The main funders of Rugby Southland were warned more than three years ago about ambitious revenue targets set by the union, and that relying on gaming returns was a real risk.
It was revealed late last year Rugby Southland was facing financial difficulties and in a statement last week Rugby Southland chairman Owen Shaw said the union was facing a $480,000 blowout.
He said that was unacceptable and was caused by a reduction in grants and an inability to cut costs.
A report given to the Otago Daily Times yesterday expressed concern about the union achieving the level of revenue it was forecasting and keeping costs at forecast level.
The report, which was prepared for the Invercargill Licensing Trust (ILT) and the Community Trust of Southland in August 2007 to look into the state of Southland rugby, concluded there was no easy answer or silver bullet to resolve Rugby Southland's financial issues.
The role of the ILT and the community trust was vital, the report said.
"However, there is a risk that, as costs rise, the trusts will be put in a position of being `bankers of last resort', in effect providing funding to bridge gaps between the union's costs and revenue from sources other than the trusts," it said.
While revenue was affected by local issues, the major cost of the union was team costs, particularly player costs, which was a function of the domestic market and, to some extent, the international market.
The report said if the union had to live within its means, it most likely would have an impact on Southland's on-field competitiveness and consequently on its ability to attract and retain the support of fans, sponsors and other commercial partners.
Rugby Southland's revenue was lower than fellow provincial unions and funding future cost increases would be a challenge, the report said.
Southland had in place a strategy around gaming revenue to break even financially but if the strategy did not achieve the desired outcome, which was a real risk, then the union would need an increase in non-interest-bearing funding to provide solvency.
Rugby Southland chairman Owen Shaw said last week a shortfall of more than $400,000 in grants and donations, including money from poker machines, was part of the reason for the loss.
The union is meeting the trusts to discuss funding while a change manager will be appointed to oversee the financial future of the organisation.
Shaw said last week up to seven players had been cut from the payroll a couple of months ago but he hoped no more players would be forced out.
