By Laura Ulrich

Laura Ulrich is an Assistant Editor at Athletic Management. She can be reached at: lulrich@MomentumMedia.com.

In 2004, Jim O'Day was serving as Director of Development for the University of Montana athletic department when auditors uncovered an unexpected $1 million deficit. The local media ran with the story, alleging overspending and financial mismanagement. Then-Athletic Director Wayne Hogan resigned his post, and a cloud descended over the department.

"Those were terrible days," recalls O'Day, now the school's Athletic Director. "I would not wish that experience on anybody."

The truth about the deficit's origin was poorly understood by the media, according to O'Day, making the situation worse. For example, a reporter who sifted through receipts for an athletic department credit card uncovered a charge to a local sewing store and speculated that department employees were using the card to finance their personal hobbies. "In fact, our equipment manager was being very frugal by sewing up torn gloves himself," O'Day says. "But once the negative publicity gained some traction, it became practically impossible to explain something like that."

In reality, according to O'Day, the deficit sprang more from miscommunication than overspending. Revenue from collegiate licensing slated for athletics was not reaching the department, and communication with central administration had broken down. "In college athletics today, we're dealing with such large numbers that a deficit can happen very quickly," O'Day says, "and this was a situation where it did."

The department set a goal of paying off the deficit in five years. Two interim athletic directors served and left, and in 2005, O'Day was given the charge of heading the department and completing its financial repair. In March, he announced that the entire deficit was paid off, two years ahead of schedule.

In today's world of college athletics, financial management can make or break an athletic director. But it's not just a matter of having enough revenue or balancing the books. It also entails communicating clearly about finances--with many different constituents.

In this article, we profile five athletic directors who are turning around negative financial situations. Although the circumstances differ, they are all opening new lines of communication, engendering cooperation, and taking calculated risks to reach their goals.

BALANCED BUDGET
On its face, O'Day's solution to Montana's budget woes was simple--increase revenues and trim spending. But the real keys were capitalizing on his program's strengths and understanding its place in the college sports landscape.

Increasing football revenue was one of the biggest pieces of the puzzle. A strong schedule helped Montana sell out every seat in its 23,000-seat stadium for every game for the past two years, bringing in over $3 million in ticket sales. Students were asked to give up their free football tickets and pay $7 to attend a game, as well as to vote for an increase to their athletic fees.

Two football guarantee games, one at Oregon for $450,000 and another at Iowa for $650,000, also helped immensely. "My role in making those games happen was basically to network," O'Day says. "I did a lot of talking with those schools' athletic directors, and ultimately we were able to negotiate agreements that helped us tremendously."

On the reduction side, coaches were asked to curtail their budget requests. "We discussed budgets extensively, both in coaches' meetings and one-on-one," O'Day says. "I let coaches know up front that we had to cut back and that we needed everyone's help. Olympic sport coaches reduced their travel. All of our coaches watched their budgets very carefully, and they still do."

The most important strategy, however, may have been avoiding the "arms race." "For us, keeping the budget balanced means not getting caught up in the 'big-time' game," O'Day says. "It's tough, because we're in an area where there are very few NCAA Division I Football Championship Subdivision schools. When we look around, we see Washington, Washington State, Oregon, and Oregon State. With our budget of $11 million, I cannot use schools with $25 million athletic department budgets as my frame of reference."

Instead, O'Day focuses on promoting the successes Montana has had right where it is. "Our football team has been in the playoffs the past 14 years running and won two national championships, and our men's and women's basketball teams are also very successful," he says. "I'm often asked why we don't move our football team to the Football Bowl Subdivision. My answer is, we know where we fit and we like where we're at."

For O'Day and those on his staff who experienced the "terrible days," that's a good place to be. "Our financial crisis was very hard to go through, but I believe we're a stronger department now," he says. "It forced us to examine how we do things, and I believe our hard work to get back on track has earned the trust of our fans and alumni like never before."

THE NEXT BIG STEP
Unlike Montana, Iowa State University has no choice but to compare itself to those programs at the top. The Cyclones' annual budget of $28.1 million is the smallest in the Big 12 Conference, which includes the University of Texas and its $74.4 million spending plan. Over the past decade, that funding gap has shown on the playing field--in the 11 years since the Big 12 began competing, Iowa State has won only six conference team championships, while Texas has won 68.

In 2005, Jamie Pollard became Athletic Director at Iowa State and accepted the challenge of taking the program to the next level. A year into Pollard's tenure, the athletic department raised more money in six months than it had for the entire previous year. The secret? Pollard's strategy has been to communicate directly with the fans and alumni who are being asked to fund Iowa State's resurgence.

