UNIVERSITY OF VIRGINIA
BOARD OF VISITORS
MEETING OF THE
FINANCE COMMITTEE
FEBRUARY 24, 2012
FINANCE COMMITTEE
Friday, February 24, 2012
9:45 – 11:15 a.m.
Board Room, The Rotunda
Committee Members:
Mark J. Kington, Chair
A. Macdonald Caputo
The Hon. Alan A. Diamonstein
Glynn D. Key
Randal J. Kirk
Stephen P. Long, M.D.
George Keith Martin
Vincent J. Mastracco Jr.
Edward D. Miller, M.D.
Helen E. Dragas, Ex-officio
Daniel M. Meyers, Consulting Member
AGENDA
PAGE
I.
II.
STRATEGIC PRIORITIES
A.
Governor’s Budget with Senate and House Amendments,
2012-2013 Academic Division Budget Planning and
Preliminary Budget Assumptions (Mr. Strine to
introduce Ms. Colette Sheehy; Mr. Strine and Ms.
Sheehy to report)
B.
Report on the University’s Financial Status as of
December 31, 2011 (Mr. Strine to introduce Ms. Yoke
San L. Reynolds and Mr. Lawrence Kochard; Messrs.
Strine and Kochard and Mmes. Sheehy and Reynolds to
report)
CONSENT AGENDA (Mr. Strine)
A.
Acquisition of 1107 West Main Street
B.
Signatory Authority for Cord Blood Procurement
C.
School of Medicine Investment in the Fund for the
Future Quasi-Endowment
III. ACTION ITEMS (Mr. Strine)
A.
Budget Amendments Transmitted to the General
Assembly (Ms. Sheehy to report)
B.
2012-2013 Tuition and Fees for Special Programs
(Ms. Sheehy to report)
1.
School of Engineering and Applied Science’s
Systems Engineering Accelerated Program
2.
School of Continuing and Professional Studies’
Post-Baccalaureate Pre-Medical Certificate
Program
C.
Acquisition of Leasehold Improvements-Squash Facility
from University of Virginia Host Properties, Inc.
1
6
12
13
14
16
18
20
PAGE
D.
IV.
V.
Authorization of and Intent to Issue Tax-Exempt Debt
REPORTS BY THE EXECUTIVE VICE PRESIDENT AND CHIEF
OPERATING OFFICER (Mr. Strine)
A.
Vice President’s Remarks
B.
Endowment Report – Market Value and Performance
as of December 31, 2011 (Written report; verbal
presentation to be provided in item I.B.)
C.
Miscellaneous Financial Reports
1.
Academic Division Accounts and Loans
Receivable
2.
Medical Center Financial Report
3.
Internal Loans to University Departments
and Activities
4.
Capital Campaign
5.
Endowment/Long-Term Investments for University
of Virginia and Related Foundations
6.
Quasi-Endowment Actions
7.
Sponsored Programs Restricted Grants and
Contracts
APPENDICES
A. Summary of Governor’s Budget Bill
B. 2012-2014 Proposed Amendments
22
25
26
44
46
48
49
50
51
52
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
I.A. Governor’s Budget with Senate and
House Amendments, 2012-2013 Academic
Division Budget Planning and Preliminary
Budget Assumptions
ACTION REQUIRED:
None
Governor’s Budget
BACKGROUND: On December 19th, Governor McDonnell presented to
the Legislature his proposed 2012-2014 biennial budget and
amendments to the 2010-2012 Appropriation Act. The General
Assembly will consider the Governor’s Budget Bill during its
long session, which began January 11th. The House
Appropriations and Senate Finance Committees release their
amendments to the introduced budget on February 19th. The House
of Delegates and the Senate must take final action on their
versions of the Budget Bill by February 23rd. The Joint
Conference Committee is slated to present its reconciled budget
on Thursday, March 8th. At the February 24th Finance Committee
meeting, the Executive Vice President and Chief Operating
Officer and the Vice President for Management and Budget will
review the status of the General Assembly activity, particularly
new developments which may occur after the distribution of these
materials.
DISCUSSION: Governor McDonnell's 2012-2014 operating budget
proposes $100 million per year to achieve the goals of the
Virginia Higher Education Opportunity Act of 2011 (HEOA), which
include educating and graduating more Virginians, encouraging
more graduates in science, technology, engineering, mathematics,
and health (STEM-H) fields, supporting underrepresented students
to graduate from higher education institutions, and awarding
100,000 new degrees in the next 15 years. The funding is
intended to slow the rising costs of tuition and fees to keep
higher education more affordable. Of this funding, the
University will receive approximately $6.9 million per year.
The Governor directs each public higher education
institution to set aside in FY13 and FY14 the equivalent of 3%
1
and 5%, respectively, of its FY12 general funds support for
educational and general (E&G) operations to reallocate toward
the goals of the HEOA. This funding will be released to
institutions once the Secretary of Education has approved a plan
for how institutions will utilize the funding in support of the
HEOA. The University’s share is approximately $4.8 million in
year one and $8.0 million in year two.
Governor McDonnell proposes to increase the Virginia
Retirement System (VRS) employer contribution rate by 2.1% and
eliminate the diversion of VRS contributions to the state
general fund that has occurred in the past two years. The
Governor has included a provision for a 3% faculty and staff
bonus on December 1, 2012, if an agency’s June 30, 2012 state
cash balances are at least twice the cost of the bonus. The
University will be responsible for funding the general fund
share of the bonus out of its unspent discretionary
appropriation.
The Governor has allocated $5 million in each year of the
biennium to create a non-stock corporation research consortium
initially comprised of UVa, Virginia Commonwealth University,
Virginia Tech, George Mason University, and the Eastern Virginia
Medical School. The consortium will work with private entities,
foundations, and other governmental sources to capture and
perform research in the biosciences.
The Governor has allocated $250,000 in planning funds to
each of two capital projects: the next phase of the Rotunda
renovation and the North Grounds boiler and chiller replacement
project.
The Governor provides $32.1 million in 2012-2013 and $31.1
million in 2013-2014 to reimburse the UVa Health System for
indigent health care costs. This funding represents a decrease
in comparison to 2010-2011 (funded at $38.2 million) and 20112012 (funded at $41.6 million).
The Governor proposes two amendments to the 2010-2012
Appropriation Act that directly impact the University: 1)
eliminating the $10 million budget reduction that was to be
imposed on public higher education institutions in 2011-2012,
and 2) decreasing the general funds provided to reimburse the
UVa Health System for indigent health care costs in 2011-2012
from $41.6 million to $40.3 million.
Specific actions can be found in Appendices A and B.
2
2012-2013 Academic Division Budget Planning
and Preliminary Budget Assumptions
BACKGROUND: At its November 2011 meeting, the Finance Committee
considered preliminary budget planning assumptions for the
development of the 2012-2013 Academic Division operating budget.
The Executive Vice President and Chief Operating Officer and the
Vice President for Management and Budget will update several
planning assumptions for the 2012-2013 operating budget.
DISCUSSION: The updated budget assumptions will be used in the
development of the 2012-2013 operating budget, to be presented
to the Board of Visitors for action at its May 2012 meeting.
Revenue Assumptions
1.
Tuition: For planning purposes, the University
anticipates undergraduate tuition rate increases which
approximate inflation and does not expect to propose any
new, undergraduate differential tuition rates. Actual
tuition and fee charges for 2012-2013 will reflect rates
that will be approved by the Board of Visitors in April.
2.
Research: Grant and contract revenue will be based on
historical spending patterns and known new awards with the
presumption of no growth projected in base federal
research spending together with a decrease related to onetime ARRA (stimulus) funds as they are spent down. For
planning purposes, the indirect cost reimbursement rate is
54%.
3.
Auxiliary Enterprises: Schools will develop plans using
student mandatory fees included in the incumbent Six-Year
Plan submittal to the State Council of Higher Education
for Virginia for 2012-2013. Actual revenues and fee
charges for 2012-2013 will be based on activity volumes
and will reflect rates that will be approved by the Board
of Visitors at its April 2012 meeting.
4.
State Appropriations: We will assume no growth in the
state appropriations, but will continue to evaluate the
Senate and House modifications to the Governor’s budget
proposal.
5.
Endowment and Interest Payout: The University’s approved
endowment spending policy will govern the endowment
distribution for 2012-2013. Return on cash balances
3
invested in the University short-term pool will reflect
market-based rates as described in the University’s
Internal Investment Program policy.
6.
Philanthropy: Estimates for annual giving will be
projected for each school and unit based upon estimates
developed in consultation between University Development
and school officials.
Expenditure Assumptions
1.
Enrollment: Schools should assume that planned enrollment
growth will be supported by allocating incremental revenue
related to enrollment growth to those schools with
additional students according to a formula that supports
the cost of faculty as well as academic, student, and
administrative support.
2.
Financial Aid: Full funding will be provided for the
projected cost of AccessUVa, including the identification
of a permanent funding source for financial aid paid from
temporary sources in 2011-2012. To the extent that
strategies emerge from the Board’s Ad Hoc Committee on
AccessUVa that can be implemented for the 2012-2013 fiscal
year, the impact of those actions will be incorporated in
the projected cost.
3.
Compensation:
a. All budgets will account for the annualized cost of
the November 2011 Strategic Salary Action.
b.
State authorized changes, if approved by the 2012
General Assembly, to classified staff compensation,
whether permanent changes to base salary or one-time
bonuses, will be funded from unit funds (for selfsupporting activities) or from central funds (for
centrally-funded activities).
c.
The budget contemplates a 2012 Strategic Salary Action
to retain and reward top performers. Self-supporting
units will reserve a pool of funds equal to 2% of
their salary base for teaching and research faculty
and equal to 2% of their salary base for University
staff and administrative and professional faculty.
4
d.
2012-2013 fringe benefit rates are estimated at:
Pooled Fringe Benefit Rates
Full-time Faculty and University
Staff-Executive
Full-time Classified Staff, University
Staff-Managerial/Professional, and
University Staff-Operational/
Administrative
Part-time Faculty and Staff with
benefits (20-31 hrs.)
Part-time Faculty and Staff without
benefits and Wage employees
Approved
2011-2012
26.8%
Projected
2012-2013
27.5%
27.6%
37.3%
26.8%
27.5%
5.5%
6.0%
4.
Academic Commitments: Development of the current budget
will consider prior-year commitments to faculty hiring and
strategic priorities in light of current financial
conditions and any revised strategic priorities formulated
from the 2012-2013 budget development process.
5.
Operations and Maintenance Costs: The University commits
to funding operating and maintenance costs for new
facilities and addressing proactively deferred
maintenance. Debt service includes principal payments as
well as the blended internal borrowing rate of 4.75%.
6.
The Darden School and Law School financial selfsufficiency models and the McIntire School and School of
Continuing and Professional Studies revenue-sharing
agreements will continue in 2012-2013.
