Meeting of the Board of Visitors Finance Committee
September 17, 2015
Agenda
I.
CONSENT AGENDA
• 2016-2022 State Six Year Plan for the Academic Division
II. ACTION ITEMS
• 2016-2018 Biennial Budget Operating Amendments and Revisions to the
2016-2018 Capital Program
III. REPORTS
A. Organizational Excellence Vision and Progress
B. UVIMCO Report: Long-Term Pool Market Value and Performance as of June
30, 2015
C. AAU Salary for Full-Time Instructional Faculty
D. Unaudited Academic Division Financial Report for Year Ending June 30, 2015
2
2016-2022 STATE SIX-YEAR PLAN FOR
THE ACADEMIC DIVISION
PAT H O G A N
E X E C U T I V E V I C E P R E S I D E N T A N D C H I E F O P E R AT I N G O F F I C E R
2016-2022 State Six-Year Plan
• 16 Strategies/Priorities reviewed with Board in June
• Aligns with Cornerstone Plan and Multi-Year Financial Plan
• Advances objectives in the Statewide Strategic Plan and the Higher
Education Opportunity Act
• State Comments:
– Provide information about the University’s involvement with the higher education
centers. Please include information such as courses offered, enrollment information,
course completions, collaborations, etc.
– Provide more detail about the methodology used to establish the guaranteed fouryear tuition prices.
• Final submission due October 1
4
Discussion Questions
• Is there additional information you need to be informed about
our Six-Year Plan submission to the state?
• Do you have specific questions about the feedback provided by
the state?
5
2016-2018 BIENNIAL BUDGET
OPERATING AMENDMENTS AND REVISIONS TO
THE 2016-2018 CAPITAL PROGRAM
C O L E T T E S H E E H Y, V I C E P R E S I D E N T F O R M A N A G E M E N T & B U D G E T
D O N N A H E N R Y , C H A N C E L L O R O F T H E C O L L E G E AT W I S E
2016-18 Biennial Budget Requests
• Requests are for General Fund support from the State, as part
of the Governor’s budget development process for the next
biennium.
• Align with the Cornerstone Plan and the State Six-Year Plan.
• Resolution grants authority to resubmit requests to the General
Assembly in January, after the Governor’s budget is presented
in December.
7
2016-18 Biennial Budget General Fund Requests
Academic Division
Operating Request (in millions)
FY2016-17
Undergraduate Enrollment Growth
FY2017-18
$5.10
$5.63
$7.00
$10.00
$2.00
$2.75
$11.00
$10.00
$2.00
$2.75
$7.77
$5.24
$10.50
$6.50
Blandy Farm – Support for preK-12 Outreach Efforts
$.07
$.07
Virginia Foundation for the Humanities
$.50
$.50
Building Research Capacity
Faculty Start-up Packages (Equipment Trust Fund)
Faculty Retention
Pan-University Research Teams
Commercialization Seed Funds
Information Technology Security
HR Service Delivery Transformation Enabling Technology
Line item language for Center for Politics
Total
N/A
$45.69
N/A
$43.69
8
2016-18 Capital Program Revisions – Academic Division
Capital Program Revisions (in millions)
Thornton Hall Clean Room Renovation
Center for Human Therapeutics
Medical Research Building #4 (MR4) Renovation, Phase I
Blandy Experimental Farm
Greenhouse Replacement
Residential Housing Expansion
Total
Project Cost
Source
$18.00
State
$9.00
State
$21.50 State;
$43.00 $21.50 Indirect
Cost Recoveries
$.92
$.65
Gifts
Gifts
$71.57
9
2016-18 Biennial Budget General Fund Requests
College at Wise
Operating Request (in millions)
FY 2016-17 FY 2017-18
NMR for Chemistry Accreditation
$.52
-
Enrollment Growth
$.08
$.16
Retention and Graduation
STEM Early College Academy and High Need (STEM-H)
Degrees
Federal Mandates
$.17
$.19
$.16
$.16
$.31
$.35
Outreach
$.04
$.04
Undergraduate Research
$.03
$.03
$1.31
$0.93
Total
10
Discussion Questions
• Is there additional information you would like to see regarding
our submission to the state?
• Do you have specific questions about any of the operating
amendments?
• Do you have specific questions about any of the capital
projects?
