I am guessing the idea behind this process is this:
Sending a person to the Olympics just so s/he can say, "I was an Olympian" is meaningless. AC only wants to spend the $ to send an athlete if they think they have a decent chance of making an meaningful impact, and placing in the race.
If they roughly budget for 12 athletes and only 4-5 qualify, what do they do with the rest of the money? I am guessing they do not have a big party with it. Does it go to promote more promising athletes? Do they just keep it?
I am sure there are many instances where they will not pay for athletes. The relationship sounds contentious.
Maybe letting the athlete w/ the Olympic standard is the solution. If you want to show up at the Olympics, perhaps they should say, "Be my guest!"
However, when I read the results from Stanford, or Mt. SAC, and see guys who flew across the country to run 14:20, I have to think, "Really? You couldn't do this at a regional meet?" I am sure the same discussions go on at AC.