Derby County

[Hxj]

On adoption of FRS 102 in 2016 you can revert to a 'Cost' basis for all assets.  So you remove the revaluation Reserve and reduce the revalued asset to cost.  You therefore 'create' an addition £30 million profit on the sale of the asset.  Amazing how far sighted Morris was 

[Mr Popodopolous]

I'll have a look into it further but thanks...it just seems suspect to me, from an FFP angle at the very least- they switched to FRS 102 in the 2016 Accounts but still seemed to show Cost and Revaluation in 2017- EFL surely have some good grounds for objection? Reserve Transfer in 2018 also, but this is not covered in the P&S Regs or their FFP predecessors.

That would just be one section of their Profit and Loss Account, the cumulative one I mean- after the Transfer I mean, this was -£42m even with the Revaluation Reserve bit. Plus unsure they changed category for all Fixed Assets- cherry picking a possibility?

Equity vs Profit? Hmm...EFL have their Equity limits with respect to what can count for P&S as well, ie the gap between £15-39m.

As for the wider issue, two lines.

1. Firstly, the EFL seem to have granted them an extension to 24th August 2021 with respect to the Restated Accounts.
2. Secondly, a number of the companies within the Group appear to have received striking off orders/notices. Presumably for lack of Accounts and Confirmation Statements.

This leads me onto two conspiracy theories, the first of which I wondered about at times...

1. Could the EFL be deliberately stringing out charges/punishment, whatever in exchange for buying time for a takeover. Takeover comes in, charges magically go away- clean slate etc.
2. Could these companies- the following all have Active proposals to Strike Off- and weirdly they're all front dated??  Dated 24th August 2021, Sevco 5112 Limited, Club DCFC Limited, Stadia DCFC Limited and The Derby County FC Academy Limited- have either FFP implications or debts that Mel Morris is looking to hide- what better way to hide them or obfuscate than to not submit Accounts and Confirmation Statements and let them automatically get struck off??

The second bit could go- in theory?

Quote

"Can't judge Consolidated Accounts without the component parts, can't chase debts from the component parts if they are struck off".

Yes these theories are likely way out but have to wonder at times...Club DCFC Limited, Stadia DCFC Limited and The Derby County FC Academy Limited all listed as being under Sevco 5112- which in turn is listed as being under Gellaw Newco 203 Limited...could the Club keep the Revenue but have the associated Costs disappear into the ether when Restated Accounts emerge for those seasons?

How about external debt, if those companies are struck off- might this disappear or at the very least be unrecoverable? Or say Rental obligations included within Gellaw Newco 203- hypothetically speaking but not the Club Accounts, for use of Pride Park...would these be impossible to gauge if these companies struck off?

Back onto the Accounting policies and transition thereof...

2015

"Held at Valuation based on DRC".

2016

"(Still) Held at Valuation based on DRC". This year was the first under FRS 102...

...As Note 26 itself shows/indicates."

They had the chance to change it then did they not?

2017

Indeed, still showing as under Cost but excluding Freehold Property- Pride Park is the Freehold Property in q. FRS 102 has already been adopted, yet in 2017 it still states "Freehold property is carried at current year value at fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses." Plus the rest...they appear to have carried on the prior Accounting Policy into FRS 102 then tried a quick switch in 2018 in their hour of need.

My argument in a nutshell, is that Derby would like to be able to have their cake and eat it, very much so.

Edited August 18, 2021 by Mr Popodopolous

[Mr Popodopolous]

Interesting thread on it too.

 

[NcnsBcfc]

@Mr Popodopolous and @Hxj many thanks for your updates on this thread.

You are both it appears specialists, and I enjoy trying to understand both of your rationales of quite complex situations.

My issue with the whole issue of FFP is thus.....

There appears to be a block of clubs within the Championship who either seem from an ethical or moralistic point of view that FFP  is merely some form of an advisory concept; and the full ramifications of what it entails doesn't apply to their particular club (Derby, Birmingham, Reading, Sheff Wed; when they were in the league). Even Stoke have posted a £54m loss for last season alone.

Then there are others that stick to the rules, in particular Gibson at Boro; and of course our own Lansdown.

The aforementioned clubs feel that they can drag out the process for eternity, and that the EFL are toothless. My question in a way is either the EFL are strong enough/able enough to withstand these legal challenges or they're not.

Clubs are obviously gambling on getting promoted, and then being governed by a different board (PL). They then do a deal with the EFL in the background to pay off any fine that they would have incurred if they hadn't been promoted with the vast riches from the PL.

I see that in L1 & L2 they seem to have have done away with all salary caps this season, after the legal challenge. Is that still the case moving forward? A number of clubs (Of which Ipswich of course, and Wigan are good examples). Seem to be taking the opportunity to spend vast amounts of money on whole new squads. It's no surprise that a number of players that you thought would be playing in the Championship have gone to L1 clubs therefore.

From my own viewpoint. Clubs appear to be punished for trying to do the right thing, and stay within the £39m threshold; and with regard to us, this is of course having a huge impact on our club at the moment. Whilst others, flout the rules; and are willing to take the risk of charges coming years down the line.

If the FFP can't be enforced on a rigorous basis, within a set period of time. Then is it fit for purpose? The parachute payments afforded to relegated clubs, already make it a completely unfair playing field anyhow.

Do clubs have to sign a set of rules, that require them to adhere to FFP? I would think that as a Ltd company they of course have obligations around tax, NI; and VAT and these are governed by laws. What is the FFP governed by? A hypothetical set of rules that more conscience owners abide by, or something more concrete.

Apologies for the numerous questions. But the whole FFP debate, when the PL, & L1 & L2 seem to have abandoned any protocols seems completely futile.

 

[Mr Popodopolous]

It's a weird one @NcnsBcfc thanks btw, do try- it's interesting stuff.

All these cases are similar yet different and I'll try and offer a little on each.

Birmingham

2018 one, the EFL did move relatively quickly- the question is why. I make the timeline Accounts to 30th June 2018 ie Projected and a Soft Embargo to hold their position in place, before any Transfer Revenue to offset the Projections. Said Revenue did not arrive, but the updated or finalised Draft Accounts did maybe a week into July 2018- EFL Statement 2nd August 2018, possibly the final charges on 14th August 2018- they can move quickly and set the ball rolling. Still need to do better but this as a starting point is positive.

