FW: Rugby Canada

Following a front page story in the Tor. Star re the Canadian women’s team having to pay $2900  to play for Canada in the Nations Cup in Toronto more interesting info and thoughts are attached re the Canadian rugby scene.

 

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From: Charles Schandl [mailto:chuckschandl@gmail.com]
Sent: Sunday, July 31, 2011 9:41 PM
To: S & J Morrison
Cc: Craig Morley; Andrew Terry; kevin bloska; Scott Hume; Nick Parks; KEITH MCINTYRE; Chris Mant
Subject: Re: Rugby Canada

 

Jack, small correction to below. The potential indebtedness arising out of the partnership in the Churchill Cup is not $750,000, it is $1,200,000. As such this could more than double Rugby Canada's deficit position overall.

 

Chuck

 

On Sun, Jul 31, 2011 at 12:23 PM, Charles Schandl <chuckschandl@gmail.com> wrote:

Jack, feel free to distribute as you see fit. If I may there are a couple of other noteworthy items:

 

1. To provide a more complete picture I decided to have a look at the minutes from the last AGM. For some reason they have not yet been posted even though the meeting was held 4 months ago.

2. I reviewed the minutes from last year's meeting instead to see what discussion and commitment had been made with respect to the financials and Women's rugby. The following are noteworthy:

a) In the AGM minutes there is no mention of financial affairs

b) There is a separate set of minutes for the "Business Session" but there is no mention of financial matters, except one line that says the financials were discussed in a separate "Financial .workshop".

c) There are no minutes from the referenced "Financial workshop"

d) There is a copy of the finance report which essentially just highlights certain items, but concludes with "Rugby Canada will continue to focus on developing sustainable commercial revenue sources combined with tight cost controls around administration and team spending." It seems that the effect of these tight cost controls around administration was to increase them by 11% the following year.

e) The only other financial-related report was for insurance. In that report it appears that a decision has already been taken to make insurance purchase "an administrative rather than a strategic task". Well, I find this interesting because there was another comment in the AGM minutes that there was to be a review of the imbalance between premiums charged and coverage costs. I also found it somewhat shocking given the recent insurance debacle our sport faced when there was no coverage available for a catastrophic claim. I also find it interesting that the board seems to feel that a cost that represents a full 25% of their non-salary discretionary expenses is merely administrative and not strategic. This is simply absurd.

f) In the AGM minutes there are numerous firm commitments to the Women's national team with no mention of how this commitment was to happen. It appears that since then the decision must have been taken to show their commitment by charging each woman $2,900 to play.

g) There is much of the AGM minutes thanking departing board members, introducing new ones, and most heartwarming was an entire section devoted to a discussion of how engraved plaques were given to departing board members.

3. In both the 2009 and 2010 audited financial statement the auditor (BDO) makes a note about Rugby Canada's ownership partnership in the Churchill Cup. It seems RC has a 40% ownership stake. For some reason that is not clear from the note or any AGM minutes I have reviewed, BDO has elected not to reflect the financial status of this ownership stake in Rugby Canada's financial statement. However in both reports it goes on to state that based on "unaudited information provided by management", the Churchill Cup partnership has sustained accumulated losses of $3,000,000 as of Dec '09, and interestingly the loss remains exactly $3,000,000 as of Dec '10 (I find it odd that the amount remains exactly the same despite there having been another tournament during the year). The note goes on to state the loss had to-date been "funded" by the RFU. Well, funded doesn't mean the loss has been assumed by the RFU, it simply means they have fronted the money. Based on the "unaudited information provided by management" it seems Rugby Canada may be indebted a further $750,000 from this partnership. To put this in context, not including this debt Rugby Canada's net worth as of Dec '10 is negative. In fact it is negative $900,000, so this partnership indebtedness could almost double their deficit overall.

4. Nowhere in the AGM or other minutes that are available is there any discussion or even mention of the Churchill Cup partnership indebtedness, so it is impossible to know what Rugby Canada's exposure here is. Also there is no mention in the minutes, nor a report from management, that outlines the "unaudited financial information provided by management" to the auditors. Nor is there any discussion of why this potential indebtedness is not considered by the auditors in their "Going Concern" note to the audited statements. This is not a trivial amount and there should be openness around what our exposure is, and how these accumulated loss amounts are arrived at.

 

Regards,

 

Chuck

 

On Fri, Jul 29, 2011 at 6:17 PM, S & J Morrison <s.j.morrison@sympatico.ca> wrote:

Chuck,    I believe you’ve provided an excellent in depth review of current concerns relating to the administration of  rugby in Canada by the current Board.   With the Professional  vs. Amateur  status in the senior men’s game it would seem that  Canada would be much more competitive in  women’s rugby, junior rugby and the 7s game.  With 7s now being an Olympic sport funding assistance will come from Govt.  which should enable Canada to run a “professional”  and competitive  7s team on the world circuit.  I also believe the general public will find the 7s game a much more attractive sport to watch than the traditional 15s. which should assist  revenues.

