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VANOC in good shape according to financial report

Auditor General still looking for full disclosure on Games costs

Olympic organizers say they are in good shape despite a global downturn in the economy.

But that has not stopped them from keeping a close eye on spending.

According to the latest quarterly financial report released this week the Vancouver Organizing Committee for the 2010 Games (VANOC) asked the International Olympic Committee (IOC) for an advance payment of (US) $71.6 million rather than rack up interest charges it would accrue if it borrowed the money to cover expenses.

“As we were going forward we looked at our own cash flow and thought we are borrowing some money here and incurring interest cost,” said John McLaughlin, CFO for VANOC.

“(But) we’ve got a really strong relationship with the IOC so we simply asked them if it would be possible for them to advance the money early… and they said yes they would.”

The report, which covers the quarter ending Oct. 31, 2008, showed expenditures exceeded income by $65.2 million.

Much of the spending has been on technology and sport as VANOC continues to work in the organizational and planning phase of hosting the Games.

Revenues for the quarter were $33.9 million with operating expenses at $99.1 million.

Project revenues to date were $370.6 million, about 23 per cent of the total budget, with operating expenses at $463 million, about 28 per cent of the project budget.

Venue construction expenses rose $21 million to $515.5 million, representing 88 per cent of that part of the budget.

The fact that most of the venues are completed and that 98 per cent of sponsorships are committed will help VANOC weather this financial crisis, said McLaughlin.

“In light of the world’s current turbulent economic outlook we are fortunate to remain in a sound financial position as 2008 comes to an end,” he said.

“We have secured the majority of the funding commitment we require and our venues construction is largely finished…

“Although it has been only two months since our last reported results the world’s economy has experienced some extraordinary events. We have seen things change more profoundly and quickly than many of us have seen in our lifetimes.

“Neither VANOC nor its partners are immune to the impact of the economic changes.”

McLaughlin reiterated that the organization’s fiscal responsibility will be supported when its revised budget, which was adopted in principle this month, is made public in January.

He also commented on a letter written this week by B.C. Auditor General John Doyle to the Speaker of the B.C Legislative Assembly, Bill Barisoff, outlining concerns about the cost of the Games.

McLaughlin said the auditor general’s staff spent time with VANOC last January as part of their preparation for an economic update on the Games. However, in May VANOC launched a major review of its May 2007 budget, which was then tweaked again as the economic crisis began to deepen this fall.

“They raised some questions, some of them were good questions,” said McLaughlin of the auditor general’s investigation.

“We knew we had pockets of uncertainty, we’ve always known that all along….

  “They raised some questions and we dealt with those when we did our own internal budget review this past year, so it is definitely dated.”

The auditor general produced reports into the Games in 2003 and 2006 and both concluded that the full costs of the Games is considerably higher that the $600 million that is often quoted.

This time Doyle wrote only a letter saying: “…Fundamental differences of opinion between government and my Office remain unresolved.”

According to Doyle about $170 million in costs have not been counted, including $47 million for the 2010 Winter Games Secretariat, $21 million for the pavilions in Turin and Beijing, $15 million from B.C. Hydro, $15 million from B.C. Lottery Corp., and $6 million from ICBC.

He did, however, praise VANOC as well.

“While costs have exceeded the original budget, I am pleased to report that, on the whole, the Vancouver Organizing Committee (VANOC) has done a good job of managing the timely completion of venue construction.”

Doyle saved most of his criticism for the provincial government.

“I am not issuing a full length report because I do not consider it necessary to detail yet again ground that has already been covered,” he said.

“I have but one recommendation — that government expand its definition of Games related costs to include all items that are reasonably attributable to hosting the 2010 Olympic and Paralympic Winter Games and report publicly on these costs and the risks associated with them.”

Doyle has not seen the latest VANOC budget.

Dave Cobb, VANOC’s executive VP in charge of revenue, marketing and communications, also commenting on the quarterly report, that said Games sponsors are on track with financial support and value in kind, including General Motors’ commitment to provide 4,000 vehicles in 2009.

“Our expectations is that we will receive all of those vehicles from GM,” he said.

“That is their commitment to us and they continue to tell us that they will deliver them. If something happens and circumstances change then we will deal with that at the time.”

The report also revealed that VANOC has offered security on $96 million to the Royal Bank for VISA charges for ticket purchasers.

“It is to provide protection in the event that we have to do refunds on tickets,” said McLaughlin.

VANOC has not released any information about how much money the organization has made on ticket sales to date — that will be in the quarterly report out in March 2009. But the figure indicates that’s how much Canadians have come up with for tickets, out of the $231 million VANOC expects to reap from sales in this first phase.

“These are for scenarios that would happen in the event of Games cancellation,” said McLaughlin.

The next quarter will show high revenues as it reflects funds from the IOC, ticket sales, and sponsors.

Also, 78 per cent of supplier payments went to B.C. companies, 16 per cent to Canadian companies outside of B.C., and 6 per cent to companies outside of Canada.