"We don't get any state funding and the university is not in a position to put significant funds into athletics," he says. "If we're going to raise the level of this program, fans and alumni need to pay for it. So we have really focused on how we communicate with our constituents about their role."

The solution was to circulate a strategic plan titled "Taking The Next Big Step." To create the plan, Pollard and his staff used data comparing Iowa State to the 11 other schools in its conference using academic, athletic, and financial measures. They then linked this data directly to clearly defined goals.

"Getting data comparing your institution to its entire NCAA division is practically impossible at this point," Pollard says. "But comparison data for your own league is readily available and easy for constituents to understand. One of the most important things a department can do is effectively present comparative data."

Reading "Taking The Next Big Step," constituents learn that Iowa State's average ranking for the past five Directors' Cups is 89th, lowest in the Big 12. Next, readers are walked through an analysis explaining the lack of athletic success. By comparing the department to its conference rivals, the document introduces the concept that more wins will require more dollars.

"Our average donation per donor was the lowest in the Big 12," Pollard says. "We also lacked sufficient premium seating opportunities, and we hadn't adjusted our donation requirements for that premium seating in over a decade. Articulating those facts to constituents allowed us to say, 'If you want us to be competitive in the Big 12, this is what it's going to take.'"

The last section of the document presents Pollard's action plan. The first priority was creating more premium seating for both football and basketball, a goal which has already been accomplished. Next came increasing the minimum donation requirements for the premium seats and increasing football ticket prices, also accomplished last year. Still in progress are goals to better leverage donor benefits like parking and postseason tickets and an initiative to substantially increase the number of donors to the National Cyclone Club, which raises money for Iowa State Athletics.

In the fall of 2006, the document was mailed to anyone who had ever purchased a ticket to an Iowa State event, every member of the Cyclone Club, and the 70,000 alums in the state of Iowa. An additional 130,000 alums across the country received an e-mail telling them how to access the document on the athletic department's Web site.

"The key has been telling people why we are doing the things we're doing," Pollard says. "When we started raising ticket prices, they knew it was because prices hadn't changed in 10 years and were the lowest in our conference. They could see that we weren't raising prices to be the highest in the Big 12, but just to get to the middle of the pack."

Both the fans themselves and the increase in fundraising dollars tell Pollard the document did its job. "Recently, we received a new $5,000 Cyclone Club membership from an alum in Pennsylvania," he says. "I called to thank him, and since I knew he probably wasn't a season ticket holder, I asked him why he decided to donate. He told me, 'I'm an investment banker. Every day, I listen to people telling me why I should put money in their company. When I read this document, the clarity of the data and the clear vision made me decide Iowa State Athletics was a venture I wanted to invest my money in.' That's when I knew the document had met its goals."

Pollard believes his communication strategy will truly pay off when Cyclones fans can clearly picture a new level of success. "We don't have a budget problem at Iowa State--we have a vision problem," Pollard says. "Our goal has been to give constituents the ability to visualize what this program could be and what it will take to get there. And already, they're responding."

To view "Taking The Next Big Step," go to: www.cyclones.com and click the link on the left hand side of the page.

GETTING THE VOTE
Earl Edwards, Athletic Director at the University of California-San Diego and an athletics consultant, also found that communicating with constituents was the ticket to increasing his athletic department budget. But his constituents comprised a much younger group: UC-San Diego students.

"We needed to increase funds to comply with NCAA Division II rules that require schools to offer at least $250,000 in scholarships," Edwards says. "In addition, we had started running a deficit and the university was covering the gap, and that couldn't continue. There were two options--increase the student athletic fee or drop sports."

The first hurdle was convincing the university's student government to put the fee increase on a ballot. "The student government president was a key player, so I spent a lot of time talking to him one on one," Edwards says. "I explained very carefully how we got to the number we did, which was a three-fold increase in the fee."

Edwards knew the student government would want data to justify the need, and he believed it would be more convincing if it came from an independent source. "We sought the assistance of former NCAA President Cedric Dempsey, who served as a consultant for us," Edwards says. "He completed a financial analysis comparing our institution to two other programs within our conference, California State University-Chico and California State University-Bakersfield."

By Dempsey's calculations, Edwards' department was under-funded by $3-4 million annually, with much of that gap arising because it sponsors substantially more sports than its peers. He generated a report and presented his findings directly to the student government, which relayed the information to the rest of the student body.

