A report into the collapse of Carillion by two parliamentary select committees has spread the blame liberally among the directors of the company, its auditors, the regulators and the government. Here are the key findings from the report:

Directors

The committees found that the directors sought to increase dividends and protect executive bonuses as the company began to unravel, while funding the pension scheme was “treated with contempt”.

Their report urged the government’s Insolvency Service, which is still trying to salvage jobs from the wreckage of Carillion, to consider whether directors breached their duties under the Companies Act.

If so, they could be recommended to the secretary of state for business for disqualification from company directorship. The report singled out three directors in particular.

Richard Adam – chief financial officer 2006-17

Chartered accountant who qualified with KPMG. Former finance director of multiple companies over 30 years, including Associated British Ports.

What Carillion said: “Strong track record in cost control, cash-flow and pension scheme risk management.”

What the report said:

• “Architect of Carillion’s aggressive accounting policies” that masked the company’s mounting financial problems.
  
• “Resolutely refused to make adequate contributions to the company’s pension schemes, which he considered a ‘waste of money’”.
  
• Sale of nearly £800,000 in shares immediately after retirement amounted to “the actions of a man who knew where the company was heading”.
  

Richard Howson – chief executive 2012-17

Civil engineer who had been with Carillion in various roles since 1999 and was previously chief operating officer.

What Carillion said: “Significant experience in operational delivery, management of commercial positions and performance improvement.”

What the report said:

• “Figurehead for a business that careered progressively out of control under his misguidedly self-assured leadership”.
  
• “Sought to distance himself from problems in the company that were ‘from the long-term and from a long time ago’”.
• “Demonstrated little grasp of the unsustainability of Carillion’s business model or the basic failings of governance that lay at the root of its problems”.
• “He was either unaware of the significant long-term problems it was facing, or chose not to act on them,” adding that he appeared surprised to have been sacked in 2017.
• “Howson should accept that, as the longstanding leader who took Carillion to the brink, he was part of the problem rather than part of the solution”.

Philip Green – chairman

Former chief executive of United Utilities and senior executive at firms including Reuters, Saga and DHL. Chaired Prince Harry’s Lesotho-focused charity Sentebale and advised David Cameron on corporate responsibility.

What Carillion said: “Strong track record in corporate responsibility.”

What the report said:

• “Mr Green appears to have interpreted his role as chairman as that of cheerleader-in-chief”.
• “An unquestioning optimist, an outlook he maintained in a delusional, upbeat assessment of the company’s prospects only days before it began its public decline.
• “While the company’s senior executives were fired, Mr Green continued to insist that he was the man to lead a turnaround of the company as head of a ‘new leadership team’.
• “As leader of the board he was both responsible and culpable”.

Directors “used aggressive accounting policies to present a rosy picture to the markets", the MPs found. This resulted in the company admitting in July 2017 that £729m in revenue it had previously recognised (money the firm assumed would be coming in) would no longer be obtainable.

Here are some of the “accounting tricks” the report highlighted.

• Peer review This involves independent assessment of whether managers are correctly calculating the value of contracts. A 2016 review of Carillion’s contract to build the Royal Liverpool Hospital – which remains delayed indefinitely – reported it was making a loss. Carillion’s management overrode it and insisted on a healthy profit margin being assumed, leading to a difference of £53m in assumptions.

• Traded not certified Carillion was in the habit of saying it had banked revenue that actually it could not be certain of receiving from clients. In December 2016 it had recognised £294m of traded not certified revenue, more than 10% of construction revenue.

• Early payment facility This scheme allowed Carillion’s suppliers to claim what they were owed by the company from a bank, receiving the money quickly in exchange for a small discount on the bill. The report found Carillion relied upon the EPF to delay paying out money, using it as a “credit card” and failing to account for it as borrowing. “The only cash supporting its profits was that banked by denying money to suppliers,” the report said.

Government

The report makes clear that the directors were responsible for Carillion’s collapse and said the government did a “competent job in clearing up the mess”. However, it also said the government had “lacked the decisiveness or bravery” to tackle a culture of corporate recklessness.

• Successive governments sought to outsource work on the cheap, a practice that “made such a collapse, if not inevitable, then at least a distinct possibility”.
• “The government’s drive for cost savings can itself come at a price: the cheapest bid is not always the best”.
• Report criticised the “semi-professional part-time system” under which a crown representative from the Cabinet Office oversees major government contractors in financial difficulty.
• “The consequences of this are clear in the taxpayer being left to foot so much of the bill for the Carillion clean-up operation”.
• Measures intended to protect small business suppliers to government contractors, such as the Prompt Payment Code, have been “wholly ineffective”.
• The Guardian has previously revealed that the government failed to back a plan that could have retrieved £364m from Carillion.
  

Auditors

One of the most eye-catching suggestions in the report is that the big four auditors – KPMG, PwC, EY and Deloitte – be referred to the Competition and Markets Authority, which should consider whether they ought to be broken up forcibly. The quartet earned £72m from the company in 10 years and were described as a “cosy club incapable of providing the degree of independent challenge needed”.

KPMG

• Received £29m in fees over 19 years as Carillion’s auditor.
• Branded “complicit” in the company’s “questionable” accounting practices, the report said “complacently signing off its directors’ increasingly fantastical figures”.

Deloitte

• Internal auditor was paid more than £10m but “failed in its risk management and financial controls role”.
• Did not identify “terminal failings” in risk management and financial controls, or “too readily ignored them”.

EY

• Took £10.8m for “six months of failed turnaround advice”.
• Advised on deferral of payments to pension scheme, HMRC and suppliers. “Their own fees, however, were not deferred”.

PwC

• Hired to manage insolvency as the only auditor with no conflict of interest, meaning it could “name its price”.
• Fees for first eight weeks’ work alone was £20.4m.
• “PwC are continuing to gain from Carillion, effectively writing their own pay cheque, without adequate scrutiny”.

Regulators

Accounting watchdog the Financial Reporting Council and the Pension Regulator stand accused of being “chronically passive”.

“We have no confidence in our regulators,” the report said. “FRC and TPR share a passive, reactive mindset and are too timid to make effective use of the powers they have.”

The Financial Reporting Council

• “Content with apportioning blame once disaster has struck” rather than flagging issues of concern to avoid business failures.
  
• Should get new powers from government “to be a much more aggressive and proactive regulator” but this will require a “significant shift in culture”.

The Pension Regulator

• Made “empty threats” to use powers to force Carillion to increase pension contributions. It has never used those powers in 13 years.
• “Failed in all its objectives regarding the Carillion pension scheme”.
• Launched investigation into recovering funds when there was no money left.
• Needs greater powers but “we are far from convinced that TPR’s current leadership is equipped to effect that change”.