University of Cincinnati A Component Unit of the State of Ohio

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1 University of Cincinnati A Component Unit of the State of Ohio Office of Management and Budget Circular A-133 Reports for the Year Ended June 30, 2012

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3 UNIVERSITY OF CINCINNATI A Component Unit of the State of Ohio BOARD OF TRUSTEES Trustee Term Expires C. Francis Barrett Chairperson 2015 Thomas H. Humes Vice Chairperson 2016 Robert E. Richardson, Jr. Secretary 2017 Gary Heiman 2013 Stanley M. Chesley 2018 Thomas D. Cassady 2019 William C. Wym Portman III 2020 Geraldine B. Ginger Warner 2021 Vacant Student Trustees Joshua M. Smith, Graduate Student 2014 Nicholas Hertlein, Undergraduate Student 2013

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5 UNIVERSITY OF CINCINNATI TABLE OF CONTENTS Independent Auditors' Report... 1 Management s Discussion and Analysis Financial Statements as of and for the year ended June 30, 2012: Statement of Net Assets Statement of Revenues, Expenses and Changes in Net Assets Statement of Cash Flows Notes to Financial Statements Schedule of Expenditures of Awards for the Year Ended June 30, Notes to Schedule of Expenditure of Awards for the Year Ended June 30, Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditors Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A Schedule of Findings and Questioned Costs For the Year Ended June 30, Summary Schedule of Prior Audit Findings and Questioned Costs... 76

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7 Independent Auditors Report on Financial Statements and Supplementary Information Board of Trustees University of Cincinnati Cincinnati, Ohio We have audited the accompanying basic financial statements of the University of Cincinnati (University) and its discretely presented component unit, collectively a component unit of the State of Ohio, as of and for the year ended June 30, 2012, as listed in the table of contents. These financial statements are the responsibility of the University's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the University of Cincinnati Foundation, a discretely presented component unit. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the University of Cincinnati Foundation, is based solely on the report of such other auditor. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the report of other auditors, the 2012 financial statements referred to above present fairly, in all material respects, the respective financial position of the University and its discretely presented component unit as of June 30, 2012, and the respective changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Notes 1, 2 and 5, in 2012 the University changed its method of accounting for endowment investments held by external trustees, certain pooled investments and pledges of the University of Cincinnati Foundation and recorded a change in reporting entity, by retroactively restating prior years financial statements. We also audited the adjustments described in Notes 1 and 2 that were applied to restate the University s net assets as of July 1, In our opinion, such adjustments were appropriate and have been properly applied. 1

8 In accordance with Government Auditing Standards, we have also issued our report dated October 15, 2012, on our consideration of the University s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, as listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. October 15,

9 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Management s Discussion and Analysis Introduction The following discussion and analysis provides an overview of the financial position of the University of Cincinnati (the University ) for the year ended June 30, 2012, with comparative information for the year ended June 30, Comments relate to the University and University Heights Community Urban Redevelopment Corporation (UHCURC), a blended component unit of the University. Comments do not pertain to the University s discretely presented component unit; The University of Cincinnati Foundation (the Foundation). The Foundation s financial results are presented in a columnar format with further information found in the notes to the financial statements. UC Physicians, Inc. (UCP) was reported as a component unit in the prior two fiscal years. Changes to the organization during fiscal year 2012 have resulted in UCP no longer meeting the standards to be included as a component unit. This overview has been prepared by management and should be read in conjunction with the financial statements and the notes that follow this section. The University was founded in 1819 and was city owned until becoming a state University on July 1, The University is a comprehensive public institution of higher learning with approximately 42,000 students and 4,400 faculty members on three campuses. The University has been designated by the Ohio Board of Regents as one of only two comprehensive graduate public universities in the state. The National Science Foundation ranks the University as one of the nation s top 25 public research universities. The University offers a diverse range of degree programs from baccalaureate to post-doctoral levels through 14 colleges. University campuses include Uptown Campus, UC Clermont, and UC Blue Ash. The University, in total, employs approximately 14,000 people, making it one of the largest employers in the Cincinnati region. The Princeton Review in its 2012 edition listed the University as one of The Best 376 Colleges and among the nation s best green schools leading in environmental practices and in preparing the next generation of green professionals. The University is also classified as a "very high" research university by the Carnegie Commission and ranked as one of America s top public research universities. The University is an institution with a rich history in discovery and innovation. With 11 Ohio Eminent Scholars and $418 million in research funding awarded to the University and its affiliates, the University is truly an innovative leader in Ohio and beyond. From the organic form at the lab bench to the lines on a drafting table, research at the University assumes many shapes, sizes, and even sounds. Discovery at the University is wide-ranging, from basic, clinical and translational research, to creative works and performance. Financial Highlights Unrestricted net assets increased from $54 million to $100 million, an increase of $46 million, a result of increases in operating revenues coupled with containment of operating expenses. Cash, cash equivalents, and investments (current and noncurrent), excluding endowment investments and other long-term investments, were $426 million and $427 million in 2012 and 2011, respectively. Of those funds, cash available for operations increased from $298 million in 2011 to $342 million in 2012, an increase of $44 million. The University s working capital is primarily invested in relatively short duration, liquid assets. The University s long-term bond rating was upgraded in 2012 by both Moody s and Standard & Poor s. Moody s increased their rating from A1 (positive outlook) to Aa3 (stable outlook). Standard & Poor s increased their rating from A+ (stable outlook) to AA- (stable outlook). The ratings increase came after their review of UC s financial activities, strategic plans, and future prospects. Demand for a University of Cincinnati education remains strong as evidenced by enrollment growth of 1,064 students to 42,421 in autumn 2011, an increase of 2.6%. Of the first-year students enrolled in autumn 2010, 85% returned to the University in autumn The six-year graduation rate was 58% in The University s studentcentered approach resulted in student tuition and fees (net of scholarship allowances and bad debt expense) increasing by $41 million to $381 million for Operating revenues continue to increase. In 2012 and 2011, operating revenues totaled $741 million and $710 million, respectively; reflecting an increase of $31 million in Conversely, operating expenses decreased by $7 million to $991 million in

