NEWS

$16 million? Try $25 million: New report reveals true scope of MSU athletics spending

Amos Bridges
ABRIDGES@NEWS-LEADER.COM

Missouri State officials have said frankly in recent months that the school's athletics spending needs to be reined in. Battered by declining ticket revenue and budget overruns, the athletics department increasingly has relied on support from the university's general fund to pay its bills.

MSU receiver Deion Holliman (5) exits the field after the end of the Bears' homecoming game against Illinois State in 2015.

A recent change in the way MSU reports athletics expenses to the NCAA now shows that the budget number the university has been citing — $16.1 million — underplays the true scope of its sports spending.

In reality, Missouri State spent $25.2 million on intercollegiate athletics during the 2014-2015 school year.

The multimillion dollar discrepancy stems from sports-related expenses, mostly facilities and administrative support, that Missouri State doesn't include in the athletics department budget. For a decade, MSU also left out those costs (and related sources of revenue, such as various student fees) when filing annual reports with the NCAA.

Updated rules that clarify that information must be reported took effect at the beginning of this year. Finance and athletics officials at Missouri State say the university's new report, filed Jan. 15, complies with the NCAA's new standards.

The new numbers call into question the idea, promoted by MSU Athletics Director Kyle Moats and others, that MSU has had to compete with a smaller budget than other schools in the Missouri Valley Conference.

After obtaining the 2015 NCAA report from MSU, the News-Leader requested reports from the five other Valley schools that are subject to open records laws.

All five reported increased expenses, but none reported a spike even half as large as MSU, which saw reported spending jump $10 million between 2014 and 2015.

In terms of relative spending, MSU jumped from fifth of the six in 2014, to the third in 2015, trailing the leader (Illinois State) by only about $1 million.

Here's how Missouri State stacks up compared to other schools in the Missouri Valley Conference.

Despite what now appears to be a decade of under-reporting, university leaders defended the earlier accounting.

"We interpreted (the reporting requirements) differently," President Clif Smart said during an interview with the News-Leader a few weeks after the report was filed. "We treated our facilities differently. We don't think we're alone in that. We don't think we were wrong."

Smart said he and the university's board of governors were well aware of the facilities costs, which were funded in part by student-approved fees and included in publicly available budgets, even if they were not connected to athletics.

"The board's not going to be surprised," he said. "We think we've been very transparent in terms of what everything costs. ... ​"We don't think we have anything to apologize for."

Old math, and the new

While it appears likely that other Division I institutions also under-reported facility expenses through the years, MSU was at the extreme end of the spectrum.

In the reports covering the fiscal years from 2005 to 2013, the only facilities costs MSU reported to the NCAA were lease payments for baseball at Hammons Field, which averaged a little less than $200,000 a year.

For 2014, the university reported $0 — an error, according to Smart, who said the baseball lease, about $210,000, was mistakenly lumped into the "other expenses" category on the report.

Even if the 2014 amount had been reported correctly, Missouri State's facility expenses would have been notably low. Of the 230 Division I institutions for which NCAA reports are publicly available, all but 17 reported spending more than $210,000 on facilities in 2014. The average expense that year was about $5.6 million, or 12.5 percent, on average, of each institution's reported budget.

The numbers reported for 2015 are far different.

Missouri State Bears cornerback Vashon Landers and the Sugar Bears dancing team celebrate after the Bears won their home opener game against the Chadron State College Eagles at Plaster Stadium in Springfield, Mo. on Sept. 12, 2015.

Of the roughly $10 million in additional reported spending, more than $6 million is for bond payments on JQH Arena, Hammons Student Center, Plaster Sports Complex and smaller facilities funded with money from the Bear fee that students approved in 2013. (Student fees also pay for the Foster Recreation Center, but that building is not used for intercollegiate athletics and so is not included in the total.)

In addition to the student fees, which were not disclosed in earlier reports, the 2015 report includes additional contributions from the John Q. Hammons trust to pay down debt on the arena, according Steve Foucart, MSU's chief financial officer.

