Secretary General/CEO Tom Hollowell about the financial situation of the IOF:
How we could in general describe financial situation of the IOF?
The overall situation can be described as challenging but stable. In the past 12-18 months we have taken important steps to establishing a long-term stable financing platform and restructured cost elements to bring them in line with income. The overall positive result from 2017 has continued into 2018. It is important that we have stable finances, but also that the absolute level of financing allows us to implement the Strategic Directions of the IOF and invest in the future. We don’t have resources for everything we would like to do, so establishing priorities and focus areas is increasingly important. The IOF is not a business and should not generate a significant profit, the resources should be channeled back into developing our sport.
At the end of 2017, the IOF had 157 TEUR in bank accounts/in cash, and the year ended with a a positive result of 16,6 TEUR. One item that has changed a bit over the past years is short-term debt on the balance sheet. At the end of 2017, the IOF had over 167 TEUR of short-term debt. Short-term debt increased significantly from 30 TEUR in 2015 to 243 TEUR in 2016 and 167 TEUR in 2017.
What is the structure of debt and how this affects (or might affect) organisation?
The major portion of what is listed as short-term debt is pre-payments from event organisers, i.e. payments of sanction fees in 2017 which are related to events which will be organised in 2018. There are also accruals for employees vacation and taxes, and debts related to invoices sent by suppliers at the very end of the year which have been paid at the beginning of 2018. Note that we also, under assets, have a number of pre-paid expenses related to 2018. The IOF has made efforts to improve the management of cash flow, and the above aspects are important, but in fact have only a minor impact on our ability to work as an organisation.
The IOFs total income has increased from 467 TEUR in 2013 to 772 TEUR in 2016. In 2017 total income was 741 TEUR. Approx. 10 % of the 2017 income is from sponsoring and advertising. The majority of income comes from within the sport – memberships fees, major events sanction fees, WRE fees, etc.
IOF had sales/marketing managers during 2016-2017, but now these positions are empty.
Do we struggle to sell orienteering? What need to be done/changed to increase proportion of external funding?
The financial statement is a little misleading in this case as a direct comparison between 2016 and 2017 cannot be made regarding income from TV rights. In 2016 all TV rights income and costs were included in the IOF finances, but in 2017 some of the income was invoiced, and the cost absorbed, via our TV production partner. From 2013 to 2017, IOF income increased in total from 500 TEUR to 773 TEUR (adjusted for comparable exchange rates and actual TV income and costs), i.e. an increase of 55%.
In 2013, 11% of the IOFs income was from external sources and in fact only from external grants. In 2017, 36% of the income was from external sources including 17% from TV rights and 10% from sponsorships and advertising. Internal income in absolute value increased from 445 TEUR to 494 TEUR during this period. This increase is due to the introduction of the Athletes Licence and Anti-doping Fund, i.e. membership fees and event sanction fees have actually gone down slightly in absolute terms in this period.
Increasing external income is a challenge and it has proven that we at the current time cannot bear the cost of full-time sales and marketing resources. However, I think we over this period time have seen indications that we are able to sell TV rights and sponsorships. We have worked a lot on defining what our actual products are and what we are able to sell. For example, sponsoring of the World Orienteering Championships and the Orienteering World Cup (when televised) and sponsoring of World Orienteering Day activities has been successful. Increasing external financing further is a question of defining and investing in those activities which can be used to generate the external funds. This requires focus and prioritization.
Changes in income from 2013 to 2017 (adjusted for comparable exchange rates and full TV rights value). Orange = Internal income
In 2016 IOF had highest ever total costs of approx. 840 TEUR. Last year total costs were reduced to 720 TEUR and the majority of savings were in staff costs (more than 90 TEUR). In 2017 staff costs were the lowest in 5 years.
What was the costs structure in 2017? What reasons were behind staff savings?
First of all, costs in 2015 and 2016 were affected by one-time costs related to changes in IOF structure and accounting. The move of the office from Helsinki to Karlstad caused the payment of costs in 2015 which had not been adequately accrued for in the Finnish accounts over the years, and accruals for vacation costs in accordance with Swedish accounting standards needed to be established from 2016.
In addition, it was obvious that we needed to make reductions in the overall level of staff and staff costs, so actions were taken in November 2016, among them the removal of the Marketing Manager positions. The move of the IOF Office to Karlstad also takes full effect in 2017. If we again take a look at the long-term, staff costs in 2013 were 51% of the IOFs total costs and in 2017 they were 32%. Even in absolute terms staff costs were 17% lower than in 2013. Office costs were in 2017, 7% of total costs whereas in 2013 they were 10% of total costs. Even here, in absolute terms the costs of the office were 14% lower than in 2013. The reduction in staff in the office has unfortunately had an affect on our ability to be responsive and I am sure can cause some questions at times. At least we in the Office do not always feel that we have the ability to respond as quickly and completely as we would like, and setting priorities is at times a challenge. But we need to have stable finances.
Starting in 2019-2020 there will be a new structure of major IOF events.
How this might affect organisation’s incomes and costs? (Are we going to spend more or less on TV, are we going to have more/less incomes from TV/sponsors?)
The new structure in the events program does not have major effects on IOF finances. It is expected that the overall level of sanction fees from events will stay at about the same level as in recent years, i.e. there are no plans to obtain more fees from events.
However, it is expected that TV rights income and income from sponsorships will increase, primarily from WOC and the Orienteering World Cup. WOC is already well-established and we are seeing increasing interest in TV rights from the World Cup. Having stable and predictable TV productions is key to generating additional sponsorship income. Therefore the IOF is taking over a larger degree of responsibility for TV productions which also means that both income and costs will increase in the IOF financial accounts. The net effect is expected to be positive.