Sport public finance: a UK sport analysis
Finanças públicas esportivas: uma análise da UK sport
Finanzas públicas deportivas: un análisis del deporte del Reino Unido
Carlos Eugênio Zardini Filho
Alexandra Smith
Alexander Walters
Stratos Chiotis
carlos.zardini@gmail.com
MSc. Sport Management
Coventry University
(United Kingdom)
Reception: 12/04/2017 - Acceptance: 04/30/2018
1st Review: 04/23/2018 - 2nd Review: 04/23/2018
Abstract
For a long time, public organizations have been facing pressure in terms of how they use their financial resources and the respective returns for the population. In the sport environment, not only a good financial management is the key to any successful sports program but also the way funds are managed and solutions to budget problems can be seen as the most important parts of financial administration. In this sense, this paper aims to analyse a public sport organization in its financial situation and performance. The analysis was supported by 3 financial years (2 sets of financial statements), where firstly it is discussed different sources of revenue, their evolution and then the financial performance is presented. The chosen institution was the British UK Sport, which, through the World Class Programme (WCP) invests National Lottery and Exchequer income into Olympic and Paralympic sport. Based on the figures found and on the trends perceived, UK Sport should improve some key strategic points and keep the same financial performance in others. Indeed, taking into consideration the last 15 fiscal years, the data did not show a Department of Culture, Media and Sport (DCMS) and Lottery tendency of investments, neither increasing nor decreasing. However, it was possible to observe that the London 2012 Games put the absolute number in a higher pattern, which with the recent increasing dependency on the Lottery fund created a better scenario to UK Sport, not so affected by political decisions. In fact, the recent positive operating results were achieved thanks to additional Lottery support. On the other hand, even with a commercial department being created in 2011, UK Sport was not able to elevate the level of other incomes (e.g.: sponsorship), which certainly needed to be changed, in order to avoid uncertainties about the DCMS and Lottery revenues. As a possible future goal, the organisation could look for private resources to cover part of the staffing expenses, which have been predictable and stable in the last years.
Keywords: Sport management. Finance. Public administration.
Resumo
Há tempos, organizações públicas têm enfrentado pressão em termos de como usam seus recursos financeiros e os respectivos retornos para a população. No ambiente esportivo, não somente uma boa gestão financeira é a chave para o sucesso de qualquer programa esportivo, mas também a forma como os fundos são geridos e soluções para problemas orçamentais podem ser vistos como partes importantes da administração financeira. Nesse sentido, este trabalho tem por objetivo analisar uma organização esportiva pública em sua situação e desempenho financeiro. A análise foi baseada em 3 anos correntes (2 anos fiscais), onde, em primeiro lugar foi discutido diferentes fontes de receita, suas evoluções e, em seguida, o desempenho financeiro propriamente. A instituição escolhida foi a britânica UK Sport, que, através do projeto World Class Program (WCP), investe recursos públicos orçamentários (DCMS) e da Loteria Esportiva daquele país no esporte olímpico e paralímpico. Com base nos números encontrados e nas tendências percebidas, a UK Sport deveria melhorar alguns pontos financeiros estratégicos e manter o mesmo desempenho em outros. De fato, levando em consideração os últimos 15 exercícios fiscais, os dados não mostraram uma tendência de investimentos do DCMS (Department of Culture, Media and Sport) e da Loteria, nem para cima ou para baixo. No entanto, foi possível se observar que os Jogos de Londres 2012 colocaram o número absoluto em um padrão mais elevado, que com a recente e crescente dependência quanto aos recursos da Loteria, criou um cenário melhor para a UK Sport, assim, não tão afetado por decisões políticas. De fato, os recentes resultados operacionais positivos foram alcançados graças ao suporte adicional da Loteria. Por outro lado, mesmo com um departamento comercial criado em 2011, a UK Sport não foi capaz de elevar o nível de outras receitas (por exemplo, patrocínio), a fim de se evitar incertezas sobre o DCMS e Loteria. Como um possível objetivo futuro, a organização poderia procurar recursos privados para cobrir parte das despesas de pessoal, que foram previsíveis e estáveis nos últimos anos.
Unitermos: Gestão esportiva. Finanças. Administração pública.
