UNIVERSITY OF VIRGINIA
BOARD OF VISITORS
MEETING OF THE
FINANCE COMMITTEE
FEBRUARY 25, 2010
FINANCE COMMITTEE
Thursday, February 25, 2010
1:45 – 3:15 p.m.
Board Room, The Rotunda
Committee Members:
Vincent J. Mastracco, Jr., Chair
Daniel R. Abramson
A. Macdonald Caputo
The Hon. Alan A. Diamonstein
Helen E. Dragas
Robert D. Hardie
Randal J. Kirk
Austin Ligon
Warren M. Thompson
John O. Wynne, Ex-officio
Daniel M. Meyers, Consulting Member
AGENDA
PAGE
I.
II.
CONSENT AGENDA (Mr. Sandridge)
A.
Budget Amendments Transmitted to the General
Assembly
B.
Transfer of Funds to the University of Virginia
Foundation for Additional Costs Related to the
Blue Ridge Hospital Property
C.
Signatory Authority for Medical Center Procurement
1.
Nutrition Services
2.
Environmental Services
ACTION ITEMS (Mr. Sandridge)
A.
2010-2011 Tuition and Fees for Special Programs
1.
Darden Executive Master of Business
Administration Program
2.
McIntire Executive Programs
3.
School of Engineering and Applied Sciences
Systems Engineering Accelerated Program
4.
School of Continuing and Professional Studies
Post-Baccalaureate Pre-Medicine Program
B.
Capital Project Approval and Financial Plan Reviews
(Mr. Sandridge to introduce Ms. Colette Sheehy; Ms.
Sheehy to report)
1.
Alderman Road Housing, Phase IV, Building 5
2.
Newcomb Hall Dining Expansion
C.
Authorization of and Intent to Issue Tax-Exempt Debt
for South Lawn Phase I; Alderman Road Housing
Phase IV, Building 5; and Newcomb Hall Dining Area
Renovation and Expansion (Mr. Sandridge to introduce
Ms. Yoke San L. Reynolds; Ms. Reynolds to report)
1
2
3
6
8
10
PAGE
III. REPORTS BY THE EXECUTIVE VICE PRESIDENT AND CHIEF
OPERATING OFFICER (Mr. Sandridge)
A.
Vice President’s Remarks
B.
Endowment Report – Market Value and Performance
as of December 31, 2009 (Mr. Sandridge to
introduce Mr. Christopher Brightman; Mr. Brightman
to report)
C.
State Budget and 2010-2011 Preliminary Budget
Assumptions (Written Report)
D.
Final Report of the Student System Project
(Written Report)
E.
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 Update Report
5.
Quasi-Endowment Actions
6.
Quarterly Budget Report
7.
Endowment/Long-Term Investments for University
Of Virginia and Related Foundations
8.
Sponsored Programs Restricted Grants and
Contracts
IV.
APPENDIX
Summary of Governor’s Budget Bill
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14
22
26
29
31
33
34
35
36
39
40
BOARD OF VISITORS CONSENT AGENDA
A.
BUDGET AMENDMENTS: Each January, the University may
propose operating and capital budget amendments to the General
Assembly.
On January 15th, the University submitted three languageonly amendments to the General Assembly for consideration. The
College at Wise did not submit any amendments. The language
amendments requested, carried by Senator Quayle and Delegate
Tata, are as follows:
1.
Restore the University's Maintenance Reserve Funding
to Pro Rata Level – Due to an error in the calculation of the
University’s allocation, we are requesting that the maintenance
reserve allocation be recalculated to provide a pro rata share
of funds to all institutions of higher education as compared to
previous funding levels.
2.
Eliminate Reversion of Non-General Fund Savings from
Furlough Day – The proposed budget reverts the ―savings‖
associated with the planned May 2010 furlough day from all
sources, including units where a true savings may not be
realized, such as at the Medical Center and in our auxiliaries
where patient and student services cannot be compromised. We
are proposing to eliminate the NGF reversion for these
situations.
3.
Modify Non-General Fund Salary Increase Language –
Proposed language prohibits annual merit salary increases from
non-general fund sources if not authorized by the Appropriation
Act. This item will apply to the Academic Division, Wise and
the Medical Center. We are proposing to modify this language
for institutions operating under a management agreement with the
Commonwealth pursuant to the Restructuring Act.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
2010 BUDGET AMENDMENTS FOR THE UNIVERSITY OF VIRGINIA
WHEREAS, the three budget amendment recommendations
represent important policy issues and one technical correction;
RESOLVED, the Board of Visitors of the University of
Virginia endorses and supports the three budget amendments to
the 2010 budget; and
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RESOLVED FURTHER, the Executive Vice President and Chief
Operating Officer is authorized to transmit to the General
Assembly the three proposed budget amendments requiring
authorization by the Commonwealth under the University’s
Management Agreement.
B.
TRANSFER OF FUNDS TO THE UNIVERSITY OF VIRGINIA FOUNDATION
FOR ADDITIONAL COSTS RELATED TO THE BLUE RIDGE HOSPITAL
PROPERTY: On October 18, 2001, the Governor of Virginia
authorized the conveyance of the Blue Ridge Hospital property to
the University of Virginia Real Estate Foundation (now known as
the University of Virginia Foundation) subject to the terms and
conditions of a Memorandum of Understanding (MOU) among the
University, the Foundation, and the Thomas Jefferson Memorial
Foundation (now known as the Thomas Jefferson Foundation) dated
October 6, 2000, and approved by the Governor. The MOU
anticipates development of the property as a research park that
furthers the University’s primary mission of education and
research. In April 2002, the Board of Visitors approved a noninterest bearing demand loan of up to $3 million for the
University of Virginia Foundation to cover the anticipated costs
of demolition and remediation of certain structures on the
property.
Over the past several years the University of Virginia
Foundation has spent $1,781,412 in excess of the original
borrowing. The additional amount above the original $3 million
University loan has been covered through the University of
Virginia Foundation’s line of credit with an external bank.
Total investment of $4,781,412 represents costs to stabilize
buildings ($515,285), demolition ($2,571,702), rezoning
($591,813), and interest and annual operating costs
(approximately $180,000 per year). It is recommended that the
non-interest bearing note be increased to cover the full
investment by the University of Virginia Foundation so that the
property will not be overly burdened with debt when it is needed
by the University. The Blue Ridge property will be classified
as a research park holding with available cash flow from
University of Virginia Foundation operations used to cover the
annual operating costs of the property. The original investment
in the property will be recovered once development begins and
tenants are located there.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
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APPROVAL OF THE TRANSFER OF FUNDS TO THE UNIVERSITY OF VIRGINIA
FOUNDATION FOR ADDITIONAL COSTS RELATED TO THE BLUE RIDGE
HOSPITAL PROPERTY
WHEREAS, pursuant to a Memorandum of Understanding dated
October 6, 2000, among the University of Virginia, the
University of Virginia Real Estate Foundation (now known as the
University of Virginia Foundation), and the Thomas Jefferson
Memorial Foundation (now known as the Thomas Jefferson
Foundation), the property known as the Blue Ridge Hospital will
be developed as a research park; and
WHEREAS, in preparation for the future development of this
site the University of Virginia Foundation has incurred
substantial costs; and
WHEREAS, in a resolution dated April 6, 2002, the Board of
Visitors authorized the transfer of $3 million to the University
of Virginia Foundation in recognition of these costs; and
WHEREAS, actual costs of demolition and stabilization of
the structures, rezoning, and annual operating expenses have
exceeded the original amount transferred by $1,781,412; and
WHEREAS, it is in the University’s best interest to cover
the additional costs incurred by the University of Virginia
Foundation;
RESOLVED, the Executive Vice President and Chief Operating
Officer is authorized to transfer up to $1.8 million to the
University of Virginia Foundation for additional costs incurred
for site preparation, restoration, and other ongoing initial
expenses of preparing the Blue Ridge Hospital property for
development as a research park.
C.
SIGNATORY AUTHORITY FOR MEDICAL CENTER PROCUREMENT: The
Board of Visitors is required to approve the execution of any
contract where the amount per year is in excess of $5 million.
