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:

Friday, December 11, 2015

For the Record: Non-resident U of Minnesota tuition to be raised: Better late than never?

This topic has been covered on numerous occasions both on The Periodic Table, as well as the Star-Tribune.

From The  Periodic Table:

State Rep Blows Whistle on Out of State Tuition Giveaway  January 10, 2013
This post contains links to background information

From the Star-Tribune:

University of Minnesota Has Lowest Out of State Tuition for BigTen Publics October 30, 2010

Today the Star-Tribune reported on plans at the University of Minnesota to fix what is obviously another money sink at the U, by finally attempting to set out of state tuition at the median of that charged by BigTen schools, instead of current bargain basement prices, e.g.

What follows are some selected quotations from the Star-Tribune.  Please see the complete article for more information.

After years with the lowest rates in the Big Ten, the University of Minnesota is considering raising tuition for nonresident students by $12,800, more than 60 percent, by the end of the decade.
Kaler has been under increasing pressure from lawmakers and other critics who say the current rates favor nonresidents at the expense of students from Minnesota. At the U, in-state students pay $13,380 a year in tuition and fees, a higher rate than half the Big Ten schools.

State Rep. Bob Barrett, who has called for a significant increase in the rate for out-of-state students, said that Kaler’s proposal is a start. “Nonresident tuition has been and currently is way too low,” said Barrett, a Republican from Lindstrom who sits on the House higher education committee.

But he said raising that rate is just the first step. “They need to use that money to lower resident tuition,” he said. “They have an opportunity with these millions and millions of dollars they’ll receive from nonresidents, and they need to apply it to resident tuition.”

University spokesman Steve Henneberry said that “any extra funds would be used to minimize in-state tuition increases.”

“I think being at the bottom, in terms of sticker price, hurts us,” said Regent Michael Hsu. “We’ve got to be concerned with our brand. … Otherwise, we’re talking about Lexus and Toyota. And we’re Toyota.”

Monday, December 7, 2015

For the Record: Governor Arne Carlson - Maybe the enemy is us?

What follows are selections. Please see the entire post for more information.

From former Governor Arne Carlson's post in Minnpost:

When I was in college, the most popular commentary on the human condition was a cartoon character named Pogo. And his most memorable line was, “We have met the enemy and he is Us.”

We [The University of Minnesota] have a most competent faculty, excellence in research, and an eager-to-learn student body. But this commitment to excellence does not extend to Morrill Hall.

For instance, we have learned that in the area of testing drugs for large pharmaceutical companies, the oversight process was corrupted by the presence of university professionals who were on the payroll of the very companies whose drugs were being tested. We also know that the former chief counsel of the university wrote the language claiming exhaustive investigations by entities that never engaged in such endeavors. Further, we know that President Eric Kaler, his management team, and the Board of Regents used those false claims to beat down critics, including faculty members who called for an independent review. They simply buried the truth.

Now, we have a growing scandal in the athletic department where Kaler and the Board of Regents hired an athletic director and associate without proper review and the result has been a very public sex scandal and the usual cries of shock from the appointing authorities. This was followed by the revelation of extraordinary misspending and waste in the athletic department.

There is a reason for this and that is there is no oversight of university management. The sad reality is that the Board of Regents is little more than a band of cheerleaders for the president and regents are content as long as they are accorded praise from the administration and receive a variety of perks including box seats at the football games, etc.

And then we have the Minnesota Legislature, which appoints the Regents but fails to conduct any meaningful public oversight.

... it is time for all of us to recognize our responsibility to speak out and insist on a thorough housecleaning at Morrill Hall. If we fail to do so, then Pogo’s truth becomes our reality and we fail our children.