by Phil Goldstein & Dr. Betsy Alden
Originally printed in Athletic Management, 23.03 April/May 2011

"You can't possibly expect me to compete in this conference with the budget I have now."

Is there a collegiate director of athletics, in any membership division of any governing body, who has not heard this comment from one of his or her coaches? You are likely also faced with complaints like, "My offensive and defensive coordinators are the lowest paid in the region," and "Do you realize how small my recruiting budget is compared to everyone else's?"

At the NCAA Division I level, it's often referred to as the economic arms race, but keeping up with the Joneses in terms of resources is a dilemma for athletic directors at all levels of intercollegiate athletics. Coaches insist that the competition is beating them on the field because the competition is beating them in money spent. Sometimes, they are right.

As a result, it's becoming more and more important for athletic administrators to know how much their peer institutions are spending on salaries, recruiting, travel, and everything else. And thus it is becoming increasingly important to use financial comparisons when assessing your athletic program.

The problem, however, is that surveys and financial reporting tools aren't as easy to analyze as a box score. The data can be useful, but administrators need to understand exactly how to compare their program's finances to others in a realistic and meaningful way.

SURVEYING THE SURVEYS

The first step in using surveys to assess athletic department spending is to find a good compilation of data. Many institutions, however, are not willing to reveal all their spending patterns, especially if they will become publicly available. Therefore, it can be difficult to convince an entire conference of schools, for example, to build a database of each member's budget allocations.

The survey information we do have on a national scale is fairly general, but a good place to start. The largest source of data is found through the U.S. Department of Education under the Equity in Athletics Disclosure Act (EADA) of 1994, which requires all coeducational postsecondary institutions that receive certain federal funding and that have intercollegiate athletics programs to report their spending on an annual basis. EADA data reveals general information about revenue and expenses in broad categories and we have found it to be a valuable source. Two caveats, however, are that the information can have errors or omissions and it is not specific.

In NCAA Divisions I and II, there is a newer resource to utilize called the Financial Dashboard. Although this endeavor makes use of the EADA data, it provides much more in the way of comparative ability over 26 indicators, with viewing available in multiple analytical formats and even a "what if" analysis function.

Usually, the best surveys are those done specifically among members of one's own conference. That allows you to compare your budget against those of your most significant competitors.

One of the first conferences to collaborate on a survey project like this was the Mid-American Conference, which started sharing extremely comprehensive financial data almost 30 years ago. According to several longtime athletics directors in the MAC, this was due primarily to the fact that conference members have struggled at times to maintain their status as a member of NCAA Division I-A/Football Bowl Subdivision, and sharing information among members helped their survival.

"There was definitely a greater willingness when I was working in the MAC to participate fully in these surveys, which meant sharing very detailed information," says Tim Weiser, now Deputy Commissioner of the Big 12 Conference and formerly the Director of Athletics at Austin Peay State University, Eastern Michigan University, Colorado State University, and Kansas State University. "At that time we were all struggling to maintain membership in Division I-A [because of facility and football attendance requirements] and there was a sense that we were all in the fight together. Any information that we could use toward that end was welcome."

The best argument athletics directors can use to convince others in their conference to initiate their own survey rather than relying upon one of the national reporting tools is that it can garner information that more broad-based surveys do not provide. For example, the EADA survey only reveals average annual salaries for all head and assistant coaches at an institution but does not give specific salaries for each sport's coaches.

WHY COMPARE?

Because there is a risk of more public scrutiny and it can be difficult to get everyone to participate in a financial survey, why do them at all? The overarching reason is that knowledge is power. Knowing what your competition is doing keeps you on top of your game. But there are also more specific reasons. Financial comparisons can help you:

Understand what it may take to be competitive in the market for staff, operating expenses, financial aid, and facilities. This is particularly helpful when you are adding a sport or considering moving into a different conference or membership division.

Be proactive instead of reactive, especially if you are putting a greater emphasis on success. The data may allow you to see where trends in spending are heading, which can ensure you put strategies into place as soon as your competition does so.

