Our friend Mr Hat, in discussion with Stefan about auditors, makes the following statement… saying auditors couldn’t determine anything about the following….
The alleged events that resulted in the charges relevant here are:
- Payments of owner funds (equity) to sponsors, onto Man City; and
- Off the book payments from related parties to subsidise payments that Man City would otherwise have had to make
I’m just checking, but we’re not alleged to have done this are we - I thought the issue was we were accused of receiving funds directly from the owner instead of the sponsor. He’s right in that if the sponsor pays us, it’s irrelevant to anyone how they themselves fund that payment and so an auditor of City couldn’t and wouldn’t care. And presumably there’s no PL or UEFA rule against it.
Am I right?
Taking your first point, there are FFP rules about owner investment. If the auditor's brief included FFP compliance then it's possible they might ask the question about where the money had come from for the Abu Dhabi linked sponsorships.
However, the Etihad sponsorship was seemingly paid in two chunks, one from Etihad and another larger chunk from central funds (but quite possibly also remitted from Etihad). As an auditor you'd probably question that arrangement and given the sums involved, you'd want to be quite certain it was OK.
As for off-the-book payments, you almost certainly wouldn't see those by definition if they were paid by third parties. But even if we were trying to hide the Fordham image rights payments, there was a direct link to Fordham from City. As an auditor, seeing that company had changed its name from Manchester City Football Club (Image Rights) Limited, you'd want to know why and what the company was set up for. You'd also surely notice that image rights payments formerly paid by City, now weren't being paid by them, and you'd want to know why.
Auditors should be looking for anything unusual, and asking questions until they get a satisfactory answer. I was involved in a couple of audits in my accountancy days, one where we noticed significant sums going through an account that didn't seem right for that account. When we investigated further, it turned out to be a major fraud, which was very high profile at the time.
Another client was a casino group, and I noticed a couple of odd things that were nothing to do with the accounting side of things but indicated potential collusion between dealers and punters. It turned out I was right.
