Changes to NCAA Financial Reporting Requirements & Minimum Agreed-Upon Procedures Kathleen McNeely NCAA Senior Vice President of Administration and Chief Financial Officer kmcneely@ncaa.org Debra Ladyman National Industry Partner Higher Education Group BKD, LLP dladyman@bkd.com
Today s Objectives Financial Data Focus Group Objectives Members FY 2013 & FY 2014 Changes FY 2015 Changes Overview Revenue & Expense Categories Agreed-upon Procedures Process for January 15, 2016 submission Questions & Discussion 2
Financial Data Focus Group Objectives Review of financial reporting cycle focused on: 1. Identify ways to streamline reporting 2. Review membership concerns 3. Ensure consistency of data 4. Share best practices in preparation of reporting & execution of agreed upon procedures 3
Financial Data Focus Group Members The focus group consisted of well-respected cross-section of personnel representing: member institutions athletic programs professional service firms knowledgeable & engaged in NCAA financial reporting 4
Financial Data Focus Group Members Mike Bitter Faculty Athletic Representative Stetson University Mark Brown Director of Athletics Pace University Kyle Clark Vice President Finance & Administration Florida State University Susan Eickhoff Partner KPMG Peter Fields Director of Athletics Montana State University Ray Hayes Vice Chancellor for Financial Affairs Alabama System Kevin Hayward Executive Senior Associate CFO University of Missouri Carl Heck Associate AD Internal Operations Butler University Katie Hill Senior Associate AD Clemson University Scott Joraanstad Associate AD for Budget & Finance Indiana University Brad Kelsheimer Vice President for Finance & Administration DePauw University Debra Ladyman National Industry Partner Higher Education Group BKD, LLP Bob Lazard Partner Crowe Horwath David Lechner Vice President for Business & Finance University of Nebraska Sue Menditto Director of Accounting Policy NACUBO Drew Paluf Vice President for Finance Notre Dame University Patricia Snopkowski Chief Audit Executive Oregon University System Larry Templeton AD Emeritus/Consultant to SEC Commissioner Mississippi State/SEC Chauncey Winbush Associate AD, Business Affairs US Naval Academy 5
Issues Considered Not Resulting in Changes to Reporting Recognition of student fees as earned revenues instead of allocated Some schools provide free tickets to students Some schools provide discounted tickets to students Earlier deadline date Elimination of all capital related financial outflows Elimination of foundation data 6
Financial Report Submission Changes In an effort for continuous improvement for financial reporting cycle, there will be submission changes, effective 2016: Enforcement of report due date of January 15 Elimination of CEO review for final submission 7
Fiscal Year 2013 2015 Changes 8
Changes to Financial Reporting System in FY 2013 & FY 2014 Elimination of Capital Expenditure Survey Design & layout changes to system Ease of navigation during input phase Creation of drop down menus Single sign-on access to system 9
Changes to Financial Reporting System for FY 2015 Changes to financial reporting cycle for FY 2015: Elimination of broad interpretations Clear & concise definitions Renaming categories for consistent & accurate reporting 10
Changes to Financial Reporting System for FY 2015 Revision of Revenue Categories Category 4: Direct Institutional Support Aligns with other allocated revenues such as student fees, governmental support Category 5: Transfers to Institution Added a contra revenue category to net transfers back to institution from athletics against funds allocated to athletics by institution 11
Changes to Financial Reporting System for FY 2015 Revision of Revenue Categories Category 6: Indirect Institutional Support Changed name from Indirect Facilities & Administrative Support Debt service, rental fees & lease payments for athletics facilities for reporting year should be included Excludes depreciation For expenses paid or services provided which were not charged to athletics 12
Changes to Financial Reporting System for FY 2015 Revision of Revenue Categories Category 8: Contributions Funds contributed for use of facility payments Excludes pledge amounts Category 9: In-Kind New category, excluding any in-kind given as part of sponsorship deal Category 11: Media Rights Represent all institutional & conference distributed media rights 13
Changes to Financial Reporting System for FY 2015 Revision of Revenue Categories Category 12: NCAA Distributions Revenues received from all NCAA distributions including NCAA championships reimbursements & payments received from NCAA for hosting a championship NCAA distributions may be provided by conference office 14
Changes to Financial Reporting System for FY 2015 Revision of Expense Categories Category 20: Athletics Student Aid Summer school Tuition discounts & waivers (unless discount or waiver available to general student body) Aid given to student-athletes who are inactive or no longer eligible The information entered into compliance assistance will automatically populate to athletic student aid section within NCAA Financial Reporting System when CAI import feature is selected 15
Changes to Financial Reporting System for FY 2015 Revision of Expense Categories Category 34: Athletic Facility Debt Service, Leases & Rental Fees Debt service payments (principal & interest, including internal loan programs) Leases & rental fees for athletics facilities for reporting year (paying entity: athletics, institution or other) 16
Changes to Financial Reporting System for FY 2015 Revision of Expense Categories Category 35: Direct Overhead & Administrative Expenses Changed name from Direct Facilities, Maintenance & Rental Overhead & administrative expenses paid by or charged directly to athletics Facilities maintenance Security & risk management Utilities 17
