Promotion of Accounting Reform as the most effective Pathway to a Fairer Safer and more Prosperous Society. Comment and Support from all quarters is Sought to straighten out NZ's problem
Its time for a review of the Accident Compensation Corporation's (ACC"s) latest annual report with particular reference to links to the Bank of New Zealand's overstated income in its 1988 and 1990 reports and other scandal.
The ACC auditor has been changed. Warren Allen, the auditor who said he understood that the Securities Commission had not found Ernst and Young's unqualified audit report on the 1990 BNZ accounts to be inappropriate, has come to the end of his 3 year contract and is gone. He has been replaced by another E & Y accountant however. The audit report is now a little clearer as to E & Y involvement.
And the ACC Chairman, ex Minister of Finance David Caygill, the man who agreed to the 1990 BNZ annual report being released despite knowing that another bail-out was needed, is apparently on his way also, having served two three year terms.
The ACC Chief Executive is also off next year. There is no known BNZ link there.
There is such a link however with the Corporation's Chief Financial Officer since 2002 Phil Burt. His past employment includes Ernst and Whinney (which he has had in common with his auditor for 2002 and 2003, Warren Allen), the BNZ's 1988 and 1989 auditor, followed by employment with the BNZ itself. Presumably this employment started prior to the formation of Ernst and Young about 1990. This employment history does not imply any involvement or complicity with the 1990 BNZ scandal but is food for thought. He would seem to have been there or thereabouts employment wise although he might not have been in Wellington.
A former accountant director of ACC, Trevor Janes has returned through the back door. He has been appointed an outside member of the Investment sub-committee. Such committees have not had outside members previously. Mr Janes was a board member when the ACC bought into National Mail just days before this company ceased the core operations which it was trying to establish itself in, losing the ACC half a million. ACC paid the vendor's brokers CSFB a half percent commission to be its brokers in the transaction as well. So much for independent advice. Mr Janes has been a sharebroker and appears to support liberal use of them or at least payments to them. Eion Edgar who appears to have replaced Mr Janes on the Board has also been a sharebroker. There appears to be no other accountants on the board.
It seems that the ACC can't decide whether it is big government or big business. The latest swing is towards the latter. The website has changed from govt.nz to co.nz and the stately looking cover with a coat of arms on the 2003 report has gone.
The 2004 report claims that ACC has been active in injury prevention since its inception 30 years ago. To some extent perhaps but the claim is dishonest since concentration on this aspect started a few years back when private competition was temporarily introduced. Private operators sought to have lower premiums by introducing financial incentives to get the accident rate down. This was seen as a worthy objective and got ACC active on the prevention front. All their examples relate to recent times, none from day 1. Such dishonesty cannot justify them being trusted with $6billion. There organisation chart indicates that they are big on ethics but that is not the feel that the report gives.
The six billion dollar liquid investments which the ACC holds constitutes excessive and unwarranted temptation. The funds should be retired to the consolidated fund. ACC dominates local securities markets to the extent that their first responsibility is becoming regard for the market rather than endeavouring to maximise profit. The name needs to be changed to the Accident and Investment Market Manipulation Corporation. They have relinquished their claim of superior strategies on the NZ sharemarket. Their successful strategy seems to have involved avoiding the demutualised life insurance companies. This has run its course and they have nothing to replace it.
The ACC is discounting the value of shares from latest market price where it holds more than 5% of a company's shares. This is recognition that a large block is harder to sell. But it doesn't take a 5% holding for this effect to be significant in the NZ markets. On their scale all buying bids up market prices and selling would depress them. This would especially apply to their NZ Govt bonds holding which no doubt are seldom traded. Because these bonds are tradable they are valued based on current market yields and hence fell in value giving a near nil return for the latest year which is meaningless nonsense.
The ACC cover themselves from an embarrasing future loss by stating that they have calculated that there is a one in four chance that they will make an overall loss on their investments in any year. Such a year has not turned up in the past so history does not back their "calculations".
The ACC is playing up pending changes to accounting standards. They take them serious, or so they would have you believe.
The scandalous Audit Cert of the 1990 BNZ annual accounts - Take a Look from Here And then learn about the Securities Commission here who reported on the affair.
We also background the role of the Institute of Chartered Accountants of NZ in ignoring the affair. It might go back 10 years but many players still maintain high office, collectivly protecting themselves at the expense of others.
------------------------
Structure and Operation of an alternative Accounting Organisation designed to shun dishonesty.