Creative accounting – VicForests style

Thursday, April 9, 2015

Paper profits for political appearances

VicForests Annual Report for 2014 is now available here and they are claiming a profit of $3.4 million this year, but this claimed profit is a mirage, created for political reasons.

$2.6m seems to have been generated (on paper at least) by re-valuing "forestry assets", see Note 3c, p.42

Another $1.1m is gained in reduced Road access fees (payable to DEPI/DELWP). Given the volume of timber carted is almost identical to the previous year, it is not clear why this fee would be reduced. Possibly to help a loss making government entity look healthy and profitable.

So $1.1m less is paid to DEPI, while a $250,000 dividend is paid to Treasury (something VicForests has reneged on every year since 2007). So if we do some simple arithmetic, the taxpayer is still losing out. 

The $25.5 million government grant to VicForests disclosed in Appendix 4 of the DEPI Annual Report does not show up as income in the VF Annual Report. Is this related to the research grants that are mentioned on p.13 but appear not to be shown in the financials?Kuark East Gippsland March 2015

Equity has taken a big leap, due largely to the gift of another $10m worth of trees from DEPI/DELWP (Note 8c) Under the changes to the Sustainable Forests Timber Act 2004, logged coupes (stand of forest) that start to grow a skin of eucalypts again, no longer need to be returned to DEPI (= asset gain) so their value will accrue (Note 1l, p.34).

VicForests also claims it has markets for all the residual wood for the next few years. They seem muddled though since elsewhere they acknowledged the bulk of woodchips sold to Eden/Nippon from East Gippsland will stop in 2015.

Oh, and the CEO's salary has increased 10%.

So revenue is down (compared to last year), yet profit is up.

If this was a company operating in the real corporate world it’d be bankrupted and possibly even had up for operating while insolvent and cooking their books.