10 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Net nonoperating revenues declined significantly from $508 million to $250 million, a decrease of $258 million. The decrease was mainly due to a $30 million decline in State operating support, a $26 million reduction in net investment income, and a $194 million decrease in the change in the fair value of investments. Reductions in net investment income and decreases in the fair value of investments were related to the slowdown in both the national and global financial markets. Using the Financial Statements The University s financial report includes three financial statements and related notes: The Statement of Net Assets The Statement of Revenues, Expenses and Changes in Net Assets The Statement of Cash Flows These financial statements are prepared in accordance with Governmental Accounting Standards Board principles, which establish standards for external financial reporting for public colleges and universities. This discussion and analysis does not include a specific narrative on the Statement of Cash Flows. Major sources and uses of cash by the institution for the fiscal year are addressed elsewhere in the Management s Discussion and Analysis including investments, capital assets, debt, revenues, and expenses. Beneficial Interests in Irrevocable External Trusts The University is the beneficiary of numerous trusts held and controlled by external trustees. Income from those trusts is received annually and will continue to be received in perpetuity. These external trusts are irrevocable, and the University has a vested beneficial interest in the net income payable by the trusts. External trusts have been recorded on the University s financial statements since the early 1980 s. The University s position to previously include external trusts as endowment investments was supported by a clean opinion from its external auditors. As discussed in Note 2, the University has restated its beginning of the year net assets to exclude the fair value of these endowed trusts (see below - Prior Period Restatement). While the income generated and distributed from these trusts is not expected to change significantly in future years, the University revised its policy on recording the interests in these perpetual trusts. There have been no changes to the terms of the agreements, including the rights of the University to receive distributions from the trusts. The market value of the external trustee assets totaled $231 million and $226 million as of June 30, 2012 and June 30, 2011, respectively. The University received income from these trusts of $7.4 million and $7.3 million in 2012 and 2011, respectively. Prior Period Restatement Certain components of the beginning of the year net assets have been restated for capital pledge receivables, endowment investments related to the Foundation s share of the Endowment Investment Pool A, and other endowed trustee investments for $11,730,000, $212,474,000, and $225,627,000; respectively. These changes have been reflected as adjustments applicable to prior years on the Statement of Revenues, Expenses and Changes in Net Assets. Statement of Net Assets The Statement of Net Assets reflects the total assets, liabilities, and net assets (equity) of the University as of June 30, 2012, with comparative information as of June 30, Liabilities due within one year and assets available to pay those liabilities are classified as current. Other assets and liabilities are classified as noncurrent. Investment assets are carried at fair value. Capital assets are separated into two lines on the statement: those assets that are depreciated and those that are not depreciated. Items that are depreciated include buildings, equipment, infrastructure, land improvements, and library books. Items that are not depreciated include land, construction in progress, art, and rare book collections. There is no requirement to fund the accumulated depreciation. Instead, capital assets are largely funded by state capital appropriations, issuance of debt, and by major gifts. A summary of the University s assets, liabilities, and net assets at June 30, 2012, and 2011 follows: 4

11 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Summary Statements of Net Assets (in thousands) Current assets $370,231 $337,351 Noncurrent assets Investments 120, ,878 Endowment investments 507, ,393 Other assets & long-term investments 424, ,603 Capital assets, net of depreciation 1,460,382 1,444,367 Other 29,269 43,969 Total assets 2,911,784 3,380,561 Current liabilities 324, ,721 Noncurrent liabilities 1,081,987 1,128,371 Total liabilities 1,406,622 1,447,092 Net assets $1,505,162 $1,933,469 The following graph illustrates the University s total assets, liabilities, and net assets: (in thousands) 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Assets Liabilities Net assets Current Assets Current assets consist primarily of cash and cash equivalents, short-term investment of operating funds and debt proceeds to be used for capital improvements, and accounts and pledges receivable. Current assets increased by $33 million in The increase in current assets during 2012 was a result of continued improved operations. 5

