Financial issues and concerns were a centerpiece of discussions at the Division I Board of Directors meeting April 30 in Indianapolis.

The Board reviewed an update of a study of Football Bowl Subdivision athletics financing that showed little change from conclusions reached by previous studies – including that spending more on athletics does not mean the athletics program will generate more money.  However, the study did find that institutions are spending more on athletics as a function of the entire university budget (an average of 6 percent of an institution’s overall spending is on athletics), up almost a full percentage point from comparable data from the last study in 2005. 

The updated study, conducted by Jonathan Orzsag and Mark Israel and commissioned by the NCAA, found that for about every $1 an institution spends in athletics, it gets about $1 in return. However, the research also shows that increased expenditures generally are not associated with greater success, except in one very narrow case – “team spending” for football. Team spending encompasses line items such as travel, team expenses and recruiting, and the correlation was found only for “top programs” – defined as those that have been ranked in the top 25 in recent years.

Spending on coaches’ salaries and scholarships had no significant relationship to success or increased revenue.

The study also confirmed earlier hypotheses that spending on athletics has no relationship to academic quality, and successful athletics teams do not prompt more alumni giving.

The study found increased support for the existence of an “arms race,” which differs slightly from previous studies.  An arms race is defined as athletics expenditure increases at one conference school tending to increase with expenditures by other conference athletics programs. The latest data showed that a $1 increase in the average athletics operating expenditures by other schools in a conference can prompt a school to increase its own athletics spending by about 60 cents.

The updated study for the first time included information about the impact of capital expenditures. Data on such expenditures was not previously available, and what is available now is limited. Research shows that there may be some relationship between capital spending and revenue; in particular a dollar increase in capital stock is associated with a $.06 increase in athletics revenue.

While Board members were not alarmed by any of the results in the updated study, they suggested the information be more broadly distributed to other groups such as athletics directors, coaches and faculty athletics representatives. The piece the presidents were most interested in publicizing was the lack of correlation between winning and high coaching salaries.

In other financial matters, the Board reviewed improvements planned for the dashboard indicators program, a financial system that allows institutional leaders to compare anonymously their athletics spending with other, like institutions. The system was unveiled a year ago, and feedback has prompted some improvements for the second year of availability.

When the improved system is released later this month, it will include four years of data for the first time. Some reporting categorizations will change, including the addition of the Academic Progress Rate and educational and general expenditures. New dashboard indicators include generated revenues over direct expenditures and generated revenues plus student fees over total expenditures. Different institutions account for student fees differently, so the ability to analyze the data differently was added.

Presidents will also be able to compare their institution with more peer groups and than in the past.

Officials are also looking at future improvements to the system, including devising a measure for how athletics contributes to a university’s community. The criteria for such a metric is difficult to construct, but NCAA Chief Financial Officer Jim Isch said a committee is examining how best to define the athletics contribution.

In other financial news, the Board directed all Division I cabinets and councils to review legislation and best practices to see where financial relief can be provided to the membership. The review will be accomplished with several principles in mind:

•         Fair competition

•         Student-athlete well-being

•         Integrity of sport

•         Costs

The cabinets will construct a priority set of recommendations, with oversight by the Leadership Council. The entire governance structure will consider any policy recommendations with oversight by the Board.