DRAFT 5
****************************************************************** DRAFT 5
SECOND
CYCLE CERTIFICATION
FISCAL
INTEGRITY SUBCOMMITTEE
SELF STUDY
INSTRUMENT
OPERATING
PRINCIPLE ONE
3.1.1 Prepare a list of
all revenue sources for intercollegiate athletics that are under the clear
accounting and financial control of the institution. Also, prepare a list of
other sources (i.e., those that are not under the accounting and financial
control of the institution) generating revenue on behalf of the institution’s
intercollegiate athletics program, including outside foundations.
All funds are under the control of the institution.
a..
General Fund
b.
General
Fee
c. NCAA Money – grant-in-aid, sport sponsorship, academic enhancement and basketball tournament money.
d. Ticket revenue – men’s and women’s basketball, football, volleyball and any special events such as MAC Championships, open meets (wrestling and track) and special events (gymnastics).
e. Foundation (development gifts)
f. Program sales
g. Concessions
h. Royalties
i. Corporate Sponsorships
j Rentals (Bowen and Rynearson)
k. Game guarantees
l. Camp and clinic revenues
m. Golf Outings (player fees, sponsorships, raffles and auctions).
All sources of revenue are under the control of the institution. Accounts that generate revenue on behalf of the institution’s intercollegiate athletics program have clear accounting and financial control by the institution.
3.1.2 Describe the
step-by-step process for budget development and approval, and highlight any
areas that may differ from the institution’s standard or normal budgeting
procedures. Prepare a separate description for those sources of revenue under
the institution’s direct control and another for revenue sources not under the
institution’s direct control.
Under Institution Control –All budgets, budget
development and approvals including revenue sources are under the institution’s
direct control. The President of the University reviews and the
Board of Regents approves all budgets and carry-forward operating balances.
The university budget development process begins
after the strategic planning process, which is in late summer. Expenditure requirements resulting both from
existing commitments and new strategic initiatives are incorporated into the
“appropriation request”. This request
is forwarded to the State of Michigan in November.
The University General Fund operating base budget is developed during the winter. The General Fund provides operating funds for the support of Intercollegiate Athletics Olympic sports. These funds are from state appropriation, student tuition and fee revenues. This process examines central operating costs, including contractual obligations and staff benefit costs. All non-central operating budgets and program initiatives are incorporated during budget development. Enrollment planning and the anticipated state appropriation define the revenue parameter, driving tuition requirements and/or spending reductions necessary to balance the operation budget. Once enrollment projections are finalized the student general fee allocations are budgeted. The General Fee support is based on student credit hours. In 2001-02, Intercollegiate Athletics received 15.172 % of the student general fee recorded in the Designated Fund.
Olympic sports operating budgets are adjusted for contractual and other compensation increases annually during the base budget development process. Responsibility for allocation and distribution of athletic operating budgets resides with the Director of Intercollegiate Athletics
At year-end Olympic sports balances within the general fund are summarized and carried forward into a single departmental operating account. The allocation of carry forward balances is at the discretion of the Director of Intercollegiate Athletics. Typically positive balances are returned to the account where they were generated. Negative balances are expected to be covered by the sport that generated the negative balance. Revenue sports and guarantee balances are carried forward into a fund balance for these sports for the new-year without intervention. This is consistent with university policy for other university divisions.
Each program within the Intercollegiate Athletic Department is required to develop an annual spending plan based upon the revenue available through the General Fund and the General Fee.
Each head coach or head of each administrative support area develops the detailed spending plans. The Director of Intercollegiate Athletics must approve spending plans.
Men’s Football and Men’s Basketball are considered “revenue sports” and are supported by ticket sales, concessions (for football), student general fee and other departmental revenues. Revenue sports are segregated in the Designated Fund.
3.1.3 Describe the process used
in selecting the independent auditor for the institution's external financial
audit for intercollegiate athletics, including any methods used to ensure the
independent nature of the auditor. Also
describe relevant corrective actions planned or implemented from the three most
recent external audits.
The independent auditor for the Intercollegiate Athletics
external financial audit is the same auditor used for the University's external
audit, PricewaterhouseCoopers LLP (PWC).
The auditor was selected according to University policy, which is described
below.
