By Kevin Lawrie and Rachel Corbett.
We recently published a snapshot on the voting structures of National Sports Organizations (NSOs) and we found some interesting results. As part of the governance restructuring that many NSOs are undergoing in their transition to compliance under the new Not-For-Profit Corporations Act, we thought it would be valuable to look at NSOs’ membership fees to find commonalities. We think it is important for NSOs to think about this financial side of reorganizing their membership structures to ensure that this revenue aspect is preserved or enhanced under the new legislation.
Unlike the snapshot of voting structures, not every NSO (in fact, very few) include their fees amounts in a publicly available document like their bylaws. Further, the amount of fees and the members who pay fees are in flux and can change from year to year. However, there is enough information to help us answer a few relevant questions. Particularly:
- Who sets membership fees?
- Which categories of members pay fees?
- What fees does each member class pay?
Each NSO may have very good reasons for instituting the membership fees structure they currently use and there is no ‘right amount’ for membership fees. However, Sport Canada has recommended that all NSOs should charge a fee to individuals participating in the sport at local and provincial/territorial levels to support national activities, and while it is certainly not a ‘prescribed standard’, Sport Canada has suggested that this fee should be at least $5 per individual.
WHO SETS MEMBERSHIP FEES?
Of the 53 NSOs included in our sample, 27 NSOs (51%) have their members’ fees decided by members. Typically this occurs at the Annual General Meeting and may come as a recommendation from a committee, from staff, or from the Board of Directors. For these organizations, even though the fees amount may be recommended by the Board of Directors, the power of approving that recommendation still rests with the membership. Cricket Canada is one example: Fees for membership in the Association shall be of such amount and on such basis, as may be fixed from time to time by the board of directors, and shall be payable at such date as the board of directors determines; PROVIDED THAT any changes to membership fees are approved by the Members at the General Meeting of Members.
Organizations must be prudent in the language used to describe this authority. If the organization is not clear in who sets and approves membership fees, then particular problems could arise. For example, the Canadian Lacrosse Association’s section on membership fees may be open to interpretation: “Annual membership fees shall be set by resolution of the Board of Directors at the Annual General Meeting”. One interpretation of this approach could be that the CLA’s Board of Directors sets the fees at the AGM in front of the members – but without their input or approval. The more logical (although not necessarily correct) interpretation is that the Board and the voting members are one and the same, so ultimately it is the members in lacrosse who are voting in fees, even though the bylaws are worded differently.
Twenty-four NSOs (45% of our sample) have their Board of Directors set membership fees. This approach is outlined clearly in the bylaws as giving the Board of Directors power to set membership fees – without approval of the membership. Biathlon Canada’s approach for regular membership fees reads: “The membership fees for this category shall be set by the Board with consideration to differences in services or benefits available to each type and adjusted from time to time, as the Board deems necessary.”
Included in neither of the above groups is one organization, the Canadian Freestyle Skiing Association, which authorizes its staff to set membership fees: “Membership fees or dues shall be as established by the Chief Executive Officer” which is certainly unique among NSOs.
WHICH MEMBERS PAY FEES?
The members that pay fees depend on how the organization interrelates with its Provincial/Territorial Sports Organizations (PTSOs). In some cases, the members of the organization are the PTSOs themselves, who pay a standard membership fee (and in some NSOs this fee would be different depending on the size or membership numbers of the PTSO). In other structures, the PTSO could charge its participants a membership fee and remit a portion of that fee to the NSO. In still other cases, the participants may be direct members of the NSO and the participant-members would therefore pay a fee directly to the NSO.
Mostly, if the membership class has a vote then they also pay a membership fee – but this is not always the case. For the Federation of Canadian Archers, categories of non-voting membership (including both ‘Individual’ and ‘Life’ members) are open to applicants who pay an appropriate fee. In this example, even non-voting classes of members must pay a fee.
WHAT FEES DOES EACH MEMBER CLASS PAY?
Members pay an amount of fees depending on how the NSO’s governance model is structured. Volleyball Canada has its PTSOs charge members a fee and then takes a portion of that fee for itself – and the portion is different depending on the membership class and province. Indoor volleyball players in Saskatchewan pay $55 while indoor volleyball players in New Brunswick are charged $35. Volleyball coaches in Ontario pay $71 while volleyball coaches in Manitoba pay $45. Volleyball Canada manages all this through a well-developed and highly automated national membership registration system.
For Golf Canada, golfers who are members of member golf clubs pay a flat fee – $10 for every adult golfer and $5.50 for every junior golfer. These fees are collected by the club and sent directly (along with a registration list) to the NSO. Anecdotally, we have been told that a great many individuals are not even aware that they are members of Golf Canada, as their $10 fee is buried in with many other charges levied by their Club and they never actually see that they are paying it.
The Canadian Lacrosse Association has its Member Associations (equivalent to PTSOs) pay a base fee (which differs among them based on their size) and also has participants pay a standard $3 membership fee. Baseball Canada also uses a hybrid system but one that may not be its desired choice. The NSO has set a participant fee of $1 of each participant in every PTSO that reports its registration numbers. However, Ontario does not report its registration numbers and Baseball Canada charges Ontario’s PSO a negotiated flat fee of $25,000.