1. Nutrition Services. The Medical Center and Morrison
Management Specialists, Inc., (Morrison) are currently parties
to a contract whereby Morrison provides food and clinical
nutrition services to the Medical Center. The contract was
entered into in 2003 for an initial five-year term, with an
option to extend for an additional five-year period.
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In 2008 the Medical Center and Morrison agreed to a oneyear extension of the contract, and in 2009 the parties extended
the contract through March 2010 pending further negotiations.
The current contract will expire in 2013.
The Medical Center and Morrison will extend the contract
for a full five-year renewal through September 30, 2013, and now
desire to amend the contract to add an additional five-year
renewal option which, if exercised, will permit the Medical
Center to extend the contract through September 30, 2018. In
exchange, Morrison has agreed to certain upgrades of the Medical
Center West Cafeteria and the Medical Center Main Hospital
Cafeteria. The total projected cost of the additional renewal
option is $32,916,000, with negotiated increases and decreases
based on the actual needs of the Medical Center.
ACTION REQUIRED: Approval by the Medical Center Operating
Board, the Finance Committee, and the Board of Visitors
APPROVAL OF SIGNATORY AUTHORITY FOR AMENDMENT TO NUTRITIONAL
SERVICES CONTRACT FOR THE MEDICAL CENTER
RESOLVED, the Board of Visitors authorizes the Executive
Vice President and Chief Operating Officer of the University to
execute an amendment to an existing contract for nutrition
services for the Medical Center, providing for an option to
extend the contract through September 30, 2018, if exercised by
the Medical Center, based on the recommendation of the Vice
President and Chief Executive Officer of the Medical Center in
accordance with Medical Center procurement policy.
2. Environmental Services. The Medical Center and
Crothall Services Group, Inc., (Crothall) are currently parties
to an environmental services contract whereby Crothall provides,
inter alia, housekeeping and waste management services to the
Medical Center. The contract was entered into in 2005 and
expires June 30, 2010.
The Medical Center and Crothall now desire to extend the
contract for an additional one-year period through June 30,
2011, during which time the Medical Center will pursue a
competitive procurement. During the extension period Crothall
has agreed to a performance-based contract, wherein its fee is
at risk if certain performance standards are not met. The total
projected cost of the one year extension is $9,500,000, with
negotiated increases and decreases based on the actual needs of
the Medical Center.
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ACTION REQUIRED: Approval by the Medical Center Operating
Board, the Finance Committee, and the Board of Visitors
APPROVAL OF SIGNATORY AUTHORITY FOR AMENDMENT TO ENVIRONMENTAL
SERVICES CONTRACT FOR THE MEDICAL CENTER
RESOLVED, the Board of Visitors authorizes the Executive
Vice President and Chief Operating Officer of the University to
execute an amendment to an existing contract for environmental
services for the Medical Center to extend the contract through
June 30, 2011, based on the recommendation of the Vice President
and Chief Executive Officer of the Medical Center in accordance
with Medical Center procurement policy.
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UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 25, 2010
COMMITTEE:
Finance
AGENDA ITEM:
II.A. 2010-2011 Tuition and Fees for
Special Programs
BACKGROUND: The University has four 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.
DISCUSSION: After analyzing competitive trends among peer
programs, market information on price as a driver of applicant
behavior, and instructional delivery costs, the University
recommends that tuition and fees for the Darden School’s MBA for
Executives program increase by six percent for Virginians and
non-Virginians to $115,500 for the 22-month program.
The University proposes to move to a single tuition and fee
rate for Virginians and non-Virginians enrolled in the McIntire
School of Commerce’s Executive MS in Management of Information
Technology (MIT) and the School of Engineering and Applied
Science’s Accelerated Master’s Program in Systems Engineering.
This would make the approach for these two weekend-style
executive programs consistent with the single rate assessed for
the Darden School’s executive program. The schools believe this
would assist in recruiting out-of-state students to these selfsupporting programs.
The charge for the McIntire School of Commerce’s Executive
MS in Management of Information Technology (MIT) is recommended
at $38,500. This amounts to an increase of $1,500 (4.1 percent)
for Virginians and a decrease of $3,500 (8.3 percent) for nonVirginians. The overall effect on total revenue would be an
increase of 6.6 percent in 2010-2011.
The recommended tuition charge for the School of
Engineering and Applied Science’s Accelerated Master’s Program
in Systems Engineering is $35,000. This amounts to an increase
of $1,000 (2.9 percent) for Virginians and a decrease of $4,000
(10.3 percent) for non-Virginians.
6
Tuition and fees for the School of Continuing and
Professional Studies’ Post-Baccalaureate Pre-Medical Certificate
Program are proposed to increase by $200 for Virginians (8.5
percent) and non-Virginians (0.7 percent) because of increasing
program costs and to price the program more competitively.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL OF 2010-2011 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,
2010, unless otherwise noted:
Virginian
Amount Percent
2009-10
of
of
2010-11
Approved Increase Increase Proposed
Non-Virginian
Amount
Percent
2009-10
of
of
Approved Increase Increase
2010-11
Proposed
MBA for Execs
$109,000 $ 6,500
6.0% $115,500 $109,000 $ 6,500
6.0% $ 115,500
The price is all inclusive for the 22 months of the full program and includes estimated
2010-2011 and 2011-2012 special session mandatory fee, books, materials, computer
leasing, software licenses, group meals, and lodging.
MIT
$ 37,000 $ 1,500
4.1% $ 38,500 $ 42,000 ($ 3,500)
(8.3%)
$ 38,500
The price includes the estimated 2010-2011 special session mandatory fee, books,
materials, software licenses, group meals, and lodging.
MIT Opt. Ind.
Study
$1,250/
cr. hr
$33
2.6%
$1,283/
cr. hr
$1,400
($117)
(8.4%)
$1,283/
cr. hr
Systems Eng.
$ 34,000
$1,000
2.9% $ 35,000 $ 39,000 ($4,000) (10.3%)
$ 35,000
The price includes the estimated 2010-2011 special session mandatory fee, books,
materials, technology, group meals, and lodging.
Post-Bac, Pre- $ 23,500
$ 200
0.9% $ 23,700 $ 28,500
$ 200
Med
The price includes the estimated 2010-2011 full-time mandatory fee.
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0.7%
$ 28,700
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 25, 2010
COMMITTEE:
Finance
AGENDA ITEM:
II.B. Capital Plan Project and Financial
Plan Approvals
BACKGROUND: Normally, the Board of Visitors approves major
capital projects as part of the biennial update of the Major
Capital Projects Program, and the Finance Committee approves
financial plans of projects expected to occur in the near term.
When the University identifies new capital projects outside the
biennial Major Capital Project Program cycle or when projects
are accelerated from the far term to the near term, the projects
require approval by the Finance and Buildings and Grounds
Committees and the financial plans require approval by the
Finance Committee. Recently one project has been accelerated
and two new projects have been identified. At its February 2010
meeting, the Finance Committee will review financial plans for
these new projects and the Buildings and Grounds Committee will
review the projects for inclusion in the Major Capital Projects
Program.
DISCUSSION: The proposed projects will be funded from selfgenerated funds, such as housing rents, dining reserves, Medical
Center operating funds, and University debt. The Administration
reviewed the preliminary business plans for each of the
proposals and found that the business plans are acceptable.
Project budgets have been developed using current cost
benchmarks for the particular type of construction escalated to
an expected midpoint of construction. On the following page is
a description of the financial plan for each proposed project,
including identified fund sources, the repayment of debt
service, and how any incremental operating and maintenance costs
will be funded.
Overall Debt Assessment
Treasury Operations has conducted a debt assessment to evaluate
the impact of these new projects to the University’s key debt
ratios as outlined in the Board approved debt policy. It is the
University’s assessment that the total new debt funding of $29.0
million sought for these new projects will not jeopardize
internal guidelines for financial ratios. By accepting this
8
assessment, the Board does not authorize the issuance of debt or
any other long-term financial obligation; rather the Board
approves the inclusion of these debt-funded projects as a part
of the University’s Major Capital Projects Plan.
