Activity Based Costing in Intercollegiate Athletic Departments: Is There Value in Using It?

Abstract

The unstable financial landscape of intercollegiate athletics is an issue that many institutions struggle with on a yearly basis. Most research in this area has focused on financial inequalities (Lawrence, 2013; Zimbalist, 2013). Specifically, Lawrence (2010) has proposed a solution that the NCAA and its members consider adopting the Activity-Based Costing (ABC) management tool to manage the financial information accumulated by athletic departments, which they believe would help make costs more transparent. Athletic administrators of NCAA institutions are unclear about the broad financial inequities issues in intercollegiate athletics and the athletic accounting practices of their institutions. Given that Lawrence, Gabriel and Tuttle (2010) and Lawrence (2013) offer a solution to the problem by implementing ABC, it is unknown what athletic administrators think about this possibility. Therefore, the purpose of this study is to ask NCAA athletic administrators their perspectives on NCAA accounting practices. Specifically whether or not their athletic department uses ABC to help them understanding their costs and then to determine why or why they do not use ABC. Our results demonstrate that most athletic departments do not use ABC and the main reason they do not is that they don’t need the detailed information that ABC would provide. This paper helps to us get a better understanding of what athletic departments are doing to understand their costs and it helps to refute prior research claims that ABC would be useful for athletic departments.