FINANCIAL MANAGEMENT

IN PHYSICAL EDUCATION AND

SPORTS
MPES 310
Prof. Marilou Arguelles
STRATEGIC MANAGEMENT
 Sports industry: $200 billion per year in
the United States
 Fiscal long-range or strategic planning
is required (e.g. programming and
facilities)
STRATEGIC MANAGEMENT
 Fiscal Strategic Plan
• is a map that outlines how the resources
will be managed to get to the leader's
vision.
• Typically, plans are for future 3 to 10
years.
• Focus on three areas: cost containment,
revenue enhancement and facility
 STRATEGIC MANAGEMENT
 The following categories have been
suggested to be included in a strategic plan:
• The mission goals and objectives of the organization
• An analysis of the program's current financial status
• An analysis of the revenue versus expenditure
projections
• An analysis of capital projections in priority order
• Specific information regarding the intended financial
state of the end of the study period
(Koteen, 1997; Alden, 2000)
 STRATEGIC MANAGEMENT
 Key concepts:
 DISTINCTIVE COMPETENCE
 COMPETITIVE ADVANTAGE

 Distinctive Competence
• Do what you do well
• Make good use of unique capabilities and
natural advantages
STRATEGIC MANAGEMENT
 Competitive Advantage
• Means that you could choose competitors to
schedule or products to sell that would provide
positive returns such as:
 A good chance for victory
 Excellent exposure
 Greater gate receipts
 STRATEGIC MANAGEMENT
 Competitive Advantage
• Cont'd...Positive Returns:
 More chance for television income
 Association with an institution or school
with an excellent reputation
 An increase in clients or patrons
 More income
STRATEGIC MANAGEMENT
• Long Range Strategic Planning
 Broad-based planning group should be
appointed
 Program goals and values should be
crafted into mission statement
 “When a lack of progress is blamed on the
notion that there wasn't enough time, money
or staff, it actually indicates that financial
strategic planning was not achieved. (Pitts, 1993)
FISCAL MANAGEMENT
 Includes three steps:
1. Top management setting goals and
objectives and appropriating the funds
to execute the program (a.k.a fiscal
strategic plan)
2. Fulfilling fiscal responsibility by
certifying that funds have been
expended legally and efficiently
FISCAL MANAGEMENT
 The benefits of effective financial
planning:
1. Decision making is proactive and
systematic rather than reactive.
2. Employees are linked throughout
various levels of organization because
they must communicate with one
another
FISCAL MANAGEMENT
 The benefits of effective financial
planning:
3. Employees are motivated to meet the
challenges that arise.
4. Risks are reduced and the organization's
competitiveness is increased.
5. The organization achieves adequate
control
ACCOUNTING
 Accountability
• Wise use of all resources
• Describes the practice of good business
principles, when handling money