Resumen
Durante mucho tiempo, las organizaciones públicas se han visto presionadas sobre cómo manejan sus recursos financieros y los respectivos beneficios para la población. En el entorno deportivo, no solo una buena gestión financiera es la clave de cualquier programa deportivo exitoso, sino también la forma en que se administran los fondos y las soluciones a los problemas presupuestarios se pueden ver como los aspectos más importantes de la administración financiera. En este sentido, este trabajo tiene como objetivo analizar una organización deportiva pública en su situación y beneficio financiero. El análisis se basó en 3 ejercicios consecutivos (2 años fiscales), en los cuales en primer lugar se discuten las diferentes fuentes de ingresos, su evolución y luego se presenta el beneficio financiero. La institución elegida fue British UK Sport, que a través del World Class Program (WCP) invierte los ingresos de la Lotería Nacional y el Tesoro en el deporte olímpico y paralímpico. Según las cifras encontradas y las tendencias percibidas, UK Sport debería mejorar algunos puntos estratégicos clave y mantener el mismo beneficio financiero en otros. De hecho, tomando en consideración los últimos 15 años fiscales, los datos no mostraron una tendencia de inversión del DCMS (Department of Culture, Media and Sport) y de la Lotería, ni aumentaron ni disminuyeron. Sin embargo, fue posible observar que los Juegos de Londres 2012 pusieron el número absoluto en un nivel más elevado, que con la reciente dependencia creciente del fondo de la Lotería creó un mejor escenario para UK Sport, no tan afectado por las decisiones políticas. De hecho, los recientes resultados operativos positivos se lograron gracias al apoyo adicional de la Lotería. Por otro lado, incluso con un departamento comercial creado en 2011, UK Sport no fue capaz de elevar el nivel de otros ingresos (por ejemplo: patrocinadores), que sin duda era necesario cambiar, para evitar incertidumbres sobre el DCMS y la Lotería. Como una posible meta futura, la organización podría buscar recursos privados para cubrir parte de los gastos de personal, que han sido predecibles y estables en los últimos años.
Palabras clave: Gestión deportiva. Finanzas. Administración Pública.
Lecturas: Educación Física y Deportes, Vol. 23, Núm. 240, May. (2018)
Introduction
According to Bodie and Merton (2002), finances is the study of how people allocate scarce resources over time. Certainly, countries depend on their financial activities to achieve their objectives (Silva, 2000). Regards public finances, Silva (2000) states that it involves all State actions to satisfy the collective necessities in a country, consequently, also embracing studies of opportunity and convenience of these actions.
For a long time, public organizations have been facing pressure in terms of how they use their financial resources and the respective returns for the population (Cavalcanti and Santana, 2014). In order to know whether a public entity is correctly acting in favour of a society it is essential to assess its performance, which can occur through financial indicators (Brazil, 2009).
In the sport environment, not only a good financial management is the key to any successful sports program but also the way funds are managed and solutions to budget problems can be seen as the most important parts of financial administration (Ohio University, 2016). In this sense, the objective of this paper is, critically, analyse a public sport organization in its financial situation and performance. In line with Azevedo et al. (2012), this study could be justified in reason of a need of more research around public finances.
Method
In regards to its methodological design, this research is characterized as a case study, in a single-case analysis. In accordance with Zainal (2007), case studies enable a researcher to closely examine the data within a specific context, which help to explain both the process and outcome of a phenomenon through complete observation, reconstruction and analysis of the cases under investigation (Tellis, 1997). Based on Yin (1984), the outlined method has features of a exploratory case study, in reason of it aims to explore a phenomenon in a specific data set. Moreover, in areas such as government and management, case studies methods are extensively used (Zainal, 2007).
For the purpose of this study, by convenience, the chosen public institution was the British UK Sport, founded in 1996. The entity was set up in order to create pathways into sport and eventually into sporting success at elite level, with the aim to compete and win medals at both the Olympic Games and the Paralympic Games. Therefore, UK Sport is focused upon elite sport over community and school sport sectors, mainly, through the World Class Programme (WCP). Precisely, UK Sport invests National Lottery and Exchequer income into Olympic and Paralympic sport (UK Sport, 2016a; UK Sport, 2016b).
