Month: November 2017

A case that may both demonstrate the reason for budget overruns and the general lack of controls within the IOF is the story when Brian Porteous, the President at the time, decided (apparently single handedly) to spend money over the anyhow loss making IOF budget on the SportAccord convention in 2013.

Brian decided to ignore the 2013 budget that was approved in July 2012, just 6 months before. A budget that he himself proposed as Vice President at the time of budget preparation.

The Council members, according to the Council minutes, did not blink, as in many other cases when the President made interesting decisions. The member federations had no meaningful mechanism to react.

As a result of the extra €14,100 spent on the SportAccord Convention the budgeted loss  of €52,400 for 2013 has become a loss of €66,600.  There was still some reserves left to spend.

Before we get into details of this story, I think that it would be useful to introduce some theoretical background.

The Agency Problem

The core issue around the IOF is what business literature calls the Agency Problem. This is an unavoidable feature of large organisations where owners  (shareholders, or in our case 70 member federations) entrust an agent (CEO/President, Board/Council) to run the organization on their behalf.  Unavoidably, the two parties will have different interest and the agent will run the organization in a way that is not optimal for the owners. Conflict of interests and moral hazards are frequent problems. The lost value to the owners is called the Agency Cost.

Continue reading “The Agency Problem – Part 1”

Over the past month I was too busy to deal with much more entertaining things than documenting the mismanagement and slow motion crash of the IOF. But now I have some time to continue with this gruesome task.

The Council had a meeting on 13-14 October. The published minutes (#186 here) provide additional information and data on the Council attitude to IOF finances.

The Council minute looks like a good old Soviet party communique: all good news, as long as you do not scratch the surface. It reinforces the feeling that the IOF leadership considers finances as their little internal business members should not get involved in.

The 19 page long minutes do not even mention the IOF – Letter to members July 2017 sent by the IOF President after the last Council meeting. The one that was carefully sent after the Presidents’ Conference regarding financial issues and the major revision of the budget. It was a “no event” that the IOF leadership apparently prefer to forget about and erase it from publicly documented history.

The key message of the minutes that revenues are up and expected to rise, while costs are largely under control. The funny bit is that the additional costs mentioned (regional event medals, higher overseas event advising costs, SEA for the World Games) are ones that should have been known when the 2017 budget was prepared. The fact that IOF Leadership uses them as an excuse for higher costs just underlines the feeling that the 2017 budget submitted to the General Assembly for approval was – mildly speaking – not thought through.

Yet, with all the improvements 2017 is still expected to show only a small positive result estimated at around €9,000 (85% below the €66,000 budget), and the updated forecast for 2018 was €30,000, that is over 80% lower than the €169,000 presented to the General Assembly. As expected, the GA approved original budget numbers were carefully not mentioned in the Council minutes.

Now it is official that Council expects to underperform their own budget by a 10 year combined gap of over €500,000 as a result of not meeting their own targets in any year since 2009.

It is also interesting to zoom in the (2016-18) budgets presented to the General Assembly 2016. The gap between Council promises and delivered results has exploded.

Continue reading “Ten Years of Underperformance – Update”