May 20, 2013
MEMORANDUM
TO:
The Finance Committee:
Victoria D. Harker, Chair
William H. Goodwin Jr., Vice Chair
Frank B. Atkinson
A. Macdonald Caputo
The Honorable Alan A. Diamonstein
Vincent J. Mastracco Jr.
Edward D. Miller, M.D.
John L. Nau III
Timothy B. Robertson
Helen E. Dragas, Ex Officio
Daniel M. Meyers, Consulting Member
Martin N. Davidson, Faculty Consulting Member
and
The Remaining Members of the Board and Senior Advisor:
Hunter E. Craig
Allison Cryor DiNardo
Marvin W. Gilliam Jr.
Bobbie G. Kilberg
Stephen P. Long, M.D.
George Keith Martin
Linwood H. Rose
Hillary A. Hurd
Leonard W. Sandridge Jr.
FROM:
Susan G. Harris
SUBJECT:
Minutes of the Finance Committee Meeting on
May 20, 2013
The Finance Committee of the Board of Visitors of the University
of Virginia met, in Open Session, at 1:30 p.m., Monday, May 20, 2013,
in the Board Room of the Rotunda; Victoria D. Harker, Chair, presided.
Present were Frank B. Atkinson, A. Macdonald Caputo, the
Honorable Alan A. Diamonstein, William H. Goodwin Jr., Vincent J.
Mastracco Jr., John L. Nau III, Timothy B. Robertson, and Helen E.
Dragas, Rector.
Also present were Hunter E. Craig, Allison Cryor DiNardo, Marvin
W. Gilliam Jr., Bobbie G. Kilberg, Stephen P. Long, M.D., George Keith
Finance Committee
May 20, 2013
2.
Martin, Linwood H. Rose, Hillary A. Hurd, Blake E. Blaze (student
member elect), and Leonard W. Sandridge Jr.
Daniel Maxwell Meyers, the consulting member from the Council of
Foundations, and Martin N. Davidson, the faculty consulting member,
were also present.
Present as well were Teresa A. Sullivan, John D. Simon, Patrick
D. Hogan, Susan G. Harris, Paul J. Forch, Susan A. Carkeek, Steven T.
DeKosky, M.D., Donna Price Henry, James L. Hilton, R. Edward Howell,
Patricia M. Lampkin, Marcus L. Martin, M.D., Nancy A. Rivers, Colette
Sheehy, Robert D. Sweeney, J. Milton Adams, Melody S. Bianchetto,
David J. Boling, Melissa F. Clarke, Anthony P. de Bruyn, Larry L.
Fitzgerald, Stephen A. Kimata, Megan K. Lowe, James S. Matteo,
McGregor McCance, Maurie D. McInnis, Gregory W. Roberts, and Debra D.
Rinker.
_ _ _ _ _ _ _ _ _ _
Mr. Hogan presented the agenda for the meeting, which included
five consent agenda items.
Consent Agenda: Amendment to Delegation of Authority in Working
Capital Investment Policy
Mr. Hogan stated the Working Capital Investment Policy delegates
investment management authority to the University’s Vice President and
Chief Financial Officer. Because the University does not have a Vice
President and Chief Financial Officer at this time, the delegation
authority must be changed. He said the University believes it is
prudent to amend the policy to authorize the Executive Vice President
and Chief Operating Officer to manage working capital investments and
further delegate such responsibility in accordance with the policy.
On motion, the committee approved the following resolution and
recommended it for full Board approval:
APPROVAL TO AMEND THE DELEGATION OF AUTHORITY IN THE WORKING CAPITAL
INVESTMENT POLICY
WHEREAS, the University’s Working Capital Investment Policy
authorizes the Vice President and Chief Financial Officer to manage,
and further delegate the management of, investments made under the
policy; and
WHEREAS, the University currently does not have a Vice President
and Chief Financial Officer;
RESOLVED, the Board of Visitors authorizes the Executive Vice
President and Chief Operating Officer to manage investments under the
Working Capital Investment Policy and further delegate or revoke such
responsibility under the program.
_ _ _ _ _ _ _ _ _ _
Finance Committee
Consent Agenda:
May 20, 2013
3.
Defined Contribution Retirement Plans Amendments
Mr. Hogan reminded the Finance Committee that they provide
oversight of the retirement plans. On May 10, 2013, Victoria Harker,
as Finance Committee Chair, and Mr. Alan Diamonstein, Finance
Committee member, met with the Executive Vice President and Chief
Operating Officer and representatives of the Retirement Administrative
Committee to review annual performance and to discuss the overall
program from participant and administrative perspectives. Minutes of
this meeting can be found on page 22 of these minutes.
It was noted that the group discussed two amendments to the
Defined Contribution Retirement Plans:
•
The University provides academic faculty and managerial and
professional staff a choice of two retirement plans – a defined
benefit plan (VRS) sponsored by the Commonwealth and a defined
contribution plan sponsored by the University. The University
also sponsors a separate defined contribution plan, the Medical
Center Optional Retirement Plan for employees of the University
of Virginia Medical Center. The Optional Retirement Plan is
being amended to provide greater flexibility to separated
employees in taking a distribution from the Plan. The amendment
removes the restriction that prohibits a distribution prior to 60
days from date of separation of service. This aligns the
University policy with the VRS requirement to qualify for retiree
health benefits.
•
The Medical Center Optional Retirement Plan is also being amended
to incorporate employees of Albemarle Arthritis Associates. On
behalf of the Medical Center, the University intends to grant
employees who became eligible employees as a result of the
Medical Center’s acquisition of Albemarle Arthritis Associates,
effective May 26, 2013, the right to apply months of service
performed on behalf of Albemarle Arthritis Associates, toward
fulfilling the vesting period requirement. To operationalize
this grant of service credit, the University must formally amend
the benefit plan. This is consistent with how we have handled
other Medical Center acquisitions of physician practices.
On motion, the committee approved the following resolution and
recommended it for full Board approval:
AMENDMENTS TO DEFINED CONTRIBUTION RETIREMENT PLANS
RESOLVED, the Optional Retirement Plan for Employees of the
University of Virginia is amended such that a separated employee may
receive benefits from the Plan any time on or after the day he or she
separates from service; and
RESOLVED FURTHER, the Optional Retirement Plan for Employees of
the UVa Medical Center is amended to grant employees who became
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May 20, 2013
4.
eligible employees as a result of the Medical Center’s acquisition of
Albemarle Arthritis Associates(AAA), LLP, effective May 26, 2013, the
right to apply months of service performed on behalf of AAA toward
fulfilling the vesting period requirement.
_ _ _ _ _ _ _ _ _ _
Consent Agenda: Capital Item – Project Review, Alderman Road
Residence Halls Building #6
In April 2011, the Board approved Alderman Road #6 for $30M and
56,898 gross square feet (gsf). In November 2012, the Board approved
the schematic design. The project scope has increased in the
following ways:
•
•
•
Budget: increases from $30M to $38M ($8M increase)
GSF: increases from 56,898 gsf to 74,898 gsf (18,000 gsf increase)
Beds: increases from 185 to 211 beds (26 increase). This
increase allows for an average of 305 gsf per bed.
Mr. Hogan said we are adding 26 beds and approximately 10,500 gsf
of office space to consolidate Housing and Residence Life support, and
position support staff centrally in a location that is convenient to
student foot traffic in the first year housing area, O’Hill Dining,
Aquatics and Fitness Center, and bus stops. This move will allow for
repurposing of 24,400 gsf across five buildings in the McCormick Road
area.
On motion, the committee approved the following resolution and
recommended it for full Board approval:
APPROVAL OF PROJECT BUDGET AND SCOPE REVIEW, ALDERMAN ROAD RESIDENCE
HALLS BUILDING #6
RESOLVED, an $8.0 million increase to the Alderman Road Residence
Halls Building #6 to a revised budget range of $36.0 - $38.0 million,
and an 18,000 gross square feet increase in scope to 74,898 gross
square feet, is approved.
RESOLVED FURTHER, the financial plan for the Alderman Road
Residence Halls Building #6 is complete and approved.
_ _ _ _ _ _ _ _ _ _
Consent Agenda: Capital Item – Project Approval, Facilities
Management Shop Support/Office Building
Mr. Hogan said he had personally visited this site and can attest
to the need for the replacement of these structures. He said the twostory 14,000 gsf building will provide shop support and office space.
The cost will be $6 million ($5 million debt and $1 million cash). He
said this new facility will consolidate staff now in leased space to
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May 20, 2013
5.
an on-Grounds location, and will free up parking and staging areas for
service vehicles.
On motion, the committee approved the following resolution and
recommended it for full Board approval. Rector Helen Dragas voted
“no” and all other committee members present voted “yes”.
APPROVAL OF ADDITION TO THE UNIVERSITY’S MAJOR CAPITAL PROJECTS PLAN –
FACILITIES MANAGEMENT SHOP SUPPORT/OFFICE BUILDING
RESOLVED, the Facilities Management Shop Support/Office Building
at an estimated project cost of $5-6 million is added to the Major
Capital Projects Program.
RESOLVED FURTHER, the financial plan for the Facilities
Management Shop Support/Office Building is complete and approved.
_ _ _ _ _ _ _ _ _ _
Consent Agenda: Purchase of Land and Improvements Located at 560 Ray
C. Hunt Drive, Charlottesville, Virginia from the University of
Virginia Foundation
Mr. Hogan said this purchase was approved in April 2013 as part
of the capital program. This building is to be converted to
translational research space for the School of Medicine, who will use
the Ivy Foundation gift for the purchase and renovation.
On motion, the committee approved the following resolution and
recommended it for full Board approval:
APPROVAL TO PURCHASE 560 RAY C. HUNT DRIVE, CHARLOTTESVILLE, VIRGINIA
FROM THE UNIVERSITY OF VIRGINIA FOUNDATION
WHEREAS, the Board of Visitors finds it to be in the best
interest of the University of Virginia to purchase from the University
of Virginia Foundation (the “Foundation”) land and improvements
thereon located at 560 Ray C. Hunt Drive, Charlottesville, Virginia
(the “Property”) at a purchase price not to exceed $15,850,000;
RESOLVED, the Board of Visitors approves the acquisition of the
Property; and
RESOLVED FURTHER, the Executive Vice President and Chief
Operating Officer is authorized, on behalf of the University, to
approve and execute purchase agreements and related documents, to
incur reasonable and customary expenses, and to take such other
actions as deemed necessary and appropriate to consummate such
property acquisition; and
RESOLVED FURTHER, all prior acts performed by the Executive Vice
President and Chief Operating Officer, and other officers and agents
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May 20, 2013
6.
of the University, in connection with such property acquisition, are
in all respects approved, ratified, and confirmed.