11
ORGANIZATIONAL EXCELLENCE
VISION AND PROGRESS
PAT H O G A N
E X E C U T I V E V I C E P R E S I D E N T A N D C H I E F O P E R AT I N G O F F I C E R
Organizational Excellence
Established in the Cornerstone Plan as a means of increasing
operating efficiencies and effectiveness
Purpose: To enable institutional strategic goals and priorities
through resource alignment and optimization
Outcomes:
• High quality and performance through best-in-class service
models and processes
• Service-oriented, collaborative, innovative culture
• Reinvest in core mission
• $150 million in savings over seven years
13
Organizational Excellence Framework – “The Design”
Best-in-Class Services and Processes
Standard Practices and Policies
IT Enablement
Key Performance Indicators
Continuous
Improvement
Collaboration
Unit Alignment
Shared Resources
Innovation
Centers of Excellence
Shared Governance
Productive Partnerships
Performance Excellence
Measures for Continuous Success
Return on Investment
Right Sourcing
14
Assessment of Opportunities
Key Cross-Functional Findings
• 2014 Benchmarking Study of Key
Support Functions with External
Consultant
Structure: 1/3 FTEs central; 2/3 FTEs distributed.
Highly fragmented roles create overlap and many
duplicative efforts
– Assessment of costs, structure and,
performance
Costs: Large labor portion, underinvested in
technology, little outsourcing
– Examined 90 processes
Activity: High volume of transactional activity in
Finance, HR, Procurement
• IT, HR, Finance, Procurement, Research
Administration, Student Services
Enabling Technology: Limited
• Surveyed Deans about priorities
required of these functions
Service-orientation: Gatekeeper/ administrator,
rather than valued partner, volume of processing
overtakes analytical capabilities
• Alignment with Strategic Plan
Initial areas for focus: Human resources, research
administration, procurement
15
Organizational Excellence Portfolio Roadmap
2013
Human Resources
Finance
Prioritize Opportunities
2020-2022
Procurement
Information Technology
Research Administration
Other Key Initiatives
Path to
Transformation
Process/Service
Improvements
Enabling
Technology
Service Delivery
Enterprisewide
Administrative
Function
Transformation
High-quality,
effective, efficient
service delivery
models
Organizational
Design
16
Human Resources Function
2018
2013
Process
Improvements
Integrated Transformation
Service Delivery Model; Enabling Technology; Organizational Design
2020
Major Initiatives
Manager Development
•
Strengthen the leadership competency of managers within
an effective organizational design strategy, including span
of control
Early Retirement Incentive Program
•
Providing management tools to restructure roles and
optimize staffing levels
Service Model Transformation – HR
Strategic Design Initiative
•
Transforming to a future-state model that delivers highly
effective and efficient services across the academic
division and health system
Aligning staffing levels and skills sets to enable the new
service delivery model
Business case supports quality and efficiency gains of 2530%
•
•
17
Finance Function
2013
Enabling Technology
Organizational
Design
Process Improvements
Service
Delivery
2020
Major Initiatives
Managerial Reporting
•
Providing access to accurate, consistent, accessible and
reliable data and reporting to inform decision-making
Gift Processing
•
Redesigning processing of gifts for accuracy, efficiency, and
timeliness
Creating a Center of Excellence
•
Service Model Transformation
•
•
Transforming to a future-state model that delivers highly
effective and efficient services
Aligning staffing levels and skills sets to enable the new
service delivery model
18
Procurement Function
2017
2013
Service Delivery
Process/service
Improvements
Organizational Design
2020
Major Initiatives
Strategic Sourcing
•
•
•
Travel and Expense Management
Increasing strategic sourcing strategy for volume discount
pricing; multi-year road map developed for 10 commodities
Participating in state-wide procurement cooperative
Savings of 5-15% per commodity
•
Redesigning and streamlining travel and expense processes
for simplification, automation, enhanced safety and
compliance and better pricing
•
Conducting a comprehensive unit review with a self-study
and review by an external group
Resulting in prioritized recommendations for quality,
efficiency and effectiveness
Administrative Unit Review
•
Service Model Transformation
•
•
Transforming to a future-state Center of Excellence model
that delivers highly effective and efficient services
Aligning staffing levels and skills sets to enable the new
service delivery model
19
Information Technology Function
Service
Improvements –
Standardize/Centralize
2013
Organizational Design
2022
Service Delivery
Major Initiatives
Major Technology Refreshes
•
Implementation of Core Network Refresh, VoIP, and Wireless
Refresh for enhanced performance
Improved Service Delivery &
Secure Environment
•
Transforming to a future-state model that delivers highly effective
and efficient services
Aligning staffing levels and skills sets to enable the new service
delivery model
Implementing a Security Enhancement Program
Improving incident management and change management
Standardizing and automating management of central IT systems
•
•
•
•
Email and Server
Consolidation/Virtualization
•
•
Consolidating central email systems and centralizing management
of department servers
Virtualizing servers, where appropriate
20
Research Administration Function
2017
2013
Integrated Transformation
Enabling Technology; Service Delivery Model; Organizational
Design
2020
Major Initiatives
Research@UVa
•
•
•
Service Model and Design
Transformation
•
•
•
Providing faculty with one-stop portal to view awards and status
and access to related systems
Implementing a streamlined workflow process for electronic
proposals
Increasing access to data and analytical capacities
Transforming to a future-state model that delivers highly
effective and efficient services
Aligning staffing levels and skills sets to enable the new service
delivery model
Delivering increased value to faculty and staff while decreasing
administrative burden
21
JLARC Recommendations
Beyond significant internal strides made, the work of Organizational
Excellence also addresses the recent JLARC recommendations:
 Review organizational structure and identify opportunities to streamline.