7.
Auxiliary enterprises, the Medical Center and the
University Physicians Group should anticipate a general
and administrative charge on the adjusted 2010-2011
expenditure base to cover their share of central services.
8.
Self-supporting units will continue to comply with the
Board of Visitors Capital and Operating Reserves Policy
established in April 2006. Schools and units will also
plan for appropriate contingency reserves.
5
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
I.B. Report on the University’s Financial
Status as of December 31, 2011
ACTION REQUIRED:
None
This is the first of narrative quarterly updates the
Finance Committee will receive on the financial status of the
University. In the past, the Finance Committee has received the
Quarterly Budget Report as part of the Miscellaneous Financial
Reports. The report on the University’s financial status will
include both a written and verbal status report on the General
Accepted Accounting Principles (GAAP) financial statements. The
endowment performance report from the University of Virginia
Investment Management Company beginning on page 26 will also be
included as part of this holistic view on the financial status
of the University.
6
UNIVERSITY OF VIRGINIA
Financial Statement and Results Review
As of and for the Six Months Ending December 31, 2011
Net assets are down $62.2 million, or -1.2%, to $4.92 billion,
largely as a result of the $113.0 million investment loss,
caused primarily by the decline in the market value of endowment
and other long-term investments (3% as of November 30 and 3.3%
as of December 31). This investment loss was offset by $29.4
million of capital additions net of non-operating expenses, as
well as $21.4 million surplus from operations.
STATEMENT OF CHANGES
Compared with prior year, operating revenues were higher by $8.6
million, or 1.3%, during the first six months of FY12. At the
same time, there was a slight decrease of $1.0 million, or -0.2%,
in operating expenses.
Net tuition revenue increased $18.7 million or 9.9%. The
increase in rates of 8.9% and 6% respectively for
undergraduates and graduate/first professional tuition and
fees, along with enrollment growth, account for this
increase.
Revenue from sponsored programs (i.e. grants and contracts)
decreased $5.6 million, or 3.2%. Federal grants are down
about $10 million, with $7 million of that being a
reduction of the American Recovery and Reinvestment Act
(ARRA) spending. Offsetting that is a $4.5 million
increased expenditure on private (foundation and corporate)
grants and contracts.
State appropriations for operations are down about $11.5
million, or 8.3%, in state budget cuts for FY12 to date.
Auxiliary enterprise revenues are up $9.5 million due to
timing differences compared to prior year.
Operating expenses are down slightly, less than $1.0 million.
Instructional expenses are down $5.5 million, or 3.6%,
primarily in compensation across most schools especially in
their State fund sources.
7
Research expenditures are down $5.3 million, or 3.4%, as a
result of the ending of ARRA funding and differences in
timing this year compared with last year.
Academic support is up $3.5 million, or 5.2%, likely due to
timing differences that will moderate this increase as the
year progresses.
Institutional support is up about $1.6 million, or 4.2%,
with about half of this increase related to timing that
should clear up as the year progresses; increased
compensation expense in a few areas explains the remainder.
Student aid (net) is up about $1.6 million, or 6.6%.
category reports stipends paid to students for work
performed.
This
Operating results to date show an operating margin of $21.4
million, compared to $11.9 million for 12/31/10.
Non-operating Revenues:
• Capital appropriations and capital gifts: down $12.7
million; fewer large gifts received compared to the same
period in the prior year. $3.1 million in capital
appropriation has been received from the Commonwealth.
• Investment loss of $113.0 million, sustained primarily as a
result of 3.3% decline in the markets.
• Endowment gifts up $20.0 million, mostly from two large
gifts.
STATEMENT OF NET ASSETS
Current assets are up about $354.8 million, primarily resulting
from receivables for spring semester tuition and fees, which
were billed in November, but are not due until after 12/31.
Cash and short-term investments are also up as a result of the
collection of fall tuition.
Noncurrent assets are down $200.0 million, due almost entirely
to a decrease in the market value of endowment and other longterm investments.
Current liabilities are up about $224.6 million, almost entirely
attributable to deferred revenues for spring semester tuition.
8
Noncurrent liabilities, consisting almost entirely of long-term
debt, decreased $7.6 million, reflecting the refunding and
payment of debt principal during the year.
Net Assets:
• Invested in Capital, net up about $29.1 million, reflecting
the ongoing investment in new facilities.
• Restricted nonexpendable net assets, which represent that
portion of endowment gifts that cannot be spent, are up
$26.2 million, reflecting two particularly large gifts
received during the year.
• Restricted expendable net assets are down about $125.1
million, attributable to three components: about $65
million of realized and unrealized market losses on
investments; another $38 million of net capital activity
(capital expenditure of previously received revenues less
new capital revenues); and about $22 million decrease from
(restricted funds) operations.
• Unrestricted net assets are up slightly, by $7.7 million;
the change in unrestricted net assets reflects a $51
million increase from operations, offset by market losses
on investments.
9
UNIVERSITY OF VIRGINIA - Academic Division Only
Fiscal Year 2012 (July 1, 2011 – June 30, 2012)
Statement of Net Assets (Unaudited) at Mid-year
As of December 31, 2011 and June 30, 2011
12/31/2011
ASSETS
Current Assets
Cash and short term investments
Receivables (accounts, notes, other)
Receivable from Medical Center
Receivable from UPG
Receivable from SWVHEC & agencies
Inventories, prepaids and other
Total current assets
Noncurrent Assets
Endowment and other long-term investments
Notes receivables
Medical Center pooled bond receivable
Deposits with bond trustees
Capital assets, net
Total noncurrent assets
Total Assets
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities
Deferred revenues and deposits
Deferred revenues, spring tuition
Commercial Paper
Deposits held for UVA-Wise and SWVHEC
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
$
Change in $ % Change
210,518,665
33,599,542
2,450,649
299,265
246,868,121
107,671,647
234,101,393
10,056,367
219,844
2,756,258
354,805,509
51.1%
696.7%
410.4%
100.0%
100.0%
0.0%
143.7%
3,510,815,540
3,694,182,732
19,437,576
18,888,318
321,603,342
331,458,157
63,181,013
109,600,506
1,992,860,053
1,953,769,983
5,907,897,524
6,107,899,696
$ 6,509,571,154 $ 6,354,767,817
(183,367,192)
549,258
(9,854,815)
(46,419,493)
39,090,070
(200,002,172)
154,803,337
-5.0%
2.9%
-3.0%
-42.4%
2.0%
-3.3%
2.4%
13,896,154
186,648,956
76,850,000
6,600,669
283,995,779
20,414,898
(38,534,460)
230,000,000
10,641,000
2,032,112
224,553,550
146.9%
-20.6%
100.0%
13.8%
30.8%
79.1%
1,085,499,455
25,622
1,085,525,077
1,594,074,406
1,093,062,659
25,622
1,093,088,281
1,377,084,060
(7,563,204)
(7,563,204)
216,990,346
-0.7%
0.0%
-0.7%
15.8%
1,183,635,917
1,154,553,281
29,082,636
2.5%
475,596,883
2,132,441,799
1,123,822,149
4,915,496,748
449,391,529
2,257,581,756
1,116,157,191
4,977,683,757
26,205,354
(125,139,957)
7,664,958
(62,187,009)
5.8%
-5.5%
0.7%
-1.2%
$
318,190,312 $
267,700,935
12,507,016
219,844
2,756,258
299,265
601,673,630
6/30/2011
34,311,052 $
148,114,496
230,000,000
87,491,000
8,632,781
508,549,329
10
UNIVERSITY OF VIRGINIA - Academic Division Only
Statement of Changes in Net Assets (Unaudited)
For the Six Months Ended December 31, 2011 and 2010
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
FY12
12/31/2011
FY11
12/31/2010
Change in $ % Change
207,888,812
170,284,898
126,918,232
83,933,947
48,696,679
11,064,672
4,280,789
653,068,029
189,208,106
175,842,465
138,406,177
74,484,220
50,580,851
11,479,180
4,508,796
644,509,795
150,468,949
151,590,570
15,496,069
71,287,380
18,508,415
39,526,868
49,543,885
25,374,732
59,299,500
47,295,364
3,252,321
631,644,053
156,010,870
156,853,068
14,190,637
67,751,669
18,988,400
37,928,431
48,984,781
23,810,715
58,492,969
45,813,061
3,791,106
632,615,707
21,423,976
11,894,088
17,770,383
(112,976,962)
25,680,580
16,142,609
(53,383,390)
30,491,597
312,208,004
5,683,275
19,489,658
367,872,534
14,510,606
385,941
15,331,048
30,227,595
15,687,211
1,127,185
3,158,946
19,973,342
(1,176,605) -7.5%
(741,244) -65.8%
12,172,102 385.3%
10,254,253
51.3%
Nonoperating revenues less nonoperating expenses
(83,610,985)
347,899,192
(431,510,177) -124.0%
Total Revenues
Total Expenses
Increase in net assets
599,684,639
661,871,648
(62,187,009)
1,012,382,329
652,589,049
359,793,280
(412,697,690) -40.8%
9,282,599
1.4%
(421,980,289) -117.3%
4,977,683,757
4,915,496,748
4,251,643,417
4,611,436,697
Operating Expenses
Instruction
Research
Public service
Academic support
Student services
Institutional support
Operation of plant
Student aid, net
Auxiliary
Depreciation
Other
Total operating expenses
Operating revenues less operating expenses
NONOPERATING REVENUES AND EXPENSES
Nonoperating Revenues
Capital appropriations, gifts, and grants
Investment income (loss)
Additions to permanent endowments
Other
Total nonoperating revenues
Nonoperating Expenses
Interest on capital asset related debt, net
Loss on capital assets (gain)
Other
Total nonoperating expenses
NET ASSETS
Net assets - July 1 (Beginning)
Net assets -- December 31 (ending)
11
18,680,706
(5,557,567)
(11,487,945)
9,449,727
(1,884,172)
(414,508)
(228,007)
8,558,234
9.9%
-3.2%
-8.3%
12.7%
-3.7%
-3.6%
-5.1%
1.3%
(5,541,921) -3.6%
(5,262,498) -3.4%
1,305,432
9.2%
3,535,711
5.2%
(479,985) -2.5%
1,598,437
4.2%
559,104
1.1%
1,564,017
6.6%
806,531
1.4%
1,482,303
3.2%
(538,785) -14.2%
(971,654) -0.2%
9,529,888
(12,721,214)
(425,184,966)
19,997,305
(3,347,049)
(421,255,924)
304,060,051
80.1%
-41.7%
-136.2%
351.9%
-17.2%
-114.5%
6.6%
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS CONSENT AGENDA
II.A. ACQUISITION OF 1107 WEST MAIN STREET: Approves the
purchase of 1107 West Main Street, Charlottesville, Virginia.
