Budgeting and Financial Management of Sport Programs

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Budgeting andFinancial Management of Sport
Programs

• Steir Chapter 7

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Class Reminders

• Weekly article 6 due today budget/finance
• WebCT this weekend chaps 6 7 (Fri-Sun)
• Resume notes available online
• Start working on Portfolio collect resources
• Attendance policy be here, contribute

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The Budgetary Process

• Whats the purpose?
• To facilitate the realization of the sport
  organizations goals and objectives through
• Fiscal responsibility
• Sound business practices
• Effective decision-making
• Prudent financial management

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The Budget as a document

• What is a budget?
• A budget is a written statement of anticipated
  income and expenses over a period of time -
  usually a 12-month period
• Serves as a financial blueprint and a guide
• Usually organizational or departmentalized
• Essential Elements of a Budget?
• Anticipated Income and Anticipated Expenses
• Time Factor (calendar or fiscal year)

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Outline Your Personal Budget

• Create a line-item for each general income and
  expense in your monthly budget
• Justify the need for each expense
• What steps can you take to increase income?
• What steps can you take to reduce expenses?

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Types of Budgets

• Different types of budgets can be used for
  different components of the organization -
  examples
• Operational Budget deals with costs and
  expenses associated with fiscal year operation
• Personnel Budget deals with employee and
  personnel costs
• Capital Expenditures Budget deals with present
  and future costs of building-renovating large
  ticket items (facilities) (15-30 years)
• Equipment Budget deals with costs associated
  with equipment needs

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Inflation?
Costs of managing physical education, fitness and
sport programs are always increasing Why? Inflat
ionary effects on supplies, equipment, insurance,
technology, travel, transportation, salaries,
security, food, utilities, etc.
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Sources of Big Fueling Professional Sport
Budgets

• What revenue streams are providing big to
  professional sport budgets?
• Broadcasting rights
• Corporate advertising
• Stadium luxury boxes
• Licensed merchandise
• Stadium concessions
• Personal seat licenses and tickets

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Sources of Big for Individual Collegiate
Athletic Programs?

• What are the main revenue sources?
• Ticket sales (27)
• Donor contributions (17)
• Institutional support (9)
• NCAA and conference distributions (8)
• Radio/Television (8)

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Sources of Expenses for Collegiate Athletic
Programs

• What are the main expenses?
• Scholarships
• Salaries
• Travel
• Supplies
• Equipment
• Publications/Promotions
• Computer Technology

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EIUs Athletic Budget

• With a partner, outline EIU Athletics
• Largest 5 Revenue sources
• Largest 5 Expense sources

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EIUs Athletic Budget

• Largest 5 Revenue sources?
• Student fees
• NCAA distributions
• Guarantees from D1 games
• Special events
• Panther Club
• Sources where there is room for growth?

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EIUs Athletic Budget

• Largest 5 Expense sources
• Wages
• Special Events
• Capital Debt Improvements
• Capital Debt Service
• Medical

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EIU Athletics Scholarship Budget
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EIU Athletics Scholarship Budget
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Sources of Big Fueling the NCAAs Budget?

• What revenue streams are providing big to the
  NCAAs Budget?
• Broadcasting rights (television)
• Division 1 Mens Basketball Championships
• Other?

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Sources of Fueling High School Athletic
Budgets?

• What revenue streams are providing big to high
  school sport programs?
• Tax appropriations to school
• Pay to Play student fees to play
• Fundraising/donations booster club
• Signage/Sponsorships
• Concessions
• Ticket sales

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Interscholastic Budget Realities

• - from Schools face funding issues in high
  schools sports NFHS News, Feb 2004
• In many cases, state funding is decreasing
• Rising costs are outpacing state funding
• Pay-to-participate fees are increasing
• Coaching staffs are being reduced
• Sub-varsity level teams are being eliminated
• of contests are gradually decreasing
• Fundraising has become an essential activity

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Pay-to-Participate in Illinois
In 2004 Glenbard High School District 87 set a
goal of a balanced budget by 2006 The school
district proposed an elimination of
extracurricular activities and half the sports
programs starting in 2004 After parent outcries
to restore the sports and extracurricular
activities, the programs were re-instated and the
per-sport fee was raised from 40 to 140, and
registration fees were increased from 55 to 180
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Research on Participation Fees