12 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Noncurrent Assets Investments Investments at June 30, 2012, totaled $120 million, a decrease of $40 million from June 30, The decrease in investments is due to a swing between current and noncurrent assets. Funds are invested in the University s temporary investment pool which had a weighted average maturity of 1.3 years at June 30, Investments with a maturity date of more than one year from the date of purchase are classified as noncurrent. Endowment Investments The University s endowment funds consist of both permanent endowments and funds functioning as endowment (quasi-endowments and term endowments). Permanent endowments are those funds received from donors with the stipulation that the principal remain inviolate and be invested in perpetuity to produce income that is to be expended for the purposes specified by the donors. Funds functioning as endowment consist of amounts (restricted gifts or unrestricted funds) that have been allocated by the University for long-term investment purposes, but are not limited by donor stipulations requiring the University to preserve principal in perpetuity. Programs supported by endowment funds include scholarships, fellowships, professorships, research efforts, and other important programs and activities. While endowment investments on the Statement of Net Assets total $507 million at June 30, 2012, endowment investments also include a $17 million loan to UHCURC. The loan receivable was eliminated from the University s Statement of Net Assets when UHCURC s financial results were blended with the University s. Endowment investments including the loan to UHCURC total $524 million. Pool A, the University s principal investment pool, decreased in value during In 2012 and 2011, Pool A totaled $704 million (includes $210 million of which the Foundation is the trustee) and $733 million, respectively; reflecting a decrease of $29 million (4%) in The decrease is net of the 5% endowment spending distribution and fundraising fee allocation. Excluding Neighborhood Development Corporation loans of $61 million, Pool A consists of approximately 45% public equities, 17% public fixed income, and 38% other investments, including private equity, real estate, and hedge funds. The balance of the endowment outside of Pool A is invested through separately managed accounts. The University manages the endowment to support current operations in a way that generates a predictable stream of support while maintaining the purchasing power of endowment funds adjusted for inflation. The spending policy provides for annual distributions of 5% of the three-year quarterly moving-average market value of assets in the investment pool. Other Assets and Long-term Investments Other assets and long-term investments primarily represent the University s interest in UC Health valued at $421 million at June 30, 2012 and The University s value for its investment is based on the cost method of accounting as of July 1, For further discussion of UC Health, please refer to Note 10, Investment in UC Health. Capital Assets The University Campus Master Plan 2000 has driven $1.9 billion of construction projects that transformed the Uptown Campus into a cohesive community that enhances the student, faculty, and staff experiences through improved teaching and research spaces, additional student spaces for an enhanced quality of life, and new spaces to address the enrollment growth the University has been privileged to experience in the recent past. Campus planners and communities around the country have recognized the significance of the University s physical campus. Noted publications such as the Princeton Review along with national press, New York Times, Los Angeles Times, and Forbes Magazine, have noted the strength of the campus plan and the design excellence of the buildings that shape the plan. Now ranked as one of the top 10 most beautiful campuses, the University is poised to begin its next physical plan. UC 2019 s Strategic and Academic Plans set the stage for the physical plan that addresses stewardship of existing assets through the use of standards and design guides. The need to replace infrastructure in existing academic buildings is the driver of this plan along with the quest for improved energy efficiency and more flexible and radical use of space. Opportunities for changing classroom teaching and learning patterns will create a more highly performing building that focuses on both function and energy use. The strategy is sustainable and responsible given the recent completion of a major building initiative as well as constrained state and local resources available to fund major construction projects. 6