The property is a one-story masonry building containing
6,380 square feet originally built in 1958 as a Ben Franklin
retail store. The property abuts Stacey Hall which is occupied
by Health System administrative functions and is directly across
the street from the Battle Building site. The University of
Virginia Foundation (the “Foundation”) successfully reached
agreement with the owner of the property for its acquisition in
the summer of 2011.
It is in the best interest of the University to own the
property directly rather than continuing to lease it from the
Foundation. The University will pay the Foundation its direct
costs of originally acquiring and now disposing of the property
which total $840,000. The University will incur additional due
diligence and incidental expenses for the acquisition;
therefore, we recommend a purchase price not to exceed $870,000.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL TO PURCHASE 1107 WEST MAIN STREET, CHARLOTTESVILLE,
VIRGINIA
WHEREAS, the Board of Visitors finds it to be in the best
interest of the University of Virginia to purchase from the
University of Virginia Foundation (the “Foundation”) land and
improvements thereon located at 1107 West Main Street,
Charlottesville, Virginia (the “Property”), at a purchase price
not to exceed $870,000;
RESOLVED, the Board of Visitors approves the acquisition of
the Property; and
RESOLVED FURTHER, the Executive Vice President and Chief
Operating Officer is authorized, on behalf of the University, to
approve and execute purchase agreements and related documents,
to incur reasonable and customary expenses, and to take such
other actions as deemed necessary and appropriate to consummate
such property acquisition; and
12
RESOLVED FURTHER, all prior acts performed by the Executive
Vice President and Chief Operating Officer, and other officers
and agents of the University, in connection with such property
acquisition, are in all respects approved, ratified, and
confirmed.
II.B. SIGNATORY AUTHORITY FOR CORD BLOOD PROCUREMENT:
Authorizes the execution of a multi-year contract for the
procurement of cord blood services and products.
The Board of Visitors is required to approve the execution
of any contract where the amount per year is in excess of $5
million.
In accordance with Medical Center procurement policy, the
Medical Center is finalizing a prime vendor contract for cord
blood products, human leukocyte antigen (HLA) matching and other
testing services required by the Cancer Center’s stem cell
transplantation service. The proposed five-year contract would
be effective July 1, 2012, with an estimated total value of
$55.4 million over the initial one-year term and four one-year
renewal options at the election of the Medical Center. The
estimated value of this contract exceeds $5 million per contract
year, thus exceeding the signatory authority of the Executive
Vice President and Chief Operating Officer of the University.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL OF SIGNATORY AUTHORITY FOR MEDICAL CENTER PROCUREMENT
OF CORD BLOOD PRODUCTS AND SERVICES
WHEREAS, the Medical Center Operating Board finds it to be
in the best interest of the Medical Center to enter into a
contract for the procurement of cord blood services and
products;
RESOLVED, the Board of Visitors authorizes the Executive
Vice President and Chief Operating Officer of the University to
execute a multi-year contract for the procurement of cord blood
services and products, based on the recommendation of the Vice
President and Chief Executive Officer of the Medical Center in
accordance with Medical Center procurement policy.
13
II.C. SCHOOL OF MEDICINE INVESTMENT IN THE FUND FOR THE FUTURE
QUASI-ENDOWMENT: Approves a $15.0 million investment by the
School of Medicine in the Fund for the Future Quasi-Endowment.
In June 1996, the Board of Visitors authorized the
Executive Vice President and Chief Operating Officer to approve
individual quasi-endowment transactions, including
establishments and divestments that are less than $2 million.
Individual quasi-endowment transactions of $2 million or more
require the approval of the Board of Visitors.
The School of Medicine received $18,044,078 in support of
its academic mission from the UVa Medical Center in November
2011. The funds were added to its Fund for the Future project.
The School of Medicine wishes to transfer $15.0 million of this
contribution into its Fund for the Future Quasi-Endowment, which
is invested in the UVIMCO long-term pool. The remaining portion
will be held back to fund current commitments. Divestments of
quasi-endowment principal will be requested as needed to meet
future School obligations. It is prudent to invest the
remaining funds until needed for future expenses.
In February 2011, the Board of Visitors approved a similar
transaction, in which the School of Medicine transferred $18.0
million to the same quasi-endowment account from a contribution
of approximately $21.0 million from the UVa Medical Center. It
is anticipated that the Medical Center will make similar
contributions in the future. If so, the School of Medicine will
request the transfer of a significant portion of the
contribution to the same quasi-endowment. This approach would
dovetail with the new clinical strategy and the estimated funds
needed to meet the plans and recruitment efforts outlined in
that strategy.
The resolution for consideration by the Board of Visitors
approves the $15.0 million investment by the School of Medicine
in its Fund for the Future Quasi-Endowment. Any similar future
investment above $2.0 million will require Board of Visitors’
approval.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
14
APPROVAL OF SCHOOL OF MEDICINE INVESTMENT IN THE FUND FOR THE
FUTURE QUASI-ENDOWMENT
WHEREAS, the Board of Visitors must approve any quasiendowment transaction of $2 million or more; and
WHEREAS, the School of Medicine received $18,044,078 from
the UVa Medical Center to support its academic mission and
wishes to invest $15.0 million of this money in its Fund for the
Future Quasi-Endowment account; and
WHEREAS, the purpose of the transfer is to invest funds
until needed to implement the Health System strategic plan
approved by the Board of Visitors;
RESOLVED, the Board of Visitors authorizes the investment
by the School of Medicine of $15.0 million into its Fund for the
Future Quasi-Endowment account; and
RESOLVED FURTHER, any other addition to any quasi-endowment
of $2 million or more will continue to require Board of
Visitors’ approval.
15
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
III.A. Budget Amendments Transmitted to the
General Assembly
BACKGROUND: Each January, the University may propose operating
and capital budget amendments to the General Assembly.
DISCUSSION: The action taken by the Board of Visitors in
September 2011 to approve the budget amendment requests to the
Governor permitted the resubmission of requests not addressed by
the Budget Bill to the General Assembly for its consideration.
On January 13th, the University submitted five amendments to the
General Assembly for consideration; four were resubmittals from
those originally proposed to the Governor through the Six-Year
Capital Plan or operating budget amendments in September (startup packages for new STEM faculty, cancer research, planning
funds for the Rotunda, and the renovation of Gilmer/Chemistry),
and one is a new amendment. The College at Wise did not submit
any amendments. The Medical Center submitted two new
amendments. The new Academic Division amendment, carried by
Senator Hanger and Delegate Tata, is as follows:
•
Virginia Logistics Research Center (VLRC) - $250,000
general funds (GF) in each year - The VLRC is being created
as a collaborative effort among Longwood University, UVa,
and Virginia State University (VSU) to conduct research and
development for the creation of efficient, cost effective,
and dependable logistics systems. The Governor’s
introduced budget provides $250,000 GF each year to
Longwood and $325,000 GF each year to VSU to support costs
of the new venture but does not provide funds to UVa.
The new Medical Center amendments, carried by Senator Deeds and
Delegate Toscano, are as follows:
1.
Medicaid Prospective Payment Rates - $12,456,000 GF in
year one and $15,768,000 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.
16
Specifically, the Medical Center requests that state
funding be restored from the current approximately 95% of
cost to the original 100% 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.
2.
Properly Address Indirect Medical Education and Inflation
Costs in Medical Center Reimbursements - $4,606,000 GF in
year one and $5,861,000 in year two – The Medical Center
requests the correction of an erroneous calculation in the
introduced 2012-2014 budget that failed to appropriately
consider indirect medical education and inflation,
resulting in decreased amounts to be reimbursed to the
Medical Center for the care of Medicaid enrollees and
Virginia residents who fall within the state of Virginia
indigent care criteria. The Secretary of Health and Human
Resources has confirmed the calculation error.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
2012-2014 BUDGET AMENDMENTS FOR THE UNIVERSITY OF VIRGINIA
WHEREAS, the three new budget amendment recommendations,
Virginia Logistics Research Center, Medicaid Prospective Payment
Rates, and Correction of Indirect Medical Education and
Inflation Costs in Medical Center Reimbursements, represent
priorities of the University and one technical correction;
RESOLVED, the Board of Visitors of the University of
Virginia endorses and supports the three budget amendments to
the 2012-2014 budget not previously considered; and
RESOLVED FURTHER, the Executive Vice President and Chief
Operating Officer is authorized to transmit to the General
Assembly the resubmitted and new proposed budget amendments
requiring authorization by the Commonwealth under the
University’s Management Agreement.
17
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
III.B. 2012-2013 Tuition and Fees for
Special Programs
BACKGROUND: The University currently has two programs whose
academic year begins in May or June rather than in August. For
that reason, the Finance Committee considers their tuition
proposals each year at this meeting. Three programs considered
by the Finance Committee at its previous February meeting (the
McIntire School of Commerce’s Executive MS in Management of
Information Technology and the Darden School’s MBA for
Executives and Global MBA for Executives programs) will be
included in the proposal the Finance Committee considers in
April 2012 due to revised program start dates.
DISCUSSION: The University recommends tuition and fees for the
School of Engineering and Applied Science’s Accelerated Master’s
Program in Systems Engineering of $37,500. This represents an
increase of $1,000 (2.7%) for both Virginians and nonVirginians.
Tuition and fees for the School of Continuing and
Professional Studies’ Post-Baccalaureate Pre-Medical Certificate
Program are proposed to increase by $750 to $25,750 for
Virginians (3.0%) and by $900 to $30,900 for non-Virginians
(3.0%) to address increasing program costs.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
18
APPROVAL OF 2012-2013 TUITION AND FEES FOR CERTAIN PROGRAMS
RESOLVED, the Board of Visitors approves the tuition and fees
applicable to the following programs as shown below, effective May 1,
2012, unless otherwise noted:
Systems Eng.
Virginian
Amount Percent
2011-12
of
of
2012-13
Approved Increase Increase Proposed
Non-Virginian
Amount
Percent
2011-12
of
of
Approved Increase Increase
$ 36,500
$ 36,500
$1,000
2.7% $ 37,500
$1,000
2012-13
Proposed
2.7%
$ 37,500
The price includes the estimated 2012-2013 special session mandatory fee, books,
materials, technology, group meals, and lodging.
Post-Bac, Pre- $ 25,000
Med
$750
3.0% $ 25,750
$ 30,000
$900
3.0%
$ 30,900
The price includes the estimated 2012-2013 full-time mandatory fee and the 2012 summer
session mandatory fee.
19
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
III.C. Acquisition of Leasehold Improvements
- Squash Facility from University of
Virginia Host Properties, Inc.