ACADEMIC DIVISION
Construct Alderman Rd Housing
Phase IV, Building 5
University Debt: $24M
Housing Reserves: $ 6M
Total: $30M
This project is for the construction of the sixth residence
house in the Alderman Road Housing replacement project, expected
to open in fall 2014. The project will be financed with housing
reserves and debt to be repaid from housing rents. Operating
and maintenance cost related to this project will be funded from
housing operations.
Renovate and Expand
Newcomb Hall Dining
University Debt: $11.5M - $13.5M
Dining Reserves:
$4.5M
Total:
$16M-$18M
The proposed project will renovate the existing dining venues on
the first and second floors of Newcomb Hall. To accommodate
increasing demand, the interiors will be re-configured and
seating areas will be expanded on the first and second floors on
the western side of the building facing the University
Bookstore. The project will be funded from debt and dining
reserves. Any incremental operating and maintenance cost
related to this project will be funded from dining operations.
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
APPROVAL OF FINANCIAL PLANS FOR RENOVATION AND EXPANSION OF
NEWCOMB HALL DINING, AND ACCELERATION OF ALDERMAN ROAD HOUSING
PHASE IV, BUILDING 5
WHEREAS, the University proposes to accelerate the Alderman
Road Housing, Phase IV, Building 5 ($30 million) in to the near
term; and to add the Renovate and Expand Newcomb Hall Dining
($16 - $18 million) project to the University’s Major Capital
Projects Program;
RESOLVED, the financial plans for the Construction of
Alderman Road Housing, Phase IV, Building 5; and the Renovation
and Expansion of Newcomb Hall Dining; are reasonable and
complete.
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UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 25, 2010
COMMITTEE:
Finance
AGENDA ITEM:
II.C. Authorization of and Intent to Issue
Tax-Exempt Debt for South Lawn Phase I;
Alderman Road Housing Phase IV, Building 5;
and Newcomb Hall Dining Area Renovation and
Expansion
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 authorizes the University to finance
capital projects on a short-term basis, through the University’s
commercial paper program, where appropriate. Short-term debt may
be issued for a capital project only after a 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
Lawn Project will require
finance the project on an
receipt of pledged gifts.
to exceed $20 million, in
period not to exceed five
flow projections indicate the South
a short-term loan, or loans, to
interim basis in anticipation of the
We anticipate the short-term loan not
aggregate, in varying amounts over a
years.
Phase IV of the Alderman Road Residence Hall Project
includes the construction of Building 5. This project is for
the construction of a residence house in the Alderman Road
Housing replacement project, expected to open in fall 2014. The
project’s business plan, submitted for approval in the previous
agenda item, includes the use of $24 million of debt proceeds.
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The Newcomb Hall Dining Area will be renovated and expanded
to accommodate increasing demand. The project’s business plan,
submitted for approval in the previous agenda item, includes the
use of $13.5 million of debt proceeds.
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 projects listed above in
the following amounts:
Project
ACADEMIC DIVISION:
South Lawn Project –
Bridge Funding
Alderman Road-Phase
IV, Building 5
Renovate and Expand
Newcomb Hall Dining
Requested Intent to
Issue Authorization
Total of Requested
and Previous Intent
to Issue
Authorizations
$20,000,000
$43,931,373
$24,000,000
$24,000,000
$13,500,000
$13,500,000
ACTION REQUIRED: Approval by the Finance Committee and by the
Board of Visitors
AUTHORIZATION OF AND INTENT TO ISSUE TAX-EXEMPT DEBT FOR SOUTH
LAWN PHASE I; ALDERMAN ROAD HOUSING PHASE IV, BUILDING 5; AND
NEWCOMB HALL DINING AREA RENOVATION AND EXPANSION
WHEREAS, the University intends to undertake certain
capital projects identified below (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:
South Lawn Project – Bridge Funding — $20,000,000,
Alderman Road-Phase IV, Building 5 - $24,000,000,
Renovate and Expand Newcomb Hall Dining - $13,500,000,
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
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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; and,
WHEREAS, prior to the issuance of long-term debt, the Board
of Visitors will be asked to consider a separate issuance
resolution;
RESOLVED, that short-term debt may be issued for each of
the Projects, 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. 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, that 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 tax-exempt 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.
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UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 25, 2010
COMMITTEE:
Finance
AGENDA ITEM:
III.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.
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UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 25, 2010
COMMITTEE:
Finance
AGENDA ITEM:
III.B. Endowment Report – Market Value and
Performance as of December 31, 2009
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.
DISCUSSION:
The December 31, 2009 Report is included below.
Quarter-End December 2009
The University of Virginia endowment is the University's
source of sustainable private support for instruction, service,
and research. The University's endowment consistently ranks
among the five largest endowments of public institutions and
among the thirty largest of all colleges and universities in the
nation. Equally important, the endowment per student has
consistently ranked among the largest in the nation for a public
university.
The University of Virginia Investment Management Company
(UVIMCO) is a University-related foundation that provides
investment management services to the University, independent
foundations and other entities affiliated with the University
operating in support of its mission. UVIMCO is governed by a
board of directors, three of whom are appointed by the Board of
Visitors and one who is appointed by the University of Virginia
President. Daily investment management is delegated to UVIMCO's
full time staff.
UVIMCO’s primary objective in managing the endowment 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 investable policy
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benchmark with similar asset allocation and risk. Recognizing
that the University must attract outstanding students, faculty,
and staff and provide appropriate resources to them, UVIMCO
strives to manage pool assets to provide long-term returns that
compare favorably with the returns of endowments of other
outstanding schools.
UVIMCO follows a fundamental value investment philosophy
with an emphasis on long-term returns and alignment of
interests. UVIMCO believes that market prices for investment
securities sometimes deviate materially from reasonable
estimates of their intrinsic value. Because such mispricing
often persists and grows for long periods, UVIMCO recognizes
that consistently exceeding the return of investment markets
over short-term periods is unlikely. Nonetheless, UVIMCO is
convinced that a fundamental value discipline provides the
opportunity for superior long-term returns.
Process
The UVIMCO board has established a traditional policy
portfolio benchmark comprised of public market indices. At
present, this policy benchmark is 60 percent equity, 10 percent
real estate, and 30 percent fixed income. It represents the
investable global securities market, and its historical returns
closely track the average returns of the broad universe of
institutional investors. The board directs staff to actively
manage the endowment pool, primarily by employing external
investment managers, to pursue returns substantially in excess
of this passively investable policy benchmark.
Staff researches investment strategies seeking
opportunities to employ skilled managers within all asset
classes and regions of the world. Some of these managers focus
in niches while others have a global reach. Many use leverage
and/or sell securities short. Some invest in private markets.
While few of these individual investment strategies resemble the
market capitalization weighted indices that comprise the policy
benchmark, the mix of active strategies produces a set of asset
class exposures and risk similar to the policy portfolio
benchmark.
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Performance
For the calendar year 2009, the UVIMCO pool appreciated by
19 percent but trailed the 26 percent return on the policy
benchmark. This year’s performance, however, should be viewed
in the context of the volatile period for investment markets
over the past few years. Taking a three-year perspective,
performance compares favorably to the passive alternative
represented by the policy benchmark. Over this volatile three
years, the pool appreciated by an annualized two percent, while
the policy benchmark lost an annualized two percent.
Through the gains of 2007, the violent losses of 2008, and
the dramatic recovery of 2009, the 60 percent+ allocation to
equity strategies produced a three-year annualized return of two
percent, and each of UVIMCO’s equity strategies individually
outperformed the four percent annualized loss of the MSCI All
Country World Index. While the real estate strategy struggled
(losing an annualized 19 percent for the three years), the
resource strategy appreciated by five percent per year.
Absolute return, credit, and bond strategies gained seven
percent per annum over the three years, outperforming the six
percent annualized return of the Barclays Aggregate Bond Index.
Public Equity
During calendar year 2009, UVIMCO’s public equity strategy
appreciated by 49 percent, significantly outperforming the 35
percent return available through ownership of the benchmark MSCI
All Country World Index. The strong performance of the public
equity strategy this year was broad based, with all manager
allocations delivering positive performance and the vast
majority of manager allocations individually outperforming the
index.
