BUDGETING CRISIS AT LITTLE STATE UNIVERSITY

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A Budgeting Crisis at Little State University Name Sport Administration- Dr. Mathner Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 2 Summary This case study is about Little State University (LSU) and it’s pending budget crisis. LSU is a university that has an enrollment of 16,000 students. They have a male to female student ratio of 1:1 and are primarily focused on undergraduate education while maintaining some graduate level programs. LSU competes in National College Athletic Association (NCAA) Division I Football Championship Series (FCS) athletics. There are currently twenty sports sponsored by LSU, which are organized into sixteen sports programs. This is due to the men and women’s track and field programs being the consolidation of six sports. In terms of scholarship athletes, LSU gives awards to the maximum allowed by FCS rules, sixty-three. They do not give out high amounts of awards past this, but do maintain NCAA compliance through Bylaw 20.9.3.2 of the NCAA Division I rulebook (NCAA, 2016). Problem Overview The primary problem for LSU stems from the mandatory cut of $800,000, which makes up ten percent of their entire budget. This budget reduction raises the problem of having to potentially cut salaries, building projects, and possibly even entire sports programs. These decisions are paramount to LSU’s athletic departments because they will not only affect students-athletes, but coaches and administrative staff as well. Along with the primary problem, the athletic department must find solutions to two secondary problems. The first secondary issues is to decide which of the six proposed capital projects are necessary for the safety and well being of the athletes, fans, and coaches. The next secondary issue is the challenge to uphold the mission statement of the athletic departments which is, “to compete successfully in athletics on a conference, regional, and national level, to educate and graduate it student-athletes, and to exemplify integrity, character, and diversity both on and off the field of play.’ Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 3 Information Gathering To accurately understand industry norms and have the ability to compare LSU to other similar universities, the Equity of Athletics Disclosure Act (EADA) financial reports will be used. These reports are publically available through the U.S. Department of Education’s website and are important to the decision making process because they help show if the potential solutions are realistic when compared to universities of similar size and competitive level. In order to determine financial information for the department, LSU’s Athletic Department Budget spreadsheet that was attached to the case study will be implemented. This spreadsheet shows the financial information for LSU such as coach and administrator salaries, capital project expenses, and operation expenses for the athletic department. This will aide the process of morphing LSU’s budget into a more sustainable and realistic financial report. The NCAA Division I rulebook will be used as well when deciding what should be cut from the budget. This rulebook can be found by the public online through the NCAA website or through the NCAA’s applications section with proper clearance. The primary usage of this rulebook will be to make sure LSU maintains NCAA compliance when making decisions on cutting programs or scholarships. Factors In order to properly handle the budget crisis, there are certain factors that must be taken into consideration. Remaining compliant with Title IX is a crucial factor to take into consideration. Title IX extended the principles of the 14th Amendment to all schools, public and private, that rely on federal and state funds. Title IX states, “No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance” Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 4 (American Civil Liberties Union, 2016). It consists of three prongs, which prove that an institution is compliant. These prongs hold institutions accountable for providing equal athletic opportunities to male and female students. The first prong of Title IX is proportionality. This means the institution must provide athletic opportunities that are proportionate to the undergraduate enrollment, with a five percent grace period. The second prong states the institution must demonstrate a continual expansion of athletic opportunities for the underrepresented sex. The third and final prong says the institution must fully accommodate the interests and abilities of the underrepresented sex (American Civil Liberties Union, 2016). Title IX would also play a factor in remaining Division I. According to bylaw 20.9.3.2 of the NCAA Division I rulebook, in order to be considered Division I FCS, the institution must have 14 sports programs, at least seven of which must be all female and seven that must be comprised of all male or mixed gender teams (NCAA, 2016). Although eliminating an entire program is not an ideal situation, it must at least be considered to meet the new budget; however, we must make sure the number of men’s to women’s participation opportunities remain proportional. It is important to factor in the efficiency and success of the athletic department as a whole. With this major cut, it is vital to take into consideration the success of each individual team and coaching staff. If entire programs must be cut, it should be a program that does not benefit the institution as a whole. In order to determine this, the athletic department would take into consideration the winning percentage, revenue generation, and the involvement and popularity of the team within the community. When it comes to coaches and staff, individual salaries and success within their program must be evaluated. The aesthetics of the facilities are Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 5 also important for the well