Secret audit reveals CFMEU’s riches

The CFMEU’s construction division has an extraordinary $310m in assets across land, buildings and cash, a confidential report ordered by the union administrator reveals.

The CFMEU's assets have been revealed via a KordaMentha report ordered by the union's administrator.

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The CFMEU’s construction division has an extraordinary $310m in assets, including $136m in cash and financial assets as well as $125m in land and buildings, a ­confidential forensic audit into the union’s finances reveals.

The KordaMentha report – ­ordered by union administrator, Mark Irving and obtained by The Australian – calls for an ­overhaul of the union’s organisational structure, finding that the different accounting and payroll systems across the branches meant there was “no central source of truth”.

The 141-page report provides a unique overall snapshot of the Construction Forestry Maritime and Energy Union’s combined ­financial wealth, detailing how the union’s branches made a combined $36.5m profit last financial year with half generated by the once dominant Victorian branch previously led by John Setka.

The examination of the union’s remarkable assets and cash ­reserves follows the Albanese government putting the construction divisions into administration in the wake of damaging allegations of union links to organised crime and outlaw bikie gangs.

After Labor recently saw off a High Court challenge to the ­administration, the re-elected government will back Mr Irving taking stronger action to clean up the union, including through whistleblowers coming forward to expose alleged unlawful conduct by former officials and organisers.

According to the report, the Victorian branch has $143m alone in assets including $42m in cash and term deposits, $11.9m in ­investments and nine properties valued at $78m, while a combined $135m in assets are held by branches in NSW and Queensland.

The report, dated March this year, called for further investigation into a range of transactions, including how cash and equivalents held by the Victorian branch fell by $13m in the months around the time the divisions went into administration last year.

While a number of material payments were identified, the ­report says: “In the absence of the cashflow statements, we are ­unable to confirm the reasons for this decline. Further investigations are warranted.”

The report calls for further ­investigations into “unexplained variances” in cash held in ­management accounts; various expenses and the need to confirm ownership of some properties. However, sources close to the administration said on Thursday the report’s findings had been thoroughly examined in recent months and the administration did not have serious concerns about any of the transactions.

Sources said the reduction in cash holdings in Victoria from $55m to $42m in the four months to August last year related, in part, to redundancy payouts made to state officials including Mr Setka and payments to suppliers.

The report details how the union’s Victorian branch has ­received $28m from the redundancy fund Incolink for the ­construction of a wellness centre in Melbourne’s central business district.

The report says a comprehensive analysis of the financial position of the NSW branch, including a review of bank ­statements, was unable to be ­undertaken due to a lack of ­information. It said there were ­“material gaps” in the records ­including no breakdown of $5.7m categorised as “other expenses”.

        

The union’s national office has committed $23m over five years to overhaul the union’s membership database but the report’s authors have not reviewed the reason­ableness of the scope or the cost of the project.

According to the detailed analysis of the accounts for the last financial year, the combined ­construction and general division branches held net assets of $235m across the country, once net ­liabilities of $74.8m were taken into account.

The branches had total combined revenue of $140m over the 12 months, including $73m in subscription revenue.

Land and buildings, including investment properties are held across four states and valued at a combined $125m.

The report says the union’s Queensland and Northern ­Territory, formerly led by ­Michael Ravbar who unsuccessfully challenged the administration in the High Court, does not own any property and derives revenue from apprentice scheme grants received from the Building Employees Redundancy Trust training fund.

The report calls for the ­appointment of a chief financial officer to work with Mr Irving and be responsible for financial governance across all branches.

It is understood this appointment has been made since the report’s completion.

In relation to disclosures and financial reporting, the report recommends that management accounts are prepared in a more consistent way with more detail about financial transactions.

Urging a review of the construction division’s organisational structure, the report says there is a wide range of management information systems used across the different entities.

Each branch uses its own ­accounting and payroll systems, which are managed independently by each branch and not centrally controlled.

“This creates inconsistency across data and there is no central source of truth,” the report says.

“Consistent and centralised systems including accounting and payroll would be beneficial. It would likely be more cost effective too.”