Critical financial issues facing grass roots sports clubs

Carolyn Cordery

Victoria University of Wellington, Faculty of Commerce

2012

Chartered Accountants Journal; November 2012; pp.31-36

Carolyn Cordery

School of Accounting and Commercial Law

Faculty of Commerce

Victoria University of Wellington

carolyn.cordery@vuw.ac.nz

There is no doubt that the economic downturn has impacted the not-for-profit sector generally, but the poor state of the economy should not be allowed to overshadow the critical financial issues facing ‘grass roots’ sports clubs, as many of these issues are not new. Growing casualisation of sport, increasing costs and poor financial management all contribute to clubs’ poor financial conditions. Sports clubs are an important facet of NZ society, but clubs need to take stock of their financial situation if they are to increase their financial sustainability.

Yet, while some clubs are struggling to manage their finances from season to season, other clubs are thriving. Without benchmarks, how can we ascertain the financial state of a not-for-profit sports club? Over the past year, Rachel Baskerville and Carolyn Cordery have undertaken research (funded by Sports New Zealand) to determine the relationship between sports clubs’ incomes and their financial vulnerability. We focused on two sports: golf and football. With the support of New Zealand Golf and New Zealand Football, we surveyed member clubs, interviewed board members, managers and stakeholders, and analysed four years of financial data from 129 golf clubs and 98 football clubs.

The financial results were sobering: 42% of golf clubs reported declining revenue and membership numbers had declined in 50% of clubs. Half the clubs had increased their debt levels over the four years. More than half (56%) reported net deficits and 44% of clubs surveyed reported that they did not have a business plan beyond their annual budget. Football clubs’ membership levels were the opposite to those in golf – more than 59% of clubs reported their numbers had risen in recent years. However, 42% of clubs reported a net deficit and declining or static revenue, and 64% had increased their expenditure. A majority (73%) of football clubs did not have a business plan.

What was less clear from the raw results was how to detect financial distress in sports clubs. Do they exhibit reducing income or reducing net assets? What indicators should careful sports administrators watch and manage? Thus, we drew on the scarce international research in this area and customised it for the New Zealand sports data we had gathered, in order to locate the factors that could warn of impending financial distress in sports clubs.

Keywords:

Financial sustainability, sports clubs

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Mixed-method

National

Sport

Clubs, Community

Amateur, Organised

Capability, Delivery, Fees, Fees, charges, user pays, Financing / funding, Governance, Impacts - economic, Management, Participation, Planning, Policy, user pays, Volunteers

Football (soccer), Golf

2470

December 11, 2012

December 12, 2012