Over the past ten years, a far more appropriate period over
which to evaluate equity investment performance, the public
equity strategy compounded at an annualized rate of eight
percent, compared to a one percent compound annual return for
the global equity index. Substantial allocations to emerging
markets managers were well rewarded and explain a large
proportion of the portfolio’s outperformance over the past
decade.
16
Long/Short
UVIMCO’s long/short equity strategy returned nine percent
for the year, less than one-third of the 35 percent return on
the global equity index. The dramatic bounce in equity prices
off of the March lows provided only a muted benefit to the
long/short strategy. The long/short strategy does not fully
participate in short-term equity market appreciation because of
UVIMCO’s emphasis on managers with substantial short positions
and low net exposures. Further, over this past year the
recovery in the prices of the low quality and more levered
stocks that UVIMCO’s managers typically short far out-paced the
returns of the broader market. As the economy and liquidity
improved, the most imperiled companies performed best.
Despite the wide margin of performance in favor of the
equity market this year, longer-term comparisons remain
positive. Across the violent price swings over the past three
years, the long/short portfolio returned an annualized five
percent, versus an annualized loss of four percent for the
global equity index. Over the past decade, the long/short
strategy compounded at an annualized rate of 10 percent, versus
a one percent compound annual return for the global equity
index. While this 10 percent return is in line with the return
expectation for this strategy, the nine percentage point spread
over the global equity index is far higher than UVIMCO
anticipates for the future.
Private Equity
For calendar year 2009, UVIMCO’s private equity strategy
appreciated by 20 percent, lagging far behind the 35 percent
return of the benchmark MSCI All Country World Index. The rapid
recovery in public equity market prices was not matched by
private market valuations. Also, some losses through sales of
fund positions in the secondary market depressed this year’s
return.
Even after this difficult year, intermediate and long-term
results with the private equity strategy compare favorably to
the public market alternative. For the past three years, the
private equity strategy return was flat versus a four percent
compound annual loss for the global equity index. Over the past
decade, the private equity strategy compounded at an annualized
rate of 10 percent, versus a one percent compound annual return
for the global equity index.
17
Real Estate
UVIMCO’s real estate strategy lost 34 percent this past
year. The continued deterioration of the commercial and
residential real estate markets, along with the associated
higher risk premiums buyers are demanding in this environment,
led managers to make downward adjustments in their fair value
estimates.
This year’s comparison to the public real estate
securities index, which was up 30 percent, is unflattering but
also misleading. Public and private market real estate
valuations can diverge materially over the short term. For the
past three years, the real estate strategy was down 19 percent
per annum, and the public market index was down 14 percent per
annum.
UVIMCO committed heavily in the past few years to
capitalize on distressed opportunities in the real estate
markets. Acquisition activity among UVIMCO’s real estate
managers is expected to increase in the coming quarters as real
estate owners’ need for liquidity is reflected in attractive
pricing and increasing transaction volumes.
Resources
UVIMCO’s resources portfolio was down four percent this
year. While energy-focused investments have benefited from the
rise in commodity prices over the past year, managers continue
to value their portfolios based on a conservative set of forward
looking assumptions. UVIMCO’s private market resources
investments are not directly comparable to public market
indices. As a result, portfolio returns and those of the
relevant indices can deviate materially in the short term.
The
strategy
strategy
the past
private resources portfolio is UVIMCO’s best performing
for the past decade by a wide margin. The resources
has provided a compound annual return of 19 percent for
decade, far outperforming public market indices.
Absolute Return
The eclectic mix of managers that comprise UVIMCO’s
absolute return strategy performed well this year, up 33 percent
compared to a 26 percent return on the policy portfolio
benchmark and six percent for the bond benchmark. This healthy
outperformance is particularly gratifying given that the group
held up relatively well as markets imploded in 2008. Over the
past three years, the strategy was up nine percent annualized,
18
versus a six percent annual return for the bond market and a two
percent loss for the policy portfolio benchmark. Longer-term
returns also compare favorably to passive benchmarks.
Credit
UVIMCO’s credit strategy returned 42 percent for the year.
This strong absolute return is less impressive when compared
with the 58 percent return on the Barclays High-Yield index.
Returns also lag the benchmark over the medium-term but compare
favorably over the past decade, up eight percent on an average
annual compound basis, versus seven percent on the high yield
benchmark and one percent on global equities.
UVIMCO’s current roster of credit managers is relatively
new, with two-thirds of the funds added in the past three years.
The managers are a mix of distressed mortgage specialists and
generalists that take an opportunistic approach to a broader
opportunity set. Timing of the distressed opportunity in
mortgages was too early, although fund returns are nearing
break-even. Opportunistic managers performed reasonably well
through a combination of security selection and adept timing.
Bonds and Cash
In 2009, UVIMCO’s government bond portfolio returned seven
percent as declining interest rates over the first nine months
of the year pushed up bond prices, causing reported returns to
exceed interest received. Over longer-term periods, bond
returns will equal interest rates, which have declined to
unusually low levels. UVIMCO’s cash return for 2008 was 0.2
percent. Current interest rates on short-term cash investments
are close to zero percent.
Peer Comparison
To provide feedback on the relative success of investment
performance, a comparison of UVIMCO’s June fiscal year-end
returns to peers is displayed on the table below. In fiscal
year 2009 university endowments greater than $2 billion recorded
larger losses than smaller endowments, and colleges and
universities recorded larger losses than the broad TUCS universe
of institutional investors. Even after this difficult year,
large university endowments achieved far higher returns than
other institutional investors over the past three, five, ten and
twenty years. UVIMCO’s long-term returns compare favorably with
peers.
19
UVIMCO Compared to Peers
Period Ending June 30, 2009
Long-Term Pool
1 YR
(21.0)
Peer Data
TUCS All Master Trusts Top Quartile (1)
TUCS All Master Trusts Median
TUCS All Master Trusts Bottom Quartile
(12.9)
(17.0)
(23.6)
(0.8)
(2.5)
(5.8)
Cambridge Universe Top Quartile
Cambridge Universe Median
Cambridge Universe Bottom Quartile
(18.1)
(20.0)
(22.0)
Cambridge $2+ Billion Top Quartile (3)
Cambridge $2+ Billion Median
Cambridge $2+ Billion Bottom Quartile
(18.1)
(21.2)
(23.5)
(2)
(1)
3 YR
1.6
5 YR
6.5
10 YR
9.5
20 YR
11.6
3.1
2.1
(0.3)
3.9
2.9
0.9
8.4
7.9
7.3
(0.6)
(1.7)
(3.0)
4.9
3.7
2.7
5.6
4.2
3.2
9.6
8.7
8.0
0.4
(0.3)
(1.1)
7.1
5.9
3.9
8.9
7.2
4.7
11.5
10.4
9.3
Trust Universe Comparison Service (TUCS) reports performance of nearly 1300 institutions representing $3.04 trillion in
assets under management.
(2)
Cambridge Universe consists of 168 colleges and universities. 163 of those institutions self-reported returns as of June 30, 2009.
(3)
Represents data for 25 colleges and universities with more than $2 billion in assets as compiled by Cambridge Associates.
Position
UVIMCO’s policy portfolio benchmark is comprised of 60
percent equity, 10 percent real estate, and 30 percent fixed
income. In line with these policy allocations, 63 percent of
the long-term pool is invested in public, private, and
long/short equity strategies, 10 percent is invested in real
estate and resource strategies, and 27 percent is invested in
absolute return, credit, bonds and cash. Looking through the
funds to the underlying market and currency exposures of the
securities within those funds, UVIMCO estimates a net exposure
of 51 percent to equity, 11 percent to real assets, and 10
percent to credit.
The pool maintains ample liquidity, with $400 million in
Treasury notes, $50 million of cash, and approximately $600
million in public equity and hedge funds that can be liquidated
within three months. Total quarterly liquidity is 24 percent of
the $4.4 billion pool.