They got -9 points, a soft Embargo into EFL approval needed and an EFL Business Plan for 2018/19 and perhaps beyond.

Derby

Where to begin? The EFL seemed not to substantially challenge their Amortisation policy or Stadium Sale under Shaun Harvey- whereas under Rick Parry, doubtless nudged by Gibson and post Bury collapse, the EFL now seemed to take a different stance hence the charges in January 2020...Covid seems to have made an impact of course into speed of Hearings etc? There have been lengthy Embargoes and restrictions but the EFL are oddly slow off the mark at times. Would have failed had the Stadium Profit rule not weirdly changed in 2016 and only been adjusted out again in 2021.

Reading

This is a big mystery to me. Their losses in 2018, 2019 and 2020- 2020 and 2021 are added and halved and Covid losses stripped as well as the usual deductions, one period so it's 2018, 2019 and then 2020 and 2021 combined average. Their P&S losses looked pretty terrible in 2018, 2019 and 2020 and this was despite sale of Stadium and sale again under new Parent presumably, sale of old Training Ground, sale of land around the Stadium and Aluko £3m loan fee counting as Revenue- they must have breached to 2021...indeed their Embargo conditions are due to this- it explicitly states due to Breach of Profit and Sustainability Regulations- therefore Charges must follow, whether it's an overspend, a breach in other ways or maybe more than one issue. Would have failed had the Stadium Profit rule not weirdly changed in 2016 and only been adjusted out again in 2021. Rot started under Harvey's tenure at the EFL and a lack of early intervention probably made matters worse...

Sheffield Wednesday

Failed and was clear they had failed to Summer 2018- they planned to sell and leaseback Hillsborough but under tough embargo conditions as lack of Accounts etc- not quite tough enough though. EFL launch investigation in Summer 2019- after Harvey departs- charged in November 2019 under Parry. Between times bits came out, such as asked to explain why discrepancy on Land Registry, Company formation and date it was suitable for the Accounts. There is an argument that they shouldn't be allowed to include it at all for FFP and it disappears after this season anyway, all depends then on how the FFP between League 1 and the Championship should join up.

Stoke

Odd one. On the one hand there is a significant Impairment in 2019/20 Accounts attributed to Covid- about £30m in Player Registrations but on the other hand there clearly were from 2019/20 efforts at downsizing beginning...see the loans out and especially from Jan 2020 onwards- Covid came at a very good time for them however and I'd be surprised if the EFL aren't looking very closely at each and every player whose value was Impaired yet there could be some justification for their claims as I believe that in a non Covid world their plan was to loan and loan and loan...and then sell final year of contract, and given a number of their players are based or went to 2nd tier European Leagues I have a certain amount of sympathy for their argument in some ways. Selling Collins for £12m absolutely helped as well- of course if they've sold the Ground on top of this, then the dial can move badly.

I have to say though, as a collective their fans are up their own arse- a lot of them, Derby I mean- weird sense of entitlement, pretty loathsome lot like Mel Morris and was he even seriously unwell or was this a figment of imagination- you can tell he's one of their own. Vile club too.

Onto the differences between the divisions

EFL and Clubs

Wanted a hard salary cap ie £xm per year with certain exemptions and probably Promotion bonuses, like in Rugby ie £m per year and within a 24-25 man squad IIRC. PFA and some clubs e.g. Sunderland, Ipswich, Portsmouth IIRC objected though I'd be surprised if EFL and Clubs at some point didn't try and rework it- fell away in the bottom 2 divisions which knocked back any ambitions for it at our level.

The PL

Have the same P&S regs as we do, except the loss limits differ greatly- £105m per 3 years as opposed to £39m in a 3 year period, between the two divisions it's -£22m per Championship season. I have to wonder if they are as hot on Embargoes in a pre-emptive sense- Everton seem to be under some kind of restrictions but it's unclear, I also have had my q's about Aston Villa too but selling Grealish for £100m may have fixed it all.

e.g. Championship-PL-Championship, that's £13m + £35m + £13m=£61m.

Covid has complicated this, naturally

Now it'd be 2017/18 Championship. 2018/19 Championship, 2019/20 PL and 2020/21 Championship- say Norwich? £13m + £13m + £35m + £13m=£74m. £74m/4 x 3=£55.5m. 2 of each would give you £72m, 3 of PL and one of our level would give you £88.5m. 4 x Championship or 4 x PL would keep it at £39m or £105m respectively.

Is there some weird punishment for compliance ongoing?

We and others are definitely being punished in a sense for trying to do the right thing, see Blackburn as well- yes they were pushing it but selling Armstrong and a clutch of players released will have eased things but will they reinvest some? Middlesbrough got hit especially badly in 2019/20 by trying to stay in, arguably- Nottingham Forest seem to have released a reasonable number, loanees ended, regularly sell academy products but signed only a free and 2 youngish loanees. Swansea too maybe to an extent? Seem to have at least one big sale per season and wages were dropping more than say Stoke in 2019/20 and 2018/19. Both dropped in the same season.

Parachute Payments

Arguments for and against. Need to be given a better type of Accounting Treatment perhaps- as in loans or cash flow to help with solvency which immediately ups the FFP pressure on Clubs. Some clubs trade and are happy to do so, likely comply in Year 1 without Parachute Payments but some use them to gain a significant and immediate competitive advantage- Cardiff were one, Fulham definitely are one. Imagine that just an amount equal to the PL Solidarity Payment goes through P&L or counts towards FFP- and the rest is for Cash Flow etc- that retains solvency but gives a huge pressure to comply that's added...you're suddenly talking about a £35-40m hole in Year 1 which won't bankrupt the club but will give them serious FFP issues or will force them either to sell/loan out higher earners, ie better players or subsidise their wages elsewhere maybe, show more restraint in the market or perhaps a bit of each.

Edited August 18, 2021 by Mr Popodopolous

[NcnsBcfc]

11 minutes ago, Mr Popodopolous said:

It's a weird one @NcnsBcfc thanks btw, do try- it's interesting stuff.

All these cases are similar yet different and I'll try and offer a little on each.