 School Accounting | 2 Primary Categories

1. Statistical
2. Financial
ACCOUNTING
 Statistical Accounting
• Includes pupil attendance figures,
inventories of equipment and supplies, and
similar types of records, all of which are
important (also in relation to purchasing
and maintaining equipment)
ACCOUNTING
 Financial Accounting
• Involves all transactions involving money
and which, in turn, affects all dimensions of
physical education, athletics, and other
sports organizations.
MANAGERIAL ACCOUNTING
 Use data to make decisions
 Managerial accounting is a system that
attempts to evaluate the benefits of
services received in terms of measurable
units.
 Cost accounting - Also called cost
effectiveness or cost-benefit analysis
 most efficient use of funds
MANAGERIAL ACCOUNTING
 Cost effectiveness/Cost-Benefit
Analysis
 “To relate program costs to
organizational effectiveness.”
 “Minimize costs and maximize
effectiveness”
MANAGERIAL ACCOUNTING
 Cost effectiveness/Cost-Benefit Analysis
 For example, in PE, one could analyze the
comparable costs of similar programs:
• by dividing the total budget for
physical education by the number of
students served to calculate the cost per
pupil.
 However, do analyze variables carefully:
1. Type of programs and activities
MANAGERIAL ACCOUNTING
 ....However, do analyze variables carefully:
2. The age and size of the school
3. The socioeconomic background of the
school population
4. The age, experience and education of the
teachers.
5. Success level of the programs.
MANAGERIAL ACCOUNTING
 Cost accounting in Athletics
 Example: Compare the costs of two
football programs by total program
costs or per participant costs
 Compare win-loss records and budgets
between two comparable schools
 Compare cost per participant.
 Must be computed over several years
MANAGERIAL ACCOUNTING
 Cost accounting in Athletics
 Include the quantity and quality of the
equipment and facilities.
 Consider the socioeconomic structure of
the community
Processes Involved in Accounting
 Accounting Records and Procedures
 The Balance Sheet
 Controls
 to ensure the funds are handled in an efficient,
safe, and correct manner.
 “Controls are to accounting what the
thermostat is to the furnace.”
Processes Involved in Accounting
 Controls: Qualities of Good Controls
1. The fewer the better.
2. Transactions and events must be
meaningful before they are controlled.
3. The controls should be specific and
appropriate to the event, especially in
athletics because unusual transactions take
place at very unusual times.
Processes Involved in Accounting
 Qualities of Good Controls
4. Controls in themselves have to be cost-
efficient and match the event being
controlled because “the more the controls,
the costlier the system”.
5. Controls must be applied at the most
propitious time during the transaction
 “too early or too late results in no control
at all.”
Processes Involved in Accounting
 Qualities of Good Controls
6. The most effective controls are the
simplest
 “A high quality control must help the
administrator make appropriate decisions
efficiently.”
 Why controls are needed: The income that
comes from donated sources carries the danger
of outside interference.
Processes Involved in Accounting
 Commonsense Controls in Athletics:
1. Require at least 2 signatures for every
transaction.
2. Have all revenue go to the treasurer or
business manager for the district or
institution, just as all other school income
does.
Processes Involved in Accounting
 Commonsense Controls in Athletics:
3. Have all bills paid by the same office and
person, but only after signed invoices are
presented by the responsible faculty
member.
(Nonfaculty assistants or nonpaid equipment
managers should not sign for incoming
equipment and supplies)
Processes Involved in Accounting
 Commonsense Controls in Athletics:
4. Require coaches to itemize large orders
and to inventory the complete order before
signing the invoice.
5. Require precise inventories at the
conclusion of each session; send reports to
the Athletic Director and the business
manager.
Processes Involved in Accounting
 Commonsense Controls in Athletics:
6. Insist that all equipment be accurately
marked and properly stored.
7. People handling cash should be bonded for
the largest amount they will handle all year,
and security for handling cash should be
thoughtfully planned.
 Processes Involved in Accounting
 Commonsense Controls in Athletics:
8. The coaches should receive timely
accounting reports of the status of the
budget they control. (Accrual accounting
systems should be utilized, and the internal and
external audits must be initiated on regular and
irregular schedules)
 Accrual Accounting - there is an attempt to
match revenues and expenses in a certain time
period.
More Processes Involved in Accounting
 Audits

 Petty Cash, Revolving Funds, and

Discretionary Funds

 Proprietary Funds
 BUDGETING
 is an approved plan for how revenue will
be expended so that the end result is that
revenue equals expenditures.
 “The budgetary process is designed to provide
data for administrators to make decisions or
reflect decisions already made.”
 “Accounting statements represent what has
happened, whereas budget represents what is
expected to happen.”
 BUDGETING
 Benefits of Good Budgeting:
1. Waste and runaway costs are reduced.
2. The organization stays focused on strategic
planning.
3. Employees are educated about resource
limitations, and they are empowered by such
knowledge.
4. Product pricing decisions are easier to
make.
BUDGETING
 Table 6.1 - Sample Cash
Flow Chart for a Sponsored
Televised Tournament

