UNIVERSITY OF VIRGINIA
BOARD OF VISITORS
MEETING OF THE
FINANCE COMMITTEE
MAY 20, 2013
FINANCE COMMITTEE
Monday, May 20, 2013
1:30 – 2:45 p.m.
Board Room, The Rotunda
Committee Members:
Victoria D. Harker, Chair
William H. Goodwin Jr., Vice Chair
Frank B. Atkinson
A. Macdonald Caputo
The Hon. Alan A. Diamonstein
Vincent J. Mastracco Jr.
Edward D. Miller, M.D.
John L. Nau III
Timothy B. Robertson
Helen E. Dragas, Ex-officio
Daniel M. Meyers, Consulting Member
Martin N. Davidson, Faculty
Consulting Member
AGENDA
PAGE
I.
II.
CONSENT AGENDA
A.
Amendment to Delegation of Authority in Working
Capital Investment Policy
B.
Defined Contribution Retirement Plan Amendments
C.
Capital Items:
1.
Project Review, Alderman Road Residence
Halls Building #6
2.
Project Approval, Facilities Management Shop
Support/Office Building
D.
Purchase of Land and Improvements Located at 560
Ray C. Hunt Drive, Charlottesville, Virginia from
the University of Virginia Foundation
ACTION ITEMS
•
2013-2014 Operating Budget (Mr. Hogan to introduce
R. Edward Howell and Colette Sheehy; Messrs. Howell
and Hogan and Ms. Sheehy to report)
1.
Academic Division
2.
The University of Virginia’s College at Wise
3.
Medical Center
4.
Transitional Care Hospital
5.
Pratt Fund
6.
Annual Renovation and Infrastructure Plan
III. REPORTS BY THE EXECUTIVE VICE PRESIDENT AND CHIEF
OPERATING OFFICER (Mr. Hogan)
A.
Executive Vice President’s Remarks
1
2
3
4
6
8
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PAGE
B.
C.
D.
E.
IV.
University of Virginia Investment Management
Company Report on the Long-Term Pool – Market
Value and Performance as of March 31, 2013
(Written Report)
Retirement Administrative Committee (Written
Report)
Academic Division Quarterly Financial Report
(Written Report)
Miscellaneous Financial Reports
1.
Capital Campaign
2.
Endowment by School/Foundation
3.
Investment of Working Capital
4.
Quasi-Endowment Actions
5.
Summer Conference Rates for 2013, 2014
and 2015
6.
Write-off of Bad Debts for Non-Patient
Services
APPENDIX
•
2013-2014 Pratt Fund Allocations
16
30
35
44
45
46
47
49
51
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS CONSENT AGENDA
I.A. AMENDMENT TO DELEGATION OF AUTHORITY IN WORKING CAPITAL
INVESTMENT POLICY: Grants the University’s Executive Vice
President and Chief Operating Officer the authority to manage the
working capital investment program and to delegate that authority
as deemed appropriate.
In September 2011, the Board of Visitors approved the
University’s Working Capital Investment Policy. This policy
replaced the University’s Short-term Investment Policy (approved
in November 2009), which replaced the Current Funds Investment
Guidelines approved by the Board in October 2002. The Working
Capital Investment Policy delegates investment management
authority to the University’s Vice President and Chief Financial
Officer. The University does not have a Vice President and Chief
Financial Officer at this time and as a result the policy’s
delegation authority requires changing.
The University believes it is prudent to amend the policy to
authorize the Executive Vice President and Chief Operating Officer
to manage working capital investments and further delegate such
responsibility in accordance with the policy. A report on the
investment of the University’s working capital is included in the
Miscellaneous Financial Reports section of this document.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL TO AMEND THE DELEGATION OF AUTHORITY IN THE WORKING
CAPITAL INVESTMENT POLICY
WHEREAS, the University’s Working Capital Investment Policy
authorizes the Vice President and Chief Financial Officer to
manage, and further delegate the management of, investments made
under the policy; and
WHEREAS, the University currently does not have a Vice
President and Chief Financial Officer;
RESOLVED, the Board of Visitors authorizes the Executive Vice
President and Chief Operating Officer to manage investments under
the Working Capital Investment Policy and further delegate or
revoke such responsibility under the program.
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I.B. DEFINED CONTRIBUTION RETIREMENT PLAN AMENDMENTS: Amend the
Optional Retirement Plan of the University of Virginia allowing
employees to receive benefits from the Plan any time on or after
the day of separation from service. Amend the Optional Retirement
Plan of the UVa Medical Center granting employees service credits
for the vesting period requirement from the Albemarle Arthritis
Associates (AAA), LLP, effective May 26, 2013.
The University provides academic faculty and managerial and
professional staff a choice of two retirement plans – a defined
benefit plan (VRS) sponsored by the Commonwealth and a defined
contribution plan (ORP) sponsored by the University. The
University also sponsors a separate defined contribution plan,
Medical Center’s Optional Retirement Plan (MCRP) for employees of
the University of Virginia Medical Center.
The ORP is being amended to provide greater flexibility to
separated employees in taking a distribution from the Plan. The
amendment removes the restriction that prohibits a distribution
prior to 60 days from date of separation of service. This aligns
the University policy with the VRS requirement to qualify for
retiree health benefits.
The MCRP is being amended to incorporate employees of AAA.
Under the MCRP vesting schedule, a participant hired on or after
September 30, 2002 is not 100% vested until completing two years
in the plan. Until that time, the participant is 50% vested for
employer contributions. On behalf of the Medical Center, the
University intends to grant employees who became eligible
employees as a result of the Medical Center’s acquisition of AAA,
effective May 26, 2013, the right to apply months of service
performed on behalf of AAA, toward fulfilling the vesting period
requirement. To operationalize this grant of service credit, the
University must formally amend the benefit plan.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
AMENDMENTS TO DEFINED CONTRIBUTION RETIREMENT PLANS
RESOLVED, the Optional Retirement Plan for Employees of the
University of Virginia is amended such that a separated employee
may receive benefits from the Plan any time on or after the day he
or she separates from service; and
RESOLVED FURTHER, the Optional Retirement Plan for Employees
of the UVa Medical Center is amended to grant employees who became
2
eligible employees as a result of the Medical Center’s acquisition
of Albemarle Arthritis Associates(AAA), LLP, effective May 26,
2013, the right to apply months of service performed on behalf of
AAA toward fulfilling the vesting period requirement.
I.C.1. PROJECT REVIEW, ALDERMAN ROAD RESIDENCE HALLS BUILDING #6:
Approves the revised financial plan for the Alderman Road
Residence Halls Building #6.
In accordance with the policy adopted by the Board of
Visitors in October 2004, all capital project budget increases in
excess of 10% require the approval of both the Finance and
Buildings and Grounds Committees. The construction of Alderman
Road Residence Halls Building #6 was approved in April 2011 for
$30.0 million.
In 2006, Housing and Residence Life embarked on a multi-phase
building project to remove and replace the 1960s era residence
halls in the Alderman Road area. Originally estimated to cost
$205 million, the six residence halls that have been completed or
will be complete by this summer have a projected total cost of
$121.7 million. That is a savings of more than $83 million, a
cost savings that resulted from favorable market conditions and
accelerated procurement.
Originally Buildings #5 and #6 were to be constructed in a
single phase with an approved authorization of $73 million. To
take advantage of the favorable construction market, the
administration, with approval from the Board of Visitors, decided
to accelerate the construction of Building #5 along with Buildings
#3 and #4. The three residence halls are scheduled to come on
line this summer.
The project budget for Building #5 and #6 was set at $30
million each. Final cost of Building #5 (63,759 gsf and 201 beds)
is expected to be $28 million. The plan for Building #6 included
build out of the ground floor for Housing and Residence Life
office space. Initial concept design revealed that in order to
realize the needed number of beds, program space, and accommodate
the offices on the ground level, the building would have to be six
stories which was deemed too high for the site. Redesign efforts
resulted in a separate two story office wing and an additional 26
beds for a total of 211 beds. Because of site conditions, a
slightly larger footprint to accommodate the additional beds,
several rooms large enough to provide for triples, and one added
apartment, the cost estimate has been revised to $38 million. In
3
addition we have lost some economies of scale because we are
constructing a single building in this phase.
The Buildings and Grounds Committee approved the design for
Building #6 at its November 2012 meeting. The building is five
stories, 74,898 gsf, and will include 211 beds, common space, and
the office wing. Housing and Residence Life staff currently
located in 24,400 square feet distributed across five buildings in
the McCormick Road housing area will be consolidated at this site
making them more accessible to students.
A budget increase of $8.0 million to fund the expanded scope
(from 56,898 gsf to 74,898 gsf) is requested. The incremental
cost will be funded from housing reserves ($1.8 million) and
increased debt ($6.2 million) taking the full project funding plan
to $8.4 million from housing reserves and $29.6 million in debt.
The debt will be paid with housing revenues and is included in
Housing and Residence Life’s 10-year pro forma.
ACTION REQUIRED: Approval by the Buildings and Grounds Committee,
the Finance Committee, and by the Board of Visitors
APPROVAL OF PROJECT BUDGET AND SCOPE REVIEW, ALDERMAN ROAD
RESIDENCE HALLS BUILDING #6
RESOLVED, an $8.0 million increase to the Alderman Road
Residence Halls Building #6 to a revised budget range of $36.0 $38.0 million, and an 18,000 gross square feet increase in scope
to 74,898 gross square feet, is approved.
RESOLVED FURTHER, the financial plan for the Alderman Road
Residence Halls Building #6 is complete and approved.
I.C.2. PROJECT APPROVAL, FACILITIES MANAGEMENT SHOP SUPPORT/
OFFICE BUILDING: Approves the addition of the Facilities
Management Shop Support/Office Building to the Major Capital
Projects program, at a cost of $5-6 million, and the financial
plan.
The Facilities Management Shop Support/Office Building is a
two-story, 14,000 gsf building to the west of the Leake Building
at 575 Alderman Road. The project will modernize work space for
many of Facilities Management (FM) in-house services, will allow
consolidation of certain shop activities, and allow for the
demolition of substandard trailers currently used to house these
activities, as well as alleviate the need to lease space off4
Grounds. FM will vacate 11,635 gsf in temporary metal buildings
and in off-Grounds rental space so that the net additional square
footage is only 2,365 gsf. The University has added over one
million gsf of space since 2009 requiring the addition of about
100 employees in Facilities Management to maintain, clean, and
service the new buildings. While many of these employees work in
the field, there is a need for permanent support space that
enables the staff to most effectively serve their customers. The
cost is estimated at $6 million, with $5 million to be financed
over a 20-year term. Net operating and maintenance costs of
$75,800 will be paid from FM operating funds.
The building will sit on what is now about 4,000 sf of garage
storage space that currently requires significant structural and
waterproofing repairs on an annual basis. The condition of the
garages is such that continued repair is not a wise investment and
they should be demolished. Because the garages are integrated
with retaining systems for the road and parking lot above, their
removal requires construction of a new permanent retaining system
capable of supporting vehicles. The cost to replace the garages
is about $750,000 of which $400,000 is related to site work and
the retaining system.
The need to replace the garages affords an opportunity to
optimize the site and achieve programmatic improvements by adding
another floor that will allow FM to vacate and remove temporary
structures, as well as vacate leased space. Exclusive of the
exceptional site conditions this project presents, construction
cost per gsf is estimated at $255 with total project costs of
$355/gsf.
