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WRU accused of neglecting clubs to tune of £16 million

In February of this year, I published an expose of the WRU’s recent financial performance in a document entitled “Lifting the lid: WRU Finances 2007 -2013”. This document was sent to all member clubs in Wales.

The information I analysed was gleaned from the WRU’s own Annual Reports which are publicly available from their website.

The WRU finally responded to my claims with a letter to all clubs stating that the document was “inaccurate” and a “scurrilous” attempt to mislead the clubs. They wrote on 20th February 2014 that a response to my document would be made available through district representatives. As of 7th June 2014, no such response has been forthcoming, despite numerous requests.

Why? Because they don’t want anyone to look further into my claims. Unfortunately for them, my team has continued to investigate. In particular, they have focused on my claim that the WRU has kept the game poor by paying down debt early.

Here is the latest statement from the WRU on that very issue in their response to the request by 43 member clubs for an EGM.

This is not the full article but is so comprehensively misleading in terms of my claim that it deserves to be highlighted. At no stage did I mention the current loan arrangements other than to say their terms have kept the game poor. This short analysis makes a nonsense of The WRUs statement:

In 2006 base rates were on average 4.75% so the WRU were paying 1.75% over base rate with their 6.5% interest rate.

After “two successful negotiations” they reduced their interest rate to 4.1% which for nearly the last four years has been 3.6% over base rates.

In effect, the WRU has more than doubled its borrowing costs (and Barclays’ profit) relative to base rates in that period (up 106% from 1.75% to 3.6% over base rates). The actual interest rate they pay has fallen 37% yet base rates have fallen by 89%.

The CEO likes to remind us how he has managed the Net debt down to £19M yet the WRU’s own quoted net debt, according to latest accounts,  is actually £67m. The Bank debt is £29m. The WRU have taken £10m of debt that isn’t repayable from this Bank debt and called it Net debt. This is deliberately misleading and typical of the headline-chasing CEO.

So approximately how much money has been denied to clubs at all levels of Welsh Rugby since a decision was taken to divert funds to accelerate debt repayments by the Executive and Board? The amount will shock you.

£16.6 million

If the WRU had followed the financing plan that existed when I left, they would have had approximately £16.6m more cash at their disposal.

Due to the need to have a solvent balance sheet, not all of this could have been distributed to the clubs, but in my previous statement regarding finances mentioned above, I felt that reserves of £5m would be sufficient, in fact there would have been GBP5.6m available for the Balance Sheet in cash after distributing 11million to the clubs. This contrasts with no cash reserves currently as the WRU has used all cash to pay off debt.

What could the WRU have practically done to help clubs with this huge sum of money, which roughly equates to an additional £34,375 per club?

For a start, the core grants to clubs could have been significantly increased, or the WRU could have issued more 100% grants. How many clubs have not bothered to apply for money knowing that they cannot secure the required match funding, particularly during the recent challenging economic climate?

If the WRU tempered their focus on capital expenditure projects, they might have allowed clubs to apply for financial assistance to pay for clubhouse repairs (wear & tear) or painting & decorating. That would have been a huge practical help to the many Honorary Treasurers who struggle to balance the books season after season.

The WRU could have used that money to centrally source playing kit for every team in every club in the Union, using that buying power to secure the best deal available. What other buying power schemes could the WRU have created that would have been of significant value to clubs? All it would have taken is imagination, because the funds were there.

The WRU could have provided money to pay directly for training equipment such as ruck pads and scrum machines, or at the very least better quality rugby balls than they currently supply.

That money could have paid for 30 brand new 4G pitches throughout Wales for use by everyone, from seniors through to minis and juniors, or the WRU could have addressed the extreme shortage of floodlights.

Or they could have subsidised the exorbitant cost of hiring council pitches, and for those clubs lucky enough to own their pitches, assisted with maintenance costs and equipment replacement, or even the cost of marking pitches which is not insignificant.

Of course, the WRU could also have been even more focused on practical day-to-day issues, and offered to assist with the crippling utilities bills (gas, water & electricity) that clubs are incurring. Or even have helped with a contribution towards the costs of the expensive SKY TV licensing that many use to attract people into the club.

Some of the cash might have kept top professional players in Wales, kept us in the European Cup, or centrally contracted all of the National Squad. There are many ways to skin this cat(astrophe)

This will be news and BAD NEWS at that, for all the clubs of Wales. Why?