_ _ _ _ _ _ _ _ _ _
Walk-on Resolution: Approval for a Medical Center Joint Venture in a
Medicaid Managed Care Business
This resolution was recommended by the Medical Center Operating
Board for approval. The Medical Center would like to participate and
invest in a joint venture with Carilion Clinic or an affiliate, Aetna,
Inc. or an affiliate, and Riverside Health System or an affiliate, and
future partners to be determined, for a Medicaid managed care
business. The Medical Center, directly or indirectly, will obtain a
membership interest not to exceed 16.33%. Mr. Hogan said Section 2377.3 of the Code of Virginia grants authority to the Medical Center to
enter into joint ventures.
This action would authorize the President of the University, or
her designee, in consultation with the Vice President and Chief
Executive Officer of the Medical Center and with the approval of the
Chair of the Medical Center Operating Board and the Chair of the
Finance Committee, to negotiate the terms of this joint venture and
execute the necessary documents.
On motion, the committee approved the following resolution and
recommended it for full Board approval:
APPROVAL FOR A MEDICAL CENTER JOINT VENTURE IN A MEDICAID MANAGED CARE
BUSINESS
WHEREAS, the Medical Center Operating Board and the Finance
Committee find it to be in the best interests of the University of
Virginia and its Medical Center for the Medical Center to participate
and invest in a joint venture with Carilion Clinic or an affiliate,
Aetna, Inc. or an affiliate, and Riverside Health System or an
affiliate, and future partners to be determined, for a Medicaid
managed care business; and
WHEREAS, Section 23-77.3 of the Code of Virginia grants authority
to the Medical Center to enter into joint ventures;
RESOLVED, the University, on behalf of the Medical Center, is
authorized to enter into a joint venture for a Medicaid managed care
business with Carilion Clinic or an affiliate, Aetna, Inc. or an
affiliate, and Riverside Health System or an affiliate, and future
partners to be determined, whereby the Medical Center, directly or
indirectly, will obtain a membership interest not to exceed 16.33%;
and
RESOLVED FURTHER, the President of the University, or her
designee, in consultation with the Vice President and Chief Executive
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May 20, 2013
7.
Officer of the Medical Center and with the approval of the Chair of
the Medical Center Operating Board and the Chair of the Finance
Committee, is authorized to negotiate the terms of such joint venture,
including the execution of contracts and all other documents necessary
for the effectuation of the joint venture, on such terms as the
President of the University or her designee deems appropriate, and to
take such other action as the President of the University or her
designee deems necessary and appropriate to consummate the foregoing.
_ _ _ _ _ _ _ _ _ _
Action Item:
2013-2014 Operating Budget
Mr. Hogan said that throughout the year we have reviewed with the
board various elements that come together in the operating budget.
At the November meeting, a set of budget assumptions that included the
distribution for FY 14 from the endowment were reviewed, along with
projected costs for AccessUVa, and estimates for sponsored research.
As the state dealt with amendments to the current two year budget,
Board members were informed. At the February meeting, the Board
approved a multi-year faculty salary plan that calls for an average
merit-based increase of 4.75% in FY 14. The Board also reaffirmed the
current student growth plan for the University. In April, the Board
approved tuition, fees, housing, and dining rates, which form a
significant portion of available operating revenue for the budget.
Mr. Hogan said this year’s budget reflects the continued
transition to a budget development process that will form the
foundation for the new internal financial model.
Ms. Sheehy reviewed the Academic Division and College at Wise
budgets. She stated the operating budget action being asked of the
Board consists of six parts – four operating entities, a special
endowed program (Pratt Fund), and a program for smaller renovation
projects that do not exceed $5 million.
Ms. Sheehy stated the Academic Division and the College at Wise
have many of the same budget priorities. She said of primary
importance is competitive compensation for our faculty and staff
coming out of a period of five straight years without base salary
increases. The budget includes the state-authorized 3% faculty salary
increase and 2% staff salary increase, and compression adjustments,
effective in July. The budget also includes supplemental salary
increases for faculty (1.75% percent) and University staff (1%) in
accordance with the resolution passed by the Board in February.
Ms. Sheehy said the University is obligated to develop strategies
that align with the objectives of the Higher Education Opportunity Act
of 2011. Annually, the University and Wise put forward six-year plan
programs that support the objectives of the Higher Education
Opportunity Act. The state provided new funds for some of those
initiatives, while others will be supported from funds reallocated
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May 20, 2013
8.
internally. To produce 100,000 more degrees statewide requires
enrolling more students, and in the case of the College at Wise,
better retention through its Early Alert program and improvement in
graduation rate. Both entities focus on access and affordabilty in
their own ways: the University through AccessUVa, and the College
with its Wise Scholars Program. Both emphasize and work to attract
more students enrolling in STEM-H disciplines.
Ms. Sheehy said revenue related to enrollment growth in the
Academic Division has been allocated to the schools that will enroll
the new students – a principle of the new financial model that revenue
follows the activity that generates it. Similarly, tuition revenue
associated with 1% of the base tuition increase for undergraduate
students will be distributed to schools, providing resources toward
their operating needs. She said this budget provides for at least $9
million from cost savings and other efficiencies to be captured and
redirected to a fund that will be available to address priorities
emerging from the strategic planning process.
Mr. Howell and Mr. Fitzgerald gave a brief, high level overview
of the Medical Center budget, which was reviewed in detail with the
Medical Center Operating Board earlier in the day.
Mr. Hogan spoke briefly about the Pratt Fund. The current market
value for this fund is $128.5 million. The funds were designated for
the School of Medicine and for four departments in the College of Arts
and Sciences: Biology, Chemistry, Physics, and Math. Each year, the
budget includes allocations from the Pratt Fund for the purposes of
faculty salaries, scholarships, and equipment, in the Departments of
Biology, Chemistry, Physics, and Math in the College and Graduate
School of Arts and Sciences and for research and scholarships in the
School of Medicine.
Mr. Hogan said for FY 14, the budget includes a $2.54 million
allocation to use for start-up packages for new faculty hires in
Chemistry, Biology, Physics, and Math. The remaining distribution is
used for fellowships, faculty salaries, and equipment.
Mr. Hogan spoke also about the Annual Renovation and
Infrastructure Plan (ARIP). He said the University implements a
number of small renovation and infrastructure projects each year that
range from $2M to $5M in cost and are paid for with cash reserves.
Including these projects in the annual budget allows us to move them
forward more quickly. He said the Academic Division ARIP ranges from
$18 - $23 million and includes projects such as Gooch and Dillard
Residence Hall balcony, air handling and fire detection improvements,
John Paul Jones Arena water intrusion, and several utility upgrade
projects. The Medical Center’s ARIP averages about $7 million. All
projects will be funded from Medical Center operating funds.
On motion, the committee approved the following resolutions and
recommended them for full Board approval:
Finance Committee
May 20, 2013
9.
APPROVAL OF THE 2013-2014 OPERATING BUDGET AND ANNUAL RENOVATION AND
INFRASTRUCTURE PLAN FOR THE ACADEMIC DIVISION
RESOLVED, the 2013-2014 Operating Budget and Annual Renovation
and Infrastructure Plan for the Academic Division is approved, as
recommended by the President and the Chief Operating Officer.
APPROVAL OF THE 2013-2014 OPERATING BUDGET FOR THE UNIVERSITY OF
VIRGINIA'S COLLEGE AT WISE
RESOLVED, the 2013-2014 Operating Budget for The University of
Virginia’s College at Wise is approved as recommended by the President
and the Chief Operating Officer.
APPROVAL OF THE 2013-2014 OPERATING AND CAPITAL BUDGETS AND ANNUAL
RENOVATION AND INFRASTRUCTURE PLAN FOR THE UNIVERSITY OF VIRGINIA
MEDICAL CENTER
RESOLVED, the 2013-2014 Operating and Capital Budgets and the
Annual Renovation and Infrastructure Plan for the University of
Virginia Medical Center are approved, as recommended by the President,
the Executive Vice President and Chief Operating Officer, and the
Medical Center Operating Board.
APPROVAL OF THE 2013-2014 OPERATING AND CAPITAL BUDGETS FOR THE
UNIVERSITY OF VIRGINIA TRANSITIONAL CARE HOSPITAL
RESOLVED, the 2013-2014 Operating and Capital Budgets for the
University of Virginia Transitional Care Hospital, presented as a
component of the Medical Center Operating Budget, are approved, as
recommended by the President, the Executive Vice President and Chief
Operating Officer, and the Medical Center Operating Board.
APPROVAL OF PRATT FUND DISTRIBUTION FOR 2013-2014
RESOLVED, the budget for the expenditure of funds from the Estate
of John Lee Pratt is approved to supplement appropriations made by the
Commonwealth of Virginia for the School of Medicine and the
Departments of Biology, Chemistry, Mathematics, and Physics in the
College of Arts and Sciences. Departmental allocations, not to exceed
$7,240,000 for 2013-2014, are suggested by the department chairs and
recommended by the dean of each school; the disbursement of each
allotment will be authorized by the Executive Vice President and
Provost. To the extent the annual income from the endowment is not
adequate to meet the recommended distribution, the principal of the
endowment will be disinvested to provide funds for the approved
budgets.
_ _ _ _ _ _ _ _ _ _
Finance Committee
May 20, 2013
10.
Executive Vice President and Chief Operating Officer Remarks:
Mr. Hogan reminded the Board of several written reports that were
provided in the Finance Committee materials. These written reports
are provided below. The Pratt Fund Allocations are attached in an
Appendix.
_ _ _ _ _ _ _ _ _
The Chair adjourned the Finance Committee meeting at 2:50 p.m.
SGH:dr
These minutes have been posted to the University of Virginia’s Board of
Visitors website. http://www.virginia.edu/bov/financeminutes.html
MISCELLANEOUS FINANCIAL REPORTS
Finance Committee
University of Virginia
May 20, 2013
Finance Committee
May 20, 2013
11.
