Sports hole: how Russian football and hockey suck the state budget

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Top soccer teams hide their income and expenses, small clubs are in crisis and desperate to survive, regions are cutting back on funding for health and social programs to keep their favorite team.

Governors play with national clubs like toys, and they endlessly suck up government money. Ruposters tells what is happening with Russian sports

Non-core expenses

At the end of last year, Finance Minister Anton Siluanov, at a meeting of the profile committee on the formation of the country's budget for 2017-2019, said that there are a number of subsidized regions that were caught in non-core spending:

Financing football clubs from regional state budgets is a headache and a subject of long-standing discussion both in the government and in society. Brand, paraphernalia, souvenirs and millions of dollars spent on foreign football players. Where does all this money come from?

In 2014, the ROI registered a proposal to prohibit financing football clubs from the state budget and to redirect the freed up funds to modernize sports grounds. The initiative was signed by only 11 thousand people, it was not enough to consider such a number of signatures.

The situation is aggravated by the complete lack of transparency in the sports clubs themselves. Citing trade secrets, only a few of them publish financial statements that can be used to judge how much money is circulating in a particular segment of the sports business.

Experts and analysts gather information bit by bit, interpret careless interviews and club purchases. The approximate budget for the 2014-2015 season of all football teams, private and public, playing in the Russian Premier League is more than $ 1 billion:

Diamond in the crown

Now the most expensive state club in Russia is Rubin Kazan. The club's budget is € 50 million, most of the money comes from the infusion of the largest company in Tatarstan, the TAIF group with a controlling stake in the government of the republic. One third is investments of the Fund for Assistance to the Development of Physical Culture and Sports of the region, the rest is small private sponsors.

The president of the club is the mayor of Kazan, Ilsur Metshin, who zealously follows the success of the team and spares no effort to attract new funds:

At the same time, the club has serious problems with FairPlay; in May 2014, UEFA fined the team € 6 million for non-compliance with contracts and debt obligations to the players.

At the same time, Rubin, when purchasing goods and services from third-party organizations, often chooses non-competitive procedures: for example, the 17-million contract for the provision of security services is concluded according to the "request for proposals" scheme, and not an auction (in which participants are bargaining for the right to offer a lower price):

Tatarstan is a wealthy region, but it also depends on the state of the world economy. Due to the fall in oil prices, less taxes have been collected in the region, the actual losses amount to 25 billion rubles. The republic, remaining in the first place in milk production, imports 40% of dairy products, is experiencing problems with meat production and, in fact, does not comply with the food security doctrine of the Russian Federation. Purchases are made for 70 billion a year - this is an amount that is 30% more compared to 2015.

Tax evasion

In 2014, the media leaked the schemes of the Rostov football club, according to which the club's employees and footballers were evading taxes. Together with the employment contract, each footballer signed an agreement with a non-profit foundation, according to which he received "material assistance" from commercial enterprises affiliated with the foundation. These were mainly enterprises with state participation.

"Fund for the Development of Sports in the Rostov Region" for the period 2011-2013 received and transferred more than 2 billion rubles. This is more than the budget of the Regional Ministry of Sports. Thus, "Rostov" avoided both income tax and insurance payments. The Rostov region received less than a billion rubles from the club.

Interesting details were revealed in the same documents: the vice-president of “Rostov” Alexander Shikunov was withdrawing significant sums to offshores that were supposed to go to the regional budget from the transfer of football player Florent Sinam-Pongol. AS Privatbank, which transferred the money, belongs to the Ukrainian oligarch Igor Kolomoisky.

A criminal case was opened against the general director of "Rostov" Oleg Lopatin, he is suspected of causing financial damage to the Rostov region. The official materials of the case say about the amount of 408.5 million rubles. This is the money that was allocated from the budget. Most of the funds are non-refundable. Only 34.5 million can return to the regional budget.

Over the past five years and now "Rostov" is unprofitable. As follows from the company's financial statements, the aggregate net loss for five years of operation amounted to almost one billion rubles.

Despite the dire financial situation, the club purchases services from third-party organizations without a competition or price reduction:

A football club is often presented with well-grounded multimillion-dollar claims by its counterparties for failure to fulfill obligations:

The region's budget is for debts

Last season, “Kuban” began without an approved budget. The main private investor, Ukrainian metallurgist Oleg Mkrtchan, left the club. The Krasnodar Territory administration had to buy out all the club's shares, and with them the debts totaling 500 million rubles.

The situation at “Kuban” is critical: the club owes its creditors 400 million rubles plus interest and € 2 million for transfers of Sergei Tkachev and Anton Sosnin from “Lokomotiv”, and the latter has already moved from the Krasnodar club to “Dynamo”.

In January 2017, the club's players turned to Vitaly Mutko and the Minister of Sports Kondratyev with an open request to find and prosecute those responsible for the situation with multi-month debts and help find funding for the club.

In the meantime, the main costs are borne by the administration of the Krasnodar Territory. According to the minimum estimates, this is 1.5 billion rubles. On January 27, the vice-governor of the region, Andrei Korobka, publicly promised that the players' salaries would be paid in the coming days. The head of the OTEKO company and film producer Michel Litvak, who became the club's new investor, transferred 200 million rubles to the company so that the club could finish the season, but this is too little to cover all debts.

