The Victorian government’s partner in the $1 billion Royal Children’s Hospital project was none other than Babcock & Brown, the financial engineer whose empire of leverage and exotic corporate structures now lies in a smoking ruin.

Desperate for cash to prop up its ailing empire in 2008, Babcock flicked on its stake in the hospital to an associate in the Atlantic tax haven of Guernsey for a quick $91 million in cash.

The state could do little more than stand by in horror, hoping nobody would draw attention to it. Few did. It was a tumultuous time.

Now, keen to allay concerns it may not have learnt the lessons of the financial crisis, the government message is that taxpayers had lost nothing from the hospital debacle.

”The change in the financial structure of the Royal Children’s Hospital did not impact the funding or security available to the project,” a spokeswoman for the Department of Treasury and Finance told BusinessDay last week.

It was a misleading statement.

Apart from the likelihood that funding costs on the deal were higher than they ought to have been, the department failed to mention, rather conveniently, that a $35 million payment was never forthcoming.

This underwritten and committed donation to the Royal Children’s Hospital was contracted as part of the state’s deal with the winning tender.

A year ago, it was written off. Suffer the children.

Strangely, the company that promised the donation, Babcock & Brown International, remains alive, which begs the question why it has not been pursued for its debt and bankrupted.

There is a far greater question, however, which needs to be answered. Why does the state not properly monitor the financial position of its PPP (public-private partnership) owners and managers?

The Department of Treasury and Finance has transferred billions of dollars worth of public assets to private joint venture partners but won’t provide their financial details.

Yet the devil, as anybody knows, lurks in the details.

Last month, BusinessDay revealed the ultimate financial position of Australia’s most successful new participant in government privatisations, Plenary Group, was hidden by a secret trust structure.

Plenary, which has won 20 PPP deals in a halcyon decade – hospitals, convention centres, army bases, high-security buildings – is now being sued by the Tax Office.

The taxman has made an application to the Federal Court in Victoria to wind up one of its subsidiaries for failing to come good with $2.35 million in overdue BAS payments. Despite this contretemps with the taxman, the high gearing of the Plenary PPP projects and, consequently, some edgy financial results, our political overlords still don’t deem it appropriate for taxpayers to be availed of the full details of their own counterparties.

In NSW, contracts for most of the billion-dollar toll-road deals are still under wraps. But at least the counterparties, firstly Macquarie Bank and now Transurban, are public entities that disclose their accounts.

The financial status of a manager, equity sponsor and debt arranger of no less than five Partnership Victoria projects – including the $1 billion VCCC hospital – ought to be in the public domain.

Does the government have access to financial information on Plenary Group and its associated unit trusts? If it doesn’t, it should. And if it does, it should put it on the record.

Plenary itself is hardly to blame. As its principals say, it only discloses what it has to. Further, infrastructure projects are typically highly geared, it says. And with regard to the tax dispute, any citizen or legal entity has the right to test its claims in the courts.

And they do. Plenary Group and its builder Grocon are now chasing more funding from the government for the Biosciences Research Centre, a $280 million PPP at La Trobe University.

The matter is in the Victorian Supreme Court as Plenary Research requests a 226-day extension on the completion date. Plenary Group owns 100 per cent.

In the case of another offshoot, Plenary Conventions, which owns the Melbourne Convention Centre, its most recent financial statements show it technically insolvent.

Plenary says a deficiency of assets over liabilities is not the best gauge of financial health. Cash flow, it points out, is strong. Assets versus liabilities is a fine indicator of leverage. How much leverage lies with the parent?

Surely authorities should ask that Plenary Group Pty Ltd and its Plenary Group Unit Trust – those that control Plenary Conventions – make full disclosure of their financial position at the end of 2011 and explain why a 100 per cent-owned subsidiary is not meeting its tax liabilities on a timely basis.

Late last month, Plenary lodged a copy of its 2011 accounts for the company, which provides accommodation and other services to the Australian Defence Force.

Plenary Living LEAP No 1 Pty Ltd – a federal government project – reported a profit of almost $4 million. Like Plenary Conventions, this PPP contractor is highly leveraged. Some $300 million of assets are funded by just over $20 million of equity – and that’s after taking a dividend that was greater than post-tax profits.

The statements note Plenary founders John O’Rourke and Paul Oppenheim resigned as directors during the year, replaced by representatives of new majority shareholders, Pinnacle RE Services Ltd and Canada’s largest pension fund, CDPQ.

The company’s financial position appears satisfactory in the circumstances, given its two financially strong shareholders.

This is indeed the case with many of Plenary’s entities.

Yet the ultimate bona fides of the group remain a mystery, and one that casts a pall over the state’s management of privatisation deals.