BACKGROUND: The University of Virginia has been working with a
donor on the construction of a squash facility at the Boar’s
Head Sports Club. The state-of-the-art squash venue will
primarily provide a home facility for the University of Virginia
club teams. When the facility is not in use by the University,
use by others is anticipated to be available in accordance with
a user agreement by and between the University and University of
Virginia Host Properties, Inc., a subsidiary of University of
Virginia Foundation (“Host Properties”). The user agreement
will be similar to the existing tennis and golf facility
agreements.
DISCUSSION: The leasehold improvements will be valued at the
total project cost to construct the facility, currently
anticipated to be $12.4 million, to be funded by the University
from private donations. The overall square footage of the
facility is proposed to be approximately 33,000 gross square
feet. The proposed program components of the facility include
eight new international singles courts with seating for
approximately ten spectators at each court, one international
show court with seating for 200-300 spectators, two new North
American doubles courts, an upper viewing mezzanine, an entry
lobby and circulation, four dedicated squash locker rooms (men’s
and women’s locker rooms for both home and visiting teams), one
team room/lounge, the opportunity for an open fitness/training
area, one coaching office, and one storage room.
It is envisioned that Host Properties, operator of the
Boar’s Head Sports Club, will ground lease to the University of
Virginia the land on which the facility will be built. The
University of Virginia, as owner of the facility, will assume
responsibility for annual operating costs. Host Properties will
manage operations pursuant to a management agreement between it
and the University.
20
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL OF ACQUISITION OF LEASEHOLD IMPROVEMENTS - SQUASH
FACILITY FROM UNIVERSITY OF VIRGINIA HOST PROPERTIES, INC.
WHEREAS, the Board of Visitors desires to provide a squash
facility where club teams of the University of Virginia can
practice and play matches; and
WHEREAS, the most suitable location for such a facility is
at the Boar’s Head Sports Club on land owned by University of
Virginia Host Properties, Inc. (“Host Properties”), a subsidiary
of University of Virginia Foundation;
RESOLVED, the Board of Visitors approves the acquisition
from Host Properties of leasehold improvements proposed to
include a squash facility that is approximately 33,000 gross
square feet and includes eight new international singles courts
with seating for approximately ten spectators at each court, one
international show court with seating for 200-300 spectators,
two new North American doubles courts, an upper viewing
mezzanine, an entry lobby and circulation, four dedicated squash
locker rooms (men’s and women’s locker rooms for both home and
visiting teams), one team room/lounge, the opportunity for an
open fitness/training area, one coaching office and one storage
room, at a cost not to exceed $12.4 million, all to be
constructed in accordance with plans and specifications approved
by the Executive Vice President and Chief Operating Officer; and
RESOLVED FURTHER, the Executive Vice President and Chief
Operating Officer is authorized, on behalf of the University, to
approve and execute all agreements and related documents, to
incur reasonable and customary expenses, to approve revisions to
the plans and specifications and building program, and to take
such other actions as deemed necessary and appropriate to
consummate such acquisition of the leasehold improvements; and
RESOLVED FURTHER, all prior acts performed by the Executive
Vice President and Chief Operating Officer, and other officers
and agents of the University, in connection with such
acquisition of the leasehold improvements, are in all respects
approved, ratified, and confirmed.
21
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
III.D. Authorization of and Intent to Issue
Tax-Exempt Debt
BACKGROUND: Under federal tax regulations, prior to the
University’s issuance of tax-exempt debt to finance a capital
project, the Board of Visitors must approve an intent to issue
resolution, so that the University may reimburse itself for
certain qualified expenditures related to the project and
incurred prior to the issuance of debt.
This resolution also authorizes the University to finance a
capital project on a short-term basis through the University’s
commercial paper program, where appropriate. Short-term debt
may be provided for a capital project only after the project’s
business plan, including documentation of the project’s fiscal
soundness, has been approved by the Capital Outlay Executive
Review Committee.
This resolution does not authorize the University to issue
long-term debt. Prior to the issuance of long-term debt, the
Board of Visitors will be asked to consider a separate issuance
resolution.
DISCUSSION: Current cash flow projections indicate the
Athletics Fieldhouse project will require a short-term loan, or
loans, to finance the project on an interim basis in
anticipation of the receipt of pledged gifts. We anticipate the
short-term loan to not exceed $10 million, in aggregate, in
varying amounts over a period not to exceed five years. The
University requests that the Board of Visitors approve this
resolution, to authorize a loan or loans and to declare its
intent to issue tax-exempt debt for the Athletics Fieldhouse
project, in the following amount:
22
Requested
Intent to
Issue
Authorization
Project
ACADEMIC DIVISION:
Bridge Funding for the
Athletics Fieldhouse
Total of
Requested and
Previous
Intent to
Issue
Authorizations
$10,000,000
$10,000,000
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
AUTHORIZATION OF AND INTENT TO ISSUE TAX-EXEMPT DEBT
WHEREAS, the University intends to undertake certain
capital projects identified below (whether one or more, the
“Projects”), and to finance the Projects through the issuance of
tax-exempt debt, in the maximum principal amount stated below
for each of the Projects:
ACADEMIC DIVISION
Athletics Fieldhouse — $10,000,000;
WHEREAS, the University further intends to expend funds on
the Projects and to reimburse such expenditures from the
proceeds of the tax-exempt debt; and
WHEREAS, to comply with the Internal Revenue Code of 1986,
as amended, and Section l.l50-2 of the Income Tax Regulations
(the “Regulations”), it is necessary, in order to reimburse such
expenditures incurred prior to the issuance of the tax-exempt
debt with the proceeds of such debt, that the University declare
its official intent to make such a reimbursement of
expenditures;
RESOLVED, debt may be issued for each of the Projects on a
short-term basis, but only if the following conditions are met:
1. A comprehensive and detailed financial plan for each of
the Projects is submitted to, and approved by, the Capital
Outlay Executive Review Committee;
2. Short-term debt shall not exceed sixty (60) months in
maturity; and
23
3. A school or unit shall remain responsible for repaying
any debt obligation incurred regardless of the status of such
school or unit’s Project; and
RESOLVED FURTHER, the Board of Visitors of the University
of Virginia declares its intent to expend funds on the Projects
and to reimburse such expenditures from the proceeds of taxexempt debt, in accordance with the following:
1. This resolution is a declaration of official intent for
purposes of Section 1.150-2 of the Regulations; and
2. The University reasonably expects to issue tax-exempt
debt for each of the Projects in the maximum principal amount
stated in the recitals above.
24
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
IV.A.
ACTION REQUIRED:
None
Vice President’s Remarks
BACKGROUND: The Executive Vice President and Chief Operating
Officer will inform the Board of recent events that do not
require formal action, but of which it should be made aware.
25
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 24, 2012
COMMITTEE:
Finance
AGENDA ITEM:
IV.B. Endowment Report – Market Value and
Performance as of December 31, 2011
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.
DISCUSSION: 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 December
31, 2011. 2011 provided a challenging investment environment as
macroeconomic fears dominated the markets and correlations rose.
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 6.8%
in 2011, which compares quite favorably to the policy benchmark
return of -1.9%. Over the 20-year period ending December 31,
2011, the Pool’s annualized return was 11.7%, exceeding the
policy benchmark return by 470 bps. The Long Term Pool is
26
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
Reflections on 2011
The S&P 500 index finished the year flat in 2011, and
adding dividends to the 0% appreciation resulted in a 2% return
for the year. Although the index was unchanged, it was anything
but a boring market. The S&P 500 index moved up or down more
than 100 bps 38% of the trading days during 2011, exceeding by a
substantial margin the 70-year historical average of 20%. We
have noted in prior commentaries some of the reasons for the
market's recent directionless volatility: worries about the US
debt ceiling negotiations and fiscal mess, European sovereign
credit and banking risks, and a slowing economy in China. These
risks all come under the broad headline of policy mistakes, and
it is clear to us that so much of what moved markets the past
few years was dictated by policies set in Washington, Brussels
or Beijing instead of by news from companies around the globe.
The elections that occur this year in the US and other countries
will have an enormous impact on the direction of future
policies. Hence, these elections and the surrounding debates
will influence market returns and volatility in 2012.
2011 was a difficult year for most investors. According to
Morningstar, only 17% of equity mutual fund managers beat the
S&P 500 index, the lowest percentage since 1997. In addition,
according to Hedge Fund Research, Inc., the average hedge fund
lost 5%, only the third time since 1990 that the average fund
has lost money. Most investment managers continued to struggle
with the high correlations across securities and asset classes,
and the lack of market attention to corporate fundamentals.
This type of market environment is particularly challenging for
fundamental value investors and those who take both long and
short positions.
US equities were stronger in 2011 than most other markets
around the world. The US economy finished the year with a
number of upside surprises, reducing the risk of a near-term
recession. On the whole, US companies are healthy and continue
to act conservatively. The 2011 return of 2% in the US market
exceeded the 12% loss in non-US developed market equities and
27
the 18% loss in emerging market equity indexes. Quality stocks
finally outperformed the broad market. The S&P 500 High Quality
Ranking (A- or better securities) Index returned 7% in 2011
compared to 2% for the broad market.
One of the best performing investments during 2011 was a
long-duration treasury bond. The Barclays long-term US Treasury
Index returned 30% during the year. The 30-year Treasury
started off the year with a yield of 4.34% and ended the year
with a yield of 2.89%. This is near the all-time low yield on
the long bond. Not surprisingly, retail investors continue to
be risk averse, redeeming $100 billion from equity funds and
adding $109 billion to fixed income funds during 2011.
QUESTIONS FOR 2012
Will the 2011 trends continue in 2012? This section
highlights issues and questions that UVIMCO will face in the
upcoming year.
We noted in this report a year ago that a ballooning
Federal Reserve balance sheet and large budget deficits
contributed to the possibility of rising inflation and interest
rates at some point in the future. As a result, we maintained a
low duration in the Long Term Pool's bond portfolio to help
protect against this risk. This was not the correct portfolio
tilt given the bond market rally that played out during 2011.
Although the same long-term risks still exist, we now expect
that low global economic growth, subdued near-term inflationary
pressures and a Federal Reserve committed to keeping short-term
rates near zero for several years will likely help keep both
long-term and short-term interest rates low in 2012 and beyond.
In the 1990s, bond vigilantes exerted discipline on political
leaders by selling bonds and driving up long-term rates,
providing the catalyst for politicians to rein in budget
deficits. A similar discipline is being imposed on European
leaders in the current environment. No such discipline is
currently being applied in the US, as bond vigilantes worry
about being on the other side of the trade from the Federal
Reserve. Although it is tempting to add duration to our
Treasury bond portfolio to pick up a few extra basis points, the
asymmetry of the upside gain versus the downside risk strikes us
as akin to picking up nickels in front of a steam roller. The
best argument for owning duration is to protect us against a
prolonged Japanese or US 1930s-style deflation. We continue to
evaluate the merits of adding duration to help diversify against
deflation risk.