The following topics were elaborated using the data and figures from the financial statements related to 2013 to 2015 (UK Sport, 2013; UK Sport, 2014; UK Sport, 2015; UK Sport, 2016a). In this way, the analyses were supported by 3 financial years (2 sets of financial statements), in which firstly it is discussed the different sources of revenue, their evolution and then the financial performance is presented.
Results
UK Sport resources
At this moment, it is fundamental to emphasize that UK Sport has two different (sometimes complementary) main sources of revenue, direct investments from the government (Exchequer / Grants) and the National Lottery, which are used to support athletes, sport partners (e.g.: National Governing Body/NGB) and maintain itself (UK Sport, 2016b; UK Sport 2016c). About the government aid, UK Sport states that the resource Grant-in-Aid that they receive in 2013/14 and 2014/15 were part of an agreed three years settlement with the Department of Culture, Media and Sport/DCMS (UK Sport, 2016a). On the UK Sport balance sheet grants are shown as expenditure or costs as they were committed in the same year as being awarded. The following table presents the evolution of the grants since 1999.
Table 1. Grant-in-Aid between 1999-2015
|
Financial
Year |
DCMS
Funding – “Grant-in-Aid” (in millions) |
%
increase/decrease on previous year |
Significance
of year |
|
1999/2000 |
£12.327 |
- |
|
|
2000/01 |
£12.452 |
1.01% |
Sydney
Olympics – UK achieved 28 Olympic, 47 Paralympic medals |
|
2001/02 |
£16.381 |
31.55% |
|
|
2002/03 |
£15.513 |
-5.30% |
|
|
2003/04 |
£23.018 |
48.38% |
|
|
2004/05 |
£23.089 |
0.31% |
Athens
Olympics - UK achieved 30 Olympic, 94 Paralympic medals |
|
2005/06 |
£29.305 |
26.92% |
London
won the 2012 bid |
|
2006/07 |
£53.105 |
81.21% |
|
|
2007/08 |
£67.380 |
26.89% |
|
|
2008/09 |
£72.201 |
7.15% |
Beijing
Olympics – UK achieved 47 Olympic, 102 Paralympic medals |
|
2009/10 |
£59.645 |
-17.39% |
|
|
2010/11 |
£55.363 |
-7.18% |
|
|
2011/12 |
£60.651 |
9.55% |
|
|
2012/13 |
£65.966 |
8.76% |
London
Olympics – UK achieved 65 Olympic, 120 Paralympic medals |
|
2013/14 |
£43.020 |
-34.78% |
|
|
2014/15 |
£49.452 |
14.95% |
Source: UK Sport (2001a), UK Sport (2002a), UK Sport (2003a), UK Sport (2004a), UK Sport (2005), UK Sport (2006), UK Sport (2007), UK Sport (2008), UK Sport (2009), UK Sport (2010), UK Sport (2011), UK Sport (2012), UK Sport (2013), UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
Considering Table 1, it is clear that there is no apparent trend in the funding, it shows that after both the Sydney and Athens Olympics a considerable increase in funding, but this trend was not seen after the Beijing and London Olympics, instead a decrease in Grant-in-Aid funding. The biggest decrease seen in funding was seen in 2013/14 the year after the London Olympics with -34.78%, there is no obvious reason for this decrease. Although Grant-in-Aid funding from DCMS has been sporadic, it is also seen that over the past sixteen years there has been a steady increase in funding (£12.372m - £49.452) giving an overall increase of 299.70%. Another significant increase was seen in 2005/06, with an increase of 81.21%, this could be attributed to London winning the bid to host the 2012 Olympics.
In the other side, when referring to National Lottery Funding, it is key to note that money is held in the National Lottery Distribution Fund (NLDF) and it is under the care of the Secretary of State for Culture, Olympics, Media and Sport (UK Sport, 2014; UK Sport, 2015). When a payment is due (suppliers/monthly recipients), funds are taken from the NLDF and placed into the UK Sport Lottery Fund. Considering the evolution of Lottery Funding in UK Sport, there has been an increase of £13.3 m, from £76.05m in 2014 to £89.36m in 2015. Unlike the Grant-in-Aid funding, there does appear to be a trend in the lottery funding that UK Sport has received, in the year before the Athens and Beijing Olympics there was a decrease in funding, while the decrease in funding did not take place until the year after the London Olympics. The table below brings the figures.