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file
BUDGETING
 Purposes and Principles of Budgets:
 “The budget should grow out of the
needs of the program.”
 Don't start by asking “How much
money do we have”.
BUDGETING
 General Principles to build a budget for a
nonprofit organization:
1. Be conservative; you are the custodian of
public funds.
2. Base expenditures and income over at least
the past three years, and take into account
unusual conditions or events (rainy weather,
new coach, winning season) that might
affect income or expenses.
BUDGETING
 General Principles to build a budget for a
nonprofit organization:
3. Plan for at least 10 percent for
contingencies, and involve all people directly
affected in the planning process.
4. Ensure proper approvals by higher
authorities; and follow through to ensure that
the budget is interpreted to the users in the
field.
BUDGETING
 General Principles to build a budget for a
nonprofit organization:
5. Be aware that most budgetary systems are
eclectic; that is “they incorporate parts of
several systems as required by their unique
situation.”
 BUDGETING

Line Item Budget

Functional

2 Subtypes of
Budgets
Line Item
TYPES OF Budget Object
BUDGETS Budgets
Program
Budgeting
 Program (or Performance) Budgeting - is a newer
method. “The larger the institution, the more it is
necessary”
PPBES
 An example of program or performance
budgeting is PPBES (Planning, Programming,
Budgeting, Evaluating System)
 Table 6.2 - Sample
Cash Balance Report
for Activity Fund
Accounts

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file
 Table 6.3 - Sample High
School Athletic Program
Operating Fund
Summary Statement
(Expressed in
Thousands)
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image to open PDF
file
 TRADITIONAL BUDGETING PROCESS
 There are 5 universal steps through
which the budget must pass.
 Step 1: Gather Data

 Step 2: Analyze Past Budgets,

Facilities, and Equipment Inventories
and Compare to New Requests.
TRADITIONAL BUDGETING PROCESS:
The Steps
 Step 3: Construct the Budget
 “Athletic and school administrators often
think only in terms of operations budgets
and tend to leave the remainder to the
higher authorities.”
TRADITIONAL BUDGETING PROCESS:
The Steps
Step 3: Construct the Budget: Principles
1. Honesty is the only professional
policy--don't pad budgets.
• Develop a reputation for absolute
credibility. Be able to justify every
dollar requested.
TRADITIONAL BUDGETING PROCESS:
Step 3: Construct the Budget: Principles
2. Get actual figures when possible rather
than estimates.
 See if officials' fees have been set rather
than guessing at increases.
 While it is not usually required to budget
for revenues in physical education,
income estimation is vital in athletics.
 “Err on the low side for income”
TRADITIONAL BUDGETING PROCESS:
Step 3: Construct the Budget: Principles
2. Get actual figures when possible rather
than estimates.
 See if officials' fees have been set rather
than guessing at increases.
 While it is not usually required to budget
for revenues in physical education,
income estimation is vital in athletics.
 “Err on the low side for income”
TRADITIONAL BUDGETING PROCESS

 Step 4: Justify the Figures and

Present the Budget
 Step 5: Interpret and Evaluate the
Budget
 FINANCIAL EXIGENCIES
 Financial exigencies are critical financial
situations requiring immediate action.
 Case in Point. The college athletic department has
gone into the red for the third year in a row, and the
reserve fund is exhausted. A plea is made in the
spring to increase the student athletic fees, but it is
quickly rejected by the board of trustees.Without
time or energy for a thorough systematic review, a
decision is made to drop both baseball (men) and
softball (women).... (continued)
 FINANCIAL EXIGENCIES
The softball players sue, on the basis of title IX and
the court rules in their favor the next spring. The
institution receives a great deal of negative publicity;
both the men and the women are upset; the
institution is left without varsity baseball; and the
same budget crisis is present, but worse, because no
funds were budgeted for softball, but the court-
ordered program must be funded.
 FINANCIAL EXIGENCIES
 Reducing a budget can and should be an
orderly, productive process based on
strategic planning and a clear statement of
the mission and goals of the unit.
 According to guidelines that clarify all the
reasons for the review board's final process,
and all affected people or groups should
have input about the budget.
FINANCIAL EXIGENCIES

