As will be seen from the dialogue below, the word derecognise has had its meaning broadened, usually a matter of interest to the editors of the OED.

And of course there is the issue as to whether or not the Commonwealth Scientific and Industrial Research Organisation is foundering in the wake of a poorly developed strategy for immediate monetary gain in place of investment for the nation's common wealth.

Wednesday, 5 November 2003 Senate—Legislation EWRE 51 EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION

Senator Kim Carr (Labor)—...Dr Sandland, do you recall that at previous estimates we discussed the question of AMC [Australian Magnesium Corporation] and the outstanding loan of $75 million? Do you recall that discussion?

Dr Ron Sandland, Deputy Chief Executive, CSIRO—Indeed.

Senator Carr—Do you recall that Mr Whelan advised the committee that the department of industry would be guaranteeing the loan?

Dr Sandland—I do not recall the details of that advice precisely; however, I do have Mr David Toll here, who may be able to shed some light on that.

Senator Carr—[Mr Troll] I am interested in whether you can advise me on the accuracy of the advice that has been tended to this date to the committee. Would you agree that CSIRO has in the past advised the committee that the department of industry would be dealing with the matter of the losses to the Commonwealth from the AMC of a $75 million loan that had been allocated to the CSIRO and the AMC?

Mr David Toll, General Manager, Corporate Finance, CSIRO—I think the reference that Mr Whelan made to the industry department related to the fact that the industry department was the portfolio department for CSIRO at the time. The issue is really that the loans were derived from the Commonwealth government, not the industry department specifically.

Senator Carr—Mr Whelan said: That non-recourse loan is repayable, conditional to the generation of the royalty stream. So, should the royalty stream not be payable to CSIRO, the asset and the liability will be written off and there will be no impact to CSIRO’s bottom line. That was in reference to the collapse of AMC. Is that right?

Mr Toll—All of those things are correct.
 

Senator Carr—Is it your view that the department of industry is the guarantor for that loan?

Mr Toll—The issue is that the Commonwealth provided the loan moneys to CSIRO through appropriation and, at the time, CSIRO was part of the industry portfolio. However, I think the issue really is that the Commonwealth provided those loans.

Senator Carr—Today I received a note from the Minister for Industry, Tourism and Resources telling me that the CSIRO-AMC loan arrangements are not secured by the Department of Industry, Tourism and Resources. Who is responsible for that loan?

Mr Toll—I would say that the Department of Finance and Administration is the more appropriate body on behalf of the Commonwealth government.

Senator Carr—Would you agree that there has been a loss of $75 million?

Mr Toll—CSIRO has derecognised the $75 million asset and liability.

Senator Carr—Derecognised?

Mr Toll—Derecognised within its balance sheet. The issue of the whole-of-government accounts is an issue for the Department of Finance and Administration.

Senator Carr—You have derecognised $75 million?

Mr Toll—That is correct and that is reported in the annual report.

Senator Carr—Who is going to pay that?

Mr Toll—The issue does not impact on CSIRO’s operating position at all. The issue is that the money was provided by the Commonwealth government at a point in time—the idea being that those moneys will be repaid once the royalties come on stream from the magnesium production.

Senator Carr—Now it has collapsed. There are no royalties. Who is going to repay the loan?

Mr Toll—The loan will not be repaid until there are such royalties in the future, and that is the nature of a non-recourse loan.

Senator Carr—But the operation has collapsed.

Mr Toll—I am not in a position to comment on the future viability of the company.

Senator Carr—It is in liquidation, is it not? Does the operation function?

Mr Toll—To my knowledge, at present, no. However, I believe that options for the future are being considered.

Senator Carr—What was the total Commonwealth exposure to that project?

Mr Toll—The Commonwealth government provided loans of $70 million and the Queensland government provided loans of $5 million.

Senator Carr—Will AMC default on the payment of that $70 million?

Mr Toll—The arrangement was that AMC would provide royalties to CSIRO as a result of the commercialisation of the magnesium production. Those royalties would then be paid back to the two governments—the Commonwealth government and the Queensland government—by the CSIRO once it had received them.

Senator Carr—Do you expect AMC to default on the loan?

Mr Toll—At this stage we believe that it is less than probable that that will be the case and that is the reason we have—

Senator Carr [interrupting]—I am a simple fellow: I want to know what ‘less than probable’ means.

Senator Amanda Vanstone (Liberal)—It does not mean probable.

[TFW: There appears to be a fine distinction being drawn between "less than probable" and improbable, but there was no elaboration on the point]

Senator Carr—That is very good, Senator. Can you tell me whether you think AMC is going to repay the loan?

Senator Vanstone—No, I cannot tell you. I am answering a simple question. You say you are a simple fellow, and it is not for me to dispute or agree with that. That is your own assessment. But you are saying, ‘What does less than probable mean?’ and I think it has a pretty clear meaning.

Senator Carr—They are not going to repay it?

Mr Toll—We have assessed it to be less than probable, and that is the reason we have derecognised those amounts from our balance sheet.

Senator Carr—So who is going to pay?

Mr Toll—With the nature of the loans being non-recourse loans, the repayment does not need to occur unless the royalty stream—

Senator Carr [interrupting]—So it is a gift?

Mr Toll—The money was provided in order for CSIRO to be able to carry out research in this area, and that was done.

Senator Carr—The research was done?

Mr Toll—Yes, up to the point of the AMC preparing itself to go into commercial production.

Dr Sandland—It is clear that CSIRO will not be responsible for repaying this loan and perhaps it should therefore be taken up with the Department of Finance.

Senator Carr—In the previous estimates you told me it was the Department of Industry. I took it up with them and they said no. This is your opportunity to correct the record that previous advice was wrong.
 

Mr Toll—I think that, yes, it is the Department of Finance and Administration which is the appropriate organisation.

Dr Sandland—I said it. I apologise for any error that we made in answering your earlier question and, should there be any change to the answer we are giving today, we will let you know immediately.

Senator Carr—I am having a bit of trouble following that—$75 million is a lot of money just to go missing and it is a bit hard to track down who asked about that. We have had a couple of answers on that matter. I will come back to that.

[TFW: In a recent interview on ABC's Inside Business (November 9) Max Whitten, former Chief of CSIRO's Division of Entomology, indicated that the money lost was significantly in excess of $75 million. It is perhaps noteworthy that, while the funding is derived from the Australian public, that wasn't alluded to by anyone present at the hearings - a minor oversight of course.]

Alex Reisner

The Funneled Web