"Having comparative data was critical," Edwards says. "When you're trying to promote your own program with in-house data, there is a natural skepticism. Having an outsider validate the need, especially someone with Dr. Dempsey's credentials, was vital."

Once the student government agreed to put the issue to a vote, Edwards scheduled a series of town-hall-style meetings to communicate directly with the student body. Both athletic administrators and student-athletes attended and spoke. "Nothing is more effective than having students talk to students," Edwards says.

While not directly involved in the student fee increase vote, faculty members were another audience Edwards felt he needed to reach out to. Because the school would be offering athletic scholarships for the first time, some faculty members worried that campus priorities were shifting. To alleviate that concern, Edwards' office came up with a unique method for distributing the scholarships: Every student-athlete would receive $500.

"I was able to say, 'We're treating every athlete the same and we're not rewarding them according to their athletic prowess,'" Edwards says. "I assured them that our admissions requirements for athletes would maintain the same high standards as before and that the faculty would continue to have a key role in determining academic standards."

Throughout meetings with the student government, student body, and faculty, Edwards and his staff stressed that the benefits of athletics extend beyond those received by student-athletes. "We talked about the fact that the athletic department is the one entity on campus that can bring everyone together and enhance school spirit," Edwards says. "We also argued that a thriving athletic department can be a very positive public relations vehicle for the university by attracting students and raising our profile. Conversely, we pointed out that if we had to cut sports, that would create negative publicity that wouldn't be easy to overcome."

Voting on the fee increase took place during the first week in February, and 9,000 students--a campus record--filled out a ballot. Fifty-seven percent of them voted yes, justifying all the work Edwards and his staff had put in.

"We've found that the positive vote and the fee increase have raised our visibility beyond campus already," Edwards says. "I've received a steady stream of calls from the media wanting to know how we're going to use the money to improve athletics. The university development office is referencing the new athletics funding when talking to potential donors. There is a new excitement about the future of UC-San Diego athletics, and the effect on the morale of coaches and athletes has been astounding."

OUTSIDE SCRUTINY
At Fresno State University, Athletic Director Thomas Boeh and University President John Welty have taken a unique approach to communicating clearly and honestly with the campus community about athletic department finances. This spring, they convened a Commission on Athletic Finances charged with examining every aspect of how the athletic department manages its dollars.

The 15-member commission consists of campus administrators, faculty, students, and community representatives. "We brought together a group of people from different backgrounds to examine how we manage our finances," Boeh says. "We've asked them: Are we being as efficient as possible? How does the way we do things compare with our peer institutions? Are we following industry best practices?"

Several factors provided the impetus for the commission's creation. For one, the department hadn't been able to balance its budget in about a decade. Second, fallout from a financial scandal in the 1990s still clouded public perception, increasing scrutiny and criticism.

"We had a situation where the athletic department received a matching gift from a company that had a rule against the money going to athletics," explains Boeh, who became athletic director two years ago. "The rule was missed, and athletics received the funds. When the mistake was discovered, athletics paid back the funds, but the media picked up the story and ran with allegations of mismanagement. When I arrived, the negative press from that incident was still affecting things."

The third factor prompting the commission's creation was the recent NCAA report, "The Second Century Imperatives." Welty was a member of the task force that wrote the report, which calls for Division I schools to exercise fiscal restraint and more closely analyze spending.

On a micro level, the commission is tracking dollars as they flow through the athletic department's current systems, seeing how money that's raised is processed and distributed. On a larger scale, the group is examining Fresno State's entire athletics funding model. The department is run by an athletics corporation formed in the mid-1980s, comprising a board, an audit committee, and a budget committee. While many athletic departments have dissolved their athletics corporations over the past two decades, Fresno State's has remained in place, and now the commission is analyzing if the model creates unnecessary red tape.

A primary goal of the commission is to create a culture of openness within the department. "Because they fund large parts of our endeavors, our constituents feel entitled to evaluate how we spend money," Boeh says. "Part of our goal with creating the commission is to say, 'We welcome that scrutiny, and we want to be transparent.'"

Boeh believes that coping with public scrutiny is one of the biggest challenges college athletic directors face today, and he is drawing on his experience to create a better dialogue with Fresno State's constituents. As Athletic Director at Ohio University, he created a series of comparisons to other universities using information from EADA (Equity in Athletics Disclosure Act) reports and internal documents. After compiling the data onto 300 slides, Boeh took his presentation public.

