Restated accounts for 2010/11

[Angus French]

Documents for the above have been sent to Council delegates who are asked to vote on the resolution proposed by the Board: "to approve the annual statement of accounts for the year ended 30 April 2011". Delegates are asked to "reply as quickly as possible".

A few quick observations:
1. I can't see that the documents are yet available from the ECF website - i.e. that they are in the public domain.
2. There doesn't appear to be any facility to ask questions or for Council to discuss (as there was at the AGM).
3. Turnover less expenses is now £2,606 - a surplus! In contrast the accounts presented for the AGM showed a loss of £5,583.
4. The Direct Members Income figures now look sensible and in line with those of 2009/10. So far as I can see there is no explanation for the misattributions.
5. Game Fee income from Congresses remains at £5,882. This contrasts with £11,281 for 2009/10. The Director of Finance states (in a covering paper on the accounts): "I have reconciled the amount of game fee that should have been received to the amount actually received and the ECF appears currently to be owed £6,600 in Game Fee. Due to the nature of the records it has not proved possible to identify with certainty who owes arrears of game fee". This must be a matter of concern in itself. It also calls into question the accuracy of the voting register - both the one used for the AGM and the current one to be used for the vote on the restated accounts - since votes are assigned on payment or deemed payment of game fee.
6. Junior expenditure was previously overstated - originally it was given as £58,579 but it is now stated to have been £50,564. The Director of Finance states (again in the covering paper on the accounts): "On investigation, a significant amount of expenditure originally recognised in the Junior Chess budget related to events happening during 2011-12. As this expenditure relates to the 2011-12 financial year, it has been removed from the Junior Chess budget and reclassified as a prepayment."

[Roger de Coverly]

"I have reconciled the amount of game fee that should have been received to the amount actually received and the ECF appears currently to be owed £6,600 in Game Fee. Due to the nature of the records it has not proved possible to identify with certainty who owes arrears of game fee".

That has to be a statement which shouldn't be accepted without challenge. The grading records tell you who played where. The membership records tell you who was a member and when they were a member. Join the two sets of data together and you have a statement of what Congresses should have paid. Surely the ECF haven't lost the records of what Congresses have actually paid? At the very least, you should be able to compare what a Congress paid this year to what they paid last year. Whilst Congresses do vary in size (and existence) and vary in the number of players with Game Fee exemptions, overall you would not expect dramatic changes from one year to the next.

Elsewhere there have been statements (by Alex H I think) that provided a Congress was "on time" with its grading data, that calculation of and invoicing of the Game Fee for Congresses had been enhanced to be a relatively simple process and that it was leagues that caused the difficulty to the office systems.

[Mike Truran]

That may be true, and is a perfectly valid question to ask, but that is a question about operational (in)efficiency, not about the true and fair nature of the accounts. The accounts have excluded the arrears in accordance with the accounting concept of prudence on the grounds that their collection is uncertain. That is a perfectly acceptable treatment for accounting purposes and in accordance with a true and fair view of the ECF's financial position.

[David Shepherd]

Maybe a question about whether proper accounting records have been kept and whether the debt that has been provided for is really a bad debt.

[Roger de Coverly]

That is a perfectly acceptable treatment for accounting purposes and in accordance with a true and fair view of the ECF's financial position.

If one of the ECF sources of income has apparently halved over a year, would you not expect an investigation to find out why and where? The ECF have been prolific with exemptions from Game Fee, so it is possible the loss is from natural causes. That is if you exempt Congresses from paying Game Fee, after a while your income drops.

The treatment may be true and fair, but aren't Council also acting as recipients of management information? At the very least, why isn't it possible to list the amounts paid detailed individually by Congress in 2009-2010 and in 2010-2011? It's data that's already been processed in effect for the deemed Game Fee applicable to voting rights.

County Associations, leagues and Congresses (!) have the voting rights on this. I would hope that they would refuse to accept the accounts because of the inadequacy of the analysis.