being of the students and fans. This must factor this into our decision making for the six capital projects that have been proposed. With that being said, efficiency goes beyond the playing field. Throughout the study we became aware that two positions were open and could either be filled or left vacant. One of the positions was within compliance and the other was a communication director (McEvoy). This is a major factor when making decisions because it is important to make sure each administrative position is covered efficiently. Although it might be possible for those positions to remain vacant, it could potentially become a problem by overwhelming one individual instead of having those extra hands to accomplish what needs to be done to the best of their ability. As an athletic department, LSU needs these jobs to be done thoroughly. With the possibility of eliminating entire sports programs, we must also take into consideration how this would personally and professionally affect the student athletes and coaching staffs. With the loss of an athletic program it forces the student athletes to choose between remaining at LSU or transferring to another university in order to continue participating in that sport. Eliminating programs would also result in the entire coaching staffs facing unemployment. Situation Analysis One of the major strengths of LSU’s athletic department is the success and revenue generation of the men’s basketball program. This program alone brings in $1,014,000 in revenue. The net profit of this team is ($60,100) which is the highest of every other team at LSU. This team also gets more televised recognition than any other sport on campus, including football. The addition of televised games creates more recognition for the team and athletic department as a whole, while also creating new recruiting opportunities for student-athletes who may have not Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 6 previously been aware of the program. Another strength for LSU is the large student population of 16,000. With this large number of students, the awareness and support for the university and its athletic programs is increased. It also benefits the athletic department due to a portion of student fees being allocated into the athletic budget. The major weakness of LSU is the miniscule budget it is allotted for athletics. According to the EADA schools similar in size to LSU have a budget of approximately $14-$17 million. This clearly affects the competitive nature of the programs that LSU can produce. This low budget makes it significantly harder to invest in new players, coaches, and facility upgrades, which in turn makes it more difficult for the programs to improve. A major opportunity that presents itself to the LSU athletic department comes from potential Football Bowl Subdivision (FBS) schools providing scheduling opportunities for the football team. These competition dates are very beneficial for multiple reasons. Competitions such as this bring more attention to smaller universities like LSU by broadcasting the games on larger television networks and radio stations. These larger universities will also pay a substantial amount to LSU in order to play them, which would be considered revenue towards the athletic department. Some external threats that LSU could possibly face would involve the other teams within their conference and geographic region. These other programs would increase competition on and off the playing field. Television broadcasting, recruiting, and on field success can all be affected negatively if other programs within the conference are improving and LSU remains the same. As stated previously it is harder to grow and improve with such a small budget, which makes it more of a threat for LSU to fall behind par of the other universities. Solution Scenarios Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 7 In order to properly meet the new budget, while considering each important factor, certain cuts must be made. To begin, the salary of the administrative Graduate Assistants and Intern will be cut by 25 percent, which initially will cut $33,604. The vacant position of communications coordinator will remain vacant, which leaves an extra $29,000 in the budget. The responsibilities of this position will then be split between other administrative positions. Next, only two of the six capital projects will be put into action. The two projects are considered imperative because they involve the safety and well-being of the athletes, coaches, and fans. The first project will be fixing the leaky roof on the arena, which will cost $47,000. The second project will be re-seeding the softball field because it is currently in poor condition, which will cost $19,000. By choosing these two projects it will initially cut $252,000 in the budget. Another large cut that will be made will be cutting three percent of every sport programs overall expense budget. Three percent was chosen in order to maintain equality throughout every program. Each head coach will be responsible for allocating the funds within their budget. Unfortunately, the largest cuts that must be made are two entire programs. In order to remain compliant with Title IX, the Men’s swimming program and Men’s golf program must be cut, which would initially cut $286,950. These programs were chosen in order to lower the disparity of participation opportunities that are allocated to females versus males from 6.28 percent to 5.14 percent. Also, this keeps LSU’s athletic scholarship program in compliance with the NCAA through bylaw 20.9.3.2, which says that there must be 50 total scholarships given out to athletes that do not participate in football and men’s and women’s basketball. Twenty-five of these scholarships must be given to women athletes (NCAA, 2016). In total, this will equal $800,090.50 in cuts. There are certain pros and cons that come along with the new budget changes. Luckily, the two must crucial capital projects