EFL appeal

[CornwallRam]

18 minutes ago, Ambitious said:

I think the 'double points penalty' presumably relates to: FFP breach and possible administration. I can't imagine they would need to take more than 21 points off us, which is the maximum applicable for a club breaching FFP - if we have, actually, breached FFP. I guess we're under the assumption we have, but we're still non-the-wiser as some people have calculated we haven't. 

I think he meant double figures points deduction- I've seen that bouncing around Twitter, but not from anyone that I'd call credible. 

[BucksRam]

29 minutes ago, Gaspode said:

Where are you reading this?

Was in the Sun on Sunday I think and has since been regurgitated by others aka Football League World. 

Fact of the matter is, no-one has a Scooby what's going on other than a sense it won't be this season it applies to.  What "it" is however remains a matter for mass-debate......

[hintonsboots]

3 minutes ago, CornwallRam said:

I think he meant double figures points deduction- I've seen that bouncing around Twitter, but not from anyone that I'd call credible. 

Must be Rod Liddle then ? He had a vitriolic rant at all things Derby in the Sunday Times.

[Anag Ram]

You'd think that if all of these people want us punished they'd let us carry on in exactly the same way we have been doing things for the past two years! 

[RoyMac5]

5 minutes ago, Spanish said:

223) The Defence however fails on the facts:

a) There was no representation by the EFL – express or implied, by words or conduct – that the Club’s Annual Accounts ‘were compliant with all the requirements of the P&S Rules’. Nor could the Club have possibly believed that the EFL was making a representation in such terms simply by acting as it did. The Club therefore fails to clear the first hurdle for establishing any legitimate expectation defence in respect of the Second Charge

b) In any event, as the EFL contends, and as the Club accepts, its financial statements did not in reality accurately record or explain the Club’s amortisation policy.

Even had we concluded that there had been clear and unequivocal representations to the effect alleged by the Club that were sufficient to give rise to a legitimate expectation, there would have been nothing unfair in the EFL departing from the same.

 

From the DC findings.  

Oh. I hadn't realised our 'they said we could do it' had been shot down in flames. How did we get that so wrong?

Is b) more serious than we've lost the fag packet we did our workings out on?

[Spanish]

6 minutes ago, RoyMac5 said:

Oh. I hadn't realised our 'they said we could do it' had been shot down in flames. How did we get that so wrong?

Is b) more serious than we've lost the fag packet we did our workings out on?

and remember this is the bunch that predominantly agreed with our case?

[hintonsboots]

The EFL’s relationship with its member clubs is like the RSPCA being involved in fox hunting, and if they can’t get it with hounds, they’ll go back for another go with a 12 bore.

 

Edited May 17, 2021 by hintonsboots

[Anag Ram]

6 minutes ago, hintonsboots said:

The EFL’s relationship with its member clubs is like the RSPCA being involved in fox hunting, and if they can’t get it with hounds, they’ll go back for another go with a 12 bore.

 

Or to continue your analogy, when the fox 'wins' by going to ground, they dig the poor little beggar up!

[DCFC1388]

Now the EFL appeal has been done and its just a case of the final punishment, doesn't that now mean we are in a position where we can submit our accounts for these past 2 financial years?

From the hearing itself it showed we had draft copies of the accounts so you would think we would have 2 versions of the accounts ready to go?

I know we were found guilty but has anything been said about if we actually have to change our old accounts for the years the hearing applied to or not?

[Spanish]

25 minutes ago, RoyMac5 said:

Oh. I hadn't realised our 'they said we could do it' had been shot down in flames. How did we get that so wrong?

Is b) more serious than we've lost the fag packet we did our workings out on?

to put a balance, sorry it is long but truly important

59) For completeness, we record that there was discussion about the Club’s approach to amortisation between the Club and the EFL in April and May 2019: a) In April 2019, as part of the process of reviewing the Club’s 2019 P&S Submission, the EFL wrote to the Club with various queries. Question 17 was in the following terms:

30 ‘Can you please explain the variances in Player related amortisation charges from £6.5m in 2017/18 down to £4.6m in 2018/19 up to £25.1m in 2019/20? As part of this, please explain how the charge reduces from £3.3m in the 6 months to December 2018 down to £1.2m in the 6 months to June 2019? b) The Club responded on 17 April 2019. As regards Question 17, the Club i) provided an ‘Amortisation reconciliation’ showing amortisation by player for each of the years 2017/18, 2018/19 and 2019/20, and ii) explained the drop in the first half of the year to the second half of the year in 2018/19 as being due to a miscalculation in the first half of the year.

c) The EFL responded on 30 April 2019. Amongst the various queries that it still wished the Club to address, it stated ‘My understanding from other Club accounts and from the accounting policy note included in the [Parent Co] accounts is that Player amortisation is the spread of the cost of acquiring a Player’s registration over the respective contract length, with the provision that this can then be revised if a contract is renegotiated (extended). Please explain the amortisation charges for the following players as I can’t understand why there are significant changes in 2019/20 as against the charges in 2018/19’. The letter identified 9 such players d) The Club suggested that the outstanding issues might be best addressed at a meeting. The EFL agreed. That meeting took place on 13 May 2019.

