Some comments and questions on the ECF’s finances, including the budget for 2021/22, and proposed fee rates...
(Papers for the meeting are here:
https://www.englishchess.org.uk/about/e ... and-board/. The ECF financial year runs from 1 September to the following 31 August.)
Accounts for 2019/20 – now completed. How did the federation do against its budget (and against the previous forecast)?
1. These are the accounts for the most recently closed accounting period and Council is asked to approve them. However, there is no commentary on the period in
the Finance Director’s report. A draft audited accounts statement for submission to Companies House is also usually provided but, at the time of writing, there doesn’t appear to be one.
The 2019/20 budget followed the revised 2018/19 budget agreed at the October 2018 AGM. At the AGM and on the back of
a paper titled “Challenges for English Chess”, the Board received approval for the creation of a Development Officer position (salary up to £20K dependent on the number of new memberships) and for new or increased funding on women’s chess (expenditure up from £5K to £15K), the ECF Office (a further £12K to cover salary increases and extra staff resource) and International chess (an extra £17.5K or so). Financing for the expenditure was to come in part from ECF funds (essentially membership and game fee income uplifted by increased membership numbers and increased fees) and in other part from the trust funds which assist English chess. So what was the outcome of these decisions?
Anyhow,
the management accounts spreadsheet shows the federation had a surplus for the year of £20,188. This was against a budgeted loss of £12,480 and a forecast surplus of £158 (with the forecast made for the 2020 FCM). Government grants totalling £20K made a big difference. I’d be interested to know how these were made up as presumably they weren’t all for furloughing of staff – staff costs came in at £72K against a budget of £79K. There was also less net expenditure than budgeted for on international chess (but see next comment) and less was spent on administration. Membership fee income was £204K vs. a budget of £229K – which I think is not bad considering the pandemic struck in March.
2. While net expenditure on international chess was better than budgeted for, both income and expenditure were significantly higher than planned. Income was £39.5K vs. a budget of £0; expenditure was £77K vs. £43K. Is it unfair to say that whenever there’s sponsorship income it’s usually used not to offset planned expenditure but for new, unbudgeted, expenditure? Looking at the figures in more detail I see there was £14.5K unbudgeted expenditure on the 2020 Online Olympiad – I think that’s OK as the online Olympiad replaced the OTB Olympiad which presumably would have been accounted for in the following accounting period. There was extra spend though on European Team Championships (£47K vs. £34K) – quite a lot I think for two five-person teams - and Senior Chess (£10K vs. £2K). I wonder: should any of this have required authorisation as unbudgeted expenditure (per the Financial Bye Laws)?
Accounts for 2020/21 – current year, with forecasts against the budget approved at last year’s Finance Council meeting
3. The first thing I note is there’s no column in MA spreadsheet for the 2020/21 budget (though there are columns for the budgets of the preceding and following periods). The budget figures would be useful to compare the forecasts against. They can, though, be extracted from the 2020 MA spreadsheet.
4. The budget was for a surplus of just over £7K. This contrasts with what the FD says in his report: “
At the moment we are predicting a smaller than anticipated loss of just over £5000 for 2020/21”. So: the anticipated result is actually £12K *worse* than expected. Looking at the figures in more detail... Membership fee income is forecast to be significantly less (£121,710 forecast vs. a budget of £161,171). Net expenditure on administration is forecast to be £123K against a budget of £111K. Net expenditure on international chess is forecast to be lower (in fact, forecast income is £0 and forecast expenditure is also £0). Government grants of £31K are forecast when none were budgeted for – I think it fair to say they will, in large part, have saved the day.
5. Calculation of reserves. If reserves stood at £57K at the end 2019/20 and a loss of £5K is forecast for 2020/21 why are reserves forecast to be £40K at the end of 2020/21? Shouldn’t the figure be £52K? I note that the reserves figure is carried forward and also impacts the budgeted reserves figure for 2021/22.
