Twelve full years and the results are the same as always. This has been the case since 2000; the General Audit’s Office (AGN, for its acronym in Spanish) once again denied an opinion on the Military Manufacturing (FN, for its acronym in Spanish) financial statements up to December 31st 2011 because of the “very significant effect of the restrictions on the scope” of their research and the uncertainty arising from the data collected.

The refusal of an opinion, as the assessment of the AGN, is not in itself a negative rating, but shows a lack of consistency in the paperwork and especially when it comes to the numbers- the audited body, which has not allow the federal watchdog to issue a favorable report for more than a decade.

In fact, the report approved this year points out: "The information developed in the Financial Statements (Military Manufacturing) suffers from some inconsistencies, such as it does not expose the composition and valuation criteria of some bills and the impact of adjustments from previous years.”

As a limitation to its investigation, the Audit states that "it was not possible to assess the acumen of the balances of the Inventories as well as other assets, because there was no data regarding the registration process, evaluation of the assets” that compose that item. 

In that sense, as a kind of justification, Military Manufacturing reported that at the time of the investigation they had not yet completed the "tasks of counting and analyzing some deposits," and added that they had also not assessed the "explosions in the Military Factory Rio Tercero to determine a reasonable value of the registered property."

According to the AGN, another limitation on the Manufacturing Sector’s numbers emerged from the Fixed Assets category in which the company "reported that some properties, mainly land, are not incorporated in the financial statements, which would be recorded in the 2012 statements by an approximate amount of $58 million, an amount that does not include a piece of land of 53,000 hectares in Cruz del Eje (Córdoba), the entity uses it as a shooting range. For these reasons, it was not possible to assess the completeness and valuation" of that category.

If its numbers that we are talking about, the audit report concludes that "the 2011 financial statements represent a loss of $47 million and a negative net worth of $1,138 billion." The outlooks for the coming months are not encouraging to read, because the financial economic projections show "significant losses" ahead in 2012.

The Blasting

Among the limitations on the scope of its investigation, the AGN dedicated a separate paragraph devoted to what were the explosions in the city of Rio Tercero in Cordoba, which occurred in November 1995, in which seven people died, and more specifically its impact in the Military Industries’ numbers. As presented by the Audit: "The company has made a provision for Military Manufacturing Río Tercero Trial for $114 million pesos. That was based on a report prepared by the Legal Department that identifies legal proceedings for nearly $91 million in connection with the claims of November 3rd and 24th 1995."

When it comes to criminal cases, and always taking into account up to December 31st 2011, the report tells us that "after various legal actions, the 11,000 plaintiffs were grouped in 6,955 trials of which 2,943 were reported by a respondent amount of $49,019,244. However, there were still 4,012 (records) that were not reported and in an amount yet unknown. "

In the forecasts civil cases also appear. There are 1,339 trails that are processed in the Federal Civil and Commercial Court of Rio Cuarto. Of that total, at the closing of the audit report, they had "Pending Litigations for $26,400,441 pesos; Trials within the First Instance amounted to $4,089,875, and Trails in Litigation had a total of $10,995,244”. This means that the calculated total for this portion of the records amounted to $41,485,560.

"With what was stated and because of the shortcomings of completeness and valuation results from the state of the proceedings and the information available, the General Auditor’s Office is unable to assess the reasonableness of the forecast for the Trials in the Military Manufacturing through December 31st, 2011," states the report. However, the same report notes a fact known after the closing of the investigation. On January 30th 2013 the Department of Legal Affairs for Military Manufacturing informed the Management Accounting and Finance Department that they "achieved to quantify and classify all state explosion trials, arriving to a total of 8,249 trials, for a total amount of $122,383,155." These numbers will be reviewed by the federal watchdog.