Although there are no contemporaneous notes of that meeting, a good flavour of what was discussed can be derived i) From the Club’s internal email dated 14 May 2019 summarising what had been discussed. Mr Pearce recorded: ‘This was more about [the EFL] wanting an understanding of the process, as they accept that there is nothing they can question on it as it is an acceptable accounting policy under accounting standards. We discussed this with them and they are now comfortable with the treatment’

ii) From an email that Mr Karran sent to himself on 14 May 2019, again summarising what had been discussed. Mr Karran recorded: ‘Player Amortisation The Club; amortisation charge is expected to vary … 31 As part of the queries sent to the Club [the EFL] obviously queried these charges. The Club explained that it was due to the fact that the Club used residual values when assessing each Player’s amortisation charge, which often resulted in very small charges initially and potentially a large charge when the player has one season to go on his contract, A breakdown by player was provided. [The EFL] explained that [it] had not seen this approach before The policy was in line with that disclosed in the Club’s accounts [The EFL] highlighted that the Club’s accounting policy resulted in it being at risk of making significant losses on disposal or large impairment charges in future years or even as an impairment as part of the audit if a player was sold post year end. [The Club] accepted this position. [The EFL] made it clear that the Club would not be able to use one of these large impairment or losses on disposal as an unforeseen charge if it exceeded the P&S Requirement as a result of them based on a review of actual numbers given the Club was fully aware of the risk it was taking. [The Club] accepted this’. This section of Mr Karran’s email to himself concluded ‘Note – [Mr Karran] re-iterated this position to [the Club] during a phone call on 14 May 2019’.

e) From those documents it is clear that there was discussion about the Club’ treatment of how it amortised players – which Mr Pearce described as ‘putting a residual value on them’.

60) In light of such matters, and in light of the matters raised by the EFL with the relevant witnesses in cross-examination, we considered carefully whether the policy described by the Club in its evidence and that we have summarised above was in fact a policy a) That the Club had devised and implemented in 2015, and b) That the Club had applied (or at least endeavoured to apply) since that date. 61) Having considered all of the evidence, we concluded that what we have summarised at paragraph 54 above did indeed represent the Club’s amortisation policy for the financial years to which the Second Charge related: a) As well as finding that we could accept as accurate the evidence of Mr Pearce and Mr Delve

i) We placed weight on the fact that the Club’s financial statements referenced a change in the amortisation policy that Smith Cooper had considered and had concluded was being applied by the Club 32 ii) We placed weight on the fact that the Draft Audit Findings Reports also confirmed that Smith Cooper had ‘no issues with the application of [the Club’s amortisation policy]’ iii) We placed weight on the records of the description of the Club’s amortisation policy given to the EFL in April/May 2019.

While that description might not have been fully understood by the EFL at that time, the contemporaneous emails are consistent with the Club having endeavoured to communicate to the EFL that it was applying an amortisation policy (1) That applied an ERV to players (2) That amortised capitalised costs of players registrations down to that ERV over a period reflecting all but 1 season of the player’s contract (3) That then amortised values down to zero over the course of the final year of the player’s contract

[RoyMac5]

13 minutes ago, Spanish said:

ii) explained the drop in the first half of the year to the second half of the year in 2018/19 as being due to a miscalculation in the first half of the year.

Ooops.

13 minutes ago, Spanish said:

The EFL] made it clear that the Club would not be able to use one of these large impairment or losses on disposal as an unforeseen charge if it exceeded the P&S Requirement as a result of them based on a review of actual numbers given the Club was fully aware of the risk it was taking. [The Club] accepted this’

So it seems like we told them, they told us well on your own head be it. We continued with it, and then had to recover our position by selling the stadium? Now they say yeah but we're not happy with your figures and method of arriving at them, which you have no details of?

Quote

...and remember this is the bunch that predominantly agreed with our case?

Phew! ?

Edited May 17, 2021 by RoyMac5

[Spanish]

6 minutes ago, RoyMac5 said:

Ooops.

So it seems like we told them, they told us well on your own head be it. We continued with it, and then had to recover our position by selling the stadium? Now they say yeah but we're not happy with your figures and method of arriving at them, which you have no details of?

Phew! ?

and of course they say that the notes to our accounts were confusing and possibly misleading, an accusation that the club and auditor have agreed to sort of

[Gaspode]

1 hour ago, BucksRam said:

Was in the Sun on Sunday I think and has since been regurgitated by others aka Football League World. 

Fact of the matter is, no-one has a Scooby what's going on other than a sense it won't be this season it applies to.  What "it" is however remains a matter for mass-debate......

So more than likely a load of Billy Ballcocks then? - wish folk wouldn't be so keen to grab every utterence of the gutter press (by that I mean pretty much all of them nowadays) and treat it as gospel.....

