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Owen: IOC Says it Redistributes 90 Percent of Revenues, but Does it?

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IOC President, Thomas Bach, visited the Eleonas refugee camp in Athens, Greece. Photo: Ian Jones/IOC

The International Olympic Committee (IOC) likes to say that it redistributes 90 percent of its revenues.

This is Thomas Bach, IOC President, on page five of the body’s recently-published 2016 accounts: “Within these pages you can see that we are distributing 90 percent of all our revenues to the world of sport, athletes, the 206 National Olympic Committees (NOCs), the Organizing Committees and the International Federations (IFs).”

The figure crops up again on page 24. And page 102. And, oh look, page 104.

I have often wondered about this magic number: for one thing it seems to me that IOC central costs have been rising in recent times, and are set to climb further; for another, the claim seems open to interpretation. Redistributed to whom? IOC adjuncts like Olympic Broadcasting Services (OBS) or the Olympic Channel; or needy athletes from Venezuela to Vanuatu?

So I thought it would be interesting to try to work out just where the IOC did spend its money over the 2013-2016 quadrennium.

To accomplish this, I have referred solely to the relevant IOC accounts, and particularly the Combined Statement of Activities and associated Notes.

As has been widely reported, the IOC generated a bit less than $5.7 billion over its last completed quadrennium. Actually, after taking into account financial and associates’ losses, we are left with just over $5.6 billion.

Expenditure detailed in the statements of activities for the period comes to rather less than $5.4 billion. But the cash flow statement reveals $225 million of net cash generated in 2016, so the income and spending sides of the ledger appear approximately to tally.

The chief difficulty in working out how the income was actually used is that the categories in the statements of activities are rather vague: much the biggest item, for example, is “revenue distribution”, which could mean anything; similarly, “TOP Program marketing” tells you where the money came from, but not where it is being spent.

So I have drilled down into the Notes to try and come up with an expenditure itemization that makes sense in terms of what the money was used for, rather than whence it was derived.

To a certified Olympic anorak such as myself, and presumably a number of you, I think the results are quite fascinating.

For example, given that the sum of four years of IOC operating expenditure/central operating and administrative costs, as originally presented, comes to more than $670 million, how, I wondered, could the IOC possibly claim to have redistributed 90 percent of its revenues, except by including its own staff?

Unless I am much mistaken, 10 percent of $5.6 billion is $560 million.

No-one disputes that the IOC pumps oodles of cash into sports, some of which would not survive in their present form without it, but why overstate the case?

And then I noticed something.

In 2015, a new line item, “Promotion of the Olympic Movement”, was introduced. This consists of two cost-centers: The Olympic Channel and “culture and heritage”.

Culture and heritage costs have been running at around $40 million per year, much of which I think would previously have been included under central operating and administrative costs.

And indeed, in the 2015 accounts, the $190.1 million in 2014 “central operating and administrative costs” has been restated as $140.7 million of “operating expenditures”.

A sum of $46.3 million is now allotted to “Promotion of the Olympic Movement”.

A note under the heading “change in presentation” states: “In order to give a more meaningful and fairer presentation of the Group’s engagement in the Olympic Movement promotion, the Group reviewed the presentation of its Operating expenses within the combined statement of activities. As a result of this review, the Culture and Heritage expenses, amounting to $41.873 million (2014: $46.330 million) are now presented as part of the Promotion of the Olympic Movement…as opposed to their previous classification within Operating expenditures.”

I am not sure the revised breakdown for 2013 has been disclosed.

However, if you dock $80-90 million from the original $670 million figure, operating expenditure over the quadrennium can justifiably be put at 10 percent of overall revenues, if you round down to the nearest percentage point.

I have to say this reclassification does seem remarkably convenient and I would like to see more detail on what that “culture and heritage” line consists of so I can make my own judgement on whether or not it should be included in the IOC’s redistribution figure.

I have some more questions.

Of $789.5 million of Olympic Games-related expenditure, $54.5 million is allocated to “IOC operations”. Is that redistribution?

And what about the $21.5 million cost of various bid- and host-city-related IOC Commissions?

Also, while things like cancellation insurance and marketing costs might be unavoidable, is it fair to regard them as redistribution?

There are also $46 million of “special projects” and $24.5 million of “grants and contributions” which, as far as I can see, are not further explained.

Granted, between them they amount to only just over one per cent of quadrennial revenues, and the spending was doubtless worthwhile, but where did the money go? Some of it to finance the Rio 2016 refugee team, possibly?

Totting it all up, and acknowledging that it is in some instances a matter of interpretation, I reckon that a hard-hearted analyst would struggle to justify that 90 percent redistribution figure – even if he were prepared to include costs linked to OBS, the Olympic Channel and “Culture and Heritage”.

To summarize, having studied the annual reports, this is how I think the $5.6 billion of 2013-2016 revenue was used, in percentage terms, and in descending order:

30.7 percent – Olympic and Youth Olympic Games Organizing Committees, so mainly to Russia and Brazil.

13.8 percent – IFs.

11.1 percent – IOC central/operating costs (including culture and heritage in 2013).

10.9 percent – NOCs, including via Olympic Solidarity

10.6 percent – broadcasting costs.

7.2 percent – the United States Olympic Committee, so a fair chunk of the funds redistributed – more than $400 million – appears to have gone to the NOC of the world’s only superpower.

4 percent – the 2016 net cash, which may by now have been redistributed.

11.7 percent – everything else, including 2.3 per cent culture and heritage in 2014-2016, 1.3 percent Olympic Channel, 0.4 percent cancellation insurance and 2.5 percent earmarked funds, which support the World Anti-Doping Agency, the International Council of Arbitration of Sports and other bodies.

It would be a good example of transparency – wouldn’t it? – if the IOC were to provide this sort of breakdown so that someone like me does not have to try and piece it all together.

By David Owen

Republished with permission from insidethegames.biz

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