Did you know that three members of the FIFA Ethics Committee that charged Joseph Blatter with making a “disloyal payment” to Michel Platini in 2011 did not actually attend any of the meetings of the FIFA Ethics Committee they were responsible for attending? This is just one of several details that can be gleaned from FIFA’s published financial reports, audited by the Big Four International Accounting firm KPMG. UEFA president and veteran Juventus soccer star Michel Platini received a deferred compensation payment of almost US$2 million in 2011 for work done years earlier.
While the lengthy delay in making the payment to Platini looks unusual, controversies swirling around Brazil’s latest budget crisis show that the 2014 FIFA World Cup host country routinely deferred hundreds of millions of dollars in payments for years at a time. It is certainly not a best practice, but many people who have experience trying to collect professional service payments from sports organizations will tell you that it happens.
While Platini announced his intention to appeal a fine of nearly US $90,000 and 8 year ban from soccer to the Court for Arbitration of Sports on December 21, FIFA responded that Platini must first take his case to FIFA’s internal appeals body. If or when Platini’s case ever gets to the Court for Arbitration of Sports is uncertain at this time. But the published financial statements in FIFA’s annual reports provide a lot of relevant information and raise a lot of questions about how a US$2 million account receivable and payable could be ignored for so many years. If the charges against Platini are valid, that make a strong case that some of the over one-billion dollars that FIFA has spent on governance procedures from 2011 through 2015 should be refunded for ongoing failures to deliver acceptable quality control.
There is convincing information that very few people writing about “Fifagate” or responsible for its governance have actually read the organization’s published financial report for 2013. Two of the pages were inadvertently printed upside down and no one seems to have noticed.
One of the most relevant bits of information in FIFA’s annual reports is that FIFA does not have non-taxable non-profit status and pays taxes in Switzerland with filing requirements similar to Major League Soccer or the NFL. So the controversial payments have been reported to the tax authorities in Switzerland, where FIFA is headquartered, and KPMG already published an opinion that FIFA’s financial statements were legitimate.
FIFA’s audited financial statements showed that the organization spent US $20.6 million on legal counsel in 2012 and US$27.7 million in 2013 for legal experts. Those expenditures are much more than the US $ 9.5 million annual budget of the entire Court for Arbitration of Sports for its operations, research and investigations. There is no reasonable explanation for the omission of lawyers who billed FIFA millions of dollars to evaluate the legalities of payments made by FIFA and the integrity of its financial statements to have not objected to Platini’s deferred compensation. To date, there is no record that any of the lawyers responsible for reviewing FIFA’s official documents has admitted any error.
The sheer volume of charges of financial mismanagement at FIFA demonstrate that the organization’s deficiencies in financial analysis have been problematic for years. On December 4, eight defendants pleaded guilty to charges filed by the U.S. Department of Justice. But FIFA spends US $5 million a year on a sophisticated “Early Warning System” that is supposed to alert management to potential financial irregularities before government investigators have grounds to prosecute. And FIFA also spends US $2 million a year on liaison investigations with Interpol to try to prevent any criminal misconduct from tarnishing FIFA’s integrity. The total budget for FIFA governance, that it administrative procedures and meetings to insure that all FIFA rules are followed, is a huge figure, $278 million a year. That amount is sixty percent of the entire annual revenues of Major League Soccer.
As FIFA tries to fix its internal problems in 2016, it needs to try to understand why the tens of millions of dollars it spends each year to optimize its internal financial management are not getting better results.
Read more business analysis of FIFA at these links:
FIFA controversies overshadow government shift and X-Games experience
FIFA saga confirms sports business is serious business
IOC seeks to control damage from sports scandals with higher standards