The Cricket West Indies (CWI) funding model for territories and venues is “broken”, according to a report by financial consultants, PKF which has created an uproar in the region and calls for the board to take decisive action.
The Pannell Kerr Forster (PKF) report was submitted in November last year with far-reaching findings and 28 recommendations but CWI has said very little about it. The publication of the report’s recommendations in Stabroek News last week prompted CWI President Ricky Skerritt to issue a statement denying that there had been any cover-up of the findings and stating that the board would consider whether to release it.
The funding model for regional cricket boards and venues was one of the major issues taken up by PKF as mandated by the Skerritt management which had replaced that headed by Dave Cameron. PKF was scathing about the financial relationship between CWI and the territories.
“The funding model for territories/venues is “broken”! It is not operating with the objective of optimising the overall (organisation’s) effectiveness and cost efficiency. The current funding model for the territories/venues is premised on a significant portion of each territory’s annual funding coming from CWI primarily as compensation for the hosting of various international, regional and local matches, tournaments and events …and various development programs and marketing initiatives”, the report said.
Other funding comes from local activities and merchandising. PKF however said that it was unable to validate these assertions “because the territories and local associations are no longer required (post 2013) to share their internal or audited financial statements with CWI”. Therefore, PKF said that CWI has very little if any meaningful sense of the financial/business affairs of the territories and their effectiveness in the discharge of their respective responsibilities.
For years, questions have been raised about the financial statements of the Guyana Cricket Board and its regional affiliates.
PKF said that it understood that the genesis of the many problems with the current funding model goes back to 2013 when the then President, Cameron removed the main oversight control that CWI had over recipients of its money.
“Thereafter, once an event budget was approved, it was not subject to further challenge. Through this action, in our opinion, a power shift occurred wherein some of the territories/associations became increasingly emboldened and less cooperative in terms of trying to work in the best interest of financial well being of cricket in the West Indies. The Board did not receive a comprehensive assessment if this change in policy and we did not see evidence of meaningful discussions and debate”, PKF said.
PKF said that the President took over the responsibility and perceived authority that should have been entrusted with the Chief Executive Officer and inaugurated a new policy where the approved event budget was considered as the final cost for delivering the match. The report said that if the actual cost was less than the budget the respective territorial board would gain but if the final cost exceeded the budgeted amount then the territorial board would accept the loss. PKF lamented that without the benefit of post-event reporting and a year-end audit, CWI has no useful insight into the territories’ commitment to the overall objectives of CWI.
“From our preliminary discussions, the current arrangement is somewhat sacrosanct”, the CWI report added.
It noted that it had not heard of a single venue declaring a “loss” from hosting an event.
“Accordingly, this practice may have incentivised territories/associations to act in their self-interest rather than the long-term financial wellbeing/sustainability of CWI as a whole: some (at a minimum) appear to protect their funding source by `gaming the system’ primarily by allegedly inflating various tournament related costs. As such, by default CWI as a significant conduit of funding have very little control over the cost efficiency of monies spent in the Territories”, the PKF report argued.
Tone
As a result of the shift in tone from the top, the PKF report argued that there was more overt pushback from some territories/associations against CWI managers.
“We have seen evidence that when some territories/associations are not pleased with what they are being told, they circumvented the particular manager/due process. This represents a further systemic breakdown in attempting to oversee the financial affairs and due process of the territories”, PKF said.
It warned that respect for the hierarchy by the associations/territories must be inscribed in the functioning policies and policed by the board and senior management.
“A power imbalance appears to exist between the territories and CWI – the territories have wielded such weight in recent years that the CWI operations and financial personnel have effectively yielded disproportionate influence to the territories, which has resulted in a seriously flawed funding model and organizational cost efficiencies”, PKF contended.
It added that this problem has been exacerbated by the fact that CWI owes significant sums to many of the territories and associations – approximately US$3m as at September 30th, 2019. It is unclear whether or not CWI has begun to clear this debt.
PKF asked whether the indebtedness could impair the relationship in bringing about possible changes in the extant territorial arrangements.
