Equestrian Australia (EA) announced that it was going into voluntary administration on 9 June, 2020, and appointed KordaMentha as administrators. The reasons were that EA directors Peter Toft, Cathi Collier, John Glenn and Helen Hamilton-James believed that without Sport Australia funding, the organisation was at risk of becoming insolvent.

“One member, one vote
caught everybody’s attention
and spread like wildfire.”

So, this news that Sport Australia funding was being withdrawn was certainly a surprise to the rank and file horse riding members, and also of surprise to the EA direct members, which are the states — Equestrian NSW, Equestrian Queensland, Equestrian Victoria, Equestrian Tasmania, Equestrian South Australia and Equestrian Western Australia. Complicated! Rank and file horse riding members are members of their respective state EA branches, who in turn are members of EA.

Also, the fact that the EA was at risk of becoming insolvent was a huge surprise to everyone, rank and file members and the state branches.

The voluntary administration (VA) was announced on 9 June and, after a short delay, correspondence dated 3 June from Sport Australia was produced, apparently supporting the position of the remaining four directors that EA could not continue without government support.

The Sport Australia letter dated 3 June basically says that EA governance has fallen short of acceptable standards and been marked with obvious instability. The recent resignation of Dr Ricky MacMillan as chair after only six months, and the resignation of another director after only four months, makes a total of eight directors who have now resigned and three chairs in the last 16 months.

Well, from a rank-and-file member’s point of view there certainly can be no argument with the EA governance being a catastrophe.

The 3 June letter from Sport Australia went on to observe that:

•    EA has received more than $13 million of taxpayer investment in the previous four years.
•    EA’s governance is of interest as a result of that investment.
•    The sport’s national governance has proven itself manifestly unfit for the purpose.
•    The composition of the EA Board has of recent times been marked by obvious instability.
•    EA has declined on numerous occasions to engage with Sport Australia on matters of safety.

Sport Australia took the following actions:

•    Funding for sports business in the sum of $450,000 for the 20/21 year was withdrawn.
•    Responsibility for the High Performance (HP) program was transferred to the Australian Institute of Sport, including all existing funding and responsibility for staff prior to the announcement of the appointment of administrators.
•    A direction that EA repay any unspent Sport Australia funding.
•    Sport Australia undertook to revisit its position when EA demonstrated it had developed and implemented a new governance model that was structurally democratic, representative and stable.

It appears likely that this Sport Australia letter was penned after considerable discussion between Sport Australia and the remaining four directors, and after seeking advice from KordaMentha. KordaMentha, in their declaration of relationships, identify a Zoom meeting with EA directors John Glenn and Helen Hamilton-James on 27 May. This meeting was explaining to the directors the voluntary administration process.

The voluntary administration was announced to members on 9 June as a fait accompli without any consultation with the states or the rank and file members.

The voluntary administration announcement by the EA board blindsided everybody associated with the sport. I believe that the state bodies were not informed of the appointment of the administrators until 30 minutes prior to a public statement being made.

The EA board had clearly been in discussions for at least two weeks prior to this announcement and I think a search of KordaMentha accounts will show communications from the EA board going back as much as three weeks before the announcement.

Throughout the process John Glenn seems to have been the main contact director, which is to me very peculiar in that it was my understanding that Peter Toft was the acting chair of EA upon the resignation of Dr Ricky MacMillian.

From a member’s point of view, this is zero transparency — actually, Sherlock Holmes secrecy — and no leadership or structure in who we, the members, are being represented by. For me this is just chaos.

“Sports Australia did vote
and used its 370,000 votes to
force change on the EA.”

The next very interesting letter to appear is correspondence from the Australian Olympic Committee (AOC) dated 15 June and signed and by the CEO Matt Carroll: The AOC is aware of the need for organisational reform of EA, which included plans for real and specific sports activity on a “whole of sport” basis, which includes participation, pathways, high performance and importantly, safety. The AOC further warned that it would need to be satisfied “that the directors (of EA) were representative of each of the members” and suggested “that this should be achieved free from outside interference, including Sport Australia”.  There was also what appeared to be a genuine offer to provide any assistance and support in achieving those objectives.

Sport Australia has been pivotally involved in major staff appointments at EA for years, including CEOs and high performance managers. To now suggest that EA’s governance has fallen short of an acceptable standing of recent times does have a bit of a hypocritical ring to it, especially when it is SA that has been a major participant in the appointment of those in charge of ensuring that the EA operates in an open, transparent and democratic manner.

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.

“The EA needs to represent
the big picture and how our
members can be part of it.”

QUESTIONS THAT NEED TO BE ANSWERED 

How did $370,000 of Sport Australia funding sit unspent in the EA bank?

