Fide Verification Commission  

Verification Commission

Nicola Palladino (Italy), Chairman

Israel Gelfer (Israel)

Don Schultz (USA)

Click on your choice!

2002 Verification Commission Report

August 11, 2002

The Verification Commission met in Lausanne on Saturday, June 8. Chairman Nicola Palladino (Italy) and members Israel Gelfer (Israel) and Don Schultz (USA) were in attendance. Also present were Treasurer David Jarrett and Executive Director Emmanuel Omuku. FIDE’s Operations for the year ending December 31, 2001 were reviewed.

The apparently successful reunion of the World Championship is a major accomplishment and the Verification Commission applauds the role FIDE President Ilyumzhinov played in the successful Prague World Championship discussions.

Nevertheless, FIDE’s dependency on its  President’s generosity and the complex and at times uncontrolled handling of finances continues to a Commission concern.

Last year the Commission expressed dismay over the waiving of a $40,000 debt from India stemming from the 2000 World Championship. Times have changed, this year the commission thanks India and its FIDE representative FIDE Vice President Koya for a partial repayment of this debt, a debt for which they no longer have any obligations.

Regarding the specific recommendations the commission made last year that have not been adequately resolved:

1) The Commission recommended the rigid enforcement of requiring personal expense requests for all purposes to include accompanying receipts and explanations. This still is not being done and the problem persists. As an example, the unsubstantiated expenses of Honorary President Florencio Campomanes stand out like a sore thumb in the financial reports. The commission requests FIDE’s Presidential Board take the necessary initiatives to assure substantiation of legitimate expenses.

2) The commission recommended the establishment of a three-year working reserve fund of SF 2,000,000. Last year the commission expressed satisfaction that some progress was made and that a working reserve of SF 200,000 was included in the 2001 budget. Unfortunately, nothing other than making it a budget item was done; there still exists no working reserve.

3) The commission recommended that the World Championship not be held unless a deposit is made in a timely manner well in advance of the championship. This was not done. The Commission repeats its recommendation for the third year in a row.

4) The commission made recommendations regarding cutting costs specifically regarding FIDE forums. Although this item was well addressed, the commission believes FIDE should go beyond reducing the number of Forums and eliminate them entirely; the Internet website represents a better and less expensive way to accomplish the objectives of the FIDE Forum.

5) The update of the FIDE Handbook was not done. This remains a recommendation of the commission. A loose leaf edition allowing for updates distributed to countries and inclusion on the Internet seem in order.

2.0 New Items:

2.1 The Commission expresses concern over the complexity of FIDE’s financial structure vis à vis FIDE Commerce, World Chess Foundation and reporting of costs of major events. The committee recognized this but understands that FIDE has a unique situation. With the world championship unification and possible termination of the FIDE Commerce association, the complexity should be reduced.

2.2 Certain expenses were not sufficiently documented and when viewing the financial report, they stand out like a sore thumb. An acceptable accounting of these expenses needs to be done. Considering the diminished opportunities for an early entry of chess into the Olympics these and other Olympic entry expenses need to be closely monitored.

2.3) Numerous federations are in arrears in payment of their dues. The Treasurer is urged to see that the delinquent countries are properly notified, reasonable attempts to remove the debt are taken (such as payment plans) and where necessary assure that FIDE Regulations regarding suspension of services are followed.

2.4) The Commission recommends the rigid enforcement of requiring personal expense requests for all purposes to include accompanying receipts and explanations. This has not always been the case.

2.5) FIDE Commerce Debt – Although Kalmykian Vice President Alexey Orlov has confirmed to Don Schultz of the Verification Commission that President Ilyumzhinov will honor all outstanding Debts owed to FIDE by FIDE Commerce, the debts have still not been paid and at a minimum a payment schedule is in order. These debts were outlined to the commission in an email of July 28, 2002 from Treasurer as follows: “The promise made in Greece that FIDE would receive USD 700,000 each year even in the absence of the World Championship in any year.  There is also a financial undertaking in the agreement signed with FIDE Commerce to pay USD1,000,000 by the end of this year although this is not included in the budget agreed in Greece.

 

2001 Verification Commission Report

July 10, 2001

The Verification Commission met in Lausanne on Saturday, June 2 and Sunday June 3. Chairman Nicola Palladino (Italy) and members Israel Gelfer (Israel) and Don Schultz (USA) were in attendance. Also present were Treasurer David Jarrett, Executive Director Emmanuel Omuku, Deputy President Georgios Makropoulos and General Secretary Noureddine Tabbane. FIDE’s Operations for the year ending December 31, 2000 were reviewed. While substantial improvements are needed, the commission can report that the situation and outlook for the future of FIDE is better than one year ago.