Birmingham

2018 one, the EFL did move relatively quickly- the question is why. I make the timeline Accounts to 30th June 2018 ie Projected and a Soft Embargo to hold their position in place, before any Transfer Revenue to offset the Projections. Said Revenue did not arrive, but the updated or finalised Draft Accounts did maybe a week into July 2018- EFL Statement 2nd August 2018, possibly the final charges on 14th August 2018- they can move quickly and set the ball rolling. Still need to do better but this as a starting point is positive.

They got -9 points, a soft Embargo into EFL approval needed and an EFL Business Plan for 2018/19 and perhaps beyond.

Derby

Where to begin? The EFL seemed not to substantially challenge their Amortisation policy or Stadium Sale under Shaun Harvey- whereas under Rick Parry, doubtless nudged by Gibson and post Bury collapse, the EFL now seemed to take a different stance hence the charges in January 2020...Covid seems to have made an impact of course into speed of Hearings etc? There have been lengthy Embargoes and restrictions but the EFL are oddly slow off the mark at times. Would have failed had the Stadium Profit rule not weirdly changed in 2016 and only been adjusted out again in 2021.

Reading

This is a big mystery to me. Their losses in 2018, 2019 and 2020- 2020 and 2021 are added and halved and Covid losses stripped as well as the usual deductions, one period so it's 2018, 2019 and then 2020 and 2021 combined average. Their P&S losses looked pretty terrible in 2018, 2019 and 2020 and this was despite sale of Stadium and sale again under new Parent presumably, sale of old Training Ground, sale of land around the Stadium and Aluko £3m loan fee counting as Revenue- they must have breached to 2021...indeed their Embargo conditions are due to this- it explicitly states due to Breach of Profit and Sustainability Regulations- therefore Charges must follow, whether it's an overspend, a breach in other ways or maybe more than one issue. Would have failed had the Stadium Profit rule not weirdly changed in 2016 and only been adjusted out again in 2021. Rot started under Harvey's tenure at the EFL and a lack of early intervention probably made matters worse...

Sheffield Wednesday

Failed and was clear they had failed to Summer 2018- they planned to sell and leaseback Hillsborough but under tough embargo conditions as lack of Accounts etc- not quite tough enough though. EFL launch investigation in Summer 2019- after Harvey departs- charged in November 2019 under Parry. Between times bits came out, such as asked to explain why discrepancy on Land Registry, Company formation and date it was suitable for the Accounts. There is an argument that they shouldn't be allowed to include it at all for FFP and it disappears after this season anyway, all depends then on how the FFP between League 1 and the Championship should join up.

Stoke

Odd one. On the one hand there is a significant Impairment in 2019/20 Accounts attributed to Covid- about £30m in Player Registrations but on the other hand there clearly were from 2019/20 efforts at downsizing beginning...see the loans out and especially from Jan 2020 onwards- Covid came at a very good time for them however and I'd be surprised if the EFL aren't looking very closely at each and every player whose value was Impaired yet there could be some justification for their claims as I believe that in a non Covid world their plan was to loan and loan and loan...and then sell final year of contract, and given a number of their players are based or went to 2nd tier European Leagues I have a certain amount of sympathy for their argument in some ways. Selling Collins for £12m absolutely helped as well- of course if they've sold the Ground on top of this, then the dial can move badly.

I have to say though, as a collective their fans are up their own arse- a lot of them, Derby I mean- weird sense of entitlement, pretty loathsome lot like Mel Morris and was he even seriously unwell or was this a figment of imagination- you can tell he's one of their own. Vile club too.

Thank you.

As to my points around the sustainability of the whole FFP process though, given that the PL, L1 & L2 seem to have given up? What's your take on it?

Plus are the rules around FFP actually legally applicable? As per the points around HMRC,VAT,NI.

In my view, it boils down to probably a bullying culture by Derby behind the scenes. The EFL itself is probably not a big organisation in terms of finance. If the billy big QC's of this world (engaged by Derby). They throw a load of legal arguments at the EFL, who themselves have to engage expensive legal counsel.

It's all reminiscent of the Ashton Vale fiasco. Where Bristol City Council cocked up. The judicial review found against them (not City). But the Council couldn't afford to find the legal ruling; so folded like a pack of cards.

Either FFP is rigorously applied fairly across the division or it's not fir for purpose in my book. 

[Hxj]

The often forgotten fundamental problem with the EFL Championship is that it is a Member's Club that everyone wants to leave.  A quarter of the members will every year.

Governance of any such organisation will be problematic regardless of how it is done.  No system is perfect and all will appear to be biased in some way or another.  The EFL needs to take the vast majority of clubs with it on any changes.  With the ever changing membership and differing priorities that will never be easy.

As regards FFP specifically, I know that there are a range of views out there.  My view is that a Member's club which last season takes action which results in one club being relegated (Sheffield Wednesday) and another having a seriously close relationship with potential relegation (Derby County) and this season has three clubs Transfer Embargoes of one sort or another cannot be doing a bad job.

The FFP rules are signed up to and agreed as are the sanctions and information requirements as part of becoming or remaining a member of the EFL.

The level of resistance from various clubs as been problematic, as has the EFL's Board inconsistent 'prosecution' of the offences, however the previous powers that be were to condoning of bad behaviour.  That said I would rather look forwards than backwards.

I would say that there are two recently good signs that matters are improving.  Firstly the published Embargo List, and secondly the announcement that all clubs were missed the filing deadline for their statutory accounts last season were on a soft embargo.  I appreciate that it had no real impact, but it was a sign if intent.  It also made it much easier to put clubs on stricter embargos if the failure continued, which did happen. 

As to improvements I would make it compulsory for each club (or relevant group to have a 31 May accounting date, submit their audited financial statements and final FFP statements by mid June, with any disciplinary action to be taken by the end of June.  Failure to comply would mean automatic expulsion.  Football clubs are not inherently complex as regards their accounts, so the deadline would be easily achievable.

[Red_Alligator]

54 minutes ago, Mr Popodopolous said:

It's a weird one @NcnsBcfc thanks btw, do try- it's interesting stuff.

All these cases are similar yet different and I'll try and offer a little on each.

