NCAA Financials vs True Accounting…

[the artist FKA zipp]

The U of L financials that were talked up big time yesterday were from a reporting system that’s commonly used but misunderstood. I’ve posted on this before, but it’s worth repeating because it’s important.

The NCAA requires member institutions to complete a financial report every year that is uploaded alongside of the same info for all the schools. It’s easy to access and compare. That doesn’t make it relevant and worth comparing.

The table below for U of L shows how our audited financials stack up with the NCAA numbers…

Columns C and D report the excess of revenues over expenses as defined under each system. The totals below those columns show how much the NCAA accounting system underreports the true losses experienced by U of L for the years shown. A CPA will tell you that U of L is doing far worse financially than the NCAA numbers show.

DEPRECIATION

The NCAA system explicitly excludes depreciation in Col F, so I added that info for comparison. For the five years shown, the total amount of depreciation comes reasonably close to the total underreported deficit. However, you can’t simply assume depreciation explains the deficit because the year to year comparison in Col E varies widely. There’s something else besides depreciation in a given year that matters.

The importance of accounting for a non-cash expense like depreciation can be debated. However, I think it’s even more important to account for depreciation with U of L because of the nature of its fixed assets. The stadium may have a book value of $50 million or more, but there’s no way in hell the true market value of the stadium is anywhere close to $50 mil. Even fully applying depreciation, the value at which we carry that stadium on the balance sheet is way overstated…

 

[the artist FKA zipp]

GROSSLY OVERSTATED REVENUES

A common mistake with the NCAA reports is to simply quote and compare the "revenues" listed in Column A for different schools. Worse still to rank them as is often done.

U of L's audited financials present GAAP revenues in two main categories: operating and nonoperating. Those are presented in Cols B and C in the table below for the same time period. The total in Col D should be comparable to the NCAA revenues in Col A. That difference is shown in Col E.

The NCAA reports consistently and significantly overstate revenues. This is likely due to the inclusion of nonrecurring sources of "revenue" that GAAP accounting could never consider, items like loans and bank reserve draw downs.

There's no question that U of L athletics has needed additional funds approaching $84 million to cover expenses the last 5+ years. But that money didn't come from ordinary sources of revenue. That's just what NCAA reports show. And who knows how other schools' NCAA revenues would be treated in a true financial audit?...