 Montana State University-Bozeman
NCAA Athletics Certification Self-Study 2001-2002 Fiscal Integrity 
Operating Principle
3.1 Financial Practices The Association’s principles include the responsibility of the institution’s chief executive officer for approval of the athletics budget and audit of all athletics expenditures. In fulfilling this principle, the institution shall demonstrate that: Self-Study Items 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 all other sources (i.e., those not under the accounting and financial control of the institution) generating revenue on behalf of the institution's intercollegiate athletics program, including outside foundations. Revenue sources that are under the clear accounting and financial control of MSU-Bozeman are as follows: Revenue Sources
The Montana State University Foundation plays a role in revenue generation that is limited to accepting gifts and providing fundraising support. Donations made to the Foundation on behalf on the Department of Intercollegiate Athletics are recorded as gifts and then subsequently transferred to athletics and deposited into either Designated or Restricted Accounts (e.g., to benefit athletic scholarships), which are under the institution’s accounting and financial control. A list of scholarships is included in Appendix III-A. Monies from the Foundation that flow through the University accounts as reimbursements for expenditures are under the accounting control of the University. The MSU Athletic Scholarship Association (MSU-ASA, or "Bobcat Boosters") maintains fundraising checking accounts for each individual sport; disbursements from these accounts are under the control of the university. The disbursement process is initiated when a head coach completes a disbursement voucher request. The voucher request is subject to the same approval procedures as all other Department of Intercollegiate Athletics expenditures, in that the Athletics Business Office, the Compliance Office, and the Director of Intercollegiate Athletics or an Associate Director of Intercollegiate Athletics must approve them. The ASA records and coaches’ checkbook accounts are included in the MSU/NCAA financial compliance audit. Other revenue sources, not under the clear accounting and financial control of MSU-Bozeman, are as follows: The MSU Athletic Scholarship Association has as its primary mission to provide opportunity for student-athlete excellence by securing funds for athletic scholarships. Monies collected for this purpose are deposited in accounts managed by the Treasurer of the MSU-ASA Board of Directors. The Executive Director approves expenses of the association from these funds. Annually, MSU-ASA provides a payment to the Department of Intercollegiate Athletics to fund scholarships. Other organizations generate funds for specific sports and/or purposes. These funds are maintained in accounts under the MSU-ASA designation but have not been subject to MSU-ASA direction. These organizations include the Quarterback Club, Friends of MSU Track and Field, the Sixth Man Club, and the Fast Break Club and have not been included in the MSU/NCAA financial compliance audits to date. In addition, a small number of fundraising golf tournaments conducted and organized by satellite chapters of MSU-ASA fall into this category, as do contributions from a group of parents of football players. In spring 2002, the Department of Intercollegiate Athletics placed a moratorium on expenditures from funds generated by such activities while procedures were put in place to bring them under the accounting and financial control of the University. To regulate such activity, the Department has now drafted and adopted "Montana State University Athletic Department Booster Organization Operating Guidelines." These guidelines take the form of an agreement to be signed by each booster organization and are attached as Appendix III-B to this report. 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. Preparation of Annual University Operating Budget – General Procedures The current standard budgeting process was adopted in 2001. The framework of the University’s annual operating budget is developed by the University Planning, Budget and Analysis Committee (UPBAC), composed of the Vice Presidents, Deans, and representatives from the faculty, students, professional employees, classified employees, the MSU Foundation, and the community. UPBAC is advisory to the President and is charged with setting priorities, establishing key performance indicators for program evaluation, soliciting budget proposals from departments, and preparing a preliminary budget proposal for discussion with campus and community. The following "General Principles for Resource Allocation Decisions" (posted on the MSU website at http://www.montana.edu/upba/upbacprinciples.html) were adopted by UPBAC in January 2002, as a guide to action:
UPBAC communicates its budget recommendations to the President, who may modify the committee’s actions. Once a basic framework is approved, the budget must be translated into specific allocations to the various operational areas. Each operational area is allocated an amount for salary increases based upon guidelines established by the President with recommendations from UPBAC. All faculty and professional salary increases are reviewed at the University level and then forwarded to the Board of Regents for approval.