ACTION REQUIRED: Approval by the Buildings and Grounds Committee,
the Finance Committee, and by the Board of Visitors
APPROVAL OF ADDITION TO THE UNIVERSITY’S MAJOR CAPITAL PROJECTS
PLAN – FACILITIES MANAGEMENT SHOP SUPPORT/OFFICE BUILDING
RESOLVED, the Facilities Management Shop Support/Office
Building at an estimated project cost of $5-6 million is added to
the Major Capital Projects Program.
RESOLVED FURTHER, the financial plan for the Facilities
Management Shop Support/Office Building is complete and approved.
5
I.D. PURCHASE OF LAND AND IMPROVEMENTS LOCATED AT 560 RAY C. HUNT
DRIVE, CHARLOTTESVILLE, VIRGINIA FROM THE UNIVERSITY OF VIRGINIA
FOUNDATION: Approves the purchase of land and improvements located
at 560 Ray C. Hunt Drive, Charlottesville, Virginia from the
University of Virginia Foundation.
In keeping with the recently approved Health System strategic
plan, the Medical School is expanding its capacity to perform
translational research. In 2007, the Ivy Foundation gave the
school $25 million for the Ivy Translational Research Building.
Rather than construct a new building, the school would like to
purchase, from the University of Virginia Foundation, an existing
building (560 Ray C. Hunt Drive) in the Fontaine Research Park
whose major tenant will vacate in the next 18 months.
The 72,000 sf building is located on 3.47 acres and includes
259 parking spaces with additional parking available on adjacent
property in the Park. The purchase price of $15.85 million is
based on a recent appraisal for the land and improvements. At its
April 2013 meeting, the Board of Visitors approved the addition of
this project to the University’s Major Capital Projects Program.
The office space will require renovation to make it suitable for
research, which will also be funded from the gift.
The central location, the ability to put an existing facility
into operation on a short timeline, and the potential for research
synergies with existing operations in the Fontaine Research Park
support the recommended purchase of 560 Ray C. Hunt Drive from the
University of Virginia Foundation.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL TO PURCHASE 560 RAY C. HUNT DRIVE, CHARLOTTESVILLE,
VIRGINIA FROM THE UNIVERSITY OF VIRGINIA FOUNDATION
WHEREAS, the Board of Visitors finds it to be in the best
interest of the University of Virginia to purchase from the
University of Virginia Foundation (the “Foundation”) land and
improvements thereon located at 560 Ray C. Hunt Drive,
Charlottesville, Virginia (the “Property”) at a purchase price not
to exceed $15,850,000;
RESOLVED, the Board of Visitors approves the acquisition of
the Property; and
6
RESOLVED FURTHER, the Executive Vice President and Chief
Operating Officer is authorized, on behalf of the University, to
approve and execute purchase agreements and related documents, to
incur reasonable and customary expenses, and to take such other
actions as deemed necessary and appropriate to consummate such
property acquisition; and
RESOLVED FURTHER, all prior acts performed by the Executive
Vice President and Chief Operating Officer, and other officers and
agents of the University, in connection with such property
acquisition, are in all respects approved, ratified, and
confirmed.
7
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
May 20, 2013
COMMITTEE:
Finance
AGENDA ITEM:
II.
2013-2014 Operating Budget
BACKGROUND: At its May meeting, the Board of Visitors considers
the proposed operating budgets for the Academic Division, The
University of Virginia's College at Wise, and the Medical Center.
At its April meeting, the Board of Visitors approved tuition,
mandatory fees, housing, and dining rates for 2013-2014, which
comprise significant revenue sources for the operating budget.
During this fiscal year, the Board of Visitors has heard reports
on the University’s budget requests to the state and the
preliminary budget assumptions for the 2013-2014 operating budget.
Additionally, the Board of Visitors was informed of the Governor’s
proposed amendments to the 2012-2014 biennial budget. On February
23, 2013, the Joint Conference Committee of the General Assembly
released a compromise budget. After review and amendment by the
Governor, the final budget should be approved by the General
Assembly in May. The Board has also approved tuition and fee
rates for 2013-14, which form a significant proportion of
operating revenues.
DISCUSSION: The 2013-2014 expenditure budget proposal for all
divisions of the University totals $2.7 billion, a 2.4% increase
compared with the revised budget of the previous fiscal year. Of
this amount, $1.4 billion relates to the Academic Division, $1.3
billion to the Medical Center, and $38.6 million to The University
of Virginia's College at Wise.
Academic Division
The proposed Academic Division operating expenditure budget
will decrease by 2.5% to $1.41 billion. The decrease in the
operating budget is driven by a reduction of expenditures on
sponsored research awards and the availability of one-time funds
from the previous fiscal year (2011-2012). In 2013-2014, net
tuition and fees (32.9%) provides the greatest proportion of the
operating budget, followed by grants and contracts (20.6%), sales
and services and other, including auxiliary sales and services,
investment income and other miscellaneous revenues (13.0%),
endowment distributions (11.1%), state general funds (10.2%), and
gifts (9.5%). The remaining 2.7% of the expenditure budget will
8
be funded from operating cash reserves and accumulated investment
balances.
Personnel costs comprise approximately 69.1% of educational
and general expenditures and 58.5% of total operating expenditures
in the Academic Division. The proposed budget provides for an
average 4.75% merit-based faculty salary pool, which incorporates
the 3% increase authorized in the state budget. The state
authorized a 2% across-the-board salary increase for classified
staff employees who meet expectations on their most recent
performance evaluation together with a compression adjustment of
$65 per year of service. For University staff we translated the
equivalent classified staff increase into a 3% pool to be awarded
based on merit.
The 2013-2014 budget development cycle for the Academic
Division incorporated elements that are expected to be principles
in the new internal financial model:
•
•
•
•
•
•
Budget assumptions were developed with greater
collaboration between administrative leadership and deans;
Revenue from undergraduate enrollment growth is flowing to
the schools that generate it, aligning incentives as the
University grows;
Tuition revenue associated with 1.0 percent of the base
undergraduate tuition increase will be distributed to
schools, providing resources to meet high-priority
operating needs;
New funding provided in the 2013-2014 budget is clearly
tied to the University’s strategic priorities;
Budget discussions were robust and inclusive, contributing
to a more transparent and engaged budget process and
greater awareness of the University’s strategic direction
and financial capacity;
Effective stewardship of the University’s resources led to
academic and administrative units looking within their
organizations to reallocate funds towards highest priority
needs.
In addition to addressing compensation for faculty and staff,
the budget provides investments to respond to the goals of the
Virginia Higher Education Opportunity Act of 2011, including
funding for undergraduate enrollment growth approved by the Board
in February 2013; ongoing investment in AccessUVa to attract and
retain a high-quality, diverse student body; and the establishment
of a Strategic Investment Fund to support initiatives emerging
9
from the strategic planning process and provide the flexibility to
seize new opportunities that advance the University’s academic
mission and strategy.
The University of Virginia’s College at Wise
The proposed operating expenditure budget for The University
of Virginia's College at Wise will increase by $1.7 million, or
4.6%, in 2013-2014. State general funds will decrease by 1.0% as
compared to the revised 2012-2013 budget, which included general
funds provided for one-time, state-authorized bonuses during 20122013. Net tuition revenues are increasing by 5.3%, and grants and
contracts will decrease by 4.7%. Sales and services, including
auxiliary sales and services revenues, will increase by 15.8% from
increased housing rents, increased meal plan rates as a result of
implementing new meal plan options for students, additional
bookstore sales, and additional athletic conference revenue and
gate receipts. Key strategic priorities addressed through this
budget cycle are increasing student retention, improving
graduation rates, and focusing on Science, Technology,
Engineering, Math, and Health (STEM-H) offerings.
Medical Center
The Medical Center operating expenditure budget is proposed
to increase by $97.3 million, or 8.7%, to $1.22 billion during
2013-2014. The operating margin is expected to be $59.1 million
or 4.6%.
The budget presentation includes a proposal to increase
hospital room rates and ancillary service charges between 7.0 and
9.9% and to enhance personnel compensation packages. The pay-forperformance pool has been established at $8.0 million, which
includes the impact on benefit costs and is based on a 3.0% salary
adjustment with an October implementation date. Other salary
adjustments, such as market and compensation design adjustments,
total $4.0 million, including the impact on benefit costs. The
Transitional Care Hospital’s operating expenditure ($19.8 million
in 2013-2014) and capital ($0.6 million in 2013-14) budgets are
consolidated with the Medical Center’s budget.
For the Medical Center, the 2013-2014 operating plan was
developed through a priority-based budget process to align
resource allocations with Medical Center strategies and goals to
achieve the Health System strategic planning goal to become a top
decile academic medical center based on quality measures. The
operating plan was developed while considering the challenges of
10
providing patient care, teaching, and research services in an
increasingly changing health care industry. The full impact of
the Affordable Care Act will not be realized for a number of
years; however, many of its provisions have already been
implemented. The result will be decreased reimbursements from
government payors and an industry-wide erosion of pricing power
with private payors. At the same time, costs associated with
providing quality patient care will continue to have upward
pressure due to increases in medical supply, pharmaceutical, and
medical device expenses, growing administrative burden, and a
shortage of health care workers. These changes require proactive
fiscal planning now to ensure meeting the mission of the Health
System in the future.
From the operating margin and from the capital reinvestment
plan, the Medical Center has set aside a total of $31.0 million
for the Strategic Investment Pool to be used to fund future
proposals that best align the allocation of resources with Medical
Center strategies and goals, including $11.8 million for capital
initiatives.
For a full discussion of the budget proposal, as well as
comparative revenue and expenditure data for the Academic
Division, The College at Wise, and the Medical Center, please
refer to the budget summary, which accompanies this book.
Pratt Fund
In April 1976, the University received funds, designated in
the will of John Lee Pratt, to be used "to supplement salaries of
the professors of the Departments of Biology, Chemistry,
Mathematics and Physics, to purchase equipment for these
departments as suggested by the heads of the departments and
approved by the President and the Board of Visitors, and to
provide for scholarships in these departments for outstanding
students." Mr. Pratt’s will provides further that these funds
could be used "to support research in the School of Medicine and
to provide scholarships for medical students." The will
stipulates that the Pratt endowment reverts to Washington and Lee
University if the University of Virginia does not comply with the
provisions of the will. The original Pratt endowment has been
split into two equal endowments, with 50% of the original
principal assigned to the College of Arts & Sciences and the
remaining 50% assigned to the School of Medicine.
The market value of the total Pratt endowment is $128.5
million as of March 31, 2013. In 2013-2014, a distribution of
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$3.44 million from the College of Arts & Sciences endowment and
$3.8 million from the School of Medicine endowment, for a total of
$7.24 million, is recommended. Additionally, the College of Arts
& Sciences plans to use in 2013-2014 approximately $246,000 in
funds that were allocated in 2012-2013 but will remain uncommitted
by the end of the fiscal year. Similarly, the School of Medicine
plans to use in 2013-2014 approximately $428,000 in funds that
were allocated in 2012-2013 but will remain uncommitted by the end
of the fiscal year. Committees in each of the schools developed
the proposal to spend the distribution, which is included as an
appendix to this document.
