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Why the USA Ultimate Conversation Should Really Be About Transparency

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For the past 36 hours, I’ve been glued to the shitstorm that’s occurred since Major League Ultimate (the professional ultimate frisbee league for those of you who aren’t in the know) aired an episode of their podcast, Cleats & Cufflinks, that took aim at USA Ultimate (the national governing body of ultimate frisbee) and its priorities.  The podcast broke down what it sees as some of USA Ultimate’s (USAU’s) inadequacies and presented data to compare USAU with the governing bodies of other growth sports like lacrosse and hockey.  The picture that Major League Ultimate (MLU) drew of USAU was not a particularly flattering one, and it was clearly perceived by a number of individuals as unnecessarily inflammatory and provocative.  After the podcast aired, Twitter blew up with accolades and righteous indignation.

The piece of the podcast that has attracted the most ire is the data that MLU commissioner Jeff Snader presented to support some of his claims about USAU’s misplaced priorities.  After MLU released the data to Facebook and the Twitterverse, Ultiworld contributor George Brell picked it apart in his fact-checking post on the site (where you can also see MLU’s original data).  Being a datahead myself, and having done some cursory data mining of USAU’s tax returns in the past, I wanted to get a better sense of numbers myself.  I tend to be highly skeptical of data presented in the service of proving a point, and I tend to favor more objectively presented data.

Let me take a moment to digress here.  You may be wondering why I care the slightest bit to waste any of my time with this.  For over a decade, ultimate was a big part of my life.  I played in college for the University of Virginia, graduated to women’s and co-ed club in Philly and moved on to masters women’s when I became old enough.  Last summer was the first summer in 12 years that I didn’t play in Philadelphia’s venerable summer league after giving up co-ed because of breaking my wrist while playing co-ed league the preceding fall (after having broken a finger in 2009).  I’ve met some of my best friends through ultimate, and I even met my husband through the sport.  And in the interest of transparency, I’ve done some design work for MLU.  Even though I have been gradually transitioning from a club player to a casual player over the past several years, the future of the sport is still important to me.  That is why I care to waste my time.

So against my better judgment, after reading Brell’s post in Ultiworld, I delved into a series of tax returns and annual reports for USAU, US Lacrosse and USA Hockey.  What I found was that MLU’s numbers may not have told the whole story, but Brell’s “fact-checked” numbers don’t really tell the whole story, either.  What Brell’s post did get right was that it’s very difficult to compare USAU with US Lacrosse and USA Hockey because they way the categorize their expenses is very different.  It’s simply not an apples-to-apples comparison.  But that doesn’t mean that we can’t have a conversation about how USAU’s choosing to spend its money anyway.

Unfortunately, that’s a somewhat difficult conversation to have because of how USAU chooses to categorize its spending.

Brell’s post is correct in that USAU spends more on member services than the $141,000 stated by MLU (and listed on USAU’s annual report as “member services”).  It includes (per its 2012 tax return) spirit of the game/rules development, marketing (which I, personally, find questionable since I’m not sure what benefit members are getting from USAU marketing itself) and sending out its newsletter/magazine to members in its definition of member services. [1]  But here’s the first spot where things get a little muddy.  USAU claims to spend $430,780 on communications and publications in its annual report. [2] However, its 2012 tax return shows that it only spent $146,160 on newsletter, printing and postage. [3] So that leaves another $284,620 of mysterious communications/publications.  You have to be sending a lot of e-mail campaigns (or be getting fleeced by your e-mail marketing firm) to make that number.

I suspect that a good portion of the $285K is the amount that USAU pays to ESPN to have its games covered.  USAU has been cagey about this number, and possibly rightly so–I’m not so sure how I feel about USAU spending more than 10% of its gross revenue [4] for 2012 ($2,338,227) on ESPN3 coverage, and I daresay other members wouldn’t like it so much, either.  But this is really just conjecture, and therein lies the problem.  USAU may pay for coverage, and they may also be paid for the rights to air their games, but USAU won’t say for sure, so it’s up to us to guess what’s going on or take them at their word that it’s all in the membership’s best interest.**  And I don’t know about you, but I’m not willing to just take their word on it.  “Trust but verify” goes the adage, right?  It may or may be in the membership’s interest, but why not tell us what the story is, and then we can have a conversation about the pros and cons of spending the deal?