20
21
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 25, 2010
COMMITTEE:
Finance
AGENDA ITEM:
III.C. State Budget and 2010-2011
Preliminary Budget Assumptions (Written
Report)
ACTION REQUIRED:
None
Governor’s Budget
BACKGROUND: On December 18, 2009, Governor Kaine presented to
the Legislature his 2010-2012 biennial budget. The General
Assembly will consider the Governor’s Budget Bill during its
long session, which began January 15th.
DISCUSSION: Governor Kaine's operating budget for higher
education is complicated by maintenance of effort requirements
(MOE)in the American Recovery and Reinvestment Act of 2009
(ARRA), which requires that states not reduce higher education
(and public education) funding below 2006 levels.
For the current fiscal year, the Governor’s proposed budget
restored $150.1 million of the higher education reduction
announced in September and also reduced the ARRA funding by $50
million to meet the MOE requirements. For the University, the
net impact for 2009-2010 is a positive $600,000. Also proposed
for this year is a reversion of auxiliary interest earnings for
the remainder of the year.
For 2010-2011, the revised budget reduction is continued
with an additional installment of $11.2 million of ARRA funding,
resulting in nearly $26 million more than we expected. However,
this is for one year only and the ARRA funding is contingent on
submission of a two-year tuition plan. Other actions for 201011 include the reversion of auxiliary interest earned, a
reversion of five percent of auxiliary cash balances (including
reserves), a reduction in the Higher Education Equipment Trust
Fund (ETF) allocation, and a reduction in Maintenance Reserve
(MR) funding.
For 2011-2012, the full $19 million, 15 percent general
fund budget reduction originally anticipated in 2009-2010 and
22
2010-2011 is proposed for implementation. Additionally, ARRA
funding will be gone, resulting in a decrease of $37 million
from 2010-2011 to 2011-2012. Other actions for 2011-2012
include the removal of appropriation related to restructuring
financial incentives, the reversion of auxiliary interest
earned, and a reduction in ETF and MR.
The proposed furlough day for May 2010 remains in place for
all state employees, including the Medical Center, and all
savings are to be reverted to the state. There are no proposed
salary increases in either year of the biennium, as well as
suspension of the state’s cash match program and a new required
employee contribution to the retirement programs, both VRS and
the optional retirement plan.
Given the state’s limited debt capacity, the budget allows for
debt financing of several customary items, but only after a debt
study and issuance schedule is developed by the Secretary of
Finance based on recommendations from the Debt Capacity Advisory
Committee to be released prior to the start of the 2011 General
Assembly Session. Priority for debt issuance is:
1.
2.
3.
4.
5.
Maintenance Reserve - $50 million per year (UVa allocation
$3.6 million in each year, down from $7.4 million).
Higher Education Equipment Trust Fund - $50 million each
year (UVa allocation $8.4 million each year, down from
$9.9 million).
Equipment for previously funded projects - $25.8 million
(UVa would get funding for the ITE Building and Wise’s
Multipurpose Center).
Energy Conservation Improvements - $35.2 million to
finance energy conservation projects.
Construction funds for projects with completed planning
(UVa’s projects are New Cabell Hall and Ruffner Hall; Wise
has the new Library).
For the Medical Center, the proposed budget reduces the
disproportionate share and indigent care payments by $10.8
million in 2010-2011 and $10.9 million in 2011-2012. Further
negative impacts associated with inflation and graduate medical
education payments result in 2010-2011 reductions of $4.7
million and 2011-2012 reductions of $6.6 million.
More information on specific actions can be found in the
Appendix.
23
Preliminary 2010-2011 Budget Assumptions
BACKGROUND: Each year at this time, we develop preliminary
budget assumptions that will be used to formulate the target
budget for the subsequent fiscal year.
DISCUSSION: The following budget assumptions will be used in
the development of the 2010-2011 budget, which will be presented
to the Board of Visitors for action in June:
1.
The 2010-2011 state appropriation will reflect any budget
changes as approved by the Governor and the 2010 General
Assembly, including any budget reduction approved in the
2010 General Assembly. The impact of these actions on the
Academic Division’s state appropriation will be reflected
in the budget presented to the Board of Visitors in June.
Any partial year amounts are annualized, and the targets
are adjusted accordingly.
2.
Tuition revenues will reflect rates approved by the Board
of Visitors later this spring.
3.
The 2010-2011 state budget will reflect the following:
Full funding will be provided for the projected cost of
Access UVa. Resources available to meet non-mandatory
institutional priorities will be very limited.
Vice presidents may reallocate existing funding and
positions among units within their areas of
responsibility.
State and local targets will be adjusted to reflect any
changes in the fringe benefit rates for 2010-2011.
Although none are expected, reserves will be budgeted to
fund any classified and faculty salary increases for the
2010-2011 fiscal year that may be approved by the 2010
General Assembly session.
Base budgets for non-personnel costs will not be
increased for inflation.
Recoveries and transfer budgets will be adjusted as
needed.
The Darden School and Law School financial selfsufficiency models will continue.
4.
Revenue from endowment income will be budgeted based upon
the Endowment Income Distribution and Spending Policy.
Related expenditures are based on historical spending
24
patterns and will emphasize institutional and school
priorities.
5.
Revenue and related expenditures from private gifts and
other sales and services are budgeted based upon historical
spending patterns and emphasize institutional and school
priorities.
6.
Revenue and related expenditures from sponsored programs
are budgeted based on historical spending patterns,
sponsored program awards, and expected indirect cost
recoveries.
7.
Revenue and related expenditures from auxiliaries are
budgeted based on fees approved by the Board of Visitors
(housing, dining and mandatory student fees) and
anticipated activity.
25
UNIVERSITY OF VIRGINIA
BOARD OF VISITORS AGENDA ITEM SUMMARY
BOARD MEETING:
February 25, 2010
COMMITTEE:
Finance
AGENDA ITEM:
III.D. Final Report of the Student System
Project (Written Report)
ACTION REQUIRED:
None
BACKGROUND: The Board of Visitors approved the budget for the
Student System Project (SSP) – the third phase of the Integrated
System Project – on June 7, 2007, and agreed to receive reports
no less frequently than semi-annually describing progress on the
project and compliance with the business plan.
The SSP team completed its work in December 2009. This
will be the final report to the Board of Visitors on the Student
System Project.
DISCUSSION: Completion of the Student System Project concluded
the University’s replacement of all administrative systems
(human resources, finance, and student). SSP implemented
PeopleSoft Campus Solutions 9.0 for the University of Virginia
between January 2007 and December 2009.
The Project either replaced existing functionality or
provided new functionality which the Integrated System Executive
Committee had approved (e.g., paying admission deposits and
charges on line; applying for undergraduate and graduate
admission to the University; applying online for University
financial aid; evaluating applications for admission online;
grading online, etc.). SSP met 114 percent1 of the University’s
functional requirements for the system that were initially
identified by about 150 individuals from across the schools and
departments.
The Project team completed its work on time and under
budget.
SSP met 256 more functional requirements than the 1756 needs which
were initially identified by users across the University as ―critical‖
or ―important.‖
1
26
The University engaged Gartner, Inc. to assess the quality
of project management and risk throughout the project and
commented that,
―… [The] project and the transition to maintenance
[have been] well run. While major package
implementations (particularly in the student
administrative area) are risky endeavors, the level of
risk for the SSP has been significantly lower than
typically observed in comparable projects. This is in
large part due to the proactive project management and
the SSP team’s responsiveness to prior risk
recommendations‖ (Final Risk Assessment, December
2009).
Maintenance of the SSP began in January 2010 as both the
SIS (Student Information System) and the SSP team members were
incorporated within the Integrated System Deployment and Support
organization of the Vice President and Chief Information
Officer. The governance structure has been transitioned to
address ongoing SIS issues.
During the final three months of the project, the SSP team:
Continued to stabilize enrollment and academic
advisement functionality in the Student Center and
Faculty Center;
Continued to implement new financial aid and student
finance processes and functionality in SIS;
Implemented online graduate admissions functionality
for Architecture, Arts and Sciences, Curry,
Engineering, McIntire, and Nursing; the School of
Continuing and Professional Studies will use the
delivered admissions functionality for their degree
and certificate programs. Online evaluation for these
schools’ applicants was implemented using ImageNow.
