As per Exclusive report of Football Economist Carlos R.Cózar Two Prestigious Auditors Decline Barcelona FC Audit Citing Transparency Concerns
In a surprising turn of events, two of the world's leading auditing firms, EY and Deloitte, have declined to audit the financial accounts of Fútbol club de Barcelona.
Citing a lack of transparency and uncertainty surrounding the club's financial figures, these major players in the auditing sector have opted not to endorse the reported results, as revealed by sources familiar with the matter.
According to Carlos, FC Barcelona reached out to prominent auditing firms, only to be met with rejections from all major contenders. Consequently, the responsibility of conducting the audit was handed over to Grant Thornton, currently ranked sixth globally.
This decision follows EY's critical assessment of Barcelona FC's financial health during their tenure as auditors. EY's analysis raised concerns over the club's working capital, which had significantly deteriorated compared to the previous year.
The auditors highlighted a negative working capital of 601 million euros as of June 30, 2020, a stark contrast to the €284m in the prior season. This raised questions about the club's adherence to the principle of business as a going concern.
EY's skepticism was rooted in several key factors, including substantial investments in projects like Espai Barca, a shift in the timing of debt obligations from long to short term, and expenditures related to player transfers.
Notable instances such as the €120m transfer of Antoine Griezmann from Atlético Madrid, as well as deals involving players like Coutinho and Dembélé, were areas of concern for EY.
In response to inquiries, EY sources clarified that their decision not to re-audit Barcelona was linked to the conclusion of their existing contract.
There could be a few reasons behind chainging auditing firms from FC Barcelona's perspective:
In a strategic move, Barcelona opted to change auditors, thereby gaining valuable time to address their precarious financial situation.
Grant Thornton undertook a review of previous financial records and postponed the auditing process by several months. This delay allowed the club to incorporate a significant financial lever approved during a June 14 assembly last year.
The lever was the sale of 10% of television rights to Sixth Street for a sum of €207m over the next 25 years.
The injection of this income, received towards the end of the fiscal year, prevented losses amounting to €160m. This financial maneuver not only ensured compliance with LaLiga's financial fair play regulations but also safeguarded the salary cap.
Equally crucial was meeting financial commitments to Goldman Sachs, who had extended a loan of €525m to cover player salaries, in addition to a stadium-related loan.
Barcelona have lately found solutions, including securing a new partner for their Barça Studios venture following the dissolution of agreements with Orpheus Media and Socios. com.
The club has yet to furnish its financial accounts for the first half of the current year to LaLiga authorities. Further financial insiders intimate that Grant Thornton's ongoing audit may unveil substantial issues in FC Barcelona's fiscal well-being.
These could be reflected in the annual report detailing the club's financial status. Eduard Romeu, the club's Vice President for Economics, has acknowledged that Barcelona's gross debt remains at a staggering 1.35 billion euros, a figure unchanged from two years prior.
This sum is compounded by an additional 1.45 billion euros tied to the Espai Barça development project—a matter of significant concern for the club.
With an estimated total debt obligation of €2.82Bn, accounting for interest on the Espai Barça financing over the next 30 years, auditors foresee challenges for Barcelona FC in meeting these financial commitments.
To avert potential complications, the club is reliant on securing funds from the sale of Barça Studios before August 31 or exploring avenues to generate savings through player departures.
Failure to not achieve the sale of Barca Studios could have had serious ramifications, including the inability to register new signings and renew existing player contracts within LaLiga.