13 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Capital asset additions are funded using a combination of state capital appropriations, gifts, debt, federal grants, and University funds. Capital additions totaled $121 million in 2012 and $167 million in Depreciation expense totaled $100 million in both 2012 and Capital additions are primarily comprised of capital projects that were either completed during the fiscal year or are in either the construction or design phase at June 30 of each fiscal year. Significant capital projects in design or construction DAAP Facade Improvement $20 million Medical Sciences Building Rehabilitation, Phases 2, 3, & 4 $195 million Morgens Residence Hall Renovation $30 million Rieveschl 600/700 Level Teaching Lab Renovation $14 million Rieveschl 400 Level Teaching Lab Renovation - $15 million Primary Electric Substation - $7.8 million Roof replacements Facade preservation Planning related to the physical campus is equally concentrated and in full support of the University s academic mission. Plans will unfold in the context of a comprehensive physical, financial, and academic picture. Liabilities Debt Total debt representing bonds, notes, capital leases, and certificates of participation was $1.153 billion at June 30, 2012; a decrease of $33 million from $1.186 billion at June 30, During 2012, the University refunded debt on three occasions to rollover non-permanent debt and to refund fixed rate maturities to reduce future debt service. Total net economic gains to be realized from the refundings are $13.1 million over 20 years (see Note 6 Refundings section). The University entered into an interest rate swap which became effective May 1, 2009, and is currently associated with Series 2012B Bond Anticipation Notes (BANS). The intent of this derivative instrument is to protect the University against the potential of rising interest rates. The University reevaluated the municipal market and the fair value of the swap in the spring of 2012, and decided to issue new BANS to replace the maturing BANS associated with the swap. This same evaluation process is anticipated to take place in 2013 to determine the optimal refinancing method for the Series 2012B BANS and the outstanding swap. The fair value of the swap at June 30, 2012, was a negative $5.3 million and is reflected as an interest rate swap liability in the noncurrent liability section of the Statements of Net Assets. The ratings on University bonds and certificates of participation (COPS) were upgraded by Standard & Poor s (S&P) and Moody s in December S&P upgraded the rating on University bonds from A+ to AA-; the rating on the University s COPS was upgraded from A to A+; and the note rating of SP-1+ was maintained. S&P s outlook for the University remained at stable during 2011 and Moody s rating for bonds was upgraded from A1 to Aa3; the rating for the COPS was upgraded from A2 to A1; and the note rating of MIG1 was maintained. Moody s outlook for the University was positive during 2011 and was changed to stable during 2012 based on the upgraded bond rating. The University continues to invest in its expansion of research and educational facilities beyond the level provided by state capital appropriations through the issuance of debt. The extensive investment in these facilities is necessary to attract and maintain high quality students, faculty, and research funding in an increasingly competitive environment. The University s future debt financing activity will focus on Academic Health Center projects, renovations of existing facilities and building systems, and the strategic management of the debt portfolio. 7

14 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Net Assets The four net asset categories represent the residual interest in the University s assets after liabilities are deducted. The University s net assets at June 30, 2012 and 2011 are summarized below. (in thousands) Invested in capital assets, net of related debt $ 382,974 $ 368,996 Restricted Nonexpendable 729,084 1,159,623 Expendable 292, ,918 Unrestricted 100,135 53,932 Total net assets $ 1,505,162 $ 1,933,469 Components of the University s Net Assets 1,200,000 1,000, , , , ,000 Invested in capital assets, net of related debt Restricted for nonexpendable Restricted for expendable Unrestricted Capital assets, net of depreciation and related debt, represent both the University s non-depreciable and depreciable assets. Non-depreciable assets include land, construction in progress, art, and rare book collections. Depreciable assets include buildings, equipment, land improvements, and infrastructure. The amount included as invested in capital assets is also net of outstanding principal balances of debt attributable to the acquisition, construction, and improvement of those assets. During fiscal year 2012, net assets invested in capital assets, net of related debt, increased by $14 million. The change was a result of depreciation expense totaling $100 million offset by additions of $121 million in 2012 and further offset by related debt reductions. Restricted nonexpendable net assets include, as a primary component, the University s permanently invested endowment funds. It also includes the University s investment in UC Health. The $430 million decrease in restricted nonexpendable net assets in 2012 is a result of eliminating both endowed donor funds held in external trusts and reporting the Foundation s portion of Pool A in the Foundation column. Restricted expendable net assets are subject to externally imposed provisions governing their use. This category of net assets mainly includes restricted quasi-endowment funds, unspent expendable endowment funds (available 8

15 UNIVERSITY OF CINCINNATI JUNE 30, 2012 through the endowment spending policy), and gifts. Quasi-endowment funds totaled $211 million and $224 million in 2012 and 2011 respectively. Unspent expendable endowment funds totaled $59 million in 2012 and $61 million in Unrestricted net assets have improved significantly over the past several years. During 2012, unrestricted net assets increased by $46 million to $100 million. Improvements in unrestricted net assets are a result of the implementation of targeted financial strategies, greater accountability, and an integrated budget planning process. STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS The Statement of Revenues, Expenses and Changes in Net Assets presents the University s results of activities for the year. Presented below are summarized statements of the University s revenues, expenses, and changes in net assets for the years ended June 30, 2012 and SUMMARY STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (in thousands) Operating revenues $741,481 $710,093 Operating expenses 991, ,519 Operating loss (249,939) (288,426) Nonoperating revenues (expenses) State appropriations 181, ,066 and state grants (nonexchange) 44,681 48,728 Gifts 43,905 41,372 Investment income and increase in fair value of investments 27, ,134 Other net nonoperating expenses (47,752) (42,405) Net nonoperating revenues (expenses) 249, ,895 Income (loss) before other revenues, expenses, gains, or losses (282) 219,469 Capital appropriations, gifts, and grants 21,109 19,415 Additions to permanent endowments ,823 Total other revenues 21,806 41,238 Increase in net assets 21, ,707 Net assets beginning of year as previously reported 1,933,469 1,684,250 Adjustments applicable to prior years (449,831) Change in University organizations beginning of year (11,488) Net assets, end of year $1,505,162 $1,933,469 Under GASB standards, revenues and expenses are categorized as either operating or nonoperating. Significant recurring sources of the University s revenues, including state appropriations, federal and state grants (nonexchange), and gifts are considered nonoperating as defined by GASB. Consequently, the operating loss of $250 million does not account for these important revenue sources. Adding these three revenue sources, which total $270 million for the fiscal year, offsets the operating loss. This provides a more accurate view of the University s operating results. REVENUES One of the University s greatest strengths is the diverse stream of revenues that supplements its student tuition and fees including voluntary private support from individuals, foundations, and corporations along with government and other sponsored programs; state appropriations; and investment income. The University has aggressively sought, and will continue to seek, funding from all possible sources consistent with its mission to supplement student tuition and will prudently manage the financial resources realized from these efforts to fund its operating activities. 9

