Salary Cap and the FAI

[sligo1]

If this has been explained before,I'm sorry.
My understanding of it is as follows:

You are allowed to spend 65% of your income on players wages.
At the end of every month,each club sends in a monthly set of accounts to the FAI.
Lets take month 1
If your income for the month is 100,000,you are allowed spend 65,000 in month one on players wages.
Your income can consist of gate receipts,sponsorship,donations,fundraising like lotto etc.
It cannot consist of a loan from directors etc.
Can it consist of a loan from a bank?
If a club spends less than 65% on wages in month 1,then it can carry forward the difference into month 2.
If a club has spent more than 65% in month 1,then whoever was backing that club needed to lodge the difference straight away.

If this was policed properly by the FAI and sanctions put in place immediately,then you probably wouldnt have a situation like Cork and Drog now.

If my reading of the salary cap is correct(and I could be wrong),then I think the FAI has to take Full blame for the situation the league is in now.
There also doesnt seem to be a clear set of rules/sanctions that will apply to clubs that dont keep to the salary cap.

Overall I think the idea of a salary cap is a good one if policed correctly.

[Mr A]

If a club has spent more than 65% in month 1,then whoever was backing that club needed to lodge the difference straight away.



There's the problem. You can be sailing along nicely getting bailed out every month- but the second the bail outs stop you're completely screwed as your leaky vessel sinks quickly into the briny deep.

[garyderry]

There's the problem. You can be sailing along nicely getting bailed out every month- but the second the bail outs stop you're completely screwed as your leaky vessel sinks quickly into the briny deep.

Which is exactly what we are talking about by both Cork & Drogs,
if anything the FAI probably helped here with the above rules,

In the past clubs (including Derry) would have just kept building up debts they
couldnt afford, at least now the FAI have to be made aware immediately.
and actions taken. Drogs at least will survive next season, in what
form no one really knows, but at least the league will have a Drogheda United

[sligo1]

Hi Gary,

My point is the FAI did nothing about it until it was too late.
In Corks case.they relied on a guarantee which is probably worthless.
If after month 1,Argana(spelt wrong),were made lodge the difference,and if they didn't then Cork shold have suffered some sort of sanction.They definitely couldn't have given Joe Gamble a new contract on mad money.

In relation to Drog and reading between the lines,they have probably given some type of guarantee to the FAI as well.

I'm only an ordinary guy working 9-5 and even I could see that clubs couldn't pay the wages they were paying.
What I am saying is that the FAI with all their advisors and Committees should have policed this a lot better.

[pete]

What I am saying is that the FAI with all their advisors and Committees should have policed this a lot better.

I think the 65% rule (or something similar) is a good one as has highlighted problems at clubs such as Galway (in the past they would have spent & gambled til the end of the season) but obviously in hindsight the written guarantees not worth anything.

The problem is how do the the FAI allow people pump money into clubs & stay within the 65% rule?

[Dodge]

The problem is how do the the FAI allow people pump money into clubs & stay within the 65% rule?

They make investors put up a bond to cover any potential losses (at least on wages). If Cork were set to pay €1.5 million in wages for this season, Arkaga should've been made put up the bond to cover those wages. (And I use cork as illustration only)

[jinxy lilywhite]

Hi Gary,

My point is the FAI did nothing about it until it was too late.
In Corks case.they relied on a guarantee which is probably worthless.
If after month 1,Argana(spelt wrong),were made lodge the difference,and if they didn't then Cork shold have suffered some sort of sanction.They definitely couldn't have given Joe Gamble a new contract on mad money.

In relation to Drog and reading between the lines,they have probably given some type of guarantee to the FAI as well.

I'm only an ordinary guy working 9-5 and even I could see that clubs couldn't pay the wages they were paying.
What I am saying is that the FAI with all their advisors and Committees should have policed this a lot better.

Realisticlly what could they of done. It's my view if they accounts where audited properly then questions would be asked so appropriate answers must of been given by each club. Now what I'm sure what has happened is that the clubs creatively adjusted (I'm not indicating fraud or misappropriation) their figures to keep the FAI happy. Whats down in b&w must of been good for them.
Really the only people to blame here are the clubs themselves. You can't blame the FAI or the NRA for the drogs situation or Arkaga for Cork. The buck stops with the clubs with their awful planning and over optimistic budgetting. As soon as clubs start treating themselves as business and not charity cases to sugar daddies and the general public then and only then will football improve in this country

[Dodge]

You can't blame the FAI or the NRA for the drogs situation or Arkaga for Cork.