6. Membership fee income: of course the budget figures were too high - as I think should have been evident at the time the budget was agreed in July 2020 [edit: date corrected], after [edit: not during] the first national lockdown. (The calculation was: players aged over 70 wouldn’t renew and 25% of the remaining Bronze members wouldn’t renew. Thus the budget was £160K against what was then a forecast £203K for 2019/20.) I expressed concern at the last FCM about what I thought were unrealistic figures but I can’t remember others saying similar except maybe David Gilbert. Anyhow, the 29 March 2021 membership list provided to organisers had 6,331 paying members (not including supporters), against 10,877 paying members at the end of 2019/20. The junior numbers (1,892 vs. 2,377 = 80%) were holding up better than the adult numbers. Gold adult members were down 37%, Silver adults were down 50% and Bronze adults down 54%. The budget aside, are these numbers good, bad or somewhere in between? My own view is that the ECF should focus more on members and membership propositions – if it did that it may gain something in membership loyalty. But it would be useful to know the reasons from the players who haven't renewed... The add-on Go! Membership Scheme *may* be a useful benefit but I think it needs to be better promoted, especially to non-members (only in the new yearbook have I seen a statement of what it costs with some firm indication of the benefits).
7. Administration expenditure. I wondered why this was forecast to be higher than budgetted. I thought the government’s furlough scheme would help cover a large portion of staff wages though that doesn’t appear to be the case (staff costs are forecast to be £62K against a budget of just over £69K). A breakdown of Government grants would be helpful. The FD’s report explains that it hasn’t been possible to relocate the ECF Library and therefore that it hasn’t been possible to relocate the office (which contains the library) – so office charges are higher.
I see there is forecast expenditure of £12,625 on ‘IT Development Initiatives’. This didn’t exist before and needs to be explained. I note
the Financial Bye Laws, specifically section F4 on unbudgeted expenditure. These say that unbudgetted expenditure exceeding 20% of reserves (budgeted y/e reserves are £43,911 – so if you use that figure, 20% of reserves = £8,782) requires the approval not only of the CEO, the FD, and a nominated NED but also of Council.
There’s been no spend on a Development Officer which was budgeted for. This is also missing from the 21/22 budget. I think the role is needed: to provide improved support for clubs and for new players in particular. Maybe the role is needed more post-pandemic - to assist with recovery; to help the ECF adjust to a new chess-playing landscape. Perhaps the new Director of Events will assist?
Budget for 2021/22 – new year beginning 1 September 2021
8. The budget is for a loss of £32K, reducing reserves to £8K. This is with what I think is an optimistic view on membership fee income (see next point) and significant expenditure on international chess (see point 11 below). In my view the budget is high risk.
9. Membership fee income. The FD report says: “
[W]e expect a return to OTB chess in the Summer of 2021 under the current guidelines, even if this is delayed we can be cautiously optimistic that we will have a full return to the board at some point in 2021/22. Of course, even on the return of OTB chess, both general chess activity and our membership level is not likely to immediately recover to previous levels and this is reflected in our budgeted figures.”
