The decade long erosion of the financial stability of the IOF discussed in the previous post did not come as a result of a sudden event. It was the result of continuing underperformance of the IOF leadership who missed the budget target for 10 years in a row.
Please see updated numbers to this post here.
This post has turned out to be longer than expected. I had little time to write it, so I could not make it shorter. Here is the summary if you are also pressed on time:
- The IOF Council has missed the budget target every year since 2009. The target set by themselves, and rubberstamped by the General Assembly without change. It would take a miracle to achieve the targets for 2017 and 2018. That makes 10 years of missed targets. 10 years of continuous underperformance.
- It is unlikely that this was due to lack of skills: the leading figures of the IOF during this period (Ake, Brian and Leho) all prided themselves with business background.
- Looking at recent events one may get a feeling that the IOF leadership just did not care about the budget approved by the GA, hence they could not possibly deliver it:
- In a letter to member federations about the difficult financial status of the IOF signed by Leho and Tom, the “GA Budget 2017” is different from the 2017 budget published as approved on the IOF website in the minutes of GA 2016.
- In the same letter they claim that in October 2016, 2 months after presenting the 2017 budget to the GA, they already started to modify it “to get costs in line with expected income”. There was not a hint of an unexpected event that could have modified expected income in the 2 months after the GA. This gives the feeling that the Council presented a 2017 budget to the GA that was not realistic, but the GA approval gave the Council free hand to modify it to their liking.
- The outcome of budget modification(s) started in October 2016 was not shared with member federations until 14 July 2017, nine days after the Presidents’ Conference in Tartu. This gives the feeling that the IOF leadership decided to avoid any open discussion about budget modification with the member federations who approve the IOF budget.
Here are the details of the story that may make you wonder how long IOF member federations will put up with being treated like this.
The numbers
The Council missed their own target every year since 2009, for 8 consecutive years. They already conceded that 2017 will be missed (€66,235 surplus was budgeted, but only €9,767 was expected in July 2017). It looks also highly unlikely, that in 2018 the budgeted €169,010 surplus, that is 2.5 times(!) higher than ever achieved in the IOF’s 56 year history, will be delivered. That gives a solid 10 consecutive years of missing the budget as shown on the chart below.
For updated data please see this post published after the October 2017 Council meeting.
This level of underperformance is most remarkable under any circumstances. It is even more remarkable, because
a) the IOF was run by experienced managers according to their CV, and
b) the budget was set by the Council themselves, only rubber stamped by the General Assembly.
Officially it is the General Assembly who sets the budget, but in practice it simply approves the one submitted by the Council. I could not find a case in recent memory when the GA modified the budget. I could not even find a case in recent memory when the GA has even debated a line item. There were some high level remarks now and then, but everything was approved as suggested by the Council. So we are not talking about some stretch targets not being met. No, simply the IOF leadership could not deliver for 10 consecutive years on their own promises made with no external pressure. Remarkable.
Skill or Will?
Seeing this level of underperformance one should ask whether it was due to missing skill or missing will. Could it happen that the leadership of the IOF did not have the basic skills required to prepare and deliver a budget for a quite simple small operation? Or was it due to lack of motivation or intention to deliver on their promises, and follow the budget approved by the General Assembly? Or was there something else behind all this?
Let’s try to find some pointers that may help us decide.
Business background
You can find below the CVs of Ake, Brian and Leho, the Presidents and Vice Presidents of the period when financial stability has declined. These CVs were published in the binders for the General Assembly when they were nominated for election President of the IOF. You can find the 2012 and 2016 binders on the IOF web in the General Assembly area.
Ake was a Managing Director and part owner for a several consultancies working internationally. Brian prided himself with several Directorships since 1979, including a major management consultancy. Leho was a CEO and board member in different companies in different industries since 1992.
One may not expect some other members of the Council, like a secondary school teacher or a professor of cartography dwelling deeply in the financial aspects of the organisation. But there seems to be no reason to believe that Ake, Brian and Leho did not have all the skills required to see and understand the decline in IOF finances and the consequences of the loss of reserves on the stability of the IOF.
A case study – the 2017 budget
The faith of the 2017 budget is a great example of how things are being done within the IOF where commitment to highest standards of governance and transparency is one of the fundamental values.
The budget was approved on 26 August 2016 on the General Assembly. See the minutes here and the approved 2017-18 budget in Appendix V.
On 14 July 2017 the IOF leadership sent a letter to member federations about the IOF financials 2016 to 2018, including the modification of the 2017 budget.
Budget variations
There is an exciting little detail that is revealed by the comparison of the two documents above: the 2017 “approved” budget is different in the GA minutes and in the letter of Leho and Tom!