Arkaga were Cork. Cork's board were at fault, and they were Arkaga people

I agree with the rest though

[sligo1]

Hi Jinxy,

I think it is down to the FAI-the money was either lodged to a Bank a/c or it wasn't.You cant take account of sponsorship that Joe Soap intends to give down the road-when you have Joe Soaps cash in your hand,then you can spend it.What happens if Joe Soap dies or gets married?

Did the FAI have specific rules for this Cap and what are the sanctions?

There is no point in bringing in all these rules if you dont police them.

[garyderry]

They make investors put up a bond to cover any potential losses (at least on wages). If Cork were set to pay €1.5 million in wages for this season, Arkaga should've been made put up the bond to cover those wages. (And I use cork as illustration only)

Does not solve the fact that the investors are mainly developers,
and simply dont have the money, you cant get blood from a stone.

[Dodge]

Does not solve the fact that the investors are mainly developers,
and simply dont have the money, you cant get blood from a stone.

LOL, how many investors in LOI are developrs? 2? I know our investor has the money (as does his numerous comanies). Drogs may not.

And lads, the league has to allow future income be a part of it as most sponsors pay over the course of a year. it ****ed up pats before when Smart Telecom floundered, and previously when DHL changed management (at a corporate level).

Allowing these be counted towards income is not the problem

[sligo1]

Hi Dodge,

They should only be classed as income when the club actually receives the money.

[Dodge]

Hi Dodge,

They should only be classed as income when the club actually receives the money.

No business in the world works like this. No football club in the world works like this. Proper budgetting and proper auditting are whats needed

[Rovers Maniac]

No business in the world works like this. No football club in the world works like this. Proper budgetting and proper auditting are whats needed

Surely clubs that operate within salary restricted league do so !?

[Trainee]

65% rule works with clubs give the Fai budgeted accounts brofre the season starts which the fai make sure is realistic.

Then Clubs submit monthly accounts to Fai and the Fai will know if clubs is the clubs income is lower and budgeted income for the month.

If Fai find this to be ture (which they have in a number of clubs) the warn clubs to increase income or reduce costs otherwise a points deduction maybe handed out.

Most clubs who FAI warned got players to take a wage cut and should be fine but I heard of 1 club who went all out to increase income and failed so FAI could hit this club with a points decuction(only a rumor so I wont name the club)

[Dodge]

Why would they? They agree with sponsors at the start of the year that they amount they receive, and sposnsors pay this at a schedule that suits all. Whats wrong with that?

[Macy]

Didn't see this thread, but if the FAI are to allow donations/ benefactors to breach the wage cap, it must now insist on a bond to cover the entire season/ contracts. The FAI could release the money to the clubs on a weekly basis as the season goes on - it'd only take standing orders to be set up.

The FAI have facilitated this mess by allowing non legally binding committments from benefactors as the basis of breaching the 65%. Licencing, FAI control and the wage cap were supposed to stop this from happening.

Now is the time for the FAI to scrap this anyway, and go back to 65% of club generated income. Any progress made on the basis of the cash injections is more than undone each time someone pulls out.

[jinxy lilywhite]

Hi Jinxy,

I think it is down to the FAI-the money was either lodged to a Bank a/c or it wasn't.You cant take account of sponsorship that Joe Soap intends to give down the road-when you have Joe Soaps cash in your hand,then you can spend it.What happens if Joe Soap dies or gets married?

Did the FAI have specific rules for this Cap and what are the sanctions?

There is no point in bringing in all these rules if you dont police them.

Sligo1 if anything needs to be sorted and you are right its the guarantees that are giving on behalf of clubs. IMO clubs need a bank guarnatee specifically to say in any event that the wages will covered. Banks don't offer these like wildfire so clubs will need to get their house in order. You must remember the FAI don't make the clubs splash out on wages, its the clubs themselves.
More stringent measures are needed and in the long term if this is done right Irish football will benefit. I hope the days of clubs spending beyond their means for ST success are over and a more conservative approach is taken.

