NCAA Reporting: The Latest on Losses and Leases

Two emerging developments in NCAA financial reporting could likely impact athletic programs’ fiscal year 2022 FRS submissions. It also means these reports have more opportunities to not be apples-to-apples.

James Moore regularly obtains clarity from the NCAA on our clients’ behalf when questions arise about NCAA financial reporting requirements. Here is what we learned about these new developments.

Endowment/Investment Losses

The NCAA guide mentions that Category 17 should only include investment/endowment earnings up to the amount used for athletics operations. Due to poor market conditions during fiscal year 2022, several schools had initially been reporting a loss in Category 17.

For example, a department generated contribution revenues of $1,000,000 and put those funds into short term investments. A few months later, it withdrew the funds to cover expenses at a value of $900,000. The question was regarding how that $100,000 loss would have been reported. Because NCAA guidance was clear that if they had instead gained the $100,000 the following would have occurred:

• $1,000,000 would have been reported as contributions
• $100,000 would have been reported as investment earnings
• $1,100,000 would be reported to the appropriate expense categories

The NCAA accountant’s response was, “Institutions should only be reporting contributions (#8) and investments (#17) used. So, institutions should never report investment losses. So, in the example of receiving $1,000,000 and investing it:

• If investment value drops to $900,000, report $900,000 in Category 8.
• If investments increase to $1,100,000 before drawn, report $1,000,000 in Category 8 and $100,000 in Category 17.”

The NCAA accountant went on to clarify, “Category 17 is to report income used for operations, not realized or unrealized gains and losses. If an institution received a permanently restricted contribution, then the earnings would only be reported in Category 17, because the principal would never be spent.”

Lease Accounting

There have been and will be changes to how entities account for leases as new accounting standards for leases go into effect. Depending on whether a university follows governmental accounting standards (GASB) or financial accounting standards (FASB), the rules for timing and method of implementation differ. Universities under GASB implemented the new lease standards during fiscal year 2022, while those under FASB will do so during fiscal year 2023.

With many schools having to implement GASB 87 and capitalize leases during fiscal year 2022, we were seeing a shift of rent expense to amortization expense. The NCAA guidance indicates that depreciation and amortization should not be reflected in the NCAA financial reporting. So we asked whether the impact of GASB 87 could be ignored and the lease payments be considered Category 34 expenses instead of being excluded as amortization. We also inquired about whether the capitalization of right-to-use assets should be included in Category 56 in the year the lease commencement (even though the cash outlay for Category 34 wouldn’t happen until a future date).

The NCAA accountant’s response was, “Principal and interest lease payments should be reported in Category 34. Depreciation and amortization expenses are not reported. If there are no cash payments on the lease, then nothing would be reported in Category 34. The balance of those leases is reported in Category 52. Assets purchased that will be depreciated over time are reported in Category 56.”

The James Moore Collegiate Athletics team is here to answer your questions. Contact us to further discuss investment losses, lease accounting or other unique aspects of your NCAA financial reports.

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