Value vs. Cost – Managing NCAA Compliance Risk

By Bo Kerin

With the increased expectations put on college coaches to win and win now, they are becoming more

creative and aggressive in the way they conduct business. Even the most ethical coaches feel the

pressure to push the envelope in order to achieve any possible edge over the competition. Much of

the burden to maintain institutional control falls to the institution’s compliance staff, which is charged

with the front-line monitoring of recruiting activities, student-athlete eligibility and participation, and

for an overwhelming amount of record keeping and paperwork. All of these activities must be

monitored and evaluated in order to reduce an institution’s risk and maintain institutional control.

There is no room for error, and based on my experience, the ACS Athletics Web-based software

program is the best product on the market to assist institutions in managing compliance risk.

As we have seen recently, failure to do so can land the institution in front of the NCAA’s Committee on

Infractions, subjecting it to numerous penalties including loss of athletics scholarships, recruiting

restrictions, post season bans and even vacating wins and championships. For the NCAA compliance

professional on a college campus, this requires a very delicate balancing act and a unique set of

challenges. Coaches must be given as much latitude as possible in order to achieve success, but this

must be tempered with the ability to control and monitor their actions to prevent NCAA rules

violations. The key is to have compliance policies and programs in place and functioning so that when

a violation does occur, the individuals involved can correct the mistake and implement corrective

action to ensure it does not occur in the future. Essentially, this is Risk Management 101 for an

institution, and the ability to control and manage these risks are vital to the long-term success and

value of the program.

As with any business, failure to control and manage risk has significant consequences. Programs

recently cited by the NCAA Committee on Infractions for failing to properly manage risk (i.e., lack of

institutional control and/or failure to monitor) are numerous:

Eastern Washington University (2009) – During a four-year period, several football student-athletes were permitted to participate in practice activities even though they were academically ineligible for various reasons. The NCAA Division I Committee on Infractions asserted that the athletics department did not have a system in place for monitoring housing and meals provided to student-athletes during the preseason. The compliance office did not review the names of student-athletes who were receiving these benefits, instead leaving it the football coaching staff to determine who was eligible to receive them.

University of Oklahoma (2007) – Cited for failing to properly monitor the employment of several football student-athletes, including failure to properly administer required employment paperwork.

University of Southern Maine (2007) – An NCAA Division III institution, USM was cited for lack of institutional control and failure to monitor, in part, due to failure to monitor student-athlete employment in the institution’s work-study program. The NCAA Division III Committee on Infractions noted that the institution did not have proper procedures in place to ensure such employment was within NCAA rules.

Kentucky Wesleyan University (2006) – An NCAA Division II institution, KWU was cited for lack of institution control and failure to monitor, in part, due to coaches in several sports failing to adhere to NCAA regulations regarding the recording of daily and weekly hour limitations on athletically related activities, as well as the proper logging of actual competition and competition day associated activities. Several coaches failed to maintain complete and accurate records of practice and game-day activities and countable practice hours.

University of Memphis (2005) – Cited for failure to adequately monitor its student-athletes’ participation in practice and conditioning activities, for permitting an ineligible student-athlete to participate and the provision of financial aid to an ineligible student-athlete.

Stony Brook University (2005) – Cited for lack of institutional control and failure to monitor as a result of permitting ineligible student-athletes to participate. The ineligibility was a result, in part, of incomplete paperwork and failure to put in place adequate systems for ensuring that all required eligibility forms had been administered and maintained, and that all eligibility certification calculations had been accurately performed.

University of Colorado (2002) – Although this case involved a number of other recruiting violations for which the institution was cited for failure to monitor, one of the violations involved the provision of institutional apparel to prospective student-athletes during campus visits. The committee noted that the institution failed to have in place adequate issuance and retrieval procedures.

In addition, an institution that fails to properly manage this risk and finds itself in the NCAA cross-hairs

is going to be subjected to significant financial obligations while navigating the process. One

compliance coordinator in the Southeastern Conference indicated that an institution can expect to pay

at least $200,000 in attorney fees for services related to a major infractions case. Of course, this is only

a fraction of the cost the institution will incur. Some cases take years to process which amounts to

thousands of hours of work for both the involved law firm and institutional staff members. When you

add travel expenses (generally, an institution will have to appear before the Committee on Infractions

in Indianapolis), the potential cost of buying out a coach’s contract, the cost of hiring a new coach, the

cost of repairing the institution’s reputation through marketing efforts, the potential loss of post

season revenues and the possibility of having to return previously received NCAA and/or conference

revenue distributions, the total can reach the millions very easily. In November 2008, the Indianapolis

Star reported that Indiana University paid nearly $500,000 in fees to Ice Miller, an Indianapolis law firm

that specializes in these types of cases, to assist in resolving a major infractions case involving

impermissible telephone calls to prospective student-athletes. In February of that year, Indiana paid

accused head men’s basketball coach Kelvin Sampson $750,000 just to go away.1 As you can see, the

cost is now over $1.2 million. That figure does not take into account the tarnished reputation and

program sanctions which equate to significant barriers to the ability to win basketball games. These

issues will most certainly factor into a prospective student-athlete’s decision-making process and if you

can’t attract the talent, it’s going to be tough to win championships and maintain the institution’s

value.

This is by far not the only example. Below are other cases that have occurred over the past fifteen

years and the reported legal fees associated with each:

Oklahoma (2005): $330,0002

University of Nevada-Las Vegas (2001): $218,0003

University of Minnesota (2000): $1,000,0003

Michigan State University (1996): $650,0003

Even so, athletics directors and budget managers will often cringe when they evaluate different

methods to address risk and subsequently identify the implementation cost, especially in today’s

economic climate. An entry level compliance position or an effective software program might cost an

institution $40,000 annually. Using the Indiana case for comparison, let’s assume an institution

decided to hire an additional compliance staff member AND purchase the compliance monitoring

software for an annual total of $80,000. At that cost, it would take an institution 15 years to reach the

$1.2 million figure incurred by Indiana as a result of its recent infractions case, and remember, that

figure was a conservative estimate. In doesn’t take a mathematician to conclude that the value (in this

case $1.2M) far exceeds the cost ($80,000/annually) of making the investment and improving the

overall compliance health of the athletics program. If one considers the value gained by implementing

adequate monitoring strategies, the cost is infinitesimally minimal. The ACS Athletics program is a wise

investment as a means to achieve greater institutional control and reduction of risk. In these times of

high expectations, high risk and high reward, can one really afford not to make that investment?

1 Staff (2008), IU Spends$500K in Sampson Case, Indianapolis Star.

2 Drape, J. (2007), Facing N.C.A.A., the Best Defense Is a Legal Team, New York Times.

3 Addy, S. (2001), UNLV: Legal fees well-spent money, Las Vegas Sun.