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Possible Merger of SD and FSF

BST09/07/2018

Background:
A possible merger of Supporters Direct (SD) and the Football Supporters Federation (FSF) has been a discussion point for a number of years and now it is necessary for SD members to make a decision. This is because of important changes to how SD’s work can and cannot be funded once its current funding arrangements come to an end in July 2019.

Both SD and the FSF receive the majority of their funding from the Premier League Fans Fund (PL Fans Fund), wholly funded by the Premier League. For the 2016-19 funding cycle, the Fans Fund committed £983,000 to support SD’s work. Towards the end of 2016, the Fans Fund panel asked SD to look at potential savings to be made from operating a shared back office function with the FSF, Level Playing Field and Kick It Out. The study found that each organisation was already run in a fairly lean fashion, so sharing services but remaining independent offered few productivity benefits.

The PL Fans Fund panel then suggested that a more radical move to a single national supporters’ organisation might benefit all parties, based on its stated belief that a single organisation could lead to:
• less duplication and better value for money
• greater efficiency, creating sustainability and longevity
• a stronger collective voice for fans
• continuation of both organisations’ missions, with skills, expertise and knowledge retained

The PL Fans Fund has also stated that funding for any new organisation would be commission-led, in that it will need to deliver outcomes that have been formally agreed with the Fans Fund Panel. The Panel must also be satisfied that funded work is operating with maximum efficiency, with a focus on avoiding duplication. Attaining value for money will continue to be critical to the PL Fans Fund, regardless of what SD and FSF members decide at our respective AGMs. This will be reflected in its consideration for core funding beyond the current agreements.

In light of the Fans Fund’s request, the SD Board has sought to develop two proposals for the future of SD – one as part of a new single supporters’ organisation, and one as a continued distinct organisation - with a view to presenting a clear and informed choice for supporters trusts to make.

SD has actively engaged with the FSF to investigate and evaluate the desirability of the creation of a new single supporters' organisation, combining, protecting and enhancing the talent, expertise and mission of both SD and the FSF, recognising that a single supporters’ organisation can only be on the basis of a democratic structure, underpinned by strong governance and robust financial control, operating with a modern streamlined board and council structure, and enabling the continued support for supporter ownership in a range of sports.

ln parallel, SD has investigated and formulated alternative proposals to remain and continue as a distinct organisation, with potential scope to develop an even broader range of activities.

18 months into a process, with a huge amount of work undertaken behind the scenes, SD’s Board having considered both options in detail is making a recommendation to the membership on this decision. However, the final decision is for member Trusts to reach by reviewing the information, assessing the potential benefits and risks, and casting a vote for their preferred option. The FSF, in parallel, is putting a set of proposals regarding a single new organisation to its members at the FSF AGM, which will follow immediately after the SD AGM.

Keep In View:
Before looking at the alternatives, it is worth keeping in view what SD has been able to achieve for supporters and for communities over the last fifteen years.

SD has secured a formal role for supporters and enhanced club governance across sport in a number of ways:
• helped supporters of football and rugby league clubs set up over 200 supporters’ trusts
• led the promotion and implementation of structured dialogue between clubs and fans
• promoted and supported the role of “Supporter Directors”, who now represent their
trusts on the boards of 75 clubs
• played a critical role in the creation of the UK’s 52 community-owned clubs
• created the opportunity for mandatory Supporter Liaison Officers
• policy papers and lobbying have led to improved rules on insolvency, financial monitoring and reformed clubs
• created the SD’s “Hub” for supporters to network, share experiences and good practice
• helped save clubs, intervening in more than 100 insolvency events since our formation
• leading the way in protecting stadia through Asset of Community Value (ACV) status
• helped bring the issue of good governance and stakeholder rights to local sports clubs
• our members have collectively raised over £50m, invested back into sport and community
• our groundbreaking work has spread throughout the world

SD’s impact has extended beyond sport:
• helped inspire local partnerships between sports clubs and the community, including charitable activities to enhance local facilities
• brought project management skills and templates to local groups
• inspired a culture of volunteering at many trust-owned and influenced sports clubs
• introduced Community Interest Companies, Community Benefit Societies and other mechanisms to widen club ownership and help raise funds
• encouraged a culture of co-operation amongst supporters to achieve community ends
• helped incorporate an ethical dimension into the management of sports clubs
• promoted democratic rights deeper into communities
• created civic pride through volunteering and community action in sport

Everyone associated with Supporters Direct is proud of our record, and we want to build on those achievements in the interests of supporters and communities. How the mission of SD is best protected, enhanced and developed is a key consideration for Trusts ahead of the AGM in July.