       Another  question I have is where does Canada’s National Men’s Team go after the World Cup.  The Churchill Cup is no more and the top nations (professionals}  will  not be interested in playing Canada in “friendlies”.  No money in it for TV  and sponors.  I’m reminded of the commentator’s comments when Canada played Wales in Cardiff “Why is Canada allowed to play at this level when they obviously cannot compete and are way outclassed?.    It’s embarrassing for the viewers”

  Forty top Canadians playing in Europe or Southern Hemisphere would provide a basis for a competitive team on the international scene. { Like the Pacific Islanders and Argentinians.).    But do we have reason for a national  team other than the World Cup every 4 years.  An IRB  sponsored  “Tier Two”  international competition would be

one way.   Whatever happens there is just no way Professional  rugby is going to be seen in Canada in the foreseeable future.

 

   Chuck,   I’d like to pass on your comments to Rugby Canada and Toronto Star in the interests of  promoting  open discussion.   Your thoughts?

 

 

  Jack

   

 

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From: Charles Schandl [mailto:chuckschandl@gmail.com]
Sent: Friday, July 29, 2011 3:44 PM
To: S & J Morrison
Cc: Craig Morley; Andrew Terry; kevin bloska; Scott Hume; Nick Parks; KEITH MCINTYRE; Chris Mant
Subject: Rugby Canada

 

Jack,

 

I've attached below a link to a recent news article that is, at least, thought provoking and in my opinion reflective of a significant problem our sport faces administratively. I know you have recently been following and circulating debate around the current state of our sport, and I thought you might find this of interest.

 

http://www.thestar.com/sports/article/1031980--female-rugby-stars-won-t-pay-to-play

 

Unfortunately the article is not complete, and possibly not even fair, since the writer makes no effort to link this back to the financial picture of rugby in Canada to evaluate whether or not the position of Rugby Canada as expressed by Graham Brown is defensible. Essentially Mr. Brown deflects the criticism to the IRB for funding women's rugby at a far lower rate than men's, saying that without more IRB funding Rugby Canada's hands are tied. I've had a look at Rugby Canada's 2010 financial statements to see what the picture is and whether or not their statements in this article are, in fact, reasonable. Now, you have circulated other commentaries on the financials earlier and the point has been made in rebuttal, I think reasonably, that comparisons to other national rugby unions or sports is unfair. As such I have just looked at the Rugby Canada financial statement in isolation, and as it relates to their stated mandate (which can be debated but for the purpose of this exercise is accepted), and with no comparison to other countries or other sports.

 

Based on this article it appears each team member is being charged $2,900. Assuming 30 team members this translates to a revenue stream to Rugby Canada of $87,000. So for this narrow issue, the question really is should Rugby Canada be able to find $87,000 themselves without charging the players.

 

There are a number of noteworthy items in the 2010 financials, and when compared to 2009:

 

1. External (IRB and Government) funding dropped in 2010 by about $300,000. Not including a non-recurring item it seems commendable that Rugby Canada was able to make up that shortfall entirely through their own revenue stream. However when you look more carefully this is deceptive.

2. Of the internal increase in revenue, $125,000 is fundraising. Unfortunately the expenses for fundraising also went up by $125,000 so there is no real increase in net fundraising income.

3. The balance, $200,000, is an increase in National Teams revenue. And in fact, the picture gets brighter because Rugby Canada expenses (contribution to the national teams) dropped by $150,000. As such the net effect is they have generated an additional $350,000 from the National Teams in net income. This seems very commendable until you realize that likely a significant portion of revenue from these national teams is the very fees charged to national players that the news article talks about.

4. Not including non-recurring items, the overall expenses for Rugby Canada are roughly flat in 2010 from 2009. Again, commendable expense control on the face of it. Unfortunately this masks the fact that in order to control these expenses Rugby Canada decreased their direct contributions to domestic competitions, development programs and the like by $150,000. When combined with their decreased direct contributions to the National Teams, this accounts for their $300,000 in reduced outlays.

5. In the meantime, year over year Rugby Canada increased their expenses associated with "National Office and general administration" by $50,000, or 11%. At the same time in 2010 they spent $70,000 on "Board of Directors and planning meetings". Between General Administration and Board and planning meetings, Rugby Canada spent $600,000 in 2010.  

6. The General Administration costs are on top of "Staff Salaries" which account for an additional $845,000 in 2010 and when combined with administration the total is some $1,445,000 for 2010. Unfortunately in 2010 their entire discretionary spend on domestic rugby, development and the like was only $1,180,000.

7. Of further interest are the Insurance revenues and expenses. Over the 2 years ('09 and '10) Rugby Canada has pocketed $350,000 of net income (in other words they collected $350,000 more than they had to pay the insurance companies for coverage), or an average of $175,000 per year. This translates to them taking an effective group commission of about 18% of our insurance premiums. Now my experience in the insurance industry (and Jack I think your broad experience will support this) is that effective commissions to group entities is usually something like 5% to the group itself for general expenses. So, effectively Rugby Canada is pocketing a windfall of 13%, or about $125,000 per year, on the insurance premiums they charge registered players.