Projected membership figures for 2021/22 are based on those for 2019/20 with: retention of 85% of Gold members; retention of 80/85% (adult/junior) of Silver members; and retention of 75% of Bronze members. These projections produce an estimate for membership fee income of £170K. In my view this is optimistic and I think it would be prudent to plan for lower numbers... Yes, the vaccine rollout has been going very well. And, yes, the numbers of cases, hospitalisations and deaths are significantly down. However, we are coming out of lockdown and there is a risk from new variants which current vaccines may not be so effective against. For example, there have been very few cases so far in the UK of the South Africa variant. Early indications are that the Pfizer vaccine may provide good protection against the variant but that protection from the AstraZeneca vaccine may be less effective. Lack of financial support for people who self-isolate and allowing people to take foreign holidays – if that happens - won’t help. Chris Whitty, the Government’s Chief Medical Officer, predicted in early March that an additional 30,000 at least would die of Covid-19 before next summer – that’s worse than a bad flu year (20,000 deaths) and doesn’t account for Long Covid cases. Players (probably more so older players if they perceive a risk) may be disinclined to play – or travel (not only on public transport but also in shared private transport for league matches and possibly congresses). They may prefer to play online. (On the other hand, new online players who didn’t previously play OTB may be interested in doing so.) Mitigations will, I think, likely be required at venues including social distancing, wearing of masks, and good ventilation. If social distancing is required then venue capacities will be reduced – so there may be less opportunity to play and the economics of playing may change. Maybe some venues which had been in use will no longer be available. I think it won’t be easy and it may take some time before we return to something approaching previous levels of OTB activity. A cautious basis for an estimate of membership fee income would be to assume that the number of players playing graded OTB chess is the same as the number of members in the current year and that all members are players. That would produce membership fee income identical to the current year of about £122K (against a budget figure of £170K). This could well be too pessimistic. I hope it is. But it would have the benefit of reducing risk to something very low. Expenditure could then be committed to once covered by an excess of income - not only membership fee income but also income from sponsorship and government grants.
10. Government grants. None are budgeted for. The current furlough scheme ends in September. Maybe there’ll be new grants if there’s another pandemic wave but that can’t be counted on.
11. International spend. The budget is for participation in the European Team Championships in November 2021 (£40K expenditure) and the Olympiad in August 2022 (£43K expenditure). The FD’s report refers to “positive discussions” on sponsorship. But currently, as proposed, both events will be paid for out of the ECF’s own funds. The European Teams would be funded in its entirety in 2021/22. The Olympiad would be funded: £18K in 2021/22 and £25K in 2022/23. The £25K of expenditure carried over to 2022/23 would be covered by a loan of the same amount from the Permanent Invested Fund... Proposed expenditure is considerable and much of it - £20K for each event? - will presumably go on player appearance fees. I don’t think this is appropriate when the federation’s finances are under strain and with membership fee income uncertain. Maybe it would be better to commit to participation in international team events only if the expenditure is covered by sponsorship, if it’s reduced or if membership fee income meets projected levels – or some combination thereof... There is, of course, always the chance that the events won’t go ahead due to the pandemic – or that players will be unwilling to travel. Also, I wonder: will the PIF trustees agree to a loan?
12. Women’s chess. The budget is for £20K of expenditure including £12.5K for the ‘2022 International year of Women in chess’. This seems quite a lot to me. The Chess Trust will contribute £12.5K (with £7.5K unspent in previous periods brought forward). I wonder: how much will go to support women’s chess at grassroots level?
Membership and other fees
13. There are proposals for fee rates relating to OTB competitions and Membership Organisations, as required by the ECF’s Articles of Association. (Such fee rates are proposed to be the same as for 2020/21.) But there are no proposals for the Supporter fee or for fees relating to non-members/non-supporters playing in rated online tournaments. I think the fees belong together and should all be set by Council. The Supporter fee is £10 for 2020/21. According to
https://englishchessonline.org.uk/ecf-s ... ng-online/ there is currently “
a charge of £5 per non-member / supporter playing per [online] congress, or per monthly rating period for a league, payable as a non-member game fee to the ECF”. If I’ve understood correctly I think there may be some issues with this:
- in OTB rated competitions a non-member/non-supporter may play a number of free games but this isn't the case for online rated competitions;
- in OTB rated junior congresses the charge for non-members/non-supporters is £2.50 but in online rated junior congresses the charge is higher at £5; and,
- in online rated leagues there's a charge of £5 for each month a non-member/non-supporter plays. So if the event lasts say four months the charge for a single non-member/non-supporter could be £20.
A simple improvement might be to charge £5/£2.50 per adult/junior per event for non-members and non-supporters.
[edit: date of 2020 FCM corrected in point 6, FCM took place after first national lockdown]