FAYETTEVILLE -- The Razorback Foundation's support for University of Arkansas, Fayetteville athletic department operations ticked upward less than 4% in fiscal 2020, despite pandemic-related upheaval in athletics, financial statements show.
Gifts to the nonprofit foundation -- either in the form of tax-deductible giving or submitted to secure tickets -- play a major role in funding UA athletics.
The financial statements give subtotals for the nonprofit organization's athletic expenses and, separately, for support given to athletic construction and capital projects.
Not including support for facilities, the foundation provided $14,117,449 to cover athletic departmental expenses in the 12-month period that ended June 30.
While it's an increase compared with the $13,618,656 provided in the same category the previous year, the fiscal 2020 support for athletic expenses fell below the $16.4 million provided in fiscal 2018 and $14.3 million in fiscal 2017.
In a statement, the foundation said the amount of support requested from the foundation "rest solely" with the university's athletic department.
"Each year, based upon the projected needs of the Athletic Department, the Razorback Foundation operates under a budget approved by its Board of Directors. The Athletic Department determines its needs, and the Razorback Foundation works to provide funding to meet those expenses. The Razorback Foundation, however, does not determine what the Athletic Department financial needs are for any given year; that determination and any corresponding funding requests rest solely with the Athletic Department," the foundation said in a statement.
UA's athletic department has avoided cutting any sports programs, unlike some other universities during the pandemic, though cost-saving measures including salary reductions and unfilled positions. No student fees support athletics at UA, with athletic officials often describing the program as self-sustaining or self-supporting.
But the University of Arkansas board of trustees in September approved a loan agreement of up to $19.1 million to help the Razorback athletic department pay down debt this year and next year from facilities bond issues.
Hunter Yurachek, UA's athletic director, told trustees in September that the department expects to see at "a minimum" a $20 million reduction in revenue from the $124.6 million originally projected for the current fiscal year.
The final loan amount ended up being $18,664,000, to be paid back at an interest rate of 1.38% for the tax-exempt portion of the loan and 1.81% for the taxable portion, Clayton Hamilton, chief finance officer for the Razorback athletic department, said Friday.
Hamilton said in a statement that the amount of Razorback Foundation transfers is determined as part of putting together an annual budget.
The process is completed in the January-April time frame each year, "which coincides with renewal of season tickets with the athletic department and annual fund contributions to the Razorback Foundation. Actual revenues are monitored and transfers spread throughout the year, with a final agreed-upon transfer at the end of a fiscal year," Hamilton said.
The pandemic this fall altered the Razorback football season, resulting in five home games rather than the planned seven. Changes to large events because of the pandemic also have reduced the number of fans allowed in the stands at UA games.
Despite this, Hamilton said there is no expectation of more financial support from the Razorback Foundation.
"There is a long history of support for Razorback athletics through foundation members and season ticket holders. This support has remained through the current year even with uncertainties of sport seasons and limitations on capacities in athletic venues. While there is not an expectation for an increase in support, we anticipate support will continue in future years," Hamilton said.
Nicholas Schlereth, a recreation and sports management professor at Coastal Carolina University, said many college athletic departments are reluctant to fully tap into foundation dollars.
That's partly for image reasons, he said. Using a rainy-day fund can be a sign of a weakening organization, Schlereth said.
Athletic directors also consider their own reputations, he said.
"You've got to prove that you can fundraise, so they don't really want to touch that," Schlereth said.
But Schlereth also said athletic departments may simply want to keep funds in reserve, despite a willingness to take on debt.
"I think they are going to seek other sources before they touch their foundations, and I equate that to, you would do anything you can to not touch your savings account unless you had to," Schlereth said.
The Razorback Foundation's financial statements show that total program support -- including facilities support -- was about $24.2 million in fiscal 2020, down from $27 million the previous year.
The pandemic has affected the foundation's finances.
Total foundation revenue and other gains were exceeded by total expenses and losses, the financial statements show. The foundation in fiscal 2020 recorded $28.7 million in revenue while expenses totaled $29 million.
In a statement, the foundation said that a potential loss of $577,000 in "uncollectible contributions" related to the pandemic was forecast and recorded as a loss as of June 30.
Razorback Foundation members were able to request refunds because of the reduced capacity at Razorback athletic events, the foundation said in a statement, but they were also given an alternative.
"We created the ONE Razorback Fund to provide a way for Razorback fans who opted out of attending games to help support Razorback Athletics by making a tax-deductible donation of their ticket refund to help us meet the challenges presented by the pandemic. Hundreds of season-ticket holders did in fact donate a portion or all of their ticket refund to be directed back to support the more than 465 Razorback student-athletes. It has been a humbling experience to see the extended support fans have shown during the pandemic," the foundation said in a statement.
Virtual events held by the foundation are part of ongoing efforts "to avoid any loss of donations and offset any uncollectible contributions," the foundation said.
The foundation closed the fiscal year with about $62.4 million in net assets, including more than $40.1 million without donor restrictions.
A separate report listing revenue and expenses for UA athletics shows how -- for multiple reasons -- revenue declined.
Financial survey information for the 12-month period that ended June 30 shows that overall athletic department revenue fell to $118.3 million from about $128.3 million the previous year.
Ticket sales fell to $34.5 million from $40.5 million the year before, a decline of nearly 15%, according to an annual survey report on athletic revenue and expenditures submitted by UA to the state Division of Higher Education.
Much of the dropoff came from football ticket sales, which fell to about $26.1 million from $30.7 million the year before, with the season wrapping up months before the pandemic.
The pandemic did, however, lead to shortened seasons for baseball and some other sports in the spring, and the survey report lists revenue from "other men's sports" dropping to about $1.2 million from more than $2.9 million the previous year.
Another big category of revenue, from "royalties, licensing, advertisements, sponsorships" also fell sharply, according to the survey report, down to about $15.8 million from nearly $23.3 million the previous year. However, the dip in this category had nothing to do with the pandemic, according to Hamilton.
"The decrease in the sponsorship/licensing revenues is primarily a result of the one-time $6M bonus payment received from IMG in FY19," Hamilton said, referring to the company that's the multimedia rights-holder for Razorback athletics. "The $6M one-time bonus payment from IMG was used to install Wifi in our football, basketball, and baseball venues."
Hamilton said the $6 million was listed as a facilities expense.
To offset the overall reduction in revenue, the university had fewer expenses. The survey reports list a decline in direct facilities, maintenance and rental expense, which fell to about $7.4 million from more than $13.6 million the previous year.
Team travel expenses also fell to about $5.6 million from just more than $8 million the previous year, as did recruiting expenses, down to below $2 million from about $3.3 million the previous year.