Overheads Are The Problem In Australian Rugby

For some reason the ARU doesn’t include the grants it gives to each state union in its expenditure numbers – they are included in the calculation of the bottom line but I consider those grants to be part of the ARU’s expenditure on the game of rugby so have restated the expenditure numbers to include them.

Total expenditure of $105 million was a 20% increase on 2011. The only item that had a significant dollar increase was Matchday Operations, which given the costs of hosting the extra test matches is to be expected.

That overhead number seemed high to me so I went back to look at previous annual reports. Those reveal that from 2005 to 2010 corporate overheads were running well below the levels in 2011 and 2012. The expenditure line that the ARU call “Corporate” was $8.652 million in 2010 but jumped to $14.707 million in 2011 and $16.911 in 2012.

What can the ARU possibly have spent an extra nearly $8.3 million on within its “Corporate” expenditure over what it spent in this area in 2010?

We know that some of that will be the payout to John O’Neill who received nearly $2.2 million in 2012 including a bonus of over $800,000 within that amount!

What about the high performance unit – what about Robbie Deans and David Nucifora’s salaries for example? No, they were there in 2010 and there is a separate expenditure item for the High Performance unit that cost another $6.7 million in 2012. On that point, should Robbie Deans salary be reported? I don’t think so – no other football code or even the Australian Cricket Board publish coach’s salaries – I don’t see why rugby needs to.

To put that $8.3 million overhead increase in some perspective, the cost of the ARC that John O’Neil was so adamant we couldn’t afford was $5.5 million, the amount the ARU spent on community rugby in 2012 was $5 million! So, the increase in “Corporate” overheads could easily have paid for a better structured ARC competition and a doubling of the money put into community rugby.

So, if you want to know why there’s no money in Australian rugby for a third tier or community rugby, it’s because head office has consumed that money!

It would be interesting to hear the ARU justify that situation when they try to explain that the amount of funding from the ARU to clubs is going to be decreased again!

Following are summaries of the expenditure split in 2012 and the growth in overheads since 2005.

My detailed analysis of the 2011 and 2012 expenditure can be found here and my summary of expenditure from 2005 to 2010 can be found here.

Other Financial

Another item that appears to be one that needs attention is the ARU’s management of its foreign exchange exposure. A significant proportion of the broadcast revenue of the ARU is paid in US dollars and obviously costs for the end of year tours and RWC tournaments are incurred in foreign currencies so the ARU has to manage its exposure to currency movements.

To manage this exposure the ARU states that it uses currency hedges, which are a bit like insurance where you choose how much of your exposure you want to insure and you pay a premium for that level of cover. The idea is to achieve a neutral result – the ARU is not in the business of being a foreign exchange trader so isn’t aiming to make a profit, just to stop losses being incurred. However in the last two years the ARU has reported losses of $7.2 million in this area.

I’m going to look at the NZRU results as part of a benchmarking exercise on Monday but in the last two years the NZRU has managed it’s foreign exchange exposure well enough to not only make sure it has no losses but has recorded a profit of NZ $4.693 million in this area.

The ARU needs every dollar it can raise to spend on rugby and cannot afford to keep wasting it like this.

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Scott is one of our regular contributors from the old days of G&GR. He has experience coaching Premier Grade with two clubs in Brisbane.

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