'He who controls the past controls the future.' George Orwell's Big Brother in the novel, 1984, knew a thing or two about rewriting history but he has plenty of followers. Whitewashing history is not confined to totalitarian states, the urge to paper over the cracks affects organisations larges and small. If the price of liberty is eternal vigilence then industry notable, James Cryer, is a true freedom fighter.
Just as we try and close the lid on the dramas that unfolded during the previous disastrous regime at Printing Industries, a hand reaches out from under the coffin-lid to once more create mistruths and distortions about the actual events that unfolded. With the publication of PIAA's 91st Annual Report for the year ended December, 2015, us punters are once more treated to a misrepresentation of what actually happened.
Although duty-bound to disclose events of significance, the report glosses over the dramatic goings-on of 2015 as if nothing of any consequence actually happened! When I began reading I thought it must have referred to the other 'PIAA' - the Pet Industry Association of Australia, as nothing in the Directors Report seemed to match up with the events of last year.
In fact, it's as if the events of last year never occurred!
Under the Fair Work Act, organisations are obliged to report if anything of 'significance' took place during the reporting period. On page 16, however, we read that the directors reported that There were no significant changes in the nature of the activities...during the year!
My god! If flogging off a $3 million asset without members' permission (and no clear plans what to do with the money) and firing most/all of the key managers, combined with the resignation of the president and several directors, does not qualify as 'significant' then I'll revise my definition of being chopped up into little pieces and being fed through a mincing-machine as 'merely a flesh wound.'
I'm no accountant, but I can read and I can turn the pages and they should be the only qualifications needed to understand an organisation's annual report. And so, let's turn each page and discover how the then president and his band of merry men (and they were nearly all men), have gotten away with a virtual re-write of history.
Page 3: Its opening salvo, the Executive Reports tells us, If 2015 could be summed up in two words, they would be 'challenge' and 'transition. How about 'chaos' and 'destruction', which I think would more aptly describe the five months of mayhem.
They go on to say they tackled the challenges ahead by having a clearly articulated strategy,' (this never occurred) and establishing an innovative structure (yes, by installing a team of spin-doctors and firing most of the key people).
Page 4: Again we're told about a mysterious three-year strategic business transformation plan, which existed only as a figment of their imagination.
And the only reference to several months of near riots in the streets was that there was, disquiet in some sectors!!!!
We're also subjected to drivel such as, We help our members...by delivering membership services to lead and guide our members to be the best'. Aarggh!
Page 5: This page takes the cake as the winner of the most weasel words used on a single page.Frankly, they are too numerous to count, but here are a few:
We're told the CEO focused his attention on, driving a transition in people, place, product and promotion.
And that he focused his, attention on the development of products and services to help members build their businesses. What 'products'? What 'services'?
We're told, overall staff numbers were reduced'' although Total Employees Expenses (Page 32) went up by $196K!
We're told a, modern, internal performance management process was introduced, but we're not told anything about it. Again, I suspect it exists in fantasy land.
We're told a, capital management plan was instigated ... . Anyone heard about it? All I know is that members keep asking what is happening with the money received from the sale of Auburn.
We're told the CEO installed a, contemporary governance strategy with a clear separation of responsibilities between Directors [and] the CEO. Sounds impressive.
We're told the CEO, improved the organisation's value proposition - whatever that means. And finally...
we're told in breathless terms, they revamped the logo. Luckily, the new CEO had the sense to undo that disastrous foray into what was a very amateurish attempt at re-branding!
There's more utter drivel (upholding our values, new horizons ahead) but let's spare ourselves the agony and move on.
Page 9: Under 'Setting the Foundations' we're told (presumably as part of the non-existent 'transformational plan') of, a number of changes to organisational arrangements, including ... [the appointment of] new State Sales Managers. Luckily this was also dismantled by the new CEO who quickly perceived that running an industry organisation was different to running a Maccas or a football club.
Page 16: Notwithstanding the sudden, unannounced and highly controversial sale of the organisation's major asset, the Auburn HQ, and the consequent injection of $3.4 million into the organisation's coffers, we're advised that, There were no significant changes in the financial affairs of the Association.
Perhaps instead of whinging, we should be grateful they even told us they'd flogged off the group's major asset. The tragedy is, this site was very close to Auburn railway station and the NSW government has re-zoned areas close to stations as high-density. If we'd held onto Auburn, in a few years it may have been worth twice what we flogged it for.
Page 19: We now turn to the financials where the P&L tries desperately to tell us the entity has made a profit of $386K.
My back-o-the envelope calculations, however, suggest a loss of $666K!
You, dear reader, make up your own mind ...
Total Revenue ......................................................................... $2,343K
LESS Total Expenses ............................................................... $3,353K
= Operating LOSS (!!!!) .....................................................$666K
PLUS, Extraordinary item (one-off gain from sale of assets)...$1,052K
and voila ...
'Profit' for the year .................................................................... $386K
We frantically search for an explanation of how a $666K loss can be transformed into a $386K profit, and so we look up Note 3F (Page 31) which simply informs us that the magic figure (of $1,052K) is the 'Total Net Gain from Sales of Assets (Land and Buildings)'. Where did this figure come from? No clues are provided so we're left to speculate on a million dollars possibly being plucked out of thin air, to prop up what otherwise appears to be an over half-a-million dollar operating loss!
