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Fiscal Integrity Subcommittee Meeting

April 5, 2002

In attendance: Fraley, Krygier, Adelsberger, Borowiec, Divis, Henderson, Marvel, McGee, Odoguardi, Sherman, Simonson, Stevens, Wruck

I. Reed Fraley introduction and Member Introduction

II. David Frantz

-Intentionally selected committee with a range of Athletics knowledge - from a lot to a little

-Goals for Certification

1. self evaluation, chance to assess ourselves, our operation

2. educated the rest of the university about what Athletics does

-Four Certification subcommittees: equity, governance, fiscal, academic

-Last study 1995, visiting committee had nothing to add to what self study found

-Charge:

- look for other matters, other than what already listed, suggested

- help educated university community, bigger community as to how Athletics functions

- fiscal probably area least understood by larger community, so committee's work is extremely important

III. Susan Henderson

-external audit of Athletics must be performed every year

-not full blown financial audits - limited scope

-audits in last three years have no findings by auditors, no major exceptions

- except in 1999, Booster portion

- three areas where auditors had concerns

1. not gotten signed compliance forms from every member of every booster

2. not getting checks back in bank statements

3. one booster group had not amended their bylaws to say that all assets would revert to university if dissolved

- all three issues were resolved

-Booster groups

- 6 or 7 booster groups here

-small, aligned with particular sport

-raise money for club, not part of university accounting system

-will contribute money to sport for specific things (Football biggest)

-boosters raise a small amount in big picture of fundraising

- booster contributions come under "other fundraising"

- part of concern for certification, since booster not run through university ledger, need to make sure all is well

-question on gifts to student athletes (summer employment, car payments, etc.)

- closely monitored by compliance office (not issue)

-budget summary handout

- reflect 5% cut

- new in operating report: capital sources, capital uses

- sources of income to athletic department:

sports: ticket sales, postage and handling on tickets, broadcast rights, big ten revenue sharing, any revenue specifically related to a sport (only major revenue sports broken out, all others lumped)

administration: revenue from sponsorships, scoreboards, Nike agreement, misc. revenues

golf course: restaurant, memberships, greens fee

sports camps: coaches run camps in the summer (few in winter), net profit from camp use at coaches discretion (thus awash when see it on budget, does not help rest of bottom line, discreet to camp operation itself) if profit on camp, divided up between coaches, supplement to their salary; entrepreneurial ventures; many intangible benefits (recruiting etc.) plus a way to supplement salaries; not a regular part of coaches duties; most sports run some sort of camp

-issue in first certification; NCAA requires that all camps be run through university, did not used to be like that at OSU, reigned them in

bowl games: big ten pools monies and then distributes on proportioned basis, so we know every year how much we will get; also listed under "bowl game direct" - if we actually go to a bowl, usually net even, do not budget it as a line item, comes and goes depending on how team does

ice rink

parking / programs - parking for football games, some goes to T&P, some to Athletics; programs are program sales, media guides

championships/clinics - team goes, certain amount is covered by NCAA, hard to budge for this since dependent on teams; separate from sports budget since cannot hold teams responsible for fluctuation; clinics are like camps but directed at staff (camp for high school coaches)

marketing - misc. marketing sponsorships, Donatos at hockey games

merchandising - revenue from the official team shop at Schott, also tents selling merchandise on football Saturdays, plus online component

other (3rd section) - development, interest, other fundraising, National Youth Sports Program (run every summer, free 10 week camp program for inner city kids, get $90K to run it, spend another $100K to fund it); royalties (down this year, fluctuates on how teams are doing)

- Capital Sources

-totally earmarked for construction, not for anything

-ticket surcharge

-all revenue from club seats (annual), suites (5 and 7 years)

-incremental increase in scoreboard sponsorships revenue (the rest, same as amount from old scoreboard is in operations)

-NO STUDENT FEES

-NO GENERAL FUND MONIES

-Big impact on budget - number of games, tickets sales

- Uses

staff - specials are intermittent casual employees, seasonal employees, bonuses for coaches, any non-continuing type of personal payment

operating - phones, printing, clothing, equipment, travel

equipment - really just capital equipment (truck for golf course); major equipment purchase, not like typewriter

physical plant assessment - own maintenance department, except for St John, ice rink, field house (physical facilities provides some maintenance, janitorial, utilities) so this is the annual cost paid to university for those three

university overhead - all non-development revenue is assessed overhead by university of 5.7%, paid to university general fund; based on calculation by budget office on cost of running the university, not much fluctuation

cost containment - from 1990 and still in place, annual payment made to general fund of university (put in place rather than a budget cut)

cost containment golf course - BOT decided not maximizing revenue from all university assets, came up with plan to raise fees to increase revenue and then give more to general fund (increase $100,000 every year until $500,000 and stays there, becomes another cost containment); membership dropped to golf course

budget reduction transfer to general fund - since Athletics not taking a cut like the rest of the university, university taxed athletics 2% of revenuer, just a one time thing

grant-in-aid budget - A pays all of this plus room, board, books, approximately 420 full grant and aids allowed by NCAA rules (scholarship, also medical non-qualifiers; does not include graduate student fee authorization (stipends in special)

UBIT - $140K to pay unrelated business income tax; transfers are to help fund special things (like David Frantz who is academic liaison, faculty reps time, legal affairs time); direct transfers to help support cost of support above overhead

JSC Operating Transfer - to Schott for offices in building

NYSP and non-operating - expenditures from discretionary development account

- Capital Uses

charged overhead on capital sources

paying off $11.5 million deficit for Schott

series of small projects undertaken over years that are debt financed (roof of St. john, stadium concrete job from a few years ago)

Ohio Stadium - this year's costs, will change next year since only have partial bonding of the project at this point

Jesse Owen - partial

Scoreboard - partial

Transfer to Stadium Plant Reserve - difference between money coming in and going out, this year more coming in, basically evens out for prior years

Steelwood Drive Bond

- Five Year Plan

3 years of projections out, draft

haven't been revised since last year

'03 will change drastically in this years budget process, which will change '04, '05

'05 has and has had a deficit

-look in '03 transfer to operating reserves (2.5 million right now) - planning to build up operating reserve to cover '05 reserve)

-go down to five home games in '05 - NCAA rules

IV. Questions

-Deficits get funding internally, not in recent history spent more than can cover

-Average balance in reserve? Big pay off to Cooper last year; last certification recommendation was to carry 5-10% of operating budge; balance right now is $1 million; UBIT has $900,000 (dedicated to tax liability); stadium $1.5-2 million (would like to keep separate from operating in case club seats sales down, etc. then would have a little cushion to keep capital dedicated revenue for stadium project)

-The Fiscal Integrity handout - abstract out of self study guide: outlines in a generic sense what our responsibilities are as well as process

-Certification process has been refined since it was started - lengthened the time period (now 10 years), made some processes simpler, also NCAA rewrites every year, thus significant differences from old self study report

-Committee will break down into three groups

-Confidentiality issues - caution on five year model - just for planning process, but most else is public record, often requested, R suggests treating data carefully, redirect requests to Reed, should not be the source for information

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