Athletic Department Gifts (2nd attempt)…

[the artist FKA zipp]

[I made this post and another on basketball attendance a couple days ago, both of which disappeared for some reason. Neither was particularly contentious, at least by my standards, so not sure what happened. I’m writing it off to a system glitch of some type unless I find out otherwise. This one on gifts was requested by a couple posters on premium. If it remains, I’ll repost the second on attendance…]

This post addresses questions about the status of gifts to the athletic department based on what U of L reports annually. The most recent report was uploaded about a month ago for fiscal year 2023 ending 6-30-2023.

I’m presenting all of the pertinent ULAA audited info in my possession going back to FY2004.

To understand the situation with gifts, I’m presenting all the main categories of revenues and expenses on the income statement: (1) operating revenues, (2) gifts or nonoperating revenues, and (3) expenses. Gifts make up almost 100% of nonoperating revenue. The sum of (1) and (2) for a nonprofit should come close to (3) since by definition a nonprofit doesn’t generate profit.

Starting with a simple table focusing on the endpoints of my available data…

It’s easy to spot an issue with gifts not keeping up with expenses and other/operating revenues over these two decades. While operating revenues have led the way, $40 million of the $76 increase is conference, media, and NCAA revenue, the majority of which is due to ACC membership. It hasn’t been U of L driving its own operating revenues to that extent. By the way, I should add that “gifts” are the total of two items on the income statement, capital gifts and a general line item for everything else.

Here’s a graph showing as-is dollar amounts for these categories on the annual reports. Again, the black and red line graphs sum closely to the green line, and do exactly when the budget is in balance…

There’s a lot of variability in gifts due to capital fundraising like a stadium expansion. And the sudden drop in the black and green plots is due to Covid (2021). To scale these categories proportionately and remove some of the year-to-year noise, I prepared a normalized graph using a five-year moving average. Here’s that data also omitting the Covid year…

The plots separate a bit in 2014 as the contribution of ACC revenue starts to inflate operating revenues while expenses keep pace. And after 2017, gifts have flattened out. The 2017 data point for gifts on the prior chart is the high water mark at $45.4 million. None of these charts are adjusted for inflation, so gifts have been declining on an equal purchasing power basis (inflation adjusted down 21% since 2017).

Therefore, expenses and operating revenues keep pace. I would summarize U of L's financial issues as follows: expenses have kept increasing while gifts have leveled off...

 

[Guardman]

I kept data going back to only 2011, but I concur with your data and your main conclusion points for the period I have data. 2011-2023.

I believe all the revenue numbers, operating and non-operating, would be quite a bit better if MBB were to get on track. But there may be a lot of added expense to get that done.

Even with its issues and its running buyout liabilities, UofL revenue levels, when improved with better basketball and resulting better attendance, will stand near the top of those of the Power schools not in the SEC/B1G.

 

[Guardman]

Louisville, with its relatively small size and its lack of market desirability, will need to forge ahead and achieve what it can with $35m a year less in media income than the 'Big Boys'.

 

[Thecycle27]

I think basketball revenue has a ceiling in today’s world. On the flip side football revenue has potential to keep growing.

I really question the future financial state of College Basketball in general. TV revenue will continue to decline. The constant flux in rosters and inconsistent play. Players being paid. It leads to constant negativity and annual challenges.

They start winning it will get much better but I would be surprised if ever gets back to the glory days.

 

[beantowncard]

1. Am I correct in assuming that gifts are not included in total operating revenue?
2. Do gifts include contributions to 502 circle?
3. How do we compare with other schools in the ACC? Also, how do we compare with a school like, say, Iowa?

 

[the artist FKA zipp]

1. Yes. The auditors consider gifts to be nonoperating.

2. No. NIL money is not on U of L’s income statement. However, NIL only dates back 1-2 years.

3. That’s the $64 million question to answer with audited financial reports. Something like the NCAA non-GAAP reporting system doesn’t exist for all schools.

