Daily Telegraph

SEPP BLATTER, the FIFA president, has claimed in a letter to national associations that the organisation’s financial problems are due to a recent series of “completely unexpected extra expenses”. However, evidence presented in FIFA’s own accounts proves that the problems are far more deep-rooted.

Blatter says the “unexpected” costs come from the collapse of marketing partners ISL, premature cancellation by AXA of the World Cup insurance policy, the global recession exacerbated by September 11 and, in particular, the spiralling costs of the 2002 World Cup finals.

But long before September 11 and even before the collapse of ISL last April, FIFA had been having to borrow money. This was to fund two costly programmes Blatter initiated after he became president in 1998. Under the Goal Project, money is given to the developing world, while the Financial Assistance Programme gives handouts to national associations and confederations.

Under the FAP, all associations receive £166,000 a year. This means little to the likes of the English Football Association, but helps cement Blatter’s support from poorer countries. In the last two years, the projects have cost FIFA £91 million.

On Nov 30, 2000, long before September 11, and more than six months before the ISL collapse, FIFA had to take a bridging loan. This was replaced by a controversial move on Nov 20, 2001, when they borrowed money against the income they anticipated gaining from sponsors of the 2002 and 2006 World Cups.

It is unheard of for an organisation like FIFA to “securitise” their assets in this way. According to Financial Reporting Standard 5, the accounting standard that guides UK accountants on this subject: “Securitisation is a means by which providers of finance fund a specific block of assets rather than the general business of a company.

“The assets that have been most commonly securitised in the UK are household mortgages. Other receivables such as credit card balances, hire purchase loans and trade debts are sometimes securitised, as other non-monetary assets such as property and stocks.”

In other words, securitisation is a method of raising a loan on assets that already exist. It is also expensive. According to a note in the accounts, FIFA’s securitisation was completed by creating a Special Purpose Vehicle. The note says: “In the first step, FIFA ceded certain receivables from sponsors of the World Cup events 2002 and 2006, amounting to £404 million, to a Special Purpose Vehicle [SPV].” The note does not explain who owns the SPV, although there is a reference to “a limited circle of investors”.

So desperate has been FIFA’s need for money that they have taken loans against £69 million of contracts still being negotiated. The auditors say there are “five expected sponsor contracts which had not yet been established at December 31, 2001”.

By borrowing this way, FIFA have had to pay a high price. Had they not gone in for securitisation, they could eventually have received £404 million from sponsors. But in order to get the money early, the accounts explain that FIFA have had to give up £97 million of this as a discount, to pay for transaction costs and also make a provision in case the income does not materialise.

Robin Dunham, an accounting analyst with City firm Charles Stanley, told Telegraph Sport: “It is not easy to understand the accounts. They are certainly very complicated. FIFA appear to have taken the liabilities off the balance sheet and that has the effect of making the accounts look better. If FIFA were registered in this country these accounts would not be acceptable. They would not comply with the Financial Reporting Standards.”

The auditors say the accounts comply with Swiss law but Harry Schmid, a Swiss member of the International Accounting Standards Board, told me: “If you have a quoted company in Switzerland they have to comply with accounting standards and give very detailed information. If you do not have exact description of accounting principle you are at a loss to know.”

The strangest element of the accounts is the note seeking to explain why FIFA securitised. At one stage, the note switches confusingly from figures in Swiss francs to US dollars without explanation.

Last Tuesday, during the FIFA finance committee meeting, attempts to approve the accounts were opposed by Senes Erzik, of Turkey, and Ismail Bhamjee, of Botswana. Their objections so upset Blatter that he said it was disgusting they were questioning the accounts and stormed out. Nevertheless, Blatter put out a statement, which is still on FIFA’s website, claiming that the accounts for 2002 had been approved.

Then on Thursday, Friday and Saturday, Blatter tussled with the members of his executive, trying to prevent them from setting up an investigations committee to make a detailed, independent audit of the books. Blatter fought hard and finally succeeded in having it called an internal audit committee. Blatter wanted it to be headed by the Argentine, Julio Grondona, one of his own supporters, but this was refused.

The main talking point was whether the committee could investigate Blatter himself. Blatter was adamant that they should not. He delayed discussion until fairly late on Saturday by which time many members, including Lennart Johansson, the president of UEFA, had planes to catch.

There were only 16 of the 24 members left when the matter was finally resolved. It was agreed that the internal audit committee would not be able to investigate the president but could call on experts and look at FIFA’s books.

One of the reasons why members want to investigate Blatter is that they do not know how much he earns — although it is believed to be £1 million a year — and how much he has spent on his office, which is almost like a parallel office to the main FIFA one, with its own press spokesman. Blatter refuses to divulge how much he earns and this provoked a furious row in the executive. The matter was again raised unsuccessfully by Isaa Hayatou, the Cameroonian head of the African federation.

There was a clash between Grondona, backing Blatter’s position and shouting in Spanish, and Hayatou, who speaks French. It all became confused and heated with interpreters struggling to cope.

Hayatou’s question about Blatter’s pay was significant. On Saturday, after the African executive have met in Cairo, Hayatou is likely to announce he will challenge Blatter for the presidency. A few months ago, Blatter promised him he wanted another term and then Hayatou could take over. But now the man from Africa seems ready to fight to bring some openness to world football.

Blatter will try every ploy to stay on. Fifty-two member associations who support him have called for an extraordinary congress and Blatter may call this just before the normal one scheduled at the end of May in Seoul to hold the election. Blatter believes whatever the executive say, he has support among the member associations.

© Mihir Bose


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