USF Board of Trustees Finance & Audit Workgroup. AUGUST 18, :30am 12:30pm

Transcription

1 USF Board of Trustees Finance & Audit Workgroup AUGUST 18, :30am 12:30pm The meeting of the Finance and Audit Workgroup was called to order by Chair John Ramil at 10:45am. The following members and liaisons were present: John Ramil, Hal Mullis, Gene Engle, Rhea Law, Judy Genshaft, Anurag Agarwal, Dahlia Robinson, and Arthur Williams. Chair Ramil welcomed new faculty liaisons Dr. Dahlia Robinson, College of Business, and Dr. Arthur Williams, College of Public Health. Action Items: I. DSO/CU Financial Plans and Strategy Statements Action: Approve DSO/CU Financial Plans Fell Stubbs, University Treasurer, introduced the agenda item and said that each year DSO management present their annual financial plans to the Trustees for approval, pursuant to statute. The financial plans include business strategies. The financial plans will also be presented to the DSO boards for their review and approval. Mr. Stubbs then asked the representatives from the DSOs to present their plans. a) University Medical Services Assoc. Inc. b) USF Medical Services Support Corp. Oon Soo Ung, CFO for the USF Physicians Group (USFPG), presented the financial plans for University Medical Services Assoc. Inc. (UMSA) and USF Medical Services Support Corp. (MSSC). Customer growth strategies include the completion of the relocation/move in to the fifth and sixth floor of the Morsani Center for Advanced Healthcare to house new disease-specific research and patient care programs including relocation of primary care and other subspecialties from the current clinic to enhance operational efficiencies and grow volume through new programs and targeted physician recruitment. On the financial plan, Patient Service Revenuescontain no assumption for Medicaid or Medicare reductions; 30% of Patient Service Revenues is Medicare related. Bad debt is flat year over year. c) USF Health Professions Conferencing Corp. Dr. Deborah Sutherland, Greg Vannette, and John Ekarius presented the financial plan for USF Health Professions Conferencing Corp (USF HPCC). The Center for Advanced Medical Learning and Simulation (CAMLS) is the primary growth strategy for FY CAMLS is a 90,000 square foot building. The building is basically a hospital without sleeping rooms. CAMLS has 30 surgical tables. There was a 7-month delay in starting the CAMLS project in the CAMLS BOT financing approval last year, CAMLS was scheduled to open in July 2011, now will open in February HPCC is continuously developing new activities. Training use sessions are episodic. HPCC holds 14 accreditations which bring more business and national recognition. The financial plan

2 for FY 2012 includes 5 months of CAMLS operations and projects an operating profit of $8M. The operating profit includes the donation of $10M of medical equipment and related depreciation charges. If these items were removed, FY12 operations are roughly breakeven. The forecasted operating loss for FY 2011 is due the timing effect of revenue and expense recognition. d) USF Financing Corp. & Property Corp. Mr. Stubbs presented the financial plan for the USF Financing Corporation. The Financing Corp. is the University's financing arm and is expected to provide attractive long-term financing for the University's major capital projects. Revenues and expenses reflect pass thru activities. The Financing Corp. operates as a conduit entity. The Financing Corp. manages $380M of long-term debt and $224M of interest rate swap agreements implemented to mitigate variable rate bond interest rate risk. The key objective for Corporation management is to maintain/enhance the University's longterm AA credit ratings from Moody's and S&P. The Financing Corp. expects to breakeven in FY Buildings and building improvements ($41M) for FY 2012 include the Athletics District, CAMLS/HPCC, and USFSP Housing Project and Student Center. e) USF Foundation, Inc. Rob Fischman presented the financial plan for the USF Foundation. The fundraising results for FY 2011 were the greatest in USF's history, at over $111 million for the University in total (an increase of 100% over the prior year). $476M was raised in the Campaign. The endowment also had its greatest annual return at 23.6%. FY 2012 is the last year of the current commitment of the University for fundraising support. f) USF Alumni Association, Inc. Mr. Fischman also presented the financial plan for the USF Alumni Association, Inc. FY 2012 will be a transition year as long-time executive director John Harper will be leaving the University. The Alumni Association budgets for an overall breakeven, but will most likely see a modest profit. g) Sun Dome, Inc. Brett Huebner presented the financial plan for Sun Dome, Inc. (SDI). SDI manages and operates a multi-purpose facility known as the USF Sun Dome Arena on behalf of the University and also provides ownership and operational support for USF flight operations. SDI has completed year-over-year restructuring plans: transfer out of payroll and personnel; dissolution of USF Intellis Media; removal of sports fields and maintenance function; transfer of fixed assets to the University; and transfer of the golf course to a USF auxiliary. The USF golf course operated in the black in FY SDI is exploring the potential financial benefits of 1) entering into an event booking partnership(s) or 2) outsourcing of the arena operation to a private management firm. SDI has issued an RFP to solicit private management of the arena. The FY 2012 financial plan is based on the arena opening in April 2012 and is forecasting a net operating profit of $43K. The budget will be adopted by the Sun Dome Board at its September meeting.