28
UVIMCO’s quality bias in the Long Term Pool’s public equity
portfolio added value in 2011. We continue to have conviction
in this quality bias. In addition to the attractive relative
valuations, the quality bias has helped reduce the risk of the
portfolio. However, we worry because a quality bias is a strong
consensus view. Although we believe the overweight will
continue to add value, if the prices of quality stocks continue
to increase relative to other equities, we (and our active
managers) may consider reducing this tilt.
A presidential election year has historically been bullish
for stocks. The fourth year of the presidential election cycle
has produced double digit US equity returns on average since
1926. Average returns for each year of the election cycle are
compared to our recent experience below:
Average S&P 500 Return
Year
Year
Year
Year
One
Two
Three
Four
Since
1926
8.2%
9.0%
18.7%
11.0%
2009-2012
26.5%
15.1%
2.1%
?%
The first three years of the current presidential election
cycle have looked very different than history. Will 2012 be
unusual as well? Higher historic returns in years preceding
presidential elections may have been influenced by simulative
macroeconomic policies intended to help incumbent parties get
re-elected. The current political debate is different;
candidates are focused on solutions to reduce the prior economic
stimulus and improve our fiscal health as opposed to offering up
more stimulus. This policy debate may be repeated around the
developed world. In addition to the US presidential election,
six other G-20 leaders are up for election in 2012, representing
35% of world GDP. These countries are dealing with the same
issues of excessive government deficits and debt. The global
debate and policy uncertainty may contribute to market
volatility and be a headwind for the markets.
The Dow Jones Industrial Average moved more than 100 points
only once during the first 17 trading days of 2012. This is big
change from 2011. We have also seen a large drop in crosssectional correlations across individual securities and asset
classes. Although the political noise worries us, if volatility
and correlations remain at lower more normal levels, we could
29
see a more attractive environment for active investment
managers.
Equities currently have reasonable valuations and are
slightly cheaper than their historic averages. Price/Earnings
multiples for US, non-US developed and emerging market equities
are 14, 13 and 11, respectively. Relative equity valuations
look even better compared to bonds. Although a broad portfolio
of equities is certainly more attractive than it was a decade
ago, this thesis is not without risks. First, this is the
consensus view, which always makes us worry. Second, valuations
are based on trailing 12-month earnings. If profit margins
revert to historic norms, valuations are no longer attractive on
absolute basis. However, even if profits revert to historic
norms, there is still a reasonable risk premium for holding
stocks over bonds.
Rogoff and Reinhart’s book, It’s Different This Time, is
one of the more widely read and quoted books by investors since
the 2008 global financial panic. The authors studied centuries
of excessive leverage and speculative-induced financial
collapses and how countries recovered from the resulting debt
problems, banking crises and economic declines. The typical
recovery lasted about ten years. This headwind to global
economic growth as the world deleverages could lead to a decade
of modest returns and continued risks from the debt unwind
(e.g., possible European banking crisis). This view is shared
by many market participants.
On the other hand, technological advances may go a long way
towards alleviating the headwinds caused by deleveraging.
Liaquat Ahamed, author of The Lords of Finance, noted that many
recoveries in the past were aided by technological advances.
New oil and gas drilling techniques in the US may be an engine
that boosts economic growth. Recent meetings with a number of
our energy managers in Houston made us excited about the
prospect of hydraulic fracturing technologies producing
substantial amounts of energy in this country. Similarly, Bruce
Jostens of the US Chamber of Commerce recently noted that the
current energy boom is creating a manufacturing revival in
certain parts of the US. For example, chemical plants are being
refurbished and built along the Ohio River to take advantage of
inexpensive natural gas produced from the Marcellus Shale
formation.
We are not predicting that unconventional drilling
technologies will have the same economic impact that railroads
30
had in the 19th century or computers had in the 20th century.
Instead, we use this example merely to illustrate two points.
First, it is easy to fixate on the downside risks to the economy
and markets over the next year or decade. These risks are well
known to all market participants. Less publicized are the
upside scenarios for economic growth that could arise from
technological developments such as new oil and gas drilling
techniques. Second, the example also illustrates how our
external investment managers find attractive investment
opportunities even in a low-return world. We remain focused, as
always, on investing and partnering with great managers who find
and execute on exciting investment opportunities in all market
conditions.
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 December 31,
2011 is 62.5% to equity managers, 14.8% to real asset managers
and 22.7% to fixed income (including credit), cash and absolute
return managers. Looking through to our managers’ underlying
investments, the Long Term Pool has a 49.0% allocation to
equities, 16.2% allocation to real assets and 34.8% allocation
to fixed income (including credit) and cash as of December 31.
Therefore, the Long Term Pool continues to be positioned
defensively versus the policy portfolio benchmark, with less
market risk. Within the overall asset allocation, the current
investment 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.
PERFORMANCE
The Long Term Pool returned 6.8% in 2011, beating the
policy benchmark loss of -1.9% by a healthy margin of almost 9%.
As has been the case the last few years, global markets were
volatile throughout 2011.
31
Growth of $1 since January 1, 2011
$
1.20
1.10
1.00
0.90
0.80
Jan
2011
Feb
Mar
Apr
Long Term Pool
May
Jun
Jul
Aug
Policy Benchmark
Sep
Oct
Nov
Dec
MSCI ACW Equity
As shown above, the Long Term Pool return tracked closely
with the policy benchmark and global equity markets during the
first four months of 2011. In the second quarter, active stock
selection by our public equity managers and sizable gains in our
natural resources portfolio boosted Long Term Pool returns even
as lower economic growth, worries about the end of QE2, and
increasing concerns about sovereign risk caused global equity
markets to begin a six-month slide. During the second half of
2011, the Long Term Pool exhibited its standard pattern of
directionally tracking the policy benchmark and global equity
markets, with less return volatility. Underlying the Long Term
Pool’s 6.8% return are positive marks for each of our strategic
asset classes in 2011.
Despite the positive results of 2011 overall, we are less
pleased with the Long Term Pool’s performance during the second
half of 2011. While our 3.3% loss for the six months ending
December 31 compares very well on a relative basis to the 6.1%
loss of the policy benchmark, we hate to see the value of our
shareholders’ investments go down. However, there have been and
will continue to be short periods of time during which the Long
Term Pool loses money, or when we trail our policy benchmark.
It is during these times that we hold fast to the same
investment philosophy and process that have served UVIMCO well
over time.
UVIMCO’s investment strategy involves making commitments to
investment managers and themes that pay off over a number of
32
years. Therefore, we focus more attention on long-term returns
than on short-term. The Long Term Pool earned an annualized
8.7% return over the last ten years, exceeding the policy
benchmark of 5.8%. Over the 20-year period ending December 31,
2011, the Pool’s annualized return was 11.7%, exceeding the
policy benchmark return by 470 bps.
EQUITIES
Public Equity
The public equity portfolio generated a 0.8% return while
global equities fell 6.9% during the year as measured by the
MSCI ACWI. The resiliency of UVIMCO’s public equity portfolio
is attributable to good stock selection by our managers and a
bias toward high-quality companies that deliver relatively
stable earnings in both developed and emerging markets. The
public portfolio maintained its value despite a high allocation
to managers and companies operating in the emerging markets (47%
versus 14% in the ACWI), which declined 18.2% as measured by the
MSCI Emerging Market Index. Declines in emerging currencies
versus the US dollar compounded the loss from falling stock
prices in those regions.
Over the past decade, the public equity portfolio
compounded at a 10.8% average annual rate versus 4.8% earned by
global equities. In the first half of the decade, returns were
more dependent on identifying and investing in relatively cheap
areas of the market, namely US small cap value and the global
emerging markets. In the latter half of the decade, stock
selection from our active managers was the primary driver of
excess returns. Differences in geographic, style, and
capitalization exposures versus the MSCI ACWI have benefitted
our public equity over both the short- and long-term. It has
been quite some time since our conviction in these biases has
been tested, but we know that time will come. In the meantime,
we will continue to assess the long-term merits of our portfolio
biases towards quality and emerging markets, making changes if
valuations become stretched.
Long/Short Equity
The long/short equity portfolio returned 3.0% in 2011
versus a decline of 6.9% on the MSCI ACWI and a loss of 7.3% on
the broad universe of long/short equity managers as measured by
the Dow Jones Credit Suisse Long/Short Equity index. Over half
of the managers in our portfolio delivered positive returns in
33
the falling market of 2011, and over three quarters
significantly outperformed the market and long/short peers. Our
long/short portfolio’s long-standing structural bias toward
larger capitalization, higher quality stocks on the long side
and smaller capitalization, lower quality stocks on the short
side provided a tailwind in 2011, as large cap stocks outpaced
small caps by about six percentage points as measured by the
difference in the Russell 1000 return of 1.5% and the Russell
2000 return of -4.2%.
The broad universe of long/short equity
managers is biased in the opposite direction (long smaller cap
stocks/short large cap), which helps to explain the poor
relative performance of that universe.
Over the past decade, UVIMCO’s long/short portfolio has
compounded at an annual rate of 7.7% versus 4.8% earned by
global equities and 6.0% recorded by the Dow Jones Credit Suisse
Long/Short Equity index. While our long/short managers have
steadily maintained the long quality/short junk structural bias
described above, their geographic exposures have changed
significantly over the last decade. The portfolio has shifted
from a predominately US centric portfolio at the beginning of
the decade, to a focus on long positions in emerging markets in
the middle of the decade, then back again to domestic equities
given the attractive valuations in many US-based global industry
leaders. On the short side, our managers have been
predominately US-centric, but some are finding short
opportunities in both developed Europe and emerging markets when
company valuations do not appropriately reflect future
challenges. As always, the long/short model and fund structure
of our managers provides them with the flexibility needed to
react to the opportunities presented by a quickly changing
equity market landscape.
Private Equity
The private equity portfolio returned 17.9% in 2011 versus
the loss of 6.9% recorded by the MSCI ACWI. On an individual
basis, the buyout portfolio returned 16.2% in 2011 and the
venture capital portfolio returned 28.5%. Total 2011 deal
volume as reported by Dealogic totaled $2.6 trillion, slightly
below the 2010 volume of $2.66 trillion but well above the
moribund level of 2009. 2011 also witnessed a respectable
amount of exit activity, with a total of 415 completed sales or
initial public offerings according to the PitchBook Newsletter.
Many of UVIMCO’s private equity managers took advantage of the
appetite for quality assets and effected successful sales of
portfolio companies in 2011.
34
Looking ahead, many market participants expect deal
activity to be flat in early 2012, and it may remain subdued
until Europe’s sovereign-debt crisis is brought under control.