 Reduce unnecessary supervisory positions and promote broader spans of
control.
 By focusing on unit alignment, management layers and span of control, goal
is to increase span of control from 3.5 to 4.5 by 2017, significantly reducing
number of managers with fewer than three direct reports.
 Maximize standardization of purchases and use of institution-wide contracts.
22
Discussion Questions
• How often and at what level of detail would the Board of
Visitors want to see milestone updates?
• Are there other near-term opportunities we should assess?
23
UVIMCO R EPORT
L ONG -T ERM P OOL M ARKET V ALUE AND
P ERFORMANCE AS OF J UNE 30, 2015
L AWRENCE KOCHARD
CHIEF EXECUTIVE OFFICER/CHIEF INVESTMENT OFFICER
Outline
– Governance and Staffing
– Performance Review
– Asset Allocation
– Risk Management
25
Governance and Staffing
Board of Directors




12 members led by David MacFarlane as Chair, three appointed by the BOV, and
one by the President
BOV representatives are Mac Caputo, John Harris, and John Macfarlane
President’s representative is Pat Hogan
Meets four times a year
Staff



38 UVIMCO team members
Investment team comprised of CEO/CIO, six Managing Directors, three Associates,
three Senior Analysts, and two Analysts
New senior staff members:
•
•
•
Lindsay Larsen, Managing Director
Steve Peterson, Managing Director of Risk & Asset Allocation
Melanie Davis, Managing Director of Marketable Alternatives & Credit
26
Performance Review
As of June 30, 2015
Long Term Pool
Policy Benchmark
Equity
Public
Long / Short
Private
Total Equity
MSCI All Country World Equity
Real Assets
Real Estate
Resources
Total Real Assets
MSCI Real Estate
Fixed Income, Cash & MAC
Marketable Alternatives and Credit
Government Bonds
Cash & Currency
Total Fixed Income, Cash & MAC
Barclays Aggregate Bond
Portfolio Overlays
Market Value
$ Millions
%
1 YR
3 YR
Annualized
5 YR
10 YR
20 YR
7,528
100.0
100.0
7.7
1.9
13.3
9.8
13.7
10.0
10.1
6.5
12.2
7.2
1,691
1,794
1,415
4,899
22.5
23.8
18.8
65.1
60.0
7.2
6.4
25.8
12.0
1.2
18.6
11.6
23.9
17.4
13.6
18.7
11.5
22.9
17.2
12.5
12.5
9.1
14.9
12.2
7.0
12.3
10.5
21.7
14.6
7.1
496
278
774
6.6
3.7
10.3
10.0
21.8
(21.2)
3.0
3.3
14.9
1.6
9.6
8.2
12.2
12.2
14.2
12.9
(1.2)
15.1
8.4
5.9
3.9
-11.1
8.5
9.9
9.0
5.6
24.6
30.0
0.1 0
(2.4)
0.7
0.0
(0.8)
2.4
(0.2)
9.0
0.4
0.0
4.3
2.5
--
7.9
0.4
0.1
4.1
3.5
--
6.5
4.0
-5.3
4.4
--
7.2
6.3
-6.8
5.7
--
747
679
425
1,851
4
27
Performance Review
Annualized Returns of the Long Term Pool Versus Benchmarks and Peers
Periods Ending June 30, 2015
1 YR
3 YR
5 YR
10 YR
20 YR
Long Term Pool
7.7
13.3
13.7
10.1
12.2
Policy Portfolio Benchmark
1.9
9.8
10.0
6.5
7.2
Comparative Industry Data
(1)
TUCS All Master Trusts Top Quartile
TUCS All Master Trusts Median
TUCS All Master Trusts Bottom Quartile
4.0
2.9
1.7
11.3
9.9
8.1
11.3
10.3
8.6
7.1
6.6
5.9
8.6
7.9
7.4
(1)
Trust Universe Comparison Service (TUCS) reports performance of over 800 institutions representing $3.6 trillion in assets under management.
