
Phoenix IT Group Discovers Accounting Irregularities in Acquired Subsidiary
Phoenix IT Group, a leading cloud computing and IT services company based in Northampton, has announced the discovery of accounting irregularities in Servo, an SMB IT services provider it acquired in 2006.
The accounting irregularities, which have been ongoing for multiple accounting periods, suggest that some of Phoenix IT Group's financial figures may have been deliberately falsified. The mis-statements have led to the mis-statement of a number of accounting balances within Servo Limited and its subsidiaries.
In response to the discovery, Phoenix has suspended one manager at Servo's finance department. The company has also appointed auditor PwC and law firm Nabarro to investigate the matter.
The investigation is ongoing, with PwC and Nabarro tasked with uncovering more details about the irregularities.
The PSN tender document, which outlines financial stipulations for eligibility, includes a clause that gives the right to exclude any supplier who has been convicted of any offence concerning their professional conduct. However, at this stage, the accounting irregularities discovered in Servo have not resulted in any legal convictions for Phoenix IT Group or its employees.
Phoenix expects that correcting these mis-statements will reduce the value of its net assets by £14 million. Despite this, the group's net debt and working capital requirements can continue to be provided by the current facilities.
The board of Phoenix IT Group believes that the group is and will remain in compliance with the covenants in its banking facilities.
In July, Phoenix IT Group was awarded a place in the government's Public Services Network procurement framework. The company is hopeful that the ongoing investigation and resolution of the accounting irregularities will not impact its standing in this framework.
Certain control processes within the finance function at Servo Limited's Birstall site in Leeds have been repeatedly and deliberately circumvented. The nature and extent of these irregularities are still under investigation.
The search results do not contain information about the name of the manager suspended by Phoenix IT Group in the finance department of Servo.
Phoenix IT Group encourages anyone with information regarding these accounting irregularities to come forward and assist in the ongoing investigation. The company is committed to maintaining the highest standards of financial integrity and transparency.
