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CARILLION “aggressively managed” the reporting of its debt, a document released by two Commons committees shows.
The construction and outsourcing company that went into liquidation in January avoided tackling the underlying challenges in respect of “problem contracts.”
Instead it did deals to “enhance the reported profitability and net debt position of the group,” says a draft independent business review (IBR) commissioned in September and carried out by FTI Consulting.
Carillion also juggled its debts via “the short-term deferral of payments, acceleration of receipts and receipt of short-term loans from joint ventures.”
Management believed the consultants had overstated the risks and were “too harsh,” but the consultants said their review reflected a “balanced view and not a worst case.”
It also highlighted “a lack of management attention to (and accountability for) addressing key issues, governance failures over the amount of risk being taken on and a focus on short-term financial benefits (net debt and cash) at the expense of long-term profitability and viability.”
A total of 1,371 Carillion workers have been made redundant since the company, which held a number of public-sector contracts, went into liquidation.
The IBR was released as part of an ongoing inquiry into the firm’s collapse by the Commons business and work & pensions committees.
A spokesman for the former Carillion board said: “The draft IBR was only made available to Carillion for review late afternoon on Saturday January 13.
“Furthermore, the executive summary had not been seen or tested with the company at all and a number of the assertions/statements would have been challenged.”
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