Analyze individual aspects of your program independently. For example, if you are looking to boost the success of one specific sport, it can be useful to know how that sport is funded at an institution you want to emulate. In this case, it is important that the school is similar to yours in terms of institutional and community demographics and socio-economic factors.

Gain a tactical advantage in generating funds to support your program. Whether you are hoping to receive more financial support from fans, students, or your institution, relaying financial information to them can be helpful. You can inform them that the numbers on the surveys tell the tale: "If we can't come up with dollars similar to what our competition is spending--through fundraising, student fees, or the general budget--we will not have the kind of program that you want to proudly call your own."

Agree to limit spending throughout your conference. With the data from surveys, conferences can better determine expense areas where they wish to mandate caps. It can also help conferences realize economies gained by way of cooperative spending or realigning game scheduling.

Construct a better strategic plan, either for the athletics department alone or as part of an institution-wide endeavor. Chris Ritrievi, formerly the Director of Athletics at the University of Northern Iowa for seven years and now the Vice President of Development at Indiana University, found surveys useful in this regard.

"When I got to Northern Iowa, our teams were not very competitive, generally eighth or ninth of 10 in the Missouri Valley Conference," he says. "To plan our climb to the upper part of the division, we took several years of data from the MVC financial surveys and developed averages for each category for every sport. After that, we compared the final standings in each sport for each year to those averages. We set out on a five-year plan to meet or exceed the conference averages in those areas that we considered essential to success. Each year our performance improved and we eventually climbed to the upper third. Benchmarking gives you the basis for your long-term financial plan. Without it, you are guessing."

Have realistic conversations with your coaches about the spending of their competition. In some cases, coaches are not correct in their accusations that everyone has more money in their budget than they do. And if they are correct, it's better if you're aware of this information as well.

ALL IN THE ANALYSIS

While the above clearly shows that this type of financial data can be useful, the big caveat is that the numbers are helpful only if they are analyzed correctly. The reality is that no two institutions are exactly alike, and no two athletic departments mirror each other. So every comparison must be looked at with an understanding of how your athletics program differs from those in the survey.

Kevin McHugh, Director of Athletics at Bates College and formerly in the same position at The College of New Jersey, both in NCAA Division III, found this to be the case. "More often than not, the data generated from these surveys isn't truly equivalent," he says. "For example, comparing salaries of head football coaches in Division III can be difficult. Some often have other duties, ranging from any number of administrative assignments to coaching another sport. Additionally, the coaches' years of service is an important factor in their compensation."

Another gaffe one can make in looking at surveys, particularly when focusing on total spending across athletic departments, is to not take into account the difference in the number of sports offered. We advocate always looking at spending per sport rather than total spending to allow for more meaningful comparisons.

Also be aware that surveys don't always compare apples to apples because the accounting practices at individual institutions differ. For example, one institution's accountants may put every single item related to recruiting in a budget for recruiting. Another might put air travel for recruiting in a travel budget, phone calls and postage for the many mailings as a communication expense, and the on-campus meals during visits as a hospitality expense. In a survey, these two institutions' total expenses for recruiting would be vastly different.

There are specific circumstances on each campus to take into account as well. One example is the institution that has its own campus buses and doesn't charge the athletics department for their use. Another difficult comparison is athletic training expenses when one institution has an on-campus athletic training curriculum and another does not.

One more variable includes costs associated with the location of your institution. For instance, the reason coaches' salaries may be higher at UCLA compared to Ohio State might simply be due to the cost of living in the Columbus and Los Angeles areas. Travel expenses that vary between two institutions may be related to the proximity to an airport and how many direct flights to various destinations those airports have.

Possibly the most important factor to consider in analyzing the data is the unique philosophy of your athletic program. For some, there is a need to consistently "demonstrate our commitment," which means you will spend what everyone else is spending in order to be successful. Other athletic programs are committed to weighing the pros and cons of increasing any budget before deciding to keep up with others.

For example, one school may decide to almost automatically offer coaches whatever they must to retain them, while another may feel there is nothing wrong with hiring young coaches with potential, and allowing them to move on in a few years. The key is having a philosophy and knowing your spending goals before making decisions. If you don't, it's easy to let emotions get the better of you, and then place blame on either fans or the administration for demanding a better program but being unwilling to pay more for it. This can backfire on you pretty quickly.