will still be completed which will benefit the overall Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 8 campus. Along with this, administrative salaries were not affected, which eliminates the risk of losing employees. Unfortunately, 33 student athletes will have to make the decision to remain at LSU without their sport, or transfer to another University. Also, not completing the recruiting based capital projects could negatively affect recruiting in the long run. Another possible solution for handling the new budget involves making cuts from other areas of the athletic department. To begin, administrative salaries will be cut by three percent, which results in a savings of $30,150. By doing this, there will be enough money in the budget to tackle three of the six capital projects. The two projects mentioned in scenario one will be completed, along with resurfacing the arena and stadium parking lots. Completing only three of the six projects will cut $222,000. Next, the men’s tennis coach will be cut and the men and women’s programs will now share a head coach, cutting $34,000 in the budget. This will be possible due to the fact the program is already designated a graduate assistant so the responsibility will not fall on one person. Also, both teams travel together, which makes it possible for one person to take on both roles. Two scholarships will also be cut. Both of these cuts will be from football, with a total number of scholarship players now equaling 61. The total amount of money that this action will cut is $36,000. This will not put LSU within the five-point margin for Title IX, but will lessen the margin from 6.28 to 6.05 which is a move in the right direction for the program. The next move that will be made is to cut sports that generate revenue overall budgets by five percent and the sports that do not generate revenue by seven percent. The five percent cut would result in eliminating $238,385 from the budget and the seven percent cut would result in cutting $143,440. These percentages were chosen in order to prevent entire programs from being cut. The Graduate Assistant salary will be cut by 25% and will cut $36,604. The intern salary will then be cut by 25%, and will cut $2,500. The cuts will make the GA and Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 9 intern salary line up with those of other similar universities. The two vacant positions, compliance and communications coordinator will remain open, which will cut $61,000. The responsibilities of each position will be divided among other administrative positions. In total, this will save $800,579. There are pros and cons to this scenario as well. On a positive note, no entire sports programs were cut. No student athletes will be forced to make the decision to stay at LSU or transfer and no coached would face unemployment. Also, a third capital project will be completed, on top of the original two that are imperative. Unfortunately, with the vacant positions being left open, the responsibility must be divided among other individuals in administrative positions. The final scenario for dealing with the new budget is compiled of choices within the first and second scenarios. Administrative salaries will be cut by three percent and would cut $31,020. The two imperative capital projects (softball field and leaky roof) will be completed, but the other four possible projects will not be completed. This will initially cut $252,000. The five revenue-generating sports overall budget will be reduced by five percent, cutting $238,385. The non revenue-generating sports will be cut by seven percent, which will save $132,475. Lastly, the men’s swimming program will be cut, leaving an extra $156,900. In total this solution would cut $809,892 in the budget. A major pro of this solution is the extra $9,000 on top of the original $800,000, which could act as a safety blanket if error occurred. Another positive aspect of this solution would be filling both vacant positions (compliance coordinator and communications coordinator). The major disadvantage of this scenario is the loss of an entire sports program and the student athletes that will face a decision of staying at LSU or transferring. Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 10 Recommended Solution The best solution for handling the budget cuts would be the scenario in which $809,892 is cut from the budget (Scenario 3). With this solution LSU will remain complaint with Title IX, as well as NCAA Division I bylaws. The two most important capital projects will be able to be completed within the new budget, which benefits LSU as a whole and not just the athletic department. The five percent and seven percent cuts that were taken from the overall budget of each athletic program will be at the discretion of the head coach and director of operations for each program. The men’s swimming program will be cut specifically in order to lower the participation disparity of female versus male sports from 6.28 to 5.39, which is in the five-point margin of error. Cutting the administrative salaries by three percent will allow LSU to keep the communications coordinator salary within the budget, which will prevent the responsibilities of this position from being distributed among other positions. Overall, the pros outweigh the cons in this scenario, which will benefit the university as a whole. Running Head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY 11 References American Civil Liberties Union. (2016). Know Your Rights: Title IX and Sexual Assault. Retrieved March 08, 2016, from https://www.aclu.org/know-your-rights/title-ix-andsexual-assault McEvoy, Chad D., & Gray, Dianna P. A Budgeting Crisis at Little State University. Case Studies in Sport Management, 1(3), 1-8. National Collegiate Athletic Association. (2016). NCAA Division I manual. Overland Park, KS: NCAA
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Running head: A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY

