The Woolf review February 2, 2012

ICC's financial model needs overhaul - Woolf report

The ICC has been asked to abolish its "subscription" model of funding and its revenue distribution method by the Woolf report to dispel the notion that the governing body is "owned" by the Full Members.

The ICC's financial structure was a key area of investigation in the report, which outlines how the body is compromised by its responsibility to pass on all surplus funds to Members, without the ability to keep a reserve for unforeseen events or even seek accounts as to how those funds have been spent.

"The ICC is currently funded through a subscription model that requires the Full Members to fund the annual budget of the ICC. This implicitly encourages the Full Members to think and act as 'shareholders' of the ICC. This means that the ICC is financially dependent on the Full Members, which inhibits its ability to be seen and to act independently of the Full Members. The position is reinforced by distributing 75% of the net profits back to the Full Members evenly. Full Members could see this as a right to share in the commercial success of the ICC."

The report recommended the abandonment of fixed percentages of revenue being given to Full Members and suggested the ICC distribute revenues strictly on a needs basis. Such a change, according to the report, would eradicate a "culture of entitlement" currently demonstrated by the Full Members.

"The distribution model should be revised so that amounts distributed to Members are on a needs basis as opposed to an automatic entitlement," the report said. "The current distribution model acts a barrier to the admission of new Full Members. For instance, if an eleventh Full Member were admitted, this would reduce each existing Full Member's share of the distributions from 7.5% to 6.8%.

"The subscription element of the current model, including the ability to recover any overspend of the ICC budget from Members, should not be necessary with the level of funds flowing through the ICC from its events and commercial activities.

"The subscription reinforces the belief in the Full Members that they are automatically entitled to a set proportion of any surplus generated, thereby perpetuating the 'closed shop' and deterring the admission of new [Members]."

The ICC lacked thorough knowledge about the state of each Member's finances, according to the report, which called for nations to open their books to help the ICC better understand their financial position.

"There is currently insufficient information available to the ICC to gain an overall picture of the financial strength of the game as a whole and each individual Member's financial position," the report said. "The first step to develop an overall funding structure (to ensure the ICC is able to achieve better balance between these competing objectives) requires the ICC to have access to, and due consideration of, full information about the current economic distribution in global cricket and the financial position of each of the ICC's Members."

The report said there was an "overall lack of transparency around financial distribution in global cricket, which means certain aspects of the finances of global cricket are not well understood." Due to this, the review panel stated they were "unable to obtain a full picture of the current financial position of global cricket. For instance, although there are various media estimates in circulation of the impact of tour cancellations (actual or threatened), it is not known with any degree of certainty the financial effect a tour by one Member has on another Member. It is clear that tours by certain Members (such as India) to other Members give a significant revenue boost to the host nation."

The report concludes that the ICC is now capable of standing on its own two feet via the revenue raised from global events such as the World Cup and the World Twenty20, removing the need for funds from Member nations. It also says that the placement of the ICC on a commercial footing, responsible for its own profits and losses, would increase its own accountability, citing the example of football's governing body FIFA and its establishment of financial reserves.

"Giving the ICC control of its income and expenditure will increase the governance demands on the ICC to ensure that its funds are used effectively and efficiently for the good of the game," the report said. "It would contribute to transparency and accord with the principles of good governance. It would also facilitate the ICC achieving its policy of building up reserves to deal with unexpected events and crises."

Daniel Brettig is an assistant editor at ESPNcricinfo. He tweets here