UNIVERSITY OF VIRGINIA
BOARD OF VISITORS
MEETING OF THE
FINANCE COMMITTEE
SEPTEMBER 14, 2012
FINANCE COMMITTEE
Friday, September 14, 2012
10:30 a.m. – 12:00 p.m.
Small Auditorium, Harrison Institute
Committee Members:
Victoria D. Harker, Chair
Frank B. Atkinson
A. Macdonald Caputo
The Hon. Alan A. Diamonstein
Randal J. Kirk
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
AGENDA
PAGE
I.
II.
REGULAR BUSINESS (Ms. Sheehy)
A.
Report on Internal Financial Model (Ms. Sheehy to
introduce Mr. John Simon; Ms. Sheehy and Mr. Simon
to report)
B.
Financial Report for the Year Ending June 30, 2012
Ms. Sheehy to introduce Mr. David Boling; Ms.
Sheehy and Mr. Boling to report)
C.
Endowment Report – Market Value and Performance as
of June 30, 2012 (Ms. Sheehy to introduce Mr.
Lawrence Kochard; Mr. Kochard to report)
ACTION ITEMS (Ms. Sheehy)
A.
Amended 2012-2018 State Six-Year Institutional
Plans for the Academic Division and the College
at Wise (Ms. Sheehy to introduce Mr. Sim Ewing;
Ms. Sheehy and Mr. Ewing to report)
B.
2013 Operating and Capital Amendments to the 20122014 Biennial Budget
C.
Albemarle Arthritis Associates, LLP Acquisition by
the Medical Center (Ms. Sheehy to introduce Mr. R.
Edward Howell; Mr. Howell to report)
III. WRITTEN REPORTS
A.
Report on Endowment Spending Rate (Written Report)
B.
Annual Report on the UVa Health Care Plan
(Written Report)
C.
Miscellaneous Financial Reports
1. Academic Division Accounts and Loans Receivable
2. Capital Campaign
3. Uses of Funds from the Pratt Estate
1
3
13
21
26
32
34
35
36
38
39
PAGE
4.
5.
6.
7.
8.
IV.
Internal Loans to University Departments
and Activities
Report on Endowment by School/Foundation
Quasi-Endowment Actions
Salary and Compensation for Full-Time
Instructional Faculty and University Staff
Sponsored Programs Restricted Grants and
Contracts
APPENDICES
A.
University of Virginia Investment Management
Company June 2012 Investment Report
B.
2012-2018 State Six-Year Institutional Plan for
the Academic Division
C.
2012-2018 State Six-Year Institutional Plan for
the College at Wise
D.
Annual Report on the UVa Health Care Plan
40
41
42
44
53
BIOGRAPHICAL STATEMENTS OF PRESENTERS
COLETTE SHEEHY
Colette Sheehy has been the University's Vice President for
Management and Budget since 1993. She serves as the
institution's senior budget officer and oversees facilities
management, space and real estate, the operating and capital
budgets, procurement and supplier diversity services, state
governmental relations, and process simplification.
Colette began her career at UVa as a Budget Analyst in 1982. In
1986, she became the Assistant to the Director of the Budget,
and in 1988 was named the Director of the Budget. Between 1991
and 1993 she served as the Associate Vice President and Director
of the Budget before assuming her current position.
A native of Freehold, New Jersey, Colette earned a Bachelor of
Arts degree in economics from Bucknell University and a Master's
degree in Business Administration with a concentration in
finance from Rutgers University Graduate School of Management.
Colette served as one of the chief architects and negotiators of
the Higher Education Restructuring and Administrative Operations
Act passed by the General Assembly of Virginia in 2005 - a law
that created a new relationship between the Commonwealth and its
public institutions of higher education. She has been a member
of the Virginia Retirement System Board of Trustees since 2009.
JOHN SIMON
John D. Simon is the Executive Vice President and Provost of the
University of Virginia and the Robert C. Taylor Professor of
Chemistry. He is charged with directing the academic
administration of the 11 schools, the Library, the Art Museum,
public service activities, numerous University centers, foreign
study programs, and the advancement of teaching and research.
He also co-chairs the Internal Financial Model Steering
Committee.
Provost Simon served as the Vice-Provost for Academic Affairs at
Duke University from 2005 to 2011. As Vice-Provost, Simon was
responsible for overseeing Duke's strategic planning and for
nurturing campus-wide academic initiatives to connect the
humanities, social sciences, and sciences. He chaired Duke's
chemistry department from 1999-2004. Simon received his B.A.
from Williams College in 1979 and his Ph.D. from the Department
of Chemistry at the Harvard University in 1983. After a
postdoctoral fellowship at UCLA, Simon joined the Department of
Chemistry and Biochemistry at UCSD in 1985, and then moved to
Duke University as the George B. Geller Professor in 1998.
Provost Simon has earned numerous fellowships and awards for his
scientific work including the Presidential Young Investigator
Award, Alfred P. Sloan Fellowship, Camille and Henry Dreyfus
Teacher Scholar Award, and the Fresenius Award. He is a fellow
of the American Association for the Advancement of Science and
the American Physical Society.
DAVID BOLING
Dave Boling is the Deputy Comptroller of the University of
Virginia. As Deputy Comptroller, his areas of responsibility
include Financial Reporting, Cost Analysis, Fixed Assets
Accounting, Debt Accounting, and Strategic Planning & Analysis.
Dave joined the University in 1980 as an Accounting Intern, and
has worked his entire 32-year career in the central Financial
Administration area.
Dave received a BS in Accounting from Old Dominion University in
1980, and an MS in Accounting from the University of Virginia in
1990. Dave is married with four grown children, who each
attended Virginia public universities, including William & Mary,
Virginia Commonwealth University, the University of Virginia,
and James Madison University.
LAWRENCE KOCHARD
Lawrence Kochard is the Chief Executive Officer/Chief Investment
Officer of UVIMCO. As Chief Executive Officer, Larry provides
leadership for all aspects of UVIMCO’s operations and serves as
UVIMCO’s primary representative to the University, related
foundations and the public. As Chief Investment Officer, Larry
is responsible for the investment management of UVIMCO’s Long
Term Pool, overseeing the asset allocation, portfolio
management, risk management, and manager selection activities of
the investment staff.
Prior to joining UVIMCO, Larry served as Chief Investment
Officer at Georgetown University. From 2001 to 2004, he was
Managing Director of Equity and Hedge Fund Investments for the
Virginia Retirement System. From 1997 to 2000, he taught in the
McIntire School of Commerce at the University of Virginia, first
as an adjunct and later full-time as an assistant professor.
Larry received his BA in Economics from the College of William &
Mary, an MBA from the University of Rochester, and an MA and
Ph.D. in Economics from the University of Virginia.
charter holder.
He is a CFA
SIM EWING
Mr. Ewing holds a dual appointment with the University of
Virginia as Director of the Southwest Virginia Office of the
Weldon Cooper Center for Public Service, and the College at Wise
as Vice Chancellor for Finance and Administration, being
appointed to the University of Virginia in 1987 and the College
at Wise in 1995. Prior to joining the University, he was Town
Manager of Wise, Virginia for over five years and previously had
local government experience in both West Virginia and Michigan.
While with the town of Wise, they were awarded two Virginia
Municipal League Achievement Awards for effective management.
He was named the Wise County Chamber of Commerce Citizen of the
Year in 2007 and received a 2011 Alumni Recognition Award from
the Eberly College of Arts and Sciences of West Virginia
University.
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
I.A.
ACTION REQUIRED:
None
Report on Internal Financial Model
BACKGROUND: Vice President for Management and Budget Colette
Sheehy and Executive Vice President and Provost John Simon,
current co-chairs of the New Internal Financial Model Steering
Committee, will provide a report on the work to develop and
prepare to implement a new internal financial model to better
align resource allocation with academic decision-making, create
greater accountability, and incentivize and encourage
entrepreneurship among deans and the faculty. They will discuss
the progress made throughout the 2011-2012 academic year and
summer, including significant work by several task forces and a
small group charged with modeling various revenue attribution
and cost allocation methods. Ms. Sheehy and Mr. Simon will also
discuss planned steps toward a phased implementation beginning
with the 2013-14 budget cycle. The Board of Visitors will
continue to receive regular updates on the status of this work
at each meeting as the project proceeds from design through
implementation.
DISCUSSION: Over the past year, the New Internal Financial
Model Steering Committee, comprised of all deans and select vice
presidents, has moved toward a model consonant with the
President’s three key principles: transparent, simple and
accountable; incentives to innovate; and quality and
stewardship. The Steering Committee and service centers have
worked together to build a broader foundation of trust and
understanding about each other’s organizations (all of the
schools and the major service units) and their visions and
challenges to inform decision-making and consequences. The
Steering Committee also researched other higher education
institutions that have activity based models and learned that
there is no one perfect model that can be adopted at UVa; each
institution has a financial model based on its own needs and is
usually a hybrid model of some kind.
The Steering Committee spent considerable time addressing
one key foundational hurdle – the absence of good data
1
reporting. Key staff in central budget and finance, working
with the Associate Deans, moved from budget to actual data as
the source for modeling and fostered institutional confidence in
the data; reconciled financial data with schools for two past
years, providing a common data set for modeling; and developed a
basic spreadsheet framework for the model with draft key
allocation metrics.
Another key activity of the past year has been each
academic and service unit’s preparedness assessment. Each
school completed a checklist of activities to see how ready
their organizations are for change and the schools are in the
process of identifying ways to help them through the transition.
In addition, key central service providers assessed readiness to
improve and align service with expectations of cost, access and
quality from those served.
As the Board heard at the May meeting, the 2012-2013 budget
process reflected several revisions as the beginnings of the
transition to the new model.
The Steering Committee created five task forces to explore
various key components of the financial model and the
initiative: 1. Revenue and Incentives -- ensuring revenues flow
in ways that incent innovation, enhance productivity and promote
quality. 2. Cost and Service Level Architecture -- promoting
high quality, efficient and aligned service in support of the
University’s missions. 3. Financial Reporting, System
Preparedness and Training -- confirming people have the
information they need to develop and implement sound resource
plans. This team has engaged a consultant to analyze both the
short- and long-term solutions for financial reporting to
support the new financial model. 4. Communication and Change
Management – preparing and supporting the University community
in the new model. And, 5. Decision-making, Governance and
Policy-making -- safeguarding effective and inclusive governance
and decision-making regarding University resources.
Armed with the task force reports and a planning and
modeling team that will test alternatives and provide data on
which to base decisions, the project is in a strong position to
accelerate the work of the Steering Committee. The Steering
Committee will consider significant actions that can be
presented to the President and taken toward a phased
implementation.
2
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
I.B. Financial Report for the Year Ending
June 30, 2012
ACTION REQUIRED:
None
BACKGROUND: The financial report for the year ended June 30,
2012 includes the preliminary unaudited General Accepted
Accounting Principles (GAAP) financial statements as well as a
comparison of budgeted sources and uses to actual results. The
audited statements will be available in late October and will be
presented at the November Finance Committee meeting. The
endowment performance report from the University of Virginia
Investment Management Company beginning on page 13 will follow
to provide a holistic view on the financial status of the
University.
DISCUSSION: The preliminary June 30, 2012 unaudited financial
statements (on page 8 and 9) present an operating margin of
-$99.3 million, compared to $-77.0 million for the prior year.
When non-operating revenue, which includes the annual endowment
spending distribution, and non-operating expenses are added to
the operating margin the result is an increase in net assets of
$153 million or 3.1% over the prior year. A more expansive
review of the results begins on page 4.
A comparison of budgeted sources and uses of operating
funds to actual results can be found on page 10 and shows that
actual sources and uses were each approximately 2% below budget
as of June 30, 2012. This cash-based operating plan differs
from GAAP-based financial statements as explained more fully on
page 12. Also on page 12 is further analysis of the
University’s performance against the operating budget.
The Academic Division continues to be in a strong financial
condition with tuition and positive returns on the endowment
coupled with reductions in expenditures offsetting declines in
state revenue and lower grant funded activity. Our challenge
going forward will be 1) to identify resources to support
competitive compensation for our faculty and staff, 2) to
finance start-up package costs that accompany recruitment of new
3
STEM-H faculty, and 3) to diversify our research base. The
results of the Board of Visitors’ current study of AccessUVa
will also influence resources available for the operating
budget.
UNIVERSITY OF VIRGINIA – Academic Division
UNAUDITED Financial Statement and Results Review
As of and for the Year Ending June 30, 2012
Statement of Changes
Operating revenues decreased by $15.2 million or -1.3% when
compared to last year. At the same time, there was a slight
increase of $7.2 million or 0.6% in operating expenses.

Tuition revenue is reported net of an accounting estimate
for scholarship discount. Net tuition increased $36.2
million or 9.8%. The increase in tuition rates, along
with enrollment growth, account for this increase.

Revenue from grants and contracts decreased $18.4 million
or 5.5%. Federal grants account for almost all of the
decrease, with $15.6 million of that being the depletion
of ARRA (stimulus) grants.

State appropriations for operations are down about $38
million or 22.4%. The end of federal stimulus (aka state
stabilization) accounts for $22.4 million of the
decrease, with the remainder attributable to additional
state budget cuts for FY12.

Current gifts do not include pledges, but only actual
cash receipts. They decreased slightly, by $2.4 million
or, 1.8%.
Operating expenses are up slightly, by just over $7
million.

Instructional expenses are down $5.0 million or -1.6%,
primarily in compensation across some of the schools, and
especially in their State fund sources.
4

Research expenditures are down $9.4 million or 3.2%,
primarily as a result of the ending of federal stimulus
(ARRA) grant funding.

Academic support is up $6.9 million or 5.5%. The
biggest single increase was a one-time payment by the
Medical School to the University Physicians Group for
its share of the loss on the acquisition of the
Augusta Professional Park ($2 million). In addition,
there were significant increases in two large accounts
funded by gifts and endowment distribution, for the
Miller Center and McIntire Sundry Gifts accounts.

Institutional support is up about $5.3 million or 7.5%.
Several one-time items contributed to the increase:
o Development/fund-raising expenses were up $1.1
million.
o EVP-COO up $1 million (EVP-COO on board for full year,
and $330K for the FY12 portion of the AccessUVa
Study).
o FY 11 expenses were lower than normal due to a $2.2
million one-time recovery of Institutional Review
Board expenses from earlier years.
o Information Technology expenses were up about $1.4
million, due to a $1.7 million one-time cost to
upgrade the Integrated System in FY11. This expense
was correctly accounted for as a capital expense
rather than operating, but that artificially reduced
FY11 operating expenses.

Student aid (net) is up about $5.9 million or 12%. This
category includes stipends paid to students for work
performed.
Operating results show an operating margin of
-$99.3 million, compared to $-77.0 million for the prior year.
It is important to note that the annual endowment spending
distribution is not included in current year operating revenues,
because it is an appropriation of previously earned revenues.
But the expenditure of this source is included in operating
expenses. The endowment spending distribution for FY12 totaled
$131.8 million for the Academic Division. If the spending
distribution is included in operating revenues, the operating
margin would be slightly positive instead of negative.
5
Non-operating Revenues:
 Capital appropriations and capital gifts: up about $2.9
million; capital appropriations from the State are down
about $4.9 million, while capital grants/gifts are up $7.7
million; Squash Courts gift of $6 million and a gift of
$3.7 million for the construction of Rice Hall;
 Investment gain of $182.7 million, sustained primarily as a
result of 5.1% in market returns of the Long Term Pool;
 Endowment gifts of $24.7 million are down about $2.5
million from the prior year; there was a single $10 million
gift (Coulter) in the prior year.
Statement of Net Assets
Current assets are up about $75.7 million primarily
resulting from an increase in cash and short-term investments.
This was a planned cash management action by Treasury
Operations, in order to generate additional liquidity.
Noncurrent assets are up $43.9 million, due almost entirely
to an increase of $52 million in the endowment and other longterm investments. The net increase reflects the 5.1% return on
the endowment, offset by the FY12 endowment spending
distribution that equated to 4.8%. The deposits held with bond
trustees, which held the unspent proceeds of the 2010 Bond
issue, were drawn down by $95 million with a corresponding
increase in capital assets of $86 million during the fiscal
year.
Current liabilities are up about $46.5 million, almost
entirely attributable to an increase in the University’s
outstanding commercial paper. The University uses commercial
paper (taxable and tax-exempt) as “bridge” financing between
bond issuances.
Noncurrent liabilities, consisting almost entirely of longterm debt, decreased $80.2 million, reflecting the refunding and
payment of debt principal during the year.
Net Assets:
 Invested in Capital, net up about $86 million, reflecting
the ongoing investment in new facilities, net of debt
used to finance the construction of those facilities.
 Restricted nonexpendable net assets, which represent that
portion of endowment gifts that cannot be spent, are up
$26.6 million for FY12.
6

Restricted expendable net assets are down slightly, by
about $16.5 million, or less than -1%. The major
components of the change:
o $105 million increase from gain on investments.
o $54 million decrease for conversion of restricted
expenditures for capital to “capital assets, net”
(expenditures from capital gifts, capital grants, and
restricted debt).
o $52 million decrease related to debt (financial
statement reclassification of restricted debt to
“related debt” on Capital).
o About $17 million decrease from Restricted funds
(gifts, plant, endowment spending) operations.