Birmingham

2018 one, the EFL did move relatively quickly- the question is why. I make the timeline Accounts to 30th June 2018 ie Projected and a Soft Embargo to hold their position in place, before any Transfer Revenue to offset the Projections. Said Revenue did not arrive, but the updated or finalised Draft Accounts did maybe a week into July 2018- EFL Statement 2nd August 2018, possibly the final charges on 14th August 2018- they can move quickly and set the ball rolling. Still need to do better but this as a starting point is positive.

They got -9 points, a soft Embargo into EFL approval needed and an EFL Business Plan for 2018/19 and perhaps beyond.

Derby

Where to begin? The EFL seemed not to substantially challenge their Amortisation policy or Stadium Sale under Shaun Harvey- whereas under Rick Parry, doubtless nudged by Gibson and post Bury collapse, the EFL now seemed to take a different stance hence the charges in January 2020...Covid seems to have made an impact of course into speed of Hearings etc? There have been lengthy Embargoes and restrictions but the EFL are oddly slow off the mark at times. Would have failed had the Stadium Profit rule not weirdly changed in 2016 and only been adjusted out again in 2021.

Reading

This is a big mystery to me. Their losses in 2018, 2019 and 2020- 2020 and 2021 are added and halved and Covid losses stripped as well as the usual deductions, one period so it's 2018, 2019 and then 2020 and 2021 combined average. Their P&S losses looked pretty terrible in 2018, 2019 and 2020 and this was despite sale of Stadium and sale again under new Parent presumably, sale of old Training Ground, sale of land around the Stadium and Aluko £3m loan fee counting as Revenue- they must have breached to 2021...indeed their Embargo conditions are due to this- it explicitly states due to Breach of Profit and Sustainability Regulations- therefore Charges must follow, whether it's an overspend, a breach in other ways or maybe more than one issue. Would have failed had the Stadium Profit rule not weirdly changed in 2016 and only been adjusted out again in 2021. Rot started under Harvey's tenure at the EFL and a lack of early intervention probably made matters worse...

Sheffield Wednesday

Failed and was clear they had failed to Summer 2018- they planned to sell and leaseback Hillsborough but under tough embargo conditions as lack of Accounts etc- not quite tough enough though. EFL launch investigation in Summer 2019- after Harvey departs- charged in November 2019 under Parry. Between times bits came out, such as asked to explain why discrepancy on Land Registry, Company formation and date it was suitable for the Accounts. There is an argument that they shouldn't be allowed to include it at all for FFP and it disappears after this season anyway, all depends then on how the FFP between League 1 and the Championship should join up.

Stoke

Odd one. On the one hand there is a significant Impairment in 2019/20 Accounts attributed to Covid- about £30m in Player Registrations but on the other hand there clearly were from 2019/20 efforts at downsizing beginning...see the loans out and especially from Jan 2020 onwards- Covid came at a very good time for them however and I'd be surprised if the EFL aren't looking very closely at each and every player whose value was Impaired yet there could be some justification for their claims as I believe that in a non Covid world their plan was to loan and loan and loan...and then sell final year of contract, and given a number of their players are based or went to 2nd tier European Leagues I have a certain amount of sympathy for their argument in some ways. Selling Collins for £12m absolutely helped as well- of course if they've sold the Ground on top of this, then the dial can move badly.

I have to say though, as a collective their fans are up their own arse- a lot of them, Derby I mean- weird sense of entitlement, pretty loathsome lot like Mel Morris and was he even seriously unwell or was this a figment of imagination- you can tell he's one of their own. Vile club too.

Onto the differences between the divisions

EFL and Clubs

Wanted a hard salary cap ie £xm per year with certain exemptions and probably Promotion bonuses, like in Rugby ie £m per year and within a 24-25 man squad IIRC. PFA and some clubs e.g. Sunderland, Ipswich, Portsmouth IIRC objected though I'd be surprised if EFL and Clubs at some point didn't try and rework it- fell away in the bottom 2 divisions which knocked back any ambitions for it at our level.

The PL

Have the same P&S regs as we do, except the loss limits differ greatly- £105m per 3 years as opposed to £39m in a 3 year period, between the two divisions it's -£22m per Championship season. I have to wonder if they are as hot on Embargoes in a pre-emptive sense- Everton seem to be under some kind of restrictions but it's unclear, I also have had my q's about Aston Villa too but selling Grealish for £100m may have fixed it all.

e.g. Championship-PL-Championship, that's £13m + £35m + £13m=£61m.

Covid has complicated this, naturally

Now it'd be 2017/18 Championship. 2018/19 Championship, 2019/20 PL and 2020/21 Championship- say Norwich? £13m + £13m + £35m + £13m=£74m. £74m/4 x 3=£55.5m. 2 of each would give you £72m, 3 of PL and one of our level would give you £88.5m. 4 x Championship or 4 x PL would keep it at £39m or £105m respectively.

Is there some weird punishment for compliance ongoing?

We and others are definitely being punished in a sense for trying to do the right thing, see Blackburn as well- yes they were pushing it but selling Armstrong and a clutch of players released will have eased things but will they reinvest some? Middlesbrough got hit especially badly in 2019/20 by trying to stay in, arguably- Nottingham Forest seem to have released a reasonable number, loanees ended, regularly sell academy products but signed only a free and 2 youngish loanees. Swansea too maybe to an extent? Seem to have at least one big sale per season and wages were dropping more than say Stoke in 2019/20 and 2018/19. Both dropped in the same season.

Parachute Payments

Arguments for and against. Need to be given a better type of Accounting Treatment perhaps- as in loans or cash flow to help with solvency which immediately ups the FFP pressure on Clubs. Some clubs trade and are happy to do so, likely comply in Year 1 without Parachute Payments but some use them to gain a significant and immediate competitive advantage- Cardiff were one, Fulham definitely are one. Imagine that just an amount equal to the PL Solidarity Payment goes through P&L or counts towards FFP- and the rest is for Cash Flow etc- that retains solvency but gives a huge pressure to comply that's added...you're suddenly talking about a £35-40m hole in Year 1 which won't bankrupt the club but will give them serious FFP issues or will force them either to sell/loan out higher earners, ie better players or subsidise their wages elsewhere maybe, show more restraint in the market or perhaps a bit of each.

