As Otago falls, others teeter on brink

The Otago Rugby Union, set to enter liquidation of Friday, is not the only rugby body teetering on the edge of a financial precipice.

Rugby unions running multi-year losses, with equity levels in the red on the back of excessive player salaries and declining gate takings are not confined to Dunedin.

A National Business Review analysis of several rugby unions’ financial results filed with the Companies Office reveals the Manawatu Rugby Football Union is facing arguably worse problems than Otago, and the union in Southland only bought a brief window to clean house with last year's $1.5 million bailout.

Many unions are only remaining solvent due to regular payments from the New Zealand Rugby Union, but - as events in Dunedin have shown - the national body is losing patience with members who continually live beyond their means.

Massacre in Manawatu?
The Manawatu union has been reporting negative equity levels since 2008, when a $434,000 loss pushed the organisation into the red and total liabilities have exceeded total assets every year since.

In the most recent published accounts, to the end of 2011, the union reported a $136,000 surplus but equity levels remain $395,000 in the red.

The auditing notes prepared by BDO point to the board’s insistence that additional “ongoing funding from sponsorship, community grants, and funding from the NZRU” is required to keep the union a going concern.

“Without qualifying our opinion we draw attention to the equity deficit at balance date … The validity of the going concern assumptions on which the consolidated financial statements are prepared depends on the successful conclusion of these matters,” BDO said.

The union’s major liability is a $200,000 bank loan from Bank of New Zealand secured by mortgage over property. The loan is due to be reviewed in June.

Southland buys time
Rugby Southland hit the financial wall in 2010, according to financial reports. The union posted a $493,000 loss after expenses – mainly player salaries – surged and revenue declined.

The result pushed equity into negative levels and raised concerns the Union might be forced to fold.

Local licensing trusts, the Community Trust of Southland and the NZRU pitched in last year with a combination of loans and grants totaling $1.5 million to push accounts back into the black, but with a reported $325,000 loss for 2011 the Union is far from out of the woods.

Auditors noted in the 2010 accounts: “The financial statements have been prepared on a going concern basis, the validity of which depends upon future funding being available.”