Changes to Financial Reporting System for FY 2015 Revision of Expense Categories Category 36: Indirect Institutional Support Changed name from Indirect Facilities & Administrative Support to be consistent with revenue definition 18
Changes to Agreed-Upon Procedures Revised procedures effective for FY 2015 agreed-upon procedures engagements Changes require an increase in procedures to be performed, including more vouching of underlying transactions Clarifies procedures are only required for line items which are > 0.5% of total revenues or expenses Will increase testing required by independent auditors 19
Changes to Revenue Procedures Defines thresholds for budget to actual & current year to prior year variance analysis Must be completed for revenue accounts > $1M and/or 10% of total revenue Must explain variances for lines that fluctuated > $1M and/or 10% from budget or from prior year Moves reporting of variances from body of AUP report to supplemental schedule 20
Changes to Revenue Procedures Student Fees new procedures Obtain & document understanding of institution s methodology allocating student fees to intercollegiate athletic programs If reported as generated revenue, recalculate totals of institution s methodology for supporting institution is able to count each sport Tie calculation to supporting documentation such as seat manifests, ticket sales reports & student fee totals 21
Changes to Revenue Procedures Transfers Back to Institution new procedure Compare transfers back to institution with permanent transfers back to institution from athletics department Recalculate totals In-Kind new procedure Compare in-kind recorded by institution during reporting period with schedule of in-kind donations Recalculate totals 22
Changes to Revenue Procedures Media Rights modified procedure Obtain & inspect agreements to understand institution s total media (broadcast, television, radio) rights received by institution or through their conference offices. Compare & agree media right revenues recorded to summary statement of all media rights identified. Compare & agree related revenues to institution s general ledger &/or statement. Ledger total may be different for total conference distributions if media rights are not broken out separately. 23
Changes to Revenue Procedures NCAA Distributions new procedures Now broken out separately from Conference Distributions Compare amounts recorded in revenue & expense reporting to general ledger detail for NCAA distributions & other corroborative supporting documents Recalculate totals 24
Changes to Expense Procedures Defines thresholds for budget to actual & current year to prior year variance analysis Must be completed for expense accounts > $1M and/or 10% of total revenue Must explain variances for lines that fluctuated > $1M and/or 10% from budget or from prior year Moves reporting of variances from body of AUP report to supplemental schedule 25
Changes to Expense Procedures Athletic Student Aid modified procedures Defines number of student-athletes required to be tested 10% of student-athletes for institutions that used NCAA s Compliance Assistant software to prepare athletic aid detail 20% of student-athletes for institutions that did not Recalculate totals for each sport & overall 26
Changes to Expense Procedures Athletic Student Aid new procedure Perform check of each student selected to ensure information was reported accurately in either NCAA s Compliance Assistant software or entered directly into NCAA Membership Financial Reporting System using pre-defined criteria (detailed criteria are defined in minimum agreed-upon procedures) 27
Changes to Expense Procedures Salary Testing Eliminates requirement to obtain & inspect W-2s/1099s for selections Replaced with requirement to obtain & inspect payroll summary registers for reporting year for each selection & to agree to recording in the statement X 28
Changes to Expense Procedures Affects following line items: Coaching Salaries, Benefits & Bonuses Paid by University & Related Entities Coaching Other Compensation & Benefits Paid by Third-Party Support Staff/Administrative Salaries, Benefits & Bonuses Paid by University & Related Entities Support Staff/Administrative Other Compensation & Benefits Paid by Third-Party 29
Changes to Expense Procedures Coaching Salaries, Benefits & Bonuses Paid by University & Related Entities Clarifies requirement to compare & agree totals recorded on statement to applicable employment contracts for period 30
Changes to Expense Procedures Recruiting & Team Travel new procedure Clarifies requirement to obtain general ledger detail & compare to total expenses recorded 31
Changes to Expense Procedures Procedures updated to clarify requirement to select a sample of transactions to validate existence of transaction and accuracy of reporting in the statement Affects following line items: Equipment, Uniforms & Supplies Games Expenses Direct Overhead & Administrative Expenses Medical Expenses & Medical Insurance Memberships & Dues Sports Camp Expenses Fundraising, Marketing & Promotion Spirit Groups Other Operating Expenses & Transfers to Institutions 32
Additional Required Procedures In order for NCAA to place reliance on financial reporting for NCAA distribution purposes, the following procedure is now required to be performed Compare & agree sports sponsored reported in NCAA Membership Financial Reporting System to squad lists of institution If there is a discrepancy, inquire about discrepancy & validate discrepancy is justifiable Report justification in AUP report 33
Questions & Discussion Details for FY 2015 changes are viewed at www.ncaa.org Membership Financial Reporting System page 34
Presenters Contact Information Kathleen McNeely NCAA Senior Vice President of Administration and Chief Financial Officer kmcneely@ncaa.org Debra Ladyman National Industry Partner Higher Education Group BKD, LLP dladyman@bkd.com