Financial Accountability in Sport Management Sport Finance

1
Financial Accountabilityin Sport
ManagementSport Finance
2
Accountability

• Accountability is achieved by taking actions
  and/or implementing processes to meet fiduciary
  responsibilities. 
• As decision makers we are obligated to be
  accountable in a public manner. 
• It is not enough to simply have controls in
  place.
• We are required to show that the controls are in
  place and are being applied.

3
Accountability

• To whom is the organization accountable?
• What activities and levels of performance is the
  organization responsible for?

4
Accountability

• Implementing Effective Internal Controls
• There are five components of internal controls
• control environment
• risk assessment
• control activities
• information and communication
• monitoring.

5
Accountability

• 1. Control Environment
• The tone, or culture, we set within our
  organization as to the importance of conducting
  business in an ethical manner.
• All levels of administration, staff and faculty
  are responsible for establishing such a tone.
• What does this include?

6
Accountability

• 2. Information and Communication
• Employees must have adequate training and
  education about the institutions policies and
  procedures.

7
Accountability

• 3. Risk Assessment
• Risks can be defined as anything that may
  jeopardize the organizations ability to meet its
  commitments.
• Risk is assessed at the institution level when
  establishing policies and procedures.
• Departments are also responsible for identifying
  risks within their units.
• What are some of the risks in various athletic
  settings?

8
Accountability

• 4. Control Activities
• Control activities are processes and procedures
  we put in place to avoid risks.
• Excessive controls may lead to increased
  bureaucracy, reduced productivity, increased
  complexity and may add little or no value.
• On the other hand, excessive risks may lead to a
  loss of assets, poor business decisions,
  increased instances of non-compliance, increased
  regulations or loss of public confidence.
• Establishing control activities then becomes a
  balancing act between the level control that is
  needed with the level of risk.

9
Accountability

• a) Pre-Approvals
• b) Post Transaction Reviews
• c) Segregation of Duties
• Segregation of duties is a system of checks and
  balances that separates duties assigned to
  employees and is intended to safeguard assets and
  ensure the reliability of financial records. 
• d) Reporting

10
Accountability

• 5. Monitoring
• Monitoring is the process of evaluating internal
  controls over time to determine if internal
  controls are adequately designed and operating
  effectively

11
Accountability

• Exercise
• Group 1 High School
• Group 2 Recreation Dept.
• Group 3 College Athletic Department
• Define to whom you are accountable and the types
  of controls necessary

12
AccountabilityWhat the manager reports

• Assets Liabilities
• Values Expenses
• Studying / Assessing Internal Financial Control
• The processes
• Who is responsible
• Efficiency
• Geared to the organizations objectives

13
Accountability Initial Financial Analysis

• Long-term investments to consider.
• Lines of business to undertake.
• What fixed assets will be necessary.
• Additional investors.
• Sources of funding.
• Management of everyday financial activities
• Collecting from customers
• Paying suppliers
• Meeting Payroll

14
AccountabilityFinancial Reporting

• Organizational Performance
• Accounting records
• Raising funds
• Handling/spending funds
• Financial status
• Accountability
• Investors
• Public officials

15
AccountabilityBalance Sheet

• Four Main Uses
• A snapshot of the financial status of an
  organization
• Growth or decline in various phases of business
• Ability to pay debts
• Financial position at a single point in time.