16 UNIVERSITY OF CINCINNATI JUNE 30, 2012 SUMMARY OF REVENUES (in thousands) Operating revenues Student tuition and fees, net $381,213 $340,150, state, & local grants and contracts 166, ,689 Nongovernmental grants and contracts 20,350 20,984 Sales & services of educational departments 63,145 62,943 Auxiliary enterprises, net 100,144 95,095 Other 10,282 8,232 Total operating revenues 741, ,093 Nonoperating revenues State appropriations 181, ,066 and state grants (nonexchange) 44,681 48,728 Gifts 43,905 41,372 Investment income 24,932 52,242 Increase in fair value of investments 2, ,892 Other (1,439) 4,631 Other revenues Capital appropriations, grants, and gifts 21,109 19,415 Additions to permanent endowments ,823 Total nonoperating and other revenues 317, ,169 Total revenues $1,059,257 $1,306,262 Operating Revenues Student tuition and fees are the primary source of revenue for the University. In 2012, tuition and fee revenue increased by $41 million. Undergraduate tuition and fees increased by 3.5% in In 2012, tuition and fees for professional programs increased an average of 6.0%. Professional programs include Law, Medicine, and PharmD. In 2012, tuition and fees for graduate programs increased by 3.5%. The University has a high level of commitment to research. Revenue from federal, state, and local grants and contracts was $166 million and $183 million in 2012 and 2011, respectively; a decrease of $17 million in The decrease in 2012 was due to an overall reduction in grant funds available for research. Annual research revenue as a percent of total operating revenue accounted for 22% of revenue in Total operating revenues for the institution increased by $31 million in Increases for 2012 were a result of increased enrollment and student retention and increases in student tuition and fee rates. Nonoperating Revenues State operating appropriations declined from $212 million in 2011 to $182 million in 2012, a decrease of $30 million; a result of a $29 million reduction in State Fiscal Stabilization Funds (SFSF) provided through stimulus funds. While state appropriations contribute a significantly lower percentage of the overall funding of University operations, particularly compared to tuition, the resources remain a vital source of funding for academic programs and administrative costs. Revenues from federal and state grants (nonexchange) provide for the recovery of direct and indirect costs. Such revenues decreased by $4 million in In a time of heightened competitiveness, especially for federal research funding, the University continues to focus on maintaining its research base. 10

17 UNIVERSITY OF CINCINNATI JUNE 30, 2012 The results of fundraising efforts have been an important component of financial resources. Expendable gifts to the University totaled $44 million and $41 million in 2012 and 2011, respectively. The $3 million increase in gift revenue was a direct result of the Foundation s fundraising efforts toward achieving the University s $1 billion gift campaign, Proudly Cincinnati that spans The University s investment income totaled $25 million and $52 million in 2012 and 2011 respectively, a decrease of $27 million. Investment income includes both endowment income and temporary investment pool income. The overall decline in investment income for 2012 is attributable to a reduction in interest rates and endowment earnings. The University s increase in fair value of investments has fluctuated dramatically over the past several years. Increases totaled $2 million and $196 million in 2012 and 2011, respectively. Investments during 2012 include both endowment and operating cash investments. The $194 million decrease in 2012 resulted from a decline in global equity markets and the University maintaining its investment value at $421 million for UC Health (see note 10). Below is a chart listing revenues by source including revenues used for operating activities and those classified as nonoperating such as state operating appropriations, federal and state grants (nonexchange), and gifts. As noted earlier, GASB requires state appropriations, federal and state grants (nonexchange), and gifts to be classified as nonoperating revenues. Student tuition and fees, net 11% 6% 4% 7% 37% Nonoperating - state operating appropriations, state & local grants and contracts 17% Auxiliary enterprises 18% Sales and services of educational departments Nonoperating - gifts Nonoperating - federal and state grants (nonexchange) 11