Other expenses being reported for the first time include university-provided utilities at sports facilities and out-of-state tuition waivers for athletes.

Foucart emphasized that, although new to the NCAA report, the costs are not new to the university's internal budget. He said that, when there was a question about what to include in the 2015 report, MSU decided to err on the side of openness.

Hammons Student Center and Plaster Sports Complex, for example, house handball and racquetball courts that are open to students, faculty and staff, and several classes are held in each building. JQH Arena also is used for non-athletic events, including concerts and graduations.

"All these facilities, to me, help our recruiting and serve a lot of different uses," he said.

Missouri State Bears forward Chris Kendrix (33) dunks the ball after a fast break during second half action of the Bears' game against the IUPUI Jaguars at JQH Arena in Springfield, Mo. on Dec. 10, 2015. The Bears won the game 88-74.

Under the new NCAA guidelines, MSU might have been able to carve off a percentage of the costs of each facility to account for those non-athletic functions. But Foucart said the university opted to include the full amount.

"Whatever we allocate, it doesn't change the cost of those facilities," he said. "It's clear now they want all this in here, and we follow the new guidelines."

A numbers game

The reports, required of all Division I institutions, are meant to provide an overview of the money universities spend to compete in the NCAA. The information, obtained under state open records laws, has been used to compare spending among institutions and analyze the expanding gulf between profitable sports programs and others with budgets that are deep in the red.

NCAA policies established in 2004 require universities to report costs included in athletics department budget, as well as "indirect" expenses, such as utilities or debt payments, accounted for elsewhere in the university's budget.

Where the money comes from.

A desire for transparency was one of the reasons the NCAA adopted the financial reporting rules in the first place, said Kathleen McNeely, senior vice president of administration and chief financial officer for the NCAA.

The "agreed-upon procedures" for financial accounting, which require institutions to report revenue and expenses in various categories and to break down spending by sport, were meant to address the concerns of university leaders who wanted greater clarity about the costs of intercollegiate athletics on their campuses.

But McNeely, who joined the NCAA in 2011, said it had become clear that not all universities were interpreting the rules as intended, causing the totals reported by some institutions to fall short of actual spending.

"We never thought people were doing it intentionally," McNeely said. But there were "concerns that the descriptions were not clear enough. There was confusion and they knew some schools were answering questions differently."

The updated reporting rules that took effect in January are meant ensure consistency, she said.

"The intention has always been to get an idea of the total cost of running an athletic program, whether those costs are borne directly by the athletic program or whether they're subsidized by the institution," McNeely said. "I think that was a point of clarity, not a change."

"We've done it like this for as long as we've done the report"

Despite the NCAA's intentions (and direct references to debt service and other facility costs in the original policies), Missouri State officials maintain they were justified in omitting the information from earlier reports.

"What we did in '14 (and prior years) was consistent with what the NCAA asked for," said Foucart, the university's CFO. "There was never intent to misrepresent what we've done."

Steve Foucart

Prior to the report for the 2015 fiscal year, the information reported to the NCAA was taken primarily from the athletics department's operating budget, which does not include administrative support offered by other university departments, or — most significantly — the millions of dollars the university spends each year on bond payments, maintenance and utilities for athletics facilities.

MSU accounts for those costs in other parts of the university budget, said Foucart, pointing to a statement in the earlier NCAA policy that said reported information "may vary among institutions as a result of differences in athletic programs, organizational structure, financial resources and budgetary methods."

MSU appears to have taken that statement as permission to apply its own budgeting policies to the numbers reported to the NCAA.

"We've done it like this for as long as we've done the report," said Moats, noting that the policy predated his hiring as athletics director.

MSU's reports never raised any red flags at the NCAA, Moats said. But they wouldn't — McNeely, the NCAA financial chief, said the association doesn't double-check the submitted financial reports, which are supposed to be reviewed by third-party accountants before they are filed.

Reports from MSU's accountants suggest facilities spending was not included in that review until the current year.

Students, university fund sports shortfall

It's not yet clear what effect the new reporting standards will have on other Division I schools. News outlets such as USA Today and Huffington Post that have compiled athletics spending data in the past have not yet updated their numbers with the newest reports.

