EFL Response to RamsTrust Questions
The EFL has responded to questions fielded by RamsTrust members. These questions were asked before Derby’s second points deduction, however the meeting was after the aforementioned points deduction.
- In our last meeting, you said the EFL would try to help to save Derby
County. What have you done to help?
Working to the principle that all EFL member Clubs are responsible for their
own individual decisions in respect of their finances and operations, the EFL
has worked with Derby County throughout the relevant stages and processes
involved since the original charge, judgment in 2020, the appeal and
subsequent sanctioning hearing and sporting sanction appeal. The League has
sought to work with the Club, and recently its Administrators, regarding funding
requirements, while simultaneously taking steps to agree to a suspension of the
notice of withdrawal of membership. In effect, the EFL has attempted to give
Club the best opportunity to move forward positively and to continue as a member
of the League. Based on the recent agreed decision, the Club’s administrators
now have increased certainty when communicating with any potential new
purchasers. - It is reported that the EFL is going to punish Derby County with a further
9-point deduction. Why so many when, after appeal, Sheffield Wednesday
were only deducted 6 points, despite falsely entering the sale of their
stadium into the wrong financial year?
All Championship Clubs are subject to the same reporting requirements in
respect of P&S, however there is often a range of differences between cases
in respect of specific breaches. For example, a Club may breach one or more
seasons’ reporting periods and by varying amounts. In respect of Derby, the
Club has accepted that it breached in three of the four reporting periods. In
essence there are always differences between cases, and these decisions are
therefore independently ratified, ultimately providing a consistent and fair
process for all parties. - Can the EFL confirm why a further nine-point deduction is in order, as we
have been told that any P&S breach which was ‘masked’ through the
alternative amortisation method would have equated to a four-point
deduction on the sliding scale? There is clearly a massive difference in
opinion there, which would in normal times have led to yet another
Independent Panel being asked to rule?
The League is limited to what additional information it can provide relating to
the agreed decision, however ultimately the decision was subject to ratification
by an Independent Chair and, based on all evidence submitted, the nine-point
penalty has been considered to be an appropriate outcome for all parties, based
on multiple breaches identified. - Why didn’t the EFL specify a straight-line amortisation method if that is
what it was looking for? The alternative approach to amortisation still
accounts for all the costs albeit in future periods. The charge relating to
amortisation appears to be an ‘error’ rather than a deliberate failure – and
this directly led to subsequent FFP failings. DCFC certainly hasn’t done
anything to misstate or incorrectly designate costs or revenue to the
wrong line which would be the kind of red flag that a points penalty is
there to deal with.
As was stated in previous judgments, the EFL had put forward its view that the
Club had breached the Profit & Sustainability (P&S) rules regarding the
amortisation of player registrations. Following the completion of the
independent judicial process that charge was upheld and the Club had to
resubmit its accounts prepared using a compliant form of amortisation in
accordance with accounting standard FRS102. It is the responsibility of all
member Clubs to adhere to the correct procedures relating to the finalisation
and auditing of its Club accounts. That said, this matter may form the basis of
future discussion with Clubs, to determine if further regulatory requirements are
needed in relation to establishing clarity in respect of amortisation methods. - Why did it take the EFL several years to make the charge regarding the
amortisation method? Is there any provision in the EFL rules to reopen
accounts once they have been audited and signed off by all parties?
For clarity, Clubs themselves sign-off their accounts, and their auditors check,
audit and sign-off, before they are then submitted to the EFL. The original
Disciplinary judgement clarifies why the EFL took the decision it did in respect
of the Club’s accounts and this was accepted by the Commission. In relation to
the actual accounts submitted, based on the nature of the breaches, the impact
became clearer over a period of time, and subsequently the Independent
Commission then accepted that the EFL was within its rights to raise the matter,
based on the findings established. - Does this mean further charges can be brought in future, or does this
‘clear the slate’ for Derby County?