On a micro level, many challenges continue to confront the
private equity industry, particularly with deals closed in 20052007 before the meltdown in global financial markets. While
UVIMCO’s private equity portfolio includes transactions
completed during this time frame, the portfolio is well
diversified across vintage years, deal sizes, fund sizes,
industries and geographies. Our portfolio has a decidedly
middle-market bias, and includes several managers focused in the
distressed and/or turn-around space. In addition to the
rewarding exits in 2011, several other managers are on the verge
of significant asset sales in 2012. Our venture capital
portfolio has recorded significant unrealized gains in certain
social media companies that have held or are expected to hold
initial public offerings in the next few calendar quarters.
For the ten-year period, the private equity portfolio
generated a return of 8.6% versus 4.8% for the MSCI ACWI. On an
individual basis, the buyout portfolio had a return of 13.9% for
the ten years ending December 31, 2011 and the venture capital
portfolio returned -2.0%.
Reflecting the sale activity noted above, cash
distributions in the buyout and venture capital portfolios for
the fourth quarter of 2011 were $52 million, significantly
outpacing capital calls of $24 million. For the full year, the
private equity program distributed $171 million in cash compared
to $125 million in capital calls.
REAL ASSETS
Resources
UVIMCO’s Resources portfolio gained 23.6% during 2011
compared to a -1.2% return for the GSCI Commodity Index and a 13.3% return for the Dow Jones/UBS Commodity Index. More than
100% of the portfolio’s return for the year was generated during
the first six months, and one investment contributed a
substantial portion of the gain. During the last six months,
our Resources portfolio returned -4.0% versus -3.8% for the GSCI
Commodity Index and -11% for the Dow Jones/UBS Commodity Index.
Beginning in August, commodity markets began to suffer more
fully from the high degree of uncertainty around macroeconomic
35
challenges and global growth. For example, copper prices fell
over 30% over the summer and, after a modest rebound, fell more
than 15% during the final six months of the year. Our resources
investments continue to benefit from both manager outperformance
as well as a concentration in energy versus a broader basket of
commodities. Oil prices remain strong due to a variety of
fundamental and geopolitical factors. US natural gas prices
remain depressed as the market remains oversupplied and
international players provide domestic players with capital and
drilling incentives. However, our managers have performed well
by utilizing exploration and production strategies focused on
proving and sizing up unconventional asset bases in areas with
advantaged marginal economics.
For the calendar year, our Resources portfolio provided a
net inflow of cash to the Long Term Pool of $82 million.
Despite this, and because of appreciation and strong relative
performance, our overall allocation to resources has remained
relatively consistent and is now at 7.4%. Looking ahead, we
have a number of large co-investment positions which in
aggregate should drive our Resources performance in 2012.
Real Estate
Our real estate portfolio gained 3.9% in 2011 versus the
0.9% return recorded by the real estate component of our policy
portfolio benchmark, a weighted index of publicly-traded US and
international real estate securities. During the last six
months, the Long Term Pool’s real estate holdings appreciated
0.7% versus a 7.0% loss for the benchmark.
US commercial real estate market fundamentals improved
during 2011. Supported by low interest rates, greater asset
price visibility, and a thawed lending environment, transaction
volumes climbed back toward more normal levels. With the market
continuing to offer few alternatives for yield, U.S. REIT
securities provided a return of 11.0% during the time period.
In particular, multifamily rent growth is strong amidst
favorable demographics, declining household formation and
constructive supply/demand dynamics. Capital has flowed
aggressively to this opportunity, impacting asset pricing across
a range of sub-sectors. The US residential housing market
remains depressed despite affordability ratios being at all-time
highs. Inventories are lingering at elevated levels, as
sluggish employment growth and stricter mortgage standards help
dampen the pool of first-time home buyers.
36
International real estate securities were impacted by the
cracking in the Chinese residential property market, and the
MSCI World Real Estate Index declined by 8.4% during 2011.
There is considerable debate as to whether this reflects the
initial bursting of a Chinese property bubble and/or a temporary
decline in an otherwise secular growth trend. The Long Term
Pool does not currently have investments in Chinese real estate
or in international real estate securities.
Structurally, UVIMCO’s real estate portfolio has continued
to season. Net capital calls for real estate were $112 million
in 2011 which, combined with unrealized and realized gains,
increased our overall real estate allocation from 5.0% at the
end of 2010 to 7.4% at the end of 2011. During this time, our
unfunded commitments to the strategy declined from $337 million
to $224 million. As the ratio of net asset value to unfunded
commitments rises, UVIMCO’s real estate portfolio will more
fully emerge from the “j-curve” in which we pay fees on
committed capital that has not yet been drawn into specific
opportunities. Many of these newer investments are currently
held at cost. Older investments, which are more concentrated in
housing and development, were marked down significantly in 2009
and 2010. Over the next several years, UVIMCO’s real estate
portfolio will continue to mature as managers begin to sell
these properties. As always, we anticipate that the return
series generated by our private real estate portfolio will
continue to diverge materially from that of the benchmark of
public real estate securities.
FIXED INCOME
Absolute Return and Credit
The absolute return portfolio gained 3.5% in 2011 versus a
6.6% return on the Barclays Aggregate Bond Index and the 1.9%
loss on the policy portfolio benchmark. The three managers
within our absolute return portfolio generated returns between
2.6% and 5.1%, with the performance of each driven by its own
set of opportunities in distressed debt, real estate, equities,
fixed income relative value, long/short emerging market
equities, rates and currencies. Each of the managers proved
adept at managing the volatility in 2011. The absolute return
managers generated 15% and 8% returns over the past three and
five years, respectively, exceeding the Barclays Aggregate Bond
Index and policy portfolio benchmark over both time intervals.
37
The credit portfolio returned 5.7% for the calendar year
versus a return of 5.0% on the Barclays High Yield index.
UVIMCO’s credit portfolio includes an eclectic mix of
predominantly credit-related assets held within several drawdown
structure funds. The mix includes positions in publicly-traded
and privately-held corporate credit, commercial and residential
mortgage-backed securities and direct real estate. We expect
the composition of our credit portfolio will evolve as our
managers continue to distribute capital. New allocations will
be targeted toward opportunistic managers with a bias toward
credit opportunities.
Bonds and Cash
Our cash and government bond portfolio is a source of
liquidity that allows us to rebalance and provide the dry powder
to invest in cheap assets in the event of a market selloff. We
have maintained a short duration (under one year) in the
government bond portfolio since there is little compensation for
taking duration risk. The negligible returns reported for these
short-term bonds and cash investments are consistent with an
environment in which current interest rates are near zero.
RISK MANAGEMENT
UVIMCO determines our investors’ risk tolerance by
balancing competing objectives of stable, current spending with
long-term growth. Investments with low risks and low returns
decrease the possibility of significant short-term depreciation,
and a corresponding reduction in spending, but also decrease
expected long-term growth. Investments with high risks and high
returns raise the possibility of a near-term decline in spending
but also raise expected long-term growth. UVIMCO measures and
controls for three primary risks: market risk, manager risk, and
liquidity risk.
Market Risk
Market risk is measured by the volatility of returns or
maximum drawdown in a portfolio. The largest risk factor
present in the Long Term Pool is equity market risk. UVIMCO
manages market risk by diversifying across three broad asset
classes: equity, fixed income, and real assets. By investing
the Long Term Pool in asset classes that perform differently
from each other, we can mitigate the Long Term Pool’s exposure
to any particular market condition. However, we recognize that
certain investments behave quite differently in an inflationary
38
environment versus a deflationary environment. During
inflationary periods, fixed-income securities may act more like
equities, and foreign currency and commodities may act less like
equities. On the other hand, during periods of deflation,
fixed-income securities may act less like equities, and foreign
currency and commodities may act more like equities. Today,
inflation is low and the global financial community has no
desire to see deflation. Given these market conditions, we
expect the returns of the Long Term Pool to have an average
future volatility of about 10% per annum versus the policy
portfolio benchmark’s annual volatility of 12%.
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. In addition,
we reduce manager risk by manager diversification, declining
certain partnership 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.
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.
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
39
liquid. In addition, we require the Long Term Pool to have at
least 30% of its assets available for conversion to cash in any
twelve-month period. At any moment, the amount of actual
liquidity we have available is a function of the size and nature
of our private portfolio and the terms governing our public
investments. As the Pool is fully invested, all new investments
are funded from the existing portfolio, but the timing of
outgoing wires versus receipt of redemptions may sometimes cause
the total of bonds and cash to temporarily slip below 10%. This
was the case as of December 31, 2011, when the total of bonds
and cash fell to 8.3% of the Long Term Pool. We expect the
receipt of redemptions and private investment distributions will
bring the total of bonds and cash back to target in early 2012.
During the fourth quarter of 2011, our private managers
called more capital than they returned to investors. Total
private investment distributions for the quarter were $116
million versus capital calls of $134 million. However, our
private investments were cash flow positive for the year, as
total private investment distributions for the 12 months ending
December 31, 2011 were $426 million, versus capital calls of
$369 million. We expect that distributions will continue to
exceed capital calls unless the economy slips back into a
recession. Unfunded private investment commitments decreased
from $975 million or 18% of the Long Term Pool as of June 30,
2011 to $843 million or 17% of the Long Term Pool as of December
31, 2011.
The percentage of the Long Term Pool that can be turned
into cash has remained relatively constant over the past year.
As of December 31, 2011, 32% of the Long Term Pool can be turned
into cash within one quarter and 48% of the Pool can be turned
into cash within one year.
40
41
Investment Report
December 31, 2011
Short-Term Liquidity(6)
Actual Liquidity (Cumulative Total % of NAV)
Weekly
Public Equity
Monthly
Quarterly
Semi-Annually
Annually
2%
6%
12%
17%
17%
Long / Short Equity
-
1%
9%
12%
15%
Absolute Return
-
-
2%
3%
7%
1%
1%
1%
1%
1%
Government Bonds
7%
7%
7%
7%
7%
Cash
2%
2%
2%
2%
2%
11%
16%
31%
41%
49%
549
832
1,573
2,072
2,471
Resources
Total
Available Liquidity ($ in Millions)
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
109
2%
34
1%
143
3%
24
0%
-
-
24
0%
1,017
20%
348
7%
1,364
27%
Real Estate
377
7%
224
4%
601
12%
Resources
343
7%
175
3%
518
10%
66
1%
-
-
66
1%
225
4%
62
1%
288
6%
2,161
43%
843
17%
3,003
59%
Europe
Asia
LAMA(9)
Long / Short Equity
Private Equity
Absolute Return
Credit
Total
Market and Currency Exposure Estimates (8)
(% of NAV)
Equity
Policy Ranges
Actual
Exposure
North
America
40 - 70
49.0
28.2
6.9
7.3
6.6
Real Assets
5 - 20
16.2
13.7
1.4
0.8
0.3
Credit
0 - 20
5.7
5.1
0.1
0.1
0.3
Government Bonds
5 - 20
6.5
6.5
0.0
0.0
0.0
Total Market Exposure
70 - 100
77.5
53.6
8.4
8.2
7.3
10 - 40
Policy Ranges
Cash & Currency
Currency Exposure
Policy Ranges
--
--
25 - 75
10 - 40
0 - 30
22.5
23.1
(0.6)
---
100.0
--
76.8
50 - 100
42
7.8
0 - 30
8.2
0 - 30
0 - 20
(0.0)
7.3
0 - 20
Investment Report
December 31, 2011
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)
Includes pure-beta proxies for illiquid asset classes, which are meant to capture the true economic risks of investing in illiquid
assets not reflected in their reported returns. Some of these proxied betas are assigned large values to provide a conservative
estimate of overall risk.
