USA Swimming Lost $17M in Net Assets, Ran $10M Operational Deficit in 2022

by Riley Overend 131

December 13th, 2023 National, News

USA Swimming’s net assets plummeted in 2022 from $39,250,078 to $21,583,773 — a loss of $17,666,305, or 45% — according to a troubling tax return released last Wednesday.

A significant chunk of that decline came from $7.48 million of “unrealized” investment losses, meaning they haven’t been sold yet and only exist on paper, for now. USA Swimming and the USA Swimming Foundation reported $8.79 in net investment losses (including interest and dividends) last year as the value of their long-term investments tanked from $63.06 million to $46.48 million, according to an independently audited financial statement.

It is SwimSwam’s understanding that USA Swimming’s investment portfolio is managed by two outside investment firms, Sterling Capital Management and First Western Trust, with oversight by the Investment Committee.

USA Swimming and the USA Swimming Foundation had more than $50 million in total financial assets available to management to meet cash needs for general expenditures within one year at the end of 2021. But by the end of 2022, that number was down to $33.35 million.

With expenses totaling $49.31 million and revenue at $29.22 million last year, USA Swimming and its Foundation together lost more than $20 million in net assets in 2022, from $62.78 million to $41.28 million.

In June of this year, USA Swimming had just $2.3 million in cash and cash equivalents at the end of June to cover $3.3 million in operating expenses for the following month.

USA Swimming’s Net Assets by Year

  • 2022: $21,583,773
  • 2021: $39,250,078
  • 2020: $36,721,772
  • 2019: $31,531,691
  • 2018: $31,041,574
  • 2017: $36,309,387
  • 2016: $34,240,740
  • 2015: $34,906,220
  • 2014: $34,684,036
  • 2013: $18,625,597
  • 2012: $17,067,685
  • 2011: $16,484,010

Perhaps even more concerning than USA Swimming’s net assets being cut almost in half was the fact it ran a $10 million operating deficit last year, the highest on record by a wide margin dating back to 2011 (the next-highest operating deficit was $2.6 million in 2019).

USA Swimming’s Net Income (Revenue Minus Expenses) by Year 

  • 2022: ($10,188,165)
  • 2021: $463,922
  • 2020: $4,637,580
  • 2019: ($2,601,301)
  • 2018: ($2,120,003)
  • 2017: ($1,279,913)
  • 2016: ($870,772)
  • 2015: $277,622
  • 2014: $390,406
  • 2013: $567,805
  • 2012: $994,719
  • 2011: $504,672

(Note: Parentheses above indicate deficits.)

The organization made more revenue last year than 2021 ($37.31 million vs. $36.99 million), but expenses spiked from $36.53 million to $47.5 million. A few line items stood out in particular.

Most glaringly on the 990, USA Swimming’s legal expenses skyrocketed from $264,859 to $6,146,656 — more than the past nine years combined. Legal costs have exceeded a million dollars only one other time over the past decade, and it was just $1,052,030 back in 2014. Insurance expenses also nearly doubled last year from $3,613,622 to $6,895,284.

Related (From 2020):

USA Swimming’s Legal Expenses by Year

  • 2022: $6,146,656
  • 2021: $264,859
  • 2020: $808,259
  • 2019: $436,780
  • 2018: $706,952
  • 2017: $302,035
  • 2016: $475,204
  • 2015: $579,485
  • 2014: $1,052,030
  • 2013: $930,300

Money spent on “business affairs” tripled from $3,504,929 to $10,791,919 last year, according to the independently audited financial statement. Part of that was $3.2 million of insurance being listed in the category unlike previous years. But a big portion was attributed to “professional fees and honoraria,” which took $6.15 million for business affairs after only spending $2.16 million on that category in 2019. According to Corporate Finance Institute, honoraria are payments for services rendered voluntarily, such as compensating a guest speaker or workshop leader. There is not a separate category for legal expenses in the independently audited financial statement as there is in the 990.

Coming out of the Olympic year, National Team spending was down more than a million dollars from $9,834,834 to $8,394,345, and direct athlete support was down from $4.06 million to $2.99 million. However, total program services spending was up more than two million dollars between USA Swimming and its foundation largely because investment in “sport development” nearly doubled from $4,578,544 to $8,810,946. A full breakdown of “sport development” expenses can be found in the independently audited financial statement; there is not a separate line for the rollout of the new SWIMS project, but that technology upgrade was rumored to have cost millions of dollars.