In addition to providing a more accurate view of expenses, the new report from MSU makes clear just how much of the bill is being subsidized by students and the university. Of the $25.2 million spent last year, $15.9 million came from student fees and university general revenue.

That trend isn't limited to MSU — other than a handful of schools in big-name conferences, most Division I schools don't come close to breaking even. Based on data compiled by USA Today, the average subsidy in 2014 for a Division I athletics program was about 54 percent. In the Missouri Valley Conference, the average was 63 percent.

Missouri State's subsidy — 59 percent in 2014, up to 63 percent in the most recent report — has increased more quickly than most. In 2005, the athletics subsidy (not including whatever facilities costs went unreported) was a comparatively conservative 38 percent. By 2014 it was 59 percent, increasing to 63 percent in 2015 with more comprehensive reporting.

Moats, the athletic director, said subsidies are a fact of life outside of the most elite programs.

Kyle  Moats

"I'd love to be self-supportive," Moats said. "(But) at our level, there's a cost of doing business to have athletics."

He said comparing MSU to other programs can be useful, but limited. "It's good to have data and know your competition, but we are who we are."

Smart, meanwhile, said the overall subsidy for athletics is something the university will have to take a look at in the future, when information from a range of other institutions is available.

"I think we'll all reevaluate that," he said.

Smart said he didn't expect Missouri State's relative position to change significantly based on facilities costs, "but we'll find out ... I do think it's a positive if we can all get to the point where we all report the same."

"We're not Division II, we're not a regional school"

Escalating athletics subsidies have prompted faculty at some other institutions to call for spending cuts, or even the outright elimination of some sports.

Other than idle chatter (and seemingly ever-present calls for coaching changes), there's been no push for that here. Smart, in any event, has repeatedly rejected the idea of cutting unprofitable sports, like football, or dropping back to Division II.

"The kind of university we see ourselves as plays Division I sports — we're not Division II, we're not a regional school," Smart said. "My position is, we can run a financially responsible athletics department ... and produce a product that our alumni, students and faculty can be proud of."

Smart said he's committed to giving the university's teams a chance to regain their feet — and fans.

Clif Smart, president of Missouri State University

Successful programs can "raise the profile of our university in many different ways," he said, and make the campus a focus of the community.

But success, Smart said, will have to come without an increased price tag.

"My goal going forward is to not go beyond where we are now" in terms of the current university subsidy for athletics, Smart said. "This is the line, and we actually want to shrink that 63 percent (subsidy)."

Moats, the athletics director, has been given two years to cut more than $1 million in university aid from the athletics budget. After that, any additional spending will have to be matched with new revenue, Smart said.

"I don't care where it comes from but we either need to increase revenue or decrease expenses to get within that budget," he said."That may make us less competitive in some sports, but we've got to live within our means."

A difference of interpretation

Missouri State officials have said the university’s failure to include debt service, utilities and other facility costs in past reports to the NCAA are due to a difference in how the rules were interpreted. The NCAA has said the intention always was for institution’s to report all athletic facilities expenses, even those paid for outside the athletics department budget. The rules have since been updated to make that clear.

Here’s an example of an old rule (which MSU interpreted not to include facility debt payments, utilities and other costs) and the new rule regarding “indirect institutional support.” Underlined text is from the original. Bolded text has been emphasized by the News-Leader.

Old rule:

Include value of facilities and services provided by the institution not charged to athletics. This support may include an allocation for institutional administrative cost, facilities and maintenance, grounds and field maintenance, security, risk management, utilities, depreciation and debt service. If your institution does not currently track indirect institutional support, consult your business office for a reasonable allocation. …

New rule:

Input value of costs covered and services provided by the institution to athletics but not charged to athletics including:

Facility debt service, rental fees or lease payments for the reporting year.
Administrative services provided by the university to athletics but not charged such by HR, Accounting and IT.
Facilities maintenance.
Security.
Risk Management.
Utilities:

Do not include depreciation. …