Just as sure as the sun will rise each morning over the rolling slopes of Bowling Green, Ky., Randy Magill knows that Western Kentucky University’s athletic department will end its fiscal year with a perfectly balanced budget.
Come rain or come shine, budget cuts or COVID: Western Kentucky nets out at zero.
Not only that, but Magill, who has served as WKU associate athletic director and financial chief since 2016, knows that each of the Hilltoppers’ 16 athletic programs will end up with exactly the same amount of revenues as expenditures. How?
“I am that good as the CFO,” Magill said with a laugh in a recent telephone interview.
With rising public concern over the money in college sports, athletic department ledgers are getting scrutinized from all corners: main campus, school faculty, boards of regents, fans and, of course, the media. In the case of many schools, the best way to inoculate the department from fiscal criticism is to show neither excesses nor deficiencies of revenue compared to expenses. But for schools that come close to this mark—or, in the case of WKU, nail it to the dollar—it is not always clear what a balanced budget even means.
Each year, the NCAA mandates that its members submit a detailed revenue and expense report; Sportico’s college sports financial database is based on this information. The Financial Reporting System (FRS) report is one of two, 12-month budget disclosures that athletic departments are compelled to produce each fiscal year. The other is for the Department of Education’s Equity in Athletics Disclosure database.
Including its most recent FRS report for FY21, WKU has been among a small cohort of FBS athletic departments that consistently claim to achieve absolute budgetary harmony. The other club members, over the past several years, include Eastern Michigan, Toledo, Southern Miss, Middle Tennessee State, and Arkansas State—mid-major programs that tend to rely heavily on campus and student subsidy.
Paul Helgren, the associate AD for communications at Toledo, explains that his athletic department is given a budget number by the university each year, and any deficits are covered by athletics-dedicated funds from the school’s foundation.
“Thus, we are able to show a balanced budget each year,” Helgren said in an email. Representatives of the other netting-zero schools did not respond to email messages inquiring about how they balance their books.
For Western Kentucky, which reported just over $28 million in total operating expenses last year, the basis of its breaking even owes more to its methodology than any particular feat of financial rigor. By Magill’s description, the accounting is as simple as this: By the end of a fiscal year, all WKU’s athletic department bills—coaching salaries, outside vendor contracts, etc...—are paid in full. Not a dollar more; not a dollar less. Thus, the revenues should match the expenses.
With that logic, it would seem that dozens of other FBS athletic departments that report deficits could instead find an accounting road to net zero. Instead the break-eveners comprise less than 5%, according to Sportico’s database.
“Far be it for me to tell somebody they are doing it wrong,” said Magill. “But you can’t lose sight of the fact that if I have $28 million in expenses, those expenses aren’t payables into the future. They were expended in the year reported. So the bills were paid—there is no excess money the way we do it here, and there was no shortfall of money…If I can’t pay the bill myself, somebody is.”
Katie Davis, a CPA with the James Moore accounting firm, which provides services for several dozen athletic departments, says it takes more than just a lone associate AD to make the math work.
“If you don’t have a strong, collaborative rapport with campus,” said Davis, who does not work with WKU, “they are going to find something wrong if you (report) too much or too little.”
And although the NCAA’s financial reporting process provides ample leeway, schools still must adhere to a long list of agreed-upon procedures, some more nebulous than others.
The NCAA does not, itself, publicize individual schools’ FRS reports, but the documents have been increasingly easy to see ever since the Indianapolis Star became the first media outlet to collect and database them, en masse, in 2006.
Now, any major Division I athletic department—at least within a public university subject to state disclosure laws—operates under an expectation that as soon as its report is finalized in January, the media (or faculty, or school regents) will be calling with questions, particularly if there’s a shortfall.
So it was three years ago, when a long-time member of the balanced budget club dropped out in spectacular fashion.
After its decade-and-a-half run of breaking even on paper, UCLA reported an $18.9 million deficit at the end of FY19. While the school announced the loss would be covered by an interest-bearing loan from main campus, its FRS report bore the ignominy.
The Bruins have subsequently disclosed even larger, eight-figure deficits in the last two completed fiscal years, including a $62.5 million shortfall for 2021.
Brandi Bryant, the recent past president of the College Athletic Business Management Association, says a lot of “smoke and mirrors” go into the tabulations of FRS reports, particularly on the revenue side.
“It is very imperfect,” said Bryant. “Because athletic departments are all structured differently, these reports are always going to be somewhat inaccurate.”
Bryant continued: “I doubt there is any one person who is doing it exactly like another person. There is not consistency, and I don’t feel like there are CFOs who are intentionally trying to mislead anyone from it… I just think there is a significant amount of variables that come into play that are going to skew everybody’s reports.”
In light of the debate over paying college athletes, Dan Rascher, a sports management professor at the University of San Francisco, has argued that the NCAA and its members have been incentivized to show bigger athletic department deficits than they actually have. Rascher, who served as an expert witness for the plaintiffs in O’Bannon v. NCAA and Alston v. NCAA, has specifically challenged the way athletic financial aid is calculated, arguing that these figures grossly overstate the actual costs to the schools of educating their scholarship athletes.
However, now that the “cat is out of the bag on the antitrust stuff,” Rascher added, referring to the Supreme Court’s ruling against the NCAA in Alston, there is probably greater incentive for schools to show they are keeping revenues in check with costs.
Brian Goff, a sport management professor at WKU who studies college sports finances, says nonprofits are generally compelled to show balanced budgets.
“In these kinds of organizations, there is no owner or shareholders who are interested in making sure that revenues exceed expenditures,” Goff said. “Instead, administrators in college athletics find some expenditure category into which to funnel revenues. This isn't just true of athletics. College deans and department chairs do the same thing.”