Athletic Expenses - why the big increase?

[CaptainProbasco]

Looking at USA Today's college athletic department database. Some things pop out to me:

From 2011 to 2013, UC's revenue has increased from 42.7 to 61.9 million, and expenses have increased from 43.7 to 59.5 million. That's a 45% increase in revenue and a 36% increase in expenses. During this time, our TV revenue has decreased and our tuition (the biggest expense) I believe has been relatively flat (isn't there a tuition freeze right now?).

Looking at our closest peers in this timespan:
UConn's revenue grew by about 300k and expenses grew 400k (about 0.5% increase)
USF's revenue grew by about 3.1 million (7%) and expenses grew 1.8 million (3%)

What is going on here? Where are all these increased expenses coming from? Are we hiring more coaches, starting new sports, or giving everyone big raises? The athletic department continues to be heavily subsidized by the university (over $20 million/year), so if revenues are growing then shouldn't we be decreasing the subsidy rather than increasing expenses? And what is causing revenues to rise so steeply for us compared to our peers?

Any insight that anyone can add would be helpful.

[CaptainProbasco]

I should add: my suspicion is that this is a shell game.

In the past, the incentive was to make athletic budgets look small. This placated those who say that an academic institution should not subsidize quasi-professional athletics. So the books were adjusted to make the AD's budget look small (look, we spend less than our peers, so you can't complain!). But in the past few years the university received a lot of criticism that Louisville and UConn spend more on their athletic departments than we do. It's safe to say that this criticism contributed, at least a little, to Louisville's promotion to the ACC over UC. I think the administration heard this criticism loud and clear, and adjusted the accounting books accordingly.

As I said, this is my suspicion. But I'd be interested to hear if anyone agrees or disagrees, or if anyone has other insights.

[JDBEARCAT]

As a financial professional, I can make the most profitable business or business segments appear to be near break even or show a loss. I believe that a lot of allocated
expenses are shifted to the athletic budgets. If the athletic dept didn't exist, most of
those allocated costs(outside of athletics) would still be there. UC stated that they lost money at the Sugar Bowl. I for one don't believe that. Again, I think costs were allocated to the event to make it seem like they lost money. However, I don't think UC is the only one doing this. Most colleges & universities take the same approach. Just my humble opinion.

[98bearcat]

Remember that the loss in athletics is due to the non revenue generating sports (the olympic sports) which are all supported by what football brings in. If you look at what football brings in vs the expenses of just football. BUT, the great news is starting in 2015 football should be bringing in enough to cover almost all Athletic Expenses and little to no tuition money will be used for anything AD related. That said, this could also be attributed to a books thing as described above, but the large jump in revenue from the suites being added to Nippert is a significant boost. It's another reason that the expansion had to be done, without corporate money football/basketball programs can never compete much less survive anymore

[CaptainProbasco]

As a financial professional, I can make the most profitable business or business segments appear to be near break even or show a loss. I believe that a lot of allocated
expenses are shifted to the athletic budgets. If the athletic dept didn't exist, most of
those allocated costs(outside of athletics) would still be there. UC stated that they lost money at the Sugar Bowl. I for one don't believe that. Again, I think costs were allocated to the event to make it seem like they lost money. However, I don't think UC is the only one doing this. Most colleges & universities take the same approach. Just my humble opinion.

Excellent point.

It's also easy to adjust revenues. Should parking revenue on gamedays go to the athletic deparment? How about naming rights for 5/3rd (after all, it was technically built as a student center)? How about sales at the Rathskeller on gamedays? There's a lot of other places for fudging.

That's why it's important to know which way you're incentivized to adjust the numbers. In the past, there may have been a good reason to artificially lower the AD's footprint. Now, there's a good reason to artificially inflate it. I'm just not sure if that's actually what's going on, or if the growing numbers reflect a real difference in money coming in and spending.