Thanks Pops, this helps a lot if, like me, you're struggling to get a clear overview of the situation. I wonder if an increasing number of Championship clubs will take a gamble with the EFL?

[chinapig]

31 minutes ago, Hxj said:

The often forgotten fundamental problem with the EFL Championship is that it is a Member's Club that everyone wants to leave.  A quarter of the members will every year.

Governance of any such organisation will be problematic regardless of how it is done.  No system is perfect and all will appear to be biased in some way or another.  The EFL needs to take the vast majority of clubs with it on any changes.  With the ever changing membership and differing priorities that will never be easy

Which is one reason I reckon why Tracey Crouch wants an independent regulator.

She has said publicly that the current authorities aren't prepared to take robust action so the authority needs to lie elsewhere.

Let's face it self regulation is rarely successful and certainly isn't likely in the case of what amounts to a cosy rich boy's club.

Note that Derby have now been given an extension to the deadline for presenting their revised accounts for instance.

[downendcity]

2 hours ago, NcnsBcfc said:

@Mr Popodopolous and @Hxj many thanks for your updates on this thread.

You are both it appears specialists, and I enjoy trying to understand both of your rationales of quite complex situations.

My issue with the whole issue of FFP is thus.....

There appears to be a block of clubs within the Championship who either seem from an ethical or moralistic point of view that FFP  is merely some form of an advisory concept; and the full ramifications of what it entails doesn't apply to their particular club (Derby, Birmingham, Reading, Sheff Wed; when they were in the league). Even Stoke have posted a £54m loss for last season alone.

Then there are others that stick to the rules, in particular Gibson at Boro; and of course our own Lansdown.

The aforementioned clubs feel that they can drag out the process for eternity, and that the EFL are toothless. My question in a way is either the EFL are strong enough/able enough to withstand these legal challenges or they're not.

Clubs are obviously gambling on getting promoted, and then being governed by a different board (PL). They then do a deal with the EFL in the background to pay off any fine that they would have incurred if they hadn't been promoted with the vast riches from the PL.

I see that in L1 & L2 they seem to have have done away with all salary caps this season, after the legal challenge. Is that still the case moving forward? A number of clubs (Of which Ipswich of course, and Wigan are good examples). Seem to be taking the opportunity to spend vast amounts of money on whole new squads. It's no surprise that a number of players that you thought would be playing in the Championship have gone to L1 clubs therefore.

From my own viewpoint. Clubs appear to be punished for trying to do the right thing, and stay within the £39m threshold; and with regard to us, this is of course having a huge impact on our club at the moment. Whilst others, flout the rules; and are willing to take the risk of charges coming years down the line.

If the FFP can't be enforced on a rigorous basis, within a set period of time. Then is it fit for purpose? The parachute payments afforded to relegated clubs, already make it a completely unfair playing field anyhow.

Do clubs have to sign a set of rules, that require them to adhere to FFP? I would think that as a Ltd company they of course have obligations around tax, NI; and VAT and these are governed by laws. What is the FFP governed by? A hypothetical set of rules that more conscience owners abide by, or something more concrete.

Apologies for the numerous questions. But the whole FFP debate, when the PL, & L1 & L2 seem to have abandoned any protocols seems completely futile.

 

My understanding of ffp is relatively basic and like you I continue to be both baffled and amazed at the amount of complex information and analysis the likes of @Mr Popodopolous@Hxj and @Davefevs produce.

With the benefit of hindsight I have a number of thoughts about ffp.

The concept was well intentioned, in trying to protect clubs from themselves in the quest to gain promotion to the premier league and avoid the Portsmouth situation, when an owner was no longer willing  and/or able to support the club’s debts.

However, it is now clear that the set up was fundamentally flawed, for a number of reasons:

1. Daft as it sounds, I think there was an element in the EFL's thinking that ,when the ffp rules were introduced, and with effectively a 3 year lead time until the first “day of reckoning” ,  all member clubs would use this time to make the necessary adjustments to their finances, in order to ensure compliance. Following on from this the EFL seems to have had the (now clearly naive) belief that all clubs would follow and adhere to the rules.

2. The people drafting the rules were just not good enough, as evidenced by failing to include a rule that prevented fixed assets ( stadia) being “sold” to other of the club owners companies as a means of adjusting profits. That rule did exist in the financial rules that preceded ffp. I know a few have questioned Harvey’s involvement and if there was any ulterior motive behind this.

3. The rules provided that in the third year projected accounts would be provided ( by the end of March I think?) so that full assessment could be made before the end of the season. This means that any club breaching ffp limits could have penalties applied during that season and accordingly if, say , a club had flouted ffp and secured promotion, then a points deduction could be immediately applied to potential stop that promotion.

4. Most crucially, in their actions ( or more accurately inaction) the EFL seem to have completely failed to address the fact that they have completely failed in their responsibility to all the other championship clubs ( including ours) that took appropriate action, at the right time to ensure compliance, even if such actions compromised their on field competitiveness - selling players to reduce wage bills and bring in transfer fees to balance the books. However, since then it seems that the date for submission of accounts has become a moveable feast, with Derby and others appearing to stretch the point further than Mrs Downend’s knicker elastic !

4. When , surprisingly, clubs have breached ffp we have then seen the tail wagging the dog, with the EFL appearing to be continually on the back foot under the threat of legal action from clubs and I suspect the majority of fans feeling that clubs have been “getting away with it”.

Many will argue “why shouldn't owners be allowed to spend what they want/can”. Derby’s situation tends to prove why, as when the sale of Pride Park broke I read many comments by Derby fans along the lines of “Mel Morris is a lifelong Derby fan and would never let the club go to pot”. We’ve seen the same man struggling to sell the club and players not getting paid during that period, which only goes to prove that things can change and why the concept of ffp is the right thing if we want clubs protected for fans and against some of th owners out there.

 

 

 

 

[Hxj]

1 hour ago, chinapig said:

Which is one reason I reckon why Tracey Crouch wants an independent regulator.

She has said publicly that the current authorities aren't prepared to take robust action so the authority needs to lie elsewhere.

Let's face it self regulation is rarely successful and certainly isn't likely in the case of what amounts to a cosy rich boy's club.

