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.
AWPAA Description
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.
Balance Sheet
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.
Expenses
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.
Conclusion
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.
One point: AWPAA is all well and good UNTIL what it is doing conflicts with the explicit written ideals of USMA in the Cadet Prayer, Honor Code, The Corps, Bugle Notes, and USMA PR.
Everyone pretty much agrees on the same values like integrity and being competitive. The key question is how CONFLICTS between the value are resolved. That must be done using a values hierarchy that ranks them in order of which value trumps the others when they conflict.
The current controversy appears to be that AWPAA and USMA are too often behaving as if Army football success outranked character. Unless USMA wants to publicly state such IS the case, the de facto practice of resolving character conflicts in favor of Army football competitiveness is outrageous hypocrisy and arguably in conflict with the oaths New Cadets, Army officers, and the politicians in Congress and the White House take.
Well put as always. Thanks for coming by John.
I thank you for posting this information as it is not easy to find. It’s supposed to reside at http://www.goarmysports.com, but good luck on your hunt from there. Financial results are consolidated with those of the WPAOG, but the only mention of this relationship is a short comment in the footnotes section of the audit report. With $550 million in total assets, the WPAOG is so large that the typical class gift of $2.5 million to $3 million is immaterial to their overall financial results. If you are a disgruntled grad that no longer wants to donate because you no longer agree with today’s “value system” at West Point, you won’t be missed.
Transparency is always good.
Mike, here is a related saying you should appreciate being a man of the cloth: It is Latin and from the Bible: Qui male agit, odit lucem. I love that one.
If you are a grad of a certain age, the phrase “infinite do-loop” brings a smile to your face and a tear to your eye. The “powers that be” seem to have created an infinite do-loop: donations enable the funding of Margin of Excellence programs, but the creation of new MoE programs increases the need for donations. Thus, the need for money always increases which increases the risk of “crossing the line” that many of us hold dear. The quest to turn USMA into UCLA where everyone dresses alike is alarming. Last spring’s “West Point” magazine could have been titled “The West Point Law Review.” Not the direction that should be taken. I see where one of this year’s regimental commanders is branching MSC?! Is this the mission?
“We don’t know under which category AWPAA filed”
AWPAA is a 501(c)(3). The third bullet of the list of eligible entities.
“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.”
Do a little work on the history of AWPAA and you’ll find the answer to this. (Hint: AWPAA didn’t exist until recently.)
Thanks.
1) Determining the exact class that AWPAA used to file for the PPP loan is perhaps missing the forest for the trees. It is likely eligible under multiple criteria. More important is why it is filing for such a loan and whether that is “the right thing” for it to do.
2)”hint…”
Yes this is the point. Did the establishment of the 501c3 structure allow a *new* $11M in grant money to be siphoned off the government, or enable new commercial deals to be put into private pockets, or was that money already being earned/spent on the same ends? One answer means that AWPAA is a rent-seeking structure, the other answer means it is just another way of doing the same business.
Forest for the trees, maybe, but sloppy writing or poor research on your part does nothing to further your cause. Unless of course you need that to further your cause.
Yes, AWPAA was formed just to get PPP money. Quite prescient of them.
Part of the problem with transparency is that the AWPAA’s fiscal year ends on June 30th while the WPAOG’s ends on December 31st. Thus, when you read the audit report of the WPAOG, you cannot bifurcate its financial results from those of the AWPAA. There most definitely needs to be some “sunshine” here; perhaps a footnote and table detailing the AWPAA’s results of operations on a calendar year basis is in order.
The AWPAA is a subsidiary of the WPAOG, so it does not file a separate income tax return. However, if you review the tax returns filed by the WPAOG, Part VII is where the salaries of the most highly compensated employees are detailed. You will not see Mike Buddie’s salary, and my guess is that he is paid more than $147K annually. Why is he not included?
I notice that there is (yet) another Colonel serving as Buddie’s deputy. Is there anything at West Point that can’t be accomplished by anyone other than a Colonel?
He isn’t included because he is not an employee of WPAOG.
The correct analogy here would be putting the cart before the mule, not horse.
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But seriously, folks, college football has been controversial since the 1800s. It was almost outlawed nationwide for killing too many players. Teddy Roosevelt saved it. And the situation has gotten worse by the decade. The original idea was that college sports were a wise extracurricular activity for vigorous young men and a character-building option for college students.
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At WP, MacArthur famously said, “On the fields of friendly strife are sown the seeds that, on other days, bear the fruits of victory.” He started the mandatory for all intramural program at West Point. Interesting theory, but we have not won a real war since 1945 and Army football has been embarrassing for much of the time since I was a cadet in the 1960s.
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Col Heffington raised questions about whether all the Army football players are really West Point material. He said some were borderline illiterate. https://johntreed.com/blogs/john-t-reed-s-news-blog/comments-on-the-ltc-heffington-and-west-point-superintendent-letters If we have to recruit players who have no business being at West Point, then FBS football has no business being at West Point.
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To stay true to is real mission and its professed ideals, West Point needs to go to D-III high academic standards like the NESCAC and play an annual Army-Coast Guard game, not an Army-Navy Game. The glory that was Army-Navy is of another day. Navy and Air Force should also go D-III high academic.
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Some respected schools like Cal-Tech got rid of football all together. The gravitational pull of the NFL and the tendency for alumni to obsess over alma mater winning percentages has long been too much. Basta! Go back to winning wars, not football games or even Rhodes Scholarships. WP is now trying to be all things to all people. That is what politicians do. What politicians do NOT do is win wars.
D-III will never happen because WP is “all about the Benjamins” (if I may quote a somewhat unpopular Congresswoman). How much money is generated from all of those nationally televised games? No way will “the powers that be” give that up! As an aside, have you noticed how empty the stands are at Michie? It’s rare that the camera crews show anything other than the cadet section. The cheapest ticket is now $45.
