On behalf of Sport Ireland, I thank the members for giving us this opportunity to speak to the committee this afternoon. I will give an overview of Sport Ireland’s funding relationship with the Football Association of Ireland, FAI, including the control mechanisms and management arrangements relating to its grant funding.
At the outset it is important to state that Sport Ireland was established in 2015 under the Sport Ireland Act and is the statutory body with responsibility for the development of sport in Ireland. The functions of Sport Ireland are prescribed in section 8 of the Irish Sports Council Act and include powers to develop participation in sport and high performance sport; eliminate doping in sport; develop coaching; develop guidelines on the protection of children in sport; and the development of the national sports campus.
The Sport Ireland Act confers considerable authority in Sport Ireland and this is reinforced by our responsibility in investing substantial amounts of public funding into sport. As a statutory agency we seek to develop strong sporting organisations and recognise the considerable public interest in a successful Irish sports sector. That said, we must be mindful of the limits of Sport Ireland’s legal powers. Sport Ireland is not a regulatory body and, notwithstanding our focus on good governance and financial management in funded bodies, we respect the autonomy of the national governing bodies, NGBs, of sport.
Sport Ireland is responsible for the investment of public funds in sport and the subsequent oversight and accountability of this investment. All procedures and interactions with NGBs reflect this responsibility.
NGBs are independent autonomous organisations. In accordance with the key corporate governance principles, the board of any NGB is collectively responsible for leading and directing the organisation’s activities. Good governance recommends that the board cannot avoid its ultimate responsibility for actions undertaken in the name of the organisation.
Sport Ireland places a high premium on good governance and encourages high standards in governance from all funded bodies. As the development agency, it is our aim to provide leadership in this area, empowering sport organisations to take responsibility for their own governance and meet the challenges they face.
Sport Ireland assists all funded bodies to achieve excellence in all areas of their work and provides a number of interventions in the area of governance. This is broken down into a series of meaningful pieces of work, ensuring both growth and sustainability moving forward.
In 2018, representatives of the FAI attended a number of governance seminars and governance code workshops provided by Sport Ireland. The FAI was also one of the 50 sporting organisations to utilise the governance elearning services which assist organisations on the journey to compliance with the governance code.
As the body tasked with the development of sport in Ireland, Sport Ireland’s primary aim and responsibility is the security of, and return on investment for, the approximately €2.9 million in Exchequer funding invested in the FAI on an annual basis. To that end, Sport Ireland is satisfied that effective control mechanisms and frameworks are in place with regard to our investment in the FAI. Sport Ireland is satisfied that our funding invested in the FAI is fully accounted for and expended on the purpose for which it was intended. This is verified on an annual basis by our financial controller based on reviews of the FAI’s financial statements and signed auditor statements stating that all our grants were expended for the purposes for which they were intended.
As a further control mechanism, Sport Ireland also commissions additional external independent audits approximately every three years. These audits independently review the FAI’s compliance with Sport Ireland’s grant terms and conditions and its overall management arrangements as they relate to our grant funding.
I will now outline in more detail the full oversight procedures and control frameworks within Sport Ireland with regard to our grant funding to the FAI.
Sport Ireland invests in the long-term sustainability of NGBs. Since 1999, the Irish Sports Council, now Sport Ireland, primarily invests in the FAI through the youth field sport programme. This grant of €2.5 million is directed towards participation and technical development programmes. While funding is allocated to the FAI on an annual basis, Sport Ireland’s strategy clearly demonstrates a commitment that extends beyond the one-year period.
In 2018, for every €1 of Sport Ireland investment, the FAI invested €4 from its own resources.
These Sport Ireland funds are spent on grassroots, education, player development, and central and regional development staff. It is important to note that Sport Ireland’s youth field sport grant goes towards technical department staff costs only, that is, development officers, national co-ordinators and programme-specific administrators. It is explicitly stipulated that Sport Ireland’s funding does not include any other salaries, such as high-performance salaries or salaries for those working in the professional game. During 2017, this equated to the part-funding of 57 members of staff, of an annual average of 193 employed by the FAI. All other staff costs, including the role of chief executive, are funded by the normal business and other commercial operations of the FAI and are not financially supported by Sport Ireland. This is explicitly agreed with the FAI in writing and is subject to audit verification. The youth field sport investment is broadly aimed at encouraging and creating more opportunities for young people throughout Ireland to participate in soccer. Programmes are based on a shared ethos of developing the grassroots of the games, growing participation numbers, improving standards and embracing communities outside of the traditional base of the sport. Sport Ireland’s youth field sport investment supports detailed action plans which are implemented by a team of development officers and volunteers.
