By David

I can’t remember ever posting two Swimwatch stories on consecutive days. But the story about Swimming New Zealand being deregistered as a charity is too important to ignore. I have now had time to read the Charities Board’s decision. It is fantastic. If you thought Swimwatch might be a little tough on Swimming New Zealand; if you felt any sympathy for Layton, Renford, Villanueva and Lyles – you must read this report. David Wright is as soft as Mary Poppins compared to the management tragedy described by the Charities Board. For example:

Paragraph Four says – “it is in the public interest that Swimming New Zealand be removed from the Charities register.” Then the document effectively says that SNZ continued inclusion would diminish public trust and confidence in the charitable sector. Wow, well done Layton; great job Renford – you have just alienated a whole sector of New Zealand business. Mike Byrne and Murray Coulter never managed to scale those dizzy heights. How is it possible that in just over a year the current Board and management have turned swimming into a leper, capable of diminishing public trust and confidence in the charitable sector? And some of you may have thought Swimwatch was making this up. No we were not.

Paragraph Six says the new Constitution submitted in July 2012 contained “an amendment to SNZ’s stated purposes.” There is nothing unusual in this except as it reflects on what is to follow in Paragraphs Seven and Eight.

Paragraph Seven reveals that further amendments made to the new Swimming New Zealand Constitution in October 2012 were not provided to the Charities service. The law, of course, demands that all alterations to the Constitution are submitted to the Charities Board.

Paragraph Eight says that the new Swimming New Zealand Constitution makes it clear that;  “The primary object of SNZ is to support the growth and performance of the sport of competitive swimming, from entry level club competitive swimmers to elite High Performance athletes.”

Paragraph Ten is central and says that a Notice of Intent to remove was sent to Swimming New Zealand on the 11 November 2013 (12 months ago). I do wonder how widely that threat was discussed. I wonder if Sport New Zealand were even told. My bet is that Swimming New Zealand sat on it. Transmitting bad news is not their strong suit.

Paragraph Eleven tells me that Swimming New Zealand submitted an objection on 14 January 2014.

Paragraph Twelve describes the following bit of stunning management. The Charities Services sent a confirmation of intent to remove on 28 March 2014 and gave Swimming New Zealand till 15 May 2014 to respond. No response was received. A reminder was sent on 10 June 2014 advising of a final decision after 4 July 2014. No response has been received.

Surely this borders on criminal negligence. The management and Board have failed in their duty to do the best thing for the organization. It seems that the scope of their responsibility is beyond them – they have failed to considered the long-term future and have embroiled themselves in operational considerations such as the Millennium Institute and neglected the true governance of the sport. It is a litany of incompetence that should not be allowed to pass unpunished.

Paragraph Twenty-eight is important and explains the distinction between a charitable purpose that is part of the organization’s purposeful plan and a charitable purpose that is hypocritically tacked on to support a different plan. There appears to be little doubt which camp the authorities put Swimming New Zealand.

Paragraph Thirty-two is the clause around which deregistration revolves. It says, “the promotion of amateur sports is only charitable if it is a means to pursue a charitable purpose. … contrasted with a purpose to promote sports as an end itself.”

Paragraph Forty-one describes why the new Swimming New Zealand fails to pass the charity’s test. It says, “It becomes an issue when an organization’s resources are geared towards the pursuit of excellence to the detriment of other either less skilled or less competitive members because in practice, benefits are being unreasonably restricted to a much narrower section of the public.”

Paragraph Fifty-three then does exactly what Swimwatch has been doing with the Swimming New Zealand accounts. It dissects the accounts and highlights the bloated and embarrassing proportion spent on High Performance and details the number of staff employed in this area.

Paragraph Fifty-five reaches the obvious and unquestionably correct conclusion that the Charities Board does not consider that the promotion of sport at an elite and professional level stands as a general proposition as a means to advance the amateur sport at the learner level. And they are right. The excessive attention to what happens at the Millennium Institute is wrong at every level and is most surely at the expense of the grass roots of the sport.

Paragraph Fifty-eight is a delight. It as near as it can says that whoever drafted the current Constitution had no idea what they were doing and that they totally misunderstood Charity regulations! Let me assure the Charities Board that their regulations are not the only thing this lot don’t understand.

Paragraph Sixty-one specifically cites the 40% expenditure on High Performance staffing and the two High Performance centres as the reason for the deregistration. It seems that while the Regions of Swimming New Zealand may not read the accounts, the Charities Board is not so slow.

And finally Paragraph Sixty-eight says that the Charities Board has a letter from Swimming New Zealand dated the 14 January offering to consider amending the stated purposes of the organization at the Annual General Meeting scheduled for April 2014. Surely that offer is the final insult to the Regions. The Swimming New Zealand Board offered outsiders the prospect of altering the Constitution without the knowledge or approval of the delegates who would be expected to vote on the issue.

So there it is – an unqualified cock-up. Any self-respecting organization would replace those responsible for the information in this post. Any self-respecting executive would resign if this saga became part of their resume.