"I spoke to Kiwanis clubs, rotary clubs, alumni groups, campus departments, the board of trustees, the faculty senate--anybody who would listen," he says. "I basically said, 'Here is where our money comes from and here is how we spend it. And this is how that compares to industry standards, on everything from salaries to recruiting expenses to travel budgets to scholarships.' That level of transparency really paid off in terms of public perception and trust, and I'm working on doing the same thing at Fresno State.

"My belief is that constituents are going to form opinions about how you spend your money, so you might as well present them with the facts in a forum where you can also educate," Boeh continues. "If our constituency feels comfortable with the way we do business, not only will it help our reputation locally, but people who are positioned to be benefactors will feel confident their dollars are being spent wisely."

TURNING THE TIDE
The University of Washington athletic department has a history of financial soundness, usually balancing its budget with room to spare. But at the end of the 2004-05 school year, the department posted its first deficit in recent history, closing the fiscal year $2.4 million in the red.

The financial downturn began with $3.5 million in expenses related to a court battle with former Head Football Coach Rick Neuheisel. It continued with costs related to NCAA sanctions, and a 2-9 football season, which led to a drop in attendance at Husky Stadium and more football coaching changes that required contract settlements.

"It was a tough time," says Todd Turner, Athletic Director at Washington since 2004. "Fortunately, we were able to cover the deficit with our reserve. But we needed to change course in order to bounce back, balance our budget, and once again start adding to the reserve."

At the close of fiscal year 2006, the turnaround was in full swing, with the department posting a $3.4 million profit margin. Projections for 2007 place the department even further into the black.

For Turner, the first step in setting Washington back on track didn't directly involve dollars and cents, but internal relations. "When I arrived, I found a coaching staff that was very frustrated with the image the athletic department was projecting," Turner says. "They knew they were committed to doing things the right way, but that had gotten lost in all the negative messages and they were becoming discouraged.

"My first priority was to use every vehicle I could to tell people we have a great staff and great athletes and we are dedicated to reflecting the highest ethical standards," he continues. "That validated the efforts of our coaches and started to repair our relationships with fans and alumni. I hired several key people who I knew would help send that message, and having them handle that on a daily basis freed me up to work on external pieces and repairing relationships."

Increasing revenue was the next goal. "We needed to make some bold moves, and some of them involved taking risks," Turner says. "I wanted to increase ticket prices and seat donation requirements in our stadium by more than 30 percent, but that's tough to do after a 2-9 season. So I went to the board of our booster organization, and told them, 'This is what needs to happen for us to get back on track.' I worked very closely with them to determine what increase people could handle financially and how to communicate the change in a way that people would accept. They helped me get the message out that we were putting Husky athletics back on course and we needed our constituents' support."

The gamble paid off: Football revenue is up 17 percent, in spite of a 5-7 season and a drop in the number of season ticket holders. "Our season ticket base declined, but we expected that," Turner said.

A cornerstone of Turner's strategy is to invest the increased football revenue back into the football program. "Rebuilding the football program is the priority for our long term success, because it provides 75 to 80 percent of our revenue," he says. "I made it clear to our constituents that this was the plan, and I told them if they would support us, we'd give football the tools it needs to be successful on a national level."

Of course the long-term result of a winning football program will be more funds to invest in the school's other 450 athletes, and Turner has gotten the support of non-revenue sport coaches by clearly communicating that concept. "I am very open with them about how the business side works," he says. "In a recent meeting, our baseball coach told the rest of the coaches, 'I don't know about you guys, but I'm telling all of our baseball supporters to buy football season tickets. The best thing we can do for baseball is support football.' The other coaches agreed. I was happy, because this showed they understand what we're doing."

To insulate revenue from drops due to a rough football season, increasing revenue from men's basketball was the next step. Turner upped seat donation requirements, which resulted in a 54-percent revenue increase. "We have a terrific coach, and he's recruited some great players from this region," Turner says. "That has sent basketball attendance skyrocketing."

For Turner, keeping the program fiscally sound in the future will rely heavily on having the right coaches, but not at any cost. "Our philosophy is that we will pay competitive salaries, but we won't spend frivolously to outbid other schools," he says. "Instead, we focus on making this a very special place to work--the kind of environment that's hard to leave. I want our coaches to say, 'I believe in what this place is about. The quality of life is unmatched, and I work with great student-athletes and have an opportunity to be successful.' If they can say that, I believe we'll retain them.

"We also need to keep our eye on the real reason we're here--to provide a great experience for student-athletes and allow them to play at a high level while getting a great education," Turner continues. "The financial side of our job is important, but only because it allows us to fulfill our core mission to provide opportunities for young people. That's what it's truly all about, and focusing on that, more than anything else, will keep us successful and financially sound."