In developing a budget for interscholastic or intercollegiate athletics, one of the first decisions that must be made is to decide whether the budget will be operated out of the general fund or as a separate entity.
The school or college usually makes this decision based at least in part on the philosophy of the athletic program. It the athletic program is considered to be an integral part of the educational offerings of the institution, quite often athletics will operate from the general fund.
This approach is sometimes referred to as the “educational model. “If the athletic program is considered to be an ancillary service, it is often operated as a separate entity.
This approach is sometimes referred to as the “business model.” Many collegiate programs operate under a combination approach whereby salaries and some other items are provided for through the general fund, and travel, grants-in-aid, and some other items are budgeted as separate entities.
If athletics operates fiscally as a part of the general fund, all income is deposited into the general fund and all expenditures are taken from that fund. Once the budget is set, the profit or loss aspect, while important, is not usually crucial, at least for that year.
Generally speaking, under this system neither profits nor losses are carried over to the following year. This approach provides considerable security for the administrator in charge but little incentive to generate income.
On the other hand, if the budget is established as a separate entity, athletics must live with income and expenditure estimates. A reserve of contingency account is usually maintained, and the administrator is expected to finish the year “in the black.”
The administrator in charge trades some of the security offered by the general fund approach for additional autonomy and flexibility.
If surplus income is produced, the department is usually permitted to carry it over into the next year or to utilize it for a special project or need. If a loss results, funds must be borrowed to balance the budget, and a change of administrators may result.