Here are the differences:
- Development projects
- €30,000 – in GA minutes as approved budget
- €20,000 – in Leadership letter as “GA budget”
- Changed line item:
- Support for regional working groups: €4000 – in GA minutes
- World Orienteering Day: €10,000 – in Leadership letter as “GA budget”… and as a result, of this….
- Expenditure Total
- €868,500 – in GA minutes as approved budget
- €864,500 – in Leadership letter as “GA budget”
All the other line items are the same.
Is this a problem? A minor detail that does not change the big picture may claim some. Well, there are two ways to look at it, but neither of them gives a nice picture.
First, imagine somebody starting with a map for a 35 control course with only two controls slightly moved. For outsiders it is not a big deal. The overall course is pretty much the same, isn’t it? For anybody remotely involved in finance the above variations of the “approved” budget are just as big as having one or two control locations “slightly” moved on a map.
The much bigger problem that should concern all member federations is that this little “mistake” suggests that the IOF leadership has multiple versions of the “GA approved budget”. So many, that they already lost track of them. Or put it in other words, they do not give a fine thought to what was approved by the General Assembly.
No wonder the Council misses the actual approved budget year after year.
Non-transparent processes
It may be just as revealing to have a closer look at the process of the approval and modification of the 2017 budget. Here is the timeline:
- 26 June 2016
The documents for the XXVIII Ordinary General Assembly are published. (see here) These included the budget proposal for 2017-18, and the updated budget for 2016. The 2016 update showed a higher than budgeted surplus (€67,456 vs €48,700), mainly due to the expected increase of Sponsorship/external revenues (€150,000 vs €50,000 budget) - 26 August 2016
On the General Assembly Leho (as Senior VP still under Brian’s Presidency) presented the 2017-18 budget . See minutes here. No mention of any issues. No mention of any uncertainties around the expected income. The budget looked very good, and it was approved with no particular discussion. (see above) - October/November 2016
According to the letter sent to member federations on 14 July 2017 (see above), the Council has started “a full review of the budget for 2017 which was set and approved at the 2016 GA” (that is 2 months earlier!) “to get costs in line with expected income”There is no mention of the “full review” of the 2017 budget in the Council minutes of October 2016 (#182). There is mention of a revised forecast in the January 2017 (#183) meeting, but with no particular details. It seems that the IOF leadership was not keen to share details about the budget modification before the Presidents’ - 5 July 2017
Presidents’ Conference in Tartu, during the FootO World Championships.
None of the 6 agenda points mentions anything about finances or budget revision for 2017, despite the fact that the Council modified the budget multiple times in the previous 8 months. - 14 July 2017
Nine days after the Presidents’ Conference the IOF sends a letter about finances to member federations signed by Leho as President and Tom as CEO. Attached to the letter the 2016 Annual Financial Report (prepared 3 months earlier on 31 March 2017) “in the interest of increasing transparency”. It also contains details of the new budget forecast for 2017 (referring to the October/November 2016 full review and subsequent reviews” (see above)
There is an abundance of questions that one may ask regarding this process.
What was the reason that the 2017 budget had to go through a full review 2 months after approval, despite no extraordinary events? What was the reason that the member federations were informed about this only 8 months later? How could it happen that the 2016 financial result was much worse (€132,737 worse!) than the updated forecast given to the GA at the end of August?
Was the IOF leadership in August 2016 (both the outgoing President and the Senior Vice President / nominated President) aware of the situation that the 2017 budget presented to the GA for approval is based on income targets that were so uncertain that required a review in 2 months? Were they aware of the situation that the 2016 updated forecast could turn out to be very different than presented?
What was the reason that the the financial situation of the IOF (the 2016 results and 2017 review) was not presented directly to the presidents of member federations on the Presidents’ Conference, but sent to them only 9 days?
Does the IOF leadership believe that in this process they conducted IOF business according to the fundamental values of orienteering, as proudly announced on the IOF website.
Will any of the member federations consult the newly set up Ethics Commission about the apparent mismatch between the declared values and the actual processes within the IOF?
Conclusion
When I put together the details presented above, I got the feeling that the will of keeping the budget, the will of respecting the decision of the General Assembly is missing from the IOF leadership. I got the feeling that the IOF leadership is concerned with the decision of the General Assembly only when it supports them, but in practice they do not really care. If they feel like, they rehash the budget after 2 months without even sharing details, and keep multiple “GA approved” budgets.
This is understandable at one level. Why should the IOF leadership bother with the budget, when nothing happens if they do not deliver it? Members get re-elected, the outgoing presidents get honorary president status for life, regardless the circumstances under which they left. Why bother if member federations put up with anything? Why bother, as long as there is still some money left to spend?
The problem is that now no more money left. Something has to change. Some things have to change big time.
IOF Reflections 