With the new academic year about to begin, do you know where your alumni dollars are going?
Increasingly, they are funding university athletics, "the most dysfunctional business in America," in the words of an expert who has studied the fiscal excesses that infect most college sports programs. In "The Money Bowl," departments editor Joseph McCafferty details what for many finance executives might seem a nightmare scenario: while revenues rise, costs often climb even faster. And with schools setting their own accounting rules, comparing financial data with that of peers is nearly impossible.
There are a few glimmers of responsibility worthy of the term higher education. The University of Minnesota, which a few years ago projected a deficit of $31 million, recently managed to get closer to break-even after a review that "looked at every nickel," according to athletic department CFO Elizabeth Eull. But by and large, the big game for most American schools is spending, with little thought to measuring the return on investment that sports provide to the university.
Why focus on the financial structure of college sport — or any sport, for that matter, as CFO has done in the past with professional hockey and football, major-league and minor-league baseball, and the Winter Olympics? As always, the main idea is to help readers draw broader lessons from the approach taken by financial executives from a range of businesses, both public and private.
Admittedly, we also thought we'd provide some vicarious pleasure for readers who might think it a dream job to be able to root for the alma mater and help guide its finances at the same time. As it turns out, there will probably be an element of vicarious pain for anyone whose idea of joy is producing a bottom line that makes sense.