IRS files list rises, drops in UA gifts

Sports sees gain; academics a dip

FAYETTEVILLE — The foundation supporting athletics at the University of Arkansas, Fayetteville saw a surge in contributions the same year a different foundation that manages academic program donations reported an annual decline of

$12 million, according to IRS returns for the 12-month period that ended June 30.

For the Razorback Foundation Inc., Internal Revenue Service returns reaching back to 2010 show that 2016’s $48.9 million in contributions are the most this decade and up about 25 percent from the previous year’s $39.2 million. The time period covered by the return included a fundraising campaign for adding new suites to an expanded Donald W. Reynolds Razorback Stadium.

Meanwhile, the University of Arkansas Foundation Inc., which manages funds supporting UA and other parts of the UA System, received contributions of $61.1 million in 2016, down about 17 percent from $73.2 million a year earlier. The biggest year-over-year change, however, came with investment income: $682,115 in the most recent fiscal year, down about 99 percent from the previous year’s $44.7 million.

Jonathan Meer, a Texas A&M University associate professor of economics, said that giving to college athletics doesn’t necessarily replace another type of gift, at least based on research he’s done on the topic.

“An uptick in giving to athletics … didn’t crowd out giving to general purpose funds when an alumnus’ own team did particularly well,” said Meer, who has written several scholarly articles looking at alumni

giving, including a paper examining the effect of athletics on giving at a private research university.

Mark Rushing, a UA-Fayetteville spokesman, said in a statement that there was “no connection” between the giving for the two foundations.

“It makes sense that contributions to the Razorback Foundation would have increased during a period in which fundraising efforts were underway for significant capital projects,” Rushing said.

UA-Fayetteville fundraising totals announced last August for the same 12-month period that ended June 30 showed an increase to $131.6 million from $116.5 million the previous year, he said. The figure cited by Rushing consists of cash, giftsin-kind, planned gifts and new pledges.

He said the contributions referred to in the IRS return for the 12-month period that ended June 30 include only cash gifts and cash pledges, leaving out other types of giving counted in UA-Fayetteville’s annual fundraising total.

In general, with data lacking, Meer said “it’s not super easy to be able to say definitively, how does giving to one cause affect giving to others.”

He added that a school’s academics and athletics are very “context specific,” making it tough to generalize.

The Razorback Foundation, whose IRS return is dated May 12 of this year, declined to answer questions about the increase in its contributions.

The estimated $160 million stadium renovation project is mostly being financed by about $115 million in bonds that, according to a bond statement written last year on behalf of the UA System trustees board, requires a total debt service of $166.9 million to be paid over 20 years.

Stadium expansion — described by UA-Fayetteville as the most expensive construction project ever for the campus — is also being paid for in part by a projected $10.2 million annually from “ticket sales and donations,” UA Athletic Director Jeff Long told trustees last year.

Last June, Long also cited “signed commitments” for “over 20 million of capital investments in this project for new suites in the stadium.” In the same meeting, Long emphasized the financial strength of the university’s athletic program and UA Chancellor Joe Steinmetz said the department is “self-sufficient.”

Stadium capacity will be increased to about 76,000 from 72,000, with an emphasis on adding premium seating and suites.

Founders Suites will have “the highest level finishes,” Long wrote in UA documents. In a January 2016 letter to trustees, Long said the Founders Suites would include “$3M+ commitments” over five years to secure a suite for a 10-year period.

The Razorback Foundation declined to answer questions about contributions for Founders Suites. University spokesman Kevin Trainor said in an email that six Founders Suites are planned for the stadium’s east side, each expected to have a capacity of 30. He said the renovation will increase the number of suites to 172 from 134.

Scott Varady, executive director and general counsel of the Razorback Foundation,

last month told WholeHogSports.com, a sister publication of the Democrat-Gazette, that each new suite requires a seven-year commitment and a donation of $3,700 to $4,100 per seat each year. Suites will accommodate between 18 to 30 people, WholeHogSports.com reported.

The Razorback Foundation is designated by the IRS as a public charity, meaning donors can generally claim tax deductions for their contributions.

Gilbert M. Gaul, author of Billion-Dollar Ball: A Journey Through the Big-Money Culture of College Football, called it “absurd” that contributions required for seats can be tax deductible “as if I were writing a check to the Red Cross.” The Razorback Foundation in its annual brochure states that “generally” 80 percent of the amount contributed for “priority seating” is tax deductible.

“It’s a quid pro quo. I’m paying you in order to get something in return of value, so the pretense that this is a gift, a voluntary gift, is nuts,” Gaul said.

Taylor Brown, a yearly donor to the Razorback Foundation, said he and his wife, Joyce, travel from Shreveport, where he works as a certified public account, to attend every Razorback home football game.

His contribution qualifies him as a Broyles-Matthews Gold foundation member, a tier assigned to donors giving between $10,000 and $19,999 yearly.

The larger the donation, the more benefits for the donor, such as parking passes and the ability to purchase more seats, Brown said.

“It does influence it,” Brown

said of the perks for his giving. “But I wouldn’t say that it’s the biggest reason.”

His main reason for giving is to “support the student-athletes,” Brown said.

