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Razorback revenues – an imprecise science

Different requirements explain $18 million gap, UA says.


REVENUE SPORT: Razorback football is the big moneymaker for UA sports and the revenue can change from year to year.
  • REVENUE SPORT: Razorback football is the big moneymaker for UA sports and the revenue can change from year to year.

The University of Arkansas athletic department released three different financial assessments for fiscal year 2009-2010 in the past five months, and the numbers don't match up. Not even close.

The gap between the figures, nearly $18 million from an initial $60 million budget estimate to final revenues of $78 million according to a recent federal report, is significant. Athletic department officials say the difference is explained by the various reporting requirements for each assessment.

The athletic department's annual report, released in July, shows a budget of $60,338,475. In September, the school reported to the Arkansas Department of Higher Education that total revenues actually reached $69,050,059. In October, an even larger sum of $78,072,620 was submitted to the U.S. Department of Education in the university's Equity in Athletics Data Analysis, or EADA, report.

According to Clayton Hamilton, associate athletic director and chief financial officer for the athletic department at UA, the initial $60 million figure was a conservative estimate. It was cited in the annual report to draw a comparison with other SEC school budgets. The $69 million reported to the ADHE, Hamilton says, is an actual figure as opposed to a budgeted one.

"We go into the year being conservative with our projections for ticket sales, concessions and that type of thing," Hamilton says. "We'd much rather come in over budget than under with our revenues. And that was in a year where we had significant increases in revenue, a big piece of it being the conference distribution, that additional TV money coming through. That's a big chunk of it. From year to year that's roughly $6 million. Having a bowl game, that's $1.2 million. In the previous year, where we traveled to Austin for a ball game, in 2010 we were able to sell tickets for that neutral-site game in Dallas [against Texas A&M]. And that's a piece of our increase as well."

According to the ADHE report, six other Arkansas schools had higher revenues than initially projected, but none showed a difference greater than $1.7 million. The UA athletic department brought in nearly $9 million more than expected. But none has a revenue producer like UA football.

"Until you know what your ticket sales are and what your attendance is – and the big one is football, it drives a large part of the revenue – we need to secure the revenues before we spend the money. That's just using sound financial planning. We are conservative with our estimates that we project with the budget, so on an annual basis, we are going to come in exceeding the budget, we hope, each year because we do take a conservative approach to that," Hamilton says.

In October, the department's EADA report showed revenues over $78 million. Hamilton says that's because federal requirements dictate that schools report foundation spending as well. Razorback Foundation money is not counted as revenue on reports to the state.

"The [U.S.] Department of Education requires you to report all the revenues and expenses by athletics and on behalf of athletics," Hamilton says. "The 'on behalf of athletics' pulls in your supporting foundations and for Arkansas that includes the Razorback Foundation and to a lesser degree the UA Foundation and the revenues and expenses that flow through those groups."

Brandi Hinkle, a spokesperson for ADHE, says the state requires universities to follow the Governmental Accounting Standards Board guidelines when reporting financial information.

"What we require from the state-funded institutions are any dollars that go through the university," Hinkle says. "However, each of them has, generally, a private foundation. And if their accounting system is separate and dollars are sent to them directly or sent directly through them, we do not require those to be reported to us. UA's is so much larger, because their foundation has so many more donations."

Hamilton says though it can be complicated to follow, if someone wanted to get a complete accounting of athletic department revenues, the EADA report is the place to look.

"[There have been] attempts in the last three to five years to structure a common reporting format," Hamilton says. "The NCAA report [which will be released in January] is the closest one to a common platform for all schools to follow. They implemented that about five years ago. The department of education, in my opinion, is slowly moving toward that, where you're at least getting common reporting requirements for all schools."

To the extent there are profits in a given year, those funds are set aside for one-time expenses, like stadium improvements, or to build the department's reserves. Hamilton says the department is trying to make their financial information more accessible.

"We're going to make the approach to better communicate and close those gaps somewhat so when we do have budget information out there, it's going to be very clear and we're going to try to project even closer than we have in the past to where we think the revenues and expenses are going to come in," Hamilton says.

Foundation support has been something of a point of contention over the years. The Razorback Foundation holds itself out as a private nonprofit, and except for a federal tax return, refuses to reveal details of its income and spending. But a good deal of foundation money is raised with the assistance of public employees who coordinate assignment of preferred seating privileges extended in return for contributions to the foundation.

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