Okay – the two options:

Option 1) The case for a single new organisation.

The new organisation will exist to represent, promote and advocate issues of concern and interest to its membership, specifically incorporating the mission of both the FSF and Supporters’ Direct (SD) into the representative structure, constitution and operating arrangements for the new organisation. The new organisation will be committed to delivering the current activity, policy and priorities of both SD and FSF as an integral part of a single, national football supporters’ organisation.

The current work of FSF and SD, where distinct, is in many ways nevertheless linked. Many of the day-today supporter issues which FSF deals with arise partly as a result of poor governance in the game and insufficient engagement with supporters from clubs and could have been avoided with a greater proportion of clubs having board level supporter representation or being community owned. Forming a new single organisation recognises that link and is designed to enable supporters to have a strong and cohesive voice to advocate for the broad range of supporter issues.

The delivery model will be network-focussed, with national democratic representation structures organised according to levels of the football pyramid and specialist protected networks for community owned clubs and diversity issues. However, where there is a desire, there will continue to be opportunity to meet and collaborate with colleagues on a regional basis. The network structure will give supporters’ groups a single point of contact to provide support from individuals with experience and knowledge at the relevant level of football. The network model will enable a single representative body to assist and encourage supporters to work together to achieve common aims.

The existing SD and FSF staff possess a broad range of capability and experience which if brought together will provide a strong, balanced and highly skilled workforce in the interests of football supporters across a wide range of issues. This will also ensure that from the start, the missions of both the FSF and SD can be protected, enhanced and developed in a new organisation with the relevant specialist knowledge and experience embedded in the professional staff team.

The existing locations of staff and offices would also mean that the new organisation would begin with a spread of staff, with both a London and Sunderland location. There would be no immediate intention to close either office.

It is essential that areas of current SD work such as governance, reform and supporter ownership retain priority and focus in a new single organisation. The leadership of both organisations have stated their determination that the mission of SD will be protected, not least because of its influence on the cause of other issues and concerns to supporters. The new organisation will maintain a policy position that supports and promotes community ownership of clubs and supporter shareholdings where possible. This, and other related governance and supporter engagement work will be ringfenced within the new organisation, with a specialist department dedicated to the pursuit of those objectives. This will further be enhanced with organisational KPIs designed to incorporate this as a priority area of activity against which the organisation’s professional leadership will be measured, to be developed by the proposed interim board. The FSF National Council and SD Board members have been working closely on proposals for further reform to governance of the game, illustrating the existing recognition of the significance of these issues to supporters.

Representation of community-owned clubs will be ensured through a specific network and council, with consequent guaranteed membership of the board for supporter organisations of community owned clubs.

Possible risks with option 1.
There could be a dilution of SD’s core mission. There is a commitment that the new organisation will deliver all historic SD mission. This is contained within the objectives of the new organisation, and there will be ringfencing of activity associated with that commitment. However a new organisation will still be reliant on funding to ensure that governance, reform and community ownership would continue to receive adequate support and resources, the same could not be guaranteed for core FSF work. The agreement in principle to protect SD’s mission, the initial three year funding commitment, the intention to create a specific department for trust issues and the guarantee of representation at council and board level will help, but here remains a risk that issues become diluted by the multiple interests of so many fans and fans groups which are compressed into one national organisation.

SD’s wider objective of improving governance in sport as a whole, which has had considerable and widespread support, is likely to be impacted by the necessary focus on football in the proposed new organisation.

Option 2) the case for keeping SD separate.

A distinct SD would continue to devote all of its skills, expertise, energy and available resources to its core purpose: to promote good governance in sport and enable the development of sustainable clubs based on supporter’s involvement and community ownership.

This mission and focus of SD is:-
• focused on the power of supporter involvement in club governance: giving supporters
not just a voice, but also a right to be heard.
• that modern governance in sport is best achieved by giving supporters a seat at the table:
whether through structured dialogue, share ownership, supporter directors or full
supporter/community ownership.
• to help supporters use the cooperative/supporters’ trust model to mobilise and organise
formally and self-govern with credibility.
• a tight focus on governance and formal supporter involvement makes it easy to extend our
reach from our core sport, football, to others.

When it comes to SD’s future delivery model, it must be recognised from the outset that “business as usual” is not an option. SD has become reliant on one funder, the Fans Fund. Changes to the way the Fans Fund funds projects will reduce the likelihood of SD securing its core funding from the Fans Fund. This is particularly true of SD’s role as a representative members organisation.