The lawsuits by former world champions Anatoly Karpov and Zsuzsa Polgar have been put to rest.

The FIDE staff remain dedicated and are willing to make sacrifices during difficult times. They are a strong asset.

The FIDE Commerce venture is moving forth though there are problems and these will be addressed later in this report.

Regarding the specific recommendations the commission made last year:

1) The commission recommended that a large overdue loan from FIDE to the World Chess Foundation be repaid immediately. This has now been completely repaid.

2) The commission  recommended that a written contract between FIDE and the World Chess Foundation be prepared and signed. The recommendation was been made mute by the arrangement with FIDE Commerce.

3) The commission  recommended that FIDE obtain documented confirmation of all 1999 World Championship payments to the players. As far as the commission knows, all payments to the players have been made.

4) The commission  recommended that the Presidential Board reevaluate the 2000 budget. This recommendation is now mute.

5) The commission  recommended that the on-site role of Mr. B. Balgabev be reevaluated by President Ilyumzhinov. This was done and Mr. Balgabev has been relocated back to Moscow.

6) The commission  made recommendations regarding staff use of cash and credit cards. It is our understanding that the Treasurer will address this issue in Greece.

7) The commission  recommended the establishment of a three-year working reserve fund of SF 2,000,000. Some progress has been made, there is now a working reserve of SF 200,000 in the budget. However no special account has, to date, been setup.

8) The commission  recommended that the World Championship not be held unless a deposit is made in a timely manner well in advance of the championship. This was not done. The Commission repeats its recommendation.

9) The commission  made recommendations regarding cutting costs. During the fiscal year 2000 some savings such as limiting the number of FIDE Forums were done. Yet no policy decision to limit the number of FIDE Forums for future years has been taken as far as we are aware.

10) The commission  recommended  that FIDE enforce its policy of having money never routed or maintained in bank accounts of individuals. This has not been done. The Las Vegas Bank account still remains open. The Commission has been advised that the account will be immediately closed.

11) The commission  recommended that the FIDE Handbook and Directory be updated. This has been done.

12) The commission  recommended that measures be put in place to protect against premature withdrawals from the pension fund. After due consideration the commission withdraws that recommendation.

Regarding new items:

The Commission recommends the rigid enforcement of requiring personal expense requests for all purposes to include accompanying receipts and explanations. This has not always been the case.

The Commission recommends that, on an ongoing basis, FIDE should send letters to FIDE Commerce that document all payments due FIDE. A schedule for payments should be included. It is unacceptable for FIDE Commerce to alter payments by directly handling other third party FIDE debts.

Concerning the forgiveness of the $40,000 World Championship loan to India by President Ilyumzhinov, the Commission recommends that in order to assure that all facts are properly conveyed, the Lausanne office and the Treasurer must be consulted on all decisions regarding payments due FIDE.

The Commission requests that its Annual Report be sent to all countries as part of the official minutes. It and not acceptable to simply make it available through Internet access at the FIDE website.

The Commission extends its thanks to FIDE staff, to Deputy President Makropoulos, General Secretary Tabbane, Executive Director Omuku and Treasurer Jarrett for their very helpful participation in the Commission’s 2001 annual review.

 

2000 Verification Commission Report

June 7, 2002

The Verification Commission met in Lausanne on Saturday, April 29. Chairman Nicola Palladino (Italy), and members Israel Gelfer (Israel) and Don Schultz (USA) were in attendance.
Also present were FIDE Executive Director Emmanuel Omuku and Treasurer David Jarrett.

FIDE’s operations for the year ending December 31, 1999 were reviewed. Unfortunately, the state of FIDE’s affairs have deteriorated during the last year. Lawsuits by former World Champions Anatoly Karpov and Susan Polgar, increasing debt, member dissatisfaction with event management and a decline in the quality, timeliness and extent of FIDE services is alarming.

On the plus side FIDE staff remains dedicated and willing to make sacrifices during difficult times. Individual volunteers continue to lend both financial and technical support. A new venture FIDE Commerce is potentially lucrative and far reaching.

Following the Verfication Commission meeting, Mr. Berek Balgabaev has reported to VC Member Schultz that President Ilyumxhinov has transferred a substantial sum into the FIDE account thus reducing the money, shown below as owed to FIDE, by that amount.