Written Report: University of Virginia Investment Management Company
Report on the Long-Term Pool – Market Value and Performance as of
March 31, 2013
Quarter-End March 2013
SUMMARY
The following commentary provides an update on the current market
environment as well as the asset allocation, performance (unaudited),
risk management, and liquidity position of UVIMCO’s Long Term Pool as
of and for periods ending March 31, 2013. The 5.1% gain recorded by
the Long Term Pool this calendar quarter is high, even beating the
4.7% increase in our policy benchmark during a market rally. Our
fiscal year-to-date return on the Long Term Pool is 10.8% versus the
fiscal year-to-date policy portfolio return of 12.6%. While we report
on short-term performance, we encourage all of our investors to focus
most on longer-term performance. Over the 20-year period ending March
31, 2013, the Pool’s annualized return was 11.9%, exceeding the policy
benchmark return by 440 basis points (bps). We continue to position
the Long Term Pool defensively versus the policy portfolio benchmark,
with less market risk.
Each spring, we estimate the future long-term return of the Long
Term Pool by adding the nominal expected return of our policy
portfolio together with expected alpha from manager performance and
portfolio tilts. This year, we adjusted our long-term (10- year)
return forecast down from 8.0% to 7.5%. The decrease in this estimate
is partially due to the rise in equity prices outpacing real earnings
growth in 2012, and the continued tightening of global credit spreads
and sustained low yields. Each asset class included in the Policy
Portfolio provides a lower long-term expected return today than it did
one year ago.
We make a few observations about the 7.5% estimate for long-term
returns. First, assuming a 5% spending rate and a 2.5% rate of
inflation, the 7.5% expected return will allow us to preserve the real
spending power of the endowment. However, we project no real growth
over the next 10 years. A second observation is that active
management will continue to be needed in order for the Long Term Pool
to keep pace with inflation over the next decade. Finally, although
our analysis underlying the 7.5% expected return on the Long Term Pool
is sound, there is much uncertainty surrounding the inputs and this
final estimate. Increased competition could hamper UVIMCO’s ability
to deliver the same level of alpha as we have in the past. In
addition, a further run in asset prices in excess of real earnings
growth poses a meaningful risk to the endowment’s assets. As always,
the UVIMCO Board and staff is working hard to develop an appropriate
response to either of these scenarios.
Finance Committee
May 20, 2013
12.
MARKET ENVIRONMENT
On the back of a very strong 2012, the market continued its
ascent with the S&P 500 up 10.6% for the first quarter of 2013. With
Treasuries continuing to offer zero yield, investors looked for yield
in any form. Inflows into equities grew, with investors focusing on
companies that pay dividends. In addition to the encouraging February
employment numbers, U.S. economic data looked positive with housing
starts, building permits, industrial production, and durable goods
orders all up this quarter. These positive economic signs led to a
small sell off in Treasuries with the 10-year Treasury ending at 1.87%
compared with 1.78% at year end. All in, the U.S. market performed
better than most other countries. The MSCI World Index, representing
the developed markets, was up 7.9% and the MSCI Emerging Markets Index
was down -1.6%.
Although the first quarter was filled with optimism, there are
plenty of reasons for investors to remain cautious. The federal
budget sequester went into effect on March 1st and it is feared that
these cuts could have a meaningful impact on U.S. economic
growth. The European markets spent the quarter focused on the banking
situation in Cyprus, which ultimately required a $10 billion bailout
from the European Union (EU) and International Monetary Fund
(IMF). The banks were required to close for two weeks, and government
limits were placed on accounts to prevent a run on the banks. Bailout
alternatives were considered and ultimately Cyprus Popular (Laiki),
the country’s second largest bank, had to close. Depositors, many of
them Russian, may be required to pay a tax as high as 40% on their
deposits and although Cyprus is a small economy within Europe, this
tax is unsettling for depositors in other EU countries as well.
In Asia, the Bank of Japan restated its target of achieving 2%
inflation and showed it is very committed to purchasing government
bonds and increasing its monetary base target. The Japanese stock
market responded to this continued easing, with the MSCI Japan Index
rising close to 12% in the first quarter and the yen continuing its
devaluation.
Investors are focused on the new global market environment and
trying to determine how best to navigate within it. In his investment
outlook piece titled “A Man in the Mirror” (April 2013), Bill Gross
discusses some of the market questions that need to be asked but are
hard to answer:
My point is this: PIMCO’s epoch, Berkshire Hathaway’s epoch,
Peter Lynch’s epoch, all occurred or have occurred within an epoch of
credit expansion – a period where those that reached for carry, that
sold volatility, that tilted towards yield and more credit risk, or
that were sheltered either structurally or reputationally from
withdrawals and delevering (Buffett) that clipped competitors at just
Finance Committee
May 20, 2013
13.
the wrong time – succeeded. Yet all of these epochs were perhaps just
that – epochs. What if an epoch changes? What if perpetual credit
expansion and its fertilization of asset prices and returns are
substantially altered? What if zero-bound interest rates define the
end of a total return epoch that began in the 1970s, accelerated in
1981 and has come to a mathematical dead-end for bonds in 2012/2013
and commonsensically for other conjoined asset classes as well? What
if a future epoch favors lower than index carry or continual bouts of
2008 Lehman-esque volatility, or encompasses a period of global
geopolitical confrontation with a quest for scarce and scarcer
resources such as oil, water, or simply food as suggested by Jeremy
Grantham? What if the effects of global “climate change or perhaps
aging demographics,” substantially alter the rather fertile petri dish
of capitalistic expansion and endorsement? What if quantitative easing
policies eventually collapse instead of elevate asset prices? What if
there is a future that demands that an investor – a seemingly great
investor – change course, or at least learn new tricks?
At UVIMCO, we continue to ask these questions to our managers and
to ourselves. We seek motivated and talented managers who can
navigate through these changes, and we are working to adjust the
portfolio accordingly.
Asset Allocation
Our policy portfolio continues to be an allocation of 60% global
public equity, 10% global public real estate and 30% global investment
grade fixed income. This portfolio is designed to provide long-term
growth from equities, an inflation hedge from real assets and a
deflation hedge from fixed income.
The Long Term Pool’s actual allocation as of March 31, 2013 is
64.5% to equity managers, 14.2% to real asset managers and 21.3% to
fixed income (including marketable alternatives, credit, and cash).
Looking through to our managers’ underlying investments, the Long Term
Pool has a 52.6% allocation to equities, 15.5% allocation to real
assets and 31.9% allocation to fixed income (including credit, bonds
and cash) as of March 31, 2013. Therefore, the Long Term Pool
continues to be positioned defensively versus the policy portfolio
benchmark, with less equity market risk.
PERFORMANCE
The Long Term Pool returned 5.1% in the quarter ended March 31,
2013 versus the policy benchmark gain of 4.7%. While we are pleased
by this level of relative outperformance, it is not our goal to
outperform the passive benchmark over short time periods such as one
quarter or year. Fiscal year-to-date, the Long Term Pool has returned
10.8% versus 12.6% earned by the policy benchmark. As expected, Pool
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May 20, 2013
14.
performance has lagged the benchmark in the face of rapidly rising
equity markets.
EQUITIES
Public Equity
The public equity portfolio returned 7.1% for the quarter versus
6.6% for its benchmark, the MSCI All Country World Equity Index (“MSCI
ACWI”). The public equity portfolio returned 20.9% for the fiscal
year versus 17.5% for the benchmark over the same nine-month period.
This outperformance was broad-based and occurred despite our tilt
towards emerging markets and the relative underperformance of those
regions. The MSCI Emerging Markets Index lost 0.4% for the quarter.
Although the emerging markets tilt was a headwind for the portfolio,
the tilt toward quality low-beta stocks has continued to contribute to
the program’s performance. Investor demand for defensive stocks has
been significant over the past couple of years.
Over the trailing three-, five-, and 10-year time periods,
UVIMCO’s public equity portfolio has returned 17.1%, 7.8%, and 16.7%
annually, outperforming the MSCI ACWI on an annualized basis by 870,
520, and 680 basis points, respectively. The long-term outperformance
is attributed to a mix of tilts (e.g. the current tilt to quality) and
the security selection of our managers. While the magnitude of our
public equity program’s outperformance is unlikely to continue, we
remain excited about the portfolio. Our managers conduct deep
fundamental research on companies and themes and build concentrated
portfolios of public equities. Our managers take a long-term approach
to investing, which gives them an edge in an increasingly short-term
and macro-focused investing environment. This advantage is magnified
by investing in less efficient markets, including emerging markets and
small cap companies.
Long/Short Equity
The long/short equity portfolio returned 8.2% for the quarter
versus 6.6% for the MSCI ACWI and 5.1% for the Dow Jones Credit Suisse
Long/Short Equity Index. The long/short equity portfolio returned
13.8% for the fiscal year versus 17.5% the MSCI ACWI and 11.3% for the
Dow Jones Credit Suisse Long/Short Equity Index over the same ninemonth period. It is unusual for the portfolio to outperform the MSCI
ACWI during such a strong equity market. The quarterly performance
was impressive for a program with a net exposure and beta to global
equities of 0.4. Security selection on the long and short side
continues to contribute to our managers’ returns.
Finance Committee
May 20, 2013
15.
We continue to focus on partnering with managers with
differentiated stock selection skills, an unwavering commitment to the
short side, and sensible portfolio construction and risk management.
Private Equity
The private equity portfolio returned 4.6% for the quarter versus
6.6% for its benchmark, the MSCI ACWI. For the fiscal year-to-date,
the portfolio increased by 8.4% versus a 17.5% increase in the index.
On a stand-alone basis, the buyout portfolio returned 4.2% for the
quarter and 8.6% for the fiscal year to date. Venture capital
returned 6.2% for the quarter and 7.2% so far in the fiscal year.
Most of our private equity managers provide conservative and lagged
valuation updates so when the public markets are firing on all
cylinders, as they have been, we expect our short-term returns to
trail the public market index. Longer term performance for the
private equity portfolio has been stellar with a return of 12.6% for
the 10-year period ending March 31, 2013, while the MSCI ACWI returned
9.9%. Broken out between buyout and venture, the former returned 15%
and the latter returned 6% for the 10-year period.