28
Asset Allocation
As of June 30, 2105
29
Risk Management
• Risk is the likelihood of a random, undesirable outcome
– For the University of Virginia, risk is the impact that a portfolio
loss may have on the operations of the institution
– Short term – volatility in payout from the endowment
– Long term – decline in the real value of the endowment
– Trade-off between short term and long term risk
– We bear risks only if doing so generates higher long-term returns
– Types of Risk: Market, Manager, and Liquidity
– Risk Committee
30
Liquidity Risk
 Defined as an inability to meet any of the following four primary
liquidity requirements:
•
•
•
•
Redemptions and payouts for the University and foundations
Capital calls from our private managers
Rebalancing efforts
The ability to deploy cash opportunistically as new investment opportunities arise
 We manage liquidity risk by:
•
•
•
Maintaining a portfolio of Treasury bills and bonds
Maintaining sufficient liquidity within our public equity and hedge fund managers
Managing the pace of commitments to private investments
 Liquidity constraints are re-assessed annually as part of the
Investment Policy Statement review by the Board of Directors
31
Liquidity Risk
Liquidity Measures as of June 30, 2015
% of NAV
Target
Minimum Maximum
Actual
Unfunded Commitments
15%
N/A
25%
13%
Private Investments
30%
N/A
N/A
33%
Cash Available within 3 Months
N/A
20%
N/A
30%
Cash Available within 12 Months
N/A
30%
N/A
47%
32
33
AAU SALARY FOR FULL-TIME
INSTRUCTIONAL FACULTY
T O M K AT S O U L E A S
EXECUTIVE VICE PRESIDENT AND PROVOST
Summary and Guiding Principles
• UVa is slightly above the median of AAU peers
• Fairly aggressive raise pools for the next couple of years are
indicated to be and remain market competitive
• UVa should not focus on a single number – a high salary average
never retained anybody! But…
• Rewarding performance is essential for retention and recruitment
in a competitive market – equity with respect to both internal and
external comparisons is an essential core value
35
Instructional Faculty Salary Compared to AAU Peers
40
34
30
28
AAU Median
27
26
28
Top 20 AAU Ranking of Average Faculty Salary
20
10
0
2010-11
2011-12
2012-13
2013-14
2014-15
NOTE: 4.75% merit pool was available in 2013-14 and 2014-15.
36
UVa Position by Instructional Faculty
Average Salary Rank, 2014-15
AAU Rank
Assistant Professor
Associate Professor
Full Professor
31
26
24
Average Increase
4.05%
5.45%
4.04%
Increase Rank
14
4
15
37
Predicted Impact of Raise Possibilities
• 4.75% for next three years: UVa will be ~#20 in
2018-19
• 5% for next two years: UVa will be ~#20 in 201718, estimated dollar cost: $1.2 million per year,
ongoing
• 7% next year: UVa will be ~# 20 in 2016-17
38
Summary and Guiding Principles
• UVa is slightly above the median of AAU peers
• Fairly aggressive raise pools for the next couple of years are
indicated to be and remain market competitive
• UVa should not focus on a single number – a high salary average
never retained anybody! But…
• Rewarding performance is essential for retention and recruitment
in a competitive market – equity with respect to both internal and
external comparisons is an essential core value
39
Discussion Questions
• Is the Board supportive of the Administration’s
recommended course of action?
40
U NAUDITED A CADEMIC D IVISION
F INANCIAL R EPORT FOR Y EAR E NDING
J UNE 30, 2015
MELODY BIANCHETTO,
A S S O C I AT E V I C E P R E S I D E N T F O R F I N A N C E
June 30, 2015 Academic Division Financial Report
• Unaudited, modified GAAP-basis Financial Statements,
as compared to prior year
– Statement of Net Assets
– Statement of Revenues, Expenses, and Changes in Net
Assets
• Cash Basis Operating Budget vs. Actual Results
42
Academic Division Financial Report
Modified GAAP-Basis Financial Statement (Unaudited)
Balance Sheet Highlights:
Net Position
Income Statement Highlights:
Net Tuition
Grants & Contracts
State Appropriations
Gifts
Other
Operating Revenues
Operating Expenses
Net Operating Margin
Net Non-operating Contribution
Change in Net Position
Year ending
Year ending
6/30/2015
6/30/2014
(in millions)
$ 6,590.4
$ 6,336.9
$
$
478.8
276.4
136.7
142.1
190.2
1,224.2
1,364.8
(140.6)
394.1
253.5
$
$
448.2
269.7
145.7
146.1
181.2
1,190.9
1,293.1
(102.2)
823.3
721.1
43
Academic Division Financial Report
Cash Basis Operating Budget vs. Actual Results
(in millions)
Net Tuition and Fees
FY15 Budget
$
490.2
FY15 Actual
$
494.0
Grants and Contracts
284.5
285.5
Endowment Distribution and Gifts
284.8
297.7
State Appropriations
136.7
136.7
Other
227.9
247.9
1,424.1
1,461.8
Instruction
374.4
367.4
Research and Public Service
291.2
306.9
Academic Support
146.7
149.2
Other Education and General
249.1
233.8
Financial Aid, Auxiliary, Debt, and Other
355.4
362.3
1,416.9
1419.6
Sources of Funds
Uses of Funds
Net Sources in Excess of Uses
$
7.2
$
42.2
44
45