18 UNIVERSITY OF CINCINNATI JUNE 30, 2012 EXPENSES The University continues to employ cost containment initiatives to control expenses while investing in research, academic & institutional support, and students through scholarships and fellowships. SUMMARY OF EXPENSE (in thousands) Operating expenses Instruction $268,935 $277,304 Research 167, ,565 Public service 57,708 55,356 Academic support and student services 140, ,353 Institutional support 84,275 79,409 Operation & maintenance of plant 49,854 57,013 Scholarships and fellowships 38,104 40,659 Auxiliary enterprises 83,992 80,071 Depreciation 100,157 99,789 Total operating expenses 991, ,519 Nonoperating expenses Interest on capital asset related debt 44,218 45,571 Other nonoperating expenses 2,095 1,465 Total nonoperating expenses 46,313 47,036 Total University expenses $1,037,733 $1,045,555 Total University expenses decreased by $8 million in The reduction in 2012 was attributable to various increases and decreases within operating expenses. Expenses related to instruction, research, operation & maintenance of plant, and scholarships and fellowships declined. Expenses related to public service, academic support and student services, institutional support, and auxiliary enterprises increased. Below is a chart reflecting operating expenses by category and percentage of total operating expenses. Instruction 9% 5% 4% 4% 8% 10% 10% 6% 17% 27% Research Public service Academic support Student services Institutional support Operation & maintenance of plant Scholarships and fellowships Auxiliary enterprises Depreciation 12

19 UNIVERSITY OF CINCINNATI JUNE 30, 2012 ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE As the University approaches its 200 th anniversary in 2019, a comprehensive action plan referred to as the Academic Master Plan (AMP) was rolled out in May The plan details the steps necessary to reach many of the UC2019 Accelerating Our Transformation aspirations and requires an initial investment of about $10 million toward longterm strategic goals set for completion in UC s bicentennial year, This initial investment in the UC2019 Academic Master Plan is coming from the University s academic budget, and involves both central and collegiate investments. The AMP is one component of the University s overall strategic plan, UC2019. The AMP consists of 180 action steps and 120 sub-action steps pertaining to nine operational principles: learning, discovery, community, economy, sustainability, global engagement, diversity, mission-based health care, and collaboration. Total investments for the AMP between now and 2019 are expected to exceed $50 million. Milestones for the comprehensive UC2019 strategic plan include becoming more competitive on measurable metrics with appropriate benchmark institutions. The University is now measuring itself against the premier group known as the Association of American Universities and against the Top American Research Universities as defined in the Lombardi report. The University is also focused toward becoming a truly global University, which will allow the University to achieve greater success in worldwide education and outreach. Annually, key targeted goals are measured in the President s report card. The University has made notable improvements in most areas as documented below: First-year retention rates increased from 80% in 2006 to 86% in 2012 Six-year graduation rates increased from 52% in 2006 to 62% in 2012 Total National Merit Scholars enrolled increased from 89 in 2006 to 169 in 2012 Average ACT scores of entering Uptown Campus class increased from 24.0 in 2006 to 25.1 in 2012 Funding from biomedical research grants and contracts (includes affiliates) increased from $275 million in 2009 to $308 million in 2011 International student enrollment percentage increased from 5.3% in 2006 to 6.2% in 2012 Institutional liquidity continues to improve from 2006 when the Board of Trustees instituted an operating cash policy that required minimum and average daily cash requirements of no less than 17% and 25% of annual operating budget expenditures and transfers, respectively. Minimum daily cash requirements for fiscal year 2013 are $188 million while requirements for average daily cash are $276 million. The University has been consistently in compliance with the policy. The University s share of state operating appropriations declined by $30 million in 2012 to a level of $182 million. The decline was mainly due to the elimination of $29 million of American Recovery and Reinvestment Act (ARRA) funding. State operating appropriations for 2013 will remain stable at $182 million. In 2012, the State of Ohio experienced a turnaround in its finances and closed its books with a $370 million cash balance. About 60% of the surplus was added to the rainy day fund, boosting it to $482 million. State capital appropriation revenue received by the University will increase in 2013 due to the passing of the State of Ohio s biannual capital appropriations bill. The University has been appropriated $35 million from the State of which $29 million has been identified for continued renovation of the Medical Sciences Building, $3 million to replace the roof on the Health Professions Building, and $3 million for branch campus renovations. To support the State s Strategic Plan for Higher Education, all 17 of Ohio s colleges and universities that had academic calendars based on quarters were required to convert their academic calendars based on semesters. It has been 48 years since the University operated under semesters. Semester conversion took place in August 2012 and required a multifaceted approach which has had a significant impact on all aspects of the University. Enrollment declined by 1% when comparing the autumn 2011 quarter term to the autumn 2012 semester term totaling 41,970 students. The enrollment decline was in part due to students accelerating their coursework to graduate prior to the conversion to semesters. With all institutions on the same academic calendar, Ohio s students will now find it easier to transfer between institutions. The Proudly Cincinnati $1 billion gift campaign is on target to reach its eight-year fundraising goal that will end on June 30, The campaign is the largest in the University s 191-year history. The campaign has raised a total of $928 million in gift and endowment contributions, non-government research funding, private practice contributions to the Medical College, and gifts-in-kind through June 30, Campaign priorities include student scholarships, fellowships to encourage advanced scholarship and research, endowed appointments for top-notch faculty, academic program support, and campus enhancements. Throughout the campaign, the Foundation expects to actively engage more than 500 volunteers. Regional committees are also focusing on cultivating relationships with alumni and 13