[Editorial note: Charlie Eisenhood at Ultiworld brought to my attention the fact that ESPN coverage did not begin until 2013, so that mystery $285K can’t be for ESPN coverage.  However, it doesn’t clarify what that roughly 12.7% of gross revenue represents, besides the nebulous “communications.”  That’s a large number to have floating out there without further explanation.  My speculation clearly wasn’t right, but that’s just my point.  Without clarity in the numbers, there can’t be meaningful conversation.  It’s the same concept as why we can’t have a meaningful conversation about healthcare spending–because it’s very hard to nail down the true costs of treatment.]

So if we take the member services expenses ($141,448) and add the SOTG/rules expenses ($8,434) [5] and newsletter expenses ($146,160), the more representative number of members services is $296,042.  I’m not adding in marketing ($149,771) [6] because I feel that’s miscategorized as member services, and I’m also leaving out the $285K of mystery “communications and publications” expenses.  So the number is certainly higher than MLU claims, but it’s still only 12.7% of gross revenue–up from MLU’s 5% figure.

The waters get muddy again when we talk about USAU’s president’s salary.  I’m not here to argue whether Tom Crawford is overpaid or appropriately compensated.  Rather, I want to point out how USAU accounts for the salary.  Crawford is paid $177,280 in base compensation and earned a performance bonus of $9,028 in 2012 [7] for a total of $186,308, or 8% of gross revenue.  According to the return, $133,046 of that is allocated as a program expense, which means that number gets spread across things like member services, sport development, national teams, the championship series and so forth.  This accounting is reinforced by the annual report, which only lists $170,536 in support service expenses that are divided into two categories–headquarters and board of directors. [8]  Therefore, that number may be artificially inflating other categories of expenses, once again making it difficult to tell how much money is actually being spent on a particular category.

Mining the tax return presented another category of expense that doesn’t appear elsewhere: player fees.  In 2012, USAU paid $101,966 in player fees. [9] There’s no further explanation about this, and it doesn’t appear on the annual report, so it’s unclear what these are.  Is USAU offering a new “member service” where it pays players (outside of the Triple Crown purse)?  And if so, can all members opt into this service?  Can I opt in?  Again, because it’s unclear what this is, I can only make assumptions about it, but I’d prefer to have a conversation.

However, there are two categories that are quite clear–sport development and the championship series.  We’ve already included communications and publications in the member services category–Brell’s post categorized it as sport development–so what we’re left with there is a combination of sport development and outreach ($144,061) [10] and youth, coach and observer development ($193,539) [11] for a grand total of $337,600, or 14.4% of gross revenue.  That’s more than double MLU’s number (5.7%) but substantially less than Brell’s 30.4%.

Which leaves us with the championship series.  A very clear $875,502 is spent on the championship series [12], USAU’s largest single category of expenditure.  That’s 37.4% of its gross revenue.  That’s more than the combined sport development and member services figures, which add up to 27.1%.  I think it’s possible to argue that the championship series is absolutely providing a valuable service to some of USAU’s members, but not necessarily all of them.  And in fact, I could easily argue that some of the structural changes that USAU has made to that series to make it more competitive have disenfranchised a number of players/teams and have effectively gutted the women’s division.  I see far fewer women’s teams at sectionals than I did ten years ago.  As far as sport development of the women’s game is concerned, I think we’re going backwards.

So I think it’s worthwhile to have a conversation about where USAU is choosing to allocate its funds, even if we have to do that without benchmarks from other similar organizations.  But it’s impossible to have that conversation without transparency and real, representative numbers, and that’s the critical piece that’s gotten lost in this argument between MLU supporters and USAU supporters.  Regardless of what you think USAU’s priorities should be, it’s impossible to argue for or against USAU’s current priorities with obfuscated numbers and a lack of organizational will to have a conversation.

