STIG InveSTIGates

This issue STIG takes a look at club accounts

Recently, the Revenue Commissioners issued a winding-up petition against a second league club, Cork City. This follows on from an earlier petition against Shelbourne, which was ultimately averted and preceded the withdrawal of Dublin City from the league entirely after they went bankrupt, in a move unforeseen by nobody. Revenue have designated the league a high risk area and are focussing on the 22 teams, so there is the possibility of more petitions to come.

Despite the withdrawal of the Shelbourne petition, a winding-up petition is a serious occurrence. It usually comes about not because a tax payment has been missed, but because a special Revenue arrangement to repay outstanding tax has been missed, often more than once. Revenue don’t particularly like putting companies out of business, as they’re unlikely to get any of the money they’re owed, and certainly won’t be getting any money from them in the future, so it’s not a step they take casually.

So what state are eircom League clubs in that Revenue are taking these steps? The accounts of clubs which are incorporated as companies are publicly available from the Companies Office - €2.50 to download via www.cro.ie, their website. That’s eleven clubs, plus Shels, who claim an exemption from disclosure of their accounts. Their most recent accounts show the following – (N/D indicates an item not disclosed)

The other clubs are run as co-ops, partnerships and, in one case, a UCD society. In contrast to the above, UCD’s and Finn Harps’ 2005 accounts show a loss of €11,000 and a profit of €2,055 respectively. St Pat’s, therefore, in running up a loss of nearly €600,000 in one year artificially inflated their turnover by about one third. It’s no wonder we can never win in Richmond!

It’s worth noting that Bohs’ figure is after a profit of €1.27m for sale of property and Shamrock Rovers had €1.5m written off during their examinership period. Leaving these clubs with a loss of about €500,000 and €200,000 respectivly on normal activities.

A trend is to be noticed with some clubs. Kildare, Waterford and Harps all overspent trying to achieve success – Kildare were a place off the play-off three years running, Waterford reached the Cup Final in 2004 and Harps hit fourth in the league and a Cup Final around 2000. Reality caught up, and all three clubs now adhere to budgets, turning in the only real profits in our above summary. The result? All three clubs are having their worst spell in years. They simply can’t compete when doing things properly.

Way back when, however, the FAI introduced a plan in part to deal with overspending – this being when Harps and Galway nearly went to the wall a few years back. It was called UEFA Licencing. What does it have to say on the subject of overspending?

Well, Section 9.2 states that “Accounts which show a negative equity deficit (i.e. negative nett assets – most clubs, as seen above) must be accompanied by a satisfactory financial report under F.1.04”. F.1.04, however, states that this is OK provided you provide a budget for the coming season. It doesn’t say the budget has to show a profit or put any other restrictions on what the budget should contain. UEFA Licencing, on this occasion, is effectively worthless. It’s so worthless that Dublin City could cease trading half way through the season dispite having had their budget approved by the FAI.

F.1.03 states in relation to non-payment of taxes that no action will be taken if “the applicant has paid the overdue payables”, if “the licence applicant has concluded a written agreement with the creditor to extend the deadline of the payment of these overdue payables” or if “proceedings have been opened with the competent body according to national legislation.” Given that, in Revenue’s case, point three is last-chance saloon, the document effectivly says that a clubs license won’t be revoked or any other punishment issued untill the club has been wound up by the revenue and no longer exists.

The above criteria are designated as “A” requirements. An “A” requirement, the Licencing manual notes, “Must be fulfilled as indicated.” But then... “However, the manual offers possible alternatives to fulfil certain criteria. Non-fulfilment of criteria will result in the licence applicant being refused a licence and the club may not be granted admission to the FAI National League Premier Division and UEFA Club Competitions.” We now have a situation whereby even a clear breach of the rules only “may” get a club punished.

This article originally appeared in print in STIG Volume VI, Issue V

Since writing this article, it has come to the author’s attention that Drogheda United FC trade as Hinge Trading Limited, and not as Drogheda United Football Club (O2) Limited, which is the parent company of Hinge Trading Limited. Hinge Trading’s loss for the year ended 31 December 2005 was €1,006,504.

Disclaimer

We have tried to make this article as factually accurate as possible. However, if there is a factual error, please contact us at stigonline@stigonline.com and we will publish a correction.