According to S&P Capital IQ, at the end of 2012, non-financial
companies in the S&P 500 held roughly $1.1 trillion in cash or shortterm cash equivalent investments, all of which have fueled merger and
acquisition activity so far in 2013. The same source notes that at
least twelve $1 billion-plus transactions had been announced by the
middle of February, which included the buyout of H.J. Heinz for $23
billion by Warren Buffett and 3G Capital, the $16.7 billion deal for
49% of NBC Universal by Comcast, and the continuing saga of Dell’s
$24.4 billion plan to take itself private. Up through mid-March,
Thomson Reuters reported that the weekly average for M&A activity was
$37.2 billion, with an expectation that the robust appetite for deals
would continue into the next few quarters.
As is typical for the first quarter of a calendar year, Initial
Public Offering (“IPO”) activity was sparse. Only eight VC-backed
companies went public on U.S stock exchanges during the quarter,
according to Thomsen Reuters and the National Venture Capital
Association (the “NVCA”). Compared to the last quarter of 2012, the
number of IPOs was the same, but there was a 58% decline in the
dollars raised for Q1 2013. IPO activity in the first quarter of a
calendar year generally takes a back seat to year-end reporting and
planning for the coming year, but the beginning of 2013 also had to
contend with various tax and political issues, e.g., the much talked
about “fiscal cliff,” and a word new to most investors’ vocabularies:
“sequestration.” All of these factors impacted the market for exits,
but Thomson Reuters and the NVCA have indicated that “they expect
stronger volume in the second and third quarters.”
Finance Committee
May 20, 2013
16.
The private equity portfolio continued to be cash flow positive
for the quarter with cash distributions of $57 million compared to $18
million in capital calls. For the fiscal year, cash distributions
have totaled $187 million versus capital calls of $96 million,
resulting in a net cash flow of $91 million through the nine months of
the fiscal year.
REAL ASSETS
Real Estate
The real estate portfolio returned 1.7% for the first quarter of
2013 versus 6.2% for the weighted benchmark of publicly-traded U.S.
and international real estate securities. This strong performance for
the benchmark was led by Asian securities and followed by U.S.
securities. Fiscal year-to-date, the real estate portfolio generated
a return of 2.8%, underperforming the public real estate benchmark by
11.7%. As we have explained in prior commentaries, our private real
estate investments are quite different than the underlying holdings of
our publicly traded real estate benchmark. However, we expect our
real estate investment to outperform the public benchmark over long
time periods. Although we have not met this goal, we believe our
current real estate portfolio is sound and has latent value.
The Federal Reserve’s aggressive monetary policy has lowered
yields on the most liquid, high quality assets over the past year or
so. This capital has started to make its way to lower quality markets
and assets over the past six months, with the multifamily sector
continuing to be a favorite for institutional investors. With
vacancies low and rents climbing, construction has rebounded to
260,000 annualized units as of January 2013. While this level is up
from the low of 50,000 units in December 2010, it is still well below
the 20-year and 40-year averages of 395,000 and 429,000 units,
respectively. Positive movement in the office sector may be seen as
the economy has continued to add jobs, which should reduce office
vacancy given that new construction in the office space is almost nonexistent. A potential dampener to the jobs growth is the shadow
vacancy that currently exists in office space, as well as the more
efficient utilization of space going forward.
Overall, the commercial real estate sector is in various stages
of stabilization and recovery. Real Treasury yields remain depressed
which will continue to support U.S. REIT pricing, with REIT investors
willing to take value erosion risk in exchange for secure dividends.
Internationally, Asia and Australia REIT markets have seen strong
returns as Europe continues to lag amid macro-economic concerns.
Fiscal year-to-date, U.S. real estate securities underperformed the
global basket of publicly-traded real estate securities by nearly 850
basis points.
Finance Committee
May 20, 2013
17.
Over the past nine months, we funded capital calls of $77 million
and received distributions of $56 million, bringing the allocation to
8.4% of the Long Term Pool. During the quarter, the real estate
portfolio had $24 million in calls and $10 million in distributions.
Staff approved commitments of $55 million to two existing managers
during the first quarter. Pending satisfactory legal review, this
will bring real estate unfunded commitments to $172 million. We are
also negotiating the purchase of a small secondary interest in an
existing manager relationship.
Resources
The resources portfolio generated a return of 3.6% and 7.3% for
the quarter and fiscal year-to-date, respectively. This compares to
quarterly and fiscal year to date returns of 0.5% and 8.5%,
respectively, for the Goldman Sachs Commodity Index, a broad-based
index of commodities. Publicly traded natural resource equities
represented by the S&P North America Natural Resources Equity Index
returned 7.2% for the quarter and 16.4% fiscal year-to-date. It is
typical for UVIMCO’s resources portfolio to lag the performance of
publicly traded natural resources during times of broad-based market
rallies. The managers in our resource portfolio primarily invest in
private, illiquid companies and tend to conservatively value these
positions relative to their ultimate sale price. Further, valuations
provided by our managers are generally one to two quarters behind the
quarter-end date, which complicates comparisons to public benchmarks.
UVIMCO’s formal real assets benchmark, the blended MSCI Real Estate
Index, returned 6.2% in the first quarter and 14.5% fiscal year to
date.
The WTI Crude Oil price finished the quarter at $97.49, just shy
of the quarterly highs in January and equal to levels seen in the fall
of 2012. The spread between WTI and Brent contracted meaningfully
towards the end of the quarter as some of the domestic supply
bottlenecks began to ease. The NYMEX Henry Hub Natural Gas spot price
ended the quarter at $4.03, an increase of 12% since the beginning of
the year and in-line with the highest prices of 2012. Prices are
still meaningfully below long-term averages as a result of the
prolific increase in drilling activity and consequent supply increase
made possible by technological advances. Colder temperatures and a
modest decrease in domestic rig counts have contributed to the price
increase seen in the first quarter of 2013. Our managers are well
positioned to benefit from any increase in natural gas prices as they
have been very active in acquiring and de-risking conventional and
unconventional domestic gas plays. That said, they have also proven
their ability to generate returns in declining gas price environments,
as evidenced by the resource portfolio’s 3- and 5-year returns of
29.1% and 18.4%, respectively. Our managers continue to focus on
acquiring assets in those basins with highly attractive returns to
capital.
Finance Committee
May 20, 2013
18.
During the first quarter, our resource managers called $7 million
of capital and distributed $17 million. For the fiscal year, cash
distributions have totaled $58 million versus capital calls of $36
million, resulting in a net cash flow of $22 million.
FIXED INCOME AND MARKETABLE ALTERNATIVES
Marketable Alternatives and Credit
For the first quarter of 2013, the marketable alternatives and
credit portfolio gained 4.6% versus a 2.9% return on the Barclays High
Yield Index. Our credit managers recorded relatively strong
performance in January, partially due to certain Lehman claims being
realized in that month. Overall, credit risk assets continued to
appreciate this quarter and our managers in liquid credit benefited
from this rally. Our investments in two credit managers were fully
realized as the managers liquidated the remaining positions in these
drawdown vehicles.
During the first quarter, our credit managers, who use a private
equity fund structure, called $4 million of capital and distributed
$13 million. For the fiscal year, cash distributions have totaled $62
million versus capital calls of $6 million, resulting in a net cash
flow of $56 million.
Bonds and Cash
Our bonds and cash continue to increase due in part to
distributions coming in from many of our private investments. Both
the domestic buyout and resource portfolios have returned sizable
amounts of capital to us so far this year. The net cash inflows for
the nine months ended March 31, 2013 were $140 million including
distributions, redemptions, and new investments.
We continue to manage bonds and cash as a source of
liquidity. Our cash portfolio is invested in U.S. Treasury bills and
notes with maturities less than one year and U.S. Treasury guaranteed
Repurchase Agreements with U.S. domiciled counterparties. The
duration of the cash portfolio as of March 31, 2013 was 0.20 years.
Our government bond portfolio has also been in short-term U.S.
Treasury notes and bonds but with maturities under three years. The
average duration of this portfolio as of quarter end was 0.88
years. Returns continue to be insignificant given the zero-interest
rate policy of the Federal Reserve Bank. The cash and bond portfolios
returned 0% and 0.1% for the quarter, and 0.1% and 0.2% for the fiscal
year. The Barclays U.S. Treasury Bond Index (duration of 5.3 years)
returned -0.2% and 0.3% for the quarter and fiscal year.
Finance Committee
May 20, 2013
19.
RISK MANAGEMENT
Investors may be willing to bear risk if they are adequately
compensated with future higher returns. At UVIMCO, we are willing to
bear certain risks, but others must be eliminated if we are unable to
absorb the downside losses or if we do not earn a sufficient risk
premium from assuming those risks. We consider three broad portfolio
risks when managing the Long Term Pool – market risk, manager risk,
and liquidity risk – and evaluate these factors relative to the risk
tolerance of the Long Term Pool shareholders.
Market Risk
The largest risk factor present in the Long Term Pool is equity
market risk. A common definition of market risk is the standard
deviation or volatility of a portfolio’s return. Volatility provides a
useful proxy for market risk if returns are normally
distributed. However, it is clear that both the broad market as well
as individual investment strategies are not normally distributed, but
rather are subject to a much higher probability of negative “tail”
events. Since investment returns are subject to “tail risk”, it is
useful to complement the standard deviation statistic with an estimate
of drawdown risk.
We manage market risk in the Long Term Pool by diversifying
across three broad asset classes: equity, fixed income, and real
assets. Our objective is to maintain estimated market risk in the
Long Term Pool that is less than or equal to the estimated market risk
of the policy portfolio. We look at volatility, worst 1 % drawdown
and beta to global equities. Our current estimate of the volatility
of the Long Term Pool returns is 11% versus 12% for the policy
portfolio. The lowest one-percentile annual drawdown on the Long Term
Pool is estimated to be -26%, less than the drawdown estimate of -30%
on the policy portfolio. We estimate the beta to global equities for
the Long Term Pool is 0.65 versus 0.68 for the policy portfolio.
Manager Risk
The Long Term Pool invests with more than one hundred external
managers. We seek to maintain a portfolio of managers that generates
sufficient returns to compensate us for bearing both market risk and
the additional risk inherent in working with individual
managers. Manager risk includes tracking error or active bets away
from the benchmark, operational or business risks, lack of
transparency, and leverage. UVIMCO mitigates manager risk by
diversification and employing extensive and ongoing due diligence to
assess both the investment and operational aspects of our external
fund managers. Our Investment Policy Statement ensures a minimum
level of diversification by limiting our exposure to any single
manager to 7.5% of the Long Term Pool. As of March 31, 2013, our
Finance Committee
May 20, 2013
20.
largest manager exposure was 5.4% of the Long Term Pool, well within
the 7.5% maximum.