A Budgeting Crisis at Little State University
Student’s Name
Institution Affiliation

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A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY

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Summary
This dissertation explores the issue of pending budget predicament at the Little State
University (LSU). This institute of higher learning has a student population of approximately
16000 where the proportion of males to females is equal, 1:1. The university admits students at
the undergraduate level although there is a small percentage pursuing graduate level courses.
LSU participates in the national college athletics and football leagues each year. Under the
university’s game department, the school has a total of 16 sports programs with approximately
20 accredited sports (McEvoy & Gray, 2012). A large number of sports programs can be
attributed to the numerous field and track events for both men and women. LSU has a
sponsorship program that admits a total of 63 students each year. The institution may wish to
admit more athletes, sports women and men though they can only admit the maximum allowed
number by the FCS. In a nutshell, every institution of higher learning must comply with article
20.9.3.2 NCAA Division rules regarding the issue of admitting students on scholarship (Hovan,
1998).
Problem Overview
The LSU athletics and sports department has experienced a hard time after the school
administration decided to cut their budget by $800000. This amount accounts for approximately
10 percent of the entire annual budget. This has forced the athletics and sports department to
reduce the salaries of sportsmen and women and other stakeholders who rely on the university’s
sporting projects as their source of livelihood. Additionally, the majority of building and
development projects have been halted due to this prevalent issue. The aftermath of this case will
not only affect student-athletes but all stakeholders such as the coaches and the administration.
The budgetary crisis narrows to two secondary problems which the university athletics and

A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY

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sports department need to reconsider. The first one is on whether the six projects which had
already been proposed will be beneficial to the athletes, fans or even the coaches. The second
one focuses on whether the operations of the athletics department are aligned with the
institutional mission of showcasing exemplary performance both in academics and other
curricular activities such as sports and athletics.
Information Gathering
Information regarding how universities should make budgetary allocations for use in the
athletics and sports department can be obtained in the Equity in Athletics Disclosure Act
(EADA) financial reports. These reports will help in comparing LSU with other institutions of
higher learning. All this information is accessible through the US Department of Education
website, and it is crucial in validating the decisions by the LSU to cut the budgetary allocation
for the athletics and sports department. Additionally, information gathered can also be used to
compare how other institutions in the same category of LSU allocate, use and deal with issues of
budgetary crisis.
A financial spreadsheet regarding how the LSU sports and athletics department have used
and are planning has to accompany this case study. The financial spreadsheet should contain
information on how much the coach and other administrative stakeholders are paid, the budget of
proposed projects and the regular operations expenses incurred daily. The bottom line is
consolidating the LSU sports and athletics department budget with the sole intention of
developing more realistic and sustainable financial services.
Majority of universities ignore to consult the NCAA Division 1 rulebook whenever
making decisions on how much they can deduct from the sports and athletics department kitty

A BUDGETING CRISIS AT LITTLE STATE UNIVERSITY

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each year (Hovan, 1998). However, the rulebook above can either be accessed from the NCAA
website under the section o...


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