The report noted that the Government of Barbados paid their bid fee to CWI and the Barbados Director on the board at the time argued vigorously that the monies should be paid over to the Barbados Cricket Association on the grounds that Barbados was owed a figure in excess of that amount. PKF said it should be noted that in due course Barbados did receive two-thirds of the funds.
PKF also adverted to alleged abuse of the funding model which if left unchecked “will continue to erode CWI’s long-term sustainability.
It cited the following examples.
a) The prices presented by Guyana for bus services were inconsistent with previous experience and beyond any comparison with other venues.
b) The prices quoted by Antigua in relation to meals for the England tour compared to the cost of meals for the Indian tour.
c) The price quoted for laundry in Antigua differs substantially from comparable services in Barbados.
PKF said that over the last several years a “culture of divisiveness” has emerged from the breakdown in the delivery of a consistent tone by the board to senior operations manages and the territories.
“This has resulted in senior operating and financial managers’ effectiveness being marginalised”, PKF contended.
As a result of the polarization/turf wars, PKF said that it is difficult to have meaningful integration of the various parts to attain the best overall cost minimisation for the organization as a whole and that in `off’ years there is no meaningful curtailment in costs.
PKF further stated that there has been a loss of confidence in the fairness of the allocation of financial resources to territories and they must be provided with an alternative funding model that is founded on fairness, consistency, transparency and accountability.
PKF asserted that there is a disconnect between the hosting of sporting events and the importance of cost controls and there must be financial accountability and transparency.
In one of its recommendations, PKF said that a specific sub-committee of the board of independent directors should hold discussions with the executive managers and the territories on a more equitable and consistent formula.
Betting
The PKF report said that CWI received US$134,000 from a betting company via Switzerland on or about the 8th of August 2018 on behalf of the Dominica Cricket Association (DCA) from a third party.
“It appears to be an offshore corporation. It is unclear why the funds did not go directly to DCA. This money was paid over to DCA in three tranches – US$104,100 on 16th November 2018, US$15,700 on 2nd August 2019, and US$14,400 on 21st September 2019”, the report said.
It listed the following underlying concerns about the transaction: What due diligence was performed to ensure that the source of these funds was legitimate and the funds “clean” from an anti-money laundering compliance perspective? What measures were taken to minimize the risk that CWI may have (been touched) by money laundering?
It noted that the auditors were unable to find an executed agreement/bona fides for the transactions, and while the funds were supposedly earmarked for “cricket development” in Dominica, there is no evidence that CWI obtained confirmation from the DCA that the funds were used as directed.
Further, the PKF report said that in 2018, CWI entered into a five-year contract for a series of exhibition matches in Miami to coincide with the visit by an Indian team. The PKF report said “We understand that ICC (International Cricket Council) approved the venue and that this contract necessitated an upfront ICC sanctioning fee of US$200,000 with respect to the particular venue”. The report said that this initiative was championed by the former CWI employee but that PKF has not seen any substantive analysis tabled before the board indicating the potential benefits and risks for such an “untested financial commitment over a protracted term”.
The PKF report also on homed in on a loan from Digicel to a St Lucian international business company associated with the former CWI employee. The PKF report said that the loan of US$125,000 was made by CWI’s main sponsor Digicel to Resiliere Inc, where the beneficial owner was believed to be the former CWI employee. The loan was made nine months after the reputed beneficial owner was employed by CWI.
PKF said: “At a very minimum, this transaction appears to be a real or perceived conflict of interest situation that may be determined to be (a) breach of (the former employee’s) fiduciary duties”. The PKF report said that the core issues are whether the board was proactively aware of and sanctioned the transaction, the rationale of the board if it did give approval and any legal exposure that CWI might attract from the transaction. Underlining that CWI has been in a cash flow crisis on a recurring basis, the PKF report has also focused on poor governance by the board while recommending a series of changes to enable accountability and transparency.
The PKF report said that there are “fundamental problems” in the core accounting system so that information needed to effectively run CWI takes too long to retrieve to be of use in decision-making.