The agreed decision was reached to help the Club and its Administrators to
move on positively and seek to establish new interested parties. The
suspended three-point deduction will take effect if the Club does not comply
with the terms of the budget as set out in the ‘Agreed Decision’ for the remainder
of season 2021/22. In addition, as is the case with any exit from Administration,
a number of financial requirements will be agreed with any new owner which
will set out how the Club is required to financially operate over a set period of
time, in order to ensure it continues to meet its obligations as a member of the
League. - Are you now going to reopen old accounts for all the other Clubs that
have broken Financial Fair Play – even if they were promoted?
There is currently no precedent of any Clubs having breached Financial Fair
Play rules in the season they have been promoted. For example, over the full
three-year rolling reporting period, Clubs can sell assets in order to comply with
the relevant reporting thresholds. Therefore the League can only apply the rules
as they are currently adopted and agreed, and in accordance with the reporting
periods determined. - The precedence issue: The only acceptable restatement would be based
on trading (new contracts and signings) decisions made following the
charge being bought in January 2020. As has been noted, trading
decisions made 2015-19 would have been based on the auditor approved
approach to amortisation and with reference to P&S headroom (rolling
39m losses).
All of these factors were considered in arriving at the decision. - On the 12 point administration deduction, does the EFL feel Derby would
have entered administration if the grounds were open for the last year and
a half and covid hadn’t happened? It’s fair to say that the business model
used has caused Derby to be affected more by covid, than a lot of other
Clubs and whilst we accept that we have a lot of debt etc, this would have
been serviceable if covid hadn’t happened and thus it’s unreasonable to
use the 12 point deduction punishment in this case as per the EFLs own
rules. Especially when you consider the restrictions embargos caused by
the charges and the impact covid has had in the Club.
The hearing process provided opportunity for these claims to be presented by
the Club. The EFL is cognisant of the impact of COVID, however following the
evidence presented the Club agreed its claim should be dismissed. The League
is bound by confidentiality in respect of further details other than to clarify that
a range of evidence was submitted as part of the hearing process, and
ultimately the Club accepted the final outcome. - If covid is not deemed to have had an impact on finances, presumably
there will be multiple further charges against other Clubs for breaking FFP
limits as accounts are published for last season?
It is accepted that Clubs have suffered COVID-related losses, however this
case determined that it was not the sole cause of insolvency. At the onset of
the pandemic, the rules were adjusted to allow for COVID-related ‘add-backs’,
which assisted with a number of areas of compliance regarding P&S
submissions. This was taken into account in respect of Derby County’s
compliance. - The points penalty only penalises the Club and the fans – and not the
owners who took the actions in question. Supporters did question the
actions at the time and had no part in the decisions. How is this
appropriate?
The application of a points penalty for P&S breaches or entering Administration,
acts as both an incentive for other member Clubs to comply with the
regulations, and also balances the interest of all of the League’s Clubs and
ensures a fair and sporting competition is maintained. Ultimately owners
themselves stand to be significantly impacted by breaches of rules, and the
regulations therefore seek to ensure fair competition and responsible
administration by those running our member Clubs. Any Club subject to a
charge, disciplinary hearing or sanction undeniably presents a challenging
scenario, and the ongoing frustrations of supporters are clearly understood,
however the League must pragmatically apply the rules as they are written, and
Clubs themselves recognise that such sanctions exist to protect fair
competition. - Is a 21 point deduction the biggest ever given to a Club in a single
season? Does the EFL not feel this destroys the integrity of the
competition when the season is over in early November?
The League stands by the process undertaken to date, and thereby the agreed
decision in respect of Derby County. In reference to previous points deductions,
Luton Town were deducted 30 points in 2008, which included 20 by the Football
League for breaking rules on exiting administration and 10 by The Football
Association for irregular matters involving player transfers. In essence, the rules
regarding sanctions exist to protect the integrity of the competition and seek to
incentivise Clubs to operate within the bounds of the regulations. - Does the EFL think it has made any errors in dealing with Derby County
in recent years?