Unrestricted net assets increased by about $57 million;
o $78 million gain on investments.
o About an $11 million decrease from unrestricted funds
operations.
o $10 million decrease for conversion of unrestricted
expenditures for capital to “capital assets, net.”
7
UNIVERSITY OF VIRGINIA - Academic Division Only
Statement of Net Assets (Unaudited)
For the year Ended June 30, 2012 and 2011
6/30/2012
ASSETS
Current Assets
Cash and short term investments
Receivables (accounts, notes, other)
Receivable from Medical Center
Inventories, prepaids and other
Total current assets
Noncurrent Assets
Endowment and other long-term investments
Notes receivables
Deposits with bond trustees
Capital assets, net
Other
Total noncurrent assets
Total Assets
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities
Internal payables to Wise, SWVHEC & Agencies
Deferred revenues and deposits
Commercial Paper
Deposits held for others
Total current liabilities
Noncurrent Liabilities
Long-term debt
Other long-term liabilities
Total noncurrent liabilities
Total Liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted:
Nonexpendable
Expendable
Unrestricted
Total Net Assets
407,799,670
44,447,701
466,491
299,265
453,013,127
6/30/2011
Change in $
% Change
329,184,497
44,826,816
3,023,055
299,265
377,333,633
78,615,173
(379,115)
(2,556,564)
75,679,494
23.9%
-0.8%
-84.6%
0.0%
20.1%
3,629,550,871
18,811,657
112,915,780
1,958,198,544
311,120
5,719,787,972
6,097,121,605
52,227,232
1,074,780
(95,128,856)
86,096,854
(338,094)
43,931,916
119,611,410
1.4%
5.7%
-84.2%
4.4%
-108.7%
0.8%
2.0%
14,192,155
9,869,959
81,039,217
127,463,000
77,985,578
310,549,909
13,637,451
6,848,394
88,240,179
76,850,000
78,469,246
264,045,270
554,704
3,021,565
(7,200,962)
50,613,000
(483,668)
46,504,639
4.1%
44.1%
-8.2%
65.9%
-0.6%
17.6%
765,041,560
136,488
765,178,048
1,075,727,957
845,366,956
25,622
845,392,578
1,109,437,848
(80,325,396)
110,866
(80,214,530)
(33,709,891)
-9.5%
432.7%
-9.5%
-3.0%
1,231,474,554
1,145,151,079
86,323,475
7.5%
485,955,789
2,252,680,397
1,170,894,318
5,141,005,058
459,400,651
2,269,222,214
1,113,909,813
4,987,683,757
26,555,138
(16,541,817)
56,984,505
153,321,301
5.8%
-0.7%
5.1%
3.1%
3,681,778,103
19,886,437
17,786,924
2,044,295,398
(26,974)
5,763,719,888
6,216,733,015
8
UNIVERSITY OF VIRGINIA - Academic Division Only
Statement of Changes in Net Assets (Unaudited)
For the year Ended June 30, 2012 and 2011
OPERATING REVENUES AND EXPENSES:
Operating Revenues
Student tuition and fees, net
Grants and contracts (federal, state, nongovernmental)
State appropriations (including federal stimulus)
Auxiliary enterprises revenues, net
Gifts, current
Sales and services of educational departments
Pell grants
Total operating revenues
Operating Expenses
Instruction
Research
Public service
Academic support
Student services
Institutional support
Operation of plant
Student aid, net
Auxiliary
Depreciation
Other
Total operating expenses
6/30/2012
6/30/2011
Change in $
% Change
406,399,395
314,039,030
131,589,476
109,352,089
131,821,678
23,719,308
8,297,125
1,125,218,101
370,239,379
332,402,942
169,467,445
104,262,855
134,209,576
21,031,817
8,791,869
1,140,405,883
36,160,016
(18,363,912)
(37,877,969)
5,089,234
(2,387,898)
2,687,491
(494,744)
(15,187,782)
9.8%
-5.5%
-22.4%
4.9%
-1.8%
12.8%
-5.6%
-1.3%
310,445,082
282,306,978
28,097,146
132,457,311
34,599,175
76,348,824
72,468,164
54,974,093
118,750,590
103,975,140
10,131,201
1,224,553,704
315,397,279
291,671,186
25,402,016
125,531,089
33,846,660
71,043,096
73,143,075
49,097,930
122,494,156
96,788,465
12,961,262
1,217,376,214
(4,952,197)
(9,364,208)
2,695,130
6,926,222
752,515
5,305,728
(674,911)
5,876,163
(3,743,566)
7,186,675
(2,830,061)
7,177,490
-1.6%
-3.2%
10.6%
5.5%
2.2%
7.5%
-0.9%
12.0%
-3.1%
7.4%
-21.8%
0.6%
Operating revenues less operating expenses
(99,335,603)
(76,970,331)
(22,365,272)
29.1%
NONOPERATING REVENUES AND EXPENSES
Nonoperating Revenues
Capital appropriations, gifts, and grants
Investment income (loss)
Additions to permanent endowments
Other
Total nonoperating revenues
55,544,018
182,717,267
24,722,040
14,552,159
277,535,484
52,691,781
741,236,266
27,185,863
20,076,955
841,190,865
2,852,237
(558,518,999)
(2,463,823)
(5,524,796)
(563,655,381)
5.4%
-75.3%
-9.1%
-27.5%
-67.0%
16,308,228
919,352
7,651,000
24,878,580
27,024,203
1,155,991
28,180,194
(10,715,975)
(236,639)
7,651,000
(3,301,614)
-39.7%
-20.5%
252,656,904
813,010,671
(560,353,767)
-68.9%
Total Revenues
Total Expenses
Increase in net assets
1,402,753,585
1,249,432,284
153,321,301
1,981,596,748
1,245,556,408
736,040,340
(578,843,163)
3,875,876
(574,967,287)
-29.2%
0.3%
-78.1%
NET ASSETS
Net assets - July 1 (Beginning)
Net assets -- June 30 (ending)
4,987,683,757
5,141,005,058
4,251,643,417
4,987,683,757
Nonoperating Expenses
Interest on capital asset related debt, net
Loss on capital assets (gain)
Other
Total nonoperating expenses
Nonoperating revenues less nonoperating expenses
9
-11.7%
UNIVERSITY OF VIRGINIA – Academic Division
Revised Budget vs. Actual Operating Results
For the Year Ending June 30, 2012
This cash-based operating plan differs from GAAP-based
financial statements. Significant changes include:

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 shown 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).

The operating plan reflects mandatory fees collected for
auxiliaries and internal revenues collected from internal
departments as auxiliary revenue.
The revised budget reflects four primary adjustments from
the original budget, 1) more tuition revenue resulting from
enrollment of more than 100 more undergraduates than
anticipated, 2) revised projections of federal grant and
philanthropic support, 3) more revenue from the endowment
distribution and endowment fee as a result of the higher than
expected June 30, 2011 endowment market value, and 4) unspent
balances from the prior year rolled forward to the current year.
For 2012, actual net sources and uses of funds were $25.7
million, slightly below the net sources and uses budget of $28.1
million.
Actual available sources of funds for the Academic Division
as of June 30, 2012 were $1,353.7 million, or 2.2% less than the
$1,384.5 million budgeted for the year. Significant negative
variances from budget included:
10

The sales, investment, and other revised budget included an
$18 million contribution from the Medical Center to the School
of Medicine. Rather than using the funds for operations the
Medical School invested the money in the University’s longterm pool, resulting in its reflection as non-operating
activity.

In fiscal year 2012, only 46% of the budgeted available cash
balances were drawn upon for operating uses, reflecting
conservative management of these balances.
Total uses of available funds for the Academic Division
totaled $1,328.1 million, or 2.1% less than the $1,356.4 million
budget for the year. Significant negative variances from budget
included:

A budget allocation to the schools for faculty hiring related
to undergraduate enrollment increases was distributed too late
(in February) to be utilized in the current year.

Academic support (deans’ offices, libraries, and academic
technology) includes an unbudgeted $2.0 million payment to the
University Physician’s Group for the School of Medicine’s
share of losses incurred in the acquisition of the Augusta
Professional Park.

The student services budget included an expected internal debt
repayment related to the Student System Implementation which
did not occur before year-end, but has taken place in early
2012-13.

The general administration revised budget includes a
carryforward of unspent balances from the prior year; however,
these reserves were retained and not expended, consequently
expenditures are below budget.

The operations and maintenance of physical plant expenditures
are below budget due to delayed spending in major maintenance
and utilities improvements (much occurring over the summer)
and lower than budgeted heating costs resulting from the mild
winter.
11
University of Virginia Academic Division
2011-12 Operating Budget Report
As of June 30, 2012
(in thousands)
2011-12
Revised
Budget
6/30/2012
Actual
Results
2011-12
Variance from
Budget
2011-12
% Variance
from Budget
Sources of Available Funds
Tuition and Fees
Undergraduate
Less: Tuition to financial aid
Net Undergraduate
$233,944
(27,674)
206,270
$233,490
(27,668)
205,822
($454)
6
(448)
(0.2%)
0.0%
(0.2%)
Graduate
Less: Tuition to financial aid
Net Graduate
34,852
(24,488)
10,364
34,743
(22,707)
12,036
(109)
1,781
1,672
(0.3%)
(7.3%)
16.1%
Professional (Law, Darden, McIntire & SEAS Exec.)
Less: Tuition to financial aid
Net Professional
96,952
(6,716)
90,236
96,817
(6,303)
90,514
(135)
413
278
(0.1%)
(6.2%)
0.3%
School of Medicine
Less: Tuition to financial aid
Net SOM
25,656
(535)
25,121
25,060
(533)
24,527
(596)
2
(594)
(2.3%)
(0.3%)
(2.4%)
Other
Less: Tuition to financial aid
Net Other
Total Net Tuition & Fees
53,319
(1,134)
52,185
384,176
51,090
(1,171)
49,919
382,818
(2,229)
(37)
(2,266)
(1,358)
(4.2%)
3.3%
(4.3%)
(0.4%)
131,492
253,825
68,300
150,410
96,049
15,500
37,937
189,900
56,920
$1,384,509
131,581
254,945
69,265
151,994
101,802
21,413
21,713
192,198
26,008
$1,353,737
89
1,120
965
1,584
5,753
5,913
(16,224)
0
2,298
(30,912)
($30,772)
0.1%
0.4%
1.4%
1.1%
6.0%
38.1%
(42.8%)
n/a
1.2%
(54.3%)
(2.2%)
$347,159
306,943
132,400
48,262
85,618
123,690
101,110
211,225
$1,356,407
$338,460
316,054
139,364
37,600
74,784
110,713
99,654
211,443
$1,328,072
(8,699)
9,111
6,964
(10,662)
(10,834)
(12,977)
(1,456)
218
($28,335)
(2.5%)
3.0%
5.3%
(22.1%)
(12.7%)
(10.5%)
(1.4%)
0.1%
(2.1%)
$28,102
$25,665
($2,437)
(8.7%)
State Appropriations
Grants & Contracts
Facilities & Administrative Cost Recoveries
Endowment Distribution & Fee
Gifts-Via Affiliated Foundations
Expendable Gifts
Sales, Investment & Other
American Recovery and Reinvestment Act of 2009
Auxiliary Enterprises
Operating Cash Balances
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
Non-tuition-funded Scholarships, Fellowships, & Other
Auxiliary Enterprises
Total Uses of Available Funds
Net Sources and Uses of Operating Funds
12
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
I.C. Endowment Report – Market Value and
Performance as of June 30, 2012
ACTION REQUIRED:
None
BACKGROUND: The University of Virginia Investment Management
Company (UVIMCO) provides investment management 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.
At the September 14 meeting, Larry Kochard, Chief Executive
Officer of University of Virginia Investment Management Company
(UVIMCO) will provide a report on UVIMCO’s staffing and
governance, investment philosophy, asset allocation, performance
and investment policy.
DISCUSSION:
Governance and Staffing
Effective June 30, 2012, Mr. Peter F. Dolan retired from
the UVIMCO Board of Directors after several years of
distinguished service. In July 2012, Mr. Mark Kington resigned
13
from the UVIMCO Board, and UVIMCO welcomed three new Board of
Visitors appointees to the Board of Directors: Messrs. A.
Macdonald Caputo, Timothy B. Robertson, and Edward D. Miller,
M.D. In August 2012, Mr. Michael Strine resigned as the
President’s Designee to the UVIMCO Board, and that position
remains vacant. Biographical information for all members of
UVIMCO’s Board of Directors is available on UVIMCO’s website.
UVIMCO’s Board of Directors delegates day-to-day investment
management activities to UVIMCO’s full-time, experienced staff.
UVIMCO’s team of 27 professionals works closely with the Board
to implement UVIMCO’s investment strategy through selection of
external managers, tactical asset allocation, and internal
trading.
Investment Philosophy (from UVIMCO’s 2011 Annual Report)
Attractive long-term investment returns are best produced
by maintaining a consistent investment philosophy, team, and
process over time. Several core principles guide us at UVIMCO
as we invest the Long Term Pool. First, we are long-term
investors. Our relatively long time horizon allows us to
capitalize on market inefficiencies and risk premiums that arise
from other investors’ focus on short-term news and market
events. While our portfolio may outperform expectations in the
short term, this is not our goal. Rather, we seek to outperform
our benchmarks over the long term, which means we are willing to
underperform passive benchmarks and peer institutions over
shorter periods of time.
Second, we seek attractive long-term returns through our
external investment manager selections, asset allocation
decisions, and portfolio tilts that take advantage of economic
themes. Securities are selected for UVIMCO by a team of
extraordinary external managers that we have built over time.
Whereas the vast majority of money managers fail to beat passive
benchmarks, UVIMCO’s disciplined research process, and pattern
recognition enable us to develop relationships with outstanding
investment managers who demonstrate an edge in both security
selection and asset allocation.
Third, we believe that price matters. Behavioral biases by
other investors can cause prices of investments to differ from
their fundamental values for long periods of time. Markets tend
to overreact to recent events and assume that recent good or bad
news will continue into the future. At UVIMCO, we believe in
long-term reversion to fundamental values. Superior long-term
14
returns depend on investing in securities, themes, and asset
classes with current prices below their fundamental values.
Mispricings at the security level create opportunities for our
external investment managers, while thematic and asset-class
inefficiencies may be exploited by both external investment
managers and our internal investment team. We seek investments
that have fallen out of favor, resulting in a supply/demand
mismatch of capital. We recognize that prices can differ from
their fundamental values for extended periods, so we must remain
patient for this approach to pay off.
Fourth, we believe our success is largely dictated by the
quality of the people on the UVIMCO team and the long-term
partnerships we maintain with external investment managers. We
ask all staff members to demonstrate a strong work ethic,
passion for investing, effective teamwork skills, and the desire
to put the University’s interests above personal interests. We
expect our external investment managers to demonstrate similar
values, and believe that hiring talented, high-integrity
managers is one of the most important ways in which we control
portfolio risk.
Finally, we believe in the benefits of diversification. We
expect that the quality of our research and manager selection
will lead to good results over time, but we understand that
certain decisions will be unsuccessful. Therefore, we diversify
our investments across asset classes, themes, and managers. We
pursue strategies and investments where we have expertise, and
decline opportunities where we do not. This approach requires
humility in our investment team. We also seek humility in our
investment managers, appreciating those who are confident but
not overconfident, who employ investment processes we can
understand, and who consider the downside risk of any
investment.
Investment Policy Statement
UVIMCO’s Board of Directors approved a revised Investment
Policy Statement (IPS) for the Long Term Pool effective July 1,
2012. Each May, the UVIMCO Board of Directors reviews the IPS
and updates it if necessary. Whereas revisions are typically
minor, this year UVIMCO adjusted the investment objectives and
established a liquidity budget for the Long Term Pool.
15
1.
Investment Objectives
The historical IPS stated that UVIMCO’s primary investment
objective is to “… maximize long-term real return commensurate
with the risk tolerance of the University.” We agree with this
statement and left this unchanged. However, we amended the next
sentence to clarify UVIMCO’s ultimate goal of achieving longterm real returns in excess of the University’s spending rate.
Therefore, UVIMCO’s Board of Directors replaced the second
sentence in the Objectives section with the following text: “To
achieve this objective, UVIMCO actively manages the Pool in an
attempt to provide a substantial and growing stream of income to
support the University’s programs, while at the same time
preserving the purchasing power of its long-term investment
assets.” This change may be subtle, but it properly recognizes
that if the long-term real returns of the policy portfolio are
significantly less than spending or even negative, it will be
insufficient for the Long Term Pool’s returns to merely exceed
its benchmarks.
2.
Liquidity
UVIMCO defines liquidity risk as the inability to meet any
of the following four primary liquidity requirements: (i)
withdrawals by the University and its related foundations; (ii)
capital calls by private funds; (iii) the need to rebalance
exposures following a market decline; and (iv) the ability to
deploy cash as new investment opportunities arise. The
liquidity risk of the Long Term Pool is managed by maintaining a
pool of cash and short term treasury bills and bonds,
maintaining sufficient liquidity with public equity and hedge
fund managers, and managing the pace of commitments to private
investments.
UVIMCO recently implemented a new target for unfunded
commitments of 15% of the Long Term Pool. The Pool will also
have a maximum level of unfunded commitments of 25%, and a
target of 30% for all private investments.
In addition to the new policy targets for private
investments, UVIMCO staff performed portfolio stress tests to
ascertain the minimum amount of cash UVIMCO must be able to
access in any given 3 month and 12 month time period in order to
meet its liquidity needs. Based on these results, UVIMCO’s
Board of Directors revised the IPS to include a minimum cash
availability requirement of 20% for a 3 month period and 30% for
a one year period. Combined with the private investment
16
parameters noted above, the new minimum liquidity requirements
were added to the IPS as follows:
Liquidity – The Board establishes minimum requirements for
available liquidity and limits for private investments within
the Pool. By establishing these liquidity parameters, the
Board ensures that there is ample liquidity in the Pool to
meet investor withdrawal requests, fund capital calls, invest
opportunistically, and rebalance the Pool.
Unfunded Commitments
Private Investments
Cash Available Within 3
months
Target
15%
30%
N/A
Cash Available Within 12 N/A
months
Minimum
N/A
N/A
20 %
Maximum
25%
N/A
N/A
30 %
N/A
The amount of actual liquidity in the Long Term Pool is a
function of the size and nature of the private portfolio, the
amount of Long Term Pool funds invested in bonds or cash, and
the liquidity terms of public investments. As of June 30, 2012,
approximately 12% of the Long Term Pool’s assets were invested
in highly liquid, government-issued debt securities and cash.
Over time, UVIMCO expects the sum of the liquid U.S. Treasury
bond and cash portfolios to vary between 8% and 12% of the Long
Term Pool. As of June 30, 2012, the Long Term Pool was well
within the newly implemented liquidity constraints. More than
30% of the Long Term Pool’s investments could be turned into
cash within three months, and about 50% within a year. Actual
unfunded commitments represented 15% of the Long Term Pool as of
June 30, 2012, and private investments represented 40% of the
Pool.
Performance:
The June 2012 Investment Report, which was delivered to
members of the Board of Visitors in August, is provided as
Appendix A to this book. The July 2012 Investment Report
follows.
17
18
19
20
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
II.A. Amended 2012-2018 State Six-Year
Institutional Plan for the Academic Division
and the College at Wise
BACKGROUND: Pursuant to the Higher Education Opportunity Act of
2011 (HEOA), in July 2011 the University submitted to the State
Council of Higher Education for Virginia (SCHEV) the preliminary
2012-18 Six-Year Institutional Plans for the Academic Division
and the College at Wise. The plans were finalized, approved by
the Board of Visitors in September 2011, and re-submitted to
SCHEV in October 2011. The University and College at Wise
submitted preliminary amended six-year plans to SCHEV in August
2012 that refined the academic and financial plans for the 201214 biennium. The state will provide feedback on the amended
plan by September 1. The University and the College will have
until October 1, 2012 to respond to the comments and submit a
final amended plan. The University of Virginia’s Vice President
for Management and Budget, Colette Sheehy, and the College at
Wise’s Vice Chancellor for Finance and Administration, Sim
Ewing, will request Finance Committee and Board of Visitors
consideration of the proposed amendments to the 2012-2018 SixYear Institutional Plans for the Academic Division and the
College at Wise. They will also request that the Finance
Committee and the Board of Visitors authorize the President to
transmit the amended six-year plans to the State Council, the
Governor, and the Chairs of the House Committee on
Appropriations and the Senate Committee on Finance.
DISCUSSION: The state required six-year plan includes
components of the Academic Division and the College at Wise
operating plans, but is not all inclusive. The preliminary
amended six-year plan that was submitted to SCHEV in August 2012
for the University’s Academic Division reflects the following
significant changes as compared to the October 2011 submission:

Six-year plan initiatives – The 2012-14 budget provided
$800,000 General Funds (GF) in each year to help address
strategies in the six-year plan that respond to the HEOA
objectives. The August 2012 submission reflects the
allocation of $560,000 in 2012-13 and $650,000 in 2013-14
21
to initiatives that increase degree production in STEM
disciplines and support growth of degree programs with an
online component. The University submitted a separate plan
to SCHEV, in conjunction with Longwood University and
Virginia State University, which provides $240,000 in 201213 and $150,000 in 2013-14 for the Virginia Logistics
Research Center.

