Hartlepool Utd explain financial fair play rules

Pools chairman Ken Hodcroft
Pools chairman Ken Hodcroft

Hartlepool United supporters have been somewhat puzzled by the recent financial fair play rules imposed by the Football League. Here the club themselves explain in their own words the ins and outs of the rule and try to provide the answers to frequently asked questions.

Salary Cost Management Protocol: What Is It?

After two years of in-depth discussions, a Financial Fair Play framework was formally introduced in the Football League’s three divisions at the beginning of 2012/13.

The aims of Salary Cost Management Protocol (SCMP) is to reduce the levels of losses incurred at some clubs and, in the longer term, ensure the League is comprised of self-sustaining professional football clubs.

SCMP has been in use in League Two since 2004/05 and was last season introduced in to League One also.

The SCMP broadly limits spending on total player wages to a proportion of each club’s turnover.

The Championship have agreed to introduce a breakeven approach based on the UEFA Financial Fair Play regulations.

The threshold in League Two was reduced from 60 per cent to the current 55 per cent at the start of the 2012/13 campaign, while in League One it had been operating at 65 per cent in the past season but will reduce to 60 per cent in 2013/14.

As part of this scheme, clubs are asked to provide estimated budgetary information to The Football League at the beginning of the season which is updated as the campaign goes on.

Any club which is deemed to have breached the permitted spending threshold will be subject to a transfer embargo. The League, where possible, will aim to tackle any such issues “at source” by refusing player registrations that could potentially take a club over the agreed threshold.

Frequently Asked Questions

How exactly does it work?

Much like you budget your incomings and outgoings on a personal level, football clubs are being asked to monitor their finances more closely and ensure they have sufficient funds to pay their bills.

Often clubs in the Championship – where a significant percentage of the League’s debt lies – were spending well in excess of their means, often more than 100 per cent of their income, on player wages.

The introduction of SCMP is a long-term strategy to ensure clubs are built on more sustainable models, which don’t rely on large cash loans to operate.

Has it worked in League Two since its introduction?

Crowds and budgets may be lower in League Two but broadly the scheme has been successful in reducing the amount of clubs who have found themselves in financial difficulties.

Aldershot are the most recent team to go in to administration following their relegation to the Conference, but the percentage of teams in such difficulty at League Two level has been reduced since the SCMP introduction in 2004/05.

How is turnover calculated and reported?

Each year, during the summer, the Club will be asked to submit a forecast of turnover for the upcoming season, including information on where the club is expected to be at the halfway stage of the campaign.

While assumptions have to be made in the pre season, the figures submitted must be supported by firm evidence from the previous campaign. For example, HUFC obviously couldn’t predict a 100 per cent increase in attendances or a seven-figure sale of two players – that would be an attempt to artificially inflate figures. Any major changes in income or expenditure from the previous season would have to be fully explained.

Are cup runs included in the forecast?

No. The most sensible way to set a budget is to assume that the Club will make no progress in cup competitions and this has always been the way HUFC have formulated annual budgets.

What factors are included in turnover?

Obviously turnover is created by season ticket sales, gate receipts, pre season friendlies, sponsorship, etc.

While early season ticket sales can give an indication to the club and act as a guide for our submissions to The League, we also have to take in to account the average crowds from the previous season.

As HUFC have maintained season ticket prices at just £150 for adults, from an SCMP point of view we have to try and attract the same numbers as previous seasons.

Other relevant turnover comes from central Football League payments (which are reduced this year with the Club in League Two), including radio and television broadcasting rights though we don’t budget for live games.

We have been live on television for a regular home league game just once in the last five years and that was in our April meeting with Brentford – in the same period other clubs, especially those who have been in administration, have been on television live multiple times and gained much more income as a result.

Does commercial income count towards the figure?

Yes, although we have to submit evidence-based figures and it’s worked out on a net income basis so we can only report the profit made.

All income that we bring in to the club can be included in our submissions from

Official website income, ground boards, sponsorship, Programme sales, catering etc. which all means that every penny you spend at The Vic is important for the Club.

Donations

Any donation to a club can be included in the turnover figure, provided that when the money is given there is no expected repayment – if that is the case then that sum can be used against the threshold.

How will relegation impact on the club?

There is no allowance for relegation to League Two and the Club will have to submit our forecast within the 55 per cent allowed level for that division.

Any reduction in income at League Two level will have an impact which is why sales of season tickets and other ways of raising money is so important to the football club.

If revenue is higher than forecast, can this extra money be used?

Absolutely. Any extra revenue can be used as we see fit so that again highlights the important of financial backing from supporters.

Clubs may be cautious when submitting their summer calculations and then, in the event of higher crowds or a good cup run, mid-season forecasts can be altered as required.

How is SCMP monitored by the Football League?

If a club comes within 5per cent of the threshold at any point then this will alert The League who will firstly ask for assurances that the club won’t break through the agreed percentage.

This also impinges on any players, permanent or loans, we would like to bring in; we have to contact The League who will give us an update on our current SCM figure and if an acquisition takes us over the threshold we will not be able to register the players.

Do Hartlepool United agree with SCMP as a positive step?

Yes, we feel like SCMP is a strategy which will hopefully allow football to become a more level playing field in the coming years.

However, we are supportive of the measures overall as long as all clubs adhere to the same rules and are subject to the same disciplinary regulations.