Big-Time Sports Pose Increasing Risks for Universities, Moody’s Says

Success in big-time college sports can increase universities’ visibility and improve their brands, but a heightened focus on athletics also presents increasing financial and reputational risks, Moody’s Investors Service said in a report released on Friday.

The credit-rating agency’s report examined the implications of athletics programs at NCAA Division I institutions. It found that athletics budgets have increased rapidly relative to other expenses: On an average basis, the report said, athletics expenses have nearly doubled since 2004, compared with a 58-percent increase in total expenses.

The report also said that 90 percent of athletics programs were not self-sustaining and required subsidies, which grew by a median of 25 percent from the 2008 to the 2012 fiscal year.

Moody’s also warned that the long-term costs of athletics programs were uncertain, given growing concerns about head injuries and unresolved, high-profile litigation that is challenging the NCAA’s system of amateurism.

“As college sports become a greater focus of both universities and the national media, strong governance is required to prevent negative financial and reputational impact,” the report said. “Establishing proper controls and procedures that reflect institutional integrity while laying the groundwork for the university to produce competitive teams remains a difficult, but crucial, objective of a university’s governing policies.”

The full report is available to Moody’s subscribers here.

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