There is also a drop in 'Grants' – presumably government subsidies but we're not told – when compared with last year of $385K, but visiting Note 3E (Page 31) casts no light on the matter. We must assume these are 'Government grants' (as defined in Note 1.6 (Page 25)) and as such, one would think they warrant further explanation. Were they grants to Future Print perhaps? Or to some other worthy cause? Was the money wisely spent? We're just not told.
Sticking with the P&L, there is another intriguing entry called 'Employee Expenses' at $2,393K, an increase of $196K over the previous year! This, in spite of the directors telling us (on Page 5) that, staff numbers were reduced. How do you reduce the headcount but increase payroll cost by 9%? Bad management? Paying a CEO an obscene amount of money? We're not told.
We may even be in breach of the 2009 Fair Work (Registered Organisations) Act, as the provisions require organisations to disclose the amounts paid to 'Holders of Office.' So we turn to Note 4A (Page 32) only to find a big, fat zero. I suspect the CEO's salary is possibly discretely recorded a few lines further down, under 'Other Employee Expenses' at $334K, but again we're just not told.
Undeterred, we turn to Note 12B (Page 40) where we discover that under 'Key Management Personnel Remuneration' we paid out $950K in salary and benefits, an increase of $160K over last year. That was $160K of members' fees poured down the toilet, in my opinion.
Just why these salary-related figures are shown under Note 12B and not under Note 4A is not clear - possibly an attempt to bury them as far back in the ''Notes'' as possible.
Page 20: The Balance Sheet includes (under 'Assets'), an entry under 'Other Investments' of $2,821K, a large amount by anyone's standards. Reference to Note 5D (Page 34) reveals nothing about it, other than it is a 'Deposit,' presumably from the sale of Auburn? Was this 'Deposit' long-term, short-term, at what rate with whom? Again, members are kept in the dark.
Now we come to the contentious sale of Auburn or we think we do. Under the heading 'Land & Buildings' is the figure of $5,735K but if we turn to Note 6A (Page 35) we start with a figure of $5,582K. Fair enough! But then that figure is subjected to a 'Revaluation' of $2,925K and a 'reduction' (they call it a 'Disposal') of $2,343K, leaving a net improvement over book value of $581K. We think!
Just when we think we've got that sorted, visit Note 3F (Page 31) to discover that the 'Net Gain from Sale of Assets' was $1,052K! With no explicit reference to the sale of Auburn – it's as if it never happened! It's hard to tell what's actually going on here. I thought the idea of an annual report was to disclose information in a helpful and informative manner.
There's another entry under 'Liabilities,' which also arouses curiosity. Shown under 'Other Payables' is Note 7B, so we turn to Page 36, only to find an amount of $521K described as 'Other'! More funds tucked away in another dark corner? I think members deserve more.
Page 22: This is the 'Cash Flow Statement,' which shows a fairly parlous state. Revenue from members' fees is down $656K compared with last year. Cash outflows are up $310K, compared with the same period. The net result is that we sustained a negative cashflow over the previous year of $965K. So under the previous management, we were chewing through cash like a new tech start-up managed by an 18-year old geek working on borrowed funds, but he's still bought the Maserati and condo in Hawaii as his first priorities! (This is confirmed by reference to Note 10A (Page 38)).
Fortunately, however, by flogging off Auburn, we were able to paper-over the cracks and come up with an improvement of more than $700K over the past year.
One would have thought there would have been some reference in the 'Year in Review' directors' report about such dire financial circumstances and their remedy rather than all the waffle about upholding values and driving growth.
The purpose of an annual report is to present a clear picture to members of the operations, events and financial management of their organisation, which they have, of necessity, left in the care of those in whom they have placed their trust. This is the sacred fiduciary responsibility that directors inherit when they don the mantle of becoming board members. Normally, most organisations enjoy long periods of tedium, when things just seem to chug along form one year to the next without too much disruption or tension.
It's only when things go haywire that such reporting mechanisms are subject to a stress test and as we have just seen, are left wanting in many areas.
For example, the Directors Report seems far too concerned with covering its own backside than admitting what went wrong. For instance there is no mention of the Queensland insurrection or the threat of the extraordinary meeting.
The narrative is littered with jargon and clichés in an attempt at damage control.
No explicit mention was made of such momentous decisions as selling off the Auburn office or sacking many of the key staff.
Ironically, many of the key policies, lauded as part of the so-called 'strategic plan' were quickly found wanting by our new CEO, Andrew Macaulay, who promptly consigned them to the dust-bin of history.
And finally, the financial reports while technically legal, are ill-equipped to paint any sort of meaningful picture of the seriousness of the position we find ourselves in with steadily declining revenues. By cooking the books to make 2105 look good, the previous directors have quite selfishly made it as hard as possible for the new CEO, who seems to be making progress even against such inauspicious headwinds.
The new board seems to be regaining the confidence of members and embarking on a program of proper governance. Let's hope the about-to-be re-elected Board will continue to honour its role, of fearlessly and honestly communicating with members, and that members will take a keener interest in the affairs of their organisation!