So by all means, let’s argue the pros and cons of betting on a championship series and Triple Crown Tour to do the heavy lifting of growing the sport. Let’s talk about whether it makes sense to fund programs abroad.  Let’s talk about where to spend the money to get the biggest bang for the buck.  Let’s have the conversation–but let’s be transparent about it.  USAU’s membership deserves that.

And you may not like the way they went about it, but you have to give credit to MLU, at least they got the conversation started.

[** This sentence originally stated that we know USAU pays for ESPN coverage, but as a reader pointed out, we don’t know for sure that USAU pays for ESPN coverage because no details have been shared about the contract.  It’s entirely possible that USAU is actually paid for the rights to air the games.  But again, USAU won’t share the details, so we just don’t know.  It’s also possible that there’s a clause in their contract with ESPN that says they can’t share details, and if so, why not tell the membership that’s the reason for the secrecy?]

Sources:

[1] USA Ultimate 2012 Form 990 – Part III

[2] USAU Annual Report, Page 54

[3] USAU 2012 Form 990 – Part IX

[4] USAU 2012 Form 990 – Part I

[5] USAU Annual Report, Page 54

[6] USAU Annual Report, Page 54

[7] USAU 2012 Form 990 – Schedule J

[8] USAU Annual Report, Page 54

[9] USAU 2012 Form 990 – Part IX

[10] USAU 2012 Form 990 – Part III

[11] Ibid.

[12] Ibid.

8 Comments

Got something to say? Feel free, I want to hear from you! Leave a Comment

  1. Question says:

    How can you claim USAU spent $285,000 on ESPN in 2012 when USAU had no partnership with ESPN until 2013. Clearly that unexplained amount in 2012 is most definitely not money paid to ESPN. It seems like you’re making false assumptions based in incorrect interpretation of data.

    • Sam says: (Author)

      That’s a good point. So it’s not ESPN coverage. But the question still remains–what is it? It’s still a decent amount of money for which the use is unclear. That’s all I’m saying.

  2. Insurance says:

    I think the “player fees” number might be the insurance costs that USAU pays for the coverage it offers to all sanctioned events. (As it’s charged on a per member basis normally.

    • Sam says: (Author)

      You may be onto something here. There is a line item for insurance ($72,507) in Part IX of the return, but that could easily be insurance on property or any other number of things. But why not just call it player insurance then?

  3. calvin says:

    Transparency is a good thing. Let’s compare USAU’s detailed accounting books to MLU’s detailed accounting books. Crickets expected.

    • Sam says: (Author)

      I agree that it would be fun to get a look at MLU’s books, but doing an apples to apples comparison between MLU and USAU would be just as difficult as comparing USAU to US Lacrosse or USA Hockey. They have fundamental structural differences in that USAU, as a non-profit membership-based entity, is responsible for creating value for its members, and MLU, as a for-profit entity, is responsible for creating value for its investors.

  4. Cite your source? says:

    “We know that USAU pays for ESPN coverage,”

    How do you know that? Can you cite your source, or is that just another incorrect assumption stated as fact? I have heard conflicting information, but yours is the first statement I’ve read that definitively states USAU is paying ESPN. Just curious if you can confirm this.

    • Sam says: (Author)

      You’re absolutely right, and this was purely speculation on my part. I have amended that sentence above (and added a footnote) to address that issue. (That’s why I need the editor of the magazine I write for to edit my personal blog, too. She would never have let me get away with such unsubstantiated journalism!) It’s entirely possible that USAU is actually paid for the rights to air the games, but again, we just don’t know because they’ve been so tight-lipped about it. My guess is that’s it’s a little from both columns–ESPN pays them for the rights, but USAU pays some portion of the production costs. I doubt it’s an even trade. But again, that’s just my speculation.

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