The salary increases approved by the Board of Regents are subsequently incorporated as part of the overall budget allocations to the functional areas. These allocations consist of the previous year’s budget base, increments for salary increases, plus or minus specific funding adjustments approved by UPBAC. Budget allocations are made by the Budget Office to the President and Vice Presidents. From that point, the allocations are distributed to Deans and department heads where detailed departmental budgets are prepared. Departmental budgets are returned, by way of the President and Vice Presidents, to the Budget Office, which verifies that budgeted personal services coincide with assigned salaries and that departmental budgets do not exceed allocations.
As part of the budgeting process, UPBAC conducts a series of winter meetings to determine whether actual expenditures are consistent with the assumptions built into the budget plan, and to make adjustments that appear necessary, given anticipated revenue as projected by the Budget Office. These meetings also provide the setting for budget planning for the coming fiscal year(s).
Budget Appropriation and Approval – General Procedures
MSU-Bozeman receives an appropriation from the Montana University System designated by the state legislature to fund a portion of its education and general operations. The appropriation is a lump sum allocation for a two-year period. Expenditure authority for each fiscal year is separately identified and can (but usually does not) transfer between fiscal years.
The Board of Regents is responsible for overall management and control of the campuses, including approval of the University’s annual operating budgets. Current Unrestricted State Funds for athletics is part of the Student Services Program. Budget schedules for Restricted, Designated, Auxiliary, Loan, Endowment and Plant funds receive approval of the Board of Regents. Detailed budgets by individual accounts are submitted to the University Budget Office and any budget amendments by entity are processed to the state through the office of the Commissioner of Higher Education. All intercollegiate athletes’ financial activities under the accounting and financial control of the University, other than state appropriated funds, are accounted for in Designated funds, Restricted funds, or Endowment funds. Procedures within the Department of Intercollegiate Athletics For revenue sources under the institution’s direct control: The management staff (Senior Associate Director of Intercollegiate Athletics, Associate Director of Intercollegiate Athletics/SWA) of the Department of Intercollegiate Athletics, with the Director of Intercollegiate Athletics, meets with each head coach and/or department head to review the prior year’s fiscal results and discuss budget strategy for the upcoming fiscal year. Once these meetings are completed, the Budget/Fiscal manager develops a preliminary budget for each area.
The management staff and Department of Intercollegiate Athletics review the preliminary budget at this time to assess if the sports programs and operations can be adequately funded based on the projections. Adjustments are subsequently made to bring the proposed budget into balance if necessary. The management staff and Director of Intercollegiate Athletics review these preliminary budgets with each head coach and/or department head to address any adjustments that have been made or additional information that has been collected.
A final draft of the budget is completed and incorporated into the University on-line budget process. If revenue shortfalls exist at this point, they must be addressed with written documentation as to how the deficit will be corrected by the end of the fiscal year.
The budget information is then "moved-up" for the next level of approval. At this point, the Department of Intercollegiate Athletics can no longer adjust the budget that will appear in the University budget system.
For revenue sources not under the institution’s direct control: Anticipated MSU Athletic Scholarship Association scholarship donations are presented in the Department of Intercollegiate Athletics’ budget as a single line item in revenues. This amount is determined by interaction with the Treasurer for the Association. The MSU-ASA operates on a calendar year and initiates their annual drive during the spring months. Due to the difference in reporting years, MSU-ASA can provide information for the budget that reflects the actual results of their annual fundraising drive for scholarships.
Funds received from the Quarterback Club, Sixth Man Club, Fast Break Club, and Friends of MSU Track and Field are not included in the Department of Intercollegiate Athletics’ budget unless a special project has been identified and approved by MSU-Bozeman. Examples would be major equipment purchases or facility enhancements.