Partnership marketing revenue for USA Swimming and its Foundation decreased by more than $1 million last year from $5,969,231 to $4,799,153.

USA Swimming CEO Tim Hinchey was compensated $973,463 last year, down slightly from his $1,037,208 total in 2021. His base salary increased from $640,566 to $655,318 despite the overall company losses, but he received a bonus of $236,205 compared to $325,000 in 2021.

The good news for USA Swimming was that membership income increased by more than $5 million — from $18,172,313 to $23,234,255 — bringing it back above pre-pandemic levels ($22,481,679 in 2019). It is important to note that membership dues have also gone up over the past few years, from $62 in 2019 to $84 in 2022 for a premium package and from $10 in 2019 to $30 in 2022 for the flex plan. That explains why the membership revenue has increased, even as membership registration has declined.

The bad news, of course, is that USA Swimming’s membership revenue gain hardly made a dent in the organization’s ballooning expenses.

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Popeye
2 months ago

It’s gonna be over soon. Either blow the whole thing up or switch memberships to the AAU. One way or another USA Swimming is headed for bankruptcy and all the executives their enablers on the board are getting what they deserve. I feel sorry for all the clubs, athletes, coaches and volunteers that had full hearts and got used and had to pay for the corruption of Chuck Wielgus, Tim Hinchey, Pat Hogan, John Leonard, Susan Woessner and all their enablers that served on the board and enjoyed the lavish perks and wearing their blue sportcoats.

DP Spellman
2 months ago

I was a multi year delegate to the USA Swimming convention for my LSC (in various roles) over a 21 year span.
What struck me as odd, more than a few times, was it was standard practice for the organization to lose large amounts of money for 2 to 3 years every Quad budget plan. There was little planning in those budgets for any major crisis situations (like multiple lawsuit settlements or a pandemic) and the organization, like other NGBs, banked on a large membership bumps after every Olympic Games.
The “Phelps Effect” started to wear off after Rio 2016 while the lawsuits just kept coming. Then the pandemic started and with a delayed Olympics there was a… Read more »

Anonymous
2 months ago

The cost of dealing with perverts?

Nick
2 months ago

As noted in other comments, we don’t have all of the facts (yet). But before everyone gets on the “lynch Hinch” bandwagon, keep in mind that the settled lawsuits may be for events pre-dating Hinchey’s tenure. It might therefore be inappropriate to make him the fall guy for prior misdeeds.

ZThomas
Reply to  Nick
2 months ago

I agree. And think about how difficult this is. Huge losses due to things that occurred under previous leadership that cannot be discussed to protect the victims identities.

oxyswim
Reply to  Nick
2 months ago

The problem with that is USA Swimming is incredibly opaque. They’ll never speak to when these lawsuits were from or what happened to have that degree of losses on investments. Regardless of that no CEO should be awarded a bonus like that when the organization they run is in the tank.

This Guy
Reply to  Nick
2 months ago

The settlements, market losses on investments and spending for SWIMS was of course none of his doing. I think the big issue a lot of people have is the fact that the entire organization is completely silent, hoping that this goes away.

Their investments have probably followed the market and have regained a good chunk of what was shown as a loss and the one time costs of settlements and tech investments should not be reoccurring. Why can’t they come out and lay even the slightest amount of information to it’s paying members? 2022 sucked, we get it. What are they doing now to mitigate and set themselves up for future success? Just be honest with people. Didn’t the… Read more »

Solando
Reply to  Nick
2 months ago

Maybe this is a stupid question but don’t individual clubs and universities bear some of the burden of these lawsuits rather than it all falling to USA swimming which may be very far removed from direct oversight of these horrible individuals? Clubs who hire and protect and enable them should be getting held responsible for their bad choices. Not just the governing body. Are these lawsuits all Larry Nasser situations where the offender is directly employed by USA Swimming?

zThomas
2 months ago

One correction: just because the amount invested in securities went down $10M, that does not mean they had an investment loss of $10M. You need to account for distributions (and contributions) to the fund to determine the funds gains (or losses in 2022). The endowment fund went from $19.9M to $16.4M with net distributions of $458K. The investments lost $3M not $10M. I think the other $7M of decline in securities comes from taking distributions to cover operational losses. Don’t bury the lead. This report sucks because of the decades of negligence in regards to safe sport.