(9)
Betas are estimated based on a four-factor linear model using three years of monthly return data for each manager. At the
43
MISCELLANEOUS FINANCIAL REPORTS
Finance Committee
University of Virginia
February 24, 2012
UNIVERSITY OF VIRGINIA
ACADEMIC DIVISION
ACCOUNTS AND LOANS RECEIVABLE
AS OF DECEMBER 31, 2011
Summary of Accounts Receivable:
The University's Academic Division's total accounts receivable at December 31, 2011 was
$260,305,000 as compared to $45,049,000 at September 30, 2011. The major sources of receivables at
December 31, 2011 were student accounts of $230,519,000 and sponsored programs of $26,515,000.
The past due receivables over 120 days old were $4,560,000 as of December 31, 2011 or 1.77 percent of
total receivables, which is below the Commonwealth's management standard of 10 percent.
Gross Accounts Receivable
Less: Allowance for
Doubtful Accounts
Net Accounts Receivable
Accounts Receivable
Greater than 120
Days Past Due
Student
Accounts
Sponsored
Programs
Other
Receivables
Total
$230,519,000
$26,515,000
$3,271,000
$260,305,000
$1,043,000
$1,102,000
$108,000
$2,253,000
$229,476,000
$25,413,000
$3,163,000
$258,052,000
$2,086,000
$2,203,000
$271,000
$4,560,000
SOURCE: Financial Administration
DATE:
January 20, 2012
44
UNIVERSITY OF VIRGINIA
ACADEMIC DIVISION
ACCOUNTS AND LOANS RECEIVABLE
AS OF DECEMBER 31, 2011
Summary of Loans Receivable:
The default rate for the Perkins Student Loan Program was 7.45 percent for the quarter ending December 31, 2011.
This is based on the cohort default calculation and is well below the 15 percent threshold set by federal regulations. The Health
Professions Loan Program default rate remained the same at 0.0 percent. The Nursing Undergraduate Student Loan Program default
rate decreased from 1.95 percent to 1.88 percent. Both medical loan programs are well below the 5 percent federal threshold.
The University Loan Program default increased from 2.37 percent to 2.73 percent for the quarter ending December 31, 2011.
Gross
Loan
Receivables
Perkins Student Loans
Current
Default
Rate
Inc/(Dec)
From Last
Quarter
$20,150,000
7.45%
4.57%
$0
0.00%
0.00%
$1,187,000
1.88%
-0.07%
University Loans
$17,621,000
2.73%
0.36%
Total Student Loans Outstanding
$38,958,000
Health Professions Loans
Undergraduate Nursing Loans
SOURCE: Financial Administration
DATE:
January 20, 2012
45
Medical Center Financial Report
University of Virginia Medical Center
SUMMARY OF OPERATING STATISTICS AND FINANCIAL PERFORMANCE MEASURES
Fiscal Year to Date with Comparative Figures for Prior Year to Date - November FY12
OPERATING STATISTICAL MEASURES - November FY12
DISCHARGES and CASE MIX - Year to Date
Actual
DISCHARGES:
Adult
Pediatrics
Psychiatric
Transitional Care
Subtotal Acute
Budget
OTHER INSTITUTIONAL MEASURES - Year to Date
% Variance Prior Year
9,930
1,286
488
62
11,766
9,870
1,262
580
96
11,808
0.6%
1.9%
(15.9%)
(35.4%)
(0.4%)
9,722
1,217
618
14
11,571
4,228
3,648
15.9%
3,733
Total Discharges
15,994
15,456
3.5%
15,304
Adjusted Discharges
21,574
21,391
0.9%
20,608
Short Stay/Post Procedure
CASE MIX INDEX:
All Acute Inpatients
Medicare Inpatients
1.95
2.10
1.90
2.04
2.6%
3.0%
1.88
2.04
Actual
Budget
% Variance
Prior Year
ACUTE INPATIENTS:
Inpatient Days
Average Length of Stay
Average Daily Census
Births
70,436
5.95
460
687
68,465
5.80
447
696
2.9%
(2.6%)
2.9%
(1.3%)
69,932
6.05
457
704
OUTPATIENTS:
Clinic Visits
Average Daily Visits
Emergency Room Visits
312,831
3,131
25,903
301,027
2,999
24,943
3.9%
4.4%
3.8%
283,769
2,935
24,373
8,404
3,371
11,775
8,106
3,662
11,768
3.7%
(7.9%)
0.1%
7,881
3,501
11,382
SURGICAL CASES
Main Operating Room (IP and OP)
UVA Outpatient Surgery Center
Total
OPERATING FINANCIAL MEASURES - November FY12
REVENUES and EXPENSES - Year to Date
($s in thousands)
NET REVENUES:
Net Patient Service Revenue
Other Operating Revenue
Total
EXPENSES:
Salaries, Wages & Contract Labor
Supplies
Contracts & Purchased Services
Bad Debts
Depreciation
Interest Expense
Total
Operating Income
Operating Margin %
Non-Operating Revenue
Net Income
Actual
$
$
$
$
$
Budget
459,625
473,534
16,960
12,520
476,585 $ 486,054
204,921
102,854
98,250
15,958
28,859
2,991
453,833
22,752
4.8%
(5,284)
OTHER INSTITUTIONAL MEASURES - Year to Date
% Variance Prior Year
(2.9%)
425,349
35.5%
12,476
(1.9%) $ 437,825
$ 205,313
0.2%
190,882
103,340
0.5%
91,247
100,016
1.8%
88,573
15,352
(3.9%)
14,798
29,872
3.4%
23,847
5,724
47.7%
3,318
$ 459,617
1.3% $ 412,665
$ 26,437
(13.9%) $ 25,160
5.4%
5.7%
$ 2,931 (280.3%) $ 36,691
17,468 $ 29,368
(40.5%) $
61,851
($s in thousands)
NET REVENUE BY PAYOR:
Medicare
Medicaid
Commercial Insurance
Anthem
Southern Health
Other
Total Paying Patient Revenue
OTHER:
Collection % of Gross Billings
Days of Revenue in Receivables (Gross)
Cost per CMI Adjusted Discharge
Total F.T.E.'s (including Contract Labor)
F.T.E.'s Per CMI Adjusted Discharge
46
Actual
Budget
% Variance
Prior Year
$ 145,387 $
46,355
95,638
81,239
12,640
78,366
$ 459,625 $
160,212
51,633
73,661
87,218
25,626
75,184
473,534
(9.3%) $
(10.2%)
29.8%
(6.9%)
(50.7%)
4.2%
(2.9%) $
143,909
46,379
66,166
78,343
23,019
67,534
425,349
35.62%
49.0
10,429 $
6,609
24.08
35.31%
45.0
10,950
6,757
25.48
0.9%
(8.9%)
4.8% $
2.2%
5.5%
35.96%
46.1
10,249
6,282
24.76
$
Medical Center Financial Report (continued)
Assumptions - Operating Statistical Measures
Discharges and Case Mix Assumptions
Discharges include all admissions except normal newborns
Pediatric cases are those discharged from 7 West, 7 Central, NICU, PICU and KCRC
Psychiatric cases are those discharged from 5 East or Rucker 3
All other cases are reported as Adult
Short Stay Admissions include both short stay and post procedure patients
Case Mix Index for All Acute Inpatients is All Payor Case Mix Index from Stat Report
Other Institutional Measures Assumptions
Patient Days, ALOS and ADC figures include all patients except normal newborns
Surgical Cases are the number of patients/cases, regardless of the number of procedures performed on that patient
Assumptions - Operating Financial Measures
Revenues and Expenses Assumptions:
Medicaid out of state is included in Medicaid
Medicaid HMOs are included in Medicaid
Physician portion of DSH is included in Other
Non-recurring revenue is included
Other Institutional Measures Assumptions
Collection % of Gross Billings includes appropriations
Days of Revenue in Receivables (Gross) is the BOV definition
Cost per CMI Adjusted Discharge uses All Payor CMI to adjust, and excludes bad debt
SOURCE: Medical Center Finance
DATE:
January 17, 2012
47
UNIVERSITY OF VIRGINIA
INTERNAL LOANS TO UNIVERSITY DEPARTMENTS AND ACTIVITIES
AS OF DECEMBER 31, 2011
DATE OF
LOAN
PURPOSE
ORIGINAL
PRINCIPAL PAYMENTS
OUTSTANDING
APPROXIMATE
MADE TO DATE
PRINCIPAL
FINAL PAYMENT
2
LOAN AMOUNT
Varsity Hall
06/30/07
1,517,726
1,459,487
58,239
Wilsdorf Hall
11/01/06
3,311,328
3,311,328
-
Wise Football Facility
10/01/07
629,171
168,149
Total Internal Loans Subject to
$15M Limit Established by BOV
NOTES: 1.
2.
$
5,458,225
$
4,938,964
461,022
$
March 2012
November 2011
October 2022
519,261
1
Per January 1990 Board of Visitors resolution establishing the internal loan pool at $10 million and per April
2003 Board of Visitors resolution approving the expansion of the internal loan pool from $10 million to $15
million. All internal loans are subject to the approval of the Executive Vice President and Chief Operating
Officer.
The University's current borrowing rate for internal loans is 4.75%.