• Survey distributed to Ohio public high schools
• (1999-2000)
• Important findings
• 22 of Ohio high schools charge a fee
• Majority of schools using fee were in larger,
  more affluent suburban districts
• Significant relationship between charging a
  participation fee and a reduced athletic
  participation rate in fee charging schools,
  especially with fees above 250 per sport
• (Smith, 2001)

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Pay-to-Participate in Midwest States

• Sylvania, Ohio Schools
• 125 annual athletic fee
• 800 surcharge for hockey
• 35 annual fee for band, yearbook, or choir
• (Emmons, 2005)

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Intercollegiate Athletics Budget

• Example of NCAA budget and EIU budget
• (see other example on p. 168-170, 183-188 of
  Steir)
• Line-Item method of budgeting typically used
• Previous and future fiscal years often included
• Typically the largest line-item expense?
• Scholarships and Salaries benefits for
  coaches, AD, staff

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Methods of Budgeting (5)
Line-Item Budgeting each class or type of
expense and income is categorized on a different
line of the balance sheet Incremental Budgeting
adding to or taking from the previous years
budget by increments or (i.e. 2.5
increase for all line-items next year) Zero-based
Budgeting based on the requirement that
organizations and their programs must propose and
justify their total need for resources, not just
request an auto-increase (Princeton Athletics)
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Methods of Budgeting (5)
Formula Budgeting using a formula to determine
how much to allocate to cover individual program
expenses (i.e. away-game travel expenses
mileage, per diem, hotel, etc.) - advanced
policies need to be established to determine
appropriate formulas State of Illinois PPBS
(Plan, Program, Budget, System) - involves
establishing programs and activities to coincide
with organization goals and objectives, then
budgeting and allocating resources to meet the
needs of these programs evaluating program
results on an annual basis government approach
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The Financial Audit

• What is a financial audit?
• A process that provides a check on whether the
  organization is in sound financial condition
• It can point out discrepancies, deviations, or
  irregularities in the management of money (acct.)
• Internal Audit conducted by employees within
  the actual organization
• External Audit conducted by an outside
  accounting firm (auditor) - seeks to determine if
  the organization has followed G.A.A.P.P
• Generally Accepted Accounting Procedures and
  Practices (GAAPP)

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Accounting (173-179)

• Purpose of Accounting?
• An orderly system of keeping track of expenses
  and income to keep your budget balanced
• Provides a snapshot of the financial status of
  the organization, or department within
  organization
• Makes it possible to track and determine whether
  purchases were made for the purpose they were
  intended
• Helps determine whether expect income was indeed
  received and deposited to the correct account

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General Steps to Creating a Budget

• Step 1 Begin preparation in advance (even a
  year before the beginning of new fiscal year)
• Step 2 Examine your organizations objectives,
  goals, and mission
• Step 3 Collect data relevant to past, present,
  and anticipated income and expenses
• Step 4 Solicit the input of financial experts
  inside and outside the organization
• Step 5 Follow organizations standard operating
  procedures (SOPs) in the construction,
  development, and presentation of the budget

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General Steps to Creating a Budget

• Step 6 Submit the completed budget documents to
  a select few for analysis prior to making the
  formal presentation
• Step 7 When making the formal presentation
  anticipate questions, be prepared with accurate
  and timely responses
• Step 8 Edit/revise budget where necessary
• Step 9 Implement new budget at the beginning of
  the new fiscal year
• Step 10 Following the end of the fiscal year,
  conduct a financial audit to ensure accuracy

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Other Topics of Interest (173-179)

• Purchasing and Receiving (174) ordering
• Petty Cash Accounts (175) for small purchases
• Bids and Quotes (175) ? vendor competition
• Bidding Process (176) solicitation for service
• Local vs. Distant Vendors (179)

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Conclusion

• With expenses and costs escalating, cost-reducing
  and accountability have become vital in managing
  and financing sport organizations NCAA article
• Biggest Challenge Cost control or reduction
  without reducing quality of program or service
• Take careful inventory of equipment/supplies
  try to maximize useful life of resources
• Be open about the budget and financial health
  of the organization with employees
• If there is nothing to hide, then dont keep the
  budget a secret from employees