Over time, UVIMCO has been well compensated for assuming manager
risk. Attribution analyses suggest that manager selection is the
largest contributor to the Long Term Pool’s long-term outperformance
versus the policy benchmark and peers.
Liquidity Risk
At UVIMCO, we define liquidity risk as an inability to meet any
of the following four primary liquidity requirements: (i) withdrawals
by the University and foundation investors, (ii) the excess of capital
calls over expected capital distributions from private funds, (iii)
the need to rebalance exposures following a market decline, and (iv)
the ability to deploy cash opportunistically as new investment
opportunities arise. We manage this risk by maintaining a portfolio
of Treasury bills and notes, maintaining sufficient liquidity with our
public equity and hedge fund managers, and managing the pace of
commitments to private investments.
Given our four primary liquidity requirements, we believe that an
appropriate target for liquidity is to have 10% of the Long Term Pool
invested in assets that are safe and highly liquid, and at least 30%
of the Pool should be available for conversion to cash in any 12-month
period. The total of bonds and cash as of March 31, 2013 was
12.4%. Over time, we continue to expect the sum of the liquid U.S.
Treasury bond and cash portfolios to vary between 8% and 12% of the
Long Term Pool. Although this is a drag on returns (especially in a
zero interest rate environment), we believe it provides insurance
against future turbulent markets and will allow us to fund attractive
investments that will more than make up for the return drag.
The percentage of the Long Term Pool that can be turned into cash
has remained relatively constant. As of March 31, 2013, 37% of the
Long Term Pool could be turned to cash within one quarter, and 51% of
the Pool could be turned into cash within one year. Our unfunded
commitments have remained relatively constant as well. Unfunded
private investment commitments ended the quarter at $895 million or
15% of the Long Term Pool. Our target level of unfunded commitments
is 15% and the maximum is 25%. We continue to manage our unfunded
commitments carefully, investing in drawdown funds only when the
expected returns are compelling enough to warrant the assumption of
the associated liquidity risk.
Finance Committee
May 20, 2013
21.
Finance Committee
May 20, 2013
22.
_ _ _ _ _ _ _ _ _ _
Written Report:
Retirement Administrative Committee
On May 10, 2013, Ms. Victoria Harker, as Finance Committee Chair,
and Mr. Alan Diamonstein, Finance Committee member, met with the
Executive Vice President and Chief Operating Officer and
representatives of the Retirement Administrative Committee to review
Finance Committee
May 20, 2013
23.
the Plan’s annual performance and to discuss the overall program from
participant and administrative perspectives. Minutes of that meeting
follow.
Minutes
University of Virginia
Board of Visitors Finance Committee Appointees on Retirement
Administrative Committee
May 10, 2013, 1:30 p.m.
Madison Hall President’s Conference Room
Board of Visitors Finance Committee Appointees (via phone):
Harker and The Honorable Alan Diamonstein
Victoria
Also in Attendance: Pat Hogan, Executive Vice President and Chief
Operating Officer; Susan Carkeek, Vice President and Chief Human
Resource Officer; Barry Schmitt, CAPTRUST Financial Advisor (via
phone); Anne Broccoli, Director of Benefits; Megan Lowe, Assistant
Vice President and Chief of Staff to the Executive Vice President and
Chief Operating Officer, Jim Matteo, University Treasurer and Chair of
the Retirement Administrative Committee.
There were six agenda items for this meeting: the background of the
Retirement Administrative Committee, the annual review of fund
performance, excess revenue credit, Roth 403(b) implementation, future
initiatives under consideration, and plan amendments requiring Board
of Visitor approval.
I.
Background of the Retirement Administrative Committee
The University is the plan sponsor of a number of defined
contribution retirement plans, the two largest being (1) the Optional
Retirement Plan for Employees of the University of Virginia and (2)
the Optional Retirement Plan for Employees of the University of
Virginia Medical Center.
In June of 2007, the Finance Committee of the Board of Visitors
approved a revised Retirement Program Policy. The revised policy
established the role of the Finance Committee of the Board of Visitors
to provide oversight of the retirement plans and to report annually to
the Board. The policy also clarified the role of the University’s
Retirement Administrative Committee (RAC) to establish procedures and
review investment performance of the various funds offered. The RAC
had been chaired by the Vice President and Chief Financial Officer.
With that position eliminated, James Matteo, University Treasurer, has
been appointed chair. Susan Carkeek, Vice President and Chief Human
Resource Officer, is the retirement program administrator.
In April of 2008, the Finance Committee of the Board of Visitors
approved new Investment Procedures, creating a menu of investment
Finance Committee
May 20, 2013
24.
options for plan participants that includes a full range of funds,
regardless of which vendor a participant elects. The new Investment
Procedures also changed the role of CAPTRUST (a third party engaged to
provide analysis of investment performance of the funds) from
consultant to advisor thus shifting fund selection and monitoring
responsibility to CAPTRUST. Since the approval of the policy and
procedures, the Finance Committee has carried out its oversight
responsibility through its Chair and one additional Finance Committee
member. The Chair and appointee meet at least annually with the RAC
to review investment performance and other relevant issues. The Chair
then reports back to the full Finance Committee and Board, typically
at the spring meeting.
December 31st, 2012 Annual Performance Review
Barry Schmitt provided an overview of the annual report on fund
performance, reminding the appointees that the RAC meets quarterly
with CAPTRUST to monitor fund performance and once per year each of
the vendors is invited to the RAC to present on their participant
activity and fund performance. A detailed of the report of fund
performance was provided.
II.
III. Excess Revenue Credit
Revenue credits have been offered by both Fidelity (one-time
credit) and TIAA-CREF (ongoing revenue credits). These credits are the
result of CAPTRUST and UVA being able to negotiate more favorable
terms which resulted in revenue credits of approximately $115,000 from
Fidelity (one-time credit) and approximately $300,000-$330,000 from
TIAA-CREF (ongoing). For each vendor a Revenue Credit Account will be
set up and funded with excess revenue generated by the plan. RAC
approved the use of the revenue credits and is considering how best to
utilize these credits. Examples of how these credits may be used
include paying reasonable and necessary expenses for the plan,
crediting back to participants, and offering additional employee
retirement investment education programs.
IV.
Roth 403(b) Implementation
In response to increasing employee requests, The University added
a Roth option in the 403(b), accepting post-tax employee
contributions, in January 2013. Unlike Roth IRA’s there is no income
limit on a Roth 403(b) so regardless of income, our employees can
elect to defer post-tax amounts up to the IRS current 403(b) limits of
$17,500 or $22,000, based on age.
To date, there are 203 employees enrolled with a Roth
contribution and the total value of these investments currently is
$103,092.
V.
Future Initiatives Under Consideration:
The following initiatives are under consideration by the RAC.
Finance Committee
May 20, 2013
25.
Fund Line-up Consolidation: It has been several years since a
significant change has been made to the fund selections with each
vendor. In 2008, the RAC (with approval from the BOV) better aligned
the investments across all three vendor platforms (Fidelity, TIAACREF, and Vanguard). This process eliminated overlap of funds, created
a “best in class” fund structure, and “froze” assets of funds that
were not performing to the goals and objectives stated within the
Investment Policy. In 2011, after a comprehensive review, Vanguard was
eliminated as a record-keeper, while, at the same time, all current
Vanguard mutual funds were migrated to and accessible on the Fidelity
platform. Currently, the RAC monitors 41 fund options plus the target
date fund options. However, the RAC is considering further fund
consolidation to continue our strategy in offering “best in class”
fund offerings on each of the remaining two platforms (Fidelity and
TIAA-CREF).
Closing/Mapping Funds: Generally, if a particular fund no
longer meets policy guidelines, it is “closed” for future
contributions and replaced with a similar type of fund. The RAC does
not monitor the performance of closed funds. Should the fund line-up
be significantly changed, consideration would also be given to mapping
funds from the closed fund to the replacement fund. Historically, the
RAC has not “mapped” funds once a fund is closed, but a change in this
strategy is under consideration.
Introduction of a Brokerage Window: If the fund line-up is
consolidated, and certain funds removed, a brokerage window would
provide employees continued and expanded choice. The brokerage window
gives the employee the ability to direct trading within a brokerage’s
offering through the retirement plan. Employees would have the option
to set up a "window", which would allow them to trade most listed
mutual funds. While the freedom of a brokerage window can be too much
for some investors to consider, it is a viable option for those who
understand the increased risks/rewards of individual fund selection
and asset allocation.
Move towards a Group contract with TIAA: Currently employees
with TIAA-CREF have “individual contracts” where assets are held by
participants without University control. While the mutual funds held
by TIAA-CREF have University control, the variable and fixed annuities
are under these individual contracts. A long term strategy under
review is adopting “group contracts”, so future contributions would be
in a group program under university control. This will provide the
University with greater flexibility to both leverage assets for more
competitive rates and to “close and map” assets if that direction is
approved.
403(b) Oversight: Federal regulations adopted in 2009 for 403(b)
plans required many institutions, including UVa, to look more closely
into the overall operation and structure of supplemental retirement
Finance Committee
May 20, 2013
26.
programs and the efficiency (or inefficiency) within these programs.
While the RAC has explicit responsibility for oversight of the
retirement plans, even with the 2009 requirements, it is not required
to have the same level of fiduciary oversight of the 403(b) Plan. UVa
is now considering whether or not to further expand our fiduciary
oversight for these plans. One of the driving forces would be to
eliminate disparate fund offerings between the ORP and the 403(b),
thereby reducing participant confusion.
VI.
Two Amendments to the Plans
Two plan amendments are proposed for Board approval as consent
agenda items of the Finance Committee. The first is a revision to the
Optional Retirement Plan for Employees of the University of Virginia
to provide flexibility to separated employees in taking a distribution
from the plan. The current Plan prohibits a distribution prior to 60
days from the date of separation. The amendment will permit a
separated employee to take a distribution at any time after separation
from service. This aligns the University policy with the VRS
requirement to qualify for retiree health benefits.
The second requested amendment is to the Medical Center’s
Optional Retirement Plan to grant service time for the purposes of
vesting to employees of Albemarle Arthritis Associates (AAA), as a
result of the recent acquisition by the Medical Center. This same
provision was extended the Virginia Ambulatory Surgery, Inc., Culpeper
Hospital Home Health, and Hematology Oncology Patient Enterprises,
P.C. (H.O.P.E.) when they were acquired.
