Ask Shorten about real Bias not perceived., page-13

A bit of a read here from a commentator on michaelsmithnews.com , must be of a legal mind.

StephenJ explains why Commissioner Bernie Riordan may have a case to answer at TURC - and no job at FWC


Here's StephenJ
I saw part of Penfolds evidence on Friday.
It annoyed me that Stoljar didn’t seem to fully understand what he was questioning him on.
I stand to be corrected once the actual financials become available on TURC site but the attached is how I see it at the moment.
Riordan has (with the assistance of Penfold) hidden the effect on ETU net assets and retained profits of the understatement in the Officers fund balance.
If Riordan had put through entries to correctly deal with what had happened the effect would have been to reduce the retained earnings of the ETU by $200k and similarly reduce its Net Assets by $200k.
The Entries that were put through did not reduce either Retained earnings or net assets. They understated provisions by $200k and increased the liability “funds held on trust” by $200k.
That is; Financial Statements were produced which did not (apparently) show a true and fair position. A breach of the Fair Work Act and one that Riordan deliberately engaged in (apparently).

Officers Fund and MERT Grant
The evidence of Mr Penfold on June 5 contains some interesting statements if in the absence of the actual Financial Statements they are also somewhat confusing.
1. Officers Fund
This fund accumulated from payroll deductions.
As at 1995 it amounted to $156,000.
Originally it was invested with Deutsche Bank and was taken over in 2004 by Chifely Financial Services (CFS) when it had grown to $245,000.
Its estimated value by May 2011 was $367,000.
It was held by CFS as part of a larger account in the name of the ETU of approximately $4 million.
All accretions to this fund were treated as Income of the ETU ie the earnings on the Officers fund have added to the retained earnings of the ETU and hence its net assets.
No tax has been paid on the amounts referable to the Officers Fund.
2. MERT Grant
The Financial Statements for the ETU for the 2010 year show the receipt of a grant from MERT of $898,000.
This grant was to cover expenses expected to be incurred by the ETU in setting up a Delegate training project and a Skills centre.
Provisions were created to cover future expenses however the notes to the accounts referred to expenses also incurred in the current year. No further information is available as to the extent of those current expenses but it seems whatever they are they have been written off in the 2010 accounts.
Penfold accepted this was not Union money and the grant (or that part unexpended) needed to be accounted for as a liability.
Note 14 to the Financial statements shows two provisions
Provision for delegate training 300,000
Provision for skills centre training 398, 845
Total 698,845
The Grant money was shown as income and then apparently offset by an entry

DR CR
Expenses (Delegate and skills centre) 898,845
Provision for delegate training 300,000
Provision for skills centre 598845
The Provision for skill centre has then apparently been reduced by 200,000 and the amount shown as held on trust for the Officers fund been increased by the same amount.
This brings the amount shown in the ETU accounts for the Officers fund to the correct estimated figure at the end of the 2010 year.
When Penfold refers to the “expenses” for these training centres at page 903 it is clear from the reference back to “page 162” that he is talking about the provisions and not any amount shown as expenses.
3. Effect of transactions
If this analysis is supported by the Financial Statements when they become available the following comments can be made.
3.1The retained earnings of the ETU have been overstated during the relevant period by the earnings attributable to the Officers Fund.
3.2 The adjustment to reflect the correct amount held for the officers Fund should have been to these retained earnings and been achieved by a below the line adjustment to the 2010 results.
3.3 The receipt of the grant has had no effect on the profits of the ETU for that year as it has been fully offset by the expenses recognised as a result of initially raising provisions equal to the grant. This puts to one side any current year expenses (see above).
3.4 The Provisions required to enable future expenditure have been understated by $200,000.
Effectively this became a problem for the future when the expenditure which exceeded the balance of the Provisions would need to have been accounted for as expenses of the relevant year and not as a debit to those Provisions (because the Provisions would have been reduced to zero).
3.5 To the extent that it may be possible to acquit the grant by reference to expenses that the Union would have incurred in any event the effective result would be that the grant money effectively added to the earnings of the Union and was used to the extent of $200,000 to correct the situation with the Officers Fund.
3.6 It follows that the Financial Statements for 2010 did not give a True and Fair view of the results for that year. Similar comments could also be made for any year prior to that when the discrepancy between the amount shown as owing for the Officers Fund and the true figure became material.
4. Responsibility
Who ordered this?
Q. What I'm trying to grapple with, Mr Penfold, is why
does the MERT Grant money get reduced by $200,000 and
what's treated as being held on trust gets increased by
$200,000?
A. I think - Mr Riordan would have instructed me to do
that.
Page 902
Q. All right. Between 2009 and 2010, the amount held in
trust is said to increase by $200,000 to $356,586.
A. Yes.
Q. Can you just explain why that adjustment was made?
A. That was after - Mr Riordan would have instructed me
to make the journal entry for that $200,000
Page 901
Q. Isn't this what happened, Mr Penfold, that the
MERT Grant provision was reduced by $200,000 and the
trust fund provision went up by $200,000?
A. Yes
Page 902
Q. When you read these accounts - and I'm not suggesting
this has occurred. I'm just trying to understand the
accounts - it looks as though the remaining $200,000 is
treated as an increase in trust funds held, but if that had
happened, then that would mean that money had come in from
MERT and was being treated as being held on behalf of the
officers?
A. Yes, it would
Page 903