The intercollegiate athletics department at Coastal Atlantic University (CAU) has major budgeting issues. For the 2022 fiscal year, the university's Board of Trustees has approved a $20.4 million budget for the department. The budget projects a $1.4 million shortfall. After CAU's president shifted $1.4 million to athletics to cover the shortfall, groups across campus complained loudly about the role of intercollegiate athletics on CAU's campus.

The CAU athletic program competes as an NCAA Division I-FBS team. The school is a member of a mid-major conference and has 16 varsity teams, the minimum number required by the NCAA for competition at the Division I level. The athletic department's budget is relatively small compared to those of other Division I-FBS teams. The team's football budget was in the bottom half of conference budgets in fiscal year 2020. For the 2021 fiscal year, the budget was cut by 5%. The athletic department employs relatively few staff members, but in 2021 ten positions were cut, saving the department $700,000. In fiscal year 2021, the department spent $20.4 million while generating $4.5 million in revenues. After the athletic department's portion of student fees was transferred to the department, it had a $1.9 million deficit. The department has overspent by a total of approximately $8.2 million over the past few fiscal years.

Beyond its athletics department, the university as a whole faces serious budgeting challenges. Due to the impacts of COVID-19, a slowly recovering economy, and declining state support, CAU will have to cut between $11 million and $24 million in fiscal year 2022. For fiscal year 2023, the cuts may grow higher, to as high as $39.5 million. As the university acts to balance its budget, many are questioning the athletic department's deficit spending. One member of CAU's faculty senate stated, "The athletics department drains resources at a time when academics are being threatened by overall cuts at the university." Other faculty members are asking whether operating the athletic department is worth the expense.

Case Questions

1. If you were advising the athletic director at CAU, what budgeting advice would you provide?
2. What budgeting approach should the athletic department use if it intends to balance its budget in the 2022 fiscal year?
3. For an average athletic department, which budgeting method would most likely keep the program from running a deficit? Why?