And so, with a final flourish, Sepp Blatter got out his cheque-book and wrote out a cheque for $200 million. No, the FIFA President’s closing gesture at this week’s FIFA Congress was not quite that dramatic. But his promise of $750,000 to all 209 national associations and $7 million to each of the six confederations has the same effect.
To which my question is this: has this $198.75 million of apparently extra expenditure already been written in to FIFA’s budgets? If the answer is No, then it ratchets up my concerns about the rate at which the governing body’s spending is increasing. You could be forgiven for thinking that this was the least of the worries of this much-criticised body, which is usually portrayed as being awash with cash. But I have to say, that is not the way I see it.
To put matters into perspective, it is not that Blatter and his lieutenants are in danger of going out of business. FIFA’s reserves, when last reported, stood at an enviable $1.4 billion. But when an organisation is as dependent as FIFA on one event that comes around every four years, it is prudent to have reserves of this magnitude. Indeed, it would be a matter of some concern if they were to start being eaten into.
Yet this, so far as I can see after a morning spent poring over FIFA accounts, may be what is about to happen – particularly if the money men in Zurich do now have to rustle up an extra unbudgeted $200 million to fund the President’s largesse.
This is what I have gleaned from various FIFA accounts:
The original 2011-14 blueprint – set out in the 2009 financial report – budgeted for $3.8 billion of revenues and $3.6 billion of investment (or spending). This would make for a $200 million surplus and a $140 million increase in FIFA’s equity, once depreciation was taken into account.
What has actually happened – so far – is that revenues have already hit $3.62 billion in the first three years of the World Cup cycle. However, expenses have raced away to $3.43 billion, leaving a positive result for the three years of $197 million.
This is less than half the $429 million generated in the first three years of the last cycle, but leaves FIFA on target to hit its budgeted surplus for the four years, depending on what happens this year.
This brings me to something I had not previously noticed (largely because it is set out in the 2012 financial report), which is the detailed budget for 2014. This appears to put budgeted revenue for the year at $1.08 billion and budgeted investments at $1.41 billion.
The document coyly fails to spell out the budgeted result that this would give rise to, but I make it a deficit of $332 million. If duly realised, this would be enough to push FIFA into deficit for the whole cycle. And if another $200 million does need to be found to fund Blatter’s new promise, that deficit could start to look rather substantial. (I did note, however, that the FIFA President left open the possibility that some of the money might not be paid until early 2015, suggesting the cost might be spread over two years – and two World Cup cycles.)
If you think about additional expenditure FIFA has become committed to in recent times – the club protection programme, increased payments to World Cup participants, Michael Garcia’s investigation into allegations of wrongdoing in the 2018 and 2022 World Cup bid process, higher-than-budgeted costs for the 2014 World Cup – I don’t actually find this all that surprising. But if there is a deficit for 2014, it may be the start of a trend.
As I reported in March, FIFA’s blueprint for the next World Cup cycle between 2015 and 2018 (published in its 2013 financial report), calls for a balanced budget over the cycle, once depreciation and taxes are taken into account. FIFA has even warned that individual annual results “may even be negative”. Projections accompanying the text suggested, indeed, that it might suffer deficits of as much as $30 million, after depreciation and taxes, in 2015 and $20 million in 2016. These would be balanced by a $50 million surplus in World Cup year, 2018.
That level of financial performance would be nothing to really worry about, given the reserves FIFA has accumulated. But what if that 2015-18 budget is as wide of the mark as the 2011-14 budget may turn out to be? Those reserves might start disappearing with disconcerting speed, forcing the Swiss-based emperors of world football to clamp down hard on costs, including the fabled development programmes that have made such a contribution to Blatter’s enduring popularity among football’s national bosses.
Those 2015-18 numbers, moreover, include the assumption that revenues will keep growing at a fair old lick to $5 billion over the cycle.
Such is the pull of the World Cup that there is no sign of it happening yet, but what if all the criticism and bad news did finally start to affect sponsors’ appetite for doing business with FIFA? Then football’s rulers would have to rein in costs even more.
Don’t get me wrong: FIFA remains an awfully long way from the poor house; most sports bodies would absolutely love to have its finances and earning power. But these figures suggest that Blatter’s organisation could be about to experience three annual deficits in a row – unless 2014 revenues are significantly higher than budgeted. Indeed, it would not take a great deal to make that four, or even five consecutive annual deficits.
Yes, FIFA has more immediate problems, but the next couple of financial reports promise to make unusually interesting reading.
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.