Serco's lack of transparency leaves much to be desired
The influx of asylum seekers may be a matter of national acrimony but there are those who welcome the boats with open arms. The British multinational that operates Australia's detention centres is one of them.
Serco is rolling in it. According to its opaque financial statements just filed, Serco Australia Pty Ltd enjoyed a rise in net profit from $49 million to $128 million last year. The bulk of this bottom-line bonanza was not due to the surge in boats - although Serco's immigration detention centre contracts with the government have grown by $1.5 billion in three years - but a one-off gain arising from an acquisition.
Unlike last year, Serco has managed to report on time and in accordance with the Corporations Act, but its financial statements are so inadequate as to warrant suspicion. It seems that Serco could be hiding something.
Nine years ago, the company prepared a "general purpose" financial report for the year ended December 31, 2003. The auditor was Deloitte. Then, Serco had 1343 employees, $127 million in revenues and $63 million in gross assets.
Everything appeared to be in order. Its "general purpose" report included disclosures for business segments, financial instruments, directors remuneration, and related party transactions. Serco and its auditor agreed in May 2004 that Serco should prepare general purpose financial reports, that is, Serco was a reporting entity under the Corporations Act.
Somehow since then, Serco and its auditors have managed to transmogrify this reporting entity into a non-reporting entity. It is a gross failure in disclosure and accountability, says accounting expert from the University of NSW Jeff Knapp. It is a failure, he says, that represents the extent to which "financial reporting among Australia's leading proprietary companies has become a shambles".
Turning to Serco's latest accounts, the company had expanded dramatically by 2012, boasting 5252 employees, $915 million in revenues and $493 million in gross assets.
"But somehow Serco and Deloitte believe that the company has become less significant from an accounting point of view," says Knapp. "Serco now claims that the company is not a reporting entity and it prepares a special purpose financial report that does include disclosures for business segments, financial instruments , directors remuneration and related party transactions and balances."
Serco said: "We are committed to working transparently, in accordance with the law and financial reporting requirements."
Serco now has 3909 more employees, $788 million more revenues and, in the past four years alone, its government contracts have ballooned from $323 million to $1.86 billion.
Given the cherished position of companies that win mandates to run privatised government assets, their duty of disclosure and transparency should be greater, not less. Serco has a dominant position in the market. It has 8000 people in its care and there are the interests of many stakeholders to be considered, not least the taxpayer. As its economic and political status has increased, rather than diminished, there is no justification for this plunge in reporting standards and disclosure.