Wednesday, December 30, 2015

Athletic Accounting Part III

Athletic Accounting Part III 

A December 9, 2015 Star Tribune editorial declares that the recent financial audit of the U of M athletic department reveals "a department whose spending excesses have undermined public trust." See Sense of Privilege at U of M Athletics Department.

This financial audit is just the proverbial tip of the iceberg. It was limited to the financial activities of the administration of the athletic department. The U of M internal auditor is working on an audit of "sports related activities." See p. 711 of the Dec 2015 BOR Special Docket. This next audit should include information on the operations and financing of the teams and facilities.

The public saw the dark gray uniforms that the football team used this year for one game (against Michigan). The public did not see the $2,928,985 expense for uniforms and equipment on line 26 of the 2014 U of M report to the NCAA. Nor did the public see the $3,306,483 for severance benefits on line 23 of the report or the $7,378,442 for guarantees (for visiting teams) on line 18 of the report or the $17,663,000 for "athletically related facilities annual debt service" on p. 2 of the report.

The U of M reports $0 for student fees (line 2) and $0 for direct state government support (line 6). This ignores the student fee for the construction of the football stadium that generates more than $1 million for the University each year and the $10,250,000 that the University receives from the state each year to pay the bonds issued for the stadium. For more detail on the complex (and opaque) financing of the athletic department and its facilities see the March 2013 post on Athletic Accounting.

The principal cost of the construction of the football stadium was $288 million and the principal cost of phase 1 of the "Athletes Village" will be $166 million. Those amounts do not include the interest that will be paid on the bonds issued to pay for part of the costs of construction. In the case of the stadium those bonds will be paid over more than 20 years (adding tens of millions of dollars in interest).

Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member

Editor's note:

Mr. McNabb properly notes that the expansion of money going toward athletics departments at universities is a seemingly never-ending business.

Yesterday's Washington Post contains yet another example of this phenomenon:

As college sports revenues spike, coaches aren’t only ones cashing in

This is an outstanding piece and includes much interesting and useful information about university athletics departments and money:

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