At its October 28 meeting, the Executive Committee unanimously approved establishing a quasi-endowment for the NCAA. While that might not seem like such a big deal, the way in which the quasi-endowment is to be funded says a lot about the long-term focus of the Executive Committee.

How will the quasi-endowment be funded? Four principal sources of funds will be used: (1) funds from the former NCAA Foundation's unrestricted net assets; (2) the NCAA working capital reserve; (3) 50 percent of year-end unbudgeted revenues and expenditure savings; and (4) allocating 10 percent of the annual increase in Association revenues for the endowment.

With respect to the first source of funds, since the NCAA Foundation was disbanded two years ago, its assets have remained intact and are used to help support student-athlete programming. The national office has been gradually moving the financial obligations of the former Foundation to the Association budget, releasing the need for those funds.

The second source of funds is a direct result of the long-term CBS agreement. Since the Association receives partial payments in September and January, the need for a working capital reserve is reduced. As a result, a total of almost $45 million can be redirected to seed the new quasi-endowment.

Regarding the third source of funds, through a combination of careful management of expenses and resources being greater than budgeted, in six of the past eight years there was an unbudgeted surplus of sufficient magnitude to warrant a supplemental distribution to Division I institutions. (Division II and III institutions maintained their own separate divisional reserves.)

When supplemental distributions were made, the total ranged from a high of $16 million to a low of $5 million. The Executive Committee approved placing one-half of the unbudgeted surplus in the quasi-endowment. As a result, in the future if a $16 million surplus occurs, the average supplemental distribution to Division I institutions will be $25,700 less than it would have been if the quasi-endowment had not been established. Likewise, if a surplus of $5 million occurs, the average supplemental distribution will be $7,650 less than it was previously.

The latter source of funds, allocating 10 percent of the annual increase in Association revenues for the endowment, is a continuation of current practice. In fact, it has been in place for several years and was the basis for establishing the working capital reserve.

Why did the Executive Committee conclude there is a need for a quasi-endowment? Among messages NCAA members voiced during their recent development of the Association's strategic plan was that changes would occur in the business of the NCAA and its finances, perhaps sooner than later. Members indicated consistently that funding for intercollegiate athletics may decline during economic downturns and may not increase as dramatically as we may be accustomed to even during future "up" cycles.

As financial stewards of the NCAA, the Executive Committee takes seriously its charge of ensuring the health of the Association's fiscal future. Today, more than ever, college and university presidents and chancellors understand the need for endowments to guard against future uncertainties.

The NCAA, in its broadest sense, is much like the institutions that compose its membership. It has as its core interest the educational well-being of young people. To the best of its abilities, it must manage well the business aspects of being a large membership organization to achieve its mission. Colleges and universities established endowments to ensure the institution's sound financial future. Yet, we know of no college or university that depends on one source of funds as much as does the NCAA -- having more than 90 percent of its resources contingent on a single event (the Division I Men's Basketball Championship).

In today's uncertain economic climate, we concluded it was time for the NCAA to take a cue from its members and establish a quasi-endowment. With changes in the media world and an increased number of entertainment options available, we felt that it was both prudent and essential for actions to be taken to protect NCAA programming and its future support.

The action taken by the Executive Committee reduces the amount of money that can be distributed back to the Division I membership in the form of unplanned supplemental distributions. However, after weighing the risks associated with not having an endowment versus the magnitude of the financial impact on any given Division I institution, the Executive Committee made its decision. (Since the real financial impact will be felt by Division I institutions, it was gratifying to hear of the overwhelming support among Division I conferences for the establishment of the quasi-endowment.)

NCAA President Myles Brand has made it clear that fiscal responsibility will be the theme for the Association once we implement academic reform. We believe establishing an endowment is fiscally responsible for any nonprofit organization.

In summary, the Executive Committee concluded that establishing a quasi-endowment is the right thing for the Association to do at this time. As college and university presidents, and as members of the NCAA Executive Committee, our job is to be stewards for the future economic viability of the organization. The quasi-endowment ensures that our fiscal future is on solid footing.

John A. White is chancellor of the University of Arkansas, Fayetteville, and chair of the NCAA Executive Committee's Finance Committee.