ECB ACCOUNTS 2018

This post is a review of the ECB accounts for the year to 31 January 2018.  I reviewed the ECB accounts for the period to 31 January 2017 here.

I won't rehash my comments about the lack of transparency in the accounts, but will say that each year the ECB provides less information to its members and people with a strange interest in cricketing finances.

I have already covered the disclosure in the accounts that a £2.5m payment was made to Glamorgan for not staging test matches despite statements to the contrary by ECB Chairman Colin Graves.

For the second year in a row the ECB accounts show a large loss.  Income increased from £119m to £125m, but with expenditure of £156m, largely unchanged from 2017, there was a 2018 deficit of £30m.

At first sight the numbers look odd as 2017 was expected to be a year of unusually high expenditure due to one off payments to the First Class Counties and note 20 the 2018 accounts discloses payments made to the First Class Counties, Minor Counties and MCC declined from £67m in 2017 to just £38m in 2018.  If the ECB reduced its largest expense,  pool payments to partners, how did overall expenditure remain constant? 

The Strategic Report provides a partial answer, stating "A further special fee distribution of £1m is scheduled to be paid to each First Class County in either 2018 or 2019, relating to Cricket World Cup 2019.  These previously unprecedented contributions coupled with significant investment in strategic Participation & Growth initiatives including the expansion of our first nationwide entry  - level programme, resulted in a loss for the year."

The "nationwide entry level programme" is presumably a reference to All  - Stars Cricket (Would it be churlish to ask why they don't just say that?) the ECB's initiative to encourage participation, plus a £1m donation to the Chance to Shine charity involved in similar work.  This seems like the sort of thing the ECB should be spending its money on and it is good that despite the ECB having its own All Stars program it donated to Chance to Shine; the more approaches the better. 

The reference to an additional £1m being paid to each county is rather harder to disentangle.  It would seem that the amounts being paid to each First Class County for the 2019 World Cup have been included in the 2018 accounts and make up a significant part of the £30m loss.  This explanation is supported by an increase in the level of creditors in 2018 compared with 2017, indicating the 2019 payments have been expended but not yet paid.  However, if this is what has happened the accounting seems odd, if the payments relate to the 2019 World Cup and are due to be paid in 2019 why not expense them in 2019?  And if the increase in expenses is largely due to additional amounts being paid to First Class Counties then note 20 to the accounts, which shows a sharp decrease in payments to the First Class Counties, is, at best, misleading and quite possibly wrong. 

Still my best guess would be that the ECB has accrued the additional £1m payable to each First Class County in 2018 expenses and this is part of the reason for the deficit in the period.  If this is the case, it is, in my opinion, a good thing.  In recent years we have seen the ECB, at the top of the cricket pyramid in the British Isles, run up substantial surpluses whilst some of the First Class Counties struggled.  Those struggles were particularly marked at counties who, at the ECB's behest, expanded their grounds to provide additional international facilities.  It makes sense to socialise some of the losses and the Counties, who all have an additional £1m to come in 2019 and £1m a year extra from The Hundred from 2020, should have some financial security.  Hopefully this will give them a chance to do more development and community work and we will have a range of different projects in different areas rather than the ECB trying to run everything.  

I should say I don't think everything the ECB does is wrong or badly done.  Hopefully All Stars Cricket will energise the game.  I'm not one of the people who traces all of cricket's ills to the lack of terrestrial TV coverage, more would be good but the ECB is not entirely to blame for cricket's absence from free to air TV.  And the ECB's settlement in the latest media rights round has generated a large amount of additional income for cricket.  But in common with other not for profit bodies the ECB has insulated itself from democratic oversight and has it has become more business orientated so it has exhibited some of the worst flaws of the business model.  This includes overly powerful managers unchecked by the board and a lack of transparency; all leading to inconsistent, poorly thought through decisions.   Some of these issues are apparent from the 2018 accounts

• Firstly there is the issue of payments to counties to not bid to stage Test matches.  Aside from the nonsense of receiving a payment for not bidding, as if the right to bid had some value attached to it there is also a lack of disclosure over what payments have been made.  We know non  - bid payments were made to Durham and Glamorgan but the accounts only disclose the Glamorgan payment.  There is no detail on whether payments were made to other counties with Test match grounds who are going without a Test match in some years of the current cycle.  One such county is Yorkshire which is part financed by two loans from family trusts associated with Colin Graves and where, as disclosed in note 20 to the accounts, Graves acts as guarantor of a £681k of payments due from The County to the ECB.

• Tacked onto the bottom of the pension disclosure note is the following little nugget about a Long Term Incentive Plan.

"Included within accruals falling due after one year is an amount of £615,718 (2017 £0) relating to a Long Term Incentive Plan (LTIP).  As at 31 January the fair value of the plan obligation, which will be cash settled in 2022, is calculated to be £3,180,035."

So a person or persons at the ECB is in line for a pay out in 2022 worth either £600k or £3.2m.  The payments may be going to England players but my guess is that this a payment to the "key management personnel" (i.e. senior ECB bureaucrats) who, as shown in note 20 to the accounts, received £2.7m remuneration in 2018, an increase of 8% on the £2.5m they received in 2017. LTIPs are quite often a feature of executive remuneration in quoted companies and can give rise to controversial pay outs.  But at least in a public company the share price provides a measure of the company's performance which can (arguably) be used to judge the effectiveness of management.  The ECB though is a company limited by guarantee and is a one off organisation, how are the rewards under the LTIP established and who is responsible for measuring outcomes? 

• Note 22 to the accounts discloses the money the ECB receives from charitable bodies, principally the Lottery Fund, and provides some detail on how the ECB puts this money to use.  Incredibly in 2017 £2m of charitable money went on "player retention".  Can this mean what I think it means? Is the ECB, an organisation that signed a £1.2bn media rights deal using charitable funding to pay its players?  If so its unacceptable, I'm sure Joe Root is a nice chap but he isn't a charitable cause.

• And finally there are payments to Reigndei, the offshore insurance company owned by the MCC and the First Class Counties whose financial statements and director's identities remain hidden by Guernsey's lack of an appropriate disclosure regime.  In 2018 £2,197,140 was paid to Reigndei with £668,403 of claims being paid from Reigndei to the ECB.  In the period from 2005 Reigndei has received £7.8m more in premiums from the ECB than it paid in claims with no indication of who controls that money or how it has been spent.

I'm not saying we should return to the days when the ECB was really just a committee of the amateur county chairmen, but I think an incoming Chairman needs to think about what the ECB is for and the appropriate standards for a public body receiving charitable funding.