NEWS & UPDATES
Update from the Cerebral Palsy Society Board – Sept 16, 2021
16 Sep 2021
16 September 2021
Kia Ora Koutou Katoa to all members
Below are some updates which we the Cerebral Palsy Society Board would like to share with you all.
In this update
- Cerebral Palsy Society (CPS) is back on track after an independent financial review into investments in Cerebral Investments Ltd (CIL) group entities.
- Independent accountants BDO Auckland has recommended the new Board divest all unorthodox investments held by CIL including selling all livestock, and assets of CIL Landscapes and CIL Concretes.
- The new Board agrees with these recommendations and are in the process of implementing these transactions.
- The new Board has made excellent progress in paving a new, transparent and exciting direction for CPS into the future.
Following the 2020 board elections, one of the first tasks of the new Board was to review and consider the investments made by the Cerebral Palsy Society (CPS) via the Cerebral Investments group of companies which includes Cerebral Investments Limited (CIL), CIL Landscapes Limited, CIL Concretes Limited and CIL Aircon Limited (together the CIL Group).
We are pleased to report that we have made a great deal of progress in this regard.
Near the end of the 2020 calendar year, we instructed independent investigative accountants BDO Auckland to review the business, activities, transactions, assets and liabilities of each of the CPS subsidiaries including Essential Assets Limited (EAL) and the CIL Group entities, to identify any issues or matters worthy of bringing to the Board’s attention, and to provide recommendations on the future of those business interests.
BDO provided its final report to the Board on 13 April, 2021.
BDO’s review also considered transactions entered into between CPS, EAL and the CIL Group entities with directors and related parties.
The BDO report noted the following based on the information made available to it:
- Regarding EAL “we consider that [EAL’s investments reflect] an orthodox approach for investing on behalf of a charity such as CPNZ”.
- “CPS funds advanced to CIL are invested in a range of mainly illiquid private assets and businesses including residential property development, peer-to-peer lending, livestock and three small private businesses in landscaping, concrete and air-conditioning”. It observed that “as at October 2020 $2m had been advanced [by CPS to CIL, no funds had been repaid and the market value is not currently clear”.
- “There is a higher number and level of related party transactions, particularly in year end June 2020 and [the last twelve months to] Oct 2020 in CIL and CIL Aircon”.
- “CIL Aircon is technically balance sheet insolvent and has insufficient assets to repay its loan if called”.
- Regarding related party transactions, the BDO report identified that some “CIL directors received income from employment and services rendered” for the review period (being between July 2017 to October 2020).
- Some of the amounts identified by BDO as having been received by a CPS director from the CIL entities (as directors fees, fees for provision of services, wages, reimbursement claims or other) include: $24,000 in the 2018 financial year, $24,000 in the 2019 financial year; $92,000 in the 2020 financial year; and $28,896 for the period between 1 July 2020 and Oct 2020.
With the above in mind, BDO’s recommendation was as follows:
- “We consider that this is an unorthodox approach for investing on behalf of a charity such as CPNZ. As such, we recommend exiting these assets and activities over a relatively short timeframe”.
In accordance with BDO’s recommendations, the Board has taken steps to divest its interest in these investments. This included:
- Negotiating, documenting and completing the sale of all assets of CIL Landscapes Ltd and CIL Concretes Ltd;
- Appointing liquidators to CIL Aircon Ltd;
- Progressing the subdivision of the investment property at Stanmore Bay with an intention to sell as soon as reasonably practicable.
- Selling all livestock
The Board thanks BDO for its thorough independent appraisal report, which has enabled the Board to make timely and informed decisions regarding the CIL Group. While it has taken a lot of Board time and effort to work through the recommendations, and to ultimately exit these activities, the Board is unanimously of the view that it is and will be well worth the effort. All current Board members are volunteers and do not receive director fees, or any other form of remuneration, in connection with their role on the Board or on the board of any subsidiary entities.
The current Board and future Boards can now focus on positively driving the CP Society into the future.
Emma, Renata, Merryn, Reuben, Pippa, Meg & Dan