Each dean, the Vice President for Research, the Executive
Vice President and Provost, and the President are required to
indicate their support of these projects. The table below shows
aggregate allocations; the attachment describes the specific
allocations.
2013-2014 Pratt Fund Allocation
Annual Renovation and Infrastructure Plan
Under Restructuring, the Board of Visitors has delegated
authority to approve all capital projects (acquisitions, capital
leases, or new construction or renovation projects costing more
than $2 million and impacting more than 5,000 gross square feet)
funded with non-general funds. To facilitate the consideration of
certain projects with no exterior impact, the Board of Visitors
considers the Annual Renovation and Infrastructure Plan (ARIP)
each year.
12
In the 2013-2014 Budget Summary, the Academic Division and
the Medical Center will present a detailed list of renovation and
infrastructure projects expected to cost between $2 million and $5
million, to be funded with non-general fund cash (no debt), and
expected to be initiated within the next fiscal year. This
shorter, annual approval process allows these smaller projects to
be planned in a more appropriate timeline based on the nature of
the project. For example, renovating a lab for a new scientist is
a project for which the need will arise during recruitment, and
which must be completed before the scientist joins the faculty.
The Academic Division’s ARIP Plan totals $18.1 million to
$22.5 million and addresses Gooch and Dillard Residence Hall
balcony, air handling and fire detection improvements, John Paul
Jones Arena water intrusion, and several utility upgrade projects.
All of the projects will be funded from maintenance cash reserves.
The Medical Center’s 2013-2014 ARIP Plan includes $6.7
million to $7.8 million in various renovation projects and
infrastructure upgrades. All projects will be funded from Medical
Center operating funds. Additionally, the Medical Center is
authorized to substitute a new project costing between $2 million
and $5 million for a project included on the approved ARIP,
provided that the total capital budget as approved by the Board is
not exceeded and that a report is provided at each Board meeting
listing the changes made to the original project list.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL OF THE 2013-2014 OPERATING BUDGET AND ANNUAL RENOVATION
AND INFRASTRUCTURE PLAN FOR THE ACADEMIC DIVISION
RESOLVED, the 2013-2014 Operating Budget and Annual
Renovation and Infrastructure Plan for the Academic Division is
approved, as recommended by the President and the Chief Operating
Officer.
RESOLVED FURTHER, the University will use the approved
operating budget to update the four-year plan, Financing Academic
Excellence, to roll forward future multi-year planning.
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APPROVAL OF THE 2013-2014 OPERATING BUDGET FOR THE UNIVERSITY OF
VIRGINIA'S COLLEGE AT WISE
RESOLVED, the 2013-2014 Operating Budget for The University
of Virginia’s College at Wise is approved as recommended by the
President and the Chief Operating Officer.
APPROVAL OF THE 2013-2014 OPERATING AND CAPITAL BUDGETS AND ANNUAL
RENOVATION AND INFRASTRUCTURE PLAN FOR THE UNIVERSITY OF VIRGINIA
MEDICAL CENTER
RESOLVED, the 2013-2014 Operating and Capital Budget and the
Annual Renovation and Infrastructure Plan for the University of
Virginia Medical Center is approved as recommended by the
President, the Chief Operating Officer, and the Medical Center
Operating Board.
APPROVAL OF THE 2013-2014 OPERATING AND CAPITAL BUDGETS FOR THE
UNIVERSITY OF VIRGINIA TRANSITIONAL CARE HOSPITAL
RESOLVED, the 2013-2014 Operating and Capital Budget for the
University of Virginia Transitional Care Hospital, presented
as a component of the Medical Center Operating Budget, is approved
as recommended by the President, Chief Operating Officer, and the
Medical Center Operating Board.
APPROVAL OF PRATT FUND DISTRIBUTION FOR 2013-2014
RESOLVED, the budget for the expenditure of funds from the
Estate of John Lee Pratt is approved to supplement appropriations
made by the Commonwealth of Virginia for the School of Medicine
and the Departments of Biology, Chemistry, Mathematics, and
Physics in the College of Arts and Sciences. Departmental
allocations, not to exceed $7,240,000 for 2013-2014, are suggested
by the department chairs and recommended by the dean of each
school; the disbursement of each allotment will be authorized by
the Executive Vice President and Provost. To the extent the
annual income from the endowment is not adequate to meet the
recommended distribution, the principal of the endowment will be
disinvested to provide funds for the approved budgets.
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UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
May 20, 2013
COMMITTEE:
Finance
AGENDA ITEM:
III.A.
ACTION REQUIRED:
None
Executive Vice President’s Remarks
BACKGROUND: The Executive Vice President and Chief Operating
Officer will inform the Board of recent events that do not require
formal action, but of which it should be made aware.
15
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
May 20, 2013
COMMITTEE:
Finance
AGENDA ITEM:
III.B. University of Virginia Investment
Management Company Report on the Long-Term
Pool – Market Value and Performance as of
March 31, 2013
ACTION REQUIRED:
None
BACKGROUND: The University of Virginia Investment Management
Company (UVIMCO) provides investment management services to the
Rector and Visitors of the University of Virginia and its related
Foundations. Assets deposited in UVIMCO are held in the custody
and control of UVIMCO on behalf of the University and Foundations
within a long-term, co-mingled investment pool.
UVIMCO’s primary objective in managing the pool is to
maximize long-term real return commensurate with the risk
tolerance of the University. To achieve this objective, UVIMCO
actively manages the pool in an attempt to achieve returns that
consistently exceed the returns on a passively managed benchmark
with similar asset allocation and risk. Recognizing that the
University must attract outstanding students, faculty, and staff
and provide them appropriate resources, UVIMCO attempts to manage
pool assets to provide long-term real returns that compare
favorably with the returns of endowments of other outstanding
schools. UVIMCO does not set spending rates. UVIMCO communicates
the Pool’s risk and return estimates to the University and
Foundations for their consideration in setting spending rates.
DISCUSSION:
The March 31, 2013, report follows.
Quarter-End March 2013
SUMMARY
The following commentary provides an update on the current
market environment as well as the asset allocation, performance
(unaudited), risk management, and liquidity position of UVIMCO’s
Long Term Pool as of and for periods ending March 31, 2013. The
5.1% gain recorded by the Long Term Pool this calendar quarter is
high, even beating the 4.7% increase in our policy benchmark
16
during a market rally. Our fiscal year-to-date return on the Long
Term Pool is 10.8% versus the fiscal year-to-date policy portfolio
return of 12.6%. While we report on short-term performance, we
encourage all of our investors to focus most on longer-term
performance. Over the 20-year period ending March 31, 2013, the
Pool’s annualized return was 11.9%, exceeding the policy benchmark
return by 440 basis points (bps). We continue to position the
Long Term Pool defensively versus the policy portfolio benchmark,
with less market risk.
Each spring, we estimate the future long-term return of the
Long Term Pool by adding the nominal expected return of our policy
portfolio together with expected alpha from manager performance
and portfolio tilts. This year, we adjusted our long-term (10year) return forecast down from 8.0% to 7.5%. The decrease in
this estimate is partially due to the rise in equity prices
outpacing real earnings growth in 2012, and the continued
tightening of global credit spreads and sustained low yields.
Each asset class included in the Policy Portfolio provides a lower
long-term expected return today than it did one year ago.
We make a few observations about the 7.5% estimate for longterm returns. First, assuming a 5% spending rate and a 2.5% rate
of inflation, the 7.5% expected return will allow us to preserve
the real spending power of the endowment. However, we project no
real growth over the next 10 years. A second observation is that
active management will continue to be needed in order for the Long
Term Pool to keep pace with inflation over the next decade.
Finally, although our analysis underlying the 7.5% expected return
on the Long Term Pool is sound, there is much uncertainty
surrounding the inputs and this final estimate. Increased
competition could hamper UVIMCO’s ability to deliver the same
level of alpha as we have in the past. In addition, a further run
in asset prices in excess of real earnings growth poses a
meaningful risk to the endowment’s assets. As always, the UVIMCO
Board and staff is working hard to develop an appropriate response
to either of these scenarios.
MARKET ENVIRONMENT
On the back of a very strong 2012, the market continued its
ascent with the S&P 500 up 10.6% for the first quarter of
2013. With Treasuries continuing to offer zero yield, investors
looked for yield in any form. Inflows into equities grew, with
investors focusing on companies that pay dividends. In addition
to the encouraging February employment numbers, U.S. economic data
looked positive with housing starts, building permits, industrial
17
production, and durable goods orders all up this quarter. These
positive economic signs led to a small sell off in Treasuries with
the 10-year Treasury ending at 1.87% compared with 1.78% at year
end. All in, the U.S. market performed better than most other
countries. The MSCI World Index, representing the developed
markets, was up 7.9% and the MSCI Emerging Markets Index was down
-1.6%.
Although the first quarter was filled with optimism, there
are plenty of reasons for investors to remain cautious. The
federal budget sequester went into effect on March 1st and it is
feared that these cuts could have a meaningful impact on U.S.
economic growth. The European markets spent the quarter focused
on the banking situation in Cyprus, which ultimately required a
$10 billion bailout from the European Union (EU) and International
Monetary Fund (IMF). The banks were required to close for two
weeks, and government limits were placed on accounts to prevent a
run on the banks. Bailout alternatives were considered and
ultimately Cyprus Popular (Laiki), the country’s second largest
bank, had to close. Depositors, many of them Russian, may be
required to pay a tax as high as 40% on their deposits and
although Cyprus is a small economy within Europe, this tax is
unsettling for depositors in other EU countries as well.
In Asia, the Bank of Japan restated its target of achieving
2% inflation and showed it is very committed to purchasing
government bonds and increasing its monetary base target. The
Japanese stock market responded to this continued easing, with the
MSCI Japan Index rising close to 12% in the first quarter and the
yen continuing its devaluation.
Investors are focused on the new global market environment
and trying to determine how best to navigate within it. In his
investment outlook piece titled “A Man in the Mirror” (April
2013), Bill Gross discusses some of the market questions that need
to be asked but are hard to answer:
My point is this: PIMCO’s epoch, Berkshire Hathaway’s epoch,
Peter Lynch’s epoch, all occurred or have occurred within an epoch
of credit expansion – a period where those that reached for carry,
that sold volatility, that tilted towards yield and more credit
risk, or that were sheltered either structurally or reputationally
from withdrawals and delevering (Buffett) that clipped competitors
at just the wrong time – succeeded. Yet all of these epochs were
perhaps just that – epochs. What if an epoch changes? What if
perpetual credit expansion and its fertilization of asset prices
and returns are substantially altered? What if zero-bound interest
18
rates define the end of a total return epoch that began in the
1970s, accelerated in 1981 and has come to a mathematical dead-end
for bonds in 2012/2013 and commonsensically for other conjoined
asset classes as well? What if a future epoch favors lower than
index carry or continual bouts of 2008 Lehman-esque volatility, or
encompasses a period of global geopolitical confrontation with a
quest for scarce and scarcer resources such as oil, water, or
simply food as suggested by Jeremy Grantham? What if the effects
of global “climate change or perhaps aging demographics,”
substantially alter the rather fertile petri dish of capitalistic
expansion and endorsement? What if quantitative easing policies
eventually collapse instead of elevate asset prices? What if there
is a future that demands that an investor – a seemingly great
investor – change course, or at least learn new tricks?