Reallocation toward HEOA objectives – To demonstrate
institutional commitment, the 2012-14 budget requires
institutions to reallocate a portion of their educational
and general budgets in support of the HEOA objectives. The
minimum requirement for the University is to reallocate
$1.7 million in 2012-13 and $2.2 million in 2013-14. The
updated August 2012 submission reflects the reallocation of
existing resources totaling $12.2 million in 2012-13 and
$2.3 million in 2013-14 toward HEOA objectives.

Online education – The August 2012 submission reflects a
modified strategy for increasing access to UVa degrees by
incorporating the new partnership with Coursera to pilot
massive open online courses through the College and
Graduate School of Arts & Sciences and the Darden School of
Business and the recent study undertaken by the Faculty
Senate’s Task Force on Online Learning to document the
University’s existing initiatives in online education. The
University will continue to expand its work with other
Virginia public institutions to share online educational
programs as part of the 4VA initiative, a partnership with
CISCO.

Faculty salary increases - The August 2012 submission
includes: 1) the annualization in 2012-13 of the Board of
Visitors-authorized December 2011 strategic salary
adjustment for faculty, 2) a two percent July 2013 faculty
salary increase included in the state budget, and 3) a
potential 3 percent supplemental merit pool for teaching &
research faculty in 2013-14. The cost of these salary
actions totals $9.1 million. The 2013-14 salary pool is a
placeholder pending development and Board approval of a
multi-year plan to return faculty salaries to a competitive
level among peers.

Staff salary increases – The August 2012 submission
includes: 1) the annualization of the Board of Visitorsauthorized December 2011 strategic salary adjustment for
university staff, and 2) a two percent July 2013 University
22
and classified staff salary increase included in the state
budget. The cost of these salary actions totals $3.8
million.

Faculty and staff bonuses – The August 2012 submission
includes $5.3 million in 2012-13 for the tuition and
general fund share of a three percent one-time bonus for
eligible faculty and staff in December 2012. The cost of
the bonus is to be shared one-third from the state, onethird from departments and schools, and one-third from
tuition for those employees paid from state funds. Other
fund sources (e.g. grants and contracts, private funds, and
auxiliary enterprises) will be responsible for funding the
entire cost of the bonus for employees paid from those
sources.

Research – The August 2012 submission includes $2.25
million general funds that were appropriated for cancer
research and focused ultrasound technology in 2012-13. The
revised plan reflects incremental funds for cancer in 201314, as the University will continue to ask the state to
support this high-priority research initiative. The August
2012 submission also includes $5 million for an economic
accelerator (including proof-of-concept fund) in 2013-14 as
a matching contribution in a proposed public/private
partnership.

Tuition and fees – The August 2012 submission did not
specify a percentage increase in undergraduate tuition and
E&G fees for 2013-14, instead explaining that the projected
increase in FY14 undergraduate tuition rates is pending
discussion by the Board of Visitors.

Financial aid – The University added a strategy to the
August 2012 submission that accounts for replacing
endowment income used to support the cost of AccessUVa with
tuition funds in 2012-13 and 2013-14. The incremental
tuition funds required during the 2012-14 biennium total
$3.4 million.

Efficiency savings – The August 2012 submission identifies
savings of $8.7 million in 2012-13 and $10.8 million in
2013-14 that will be realized as a result of a
comprehensive employee wellness program, academic and
administrative efficiency reforms, maximizing resources,
eliminating duplication and waste, and improving service.
23

Reserves – The University added a strategy to the August
2012 submission that accounts for the $3.3 million reserve
generated in 2012-13 from lower-than-expected fringe
benefit and utility rates. The reserve will be used to
address strategic institutional priorities.
The amended six-year plan that was submitted to SCHEV in August
2012 for the College at Wise reflects the following significant
changes as compared to the October 2011 submission:

Reallocation toward HEOA objectives – In compliance with
the 2012-14 budget requirement, the College’s revised plan
reflects reallocation of $171,000 in 2012-13 and $228,000
in 2013-14 from current E&G programs to support six-year
plan initiatives and the objectives of the HEOA.

Faculty hire - An additional STEM-H teaching & research
faculty position in Chemistry has been funded for 2012-13
and 2013-14 from non-general fund tuition revenue.

Faculty and staff salary increases and bonus – The August
2012 submission includes funding for the 2012-13 faculty
and staff bonus and the 2013-14 faculty and staff salary
increases.

Retention and graduation rates - The August 2012 submission
includes the utilization of $266,000 GF for an early alert
program to enhance the College’s retention and graduation
rates in both 2012-13 and 2013-14.

Community collaboration - The $275,000 in funding in 201213 and 2013-14 that was included in the Commonwealth’s
appropriation will enable Wise to develop a systemic public
school/UVA-Wise collaboration to create greater community
interest in the broad range of opportunities in sciencerelated careers and better prepare students for success in
STEM-H fields.

