BDO allegedly eyes Everton exit amid ownership questions

14 October 2022 4 min. read

The club finances of Everton FC have been called into question, after it was suggested auditor BDO was considering severing ties with the Premier League club. The news comes as BDO re-evaluates a number of ‘high-risk’ clients it had won from the Big Four in recent years.

BDO was first awarded a contract to supply auditing services to Everton FC. The move came amid the Covid-19 pandemic – which rocked club finances across English football, as lockdown measures prevented fans from attending matches, and also jeopardised television income. In the period since, however, Everton has faced a number of other notable headwinds.

As the club seeks to raise its profile, and capacity to generate ticket revenues, it is planning to move to a new stadium. However, the cost of moving away from Goodison Park is escalating, with its most recently estimated price tag standing at a hefty £500 million. As the club works to raise funds to complete the construction of its new home, its finances have also been in the spotlight after international governments imposed sanctions on billionaire oligarch Alisher Usmanov.

Everton, Goodison Park

Usmanov’s USM Holdings commenced a five-year sponsorship of Everton’s training ground in 2017, worth about £12 million per year, while it also paid £30 million for a first naming rights option on Everton’s new stadium. Meanwhile, MegaFon, which is owned by USM, and the Russian smartphone company Yota, which is part of the MegaFon group, sponsored Everton Women.

While Usmanov called the apparent ties to Russia’s government as “false and defamatory allegations” and pledged to fight the sanctions on legal grounds, the news has rocked Everton’s bottom line, which was already in a weakened state. In its most recent financial year to the end of June 2021, the club lost £120.9 million, on top of the £139.9 million it lost the year before, according to accounts filed at Companies House.

Amid all this, Everton’s owner, Farhad Moshiri, has been widely reported as placing the club up for sale, though he has stated publicly that the club is not for sale. The billionaire, who is a long-time business partner of Usmanov, purchased a 49.9% stake in Everton in March 2016, using funds he raised by selling shares of Arsenal he owned to Usmanov shortly before. He has since upped his Everton holding to 94%.

BDO exiting?

Everton’s next annual report is due to be published by the end of March 2023, according to Companies House. Should BDO walk out on the club, as reports from The Guardian suggest it is preparing to, it would leave the Toffees with just five months to find a new auditor to sign off on the accounts. However, the club remains adamant that BDO will be in place to complete the task.

The UK newspaper had noted, “the accounting firm BDO has told Everton it will not be conducting the work”. Contrary to The Guardian’s claim that “the Merseyside club is now believed to be searching for a replacement”, however, a statement from Moshiri’s spokesperson said “BDO remain our auditors and have not resigned.”

The statement also criticised The Guardian’s conclusions, arguing that “Your assertions [about BDO] are based on nothing more than them refusing to discuss a client matter with a third-party journalist.” However, while The Guardian did include a note that “BDO declined to confirm it would be auditing Everton’s latest accounts”, it also cited unnamed sources, which had allegedly informed the paper BDO would exit, in a decision was “related to Farhad Moshiri’s ownership of the Premier League team”.

The incident also comes at a time when BDO is re-evaluating a number of its UK audit contracts. In August, reports emerged that BDO was set to quit its role as auditor of Quintessentially. The ‘luxury lifestyle management’ firm was yet to file its financial statements from 2020, which were due more than a year ago. BDO had also won that contract from a Big Four firm in 2020 – this time, PwC. A year after the switch, the client admitted to making £7 million in errors on its accounts, and paying out £1.4 million in unlawful dividends in 2021.

Earlier in the year, the Financial Reporting Council (FRC) found that 42% of BDO’s audits in the last year needed improvements. This was something audit market reform advocates alleged was the result of the firm picking up the ‘more challenging’ audits dropped by the Big Four. As such, the cases of Quintessentially and Everton may not be the last cases of BDO apparently re-thinking the roles it recently assumed from the Big Four.