At UVIMCO, we continue to ask these questions to our managers
and to ourselves. We seek motivated and talented managers who can
navigate through these changes, and we are working to adjust the
portfolio accordingly.
Asset Allocation
Our policy portfolio continues to be an allocation of 60%
global public equity, 10% global public real estate and 30% global
investment grade fixed income. This portfolio is designed to
provide long-term growth from equities, an inflation hedge from
real assets and a deflation hedge from fixed income.
The Long Term Pool’s actual allocation as of March 31, 2013
is 64.5% to equity managers, 14.2% to real asset managers and
21.3% to fixed income (including marketable alternatives, credit,
and cash). Looking through to our managers’ underlying
investments, the Long Term Pool has a 52.6% allocation to
equities, 15.5% allocation to real assets and 31.9% allocation to
fixed income (including credit, bonds and cash) as of March 31,
2013. Therefore, the Long Term Pool continues to be positioned
defensively versus the policy portfolio benchmark, with less
equity market risk.
PERFORMANCE
The Long Term Pool returned 5.1% in the quarter ended March
31, 2013 versus the policy benchmark gain of 4.7%. While we are
pleased by this level of relative outperformance, it is not our
goal to outperform the passive benchmark over short time periods
such as one quarter or year. Fiscal year-to-date, the Long Term
Pool has returned 10.8% versus 12.6% earned by the policy
19
benchmark. As expected, Pool performance has lagged the benchmark
in the face of rapidly rising equity markets.
EQUITIES
Public Equity
The public equity portfolio returned 7.1% for the quarter
versus 6.6% for its benchmark, the MSCI All Country World Equity
Index (“MSCI ACWI”). The public equity portfolio returned 20.9%
for the fiscal year versus 17.5% for the benchmark over the same
nine-month period. This outperformance was broad-based and
occurred despite our tilt towards emerging markets and the
relative underperformance of those regions. The MSCI Emerging
Markets Index lost 0.4% for the quarter. Although the emerging
markets tilt was a headwind for the portfolio, the tilt toward
quality low-beta stocks has continued to contribute to the
program’s performance. Investor demand for defensive stocks has
been significant over the past couple of years.
Over the trailing three-, five-, and 10-year time periods,
UVIMCO’s public equity portfolio has returned 17.1%, 7.8%, and
16.7% annually, outperforming the MSCI ACWI on an annualized basis
by 870, 520, and 680 basis points, respectively. The long-term
outperformance is attributed to a mix of tilts (e.g. the current
tilt to quality) and the security selection of our managers.
While the magnitude of our public equity program’s outperformance
is unlikely to continue, we remain excited about the portfolio.
Our managers conduct deep fundamental research on companies and
themes and build concentrated portfolios of public equities. Our
managers take a long-term approach to investing, which gives them
an edge in an increasingly short-term and macro-focused investing
environment. This advantage is magnified by investing in less
efficient markets, including emerging markets and small cap
companies.
Long/Short Equity
The long/short equity portfolio returned 8.2% for the quarter
versus 6.6% for the MSCI ACWI and 5.1% for the Dow Jones Credit
Suisse Long/Short Equity Index. The long/short equity portfolio
returned 13.8% for the fiscal year versus 17.5% the MSCI ACWI and
11.3% for the Dow Jones Credit Suisse Long/Short Equity Index over
the same nine-month period. It is unusual for the portfolio to
outperform the MSCI ACWI during such a strong equity market. The
quarterly performance was impressive for a program with a net
exposure and beta to global equities of 0.4. Security selection
20
on the long and short side continues to contribute to our
managers’ returns.
We continue to focus on partnering with managers with
differentiated stock selection skills, an unwavering commitment to
the short side, and sensible portfolio construction and risk
management.
Private Equity
The private equity portfolio returned 4.6% for the quarter
versus 6.6% for its benchmark, the MSCI ACWI. For the fiscal
year-to-date, the portfolio increased by 8.4% versus a 17.5%
increase in the index. On a stand-alone basis, the buyout
portfolio returned 4.2% for the quarter and 8.6% for the fiscal
year to date. Venture capital returned 6.2% for the quarter and
7.2% so far in the fiscal year. Most of our private equity
managers provide conservative and lagged valuation updates so when
the public markets are firing on all cylinders, as they have been,
we expect our short-term returns to trail the public market index.
Longer term performance for the private equity portfolio has been
stellar with a return of 12.6% for the 10-year period ending March
31, 2013, while the MSCI ACWI returned 9.9%. Broken out between
buyout and venture, the former returned 15% and the latter
returned 6% for the 10-year period.
According to S&P Capital IQ, at the end of 2012, nonfinancial companies in the S&P 500 held roughly $1.1 trillion in
cash or short-term cash equivalent investments, all of which have
fueled merger and acquisition activity so far in 2013. The same
source notes that at least twelve $1 billion-plus transactions had
been announced by the middle of February, which included the
buyout of H.J. Heinz for $23 billion by Warren Buffett and 3G
Capital, the $16.7 billion deal for 49% of NBC Universal by
Comcast, and the continuing saga of Dell’s $24.4 billion plan to
take itself private. Up through mid-March, Thomson Reuters
reported that the weekly average for M&A activity was $37.2
billion, with an expectation that the robust appetite for deals
would continue into the next few quarters.
As is typical for the first quarter of a calendar year,
Initial Public Offering (“IPO”) activity was sparse. Only eight
VC-backed companies went public on U.S stock exchanges during the
quarter, according to Thomsen Reuters and the National Venture
Capital Association (the “NVCA”). Compared to the last quarter of
2012, the number of IPOs was the same, but there was a 58% decline
in the dollars raised for Q1 2013. IPO activity in the first
21
quarter of a calendar year generally takes a back seat to year-end
reporting and planning for the coming year, but the beginning of
2013 also had to contend with various tax and political issues,
e.g., the much talked about “fiscal cliff,” and a word new to most
investors’ vocabularies: “sequestration.” All of these factors
impacted the market for exits, but Thomson Reuters and the NVCA
have indicated that “they expect stronger volume in the second and
third quarters.”
The private equity portfolio continued to be cash flow
positive for the quarter with cash distributions of $57 million
compared to $18 million in capital calls. For the fiscal year,
cash distributions have totaled $187 million versus capital calls
of $96 million, resulting in a net cash flow of $91 million
through the nine months of the fiscal year.
REAL ASSETS
Real Estate
The real estate portfolio returned 1.7% for the first quarter
of 2013 versus 6.2% for the weighted benchmark of publicly-traded
U.S. and international real estate securities. This strong
performance for the benchmark was led by Asian securities and
followed by U.S. securities. Fiscal year-to-date, the real estate
portfolio generated a return of 2.8%, underperforming the public
real estate benchmark by 11.7%. As we have explained in prior
commentaries, our private real estate investments are quite
different than the underlying holdings of our publicly traded real
estate benchmark. However, we expect our real estate investment
to outperform the public benchmark over long time periods.
Although we have not met this goal, we believe our current real
estate portfolio is sound and has latent value.
The Federal Reserve’s aggressive monetary policy has lowered
yields on the most liquid, high quality assets over the past year
or so. This capital has started to make its way to lower quality
markets and assets over the past six months, with the multifamily
sector continuing to be a favorite for institutional investors.
With vacancies low and rents climbing, construction has rebounded
to 260,000 annualized units as of January 2013. While this level
is up from the low of 50,000 units in December 2010, it is still
well below the 20-year and 40-year averages of 395,000 and 429,000
units, respectively. Positive movement in the office sector may
be seen as the economy has continued to add jobs, which should
reduce office vacancy given that new construction in the office
space is almost non-existent. A potential dampener to the jobs
22
growth is the shadow vacancy that currently exists in office
space, as well as the more efficient utilization of space going
forward.
Overall, the commercial real estate sector is in various
stages of stabilization and recovery. Real Treasury yields remain
depressed which will continue to support U.S. REIT pricing, with
REIT investors willing to take value erosion risk in exchange for
secure dividends. Internationally, Asia and Australia REIT
markets have seen strong returns as Europe continues to lag amid
macro-economic concerns. Fiscal year-to-date, U.S. real estate
securities underperformed the global basket of publicly-traded
real estate securities by nearly 850 basis points.
Over the past nine months, we funded capital calls of $77
million and received distributions of $56 million, bringing the
allocation to 8.4% of the Long Term Pool. During the quarter, the
real estate portfolio had $24 million in calls and $10 million in
distributions. Staff approved commitments of $55 million to two
existing managers during the first quarter. Pending satisfactory
legal review, this will bring real estate unfunded commitments to
$172 million. We are also negotiating the purchase of a small
secondary interest in an existing manager relationship.
Resources
The resources portfolio generated a return of 3.6% and 7.3%
for the quarter and fiscal year-to-date, respectively. This
compares to quarterly and fiscal year to date returns of 0.5% and
8.5%, respectively, for the Goldman Sachs Commodity Index, a
broad-based index of commodities. Publicly traded natural
resource equities represented by the S&P North America Natural
Resources Equity Index returned 7.2% for the quarter and 16.4%
fiscal year-to-date. It is typical for UVIMCO’s resources
portfolio to lag the performance of publicly traded natural
resources during times of broad-based market rallies. The
managers in our resource portfolio primarily invest in private,
illiquid companies and tend to conservatively value these
positions relative to their ultimate sale price. Further,
valuations provided by our managers are generally one to two
quarters behind the quarter-end date, which complicates
comparisons to public benchmarks. UVIMCO’s formal real assets
benchmark, the blended MSCI Real Estate Index, returned 6.2% in
the first quarter and 14.5% fiscal year to date.
The WTI Crude Oil price finished the quarter at $97.49, just
shy of the quarterly highs in January and equal to levels seen in
23
the fall of 2012. The spread between WTI and Brent contracted
meaningfully towards the end of the quarter as some of the
domestic supply bottlenecks began to ease. The NYMEX Henry Hub
Natural Gas spot price ended the quarter at $4.03, an increase of
12% since the beginning of the year and in-line with the highest
prices of 2012. Prices are still meaningfully below long-term
averages as a result of the prolific increase in drilling activity
and consequent supply increase made possible by technological
advances. Colder temperatures and a modest decrease in domestic
rig counts have contributed to the price increase seen in the
first quarter of 2013. Our managers are well positioned to
benefit from any increase in natural gas prices as they have been
very active in acquiring and de-risking conventional and
unconventional domestic gas plays. That said, they have also
proven their ability to generate returns in declining gas price
environments, as evidenced by the resource portfolio’s 3- and 5year returns of 29.1% and 18.4%, respectively. Our managers
continue to focus on acquiring assets in those basins with highly
attractive returns to capital.
During the first quarter, our resource managers called $7
million of capital and distributed $17 million. For the fiscal
year, cash distributions have totaled $58 million versus capital
calls of $36 million, resulting in a net cash flow of $22 million.
FIXED INCOME AND MARKETABLE ALTERNATIVES
Marketable Alternatives and Credit
For the first quarter of 2013, the marketable alternatives
and credit portfolio gained 4.6% versus a 2.9% return on the
Barclays High Yield Index. Our credit managers recorded
relatively strong performance in January, partially due to certain
Lehman claims being realized in that month. Overall, credit risk
assets continued to appreciate this quarter and our managers in
liquid credit benefited from this rally. Our investments in two
credit managers were fully realized as the managers liquidated the
remaining positions in these drawdown vehicles.