Tuition and fees – As a result of support from the
Commonwealth for certain programs anticipated to be funded
from tuition in the original plan, the College revised its
proposed 2013-14 tuition rate increase to 5%.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
24
APPROVAL OF AMENDED 2012-2018 STATE SIX-YEAR INSTITUTIONAL PLAN
WHEREAS, §23-38.87:17 of the Virginia Higher Education
Opportunity Act of 2011 requires the governing boards of all
public institutions of higher education to develop and adopt
biennially (each odd-numbered year) and amend or affirm annually
(each even-numbered year) an institutional six-year plan and
submit that plan to SCHEV, the Governor, and the Chairs of the
House Committee on Appropriations and the Senate Committee on
Finance; and
WHEREAS, the University submitted its preliminary amended
plans for the Academic Division and the College at Wise as
required on August 3, 2011, refining the general strategies it
outlined in 2012-14 to advance the objectives of the Act and to
enhance teaching, research, and service; and
WHEREAS, final amended institutional plans must be approved
by the Board of Visitors and submitted to SCHEV, the Governor,
and the Chairs of the House Committee on Appropriations and the
Senate Committee on Finance no later than October 1;
RESOLVED, the Board of Visitors approves the amended 201218 six-year institutional plans of the University’s Academic
Division and the College at Wise; and
RESOLVED FURTHER, the President is authorized to transmit
the amended six-year plans to the State Council, the Governor,
and the Chairs of the House Committee on Appropriations and the
Senate Committee on Finance.
25
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
II.B. 2013 Operating and Capital Amendments
to the 2012-2014 Biennial Budget
BACKGROUND: In even-numbered years, the University submits its
requested amendments to the biennial budget to the Department of
Planning and Budget for review by the Governor for inclusion in
his amended budget presented to the General Assembly in
December. Operating amendments for the Academic Division total
$14.1 million General Funds (GF) in 2012-13. The Academic
Division proposes two capital requests totaling $25.9 million GF
to address renovation requirements for the Rotunda, and a
planning study for the proposed renovation of Gilmer Hall and
the Chemistry Building. The Medical Center proposes two
operating amendments related to indigent care support totaling
$21.7 million GF in 2013-14 and also proposes to strike the
current Appropriation Act language requiring consultation with
Augusta Health in order to avoid duplication of services. The
University of Virginia’s College at Wise will request $1.9
million GF in 2012-13. The Finance Committee is asked to
approve the proposed operating and capital amendments to the
2012-2014 biennial budget for the Academic Division, the Medical
Center and the College at Wise.
DISCUSSION: Agencies have been instructed to submit proposed
budget amendments to the Commonwealth by September 21, 2012
after first gaining concurrence from the Secretary of Education.
Items such as faculty and staff salary increases, base budget
adequacy (operating budget support), and undergraduate financial
aid are cross-cutting issues that will be addressed by the state
for all institutions.
Depending on the outcome of the Governor’s budget process,
the University may want to submit the following amendments, and
possibly others, to the legislative session in January 2013.
Any requests not included on this list that might be submitted
to the General Assembly will be communicated to the Board of
Visitors in advance of the due date. Formal approval by the
Board of Visitors will be sought at its February 2013 meeting.
26
AGENCY 207 – Academic Division:
Fund Enrollment Growth – ($1,103,000 GF in year two) – The
University requests general fund support, at $8,423 per student
from the October 2011 calculation of the base budget adequacy
formula, to educate 131 additional Virginia undergraduates in
Fall 2013. The State Council of Higher Education will update
the base budget adequacy model with more current enrollment
data, so the per-student funding calculation will likely change.
We will want to revise our amendment to conform to the most
recent calculation available.
Fund Start-up Packages for Faculty ($5,654,000 GF in year two) –
The University requests the establishment of a multi-year fund
for start-up packages necessary to recruit new faculty,
particularly in the science, technology, engineering and math
(STEM) disciplines, to support expected enrollment growth over
the next several years and anticipated retirements. The fund
will provide critical resources for laboratory renovations,
equipment, summer wages for nine-month faculty, and other
support for eighteen new faculty in these fields in 2013-14.
The start-up packages will average $637,000 per faculty to be
paid out over three years as the new faculty establish their
research programs at the University. The start-up packages will
not include base salary support or signing bonuses for new
faculty.
Fund Operations and Maintenance Costs for New Facilities
($67,500 GF in year two) – The University requests ongoing
support for new operations and maintenance costs for capital
projects completed in 2013-14. These include New Cabell Hall
Renovation (supporting new systems) and the East Chiller Plant
(building shell).
Fund Economic Development Accelerator ($5.0 million GF in year
two) – The University requests the establishment of an economic
development fund to increase research, promote economic
development, and enhance the innovation ecosystem. The
Commonwealth’s investment of $5.0 million in each of the next
five years will match private contributions to develop the UVa
Innovation Accelerator, a public-private partnership designed to
facilitate knowledge transfer and business development around
university research and innovation (including a proof-of-concept
fund).
27
Fund Medical Translational Research ($2.25 million GF in year
two) – Continue the Commonwealth’s efforts to expand medical
translational research so that laboratory discoveries are
converted into new methods to diagnose and treat illness and
augment cancer outreach and prevention activities.
Renovate the Rotunda (less the roof) ($24.1 million GF and $17.1
million NGF) – This capital project will address critical
repairs in the Rotunda, the centerpiece and symbol of the
University. The Rotunda is listed on the Virginia Landmarks
Register, is a National Historic Landmark, and is within the
boundaries of the UNESCO-designated World Heritage Site. This
phase of the planned renovation will address work which
threatens the integrity of the building envelope, including the
repair of the marble Corinthian capitals on each portico. The
total project cost, excluding roof repair, will be $45.95
million, the balance to be funded by private funds.
Fund Gilmer Hall and Chemistry Building Renovations Planning
($1.8 million GF) - The University requests $1.8 million to
proceed with the programming and concept design stage of
renovating Gilmer Hall and the Chemistry Building. Cornerstones
of UVa’s undergraduate and graduate science programs for nearly
a half century, Gilmer Hall (237,500 gross square feet) and the
Chemistry Building (261,000 gross square feet) were built in
1963 and 1968, respectively. Proposed reinvestments in the
facilities will maximize space utilization through efficient and
flexible teaching and research laboratory design; replace
antiquated and inefficient mechanical, electrical, and plumbing
systems with a modern, efficient, and adaptable infrastructure;
install new high-performance exterior glazing and masonry
systems for Gilmer Hall, providing a new watertight and energy
efficient exterior envelope; and renovate the space under the
Chemistry terrace to create up to four new general assignment
classrooms for the University. The total project cost is
projected to be $134 million.
AGENCY 209 – Medical Center:
Properly Address Indirect Medical Education and Inflation Costs
in Medical Center Reimbursements ($5.861 million GF in year two)
- The Medical Center requests the correction of an erroneous
calculation in the introduced 2012-14 budget that failed to
appropriately consider indirect medical education and
inflation. This error resulted in a 2013-14 decrease in the
amounts to be reimbursed to the Medical Center for the care of
28
Medicaid enrollees and Virginia residents who fall within the
state of Virginia indigent criteria. The University has
discussed the calculation with the Secretary of Health and Human
Resources who has confirmed the calculation error. The 2012
General Assembly adjusted the 2012-13 budget for the correction,
but did not make the correction for 2013-14.
Restore Medicaid Reimbursement to 100% ($15.853 million GF in
year two) - The Medical Center requests an increase to Medicaid
prospective payment rates in order to meet the need of an
increasing number of Medicaid enrollees and Virginia residents
who fall within the state of Virginia indigent criteria. The
Medical Center requests that state funding be restored from the
current approximately 95 percent of cost to the original 100
percent of the costs to care for Medicaid and state defined
indigent patients, as previously received in fiscal years 2007
and 2008 and as established by policy in 2004. If the state
does not return to the practice of fully reimbursing the
University for the care it provides to Medicaid and indigent
care patients, the Medical Center will have to provide free
medical care to these Virginia residents.
Eliminate Appropriation Act Language for Duplication of Health
Services with Augusta Health (Language Only) – The University
requests the language requiring the University of Virginia
Hospital to engage in substantive dialogue with Augusta Health
to avoid or resolve issues surrounding possible duplication of
health services and report progress to the Chairmen of the House
Appropriations and Senate Finance Committees by November 1, 2012
be eliminated from the Appropriation Act.
AGENCY 246 – University of Virginia’s College at Wise:
Supplemental Instruction to Enhance Student Learning
Opportunities ($250,000 GF in year two) - An increased number of
students are enrolling at Wise with a need to be in targeted
programs, particularly in math and the natural sciences.
However, these students frequently are deficient in the core
skills which are critical to the timely completion of their
degree. The College requests funding to support instructional
programs focused on these targeted needs to achieve greater
student success.
STEM-H Recruiting Materials and Dedicated Recruiters ($198,000
GF and 2 FTEs in year two) – The College requests funding for
marketing materials and admissions and enrollment management
29
recruiters to target students who have an expressed interest in
the STEM-H degree programs at UVA-Wise.
Online Learning Initiative ($150,000 GF in year two) - The
College offers an effective and successful online and
alternative educational program, particularly through the Summer
College course offerings. Funding for this amendment will be
used to enhance the current online curriculum through additional
course offerings.
Fulfill the Remaining Retention and Graduation Program Request
($600,000 GF and 7 FTEs in year two) - The first phase of this
amendment request was funded by the Governor and General
Assembly beginning in the current fiscal year. Per the Six-Year
Plan, existing first-year programs have been enhanced with
positive results. Full funding will allow the College to
continue existing programs and offer additional resources to
create a successful first-year experience which, in turn, will
also increase graduation rates, targeting “at risk” students.
Complete Funding for Science Consortium ($700,000 GF and 6 FTEs
in year two) - The first phase of this program was included by
the Governor and General Assembly in the current budget. This
request provides for the second phase for science and math
interaction in the region’s middle and high schools. Funding
would be used to develop a systemic public school/UVa-Wise
collaboration to create greater community interest in the broad
range of opportunities in science-related careers and to better
prepare students for success in STEM fields. Outcomes to date
are showing signs of potential through programs such as the LEGO
robotics, which demonstrate the utilization of math and science
in ways that the students find as an enjoyable learning
experience.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL OF 2013 OPERATING AND CAPITAL AMENDMENTS TO THE 20122014 BIENNIAL BUDGET
WHEREAS, the University, the Medical Center, and the
College at Wise have an opportunity to propose budget amendments
for consideration by the Governor in his amended 2012-2014
budget; and
WHEREAS, the six-year plans previously approved by the
Board of Visitors and submitted to the state by the Academic
30
Division and the College at Wise provide the basis for the
proposed amendments;
RESOLVED, the Board of Visitors of the University of
Virginia approves the amendments to the 2012-2014 biennial
budget; and
RESOLVED FURTHER, the Board of Visitors understands that to
the extent these initiatives are not included in the Governor’s
2012-2014 amended budget, the University may want to pursue
similar requests to the Legislature; and
RESOLVED FURTHER, the President or her designee is
authorized to transmit to the General Assembly any request not
funded by the Governor as long as there are no material
differences from the items already endorsed by the Board of
Visitors.
31
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
II.C. Albemarle Arthritis Associates, LLP
Acquisition by the Medical Center
BACKGROUND: At the May 21, 2012 Medical Center Operating Board
meeting, a resolution was approved to acquire substantially all
of the assets of the Albemarle Arthritis Associates, LLP medical
practice. The Medical Center desires to amend the resolution.
Since the proposal was submitted in May, we have determined that
the space originally planned will not accommodate the program.
Accordingly, a different site has been identified in the same
area that will meet current and projected needs. As a result of
the additional square footage and an increase in the cost per
square foot for renovations plus contingency, the total facility
cost has increased. We have also determined that the projected
returns on a very conservative basis are slightly less than we
originally projected.
DISCUSSION: Albemarle Arthritis Associates, LLP is a threephysician practice located in Charlottesville. The practice
operates a small infusion center that performs 1,400 infusions
annually. The practice will be acquired and converted to a
provider-based clinic, and the infusion center will be enlarged
to perform at least 2,200 and as many as 4,500 infusions
annually. The three physicians will be employed by the
University of Virginia Physicians Group. This acquisition will
improve access for the Medical Center’s infusion patients,
expand the referral base for more complex care, and provide
strong financial performance, with projected operating income
over $1 million and operating margin in excess of 15% by the end
of year four.
The acquisition cost for Albemarle Arthritis Associates,
LLP, is $200,000 plus the appraised value of the equipment,
which is likely to be less than $50,000. We will be required to
build-out new space to accommodate the physicians, recruit an
additional rheumatologist and expand the number of infusion
chairs at cost not to exceed $1,650,000. The all-in cost to
acquire Albemarle Arthritis Associates, LLP, including working
capital of $600,000 until they are generating positive cash
flow, is not to exceed $2,500,000.
32
The total cost reflected in the initial pro forma that was
relied on for the May 21, 2012 resolution was $1,200,000. The
higher cost of $2,500,000 reflects a need for additional space,
the identification of a different site in the same area, an
increase in the cost per square foot for renovations, and the
addition of a contingency. We have also determined that the
projected returns on a very conservative basis are slightly less
than we originally projected.
ACTION REQUIRED: Approval by the Medical Center Operating
Board, the Finance Committee, and by the Board of Visitors
APPROVAL TO ACQUIRE_ALBEMARLE ARTHRITIS ASSOCIATES, LLP
WHEREAS, the Medical Center Operating Board and the Finance
Committee find it to be in the best interests of the University
of Virginia and its Medical Center for the Medical Center to
purchase substantially all of the assets of Albemarle Arthritis
Associates, LLP;
RESOLVED, the University, on behalf of the Medical Center,
is authorized to acquire substantially all of the assets of
Albemarle Arthritis Associates, LLP on such terms to be
contained in a definitive agreement between the parties at a
total investment not to exceed $2,500,000; and
RESOLVED FURTHER, the President of the University or her
designee in consultation with the Vice President and Chief
Executive Officer of the Medical Center, and with the
concurrence of the Chair of the Medical Center Operating Board
and the Chair of the Finance Committee, is authorized to
negotiate the terms of such acquisition, including execution of
the definitive agreement, contracts, and all other documents
necessary for the closing of the transaction, on such terms as
the President of the University or her designee deems
appropriate, and to take such other action as the President of
the University or her designee deems necessary and appropriate
to consummate the foregoing.
33
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
III. A. Report on Endowment Spending Rate
(Written Report)
ACTION REQUIRED:
None
BACKGROUND: At its June 2008 meeting, the Board of Visitors
adopted a resolution to change the parameters of the endowment
spending policy. This policy, which became effective July 1,
2008, calls for “a percentage increase in the annual
distribution from the endowment, unless such increase causes the
distribution to fall outside a range defined as four percent on
the low end and six percent on the high end of the market value
of the Pooled Endowment Fund.” If the distribution falls
outside of this range, the Finance Committee may recommend
either raising or lowering the rate of increase.
The percentage increase in spending distribution is based
on a five-year average of the Higher Education Price Index
(HEPI). The University’s HEPI factor was reviewed in fiscal
year 2010-11, and reset to 3.8%. It will be applied again in
deriving the fiscal year 2012-13 spending distribution.
DISCUSSION: In fiscal year 2011-2012, the endowment experienced
a return of 5.1 percent. Applying the spending policy in place
will result in an endowment distribution for fiscal year 20122013 of approximately $160 million, or 4.83% of the June 30,
2012 market value of the Pooled Endowment Fund. Since this
falls within the approved band of four percent to six percent
established by the Board of Visitors’ policy, no further action
is required by the Board. The endowment distribution for fiscal
year 2011-12 was $152.6 million, or 4.6% of the June 30, 2011
market value of the Pooled Endowment Fund.
34
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
September 14, 2012
COMMITTEE:
Finance
AGENDA ITEM:
III. B. Annual Report on the UVa Health
Care Plan (Written Report)
ACTION REQUIRED:
None
BACKGROUND: The University provides its regular annual report
on the status of the University’s self-insured health care plan
at the Board’s fall meeting.
The University regularly monitors its health insurance
claims and premiums, the adequacy of its reserves, and the
outlook for future health care costs. It is anticipated that
over time health care costs will continue to increase. The
University slowed the impact of cost increases in 2010 through
the implementation of strategic cost-control plan design
changes. Each year additional cost-control plan design changes
are considered.
DISCUSSION: Medical claim costs increased in 2011, due in large
part to an increase in both the number and amount of “high
dollar” claims. Prescription costs decreased as a result of
more favorable pricing with a new Pharmacy Benefit Manager
(PBM), contracted as of January 1, 2011. To offset increased
utilization and anticipated medical trends, some premium rates
will increase to cover projected 2013 costs. The Hoos Well@
wellness program, introduced in 2011 in collaboration with the
Plan’s Third Party Administrator, Aetna, will launch its second
year programming later this fall. Incentives adopted last year
to encourage greater employee utilization of UVa providers will
be expanded in 2013. Additional services will have reduced outof-pocket costs for UVa-provided procedures, admissions, and
prescriptions.
A detailed report on the plan’s demographics, utilization,
claims experience, wellness program data, and other plan design
changes for next year is included as Appendix D.
35
MISCELLANEOUS FINANCIAL REPORTS
Finance Committee
University of Virginia
September 14, 2012
UNIVERSITY OF VIRGINIA
ACADEMIC DIVISION
ACCOUNTS AND LOANS RECEIVABLE
AS OF JUNE 30, 2012
SOURCE: Financial Administration
DATE:
July 19, 2012
36
UNIVERSITY OF VIRGINIA
ACADEMIC DIVISION
ACCOUNTS AND LOANS RECEIVABLE
AS OF JUNE 30, 2012
SOURCE: Financial Administration
DATE:
July 19, 2012
37
University of Virginia
Capital Campaign Summary
As Of 6/30/12
All Units
Expendable
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Gift and Pledge Total
Future Support
Campaign Total
Additional Amounts To Be Raised
(1)
Total
Endowment
Total
1,197,365,397
165,452,917
542,262,895
47,274,603
1,739,628,292
212,727,520
94,162,576
234,433,358
77,080,313
30,526,179
0
2,201,467
124,688,755
234,433,358
79,281,780
1,768,494,561
622,265,144
2,390,759,705
283,983,625
76,870,858
360,854,483
2,052,478,186
699,136,002
2,751,614,188
-396,544,561
1,005,784,856
609,240,295
1,371,950,000
1,628,050,000
3,000,000,000
Rector & Visitors Gift Accounts Only
Expendable
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Gift and Pledge Total
Future Support
Campaign Total
Additional Amounts To Be Raised
Endowment
282,110,686
4,123,502
15,387,573
688,139,482
34,495,201
76,629,746
0
32,502,397
0
11,184
0
32,513,581
530,145,065
301,632,945
831,778,010
153,710,286
19,365,595
173,075,881
683,855,351
320,998,540
TBD
Total
Total
406,028,796
30,371,699
61,242,173
TBD
683,855,351
1,004,853,891
TBD
320,998,540
1,004,853,891
10,435,793
0
10,435,793
200,000
107,160
0
0
200,000
107,160
10,742,953
0
10,742,953
Rector & Visitors Unrestricted Giving
Gifts and Pledge Payments
Deferred Gifts
Outstanding Pledge Balances
Total
(1) Excludes future or revocable support
SOURCE: Development and Public Affairs
DATE:
July 26, 2012
Source: Office of Development and Public Affairs
Date: July 26, 2012
38
SOURCE: University Budget Office
DATE:
July 9, 2012
39
UNIVERSITY OF VIRGINIA
INTERNAL LOANS TO UNIVERSITY DEPARTMENTS AND ACTIVITIES
AS OF JUNE 30, 2012
SOURCE: Financial Administration
DATE:
August 7, 2012
40
UNIVERSITY OF VIRGINIA
ENDOWMENT/LONG TERM INVESTMENTS FOR UVA AND RELATED FOUNDATIONS
AS OF JUNE 30, 2012
(in thousands)
SOURCE: Financial Administration
DATE:
August 22, 2012
41
UNIVERSITY OF VIRGINIA
QUASI-ENDOWMENT ACTIONS
APRIL 1, 2012 TO JUNE 30, 2012
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 Vice President and Chief Financial
Officer, 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.
Additions from Gifts
Amount
Jones D. Lung Cancer Research Quasi-Endowment
President's Fund for Excellence Unrestricted Quasi-Endowment
Pristo, Lori Ann Award
Rainey Professorship in the History of Landscape Architecture Quasi-Endowment*
Research Activities Quasi-Endowment Fund
University Quasi-Endowment Fund (1)
UVA Bookstore Quasi-Endowment for Excellence
Weedon Professorship in Asian Architecture Quasi-Endowment*
Total Additions from Gifts to Quasi-Endowments
$
250,000.00
73,713.10
3,230.00
221,000.00
175,000.00
89,316.32
200,000.00
116,000.00
$ 1,128,259.42
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
42
$
8,213.18
75,020.05
1,620.45
1,754.33
5,972.52
4,643.30
5,903.29
6,901.05
5,816.97
5,253.91
7,668.29
2,373.13
4,670.86
1,425.66
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
McIntire School of Commerce Operations Fund
McIntire, Howard Quasi-Endowment in Neurology
Medical Center Capital Assets Quasi-Endowment (2)
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
$
28,057.05
7,897.90
2,124.26
52,683.58
10,900.91
1,701.64
1,285.42
1,103.12
807,497.21
20,287.98
6,088,856.53
5,445.39
3,920.56
16,594.02
3,954.07
2,240.20
79,151.74
14,745.42
291.05
503.49
$ 7,286,478.53
Divestments
Hecht-Cruachem Chemistry Quasi-Endowment #3
McIntire School of Commerce Operations Fund
Total Divestments from Quasi-Endowments
$
37,000.00
898,758.75
$
935,758.75
Notes:
*Quasi-endowment newly established or originally funded since April 1, 2012.
(1) 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.
(2) 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:
August 10, 2012
43
UNIVERSITY OF VIRGINIA
SALARY AND COMPENSATION FOR FULL-TIME INSTRUCTIONAL FACULTY
AT AAU AND SCHEV PEER GROUP INSTITUTIONS
These reports provide average compensation and salary figures for institutions included
in the Association of American Universities, and average salary figures for the University's peer
institutions, as established by the State Council of Higher Education in Virginia. These figures
include instructional faculty paid on a full-time basis; all medical faculty have been excluded.
Salary figures for those faculty with eleven- or twelve-month duties have been converted to ninemonth figures by adjusting the total salaries by a factor of 9/11ths. The source for these figures is
"The Annual Report on the Economic Status of the Profession, 2011-2012," Academe, MarchApril, 2012, the bulletin of the American Association of University Professors.
The University’s current position in the AAU, 26th, is short of the BOV target range of
15 through 19th. This gap represents $4,300 in average salary. A total of $4.9 million would be
required to raise the salaries of the 1,147 full-time instructional (non-medical) faculty included in
this calculation to the 19th position (and holding peer salaries unchanged). A total of
approximately $9.5 million in current dollars would be required to award the same salary
increase to the 2,200 total FTE teaching and research faculty at UVa.
th
SOURCE:
DATE:
44
Institutional Assessment and Studies
August 21, 2012
UNIVERSITY OF VIRGINIA
FACULTY SALARY AND COMPENSATION AVERAGES
I.
Salary at AAU Institutions
 AAU salary data includes all sources of funds.

The 59 institutions included in this year’s rankings are only the U.S. institutions.
Two Canadian institutions, the University of Toronto and McGill University, have
been excluded. The list has been revised this year to account for the addition of
Georgia Tech and the termination of Nebraska and Syracuse from the AAU.

The UVa average in each of the years displayed represents the salary average as of
Dec. 1 of that year and reflects the merit increase of that date.

In 2011-12, for the fourth consecutive year, the state did not provide any increase in
faculty salaries. However, Deans of the individual schools within the University were
allowed to give increases for promotions, retention, additional responsibilities, and
for maintaining equity if they had available funds. The result was an average salary
increase of 4.3%. The median increase among AAU institutions was 2.4% and UVa’s
rank among the AAU increased by two positions to 26th.

In 1989-90, before the first round of the Wilder budget cuts, UVa ranked 18th (69th
percentile) in the AAU. Since then our ranking has varied, never rising above 18th,
dropping as low as 32nd in 1996-97, and now stands at 26th (57th percentile) in
2011-12. During that 22-year period, the University’s average salary increased from
$54,100 in 1989-90 to $110,900 in 2011-12 (a total increase of 105.0%, which is the
equivalent of an annual 3.32% increase applied and compounded each year).

The University’s current position in the AAU, 26th, is short of the BOV target range
of 15th through 19th. This gap represents $4,300 in average salary. A total of $4.9
million would be required to raise the salaries of the 1,147 full-time instructional
(non-medical) faculty included in this calculation to the 19th position (and holding
peer salaries unchanged). A total of approximately $9.5 million in current dollars
would be required to award the same salary increase to the 2,200 total FTE teaching
and research faculty at UVa.
Compensation at AAU Institutions
 As in the case of the average salary, average compensation was reported as of
December 1 of those years. The average compensation includes both salary and
benefits.

The UVa percentage compensation increase between 2010-11 and 2011-12 was
4.21%. This was well above the median for the AAU (2.47%) and resulted in an
increase of 2 positions in our compensation ranking, from 31st to 29th.

In 1989-90 UVa ranked 20th (65th percentile) in compensation. Since then our
45
ranking has varied, never rising above 20th, and now stands at 29th (52nd percentile)
in 2011-12. During that 22-year period our average compensation increased from
$66,800 in 1989-90 to $138,700 in 2011-12 (a total increase of 107.6%, which is the
equivalent of an annual 3.38% increase applied and compounded each year).
II.
State Salary at SCHEV Peer Institutions
 In the summer of 2007, SCHEV approved a new sample of peer institutions for the
University. The attached table includes the salary averages of the new peer group in
2006-07 through 2011-12. Again, the UVa state salary average represents the salary
average as of December 1 each year. The UVa state salary averages listed in the table
represent the authorized state salary averages rather than the actual averages. They
are intended to exclude all UVa endowment funds.

Four consecutive years without state faculty salary increases has caused UVa’s rank
among the new sample peers to drop to the 19th position (23rd percentile) in 2011-12.

