Where the money is going

Probably you were also wondering where all the money collected mainly as fee/tax is going. Many people are guessing, but very few know the numbers. My feeling is that even the ones who know the numbers have only vague ideas about the trends. So I am happy to present here probably the only historic overview of IOF expense evolution from 2000 to present.

The short summary:

  • IOF expenses have grown unrelentlessly since 2005, from around €200,000 to a budgeted €900,000 in 2018
  • Staff cost is the dominant expense that also provided the backbone for total growth, a superb confirmation of Parkinson’s Law
  • Spend on IT systems has exploded from €0 in 2013 to a planned €110,000 in 2018 – or close to 4 times what he IOF spends on quality assurance for all events in a typical year
  • The Olympic project is a less visible sink for freely spendable money, but its average annual cost is comparable to all spend on IOF event quality
  • Some growth is related to taking on flow through expenses (TV, AD), that were part of the sport, but now they are more visible, which is a good thing.

IOF Expenses 2000-2018 v2

I have to admit, that it was not easy to put together the data, despite IOF being committed to the highest standards of transparency. It is bad form to complain about the difficulty of an analysis, but I have to give this caveat: post-2006 the data is mainly estimate, directionally correct, but may deviate slightly in detail. Audited reports have a different cut than relevant budget. Post-2012 60% of the expenses were on one single line “Other expenses” in the audited reports, so I had to rely on adjusted budget numbers. Where some details were given, like 2013 and 2015, they did not appear to match the totals in the audited reports, and so on.

The 2017 budget numbers were adjusted in January according to the Council meeting minutes of 2017, but not many specific details known, other than lower cost for staff (one part timer has left, but a part timer may have become full timer), and an extra €20,000 authorised for the World Games (Olympic project).

Despite all the uncertainty, the most reliable number is the ever growing total staff cost, because that was the only major expense reported on a separate line in all audited reports used. Luckily, that is also the single largest expenditure that worths attention. The other ones that exploded over the past couple years are IT systems, Olympic project, TV and Anti-Doping expenses.

Let’s have a look at these in a bit more detail.

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Presidents’ Conference – will there be questions?

I am just getting curious, if there will be any questions on the Presidents’ Conference in Tartu regarding the critical financial situation of the Federation.

The IOF finances have deteriorated to a point where normal business variation may result in bankruptcy, not to talk about the impact of an unexpected event.

The presidents of IOF member organisations will meet the President, the Council and the Secretary General on Wednesday, 5 July, during WOC 2017. The Presidents’ Conference is an advisory body to the IOF, typically meets every second year in between General Assemblies. Yet, all key participants are the same as on a General Assembly, hence it gives the opportunity to discuss all important IOF questions with the members.

The agenda for this years Presidents’ Conference was sent on 24 April

• Strategic Directions 2018-2024
• Strategic Planning Calendar for IOF Events
• IOF Sustainability Policy
• Update on the IOFs Anti-doping work
• Reports on on-going activities

No mention of financial questions, whatsoever, though it was clear in January that IOF finances took a nosedive after years of steady decline (see here). One may – mistakenly – believe that there are two topics where overall finances may be addressed, but that is not the case.

The strategic directions document is light on numbers (contains only dates and page numbers), despite the sad fact that finances often present hard constraints to strategic dreams.

The IOF Sustainability Policy is all about environmental impact, while the sustainability of the IOF as a financially viable organisation is taken for granted.

(Interesting to note that the Consultation Paper on IOF Sustainability includes fascinating ideas like using Eventor to make participants of orienteering events pay an environment fee dependent on where the participant travel from – but that deserves a separate post).

 

Budget and results 2016-17 v2

Yet, the Council knew already in January that the 2016 and 2017 combined financial results were expected to be €160,000 worse than the budgets the Council presented to the General Assembly 5 months before. (see 12.2 and 12.5 in Council Minutes #183).

Compare this with the IOF reserves of €114,630 at the end of 2015, and an estimated €77,000 at the end of 2016. The uncertainty in the budget forecast shown above is comparable to the reserves left after the continued decline since 2008. Another downward revision comparable to what happened in 2016 or expected for 2017 would mean that the IOF looses all its reserves. That is called bankruptcy.

Continue reading “Presidents’ Conference – will there be questions?”

Where the money is coming from – Part 2

Let’s look at external (not fee based) income attracted by the IOF. As you can see from the chart in Part 1 of this post,  this has been a minor part of the revenue, since 2002, but there are ambitious plans to grow it.

The details around external revenue streams are rather unclear, but it is very likely that they fall far short from becoming major contributors to freely spendable IOF resources.

The shortfall is most spectacular in IOF services (LiveCenter, eventor, etc) where the 2015 revenue was €61,040 or 98.5% lower than the budget.

IOF Services budget vs result v2

Continue reading “Where the money is coming from – Part 2”

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.

Continue reading “Where the money is coming from – Part 1”

Highest standards of transparency

Let’s try to understand why the International Orienteering Federation has been losing substantial monies over the past 8 years. On the face of it, it should be easy: the IOF is an international sport federation, a not-for-profit organisation that publishes annual accounts. These are presented to the General Assembly every second year in the Congress binder and in the Biennial report. You can find the latest one here.

It should also help, that the fundamental values of the IOF clearly state that

“Orienteering is committed to the highest standards of governance and transparency in the conduct of its business”

Unfortunately, practice is always more complicated than declared values.

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IOF Finances – the Good, the Bad, and the Ugly

Money matters. Even in amateur sport. Even if we prefer to focus on the sport we love.

Still, in amateur sport money is often the critical resource that limits possibilities. Ambitious ideas quickly come down to earth when one tries to find funds to cover even basic expenses. Any discussion on strategy is empty fluff when money matters are not considered together with the ideas discussed.

When we look at the finances of the IOF we see a mixed picture: solid revenue streams, runaway expenses, and dwindling reserves that may threaten bankruptcy at current trends

Continue reading “IOF Finances – the Good, the Bad, and the Ugly”