Table 2. Lottery Funding Between 1999-2015
|
Financial
Year |
Lottery
Funding Received (in millions) |
%
increase/decrease on previous year |
|
1999/2000 |
£18.778 |
- |
|
2000/01 |
£23,735 |
26.40% |
|
2001/02 |
£25.442 |
7.19% |
|
2002/03 |
£21.110 |
-17.03% |
|
2003/04 |
£19.927 |
-5.60% |
|
2004/05 |
£20.798 |
4.37% |
|
2005/06 |
£21.198 |
1.92% |
|
2006/07 |
£53.277 |
151.33% |
|
2007/08 |
£45.716 |
-14.20% |
|
2008/09 |
£47.452 |
3.80% |
|
2009/10 |
£56.259 |
18.56% |
|
2010/11 |
£58.761 |
4.45% |
|
2011/12 |
£69.550 |
18.36% |
|
2012/13 |
£88.298 |
26.96% |
|
2013/14 |
£75.704 |
-14.27% |
|
2014/15 |
£82.223 |
8.61% |
Source: UK Sport (2001b), UK Sport (2002b), UK Sport (2003b), UK Sport (2004b), UK Sport (2005), UK Sport (2006), UK Sport (2007), UK Sport (2008),
UK Sport (2009), UK Sport (2010), UK Sport (2011), UK Sport (2012), UK Sport (2013), UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
Table 3 has compared the Lottery and Grant-in-Aid funding streams for UK Sport, after, a graphic was elaborated in order to clarify the evolution of the resources. Looking at the table there is two occasions where both sources have decreased at the same time, 2002/03 and 2013/14, both of these were in the following two years after an Olympic Games. When comparing both funding streams, there does not appear to be any political influence, which is important for UK Sport as it should not be influenced by politics.
Table 3. Comparison of funding streams: Lottery and Grant-in-Aid
|
Financial
Year |
Lottery
Funding Received (in millions) |
%
increase/decrease on previous year |
DCMS
Funding – “Grant-in-Aid” (in millions) |
%
increase/decrease on previous year |
|
1999/2000 |
£18.778 |
- |
£12.327 |
- |
|
2000/01 |
£23,735 |
26.40% |
£12.452 |
1.01% |
|
2001/02 |
£25.442 |
7.19% |
£16.381 |
31.55% |
|
2002/03 |
£21.110 |
-17.03% |
£15.513 |
-5.30% |
|
2003/04 |
£19.927 |
-5.60% |
£23.018 |
48.38% |
|
2004/05 |
£20.798 |
4.37% |
£23.089 |
0.31% |
|
2005/06 |
£21.198 |
1.92% |
£29.305 |
26.92% |
|
2006/07 |
£53.277 |
151.33% |
£53.105 |
81.21% |
|
2007/08 |
£45.716 |
-14.20% |
£67.380 |
26.89% |
|
2008/09 |
£47.452 |
3.80% |
£72.201 |
7.15% |
|
2009/10 |
£56.259 |
18.56% |
£59.645 |
-17.39% |
|
2010/11 |
£58.761 |
4.45% |
£55.363 |
-7.18% |
|
2011/12 |
£69.550 |
18.36% |
£60.651 |
9.55% |
|
2012/13 |
£88.298 |
26.96% |
£65.966 |
8.76% |
|
2013/14 |
£75.704 |
-14.27% |
£43.020 |
-34.78% |
|
2014/15 |
£82.223 |
8.61% |
£49.452 |
14.95% |
|
Overall
% Increase |
299.70% |
270.38% |
||
Source: UK Sport (2001a), UK Sport (2001b), UK Sport (2002a), UK Sport (2002b), UK Sport (2003a), UK Sport (2003b), UK Sport (2004a), UK Sport (2004b), UK Sport (2005), UK Sport (2006), UK Sport (2007), UK Sport (2008), UK Sport (2009), UK Sport (2010), UK Sport (2011), UK Sport (2012), UK Sport (2013), UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
Graphic 1. Evolution of resources in terms of percentages
Source: UK Sport (2001a), UK Sport (2001b), UK Sport (2002a), UK Sport (2002b), UK Sport (2003a), UK Sport (2003b), UK Sport (2004a), UK Sport (2004b), UK Sport (2005), UK Sport (2006), UK Sport (2007), UK Sport (2008), UK Sport (2009), UK Sport (2010), UK Sport (2011), UK Sport (2012), UK Sport (2013), UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
As a matter of fact, the Graphic 1 makes visible the Olympic effect on the amount of resources incremented for the UK Sport after London has received the right to host the Games of 2012. As a result, the level of athletes’ performance and the increasing number of Olympic/Paralympic medals achieved after this higher investment can be understood as a proper sport legacy. After all, from a 10th place in Athens 2004 (UOL, 2008), the UK has become a “sporting superpower” after Rio 2016, achieving the second position in the medal ranking (Ahmed, Leahy and Pearson, 2016).
