The University of North Carolina and Duke University have two of the more developed athletic department endowment programs in the NCAA. The main endowed fund at North Carolina is the Scholarship Endowment Trust, with over \($196\) million in assets. From this principal, 5% (\($9.8\) million) is used to pay annual scholarship costs. The trust is being built through endowed giving and the fund’s investment returns. As mentioned previously, donors may endow a scholarship with a gift of \($500,000,\) payable over a five-year period. The Scholarship Endowment Trust does not fully cover the costs of all of North Carolina’s athletic scholarships. The goal is to raise over \($316\) million for this endowment to cover the \($15.8\) million (which would be 5% of the endowment total) cost of providing approximately 450 scholarships to athletes in 2015. Tuition costs are expected to grow to \($21.1\) million by 2017. North Carolina hopes to fund athletic scholarships fully through this endowment, but with the cost of education rising faster than inflation (North Carolina scholarship costs have doubled over the past 12 years)—and, more important, rising faster than the return rate of the endowment—North Carolina has had to continue to raise money for the fund. In addition to raising funds to offset scholarship costs, North Carolina has begun to create endowments for each of its teams. The funds for the Sport Endowments are invested, providing an annual yield of 5%, which is the same yield provided by the Scholarship Endowment Trust. Sport Endowments provide supplemental income to each team’s individual budget, and the money may be used at the coach’s discretion. Typically, this fund provides monies to enhance recruiting, team travel, and assistant coaches’ salaries. Duke University, through its ASG, the Iron Dukes, responded to North Carolina’s endowment efforts with two major programs. First, Duke created an endowment fund for scholarships. According to the Iron Dukes website, Growing our endowment designated to scholarships is vital to advancing all of our priorities in Duke Athletics, and we invite named scholarship donors to campus each year to meet their student-athletes at our scholarship celebration. With increased endowment support, funds can be otherwise directed to our programs, coaches, recruitment efforts, and facilities. As the cost of Duke tuition continues to rise so does the gap between endowed scholarships and what it would take to become fully endowed. This gap in 2013–2014 academic year totaled \($260\) million. By endowing a scholarship, you can help close this gap and help Duke Athletics to continue building champions. As Duke is a private institution, the cost of providing an athletic scholarship is considerably higher than the cost at North Carolina, a public institution. To endow a full scholarship at Duke requires a gift of \($1\) million. At North Carolina, the amount is \($500,000. A\) second major endowment initiative at Duke was its Basketball Legacy Fund, created in 2000 to fund Duke University men’s basketball perpetually. The fund’s yield is used for player scholarship costs, coaching salaries, and the operating costs of its team. The Legacy Fund was fully endowed in 2012. It pays for the costs of 13 scholarships, 2.5 managers’ scholarships, the head coach’s salary, and salaries of two assistant coaches, an intern, and an academic advisor.
case questions:
1. How are development efforts used to fund athletics at your institution?
2. How do these development activities at your institution compare to North Carolina’s and Duke’s activities?
3. What risks are involved when an athletic department relies on the interest earned from an endowment to fund its program?
4. What are the benefits of using endowments?