Expounding further on (3)… I’m pretty sure the NCAA system has a large category for gifts. If I’m remembering correctly and you want take a stab at answering your own question, I’d first try to correlate what the NCAA and outside auditors report for U of L as gifts. Then, I’d compare “gifts” inside the NCAA reporting system. I’d be interested in those results…

 

[the artist FKA zipp]

I have no problem recognizing legit macro issues. We might however debate what is and isn’t “legit” without supporting data.

And I have no problem with U of L continuing to make investments into athletics which are accounted for as expenses on an income statement.

The ongoing problem inside U of L—macro issues aside—is we can’t balance a budget. Like the federal government, we have the noble cause of not cutting entitlements, yet not addressing it with tax revenue increases. We can’t figure out a way to keep making investments in athletics and producing the revenue to cover them.

And as with the government that can print money and kick the can down the road, there is no good endgame in this. The financial hole keeps getting bigger which will make the ultimate outcome ever worse…

 

[CardX]

No offense, but I’ll remember to read this later if I have trouble sleeping.

 

[the artist FKA zipp]

No offense, but I’ll remember to read this later if I have trouble sleeping.

You can take your issues to the people who asked me to post it. No offense taken…

 

[Sultan__of__Swine]

I would like to know if Josh Heird has any incentives in his contract related to department fundraising. The fact that fundraising is still flat is alarming and should have been addressed with Heird's contract when he was hired full time.

 

[beantowncard]

No offense, but I’ll remember to read this later if I have trouble sleeping.

Sweet dreams….

 

[beantowncard]

1. Yes. The auditors consider gifts to be nonoperating.

2. No. NIL money is not on U of L’s income statement. However, NIL only dates back 1-2 years.

3. That’s the $64 million question to answer with audited financial reports. Something like the NCAA non-GAAP reporting system doesn’t exist for all schools.

Expounding further on (3)… I’m pretty sure the NCAA system has a large category for gifts. If I’m remembering correctly and you want take a stab at answering your own question, I’d first try to correlate what the NCAA and outside auditors report for U of L as gifts. Then, I’d compare “gifts” inside the NCAA reporting system. I’d be interested in those results…

I asked about our peers in the ACC for obvious reasons, but it would be interesting also to see how a school like Iowa, in a relatively small state with two P5 programs (like us) compared with respect to how much they depend on conference revenues. I’m sure Iowa is in a better financial position than UofL, but to what degree is that due to membership in the B1G?

Though NIL is not on UofL’s income statement, it is effectively a gift, since it is unlikely that many, or even any of the athletes receiving these funds are returning services of equivalent value. I realize that NIL is not used to cover department expenses, but it may divert money that would otherwise go to the department.

 

[2330859]

Guardman & Cycle: don’t tell UK, and the BB fanbase about the downward trend in Men’s College Basketball. I believe Kansas, UNC and many others Universities and Colleges across the country are demonstrating success in both “on the court performance”, as well as generating positive financial growth for their respective budgets, while increasing their National brand.

I will agree that from where UL Basketball is right now, one could make a strong argument that we have taken one of the very top college basketball programs and driven it well below a sustainable level. However, I think it speaks much more about this University’s leadership than it does about college basketball in general.p

 

[Guardman]

I asked about our peers in the ACC for obvious reasons, but it would be interesting also to see how a school like Iowa, in a relatively small state with two P5 programs (like us) compared with respect to how much they depend on conference revenues. I’m sure Iowa is in a better financial position than UofL, but to what degree is that due to membership in the B1G?

Though NIL is not on UofL’s income statement, it is effectively a gift, since it is unlikely that many, or even any of the athletes receiving these funds are returning services of equivalent value. I realize that NIL is not used to cover department expenses, but it may divert money that would otherwise go to the department.

The same comparison likely works for the small State of Kansas and it's 2 Power teams.

Guardman & Cycle: don’t tell UK, and the BB fanbase about the downward trend in Men’s College Basketball. I believe Kansas, UNC and many others Universities and Colleges across the country are demonstrating success in both “on the court performance”, as well as generating positive financial growth for their respective budgets, while increasing their National brand.

