The latest auditor’s report into the collapse of Sydney 2002 Gay Games raises more questions than it answers about the company’s financial viability in the months leading up to the Games.
A report written by auditor Peter Marsden from RSM Bird Cameron Partners for tomorrow’s meeting of creditors includes internal memos suggesting the board members were aware of the Games’ bleak financial outlook in April last year.
Marsden included details of an internal memo between the directors from 15 April 2002, which stated the board would need to reduce the budget by 10 to 15 percent. Instead, a budget prepared on 26 April 2002 increased proposed expenses by 3.2 percent.
The report also contained reference to an auditor’s report from January 2002 which expressed concerns about the company’s ability to continue as a going concern.
Marsden has recommended the Games creditors accept a proposed Deed of Company Arrangement from the former Sydney 2002 Board, which could see 59 DJs, artists and suppliers receiving full payment.
Other suppliers would receive between six and 27 cents for every dollar owed to them by the Gay Games.
Among the 59 suppliers set to receive full payment is former CEO Judith Fletcher’s company Square One.
Marsden wrote in the report the Deed of Company Arrangement is likely to be a better outcome for the creditors than taking the company into liquidation.
He stated that he is unlikely to guarantee that any additional money could be recovered by the liquidation process. Proving whether the company had traded while insolvent would be hard to determine and a legal challenge would be a difficult and expensive process, he said.
It is difficult to determine the exact date when the company became insolvent, and the date at which the directors knew, or ought to have known, the company was insolvent.
Sydney 2002 directors have maintained their reasons for the Games financial failure -“ overestimating the support of the gay and lesbian community, overestimating attendance at the Farewell Party and negative early press.
Marsden wrote in his report that he did not expressly disagree with these reasons.
Gay Games creditors will vote on whether to accept the Deed of Company Arrangement, or commence liquidation proceedings at a meeting tomorrow morning.
Sydney Gay and Lesbian Community Publishing, which publishes the Sydney Star Observer is a creditor of Sydney 2002 Gay Games.