SO HOW DID WE GET TO WHERE WE ARE?
Sport Australia has committed $13 million into the sport of equestrian in the past four years and, at first blush, this appears to be a tonne of money. With the high performance program and its money moved away from EA, the claim of such a big investment begins to unravel. Only $450,000 p.a. has been given to EA to look after its members in the form of a “sports business” grant. Put simply, of the $13 million, only $1.8 million has benefited the rank and file members over the last four years, and this appears to be used to offset the costs of running EA in the form of wages and administration costs. That leaves more than $11 million for high performance staff wages and high performance objectives for less than 20 athletes in the disciplines of Para-Dressage and Eventing. Showjumping and Dressage were not seen as medal prospects and did not receive funding for their activities.
So, $11 million for 20 athletes in the disciplines of Para-Dressage and Eventing! How much money do these athletes actually receive for their training, competition expenses and elite support network? Let me tell you right now in Australia that most of them receive nothing. In years gone by, certainly riders in the elite squad did qualify for funding towards competition expenses, travel, coaching, horse upkeep, etc. Not today. So where does that money go? Is there any transparency? No. This is a real concern.
Just getting back to the original point. Sport Australia really has only given EA $450,000 each year for sports business. So, over four years, that is a little less than $2 million. That whopping big $13 million number that came up in the Sport Australia letter on 3 June is mostly high performance money, which is completely separate to the EA. So, in actual fact, the EA is not nearly as dependent on Sport Australia if it does not have to be accountable for high performance funding. The question begs asking once we are all aware of this: Was EA at risk of becoming insolvent on 9 June as a result of the withdrawal of its government funding for sports business? I don’t believe it was!
With high performance moved to the responsibility of the Australian Institute of Sport (AIS) prior to the appointment of administrators, the true financial position of EA is, in my view, very clear.
The financials for 30 June 2020 are not available due to the voluntary administration and KordaMentha taking over on 6 June. However, what we can do is look at the financials for the year ending 3 June 2019. EA actually had a gross income of a bit more than $6.5million. Just from us members in terms of membership fees and insurance levies, we contribute $2.25million to the gross income of $6.5million. The EA is a very healthy business. Sport Australia contributes $450,000 to this income once high performance is cut away. A very nice contribution, however, with all due respect, it is not a straw that will break the back on EA financially if it is not forthcoming. Just like everyone else we would just have to tighten our belts a bit.
There is no doubt EA was in trouble with its governance, but to suggest that it was at risk of becoming insolvent as at the date of administration cannot be right. High Performance had been withdrawn and transferred to the AIS. The Sports Commission appeared to confirm that all its funding had been moved with it, leaving EA with the sole responsibility of looking after its grass roots members with nearly $1 million left in the bank and membership levies due to start flowing in from the bigger states of Victoria and NSW due for renewal just three weeks after the administrators where brought in.
The first meeting of Creditors on 19 June 2020 run by KordaMentha, was held in the week following the announcement of the administration. It was a slick and well-rehearsed affair which left most who took part in the virtual meeting with a confidence not seen of recent times that finally reform was on the way and members would receive a voice and a vote on matters involving the national body.
PowerPoint slideshows detailed the apparent duplication of effort across the organisation of EA and then the state branches, and the potential to significantly reduce costs from the top to the bottom. Reforming the EA’s constitution would give members a voice and a vote on who represented them at national board level. “One member, one vote” caught everybody’s attention and spread like wildfire through the membership as something that we all desired. Well, the state branches, that are the members of the EA, evidently did not share the rank and file membership enthusiasm for the “one member, one vote” call to arms. This has emerged as the biggest stumbling block in this restructuring process.
The problems with the meaningful restructuring should have been apparent then, but we missed it. The promises of removing duplication and giving members a democratic and transparent voice in EA could never be achieved.
Each state is an organisation within itself. All are separate legal entities (incorporated associations) and all the states operate for the benefit of their members. The states all run sustainable businesses and all are recognised by their respective state governments as peak bodies at state level. Each state body is answerable to their own membership, and all states appear to be profitable. It is state body membership that gives members a right to be participating members of EA. The models put to the participating members and creditors by KordaMentha were asking the members to vote their state bodies out of existence. Running our state branches are lots of really good people who rely on their job for existence. Right in the middle of Covid-19, KordaMentha’s new restructure required the states in the first instance to sack themselves. Well, that was never going to happen.
One of the major flaws — and as time progressed many flaws became apparent — was that constitutional change cannot come into effect unless the state branches approve any final changes. I just can’t imagine any of the state branches, all apparently running profitably, would even consider dismantling themselves in favour of a national body that doesn’t even exist yet.
Other flaws appearing early in the process was that the administrators were charging $66,000 for the first two weeks of work.
In these creditor meetings, the members were told that they had a voice that, in actual fact, was not true. There is no doubt that from the outset Sport Australia and the EA staff always had the votes to support the administrators, KordaMentha. Members were given one single vote, a total of 18,000 if we all voted. We might have been told we had a voice but in reality, we never did. Sport Australia did vote and used its 370,000 votes to force change on the EA. The members were in actual fact also in full support of restructuring along the lines originally drafted out by KordaMentha at the first creditors meeting on 19 June. However, if the members had decided against the restructuring, their 18,000 votes were nothing alongside Sport Australia’s 370,000.
I have been advised that traditionally, government departments like Sport Australia or the Australian Taxation Office, which are often creditors in these situations, do not get involved with voting on voluntary administration matters. The fact that SA used their 370,000 votes to force change on the EA is very concerning, especially when it was the withdrawing of the SA funding that apparently led to the appointment of the administrators in the first place.