OPINION-(Un)transparently so

In late December, the government created an office for the supervision of public assets. One of its main tasks is “to set up a centralized and unified system for supervision and management of public assets.” That is, assets owned by capital companies or funds where the region is a shareholder. More recently, it defined rules for the publication of information concerning public capital companies, aiming to increase those companies’ “operational and financial transparency.”

Most of the companies that fall under the new supervisory office’s remit are “Sociedades Anónimas” (SA’s, or public limited companies). In some cases, they operate under concessions. For one of those reasons, and in some cases for both, they have since 2005 to follow IFRS accounting norms. These include standard formats for the financial statements, which are already broadly used around the world anyway.

Recently, one of our legislators also questioned the government about the profits declared by the Light Rail company. It is a pertinent subject, and I believe just one among a few the published financial report elicits.

First of all, the format used to publish the accounts, as available in the Official Gazette, is problematic. There, the company publishes a “simplified” version of the balance sheet. For publication and transparency purposes, a legal (and well-known) format should be used. That a company owned by the region disregards it is already a meaningful failure.

Then, some of the information provided is manifestly perplexing. We are talking about a company with a capital of 1.4 billion patacas. The “simplified” sheet shows one single line for fixed capital. There is no way one can tell the size of any of its main components, such as buildings and machinery, to mention the most obvious. And then, the total fixed capital stated is just over 27,000 patacas. Hardly enough to equip a simple office room.

Equally extraordinary: the company declares over 11 million patacas in profits. Remember that they operated for less than three weeks in 2019 – for free! Even if they were compensated (in advance!) by the government for the forfeited revenue, at the highest ticket price for all free users in that period, the total income earned in 2019 would just over half of the stated profit. 

A company with no physical capital or operating income generates well over half a million patacas of profit a day. If not a miracle, will someone step forward to explain how?