Gymnastics Canada uses a slightly different approach in determining membership fees. When the annual budget is prepared, it includes a set amount that must be raised through membership. This global amount is then divided by the number of individuals participating in programs throughout the country, and the resulting number is the individual membership fee. In recent years this fee has amounted to $2 to $3 per individual participant.
Many NSOs have membership fees along a sliding scale depending on the level of member and the amount of services received. Swimming ranges from $5 (recreational member) to $55 (competitive swimmer). Volleyball’s fee for a competitive youth player is $20. Speed Skating is considering introducing a phased approach to raise fees from $20 for an elite competitive member to $50 in 2015. Fees for recreational members would remain low, from $1 to $15. Clearly, there are many different approaches to setting fees.
OTHER SOURCES OF REVENUE
Membership fees are not the only means by which NSOs collect revenue from their stakeholders. Softball Canada charges potential National Team athletes a $75 tryout fee and an additional $300 if they make the team. Soccer Canada occasionally charges user fees and gate receipts, in and 2007 charged every individual member a surcharge of $1 to raise about $1 million to support the Canadian team in the U21 World Cup which was hosted by Canada that year. Each of the five regions of Baseball Canada pays a standard affiliation fee of $10,000 which is directed to cover corporate governance expenses. Skate Canada’s skaters pay approximately $200 for competitions and a smaller fee ($10-$20) for tests – 80 percent of which is sent to the NSO.
There are numerous other examples of fees, dues, and licenses that NSOs charge individual participants for the services they receive. In most cases, these fees increase as the athlete moves up the competitive ranks, and a National Team athlete is often paying many thousands of dollars for affiliation with the NSO and its high performance programs (this is especially true in a sport like alpine skiing). Coaches and officials will also be charged various membership fees – Skate Canada recently introduced a sliding fee for coaches that declines as the coach’s level of certification increases, which is a certainly a noteworthy and innovative practice.
THE BEST APPROACH
Each NSO should have its own approach to collecting membership fees from its members and other participants. Just as with voting structures, it is difficult to recommend a ‘best’ approach because of the many differences between the sports and their contexts.
With the changes arising in the new NFP Act, choosing the ‘best’ approach for membership fees should take the following issues into consideration:
- Who should set membership fees? (Board of Directors, Executive Committee, staff, or Members). Even if one group is given the authority to set membership fees, organizations will also want to determine if the other group must ratify that recommendation. Regardless of which group sets the membership fees, the sections in the bylaws should be clear enough to allow changes to the fees without a controversial interpretation about who has the authority to make those changes.
- How does the NSO receive membership fees? (Through the PTSOs, directly from participants, or through a hybrid system). Some larger NSOs may prefer that participants register directly with the organization and these NSOs could have the capacity to track all of its members. This requires a centralized, online member registration system which currently exists within only a few NSOs. Other NSOs may prefer a hybrid system whereby PTSOs collect membership fees and remit a portion of each fee to the NSO. Still other NSOs may simply prefer that each PTSO pay a negotiated membership fee (based on participation numbers, size, or some other factor) and submit a flat fee to the NSO. The answer to this question also intersects with how member categories are defined, and what is practical and manageable in terms of giving notice to a member. If the NSO has a direct communication link to every member (for the purpose of giving notice of a members meeting), then the NSO can also levy fees directly from the member, if it wishes.
- Are there differences in membership fees or are all membership fees equal? Should participants in Ontario pay the same membership fee as participants in Nova Scotia? Should Alberta pay the same membership fee as Quebec? The differences in membership fees will likely be connected to the governance and voting structures of the organization. One NSO, Equine Canada, has considered a system whereby the individual membership fee to be paid to the national body is a set percentage (10 percent) of PTSO fees, which does a good job of accommodating regional differences. So where PTSO member fees are low, such as in a small province like Newfoundland/Labrador, the fee paid to national is also relatively low.
- Exactly how much are membership fees? Naturally this question is best answered with a detailed business case and budget. It would be foolhardy for an NSO to randomly choose a dollar amount and ask members to pay it. NSOs must take into account their expenses, expected revenue from other sources, predicted participation numbers in each PTSO (which could also guide the creation of a non-standard fee among provinces), and pressures or input from other funding organizations like Sport Canada, Own the Podium, the Coaching Association of Canada, and the various provincial and territorial governments that contribute to sport funding.
TRENDS WE ARE SEEING
It is really too soon say much about how NSOs are going to treat the membership fee issue under their new governance structures. Frankly, their focus of energy and time is presently on devising new membership classes and rethinking the structure of the Boards of Directors. Eventually, however, it will be important to consider the business case arising from new membership and governance models. We will post again when we know more about how this business case is shaping up.
For further information on the new Not-for-Profit Corporations Act and how sport is making the transition, feel free to contact us at the Sport Law & Strategy Group. We can also share more detailed information about our comparative snapshot of membership fees, upon request.
[Note: membership fee amounts in this post are based on 2010-2011 numbers (and in the case of Volleyball Canada, 2009-2010 numbers) and may have changed]