In 1989-90, UVa ranked 10th in the State peer group that was in effect at that time.
Two new peer groups have been approved since then. In the current peer group, the
University began in 2007-08 at position 15, at the 41st percentile, and has dropped to
19th (23rd percentile) in 2011-12.
46
47
48
49
UNIVERSITY OF VIRGINIA
REPORT TO BOARD OF VISITORS ON UNIVERSITY STAFF SALARIES
MAY 9, 2012
The University Staff Human Resources Plan governs UVa’s ―University Staff,‖ a category of
employee created under the authority of the Higher Education Restructuring Act. The Plan
incorporates a compensation philosophy which emphasizes market-based pay, with incentives to
recognize employee achievements in work accomplishments and for career development.
Currently 52% of the UVa staff workforce are ―University Staff‖; the remaining 48% are
Classified Staff, with compensation managed by the Commonwealth of Virginia, Department of
Human Resource Management.
University Staff salaries are managed against market ranges, benchmarked to determine
appropriate alignment and competitiveness. This is similar to the methodology for faculty salary
benchmarking, and aids in staff recruitment and retention. The University adopted the concept
of market relevance with rewards for performance and career development in designing the
University Staff compensation program. Market ranges are developed by applying generally
accepted compensation practices to reflect similar pay opportunities in the marketplace.
The recent economic downturn has had a dampening effect on the University’s intended salary
alignment progress. The University suspended annual and mid-year base salary increases for the
past four years. Outside of the 2011 Strategic Salary Adjustment, only the most critical base
salary adjustments have been considered on an exception basis. The goal, initiated in 2009 when
the HR Plan became effective, is to achieve an average University Staff salary approximating the
50th percentile of our competitive market pay ranges. Despite the serious financial challenges
the University has faced, some progress toward this goal is evident.
Figure 1 below displays the progress that the University has made in the salary positioning by
showing the percentage of University Staff distributed across the market ranges in each of the
past four years.
50
Figure 1: 4-Year Trend: Market Range Positioning -- By Percent of University Staff
Employees
The modest yet positive gains in the first three years is primarily attributable to the impact of
using market ranges for new hires. However, the significant movement evident this past year is
attributed to the strategic salary adjustments awarded in November, 2011. It is encouraging to
see the beginnings of a ―normal distribution‖ around the midpoint in the 2012 line.
The percentage of University Staff employees with salaries below the Lower Reference has been
declining every year, reduced from 14.2% in 2009 to 4.9% in 2012. More impressive is the
significant (and appropriate) movement of the salaries to the ―Middle Third‖ or what is called the
“Competitive Range” for the fully qualified and fully performing employee—from 31.8% in
2009 to 46% in 2012. As would be expected from the movement depicted in the graph, the
average market range penetration for staff is also moving in a positive direction. The average
market range penetration for staff increased from 34.9% in 2010 to 36.8% in 2011, and is
currently at 43% of market. Despite these gains, we remain short of our 50th percentile goal.
The number of staff who are fully qualified and performing competently but whose salaries are
positioned in the lower third of the market range is cause for concern. These employees are
considered ―at risk‖– at risk of turnover and low engagement and satisfaction levels. It is also
essential to address the compression caused by new hires coming in at market-competitive
salaries, often above existing employees.
In addition, we recognize that multiple years with no salary increases has been particularly
difficult for our lowest paid employees. Last year, the Board of Visitors provided supplemental
funding ($250,000 annually) as part of the annual operating budget for strategic staff salary
increases. Restoration of these funds allowed us to accelerate salary increases to address this
critical issue. The number of University Staff (4.9%) with salaries still below the Lower
Reference is also cause for continued concern. While progress has been made each year the
model has been in place, having salaries completely outside the established market range remains
problematic.
51
A five-year plan has been developed to achieve the 50th percentile for University Staff salaries.
That plan recognizes the need for both ―catch up‖ funding and ―keep up‖ funding – ―catch up‖
funding to address the University’s lagging market position and ―keep up‖ funding to reward and
retain high performers.
Even with the recent economic downturn, market pay levels have continued to increase. The
University’s ability to attract, motivate and maintain highly qualified talent is in part dependent
on maintaining competitive compensation levels with a continually moving market. Increasing
staff salaries closer to the 50th percentile through a disciplined, fiscally responsible, and wellinformed movement of the pay curve to the right will establish market competitive salaries
necessary to sustain excellence in support of the University’s core missions of teaching, research,
patient care, and service.
SOURCE: University Human Resources
DATE:
August 21, 2012
52
UNIVERSITY OF VIRGINIA
SPONSORED PROGRAMS RESTRICTED GRANTS AND CONTRACTS
FISCAL YEAR 2011-2012
SUMMARY:
For Fiscal Year 2012, the University received sponsored program awards totaling $307.30
million, a decrease of almost nine percent from the fiscal year 2011 amount of $337 million. This
year’s total includes $68 million in facilities and administrative (indirect) costs as compared to
$74 million last year. Excluding ARRA funding, the University’s sponsored program
awards declined by 3.5%, from $317 million in FY2011 to $306 million in FY 2012.
Once again, federal agencies continue to account for most of our funding, with 66% of the total.
The Department of Health and Human Services continues to be the University’s largest
individual sponsor of awards, accounting for 42% of the total.
The School of Medicine was awarded almost 58% of all award dollars, followed by the School
of Engineering with 21% and the College of Arts and Sciences, which accounted for 15% of the
funds. The remaining 6% was distributed among various areas within the University.
Finally, it also should be noted that this year’s report reflects the end of the American
Reinvestment and Recovery Act (ARRA). These awards accounted for almost $19.75 million in
FY2011, but only $1.18 million in FY2012.
SOURCE: Office of Sponsored Programs
DATE:
August 9, 2012
53
UNIVERSITY OF VIRGINIA
SPONSORED PROGRAMS RESTRICTED GRANTS AND CONTRACTS
YEAR-END COMPARISON REPORT OF AWARD DATA
FISCAL YEAR 2012
(in millions)
SCHOOL
DHHS
DOD
DE(1)
DOE
NASA
NSF
Architecture
Arts & Scs.
8.94
Education
0.50
Engineering
2.92
1.70
1.48
8.11
1.67
5.53
16.45
0.86
1.80
Other
NonTotal
Total
% of
% of
%
Federal (1) Federal (1) (2) State (1) FY 2012 (3) FY 2012 FY 2011 (3) FY 2011 Inc/Dec
0.01
0.17
0.04
0.22
0.1%
0.19
0.1%
18.9%
11.11
1.77
9.38
0.50
44.67
14.5%
48.19
14.3%
-7.3%
1.30
0.12
4.97
1.26
13.68
4.5%
18.49
5.5%
-26.0%
10.75
4.54
16.92
8.82
63.07
20.5%
61.25
18.2%
3.0%
0.46
0.08
0.54
0.2%
1.01
0.3%
-46.8%
52.61
2.66
176.73
57.5%
193.99
57.6%
-8.9%
1.78
0.00
2.67
0.9%
2.99
0.9%
-10.7%
2.61
1.26
5.72
1.9%
10.84
3.2%
-47.3%
307.30
Law
Medicine
116.25
Nursing
0.76
3.46
0.47
1.03
Total FY 2012
0.30
0.62
0.13
Other (4)
(3)
0.36
0.03
0.30
0.49
129.38
21.60
8.17
9.47
3.84
23.76
7.55
88.91
14.61
% of FY 2012 42.1%
7.0%
2.7%
3.1%
1.3%
7.7%
2.5%
28.9%
4.8%
Total FY 2011 (3) 145.86
28.05
11.29
13.03
4.04
26.17
11.17
86.80
10.53
% of FY 2011 43.3%
8.3%
3.4%
3.9%
1.2%
7.8%
3.3%
25.8%
3.1%
-4.8%
-9.2%
-32.4%
2.4%
38.7%
% Inc/Dec
-11.3% -23.0% -27.6% -27.3%
336.96
-8.8%
Notes: Totals may be off slightly due to rounding
1) The University also provides administrative support for awards (not included here) for the Virginia Foundation for the Humanities and the
Southwest Virginia Higher Education Center, totaling $15.65 million for fiscal year 2012 and $1.52 million for fiscal year 2011.
2) Items listed as "Non-Federal" include support from foundations, industrial sponsors, and subcontracts from other institutions which may have
originated from a federal agency.
3) Totals for fiscal year 2012 include $1.18 million in ARRA funding. Totals for fiscal year 2011 included $19.75 million in ARRA funding.
4) Includes: Associate Provost For Academic Support & Classroom Management; Vice Provost for the Arts; Center for Public Service; Center for
Liberal Arts; Center for Politics; Darden School of Business; Batten School of Leadership and Public Policy; McIntire School of Commerce;
Miller Center; School of Continuing and Professional Studies; University Librarian; UVa's College at Wise; Vice President and Chief Student
Affairs Officer; Executive Vice President and Provost; Vice President for Research; WTJU Radio.
SOURCE: Office of Sponsored Programs
DATE:
August 9, 2012
54
APPENDICES
APPENDIX A
INVESTMENT MANAGEMENT COMPANY
Commentary
Quarter End June 2012
SUMMARY
The following commentary provides information 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 June 30, 2012. Please note that in addition to this
quarterly commentary, we will publish the June 2012 Annual Report that will serve as the primary
source of public information about the Long Term Pool. We expect to publish the Annual Report
in September once KPMG’s audit of our financial results is complete.
Over the past year, uncertainty dominated the markets and created a challenging investment
environment. Macroeconomic fears overshadowed relatively solid corporate fundamentals,
contributing to choppy and negative global equity markets. Investor concerns included the fiscal
health of the United States and Europe, the potential collapse of the European Monetary Union, and
a slowing economy in China. Conflicting market signals and unrelenting volatility caused many
investors to question their investment thesis, shorten their holding periods, and attempt to time the
markets.
Against this backdrop, UVIMCO continued to maintain the same asset allocation and portfolio tilts
that have served us well for the past several quarters. The Long Term Pool returned 5.1% in fiscal
year 2012, which compares quite favorably to the policy benchmark return of -0.4%. Over the
twenty-year period ending June 30, 2012, the Pool’s annualized return was 12.1%, exceeding the
policy benchmark return by 460 bps. The Long Term Pool is positioned defensively versus the
policy portfolio benchmark, with less market risk. Current themes continue to be a relative
overweight to quality equities, a low duration bond portfolio, a relative underweight to real estate,
and a meaningful allocation to natural resources.
MARKET ENVIRONMENT
Financial markets were largely driven by macroeconomic news during the past fiscal year. The year
of “risk-on” and “risk-off” saw record high cross-sectional correlations across securities and asset
classes as security prices moved up and down more on macroeconomic news (e.g., European
sovereign credit) than on bottom-up fundamentals. The fiscal year began with a 17% decline in
global equities through September 2011 due to worries about a Treasury default, Treasury
downgrade and a repeat of 2008. Markets recovered 20% over the subsequent two quarters.
Following a strong first quarter 2012 rally during which global equity markets enjoyed a 12% return,
investors retreated in the second quarter of 2012 as the pace of global growth declined and worry
over Europe reemerged. Global equities lost 5% in this most recent quarter, and international
A-1
APPENDIX A
stocks fared worse than U.S. stocks. Gold, oil and commodities declined as the global economy
showed signs of weakness.
One of the best performing investments during the fiscal year ended June 30, 2012 was the 30-year
Treasury bond. The Barclays U.S. Aggregate Long Treasury index returned 32% during this period
as the yield on the 30-year Treasury bond dropped from 4.38% to 2.76%. Investors’ flight to safety
and additional buying from the Fed led to the record low yields. As worries over high
unemployment continued, the Fed extended Operation Twist to the end of 2012 with the stated goal
of holding down long-term rates. Through this program, the Fed sells one- to three-year bonds and
uses the proceeds to buy six- to thirty-year bonds. In a related statement, the Fed said:
“The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually.
Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it
judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose
significant downside risks to the economic outlook.”
Although Operation Twist has had the desired effect on Treasury yields, the program has generated
little impact on the broader economy.
The European debt crisis flared up again in the second quarter of 2012. Spain officially requested
aid from the European Union at the end of June, confirming the spike in Spanish bond yields and
leading Spanish banks to undergo even deeper scrutiny. In Greece’s second round of elections the
pro-bailout New Democracy party won by a narrow margin, allowing the country to remain eligible
for bailout funds and providing temporary relief. Also at the end of June, European leaders met at
the EU summit and exceeded expectations by approving the bailout of Spanish banks and agreeing
on broader goals for the group. All of this back and forth in Europe has continued to make
investors nervous and uncertain.
On a positive note, the housing sector has showed signs of bottoming out. New home sales,
existing home sales and new home construction have increased over the past year approximately
20%, 10% and 30% respectively. Corporate profits also remained strong during the fiscal year.
However, earnings gains came mostly from cost containment rather than top-line growth. Future
earnings growth could be more challenging. Sell-side analysts published downward earnings
revisions for 65% of all S&P 500 companies in June. This trend has been increasing over the past
couple years and may portend lower earnings later in the year and in 2013.
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 deflation hedge from fixed
income.
The Long Term Pool’s actual allocation as of June 30, 2012 is 62.9% to equity managers, 15.6% to
real asset managers and 21.6% to fixed income (including marketable alternatives and credit) and
cash. Looking through to our managers’ underlying investments, the Long Term Pool has a 50.0%
allocation to equities, 16.9% allocation to real assets and 33.1% allocation to fixed income (including
credit) and cash as of June 30, 2012. Therefore, the Long Term Pool continues to be positioned
A-2
APPENDIX A
defensively versus the policy portfolio benchmark, with less market risk. Our portfolio tilts remain
unchanged: a relative overweight to quality equities, a low duration bond portfolio, a relative
underweight to real estate, and a meaningful allocation to natural resources.
PERFORMANCE
The Long Term Pool returned 5.1% for the year ended June 30, 2012, exceeding the policy
benchmark loss of 0.4%. Calendar year-to-date, the Long Term Pool has returned 8.7% versus
6.1% earned by the policy benchmark. 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 year. Rather, as long-term investors, we believe the Long Term Pool’s performance is
most appropriately evaluated over multi-year periods. Over the ten- and twenty-year periods ending
June 30, 2012, UVIMCO’s portfolio compounded at an annualized rate of 9.8% and 12.1%,
respectively. This performance comfortably exceeded both the University’s spending rate (plus
inflation) and the 6.7% and 7.5% annualized returns available through ownership of the passive
policy portfolio over the same ten- and twenty-year time horizons.
EQUITIES
Public Equity
The public equity portfolio returned 0.0% for the fiscal year, outperforming the MSCI All Country
World (MSCI ACWI) public equity benchmark return, which lost 6.0%. Over the past ten years, our
public equity portfolio returned 12.9% versus 6.3% on the MSCI ACWI.
The portfolio continues to benefit from the strong stock selection of our external investment
managers. Over the past decade we have transitioned the public equity portfolio to high valueadded, long-term, absolute return oriented managers. The largest allocation, fifty percent, includes
managers who source opportunities from a global opportunity set. Forty percent represents
managers who select securities within the emerging markets; most are country or regional specialists.
As a comparison, emerging markets represent fourteen percent of the MSCI ACWI. The remainder
of our public equity portfolio is invested with a manager who invests in smaller capitalization
companies within the U.S. When combined, our public equity managers have a bias toward
growing, high-quality companies with relatively predictable earnings. While we have been helped by
our long-term biases towards the emerging markets and higher-quality companies, we believe the
most consistent source of value added in our public equity portfolio has been the skillful
management of the underlying portfolios by our managers. A common element across all of our
long-only (and most of our long/short) managers is an emphasis on business analysis over stock
analysis, understanding what makes a good business and what defines a bad business, and careful
consideration of what makes a good management team versus the characteristics of bad
management. This time-consuming investment process generates a great deal of knowledge and
results in portfolio returns that are difficult to replicate quantitatively.
Long/Short Equity
The long/short equity portfolio returned 6.8% for the fiscal year versus a loss of 6.0% on both the
Dow Jones Credit Suisse (DJCS) Long/Short Equity index and the MSCI ACWI. Over the past ten
A-3
APPENDIX A
years, the portfolio returned 8.7% versus 6.2% on the DJCS Long/Short Equity index and 6.3% on
MSCI ACWI.
Like our long-only portfolio, UVIMCO’s portfolio of long/short managers has a bias toward
growing, higher quality companies. The portfolio tends to be short lower-quality, relatively smallercap companies. Market performance over the past fiscal year provided a favorable backdrop as
growth performed well while smaller companies performed poorly. While this bias can explain
relative periods of shorter-term strength and weakness in the return of the long/short portfolio, the
longer-term out-performance rests on strong, bottom-up fundamental stock-selection.
Compared with the long-only portfolio, the long/short portfolio is more able to shift regional
exposures as it is dominated by managers who consider global opportunities both long and short.
While our managers’ long high-quality/short low-quality bias has been consistent over the years, the
allocation to regions has varied widely depending upon bottoms-up opportunities. Over the past
five years, the collective actions of our long/short managers has shifted the portfolio from a
significant net long exposure to the emerging markets (one-half to the emerging markets and the
remainder split between the U.S. and Europe) to a net long exposure today that is almost exclusively
domestic. The shift was made in response to favorable valuations of resilient, high-quality, U.S.domiciled franchise companies. The ability for this portfolio of long/short managers to respond
quickly to unfolding opportunities in the marketplace is a significant advantage for UVIMCO. We
are much less nimble in our ability to react to changing opportunities, as the hiring of niche
managers is a time-consuming process. We suspect the turmoil in Europe will produce some
interesting investments and while we have very little exposure to the Continent today, we know our
managers are looking closely at these opportunities.
Private Equity
Despite lackluster private market activity during the first half of 2012 , our private equity portfolio
returned 8.9% for the twelve-month period ending June 30, 2012, exceeding the 6.0% loss for the
MSCI ACWI index by a considerable margin. Our return was driven by a number of sales of buyout
portfolio companies during the fiscal year and significant appreciation in the carrying value of other
holdings. The venture portfolio also generated a number of stock distributions that were sold
during the fiscal year for large gains. The global equity markets, however, were impacted by the
continuing debt crisis in Europe and the lethargic U.S. economy, both of which had a dampening
effect on corporate confidence. This dampening effect resulted in the dollar volume of M&A deals
declining to $1.1 trillion in the first six months of 2012, a reduction of 22% compared to the first
half of 2011 (according to Thomson Reuters). The number of announced deals was down 17% to
17,826 for the same time period. The industry with the most deal activity was energy/power with
18% of the total volume, followed by materials (13%) and financials (11%). Continuing market
volatility and economic uncertainty could continue to impact M&A activity for the rest of 2012.
In contrast to the M&A arena, venture capital-backed IPOs had the best quarter ever in the second
quarter of 2012 (in dollars raised). However, eliminating the $16 billion IPO of Facebook changes
the story, as only 11 venture-backed companies went public in the U.S. during the quarter. Nine of
the eleven IPOs were for technology companies, and the underwhelming response to Facebook’s
IPO could impact the eagerness of other companies to go public in the next several quarters. There
were fewer venture-backed IPOs in the second quarter of 2012 than there were in the first quarter
A-4
APPENDIX A
of 2012 (19) or the second quarter of 2011 (22), according to Thomson Reuters and the National
Venture Capital Association.
On an individual basis, the buyout portfolio returned 6.9% for the fiscal year and the venture capital
portfolio returned 20.1%. For the 10-year period, the buyout portfolio returned 15.3% and the