It's a process of elimination. You know that the number of games is comparable between the years. You also know that the voting rights are comparable. So if there's a shortfall in income, at least three possible causes come to mind
(a) a missing accrual or amount posted to the wrong year ( as with the Junior budget)
(b) underpaying Congresses and bad debts - in which case identify them by prior year comparisons
(c) additional exemptions - again a prior year comparison would help identification.

[Mike Truran]

County Associations, leagues and Congresses (!) have the voting rights on this. I would hope that they would refuse to accept the accounts because of the inadequacy of the analysis.

There are thirteen days to go before the deadline under which the ECF has a legal requirement to file accounts in accordance with the Companies Act. Whether you are right or wrong in your assessment of the adequacy or otherwise of the management accounting analysis, there's not a lot of point in holding a gun to the ECF's head at this juncture.

The treatment is true and fair from the accounting point of view, and the accounts have also been signed off by the external auditors. There may well be operational issues to be addressed, but refusing to approve the accounts is not a sensible way to address them.

[Alex Holowczak]

The analysis I did found shortfall in terms of Game Fee collection in 2009/10. The 2010/11 accounts are showing a similar shortfall. I'm not sure why this is a particularly startling discovery, given I found the 2009/10 problem in the 2010/11 period, and it took time to put the changes in place to help resolve the problem. I'm not sure when I said what I said, but it was almost certainly nearer the end of 2010/11 than the start of 2010/11, if it was indeed in 2010/11 at all.

[Angus French]

The analysis I did found shortfall in terms of Game Fee collection in 2009/10. The 2010/11 accounts are showing a similar shortfall. I'm not sure why this is a particularly startling discovery, given I found the 2009/10 problem in the 2010/11 period, and it took time to put the changes in place to help resolve the problem.

But it appears (looking at actual and budget figures) that the bulk of the shortful is now in income from Congresses and that wasn't previously the case.

[Alex Holowczak]

The analysis I did found shortfall in terms of Game Fee collection in 2009/10. The 2010/11 accounts are showing a similar shortfall. I'm not sure why this is a particularly startling discovery, given I found the 2009/10 problem in the 2010/11 period, and it took time to put the changes in place to help resolve the problem. I'm not sure when I said what I said, but it was almost certainly nearer the end of 2010/11 than the start of 2010/11, if it was indeed in 2010/11 at all.

That doesn't explain why game fee income from Congresses was £11,281 for 2009/10 and only £5,882 for 2010/11.

I didn't say it did, but Roger was alluding to the work I did, and trying to use it to make sense of the 2010/11 numbers.

All I am trying to convey is that I found that there was some Game Fee missing from the accounts in 2009/10, during 2010/11. The 2010/11 accounts were none of my business in that regard, because I didn't compile any stats for these.

Mike keeps saying that the accounts are a true and fair view of the ECF's financial position. Which is what we're voting for (or against).

[E Michael White]

There are thirteen days to go before the deadline under which the ECF has a legal requirement to file accounts in accordance with the Companies Act. Whether you are right or wrong in your assessment of the adequacy or otherwise of the management accounting analysis, there's not a lot of point in holding a gun to the ECF's head at this juncture.

The treatment is true and fair from the accounting point of view, and the accounts have also been signed off by the external auditors.

Mike you seem to be advocating a "tick and run" policy.

Do you see any risks attaching to this approach ?

[Roger de Coverly]

Whether you are right or wrong in your assessment of the adequacy or otherwise of the management accounting analysis, there's not a lot of point in holding a gun to the ECF's head at this juncture.
.

The ECF are holding a gun at the head of Council. Approve these accounts or else!

Those of us with experience of finance and investment are aware that it's not unknown for a Company to have a clean bill of health at an audit and a supposed true and fair view presented, only to collapse in spectacular manner within a year.

What's the position on the ECF's undisclosed legal activity at the CAS?

