FAI is at death’s door and only government intervention can save Irish soccer

Analysis: Huge failings in area of corporate governance across the board

After years of denial and defiance, the Football Association of Ireland’s (FAI) 2018 financial statements admit desperation and possible defeat. One of the country’s leaders on corporate governance, Professor Niamh Brennan, examines the key parts of the statements and sees very little light at the end of the tunnel.

Audit opinion

The auditors, Deloitte, have disclaimed an audit opinion, a very rare event in auditing. Deloitte's unwillingness to provide an audit opinion relates to the directors preparing the financial statements assuming the FAI will continue as a going concern and because of concerns about undisclosed transactions. The going concern assumption means that an organisation is assumed to be capable of continuing to operate for the foreseeable future. The FAI was unable to provide the auditors with evidence to support the going concern assumption. Such evidence usually comprises a cash flow forecast for a year from the date the board approved the financial statements (last Friday in FAI's case) showing that the organisation can meet its liabilities as they fall due. Unfortunately, the annual report reveals that the FAI's financial situation is getting worse, with negative cashflow in 2019.

Financial position

The FAI’s balance sheet brings its dire financial position into stark relief. It has total liabilities of €85 million, of which €62 million are due within one year. How is the FAI going to pay back these monies? It has no cash. It has non-current assets of €84 million, which look to me to be almost impossible to turn into cash to pay back the liabilities.

The alternative to going concern valuation is break-up valuation. The FAI’s main assets comprise intangibles of €57 million and its two shares in the joint venture company with the Irish Rugby Football Union (IRFU). That company holds the Aviva stadium. The FAI values its two shares at €24 million. On a break-up basis of valuation, how much would these shares be worth?


Undisclosed transactions

The 2018 annual report discloses multiple incidents of information withheld from the auditors. These include two contracts with John Delaney, neither of which were mentioned in board minutes and an option agreement with a sponsor, Sports Direct, providing it with the right to terminate its 10-year sponsorship agreement and seek repayment of sponsorship monies. In March 2019, the sponsor served notice on the FAI that it was going to exercise these option rights. The FAI now has to repay €6.5 million to Sports Direct, at €100,000 a month – another drain on FAI's already overstretched cash flow. A revenue audit in 2019 revealed underpayment of taxes which, together with interest and penalties, led to additional liabilities of €2.3 million.

The 2017 financial statements had to be revised for these undisclosed transactions, reversing a profit before grants of €5.2 million to a deficit before grants of €0.5 million. Net assets originally reported of €22 million dropped to €14 million in the revised 2017 balance sheet.

The loss before grants for 2018 is €5.5 million. At Friday's press conference, vice-president Paul Cooke said that the FAI will not breakeven until at least 2022 or 2023.

Consequent on the non-payment of taxes, the directors also had to correct their compliance statements of previous years, admitting they had not complied with the relevant obligations (i.e. tax obligations) of the Companies Act.

In the 2017 annual report, the directors stated [for each individual director] that they had provided the auditors with all relevant audit information. The 2018 annual report states that the directors had not provided all relevant audit information. Under the Companies Act, every director making a false statement is guilty of an offence carrying a fine of up to €50,000 and a prison term of up to five years. Is there a basis for prosecutions?

Internal controls

The annual report also reveals almost complete absence of a system of internal control. The board did not keep proper books of account. The FAI had no procurement policies or procedures. There was no internal audit or compliance function. The are no protocols for business cases, options appraisals or business justification. The FAI has no business plan. It is currently being drafted.

Did all this only emerge in 2018? At the end of an audit, external auditors provide the board with what is called a management letter. We should see the auditor’s management letters and the internal control weaknesses they highlighted in prior years.

Corporate governance failure

Ultimate responsibility for this debacle rests with the board of directors. Over many years, the FAI board allowed itself to be captured by its CEO, John Delaney. Board capture results in dominant CEOs, in effect, setting their own pay. The FAI board appears to have approved Delaney’s 2014 contract, without sight of the contract. This seems extraordinarily lax. Did Delaney influence the composition of the FAI board elected by the members? Was the FAI board composed of non-executive directors with personality types that made board capture easy?

The board, including Delaney, were in denial of the seriousness of the FAI’s situation, exemplified by Delaney claiming the FAI would be debt free by 2020. Secret efforts to fund the FAI meant that it did not acknowledge its problems. Management style seemed to have been more wishful thinking than business rigour. Such denial meant problems were not addressed.


The FAI is broke. Staff will lose their jobs. Football clubs will not receive FAI grants for the foreseeable future. Players will not be properly supported. Thousands of volunteers will not be supported. Fans will be let down.

Can the FAI be saved?

Vice-President Paul Cooke says the FAI is close to reaching agreement with its bankers to refinance its debt. Being close to agreement means nothing. Until the banks agree to refinance the FAI’s debt, the banks have not agreed to do so.

Barring some white knight turning up, there is no hope for the FAI. Honorary President for Life, Denis O’Brien, may feel that further generosity, of which there was much during John Delaney’s tenure, would simply be a case of throwing good money after bad.

The organisation is at death’s door. As I see it, only government intervention can save Irish soccer.

Niamh Brennan is Michael MacCormac Professor of Management at UCD Centre for Corporate Governance