Southland pile in during a Ranfurly Shield defence against North Otago © Getty Images

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Teams: New Zealand | Southland

Rugby Southland chairman Owen Shaw has blamed the "extremely challenging" rugby environment for the union's financial loss of NZ$480,000 for the 2010 calendar year.

While the accounts are yet to be finalised, Rugby Southland is anticipating the heavy shortfall. Shaw admitted that grants and donations were significantly less than anticipated while the "unusual" business model needed to compete in the ITM Cup had played a major part in the deficit.

"What people don't realise is you have to commit to costs about a year out from actually taking the field. Then you have to guess the revenue situation which, as anyone in business knows, can be very difficult," he said. "There has been criticism that we didn't adjust when our revenue situation didn't meet our forecast, but it simply isn't that easy."

Budgets for the 2010 season were prepared shortly after Southland won the Ranfurly Shield in October 2009 and were based on support received during that year. Players were then contracted for 2010, with their salaries making up a large chunk of the NZ$2 million total costs.

"When it became evident the budgeted income would not be achieved, we were unable to make changes as players had already been contracted and operational costs committed to," Shaw said.

"We were hopeful playing results later in the season would have assisted financially with retention of the Shield or a semi-final in Invercargill but unfortunately that did not come to fruition."

Shaw said the deficit was "unacceptable", lamenting the fact that the grants and donations revenue figure was NZ$432,000 less than budget. The union has begun working with community funders to establish a solution.

"The model will change with costs being reduced, particularly around the player salary cap," Shaw said. "Ever since the advent of professional rugby it has been very difficult financially and will continue to be. Southland is the smallest province in the premier division of New Zealand rugby and has a small commercial base.

"To aspire to play and compete in the ITM Cup at the extent we have and maintain our level of community rugby activity, it will continue to require a major financial commitment from both our community funders and the Southland community - support which to date has been outstanding."