Article
The importance of NCAA Agreed-Upon Procedures and the impact of NIL legislation changes
Jun 02, 2025 · Authored by Susan Maloney, Alyssa Mondl
In the realm of collegiate athletics, financial transparency and compliance are paramount. The NCAA's Agreed-Upon Procedures (AUP) play a crucial role in ensuring that member institutions adhere to standardized financial reporting practices. These procedures are not just a compliance exercise; they are essential for maintaining the integrity and sustainability of athletic programs, strategizing for the future and ensuring accuracy of information used to calculate revenue sharing. Additionally, the evolving landscape of Name, Image and Likeness (NIL) legislation presents new challenges and opportunities for colleges and universities. This article explores the significance of NCAA AUP and the potential ramifications of changes in NIL legislation.
Understanding NCAA Agreed-Upon Procedures
The NCAA requires member institutions to submit annual financial data, which is reviewed by an independent public accountant according to the NCAA AUP guidelines.
- This process involves a thorough examination of revenues, expenses and capital related to intercollegiate athletics. For Division I schools, AUP engagements are required to be conducted annually, while Division II schools undergo these procedures at least once every three years
- Division III schools have the option to submit financial data annually or provide the EADA (Equity in Athletics Disclosure Act) Certificate of Completion
- The primary objective of these procedures is to ensure accuracy and consistency in financial reporting. By adhering to AUP, schools can demonstrate accountability to stakeholders, ensure accuracy in their financial reporting process and identify opportunities for improvement. This transparency is vital for maintaining trust among students, parents, alumni and the broader community
Why AUP is important to universities
- Financial integrity: AUP helps institutions maintain accurate financial records, which are essential for budgeting, planning and decision-making. Accurate financial data allows schools to allocate resources effectively and ensure the long-term viability of their athletic programs
- Compliance and accountability: Adhering to AUP ensures that schools comply with NCAA regulations, reducing the risk of penalties and sanctions. It also fosters a culture of accountability, where institutions are held responsible for their financial practices
- Benchmarking and improvement: The data collected through AUP allows colleges and universities to compare their financial performance with other institutions. This benchmarking can highlight strengths and weaknesses, including internal control structures, thereby enabling schools to implement best practices and improve their operations
- Stakeholder trust: Transparency in financial reporting builds trust among stakeholders, including students, parents, alumni and donors. When stakeholders have confidence in a school's financial integrity, they are more likely to support its athletic programs
Ramifications of NIL legislation changes
The landscape of collegiate athletics is undergoing a significant and swift transformation with the advent of NIL legislation. Student-athletes' ability to profit from their name, image and likeness has introduced new dynamics into the world of college sports. While this change is largely seen as a positive step towards athlete empowerment, it also brings several challenges and implications for schools, including changing student needs around understanding income tax reporting, sponsorships, endorsements and social media.
NIL legislation
In June 2021, the U.S. Supreme Court's decision in NCAA v. Alston marked a turning point by striking down the NCAA's restrictions on athletes profiting from their NIL. This decision led to a patchwork of state laws and individual school policies, creating an uneven playing field in college athletics. Colleges and universities must navigate these varying regulations while ensuring compliance and fairness.
On May 23, 2024, the NCAA agreed to a revenue-sharing model allowing member institutions to distribute payments to Division I athletes who have played since 2016. A number of issues related to the settlement are still being legislated, but if approved, this historic change could significantly alter the way the NCAA enforces and administers NIL rules.
The impending changes in NIL legislation, particularly the House v. NCAA settlement, are set to further reshape the collegiate sports landscape.
- This settlement will distribute over $2.5 million to former players, create a revenue-sharing model and establish more oversight on NIL payments
- Schools, especially those in Division I, must be prepared to adapt to these changes
Revenue sharing:
The settlement introduces a revenue-sharing model, allowing colleges and universities to compensate student-athletes directly. This shift requires schools to manage new financial obligations and ensure compliance with the settlement terms.
- Increased oversight: With more oversight on NIL payments, colleges and universities must implement robust systems to track and report NIL activities. This increased scrutiny can help prevent abuses and ensure fair compensation for athletes
- Competitive balance: The varying NIL regulations across states and institutions can impact competitive balance. Schools in states with more lenient NIL laws may have an advantage in recruiting top talent. This disparity could lead to calls for federal legislation to standardize NIL practices
- Financial strain: The financial implications of NIL legislation can strain school budgets. Institutions must find ways to balance these new expenses while maintaining support for other athletic and academic programs
NCAA guidelines update
The NCAA AUP guidelines are issued annually to guide accounting firms in the current requirements for testing financial reporting. The 2025 guide is expected to be issued in June 2025. Stay tuned for additional information related to NIL and its impact on revenue and expense reporting.
Conclusion
The NCAA Agreed-Upon Procedures are vital for ensuring financial integrity and accountability in collegiate athletics. As institutions navigate the complexities of NIL legislation, they must remain vigilant in their financial practices and adapt to new regulations. By doing so, they can uphold the values of transparency and fairness, while empowering student-athletes to benefit from their name, image and likeness.
How Baker Tilly can help
Baker Tilly has a dedicated and specialized higher education team with deep knowledge of NCAA financial reporting standards and experience with AUP engagements. Connect with us today to discover how we can assist your institution.
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