As Angus comments, the conclusions of the previous analysis were that it was leagues where there was a possible shortfall in Game Fee. Congresses were believed to be clean, because there was an analysis at the ECF end and also because the Tournament Director software has the facility to merge the grading file and the membership list to calculate the exemptions

Alex H's analysis in August 2010 using the grading files and membership lists presumably means the 2009-2010 Game Fee for Congresses is a reliable set of numbers. If the 2010-2011 Game Fee for Congresses appears to have halved, why is it not possible to compare the two and report on the shortfall?

[Carl Hibbard]

Due to the nature of the records it has not proved possible to identify with certainty who owes arrears of game fee

Staggering

[Mike Truran]

Mike you seem to be advocating a "tick and run" policy.

Do you see any risks attaching to this approach ?

If the ECF were overstating income that may not be collected that would indeed be risky. However, the ECF is excluding income that may not be collected. That is a prudent approach.

There seems little point in refusing to approve the accounts when they represent a true and fair view and have been signed off by the external auditor, and when significant penalties apply to non-filing. Refusing to approve the accounts won't get the underlying administration issues sorted out.

Late Filing Penalties

Section 441 of the Companies Act 2006 requires all companies to deliver annual accounts to the Registrar of Companies by the due date. Section 453 specifies that a civil administration penalty shall be payable if the accounts are delivered late, and provides for the Secretary of State to specify the level of this penalty through regulations.

To increase the effectiveness of the late filing penalties, when section 453 came into force Companies House changed the current schedule of late filing penalties as contained in section 242A of the Companies Act 1985. In parallel, the Government will amend section 242A of the 1985 Act so that these changes also apply to accounts prepared under the 1985 Act but delivered late on or after 1st February 2009 when the updated penalties came into force.

What are late filing penalties?

Late filing penalties were introduced in 1992 to encourage directors of limited companies to file their accounts on time because they must provide this statutory information for the public record.

What changes have been introduced?

All penalties have been increased to take account of inflation between 1992 and 2007.
A faster rate of increase in penalties for companies who file more than one month late.
A doubling of the penalty for any company which files late having also filed late in the previous year.

What are the new late filing penalties?

The new table of penalties is a follows: *
How late are the accounts delivered Penalty –
Private Company Penalty - PLC
Not more than one month £ 150 £750
More than one month but not more than three months £375 £1500
More than three months but not more than six months £750 £3000
More than six months £1500 £7500

In addition where there was a failure to comply with filing requirements in relation to the previous financial year (and that the previous financial year had begun on or after 6th April 2008), the penalty will be double that shown in the table.

[David Sedgwick]

Mike you seem to be advocating a "tick and run" policy.

Do you see any risks attaching to this approach ?

If the ECF were overstating income that may not be collected that would indeed be risky. However, the ECF is excluding income that may not be collected. That is a prudent approach.

There seems little point in refusing to approve the accounts when they represent a true and fair view and have been signed off by the external auditor, and when significant penalties apply to non-filing. Refusing to approve the accounts won't get the underlying administration issues sorted out.

Mike, firstly thank you for ending your "ECF exile" and coming back to the fray.

I completely agree with you and I shall be voting to approve the accounts.

I'm sure you appreciate that the administration issues do need to be sorted out and that you'll make that clear to the ECF Board. I await with interest your report to the April Council Meeting.

[Roger de Coverly]

I completely agree with you and I shall be voting to approve the accounts.

I'm sure you appreciate that the administration issues do need to be sorted out and that you'll make that clear to the ECF Board. I await with interest your report to the April Council Meeting.

It is getting close to having no confidence in the Board. Why is it impossible to write down a list of Congresses, the amount they paid in Game Fee in 2009-2010 and the amount they paid in 2010-2011? Surely this is straightforward book-keeping and something you might expect an audit, or even an examination to require?

In my mind it's not even obvious that Congresses are to be blamed for the shortfall. Here and there, Congresses report and pay their ECF membership costs through a local county or league. A few of these payments misclassified and you seem to have a Congress shortfall, whereas it's actually a league one.

It's a form of coercion to delay the release of a set of accounts with an unresolved issue until the last possible moment and demand approval against the backdrop of a threat of late filing penalties.