How did they not have an embargo on them as soon as they hit 60%
Northern Echo
Club's spending was in excess of league rules
5:00am Tuesday 19th May 2009
By Paul Cook »
ACCOUNTANTS warned of the threat of liquidation at Darlington Football Club less than three months before it was placed into administration, The Northern Echo can reveal today.
Club accounts for the 2006-7 financial year also show that the club spent 110 per cent of its turnover on staff costs – in excess of Football League rules.
Charlton Williamson Accountants, who audited the club’s accounts, cast doubt on the club continuing as a going concern last December.
Their warning came only five days after Raj Singh invested £1.1m into the club in return for a ten per cent share.
George Houghton, who was chairman at the time, sought investment into the football club last year, including from some of his business ventures in China and the US.
On December 3, 2008, Mr Singh was appointed a director of the Quakers. He paid £500,000 for a ten per cent share in the company and also invested a £625,000 loan.
The report says Mr Houghton held nearly 90 per cent of the shares for a consideration of £4.5m, satisfied by the settlement of his loan to the club. In October 2007, the size of the loan was £3,304,598.
However, five days after Mr Singh’s appointment, the accountants issued a warning about the club’s future.
They said the club incurred a net loss of £2,662,724 for the year ending October 31, 2007. At the time, the club’s total liabilities exceeded assets by £5,157,313.
The statement added: “This, along with the other matters explained in the note, indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.”
The 2007 accounts also show that the club’s annual turnover was £2,686,333. Employment costs totalled £2,955,908. Although there is no breakdown, it would include players, staff wages, National Insurance and taxes.
The Football League introduced the Salary Cost Management Protocol in 2003, which was signed by all 24 clubs in then Division Three – now League Two. It limited player wages to 60 per cent of club turnover and total salary costs to 75 per cent of revenue.
When Hartlepool United broke the limits following relegation in 2006, a transfer embargo was placed on the side until they reduced their wage bill.
Neither Mr Singh nor Mr Houghton were available for comment last night.
However, Mr Singh told The Northern Echo in April that the financial problems were historic and the damage had already been done before he invested in the club.
He said at the time: “If I had known that I would never have put my money in it. I was led to believe my money would get the club through to the end of the season.”
A Football League spokesman said he would pass the figures on to the league’s finance team for further comment.
