department has lost
millions since 02
Athletic director Herman Frazier
sees a recovery by 2006
The University of Hawaii athletic department is preparing to embark on a five-year financial plan in response to an auditor's report stating that the department operated at a $2.5 million deficit in the 2002-03 fiscal year.
The audit was presented to the school's Board of Regents yesterday by Jim Hasselman, of PricewaterhouseCoopers. He reported that the department's financial standing had "deteriorated significantly."
According to the report, the department spent $19.7 million in the 2002-03 fiscal year while bringing in $17.2 million in revenue. The report goes on to say the losses were accelerated by an increase in overall expenses for women's sports while profits generated by men's sports fell.
UH athletic director Herman Frazier said the department operated at a deficit again in the 2004 fiscal year, estimated at $1.4 million, and has restructured its budget to address the deficit.
He introduced a five-year recovery plan at yesterday's meeting. He will brief the board again next month and formally present the plan in the fall.
"We've been (addressing the financial issues) from day one when we walked in," Frazier said. "You didn't have to be a rocket scientist to see where the expenses were and where the revenue was, and we knew we had to generate additional revenue.
"(The board) was supportive of the preview of the plan they heard today."
The plan calls for the department to operate in the black for the 2005 fiscal year and climb out of the deficit by 2006 in part by reducing sports budgets by 4 percent and increasing revenue through premium seat donations, football ticket sales, increased fund-raising efforts and through television and radio contracts.
It also calls for the football program to play nonconference road games, which will bring in large guarantees from the host schools.
Frazier joined the university in August 2002, after the budget for the year ahead had already been set.
"We're not pointing fingers," Frazier said. "All we're saying is the issue is now not how we got here, but how do we get it fixed."
The athletic department's operating expenses were $19.7 million in 2003 compared with $17 million in 2002. Frazier projects expenses to top $18.4 million for the 2004 fiscal year.
He said the department is placing next year's expense budget at $18 million and said more than $321,000 can be cut from its expenses with the 4 percent reductions. He also pointed out that travel costs will drop by approximately $200,000 with the football team playing two fewer road games this season.
The expense figures include repayment of a $1 million loan the athletic department received from the university in 2002. A $200,000 payment is due at the end of the month, and payments of $400,000 are due the next two years.
The plan relies on fans to provide much of the increase in revenue, calling for premium seat donations in football to increase from $794,000 in 2004 to $1.4 million in 2005. The figure is projected to rise to $3.2 million by 2008.
Premium seat donations range from $30 to $300 for the upcoming football season.
It also calls for revenue from television and pay-per-view to progressively increase from $1.3 million in 2004 to $2 million in 2009.
According to the report, men's sports generated profits of $1.3 million in the 2002 fiscal year but ran at a deficit of $37,000 in 2003 as expenses for all seven men's sports increased. Expenses for women's sports rose by $183,612 in 2003.
Football actually performed better at the gate in 2003 than it did in 2002 and generated more than $174,000 in additional revenue. But its expenses increased by more than $850,000.
"When football suffers everybody suffers," Hasselman said.
The auditor added that the financial reporting of the department needed to be improved to better track where the department is losing money.
Regent Jim Haynes likened the situation to attending a sporting event, saying, "You look up at the scoreboard, you don't see the score, you don't know how you're doing."
The department is currently operating without a fiscal officer. Frazier said the position of business manager is being upgraded, and he is waiting for a job description to be completed by the university before posting the position.
Star-Bulletin reporter Craig Gima contributed to this story.