Discussion
UK Sport financial performance
Aiming at the analysis of the financial health of the organization, it was done through two steps. The first, took into consideration some ratios to evaluate UK Sport. In the sequence, a more qualitative look is presented to complement the first step. Notably, the public nature of UK Sport requires special treatment in analysing its financial performance. In line with Wilson and Joyce (2008) and Turley, Robbins and McNena (2015), the entity was initially assessed based on key elements of a healthy public company: Operating Performance and Autonomy. The following table lists the indicators used related to these elements.
Table 4. Financial Ratios Framework
|
Indicator |
Group
of reference |
Concept
|
Authors |
|
Other
incomes/total revenue |
Autonomy |
How
reliant or dependent is a public institution on central government
funding and the percentage of the revenue that is earned from its own
incomes. |
Turley,
Robbins and McNena (2015) Wilson
and Joyce (2008) Ryan,
Robinson and Grigg (2000) |
|
Dependency |
|||
|
Operating
surplus/deficit |
Operating performance |
The difference between
revenue income and expenditure for the period. |
Turley, Robbins and
McNena (2015) |
|
Operating
surplus/deficit ratio |
Equal
to the operating surplus/deficit divided by total income. |
||
|
Debt/assets
ratio |
Total
liabilities divided by total assets |
Source: The author.
Autonomy Indicators
a. Other Incomes/Total Revenue
The first autonomy indicator is the other incomes (apart from Grants and Lottery resources) divided by total revenues. Other incomes, not only refers to sponsorship income, but also received through funding for the International Development Activities (UK Sport, 2015) and other increments linked to the DCMS and Lottery accounts. Analysing the abovementioned financial statements, the Graphic 2 below was created. The Graphic shows that DCMS other incomes compared to total revenue had a significant decrease between 2013-2014, falling 2.55%. However, between 2014-2015, there was a smaller decrease, only falling 0.38%. As a whole, it shows a significant drop in other incomes. Looking at the Lottery other incomes compared to total revenue, it can be said that it has plateaued from 0.11% to 0.01%, marking an insignificant decrease. Considering the dependency on other incomes, which started at 4.27% and dropped down to 2.40%, a similar drop happened to DCMS in 2013-2014, steadying out in 2014-2015.
Graphic 2. Autonomy indicator 1
Source: UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
A key point, UK Sport posses a Commercial Department, responsible for working with partners to leverage commercial and Value-in-Kind sponsorship from the private sector (UK Sport, 2016a). Nonetheless, it is possible to observe that there are not enough partners aiding to remove UK Sport heavily reliant status on government and lottery funding. This shows that the money from other incomes is almost insignificant compared to Lottery and DCMS support, which both stand at around £89.300m whereas other incomes is £11.000, which is not big enough to have a relevant impact.
b. Dependency
From the following Graphic 3, it can be seen that dependency of DCMS, which was at 40.82% in dropped to 35.19% by 2014 and then a slight decrease into 2015 to 34.77%. Considering the dependency of the Lottery, the opposite effect is seen, starting at 54.91% (2013), rising to 62.22% (2014) and plateauing out at 62.83% (2015).