20 UNIVERSITY OF CINCINNATI JUNE 30, 2012 friends. Private gifts will continue to be a critically important financial resource and a significant factor in the growth of instruction, research, and services. The University is committed to continuing its strategic vision while continuing to build upon its financial strength. On August 21, Santa Jeremy Ono, PhD, was appointed Interim President. Prior to becoming Interim President, Dr. Ono served for two years as the Senior Vice President for Academic Affairs and Provost. As Provost, he led the development of the Academic Master Plan which is aligned to the University s strategic plan, UC2019 Accelerating Our Transformation. The University community continues to build toward its bicentennial celebration. 14

21 University of Cincinnati (A Component Unit of the State of Ohio) Statement of Net Assets (in thousands) as of June 30, 2012 The University of University Cincinnati Foundation ASSETS Current assets Cash and cash equivalents $ 112,016 $ 3,093 Investments 194,050 3,650 Accounts and pledges receivable, net 46,044 20,873 Inventories 2,272 Deposits with bond trustees 7,512 Notes receivable, net 6,459 Other assets 1,878 9,772 Total current assets 370,231 37,388 Noncurrent assets Investments 120,021 Accounts and pledges receivable, net 3,648 33,015 Deposits with bond trustees 187 Endowment investments 507, ,068 Notes receivable, net 25,434 Other assets and long-term investments 424,447 Capital assets not being depreciated 214,510 Capital assets being depreciated, net 1,245, Total noncurrent assets 2,541, ,771 Total assets 2,911, ,159 LIABILITIES Current liabilities Accounts payable and accrued liabilities 163,181 1,815 Advances 31,428 Long-term debt - current portion 130,026 Total current liabilities 324,635 1,815 Noncurrent liabilities Deposits 7,560 3,972 Accrued liabilities 21,244 6,881 Refundable advances for federal loans 25,168 Long-term debt 1,022,752 Interest rate swap liability 5,263 Total noncurrent liabilities 1,081,987 10,853 Total liabilities 1,406,622 12,668 NET ASSETS Invested in capital assets, net of related debt 382, Restricted for: Nonexpendable 729, ,613 Expendable 292,969 82,554 Unrestricted 100,135 (25,364) Total net assets $ 1,505,162 $ 308,491 See accompanying notes to financial statements 15

22 University of Cincinnati (A Component Unit of the State of Ohio) Statement of Revenues, Expenses and Changes in Net Assets (in thousands) For the Year Ended June 30, 2012 The University of University Cincinnati Foundation REVENUES Operating Revenues Student tuition and fees (net of scholarship allowances of $96,212 and bad debt expense of $2,194) $ 381,213 $ grants and contracts 156,103 State and local grants and contracts 10,244 Nongovernmental grants and contracts 20,350 Sales and services 63,145 Auxiliary enterprises Residential life 40,228 Athletics 23,522 Other auxiliary enterprises 36,394 Other operating revenues 10,282 12,494 Total operating revenues 741,481 12,494 EXPENSES Operating Expenses Instruction 268,935 Research 167,694 Public service 57,708 Academic support 97,441 Student services 43,260 Institutional support 84,275 17,522 Operation & maintenance of plant 49,854 Scholarships and fellowships 38,104 Auxiliary enterprises 83,992 Depreciation 100, Total operating expenses 991,420 17,778 Operating loss (249,939) (5,284) NONOPERATING REVENUES (EXPENSES) State operating appropriations 181,590 and state grants (nonexchange) 44,681 Gifts, including $37,524 from the University Foundation 43,905 40,786 Investment income, net 24,932 9,894 Increase (decrease) in fair value of investments 2,301 (6,664) Interest on capital asset-related debt (44,218) Loss on disposal of assets (2,095) Payments to University of Cincinnati (37,524) Other nonoperating expenses (1,439) (3,876) Net nonoperating revenues (expenses) 249,657 2,616 Loss before other revenues, expenses, gains or losses (282) (2,668) State capital appropriations 10,757 Capital grants and gifts 10,352 Additions to permanent endowments 697 Total other revenues 21,806 - Increase (decrease) in net assets 21,524 (2,668) NET ASSETS Net assets - beginning of year as previously reported 1,933, ,656 Adjustments applicable to prior years (449,831) 245,945 Change in University organizations (114,442) Net assets, end of year $ 1,505,162 $ 308,491 See accompanying notes to financial statements 16

