The biggest question is, how do so many athletic departments lose so much money? Don’t the bills have to get paid? What's going on here, when an athletic department like Pittsburgh's can lose $8 million dollars, as shown in the figures, and then turn right around and do it again the following year (as revealed in a Dec. 28, 2000 article in The Detroit News)?

Not being an expert in the world of college athletics finances, and having no business or accounting background at all, I don't know the answers to those questions, except for one: yes, the bills have to get paid. How they get paid varies widely from school to school, particularly when comparing private schools to public schools.

A bigger point to be made here is that looking at the revenue and expense totals for an athletic department, as we did in Part 1, does not give you the overall financial picture of that athletic department. There are unreported sources of income and probably unreported expenses buried within the records of a university's athletic department. The revenue and expense totals we saw in Part 1 only tell part of the story.

A wise man once said, "The more I learn, the more I realize I need to learn." In my case, running Part 1 of this series not only taught me (and you) quite a bit, but it brought forth a learning opportunity. What started my education was this email:

Will:

After 25 years in higher education financing, I have to tell you that your article comparing revenue and expenses at major universities was way off base. You cannot compare private and public universities. They keep their records and their accounts in different forms.

In most public universities, tuition funds cannot be used to fund intercollegiate athletics. In private universities, the opposite is true. Intercollegiate athletics are considered as part of the academic mission at some universities, and a portion of the general funds of the university are budgeted to go to that expense. Therefore, the university shows revenue and expenses, with the deficit being covered by budget funds from the general fund.

This is especially true in the Big East and other conferences with private universities. I know for a fact that this is true at Georgetown, BC, SU, SJ, SH and several other schools.

I can't believe you would think that the management of those universities would allow their athletic department to run deficits of the magnitude shown in your article. The Presidents would fire their Athletic Directors. If not, the Boards of Directors would get rid of the presidents.

Your mistake was a common one. However, private universities have many ways of hiding their true revenues and expenses. That is why they are private.

Okay, so maybe I was a little naïve to present the figures in the fashion I did, as if to say, "University XYZ's athletic program takes in A dollars and spends B dollars, meaning that they lost C dollars," as if there was no other money available from other sources. In my own mind, I know that money comes from somewhere else, and the bills do somehow get paid, but I didn't specifically address that point in my article.

I started an email conversation with my new friend, whom I'll call MB, and he enlightened me on some aspects of college sports financing, most importantly the difference between public and private universities in funding athletics. Did MB have all the answers? No. Did MB leave me a little smarter than before? Uh, I think so.

This was the most educational part of my dialogue with MB. MB pointed out that private universities, unlike most public universities, can use tuition funds and general funds to cover athletic department shortfalls. This is one of many reasons why private school tuition is higher than public school tuition.

The Big East is probably the biggest mish-mash of private and public schools among the BCS conferences (ACC, Big 12, Big East, Big Ten, PAC 10, and SEC). Its members range from large land-grant universities like Tech and WVU down to smaller private schools like Georgetown, that don't play Division 1-A football. In between are Boston College and Miami, relatively large private schools that attempt to compete (and in Miami's case, do compete) at the highest levels of Division 1-A football.

"A private university," MB explained in a later email, "doesn't 'lose' money on athletics for long. No one can afford it. The Athletic Department goes through the same budget process as all other University Departments. The only difference is that, unlike academic departments, the athletic department has revenue. The basic question is: does their revenue have to cover their expenses? In most state institutions, the answer is YES. In most private institutions, the answer is NO."

Ah, so the athletic departments at public universities are under pressure to balance the revenue/expense bottom line that private university athletic departments are not necessarily under. That explains why schools like Virginia Tech usually report break-even or turn a profit, while schools like Harvard report a $4.2 million shortfall, only to have the difference covered by money from the university's general fund, a transfer of assets that doesn't show up in the revenue and expense columns from Part 1's data.

Not to mention, as MB said, that accounting and reporting practices vary widely between public and private universities, and even from one private school to the next, or from one public school to the next.

Knowing that, let's take the Big East schools, break them up into private versus public universities, and revisit that financial data from Part 1.

Viewed in this way, the data for Big East schools start to make more sense. As a group, the private schools "lose" much more money than the public schools, with the curious exceptions of Temple and Pittsburgh, which we'll get to in a moment.

As noted in Part 1, only 3 of the Big East schools reported a profit or broke even in 98-99: UConn, Rutgers, and Virginia Tech. It's not a coincidence that those three schools are public schools.

Of the other three public schools, WVU nearly broke even, losing $800,000 on a budget of $24 million. If I remember correctly, that year was the beginning of the asbestos problems in WVU's basketball coliseum, and they incurred unexpected expenses in travel costs, repair costs, and lost ticket revenue.