The meeting was adjourned at 2:05 p.m.
_ _ _ _ _ _ _ _ _ _
Written Report:
Academic Division Quarterly Financial Report
Statement of Net Assets – This statement, on page 27, provides
Academic Division’s net assets as of March 31, 2013 as compared to
June 30, 2012. The unaudited statement is developed based on
Generally Accepted Accounting Principles (GAAP). The unaudited
statements include material adjustments and accruals in order to be
reasonably accurate, but are not on a full accrual basis.
Net assets are up $404.0 million or 7.9 percent due to cash
collected from tuition billings (in advance of fourth quarter
expenses) and a 10.8 percent year-to-date return on investments.
The $39.5 million in receivables are primarily comprised of
billing for sponsored research ($30.2 million) and student charges
($5.4 million). Past due receivables over 120 days are only $3.0
million, just under 7 percent and well within the Commonwealth of
Virginia’s management standard of 10 percent.
Finance Committee
May 20, 2013
27.
Endowment investments are up nearly $270 million, on the strength
of 10.8 percent returns so far in FY13. Further information on the
endowment’s performance this year is included in the written report
from the University of Virginia Investment Management Company (UVIMCO)
on page 10 of these minutes.
Student loan receivables, depending on payment schedules, are
included in accounts payable and long-term debt. Student loan
receivables of $39.9 million include $20.3 million through the Federal
Perkins Loan Program, $1.0 million through the Federal Nursing Student
Loan Program, and $18.6 million through loan programs managed by the
University using philanthropy given for this purpose. The default
rates by University students on the federal loan programs are below
required thresholds: 7 percent for Perkins versus the federal
requirement of 15 percent and 2.1 percent for nursing versus the 5
percent federal threshold.
Collectively, the default rate on University managed loan
programs stands at 2.3 percent.
Finance Committee
28.
May 20, 2013
UNIVERSITY OF VIRGINIA - Academic Division Only
Statement of Net Assets
As of 3/31/13
ASSETS
Current Assets
Cash and short term investments
Receivables (accounts, notes, other)
Inventories, prepaids and other
Total current assets
$
Noncurrent Assets
Endowment and other investments
Receivables (pledges and notes)
Capital assets, net
Receivable from Medical Center
Receivable from SWVHEC & agencies
Total noncurrent assets
Total assets
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities
Deferred revenues and deposits
Commercial Paper
Internal loan deposits held for UVA Wise
Deposits held for SWVHEC
Total current liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted:
Nonexpendable
Expendable
Unrestricted
Total net assets
Total liabilities & net assets
520,963
39,532
283
560,778
$
3,951,118
21,679
2,130,250
6,748
6,109,795
426,223
44,980
299
471,502
3,681,778
37,673
2,044,295
466
5,764,212
$
6,670,573
$
6,235,714
$
25,723
149,183
204,593
13,106
392,605
$
14,192
183,625
127,463
7,550
2,161
334,991
Noncurrent Liabilities
Long-term debt
Other long-term liabilities
Total noncurrent liabilities
Total liabilities
As of 6/30/12
(in 000s)
732,019
500
732,519
759,582
136
759,718
$
1,125,123
$
1,094,709
$
1,246,430
$
1,238,034
$
495,187
2,373,016
1,430,818
5,545,450
$
485,956
2,236,393
1,180,622
5,141,005
$
6,670,573
$
6,235,714
Finance Committee
May 20, 2013
29.
Statement of Revenues, Expenses, and Changes in Net Assets (SRECNA) –
Shown on page 29, this statement outlines the Academic Division’s
revenues, expenses, and change in net assets as of March 31, 2013 as
compared to the same period last year. It is developed based on
Generally Accepted Accounting Principles (GAAP) but is unaudited.
At March 31st, net assets are up $404.0 million or 7.9 percent due
mostly to the 10.8 percent performance gain on investments. Compared
to the prior year operating revenue and expenses are up 4.0 percent
and 2.4 percent, respectively, because of the one-time employee bonus
awarded in November 2012. Without the bonus revenue and expenses would
show only a slight increase of just under 1 percent.
Operating Revenues:
Net student tuition and fees are up about 5.7 percent, related to
undergraduate enrollment growth and increases in tuition and fees
approved by the Board of Visitors in April 2012.
Grants and contracts are down 4.5 percent overall, but with a varied
mix by source. As anticipated, federally funded grants are down
significantly, despite funding for the one-time November 2012 3
percent bonus. The overall decline of $19 million in federal funding
includes the bonus; if this one-time funding were excluded, federal
grants would have been down about $21 million. State/local grants are
up by $4 million, mostly due to a large subcontract. Grants from
private industry and foundations are flat.
State appropriations have increased $13 million or 10 percent due to
$5.3 million related to employee benefits and the one-time November
2012 three percent bonus and additional appropriations in support of
the Higher Education Opportunity Act of 2009.
Spendable gifts are up $18.0 million or 20.6 percent. A few large
gifts from the foundations account for much of the increase.
Investment income is $326.4, reflecting the 10.8 percent return on the
UVIMCO Long Term Pool through March 31, 2013.
Additions to permanent endowment have declined by $20 million to $8.1
million. There is only one gift exceeding $1 million so far in FY13,
whereas there were five gifts totaling $22 million as of March 31,
2012.
Operating Expenses:
Operating expenses were up $24 million or 2.4 percent as of March 31,
2013 compared to March 31, 2012, most of which is attributable to the
3 percent bonus paid to employees in November 2012. Without it,
operating expenditures would have been up only $9 million or just
about 1 percent.
Finance Committee
30.
May 20, 2013
UNIVERSITY OF VIRGINIA - Academic Division Only
Statement of Revenues, Expenses, and Changes in Net Assets
Nine Months
Ende d 3/31/13
OPERATING REVENUES AND EXPENSES:
Operating Revenues
Student tuition and fees, net
Grants and contracts (federal, state, nongovernmental)
State appropriations (includes ARRA state stabilization)
Gifts
Sales and services of educational departments
Auxiliary enterprises revenues, net
Pell grants
Total operating revenues
Nine Months
Ende d 3/31/12
(in 000s)
$
Operating Expenses
Instruction
Research
Public service
Academic support
Student services
Institutional support
Operation of plant
Student aid, net
Auxiliary
Depreciation
Other
Total operating expenses
439,988
237,550
140,103
105,552
12,483
92,317
7,773
1,035,765
$
416,195
248,752
127,111
87,545
14,679
93,342
8,198
995,823
255,640
219,314
25,308
108,374
29,096
52,738
69,574
66,286
93,380
76,353
12,869
1,008,932
241,563
217,843
25,295
104,993
29,020
54,393
68,528
63,091
93,384
72,082
14,670
984,862
26,833
10,961
NONOPERATING REVENUES AND EXPENSES
Nonoperating Revenues
Capital appropriations, grants and gifts
Investment income (loss)
Additions to permanent endowments
Other
Total nonoperating revenues (losses)
58,345
326,440
8,053
11,438
404,275
34,488
71,383
28,056
16,707
150,634
Nonoperating Expenses
Interest on capital asset related debt, net
Loss on capital assets (gain)
Other
Total nonoperating expenses
24,664
1,581
418
26,664
21,766
799
699
23,264
Nonoperating revenues less nonoperating expenses (losses)
377,612
127,370
Total Revenues
Total Expenses
Increase (decrease) in net assets
1,440,040
1,035,595
404,445
1,146,457
1,008,126
138,331
5,141,005
4,977,684
Operating revenues less operating expenses
NET ASSETS
Net assets - July 1 (beginning)
Net assets - March 31 (ending)
$
5,545,450
$
5,116,015
Finance Committee
May 20, 2013
31.
Operating Sources and Uses, Budget vs. Actual – Shown on page 32, this
report reviews Academic Division’s budgeted sources and uses versus
actual results through March 31, 2013 to highlight performance versus
the approved plan. For reference, the annual budget is also presented.
The cash-based operating plan differs from the Generally Accepted
Accounting Principles (GAAP) financial statements in the following
ways:
•
External debt service, UVa Health Plan activity, and endowment
investment performance are excluded, while repayments of debt to the
internal bank and the expendable endowment distribution are
included.
•
Depreciation is not recognized and most equipment purchases are
reported as a use of funds, not capitalized.
•
Only gifts received and available for the operating plan are
included. Pledges, non-cash gifts, gifts transferred to the
endowment or capital program, and gifts held at foundations are
excluded.
•
The operating plan nets financial aid funded from tuition from gross
tuition, but does not net financial aid funded from other sources
(gifts, endowments, and grants) from tuition.
•
The operating plan reflects mandatory fees collected for auxiliaries
and internal revenues collected from internal departments as
auxiliary revenue.
Overall Results:
Through March 31, 2013, actual net sources exceeded uses by $93.9
million, higher than the $35.3 million fiscal year to date budget.
Actual available sources of funds for the Academic Division as of
March 31, 2013 were $1,150.2 million, right on target versus the
planned sources of $1,147.0 million. Similarly, uses of available
funds through March 31st are right on target, totaling $1,056.2
million, which is 5 percent below planned uses of $1,111.7 million.
•
While it appears as though expenditures for undergraduate financial
aid are $1.7 million over the annual budget as of March 31,
adjustments between financial aid sources during the fourth quarter
will bring the charges against tuition back within budget.
•
Academic support is $8.9 million or 7.5 percent below the
quarterly budget. While it is expected that there will be some
increased spending of these funds in the fourth quarter, the
Finance Committee
May 20, 2013
32.
majority of this amount represents reserves which will be held
for future use.
•
General administration is $9.2 million or 14.0 percent below the
quarterly budget. The quarterly budgets are determined based on
historical spending which had been higher through the third quarter
of the preceding year primarily due to the impact of higher than
budgeted Virginia Retirement System costs paid to the state.
Additionally, administrative reserves will be held for future use.
•
Operation & maintenance of physical plant is $25.9 million or 29.1%
below the quarterly budget primarily as a result of lower utility
costs and utility improvement spending. This trend is expected to
continue through year end. Additionally, an estimated $5.5 million
has been reserved for building improvements, the anticipated
additional payroll scheduled for FY16, and as an offset to the
anticipated decline in future fee collections related to the
projected decrease in capital project volume.
•
Scholarships, fellowships, & other is $8.9 million or 8.8% below the
quarterly budget. The timing of the expected increase in
scholarships/fellowships from private gifts will result in costs
crossing fiscal years.