[Elwood P Dowd]

But why, if the accounts were confusing the EFL , didnt the EFL contact the club for clarification, it does seem to be the resonable course of action. What is the point of the EFL signing off the acounts if they dont understand the contents or felt that the accounts were confusing.  What would have happen if the EFL had simply not signed off the accounts.

I am simply puzzled by the value added to the accounting process by the EFL signing off the acounts.

 

Edited May 17, 2021 by Elwood P Dowd

[RoyMac5]

12 minutes ago, Spanish said:

and of course they say that the notes to our accounts were confusing and possibly misleading, an accusation that the club and auditor have agreed to sort of

So what's your thought on what they might demand(?)/hope the original panel decide as our punishment? A fine and resubmit the accounts using another method?

[jono]

1 hour ago, RoyMac5 said:

Oh. I hadn't realised our 'they said we could do it' had been shot down in flames. How did we get that so wrong?

Is b) more serious than we've lost the fag packet we did our workings out on?

Yeas Roy me to. Everything we saw during the first case seemed to imply pretty unequivocally that the EFL had okayed our accounts. The goal posts have moved. 

[Spanish]

8 minutes ago, Elwood P Dowd said:

But why, if the accounts were confusing the EFL , didnt the EFL contact the club for clarification, it does seem to be the resonable course of action. What is the point of the EFL signing off the acounts if they dont understand the contents or felt that the accounts were confusing.  What would have happen if the EFL had simply not signed off the accounts.

I am simply puzzled by the value added to the accounting process by the EFL signing off the acounts.

 

I think the calculation confirmation is sent before the audited accounts are finalized.  I don't think the EFL 'sign off' the accounts as such and the estoppel the club tried to use didn't work.  It looks like the EFL took the accounts on face value and whoever was involved in the initial discussions was not part or forgot about the discussions.   So the audited accounts relied on the disclosure which was not clear enough to flag up the new process.  What is missing is a letter clearly stating that this would be out new process and a response from EFL confirming that this change was permissible.

[Spanish]

10 minutes ago, RoyMac5 said:

So what's your thought on what they might demand(?)/hope the original panel decide as our punishment? A fine and resubmit the accounts using another method?

too difficult for me to guess. Much depends on whether the IDC end up a bit pissed that they have been overruled by a group with no accounts expert.  The I in IDC stands for independent if they just kowtow to the EFL it undermines them somewhat .  If we redo the calc with the more standard RV and there is no breach as some have said then I struggle to see why they would put a points penalty down.  Its not just the hope that kills you, it is the uncertainty.

I still am suspicious that we invented a completely new method to deal with the overspending early on but hopefully I am proved wrong

 

Roy, you have any guesses on this?

[duncanjwitham]

12 minutes ago, Spanish said:

 If we redo the calc with the more standard RV and there is no breach as some have said then I struggle to see why they would put a points penalty down. 

That's the big point for me.  The standardised penalties (i.e. the FFP overspend ones, not necessarily the ones for us), are basically something like 1 point per £m overspend (up to 12), plus up to another 9 for bad-faith type behaviours.  From the long extract above, it's fairly clear that the IDC though we were basically being honest in what we were doing. We didn't describe it very well in the accounts, but it seems like we described it fairly well to the EFL in a meeting, and there is evidence that we were doing it well before we hit a serious FFP problems, and had been applying it consistently ever since.  It's also pretty clear that they believed that we thought it was acceptable under accounting regs.  So it's had to see them finding us massively at fault in a bad-faith sense.

My gut feeling is there will be a fine for the bad accounting explanation and a requirement to resubmit the P&S filings with straight-line amortisation applied.  Any failing there will obviously result in the specified points deductions. If we do fail, there's a discussion to be had about us not having the opportunity to address the failing at the time (i.e. if we knew we were going to fail we could have sold a player or something, but we can't do that retrospectively).  Obviously we will argue that any deductions should be reduced because we couldn't mitigate them at the time. And the EFL will want them bumped up because reasons.  We can only hope the the IDC are swayed to be lenient because they also believe what we were doing was allowed.

[Elwood P Dowd]

17 minutes ago, Spanish said:

I think the calculation confirmation is sent before the audited accounts are finalized.  I don't think the EFL 'sign off' the accounts as such and the estoppel the club tried to use didn't work.  It looks like the EFL took the accounts on face value and whoever was involved in the initial discussions was not part or forgot about the discussions.   So the audited accounts relied on the disclosure which was not clear enough to flag up the new process.  What is missing is a letter clearly stating that this would be out new process and a response from EFL confirming that this change was permissible.

What is the point of the club submitting the accounts to the EFL if the EFL simply "rubber stamp them" through, I have avoided the words "sign off" as they normally signify some sort of proactive\oversight process. I considered the original estoppel aproach to be fairly sound but that was based on the assumption that the EFL actualy "went through" the accounts with some rigor and would have contacted the club if they had any questions.  

It does make me wonder if there are other clubs accounts in which the disclosure which was not clear enough to flag up a new  process and the EFL either didn't spot it or didn't question it.