SOURCE: Financial Administration
DATE:
January 6, 2012
48
University of Virginia
Capital Campaign Summary
As of 12/31/11
All Units
Expendable
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Endowment
1,125,938,376
160,448,191
93,367,035
Total
517,656,348
44,922,289
29,646,847
1,643,594,724
205,370,480
123,013,882
228,048,487
0
228,048,487
75,204,614
2,199,170
77,403,784
1,683,006,703
594,424,654
2,277,431,357
265,846,102
79,449,338
345,295,440
1,948,852,805
673,873,992
2,622,726,797
-311,056,703
1,371,950,000
1,033,625,346
1,628,050,000
722,568,643
3,000,000,000
Expendable
386,753,433
27,354,438
61,027,400
0
31,716,970
Endowment
274,339,838
5,185,588
14,658,242
0
10,587
Total
661,093,271
32,540,026
75,685,642
0
31,727,557
Gift and Pledge Total
506,852,241
142,021,773
294,194,255
24,465,594
801,046,496
166,487,367
Campaign Total
Additional Amounts To Be Raised
Total
648,874,014
TBD
648,874,014
318,659,849
TBD
318,659,849
967,533,863
TBD
967,533,863
10,147,272
200,000
107,758
0
0
0
10,147,272
200,000
107,758
10,455,030
0
10,455,030
Private Grants
Gifts in Kind
Gift and Pledge Total
Future Support
Campaign Total
Additional Amounts To Be Raised
(1)
Total
Rector & Visitors Gift Accounts Only
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Future Support
Rector & Visitors Unrestricted Giving
Gifts and Pledge Payments
Deferred Gifts
Outstanding Pledge Balances
Total
(1) Excludes future or revocable support
Source: Office of Development and Public Affairs
Date: January 22, 2012
49
UNIVERSITY OF VIRGINIA
ENDOWMENT/LONG TERM INVESTMENTS FOR UVA AND RELATED FOUNDATIONS
AS OF DECEMBER 31, 2011
(in thousands)
SOURCE: Financial Administration
DATE:
January 26, 2012
50
UNIVERSITY OF VIRGINIA
QUASI-ENDOWMENT ACTIONS
OCTOBER 1, 2011 TO DECEMBER 31, 2011
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
Livy, Robert Bruce Fellowship Fund in English*
McIntire School of Commerce Bequest Gifts Quasi-Endowment
President's Fund for Excellence Unrestricted Quasi-Endowment
University Quasi-Endowment Fund (1)
Total Additions from Gifts to Quasi-Endowments
$
500,000.00
5,000.00
141,869.78
86,313.44
$
733,183.22
Additions from Endowment Income (Capitalizations)
Total Additions from Endowment Income to Quasi-Endowments
$
-
Divestments
McIntire School of Commerce Operations Fund
898,758.75
Total Divestments from Quasi-Endowments
$
898,758.75
Notes:
*Quasi-endowment newly established or originally funded since October 1, 2011.
(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.
SOURCE: Financial Administration
DATE:
January 6, 2012
51
UNIVERSITY OF VIRGINIA
SPONSORED PROGRAM GRANTS AND CONTRACTS
MID-YEAR COMPARISON REPORT OF AWARD DATA
FISCAL YEAR 2012, as of DECEMBER 31, 2011
(in millions)
SCHOOL
Architecture
Arts & Scs.
Education
Engineering
Law
Medicine
Nursing
Other
DHHS
DOD
DE
DOE
NASA
4.17
0.50
1.30
0.37
0.42
3.21
4.69
0.72
6.67
0.55
0.92
61.54
0.76
3.46
0.47
Mid-Year Total FY12
(3)
68.26
(3)
89.65
-24%
Mid-Year Total FY11
% Increase/Decrease
State
(1)(2)
(2)
Colleges (2)
(1)(2)
FY 2012(3)
0.12
4.24
1.08
0.45
0.08
18.70
1.23
0.00
0.41
0.02
4.22
0.02
1.17
2.82
2.13
0.21
8.06
0.25
0.03
0.15
1.30
7.93
0.08
2.31
0.00
0.17
26.09
9.97
37.45
0.36
104.23
2.37
0.15
28.17
13.14
31.94
1.01
120.69
2.59
11%
-7%
-24%
17%
-64%
-14%
-9%
0.20
0.42
2.68
6.95
-61%
204.63
-10%
0.00
2.80
0.15
4.99
0.80
0.13
(4)
0.27
0.03
10.50
4.03
5.74
13.51
-22%
8.59
-53%
8.77
-35%
Mid-Year
%
Total Increase/
FY 2011(3) Decrease
Other
NSF Federal(1)
6.96
0.90
8.30
Mid-Year
Total
Other Foundations Industry
8.90
0.45
0.47
0.85
1.65
16.60
9.21
26.74
13.55
14.85
12.20
183.32
2.40
-31%
18.11
-8%
5.19
78%
22.34
20%
13.52
0%
14.25
4%
8.30
47%
204.63
-10%
Notes: Historically, mid-year totals have not been predictive of performance for the entire fiscal year. 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 $8.34 million for the current period and $0.71 million for the mid-year period for fiscal
year 2011.
2)
Items listed include support from foundations, industrial sponsors and subcontracts from other institutions which may have originated from a
federal agency.
3)
Totals for mid-year 2012 include $1.10 million in ARRA funding. Totals for mid-year 2011 include $18.37 million in ARRA funding.
4)
Other includes grants and contracts awarded to: Associate Provost for Academic Support & Classroom Management; Center for Public Service;
Darden School of Business; Frank Batten School of Leadership and Public Policy; McIntire School of Commerce; Miller Center; University
Librarian; UVa's College at Wise; Vice President and Chief Student Affairs Officer; Executive Vice President and Provost; Vice President for
Research.
SOURCE: Office of Sponsored Programs
DATE:
January 12, 2012
52
APPENDICES
APPENDIX A
UNIVERSITY OF VIRGINIA – ACADEMIC DIVISION
SUMMARY OF BUDGET REQUESTS AND GOVERNOR'S BUDGET BILL
(in 000s)
2012-2013
2013-2014
Governor's
Request
Budget
Request
Governor's Budget
GF
NGF
GF
NGF
GF
NGF
GF
NGF
Operating
A-1
New Undergraduate Enrollment Growth
New STEM Faculty Start-up Packages
Replacement STEM Faculty Start-up
Packages
Operations and Maintenance, New
Facilities
Cancer and Medical Translational
Research
Economic Development Accelerator
Past Undergraduate Enrollment
Growth
Base Operating Costs
Graduation Incentives
Focused Ultrasound Surgery Center
Undergraduate Financial Assistance
Health Insurance Premium Increases
Subtotal Operating
Capital
Maintenance Reserve
Planning for Rotunda Renovation
Planning for North Grounds
Boiler and Chiller Replacement
Subtotal Capital
Total
$1,035
616
$2,915
-
$
322
-
2,000
-
244
-
$1,628
2,394
$5,270
-
-
-
3,400
-
-
-
437
-
-
319
572
-
-
5,000
-
-
1,500
-
-
5,000
5,000
-
1,500
-
-
3,480
-
-
1,875
1,555
1,500
119
527
-
3,480
-
-
1,875
1,555
1,500
119
527
-
$12,375
$3,352
$7,398
$
-
$21,221
$5,842
$7,398
$
-
-
$5,027
250
$
-
-
$5,027
-
$
-
$
$3,352
250
$5,527
$12,925
$
$5,842
$5,027
$12,425
$
-
$
$12,375
$
$
$
$
-
$
-
$
$21,221
$
$
322
-
$
$
$
-
-
APPENDIX A (continued)
UNIVERSITY OF VIRGINIA – MEDICAL CENTER
SUMMARY OF BUDGET REQUESTS AND GOVERNOR'S BUDGET BILL
(in 000s)
2012-2013
Request
Governor's Budget
GF
NGF
GF
NGF
Operating
Medicaid Inpatient Payment Rates
Subtotal Operating
$
$
-
$
$
-
Subtotal Capital
$
$
-
$
$
-
Total
$
-
$
-
($8,239)
($8,239)
2013-2014
Request
Governor's Budget
GF
NGF
GF
NGF
$ 3,346
$ 3,346
$
$
-
$
$
-
$
$
-
$
$
-
$
$
-
$ 3,346
$
-
$
-
($9,191)
($9,191)
$ 6,959
$ 6,959
Capital
$
$
-
($8,239)
$
$
-
($9,191)
$
$
-
$ 6,959
A-2
APPENDIX A (continued)
UNIVERSITY OF VIRGINIA’S COLLEGE AT WISE
SUMMARY OF BUDGET REQUESTS AND GOVERNOR'S BUDGET BILL
(in 000s)
2012-2013
Request
Governor’s Budget
GF
NGF
GF
NGF
2013-2014
Request
Governor’s Budget
GF
NGF
GF
NGF
Operating
Early Alert and Retention
Program
High Need Degrees
Science Consortium
Base Operating Costs
Graduation Incentives
Undergraduate Enrollment Growth
Undergraduate Financial Assist.
UVA-Wise Scholarships
Subtotal Operating
$
A-3
250
219
976
900
$ 2,346
$
$
-
$
-
$
$ 2,346
$
$
$
$
275
169
116
352
57
275
1,244
$
$
-
-
$
-
$
275
259
1,092
972
$ 2,598
2,558
$
-
$
3,802
$
-
$ 2,598
$
$
-
$
$
275
169
116
352
57
275
1,244
$
$
-
105
$
-
1,349
$
-
Capital
Maintenance Reserve (Note A)
Total
-
$
$
-
$
$
Note A: 2012-2013 maintenance reserve funding includes funding for the requested Dam
Safety Modifications.
APPENDIX B
UNIVERSITY OF VIRGINIA - ACADEMIC DIVISION
2012-2014 PROPOSED AMENDMENTS
(in 000s)
GF
Operating
New Undergraduate Enrollment Growth
New STEM Faculty Start-up Packages
Cancer and Medical Translational
Research
Virginia Logistics Research Center
B-1
Capital
Planning for Renovations to Gilmer
Hall and Chemistry Building
Planning for Renovations to the
Rotunda
Total
Patrons:
Senator Hanger, Delegate Tata
2012-2013
NGF
2013-2014
GF
NGF
$
832
$
616
$ 3,500
$
$
$
-
$ 1,851
$ 2,394
$ 3,500
$
$
$
-
$
250
$
-
$
250
$
-
$
250
$
-
$
-
$
-
-
$
-
$ 7,995
$
-
$
-
$2,250
$ 5,448
$2,250
$
APPENDIX B (continued)
UNIVERSITY OF VIRGINIA – MEDICAL CENTER
2012-2014 PROPOSED AMENDMENTS
(in 000s)
2012-2013
GF
NGF
Operating
Medicaid Inpatient Payment Rates
Properly Address Indirect Medical
Education and Inflation Costs in
Medical Center Reimbursements
2013-2014
GF
NGF
B-2
$12,456
$ 4,606
$
-
$15,768
$ 5,861
$
-
Capital
None
$
-
$
-
$
-
$
-
Total
$17,062
$
-
$21,629
$
-
Patrons:
Senator Deeds, Delegate Toscano
APPENDIX B (continued)
UNIVERSITY OF VIRGINIA – COLLEGE AT WISE
2012-2014 PROPOSED AMENDMENTS
(in 000s)
2012-2013
GF
NGF
2013-2014
GF
NGF
Operating
None
$
-
$
-
$
-
$
-
Capital
None
$
-
$
-
$
-
$
-
Total
$
-
$
-
$
-
$
-
B-3