Finance

Finance

FIFA's finances - a healthy organisation?

Mr Kieran Maguire

Posted: August 4, 2014

What does FIFA stand for?

Officially FIFA stands for Fédération Internationale de Football Association, the international governing body of football. It’s prime objective is “to improve the game of football constantly and promote it globally in the light of its unifying, educational, cultural and humanitarian values, particularly through youth and development programmes”.

According to FIFA’s website it wants to “share the success of the FIFA World Cup™ to support football development projects in our 209 member associations across the globe. Football has flourished as a global game because of this support. With USD 550,000 going into these programmes each day, we are spending more than ever on football development.

Many of our members depend on this support to finance their day-to-day operations”

How do the numbers add up?

So far, so laudable, but a look at FIFA’s balance sheet reveals more bonds than balls, more derivatives than developments, more shares than shirts and shorts.

According to FIFA’s most recent financial report, it has $3.16 billion of assets. A casual observer would probably think that (a) this is a huge sum (True) , and (b) it must be mainly football related (False).

FIFA has property of $158 million, none of this relates directly to football. It consists almost entirely of ‘operational buildings’ which are the home of FIFA, FIFA House (perhaps insert photo?)  and three other buildings in Zurich. Whilst Swiss property prices are very high, this is an amazing figure for an organisation that prides itself on its humanitarian values.

Even so, property assets only represent 5% of FIFA’s total wealth. FIFA also owns $1.25 billion of financial assets, these can be broken down as follows:

(a) Bonds (debts issued by sovereign governments and companies) that pay interest, amounting to $1.01 billion. FIFA does not go into any detail as to the nature of these bonds.

(b) Deposits in banks. These are usually long term deposit accounts of three months or more, FIFA has $232 million of these.

(c) Equities. These are shares purchased in corporate companies. This seems a strange type of acquisition for a sport governing body, but only accounts for just over $1 million of FIFA’s assets.

Together these financial assets come to over £1.25 billion, which should in theory generate a lot of income for FIFA. However an analysis of FIFA’s income statement reveals that together they generated just $12 million of income, a return of less than 1%. FIFA is either a very cautious investor, or perhaps has taken its eye off the ball in relation to these investments. Recent revelations in Private Eye showed that FIFA lent a company partially owned by Sepp Blatter’s nephew a $10million interest free loan.

FIFA also has cash, a lot of it. A further  $1.25 billion was sitting in its bank accounts at 31 December 2013. FIFA argue that the money is needed for three reasons:

(a) It is impossible to arrange cancellation insurance for the 2014 World Cup finals in Brazil, and therefore FIFA has to keep a contingency fund as it is effectively self insuring the tournament.

(b) FIFA has bills to pay in 2014. It claims that for the finals in Brazil it owes a total of $559 million, including $68 million for travel and accommodation for officials and teams, $121 million for marketing and TV, $35 million for IT/ticketing etc.

(c) FIFA has received money in advance from sponsors/partners and fans in advance of providing any product. Tickets for the World Cup finals went on sale in 2013 and fans had to pay in advance. This helps explain why FIFA’s cash coffers were so high.

The latest news from FIFA is that it is now promising to distribute $750,000 to each of its 210 members from the profits of the 2014 finals. In addition the six continental bodies have been promised $7 million each. This announcement, so soon after FIFA Sepp Blatter put himself forward for re-election is probably just a coincidence.

 

 

 

About Kieran Maguire

Kieran is a chartered accountant who has been involved in financial education since 1989. He loves mixing technology with teaching, have won the UK’s best finance lecturer award, as well as a number of local ones from when he taught in higher education in Manchester. Kieran has appeared in the media on BBC national and local TV and Radio, Granada, The Times, FT, Independent, Guardian, Manchester Evening News and others talking about general finance and business issues, specialising in sport finance, the budget.