12 Takeaways from The University of Maryland Athletics Department’s Finances

An organization’s finances tell a story — they tell us about the organization’s priorities, the internal trends and changes, and the reasons behind certain decisions.

Given the recent scrutiny that the University of Maryland’s Athletics Department has come under, it is an opportune time to review the organization’s finances. Through a Public Records request the University provided the last five years of the NCAA Membership Financial Report which I consolidated into one five-year income snapshot (see below).

This document tells a story that is open for interpretation. Following this document is my interpretation.

[View the aggregated reports in google sheets][Download PDF]

Summary

Revenue and expense distribution in 2017

Interactive Revenue

Interactive Expenses

Revenue, expenses, and income over time (notice the difference in scale of the two vertical axises)

This shows $2M of income off $95M in revenue and $93M in expenses in 2017. [Interactive]

12 Takeaways

1. Student Fees generate almost the same amount of revenue as all tickets sales. In 2017 student fees tied as the third largest revenue driver. Why do student fees make up 13% of the Athletic Department’s revenue? How does a 1:1 ratio of student fees to all ticket sales compare to peer institutions? (Chart here)
2. Big Ten Conference distribution is 1/3 of the total Athletics Department revenue and is the single largest source of revenue. Big Ten Conference distributions are about an 85% increase over ACC Conference distributions ($16M increase per year in absolute terms). The University of Michigan released a report that indicates a full Big Ten Conference share is about $50M, this means Maryland is receiving about 70% of a share given its early tenure status in the conference. When Maryland ultimately receives a full share conference distributions will generate more than half of the total Athletics Department revenue.
3. The ACC Exit Fee. When Maryland announced the exit from the Atlantic Coast Conference a recurring concern was the conference exit fee. In retrospect, it looks like it paid for itself. In 2015 a $31M ‘conference realignment expense’ appears in the reports which is less than the $35M conference distribution revenue received from the Big Ten in the same year.
4. Ticket sales generate about 16% of revenue. Ticket sales revenue was down 7% in the last year and have been stagnant in the preceding three years. In 2017 the breakdown of ticket sales revenues by sport: Football 48%, Men’s Basketball 42%, and all other sports 10% In 2017 football ticket sales revenue decreased dramatically by 18% ($1.5M in absolute terms).
5. Edsall’s Severance. In 2016 ‘severance’ jumped by $2.7M (19x)— it’s safe to say this relates to Randy Edsall’s departure. We can expect to see another $5.1M in 2018 ‘severance’ related to DJ Durkin’s without cause firing.
6. Cole Field House Renovations. Expenses for Cole Field House renovations, which are expected to cost $196M, do not appear in any related line item like ‘athletics related capital expenditures’, ‘total athletics related debt’, or ‘total institutional debt’. How are Cole Field House renovation expenses captured in the University’s finances and what budget is impacted?
7. Athletics Department relative to the University. a) The Athletics Department’s operating expense ($93M) is 5% of the University’s operating expense ($1.8B). b) The Athletics Department’s annual debt service ($6M) is 8% of the University’s annual debt service ($76M). c) The Athletic Department’s debt ($37M) is 11% of the University’s debt ($342M). d) The Athletic Department’s dedicated endowment ($17M) is 8% of the University’s endowment ($461M). All in all, the Athletic’s Department makes about a tenth of the University’s broader finances.
8. The Major Expenses are athlete student aid and salaries. These two expense items make up more than half of the total expenses. Athlete student aid is on average 18% of total expenses and is increasing 6% on average per year. The increase in student aid may relate to The Maryland Way Guarantee which was announced in 2014 and provides lifetime scholarships for all athletes. Salaries are itemized between coaching and administration salaries, these two categories of salaries tend to align in size and annual increases. Yes, administrative salaries are the same size as coaching salaries. Salaries and benefits compose 36% of the expense base and are the single largest expense.
9. Institution Support. The Athletics Department’s budget tends to net out to a fraction of the overall revenue and expense. The average net income reported by the Athletics Department over the last 5 years is $700K which is less than 1% of revenue — this is an incredibly slim margin. My hypothesis is that the balancing act is orchestrated by ‘Direct Institution Support’, which is the money the University moves from the Institution budget to the Athletics Department budget. Over the last five years, institution support averages out to $4M per year and has trended down to $3M per year for the last 3 years. If the direct institution support is removed from the budget the Athletics Department would have reported an average net loss of $3M per year for the last 5 years.
10. Fundraising. The Athletics Department struggles with fundraising. The Athletics Department has a $17M endowment that generates around $750K per year (4% return). As an arbitrary comparison, the endowment returns less than the Athletic Director’s and Associate Athletic Director’s salaries ($494K + $325K respectively). The Athletics Department also captures $12M a year in ‘contributions’ a year which is about the same size as student fees (13% of total revenue).
11. Medical Expenses and Insurance has trended up 11% per year on average. However, this category makes up just 1% of total expenses.
12. By Sport. The reports break out the same 41 items by sport, I did not aggregate them by sport (but you can!). At a high-level, this is how each sport netted out in 2017: Football $11M, Men’s Basketball $10M, Women’s Basketball -$3.5M, Other Sports -$12M, Non-Program Specific -$5.4M. Only Football and Men’s Basketball generate income. Notably, $17M of ‘conference distributions’ is allocated to the football program. In other words, Big Ten football conference money is the single largest source of revenue. The Athletics Department also pays about $250K in total towards the band, cheerleaders, mascots, and dancers.

Money never tells the full story and the integrity of these reports should always be questioned (although they are audited). Nevertheless, these aggregated reports give us a more transparent picture of the University of Maryland’s Athletics Department.