SA only committed $450,000 for sports business in the 2019/20 year… how was it that $370,000 was left just three weeks prior to the end of the financial year? Surely EA would have either spent the original $450,000 grant or be spending the final dollars from that grant. Just keep in mind that the EA was supposed to be almost insolvent. Why was there a lazy $370,000 lying around in their bank account? On a dollar-for-dollar basis, $370,000 translates into 370,000 votes at creditors’ meetings. This of course makes one think that Sport Australia was very aware of the voluntary administration long before it transpired and had manoeuvred into a position of influence.

I believe EA members should have had over three million credits at their disposal in the creditors’ meetings.

At these creditors’ meetings, EA members were treated as members with much of their membership having expired. So, we pay $208 in NSW for a Senior Renewal. This would mean I am a creditor of 208 votes on the first day of renewal. This number reduces each day by 56c by the KordaMentha equation of allocating membership credits. So, at the first creditors’ meeting, which was near the end of the financial year, I had 12 votes left as a creditor or member at that time of year. Well, in actual fact I pay my membership to ENSW, which then is levied by EA. I think it is reasonable to argue that a levy does not depreciate like a membership. I am not sure that a membership depreciates either actually. We are levied for insurance. At the end of the financial year my insurance has not depreciated in value from when I first paid at the start of the financial year. The state branches contributed at least $2.2 million in levies to the EA. That means they should have been creditors for 2.2 million votes. That would have changed the creditor voting run by KordaMentha.

Initially, KordaMentha ignited the passion that we all have for horses and horse sports, and they told us —the rank and file members — what we wanted to hear. But I am not convinced they really understood the structure and the passion. As corporate undertakers, KordaMentha are used to picking up the pieces and tidying up the mess of insolvency, all within a very tight legal structure that usually has no pushback. Traditionally, it’s the administrators who hold all the power and they operate with this in mind.

How was EA talked into this process? Was it because of governance issues, or because of outside influences such as Sport Australia, or both? I think the EA board made a very unwise decision and what the administrators KordaMentha underestimated was that the states, who were the EA members, were not broke and not destitute. Governance might not have been the states strongest point, however, they were very healthy and, at the end of the day, fought back to protect their existence with a vengeance. So much so that although KordaMentha does get paid by us members for their efforts, they have had to seriously back down and the rank and file members are left with very little for quite a stressful experience —and we will be relieved of around half a million dollars. Not bad for a little company that was supposed to be on the verge of insolvency.

WHAT DO WE HAVE TO LOOK FORWARD TO? 

•    The latest draft of the constitution offered by KordaMentha in conjunction with the state branches effectively hands control of EA back to the state branches with the power of veto over members’ wishes.
•    So much for the “one member, one vote” idea.
•    The members certainly can call a special general meeting and sack the state boards if they really feel an issue is worth the effort. Sacking a state board is not a new process. We have always had that option and it has, to my knowledge, never been exercised.
•    I do think through this administration process that members have very clearly stated they would like reform. I think the states have very clearly resisted reform. I do, however, think the states are much more important and do a lot more work than they are perhaps given credit for. Clearly, transparency and communication are very poor at all levels of Equestrian Australia.
•    I think the members should be able to put forward nominations for the EA board, full stop. A nominations committee should not have the power to “sanitise” the candidates who the members would like to put forward for the national board.
•    The high performance financials desperately need to be transparent. An allocation of $13 million over four years is enough to give Australia one of the best high performance programs in the world. It is a long way off that at the moment.
•    Personally, I feel very strongly that KordaMentha has very clearly not delivered what it promised. KordaMentha really could only be involved with the EA from an administration point of view if the EA was in danger of becoming insolvent. It is my opinion that at no stage was the EA in danger of insolvency. I feel that KordaMentha should refund all monies paid by the EA to date and decline to charge any further fees to complete the administration process.

At the end of the day, we will get a new EA board and we can all hope that a new era of stability and transparency and good governance will rise out of the ashes. I think the KordaMentha experiment is a good reminder to all of us that there are no miracles out there and we just have to work hard at what we want. I also think that handouts from Sport Australia are wonderful on the surface but not very healthy at the end of the day. We need to have much clearer goals on increasing participation and membership right from the grass roots up. We need to be proactive in promoting pathways in all of the Olympic disciplines and this promotion must be available to members. We need to assess where we are at in the high performance expectations and then where we need to be in four years’ time and how we get there and then action the programs. We need to at long last recognise the industry side of our sport and all of our goals need to have a serious safety component as part of the promotion.

The EA needs to represent the big picture and how our members can be part of it.

Cheers,
Heath

EQ

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