 

Based on the above, I have some suggestions for Mr. Brown to help fund the Women's National side and to ensure that our best players actually play (surely this is the point of a national side, and in line with the stated purpose of Rugby Canada). Essentially he needs to come up with $87,000 to avoid any of the Women's National team having to "pay-to-play":

 

A) Cut your General Administration costs back by the amount they increased last year. In the world at large flat administrative budgeting (as opposed to your 11% increase) has been the norm for some time now, so this should be easily achievable. Net benefit: $50,000

 

B)  Decrease your expenses associated with fundraising. Currently the expenses associated with fundraising are $173K against revenue of $246K, or a staggering 70%! Just reducing the expense rate to 50% which is still high (perhaps fewer canapes and drinkies for Board members on Gala nights might help do the trick) generates an additional $50,000

 

C) Decrease costs associated with Board meetings by 50%. I can suggest some new technology called "conference calling" that might defray the costs of business class tickets and downtown Vancouver hotels (of course the savings would be somewhat less if everyone already just flies economy; perhaps you can let us know the board's policy on this). This generates an additional $35,000. 

 

D) Contribute back 50% of your windfall on insurance premiums for an additional $65,000. I would suggest the other 50% be given back in the way of reduced premiums for players. At the current high premium costs for players vs. other sports, there can be little doubt that at least some people are turning away from rugby. If we can bring these premiums down it will help attract more players, thereby generating more membership dues for Rugby Canada. At worst this will be a financial wash, and more likely the increase in player base will actually be a net financial benefit (supply side/trickle down economics, even consistent with Keynesian macroeconomic theory, so I think you're covered on all fronts).

 

E) Take a serious look at your mandate and decide whether it is to support "Staff Salaries" and "General Administration" or is it to support the development of a national rugby plan through donation, development and the like. The direct expenses associated with the national team are essentially a wash against revenue received from outside sources (IRB and Government) so we need to look to the other revenue and expense items that are at the discretion of Rugby Canada. As per point # 6 above you currently spend $245,000 more on salaries and admin than on donations and development. This is ridiculous. In 2009 you spent slightly more on development, etc than salaries and admin (about $25,000 more). Frankly it is still ridiculous to even spend as much, however when you spend more on the one item than another I'm afraid that means your mandate is changing away from the lesser spend (supporting national team rugby development) to the greater spend (supporting your salaries and administration costs). You should have a firm commitment, even a governing rule, that you cannot spend more on salaries and admin than on development, etc. This means that with this mandate you should have half of the overspend immediately available to you, or about an additional $125,000. With even moderately effective cost controls you should be able increase this to the full amount of the overspend by next year, the full $245,000.

 

With these very modest steps we total $325,000 (more next year) that should be immediately available to support our Women's National side at the Nations Cup. They only need $87,000 to stop this absurd pay-to-play policy, so that leaves a balance of about $240,000. Now in the article attached above Mr. Brown also mentions in passing that the National Under 20's side recently had to pay $4,100 each to play. I for one had to pull out my handkerchief in sympathy with his tough situation when he says that Rugby Canada's decision to charge these young players, who represent the future of our national program, was "tough to talk to parents about". Well, I am very pleased to tell him that with the $240,000 that is left over he can make lots of cheerful calls to parents and tell them they're getting their money back, since that will only cost about $123,000. 

 

This still leaves us with about $115,000 left over from our modest cost saving suggestions. I suggest it be put aside in a fund, to be called upon the next time a young national player misses the chance to contribute to our national side because his parents can't afford Mr. Brown's pay-to-play fee, or our Women's National side can't field our strongest team at the Nations Cup.

 

We can, and should, debate what the true mandate of Rugby Canada is and should be-this is healthy. We can, and should, debate how our national teams and their players are supported, and the realities of playing on a stage of professionals vs. amateurs-this too is healthy. I may not fully agree with the positions taken by Rugby Canada, but at the end of the day they are our representatives of the sport and so I accept that their mandate and directors are a representation of the view held by the largest portion of the Canadian rugby community. 

 

What I find unacceptable, and even unconscionable, is a state of affairs where Rugby Canada:

1. Uses more of its discretionary spend to administer the mandate than to fulfill it, thereby charging fees and premiums that serve to block new entrants to the sport; 

2. Has created a financial situation and allocation that favors administrative and Board expenses over paying for our Nations Cup playing shirts (players have to pay for their own jerseys it seems), resulting in national level players unwilling or unable to play for their respective national teams; and

3. Has a Board that rationalizes these failures by blaming IRB contributions rather than getting their own house in order and actually doing something about the absurdity of charging the national players exorbitant fees for the right to play for Canada. Accomplishment and not deflection is what is required from leaders of an organization.

 

I have heard much in recent years from Rugby Canada about the need to build professionalism in their organization to achieve success. This is commendable, but needs to be balanced against the existing problems as reflected in the attached news article and their financial decisions. The Rugby Canada Board is accountable to manage their mandate. On the face of it they are failing, and in a way that I believe hurts not just the national teams, but spills over and damages rugby at a grass roots level. They should either take immediate measurable steps to address this or resign; there are no other options at this stage.

 

Yours,

 

Chuck Schandl

Club Captain

Toronto XL's RFC