The debts of the region itself, on which the main obligations to ensure billions of dollars in expenditures fall, amount to 136 billion rubles, this year the budget was drawn up with a deficit of 10 billion, the management promises to cut costs.

In the meantime, the net loss of "Kuban" for 2015 - 164 million rubles, and short-term debt is calculated at an astronomical amount of 2.8 billion rubles.

The law is not written

There have been two attempts to restrict public sector investment. In 2013, a law on natural monopolies was introduced to the State Duma, prohibiting state corporations from financing sports teams directly. It was proposed to send money from companies to the federal budget and distribute it there in the interests of all national teams.

The head of Russian Railways Vladimir Yakunin did not agree with this decision. He is in charge of the Lokomotiv football club (budget $ 145 million) and the hockey club of the same name in Yaroslavl:

In 2015, the working group for the development of physical culture and sports developed a document limiting the use of budget funds for the purchase of athletes if more than 25% of the club's shares belong to the state.

It is proposed to direct the saved funds to the development of children's sports clubs and the development of infrastructure.

Develop or master

In this context, one cannot but recall the story of the Silver Lions youth hockey team. In 2015, the base skating rink of the State Budgetary Educational Institution "Olympic Hopes" refused to cooperate with the club, leaving the St. Petersburg team, the hope of the northern capital, virtually without ice.

In St. Petersburg, there are no more than a dozen indoor hockey rinks, and they are already packed to capacity. The promising youth team, which for the first time took the city to the final of the Russian Championship, is also supported by private investors (Eurosib and others), but building its own site will be too expensive, and there is no time to build it. The team risks losing promising players, and the preparation of talents for the Russian national team is seriously hampered.

Sports and Political Project

The Chelyabinsk Traktor club is in the top of the richest KHL clubs thanks to investments from the budget of the Chelyabinsk region and sponsors, among which were Fortum OJSC, Chelyabinvestbank, Makfa OJSC. The director of the latter company is the father of the former governor Mikhail Yurevich Valery Yurevich. In total, in 2013, the most productive year for the team (reaching the final of the Russian Championship), the players earned almost 900 million rubles. But you need to take into account the costs of renting premises, equipment, marketing and flights.

Experts believe that three sponsors received preferences in the domestic market from the governor and concurrently the president of HC "Traktor":

In March 2014, the then acting governor of the Chelyabinsk region, Boris Dubrovsky, became the new president of the club. With the departure from the governor's post of Mikhail Yurevich, his father stopped supporting the club and became a sponsor of the Moscow “Dynamo” Arkady Rotenberg, with whom he has long-standing friendly relations.

At the beginning of 2016, Traktor received 80 million rubles from the Chelyabinsk budget thanks to the program "On the support and development of game and technical sports in the city of Chelyabinsk for 2016-2019." The total funding of the club in the last playing season amounted to 600 million rubles from the budget. Compared to the 2014-2015 season, it decreased by $ 300 million.

The financial statements of the club in recent years indicate that sponsors have invested in the budget of the club, according to which the profit of the club from entrepreneurial activities (84 million) is several times less than contributions and earmarked receipts from sponsors.

"Admiral" is more expensive than an ambulance

The new club "Admiral" from Vladivostok, formed in 2013 with the support of hockey player Vyacheslav Fetisov, is confidently approaching the leading positions in the regional championship. The home ground of "Admiral" is named after Fetisov.

The team's budget is "up to a billion rubles", private investors - Megafon and the largest transport company in Primorye, FESCO, owned by the Summa group. State funding in 2013 amounted to a quarter of a billion rubles. But already in the next season, Governor Vladimir Miklushevsky asked sponsors to double funding, which the companies easily went for. And in 2015, the head of Sumy Ziyavudin Magomedov became the president of the club, the salary debts accumulated over two years were paid off.

While more money is allocated for professional hockey, salaries in other areas are rapidly falling:

This is a short retelling of the history of the conflict between the Vladivostok ambulance staff and the management. Primorye is experiencing a shortage of personnel: the basic salary of an ambulance doctor in the region is 33 thousand rubles under the compulsory medical insurance system, and allowances have to be squeezed out of higher authorities through rallies and strikes.

Budget dependence

Not every region can afford a personal team. Many clubs have ceased to exist in the past two years because regional budgets have not been able to bear the costs alone following the refusal of private companies to sponsor teams.

FC Siberia is on the edge.160 million rubles were withdrawn from the budget of the Department of Culture and Sports of the Novosibirsk Region, which was the result of a 10% reduction in deductions for personal income tax in favor of the regional budget, and not municipalities. The budget of Novosibirsk has lost 3.5 billion rubles.

Disbandment decisions are also linked to poor leadership. The Nizhny Novgorod club "Volga" actually ceased to exist due to debts. In 2015, the club tried four times to go through bankruptcy proceedings, and there were 11 players left in the team by its closure, and the club was prohibited from buying new ones. At the beginning of February 2017, Volga still managed to go through bankruptcy proceedings; 10 million rubles were collected in favor of Sapfir LLC, which will have to be paid to the city.