What Do Non-profits Do with their Surpluses?

When an institution is organized as a not-for-profit institution, this classification does not imply that those in charge do not seek to maximize the difference between revenues and costs. It means that, for tax purposes, the not-for-profit must spend everything it takes in – its managers cannot turn over any net income to owners/shareholders. Colleges are not-for-profit institutions. So what sorts of things do colleges spend their money on when they receive a windfall, expected or unexpected? Here are two examples related to the world of collegiate sports.

The University of Utah (from the Chronicle of Higher Education):

As if their football team’s 12-0 record were not reason enough for students at the University of Utah to celebrate, here’s one more: The campus bookstore will give a 5-percent discount on new and used textbooks this semester, and the credit goes to the university’s football team.

The Utes’ gridiron success has caused a surge in the bookstore’s sales of T-shirts, sweatshirts, and other merchandise bearing the university’s logo. Profits are more than double the previous record, set in 1998, when Utah’s men’s basketball team made it to the NCAA Final Four, says Earl L. Clegg, director of the bookstore.

From Minnesota State University, Mankato (the “MIT of the Midwest”):

Minnesota State University, Mankato is examining new ways to promote Maverick athletics as part of its integrated marketing initiative for the entire university.

and later:

The Greater Mankato Area Chamber of Commerce has pledged financial support for the athletic plan, and MSU will earmark a portion of its revenues from the relocated Jan. 14 men’s hockey game at Xcel Center to help fund the effort.

Minnesota State’s Athletic Director, Kevin Buisman, was roundly criticized for moving a home hockey game against Minnesota up to the hockey-starved Xcel Energy Center, the home of the NHL’s Minnesota Wild. That move is expected to bring in an additional $140,000 in gross revenue to the University (Buisman believed the move would bring about $100,000 in revenue to the athletic department).

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Author: Phil Miller

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