It’s that time of year again: March Madness, the annual men’s Division 1 college basketball tournament. Hoops fans will soon be poring over team stats and filling out brackets for office pools. But college CFOs, presidents, and athletic directors will likely be studying a different set of data: financial indicators for college athletic programs.
Last May, for the first time, the National Collegiate Athletic Association (NCAA) made aggregated financial data from college athletic departments available to its members. So far, more than 250 Division 1 universities and colleges have received a “dashboard” of some 26 financial indicators that enables them to compare their revenues and spending with aggregated numbers for their peer group, says NCAA finance chief Jim Isch.
The dashboards are part of the NCAA’s ongoing effort to improve athletic-department financial reporting. In 2006, the association began requiring universities to file audited reports using common accounting standards. Isch expects to see more changes to reporting requirements by 2010, most likely concerning capital costs.
Meanwhile, the recent increase in sports spending is a major concern, says Andrew Zimbalist, professor of economics at Smith College. “Over the past three years, costs grew 7 percent more than revenue,” he says. According to the NCAA’s own research, only 19 athletic programs among the 119 schools that participated in the NCAA Football Bowl Subdivision (formerly Division 1-A) generated more revenue than expenses in 2006. The median net loss for the other 100 programs was $8.9 million. “There still needs to be better oversight and some system of incentives to encourage accurate reporting,” Zimbalist says.
The recession is only going to make things worse, adds Zimbalist. “All the sources of support for athletic programs are being challenged,” he says. If there are warning lights on those dashboards, they should be glowing red.