During the first quarter, our credit managers,
private equity fund structure, called $4 million of
distributed $13 million. For the fiscal year, cash
have totaled $62 million versus capital calls of $6
resulting in a net cash flow of $56 million.
24
who use a
capital and
distributions
million,
Bonds and Cash
Our bonds and cash continue to increase due in part to
distributions coming in from many of our private
investments. Both the domestic buyout and resource portfolios
have returned sizable amounts of capital to us so far this
year. The net cash inflows for the nine months ended March 31,
2013 were $140 million including distributions, redemptions, and
new investments.
We continue to manage bonds and cash as a source of
liquidity. Our cash portfolio is invested in U.S. Treasury bills
and notes with maturities less than one year and U.S. Treasury
guaranteed Repurchase Agreements with U.S. domiciled
counterparties. The duration of the cash portfolio as of March
31, 2013 was 0.20 years. Our government bond portfolio has also
been in short-term U.S. Treasury notes and bonds but with
maturities under three years. The average duration of this
portfolio as of quarter end was 0.88 years. Returns continue to
be insignificant given the zero-interest rate policy of the
Federal Reserve Bank. The cash and bond portfolios returned 0%
and 0.1% for the quarter, and 0.1% and 0.2% for the fiscal year.
The Barclays U.S. Treasury Bond Index (duration of 5.3 years)
returned -0.2% and 0.3% for the quarter and fiscal year.
RISK MANAGEMENT
Investors may be willing to bear risk if they are adequately
compensated with future higher returns. At UVIMCO, we are willing
to bear certain risks, but others must be eliminated if we are
unable to absorb the downside losses or if we do not earn a
sufficient risk premium from assuming those risks. We consider
three broad portfolio risks when managing the Long Term Pool –
market risk, manager risk, and liquidity risk – and evaluate these
factors relative to the risk tolerance of the Long Term Pool
shareholders.
Market Risk
The largest risk factor present in the Long Term Pool is
equity market risk. A common definition of market risk is the
standard deviation or volatility of a portfolio’s return.
Volatility provides a useful proxy for market risk if returns are
normally distributed. However, it is clear that both the broad
market as well as individual investment strategies are not
normally distributed, but rather are subject to a much higher
probability of negative “tail” events. Since investment returns
25
are subject to “tail risk”, it is useful to complement the
standard deviation statistic with an estimate of drawdown risk.
We manage market risk in the Long Term Pool by diversifying
across three broad asset classes: equity, fixed income, and real
assets. Our objective is to maintain estimated market risk in the
Long Term Pool that is less than or equal to the estimated market
risk of the policy portfolio. We look at volatility, worst 1 %
drawdown and beta to global equities. Our current estimate of the
volatility of the Long Term Pool returns is 11% versus 12% for the
policy portfolio. The lowest one-percentile annual drawdown on
the Long Term Pool is estimated to be -26%, less than the drawdown
estimate of -30% on the policy portfolio. We estimate the beta to
global equities for the Long Term Pool is 0.65 versus 0.68 for the
policy portfolio.
Manager Risk
The Long Term Pool invests with more than one hundred
external managers. We seek to maintain a portfolio of managers
that generates sufficient returns to compensate us for bearing
both market risk and the additional risk inherent in working with
individual managers. Manager risk includes tracking error or
active bets away from the benchmark, operational or business
risks, lack of transparency, and leverage. UVIMCO mitigates
manager risk by diversification and employing extensive and
ongoing due diligence to assess both the investment and
operational aspects of our external fund managers. Our Investment
Policy Statement ensures a minimum level of diversification by
limiting our exposure to any single manager to 7.5% of the Long
Term Pool. As of March 31, 2013, our largest manager exposure was
5.4% of the Long Term Pool, well within the 7.5% maximum.
Over time, UVIMCO has been well compensated for assuming
manager risk. Attribution analyses suggest that manager selection
is the largest contributor to the Long Term Pool’s long-term
outperformance versus the policy benchmark and peers.
Liquidity Risk
At UVIMCO, we define liquidity risk as an inability to meet
any of the following four primary liquidity requirements: (i)
withdrawals by the University and foundation investors, (ii) the
excess of capital calls over expected capital distributions from
private funds, (iii) the need to rebalance exposures following a
market decline, and (iv) the ability to deploy cash
opportunistically as new investment opportunities arise. We
26
manage this risk by maintaining a portfolio of Treasury bills and
notes, maintaining sufficient liquidity with our public equity and
hedge fund managers, and managing the pace of commitments to
private investments.
Given our four primary liquidity requirements, we believe
that an appropriate target for liquidity is to have 10% of the
Long Term Pool invested in assets that are safe and highly liquid,
and at least 30% of the Pool should be available for conversion to
cash in any 12-month period. The total of bonds and cash as of
March 31, 2013 was 12.4%. Over time, we continue to expect the
sum of the liquid U.S. Treasury bond and cash portfolios to vary
between 8% and 12% of the Long Term Pool. Although this is a drag
on returns (especially in a zero interest rate environment), we
believe it provides insurance against future turbulent markets and
will allow us to fund attractive investments that will more than
make up for the return drag.
The percentage of the Long Term Pool that can be turned into
cash has remained relatively constant. As of March 31, 2013, 37%
of the Long Term Pool could be turned to cash within one quarter,
and 51% of the Pool could be turned into cash within one year.
Our unfunded commitments have remained relatively constant as
well. Unfunded private investment commitments ended the quarter
at $895 million or 15% of the Long Term Pool. Our target level of
unfunded commitments is 15% and the maximum is 25%. We continue
to manage our unfunded commitments carefully, investing in
drawdown funds only when the expected returns are compelling
enough to warrant the assumption of the associated liquidity risk.
27
28
29
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
May 20, 2013
COMMITTEE:
Finance
AGENDA ITEM:
III.C.
ACTION REQUIRED:
None
Retirement Administrative Committee
BACKGROUND: The University is the plan sponsor of a number of
defined contribution retirement plans, including the Optional
Retirement Plan for Employees of the University of Virginia and
the Optional Retirement Plan for Employees of the University of
Virginia Medical Center.
At its June 2, 2007 meeting, the Finance Committee of the
Board of Visitors approved a revised Retirement Program Policy.
The revised policy established the role of the Finance Committee
of the Board of Visitors to provide oversight of the retirement
plans and to report annually to the Board.
On May 10, 2013, Ms. Victoria Harker, as Finance Committee
Chair, and Mr. Alan Diamonstein, Finance Committee member, met
with the Executive Vice President and Chief Operating Officer and
representatives of the Retirement Administrative Committee to
review the Plan’s annual performance and to discuss the overall
program from participant and administrative perspectives. Minutes
of that meeting follow.
30
Minutes
University of Virginia
Board of Visitors Finance Committee Appointees on Retirement
Administrative Committee
May 10, 2013, 1:30 p.m.
Madison Hall President’s Conference Room
Board of Visitors Finance Committee Appointees (via
phone): Victoria Harker and The Honorable Alan Diamonstein
Also in Attendance: Pat Hogan, Executive Vice President and
Chief Operating Officer; Susan Carkeek, Vice President and Chief
Human Resource Officer; Barry Schmitt, CAPTRUST Financial
Advisor (via phone); Anne Broccoli, Director of Benefits; Megan
Lowe, Assistant Vice President and Chief of Staff to the
Executive Vice President and Chief Operating Officer, Jim
Matteo, University Treasurer and Chair of the Retirement
Administrative Committee.
There were six agenda items for this meeting: the background of
the Retirement Administrative Committee, the annual review of
fund performance, excess revenue credit, Roth 403(b)
implementation, future initiatives under consideration, and plan
amendments requiring Board of Visitor approval.
I.
Background of the Retirement Administrative Committee
The University is the plan sponsor of a number of defined
contribution retirement plans, the two largest being (1) the
Optional Retirement Plan for Employees of the University of
Virginia and (2) the Optional Retirement Plan for Employees of
the University of Virginia Medical Center.
In June of 2007, the Finance Committee of the Board of
Visitors approved a revised Retirement Program Policy. The
revised policy established the role of the Finance Committee of
the Board of Visitors to provide oversight of the retirement
plans and to report annually to the Board. The policy also
clarified the role of the University’s Retirement Administrative
Committee (RAC) to establish procedures and review investment
performance of the various funds offered. The RAC had been
chaired by the Vice President and Chief Financial Officer. With
that position eliminated, James Matteo, University Treasurer,
has been appointed chair. Susan Carkeek, Vice President and
Chief Human Resource Officer, is the retirement program
administrator.
31
In April of 2008, the Finance Committee of the Board of
Visitors approved new Investment Procedures, creating a menu of
investment options for plan participants that includes a full
range of funds, regardless of which vendor a participant elects.
The new Investment Procedures also changed the role of CAPTRUST
(a third party engaged to provide analysis of investment
performance of the funds) from consultant to advisor thus
shifting fund selection and monitoring responsibility to
CAPTRUST. Since the approval of the policy and procedures, the
Finance Committee has carried out its oversight responsibility
through its Chair and one additional Finance Committee member.
The Chair and appointee meet at least annually with the RAC to
review investment performance and other relevant issues. The
Chair then reports back to the full Finance Committee and Board,
typically at the spring meeting.
December 31st, 2012 Annual Performance Review
Barry Schmitt provided an overview of the annual report on
fund performance, reminding the appointees that the RAC meets
quarterly with CAPTRUST to monitor fund performance and once per
year each of the vendors is invited to the RAC to present on
their participant activity and fund performance. A detailed of
the report of fund performance was provided.
II.
III. Excess Revenue Credit
Revenue credits have been offered by both Fidelity (onetime credit) and TIAA-CREF (ongoing revenue credits). These
credits are the result of CAPTRUST and UVA being able to
negotiate more favorable terms which resulted in revenue credits
of approximately $115,000 from Fidelity (one-time credit) and
approximately $300,000-$330,000 from TIAA-CREF (ongoing). For
each vendor a Revenue Credit Account will be set up and funded
with excess revenue generated by the plan. RAC approved the use
of the revenue credits and is considering how best to utilize
these credits. Examples of how these credits may be used include
paying reasonable and necessary expenses for the plan, crediting
back to participants, and offering additional employee
retirement investment education programs.
IV.
Roth 403(b) Implementation
In response to increasing employee requests, The University
added a Roth option in the 403(b), accepting post-tax employee
contributions, in January 2013. Unlike Roth IRA’s there is no
income limit on a Roth 403(b) so regardless of income, our
employees can elect to defer post-tax amounts up to the IRS
current 403(b) limits of $17,500 or $22,000, based on age.
32
To date, there are 203 employees enrolled with a Roth
contribution and the total value of these investments currently
is $103,092.
V.
Future Initiatives Under Consideration:
The following initiatives are under consideration by the
RAC.
Fund Line-up Consolidation: It has been several years
since a significant change has been made to the fund selections
with each vendor. In 2008, the RAC (with approval from the BOV)
better aligned the investments across all three vendor platforms
(Fidelity, TIAA-CREF, and Vanguard). This process eliminated
overlap of funds, created a “best in class” fund structure, and
“froze” assets of funds that were not performing to the goals
and objectives stated within the Investment Policy. In 2011,
after a comprehensive review, Vanguard was eliminated as a
record-keeper, while, at the same time, all current Vanguard
mutual funds were migrated to and accessible on the Fidelity
platform. Currently, the RAC monitors 41 fund options plus the
target date fund options. However, the RAC is considering
further fund consolidation to continue our strategy in offering
“best in class” fund offerings on each of the remaining two
platforms (Fidelity and TIAA-CREF).
