Athletic deficits ran deep before 2002

A report conducted under former Athletics Director Michael McNeely shows the athletics department operated under deficits from 1998 to 2001 and lacked the adequate financial controls that might have prevented those losses. \nSeparate reports filed by the athletics department with the NCAA, and required under federal law, claim the department's budgets were in the positive during those years.\nFor the fiscal year ending June 30, 1999, the department reported to the NCAA on its Equity in Athletics Disclosure Act it had a $40,000 surplus. For fiscal year 2000, the department claimed it was $1.6 million in the positive, and in fiscal year 2001, it reported revenues of $.7 million. \nThese reports are available online, and every college and university in the nation is required to file them annually.\nIn 2002, IU officials announced an athletics deficit for that fiscal year of $3.2 million. Officials claimed then it was the first year in the history of IU that athletics was in the negative. \nHowever, an internal audit, presented to former IU President Myles Brand and Vice President for Administration J. Terry Clapacs April 25, 2002, paints a completely different picture of the department's finances.\nThe departmental review -- conducted during the transition between Clarence Doninger and McNeely -- shows athletics actually ran deficits of $1 million in 1998, $3.1 million in 1999, $.6 million in 2000 and $1.9 million in 2001. \nThe audit cites many examples of where the department's own business structures and policies went wrong and criticizes handling of the Varsity Club, catering to football games, personnel, season ticket holders and the ticket priority policy. \nThe business failures identified in the report include:\n• A conflict of interest existing between a female senior Varsity Club employee and a company owned in part by her spouse that over six years handled the Football Marketing Campaign worth more than $1 million. The report said the conflict was not disclosed as required.\n• Catering at football games worth $750,000 that was paid to one caterer over 6 years without a written contract.\n• Day-to-day expenses of the Varsity Club that were inappropriately paid through an IU Foundation account when they should have been paid through a University account. \n• A lack of proper controls in place at the Varsity Club to monitor donations and annual memberships that could have controlled for lost, misdirected or undetected money.\n• Performance feedback for employees, as required by IU personnel policy 2.2, that was not conducted and background checks on employees that were not carried out. The report said the $2,300 in basketball ticket money stolen by an employee in October 2001 could have been prevented by such checks. \nThe audit made a total of 40 recommendations on how the financial structure of the athletics department could have been improved.\nClapacs could not be reached for comment at press time.\nThe department is currently seeking approval from the IU board of trustees to charge IU students a $30 fee next year. It would be one of the first student fees for athletics among NCAA division 1-A public schools. \nClapacs has said the department's declining revenues are caused by poor performance of the IU football team, and it needs the $30 fee to bail out the budget.\nThe Equity in Athletics Disclosure report filed for fiscal year 2003 shows a current deficit of $1.8 million. \nMcNeely resigned Nov. 8, 2002, six months after the internal audit's completion. Clapacs then took over as interim director.\nThe fee will be voted upon at Friday's board of trustees meeting in New Albany, Ind, along with a 4 percent tuition increase.