Where the money is coming from – Part 1

Let’s get to exploring IOF finances further. It would be great to understand where the continued losses come from. First we look at the revenues, and then at the skyrocketing expenses. It makes sense to have a look at where the money is coming from first. After all,  makes a huge difference if the money spent was earned on the market, or simply squeezed out from within the sport.

This task is surprisingly difficult for the post-2012 period. IOF’s commitment to highest level of transparency means that a whopping 92%(!!) of the revenues are reported on one line as “Funding/income” in the 2015 Profit and Loss Statement. One may have thought that reporting 60% of expenses on one line as “Other expenses” was interesting enough. The point is that post-2012 it is unavoidable to make estimates on the breakdown of revenues, and do a bit of a guesswork.

This is also a long topic. In this first part I look at the general picture and the various fees (taxes) charged by the IOF. In the second part I look into the attempts to bring in monies from outside orienteering: grants and ambitious commercial revenues.

The sad news is: 80% to 90% of IOF revenue comes from within the sport as various fees, in essence taxes on the love of our sport.

If you look from a distance, ignoring the details, this looks like a dynamically growing successful organisation.

IOF Revenues 2000-2018 v2

Alas, details tell a different story. The expectation of dynamic growth of commercial income appears to be way overestimated when it comes to facts. It looks promising only in the budget. TV rights are balanced with similar TV expense, that makes them in essence a zero sum game. More details on that in Part 2 of this article.

The dominant source (80% to 90%) of the freely spendable revenue comes from within the sport as various fees. They come directly or indirectly from athletes, both elite and masters, and volunteer organisers who are all being taxed by the IOF for the love of our sport.

 

Of course, there is nothing wrong with paying tax to support public services. Also, there is nothing wrong with admitting that our sport is less marketable than some other spectator sports. After all, sport caving is even more confined than orienteering.

But funding based on taxes calls for transparency and consensus around the way money is spent. It is essential that the majority of taxpayers feel that the money is spent well. People can easily get disillusioned when they feel that the money is not spent well, but new fees and charges introduced into the system to cover growing expenses.

Below I review the different sources of IOF income to see where they come from and how they changed over the past years. I disregard the Investment and financing revenue/expenses, because they are close to zero, and that is not a core activity for the IOF.

Note: the 2012 to 2016 period details are estimates based on budgets, reported totals, Council minutes and other information. Starting from the Financial Year of 2012, reports prepared under the leadership of Brian Porteous as President, and Leho Haldna as Senior Vice President, showed very little detail both on revenues and expenses compared to previous years, as discussed in my previous post.

Monies collected from within the sport

Membership fees

The basis of the budget for most amateur federations. Obviously paid by member federations, who in return get their monies typically from their members. Similar to the IOF, there is little commercial money comes into the sport at national level. Few national federations pride themselves with major sponsors. Some lucky ones get state support. Majority lives on membership fees, and more recently more and more on a tax levied on event participation.

There was some growth over the years due to more members and some increase in fees, but growth on this line has a strong limit: members have to approve it. It provides a solid base, but not a platform for ambitious growth plans.

Event sanction fees

Event sanction fees are fees that the IOF charges for allowing member federations to stage IOF events. These range from €250 a day for a World Ranking Event, through €60,000 for FootO World Championships, to €65,000 + €12/participant for a FootO World Masters Championships. You can find details here.

These event sanction fees are a goldmine for the IOF, the “most successful” revenue stream. It has grown to 650% of its 2000 level.  Now it provides around 50% of the IOF revenues.

It is interesting, that there is a major discrepancy between how the IOF leadership looks at this revenue and how organisers do.

IOF leadership looks at this as “selling their only product”. Hence, they try to maximise rent. Organizers look at it as a tax on the enthusiasm and sweat of volunteers. They see organising most major IOF events as an unpaid service to the community, typically in a commercially non-viable environment where you have to juggle tight budgets and beg for support locally, or charge athletes participation fees that some simply cannot afford.

Smart or shameless – classical business question when somebody exploits limited supply of goods to maximise profit, while others feel that their desire to contribute to the general good requires them to “buy” overpriced goods.

The tax nature of this fee may also explain why IOF leadership is not keen on talking about sanction fees publicly. I know of two occasions where it was deleted from interviews for IOF publications that the high sanction fees seriously limit our ability to attract new organisers. When the organisers of the 2015 MTBO World Cup detailed in Bulletin #2 how much of the entry fees lands with the IOF, the Council threatened them removing the event’s World Cup status.

This is strange from a leadership that all for the professionalism of the sport. Professional sport federations happy to say for how high they can bid up the price of events and the TV rights. If the IOF Leadership truly believed that they were “selling” events for reasonable sanction fees, why were they always shy about the increase in revenues? Why did not they pride themselves with being able to “sell” major events for a revenue more than six times compared to that 15 years ago?