Finance Committee
33.
May 20, 2013
University of Virginia
Academic Division
Comparative Statement of Sources and Uses of Funds, Year to Date
as of 03/31/2013 (in thousands)
2012-13
Quarterly
Budget
2012-13
Revised Budget
Actuals
Through
3/31/2013
Actuals Over Actuals as a %
(Under) Budget of Budget
Sources of Available Funds
Tuition and Fees
Undergraduate
Less: Tuition to financial aid
Net Undergraduate
248,900 $
(31,069)
217,831
247,000 $
(31,058) $
215,942
248,468 $
(32,742)
215,726
1,468
(1,684)
(216)
0.6%
5.4%
-0.1%
Graduate
Less: Tuition to financial aid
Net Graduate
35,353
(22,552)
12,801
36,000
(22,000)
14,000
35,336
(20,928)
14,408
(664)
1,072
408
-1.8%
-4.9%
2.9%
Professional (Law, Darden, McIntire & SEAS Exec.)
Less: Tuition to financial aid
Net Professional
100,416
(6,870)
93,546
98,000
(6,600)
91,400
103,303
(7,088)
96,215
5,303
(488)
4,815
5.4%
7.4%
5.3%
School of Medicine
Less: Tuition to financial aid
Net School of Medicine
27,128
(510)
26,618
26,000
(535)
25,465
27,145
(510)
26,635
1,145
25
1,170
4.4%
-4.7%
4.6%
Other
Less: Tuition to financial aid
Net Other
Total Net Tuition & Fees
97,017
(1,145)
95,872
446,668
97,000
(500)
96,500
443,307
89,735
(539)
89,196
442,180
(7,265)
(39)
(7,304)
(1,127)
-7.5%
7.8%
-7.6%
-0.3%
State Appropriations
Grants & Contracts
Facilities & Administrative Cost Recoveries
Endowment Distribution & Fee
Gifts-Via Affiliated Foundations
Expendable Gifts
Sales, Investment & Other
Operating Cash Balances
140,140
237,367
65,400
155,045
102,485
33,890
169,921
105,025
139,000
195,000
52,000
85,000
67,577
14,100
151,000
-
140,103
191,644
51,810
87,899
71,155
13,374
151,999
-
1,103
(3,356)
(190)
2,899
3,578
(726)
999
-
0.8%
-1.7%
-0.4%
3.4%
5.3%
-5.1%
0.7%
n/a
$ 1,455,940
$ 1,146,984
$ 1,150,164
$
3,180
0.3%
$
$
$
258,633
244,311
109,943
29,744
56,527
63,267
92,584
120,335
80,885
$
(1,967)
1,311
(8,957)
(456)
(9,173)
(25,933)
(8,916)
(265)
(1,115)
-0.8%
0.5%
-7.5%
-1.5%
-14.0%
-29.1%
-8.8%
-0.2%
-1.4%
-5.0%
Total Sources of Available Funds
$
Uses of Available Funds
Direct Instruction
Research & Public Service
Academic Support
Student Services
General Administration
Operation & Maintenance of Physical Plant
Scholarships, Fellowships, & Other
Auxiliary Enterprises
Internal Debt Service/Transfers
347,466
319,740
158,478
43,204
88,755
118,960
104,675
152,695
115,241
260,600
243,000
118,900
30,200
65,700
89,200
101,500
120,600
82,000
Total Uses of Available Funds
$ 1,449,214
$ 1,111,700
$ 1,056,229
$
(55,471)
Net Sources in Excess of Uses
$
$
$
$
58,651
6,727
35,284
93,935
166.2%
Finance Committee
34.
May 20, 2013
UNIVERSITY OF VIRGINIA
CAPITAL CAMPAIGN SUMMARY
as of 3/31/13
All Units
Expendable
1,293,729,948
151,436,897
96,804,527
249,707,077
82,797,435
Endowment
580,960,545
57,032,971
35,536,845
0
2,433,528
Total
1,874,690,493
208,469,868
132,341,372
249,707,077
85,230,963
Gift and Pledge Total
1,874,952,849
302,921,938
675,486,924
83,811,894
2,550,439,773
386,733,832
Campaign Total
2,177,874,787
759,298,818
2,937,173,605
-503,002,849
1,371,950,000
952,563,076
1,628,050,000
449,560,227
3,000,000,000
Expendable
533,296,273
75,852,664
62,164,277
0
59,011,415
Endowment
309,339,003
112,655,635
19,220,117
0
11,184
Total
842,635,276
188,508,299
81,384,394
0
59,022,599
Gift and Pledge Total
730,324,629
168,674,462
441,225,939
22,697,659
1,171,550,568
191,372,121
Campaign Total
Additional Amounts To Be Raised
Total
898,999,091
TBD
898,999,091
463,923,598
TBD
463,923,598
TBD
1,362,922,689
0
0
0
0
10,913,905
200,000
57,560
11,171,465
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Future Support
Additional Amounts To Be Raised
(1)
Total
Rector & Visitors Gift Accounts Only
Gifts and Pledge Payments
Outstanding Pledge Balances
Deferred Gifts
Private Grants
Gifts in Kind
Future Support
1,362,922,689
Rector & Visitors Unrestricted Giving
Gifts and Pledge Payments
Deferred Gifts
Outstanding Pledge Balances
Total
10,913,905
200,000
57,560
11,171,465
(1) Excludes future or revocable support
Source: Office of Development and Public Affairs
Date: May 3, 2013
Finance Committee
35.
May 20, 2013
UNIVERSITY OF VIRGINIA
Endowment/Long Term Investments for UVa and Related Foundations
March 31, 2013
Unaudited
(in thousands)
Rector and
Visitors Funds
The University of Virginia Medical School and related foundations
The College of Arts and Sciences and related foundations
The University of Virginia Law School and related foundation
Darden School and related foundation
The McIntire School of Commerce and related foundation
Batten School of Leadership and Public Policy
School of Engineering and related foundation
University of Virginia's College at Wise and related foundation
Graduate School of Arts and Sciences
School of Nursing
Curry School of Education and related foundation
School of Architecture and related foundation
School of Continuing and Professional Studies
$
856,459
388,119
47,177
119,399
82,298
118,682
100,302
48,229
56,908
46,635
14,238
18,472
2,032
Related Foundation
Funds Invested by
UVIMCO
$
43,206
66,852
236,912
225,239
9,524
6,891
9,149
2,102
-
Alumni
Association Funds
Invested by
UVIMCO
Related Foundation
Funds Invested by
Direction of
Foundation Board
$
$
9,687
11,709
40,213
2,511
2,439
425
52
University of Virginia Medical Center and related foundations
Centrally Managed University Scholarships
Athletics and related foundation
Alumni Association
Provost
University of Virginia Foundation and related entities
Miller Center and related foundation
Alumni Board of Trustees
University Libraries
456,530
185,453
43,085
97,052
55,271
56,050
61,144
64,317
66,455
9,996
56,645
-
5,063
442
73,961
36
University - Unrestricted but designated
University - Unrestricted Quasi and True Endowment
University - Unrestricted Other
332,981
175,139
162,167
-
-
All Other
231,468
231,624
53,185
$ 3,694,146
$
1,090,056
$
199,723
429
106,773
7,865
621
1,728
2,531
1,552
584
26,727 **
289
29,976
207
-
*
$
Total
$ 909,352
467,109
390,862
352,503
123,132
118,682
111,554
60,162
56,908
49,074
24,939
21,583
2,084
549,464
185,453
108,133
103,937
97,052
66,662
65,267
56,645
56,086
-
332,981
175,139
162,167
12,104
528,381
191,386
$ 5,175,311
*Includes funds on deposit for other areas/schools not individually listed.
**Excludes approximately $60.7 million of board designated pension funds.
SOURCE: Financial Administration
DATE: April 30, 2013
Finance Committee
36.
May 20, 2013
UNIVERSITY OF VIRGINIA
WORKING CAPITAL INVESTMENTS AND LIQUIDITY
AS OF MARCH 31, 2013
Ca s h-Aca demi c
Ca s h-Medi ca l Ctr
ST Opera ti ng Inv.
LT Opera ti ng Inv.
Ca s h & Ca s h Equi va l ents
Credi t Li nes
Tota l
% of Tota l
Liquid Balances
Daily
Weekly
$21
$60
$376
$192
> Weekly
$458
$250
$192
$990
$990
$708
37.5%
$192
10.2%
$990
52.4%
Total
$21
$60
$568
$990
$1,640
$250
$1,890
100.0%
Working Capital Investment Allocation
Cash
4.98%
US Treasury Bond
10.04%
Federal Agency
15.09%
UVIMCO LTP
60.36%
CP
0.94%
Repo Agreement
8.29%
PFM Fund
0.30%
Finance Committee
May 20, 2013
37.
UNIVERSITY OF VIRGINIA
QUASI-ENDOWMENT ACTIONS -- JANUARY 1, 2013 THROUGH MARCH 31, 2013
The quasi-endowment actions listed below were approved by either (1) the Executive Vice President and Chief Operating
Officer, under the following Board of Visitors' resolutions or (2) the Assistant Vice President for Finance and University
Comptroller, under the delegation of authority from the Executive Vice President and Chief Operating Officer:
● In October 1990 and June 1996 the Board of Visitors approved resolutions delegating to the Executive Vice President and
Chief Operating Officer the authority to approve quasi-endowment actions, including establishments and divestments of less
than $2,000,000, with regular reports on such actions.
● In February 2006, the Board of Visitors approved a resolution permitting approval of quasi-endowment transactions,
regardless of dollar amount, in cases in which it is determined to be necessary as part of the assessment of the business plan for
capital projects. Additionally, to the extent that the central loan program has balances, they may be invested in the long term
investment pool managed by UVIMCO or in other investment vehicles as permitted by law.