  1. Because the clubs were never consulted over the decision to repay the debt early.
  2. Because it is clear that if this information got out there would be wholesale revolt.
  3. Because The Board either knew of this figure or more likely they did not and were not interested enough in the welfare of the clubs to demand the information.
  4. Because if the Executive knew of this figure and withheld it from the Board that would trigger a call for their dismissal.

So, either the Executive and Board were aware of this figure or they were not. Either way they are culpable of keeping the game poor throughout a really difficult period for all clubs in Wales.

On this basis alone the Chairman, Board, CEO and FD should immediately resign even before the EGM. Their actions are unforgivable and they need to pay the ultimate price.

I am sure though that they will claim my numbers are wrong. They will attempt to brush it all under the carpet. The clubs should demand to see their numbers.

There is another issue which needs to be highlighted. In my original document I stated the WRU had reserves of £11 million, as per their 2013 annual report. They said these reserves did not represent cash but have never explained what they are. We are still unsure but believe they may in some way be associated with the Stadium and Debentures.

The WRU have steadfastly said they have no cash reserves or extra money to give clubs. In fact they called my claims regarding these reserves “ludicrous and inaccurate”. If I now take their word for it, then why are there no cash reserves? Where has all the cash gone? Well you don’t have to be a genius to work out that it has all gone to pay off the debt early.

The WRU’s apparent lack of cash has led to the unseemly and highly unprofessional attempt to raise money from Sponsors (or “Business Partners”) to centrally contract players. I have never come across this sort of activity anywhere else in all my years in sports administration. If I was a sponsor and found out the WRU needed these funds because they needlessly paid down debt early, I would suggest some rather unpleasant things.

It is a matter of huge concern that a company turning over £60 million of member’s funds, does not have any cash reserves.

But that is not the only financial problem the WRU faces. I can reveal that there is an ongoing investigation into the WRU’s accounts by the Financial Reporting Council. It is alleged that the 2013 accounts are materially incorrect, principally due to an overstatement of expense/liabilities in relation to the regional rugby teams in the amount of £1M. If this is correct they have understated their profit by GBP 1million

It’s not all doom and gloom though. There is good news for one set of people in all of this, and that is the WRUs own staff.

Since 2007, their numbers have swelled by 28%, wage costs have gone up by 50% and cost per employee has risen by 20% – an increase equivalent to £7,355 per person.

The salaries of the Chairman and CEO have risen by 67% from £229,000 to £383,000 during this period. The CEO in particular has done extremely well out of this. His pay even managed to increase when he was on sabbatical leave to run the ‘Yes’ campaign in 2011. It has risen from an annual equivalent of £220,000 in 2007 to an eye-watering £337,000 in 2013.

The actual salary increase awarded to the Group CEO for FY 2013 is in the region of a whopping £30,000. The WRU’s accounts spin this so that it does not appear so – at first reading it looks like an increase of £16,000; however FY 2012 emoluments included what appears to be a one off payment of £14,000 of Company contributions to a defined contribution pension scheme for the CEO. It will be interesting to know whether the £14,000 is accounted for on an ongoing basis, if not the increase is still a substantial £16,000 a year.

Finally, in a letter dated 9th April 2014, the WRU Chairman and CEO revealed a “multi million pound boost to the annual investment to the game in Wales”. The community game will benefit from a 13% increase to £2.6M from July 2014. This represents GBP 300,000 or the equivalent of sending the board, their wives, staff and others to 3 away games in the 6 Nations.

The community clubs will be delighted to learn that they will still collectively be receiving less than the WRU spent on the recent refurbishment of Millennium Stadium’s Hospitality Boxes (£3m).

In inimitable fashion the WRU will try and obfuscate and spin their way out of these issues. The clubs must bring them to account.

 

2 thoughts on “WRU accused of neglecting clubs to tune of £16 million”

  1. I coach an U14 side in the Bridgend area – since the players were U7’s we have scraped and begged for sponsorship and funds to keep the team in kit and facilities (and that is the norm throughout our club and every other in Wales for sure); reading this makes me depressed and angry. Mini and junior teams do so much for the players in terms of physical and social development; whilst it’s a cliche – be under no illusion – these teams are the real future in Wales.
    Still, as long as the WRU Exec make sure they get their inflated self-awarded salaries that’s ok isn’t it? Shame on you Mr Lewis, shame on you all.

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