Continued to refine functionality for loans,
disbursement of loans and other aid, and
billing/cashiering;
Continued to work with users who need to understand
the data in SIS and how to report accurately from it;
Executed the project-to-maintenance transition plan
and created project closeout report.
27
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28
MISCELLANEOUS FINANCIAL REPORTS
Finance Committee
University of Virginia
February 25, 2010
UNIVERSITY OF VIRGINIA
ACADEMIC DIVISION
ACCOUNTS AND LOANS RECEIVABLE
As of December 31, 2009
Summary of Accounts Receivable:
The University’s Academic Division’s total accounts receivable at December 31, 2009, was
$191,812,000 as compared to $55,367,000 at September 30, 2009. The major sources of
receivables at December 31, 2009, were Student Accounts of $172,840,000 and Sponsored
Programs of $15,629,000.
The past due receivables over 120 days old were $4,571,000 as of December 31, 2009, or 2.38
percent of total receivables, which is below the Commonwealth’s management standard of 10
percent.
Student
Accounts
Gross Accounts
Receivable
$ 172,840,000
Sponsored
Programs
$ 15,629,000
Other
Receivables
Total
$ 3,343,000
$ 191,812,000
2,000
2,184,000
Less: Allowance for
Doubtful Accounts
1,791,000
391,000
Net Accounts
Receivable
$ 171,049,000
$ 15,238,000
$ 3,341,000
$ 189,628,000
Accounts Receivable
Greater than 120 Days
Past Due
$
$
$
$
3,582,000
977,000
12,000
4,571,000
SOURCE: Financial Administration
DATE:
January 13, 2010
29
UNIVERSITY OF VIRGINIA
ACADEMIC DIVISION
ACCOUNTS AND LOANS RECEIVABLE
As of December 31, 2009
Summary of Loans Receivable:
The default rate for the Perkins Student Loan Program was 5.86 percent for the quarter ending
December 31, 2009. 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 zero percent. The Nursing Undergraduate Student Loan Program default
rate decreased by 0.20 percent to 1.68 percent. Both medical loan programs are well below the 5
percent federal threshold. The University Loan Program default rate decreased by 0.52 percent
to 3.11 percent for the quarter ending December 31, 2009.
Perkins Student Loans
Health Professions Loans
Undergraduate
Nursing Loans
University Loans
Total Student
Loan Outstanding
Gross Loans
Receivable
Current
Default Rate
Inc./(Dec)
From Last Quarter
$ 19,366,000
5.86%
5.38%
3,000
0.00%
0.00%
1,393,000
1.68%
-0.20%
14,282,000
3.11%
-0.52%
$ 35,044,000
SOURCE: Financial Administration
DATE:
January 13, 2010
30
UNIVERSITY OF VIRGINIA
MEDICAL CENTER FINANCIAL REPORT
As of November 30, 2009
At the end of the first five months of Fiscal Year 2010, the operating margin for all
business units was 5.7 percent, which was above the budget of 5.2 percent. Total operating
revenue was below budget by 3.4 percent, and total operating expenses were below budget by
3.9 percent. The operating margin for the Medical Center business unit was 3.3 percent against a
budget of 3.6 percent. All other business units (UVA Imaging, UVA Outpatient Surgery Center,
Off-Campus Dialysis and Community Medicine) posted operating margins which exceeded
expectations.
Inpatient activity in the first five months of Fiscal Year 2010 continues to mirror the
trends of Fiscal Year 2009, with admissions below budget, observation patients above budget,
and average length of stay higher than expected. The high average length of stay (6.24 days) can
be partially explained by a high case mix index. The case mix index for all acute inpatients was
1.88, which was above the budget of 1.85 and was higher than we have experienced in any five
month period in at least the past ten years.
Inpatient admissions for Fiscal Year 2010 through November were 7.1 percent below
budget and six percent below prior year. While many services continued to experience declining
admissions, the most significant decrease in the first five months occurred in general medicine.
Adult surgical and pediatric general admissions have also decreased. Obstetrics admissions have
decreased and the number of babies born at the Medical Center has decreased by 9.3 percent
from the prior year. Although births have declined, admissions of newborns with complications
have increased by 35.2 percent over the prior year, while normal newborn admissions have
decreased 14.1 percent. Other services which have experienced increased admissions over the
prior year include hematology oncology, pulmonary critical care, and otolaryngology.
Total labor expenses (including salaries and wages, fringe benefits and contract labor)
were 2.1 percent below budget. Total supply cost was 0.9 percent below the $93.3 million
budget. All other expense categories, including purchased services, depreciation and bad debt,
were below budget.
Total paid employees, including contracted employees, were 33 below budget.
FY 2009
FY 2010
6,162
6,018
6,051
Salary, Wage and
Benefit Cost per FTE
$67,490
$69,728
$70,954
Contract Labor FTEs
246
176
177
6,408
6,194
6,228
Employee FTEs
Total FTEs
31
2010 Budget
Other Financial Issues
For over two years the Medical Center has been working with the Virginia
Commonwealth University Health System in a collaborative effort to lower supply costs for both
organizations. The supply chain collaborative between our two Health Systems, the University
HealthSystem Consortium, and Novation, has recorded approximately $5.4 million in estimated
annualized savings since its inception in 2007, and is currently developing a long-range
procurement plan to align local contracts for high-cost physician preference items in order to
facilitate additional cooperative procurements. We have identified an additional $8.0 million
opportunity in total for the two organizations.
The Medical Center recently received the University HealthSystem Consortium (UHC)
Supply Chain Optimization Top 10 Award for 2009. UHC gives this award annually to 10
member organizations that model best practices in supply chain by (a) optimizing UHC and
Novation contracts, (b) focusing on efficiency and cost reduction while ensuring end-user
satisfaction, and (c) using informatics tools to identify savings opportunities.
The clinical documentation improvement program began in September. Since that time,
approximately two-thirds of all active attending physicians and residents have attended one of
the physician led education sessions. More sessions have been scheduled for those not able to
attend in the fall. The program has been well received and results have been positive. Four
nurse documentation specialists have been hired and trained, and they are assisting physicians on
the units with best documentation practices. Early indications are that the patient severity and
mortality scores have increased as we had anticipated.
Based on numerous legislative initiatives, including the Medicare Prescription Drug
Improvement and Modernization Act of 2003, the Deficit Reduction Act of 2005 and the Fraud
Enforcement and Recovery Act, federal agencies have authorized independent contractors to
audit healthcare providers for appropriate billing, coding and documentation. The primary
purpose is to reduce healthcare costs by recovering improper payments. State agencies are also
commencing similar audits for Medicaid services. In response to these initiatives, the Medical
Center has created a Payer Audit Response Department to provide a centralized response to the
myriad of audit initiatives, the most prevalent of which are RAC (Recovery Audit Contractors)
and MIC (Medicaid Integrity Contractors) audits. An oversight committee has been created
including representatives from Finance, Coding, Patient Accounting, and Patient Care Services.
An electronic system which will track each account being audited has been acquired. Workflows
are being developed and contracts have been initiated with consulting firms specializing in audit
defense.
SOURCE: Medical Center Finance
DATE:
February 9, 2010
32
UNIVERSITY OF VIRGINIA
INTERNAL LOANS TO UNIVERSITY DEPARTMENTS AND ACTIVITIES
As of December 31, 2009
DATE OF
INTEREST
ORIGINAL
PURPOSE
LOAN
RATE 2
LOAN AMOUNT
Cocke Hall
06/30/06
4.75%
1,941,787
1,317,936
623,851
June 2011
ITC ISIS Software
06/30/06
4.75%
1,575,000
1,230,107
344,893
July 2010
National Radio Astronomy
Observatory Piping
09/01/06
6.25%
706,833
448,056
258,777
August 2011
Varsity Hall
06/30/07
4.75%
1,517,726
795,327
722,399
March 2012
Wilsdorf Hall
11/01/06
4.75%
3,311,328
2,966,945
344,383
November 2011
Wise Football Facility
10/01/07
4.75%
629,171
106,021
523,150
October 2022
Total Internal Loans Subject to
$
PRINCIPAL PAYMENTS OUTSTANDING
9,681,845
MADE TO DATE
$
6,864,392
PRINCIPAL
$
APPROXIMATE
FINAL PAYMENT
2,817,453
$15M Limit Established by BOV1
NOTES: 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.
