Razorback Foundation sees drop in donations

Arkansas fans cheer before taking on Alabama Saturday, Oct. 6, 2018, at Razorback Stadium in Fayetteville. Visit nwadg.com/photos to see more photographs from the game.

FAYETTEVILLE -- Contributions to the nonprofit organization supporting athletics at the University of Arkansas, Fayetteville totaled $28.1 million in the 12-month period ending June 30, 2018, a decrease in giving of about $8.4 million compared with the previous fiscal year.

The decrease marked the second consecutive year of declining donations to the Razorback Foundation, based on the organization's annual 990 IRS return dated May 14.

The foundation provides financial support for UA student-athlete scholarships, building and renovation projects and other athletics-related programming.

The 990 document lists information related to the foundation's obligation to pay Bret Bielema after his firing as head football coach in November 2017. The 990 return lists an $11.6 million "guaranty payment" liability and a $9.3 million "guaranty payment payable" as a liability as of June 30, 2018.

The difference between those numbers, $2.3 million, was what the foundation paid in that 12-month period because of its obligation to Bielema, foundation officials confirmed, but they declined to say what payments have been made since that date.

Giving for the Razorbacks
Giving for the Razorbacks

For UA athletics, contributions from donors made up about 18% of the $130.1 million in operating revenue over the time period covered in the IRS return, according a report submitted by the university to the NCAA. The report to the NCAA listed $23.3 million in contributions provided and used in fiscal 2018.

Questions about declining contributions to foundation Executive Director Scott Varady were answered in a statement released by Kassidie Blackstock, director of strategic communications and stewardship for the foundation.

The statement cited the foundation's recent support for the approximately $160 million expansion and renovation of Donald W. Reynolds Razorback Stadium, which was completed in the fall.

The foundation "in fact, raised more than $44 million for this initiative over a period of time, including the time frame covered by the 990," exceeding a goal to raise $40 million, the statement said.

"The reference to a 'decline' in the question [submitted by the Democrat-Gazette] is misleading given that the Razorback Foundation's stadium campaign goal is more accurately measured over the time period established to achieve the goal rather than a single tax year. Additionally, the timing of gifts impacts tax reporting as well. Thus, in context, the Razorback Foundation worked to complete and exceeded its fundraising goal during the fiscal year covered by the 990," the statement said.

The $28.1 million in contributions and grants to the Razorback Foundation decreased from $36.5 million a year earlier and from $48.9 million the year before that. The $28.1 million contributions and grants total was the foundation's lowest since it reported $27.9 million in gifts for the 12-month period ending June 30, 2014.

The foundation reported $28.9 million in total revenue and $52.4 million in total expenses for the year. The expense total included $34.4 million in money paid in support of UA athletics, according to the IRS return.

Including end-of-year liabilities, the foundation reported net assets of $56.2 million as of June 30, 2018, down from $79 million reported a year earlier.

Kevin Trainor, a UA spokesman, said in an email that the university's Athletics Department "remains one of less than 20 financially self-supporting programs in the nation," in part because of "loyal support" from members of the Razorback Foundation.

"The continued success of private donations through the Razorback Foundation and generated revenues have enabled Razorback Athletics to enhance the experience for more than 465 student-athletes while also providing the financial resources for more than $300 million of capital projects in the past eight years," Trainor said, calling UA athletics "fiscally strong."

Beginning in 2018, federal tax law changes affected giving in support of collegiate athletics. Donors no longer are allowed to take an 80% tax deduction on gifts made for the right to purchase tickets or seating.

Yong Jae Ko, a professor at the University of Florida, has studied what motivates donors to athletic programs.

"Big donors, the biggest motive for them is to develop relationships -- so, socialization and affiliation to the prestigious group. That is the biggest motive they have," Ko said, adding that big donors can be thought of as those giving $10,000 or more.

But "small donors, they are much more interested in the tangible benefits, including the tax-related benefits, parking, season tickets, et cetera," Ko said. He said he did not have any data showing whether giving to collegiate athletics has decreased since the tax changes took effect.

The Razorback Foundation links donors' giving to their access to tickets and parking. Donors accrue what are called "priority points" based mostly on giving amounts and consecutive years of giving.