Closing/Mapping Funds: Generally, if a particular fund no
longer meets policy guidelines, it is “closed” for future
contributions and replaced with a similar type of fund. The RAC
does not monitor the performance of closed funds. Should the
fund line-up be significantly changed, consideration would also
be given to mapping funds from the closed fund to the
replacement fund. Historically, the RAC has not “mapped” funds
once a fund is closed, but a change in this strategy is under
consideration.
Introduction of a Brokerage Window: If the fund line-up is
consolidated, and certain funds removed, a brokerage window
would provide employees continued and expanded choice. The
brokerage window gives the employee the ability to direct
trading within a brokerage’s offering through the retirement
plan. Employees would have the option to set up a "window",
which would allow them to trade most listed mutual funds. While
the freedom of a brokerage window can be too much for some
investors to consider, it is a viable option for those who
understand the increased risks/rewards of individual fund
selection and asset allocation.
33
Move towards a Group contract with TIAA: Currently
employees with TIAA-CREF have “individual contracts” where
assets are held by participants without University control.
While the mutual funds held by TIAA-CREF have University
control, the variable and fixed annuities are under these
individual contracts. A long term strategy under review is
adopting “group contracts”, so future contributions would be in
a group program under university control. This will provide the
University with greater flexibility to both leverage assets for
more competitive rates and to “close and map” assets if that
direction is approved.
403(b) Oversight: Federal regulations adopted in 2009 for
403(b) plans required many institutions, including UVa, to look
more closely into the overall operation and structure of
supplemental retirement programs and the efficiency (or
inefficiency) within these programs. While the RAC has explicit
responsibility for oversight of the retirement plans, even with
the 2009 requirements, it is not required to have the same level
of fiduciary oversight of the 403(b) Plan. UVa is now
considering whether or not to further expand our fiduciary
oversight for these plans. One of the driving forces would be to
eliminate disparate fund offerings between the ORP and the
403(b), thereby reducing participant confusion.
VI.
Two Amendments to the Plans
Two plan amendments are proposed for Board approval as
consent agenda items of the Finance Committee. The first is a
revision to the Optional Retirement Plan for Employees of the
University of Virginia to provide flexibility to separated
employees in taking a distribution from the plan. The current
Plan prohibits a distribution prior to 60 days from the date of
separation. The amendment will permit a separated employee to
take a distribution at any time after separation from service.
This aligns the University policy with the VRS requirement to
qualify for retiree health benefits.
The second requested amendment is to the Medical Center’s
Optional Retirement Plan to grant service time for the purposes
of vesting to employees of Albemarle Arthritis Associates (AAA),
as a result of the recent acquisition by the Medical Center.
This same provision was extended the Virginia Ambulatory
Surgery, Inc., Culpeper Hospital Home Health, and Hematology
Oncology Patient Enterprises, P.C. (H.O.P.E.) when they were
acquired.
The meeting was adjourned at 2:05 p.m.
34
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
May 20, 2013
COMMITTEE:
Finance
AGENDA ITEM:
III.D. Academic Division Quarterly
Financial Report
ACTION REQUIRED:
None
BACKGROUND: To provide a holistic view of the current financial
status of the University’s Academic Division, the financial
report for the quarter ended March 31, 2013 includes:
• statement of net assets compared to prior year;
• statement of revenues, expenses, and changes in net
assets compared to prior year; and
• operating sources and uses, budget versus actual results
to date.
DISCUSSION:
Statement of Net Assets – This statement, on page 37, provides
Academic Division’s net assets as of March 31, 2013 as compared
to June 30, 2012. The unaudited statement is developed based on
Generally Accepted Accounting Principles (GAAP). The unaudited
statements include material adjustments and accruals in order to
be reasonably accurate, but are not on a full accrual basis.
Net assets are up $404.0 million or 7.9 percent due to cash
collected from tuition billings (in advance of fourth quarter
expenses) and a 10.8 percent year-to-date return on investments.
The $39.5 million in receivables are primarily comprised of
billing for sponsored research ($30.2 million) and student
charges ($5.4 million). Past due receivables over 120 days are
only $3.0 million, just under 7 percent and well within the
Commonwealth of Virginia’s management standard of 10 percent.
Endowment investments are up nearly $270 million, on the
strength of 10.8 percent returns so far in FY13. Further
information on the endowment’s performance this year is included
in the written report from the University of Virginia Investment
Management Company (UVIMCO) on page 16.
Student loan receivables, depending on payment schedules, are
included in accounts payable and long-term debt. Student loan
35
receivables of $39.9 million include $20.3 million through the
Federal Perkins Loan Program, $1.0 million through the Federal
Nursing Student Loan Program, and $18.6 million through loan
programs managed by the University using philanthropy given for
this purpose. The default rates by University students on the
federal loan programs are below required thresholds: 7 percent
for Perkins versus the federal requirement of 15 percent and 2.1
percent for nursing versus the 5 percent federal threshold.
Collectively, the default rate on University managed loan
programs stands at 2.3 percent.
36
UNIVERSITY OF VIRGINIA - Academic Division Only
Statement of Net Assets
As of 3/31/13
ASSETS
Current Assets
Cash and short term investments
Receivables (accounts, notes, other)
Inventories, prepaids and other
Total current assets
As of 6/30/12
(in 000s)
$
Noncurrent Assets
Endowment and other investments
Receivables (pledges and notes)
Capital assets, net
Receivable from Medical Center
Receivable from SWVHEC & agencies
Total noncurrent assets
520,963
39,532
283
560,778
$
3,951,118
21,679
2,130,250
6,748
6,109,795
Total assets
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities
Deferred revenues and deposits
Commercial Paper
Internal loan deposits held for UVA Wise
Deposits held for SWVHEC
Total current liabilities
3,681,778
37,673
2,044,295
466
5,764,212
$
6,670,573
$
6,235,714
$
25,723
149,183
204,593
13,106
392,605
$
14,192
183,625
127,463
7,550
2,161
334,991
Noncurrent Liabilities
Long-term debt
Other long-term liabilities
Total noncurrent liabilities
732,019
500
732,519
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted:
Nonexpendable
Expendable
Unrestricted
Total net assets
Total liabilities & net assets
37
426,223
44,980
299
471,502
759,582
136
759,718
$
1,125,123
$
1,094,709
$
1,246,430
$
1,238,034
$
495,187
2,373,016
1,430,818
5,545,450
$
485,956
2,236,393
1,180,622
5,141,005
$
6,670,573
$
6,235,714
Statement of Revenues, Expenses, and Changes in Net Assets
(SRECNA) – Shown on page 40, this statement outlines the
Academic Division’s revenues, expenses, and change in net assets
as of March 31, 2013 as compared to the same period last year.
It is developed based on Generally Accepted Accounting
Principles (GAAP) but is unaudited.
At March 31st, net assets are up $404.0 million or 7.9 percent
due mostly to the 10.8 percent performance gain on investments.
Compared to the prior year operating revenue and expenses are up
4.0 percent and 2.4 percent, respectively, because of the onetime employee bonus awarded in November 2012. Without the bonus
revenue and expenses would show only a slight increase of just
under 1 percent.
Operating Revenues:
Net student tuition and fees are up about 5.7 percent, related
to undergraduate enrollment growth and increases in tuition and
fees approved by the Board of Visitors in April 2012.
Grants and contracts are down 4.5 percent overall, but with a
varied mix by source. As anticipated, federally funded grants
are down significantly, despite funding for the one-time
November 2012 3 percent bonus. The overall decline of $19
million in federal funding includes the bonus; if this one-time
funding were excluded, federal grants would have been down about
$21 million. State/local grants are up by $4 million, mostly due
to a large subcontract. Grants from private industry and
foundations are flat.
State appropriations have increased $13 million or 10 percent
due to $5.3 million related to employee benefits and the onetime November 2012 three percent bonus and additional
appropriations in support of the Higher Education Opportunity
Act of 2009.
Spendable gifts are up $18.0 million or 20.6 percent. A few
large gifts from the foundations account for much of the
increase.
Investment income is $326.4, reflecting the 10.8 percent return
on the UVIMCO Long Term Pool through March 31, 2013.
Additions to permanent endowment have declined by $20 million to
$8.1 million. There is only one gift exceeding $1 million so far
in FY13, whereas there were five gifts totaling $22 million as
of March 31, 2012.
38
Operating Expenses:
Operating expenses were up $24 million or 2.4 percent as of
March 31, 2013 compared to March 31, 2012, most of which is
attributable to the 3 percent bonus paid to employees in
November 2012. Without it, operating expenditures would have
been up only $9 million or just about 1 percent.
39
UNIVERSITY OF VIRGINIA - Academic Division Only
Statement of Revenues, Expenses, and Changes in Net Assets
Nine Months
Ende d 3/31/13
OPERATING REVENUES AND EXPENSES:
Operating Revenues
Student tuition and fees, net
Grants and contracts (federal, state, nongovernmental)
State appropriations (includes ARRA state stabilization)
Gifts
Sales and services of educational departments
Auxiliary enterprises revenues, net
Pell grants
Total operating revenues
Nine Months
Ende d 3/31/12
(in 000s)
$
Operating Expenses
Instruction
Research
Public service
Academic support
Student services
Institutional support
Operation of plant
Student aid, net
Auxiliary
Depreciation
Other
Total operating expenses
439,988
237,550
140,103
105,552
12,483
92,317
7,773
1,035,765
$
416,195
248,752
127,111
87,545
14,679
93,342
8,198
995,823
255,640
219,314
25,308
108,374
29,096
52,738
69,574
66,286
93,380
76,353
12,869
1,008,932
241,563
217,843
25,295
104,993
29,020
54,393
68,528
63,091
93,384
72,082
14,670
984,862
26,833
10,961
NONOPERATING REVENUES AND EXPENSES
Nonoperating Revenues
Capital appropriations, grants and gifts
Investment income (loss)
Additions to permanent endowments
Other
Total nonoperating revenues (losses)
58,345
326,440
8,053
11,438
404,275
34,488
71,383
28,056
16,707
150,634
Nonoperating Expenses
Interest on capital asset related debt, net
Loss on capital assets (gain)
Other
Total nonoperating expenses
24,664
1,581
418
26,664
21,766
799
699
23,264
Nonoperating revenues less nonoperating expenses (losses)
377,612
127,370
Total Revenues
Total Expenses
Increase (decrease) in net assets
1,440,040
1,035,595
404,445
1,146,457
1,008,126
138,331
5,141,005
4,977,684
Operating revenues less operating expenses
NET ASSETS
Net assets - July 1 (beginning)
Net assets - March 31 (ending)
$
40
5,545,450
$
5,116,015
Operating Sources and Uses, Budget vs. Actual – Shown on page
43, this report reviews Academic Division’s budgeted sources and
uses versus actual results through March 31, 2013 to highlight
performance versus the approved plan. For reference, the annual
budget is also presented. The cash-based operating plan differs
from the Generally Accepted Accounting Principles (GAAP)
financial statements in the following ways:
•
External debt service, UVa Health Plan activity, and endowment
investment performance are excluded, while repayments of debt
to the internal bank and the expendable endowment distribution
are included.