By David

Secrecy breeds distrust, fear and paranoia. The style feeds on itself. As group performance and situations deteriorate, secrecy management becomes more controlling, secretive, defensive, and untrusting. What does it say to an organization if the top team is inaccessible, secretive, suspicious, does not show trust and is not trusted? What effect does this have on morale, motivation, commitment and, ultimately, productivity?

Swimwatch posts have often described the secrecy of the new Swimming New Zealand. Board Minutes are no longer published on the website. The content of monthly telephone discussions between Swimming New Zealand and the Regions are a closely guarded secret. There is no genuine democracy in the selection of the new Swimming New Zealand Board. But today the possible extent of Swimming New Zealand’s concealment reached unprecedented heights.

Before disclosing exactly what I believe happened today at Swimming New Zealand I should confess that my source may not have a full and accurate grasp of all the facts. You see, he manages a pub that has a thriving gambling machine business. As such he is acutely aware of the rules surrounding payment to local charities. And so with all the caution properly given to “pub talk” here is my informant’s account.

A recent decision of the Charities Board (30 September 2014), I was told, will significantly impact sports’ ability to obtain and retain charitable status under the Charities Act. Many sports clubs and organisations are increasingly finding it difficult to obtain charitable status, in what appears to have been a change in “policy” since the Charities Commission became the Charities Board. This looks set to become even harder following the decision to deregister Swimming New Zealand as a charity on 30 October 2014.

 The Charities Board has reported, “that as a general proposition bodies established to administer and manage a sporting code or discipline in a region or for a nation are likely to be established for the purpose of promoting sport as an ends in itself. As such entitles of this kind are likely to lie outside the scope of charity in New Zealand law, as reflected in section 5(2A) of the Act”

“entities acting as regional or national governing bodies for a sport may be seen to promote sport as a means to a number of ends, which are not exclusively charitable”

 “relevantly, the promotion of sports for elite athletes does not provide sufficient public benefit to qualify as charitable in law and the promotion of sporting success is not itself a charitable aim”

“an entity which is established with independent purposes to promote sport as a means to these ends will not fall within the scope of charity recognised in section 5(2A) of the Act”

 “the Board considers that Swimming NZ is established and maintained with a purpose of promoting success in competitive swimming as an end in itself. The Board considers that this conclusion is justified by reference to the constitution of Swimming NZ”

“while we recognise the importance of water safety and swimming skills for the general public, we are not convinced by the submission [that the promotion of elite and professional sports is a means to promote amateur entry level swimming and water safety in NZ]

This decision is important. The fact it has been kept secret from the grass roots membership of Swimming New Zealand is inexcusable and negligent. It is interesting and significant that the Charities Board did not decline a Swimming New Zealand application for charitable status. An existing entity (Swimming New Zealand) was deregistered; that means given the boot, probably as a result of Swimming New Zealand filing all those posh new amendments to its constitution and the obsession with the its privileged swim school at the Millennium Institute.

You see Swimming New Zealand’s secrecy, in this case, comes close to self-inflicted harm; even treason perhaps; certainly an own goal. Why? Because if your club is a charity, and most clubs are, you need to take legal advice about whether the new club constitution currently being forced on your club is going to result in the same disaster as the Head Office version. A new constitution has, today, cost Swimming New Zealand its charitable status. Club’s need to ensure that the incompetence of Antares Place does inflict the same deregistration penalty on us all.

It is very possible that the SNZ has put at risk the charitable status and funding of New Zealand’s smallest clubs. Who would have thought that in their ridiculous rush to seize power and fund a swim school at the Millennium Institute, Swimming New Zealand and Sport New Zealand would potentially undermine the funding base of every swim club in the country? One SNZ Board members, Margaret McKee, comes from a club in Gisborne that could well suffer as a result of this change to the charitable status of the sport. I do hope she feels some remorse if that is the consequence of the behaviour of her Board.

Charitable status is important. It can influence an organization’s income tax status. It can have a substantial bearing on obtaining funding from community and gaming trusts, some of whom will not provide grants unless a club is a registered charity. Other benefits include having donee status which may impact a club’s ability to obtain philanthropic monies. The new superstars that run Swimming New Zealand have just cost the parent organization those benefits. Clubs should exercise great caution about anything sourced at Antares Place.

Given the possibility of the harm to the grass roots of swimming that could arise as a result of Swimming New Zealand’s deregistration, it is stunningly unbelievable that Renford and Layton kept the deregistration secret. In any situation trusting those who lead the organization is vital. Events like this understandably tear trust to ribbons.

On the same day Swimming New Zealand was deregistered as a charity I did have to smile at the following headline, “NASA’s unmanned Antares rocket exploded unexpectedly Tuesday seconds after it took off.” Clearly NASA does not have the only Antares item likely to explode. Antares Place may soon follow; a welcome sign perhaps of things to come.

