Serco "hits a new low watermark for transparency and accountability in Australian financial reporting", according to an accounting expert. Credit:Getty Images Indeed, by the look of the G4S and Serco accounts, Australia could hardly be more "open for business". Red tape has shredded to the point where the multinational duo doesn't even bother complying with Australian accounting rules. The financials for G4S reveal a mysterious $56 million owing to unidentified related parties. Its sole director from Blackpool in Britain and auditors KPMG have not deemed this worthy of further explanation. Serco, however, puts G4S in the shade. The company which runs our mainland detention centres (and other privatised assets such as jails) "hits a new low watermark for transparency and accountability in Australian financial reporting", according to an accounting expert from the University of NSW, Jeff Knapp.

It costs nearly $75,000 a year to house a detainee on Manus Island. Serco's revenue has shot up threefold in the past four years – last year it rose from $915 million to $1.25 billion – yet somehow profits are relatively stagnant. It is not possible to see from the accounts, audited by Deloitte, the costs that being charged from related parties outside of Australia, or what the nature of these costs are. For its part, G4S Australia Pty Ltd, the company which ran Manus Island detention centre, notched up $98 million in revenue last year and its net profit jumped from $1.3 million to $14.2 million. Although the government and G4S may have hoped the fees and charges for Manus would be kept under wraps – a Freedom of Information response redacted these details - it is possible to estimate the fees using the G4S annual financial report.

The cash-flow statement shows $89.75 million in receipts from customers. There is one significant customer, the government. There were approximately 1200 asylum seekers on Manus around March 2014, so G4S has made a profit of at least $17,355 per inmate before tax. Serco Australia Pty Limited had 7670 employees at December 31, 2013. It made $1.2 billion dollars in revenue for the year and held assets of more than $700 million. The directors of Serco claim it is a non-reporting entity, a contention Mr Knapp says he cannot understand.

"Serco has thousands of employees and numerous creditors," he says. These stakeholders should be able to inform themselves about the company using financial reports that comply with all accounting standards. "The directors and the auditor seem to have been navel gazing and only considered the information needs of a multinational shareholder," Mr Knapp told Fairfax Media. The sole director of G4S also claims it is a non-reporting entity, even though the company is economically and politically important in the context of its operations at Manus Island. Knapp explains that the Serco and G4S claims for non-reporting entity status mean these companies avoid disclosures in accordance with accounting standards - especially disclosures about related party transactions and balances.

The government is another stakeholder in these two companies which should be interested in related party transactions being disclosed in the financial reports. "The government is handing over hundreds of millions of taxpayer dollars to these companies but not showing any concern about the blatant information deficiencies in their financial reports" said Knapp. "G4S should be more transparent about its related party transactions. According to the 2013 financial report, operating cash flow of $21.5 million has been advanced to unspecified related parties. "The company has a bank overdraft at December 2013 but is owed $56 million from related parties. And who is the recipient of the management fee cost of $5 million?" Knapp also said the statement of cash flows appeared to be wrong because it "inappropriately" netted off amounts that have been paid to and received from related parties.

On a dim view of it, the boats might have stopped coming to Australia, the people smugglers have been thwarted but the green lights are well and truly on for profit smugglers, as evinced by the undisclosed related party deals that are going on from G4S and Serco without explanation. Knapp says that the recent Serco and G4S accounts suggest that financial reporting practice and audit standards are dropping in Australia. G4S lost its contract in March, in the wake of the riots on Manus Island which culminated in the tragic death of Iranian asylum seeker Reza Barati. It now faces a class action lawsuit from guards and the contract has gone to Transfield Services - the ASX listed company which was chaired by the government's Commission of Audit chairman Tony Shepherd. G4S woes over Manus were compounded in February when it was revealed the company faced a criminal investigation at home.

Newspaper reports of an investigation by the Serious Fraud Office into G4S detailed allegations of overcharging the government. The probe widened to new claims of accounting irregularities. Loading The allegations emerged in statements from whistleblower Malcolm Batki, former finance director at G4S Integrated Services, during proceedings covering his claim for unfair dismissal. G4S first came to international prominence in 2012 with the imbroglio over its failure to supply security staff for the London Olympics, despite its £57 million contract.