I will agree that from where UL Basketball is right now, one could make a strong argument that we have taken one of the very top college basketball programs and driven it well below a sustainable level. However, I think it speaks much more about this University’s leadership than it does about college basketball in general.p

I really don't want to debate a topic that is all about how bad this is. But I appreciate your point. And I pray to God that your comparisons are reasonable.

 

[Thecycle27]

I can’t argue your point on financial growth those schools just haven’t seen data. My point is more around the growth of college basketball in general. TV viewership is not good at the college or pro level. Players movement and NBA G League is hurting the overall product on the court. March Madness is a different animal and with gambling I can see that growing.

I agree the Administration and management of the basketball program has been awful.

 

[rentalman]

[I made this post and another on basketball attendance a couple days ago, both of which disappeared for some reason. Neither was particularly contentious, at least by my standards, so not sure what happened. I’m writing it off to a system glitch of some type unless I find out otherwise. This one on gifts was requested by a couple posters on premium. If it remains, I’ll repost the second on attendance…]

This post addresses questions about the status of gifts to the athletic department based on what U of L reports annually. The most recent report was uploaded about a month ago for fiscal year 2023 ending 6-30-2023.

I’m presenting all of the pertinent ULAA audited info in my possession going back to FY2004.

To understand the situation with gifts, I’m presenting all the main categories of revenues and expenses on the income statement: (1) operating revenues, (2) gifts or nonoperating revenues, and (3) expenses. Gifts make up almost 100% of nonoperating revenue. The sum of (1) and (2) for a nonprofit should come close to (3) since by definition a nonprofit doesn’t generate profit.

Starting with a simple table focusing on the endpoints of my available data…

It’s easy to spot an issue with gifts not keeping up with expenses and other/operating revenues over these two decades. While operating revenues have led the way, $40 million of the $76 increase is conference, media, and NCAA revenue, the majority of which is due to ACC membership. It hasn’t been U of L driving its own operating revenues to that extent. By the way, I should add that “gifts” are the total of two items on the income statement, capital gifts and a general line item for everything else.

Here’s a graph showing as-is dollar amounts for these categories on the annual reports. Again, the black and red line graphs sum closely to the green line, and do exactly when the budget is in balance…

There’s a lot of variability in gifts due to capital fundraising like a stadium expansion. And the sudden drop in the black and green plots is due to Covid (2021). To scale these categories proportionately and remove some of the year-to-year noise, I prepared a normalized graph using a five-year moving average. Here’s that data also omitting the Covid year…

The plots separate a bit in 2014 as the contribution of ACC revenue starts to inflate operating revenues while expenses keep pace. And after 2017, gifts have flattened out. The 2017 data point for gifts on the prior chart is the high water mark at $45.4 million. None of these charts are adjusted for inflation, so gifts have been declining on an equal purchasing power basis (inflation adjusted down 21% since 2017).

Therefore, expenses and operating revenues keep pace. I would summarize U of L's financial issues as follows: expenses have kept increasing while gifts have leveled off...

Thanks for taking the time to put this together. Very interesting.

 

[the artist FKA zipp]

As a follow-up... While looking at some uploaded financial files for ULAA, I found the following breakdown for athletic department gifts for FY2022. It's toward the end of this FILE...

Click on the table to enlarge it so that the numbers are more easily read.

I've broken them out by direct sports and other categories. Note that most "gifts" (57%) are really not gifts at all, rather, required donations to obtain football and basketball tickets. Not even the IRS calls them gifts anymore.

The total for this particular year summed to $36.668 million, which is exactly the number for gifts in the 2022 audited financial report for ULAA. I'm presenting the info mostly without commentary for anyone who wants to see where the money is going.

My biggest takeaway is how little money is being contributed directly to individual U of L sports as gifts, incl. the major sports. Something for those who embrace the notion of a "big time donor" to think about...