2. The University's blended borrowing rate for tax exempt financing is 4.75%. A taxable rate of 6.25%
was charged for the National Radio Astronomy Observatory Piping project.
SOURCE: Financial Administration
DATE:
January 8, 2010
33
UNIVERSITY OF VIRGINIA
CAPITAL CAMPAIGN SUMMARY
As of December 31, 2009
All Units
Expendable
844,641,079
197,213,647
88,950,222
169,256,617
66,960,737
Endowment
400,918,605
64,419,227
25,199,818
0
3,325,517
Total
1,245,559,684
261,632,874
114,150,040
169,256,617
70,286,254
Gift and Pledge Total
1,367,022,302
171,376,318
493,863,167
49,472,203
1,860,885,469
220,848,521
Campaign Total
1,538,398,620
543,335,370
2,081,733,990
4,927,698
1,371,950,000
1,134,186,833
1,628,050,000
1,139,114,531
3,000,000,000
Expendable
301,167,936
42,632,909
57,409,383
0
27,539,174
Endowment
228,597,197
16,812,574
9,562,646
0
10,587
Total
529,765,133
59,445,483
66,972,029
0
27,549,761
Gift and Pledge Total
428,749,402
109,167,070
254,983,004
3,592,539
683,732,406
112,759,609
Campaign Total
537,916,472
TBD
537,916,472
258,575,543
TBD
258,575,543
796,492,015
TBD
796,492,015
0
4,357,270
200,000
270,648
4,827,918
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Future Support
Additional Amounts To Be Raised
(1)
Total
Rector & Visitors Gift Accounts Only
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Future Support
Additional Amounts To Be Raised
Total
Rector & Visitors Unrestricted Giving
Gifts and Pledge Payments
Deferred Gifts
Outstanding Pledge Balances
4,357,270
200,000
270,648
4,827,918
Total
(1) Excludes future or revocable support
SOURCE: Office of Development & Public Affairs
DATE:
December 16, 2009
34
UNIVERSITY OF VIRGINIA
QUASI-ENDOWMENT ACTIONS
October 1, 2009 to December 31, 2009
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
Dulaney, Paul S. Memorial Fund
Amount
$
1,000.00
Gilbert, Harry Bramhall Merit Scholarship
200,000.00
President's Fund for Excellence Unrestricted Quasi-Endowment
199,875.26
University Quasi-Endowment Fund
(1)
291,258.15
Total Additions from Gifts to Quasi-Endowments
$
692,133.41
$
42,500.00
$
42,500.00
$
(175,000.00)
Additions from Endowment Income (Capitalizations)
Gilbert, Harry Bramhall Merit Scholarship
Total Additions from Endowment Income to Quasi-Endowments
Divestments
Carlson Psychiatry Research Fund
McIntire School of Commerce Operations Fund
(599,172.50)
Total Divestments from Quasi-Endowments
$
(774,172.50)
Notes:
(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 13, 2010
35
UNIVERSITY OF VIRGINIA
QUARTERLY BUDGET REPORT
As of December 31, 2009
This report compares the actual results for the sources and uses of funds to the Academic
Division annual budget (excluding the Medical Center and the University of Virginia’s College
at Wise). At the end of the second quarter of 2009-10, 69.0 percent of the budgeted sources were
collected and 52.1 percent of the budgeted uses were expended.
The operating budget is developed using differing rules and conventions from the audited
financial statements, which are developed in accordance with generally accepted accounting
principles (GAAP). In some cases, similar descriptions are used in both reports even though the
precise definitions and the specific amounts are not identical. However, both sets of figures are
accurate for their particular purposes, and both are drawn from the University’s financial
applications. Outlined below are several of the differing conventions used in the operating
budget and the actual results presented on the accompanying statement:
The operating budget is prepared on a cash basis.
The operating budget presents tuition and fees as gross income and the full amount of
student aid as an expense.
In the operating budget, depreciation is not funded and non-capital outlay purchases are
recognized as expensed rather than spread over the useful life of the purchase. Debt
service, major repair or renovation expenditures occur within the capital outlay accounts
– and off the operating budget.
The Federal Family Education Loan Program is excluded from the operating budget.
Sources of funds are shown net of transfers to capital reserves/projects in the operating
budget.
Fringe benefit expenditures are included in the operating budget using pooled benefit
rates.
The operating budget recognizes recoveries of indirect costs only upon distribution of
those revenues, and not when billed to granting agencies.
A definition of terms is included to explain the categories for the sources and uses of
funds.
SOURCE: University Budget Office
DATE:
February 8, 2010
36
University of Virginia Academic Division
2008-09 Operating Budget Report
As of December 31, 2009
(in thousands)
2009-10
Revised
Budget
Sources of Available Funds, net of transfers to capital reserves
Tuition & Fees for Operating Plan
State General Fund Appropriation for Operating Plan
Sponsored Research for Operating Plan
Endowment Distribution
Net Gifts Available for Operating Plan
Sales, Investment & Other
American Recovery and Reinvestment Act of 2009
Net Auxiliary Enterprises for Operating Plan
Total Sources of Available Funds
Uses of Available Funds
Direct Instruction
Research and Public Service
Library, Information Tech., & Academic Administration
Student Services
General Administration
Operation & Maintenance of Physical Plant
Scholarships, Fellowships, & Other Graduate Support
Athletics
Bookstore
Housing and Conference Services
Other Auxiliary Operations
Total Operating Expenses
Total Operating Reserves and Temporary Allocations
Total Uses of Available Funds
Net Sources and Uses of Operating Funds
37
12/31/2009
Actual
Results
Variance
12/31/2009
Results
Percentage
$374,647
$141,011
$299,200
$134,960
$88,702
$28,261
$11,173
$151,595
$1,229,549
$367,051
$139,149
$159,305
$11,147
$48,252
$17,154
$0
$106,091
$848,149
$7,596
$1,862
$139,895
$123,813
$40,450
$11,107
$11,173
$45,504
$381,400
98.0%
98.7%
53.2%
8.3%
54.4%
60.7%
0.0%
70.0%
69.0%
$313,333
$304,591
$119,394
$39,563
$76,608
$84,599
$136,316
$148,164
$163,649
$74,065
$20,185
$37,761
$45,897
$67,694
$165,169
$140,942
$45,329
$19,378
$38,847
$38,702
$68,622
47.3%
53.7%
62.0%
51.0%
49.3%
54.3%
49.7%
$42,788
$29,173
$21,669
$58,179
$1,226,213
$27,686
$17,915
$9,967
$27,605
$640,588
$15,102
$11,258
$11,702
$30,574
$585,625
64.7%
61.4%
46.0%
47.4%
52.2%
$2,936
$1,229,149
$640,588
2,936
$588,561
0.0%
52.1%
$400
$207,561
($207,161)
DEFINITION OF TERMS
Sponsored Research -- primarily research projects, but also includes activities restricted to
institutional and service programs.
Auxiliary Enterprises -- those activities which are supported entirely through fees charged
to users, such as housing, athletics, dining services, the telephone system and the bookstore.
Instruction -- expenditures for the primary mission of the University, which includes
teaching faculty, support staff, instructional equipment, and related routine operating costs.
Research -- includes expenditures for activities such as support for research faculty and
sponsored research. Activities include the Center for Public Service, the State
Climatologist, and the Center for Liberal Arts.
Public Service -- includes activities such as the Miller Center of Public Affairs, the
Virginia Foundation for the Humanities, and that portion of the medical school's clinical
physicians’ salaries and fringe benefits related to patient care.
Library, Information Technology and Academic Administration -- encompasses the
libraries, the activities of the deans of the schools, and other related expenditures.
Student Services -- activities whose primary purpose is to contribute to the students'
emotional and physical well-being and to their intellectual, cultural, and social
development outside the classroom.