Continuing as a distinct organisation, therefore, carries significant risks. A vote to remain distinct must be followed by a] a vigorous and concerted effort to seek new funding avenues and b] a radical revisiting of SD’s operational structure and delivery model.

It is reasonable to believe that a continued distinct SD would remain competitive for funding, including Fans Fund funding, in a number of our key delivery areas, including helping crisis clubs, promoting supporter ownership, support in setting up and running a trust, supporter directors, independent directors, and protection of facilities (e.g. assets of community value).

It would also have a decent claim to securing funding to support work in structured dialogue,
volunteering development, lobbying for sports reform, promoting good governance, supporting mediation at both club and national level, and network building, although the route to sustainable funding is less clear for these areas.

SD has the potential to increase its work with funders who support work around community assets, community business and the citizenship agenda, as well as seeking opportunities for project sponsorship with companies who share its values.

Furthermore, SD would not stand still in terms of its own democratic structure. If members vote to continue as a distinct organisation, the Board would move quickly to consult and introduce measures on the following fronts:
• recruit independent non-executive directors to the SD Board
• new representation in SD governance structure from network areas
• representation from other sports
• new diversity policy for Board and Council representation

SD would face a period of uncertainty and upheaval, delivering the work where funding might be available, both within football but starting to focus more resources on other sports. SD would need to re-emphasise and demonstrate the value of its sports and community impact and concentrate on what it can achieve through constructive change in sports governance, mirroring the wider focus on improving governance in all institutions that have public responsibilities.

If SD continues as a distinct organisation, trusts from non-football sports will continue to enjoy full and equal membership of SD. As above, the SD Board would explore ways of enhancing non-football sports’ representation within SD’s governance structures. SD’s support for non-football trusts and clubs would continue to depend on securing funding from outside of the PL Fans Fund.

Potential advantages of remaining separate.

First and foremost, preserving SD’s mission. SD and the supporters trust movement has delivered a radical change in how supporters’ voices are heard and advanced new ownership models that are suitable for many clubs, securing government and UEFA backing in the process. Slowly but surely, the supporters’ trust movement is winning the argument.

Creating this change requires a distinct and focused effort. Vital governance issues are always at risk of being crowded out by more pressing day-to-day supporter issues. By continuing as a distinct organisation, SD minimises this risk.

Provided the funding exists an independent SD can guarantee that it would prioritise resources and energy to push forward trust issues in the same way that it does today, ensuring that supporters’ trusts continue to get the support they need.

Secondly, more focus axhieves better results. A distinct identity and a focused mission have allowed SD to achieve significant results in the complex areas of club governance and stakeholder rights. It’s hard enough to press for supporter and stakeholder rights, many of which are still evolving, but in a large organisation with a multi-faceted agenda and many campaigns it could well prove impossible.

A continued distinct SD acting as a campaigning organisation can credibly and persuasively advocate and still be respected within sports authorities and clubs. That is why it is common for distinct organisations to operate within one field (e.g. there are multiple cancer charities and multiple mental health organisations).

Thirdly, extending SD’s impact across other sports. We are campaigning for and supporting something more than just change in football. Our work already extends to rugby league, rugby union, ice hockey and others. Our ambition is to use the knowledge we have gained in our core sport of football to change the relationship between fans and sports across the board.

We are recognised as world experts in supporter-led sports governance. We developed and incubated SD Europe, now an independent network of European supporters’ associations, and have been approached by sports and supporters’ organisations from around the world for advice and guidance.

Possible risks with option 2.

Mission failure because of lack of funding. There is a risk that, in keeping SD’s mission uncompromised by continuing as a distinct organisation, the supporters’ trust movement will end up cutting itself from vital Fans Fund funding with no clear replacement. This will compromise SD’s ability to deliver its mission, and in the extreme case, limit SD to operating as fully volunteer-run democratic membership organisation with little or no ability to provide services to members.

Short-term loss of key staff. Even if SD is able to find new, stable sources of funding over the medium and long-term, there is a risk that the short-term disruption of SD’s restructuring will lead to the loss of expert, talented and enthusiastic employees, taking with them deep institutional knowledge.

Move of focus away from football and into other sports. Remaining independent will require SD to seek more work in other sports, with the likelihood that existing resources will be moved away from football and allocated elsewhere. Just as some may see this as a positive step as SD broadens its reach some within the football community may consider it a
negative move as SD’s level of support of its football trusts reduces.

Some financial information:

Supporters Direct has prepared and considered forecasts evaluating the financial implications of two optional scenarios following expiry of the current Fans Fund grant cycle in July 2019.

