The University of Hawaii “should find a way to eliminate or forgive” an accumulated net $9.58 million athletic deficit because “the department may incur a new loss every year due to soaring costs to operate a quality Division I-A athletic program,” according to an operational review by an outside consultant.

The recommendation was contained in a 17-page report compiled by Gary Cunningham, a former athletic director at Wyoming, Fresno State and UC Santa Barbara. Cunningham was commissioned in 2009 by the UH Office of Internal Audit at the request of the state Legislature and paid $10,000 for the report, UH said.

A copy of the report was obtained under the state’s open records law.

UH athletics has run at a deficit eight of the past nine years but is pledged to narrowing the gap for the fiscal year that ends June 30, 2011.

Still, the report maintains “given the many unique challenges” UH faces and, “having scrutinized the data and fiscal challenges facing the athletics department leads me to conclude that there is no way for the athletics department to be competitive in Division I-A athletics in the future unless budgeted expenses are increased and the university accepts the fact that to be competitive there will be an annual generated net loss.”

Said Manoa chancellor Virginia Hinshaw: “Our goal has been to eliminate the annual deficit then start reducing the accumulated deficit created during  the last decade. The university has continued to face reducing state support during the recession so ‘eliminating or forgiving’ the deficit remains challenging.”

The report notes UH self-generated 81 percent to 84 percent of its revenue for fiscal years 2008 and ’09, well ahead of Mountain West and Western Athletic Conference members, who averaged 50 percent. In addition, Cunningham wrote, “Within the context of the unique fiscal challenges (UH) faces, the program is operating at a smaller annual generated net loss than most NCAA Division I-A programs.”

The report said the “athletic department’s top-level administration is outstanding,” but said athletic director Jim Donovan’s “biggest challenge lies in dealing with the accumulated deficit.”

Donovan said, “We recognize there are some of the worst economic times and our goal remains the same, to do as the Regents have asked and run more like a business. Our plan is still to move forward and operate a balanced budget and pay back down the deficit over time. At some point, any assistance we could get would be greatly appreciated.”

In the meantime, Cunningham said cutting back UH’s 19-program offering is not a realistic option:

“Reducing sponsored sports is not a solution and could have a profound effect on meeting Title IX requirements. Also, cost saving from reducing the number of sponsored sports is (a) temporary solution to a long-term problem.”