It's expensive to be a nonprofit, as Air Force sports program learns

June 5, 2010
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For several years, Air Force Academy senior officials laid the groundwork for converting the athletic department into a nonprofit corporation.

They sold the idea to the academy’s Board of Visitors (essentially its board of trustees). They presented it to the Secretary of the Air Force. They crafted legislation with lawyers. And they lobbied members of Congress to include the proposal in a bill.

Finally, in October, Congress gave the academy authorization to make the change, and the legislation was signed by the president.

But the academy’s work isn’t done. Far from it.

Making the transition from a Non-Appropriated Fund Instrumentality (the department’s current construct) to a Colorado nonprofit organization won’t be as easy as flipping a switch.

The academy must meet “a host of milestones,” according to associate athletic director for resources John Coulahan, in order to make the change.

Among the milestones are filing with the state of Colorado to become a nonprofit organization, getting bylaws approved and setting up a board of directors. The athletic department also must set up a human resources department and accounting system (previously handled by the government) and get all academy athletic buildings on the same computer system.

And those are just the anticipated tasks.

“Every time you go around a corner, you find another maze to go through,” said Jim Trego, Air Force’s senior associate athletic director for external operations.

The academy sought to recast its athletic department as a nonprofit corporation — like the Naval Academy’s athletic department — primarily for financial reasons. As currently formed the department can accept donations but not solicit them. (As Trego put it, the department can “friend raise,” but not “fund raise.”)

In addition, as a nonprofit corporation, the department will be able to procure funds much more expeditiously and operate more efficiently.

“If we want to spend $20,000 tomorrow, we can in this new company,” said Nicholas Liegl, assistant athletic director–finance. “But right now there are so many hurdles we need to get through. ... Obviously there will be internal controls in the new company that will prohibit us from being reckless. But there’s going to be more opportunity to be more efficient.”

The public still will have access to the department’s financial records — through the Freedom of Information Act for appropriated funds (those from the government) and through Colorado state statutes for funds generated by the department.

Coulahan estimated the department’s transition will take approximately two years. The plan is to set up a construct of the nonprofit department and then make the conversion piece by piece when certain aspects appear ready. Instead of flipping a switch, Trego said, it will be more like using a dimmer.

“And after that two-year period we’ll be at maximum illumination, and the company will be running at full speed,” he said.

Another change the department hopes to make is to its fiscal calendar. Currently the fiscal year starts each October, but that creates confusion because the football season already has begun.

“We go into the fourth game of the season, and then we switch over to a new fiscal year, which is maddening,” Trego said.

The academy wants its fiscal calendar to mirror the academic year.

Making the change to a nonprofit corporation will require a significant financial investment — Liegl said the department has set aside $500,000. He estimated that getting the gift shop, stadium, warehouse and athletic department buildings on the same computer system would cost about $200,000, and the accounting system would cost approximately $150,000 to $200,000.

But academy officials are confident that the department eventually will be able to offset those costs.

“With the fundraising in the long term, we should have no problem becoming self-sufficient way down the road,” Liegl said. “Right now in the initial stages we’re still going to need that appropriated support to get us on our feet.”

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