Note that Derby have now been given an extension to the deadline for presenting their revised accounts for instance.

Well enforced government regulation will result in the FA being thrown out of UEFA and FIFA, so that would work well!  

Derby is a red herring.  They are in a Hard Embargo, so any delay in submitting the accounts will simply hamper their recruitment policy further.

[chinapig]

Just now, Hxj said:

Well enforced government regulation will result in the FA being thrown out of UEFA and FIFA, so that would work well!  

Derby is a red herring.  They are in a Hard Embargo, so any delay in submitting the accounts will simply hamper their recruitment policy further.

An independent regulator is not the same as government regulation. Nobody is suggesting the EFL be accountable to DCMS.

The FA should of course have been the regulator but it sold out to the Premier League so lost all credibility and authority.

Not that I expect an independent regulator to happen. The minute the PL objects the government would back down.

So it will be left to the jolly decent chaps who control the game to carry on doing a splendid job of protecting the financial security of clubs.

As to Derby, what is the point in acting firm in setting a deadline then saying in effect "ok chaps we didn't really mean it, carry on"? It just adds to the perception that the EFL does not stand firm.

[Hxj]

1 hour ago, downendcity said:

The concept was well intentioned, in trying to protect clubs from themselves in the quest to gain promotion to the premier league and avoid the Portsmouth situation, when an owner was no longer willing  and/or able to support the club’s debts.

Agreed.

 

1 hour ago, downendcity said:

However, it is now clear that the set up was fundamentally flawed, for a number of reasons:

Agreed.

1 hour ago, downendcity said:

1. Daft as it sounds, I think there was an element in the EFL's thinking that ,when the ffp rules were introduced, and with effectively a 3 year lead time until the first “day of reckoning” ,  all member clubs would use this time to make the necessary adjustments to their finances, in order to ensure compliance. Following on from this the EFL seems to have had the (now clearly naive) belief that all clubs would follow and adhere to the rules.

Agreed.

1 hour ago, downendcity said:

2. The people drafting the rules were just not good enough, as evidenced by failing to include a rule that prevented fixed assets ( stadia) being “sold” to other of the club owners companies as a means of adjusting profits. That rule did exist in the financial rules that preceded ffp. I know a few have questioned Harvey’s involvement and if there was any ulterior motive behind this.

I would prefer - "Didn't realise the extent to which clubs would go to bend the rules" - clearly none of them had kids!

1 hour ago, downendcity said:

The rules provided that in the third year projected accounts would be provided ( by the end of March I think?) so that full assessment could be made before the end of the season. This means that any club breaching ffp limits could have penalties applied during that season and accordingly if, say , a club had flouted ffp and secured promotion, then a points deduction could be immediately applied to potential stop that promotion.

The problem is that until the end of the season, you can't tell what the FFP position actually is, so this fails on the 'Theoretically good, practically impossible' test.

 

1 hour ago, downendcity said:

4. Most crucially, in their actions ( or more accurately inaction) the EFL seem to have completely failed to address the fact that they have completely failed in their responsibility to all the other championship clubs ( including ours) that took appropriate action, at the right time to ensure compliance, even if such actions compromised their on field competitiveness - selling players to reduce wage bills and bring in transfer fees to balance the books. However, since then it seems that the date for submission of accounts has become a moveable feast, with Derby and others appearing to stretch the point further than Mrs Downend’s knicker elastic !

Two points here.  Firstly the new crowd are better than the old crowd.  Secondly the EFL did tighten up significantly on accounts submission with the soft embargos, moving to hard embargos for such failures.  The extended failure for Derby simply harms them, not anyone else.

 

1 hour ago, downendcity said:

4. When , surprisingly, clubs have breached ffp we have then seen the tail wagging the dog, with the EFL appearing to be continually on the back foot under the threat of legal action from clubs and I suspect the majority of fans feeling that clubs have been “getting away with it”.

This is a commonly quoted problem, but it does not really exist.  No club can take legal action through the courts against the EFL or another club.  What they can do is go to arbitration on a relevant dispute.

1 hour ago, downendcity said:

Many will argue “why shouldn't owners be allowed to spend what they want/can”.

That is a perfectly valid position and regulatory system to adopt.  

 

1 hour ago, downendcity said:

the concept of ffp is the right thing if we want clubs protected for fans and against some of th owners out there.

Agreed, and I think that, contrary to an awful lot on here that Steve Lansdown is an excellent owner.

[Hxj]

6 minutes ago, chinapig said:

An independent regulator is not the same as government regulation

It's a fine point of distinction, but if a regulator is truly independent then then their rules have to be set by a truly independent body with the power to make those rules enforceable.  Other than government who is there?

 

8 minutes ago, chinapig said:

As to Derby, what is the point in acting firm in setting a deadline then saying in effect "ok chaps we didn't really mean it, carry on"?

I'd prefer "OK Derby you carry on not submitting your accounts and we will carry on with the Hard Embargo until you do." The only party suffering as a result of Derby's actions is Derby.

[chinapig]

Just now, Hxj said:

It's a fine point of distinction, but if a regulator is truly independent then then their rules have to be set by a truly independent body with the power to make those rules enforceable.  Other than government who is there?

 

I'd prefer "OK Derby you carry on not submitting your accounts and we will carry on with the Hard Embargo until you do." The only party suffering as a result of Derby's actions is Derby.

Fair point. I guess the requirement has to be for the EFL Board to be made up of non-executive Directors as opposed to club representatives. That looks like good corporate governance to me.

Though they need to be given sufficient qualified staff to carry out their functions.

As to Derby, short term pain for sure but there may be long term gain if it allows time for a deal to be done over the revised accounts.

Forgive my cynicism but there are a lot of cynical people controlling the game. We could yet find ourselves in a situation like Man City, who have been under investigation for 3 years and counting.

Justice delayed is justice denied.

[Hxj]

14 minutes ago, chinapig said:

Forgive my cynicism

Never, cynicism is healthy!

15 minutes ago, chinapig said:

Fair point. I guess the requirement has to be for the EFL Board to be made up of non-executive Directors as opposed to club representatives. That looks like good corporate governance to me.