•
Depreciation is not recognized and most equipment purchases
are reported as a use of funds, not capitalized.
•
Only gifts received and available for the operating plan are
included. Pledges, non-cash gifts, gifts transferred to the
endowment or capital program, and gifts held at foundations
are excluded.
•
The operating plan nets financial aid funded from tuition from
gross tuition, but does not net financial aid funded from
other sources (gifts, endowments, and grants) from tuition.
•
The operating plan reflects mandatory fees collected for
auxiliaries and internal revenues collected from internal
departments as auxiliary revenue.
Overall Results:
Through March 31, 2013, actual net sources exceeded uses by
$93.9 million, higher than the $35.3 million fiscal year to date
budget. Actual available sources of funds for the Academic
Division as of March 31, 2013 were $1,150.2 million, right on
target versus the planned sources of $1,147.0 million.
Similarly, uses of available funds through March 31st are right
on target, totaling $1,056.2 million, which is 5 percent below
planned uses of $1,111.7 million.
•
While it appears as though expenditures for undergraduate
financial aid are $1.7 million over the annual budget as of
March 31, adjustments between financial aid sources during the
fourth quarter will bring the charges against tuition back
within budget.
41
•
Academic support is $8.9 million or 7.5 percent below the
quarterly budget. While it is expected that there will be some
increased spending of these funds in the fourth quarter, the
majority of this amount represents reserves which will be held
for future use.
•
General administration is $9.2 million or 14.0 percent below
the quarterly budget. The quarterly budgets are determined
based on historical spending which had been higher through the
third quarter of the preceding year primarily due to the
impact of higher than budgeted Virginia Retirement System
costs paid to the state. Additionally, administrative reserves
will be held for future use.
•
Operation & maintenance of physical plant is $25.9 million or
29.1% below the quarterly budget primarily as a result of
lower utility costs and utility improvement spending. This
trend is expected to continue through year end. Additionally,
an estimated $5.5 million has been reserved for building
improvements, the anticipated additional payroll scheduled for
FY16, and as an offset to the anticipated decline in future
fee collections related to the projected decrease in capital
project volume.
•
Scholarships, fellowships, & other is $8.9 million or 8.8%
below the quarterly budget. The timing of the expected
increase in scholarships/fellowships from private gifts will
result in costs crossing fiscal years.
42
University of Virginia
Academic Division
Comparative Statement of Sources and Uses of Funds, Year to Date
as of 03/31/2013 (in thousands)
2012-13
Quarterly
Budget
2012-13
Revised Budget
Actuals
Through
3/31/2013
Actuals Over Actuals as a %
(Under) Budget of Budget
Sources of Available Funds
Tuition and Fees
Undergraduate
Less: Tuition to financial aid
Net Undergraduate
248,900 $
(31,069)
217,831
247,000 $
(31,058) $
215,942
248,468 $
(32,742)
215,726
Graduate
Less: Tuition to financial aid
Net Graduate
35,353
(22,552)
12,801
36,000
(22,000)
14,000
Professional (Law, Darden, McIntire & SEAS Exec.)
Less: Tuition to financial aid
Net Professional
100,416
(6,870)
93,546
School of Medicine
Less: Tuition to financial aid
Net School of Medicine
$
1,468
(1,684)
(216)
0.6%
5.4%
-0.1%
35,336
(20,928)
14,408
(664)
1,072
408
-1.8%
-4.9%
2.9%
98,000
(6,600)
91,400
103,303
(7,088)
96,215
5,303
(488)
4,815
5.4%
7.4%
5.3%
27,128
(510)
26,618
26,000
(535)
25,465
27,145
(510)
26,635
1,145
25
1,170
4.4%
-4.7%
4.6%
Other
Less: Tuition to financial aid
Net Other
Total Net Tuition & Fees
97,017
(1,145)
95,872
446,668
97,000
(500)
96,500
443,307
89,735
(539)
89,196
442,180
(7,265)
(39)
(7,304)
(1,127)
-7.5%
7.8%
-7.6%
-0.3%
State Appropriations
Grants & Contracts
Facilities & Administrative Cost Recoveries
Endowment Distribution & Fee
Gifts-Via Affiliated Foundations
Expendable Gifts
Sales, Investment & Other
Operating Cash Balances
140,140
237,367
65,400
155,045
102,485
33,890
169,921
105,025
139,000
195,000
52,000
85,000
67,577
14,100
151,000
-
140,103
191,644
51,810
87,899
71,155
13,374
151,999
-
1,103
(3,356)
(190)
2,899
3,578
(726)
999
-
0.8%
-1.7%
-0.4%
3.4%
5.3%
-5.1%
0.7%
n/a
$ 1,455,940
$ 1,146,984
$ 1,150,164
$
3,180
0.3%
$
$
$
258,633
244,311
109,943
29,744
56,527
63,267
92,584
120,335
80,885
$
(1,967)
1,311
(8,957)
(456)
(9,173)
(25,933)
(8,916)
(265)
(1,115)
-0.8%
0.5%
-7.5%
-1.5%
-14.0%
-29.1%
-8.8%
-0.2%
-1.4%
-5.0%
Total Sources of Available Funds
Uses of Available Funds
Direct Instruction
Research & Public Service
Academic Support
Student Services
General Administration
Operation & Maintenance of Physical Plant
Scholarships, Fellowships, & Other
Auxiliary Enterprises
Internal Debt Service/Transfers
347,466
319,740
158,478
43,204
88,755
118,960
104,675
152,695
115,241
260,600
243,000
118,900
30,200
65,700
89,200
101,500
120,600
82,000
Total Uses of Available Funds
$ 1,449,214
$ 1,111,700
$ 1,056,229
$
(55,471)
Net Sources in Excess of Uses
$
$
$
$
58,651
6,727
43
35,284
93,935
166.2%
MISCELLANEOUS FINANCIAL REPORTS
Finance Committee
University of Virginia
May 20, 2013
UNIVERSITY OF VIRGINIA
CAPITAL CAMPAIGN SUMMARY
as of 3/31/13
All Units
Expendable
1,293,729,948
151,436,897
96,804,527
249,707,077
82,797,435
Endowment
580,960,545
57,032,971
35,536,845
0
2,433,528
Total
1,874,690,493
208,469,868
132,341,372
249,707,077
85,230,963
Gift and Pledge Total
1,874,952,849
302,921,938
675,486,924
83,811,894
2,550,439,773
386,733,832
Campaign Total
2,177,874,787
759,298,818
2,937,173,605
-503,002,849
1,371,950,000
952,563,076
1,628,050,000
449,560,227
3,000,000,000
Expendable
533,296,273
75,852,664
62,164,277
0
59,011,415
Endowment
309,339,003
112,655,635
19,220,117
0
11,184
Total
842,635,276
188,508,299
81,384,394
0
59,022,599
Gift and Pledge Total
730,324,629
168,674,462
441,225,939
22,697,659
1,171,550,568
191,372,121
Campaign Total
Additional Amounts To Be Raised
Total
898,999,091
TBD
898,999,091
463,923,598
TBD
463,923,598
TBD
1,362,922,689
0
0
0
0
10,913,905
200,000
57,560
11,171,465
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Future Support
Additional Amounts To Be Raised
(1)
Total
Rector & Visitors Gift Accounts Only
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Future Support
1,362,922,689
Rector & Visitors Unrestricted Giving
Gifts and Pledge Payments
Deferred Gifts
Outstanding Pledge Balances
10,913,905
200,000
57,560
11,171,465
Total
(1) Excludes future or revocable support
Source: Office of Development and Public Affairs
Date: May 3, 2013
44
UNIVERSITY OF VIRGINIA
Endowment/Long Term Investments for UVa and Related Foundations
March 31, 2013
Unaudited
(in thousands)
Rector and
Visitors Funds
The University of Virginia Medical School and related foundations
The College of Arts and Sciences and related foundations
The University of Virginia Law School and related foundation
Darden School and related foundation
The McIntire School of Commerce and related foundation
Batten School of Leadership and Public Policy
School of Engineering and related foundation
University of Virginia's College at Wise and related foundation
Graduate School of Arts and Sciences
School of Nursing
Curry School of Education and related foundation
School of Architecture and related foundation
School of Continuing and Professional Studies
$
856,459
388,119
47,177
119,399
82,298
118,682
100,302
48,229
56,908
46,635
14,238
18,472
2,032
Related Foundation
Funds Invested by
UVIMCO
$
43,206
66,852
236,912
225,239
9,524
6,891
9,149
2,102
-
Alumni
Association Funds
Invested by
UVIMCO
Related Foundation
Funds Invested by
Direction of
Foundation Board
$
$
9,687
11,709
40,213
2,511
2,439
425
52
University of Virginia Medical Center and related foundations
Centrally Managed University Scholarships
Athletics and related foundation
Alumni Association
Provost
University of Virginia Foundation and related entities
Miller Center and related foundation
Alumni Board of Trustees
University Libraries
456,530
185,453
43,085
97,052
55,271
56,050
61,144
64,317
66,455
9,996
56,645
-
5,063
442
73,961
36
University - Unrestricted but designated
University - Unrestricted Quasi and True Endowment
University - Unrestricted Other
332,981
175,139
162,167
-
-
All Other
231,468
231,624
53,185
$ 3,694,146
$
1,090,056
$
199,723
429
106,773
7,865
621
1,728
2,531
1,552
584
26,727 **
289
29,976
207
-
*
$
$ 909,352
467,109
390,862
352,503
123,132
118,682
111,554
60,162
56,908
49,074
24,939
21,583
2,084
549,464
185,453
108,133
103,937
97,052
66,662
65,267
56,645
56,086
-
332,981
175,139
162,167
12,104
528,381
191,386
$ 5,175,311
*Includes funds on deposit for other areas/schools not individually listed.
**Excludes approximately $60.7 million of board designated pension funds.
SOURCE: Financial Administration
DATE: April 30, 2013
45
Total
UNIVERSITY OF VIRGINIA
WORKING CAPITAL INVESTMENTS AND LIQUIDITY
AS OF MARCH 31, 2013
Ca s h-Aca demi c
Ca s h-Medi ca l Ctr
ST Opera ti ng Inv.
LT Opera ti ng Inv.
Ca s h & Ca s h Equi va l ents
Credi t Li nes
Tota l
% of Tota l
Liquid Balances
Daily
Weekly
$21
$60
$376
$192
> Weekly
$458
$250
$192
$990
$990
$708
37.5%
$192
10.2%
$990
52.4%
Total
$21
$60
$568
$990
$1,640
$250
$1,890
100.0%
Working Capital Investment Allocation
Cash
4.98%
US Treasury Bond
10.04%
Federal Agency
15.09%
CP
0.94%
UVIMCO LTP
60.36%
Repo Agreement
8.29%
PFM Fund
0.30%
46
UNIVERSITY OF VIRGINIA
QUASI-ENDOWMENT ACTIONS -- JANUARY 1, 2013 THROUGH MARCH 31, 2013
The quasi-endowment actions listed below were approved by either (1) the Executive Vice President and Chief Operating
Officer, under the following Board of Visitors' resolutions or (2) the Assistant Vice President for Finance and University
Comptroller, under the delegation of authority from the Executive Vice President and Chief Operating Officer:
● In October 1990 and June 1996 the Board of Visitors approved resolutions delegating to the Executive Vice President and
Chief Operating Officer the authority to approve quasi-endowment actions, including establishments and divestments of less
than $2,000,000, with regular reports on such actions.