Here are our specific observations and recommendations:

1) Last year, there was a large overdue loan from FIDE to the World Chess Foundation for SF402, 372. This loan ballooned to SF1,365,659 by year end 1999. During the first months of 2000, $130,000 was paid back to FIDE. At a 1.6 to 1 SF to US$ exchange rate, the outstanding balance would be SF1,157,659. FIDE has now become completely dependent upon the financial support of President Ilyumzhinov. If for any reason that support ends without payment of the outstanding loans, FIDE will be destroyed. We recommend that FIDE insist upon immediate payment.

2) We take note that there does not seem to be any signed contract between FIDE and the World Chess Foundation. We recommend that this be quickly clarified.

3) We also take note that because of the bad checks to World Championship prize winners, FIDE directly paid several of the players the amount owed to them. Furthermore, it has not been confirmed that all the 1999 World Championship participants have been paid their prizes and that all bad World Chess Foundation checks have been returned or otherwise accounted for. We recommend that FIDE obtain documented confirmation regarding confirmation of all 1999 World Championship payments to the players.

4) The Anatoly Karpov and Susan Polgar lawsuits are in arbitration. The Executive Director is confident of a favorable outcome in both lawsuits. However, even if it is favorable, FIDE’s legal costs will likely exceed the SF5,000 that was budgeted for 2000; the 1999 legal costs were SF45,757. The potential negative impact for FIDE of unfavorable arbitration threatens FIDE’s very existence. We recommend that the PB re-evaluate the 2000 budget.

5) Regarding FIDE in Elista and Lausanne, we take note and endorse the points raised by Mr. Gelfer in his April 28, 2000 Report to the VC on the state of the office in Elista and the rating system. We note that while the names of nine Elista staff members have been made known to the Treasurer and have been documented, the associated job descriptions of these employees have not been documented. Furthermore, the role of Mr. B. Balgabev at the FIDE office is unclear. He was placed there by President Ilyumzhinov. It is costing FIDE a significant amount of money to keep there: Salary – SF60,000, accommodations – SF20,430, travel – SF9,052, allocations familiales – SF6,898 and taxes – SF10,404. In addition, there is an impact upon staff insurance, the building up of a reserve for ex-gratia payments. We recommend that the President consider this issue accordingly, taking into consideration the Treasurer’s Report.

6) The Treasurer reported that the use of cash and credit cards for payments is too high. We recommend that the Executive Director take appropriate action to minimize these methods of payment and, that in the future the Treasurer be immediately notified of all credit card and cash payments.

7) Last year, the Verification Commission recommended the establishment of a three year working reserve fund of SF2,000,000. This has not yet been done. We recommend it be done this year with a fixed amount included in the budget for 2001.

8) We take note that no deposit or bank guarantee for the 2000 World Championship has been received. We recommend that the World Championship not be held unless a deposit is made in a timely manner well in advance of the championship. In future years, FIDE must insist on financial protection in accordance with guidelines.

9) The Treasurer has reported that FIDE’s cash flow is precarious and worsening. In light of this, we recommend that cuts to the 2000 budget be made immediately. Suggested areas of reduction are limiting FIDE forums to four instead of six per year, staff reductions, limitations on travel, limitations on administrative costs, cessation of CACDEC initiatives and curbs on board expenses. Long range consideration should be given to moving the FIDE headquarters from a high cost location such as Lausanne.

10) We take note that for purposes of paying the World Championship Prize Fund, a Wells Fargo Bank Account in the name of several individuals was set-up. This is poor business practice and in contradiction with a prior General Assembly directive. We recommend that FIDE enforce its policy of having money never routed or maintained in bank accounts of individual(s).

11) We take note that the FIDE Handbook and Directory have not been updated. We recommend that this be done as soon as possible, not only because of their value, but because income from sales will likely exceed costs.

12) We have not specifically commented on details of the FIDE Commerce Proposal. There has been substantial input from countries and interested parties. There is a need for FIDE to take initiatives such at this. However, great care must be exercised to avoid pitfalls and obtain widespread support.

13) The establishment of a pension fund for staff is meant for future benefits and should not be paid directly to any members of the current staff. We recommend that measures be put in place to protect against premature withdrawals from the pension fund.

We compliment Treasurer Jarrett for presenting FIDE’s financial state in a clear concise manner. We thank Executive Director Omuku for his help and cooperation.

Nicola Palladino Israel Gelfer Don Schultz
Chairman Member Member

5/5 - (1 vote)