As far as I am aware the EFL Board consists of 10 members, the EFL Chair and CEO, three independent members, three from the Championship, 2 from League 1 and 1 from League 2, that seems fairly balanced to me, and certain;y ahead of most big business.

17 minutes ago, chinapig said:

Justice delayed is justice denied.

Agreed.

[Selred]

How are Derby 12th? Phenomenal really.

[alexukhc]

Can’t deny their wage bill must be huge

[Davefevs]

2 hours ago, Selred said:

How are Derby 12th? Phenomenal really.

They still have some good players, enough to field a competitive (not great) eleven, so will get the odd result….but as soon as injuries and fatigue hit they are gonna suffer.  There is no depth.

[Mr Popodopolous]

2 hours ago, alexukhc said:

Can’t deny their wage bill must be huge

Was maybe....some estimates on their forum have claimed it's £1.2m per month- and this is last season! Sky suggested that was what Mel was putting in one of the months last season.

Now there could be a lot of variables- is that just for players or for the entire club and club staff, is that before or after PAYE etc, is this £1.2m per month literally per month or divided up into per week x 52 and then divided by 4 or maybe other way round...ie £1.2m x 12 or £1.2m x 13. 

Edited August 18, 2021 by Mr Popodopolous

[Mr Popodopolous]

4 hours ago, Hxj said:

It's a fine point of distinction, but if a regulator is truly independent then then their rules have to be set by a truly independent body with the power to make those rules enforceable.  Other than government who is there?

 

I'd prefer "OK Derby you carry on not submitting your accounts and we will carry on with the Hard Embargo until you do." The only party suffering as a result of Derby's actions is Derby.

Should they have been allowed to sign Jagielka and Baldock until Jan while this was outstanding? Or just told to pick one of them...

Edited August 18, 2021 by Mr Popodopolous

[Hxj]

As I said before I think that that is fair.

The FA told them to play the FA Cup match, whilst the squad had players isolating.  They therefore fielding a team with lots of non-first team players in it.  In my view to count those players towards the permitted squad level is not fair in the circumstances.  It would be different if they had chosen to include a few such players in the starting 11 for the experience.

[Hxj]

6 hours ago, Mr Popodopolous said:

Was maybe....some estimates on their forum have claimed it's £1.2m per month- and this is last season! Sky suggested that was what Mel was putting in one of the months last season.

My guess is that was what Mel was putting in to fund the amount paid to players.  Taking into account PAYE and NIC that would be a gross wages bill of around £27 million a year.  It also explains the amount owing to HMRC.

[Mr Popodopolous]

4 hours ago, Hxj said:

My guess is that was what Mel was putting in to fund the amount paid to players.  Taking into account PAYE and NIC that would be a gross wages bill of around £27 million a year.  It also explains the amount owing to HMRC.

Thanks, that sounds quite plausible. I was struggling to see how they would have cut the entire consolidated wage bill inclusive of PAYE etc from £46m in 2017/18 to that in 2020/21, it the £1.2m per month bit. Yes lots left but Cocu and his staff won't have been cheap, Clarke loan, Bielik and Rooney wages likewise. Then there's all the non football costs included in Sevco 5112 but not Club accounts but furlough knocks it down ...

...Okay don't necessarily disagree with your other point but Jagielka and Baldock feels one too many- some reports suggested the latter got permission to sign due to Kazim-Richards long term injury? To which I believe, the answer to them should be, suck it up- if you have to play Stretton, a midfielder or similar up front then tough.

Nixon has posted at times about a lack of guarantees about certain issues by Mel relating to football debts as they fall due etc, why should they be allowed to add two players in those circs? I assume he was referencing Keogh plus Cocu and staff.

[Mr Popodopolous]

As to this potential winding up through lack of Accounts for a variety of companies, putting my conspiracy theories aside:

1) Club DCFC Limited

2) Stadia DCFC Limited

3) The Derby County FC Academy Limited

4) Sevco 5112 Limited

What is your take on this @Hxj (apologies if already covered Wednesday as thread has moved along a bit).

Could it be a ruse to hide costs contained within Accounts for 2019, 2020? ie Revenue flows to club but costs to Sevco 5112, then if these companies disappear so do some of the Costs/wages! How can the EFL take consolidated results from a company that doesn't exist anymore.

The ruse idea comes from not submitting Accounts or Confirmation Statements and if you do it for long enough the Company(ies) might be struck off. Simplistic by me I know...

What about debt? Secured, HMRC, tax or otherwise? If costs are contained within these companies, especially HMRC or tax, then does that vanish if the company does..

If the debt is reduced drastically as it disappears with the companies, that reduces it significantly for a new owner.

Could be talking rubbish here but these theories have at least made me wonder a little.

[downendcity]

6 minutes ago, Mr Popodopolous said:

Thanks, that sounds quite plausible. I was struggling to see how they would have cut the entire consolidated wage bill inclusive of PAYE etc from £46m in 2017/18 to that in 2020/21, it the £1.2m per month bit. Yes lots left but Cocu and his staff won't have been cheap, Clarke loan, Bielik and Rooney wages likewise. Then there's all the non football costs included in Sevco 5112 but not Club accounts but furlough knocks it down ...

...Okay don't necessarily disagree with your other point but Jagielka and Baldock feels one too many- some reports suggested the latter got permission to sign due to Kazim-Richards long term injury? To which I believe, the answer to them should be, suck it up- if you have to play Stretton, a midfielder or similar up front then tough.

Nixon has posted at times about a lack of guarantees about certain issues by Mel relating to football debts as they fall due etc, why should they be allowed to add two players in those circs? I assume he was referencing Keogh plus Cocu and staff.

Isn’t there an element of you reap what you sow with Derby’s current situation.

They failed to address/ignored the implementation of ffp, as did most other clubs as they continued their push for promotion to the premier league and the financial rewards it offered. In one interview following the contentious “sale” of Pride Park, Mel Morris said that to address their finances, as ffp would have required, would have made them uncompetitive on the pitch, but that’s what happened to most, if not all the clubs that did make the necessary financial changes.

The irony is that had they taken the ffp hit by not selling Pride Park, they would have suffered a points deduction that would have meant they could not be promoted, which they managed all by themselves anyway, both that season and subsequently. 