As well as a number of initiatives specifically aimed at bringing young people into sport, there are programmes that develop clubs and build links with communities. Also, with Sport Ireland’s support, the FAI builds on the expertise of teachers, coaches, referees and volunteers in order that it can provide a quality experience for children and young people who become involved in sport. There is a strong emphasis within FAI programmes on disadvantaged areas, social inclusion, people with ethnic minority backgrounds and opportunities for players with a disability. Sport Ireland also invests €142,000 in the FAI through the women in sport programme, which aims to raise overall physical activity levels among women and girls and support women’s roles within sporting organisations. In 2018, Sport Ireland also invested €195,000 in the women’s national team. The core objective of the fund is to raise standards and improve the standard of playing and training environments. A full breakdown of all funding allocated to the FAI since 2008 has been provided to the committee as part of Sport Ireland’s submission. The committee should note that in 2017, our investment in the FAI represented approximately 5% of its total annual income, with the other 95% coming from the FAI’s commercial activity, including sponsorship deals, broadcasting and gate receipts.
On control and management arrangements, specifically for the funding invested by Sport Ireland in the FAI, there are six layers of control in place. The first is that there is strategic alignment between Sport Ireland’s commitment to increasing sports participation and the development of sport in Ireland, and the FAI's aim to develop participation and volunteer-led local clubs, educate coaches and referees, and promote women's and girls' football. The aims are outlined in our respective strategies.
Second, Sport Ireland operates a detailed grant application process for the FAI. Once received, detailed grant applications are assessed by the senior management team, including me. The FAI’s application for funding is underpinned by an annual programme for action that must assist the achievement of Sport Ireland’s aims and objectives. The board of Sport Ireland is presented with a comprehensive paper outlining the funding recommendations and the board makes the final decisions on the allocation of funds to the FAI.
Third, Sport Ireland has in place detailed terms and conditions of grant approval, which are reviewed on an annual basis for effectiveness and relevance. These terms and conditions are signed by the FAI’s president and chief executive annually, and are returned to Sport Ireland and retained on file. Among other things, the terms and conditions include a requirement to notify Sport Ireland in writing without delay in the event of any material deterioration in the FAI’s financial position, or of any other matter which may jeopardise the organisation’s overall financial viability.
Fourth, Sport Ireland operates ongoing performance monitoring of the FAI programmes in which we invest throughout the year. There is regular and ongoing liaison between Sport Ireland and the FAI at various levels. Sport Ireland periodically meets the FAI to discuss performance, progress and any other issues that may arise. Sport Ireland staff also perform periodic verification visits to observe courses, seminars, grassroots programmes and other work undertaken within the scope of the funding. The FAI provides comprehensive information to Sport Ireland on its funded programmes, events and levels of participation throughout the year, which includes submitting an interim report and an end-of-year report which show the FAI's performance against targets.
Fifth, the FAI is required to submit its financial statements and a note from its annual general meeting to Sport Ireland in a timely fashion. The financial statements must include an auditor’s statement confirming that the Sport Ireland grant was expended for the purposes for which it was intended. Sport Ireland’s financial controller analyses the financial statements submitted by the FAI and highlights any concerns or questions that may arise. Any queries must be satisfactorily addressed prior to the release of the FAI’s final grant payment for the year.
Sixth, at the direction of Sport Ireland’s audit and risk committee, this entire system as it relates to the FAI is also audited by an independent external auditor every three years.
Turning to Sport Ireland's audits of the FAI, Sport Ireland has an audit and risk committee, which commissions audits of Sport Ireland’s grantee organisations. Over the past decade, the FAI has been audited by Sport Ireland’s independent auditors on more occasions than has any other sporting organisation. Independent audits of the FAI have been completed on Sport Ireland’s behalf in 2010, 2014 and 2016, with all findings reported to Sport Ireland’s audit and risk committee. The scope of the most recent audit, completed in 2016, included a review of compliance with the Sport Ireland grant terms and conditions. The scope of this audit also included consideration of overall FAI governance and management arrangements as they related to the grant funding of €2.7 million received from Sport Ireland. This included a high level review in the following areas: board or committee structure and oversight, with reporting and minutes maintained; risk management practices, including formal risk identification, monitoring and reporting; financial management, controls and procedures; whistleblowing policies; and, code of conduct policies and related procedures. The overall audit opinion concluded that reasonable assurance can be placed on the effectiveness and operation of internal controls. It should be noted that reasonable assurance was the highest level of classification available. No high-priority item was identified, while one medium-priority and two low-priority items were identified.
The 2014 audit did not identify any significant or important items and concluded that it was apparent that the FAI had put in place processes designed to comply with the terms and conditions as set out by Sport Ireland with regard to grant aided expenditure programmes. The 2010 audit concluded that the system in place provided substantial assurance over the establishment, management and monitoring of contractual arrangements by way of the funding process between Sport Ireland and the FAI. Three separate independent audit firms, therefore, have provided Sport Ireland with the highest level of assurance that all funding is fully accounted for and expended for the purposes for which it was intended, and that the terms and conditions of funding are being complied with. The committee should be aware that in November 2018, Sport Ireland’s audit and risk committee approved our 2019 audit plan, which includes a provision for an audit of the FAI, as per our normal procedures. The internal audit plan was presented to the board of Sport Ireland at its meeting in February 2019 and agreed to.
