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Supposedly, but not actually the case
Posted on: March 15, 2017 at 16:39:02 CT
ScottsdaleTiger MU
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The AD has no separate funds. All AD revenue goes into and all AD expenses are paid from the University's general accounts/funds.
The AD is self-funded in the sense it is supposed to generate more revenue each year than the amount it spends. That is not always the case.
If the AD generates a surplus, the University records that in a reserve account in its financial record keeping system. It does not segregate the funds by placing them into a separate bank account. If the AD has a deficit, the balance in the reserve account is reduced. The negative is covered by the University from general funds.
The AD has produced a surplus in some years and a negative in others. The most glaring example of the latter was 2011/12 when it forfeited the Big XII distribution due to the SEC move which resulted in a 14 million dollar negative for the AD.
The AD does not have the authority to borrow money. Therefore, when it does "borrow", i.e. to fund the renovation of the East Stands at Memorial, the University actually issues the bonds and puts the proceeds in its general account. The University then pays the amounts the AD spends on the renovation directly from its accounts. The AD does not write any checks. The debt payments come from the University's general funds. Hopefully, the deposits of AD receipts exceed the amount the University spends covering the debt payments. Under this system it is quite possible for the University to spend more on the AD than the AD generates in revenue for the University.
The downside for the AD is if it starts running deficits, they will be covered by the University from other funds and the folks who normally get those funds, i.e. faculty, staff, students, etc. start complaining about their money going to the AD rather than for academics. While that scenario doesn't seem to be particularly likely to happen, if it does, it could get very ugly for the AD.
The AD is self-funded in the sense it is supposed to generate more revenue each year than the amount it spends. That is not always the case.
If the AD generates a surplus, the University records that in a reserve account in its financial record keeping system. It does not segregate the funds by placing them into a separate bank account. If the AD has a deficit, the balance in the reserve account is reduced. The negative is covered by the University from general funds.
The AD has produced a surplus in some years and a negative in others. The most glaring example of the latter was 2011/12 when it forfeited the Big XII distribution due to the SEC move which resulted in a 14 million dollar negative for the AD.
The AD does not have the authority to borrow money. Therefore, when it does "borrow", i.e. to fund the renovation of the East Stands at Memorial, the University actually issues the bonds and puts the proceeds in its general account. The University then pays the amounts the AD spends on the renovation directly from its accounts. The AD does not write any checks. The debt payments come from the University's general funds. Hopefully, the deposits of AD receipts exceed the amount the University spends covering the debt payments. Under this system it is quite possible for the University to spend more on the AD than the AD generates in revenue for the University.
The downside for the AD is if it starts running deficits, they will be covered by the University from other funds and the folks who normally get those funds, i.e. faculty, staff, students, etc. start complaining about their money going to the AD rather than for academics. While that scenario doesn't seem to be particularly likely to happen, if it does, it could get very ugly for the AD.
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Supposedly, but not actually the case - ScottsdaleTiger MU - 3/15 16:39:02