Since resigning from the BOS I have actually written a very detailed diatribe on the way the way the Club is structured, what I see wrong with that structure, and what needs to happen for the Club to continue to be an effective force under Trust control. It started as a detailed critique, largely reflecting the current economic crisis (which is of course applicable to all football league clubs). It has now been severely compounded/compromised by further gate reduction through our own poor on field performance. However, on reflection I have been party to a lot of confidential information during my time as a Trustee so I feel it would be inappropriate to publish my thoughts in detail. Here therefore are just some of the very bare bones of some aspects of those thoughts.
Trust owned clubs, particularly those in an expansive mode such as we have experienced for the last six years, are never going to be cash rich. The building of an infrastructure designed to take the club into the higher echelons of the Football League costs money. Consequently every budget set as a trust owned club has been cost neutral, whilst out turn figures have largely reflected that stance. This is ok when things are going right. However what happens when things go wrong (as in the situation in which we currently find ourselves)?
Average gates of under 4,500 could give us a deficit this season of over £200,000. If the 3,500 for the Notts County game became the norm then this could rise to double that amount. This is at a time when our normal ‘selling policy’, applied to negating any loss, would be ineffective simply because we currently have no players capable of commanding transfer fees of that level. The financial alarm bells should therefore be ringing for all Trustees, and I would expect to see an item on the next BOS Part 2 Agenda to that effect. Personally I would like to see the BOS commission a VFM study on the constraints necessary for the Club to continue under Trust ownership in all circumstances, but with particular reference to the current conditions. In the short term the likelihood of building additional revenue streams is remote. Therefore the greatest need is to concentrate on cost reduction, although, even here this is not as straight forward as it might seem. All cost centres at the Club need to be critically appraised. If those centres are not delivering the required effect, then serious consideration must be given to their adjustment. Certainly what has not been previously known or even considered by the BOS (or probably anyone at the Club) is how those cost centres are built up. For example, how many people in each cost centre are on long term contracts? What would be the immediate costs (and the longer term financial effects) of paying up some of those contracts? It appears to me that no longer term planning has been considered which would allow for immediate adjustments to these centres in any future adverse financial circumstances. High cost areas that should be immediately appraised ought to include the coaching budget, the level of Directors’ fees (or was talk of having a Directors Remuneration Panel controlled by the BOS simply talk?), and the commercial budget. Currently the BOS has no little or no detail on many of these aspects and, in my opinion Trustees are individually failing in their fiduciary relationship with the trust membership if governance aspects such as these are not fully addressed.
David Bernstein, who was the much preferred choice for Club Chairman, brought in forensic accountant Jon Paddison to undertake a review of the current financial structure and standing of the club when he was considering taking the appointment. The fact that he declined that appointment, even at a time of ‘relative affluence,’ is a certain indicator of the fragility of Trust control. Even then I am not sure if Jon Paddison addressed the longer term implications that I have described above. Certainly the Trust needs to take the bull by the horns and establish the full relevance of all cost centres and income flows in relation to this or any change in financial circumstances.
Any deficit falls to the Trust to make up the difference. Whilst the current £50,000 surplus held in Trust accounts can take care of Club short term cash flow problems, what happens if and when the Trust is faced with a Club annual loss of £400,000? This is the question that must be addressed by Trustees NOW. Will the Trust and the Club heed my advice? Based on my experience of repeated warnings on certain aspects of ground redevelopment, the answer is probably ‘no.’ However I feel it is my duty as one of my last acts as a trustee to make these warnings.
Trust owned clubs, particularly those in an expansive mode such as we have experienced for the last six years, are never going to be cash rich. The building of an infrastructure designed to take the club into the higher echelons of the Football League costs money. Consequently every budget set as a trust owned club has been cost neutral, whilst out turn figures have largely reflected that stance. This is ok when things are going right. However what happens when things go wrong (as in the situation in which we currently find ourselves)?
Average gates of under 4,500 could give us a deficit this season of over £200,000. If the 3,500 for the Notts County game became the norm then this could rise to double that amount. This is at a time when our normal ‘selling policy’, applied to negating any loss, would be ineffective simply because we currently have no players capable of commanding transfer fees of that level. The financial alarm bells should therefore be ringing for all Trustees, and I would expect to see an item on the next BOS Part 2 Agenda to that effect. Personally I would like to see the BOS commission a VFM study on the constraints necessary for the Club to continue under Trust ownership in all circumstances, but with particular reference to the current conditions. In the short term the likelihood of building additional revenue streams is remote. Therefore the greatest need is to concentrate on cost reduction, although, even here this is not as straight forward as it might seem. All cost centres at the Club need to be critically appraised. If those centres are not delivering the required effect, then serious consideration must be given to their adjustment. Certainly what has not been previously known or even considered by the BOS (or probably anyone at the Club) is how those cost centres are built up. For example, how many people in each cost centre are on long term contracts? What would be the immediate costs (and the longer term financial effects) of paying up some of those contracts? It appears to me that no longer term planning has been considered which would allow for immediate adjustments to these centres in any future adverse financial circumstances. High cost areas that should be immediately appraised ought to include the coaching budget, the level of Directors’ fees (or was talk of having a Directors Remuneration Panel controlled by the BOS simply talk?), and the commercial budget. Currently the BOS has no little or no detail on many of these aspects and, in my opinion Trustees are individually failing in their fiduciary relationship with the trust membership if governance aspects such as these are not fully addressed.
David Bernstein, who was the much preferred choice for Club Chairman, brought in forensic accountant Jon Paddison to undertake a review of the current financial structure and standing of the club when he was considering taking the appointment. The fact that he declined that appointment, even at a time of ‘relative affluence,’ is a certain indicator of the fragility of Trust control. Even then I am not sure if Jon Paddison addressed the longer term implications that I have described above. Certainly the Trust needs to take the bull by the horns and establish the full relevance of all cost centres and income flows in relation to this or any change in financial circumstances.
Any deficit falls to the Trust to make up the difference. Whilst the current £50,000 surplus held in Trust accounts can take care of Club short term cash flow problems, what happens if and when the Trust is faced with a Club annual loss of £400,000? This is the question that must be addressed by Trustees NOW. Will the Trust and the Club heed my advice? Based on my experience of repeated warnings on certain aspects of ground redevelopment, the answer is probably ‘no.’ However I feel it is my duty as one of my last acts as a trustee to make these warnings.