I agree with you, John, but generating cash “outranks” standards.
Doesn’t there have to be some throw-off from Army Athletics to USMA? It sounds like the Benjamins check into Army Athletics, but don’t check out. Why would the supe, et al. let the Army Athletics tail wag the USMA dog? Seems like Army athletics, i.e., FSB football, exists for the purpose of the people who work in Army Athletics continuing to work there. I do not doubt selling Army football is still profitable for what used to be called AAA, but I do not understand why the rest of USMA has to put up with it for no benefit.
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I suspect the alumni would hate football ending, but to be blunt, no one including the AOG gives a damn about what the West Point alums want regarding any aspect of USMA. Another way to put it might be that Army football already ended before it had to adopt the option offense. What is today called Army football is like an aging star who no longer has it but refuses to leave the league. Namath at Rams, Simpson at Niners, Unitas at Chargers.
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Seems to me those getting the Army football Benjamins are keeping them for themselves which raises the question how do they have the power to keep collecting Benjamins? Your analysis passes the cynicism test, but when I “Follow the money,” it leads to no one with the power to continue Army football.
Recall that the AWPAA (known to many of us as simply the AAA) is now a “wholly owned subsidiary” (since 2017) of the WPAOG (formerly known to many of us as the institution that cared about its alumni beyond one’s last donation). As such, revenue from all athletic endeavors flows to the WPAOG which, in turn, distributes the money to USMA ($17.2M in 2021 and $16.3M in 2020 per page 20 of the 2021 WPAOG audit report.). The next line of that same table shows grants from the WPAOG to the AWPAA of $8.6M in 2021 and $6.9M in 2020. All of these grants are shown in a column entitled “Educational and Historical.”
Scrolling up to page 4 of the audit report, we see the non-profit version of the income statement. Of the $110M in total revenues for 2021 (up substantially from the $58M received in 2020), $94.6M is classified as “contributions” compared to $38.1M in 2020. Scrolling down to page 8 of the audit report, we see the explanation of “contributions” which, IMHO, leaves the reader with the impression that these amounts are donations such as reunion class gifts, programs such as “All For The Corps,” etc. There is no mention of athletic revenue whatsoever. Obviously, we alumni who make donations, have no “need to know” any further details.
The “mushroom theory” is further perpetuated by not disclosing to the alumni any of the details behind its grants to both organizations. How did USMA spend the money it was granted? Were there any further incidents such as theft by the fencing coach or failure of the OICs of the myriad of Margin of Excellence programs to maintain proper controls over the receipt and disbursement of cash per DA Regs as in 2015? Inquiring minds want to know…..
Sounds like ending FBS level Army football means several dozen people now employed at AOG, USMA, and/or AAA would need to find work elsewhere in Orange County, period. I do not see how that trumps the national defense, the protesteth too much values of West Point, and the harm to the Army’s reputation as a can-do, knows-how-to-win, competent organization.
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The Army team in Michie stadium is a perennial also ran among teams trying to be ranked. The US Army would have us believe that its 2022 edition is the same Army that won WW II in 1945. The Army football team in 2022 surely is not the same as the national championship-winning, two Heisman winning players 1945 football team. Every season of Army scheduling weak opponents then still struggling to get a bowl game raises the question of whether the seeds sown on the field of friendly strife can produce disappointment season after season yet really still do lead to the fruits of victory in Iraq and Afghanistan. I think the theory that athletic competition leads to military victory has been proven not true in US military history since WW II. I think Woody Hayes said about the US military, their record was 5-1-1- which was pretty good but he did not care for the recent trend.
If my recollection is correct, D-III programs cannot offer athletic scholarships. Would Army even be eligible for D-III since, technically speaking, all cadets are on scholarship? The question is moot, however, because “downsizing” to D-III will never happen.
Downsizing the staff of the AOG/AAA also will never happen because these organizations now exist to fuel their own growth. Like everything else at WP and The Army, these organizations suffer badly from rank inflation.
Perhaps the Army should “schedule” its next war against a “creampuff” opponent such as Villanova so it can notch a “W” on the battlefield.
USCGA and USMMA are both D-III, play NCAA football, and paid by government. May be hard to get into a league like NESCAC though. The “free scholarship” is sort of offset by the five years active duty and three years reserve duty and things like a 3% KIA rate in my class, not to mention college being an ordeal rather than fun.
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It may not be up to low-level bureaucrats at AAA or USMA. Is CBS sports really making a profit broadcasting academy games? They may be addicted to Army-Navy games, also CBS. It sounds like it may be some perpetual motion machine with all who might change things afraid to step forward.
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I used to have arguments when I was in the Army. Everyone would be bitching about how the Army should do this or the Army needs that or the Army wants so and so. My position was, “You speak of the Army as if it were a sentient being. It is not. It is just a bunch of people either trying to get another star or counting the days until retirement. No one is interested in what is good for the Army. Maybe I am making the same mistake—assuming someone at West Point cares about West Point. No one does. Where is Marty Maher when you need him? Or Douglas MacArthur?
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West Point has lofty ideals and values—and absolutely no one in charge of upholding them. Everyone is in their silo and that silo is empty.
Well said! I’m drifting off course now, but I strongly agree with your concern regarding just whom is upholding the values of West Point. Ever since the AOG got into the “margin of excellence” business, they are devoted to raising money and little else. We grads are told very little about these programs such as how do they measure the success of a program, what are the criteria for creating a new one or closing an old one, etc. Every year, the AOG grows in headcount and the folks at the top get larger salaries, but just what is being accomplished with all of this effort?