Financial reviews sounded alarms over debt-laden Carich

By ALAN PERROTT, education reporter

Confidential reviews of Carich Training painted a bleak picture of the company's financial wellbeing, as creditors became anxious about debts that had swollen to more than $5 million.

The Weekend Herald has obtained the finance and management reviews by PricewaterhouseCoopers and KPMG into the collapsed education provider.

Carich went into voluntary receivership on October 29, closing 11 sites, leaving 3700 students adrift and putting 233 staff out of work.

In September, PricewaterhouseCoopers was commissioned to investigate serious misgivings held by the Tertiary Education Commission.

An initial financial report on the company's position in August was revised at the request of Carich director Caron Taurima to include more favourable results for September.

The report concluded that Carich was insolvent. It also found:

* Debts were being deferred, including rent, and the firm increased its overdraft temporarily to pay wages.

* Despite requests, no proof had been produced that a cash injection of about $3 million anticipated by Mrs Taurima would be available.

* Even if this cash was found and the commission repaid $1.3 million, Carich might not always stay within its $1 million overdraft limit.

Despite this cash crisis, a KPMG report found that the company still had a future if a row with the commission could be resolved swiftly.

The dispute centred on how much Carich owed the commission for overestimating its student roll last December. Carich's initial calculation indicated it owed $3.2 million, to be repaid by October 31, but an inhouse review early last month slashed that figure to $600,000.

As Carich had already repaid $1.9 million, it felt the commission should return $1.3 million. The discrepancy is still being investigated.

The KPMG report was commissioned on October 16 after Mrs Taurima questioned the "safety" of the PricewaterhouseCoopers report.

KPMG concluded:

* Carich had serious cashflow problems, mainly resulting from "potentially catastrophic" changes to Government funding of private training establishments and the overfunding dispute with the commission.

* The working capital deficit was $5.3 million at September 30, but if the commission row was resolved and the overpayment recouped, that would restore liquidity.