Amount
Additions from Gifts
Access UVA Scholarships
Darden, Barbara B. Endowed Scholarship
Denomme, Robert Quasi-Endowment for French Undergraduate Program 1
Denomme, Robert Graduate Fellowship Quasi-Endowment for French Department 1
FINS Research Support Quasi-Endowment 1
Jones D. Lung Cancer Research Quasi-Endowment
President's Fund for Excellence Unrestricted Quasi-Endowment
Research Activities Quasi-Endowment Fund
University Quasi-Endowment Fund 2
Vincent, Hugh Delacy and Nannie McCutcheon Fund
Total Additions from Gifts to Quasi-Endowments
Additions from Endowment Income (Capitalizations)
Antrim, Lottie C. Income Capitalization Quasi-Endowment
Athletics General Operations Quasi-Endowment
Chrysler, W. P. Fund for Engineering Library
Class of 1955 Fund
Class of 1956 Fund
Class of 1957 Fund
Class of 1958 Fund
Class of 1959 Fund
Class of 1960 Fund
Class of 1961 Fund
Class of 1962 Fund
Class of 1963 Fund
Class of 1964 Fund
Class of 1965 Fund
Dermatology General Investment Fund
Hecht, Sidney M. Fellowship in Chemistry
Hecht-Cruachem Chemistry Quasi-Endowment #3
HOPE Physician Incentive Quasi-Endowment
Horton, Charles E. Professorship in International Plastic Surgery Quasi-Endowment
Hughes Endowment Income Capitalization Quasi-Endowment
Jordan, Harvey E. Lectureship
Low, Emmet F. and N. Alyce Chair Quasi-Endowment
$
90,000
55,000
154,000
154,000
20,582
300,000
121,471
314,828
480,816
25,000
$ 1,715,697
$
8,942
81,680
1,694
1,910
6,503
5,056
6,427
7,514
6,333
5,720
8,349
2,584
5,086
1,552
30,548
8,599
1,419
62,945
11,869
1,862
1,400
1,201
Finance Committee
May 20, 2013
38.
McIntire School of Commerce Operations Fund
McIntire, Howard Quasi-Endowment in Neurology
Medical Center Capital Assets Quasi-Endowment 3
815,721
22,089
6,629,414
Additions from Endowment Income (Capitalizations) - continued
Miller, Mae W. Cancer Research Quasi-Endowment
Moyston, Vernah Scott Professorship in Ophthalmology Investment Quasi-Endowment
Plastic Surgery Quasi-Endowment Fund
Radiology Fund Special Diagnostic
Samuels, Bernard Ophthalmology Library Quasi-Endowment
School of Medicine Quasi-Endowment
Southwest-Dishner Gift Quasi-Endowment Fund
Taylor, Henry N. Fund
Virginia Quarterly Review - Anonymous
Total Additions from Endowment Income to Quasi-Endowments
Divestments
Mellon Prostate Cancer Research Quasi-Endowment Fund
McIntire School of Commerce Operations Fund
Thaler, Myles H. Quasi-Endowment for HIV Research
Total Divestments from Quasi-Endowments
5,929
4,269
18,067
4,305
2,439
86,179
16,055
317
548
$
7,874,525
$
400,000
898,758
25,000
$
1,323,758
Notes:
1
Quasi-endowment newly established or originally funded since January 1, 2013.
2
Includes current unrestricted gifts to the University which, under a standing Board of Visitors resolution, are required to be
added to the University's Unrestricted Endowment Fund.
3
Per February 7, 2008 BOV authorization, additional amounts up to $300 million can be made to this fund without further BOV
approval.
SOURCE: Financial Administration
DATE: April 19, 2013
Finance Committee
May 20, 2013
39.
UNIVERSITY OF VIRGINIA
SUMMER CONFERENCE RATES REPORT
2013, 2014 and 2015
On June 16, 2001, the Board approved the Signatory Authority Policy which delegates the
"[e]stablishment of summer conference rates for housing facilities and for meals, overnight
accommodation rates for the Birdwood Pavilion, and room rates for the International Center" to
the "President, the Executive Vice President and Chief Operating Officer and the Vice President
for Finance". Any approved transaction must be reported to the Board of Visitors at its next
meeting following the action.
The rates below have been approved by Patrick Hogan, Executive Vice President and Chief
Operating Officer and are hereby being reported to the Board of Visitors as required.
Summer Conference Rates – Housing
Finance Committee
40.
May 20, 2013
Summer Conference Rates – Dining
Summer Housing and Dining Rates – College at Wise
International Center – Room Rates
Guest lodgings are available for international visitors associated with the University of Virginia. The accommodation goal of the
International Center is to create a small community for visitors from around the world who need short-term lodgings (3-month
maximum stay).
Stays of 16 nights or fewer (per day)
Single occupancy
Double occupancy
Stays of more than 16 nights (per month)
Single, private bath
Double, private bath
Single, shared bath
Double, shared bath
Single “cozy” room
Actual
2012-13
Actual
2013-14
Proposed
Increase
Percent
Increase
$40.00
$60.00
$40.000
$60.00
$0.00
$0.00
0.00%
0.00%
$750.00
$1,125.00
$650.00
$975.00
$550.00
$750.00
$1,125.00
$650.00
$975.00
$550.00
$0.00
$0.00
$0.00
$0.00
$0.00
0.00%
0.00%
0.00%
0.00%
0.00%
SOURCE: Business Operations
DATE: April 29, 2013
Finance Committee
May 20, 2013
41.
APPENDIX
2013-2014 PRATT FUND ALLOCATIONS
ARTS AND SCIENCES - $3,440,000 allocation for 2013-2014, plus
$245,820 anticipated carryforward of
remaining 2012-2013 funds
Biology - The department proposes to allocate $183,378 from the
2013-14 allocation for graduate fellowships. Of this amount,
$128,100 will be used to provide support to outstanding graduate
students in Biology, including support of two Jefferson Scholars.
The department proposes to use $55,278 to satisfy the department’s
membership and to support one in-state student in the Biomedical
Sciences Graduate Program (BIMS), an important, inter-school
collaborative effort. The department proposes to use the
remaining $66,622 of its allocation to augment the salaries of the
Director and Associate Director of the Mountain Lake Biological
Station.
Chemistry - The department proposes to allocate $150,000 of the
2013-14 allocation for graduate support. Pratt funds are a
crucial component of the total support package assembled to
attract outstanding graduate students. The funds will be used as
well to provide merit-based fellowships for outstanding students
who have completed their candidacy exams. These funds will also
continue to provide a portion of the department’s cost-share on
the AES Fellowships in Energy Research. The department proposes
to use $50,000 of its allocation to supplement: faculty
compensation, including summer wage support for a new faculty
position in organic chemistry; summer wages for faculty holding
key departmental administrative posts, including the graduate
program director and undergraduate program director; and
instructional faculty to develop curricular materials for the
upcoming academic year. The department proposes to use the
remaining $50,000 to purchase research and instructional equipment
and to fulfill partially the department’s commitments to matching
support for major equipment grants.
Mathematics - The Department of Mathematics proposes to allocate
$113,098 in partial support of the salaries of four Whyburn
Postdoctoral Fellows. Internationally recognized for its
excellence, the Whyburn postdoctoral program brings new Ph.D.
recipients in mathematics to UVA as faculty instructors for three
years of teaching and research. Pratt funds support 40 percent of
the academic year compensation plus one month of summer wages for
each fellow. The department proposes to allocate $30,000 in
faculty summer wages for faculty members serving as mentors in the
summer REU program, for the associate chair and for faculty
writing department-level grants. The department proposes to spend
Appendix – Page 1
$6,901 of the 2013-14 allocation, along with a portion of the
remaining balance from prior years’ allocations (approximately
$38,099), to provide fellowship support for students engaged in
Ph.D. research. This funding allows the department to be
competitive with peer institutions in attracting graduate
students. The department is requesting to use $20,000 of prior
years’ remaining balances to replace aging computers and printers
for the faculty in order to facilitate the continuation of their
research programs.
Physics - The department proposes to allocate the entire 2013-14
allocation of $250,000 for fellowship support, health insurance,
and tuition and fees to outstanding graduate students. Pratt
funds are crucial to the department’s ability to provide
competitive multi-year packages to attract the most highly
qualified physics graduate students. The department also seeks to
reallocate prior year balances of $38,721 in continued support of
the salary of new faculty member Craig Group and to provide summer
wages to the associate chair of the department. The department is
requesting that $149,000 of prior year balances be reallocated as
a matching cost share on a National Science Foundation proposal
that has been awarded entitled “MRI Consortium Development of a
Magneto-Electrostatic Spectrometer for High Precision Measurements
of Neutron Beta Decay,” Principal Investigator - Dinko Pocanic.
New Faculty Start-up Fund – A total of $2,540,000 is requested by
the College to use as components of start-up packages associated
with new hires, some of which are still being negotiated; for cost
sharing on grants and other opportunities that may arise in the
coming year; and for other strategic needs in building the
programs in these four departments. It is estimated that this
funding will be equally split between equipment, faculty salaries,
and fellowships. This $2,540,000 is comprised of a $400,000
reserve managed by the dean and a $2.14 million Faculty Start-Up
Fund, from which all allocations will be authorized by the
Executive Vice President and Provost. This reserve, which will be
carefully allocated in accordance with the terms of Mr. Pratt’s
will, is critical in the recruitment of faculty members in
biology, chemistry, mathematics, and physics.
Appendix – Page 2
SCHOOL OF MEDICINE — $3,800,000 allocation for 2013-2014, plus
$427,908 anticipated carryforward of
remaining 2012-2013 funds
Support and Training of Student Researchers - $751,406 - Graduate
students and postdoctoral fellows are central to a successful
biomedical research program. A modest institutional share from
the Pratt bequest supplements funds from federal government
training programs and charitable foundations to attract
exceptional students. These individuals are critical in enhancing
the quality of research in the Ph.D. and MD/Ph.D. programs at the
University, and the success of these programs has a direct impact
on the quality of faculty research at the School of Medicine.
Core Facility Support - $976,502 – Research core facilities,
including, but not limited to: the Small Animal Multimodality
Imaging Core, Advanced Microscopy Facility, Biomolecular Research
Facility, Gene Targeting & Transgenic Facility, Biorepository, and
the new BioNMR core, provide access to large, expensive equipment
and techniques that otherwise would not be available or costeffective to individual investigators. These facilities operate
on a fee-for-service basis. After development costs and other
expenses, the core facilities average a cost recovery of 80%, with
differential funded by Pratt allocations. These resources
provide a competitive advantage to acquiring emerging
technologies, and they are critical to the School of Medicine’s
success in recruitment and retention of faculty and its ability to
continue to grow its externally funded research programs.
The Decade Plan - $2,500,000 - The School of Medicine proposes a
special distribution to be used towards the recruitment package of
the new Cancer Center director. This will be the third of four
annual $2.5 million distributions for this purpose.
Appendix – Page 3