Peter Fields, formerly the Athletics Business Manager at Kent State University, the University of Toledo, and then the University of Missouri before becoming Athletics Director at Montana State University, offers a valuable perspective. "I've seen a lot of programs look at surveys to see what their competition was doing and automatically assume they had to match them," he says. "We always focused on making sure we were getting the most bang for our buck. We also made it clear to our staff, particularly our coaches, that merely outspending others was not necessarily the answer. It takes more work to be efficient and spend prudently, but that was our directive.

"When it came to retaining coaches who were likely to command higher salaries elsewhere," Fields continues, "we made up our minds in advance that we would evaluate each situation and make an informed decision as to how we would proceed using good data, while trying hard to remove the emotion from the discussion."

The philosophy and goals of an athletic department may dictate how you analyze the data in other ways. For example, an institution might state, "We aspire to have a budget that is at least in the top third of the conference."

Finally, you should be studying the information for meaningful trends and not just for comparison's sake. At Northern Iowa, Ritrievi found that you didn't need to be a big spender to be successful, but you couldn't pinch pennies.

"After analyzing everything carefully and removing the anomalies, we concluded that there was no such thing as a financial advantage, only financial disadvantage," he says. "The numbers showed that teams spending the most in any given year were not always at the top of the standings, whereas the teams that spent at the average were consistently competitive. The teams that consistently spent below average amounts, however, were usually at the bottom of the standings."

BREAKING IT DOWN

Overall, we have found some budget areas provide better comparisons than others. Below are several broad categories of financial survey information broken down into two categories.

The first list includes those areas that provide generally reliable comparisons:

Team travel: Although as we noted previously there may be some situational differences, the basics in getting a team from one spot to another is similar (buses or vans, flights, meals, lodging). Make sure you know whether the flights are commercial or charter as that makes a big difference.

Equipment and supplies: This is another area that normally provides good data. If you find the competition's numbers look unusually low it may mean that they are getting a significant amount of athletic gear via a shoe and or gear contract with Nike, adidas, or others.

Base salaries: Contracts for high-level coaches often include perks and benefits that can make base salaries vastly different. One coach may have several incentives in his or her contract and a lower base salary, while another might have the opposite. But for lower-level coaches, base salaries can provide good comparisons. Keep in mind, as mentioned earlier, factors such as longevity and coaches with additional duties.

Ticket sales: This is another good comparative category, but make sure you factor in facility size, ticket prices, and the number of sports for which the school charges admission.

This second list includes those areas where you'll need to dig deeper to get good comparative data:

Institutional support: When it comes to university and/or student fee funding, there is usually no rhyme or reason to why one institution's athletics program is given more money than another. To some extent, it may reflect the priority the institution places on its athletics program, but often it's just historical--this is what's always been provided. Some institutions also book some non-cash support such as depreciation and maintenance on athletic facilities.

Donations: This area can be accounted for very differently from school to school. Some will report only what they actually generate in that fiscal year, while others will use what they transferred from an accumulated pool of previously generated donations. Also, some institutions will book in-kind (goods and services, not cash) donations, while others may not.

Total compensation: This differs from base salary in that it includes other sources of cash or cash equivalent remuneration and fringe benefits, such as retirement fund contributions, club memberships, and bonuses. It is very difficult to make apples-to-apples comparisons in this category. In addition, when looking at the total amount of compensation paid out to all coaches by an athletics department, there are often discrepancies based on things like whether the department has its own maintenance staff or uses the university's.

Recruiting: Because of how institutions account for different areas of recruiting spending, from travel to mailings, there are often huge disparities in this area.

Security: Some institutions will assign the campus police to work athletic events and cover it under the police budget. Most pass it along to athletics.

Financial aid: This area is another that varies, since it depends upon the number of grants being issued, the number of sports and, especially, the cost of tuition, fees, and room and board.

There are a lot of pros and cons to using surveys to compare finances with peers. They do often take a lot of time to complete and they frequently raise as many questions as they answer. But they also can provide insight for your strategic planning and ultimate department success.