For the 12-month period that ended June 30, the Razorback Foundation reported making $21.2 million in “payments to and on behalf of the University of Arkansas athletic department for scholarships, facilities, construction, renovation, and operational funding,” down from $28.1 million paid out the previous year.

Expenses, including salaries and other costs, totaled $26.4 million, down from $33.6 million the previous year. Total revenue, including investment income, added up to $49.6 million, up from $40.6 million the previous year.

As of June 30 last year, the foundation reported $74.4 million in net assets, up from $52.1 million a year earlier.

In contrast, assets are far greater for the University of Arkansas Foundation, described on its website as “the primary avenue of giving to support academic programs and campuses of the University of Arkansas system.”

The University of Arkansas Foundation in its IRS return signed April 24 of this year reported net assets of $890.2 million, down from $901.9 million a year earlier. It handles many endowed funds, making investments while paying out approximately 5 percent yearly, including 4.4 percent to 4.5 percent for “academic and programmatic spending” as well as 0.5 percent to 0.6 percent for overhead costs, according to the foundation’s website.

“Primary consideration” is given “to providing stable funding to the University while being mindful of preserving the endowment value,” the foundation’s website states. It manages funds for what’s collectively considered the UA-Fayetteville campus endowment, but also other funds supporting different parts of the UA System.

Months ago, a survey of campus endowments revealed a nose-dive in investment income, at least as it relates to the UA-Fayetteville endowment listed in the survey as $898.9 million.

The survey, by the National Association of College and University Business Officers and the Commonfund Institute, showed other schools also reporting yearly investment losses, despite the S&P 500, an American stock market index, increasing by 1.73 percent for the 12-month period ending June 30.

UA reported a negative 2.1 percent net annualized return, but Rushing said the figure reported in the survey was preliminary, with the net annualized loss actually 1.5 percent. A report released with the survey in January found that endowments of similar size to UA’s, from $501 million to $1 billion, averaged a negative 2.2 percent return.

The documents submitted to the IRS showed that the foundation’s five highest-paid independent contractors received $4.6 million for investment management services, including $2.8 million to Boston-based Cambridge Associates, LLC.

For the 12-month period that ended June 30, University of Arkansas Foundation total revenue was $61.8 million, down from $117.9 million the previous year. Total expenses were $73.8 million, including $66.4 million in grants and similar amounts paid.

Spending increased compared with the previous year, when the foundation reported $62 million in total expenses, including $54.5 million in grants and similar amounts paid.

“Because of year to year fluctuations, the Foundation applies its 5% spending to a three-year moving average of endowment values in order to

provide consistent funding every year. Even though investment return for FY16 was negative, the annualized average over the three-years trailing from June 30, 2016 was positive (+6.0%),” Rushing said in an email.

The return shows a $29.4 million cash grant paid to UA-Fayetteville and $15.6 million paid to the University of Arkansas for Medical Sciences, Little Rock. Another $10.5 million was paid to the UAMS Winthrop P. Rockefeller Cancer Institute.

Smaller grants were paid to other entities, including: $4.8 million to the University of Arkansas at Little Rock; $2.4 million to the UA System; and $2.3 million to the University of Arkansas System Division of Agriculture Research & Extension.

Rushing said that of the $12.1 million dip in foundation contributions compared with the previous year, the UA-Fayetteville portion was $8.4 million.

UA-Fayetteville is attempting to take in $1 billion as part of its Campaign Arkansas fundraising effort, which is to end on June 30, 2020. The university has publicly reported raising about $620.3 million.

The University of Arkansas Foundation in calendar year 2015 paid $292,925 to Clay Davis, the organization’s president, chief executive officer and treasurer. Davis also received an estimated $37,642 in “other compensation” from the foundation and related organizations.

The Razorback Foundation in calendar year 2015 paid $146,509 to former executive director Sean Rochelle, not including $23,952 in estimated “other compensation.” Varady, who was reported at the time to start Dec. 1, 2015, with the foundation, received $19,433, not including $967 in estimated “other compensation.”

The IRS return for the 12-month period that ended June 30 also listed independent contractors. UA athletic coaches Van Horn Enterprises, a limited liability company founded by Dave Van Horn, the Razorback head baseball coach, received $860,457 in compensation for speaking engagements in calendar year 2015.

Bret Bielema, the Razorback head football coach, earned $485,268 for speaking engagements over the same time period. Mi-Mar Enterprises LLC earned $200,000 in speaking engagements, with the address for the limited liability company matching that of men’s basketball coach Mike Anderson, according to property records.

The foundation also paid $102,000 in deferred compensation to Frank Broyles, the former Razorback football coach and athletic director.

A real estate contribution with a “fair market value” of $3 million was recorded by the foundation, and TSSD, LLC, a foundation-controlled entity, accepted a $3 million gift.

The IRS return for the 12-month period that ended June 30 doesn’t provide details of the $3 million gift, but Washington County records show that TSSD, LLC is the owner of a 7-acre property that at one time was a Clarion Inn in south Fayetteville near I-49.

Property records show that ownership was transferred from H&C Fayetteville Clarion LLC, with Colby L. Curry signing over the property. The foundation declined to answer questions about the property.

Long

Rushing