Ko said winning games influences donors, but so does whether or not an athletic department is transparent and keeps its promises, as well as if it partners with community organizations seen as doing good work.

For donors big or small, "the key is whether they feel proud of what the athletic department is doing, on field and off field," Ko said.

The IRS 990 return listed an $11.6 million "guaranty payment" liability that counted against the foundation's revenue.

In a statement, the foundation said the $11.6 million is "not an amount actually 'paid.'" Blackstock said in an email that accounting principles followed by the foundation require that "you recognized the FULL expense when it is 'earned.'"

Asked what the amount was for, the foundation's statement referred to the $9.3 million end-of-year liability.

"To further clarify, the $9.3 million "guaranty payment payable" is related to the termination of Coach Bret Bielema. As of June 30, this amount represented the portion of the $11.6 million that remained outstanding (unpaid) as of June 30, 2018," Blackstock said in an email.

In January 2018, the foundation announced that it had agreed to pay Bielema up to $11.9 million. The statement released by Blackstock said the $11.6 million figure "represents the net present value of the guaranty liability."

Compensation by the Razorback Foundation should he be fired was part of Bielema's contract with the university, though the post-employment pay amount was negotiated as part of a new agreement dated January 2018.

The agreement specified that payments would be mitigated by Bielema's earnings should he find employment elsewhere.

In July 2018, ESPN reported that Bielema had been hired as a consultant to the head coach of the NFL's New England Patriots. In an interview earlier this month with reporters covering the Patriots, Bielema, according to various reports, described himself as taking on a new role as an assistant coach.

The foundation "is in communication with Coach Bret Bielema's representatives regarding our agreement" and is "enforcing its agreement," according to a statement from Blackstock.

In November 2017, the university also fired Athletic Director Jeff Long.

In July, the University of Kansas announced that it had hired Long to be its athletic director. At that time, Trainor told WholeHogSports.com, a sister site of the Democrat-Gazette, that Long was being paid $83,333.33 per month by the university and that "the monthly severance payments from the University of Arkansas would be fully mitigated beginning Aug. 1, 2018." Trainor confirmed in an email that the university, rather than the Razorback Foundation, made the post-employment payments to Long.

The IRS 990 lists "deferred compensation" payments to Long and Bielema made during the 2017 calendar year, but the foundation said these payments were not made as part of post-employment compensation.

Bielema received $416,667 in deferred compensation; Long received $250,000. Money was also paid to entities associated with coaches of the university's baseball and men's basketball teams during 2017.

The IRS 990 lists a $250,000 payment for speaking engagements to Van Horn Enterprises. UA's head baseball coach is Dave Van Horn.

The document lists a $200,000 payment to Mi-Mar Family Enterprises, LLC, which is associated with Mike Anderson, UA's head men's basketball coach during the 2017 calendar year. Anderson was fired in March.

The Razorback Foundation also paid $367,656 to New York-based CSL, LLC for "project development" services. The foundation's statement referred to CSL, LLC as having "a consultant role during the planning, design, and construction" of Razorback Stadium. The services included representing UA's athletic department "in review of project budgets, schedule, contracts, fees, designs, scopes of work, progress building, and payment requests."

The IRS 990 return also lists compensation for Razorback Foundation leaders. Varady, who also serves as general counsel for the foundation, in calendar year 2017 was paid $251,731 in "reportable compensation" of the kind included on W-2 forms required of employers by the IRS, up from $236,848 in "reportable compensation" as reported in the previous year's 990 return.

In 2017, Varady also was paid $25,920 in additional compensation, according to the 990 document. The previous calendar year, he was paid $26,108 in other compensation.

Varady was hired in 2015, replacing Sean Rochelle, who in 2014 was paid $173,987 in "reportable compensation" and $28,414 in other compensation.

The 12-person Razorback Foundation board of directors has an executive committee that sets the compensation for Varady and other salaries, Rick Massey, chairman of the board, said in a statement.

Salaries are set "in a competitive range with other similar athletic fundraising organizations" and in line with duties and responsibilities, Massey said. Varady "performs an expanded role as legal counsel that was not previously included as part of the functions of the that position.

Metro on 05/29/2019