● In February 2006, the Board of Visitors approved a resolution permitting approval of quasi-endowment transactions,
regardless of dollar amount, in cases in which it is determined to be necessary as part of the assessment of the business plan for
capital projects. Additionally, to the extent that the central loan program has balances, they may be invested in the long term
investment pool managed by UVIMCO or in other investment vehicles as permitted by law.
Amount
Additions from Gifts
Access UVA Scholarships
Darden, Barbara B. Endowed Scholarship
Denomme, Robert Quasi-Endowment for French Undergraduate Program 1
Denomme, Robert Graduate Fellowship Quasi-Endowment for French Department 1
FINS Research Support Quasi-Endowment 1
Jones D. Lung Cancer Research Quasi-Endowment
President's Fund for Excellence Unrestricted Quasi-Endowment
Research Activities Quasi-Endowment Fund
University Quasi-Endowment Fund 2
Vincent, Hugh Delacy and Nannie McCutcheon Fund
$
90,000
55,000
154,000
154,000
20,582
300,000
121,471
314,828
480,816
25,000
$ 1,715,697
Total Additions from Gifts to Quasi-Endowments
Additions from Endowment Income (Capitalizations)
Antrim, Lottie C. Income Capitalization Quasi-Endowment
Athletics General Operations Quasi-Endowment
Chrysler, W. P. Fund for Engineering Library
Class of 1955 Fund
Class of 1956 Fund
Class of 1957 Fund
Class of 1958 Fund
Class of 1959 Fund
Class of 1960 Fund
Class of 1961 Fund
Class of 1962 Fund
Class of 1963 Fund
Class of 1964 Fund
Class of 1965 Fund
Dermatology General Investment Fund
Hecht, Sidney M. Fellowship in Chemistry
Hecht-Cruachem Chemistry Quasi-Endowment #3
HOPE Physician Incentive Quasi-Endowment
Horton, Charles E. Professorship in International Plastic Surgery Quasi-Endowment
Hughes Endowment Income Capitalization Quasi-Endowment
Jordan, Harvey E. Lectureship
Low, Emmet F. and N. Alyce Chair Quasi-Endowment
47
$
8,942
81,680
1,694
1,910
6,503
5,056
6,427
7,514
6,333
5,720
8,349
2,584
5,086
1,552
30,548
8,599
1,419
62,945
11,869
1,862
1,400
1,201
McIntire School of Commerce Operations Fund
McIntire, Howard Quasi-Endowment in Neurology
Medical Center Capital Assets Quasi-Endowment 3
815,721
22,089
6,629,414
Additions from Endowment Income (Capitalizations) - continued
Miller, Mae W. Cancer Research Quasi-Endowment
Moyston, Vernah Scott Professorship in Ophthalmology Investment Quasi-Endowment
Plastic Surgery Quasi-Endowment Fund
Radiology Fund Special Diagnostic
Samuels, Bernard Ophthalmology Library Quasi-Endowment
School of Medicine Quasi-Endowment
Southwest-Dishner Gift Quasi-Endowment Fund
Taylor, Henry N. Fund
Virginia Quarterly Review - Anonymous
Total Additions from Endowment Income to Quasi-Endowments
Divestments
Mellon Prostate Cancer Research Quasi-Endowment Fund
McIntire School of Commerce Operations Fund
Thaler, Myles H. Quasi-Endowment for HIV Research
Total Divestments from Quasi-Endowments
5,929
4,269
18,067
4,305
2,439
86,179
16,055
317
548
$
7,874,525
$
400,000
898,758
25,000
$
1,323,758
Notes:
1
Quasi-endowment newly established or originally funded since January 1, 2013.
2
Includes current unrestricted gifts to the University which, under a standing Board of Visitors resolution, are required to be
added to the University's Unrestricted Endowment Fund.
3
Per February 7, 2008 BOV authorization, additional amounts up to $300 million can be made to this fund without further BOV
approval.
SOURCE: Financial Administration
DATE: April 19, 2013
48
UNIVERSITY OF VIRGINIA
SUMMER CONFERENCE RATES REPORT
2013, 2014 and 2015
On June 16, 2001, the Board approved the Signatory Authority Policy which delegates the
"[e]stablishment of summer conference rates for housing facilities and for meals, overnight
accommodation rates for the Birdwood Pavilion, and room rates for the International Center" to
the "President, the Executive Vice President and Chief Operating Officer and the Vice President
for Finance". Any approved transaction must be reported to the Board of Visitors at its next
meeting following the action.
The rates below have been approved by Patrick Hogan, Executive Vice President and Chief
Operating Officer and are hereby being reported to the Board of Visitors as required.
Summer Conference Rates – Housing
49
Summer Conference Rates – Dining
Summer Housing and Dining Rates – College at Wise
International Center – Room Rates
Guest lodgings are available for international visitors associated with the University of Virginia. The accommodation goal of the
International Center is to create a small community for visitors from around the world who need short-term lodgings (3-month
maximum stay).
Stays of 16 nights or fewer (per day)
Single occupancy
Double occupancy
Stays of more than 16 nights (per month)
Single, private bath
Double, private bath
Single, shared bath
Double, shared bath
Single “cozy” room
Actual
2012-13
Actual
2013-14
Proposed
Increase
Percent
Increase
$40.00
$60.00
$40.000
$60.00
$0.00
$0.00
0.00%
0.00%
$750.00
$1,125.00
$650.00
$975.00
$550.00
$750.00
$1,125.00
$650.00
$975.00
$550.00
$0.00
$0.00
$0.00
$0.00
$0.00
0.00%
0.00%
0.00%
0.00%
0.00%
SOURCE: Business Operations
DATE: April 29, 2013
50
51
APPENDIX
2013-2014 PRATT FUND ALLOCATIONS
ARTS AND SCIENCES - $3,440,000 allocation for 2013-2014, plus
$245,820 anticipated carryforward of
remaining 2012-2013 funds
Biology - The department proposes to allocate $183,378 from the
2013-14 allocation for graduate fellowships. Of this amount,
$128,100 will be used to provide support to outstanding graduate
students in Biology, including support of two Jefferson Scholars.
The department proposes to use $55,278 to satisfy the department’s
membership and to support one in-state student in the Biomedical
Sciences Graduate Program (BIMS), an important, inter-school
collaborative effort. The department proposes to use the
remaining $66,622 of its allocation to augment the salaries of the
Director and Associate Director of the Mountain Lake Biological
Station.
Chemistry - The department proposes to allocate $150,000 of the
2013-14 allocation for graduate support. Pratt funds are a
crucial component of the total support package assembled to
attract outstanding graduate students. The funds will be used as
well to provide merit-based fellowships for outstanding students
who have completed their candidacy exams. These funds will also
continue to provide a portion of the department’s cost-share on
the AES Fellowships in Energy Research. The department proposes
to use $50,000 of its allocation to supplement: faculty
compensation, including summer wage support for a new faculty
position in organic chemistry; summer wages for faculty holding
key departmental administrative posts, including the graduate
program director and undergraduate program director; and
instructional faculty to develop curricular materials for the
upcoming academic year. The department proposes to use the
remaining $50,000 to purchase research and instructional equipment
and to fulfill partially the department’s commitments to matching
support for major equipment grants.
Mathematics - The Department of Mathematics proposes to allocate
$113,098 in partial support of the salaries of four Whyburn
Postdoctoral Fellows. Internationally recognized for its
excellence, the Whyburn postdoctoral program brings new Ph.D.
recipients in mathematics to UVA as faculty instructors for three
years of teaching and research. Pratt funds support 40 percent of
the academic year compensation plus one month of summer wages for
each fellow. The department proposes to allocate $30,000 in
faculty summer wages for faculty members serving as mentors in the
summer REU program, for the associate chair and for faculty
writing department-level grants. The department proposes to spend
Appendix – Page 1
$6,901 of the 2013-14 allocation, along with a portion of the
remaining balance from prior years’ allocations (approximately
$38,099), to provide fellowship support for students engaged in
Ph.D. research. This funding allows the department to be
competitive with peer institutions in attracting graduate
students. The department is requesting to use $20,000 of prior
years’ remaining balances to replace aging computers and printers
for the faculty in order to facilitate the continuation of their
research programs.
Physics - The department proposes to allocate the entire 2013-14
allocation of $250,000 for fellowship support, health insurance,
and tuition and fees to outstanding graduate students. Pratt
funds are crucial to the department’s ability to provide
competitive multi-year packages to attract the most highly
qualified physics graduate students. The department also seeks to
reallocate prior year balances of $38,721 in continued support of
the salary of new faculty member Craig Group and to provide summer
wages to the associate chair of the department. The department is
requesting that $149,000 of prior year balances be reallocated as
a matching cost share on a National Science Foundation proposal
that has been awarded entitled “MRI Consortium Development of a
Magneto-Electrostatic Spectrometer for High Precision Measurements
of Neutron Beta Decay,” Principal Investigator - Dinko Pocanic.
New Faculty Start-up Fund – A total of $2,540,000 is requested by
the College to use as components of start-up packages associated
with new hires, some of which are still being negotiated; for cost
sharing on grants and other opportunities that may arise in the
coming year; and for other strategic needs in building the
programs in these four departments. It is estimated that this
funding will be equally split between equipment, faculty salaries,
and fellowships. This $2,540,000 is comprised of a $400,000
reserve managed by the dean and a $2.14 million Faculty Start-Up
Fund, from which all allocations will be authorized by the
Executive Vice President and Provost. This reserve, which will be
carefully allocated in accordance with the terms of Mr. Pratt’s
will, is critical in the recruitment of faculty members in
biology, chemistry, mathematics, and physics.
Appendix – Page 2
SCHOOL OF MEDICINE — $3,800,000 allocation for 2013-2014, plus
$427,908 anticipated carryforward of
remaining 2012-2013 funds
Support and Training of Student Researchers - $751,406 - Graduate
students and postdoctoral fellows are central to a successful
biomedical research program. A modest institutional share from
the Pratt bequest supplements funds from federal government
training programs and charitable foundations to attract
exceptional students. These individuals are critical in enhancing
the quality of research in the Ph.D. and MD/Ph.D. programs at the
University, and the success of these programs has a direct impact
on the quality of faculty research at the School of Medicine.
Core Facility Support - $976,502 – Research core facilities,
including, but not limited to: the Small Animal Multimodality
Imaging Core, Advanced Microscopy Facility, Biomolecular Research
Facility, Gene Targeting & Transgenic Facility, Biorepository, and
the new BioNMR core, provide access to large, expensive equipment
and techniques that otherwise would not be available or costeffective to individual investigators. These facilities operate
on a fee-for-service basis. After development costs and other
expenses, the core facilities average a cost recovery of 80%, with
differential funded by Pratt allocations. These resources
provide a competitive advantage to acquiring emerging
technologies, and they are critical to the School of Medicine’s
success in recruitment and retention of faculty and its ability to
continue to grow its externally funded research programs.
The Decade Plan - $2,500,000 - The School of Medicine proposes a
special distribution to be used towards the recruitment package of
the new Cancer Center director. This will be the third of four
annual $2.5 million distributions for this purpose.
Appendix – Page 3