The Army West Point Athletic Association (AWPAA) is big business. How big? As it turns out, the close to $50M annually.
In our last post we pointed out that West Point’s non-profit 501(c)(3) athletic organization creates purpose conflict and interferes with USMA’s ability to execute its core mission. In this post we’ll fill in some more of the gaps around the AWPAA financials and behaviors. This is for transparency and to highlight conflicts with West Point’s mission.
A blurb from the audits on what AWPAA is:
“Army West Point Athletic Association Inc is a New York not-for-profit corporation organized on October 14, 2015 to provide an extraordinary Division I athletic experience at the United States Military Academy (“USMA”). This intercollegiate athletic program supports the USMA mission to build leaders of character committed to the values of Duty, Honor, Country. The experiences obtained by participation in USMA’s intercollegiate athletic program prepare and motivate Cadets of a lifetime of public service through physical education, fitness training and testing and Division I athletic competition.”
Now let’s take a look.
AWPAA Finances Overview
Last post saw a reader send us links to auditor reports for the AWPAA. These are able to help us understand Army’s athletic program a bit better.
The statements were available here https://facdissem.census.gov/. Links are below.
A summary YOY income statement is below. The AWPAA was instantiated in 2016 so that year’s financials are minimal likely due to organizational setup.
From the reports we find that various grants are designated for different athletic programs, so this is not just football.
We will also see below that ~$10M of federal grant money is in Revenues. This means that AWPAA would be about $8M in the hole barring any adjustments to expenses. So the Army Athletics program loses money, every year, and quite a lot of it.
A consolidated balance sheet is below:
We were surprised to see a Payday Protection Program loan of $2.795M. We thought that the program was for struggling businesses* so that they didn’t have to lay off employees. It seems inappropriate to us that an Army-affiliated organization receiving $11M in US Government grants, with net income YOY higher than 2019, should be receiving funds meant for Main Street. Note 11 in the 2020 auditor report says that AWPAA believes the loan will likely be substantially or fully forgiven. So we see that AWPAA, a West Point organization, takes free money from the government that is meant for private businesses. Seems like a violation of the spirit and intent of both organizations to us.
*We note that the PPP was meant for small businesses.
Qualification criteria for PPP are, from the website:
Who may qualify
The following entities affected by COVID-19 may be eligible:
- Sole proprietors, independent contractors, and self-employed persons
- Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
We don’t know under which category AWPAA filed, but the closest description we could find was code 711310, “Promoters of Performing Arts, Sports and Similar Events with Facilities.” The revenue cap for this code is $32.5 million. AWPAA shows $48M in revenue for the period in question. While we’re not specialists on PPP or SBA, this seems wrong.
Income and Business
A more detailed view of the revenue sources shows the following.
Here a few things jump out:
- 2017-18 saw multiple income streams come online. The reports don’t indicate whether this is *new* income or income that USMA had managed prior to the organizational change, but it’s a huge jump.
- The largest source of revenue is Federal Grants, which geared up from almost $3M in 2017 to 10-11M (rounded) in 2018-2020. Was this revenue available to and used by USMA prior to this organizational change?
- Ticket sales, sponsorships, guarantee income, and contributions are roughly the same percentage of income. No lines specifically note merchandise rights.
- Media rights and guarantee income kicked off in 2018, perhaps this is when the transfer of Army athletics rights to AWPAA happened although this isn’t noted in the auditor notes.
- The contributions from corporations, if one reads the notes, is an exchange. It is Legends Media LLC fronting capital to AWPAA for stadium renovations in exchange for recurring consulting fees and commissions of corporate and premium hospitality sales.
In summary, we see that AWPAA runs several lines of business which grew on paper from $0 to $47M+ in 3-4 years.
- Event sales (games, camps) .
- Marketing (media rights, game guarantees, sponsorships)
- Grants & donations (government grants and Association of Graduates deals)
- Miscellaneous – we don’t know what’s in this bucket
Clearly some of this revenue existed before but we don’t have history how much or which lines. The history would be helpful to see how much grant revenue especially is enabled by this entity structure.
It would be also helpful to see the by-sport figures for revenue and expenses, as is available for other schools – example: Notre Dame. If Football subsidizes all the other programs, then we see pressure to generate revenue to sustain an athletic program which may make USMA attractive to many varieties of athletes. Of course we disagree with the premise that Div-1 athletics should be why candidates want to attend, but perhaps there is a draw there.
An expense summary is:
And detail is:
Here is where proactive transparency from the AWPAA would be helpful.
- What are the program headcount and functions? We see $19M in personnel costs. At $150k/annually fully loaded (an estimate for our approximation here, not anywhere in the documents), this comes out to 127 headcount. Not counting “coaching services” which is another $1.7M annually. Not counting professional fees, outside services, maintenance. Update 1/24: Here is the staff directory: [LINK]
- Who (or which entity) maintains the facilities? Does AWPAA maintain Michie and the Fieldhouse and fields and rinks and courts on a $200k budget?
- Who are the AWPAA board members? What is their compensation?
- How many more games did USMA win since it started doing special uniforms for Army-Navy? (Just kidding!)
- Is the athlete meal expense separate from the travel budget? or do athletes get special cooking at West Point as cadets?
- Recruiting is $1.4M – 1.7M annually. How does this affect interaction with USMA admissions and how does it influence who is admitted? If AWPAA is spending money on recruits (we guess for football) to drive the sports program then it likely expects cooperation from USMA admissions. How often does Admissions turn recruits down, especially when they are lower performers in other areas than other recruits?
Most importantly: Is all this helpful to the mission of “educating, training, and inspiring the Corps of Cadets“? Does it make cadets more “prepared for a career of professional excellence and service as an officer”? Winning is inspiring, but West Point should focus on winning wars, not nostalgia.
We see that we have an organization that sucks up federal grants and government loans, loses money on the athletic program, maintains an unknown board and unknown compensation structure, and which compromises recruiting and USMA class composition. This at least explains the lack of easily available, consolidated information about the organization.
But this organization is running one of the most public-facing aspects of West Point. All this information and more should be easily and readily available to the public. A good place to link to this would be on the Army Athletics website. We should not have to hunt for it. We would want to see organizational details of AWPAA (of which we still can’t find an organizational website), revenue and expense breakdowns by sport supported, and recruiting yield figures.
There is significant money tied to this area of West Point’s activities. West Point deliberately moved all of this off its books. This could make sense from an organizational roles-and-responsibilities point of view, but it highlights how much the athletics cart is before the West Point and Army horses.
The organization engages in recruiting which drives the viability of event and marketing revenues. There are strong incentives to compromise admissions standards with this much money and status at stake.
Given all this, it would be difficult to conclude that there is no negative impact on the class composition, focus, or quality of the core mission programming for USMA. It is a self-licking ice-cream cone: USMA must have a big athletic program, with all the downsides that entails, to recruit and pay for the big athletic program.
We don’t think there is anything “nefarious” going on except perhaps a little W in the FW&A. But we do want transparency in areas where the possibility of adverse incentives and impacts on West Point efficacy exists. An institution claiming to be the example of duty, honor, and country ought to behave that way. And it ought not put the athletics cart before the Army horse.
Thoughtful criticism and factual corrections are welcome.