University Policy No. 11.1.5 Selection of External
Auditors (see Appendix __) states that "Prior to the appointment
of a new external auditor, the administration shall invite proposals, conduct a
formal evaluation, and recommend two firms for final consideration by the Board
of Regents.”
The most recent process (January 2000) for selection of an
independent auditor was initiated through a Request for Proposal (RFP) prepared
and submitted to eight independent certified public accounting firms. In addition to the audit of the University
in general, the RFP specified that the proposal was to include “Certain limited
agreed-upon procedures on accounting records and the system of internal
accounting control and report on the results of those procedures in connection
with the University's Intercollegiate Athletics Program, as specified in the
National Collegiate Athletic Association’s (NCAA) bylaw 6.2.3.1."
Three
proposals were received. A selection
committee consisting of the Vice President for Business and Finance, University
Controller, Director of Financial Services and Director of Student Business
Services evaluated them. Based upon
this evaluation two firms were interviewed by the selection committee. The selection committee recommended PricewaterhouseCoopers
LLP (PWC) to the Board of Regents. The
recommendation stated that “PricewaterhouseCoopers is the recommended firm of
choice based on the established evaluation criteria, i.e.: experience, reputation, expertise, audit
approach, staff qualifications, commitment to meeting EMU audit schedules,
references, peer reviews, engagement letter language and campus recruitment
efforts.” The recommendation was
approved by the Board of Regents at its March 21, 2000 meeting (see Appendix
__).
PricewaterhouseCooper
LLP was the external auditor for Intercollegiate Athletics for the three years
(fiscal years ending June 30, 2000, 2001 and 2002) under review by the Self
Study Team
The external audits of the University’s Financial
Statements for fiscal years 1999-2000, 2000-2001 and 2001-2002 include
Intercollegiate Athletics activities.
In addition to the Financial Statements, the audit firms issued
Management Letters with recommendations for system and internal control
improvements. There were no findings that directly affect the Athletic
Department.
The external auditor in accordance with NCAA Bylaw 6.2.3.1
also prepares an annual “Report on Agreed-Upon Procedures” for Intercollegiate
Athletics. The report
was positive. No findings were reported. (See Appendix __)
In addition, the independent external auditor conducts
audits in compliance with the Office of Management and Budget (OMB) Circular
A-133 related to the University's Federal Financial Assistance Program (see
Appendix __ ;- Financial Statements and OMB Circular A-133 Supplementary
Financial Report for the years ended June 30, 1999, 2000, 2001).
3.1.4 Describe the ways
in which your institution approves expenditures for intercollegiate athletics,
including a description of different procedures based on various sources of
funding (e.g., state funds vs. restricted/foundation funds).
All
expenditures are made in accordance with the Board of Regents approved policy
and procedures.
All
Athletic Department expenditures, regardless of the source of funding, are
handled through the normal University processes, which include
departmentally-generated requisitions, review and bidding (if necessary) by the
University Purchasing Department and verification of receipt of non-personnel
items.
The
head coaches or the heads of administrative support areas generate
requisitions. Proposed expenditures are compared with the spending plan by the
Assistant Athletics Director-Business.
Variations from the spending plan are either rejected or the spending
plan is revised to accommodate the expenditure. Both the Assistant Athletic
Director –Business and the Director of Intercollegiate Athletics must approve
all requisitions. In emergency
situations, one approval is permitted.
Intercollegiate
Athletics have accounts in the Designated/ Restricted Fund and Foundation. The spending in these accounts follows the
specific requirements for expenditures when the accounts were established.
3.1.5 Please attach
copies of the management letters (or executive or management summaries) of the
institution’s three most recent external (those used to satisfy the annual
independent financial audit requirement in Constitution 6.2.3.1) and internal
(if any) financial audits for intercollegiate athletics.
A.
Copies
of the institution’s management letters for the three most recent years
external audits are found in Appendix____
There are no internal audits for Athletics.
There were three internal audits on ticket sales. Ticket sales operation does
not report to Athletics. The internal audits on ticket sales are available on
requested.
Information to be available:
A. Copies of the institution’s three most recent external and internal financial audits for intercollegiate athletics. There are no external or internal financial audits for intercollegiate athletics. The universities external and internal financial audits are available on request.
B. Copies of all athletics
staff members’ most recently completed and signed statements related to the
reporting and approval of athletically related income and benefits from sources
outside
The institution, per NCAA bylaw 11.2.2. These
copies are available on request.