Here’s what I understand about the IRFU model, for what it’s worth. The IRFU does 5 big things commercially, and lots of small things. The big things are: it runs the national side, and it runs 4 provincial sides. It does the former directly from HQ in Dublin, and it does the latter operating through branches in the 4 provinces, to which it appoints local managers reporting to a “CEO” (a misnomer, as the role is in fact a local branch manager). So key point number 1, Ulster *is* the IRFU, acting through its local branch – you see a lot of comment which talks of Ulster and the IRFU as if they were unrelated third parties.
It is and always has been the case that the national team makes a profit and pays all the bills, and the provinces all run at a loss and require ongoing subsidies in one form or another from HQ. (Yes even Leinster, even though they bring in more commercial revenues than any other province, taking into account central contracts etc they would still run at a loss on a fully standalone basis). The surplus generated on the national side basically becomes the ceiling on the funding available to the provinces.
To put this in context, you may have seen talk of Ulster’s deficit being £1m in 2022/23, in fact the ‘real’ deficit, stripping out IRFU funding was more like £5m (on turnover of £12m) – grants of over £4m were remitted from IRFU, 35% of total income. Key point number 2, all provinces are reliant on ongoing funding from IRFU, this is the rule, not the exception.
HQ delegates authority to manage the day to day operations to the branch management teams. Annual budgets are submitted by branches and
agreed with HQ, with funding levels agreed and provided under SLAs.
The fact that the provinces are effectively cost centres gives rise to a risk of moral hazard. When the default is that someone else is stepping in to pick up your tab, there is an incentive to run less of a tight ship than you would if it was your responsibility. So for example, it’s not hard to imagine the provinces having an incentive to try to push through unrealistically ambitious commercial budgets to justify a larger player cost budget, enabling them to carry a bigger / better squad. If the IRFU / province relationship was more akin to a private equity investor / portfolio company relationship, then management could be kept honest by a credible threat of withdrawal of follow-on investment or disposal, with the ultimate sanction being initiation of insolvency proceedings – how credible are any of these in the IRFU set-up? Not at all… For good or ill the IRFU and its branches are bound together and destined to keep limping forward even when things don’t go as planned. (Case study being Munster’s almost comically ambitious projections for Thomond)
What has happened with Ulster this season? Well they were budgeting to make a loss, but it seems as if their financial performance has been adverse to budget. So, mindful of moral hazard, what does the IRFU do? Well it basically does what it has been doing, i.e. makes a bit of a scene, makes noise about imposing cost cuts on the management team etc etc – the IRFU needs to try to incentivise the branch in question to up its game, rather than just turning up and writing a cheque. But at the same time, ultimately it can’t afford to over-egg the pudding, and cut off its nose to spite its face. It needs to incentivise good financial discipline in the branches, but it also needs to keep the provincial sides firing on as many cylinders as possible.
This is not that unusual a situation – so why is it getting so much profile? One reason is that alone among all of the provincial branches, Ulster is the only one to publish a full set of audited accounts, which lays everything out in inglorious detail. So Ulster’s is the only head above the parapet – the accounts are prefaced by statement after statement from CEO, Secretary, Treasurer all talking about how difficult the conditions are, the loss of the La Rochelle game etc etc, all of which is fine, and all of which would also appear in the financial statements of the other provinces if they also published them – but they don’t! So the press and social media only have Ulster’s to get their teeth into… If I was FD of Ulster Branch, the first thing I would do is to meet with the auditors to discuss the absolute bare minimum that I would statutorily be required to file, and do away with everything else.
I think the current doom and gloom over Ulster’s finances is very much overdone – I have seen some frankly mental comments around the place, literally worrying about Ulster’s solvency. Which is crazy, yes management will (justifiably) get a bit of a punishment beating, cost-cutting will take place, but ultimately when the IRFU is seen to get its pound of flesh, it will seek to make the pill less bitter. It is ultimately not in the IRFU’s interests to overdo things and leave Ulster utterly uncompetitive – it wants as many dice as possible to roll each season for knock-out games, gate receipts, etc etc.
That said, there are big questions out there about future years for all 4 provinces – which I’ll come back to as it’s now 10.30 and I’m knackered