But what about Pittsburgh and Temple? They're public schools, and they lost $6.2 and $7.7 million dollars. Question for you: what do they have in common? Answer: they're both in the state of Pennsylvania.

As my friend MB said in one email, "The state of Pennsylvania allows some creative financing." Translation: the bills are getting paid somehow, and those schools didn't really "lose" those amounts of money.

Looking at the private schools, one sees a sea of red ink, but according to MB, the shortcoming is covered from the general funds of the respective universities. Notre Dame made money on athletics (because they're Notre Dame), but the remaining private schools all "lost" an average of $4.2 million on athletics.

So now that we know a little bit more about how the athletic departments at public versus private universities are funded, we have managed to explain away the numbers logged by the Big East Conference teams as reported in Part 1. And those that we couldn't explain strictly as public versus private, i.e. Temple and Pitt, can be explained as a creative use of accounting under the rules and laws of their home state, Pennsylvania.

That's my interpretation of my conversation with MB. If I'm wrong, you may see a follow-up to this follow-up next issue.

One question remains unanswered: what about those "athletic fees" that students are sometimes charged? What do they fund?

Virginia Tech charges an athletic fee that is mandatory for full-time students (12 hours or more) and optional for part-time students. The fee was $116.00 for the 2000-2001 academic year, and according to the Virginia Tech Bursar's web site, it is a "Non-refundable mandatory fee for all students in residence paying full tuition; for support of athletic program operations. This fee allows students the privilege of picking up free student tickets for in-season home athletic events. Fee is applicable to both graduate and undergraduate students in residence, but is optional for students paying less than full tuition."

That's a vague description ("for support of athletic program operations"), and I'm not sure how to interpret the "in residence" clause -- does that mean on-campus student's only? I don't think so. But the bottom line is, the athletic department gets $116 from each student who pays the fee.

In 1999, Virginia Tech had 19,496 full-time undergraduate students and 2,857 full-time graduate students. Assuming every one of them paid the athletic fee, that's a total of $2.59 million, assuming that the fee was the same back then as it is now. And that doesn't include any part-timers who chose to pay the fee.

Private universities typically don't charge a dedicated athletic fee, but instead allocate money to athletics from the tuition and fees paid by students, or from general funds they may have from other sources.

If I could sum up my email conversation with MB, I would do so in three statements:

1.) Private schools run revenue/expense deficits, but the difference is often/always covered by student tuition and fees, or other general funds.

2.) Public universities may run revenue/expense deficits, but the real situation is usually not as dire as it seems due to creative accounting. Private universities can be creative, too, because they don’t have state auditors looking over their shoulders.

3.) Regardless of how deficits are covered or accounted for, any athletic director, public or private, is going to receive pressure to bring his costs more in line with his revenue and budget, either by cutting costs or increasing revenue. Hence Providence, a private university, dropping men's baseball to cut costs, instead of raising tuition and fees.

One reader caught a pretty severe error in the Big Ten revenue/expense data in Part 1. I have since lost the original email, but the reader alerted me to the fact that the Big Ten expense data seemed to be incorrect. She added the expense numbers up and got a higher total figure than I did, and found that instead of Big Ten schools making $2.3 million per team, as I had reported, they actually lost $165,000 per school.

This is a pretty serious error. My calculations somehow dropped about $27 million in expenses from the Big Ten's total. I reported Big Ten Conference income as $415,624,664 and expenses as $390,344,592, when the actual expense total, if you added up the figures in my spreadsheet using a calculator, came out to $417,441,606.

The error was easy to find. My original spreadsheet had Purdue's expenses listed as $27,097,014, but the problem is, the person who entered the data actually typed in "$27,,097,014" for the figure -- notice the extra comma? When I started adding that "number" into spreadsheet formulas, it totaled up as a zero instead of the actual numeric value.

In addition to finding the Purdue expense error, which threw the calculations off significantly, I was able to track down data for Oregon, which had been missing from the PAC 10 totals. Here are the previous tables from Part 1 and the updated tables from this follow-up:

I apologize for the Purdue error, and if you downloaded the spreadsheet, please correct it in your version. I scanned the spreadsheet for other double-comma entries (I had noticed one before running my article and had caught it) and did not find any.

You can find the Oregon data, and any other data that is missing from the original spreadsheet, at this Web address:

http://chronicle.com/stats/genderequity/

Simply do a search on any team of interest. You can even pull up lists of other teams in the selected team's conference.

That's it for follow-up comments to Part 1 of "The Money-Makers." I hope you learned something, as I did.

Now, I can only hope Part 2 isn't so chock full of unclear points and mistakes in the data …

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