Graphic 3. Autonomy indicator 2
Source: UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
Indeed, considering the results of other incomes, it can be seen that UK Sports dependency on DCMS has also reduced (2013-15), in contrast, the dependency on Lottery is rising. This is likely linked to the government reducing money put into UK Sport and encouraging the use of Lottery funding. Creating positives and negatives, as less tax-payers money is put into UK Sport and thus it can be used for others and, on the other hand, it signifies an increase in Lottery use and national increase in taking part in the Lottery. This strategy, possibly, supported by the fact that Lotteries are part of British culture, as affirmed by Hattersley (2009), who emphasized also that it is a nation in which gambling is actively promoted by the government.
Operational indicators
For the operating analysis, the figures can be observed at the Appendices 1. Considering the operational results, the political decisions around UK Sports budget might have impacted on the deficits in 2012/13 and 2014/15, meaning a need for complementary aid from the Lottery fund or an increase of equity support (tax money). Taking into account the operating result ratio, only 2014 represented a fair use of public resources, achieving more than £1m in savings and 2.22% in that ratio. Also, only in 2014, the entity had an increase of assets, which could minimise the tendency of elevation with liabilities. In 2015, every pound composing UK Sport assets would have around 3 others in liabilities. It might be explained by the fact that the organisation is making more long-term commitments with NGB’s in the WCP.
Particularly about the Lottery operating results, they can be analysed observing 2 different scenarios (Appendices 1). Firstly, based on the overall expenses of UK Sport related to that account, there was an increasing tendency from -£50m in 2012/13 to an operating surplus of £564,000 in 2014/15, placing the operation result ratio in a positive figure. Interestingly, in 2014/15, based on superior recommendation (UK Sport, 2015), UK Sport changed the method of calculation of the expenses and liabilities in relation with the Lottery fund, which amended the numbers of the previous year. As a consequence, the 2013/14 fiscal year, which had an initial operation deficit around -£92m (Operating result ratio = -121.44%), nowadays, this value is stated as -£16m (Operating result ratio = -21.58%).
This new method affected UK Sports financial statements in 2014/15, which, presumably, would have a deficit in its operations, now the organisation shows a surplus, following a new increase in terms of operation result ratio (-57.34%, -21.58% to 0.63%). Undoubtedly, the new method has brought a better measure to positively assess the performance of UK Sport, which demonstrates a general and political decision aiming to improve the financial image of UK Sport.
Secondly, in a different perspective, taking the revenue as the amount withdrawn by UK Sport from the NLDF (not reflecting what was “delivered” by the Lottery, but the amount taken from the fund), and considering the total of expenses only the “hard commitments” met, UK Sport would have a surplus (around £3m) observing 2012/13, 2013/14 and 2014/15, with an initial decrease but still significantly positive operation result ratio. It might be assumed that the long-term commitments, which can be related to 4 or 8 years – 1 or 2 Olympic cycles, create a false sense of deficit in the operations of the Lottery account. It is worth mentioning that UK Sport can cancel these “hard-commitments” insofar as the NBG doesn’t achieve the desirable performance (UK Sport, 2015). Graphic 4 illustrates these two scenarios, showing a similar movement of the revenues x expenses into them as well.
Graphic 4. Total Revenues and Expenses for UK Sport
Source: UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
Generally, taking into consideration the Lottery and DCMS support accounts, influenced by the new accounting method, UK Sport has faced an increasing positive tendency of its operating results (Graphics 4 and 5), leading to the recent surplus, with a current positive operating result ratio, meaning more resources for future investments (Appendices 1).
Graphic 5. General Performance
Source: UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
For UK Sport, this growth tendency may result in better indicators next fiscal year (2015/16) on the current surplus number, which, considering its goals and public nature, would mean more incentives to the Olympic and Paralympic sports. Graphic 6 presents the evolution of the relation revenue x expenses observing the 3 different perspectives analysed (DCMS, Lottery separated accounts and the UK as general).
Graphic 6. Evolution of revenue x expenses
Source: UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
Complementary indicators of performance
The second step to examine the financial health of UK Sport was constructed by new forms of ratios, more qualitative and directly regarding management decisions of UK Sport. The first indicator is savings x total funding available for distribution, which gives the added value of how effective UK Sport was in utilising Lottery Funding. Next, total cost of the staff x number of staff was implemented, which allows future predictions, allowing financial planning with particular reference to expenditure. The final ratio used was the number of NGB’s x total revenue, which brings into the debate a discussion about UK Sports and its ability to invest in different sport and athletes.