The decisions taken in relation to Derby County throughout have been done so
in accordance with the regulations. The League will always attempt to conclude
any such matters quickly but very often such cases become very complex and
subject to legal influence. That said, the outcome has shown the EFL was
correct to take the action it did, and we stand by the decisions taken. - Does the EFL feel it has been fully consistent over time in applying the
rules generally and that all members are aligned with the EFL approach?
The League has applied its rules consistently and fairly at all times. In cases
which are determined by an Independent Disciplinary Commission, however,
the final decisions are not made by the EFL but by those appointed to oversee
the process. As previously outlined the League has a responsibility to uphold
its rules for the benefit of all member Clubs, and there are opportunities for the
EFL and Clubs to learn, discuss and develop its regulations accordingly. - If Derby County goes into liquidation because nobody is prepared to take
on a Club guaranteed to be relegated, will the EFL feel that it has served
the best interests of its members? Has this policy worked with previous
Clubs in the same position?
The EFL believes all its members have an obligation to meet the regulatory
requirements at all times. The League’s objective is to work with its Clubs in
accordance with those rules, however ultimately Clubs themselves are
responsible for their ongoing management and operational activities. - On the subject of squad size, the EFL states that the restrictions are there
to prevent the Club from overspending. However, this doesn’t explain why
it doesn’t allow the Club to make full use of the young players it has, which
they are already paying. At the moment, several of those promising young
players are denied an opportunity to play in the first team, despite that
being a clear pathway to more sustainable football. Eiran Cashin and Liam
Thompson are the two to use as an example. Wayne Rooney is on record
as saying both would’ve played this season under normal circumstances,
but playing either of them, even for just one minute, would have made
them a player of professional standing and meant one less free agent he
could sign. Effectively, the current embargo terms are blocking the
pathway to the first team of young professional players who haven’t yet
made a senior appearance. Is that really what the EFL wants?
Derby County is bound by the agreed decision which, in relation to its playing
squad, applies in respect of the 2021/22 season. Ultimately the Administrator
will manage the current playing staff requirements and while the League cannot
provide additional details on squad matters, the Club understands the
parameters of the business plan as part of the agreed decision, and is aware
of the options available in respect of determining players eligible for selection.
It is therefore at the discretion of the Club to provide any further details on its
playing squad. - The EFL responses to our questions talk a lot about the unsuitability of
the current rules, particularly parachute and solidarity payments. It also
refers to wanting to move away from the benefactor model. Yet at the
same time it appears to show no flexibility in applying the rules from the
governance model that it considers to be broken. The areas raised a
distinctly different.
The EFL has argued that football’s financial model requires a reset, and awaits
the outcome of the Fan Led Review on this particular issue. However, the fact
we have made that argument does not absolve Clubs of the obligation to
comply with the Regulations that they agreed to adopt as part of measures
aimed at improving their financial performance or absolve the league of
responsibility to enforce those regulations. Clearly, regulations evolve over time
and again, we will continue to appraise the rules in place to determine whether
they continue to be appropriate. There is recent evidence to suggest that the
League and its members are open to changes to the regulatory framework and
there are a number of discussions ongoing in this respect. - Does the EFL anticipate any significant changes as a result of the fan-led review?
The EFL will await the findings and advise in due course. - How can we work to turn this situation into a more positive example that
demonstrates that the EFL can act with compassion to help save and turn
around a founder member with a rich history and large, passionate
fanbase? Surely this would then provide a better example for change, by
proving that it can work with understanding on both sides?
As is evidenced throughout the history of the game, The League and its
Clubs will continue to learn and adapt to circumstances arising. Ultimately the
League’s approach is to support its member Clubs, and it will collectively
continue to review and amend its regulations where appropriate, to ensure they
remain fair, advocate strong competition both for the overall development of the
League, and ultimately the betterment of the game as a whole.