Determining Funding Needs

The core business of recreation organisations is the organisation of events, programs and activities for the enjoyment of its members or customers.

In profit oriented organisations such events, programs and activities are generally fully funded by the participant. The total fees paid by participants covers all the delivery costs of the event i.e. administration, promotion, materials, instructors, building maintenance and even taxation. If the fees set by the recreation organisation do not cover all costs, the business will make a loss.

In a not-for-profit organisation it is common to find that there is a gap between the total costs of sport delivery and fees paid by the participants. This gap must be funded in some other way and often it is the community at large that pays. The following example may illustrate:

 

An approximate cost of sending a team of 11 amateur soccer players and their coach from Brisbane to Perth may be about $8,000 in airfares alone (even at maximum discount). If the team had to pay all their own travel expenses the chances are they would never go. In order for the team to make the trip a good deal of the trips expenses must be paid by persons who are not part of the team. Traditionally such teams will engage in fundraising to pay part of the trip's expenses. Fundraising may be looked upon as a form of public funding.

It is essential for the not-for-profit recreation organisation to find funding to deliver their services. It does not necessarily follow that organisations will charge a higher price to deliver a higher quality of service. This is a great dilemma. Often the more the organisation seeks to provide higher quality services, the more funding the organisation must find from outside the participant group. Therefore when a management committees sits down to plan their organisation's goals and objectives, they must be fully aware that an improvement of services is usually reliant on a lot of hard work to find funding, sometimes in ingenious ways.

The level of funding of a recreation organisation is not therefore static from year to year but changes in accordance with the goals, objectives and strategies contained within the organisation's development plan.

For example:

 

A sports organisation has a goal to achieve an active coaching staff of 50 qualified persons. To achieve this goal, the organisation will pursue three objectives:

1

To increase the number of Level 1 Coaches by 25% by December 2000.

2

To ensure all practising coaches are re-accredited at the end of their four-year accreditation period.

3

To ensure that at least two coaches participate in the National Coaching Conference.
The organisation's strategy to achieve Objective 1 is to stage four Level 1 coaching accreditation courses in 2000. The organisation's planning committee must now work out how these course are to be funded.

In the above example, staging coaching courses in Brisbane may present no funding problem as participant fees are likely to cover all costs. However if the course were to be arranged in Townsville would there be a need for additional funding if lecturers had to be flown from Brisbane?

In determining an organisation's need for funding, the management committee will need to consider and differentiate between activities which are self-funding from those which can only be carried out if funding from outside the organisation is achieved. Table 1 illustrates:

Activities which are generally self-funding

 

Activity Exceptions to the rule
Events Major events requiring facility improvements and/or new equipment
Coaching courses Coaching courses in distant locations and lecturers need to be transported from a significant distance

Activities which are generally not self-funding

 

Activity Exceptions to the rule
Employment of professional administrators Where the membership is very large and the salary can be paid for out of membership funds or the professional administrator has the ability to raise sponsorship and other types of funding to cover their own salary costs.
Employment of professional coaches Where the club or team is a business and good results means increased profit e.g. major league football teams.

Where participants are prepared to pay professional coaching fees e.g. golf, tennis, ice skating
Talent Identification programs (TIP.) Generally participants involved in TIP activities are not charged but where demand to enter a sport program of this nature is great because of the sport's prestige it may be possible to charge participants.

Definition: Self-funding means that all costs are borne by users or participants directly

Special Cases

There are activities that may be deemed self-funding although recreation organisations may need to borrow the money to cover costs. An example of this is the construction and/or improvement of facilities. Participants may pay an increased charge over many years in order to pay back the loan.

Note:

A limiting factor to what sporting organisations can achieve is linked to their ability to attract sponsorship and media profile. Moreover these two factors are closely related. For most sports organisations, achieving any significant level of sponsorship is an almost impossible task. Potential sponsors are mostly interested in television exposure of their company name. Unless a sports organisation has high profile athletes they are unlikely to achieve such television exposure.

In circumstances where a sport has negligible media profile it may be better to invest time in developing incomes sources such as sales and merchandising.