3 h) USF Research Foundation, Inc. Patti Gamble presented the financial plan for USF Research Foundation, Inc. The Research Foundation is projecting an 8% increase in revenue and a net profit of 10.7% for FY This includes the projected historical return for USF Foundation investments of 8.5%. The plan contains $6.6M in capital outlay expenditures which will complete the buildout of IRDB spending down capital carry forward funds for the buildout. The buildout will increase occupancy from 80% to 95%. Chair Ramil expressed concern over the Research Foundation s cash position and asked why we keep investing capital if we are not seeing increased returns. Trustee Mullis made a motion to separately approve each of the DSO/CU Financial Plans (items 1a thru h) as presented. Trustee Law seconded the motion. The motion passed. II. University Audit & Compliance 2011/12 Work Plan Action: Approval Debra Gula presented the 2011/12 work plan for University Audit and Compliance. Trustee Mullis has reviewed the work plan. The model for the work plan is a 60/40 split of direct/indirect support hours. Upcoming audits/reviews include: Core Processes tuition collections (operational audit), payroll for temporary employees, and EFTs (new guidelines relative to international operations); EBS asset management module; Financial/Accounting Issues convenience accounts (rollover from last year); Academic Affairs University College and lab (research and academic) safety audit (cyclical audit); and IT data center operations (IT security audit). In the area of continuous assurance, there will be a follow-up audit for P-Card compliance. UAC should be at full staff by September 1. Trustee Mullis made a motion to approve the 2011/12 work plan. Trustee Engle seconded the motion. The motion passed. Information Items: III. Arena Update Vice President Sandy Lovins gave a construction update for the arena. The renovations will extend the life of the facility another 30 years, improve mechanical systems, and improve fan and visitor experience. The renovations are on schedule for the April 15, 2012 completion date. The project is on time and still within the original budget. The first event in the renovated arena will be spring commencement. Demolition is almost complete. The renovated arena will have fixed seating, additional concession and additional rest rooms. Vice President Lovins introduced project manager Steve Lafferty. Mr. Lafferty reported that 84% of the materials removed have been recycled. The renovated arena will have a Leed silver level and increased energy efficiency. AD Doug Woolard announced that the women s volleyball games will be held in the Campus Rec Center as well as women s basketball non-conference games. Women s basketball conference games will be held at University of Tampa (UT). Men s basketball non-conference games will be at the Lakeland Center and UT; conference games will be at the St. Pete Times Forum. ICA currently has a partnership with International Marketing Group (IMG) who is working to secure naming rights for the arena. ICA and IMG are working together to identify and vet prospects; develop a strong proposal; and develop a game plan.