Admin
Reply to  zThomas
2 months ago

The endowment fund is not the totality of the organization’s long-term investments. It’s a piece that’s been designated by the donors or by the board to go into the endowment.

But you’re right, it is a bit opaque.

zThomas
Reply to  Braden Keith
2 months ago

I really think you should correct that part of the article, though. Because you are implying that those management companies lost USA swimming a larger percentage of principal than they actually did. Saying that as a friend of the site (even subscribed to the mag for my swimmer!).

Pescatarian
Reply to  zThomas
2 months ago

Agree with the last sentence 100%.

Taa
Reply to  zThomas
2 months ago

Read page 16 of the audited statements. Net investment income(loss) for the year is ($8.8)M this includes interest and dividend income. Beginning of year investment asset balance is $63M but end of year is $46.5M. Probably most accurate return calc is $8.8/$55M or a loss of 16% based on avg asset balance for the year.

ZThomas
Reply to  Taa
2 months ago

Right – the audited report is the foundation plus the orgs funds together. My figures at the top of this thread refer to the orgs 990.

Angello J Malefakis
2 months ago

Plain and simple the organization is run by amateurs! Except for the US Olympic Trials that were held in Omaha, the rest of the meets are held in hideous facilities and run by amateurs! The US Open in Charlotte. Look at that facility? Katy Ledecky deserves better than that! USA Swimming should be in facilities holding 10k minimum! Anything less than that should be managed by local clubs! Swimming is a great sport! We have great athletes! They deserve a showcase facility! Not 🚫🚫🚫 some small, small, small venues! Small venues don’t bring the income and the excitement in the sport!

RealSlimThomas
Reply to  Angello J Malefakis
2 months ago

A lot to unpack here.

  1. Trials in Omaha were held in a basketball arena. It’s unrealistic to expect USA Swimming to put on an event such as that as frequently as you might want or expect. I think they consider travel and local accommodations (hotels, restaurants, etc) when they select pools, but there are still people who complain in the comments..so I am not too sure.
  2. It’s Katie not Katy. I imagine most of your downvotes were purely because of that typo.
  3. Holding 10k at minimum is nice but I don’t think there are many facilities that can without temporary bleachers that remove deck space. Personally, I don’t think a winter US open meet can fill 10,000 seats anyway.
… Read more »

Mrs-uh-whiggens
Reply to  Angello J Malefakis
2 months ago

Last edited 2 months ago by Mrs-uh-whiggens
View From The Bottom
Reply to  Angello J Malefakis
2 months ago

There are zero permanent facilities in the United States that seat more than 5,000 spectators, let alone 10,000. The IU Natatorium is the largest permanent facility with a capacity (I believe) of around 4,250. If USA Swimming were to hold more events requiring temporary setups, it would just increase the annual expenses. Not necessary, and not going to happen.

Agree to disagree
Reply to  Angello J Malefakis
2 months ago

Having worked for SwimMAC for several years, I think MCAC is an awesome venue to host Olympic athletes and it’s very well run and a fun event downtown in one of the best cities. There’s a reason it’s a tradition meet and they keep coming back. It’s a legendary place.

SwimNC
Reply to  Agree to disagree
2 months ago

I don’t think a single swim parent would agree. MCAC may be well run but it has horrible spectator seating. The concrete bleachers are poorly spaced so that you can only sit every other row, unless you sit on the feet of the person behind you.

2 months ago

The sting from the bitcoin bubble was painful.

PineappleNoMore
Reply to  Mark Rauterkus
2 months ago

Do you know if any of their investments were in crypto? I would be shocked if a nonprofit had significant investments in a speculative asset class that doesn’t generate cash flows. It makes more sense (off the cuff, without knowing specifics) for them to have bond holdings – and bond markets have had a rough go with rising rates. The big banks are carrying massive unrealized bond losses right now, and I wouldn’t be shocked if a lot of investment committees for nonprofits got caught in similar situations. I haven’t read the reports yet, so I’m just speculating.

Anony
2 months ago

Curious about how the bonus amount is calculated. Even 200k plus seems excessive given how poor the results were and some of the trend lines.

About Riley Overend

Riley is an associate editor interested in the stories taking place outside of the pool just as much as the drama between the lane lines. A 2019 graduate of Boston College, he arrived at SwimSwam in April of 2022 after three years as a sports reporter and sports editor at newspapers …

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