On the conditions of funding, a copy of Sport Ireland’s terms and conditions of grant approval was provided to the committee for reference. With specific reference to the FAI, in accordance with Sport Ireland’s terms and conditions of grant approval, all grant funding made available by Sport Ireland must be expended in accordance with the organisation’s funding submission as approved by Sport Ireland. The FAI must submit to Sport Ireland a copy of its financial statement to the end of the accounting year for the mid-year review process. All grants received from Sport Ireland must be separately identified as income in the organisation’s annual financial statements. The FAI, and all organisations in receipt of more than €200,000, must present its financial statements with accounts fully audited by a registered auditor in accordance with Irish generally accepted accounting principles, including a signed audit opinion specifying the auditor’s name and address, and a statement from the auditor that each grant was expended in accordance with the approved submission.
The committee should note that, as part of the mid-year financial review of the FAI’s 2017 financial statements and in advance of the final tranche of 2018 funding being released to the FAI, Sport Ireland’s financial controller raised a query with the FAI regarding its 2017 liquidity position, specifically the introduction of a bank overdraft facility of €1.3 million and the increased net debt position in 2017. The query was responded to by the FAI's director of finance, who stated:
The Net Current Liabilities position is a common annual position mainly driven by Deferred Income balances where advance funds from grants, sponsorship & commercial agreements are being released over the life of the respective agreement. The overdraft position at Dec 2017 was within our Overdraft Facility with our Banking partners and was a matter of timing rather than a liquidity concern – the balance has been in credit for the majority of 2018 to date. The Balance Sheet position was reviewed by the audit team as part of going concern procedures, including reviewing future budgets, and no concerns were raised.
The committee should also note that the €100,000 loan from the chief executive to the FAI was not disclosed as a separate note in the 2017 financial statements and this information was not made available to Sport Ireland at any stage.
With respect to the release of grant payments to the FAI, in line with Sport Ireland’s code of governance and business conduct, the chief executive has the authority to pay to funded bodies that operate on an ongoing basis up to 50% of their previous year's allocation in advance of the formal approval by the board. The board of Sport Ireland is informed of payment at the next opportunity. In recent years the FAI has written to Sport Ireland requesting an early drawdown of a portion of funding. Sport Ireland has always demonstrated a flexibility and willingness to facilitate the FAI, as we have with other national governing bodies, NGBs, with early drawdowns of portions of funding where possible and feasible to do so. In assessing an early drawdown request, the following are considered: procedures within Sport Ireland’s code of governance and business conduct; the cyclical nature of funding and Sport Ireland’s commitment to funding a programme beyond any one-year period; the NGBs' programme of action and programme delivery timelines; and, the risk appetite and achievement of Sport Ireland’s strategic objectives.
The committee should note there are a number of reasons a funded body may request early drawdown of a portion of funding, including but not limited to the scheduling of home fixtures; financial cycles for the funded body and Sport Ireland; the hosting of major events; the timing and delivery of the funded programme and costs already incurred; and, the schedule of the Sport Ireland grant process and board decisions. Sport Ireland pays the majority of NGBs 75% of their annual funds in January and February for the year in question. However, board decisions on the award of funding to the FAI under the youth field sports programme is typically reached later, during quarter 2 or quarter 3. Sport Ireland has brought forward the dates for board decision on the youth field sports programme to April, in 2018, and March, in 2019.
It is important to note that final payment to funded bodies in any given year, following formal approval by the board of Sport Ireland, is only released following the annual general meeting of the organisation, the provision of an interim report, the provision of financial statements for the preceding year, which must be reviewed and approved by Sport Ireland’s financial controller, and the funded body meeting other compliance obligations.
Regarding current ongoing matters in the FAI, following media reports concerning a loan of €100,000 to the organisation by its now former chief executive, and at the request of the Minister for Transport, Tourism and Sport, Deputy Shane Ross, Sport Ireland wrote to the president of the FAI on 19 March seeking urgent clarification from the board of the FAI on the circustanmces of the loan and its repayment. Sport Ireland also sought an explanation on why we were not notified at any stage in 2017 about any apparent deterioration in the FAI’s financial position, which is a requirement of the terms and conditions of grant approval. Sport Ireland received a response from the president of the FAI, which acknowledged the loan of €100,000 to the FAI by its then chief executive. However, the contents of the FAI letter did not sufficiently explain the circumstances of this loan and its repayment, nor fully address the matter of compliance with Sport Ireland’s terms and conditions of grant approval.
On Monday, 25 March, Sport Ireland again wrote to the president of the FAI re-seeking clarification on the circumstances of this loan. More detail was also requested by Sport Ireland in order to assess compliance with the terms and conditions of grant approval. Sport Ireland also sought reconfirmation that all State funding provided to the FAI had been spent for the purposes intended and in accordance with approved submissions. We also asked the FAI to fully apprise us of any other significant issues that had arisen or were likely to arise, including key risks and actions proposed and how it proposed to manage them. That was the letter. At the time of this submission, I stated a second letter had not been received but a second letter was received last evening in the office of Sport Ireland by email and was handed delivered to Sport Ireland today at 10.45 a.m.
I will read the letter into the record, if that is okay.