By David Owen
It was lost – understandably – in the Kafkaesque farce surrounding the Garcia report, but last week’s meeting of the FIFA executive committee in Marrakech has left us business of football types with another financial teaser to savour.
It is, by my calculations, a $62.7 million teaser, so worth devoting a certain amount of space to.
As those who persevere with my ramblings may recall, I was expecting FIFA President Sepp Blatter, the masterful politician, to take advantage of Marrakech to remind FIFA’s 209 member associations of the “additional bonus” that would soon be heading their way.
This was first announced by Blatter at the FIFA Congress in São Paulo in June – and immediately quantified in a circular signed by FIFA Secretary General Jérôme Valcke as an anticipated $500,000 to all FIFA member associations.
Another Valcke circular last month informed member associations that the amount of the bonus would actually be decided by the executive committee on December 19. The necessary documents and instructions would then be sent to them “immediately following this decision”.
It could be that this is exactly what happened, but I have been unable so far to find any reference to it.
What I have found is two fleeting mentions by Blatter of the “good” and “healthy” state of FIFA’s finances at last Friday’s press conference, where he also stated: “We could give more to the national associations for whatever.”
And then there is the post-Exco media release which, in a section relating to the 2018 World Cup in Russia, reveals that a proposal “for each member association to receive a contribution of $300,000 to the costs of qualification for the 2018 FIFA World Cup – subject to audit” was approved.
This brings me to my $62.7 million question: is this as well as, or instead of, the anticipated $500,000 additional bonus that we were led to expect would be finalised in Morocco?
It seems to me that the answer is rather important.
If ‘instead of’, will national associations be disgruntled about the aggregate $41.8m shortfall against the figure that they had been led initially to expect?
This would be unfortunate with FIFA’s Presidential election season looming.
In this context, one wonders whether to attach significance to the detail, also in the media release, that the proposal emanated from the finance committee. This connects it, for good or ill, to finance committee chairman Issa Hayatou of Cameroon and his five colleagues, rather than direct to Blatter.
Women’s football representatives would also have reason to be disappointed, since 15% of the original bonus has to be used for women’s football.
If, by contrast, the answer is ‘as well as’ – as on balance I think is more likely, in spite of the rather puzzling public silence from Morocco about the “additional bonus” – then, for all the positive noises about its finances, I return to a question I have posed before in this column: is FIFA spending too much?
Yes, the amount of money passing through world football’s governing body would be the envy of most sports organisations in the world. And, yes, it has reserves, last time I checked, of $1.4 billion – though while it is so heavily dependent on a single event coming around once every four years, this is a prudent measure and one would not want to see the pot substantially reduced.
Yet, as I discovered when poring over a series of FIFA accounts this summer, unless revenues are substantially better than budgeted, the organisation may be about to swing into deficit – and that is without taking account of the extra $167.2 million of expense that these measures would give rise to, if that is the $300,000 per association disclosed last week is indeed in addition to the previously announced $500,000 (or so) “additional bonus”.
According to a detailed budget for 2014 (included, somewhat confusingly in the 2012 financial report) budgeted revenue for the year was put at $1.08 billion and investments at $1.41 billion. Based on what happened in the first three years of the World Cup cycle, both figures in actuality will almost certainly be higher. But the budgeted deficit, based on those numbers, comes out at $330 million, and that presumably is before allowance is made for any additional bonus.
The latest $300,000 per association handout is said to relate to the next World Cup and would hence be accounted for over the 2015-18 cycle. A FIFA blueprint for this period, published in its 2013 financial report, explains that the organisation is aiming for a balanced budget over the cycle, with possible deficits in 2015 and 2016 offset by a surplus in World Cup year itself.
This exercise is performed so far in advance by FIFA that it can only be a guide. Since then, though, both the oil price and the rouble have tanked, while relations between host Russia and the West have become extremely frosty. While no-one would suggest that the 2018 World Cup will be anything other than a massive international commercial and popular draw, if present conditions persist, it seems reasonable to suppose both that Russia may need extra unbudgeted help from FIFA and that revenues may be a touch lower than forecast. Either eventuality would put the projected four-year balance under pressure – and now, apparently, comes this extra $62.7 million commitment to build into the equation.
So which is it, I wonder: has FIFA rethought its $104.5 million “additional bonus” commitment and turned it into a lesser $62.7 million pledge – to be paid out, furthermore, over a longer period; or have the two promises saddled it with an overall $167.2 million of extra expense, making it harder to avoid posting annual deficits, and eating into reserves, in coming years?
We should know the answer at latest by March, probably before.
David Owen worked for 20 years for the Financial Times in the United States, Canada, France and the UK. He ended his FT career as sports editor after the 2006 World Cup and is now freelancing, including covering the 2008 Beijing Olympics, the 2010 World Cup and London 2012. Owen’s Twitter feed can be accessed at www.twitter.com/dodo938.