Georgia reinvents accounting to show they didn't make lots of money

[Beau Vine 54018]

I saw someone on here just this week trotting out the lie that "athletic departments don't make money."   Anyone who's had even a semester of accounting knows that you can't just claim that everything you spend money on as an expense.  

 

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ATHENS — Georgia athletic director Greg McGarity explained how UGA balanced its budget during the 2017-18 fiscal year in the wake of a national financial report that would seem to suggest otherwise.

The EADA report — Equity in Athletics Disclosure Act — is a report sent to Congress annually that breaks down revenue in a way to reflect gender equity spending in intercollegiate athletics.

The report, however, is not meant to be inclusive in its budget items, and that has led to some confusion and misperception that Georgia is sitting on pots of gold.

“To read that EADA report one would think we had a $52 million profit,” McGarity said. “But that’s simply not accurate because the numbers provided in the EADA report aren’t inclusive of all of our expenses.

“A more thorough review of our finances reflects a balanced budget.”

The EADA accurately reported Georgia took in $176,699,894 in revenue, which included the $27 million generated from the Magill Society.

The EADA’s report of $124,029,698 in expenses is where the math starts to get fuzzy.

“There are three areas of expenses that are not included in the EADA report,” McGarity said. “Those would be our annual payment to the university, our debt service and the money being used for current and future projects.”

Once those numbers are factored in, Georgia’s athletic department budget appears balanced.  (Editorial note: LIKE FUCKING MAGIC!!!)

Payment to university ($4.5 million)

“Our payment to the university was $4.5 million,” McGarity said. “It’s money that’s used at the discretion of the university, with a lot of it going to scholarship assistance or to endow academic professorships throughout the university.”

Debt service ($9.9 million)

“That’s the payment on the amount of money we owe, which is currently $105 million,” McGarity said. “

That money is from the bonds purchased for projects prior to 2010, which included the 2009 Butts-Mehre expansion, Stegeman Coliseum renovation, and the Reed Plaza expansion on the north side of Sanford Stadium.

“We have a payment of $9.9 million to service that debt we owe.”

Projects ($38.2 million)

“That’s money spent on paying for current and future projects,” McGarity said, “which includes the West End Zone expansion and renovation, as well as money being spent on golf, soccer and several other ongoing projects.”

Georgia’s budget for the upcoming year —  $153.8 million, not including the Magill Society revenue — is bolstered in large part by a seventh home game.

 

[Guest]

so the inverse of aggy...

[sushihorn 3233]

 

Quote

 

Projects ($38.2 million)

“That’s money spent on paying for current and future projects,” McGarity said, “which includes the West End Zone expansion and renovation, as well as money being spent on golf, soccer and several other ongoing projects.”

 

Even intro to accounting students know that capital spending on major projects is depreciated over a 30 or 40 year schedule.  It is certainly not expensed all at once.  So this should probably be $1.0 to $1.3 million each year spread out over that time.

Edited June 29, 2019 by sushihorn

[VirginiaLonghorn 4750]

Makes my head hurt. Is this some convoluted explanation for hiding large, under the table, cash payments?

[HenryJames 65914]

55 minutes ago, Beau Vine said:

and the money being used for current and future projects.”

Recruiting?

[Helobious 9490]

39 minutes ago, sushihorn said:

 

Even intro to accounting students know that capital spending on major projects is depreciated over a 30 or 40 year schedule.  It is certainly not expensed all at once.  So this should probably be $1.0 to $1.3 million each year spread out over that time.

I thought he was saying they actually spent $38 million this year on those payments (says it includes a bunch of other things). Not that they’re expensing a $38 million project. 

Edited June 29, 2019 by Helobious

[VirginiaLonghorn 4750]

10 minutes ago, BurntEyes said:

I'm not a lawyer nor an accountant, but it appears Georgia Athletics is claiming expenses in order to avoid Title IX compliance issue based on their athletic revenue.

If they made $xx in rev they would have to show $yy in title ix spending. However, through their fuzzy math, they are only making $zz money so $yy can be a lot less money.

Thnx ... I think. 🤓

[Dennis Taylor 18725]

Edited June 29, 2019 by Dennis Taylor

[Beau Vine 54018]

15 minutes ago, BurntEyes said:

I'm not a lawyer nor an accountant, but it appears Georgia Athletics is claiming expenses in order to avoid Title IX compliance issue based on their athletic revenue.

If they made $xx in rev they would have to show $yy in title ix spending. However, through their fuzzy math, they are only making $zz money so $yy can be a lot less money.

Looks to me that the EADA report has to be completed using GAAP (Generally Accepted Accounting Principles), which don't allow you to treat dividend payments, debt principle repayments, or capital expenditures as expenses.  IOW, by GAAP, UGa did make $52M in profit this year.  But that destroys the "we don't make money" narrative that the NCAA clings to, so they decided make up their own brand of accounting.  What they did is basically like me claiming that my retirement contributions, kid college fund contributions, and the new car I bought are expenses.  

Clearly, UGa needs to hire some more 6-figure athletic administrators and buy $500 couch pillows for everyone, and charge every scholarship at the out-of-state tuition rate like UT does to get rid of that profit.  

[TwiceHorn 31322]

Well McGarity clearly wants to speak in terms of Cash Flow Statement, while the gubmint wants an Income Statement.  The gubmint regs are here and it's GAAP like in the sense that balance sheet items are excluded from expenses.

I'm not sure which one should think most accurately reflects the state of the program.

[sushihorn 3233]

1 hour ago, Helobious said:

I thought he was saying they actually spent $38 million this year on those payments (says it includes a bunch of other things). Not that they’re expensing a $38 million project. 

Yes.  They refer to "money spent" twice in that one paragraph.  They also mention future projects.  You can't depreciate something that hasn't even been built yet and usually not while it's under construction.  But if they are paying for long lead-time items that can be "money spent" which then gets turned into an asset on the balance sheet under GAAP until it's time to depreciate it.

[Beau Vine 54018]

1 hour ago, TwiceHorn said:

Well McGarity clearly wants to speak in terms of Cash Flow Statement, while the gubmint wants an Income Statement.  The gubmint regs are here and it's GAAP like in the sense that balance sheet items are excluded from expenses.

 

He wants a CF statement when it benefits him and not when it doesn't -- I'm sure those tuition "payments" to the university are included.  CF statements are basically always more meaningful than income statements, but regardless of which one you choose, you have to do them correctly and consistently, or they're meaningless.  

Edited June 29, 2019 by Beau Vine

[Beau Vine 54018]

1 hour ago, sushihorn said:

Yes.  They refer to "money spent" twice in that one paragraph.  They also mention future projects.  You can't depreciate something that hasn't even been built yet and usually not while it's under construction.  But if they are paying for long lead-time items that can be "money spent" which then gets turned into an asset on the balance sheet under GAAP until it's time to depreciate it.

I'm trying to figure out how you spend money on a "future project."  Once you spend money on something, it's a project.  

[Treefidy 1463]

Projects ($38.2 million)

“That’s money spent on paying for current and future projects prospects,” McGarity said, “which includes the West End Zone expansion and renovation, as well as money being spent on golf, soccer and several other ongoing projects prospects.”

 

Not only bad at accounting, their spelling is terrible  

Though they are certainly taking advantage of the current lack of a salary cap.

[Hurtlocker 2208]

On 6/29/2019 at 2:59 PM, Beau Vine said:

I'm trying to figure out how you spend money on a "future project."  Once you spend money on something, it's a project.  

[notre dame joe 173]

Do you need a separate item for honest graft?