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.
Every three years, the Internal Auditor at MSU-Bozeman conducts a competitive bid process to select the independent auditor for the institution’s external audit of intercollegiate athletics. Requests for Proposals (RFP’s) are sent to several Montana CPA firms listed on the preapproved bidder list maintained by the Montana Office of the Legislative Auditor. The independence of the auditor is ensured as audit requirements included in the RFP state that procedures will be conducted in accordance with Generally Accepted Auditing Standards as approved and adopted by the American Institute of Certified Public Accountants (AICPA) and the standards approved in the NCAA Financial Audit Guidelines. AICPA standards require auditors who are certified public accountants to be independent of the subjects they audit. The NCAA standards require a qualified auditor who is not a staff member of the institution.
The Internal Auditor and two other evaluators with appropriate background and experience review and evaluate the bids received. The evaluators select the firm whose bid is considered to be the most advantageous to the institution and recommend the selected firm to the MSU-Bozeman President for approval.
The selected audit firm and MSU-Bozeman enter into a three-year annual audit contract. The contract includes standard boilerplate language to meet legal requirements and incorporates the RFP into the contract text. Again, the independence of the auditor is ensured as the contract includes the statement that the accountants are independent public accountants and they will not be requested, nor required, to surrender their independence as such term is professionally understood and used concerning public accountants. The contract further states that the accountants shall at all times be deemed independent contractors and not employees of the University.
Details of the corrective actions recommended in the audits of FY 1999, 2000 and 2001 can be found in the management letters provided in Self Study Item 5 of this Operating Principle (Appendices III-C, III-D, and III-E). The recommendations from FY 1999 and 2000 audits are reported as having been implemented. Actions related to the recommendations made in the FY 2001 audit are as follows:
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). General Procedures within the University For University operations, account management and expenditure control is primarily the responsibility of the individual account managers. As part of the budgeting process, each account manager establishes an expenditure plan for the account. The original budget may be revised up or down throughout the year depending on the funding source and the availability of funds. The accounts are monitored not only by individual managers, but also by the Dean or Director to whom the account manager reports.
The Budget Office is responsible for ensuring that expenditures of state appropriated accounts do not exceed institutional appropriation limits. Expenditures may be processed through the account up to the amount budgeted, although Deans and Directors may allow an individual account to exceed its budget if the total College or Division budget is not exceeded. The Budget Office also monitors all accounts from a central level. When a problem account is identified, efforts are made to work with the Dean or Director to correct the situation. If necessary, the Budget Office may "freeze" an account to prevent additional expenditures from being processed. The University also maintains a policy that if state appropriated expenditures at the Vice Presidential level exceed the authorized budget at the fiscal year end, the budget for the next fiscal year for that operating division will be reduced by the amount of the overrun.
The Office of Grants and Contracts (G&C) is responsible for monitoring the majority of the University’s restricted, non-financial aid accounts. The G&C office staff reviews each claim against G&C funds to ensure that it has been charged to a valid account and has the signature of the correct principal investigator. More importantly, the review attempts to determine that the expense is allowable and consistent with the provision of OMB Circular A-21 and the terms of the grant or contract. In addition, the G&C office has a policy of automatically reviewing any account when it has an uncommitted balance of $500 or less. When an account is on review, the account manager is notified and all subsequent claims are reviewed to minimize expenditure overruns.
The Controller's Office reviews all MSU-Bozeman operational expenditure claims. Procurement invoices are routed through the Purchasing Office for review to ensure compliance with State and University purchasing policies and procedures. Verification by Business Office staff includes proper review of expenditure classification, an authorized signature, proper documentation, and the appropriateness of the expenditure in accordance with various State laws and University policies.