4 Bill McGillis, Executive Associate Director of Athletics, is optimistic that this can be done, although it could take some time. There is tremendous value in this deal, including TV exposure. Ten years is common length of agreement for naming rights. Mr. Woolard announced the ribbon cutting for the new soccer stadium will be Tuesday and 16 days until the game with Notre Dame. IV. Annual Investment/Debt Management/Derivatives Policy Reports Mr. Stubbs presented the annual financial policy reports noting no changes are recommended to the existing policies and all DSOs and the University are in compliance with the policies. 1. Annual Investment Policy Report. The USF System has 10 investment portfolios defined by Legal Entities: Foundation Endowment ($368M); University Portfolio ($572M); and 8 DSO Portfolios ($243M). Portfolios are governed by Investment Committees independent members with investment expertise. These portfolios provide essential liquidity for USF operations. The 3-year combined investment return is 3.75%, which exceeds the index return by 46 basis points. The 5-year combined investment return is 4.19%, which exceeds the index return by 16 basis points. 2. Annual Debt Management Policy Report. USF Credit Rating is AA2 (Moody s) and USF Rating Outlook is Stable. This reflects leadership and stability. This is the highest rating in the SUS along with two other institutions. Our rating is the same as the SUS. Moody s expects USF to maintain a stable student marketing position, a solid financial resource base, a balanced operating performance with continued growth in net tuition per student and to bolster its research enterprise. The PFM Group, the leading financial advisor to higher education institutions in the U.S., analyzed USF s debt management program. PFM believes that USF s current approach to issuing debt through its Master Finance Program, which created the University s five financing Systems, is the most efficient and appropriate method available to Florida public universities. Mr. Stubbs reported on several debt management trends. Our Freshman Acceptance Rate is 42.7% in this indicates substantial demand, but we are very selective. Our total outstanding debt has been stable since USF did not issue any new debt in 2008 and 2009 USF intentionally stayed out of the capital markets during the global financial crisis. Assessment of our debt capacity shows USF performing above peer level for four of the six measures. 3. Annual Derivatives Policy Report. Derivative instruments are maintained to reduce exposure to particular markets and financial instruments. We only use interest rate swaps as our derivative. Derivative instruments may not be used for speculative purposes. Moody s states that the University s Affiliates (DSOs) are sophisticated users of swaps and they have managed their exposure well in a difficult interest rate environment by budgeting conservatively for monthly swap payments and tracking rate changes on a weekly basis. USF has not added any interest rate swaps since 2007.

5 V. 03/31/11 University and DSO Financial Statements and 2011 Forecast Linda Peterson, University Controller, presented the 03/31/11 USF Financial Statements and 2011 Forecast. The University's construction-in-progress has increased by $113 million over the previous year as we continue to expand our facilities. No significant issues to report still projecting breakeven. Not much difference between March 2010 and March 2011; and not much difference between December 2010 and March Financial statements are due to the state and the auditor general on September 15. Mr. Stubbs presented the 03/31/11 DSO Financial Statements and 2011 Forecast. No significant issues to report. The USF Foundation had an operating profit of $2.4M in 2010 and is forecasting an operating profit of $5.8M in The Alumni Association had an operating profit of $257K in 2010 and is forecasting an operating profit of $60K in The Financing Corp. had an operating profit of $500K in 2010 and is forecasting an operating loss of $243K in UMSA had an operating profit of $2.8M in 2010 and is forecasting an operating profit of $1.4M and a positive $3M cash flow in MSSC had an operating loss of $975K in 2010 and is forecasting an operating loss of $971K and a negative $500K cash flow in 2011 ($1M construction project commitments). HPCC had an operating loss of $2.7M in 2010 and is forecasting an operating profit of $477K and a positive $300K cash flow in Research Foundation had an operating profit of $7.4M in 2010 and is forecasting an operating profit of $1.2M and a negative $600K cash flow in Sun Dome, Inc. had an operating profit of $1.1M in 2010 and is forecasting an operating loss of $201K and a negative $300K cash flow in Chief Operating Office John Long stated that we need to make some process improvements in reporting financial information. Mr. Stubbs noted the information is dated, but the forecasts are accurate. Other Chair Ramil asked if there was any other business. Having no further business, Chair Ramil adjourned the Finance and Audit Workgroup meeting at 12:42pm.