venture capital portfolio returned 2.0%. The annualized return for the combined private equity
portfolio over the last ten years was 11.1% versus 6.3% for the MSCI ACWI.
For the quarter ended June 30, 2012, we received $67 million in distributions from the private equity
portfolio and had capital calls of $33 million. During fiscal year 2012, our venture and buyout
portfolios distributed $207 million, exceeding capital calls of $125 million and resulting in net cash
inflows to the overall portfolio.
REAL ASSETS
Real Estate
The U.S. commercial real estate market has stabilized and even begun a strong recovery in certain
sectors. Multifamily fundamentals continue to improve, supporting a broad decline in vacancies and
robust increases in effective rents. The hospitality market has also strengthened with rising RevPARs
in most major markets. New supply remains muted across all sectors. However, construction starts
are expected to pick up over the coming year as prospective returns lure investors back into the
development business.
For the fiscal year ended June 30, 2012, UVIMCO’s real estate portfolio generated a return of 13.0%
versus a return of 7.6% for the weighted benchmark of publicly-traded U.S. and international real
estate securities. Historically low Treasury yields continue to support high U.S. REIT valuations as
yield-starved investors evaluate REITs on a spread-to-treasuries basis versus a net asset value basis.
The MSCI U.S. REIT index rose by 12.9% in fiscal year 2012. International real estate markets
encountered more headwinds during the last twelve months as investors expressed economic growth
concerns for both Europe and China. The MSCI International Real Estate Securities Index rose by
2.2% during fiscal year 2012.
UVIMCO’s current real estate portfolio consists of investments with private market managers who
seek to purchase high-quality assets below replacement cost in strong markets where additional value
creation opportunities exist. UVIMCO’s managers do not compete directly with REITs, as the
assets in our real estate portfolio tend to be much smaller and require a more management-intensive
business plan. We hold a very targeted exposure to European markets, primarily in well-leased
assets in the UK, and have avoided exposure to real estate assets in the emerging markets.
UVIMCO’s real estate portfolio continues to mature. As capital has been drawn by our managers,
our unfunded commitments to real estate recently fell below $175 million for the first time since
2006. The net inflows to the strategy along with the positive relative performance have driven the
overall real estate allocation up to over 8.6% of the Long Term Pool. As these private real estate
funds season, and the level of unfunded capital drops, we anticipate that the real estate portfolio will
generate more cash than it consumes. For the quarter ended June 30, 2012, we received $7 million
in distributions from the real estate portfolio and had capital calls of $24 million. During fiscal year
A-5
APPENDIX A
2012, our real estate portfolios distributed $37 million compared to capital calls of $124 million.
The 2012 distributions greatly exceeded the $9 million received in fiscal year 2011.
Resources
The past twelve months marked a turbulent period for natural resources. Global commodity prices
retrenched broadly from the levels a year ago, reflecting concerns about the outlook for the world
economy and the impact of decelerating growth in China on the market demand for commodities.
During the fiscal year 2012, the Goldman Sachs Commodity Index declined by 10.7%. Publiclytraded natural resources equities were hit particularly hard, with the S&P Global Natural Resources
Equity Index losing 18.7% of its market value. WTI Crude Oil spot price mirrored the broader
market sentiment, declining by 11.0% from $95.42 per barrel on June 30, 2011 to $84.96 per barrel
on June 30, 2012. On a positive note, the discovery of oil resource plays and the application of
advanced drilling technology have reversed the U.S. oil production trend toward sustainable growth.
North American natural gas prices continued to experience a sustained downward pressure due to
the persistent supply overhang caused by high production rates, sub-economic drilling activity and
tight storage capacity. The Henry Hub Natural Gas spot price reached a fifteen-year low of $1.98
per Mcf before rebounding to $2.83 per Mcf by the end of the fiscal year, down 35.5% for the year.
The current prices are still below the operating cost for a number of natural gas producers, requiring
continuing adjustments in the industry’s behavior.
In the context of this challenging market environment, we are very pleased that our Resources
investments in domestic upstream oil and gas continued to perform and deliver positive returns.
UVIMCO’s Resources portfolio appreciated by 4.7% for the year ended June 30, 2012. Our
performance was buoyed by two successful exits of core holdings in our co-investment program.
The long-term performance of the Resources program remains outstanding, returning 25.5%
annually over the last ten years, compared to a 3.4% annualized return from the Goldman Sachs
Commodity Index during the same period.
During the fiscal year, the Resources portfolio generated $33 million of net cash as $85 million in
distributions outpaced $52 million in capital calls. We remain judicious in the redeployment of the
proceeds, as we do not expect that our historical outperformance in resource investments can be
repeated going forward. Nevertheless, we believe that the long-term demand for the world’s
resources in the form of energy, metals, food or water will continue to intensify, while the marginal
costs of supply may also increase across most commodities. This tailwind should provide selective
opportunities to deploy capital at attractive rate of returns for high-quality managers with strong
focus on risk management and disciplined execution.
FIXED INCOME AND MARKETABLE ALTERNATIVES
Marketable Alternatives and Credit
Beginning with this June 2012 report, we have combined the Absolute Return and Credit portfolios
for reporting purposes and have re-named the group Marketable Alternatives and Credit. As part of
this combination, we moved one long-standing manager with significant long/short equity exposure
to the long/short equity portfolio. Taking into account this reconfiguration, the Marketable
Alternatives and Credit portfolio returned 3.4% over the past fiscal year versus 7.3% on the Barclays
High Yield Index. Over the past ten years the portfolio returned 7.7% versus 10.2% on the index.
A-6
APPENDIX A
The long-term history of the Marketable Alternatives and Credit portfolio includes managers that
have not fit neatly into any other bucket. Recently, the composition of the portfolio has been more
consistent, reflecting opportunities in credit-related managers and other hedge fund managers that
cannot be classified as long/short. Over the past year, we redeemed a significant position with a
fixed income arbitrage manager that had performed well, exceeding expectations, but whose strategy
was more complex than we were comfortable continuing to underwrite. Today, the Marketable
Alternatives and Credit portfolio is dominated by two sizable allocations. Half of the portfolio is
comprised of an opportunistic, value-oriented manger that has the ability to analyze opportunities
and allocate capital across asset classes globally. Like the long/short managers, the ability of this
manager to move with speed across a broad palette of investment opportunities is a significant
advantage. A second manager employs an eclectic, opportunistic credit-oriented approach to
investing. Neither of these managers met the return on the High-Yield index over the past year,
with each selling into the credit rally during the year. Longer-term returns are strong and we believe
the portfolios are positioned well for the future. Twenty percent of the Marketable Alternatives and
Credit portfolio consists of drawdown structure funds in the distribution phase, and fourteen
percent consists of three smaller allocations to an eclectic mix of managers.
Bonds and Cash
Our cash and bond portfolios continue to be managed as sources of liquidity. Our cash portfolio is
invested in U.S. Treasury bills and notes with maturities under one year and U.S. Treasury
guaranteed Repurchase Agreements with U.S. domiciled counterparties. The duration of the cash
portfolio as of June 30, 2012 was 0.16 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 June 30, 2012 was 0.66 years. We have continued to maintain our
position in shorter duration bonds, as we feel that the small additional return for longer duration
bonds does not compensate us for the risk of higher rates in the near future. The negligible returns
reported for the short-term cash investments are consistent with an environment in which current
interest rates are near 0%.
RISK MANAGEMENT
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
A-7
APPENDIX A
to a much higher probability of negative “tail” events. Since investment returns 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. Our current
estimate of the volatility of the Long Term Pool returns is 11% versus 12% for the policy portfolio.
In addition, the lowest one-percentile annual drawdown on the Long Term Pool is estimated to be 25%, less than the drawdown estimate of -30% on 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 a thorough due diligence process. We are currently recruiting
for a Manager of Operational Due Diligence, who will augment the current procedures we use to
assess our managers’ operations and controls. We also reduce manager risk through diversification,
bypassing certain investment structures, and avoiding certain investment strategies (e.g. highly
leveraged hedge funds). Most importantly, we control manager risk by building close relationships
with managers who have unquestioned ethics and integrity, and who align their interests with those
of our University and foundation shareholders.
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 manage this risk by maintaining a portfolio of Treasury bills and
bonds, maintaining sufficient liquidity with our public equity and hedge fund managers, and
managing the pace of commitments to private investments.
Managing the pace of commitments to private investments is an inexact science. As the timing and
amount of capital calls to and distributions from private investments is at the discretion of our
external private fund managers, we must continually recalibrate our models to better predict these
cash flows. In addition, for the past few years, we focused on the sum of private market values and
unfunded commitments (the “private aggregate”) as the primary risk control for our private
portfolio. While this measure is useful, it overlooks material changes to the composition of the
private exposure and the underlying risks. An excessive level of private market value within the
Long Term Pool may prevent us from having the liquidity needed to fund shareholder redemptions
A-8
APPENDIX A
or rebalance the portfolio. However, unfunded commitments represent a form of implicit leverage,
a more serious risk. Actual unfunded private investment commitments decreased from $975 million
or 18% of the Long Term Pool as of June 30, 2011 to $841 million or 15% of the Long Term Pool
as of June 30, 2012. We believe a target for unfunded commitments of 15% of the Long Term Pool
is prudent, and enables us to invest consistently through a variety of market cycles.
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. In addition,
we believe the Pool should have at least 20% of its assets available for conversion to cash in any
three-month period, and 30% available for conversion to cash in any twelve-month period. The
percentage of the Long Term Pool that can be turned into cash has remained relatively constant
over the past year. As of June 30, 2012, 32% of the Long Term Pool can be turned to cash within
one quarter and 52% of the Pool can be turned into cash within one year. The total of bonds and
cash as of June 30, 2012 was 12.3%. 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 it will
more than make up for the return drag.
A-9
APPENDIX A
INVES TMENT MANAGEMENT COMPANY
Investment Report
June 30, 2012
Investment Activity
Beginning Net Asset Value (NAV)
Month
FYTD 2012 (1)
$5,347,885,328.44
$5,346,502,216.17
901,947.68
$5,929.26
$2,409,776.86
($5,509,245.33)
$86,122,551.07
($891,314.23)
$0.00
Beginning Shares
NAV Per Share at Beginning of Period
+ Contributions
– Redemptions
+ Investment Return
– Fees
+ Fee Rebates
Ending Net Asset Value (NAV)
Ending Shares
NAV Per Share at End of Period
932,765.04
$5,731.89
$44,491,183.88
($214,561,872.56)
$263,583,304.84
($12,997,735.52)
$3,000,000.00
$5,430,017,096.81
901,285.28
$6,024.75
$5,430,017,096.81
901,285.28
$6,024.75
Long Term Pool
% of NAV
Shareholder Summary
$3,362,617,778.90
$1,187,375,701.51
$880,023,616.40
$5,430,017,096.81
University of Virginia Endowment
Affiliated Organizations
University Operating Funds
Total
61.9%
21.9%
16.2%
100.0%
Performance
Market Value (2)
$ Millions %
Long Term Pool
5,430
Policy Benchmark (3)
Equity
Public
Long / Short
Buyout
Venture Capital
Total Equity
MSCI All Country World Equity
Real Assets
Real Estate
Resources
Total Real Assets
Total Fixed Income, Cash & MAC
Barclays Aggregate Bond (5)
3 YR
Annualized
5 YR 10 YR
20 YR
100.0
1.6
8.7
5.1
14.6
4.7
9.8
12.1
100.0
3.6
6.1
(0.4)
11.4
1.0
6.7
7.5
1,112
1,235
878
189
20.5
22.7
16.2
3.5
4.5
0.1
1.8
4.6
12.3
8.8
9.8
19.8
0.0
6.8
6.9
20.1
21.7
8.4
20.0
25.4
2.7
4.6
5.1
6.9
12.9
8.7
15.3
2.0
11.7
10.7
-18.2
3,414
62.9
60.0
2.2
5.0
10.7
6.0
5.3
(6.0)
16.4
11.4
5.0
(2.2)
10.6
6.3
14.1
7.1
465
380
8.6
7.0
2.1
0.9
12.2
9.0
13.0
4.7
845
15.6
1.6
10.7
8.5
17.1
1.6
12.4
--
10.0
6.6
15.6
7.6
24.1
(1.2)
9.1
9.1
503
542
126
9.3
10.0
2.3
(0.0)
(0.0)
0.2
2.4
0.0
(0.1)
3.4
0.1
(0.1)
11.5
2.4
0.2
5.3
6.2
4.7
7.7
6.3
--
-7.2
--
1,171
21.6
(0.0)
1.4
1.9
7.7
5.9
6.4
7.4
30.0
(0.1)
2.6
7.1
6.2
6.2
5.3
6.4
(4)
MSCI Real Estate
Fixed Income, Cash & MAC
Marketable Alternatives & Credit
Government Bonds
Cash & Currency
Time-Weighted Returns
MO
CYTD
FYTD
A-10
(5.5)
33.7
(16.5)
18.7
(1.9)
25.5
---
APPENDIX A
Investment Report
June 30, 2012
Short-Term Liquidity(6)
Actual Liquidity (Cumulative Total % of NAV)
Weekly
Public Equity
Monthly
Quarterly
Semi-Annually
Annually
2%
6%
12%
18%
18%
Long / Short Equity
-
0%
7%
12%
16%
Marketable Alternatives & Credit
-
-
0%
6%
6%
0%
0%
0%
0%
0%
10%
10%
10%
10%
10%
Resources
Government Bonds
Cash
Total
Available Liquidity ($ in Millions)
2%
2%
2%
2%
2%
15%
19%
32%
48%
52%
795
1,031
1,741
2,620
2,836
Private Funds Market Values and Commitments (7)
($ in Millions)
Market Value of Private Investments
Amount
Public Equity
% of NAV
Uncalled Commitments
Amount
% of NAV
Private Aggregate
Amount
% of NAV
131
2%
57
1%
188
19
0%
-
-
19
0%
1,067
20%
371
7%
1,438
26%
Real Estate
465
9%
190
3%
654
12%
Resources
354
7%
179
3%
533
10%
Marketable Alternatives & Credit
263
5%
43
1%
307
6%
2,300
42%
841
15%
3,140
58%
Europe
Asia
LAMA(9)
Long / Short Equity
Private Equity
Total
3%
Market and Currency Exposure Estimates (8)
(% of NAV)
Equity
Policy Ranges
Actual
Exposure
North
America
40 - 70
50.0
29.0
7.6
7.7
5.7
Real Assets
5 - 20
16.9
14.3
1.5
0.8
0.3
Credit
0 - 20
4.4
3.9
0.1
0.0
0.4
Government Bonds
5 - 20
10.0
10.0
-
-
-
Total Market Exposure
70 - 100
81.3
57.2
9.2
8.5
6.4
--
--
25 - 75
0 - 40
0 - 40
0 - 20
Policy Ranges
Cash & Currency
Currency Exposure
Policy Ranges
0 - 30
18.7
20.1
---
100.0
--
77.3
50 - 100
A-11
(1.4)
7.8
0 - 30
8.5
0 - 30
0.0
6.4
0 - 20
APPENDIX A
Investment Report
June 30, 2012
Endnotes
(1)
UVIMCO's fiscal year runs from July 1 through June 30.
(2)
All investments are recorded at estimated fair market value in accordance with UVIMCO's valuation policy.
(3)
The Policy Benchmark is the geometrically linked monthly average of the underlying asset classes' benchmarks, weighted by
the Fiscal Year 2012 policy target allocations: 60% Equity, 10% Real Assets, 30% Fixed Income.
(4)
The Real Estate component of our Fiscal Year 2012 policy portfolio is comprised of 50% MSCI U.S. Real Estate Index and
50% MSCI All Country World Real Estate Index. Prior to January 1995, the benchmark is comprised of 100% FTSE National
Association of Real Estate Investment Trusts Equity Index.
(5)
The Fixed Income component of our Fiscal Year 2012 policy portfolio is comprised of 50% Barclays Capital U.S. Aggregate
Bond Index and 50% Barclays Capital Global Aggregate Bond Index (Hedged in U.S. Dollars). Prior to January 1990, the
benchmark is comprised of 100% Barclays Capital U.S. Aggregate Bond Index.
(6)
Represents securities and funds that may be readily sold for cash within the designated time periods.
(7)
Represents the market values of investments where distributions are at the sole discretion of the managers, plus all uncalled
commitments.
(8)
Market and currency exposures are estimated by looking through managers and funds to the underlying security positions.
Policy ranges express the expected variation in asset class, regional, and currency exposures during normal market
circumstances. Totals may not add due to rounding.
(9)
Latin America, Middle East, and Africa.
A-12
APPENDIX B
SIX-YEAR PLAN: ADDRESSING TOP JOBS 21
THE UNIVERSITY OF VIRGINIA
September 2011
B-1
APPENDIX B
―Every student in Virginia deserves the opportunity to get a high-quality education at an affordable
price. Virginia‘s higher education institutions are among the best in the nation. However, we must
increase access and ensure that we are adequately preparing our students for the jobs of tomorrow
when they graduate. The ‗Top Jobs‘ legislation will enable our institutions to meet the goal of issuing
an additional 100,000 degrees over the next 15 years, making Virginia one of the most highly educated
states in the nation. In fact, based on this legislation, for example, the University of Virginia Board of
Visitors already is poised to add nearly 1,000 new spaces for in-state students on the University‘s
grounds, and that‘s great news. Our legislation also places a greater emphasis on the high demand
science, technology, engineering and math subjects through the formation of a public-private
partnership that will engage the business and professional community in leveraging best practices for
K-12 and higher education. The legislation will create the framework for sustained reform-based
investment and will encourage meaningful innovation through the use of greater technology, year
round facilities usage and innovative and economical degree paths. By implementing these reforms,
more Virginia students will have access to Virginia institutions. These reforms will help us attract new
employers to Virginia, and better prepare our citizens to fill the jobs that already exist in the state
today. We must do better in providing an affordable quality education in Virginia, and we must look to
better capitalize on the resources already available at our great institutions. This legislation is based
on a clear understanding of what it takes to not only succeed, but to lead, in the 21st century economy –
and, first and foremost, it takes a highly educated workforce. We have a good idea what this
investment will produce for our state, because the Cooper Center‘s comprehensive recent study,
sponsored by the Business Higher Education Council, shows that every dollar we invest in the higher
education system produces 13 dollars in additional economic output in Virginia. It returns even more
in new tax revenues to the Commonwealth than it costs. So it is one of the very best economic
investments we can make for our people. But we are not just investing; we are also innovating and
reforming – and the two must go hand in hand.‖
Governor Bob McDonnell, on the creation of ―Preparing for the Top Jobs of the
21st Century: The Virginia Higher Education Opportunity Act of 2011,‖
legislation that resulted from recommendations from his Higher Education
Commission on Reform, Innovation and Investment. Jan. 17, 2011.
―The University of Virginia has submitted a Six-Year Plan that gives us a formal framework for
aligning our priorities with key priorities identified by Governor McDonnell and the Higher Education
Commission. We believe that the strategies identified in our plan will allow us to support the
Commission‘s goals while providing a greater educational experience for more students.‖
Teresa A. Sullivan
President, University of Virginia
B-2
APPENDIX B
Introduction
The University of Virginia’s mission has expanded since the institution first opened for
classes in 1825, but Thomas Jefferson’s core belief in the importance of a well-educated
citizenry remains as vital as ever. We continue to believe that a highly educated
workforce is critical to the future of our nation, not only to sustain democracy, as
Jefferson stated, but also to create new knowledge, stimulate meaningful innovation, and
advance new possibilities for citizens in the Commonwealth and throughout the world.
The Higher Education Opportunity Act of 2011
In an effort to make the Commonwealth of Virginia a leader in college degree attainment
and in the national and international knowledge-based economies, Governor Robert
McDonnell championed The Virginia Higher Education Opportunity Act of 2011 (HEOA)
also known as the Top Jobs Act. The act provides a framework for increasing the number
of Virginians who receive college degrees, stimulating economic growth, and diversifying
research in the Commonwealth. In addition, the legislation requires that every two
years each higher education institution submit a six-year plan addressing its academic,
financial and enrollment objectives. By establishing a long-term link between higher
education and job creation, the Higher Education Opportunity Act is designed to prepare
Virginians for the top jobs of the 21st century.
The Six-Year Plan: Our Approach
The University of Virginia’s six-year
plan for 2012-18 reflects the
institution’s early commitment to The
Higher Education Opportunity Act.
Our plan reflects programs and general
strategies that will advance the
objectives in the HEOA, as well as
initiatives that will enhance the
quality of education, research, and
service in the University’s academic
division.
UVa FACTS and FIGURES








