12 December 2009

Dead companies still on government asset books

The provincial government is still carrying shares in two dead companies on its books as assets even though the companies are now out of business and the chances of recovering any cash from them is virtually non-existent.

A total of $1.0 million in shares in Consilient and SAC Manufacturing are still listed as investments in Volume II of the Public Accounts, the audited financial statements for the provincial government.

SAC Manufacturing went out of business less than six months after the provincial government injected a half million dollars into that company.

Consilient, a high technology company, went bankrupt last year. it was featured in a report by the province’s auditor general on investments that, among other things, lacked adequate documentation and security.

Unlike past years, the Public Accounts section that includes these companies doesn’t contain any notes on existing holdings and any new ones acquired during the year. There is only reference to $3.3 million being available to write-off bad investments. 

There is no indication any of the investments have been written off. 

That’s despite a note in the 2008 audited financial statements which said the half million dollars for SAC Manufacturing would be written off over a year ago:

During 2006-07, the Province acquired 500 Class “B”Common shares at a cost of $500,000. Commencing in June 2007,
these shares are conditionally redeemable based on after tax earnings. All shares must be redeemed no later than 19 December 2016.

During 2007-08, the company ceased operations and, as there is now no reasonable prospect for redemption of these shares, the full amount of the investment has been included in the provision for investment write-downs.

That’s not the only peculiarity in the recent work by the auditor general about one of these companies. 

An omnibus report on previous audits, released in November 2009, made up the recommendation related to original audit.  The report replaced the original list of five suggested changes and actions with one that wasn’t made originally.  The AG then reported that the innovation department was making progress on the phony recommendation.