It now appears that the consequence of their actions back then is almost more severe due to what appear to be real financial problems, Morris not being able to find a buyer for the club, and the embargo that is causing them real on field issues.

Had they not tried to circumvent ffp punishment back at the time of the first assessment, the worst case scenario from a points deduction would have been failing to gain promotion. As it is, the consequence of their actions is that they now face the real possibility of relgation.

[Mr Popodopolous]

2 minutes ago, downendcity said:

Isn’t there an element of you reap what you sow with Derby’s current situation.

They failed to address/ignored the implementation of ffp, as did most other clubs as they continued their push for promotion to the premier league and the financial rewards it offered. In one interview following the contentious “sale” of Pride Park, Mel Morris said that to address their finances, as ffp would have required, would have made them uncompetitive on the pitch, but that’s what happened to most, if not all the clubs that did make the necessary financial changes.

The irony is that had they taken the ffp hit by not selling Pride Park, they would have suffered a points deduction that would have meant they could not be promoted, which they managed all by themselves anyway, both that season and subsequently. 

It now appears that the consequence of their actions back then is almost more severe due to what appear to be real financial problems, Morris not being able to find a buyer for the club, and the embargo that is causing them real on field issues.

Had they not tried to circumvent ffp punishment back at the time of the first assessment, the worst case scenario from a points deduction would have been failing to gain promotion. As it is, the consequence of their actions is that they now face the real possibility of relgation.

Oh absolutely, it's richly deserved what's going on there.

That is it, try to circumvent in order to get promotion, worst case if nipped in bud sooner would've been a 2018/19 deduction so missing the playoffs then could have slowly rebuilt like Birmingham, and ironically QPR who have moved in the right direction off the pitch in recent times.

Mix of overspending and covid has put them in a position.

Remember too that a decent minority at best were crowing in April 2019, then the Rooney coup. Oh yes adding Clarke loan and Billie in Summer 2019- EFL on strings all that irksome stuff.

Don't even know how much they tried to cut back after the Stadium sale in reality.

There are few clubs and arguably decent sections of the fanbase too more deserving of their current travails at our level.

[Mr Popodopolous]

Just to add a little bit on the Projected Accounts bit, with hindsight admittedly.

I can see how it could work. It all depends on efficiently joining up past, present and future financials.

Past

Previous 3 years, assess pass or fail (albeit as we've seen with legacy issues can take somewhat longer for charges to arise)!

Where the Present and Future kick in.

Present

*You have lost X in T-1 and T-2. Therefore you can lose Y in T. Hence the Projections.*

*=Subject to aggregate loss in the last two falling between £15-39m.

Future

As we know Clubs are to submit Future financial information if losses fall between these two categories.

The aggregation of T-2 and T-1 going into T. Therefore a club can only lose X and if the financial info shows an upcoming breach they have to rectify by March, or show proof ie an agreement to sell player X to a Club struck now but taking place in Summer that it will be solved by end of May/June/July. Additionally a pre-emptive Soft Embargo or Hard one remains in play to not make matters worse.

Failure to be in line by March=Deduction based on the sliding scale. I hope they're moving towards this now and their win on Appeal v Birmingham for the Business Plan might mean that Absolute Obligations to make good the deficit are in play.

Edited August 19, 2021 by Mr Popodopolous

[Hxj]

3 hours ago, Mr Popodopolous said:

As to this potential winding up through lack of Accounts for a variety of companies, putting my conspiracy theories aside:

1) Club DCFC Limited

2) Stadia DCFC Limited

3) The Derby County FC Academy Limited

4) Sevco 5112 Limited

What is your take on this @Hxj (apologies if already covered Wednesday as thread has moved along a bit).

Could it be a ruse to hide costs contained within Accounts for 2019, 2020? ie Revenue flows to club but costs to Sevco 5112, then if these companies disappear so do some of the Costs/wages! How can the EFL take consolidated results from a company that doesn't exist anymore.

The ruse idea comes from not submitting Accounts or Confirmation Statements and if you do it for long enough the Company(ies) might be struck off. Simplistic by me I know...

What about debt? Secured, HMRC, tax or otherwise? If costs are contained within these companies, especially HMRC or tax, then does that vanish if the company does..

If the debt is reduced drastically as it disappears with the companies, that reduces it significantly for a new owner.

Could be talking rubbish here but these theories have at least made me wonder a little.

Compulsory Strike Off is an administrative action taken by Companies House only.  If it happens it (which it clearly won't) all those companies would be dissolved and cease to exist, all assets held would vest in the Crown, including the shares held in any subsidiaries.  Company debts would not exist after the company was dissolved. 

Bona vacantia dissolved companies (BVC1) - GOV.UK (www.gov.uk)

Edited August 19, 2021 by Hxj

[Mr Popodopolous]

1 hour ago, Hxj said:

Compulsory Strike Off is an administrative action taken by Companies House only.  If it happens it (which it clearly won't) all those companies would be dissolved and cease to exist, all assets held would vest in the Crown, including the shares held in any subsidiaries.  Company debts would not exist after the company was dissolved. 

Bona vacantia dissolved companies (BVC1) - GOV.UK (www.gov.uk)

I will have a read of that and try to understand it- thank you!

Hmm so in theory, just don't submit what you have to submit and debts/costs can vanish or reduce...Surely the Football League would have something to say if it meant that they no longer could prove the 2019 Consolidated Accounts...surely Dell via MSD would have a view if he thought his not small loans were at risk! There must be many interested counterparties here?

In this scenario however, do Derby just wriggle off the hook? The second part of my theory would be that they release Club Accounts, Gellaw Newco 203 Accounts- retain the historic revenue streams from the component parts up to 2020 and maybe 2021, but debts relevant to these Accounts and Costs in these and Sevco 5112 but not Club Accounts just disappear.

Quote

Set up a company...wrack up debts, through borrowing- don't bother to submit and pay smallish fines- ooh smallish fines, CH eventually dissolve your company- cash overseas or similar, haha- yes you can claim assets but there is little asset to claim!

Clearly that post, and particularly clear that I'm messing about a bit with the 'Set up a company' paragraph- but the loophole does seem much too good to be true. I must be fundamentally misunderstanding it here.

Edited August 19, 2021 by Mr Popodopolous