Opaque Transparency

A friend and I were chatting during last week’s college football championship game about big-time NCAA sports teams, their profitability, and whether most athletic departments make money or not. I told him about Chad’s post from October on the NCAA’s annual report, which showed that all but 25 of the 119 schools in college football’s highest division had lost money on their athletic departments in the 2008 fiscal year, and only 18 institutions had positive net revenue from 2004 through 2008. In addition, the average profit was only $3.9 million, well below the average loss of $9.9 million, meaning that the combined net position for schools that participated in college football’s top division was a loss of around $833.1 million.

Unfortunately, the NCAA’s report does not include any data on specific schools, making it impossible to know exactly who lost or made money over the years reported. So in an attempt to answer this question, I turned to the U.S. Department of Education, which maintains a seemingly thorough database of athletics spending data, including a breakdown of salaries, recruiting, aid, scholarships, and operating expenses for every sport from archery to wrestling. (For the record, only Texas A&M offers archery as a varsity sport in Division I-A, but five schools offer bowling.)

But a funny thing happens when you run the numbers—104 schools appear to have turned a net profit from 2003 to 2008, nine appear to have broken even, and only 11 appear to have lost money. (Data for the University of Maryland, College Park is also inexplicably missing for several years.) In other words, the data source that is supposed to provide us with some measure of transparency into the college sports spending arms race appears to be yielding either incomplete or inaccurate results.

Take the University of California, Berkeley’s 2008 data. According to the Ed Dept. data, the school’s athletic department had a perfectly balanced budget, where it took in $73,354,967 and spent exactly that amount. Now, I’ll admit that I’ve never had to put together a $73 million budget, but I find it surprising that the school managed to zero out its expenses and revenues perfectly. Moreover, this number simply does not match with the $7.4 million loss for that year reported during a  debate over a motion by the faculty senate to cut off any institutional support for the athletic department at Berkeley. It certainly seems that someone is misrepresenting the truth.

A article from yesterday’s USA Today sheds some light on the situation. Using open records requests, three reporters at the paper put together an impressive database that shows just where some of these “revenues” are coming from. For example, it notes that the University of Alabama—the national champion in college football—twice counted a $25.3 million transfer from its booster club as part of its $123.8 million in revenue for 2007-08. Other schools, meanwhile, have used increased student fees or transfers from the school itself to make the revenue part of the equation look better.

Other institutions have found ways to make their expenses seem lower than they are. The Unviersity of North Carolina, Chapel Hill, for example, treats scholarships given to out-of-state students as covering the tuition and fees that student would have paid if they were in-state. That’s a difference of about $18,000 per student, which lowered its costs by about $1.2 million in 2008. Given that the school reported net positive revenue of $192,592 last year, that discount was basically the difference between a small gain and a loss of over a million dollars.

Speaking at the NCAA’s convention yesterday, Education Secretary Arne Duncan challenged the group to change its ways, especially with respect to graduation rate outcomes and recruiting practices. But as this questionable expense and revenue data shows, the NCAA still has many more areas in which it could do with some real transparency.