General Administration -- includes the financial, administrative, logistical, and
development activities of the University.
Operation and Maintenance of Physical Plant -- includes expenditures for activities
related to the operation and maintenance of the physical plant, net of amounts charged to
auxiliary enterprises and the Medical Center.
38
UNIVERSITY OF VIRGINIA
ENDOWMENT/LONG TERM INVESTMENTS FOR
UNIVERSITY OF VIRGINIA AND RELATED FOUNDATIONS
As of December 31, 2009
(in thousands)
The University of Virginia Medical School and related foundations
Rector and
Visitors Funds
Related
Foundation
Funds Invested
by UVIM CO
Alumni
Association
Funds Invested
by UVIM CO
Related Foundation
Funds Invested by
Direction of
Foundation Board
$
$
$
$
The College of Arts and Sciences and related foundations
630,358
28,933
5,865
-
Total
$
665,156
281,845
36,600
8,673
2,390
329,508
The University of Virginia Law School and related foundation
37,160
174,485
-
84,523
296,168
Darden School and related foundation
94,452
182,438
-
5,208
282,098
The McIntire School of Commerce and related foundation
67,060
-
19,524
457
87,041
Batten School of Leadership and Public Policy
83,755
-
-
-
83,755
School of Engineering and related foundation
71,036
258
2,276
1,582
75,152
University of Virginia's College at Wise and related foundation
36,010
3,731
1,760
7,231
48,732
Graduate School of Arts and Sciences
41,972
-
-
-
41,972
School of Nursing
33,255
-
1,560
-
34,815
Curry School of Education and related foundation
10,763
6,539
-
1,320
18,622
School of Architecture and related foundation
14,028
-
349
588
14,965
School of Continuing and Professional Studies
62
-
42
-
104
University of Virginia Medical Center and related foundations
327,245
53,881
3,772
17,440
402,338
Centrally Managed University Scholarships
129,285
-
-
-
129,285
Athletics and related foundation
33,692
53,853
321
574
88,440
Provost
74,795
-
-
-
74,795
Alumni Association
-
-
43,381
12,426
55,807
University of Virginia Foundation and related entities
-
52,553
-
240
52,793
45,595
6,923
-
-
52,518
-
42,941
-
-
42,941
41,888
-
39
-
41,927
University - Unrestricted but designated
262,281
-
-
-
262,281
University - Unrestricted Quasi and True Endowment
157,911
-
-
-
157,911
University - Unrestricted Other
128,289
-
-
-
128,289
All Other
172,543
10,466
196,732
-
379,741
133,979
$ 3,847,154
Miller Center and related foundation
Alumni Board of Trustees
University Libraries
$
2,775,280
$
653,601
$
284,294
$
*Includes funds on deposit for other areas/schools not individually listed.
**Excludes approximately $35.6 million of board designated pension funds.
SOURCE: Financial Administration
DATE:
January 27, 2010
39
UNIVERSITY OF VIRGINIA
SPONSORED PROGRAM GRANTS AND CONTRACTS
MID-YEAR COMPARISON REPORT OF AWARD DATA
Fiscal Year 2010
(in millions)
SCHOOL
DHHS
DOD
DE
DOE
Non-Federal
Federal (1)
(1) (2)
State (1)
0.12
0.15
0.05
0.32
0.14
130%
10.92
0.76
3.12
1.44
30.04
26.83
12%
0.41
0.16
2.10
1.03
10.95
9.43
16%
9.07
3.03
7.89
2.39
36.70
30.37
21%
0.58
1.76
-67%
NASA
NSF
Architecture
Arts & Scs.
5.60
Education
1.16
Engineering
6.47
0.65
0.69
5.44
1.41
6.10
6.55
0.75
0.56
Law
0.58
Medicine
111.40
Nursing
1.87
1.00
0.88
0.13
Other (4)
0.78
0.04
Mid-Year Mid-Year
%
Total FY Total FY Increase/
2010 (3)
2009
Decrease
Other
30.91
3.09
147.28
110.30
34%
1.09
0.04
3.13
2.02
55%
0.18
0.49
2.42
0.56
4.47
4.36
3%
185.21
26%
Mid-Year Total FY 2010 (3)
126.51
8.20
7.70
7.11
1.98
20.57
4.55
48.26
8.60
233.46
Mid-Year Total FY 2009
89.89
8.85
2.90
3.34
2.22
17.23
5.99
46.72
8.07
185.21
% Increase/Decrease
41%
-7%
166%
113%
-11%
19%
-24%
3%
6%
Note:
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 $1.9 million for the current period.
Funding for these entities has been included in previous reports, and appeared largely in the Other Federal, NonFederal, and State categories. Mid-year FY09 totals have been adjusted to reflect the exclusion of funding for these entities.
(2) Items listed as "Non-Federal" include support from foundations, industrial sponsors, and subcontracts
from other institutions which may have originated from a federal agency.
(3) Totals include $38.31 million in ARRA funding. Although mid-year FY10 award totals are higher than at the same
time last year, these totals have not historically been predictive of performance for the entire fiscal year.
(4) Includes University Librarian; Vice President for Graduate Studies; Miller Center; Executive Vice President and
Provost; School of Continuing and Professional Studies; Center for Public Service; Financial Administration; Student
Health; Health Sciences Library; UVA College at Wise; Vice President and Chief Student Affairs Officer.
SOURCE: Office of Sponsored Programs
DATE:
January 18, 2010
40
APPENDIX
APPENDIX
UNIVERSITY OF VIRGINIA – ACADEMIC DIVISION
SUMMARY OF BUDGET REQUESTS AND GOVERNOR'S BUDGET BILL
(in 000s)
2010-11
Request
Governor's Budget
GF
NGF
GF
NGF
2011-12
Request
Governor's Budget
GF
NGF
GF
NGF
Operating
Health Plan Funding
GF Budget Reduction
Federal Stimulus Funds
Subtotal Operating
Capital
Maintenance Reserve
ITE Building
New Cabell Hall Renovation
A-1
Ruffner Hall Renovation
Ivy Translational Research Bldg
Ivy Stacks I Retrofit
North Chiller Plant, Chiller
Fiske Kimball Fine Arts Library
Rotunda Renovations
Alderman/Clemons Chillers Repl.
N. Ground Boiler/Chiller Plant
Gilmer/Chemistry Ren Planning
Subtotal Capital
Total
$1,248
$1,248
$16,000
1,701
76,120
18,698
78,000
7,500
28,670
15,000
40,310
8,186
15,224
1,800
307,209
$308,457
$1,936
$1,936
$
(funded through
central adj.
(4,569)
21,893
($4,569)
$21,893
$1,248
$1,248
42,000
28,670
9,970
5,824
6,776
93,240
$7,187
1,701
76,120
18,698
103,706
$
-
(contingent
(contingent
(contingent
(contingent
$95,176
$99,137
$21,893
$1,248
$1,936
$1,936
on
on
on
on
debt
debt
debt
debt
(funded through
central adj.
(19,250)
($19,250)
$-
capacity)
capacity)
capacity)
capacity)
$1,936
($19,250)
$-
APPENDIX (continued)
UNIVERSITY OF VIRGINIA’S COLLEGE AT WISE
SUMMARY OF BUDGET REQUESTS AND GOVERNOR'S BUDGET BILL
(in 000s)
2010-11
Request
Governor’s Budget
GF
NGF
GF
NGF
2011-12
Request
Governor’s Budget
GF
NGF
GF
NGF
Operating
None
$
-
$
-
$
-
$
-
900
1,400
49,750
2,000
6,300
1,200
1,860
63,410
$
-
$
360
1,400
49,750
51,510
$
-
$ -
$
51,510
$
-
$
-
$
-
$
-
Capital
A-2
Maintenance Reserve
Greear Gym and Multipurpose Ctr
New Library
Alternative Energy Feasibility
Campus Telecommunications
Dam Safety Modifications
Proscenium Theatre - Planning
Subtotal Capital
$
Total
$ 63,410
$
-
(contingent on debt capacity)
(contingent on debt capacity)
(contingent on debt capacity)
$
-
$
-
$
-
$
-