The Football Conference’s Financial Reporting Initiative: Cause For Cautious Optimism

By on Nov 22, 2010 in Latest, Non-League | 5 comments

While the financial news elsewhere in football continues to be no better than mixed, one league at least seems to be moving in the right direction with regard to how it deals with its financial affairs. The Football Conference, comprising the Blue Square Premier, North and South introduced new, tougher financial rules for clubs last year, and the first results that it has released would seem to indicate that they are working. Indeed, the obvious conclusion to reach is that, whilst laissez-faire economics lead primarily to a state of survival of the fittest among clubs, the tighter regulation of the financial affairs of clubs leads to at least a degree of greater financial responsibility by those clubs themselves.

The Financial Reporting Initiative was introduced in 2009 in response to a growing sense of crisis within the non-league game. In the last three years, the position of clubs in the Football Conference had become pretty horrific. Thirteen were subject to winding up orders, six ceased to exist altogether and one more had entered into a CVA in order to remain solvent. This makes a total of twenty clubs in just three years, and with HMRC’s stance on football clubs hardening with each passing season (Sheffield Wednesday’s three winding up orders already this season being a case in point for the 2010/11 season) it became clear that radical steps had to be taken.

Clubs are now required to submit quarterly financial reports to the league and failure to do so can lead to harsh penalties, up to and including transfer embargoes and more. In September, Welling United of the Blue Square South were found guilty by the league of submitting false information relating to HMRC payments and Crown debt and were heavily punished for doing so. A fine of £5,000 suspended for two years and a five point deduction may make others think again before attempting the same thing. Without this deduction, Welling would be one point off the top of the table. As things stand, however, they are in third place in the table, six points behind the leaders Bromley.

The end of October brought the end of the first full year of reporting, so it was only appropriate that results should be made public. They make for encouraging reading. An overall tax bill across the sixty-seven clubs of the league had been reduced from £1.6m to less than £400,000 over the last twelve months. Forty-seven of the league’s clubs were identified as being completely up to date with their tax bills, compared with thirty-nine this time last year. Of the remaining twenty, twelve have agreements in place with HMRC to reduce their indebtedness, five have no arrangement in place but arrears of less than three months and these three are currently subject to player transfer embargoes. Perhaps understandably, the chairman of the Football Conference, Brian Lee, has spoken with  pride about the results:

As Chairman of the Football Conference I am proud to head up a group of dedicated directors who have been instrumental in leading the way for the whole of the game and who will not be deflected from their vision to improve how clubs operate financially.

More encouraging still are his comments that further changes to the way that the clubs of the Football Conference are planned, although they haven’t been made public yet and are unlikely to be until next summer. The Football Conference seems to have taken a firm but consensual stance on the matter, on the one hand actively seeking the co-operation of the clubs in the league whilst on the other taking no prisoners in affecting sanctions towards those that do not play ball. What was notable about the fallout of the Welling United points deduction was that there was a degree of contrition in their public statement on the subject that was almost unusual for such a situation.

What this teaches us about how to manage football clubs by way of regulation is surely that a light regulatory touch is not worth a great deal. We could compare and contrast the incisive action taken by the Football League with the Premier League’s inertia over Portsmouth and Liverpool, or the way in which Notts County were effectively allowed by the Football League to bypass the League Two salary cap to win the championship. We could, indeed, compare the attitude of the Notts County chairman Ray Trew (who admittedly cannot be held responsible for the car crash that was Notts’ financial affairs last season) upon promotion last season : “I’m sure if we’re crowned champions there’ll be some clubs still bleating, but with no justification”, while his team were still paying their goalkeeper £15,000 per week in League Two with that of the Welling United statement.

The truth of the matter is that if the last ten years has proved anything, it is that a light regulatory touch doesn’t achieve a great deal. What the Football Conference will think up before the start of next season remains to be seen, but we can be optimistic that not only will they come up with imaginitive ways of continuing the more troubling instincts of its member clubs, but that they will be able to manage their rules in a way that is firm and fair. This site has, in the past, not been slow to criticise the Football Conference in the past over some of its decisions. In this case, however, they fully deserve the praise that they are receiving.

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    5 Comments

  1. As Colin Peake said on the Non-League Show last night, all this is dependent on the figures provided by clubs to the Conference and HMRC being accurate and we know that in Boston’s famous case Steve Evans and his cronies’ figures were a complete fabrication.

    The budget analysis will help but it also needs some sort of sanity check when a player leaves somewhere like, say York, for another Conference club, say Crawley, for a huge fee and yet doesn’t appear to have increased his wages much if at all…

    Martin

    November 23, 2010

  2. “An overall tax bill across the sixty-seven clubs of the league had been reduced from £1.6m to less than £400,000 over the last twelve months.”

    You also have to wonder how much of that is due to Oxford finally getting promoted.

    This season’s figures could be interesting given Mansfield, Wrexham, York and Darlington’s situation though.

    Martin

    November 23, 2010

  3. Be interesting to see how much attention they pay to a certain Sussex club …..

    Dermot O'Dreary

    November 23, 2010

  4. It’s good to see financial controls on football clubs beginning to be put in place. Hopefully the success will continue and the football league and premier league will introduce very similar measures.

    Richard

    November 23, 2010

  5. I doubt the Football League will put similar measures in place as turkeys don’t vote for Christmas.

    Can you see Ken Bates or that bloke at Southend going for this? I can’t.

    For me there are three fundamental issues:

    1) Everyone involved in football has a responsibility to ensure that the money coming into the game is “clean”. I.e. it comes from reputable businesses and individuals, its source is not illegal and would pass HMRC’s Money Laundering Regulations and others.

    2) The accounts maintained by clubs and submitted to the league and HMRC are correct and honest. Whilst this is usually the job of the club’s auditor, that function has not prevented some of the major abuses in recent years and hence the Conference have brought in their own budget checking.

    3) The tax clubs owe should be paid in full and on time. This is the area where the Conference has had the most success in recent years, as the announcement above indicates. It is also the easiest of the three things to check and enforce of course.

    People forget that, unlike all other creditors, HMRC are not a creditor by choice and therefore should be granted special status and more protection by those running the game. The Football Creditors Rule stitch-up must be reviewed ASAP.

    Martin

    November 23, 2010

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