B-3
Academic Division and Health System
budget: $2.5 billion.
Largest employer in Charlottesville
with over 13,700 employees.
On-Grounds enrollment, Fall 2010:
14,039 undergraduate, 6,525
graduate students.
One-year student retention rate: 97
percent.
Six-year graduation rate: 93 percent.
Research budget: $314 million.
Local spending by UVa. units,
employees, students, and visitors:
more than $1 billion
One dollar of state support for UVa
supports activities that result in $3.45
of new spending in Virginia.
APPENDIX B
The University of Virginia’s six-year plan takes the following approach:





Responds to all objectives of the Higher Education Opportunity Act
Recognizes the need to limit future tuition increases.
Reflects initiatives that reach beyond the undergraduate student population.
Relies on funding partners (state, federal, private donors, and others) rather than
just students and their families to meet the cost of all strategies outlined.
Demonstrates continuous efforts at self-assessment and action to address our
mission, even in areas where we may already be quite strong.
HEOA Academic Objective: Educate More Virginians
With a six-year graduation rate of 93 percent – the best among all public research
universities and second only to a few private universities in the nation – UVa already
achieves significant results in higher education. We must meet this challenge, therefore,
by using our facilities, programs, and resources in new and creative ways. We have
identified four major strategies to help meet the HEOA objective of more undergraduate
degrees:
(1) Enroll more undergraduates
Consistent with the governor’s proposal to produce 100,000 more degrees in the next 15
years, the University will enroll more undergraduate students, maintaining our ratio of
enrolling seven in-state students for every three non-residents. Our new growth plan
calls for enrolling 1,673 new undergraduates by the 2018-2019 academic year, an
increase of 11.9 percent from 2010-2011. Of these, 1,171 students (70 percent) will be
Virginians.
(2) Accelerate the time required for degree completion
We estimate that three-quarters of our first-year students arrive with advanced standing
through Advanced Placement and other test credits; on average, these students have
earned the equivalent of more than one academic semester before their first day of class.
The exemplary credentials of many of our undergraduates allow us to think of ways to
reduce the time in which they can earn degrees. To offer these undergraduates the
opportunity for an accelerated degree – or degrees – would not only increase the numbers
of graduates but also open available slots in subsequent incoming classes.
Accelerated degree program: We are exploring the creation of a “3 + 1 accelerated degree
program” that would allow motivated students to remain at the University for the
standard four years but earn both a bachelor’s and a master’s degree in certain
programs. Public policy, commerce, Middle Eastern and South Asian studies, statistics
and education are areas that could be amenable to the master’s portion of a 3 + 1 format.
B-4
APPENDIX B
Summer Session: Accelerated degree programs will require that we make better use of
our resources and classroom facilities throughout the summer. As student demand
dictates we will expand the summer session, which enrolled almost 8,000 students in
summer 2011.
January Term: Established in 2004 as an opportunity for students to take an intensive
two-week course and earn three credits, the January Term offers classes on University
Grounds and in remote parts of the world. The number of students enrolled in January
Term in 2011 included 928 on-Grounds and 208 off-Grounds students. Ten study abroad
classes will be offered in January 2012. January Term will grow as we expand
opportunities to include students from other institutions.
(3) Enroll additional adult students in the Bachelor’s of Interdisciplinary Studies
Program and other completer programs
Our completer programs, designed for adult learners who have some college credits and
want to return to complete their bachelor’s degree, are successful and expanding. The
Bachelor of Interdisciplinary Studies (BIS) program – with a presence in Charlottesville,
Hampton Roads and Northern Virginia – enrolled 251 students in fall 2010. In 2012, the
program will expand to Loudoun County and Richmond. We are also working toward a
new Bachelor of Professional Studies (BPS) program in collaboration with Piedmont
Virginia Community College, which would initially focus on allied health fields.
Another success is PRODUCED in Virginia, a cooperative distance-learning program
with the Virginia Community College System that helps meet the demand for a techsavvy workforce. Students earn an associate’s degree and a bachelor of science degree in
engineering science, almost entirely without leaving their communities. The first class of
engineers PRODUCED in Virginia will earn their BSE degrees in May 2012.
(4) Increase degrees in critical STEM fields (science, technology, engineering and math)
and in STEM-H (-Health)
The Higher Education Opportunity Act links degrees with careers in high-demand fields
such as science, technology, engineering, math and health. Increasing graduates in these
fields is an important priority. We have experienced a 26 percent growth in STEM
degrees and a 25 percent growth in STEM-H degrees over the past decade. Our target is
to increase the strength of the Commonwealth’s STEM-H workforce by enrolling 33 to 40
percent of first-time undergraduates in STEM-H fields.
It should be noted that as enthusiastic as we are to support the Governor’s proposal to
graduate more Virginians and prepare them for top jobs in our economy, an increase in
B-5
APPENDIX B
faculty members must accompany an increase in undergraduate degrees. Faculty
members teach and lead students in the research that creates new knowledge. In the
critical STEM-H fields, for example, we estimate an average start-up cost of $600,000 per
faculty member for lab space, equipment and related costs. An inability to hire these
faculty members for lack of one-time startup funds will create a bottleneck in our ability
to expand STEM-H fields.
We also recognize that financial aid is a vital component in educating Virginians. Our
nationally acclaimed financial aid program, AccessUVa, has provided 100 percent of need
through grants to low-income students and loan-capped packages for middle-income
students since 2004. In the 2010-11 academic year, 4,702 students (32.8 percent)
demonstrated financial need, and the average aid package was $17,932. The program’s
cost is rising – it was $83.3 million in 2010-11 – and requires a larger portion of tuition
revenue every year. We are looking for ways to contain the rising costs yet keep our
undergraduate student body academically qualified and socioeconomically diverse in the
face of looming federal cuts to student aid programs.
HEOA Objectives: Diversify Research and Promote Economic Growth
The University plans to foster new strategic research opportunities in key areas
including sustainability, biosciences, energy, K-12 education, defense intelligence and the
medical cancer, cardiovascular and neural specialties.
Cancer research, as an example of economic contribution to the region, enhances patient
care, health and the economy; creates jobs, new ventures and licensure revenue; and
attracts additional external funding. A study by the Weldon Cooper Center projects that
the economic impact for the region from the University’s Emily Couric Clinical Cancer
Center is $75 million in salaries and revenues from a $5 million investment. We plan to
request $5 million in state support to expand clinical trials and outreach to Southwest
Virginia.
Commercialization opportunities and innovation partnerships will increase, and we will
continue to seek opportunities to create public/private partnerships to expand research
opportunities and new ventures, such as the Rolls-Royce collaboration with UVa,
Virginia Tech, Virginia State University, and John Tyler Community College. We will
also enhance proof-of-concept funding opportunities modeled after the highly successful
Coulter Translational Research Partnership, which has in a very short time produced a
7:1 return on investment. In the 2013-14 fiscal year we will seek state funds of $5
million to match private contributions to develop the UVa Innovation Accelerator, a
public-private partnership designed to facilitate knowledge transfer and business
development around university research and innovation.
B-6
APPENDIX B
Our Most Valuable Resource
Employees are the University’s most valuable resource. In order to attract and retain
the best talent to support its academic mission, the University must remain an employer
of choice among institutions of higher education. Thus, our budget priorities reflect the
critical importance of merit-based investments in the highest quality faculty and staff.
Prior to the economic downturn, the University had made great strides in faculty
compensation to become competitive with our peer institutions. We have lost important
ground during the past five years and are struggling to regain our position. Our lagging
faculty salaries need to be increased to the 60th percentile of our peer institutions, as
identified by the State Council for Higher Education in Virginia. There is a $13,754 gap
between that 60th percentile goal and our rank in the 26th percentile.
The University Staff program bases compensation on market-based pay with incentives
and rewards for career development and performance. The goal is to have our salaries at
the 50th percentile of these competitive market pay ranges, but University staff salaries
lag the market by 7.88 percent. The University’s classified employees work under a
compensation scheme determined by the state, which should also consider the
competitive position of staff salaries.
Efficiency in Processes, Use of Facilities and Technology
The University always strives for greater efficiency. Examples of our efforts can be found
at the following web site: www.virginia.edu/processsimplification. One of the top
priorities of President Sullivan’s first term is the development of a new internal financial
model that provides revenue centers with a transparent resource allocation and decision
making process, a more effective long-range planning tool, and incentives for
entrepreneurial activity and prudent stewardship of resources.
While it is true that more efficient use of existing resources and facilities will
accommodate enrollment growth and increase our productivity, we should acknowledge
that UVa. is already a national model of efficiency. For over 20 years, U.S. News and
World Report has ranked UVa among the top 25 institutions, public and private, in the
country. In each of these 20 years, the University has also been the most efficient among
the top 25 public and private institutions as measured by comparing our quality ranking
– which is high – with our expenditure per student – which is low. We consistently rank
high in Kiplinger’s Personal Finance magazine “100 Best Values in Public Colleges.”
This year, we ranked #3 in the nation for the fifth time in six years.
The use of technology to enhance instruction gains ground with each academic year. The
University’s latest venture is a partnership with three other Virginia public institutions
(Virginia Tech, James Madison University, and George Mason University) and CISCO
B-7
APPENDIX B
Systems in which we will deploy CISCO’s Telepresence technology to share instructional
resources across our institutions. Our collaborative efforts are focused on five areas: 1)
sharing in the instruction of strategic languages, 2) increasing the pipeline for STEM
students, 3) redesigning courses to increase scale, enhance learning outcomes, and drive
per student cost down, 4) enhancing dual enrollment classes aimed at high school juniors
and seniors in STEM areas, and 5) enhancing research competitiveness by leveraging
technology investments already made by each institution.
Conclusion
Starting from a solid foundation of proven performance, our six-year institutional plan
includes programs and strategies that align with the objectives of the Higher Education
Opportunity Act: find new and better ways to increase the numbers of undergraduate
degrees, stimulate economic development, and diversify research. At the same time,
these strategies align with Jefferson’s vision to enrich the quality of education, research
and service that the University of Virginia will provide to its students, the citizens of the
Commonwealth, and the world.
Governor McDonnell and the General Assembly have clearly stated their priorities for higher
education in the Top Jobs Act. Many of these priorities — enrolling and graduating more Virginians;
granting more degrees in science, technology, engineering, and math; enhancing research
collaboration among colleges and universities; using technology to teach in creative new ways; and
using our institutional spaces more fully and more efficiently — align well with our vision for the
University of Virginia.
To do all these things, we must have adequate housing, dining, recreational facilities, need-based
financial aid, and faculty and staff to serve the new students and protect the quality of the
undergraduate experience for all our students. To that end, we will need to work together with the
governor and members of the General Assembly to ensure appropriate state funding for the additional
Virginians we will serve.
Teresa A. Sullivan
President, University of Virginia
B-8
APPENDIX C
AN ACADEMIC, FINANCI AL & ENROLLMENT BLUEPRINT TO ADDRESS TOP JOBS 21.
The University of Virginia’s College at Wise
Higher Education Advisory Committee
August 2011
C-1
APPENDIX C
Contributing to Virginia’s Top Jobs 21
Vision of an Educated Citizenry &
Vibrant Economy
“Every student in Virginia deserves the opportunity to get a high-quality education at an affordable price. Virginia’s
higher education institutions are among the best in the nation. However, we must increase access and ensure that we are
adequately preparing our students for the jobs of tomorrow when they graduate.” Governor Bob McDonnell
1. INTRODUCTION: MISSION,
PLACE &
ACCOMPLISHMENTS
B
y its very nature, The University of Virginia’s College at Wise has aspirations for service to
Virginia’s citizens that are identical to those outlined in the Top Jobs of the 21st Century legislation.
Access, affordability, economic development, and investment are watchwords of the UVa-Wise
culture. Since its beginning in 1954, UVa-Wise has progressed from that first class on the county
poor farm to a growing and relevant learning community.
UVa-Wise is a public, four-year college located in the Appalachian mountains of far Southwest Virginia.
We offer majors in the liberal arts and sciences and in professional programs, including education,
business, nursing, and software engineering. Our faculty, staff, students, alumni and greater citizenry
believe passionately in our mission of student success and service to the region. We embrace our region’s
desire for greater economic prosperity and a better quality of life, and work diligently to achieve those
outcomes. We serve as the region’s linchpin for economic development and education.
UVa-Wise’s effectiveness and growth are inextricably linked to the success of the place in which it resides,
an opportunity that we embrace. Providing a quality, student-centered education for our region is the
core of the College’s mission.
A Special Mission . . .




UVa-Wise serves Virginians – 95.4% of our student
body is from the Commonwealth (Fall 2010). This
high percentage has been consistent throughout
our history.
We are devoted to undergraduate education and are
one of only two undergraduate public senior
institutions in the Commonwealth of Virginia.
62.6% of our student body is from Southwest
Virginia. 50.6% of the student body is from the
Coalfields (Fall 2010).
UVa-Wise students, both rural and urban, are
economically disadvantaged and a majority are first
generation college students. 65% of the student
body qualified for need-based aid in FY2011. We
serve an acutely economically disadvantaged group
of students. Of those students who completed the
C-2
QUICK FACTS
Fall 2010 Census Headcount: 1,990
Total Employees: 286
Faculty: 91 Full-Time, 7 Part-Time
Curriculum: 30 Majors, 32 Minors
7 Pre-Professional Programs
24 Teaching Licensures
Campus: 396 Acres
Capital Projects:
Recently Completed
Commonwealth Residence Hall
Gilliam Center for the Arts
Hunter Smith Dining Commons
Science Center Renovation (LEED Platinum Certified)
Nearing Completion
Convocation Center
Smiddy Hall Renovation & IT Addition
In A/E Selection
Health and Wellness Center
In Planning
Library
APPENDIX C




FAFSA, 31.7% had an expected family contribution of $0 – their families could contribute
nothing toward their education.
Our students don’t follow a typical path – most work while going to school and many step in and
out of College because of family and financial pressures.
We are one of the smallest senior institutions in the Commonwealth and one of the youngest.
UVa-Wise is the only branch campus of the University of Virginia and shares many functions and
processes that streamline our operations and create efficiencies.
Where we are and what we’re doing now . . .
E C O N O M I C



O P P O R T U N I T Y
A N D
I M P A C T
UVa-Wise is a center for hope in rural Southwest Virginia, a region where the –
 Median household income is $41,560, compared to Virginia’s $80,851.
 Poverty rate is 19%, compared to Virginia’s 10.1%
 Percentage of citizens with college degrees is 11.5%, compared to Virginia’s 33.4%
 Mining industry has seen a steep decline in jobs in the period 1990 - 2009 (-6,168 jobs)
and the greatest growth has been in the health care and social assistance sector (+3,903
jobs).
 Transfer payments as a percentage of total personal income have grown from 14% in
1969 to 35% in 2009, with medical benefit payments growing at the most rapid pace. By
comparison, Virginia had an average of 13% transfer payments as a percentage of total
personal income in 2009.
The region is, however, now seeing significant gains in key economic indicators –
 The unemployment rate has declined in the last few years driven by an emerging IT
sector and a more stabilized mining industry.
 Per capita income, largely stagnant in the 1980’s and 1990’s, has in recent years grown at a
rate faster than the state and nation.
UVa-Wise takes seriously its role in improving the region’s economic prosperity and quality of
life. To that end, we have –
 Increased our headcount enrollment from 1,447 in Fall 2000 to 1,990 in Fall 2010, a
37.5% increase.
 Increased transfer enrollment by 15.7% in the five-year period from Fall 2006 to Fall
2010.
 Improved our fall-to-fall retention rate by 9 percentage points in the last five years and
our four-year graduation rate by 3.7 percentage points in the most recent five year
comparison (cohorts 2002 and 2006).
 Enhanced our admission standards (improving students’ opportunities for persistence
and success and sending a strong message to our regional public schools that better
preparation is required.)
 Launched new academic majors, such as our ABET-accredited software engineering and
computer science programs, that helped recruit new tech companies into the region.
 Opened an Office of Economic Development to support current and new employers,
provide professional and leadership development, and assist the region’s economic
development community.
C-3
APPENDIX C
A F F O R D A B L E







2.
F O R
V I R G I N I A N S
In FY 2011, we awarded $13,784,449 in need-based financial aid. The average need-based
financial aid award was $8,435.
From FY2008 to FY2012, UVa-Wise has moderately increased tuition and mandatory E& G fees
as compared to Virginia’s other senior public institutions – an average annual increase of 5.2% for
UVa-Wise as compared to an average annual increase of 7.9% for all other public senior
institutions.
Our students consistently graduate with a lower debt load than students at any of the nation’s
public liberal arts colleges because of the excellent work of our financial aid office, robust private
scholarship support, and the containment of costs through efficient operation.
The majority of UVa-Wise students would not have access to higher education were it not for the
College having such a robust financial aid program.
F I S C A L

A C C E S S
I N N O V A T I O N
A N D
P R U D E N C E
Summer College enrollment has increased by 24.9% from Summer 2007 to Summer 2011.
Courses have been added to improve timeliness to degree and to better utilize facilities. UVa-Wise
is preparing for more online learning in Summer College by recently upgrading our online learning
platform, training faculty in its use and developing a pilot faculty pay plan to incentivize online
course development.
We are improving offerings for adult degree completers at the Southwest Virginia Higher
Education Center in Abingdon by piloting an on-line completion program in FY2012.
In that 64% of the College’s E & G budget in FY2012 is from state appropriations (the highest
percentage of the state’s senior institutions) and because the College has incurred a $5.16 million
reduction (-35%) in its state appropriation over the past five years, we have had to assertively
increase efficiencies and become better at financial planning.
In support of the Restructuring Act, the University of Virginia and the College formed a partnership
that blends education, economic development and health improvement - a partnership that is
leveraging resources at both institutions and has resulted in over $10 million in new investments
in the region in three years.
THE
SIX-YEAR
PLAN
Guiding Principles . . .
Six principles guided the development of the UVa-Wise academic, financial and enrollment six-year
blueprint:
1) Continue our commitment to student success and service to Southwest Virginia.
2) Fulfill the goals of the legislation while doing what is feasible for our small college.
3) Build on our documented successes in improving student retention (the Early Alert program),
growing our Summer College program and extending our tuition support program to a wider
student base.
4) Keep our student body profile in the forefront of every deliberation, paying attention to the
tenuous balance between tuition and fee increases, enrollment growth, and institutional vitality.
5) Understand the limits of no additional state support for the academic plan and what that means at
a small college that enrolls few out-of-state students.
6) Expand the opportunities to share resources with the University of Virginia (e.g. High Need
Degrees and Science Consortium).
C-4
APPENDIX C
Six-Year Plan Integration . . .