[sligo1]

Dodge,

The idea on sponsorship is a 2 way relationship.
The Club's benefit is an amount of money which will go towards the Club's running costs.
The Sponsors benefit is getting promotion for his product usually by advertisements,signage etc
There is no benefit to the Club if the sponsor cant pay until later on in the season-it is also very hard to get money out of sponsors once the season is nearly over.
Only money lodged to the Club's Bank a/c should be taken into account.

[Dodge]

Dodge,

The idea on sponsorship is a 2 way relationship.
The Club's benefit is an amount of money which will go towards the Club's running costs.
The Sponsors benefit is getting promotion for his product usually by advertisements,signage etc
There is no benefit to the Club if the sponsor cant pay until later on in the season-it is also very hard to get money out of sponsors once the season is nearly over.
Only money lodged to the Club's Bank a/c should be taken into account.

That maybe and ideal situation, but most business prefer to spread their payments out over the course of a year. Evry single club works like this, and it has never been a major problem. As I said, if you want to see real problems, look elsewhere

[sligo1]

That's fine Dodge but it should only be the actual amount that is received each month that is taken into account and not the total amount.

[OneRedArmy]

No offence but I fear you're missing the point. The problem as I see it, as any accountant will tell you, is that monthly management accounts aren't worth the paper they are written on and submitting them to the FAI is only a box-ticking exercise.

Whether the audited accounts are any more accurate I'm not sure. Cash is king.

The EL's finances has historically been based firmly on payments not going through the books, basically gate receipts and other backhanders in brown envelopes. Allegedly the Revenue keeping a close eye on clubs has cut down on this but the stories I've heard about wages and the figures I've seen in audited accounts don't even come within an arses roar of tying up.

Would anybody swear on their families lives that this isn't a problem anymore?

If this was the case they the wage cap becomes an irrelevance.

[Dodge]

I can tell you that the "reported" figures about some Pats players are at least 100% exaggerated. I also know that Pats are fully compliant with PAYE and PRSI (which caused a bit of a shock to one player we signed, who thought he was a greeing to a net contract, and not a gross one)

[Macy]

Would anybody swear on their families lives that this isn't a problem anymore?
It's a problem in general in the Irish economy. However, the wage cap system has been shown to work to some degree with Galway and the Sligwegians. The major problems have been where it's been a bit of paper guaranteeing money. So whilst the basic system isn't fool proof, it's proving to be better than the amendments the FAI tagged on the end.

[jinxy lilywhite]

Cash is king.



Alas someone hit the nail on the head. I was trying to say that but i couldn't put it any better.
With your accounts background what would you look for? I thought of something along the lines of FRS1 or cash flow or would something that intricate be needed.
Balance sheets are only a capture of accounts at a particular time and as you point out easily manipulated to show what the creator wants to show.

[OneRedArmy]

Alas someone hit the nail on the head. I was trying to say that but i couldn't put it any better.
With your accounts background what would you look for? I thought of something along the lines of FRS1 or cash flow or would something that intricate be needed.
Balance sheets are only a capture of accounts at a particular time and as you point out easily manipulated to show what the creator wants to show.Cashflow statement with a bank rec thrown in.

[passerrby]

when the FAI announced they were issuing a salary cap some clubs thought it was a promotional gimmick along with scrafs and badges

[jinxy lilywhite]

Cashflow statement with a bank rec thrown in.

I like it. Can't get enough of those bank recs

[higgins]

http://www.eircomloi.ie/news-centre/news-1/2008/january/news-141/


If at any point during the year a club is found to be in breach, they will be informed of the breach and requested to discuss the matter with the FAI. The FAI Club Licensing Committee will be convened and the breach and explanation put to them.

What Sanctions can be applied?
The FAI Club Licensing Committee will have the power to apply any one or combination of the following;

• Reprimand
• Fines
• Transfer Embargo
• Points Deduction
• Prize Money withheld
• Removal as eircom League of Ireland's European Representative
• Withdrawal of licence

So when will all the punishment be dished out ???

[Dodge]

They don't have to give any sanctions though

http://www.fai.ie/pdf/FAI_Club_Licensing_Manual_2008.pdf

[passerrby]

Cash is king.

I think you ll find that Evis is king and that while cash released some very good albums he like some premier clubs was never in the same league. pardon the pun