16
AccountabilityBalance Sheet

• Assets
• Fixed
• Asset with a relatively long life (1 year ).
• Tangible vs. Intangible
• Current
• Life of less than a year
• Inventory
• Cash
• Accounts receivable

17
AccountabilityBalance Sheet

• Liabilities
• Current
• Less than one year (must be paid)
• Long Term Liabilities
• Employment contracts
• Loans
• Debt
• Total assets total liabilities Equity

18
Example of Current vs. Long Term

• The Albuquerque Isotopes take out a loan that is
  to be paid down over 5 years
• Payments due within the next 12 months are
  classified as current payments on LT debt on
  the balance sheet
• The balance of the loan is Long Term debt

19
AccountabilityStatement of Cash Flow

• A financial statement that reports changes in a
  companys cash holdings over a particular period.
• Firms have value when they generate cash flow for
  investors.
• Cash flow refers to the difference between what a
  company brings in and what they pay out

20
AccountabilityStatement of Cash Flow

• Three primary sources of cash flows as a result
  of business activities
• Operating Activities
• Income
• Expenses
• Financing Activities
• Debt Loan Payment
• Stock dividends paid
• Stock value increases
• Investment Activities
• Fixed asset acquisitions

21
AccountabilityIncome Statement

• Measures a business profitability over a
  specific period of time, such as a year or a
  quarter.
• Income Revenue Expenses
• Three sections
• Revenues and Expenses from operations
• Non-operating section includes financing costs
  and income earned by financial investments
  (including taxes paid)
• Net Income
• Must consider depreciation

22
Types of Budgets

• Lump Sum
• Typically, lump sum budgeting involves the
  allocation by the athletic dept. parent
  organizations upper-level management of a lump
  sum of budget resources to the athletic dept.
• Provides a high-level of flexibility and control
  within the athletic dept. itself.
• Once the lump-sum is received, the athletic
  director proceeds with lower-level allocations
  among sport programs and services.

23
Types of Budgets

• Line-Item Budget
• In a line-item budget, each category of activity
  is afforded its separate appearance.
• Among the advantages of line-item budgets are
• Ease of preparation
• Use as detailed planning vehicle
• Utility as a means of comparing performance from
  one fiscal period to another fiscal period.

24
Types of Budgets

• Line-Item Budget, cont.
• Problems include
• The difficulty of relating the line budget to the
  goals of the parent organization.
• The line-item budgets propensity for
  perpetuating a line, i.e., once a line, always
  a line.
• The tendency of the Miscellaneous line to grow
  unwieldy as technologies and their costs evolve.
• The reality that comparing this year to last year
  is more complex and represents variables
  unaccounted for within the line-item budget.

25
Types of Budgets
26
Types of Budgets

• Program Budget
• A program budget focuses on the services the
  athletic department provides to its clients.
• The program budget more readily relates to
  overall organizational goals and objectives. Its
  attractiveness is further enhanced by its
  usefulness when establishing priority for sport
  programs relative to the athletic department.
• The program budget development is typically an
  extension of the line-item budget development
  method.

27
Types of Budgets

• Program Budget
• Each program in the program budget appears
  separately and is broken out in categories
  similar to the line-item budget.
• The program budget facilitates comparative
  analyses among the dept.s multiple programs.
• Others maintain that a program budget produces a
  document that is easily understood and
  demonstrates a willingness to make best use of
  limited resources by minimizing conflict and
  overlap among projects.

28
Types of Budgets

• Zero-Based Budget
• Zero-based budgeting shifts the emphasis from
  comparing present performance and/or programs to
  the past or to the current activity.
• Zero-based budgeting requires that a clean
  slate be the starting point for budget
  development.
• The emphasis is on what will happen in the future
  that corresponds to the goals and objectives of
  the parent organization.
• This from scratch approach is viewed as an
  appropriate instrument to rank athletic programs
  by cost/importance to organizational goals and to
  identify and eliminate programs that provide
  minimal value.

29
Types of Budgets

• Zero-Based Budget
• Once the value-enhancing activities are
  identified, then the attendant costs are
  developed.
• Once the top-ranking programs are identified, a
  program budget model is typically used to
  construct the resource details.
• Advantages associated with zero-based budgeting
  include its focus on identifying programs that
  will further the goals for the future.
• Reliance on the way weve always done things
  violates the basic premise of zero-based
  budgeting. Most zero-based budgeting advocates
  maintain that the method promotes innovation,
  effectiveness and efficiency.