As we have enhanced our admission standards for the Fall 2011 class, future enrollment growth is
difficult to assess. In addition, a sudden increase in part-time freshmen in Fall 2010 was unusual
and it is uncertain if this will continue. The elimination of the year-round provision of students
receiving Pell Grants in FY2011, the potential reductions in SEOG and Federal Work study
funding, and the potential reduction in Pell Grant funding in FY2012 exacerbate the issue.
Although we believe our Early Alert initiative and enhanced admission standards will produce
long-term results, the enrollment projections must, at this time, be conservative. At the next
biennial update, when the outcomes of these initiatives will be available, a clearer picture should
emerge that will afford us greater certainty in the enrollment projections.
A key component of the College’s mission is to provide high quality, affordable educational
opportunity. This plan supports these goals through modest tuition and fee increases and
emphasis on persistence, STEM-H enhancement, and tuition and fee support for especially
promising students.
As noted in the guiding principles, the financial capacity of our students is always at the forefront
in determining tuition and fee increases and how that balances with institutional effectiveness.
We determined that next year’s 8% tuition and mandatory E & G increase must cover the cost of
any new initiatives (with some predicted cost savings in certain areas.) The addendum, outlining
additional important initiatives (e.g. the STEM “Pathways” project), demonstrates the entire cost
of full implementation, which would require support from the Commonwealth or private
resources.
Academic Components of the Plan . . .
Early Alert
Program improving student
success.
The Early Alert program is the top priority of the six-year plan. The strategies outlined
build on what has been effective over the past two years to raise student persistence
rates, yet goes further. The College will build a predictive mathematical model for
student success that identifies student risk factors as well as institutional characteristics
that encourage - or discourage - student success. This initiative also includes changing
College policies and processes – e.g. interval grade reporting, required supplemental
instruction and continued enhancement of the College’s admissions standards.
In recent years, UVa-Wise has begun new STEM programs in software engineering,
computer science, and biochemistry and built new classroom and laboratory spaces for
the Department of Natural Sciences and the Department of Mathematics and Computer
Science. Both software engineering and computer science recently received ABET
accreditation. This initiative will include new marketing initiatives, regional public school
outreach, sharing of resources with UVa and efforts to create new scholarship
opportunities. In nursing, the College will explore an online RN to BSN cohort
completer program. For all STEM-H programs, the College will identify new
opportunities to improve current articulation agreements with the College’s three primary community college feeder
institutions – Mountain Empire Community College, Virginia Highlands Community College and Southwest
Virginia
Community
College.
High Need
Degrees producing highdemand, high
income graduates.
C-5
APPENDIX C
UVa-Wise students are typically first-generation college students with high financial
need. Access for many students is dependent upon financial aid, with many students’
packages a combination of public and private support, and minimal loan indebtedness.
The College has also successfully raised significant scholarship funds from private
donors. In recent years, we launched the AIMS program. AIMS (Appalachian Intermountain Scholars) pays tuition and fees to students transferring from Mountain Empire
Community College who demonstrate academic promise and a strong work ethic. AIMS now supports over 30
transfer students each year with continued tuition and fee support as long as they maintain good academic standing.
UVa-Wise School Scholars expands this AIMS approach to a wider student base - students from other jurisdictions
and students entering as freshmen. UVa-Wise School Scholars will focus on students interested in STEM-H fields.
Initial private support has been received from the Slemp Foundation and Bank of America, and several proposals
are currently pending.
UVa-Wise School
Scholars improving
affordability.
The Center for Teaching Excellence (CTE) is currently the College’s best strategy for the
long-term goal of improving the academic readiness of our applicants. By improving the
quality of teaching in the public schools, more students will be prepared for college
academics. CTE serves over 1,000 public school educators with credit and non-credit
programs and workshops, including online teaching licensure opportunities. Enrollment
in credit courses for FY12 is projected to increase 25% from the previous year, and CTE is introducing an
alternative semester schedule to better accommodate school professionals. This initiative will increase the variety
and number of programs offered, emphasizing STEM teacher development and opportunities for licensure in
STEM. CTE will also launch an online special education licensure curriculum in Fall 2011 that will complement its
online teacher recertification curriculum for teachers with provisional licenses. The CTE administration and faculty
are working with the region’s school districts to better assess, predict, and meet evolving professional development
and state certification needs.
CTE –
preparing better
public school
professionals.
Summer
programs –
providing a
faster degree
path.
Further develops our growing Summer College to better utilize our facilities and shorten
our students’ time to degree. Summer College enrollment has grown 24.9% in the last five
years through more general education courses and more diversity in offerings. Online
learning opportunities will also increase as faculty members take advantage of the new
online learning platform and incentive pay plan.
Stabilizes and expands our robust partnership with the University of Virginia in
education, health and economic development. It is one of the most effective, mutually
beneficial alliances in Virginia resulting from the Restructuring Act. The collaboration
includes dozens of regional partners including the planning and health districts, regional
public schools, regional health centers and systems, regional businesses and industries
and several state agencies. For example, through this partnership the Darden Executive
program is being offered in Southwest Virginia for the first time. The College’s Office of
Economic Development has developed and is implementing a mid-level supervisors
program that has graduated 92 supervisors in seven cohorts to enhance existing industry
competitiveness. The Healthy Appalachia Institute, a public health institute seeking to address geographic health
disparities, is improving health access for disadvantaged women in cancer screening and care, increasing the number
of future health professionals, among other projects. The SWELL (the Southwest Virginia Early Language and
Literacy) program is a collaboration with the local Head Start program and East Tennessee State University that is
designed to improve early language acquisition for very young children in the home using innovative voice
recognition technology and software. The Clinch River project - downtown revitalization and outdoor recreation –
is being led by UVa’s Institute for Environmental Negotiation and has drawn 75 stakeholders from 30
Healthy
Appalachia –
partnering with
UVa for education,
economic
development and
health.
C-6
APPENDIX C
organizations to the table. In October, the Association of Public and Land-Grant Universities will recognize this
partnership with an award during the National Outreach Scholarship conference.
The College has demonstrated a continuing commitment to undergraduate research
in a number of ways. It has instituted a highly successful FINS (Fellowships in the
Natural Sciences) undergraduate research program that supports students/faculty
in summer research. In recent years the College has been able to offer at least six
FINS fellowships each summer, funded primarily by endowed funds. UVa-Wise
has had an active undergraduate research council since 2007. The College was a
founding member and has been an active participant in an annual COPLAC undergraduate research
conference with UNC-Asheville, and the University of Montevallo. It also participates in an annual
undergraduate research symposium with Emory & Henry College. Academic leaders have identified more
than $50,000 in endowed funds that will be used in support of student research and conference presentations
to expand this effort to the humanities.
Undergraduate
research –
applying
knowledge.
The addendum includes initiatives that are important to the future vitality of UVa-Wise
and the region, but which couldn’t be included in the plan because of the “no additional
state funds” guideline. These are the “Pathways” initiative, an acceleration of the High
Need Degrees initiative, and faculty and staff salary increases. The “Pathways to Science
and Engineering Careers: A Community-Based Initiative,” will be a systemic
collaboration between the PK-12 public schools and UVa-Wise that will create greater
community awareness of the broad range of opportunities in science-related careers, provide professional
development for public school and college teachers, and stimulate students’ interest and persistence in science,
technology, engineering and math (STEM) fields. In the first year, while additional external funds are sought, UVaWise will partner with the University of Virginia to bring proven programming to Wise County Schools in
professional development for teachers (teaching scientific inquiry and nanotechnology) and programs for middle
school students (engineering kits). The College will also expand its current middle school student programming
such as the robotics camp and Lego science teams. We will only pilot aspects of the “Pathways” initiative in FY2012
because of fiscal constraints. We offer the addendum for consideration and discussion.
Addendum –
“Pathways”
Initiative, creating
a vital workforce.
Greater Prosperity and Well-Being
Southwest Virginia is now seeing the beginnings of a transformed economy, brought about in large part by a more
educated and capable workforce. Higher education is the catalyst for this change and UVa-Wise is its anchor in far
Southwest Virginia. Investment in higher education is investment in the people of Southwest Virginia and its future
economic prosperity. UVa-Wise stands ready to partner with the Commonwealth to begin these Top Jobs 21
strategic improvements and to make a difference in the lives of our students, our region and the Commonwealth.
C-7
APPENDIX D
Annual Report to the Board of Visitors
on
The University of Virginia Employee Health Plan
September 2012
Background
The University of Virginia manages its own employee health plan. There are three main objectives
in managing the Plan. To:
(1)
(2)
(3)
Provide a health benefit that is attractive to current and prospective faculty and
staff and retirees.
Ensure financial stability of the health plan while maintaining appropriate
reserves.
Keep plan cost increases as low as possible while keeping the plan fiscally
sound. This has been particularly challenging over the past two years with
employees using more health care services than ever before and trying to
contain cost increases in times of no salary increases and tight budgets.
In total, 13,428 employees participate in UVa Health Plan. This represents 98% of those eligible to
enroll. Included are active employees in the Medical Center and the Academic Division as well as
retirees and COBRA participants. When spouses and dependents are added, the total health plan
enrollment is 28,625.
There are two options in the UVa Health Plan– a low premium plan and a high premium plan.
Nineteen percent (19%) of participants (2,541) are in the Low Premium Plan and 81% are in the
High Premium Plan (10,887).
Total claim costs per participant are 41.4% lower in the Low Premium than the High Premium plan.
Encouraging enrollment of more employees in the Low Premium plan has been an intentional
strategy over the past several years. The average High Premium Plan participant utilizes $778 in
claims per month (about $9,336 per year); the average Low Premium Plan participant utilizes $456
in claims per month (about $5,472 per year). Average enrollment in the High Premium Plan for
2011 decreased by 4.1%, while average enrollment in the Low Premium Plan increased by 28.4%.
Plan Costs
As a “self-funded” plan, the University does not purchase insurance, rather we pay directly for the
services employees and their dependents use. As can be seen in Figure 1, below, the total cost of
the health plan for 2011 was $119.8 million; up from $109.8 million in 2010.
D-1
APPENDIX D
Figure 1. Total Health Plan Costs
In the face of rising costs from 2007 to 2009, several major and difficult plan changes were
implemented in 2010. Deductibles were added, co-pays and premiums were increased. As a result,
employee cost share increased by $3.1 million. The decisions were painful to make and not
popular. However, those changes made a difference by containing the rate of increase the plan was
experiencing.
In 2011, medical claims increased by 18.7% per participant. This is due in large part to a significant
increase in both the number and amount of “high dollar” claims (defined as claims over $100,000).
Historically, the plan averaged approximately 30 high dollar claims per year, but in 2008 that
increased to 44 and in 2009 to 55. Calendar year 2010 had 4 less high dollar claims (51), $1.7
million less in cost, than in 2009. However, in 2011, there were 86 claims over $100,000, $9.6
million more than in 2010.
Prescription cost decreased by 16% in 2011 as a result of more favorable pricing with a new
Pharmacy Benefit Manager (PBM), contracted as of January 1, 2011. The Plan also applied for and
received $720,000 in federal funds from the Early Retiree Reimbursement Program in 2011(ERRP).
Plan reserves are stable. At the end of 2010, the reserve was at $53.3 million. Historically, a
contingent reserve of 20% had been recommended. Given the size of the plan and the potential for
wide variations from year-to-year, the contingent reserve target was moved to 25%. As of
December 31, 2011, reserves exceeded the target and are at $64.1 million.
To offset increased utilization and anticipated medical trend, employer and employee rates would
need to increase slightly more than 7% to cover projected 2013 costs. A portion of this increase
will be absorbed by intentionally drawing down reserves. Premiums for active employees in the
High Premium Plan will increase by 3.25% in the coming year. Plans are underway for a 6%
D-2
APPENDIX D
increase in retiree premiums. The University/Employer contributions for both Low Premium and
High Premium plans will increase 3.25% for 2013.
Active Employee/Employer Premium Rates
Figures 2 and 3 below provide the monthly costs for active employees in the Low Premium and
High Premium plans, respectively. The first column shows the University/employer contributions,
the middle column shows the employee contributions, and the column to the far right shows the
total premium. Down the left side are the coverage options the employee has from employee only
or “single” coverage, to the various dependent coverage options. These rates reflect no change for
active employees in the Low Premium Plan and a 3.25% increase in the High Premium Plan.
Figure 2. Low Premium Plan Rates
Figure 3. High Premium Plan Rates
UVa is the only state agency that manages a health plan. All other state employees and retirees are
covered under the Commonwealth of Virginia health plans. One benchmark used to measure the
effectiveness of the UVa Health Plan is how it compares against the Commonwealth’s plan for other
state employees. The expectation is that the UVa plan should provide equal or better benefits for
the same or less cost. A third-party analysis reveals that, overall, the UVa plan continues to provide
quality coverage at less cost than the state.
Retiree Coverage
Included in the participant data provided above are 545 “early retirees”. These are retirees who
are not eligible for Medicare. When they become Medicare-eligible, retirees transfer to the
Commonwealth of Virginia health plan. These “early retirees” represent 4% of participation in the
UVa Health Plan.
D-3
APPENDIX D
Retirees contribute through their premiums about $4.2 million per year against expenses of about
$7.1 million per year. On average, a retiree utilizes $1,055 per month, significantly more than the
$702 per month an active employee utilizes. The difference of about $5,504 per retiree per year is
subsidized by the active employee group. Higher utilization is expected for this population group.
However, a premium increase of 6% (about $26 per retiree per month) is planned to help cover
these costs and close the discrepancy between the premiums and the expenses.
The table below in Figure 4 provides retiree premiums for 2012 and 2013 for the Low and High
Premium Health Plans as well as the Dental Plan.
Figure 4. Retiree Premiums for 2012 and 2013
Wellness Program
In 2011, under the direction of President Sullivan, the University implemented a comprehensive
wellness program, entitled Hoo’s Well@. The program represents a collaborative effort of
providers across Grounds including University Human Resources, Intramural-Recreation Sports,
UVa WorkMed, the Faculty and Employee Assistance Program, UVa Nutrition Services, UVa Dining
Services, and others. Of the 19,000 eligible employees and spouses, nearly 4,000 participated in the
Biometric Screening and Health Risk Assessments, a 19% participation rate. As part of the wellness
program, exercise and fitness classes and consultations were offered along with nutrition
consultations, personal and prescription assistance for tobacco cessation, work-life balance
offerings, and reminders on the importance of preventive care.
The greatest success of the program is that for the first time, UVa will be able to offer future
wellness programming based on real data from UVa’s employee/spouse population. Aggregate
data obtained from the first-year screenings and assessments indicate areas of risk to be heart
disease, stroke, and diabetes. Body Mass Index has been identified as the primary clinical indicator
of current and future health risks, so a targeted focus on weight loss will impact both short-term
and chronic health conditions. In addition to unhealthy weight, other high risk health indicators
identified from the data are high-fat diets, high blood pressure, and tobacco use.
D-4
APPENDIX D
Through the assessment, the top five most prevalent modifiable risk factors were found to be
nutrition, inadequate sun protection, insufficient exercise, overdue preventative health screenings,
and problems with stress. These findings are being used to tailor programming needs for the UVa
population in the year ahead. In offering consolidated wellness services across Grounds under one
umbrella, gaps and overlaps were also identified. Administrative improvements are planned to
address these issues and new offerings are planned to address the gaps.
Changes for 2013
Changes for calendar year 2013 include enhancements to the wellness program, some plan design
changes, and additional incentives to encourage employees to obtain services from the UVa Health
System. More information on each follows.
Enhanced wellness program: Again this fall, employees and their covered spouses will have a
chance to participate in the Hoo’s Well@ comprehensive wellness program. Employees who have
Biometric Screenings and Health Risk Assessments will receive rewards in their paychecks. The
program will also continue to offer fitness classes at IM-Rec Sports, and many additional
opportunities to “get well” through other University partners including WorkMed,
Faculty/Employee Assistance Program, and UVa Nutrition. A wellness fair is scheduled at the John
Paul Jones Arena on September 13th where employees will be able to get biometric screenings, visit
with vendors, and receive flu shots. New to the wellness program this year will be further benefit
enhancements including preventive medical services covered at 100% with no office visit
copayment required; prescription benefits to cover several generic medications at 100% when
members participate in disease management programs for conditions such as high blood pressure,
diabetes, etc.; and waiver of prescription copayments for tobacco cessation drugs when enrolled in
the Quit for Life program.
Plan Design Changes: There will be moderate increases in prescription cost-sharing for Tier 2 and
Tier 3 drugs and an expansion of the specialty drug tiers. Currently there is only one tier for
specialty medications. The change will add two tiers, creating the same three-tier structure for
specialty drugs that is in place for non-specialty medications (i.e. generic, preferred brand, and nonpreferred brand).
Incentives to the UVa Health System: The UVa health plan was re-designed in 2011 to offer
incentives for employees and their dependents to use UVa providers. The incentives in the first
year were in the form of lower co-payments when plan participants used University health care
providers. For 2013, additional services will have reduced out-of-pocket costs, including lower
cost-sharing for procedures, admissions and prescriptions when filled at UVa’s pharmacy. The plan
will also cover telemedicine services when provided by UVa physicians. Additionally, out-of-pocket
costs for using non-UVa providers and facilities will increase, further incentivizing the use of UVa.
Reducing employees’ out-of-pocket expenses for using UVa is yet another way to improve the
employee health benefit.
D-5
APPENDIX D
Next Steps
The UVa health plan is managed on a calendar year basis. An open enrollment period from October
29th -November 16th will allow employees to change coverage and plan options. All plan changes
will be effective January 1, 2013.
University Human Resources commissioned a study comparing the value of the UVa health plan
with that of selected peer institutions. Over the course of the next year, the results of that study will
be analyzed and shared with faculty and staff representatives. These collaborative discussions will
inform decision-making around the future direction of the health plan.
D-6