Head scratching about the financial reporting of the UA Athletics Department
How much does the University of Arkansas spend on its athletics department? The total number for fiscal year 2013 was an astonishing 88 million dollars, up from 81 million the previous year and 68 million in 2010, an increase of almost 30% in 3 years. According to the University, these expenses are more than covered by the revenues so that no taxpayer or tuition money is spent on athletics.
It is interesting however to note that the actual revenues and expenditures reported each year are twelve million more than was budgeted (according to certified budget documents filed with the state). Every year. Why are budget makers so wide off the mark?
For example, about 3 million are spent every year for game guarantees ($3.6 million in 2013). Yet these amounts never appear in the budget. Could this be related to the UA’s attitude that game guarantees constitute a trade secret? Somewhat bizarrely, the line item for ‘Facilities’ is under-budgeted every year – by seven million in 2013 and a whopping 12 million in 2012. Can you picture the financial officer preparing the budget: “Let’s see, last year we budgeted 3 million but spent 15 million on facilities, so this year we are going to budget 4 million, that should fix it”. On the revenue side, most of the unbudgeted revenue appears in the “Other Income” category (12 million in 2013, up from 9 million in 2010). The same line item, which is said to include “investment, rental, endowment income”, is budgeted as zero ($0) every year. Is this related to the UA’s habit of keeping Razorback Foundation finances in the dark? Or is it another result of the sloppiness built into the UA’s accounting practices, as recently revealed and criticized by the Legislative Audit report?
In an additional twist to the story, google turned up an Economic Impact study from 2012 which quantifies athletic department expenditures for 2010-11 as $84.7 million and revenues as $90.0 million, compared to the official figures of $74.9 million expenditures and $75.2 million revenues. Further, the study (p. 14) lists almost $20 million in private donations, a figure nowhere to be found in the official financial report (which lists $7.7 million in “private gifts”). What kind of creative accounting is going on here???
UPDATE: As a reader points out, athletic revenues and expenses also have to be reported to a federal database known as EADA. Look up an institution and click on “Revenues and Expenses” to see the most current data. They are dramatically different from the figures reported to the state (and also not the same as the economic impact study figures). The total revenue reported to EADA was almost $100 million in 2012 and 2013. Over the last four years, the Athletic Departent reported $55 million more in revenues and $40 million more in surplus to EADA than was reported to ADHE!
The explanation seems to be that ADHE requires to budget and report only expenditures “paid by an institutionally held fund”, and to report only “monies from foundations, clubs, and other private gifts which are received by institutionally held accounts”, which in effect allows the UA to keep multiple sets of books and thereby defeat state oversight and transparency.
The budget documents and where to find them
State law requires all Universities every year to file a Certification of Budgeted Athletic Revenues and Expenditures with the Arkansas Department of Higher Education (ADHE), and to report the actual revenues and expenditures (AR Code 6-62-106) at the end of each fiscal year (fiscal year 2014 runs from July 2013 to June 2014). The forms to be used are known as ADHE Form 21-2 (budgeted) and ADHE Form 21-1 (actual). Note that each form uses somewhat different line items. Some of the recent reports (both budgeted and actual) can be found on the UA’s Financial Affairs web site. State law requires all state entities, including state-supported universities, to publish on their web site each and every report they file with another state entity (AR Code 25-1-118). Compliance with this law is uneven, as we shall examine in a later post.
A more detailed breakdown of the 2014 athletic budget can be viewed at Arkansas Business. The ADHE is also required to publish the athletic finance reports, but they are not easy to find. A Summary of Intercollegiate Athletic Revenues and Expenditures, 2012-13 is contained on the last page of the Arkansas Higher Education Coordinating Board quarterly meeting agenda, October 25, 2013. The last agenda item of the board meeting taking place today is approval of the athletic financial survey.