In percentage terms, the savings showed a relevant decrease (from 60.96% in 2012/13 to 43.87% in 2014/15), following the decrease in absolute numbers of the total revenue in 2013, which might have required UK Sport to use the savings. Under those circumstances, considering the increased dependency on revenues from the Lottery, the institution had to spend more from the Lottery fund in order to run the World Class Programme (Appendices 2 and 3). According to the financial statement of 2014/15 (UK Sport, 2015), the organisation was able to keep around £70m, which would allow, in a hypothetical situation, both DCMS and Lottery do not provide any resources to the following year and, even so, permitting to UK Sport to run 80% of the WCP commitments, estimated around £85m. Graphic 7 illustrates the behaviour of the savings from the Lottery revenue, comparing with what was spent, the total revenues and expenses throughout the last 3 fiscal years.
Graphic 7. UK Sports savings, revenue and expenses
Source: UK Sport (2014), UK Sport (2015) and UK Sport (2016a).
Considering staffing expenses, it is worth mentioning that the number of staff did not change relevantly, in 2014/15, 105 full time employees (UK Sport, 2016a). Observing also that in 2013/14 there was a decrease in the number of employees but an increase in terms of respective expenses, a tendency of higher expenses with staffing can be seen, around £130 monthly per employee on average (a figure higher than the country’s inflation). The fluctuation of the total revenue does not have an effect on the tendency of more costs in staff (Appendices 3).
Additionally, it appears that the total revenue fluctuation has not an impacted on the number of sports supported by UK Sport in the WCP. Comparing the last 2 accountable years (2013/14/15), there was a small decrease in the sports financially supported by the organisation (51, 47 to 46), which is relevant for those who have lost the public partner. Indeed, the initial decrease and the followed increase of revenues did not demonstrate a correlation between more revenue equal to sports funded. Notably, analysing 2012/13 and 2013/14, if UK Sport had cut the number of sports supported in the same proportion of the decrease in terms of revenue, only 39 (instead of 47) sports would have received funds from the WCP. In this sense, the institution managed its resources to provide less but for more sports. In contrast, comparing 2013/14 with 2014/15 (UK Sport, 2015) it had an increase around 17% on its revenues, but they removed one institution from the programme, instated of supporting 55 of them. On the other hand, the athletes, there is a tendency of them receiving (directly) more resources from UK Sport, insofar as in the last 2 fiscal years they had higher percentages comparing to 2012/13, although 2014/15 had a decrease in percentages terms.
Conclusion
To sum up, based on the figures found and on the trends perceived, UK Sport should improve some key strategic points and keep the same financial performance in others. Indeed, taking into consideration the last 15 fiscal years (reaching around 4 Olympic cycles), the data did not show a DCMS and Lottery tendency of investments, neither increasing nor decreasing. However, it was possible to observe that the London 2012 Games put the absolute number in a higher pattern, which with the recent increasing dependency on the Lottery fund created a better scenario to UK Sport, not so affected by political decisions. This legacy now makes it possible for the entity to intervene in the Lottery framework, considering that the growth and success of the British athletes’ performance might leverage the numbers around the gambling activities. In fact, the recent positive operating results were achieved thanks to additional Lottery support.
On the other hand, even with a commercial department being created in 2011, UK Sport was not able to elevate the level of other incomes (e.g.: sponsorship), which certainly needed to be changed, in order to avoid uncertainties about the DCMS and Lottery revenues. As a possible future goal, the organisation could look for private resources to cover part of the staffing expenses, which have been predictable and stable in the last years. Another key point, the organisation should keep the increasing tendency of investing more and directly on athletes, which potentially eliminates intermediation from the NGB’s. In this sense, the strategy of saving part of the Lottery fund revenue shows it value facing the unpredictable support from DCMS.
Finally, it seems reasonable whether UK Sport could improve its financial statements, explaining better the relation around the non-current liabilities/hard-commitments and the expenses paid/made. Surely, thinking of budgeting, the long-term commitments with the NGB’s being placed in the Income/lose and Position statements is necessary, however, they need to put into perspectives in order to illustrate a real idea of revenue x expenditures.
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Appendices