Serious problem is that many potentially interested organisers (and not only from poorer countries) shy away from applying to organise major events because of the financial risk due to sanction fees and compulsory Anti-Doping “contribution” (see below). For years it was even impossible to get an application submitted in the normal process for the FootO World Orienteering Championships.

A pure bidding process would clarify the commercial viability of major IOF events, but IOF leadership has shied away from testing the “price tag” they put on an event in a competitive process. It is understandable. Competitions are unpredictable. Who likes that?!?! 

The only exception to the limiting impact of high event sanction fees are the Masters World championships (due to large participation numbers) and – theoretically – the FootO World Championships (due to its largest commercial potential).

Albeit, there is an interesting pattern that has emerged. See the following  table. What a coincidence: most recent WOC organisers also organised a Masters WOC a year or two earlier. If you ever got the impression that masters are paying more than necessary, you may find some comfort that you also supported the competition of elites.

WOC-WMOC organisers

The odd one out is Latvia, who organizes WOC first. But they were not shy stating the obvious, as recorded even in the XXVII (2014) GA minutes under 17.1 World Championships in 2018:   “LAT stressed that their proposal to host the 2018 Championships is subject to LAT also being awarded the 2019 World Masters Orienteering Championships, as the income from this event will make it possible for them to finance the 2018 WOC.”

It is also interesting to note in the minutes under the same point that “Brian Porteous also stressed that, should the General Assembly award the World Orienteering Championships to LAT, such a decision would not create a precedent for future years.”

Sure enough. Organisers linking WOC and WMOC could not possibly create a precedent with a decision on WOC 2018. It seems that the informal practice has existed for many years.

Anti-Doping contribution by organisers

This is just a bolt on to the event sanction fees. It varies by the event between €400 to €1000 per day in 2017, and between €600 to €1250 per day in 2022. It may add 10% (WOC), 50% (WMTBOC), or even 100% (JWOC) to the sanction fees, depending on the event. You can find details here.

Organisers just have to pay it, even if it is somewhat misleadingly called a “contribution”. In reality it is a tax paid by the athletes, even if the nominal “contributor” is the organiser of the event.

To be frank, this system is a welcome improvement on the previous one used until 2015 and part in 2016. Then the organisers were informed about the number of A-D tests they had to finance, only after the entry fees were published. Hence, they had to either run the risk of unexpected charges, or collect higher fees from the athletes in anticipation of an unknown A-D charge.

There is very little known about the level of required Anti-Doping activity. It is unfortunately needed, but it is also very expensive. Finding the optimal spend and structure is a fascinating and complex topic with a long list of questions that I will write about later. The bottom line is that currently the IOF sets the level of fees, the organisers collect it typically as part of the entry fees (or other services, like accommodation), and pay in as organisers’ A-D Contribution.

Athletes Licence fee

Yet another tax for elite athletes in a different skin. Whether there is a need for an orienteering athlete’s license is a question, but IOF Leadership believed that it was required to make the sport more professional.

One may argue that prize monies make a sport professional, and not paperwork, but it is much easier to introduce paperwork that looks professional.

Once there was a decision to introduce the licence, IOF immediately wanted to use it as a money collecting vehicle. It is very interesting to see how the “purpose” of the money collected has evolved based on Council minutes. If you believed that it was introduced for A-D reasons, think again.

  • April 2013 (#165) – first mention of licence, no fee mentioned
  • January 2014 (#168) – licence fee to be used to finance the entry system (eventor)
  • Mar, Jul, Oct 2014 (#169,170,172) – licence system discussed, but no mention of fees
  • January 2015 (#173) – first mention of athletes’ fees to be used for A-D financing

In fact, there was no necessity to impose a fee with the Athletes Licence. The IOF budget includes roughly the same amount (€50,000 to €60,000) for the combined A-D fund contribution of athletes and organisers, as for eventor and World Ranking (services that were part provided for free to the IOF, part were not needed, especially at the current high cost). So by forgetting eventor the fee for athletes licenses could be eliminated.

Anyway, it does not really matter what is the stated reason for the licence fee. The money gets into the big pot and gets spent somehow. There are no Chinese walls between IOF budget items.

But looking from the Council’s position the question is very different. Why shall the IOF leadership stop charging new fees and spend it the way they want, if they can do it? Charging athletes and volunteer organizers for the love of our sport is far the easiest way to collecting money.

Next time we will look at the recent track record of the IOF’s commercial ventures to show why the above tax charges will stay us for a long time.

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(to be continued soon with exploring external sources of IOF revenue)