1. A new single supporters’ organisation
Discussions have been held with the FSF regarding accounting, budgeting and the scope for economies of scale following a combination of the two organisations. A pro-forma consolidated budget was prepared for the combined entity for the first year of operation, based on key assumptions regarding income and expenditure.

Income -
The Fans Fund has undertaken that grant income for a combined entity in a new grant cycle would be not less than the total paid to the two entities over the three years from August 2016 to July 2019. This has been assumed to mean an equal annual amount over the following three years: in the current cycle, SD’s grant has reduced each year. Income from all other existing sources is, in material terms, expected to be unchanged.

Expenditure -
In the discussions with the FSF limited economies of scale could be identified, not least as a consequence of the two entities being based at separate locations approximately 250 miles apart, albeit there are opportunities related to combining the London offices. Consequently only minor cost savings were recognised in the pro-forma budget.

In the event of the single organisation being approved a more detailed exercise would be undertaken to include a comprehensive review of all costs.

Conclusion -
Based on this budget there is reasonable assurance that the combined entity would be financially sustainable.

2. A continued distinct Supporters Direct
The forecast for an independent SD is merely a continuation of SD’s normal budgeting process, projecting forward to 2019 and 2020 and based on the following key assumptions.

Income -
By contrast with the scenario for the combined entities, the Fans Fund has given no commitment regarding grant funding beyond July 2019 should the two entities remain independent. Moreover, it was indicated that grant awards would be “commission based” and so SD would have to bid competitively for future grant funding.

Consequently, SD must accept that there can be no guarantee that funding would even remain at the level of the existing three year cycle, a period in which SD has either reported or is budgeting for annual deficits, as explained in SD’s Financial Statements for 2017.

This budget therefore considered alternative scenarios for Fans Fund grant income, ranging from it continuing at the level of year 3 of the existing cycle (2018/19) to a 30% reduction on that figure. Income from all other existing sources is, in material terms, expected to be unchanged.

Expenditure -
A detailed review of current expenditure has failed to identify scope for material cost savings, conceivably up to £100,000 per annum, without compromise to the effective delivery of SD’s mission. SD already runs a very lean operation and, since significant cost savings have already been achieved in recent years, further savings would likely be resource based.

Conclusion -
Based on this budget, it is clear that, if SD is to remain financially sustainable while maintaining the existing level of support to members, it will be essential to generate income from new sources either by establishing relationships with new funders or by diversifying its operations. It is likely that, if successful, this funding would be to support work in sports other than football and therefore our activity supporting football member trusts would decrease.

If these initiatives were unsuccessful, it would be necessary to scale back the Society’s operations in order to ensure that essential cost savings could be achieved.

Nick Igoe
Chief Financial Officer
June 2018

Finally, the Board’s Recommendation:
As stated above, the final decision is for member Trusts to reach by reviewing the information, assessing the potential benefits and risks, and casting a vote for their preferred option. The Board of SD, its CEO and staff have gone to great lengths to understand and explain as candidly as possible the issues, risks and opportunities of the two options being put forward at the AGM. This has involved a great deal of soul searching and discussion to help the board decide its own view and make a recommendation to members.

It is clear that there is a threat of reduced funding from our principle funder if SD decides to remain as a distinct organisation. SD would therefore need to attract funding from other sources or reduce its activities. Just as forming a new, single organisation will result in significant change, so will continuing as a distinct entity.

Therefore in the short to medium term there are financial benefits for SD’s operations by joining with the FSF into a new organisation and some degree of predictability of future funding for the next three year period, but there are risks that the focus and mission of SD’s work would be lost or reduced in a larger organisation with a much wider range of issues and campaigns to undertake compared with the tight focus on better governance and supporters’ rights that is the essence of SD’s mission.

The Board is acutely aware of the successes and impact SD has had since its formation and many of these are laid out in the pack. The successes came from the power of its arguments in convincing sports authorities, clubs, government, and ordinary fans that there are new and better ways to operate football, and other sports, for the benefit of all, and to formally embed the supporters’ voice in the ownership and governance of sport.

While appreciating the effort that has been made both by, and with, our colleagues in the FSF to develop proposals to bring the two organisations together, and having considered and discussed thoroughly all of the information that is provided in this pack, on balance and by a significant majority, the Board’s judgement is that the benefits associated with being part of a new, single organisation are outweighed by the risks associated with the potential loss of focus on what is, and has been, SD’s core purpose over many years.

The Board is therefore recommending option 2 to member Trusts, that SD should continue as a distinct organisation, and requests that you take this recommendation into account when making your judgement on how your Trust will vote on the resolution which will be tabled at the AGM.


Supporters’ Direct Board
13th June 2018

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