By David

I have an uncomfortable feeling that I should offer an apology for this Swimwatch post. Why – because I am going back to the subject of the Swimming New Zealand 2014 Annual Accounts. I imagine there are few readers that find accounts of any sort all that interesting. The reputation of accountants as dull pencil pushers has not been earned because their job has the appeal of Formula One racing. Accounts are usually a dull description of last year’s history – they can be pretty boring.

However accounts also give us a picture of what the management of a business sees as important. How has the organization’s money been spent? What are the priorities of the business? Is the corporation secure? Is its future in good hands? And for all these reasons it is well worthwhile spending (excuse the pun) some additional time on the 2014 Swimming New Zealand accounts. Because the numbers do suggest a change in priorities; an exposure to greater financial risk; perhaps even a suggestion that the sport’s financial future may not be in good hands. The picture painted by this set of accounts is seriously bad – really, really awful, terrible, shocking horrific. I emphasise that point only to stress how abysmal I believe things have become; in the hope that the members of Swimming New Zealand will consider the case put by Swimwatch and will demand a change in the direction currently being followed by the current Board and management. Or perhaps, better still, – may demand a change in the Board and management that set the organization on this new and dissolute course.

In two previous posts Swimwatch has discussed the dramatic reduction in money applied to swimming related costs. The accounts suggest that SNZ’s core business has been neglected. For example in five years PEGS scholarship money has declined from $K298 to $K171 (43%). Athlete Rewards payments have plummeted from $K31 to $K11 (65%). Money spent on athlete/coaching support has dropped from $K721 to $K576 (20%).

At the same time as the spending on swimming has declined, the money spent on administration, salaries, cars, office equipment, and consultants has ballooned beyond belief. The cost of leasing flash cars has risen from $K37 to $K85 (130%). The cost categorized as Administration has climbed from $K365 to $K682 (87%). The cash wasted on consultants and marketing has grown from $K55 to $K112 (104%). To call it profligate could well be justified.

And while all this change of priorities has taken place the sport, at the Olympic level, has won nothing and the competitive swimming membership has declined from 6,510 to 5,498 (18%). I guess all this could be best summarized as ironic. In five years Miskimmin has poured $11,120,748 into swimming and at the two Olympics in that period has won nothing and has serviced 1012 fewer swimming members. You would think, even a hockey player, could figure out that’s not right.

In addition to the comparison figures mentioned above, accountants use a variety of ratios to measure the financial health of an organization. I wonder how Swimming New Zealand, with all its Institute of Directors’ Board members and foreign, well paid executives, measures up.

For example a sound, healthy business ensures there is adequate diversity of revenue sources. Have the leaders of swimming been able to guide the sport into a position where a diverse range of income sources provide financial security and the prospect of long term growth? Not bloody likely is the answer. In fact the business of swimming is as dependant on government money as any welfare beneficiary. An unbelievable 54% of all swimming’s income comes from one source, Peter Miskimmin. The sport is not an independent strong business. It’s as much a government cost centre as any state school or public hospital. Right now the “Lord giveth” but what happens when the “Lord taketh away”?

But, before rushing to judgement, how well have the Institute of Directors and foreign imports done in building income from the core business of swimming? Is swimming all about government hand-outs or is swimming a healthy business with a strong income stream from its staple activity? You probably know the answer already. Membership fees account for 6% of swimming’s income. Work it out. With those figures who do you think will get the majority of Layton and Renford’s time? What relationship do you think Layton and Renford will spend most time cultivating? Who is more important to them? Peter Miskimmin’s 54% or your swimmer’s 6%?

In a sport where 54% of all income comes from the government, profit is a meaningless figure. Miskimmin is able to manipulate his hand-outs to ensure costs are covered but profits are small. And that is exactly what he appears to have done. Any normal business aims to achieve a profit to income ratio of 10%. Miskimmin allows swimming just 0.4%; enough to survive but not nearly enough to build financial independence. Miskimmin wouldn’t like that. It would render him irrelevant.

Over many years the management of Swimming New Zealand has maintained a healthy liquidity ratio. This measures the extent to which the current assets of the organization cover the current liabilities. Most companies look for a ratio of at least 1/1.1. In other words the assets of the company cover all the liabilities with a small surplus. The liquidity ratio of SNZ is a healthy 1/1.3.

Of more concern is the ratio that tells us that it would take almost every cent of the annual membership income to pay for the already incurred liabilities of the organization. In other words, if Miskimmin’s money stopped, the whole place would need to be closed and the members would have to pay their fees for a further year just to pay off the debts already incurred.

And so what do we know about Swimming New Zealand?

1. Membership is constantly declining.

2. Spending on swimming related costs is being cut.

3. Spending on administrators and their fringe benefits is sharply increasing.

4. The business is seriously exposed to the whim of one income stream.

5. The income generated by the core business is so small as to be irrelevant.

6. And, worst of all, SNZ is proving itself useless at running a Millennium swim school.

It’s all there. Just read the SNZ 2014 Annual Report. No matter what SNZ might say, the numbers don’t lie.