Fee waivers are disbursed according to the policy established by the Board of Regents. An Advisory Fee Waiver Allocation Committee coordinates and monitors the distribution and awarding of fee waivers. The committee consists of the Vice President for Administration and Finance, the Director of the University Budget Office, the Director of Intercollegiate Athletics, the Dean of Graduate Studies, the Director of the Honors Program, the Administrative Assistant for the Music Department, and the Director of Financial Aid Services (Chair). The Committee reviews the annual allocation of fee waivers to various user groups on campus for approval by the University Planning and Budgeting Advisory Committee. During the academic year, the Committee meets to ensure waivers are being utilized appropriately, to identify potential problems, and to recommend changes in allocations. The Director of Financial Aid is authorized to monitor utilization of the waivers on a day-to-day basis and cancel any waiver awarded should it exceed the approved allocation.
All expenditures are subject to audit, which constitutes another control over expenditures. The University maintains its own Internal Audit staff that reports to the President. The Internal Audit staff assists managers by reviewing internal control procedures, performing financial compliance and operations/performance audits, and evaluating the appropriateness of financial activities and systems controls. The University is also subject to management and compliance audits by the State Legislative Auditor on behalf of the Legislature as well as other limited scope audits by federal agencies and public accounting firms.
Procedures Specific to the Department of Intercollegiate Athletics MSU Foundation Accounts: Procedures for expenditures from athletics- related MSU-Foundation accounts differ depending on the type of accounts, i.e. restricted vs unrestricted, and whether the account is for student-athlete scholarships, or for Department of Intercollegiate Athletics operations or projects. Scholarship Accounts: The Foundation furnishes a monthly status report of all accounts held on behalf of the Department of Intercollegiate Athletics. A member of the financial aid staff identifies funds eligible for scholarships and generates a letter to the student-athlete for their acceptance of the "special scholarship". This procedure is used to inform the student-athlete that these scholarship funds will replace those that would have been provided by the Department of Intercollegiate Athletics. Upon acceptance by the student-athlete, a member of the Financial Aid staff initiates a request for funds. These funds are transmitted directly to the Financial Aid office and applied against student-athlete fees.
Non-scholarship Accounts: Funds from these accounts are disbursed on a "cost-reimbursement" basis. Expenditures are generated through the normal Department of Intercollegiate Athletics/University procedures. Documentation that includes copies of invoices and/or contracts along with proof of expenditure by the Director of Intercollegiate Athletics, are submitted for reimbursement via a Montana State University Foundation Disbursement Voucher. The voucher is submitted for approval by the Director of Intercollegiate Athletics, Vice-President for Student Affairs, and the Vice President for Administration and Finance. Subsequent to approval, the information is submitted to the Foundation where procedures ensure that the expenditure is consistent with the intent of the account.
Booster Accounts: Expenditures are initially requested by either the booster groups or head coaches. Requests are in written form and must be approved by the Director of Intercollegiate Athletics as well as reviewed by the Compliance Office. For booster accounts maintained by MSU-ASA, the appropriate coach completes a voucher request form and routed through the Athletics Business Office to verify classification of the expenditure for financial statement purposes. The voucher request is then routed to the compliance office, and finally to the Director of Intercollegiate Athletics for approval.
The following procedure has been recently adopted for booster accounts not maintained by MSU-ASA (Quarterback Club, Sixth Man Club, Friends of MSU Track, Satellite Chapters of MSU-ASA): Either head coaches or the respective governing boards request expenditures for these organizations. Organizations must obtain, at a minimum, verbal approval from the Director of Intercollegiate Athletics for all expenditures. In addition, expenditures in excess of $300 are subject to written approval by the Director of Intercollegiate Athletics. Where appropriate, expenditures will be routed through the Assistant Director of Compliance for additional approval. Each organization is required to submit copies of its bank statements on a monthly basis for overview by the Director of Intercollegiate Athletics
5. Please provide 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.
Management letters are attached from external audits of the years 1998-99, 1999-2000, and 2000-2001 as Appendices III-C, III-D, and III-E. |