 When the review board has decided,

the CEO (AD, Chair, Director) should
privately counsel any sub-unit head
(such as football coach) whose budget
has been adversely affected, and then
announce the results.
FINANCIAL EXIGENCIES
 For physical education, the following are
some of the types of changes that could be
considered (even though many are unappealing)
to reduce budgets:
1. Increasing class sizes.
2. Increasing the number of classes each
instructor teachers.
FINANCIAL EXIGENCIES
3. Using paraprofessionals or aides to teach
some classes.
4. Reducing the course requirements.
5. Increasing the standards of elective
classes so fewer marginal students will
elect to take the classes.
FINANCIAL EXIGENCIES
6. Changing the activities from those that
require small numbers to those that can
accommodate large numbers.
7. Changing from activities requiring costly
facilities and equipment to those that
require little.
8. Changing the schedule so more classes
can meet within a given time.
FINANCIAL EXIGENCIES
9. Reducing the number of classes that
require transportation.
10. Adding classes for which a fee is paid for
an adjunct instructor to teach, such as
scuba class.
11. Reducing nonessential maintenance.
12. Purchasing less expensive equipment or
using discarded equipment.
 BUDGETING IN PRACTICE
 University Campus Recreation and
Intramural Program: An Example.
 The funding comes from student fees.
 An application for support is made to the
student affairs budget council.
 The intramural program director begins
gathering data in the fall and builds this
database throughout the year.
 BUDGETING IN PRACTICE
 University Campus Recreation and Intramural
Program: An Example.
 (Director gathers data) Which programs
and activities are growing and need
more support as well as those that are
perhaps losing appeal?
 With this information in mind, the
line-item and object budget is
completed.
 BUDGETING IN PRACTICE
 A Medium-Size High School Athletic
Budget: An Example.
 Each coach inventories equipment and
assesses the program for the next year.
 Each coach has a conference with the
AD.
• The aim is frugality
 BUDGETING IN PRACTICE
 A Medium-Size High School Athletic
Budget: An Example.
 The AD makes the final decision in
consultation with the principal
 Five-year plans are maintained and
revised annually for capital
expenditures (e.g. cost of a new activity
bus)
 Figure 6.2 - Example of
Planning Next Year's Budget

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 BUDGETING IN PRACTICE
 A University Physical Education
Department Budget: An Example.
 In the past, most college physical
education budgets were established
by the chairperson sending a budget
request with justifications to the next
higher level, frequently a dean.
 BUDGETING IN PRACTICE
 A University Athletic Department Budget:
An Example.
 The University AD frequently utilizes
assistants to help build the budget.
 All coaches prepare budget requests, and
then the AD and the assistants begin to
estimate revenues.
 “The revenue expected from student
athletic fees can be predicted quite
 BUDGETING IN PRACTICE
 A University Athletic Department Budget: An
Example.
 Other sources of revenues are difficult to
predict (sponsors/booster clubs)
• How will this year's athletic teams' records
(primarily football and basketball) affect giving?
• What will be the state of the economy and how
will that affect contributions?
 BUDGETING IN PRACTICE
 A Sport Business Budget Procedure.
1. As required for the preparation of any
budget, compiling information and
documents is the first step.
 Unlike nonprofit organizations, items such as
unemployment rates, market trends, wage and
salary plans, and customer or membership data
will be important, along with information such as
equipment and supplies expenditures emphasized
in nonprofit programs.
 BUDGETING IN PRACTICE
 A Sport Business Budget Procedure.
2. Next, a revenue budget representing all
the money coming into the business is
computed.
 The internal factors controlled by the business,
such as risk objectives and management style, are
identified; the external factors not within the control
of management, such as inflation, the economy
and interest rates, are also recognized.
BUDGETING IN PRACTICE

 A Sport Business Budget Procedure.

3. The next step, budgeting expenses,
includes both fixed expenses (e.g. utilities
and rent) and variable or uncontrolled
expenses (e.g. payroll).
 BUDGETING IN PRACTICE
 A Sport Business Budget Procedure.
4. Finally, compute the result of revenue
minus expenses.
 Rather than profit, this should be considered the
capital budget to accommodate equipment or
facility improvements or expansion, or to improve
services.
 (As in all types of operations) The day the new
budget is put into service, an evaluation program
should automatically swing into place.
FINANCING: Sport Organizations in Schools
 “Operation financing will typically be from
municipal, district or state funds
augmented by fees, and to a lesser extent
by sales.”
 Higher education athletics also obtain funding
from student fees, donations, media
payments, sponsorships, and gate receipts.
 Alternative sources of funding are private
investors.
THANK YOU