23 University of Cincinnati (A Component Unit of the State of Ohio) Statement of Cash Flows (in thousands) For the Year Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees $ 376,539 Grants and contracts 229,591 Sales and services of educational departments and auxiliary enterprises 163,475 Expenditures and other deductions: Compensation (612,241) Payments for materials, services and other (325,964) Loans issued (6,507) Loan principal collected 5,339 Interest on loans receivable 737 Other revenue 9,931 Cash used for operating activities (159,100) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State appropriations 181,590 and state grants (non-exchange) 44,681 Gifts for other than capital purposes (including additions to permanent endowments) 47,557 Cash from noncapital financing activities 273,828 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES State appropriations - capital 15,109 Private gifts for capital purposes 3,793 Grants for capital purposes 5,420 Other 8,447 Proceeds from capital debt 231,115 Purchases of capital assets (117,578) Principal paid on capital debt and leases (263,936) Interest paid on capital debt and leases (52,717) Cash used for capital financing activities (170,347) CASH FLOWS FROM INVESTING ACTIVITIES Endowment income 19,685 Income from deposits with trustees 315 Other endowment expenditures (2,436) Purchase of investments (1,297,038) Sale of investments 1,363,205 Investment income 3,749 Cash from investing activities 87,480 NET INCREASE IN CASH AND CASH EQUIVALENTS 31,861 Cash and cash equivalents - beginning of the year 80,155 Cash and cash equivalents - end of the year $ 112,016 See accompanying notes to financial statements 17

24 University of Cincinnati (A Component Unit of the State of Ohio) Statement of Cash Flows (in thousands) For the Year Ended June 30, 2012 (continued) RECONCILIATION OF NET OPERATING LOSS TO NET CASH USED FOR OPERATING ACTIVITIES 2012 Operating loss (249,939) Adjustments to reconcile operating loss to net cash used for operating activities Depreciation expense 100,157 Changes in assets and liabilities: Receivables, net 4,515 Inventories (133) Other assets (1,297) Accounts payable and accrued liabilities (11,812) Deferred revenue (515) Compensated absences (1,242) Deposits 1,166 Net cash used for operating activities $ (159,100) Noncash transactions Accrued liabilities for property, plant and equipment $ 17,709 Gifts of moveable equipment 1,139 See accompanying notes to financial statements 18

25 UNIVERSITY OF CINCINNATI JUNE 30, 2012 NOTES TO FINANCIAL STATEMENTS For the Year Ended June 30, Organization and Summary of Significant Accounting Policies Organization The University of Cincinnati (the University) was founded in 1819 with the first charter granted by the State of Ohio in The University, formerly city owned, became a State University on July 1, As such, it is a component unit of the State of Ohio. Under provisions of the Internal Revenue Code, Section 115, and the applicable income tax regulations of the State of Ohio, the University, as a state institution, is exempt from taxes on income other than unrelated business income. Since the University has no material net unrelated business income during the year ended June 30, 2012, no provision for income taxes has been made. The accompanying financial statements present the accounts of the University and of the following entities: The University of Cincinnati Foundation (Foundation), described more fully in Note 14, is a legally separate not-for-profit organization engaged in fundraising activities exclusively for the benefit of the University. The Foundation is a discretely presented component unit of the University in accordance with the provisions of the Governmental Accounting Standards Board (GASB) on the Statement of Net Assets and the Statement of Revenues, Expenses and Changes in Net Assets. University Heights Community Urban Redevelopment Corporation (UHCURC), described more fully in Note 16, is a legally separate not-for-profit organization which owns a residence complex offering housing for University students. UHCURC is reported as a blended component unit of the University in accordance with the provisions of GASB and is included in the University s Statement of Net Assets, the Statement of Revenues, Expenses and Changes in Net Assets and Statement of Cash Flows. Basis of Presentation The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, as prescribed by the GASB. The University has elected not to apply those Financial Accounting Standards Board (FASB) pronouncements issued after November 30, In June 2010, GASB issued a statement to amend previous statements related to the replacement of counterparties in a derivatives transaction (such as an interest-rate swap). In general, it allows governments to continue to apply hedge fund accounting rules to these transactions as long as they meet certain conditions. The requirements of this statement are effective for periods beginning after June 15, There was no significant impact on the financial statements related to the implementation of this statement. In November, 2010, GASB issued a statement to amend previous statements related to the assessment of potential component units in determining what should be included in the financial reporting entity, and financial reporting entity display and disclosure requirements. The requirements of this statement are effective for periods beginning after June 15, The University elected early adoption of this statement for the year ended June 30, There was no significant impact on the financial statements related to the implementation of this statement. 19

26 UNIVERSITY OF CINCINNATI JUNE 30, 2012 The University s financial resources are classified for accounting and reporting purposes into the following three net asset categories: Invested in Capital Assets Net of Related Debt Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets. Restricted for Nonexpendable restricted net assets are subject to externally imposed stipulations that they be maintained permanently by the University. Such assets include the University s permanent endowment funds. Expendable restricted net assets are subject to externally imposed stipulations that can be fulfilled by actions of the University pursuant to those stipulations or that expire by the passage of time. Unrestricted Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of management or the Board of Trustees or may otherwise be limited by contractual agreements with outside parties. Substantially all unrestricted net assets are designated for academic and research programs and initiatives and for capital programs. Summary of Significant Accounting Policies The accompanying financial statements have been prepared on the accrual basis. The University reports as an entity engaged in business-type activities because its operations are financed, in part, by fees charged to external parties for goods and services provided. Accounts Receivable consists of tuition and fee charges to students and charges for auxiliary enterprise services provided to students, faculty and staff. Accounts receivable is recorded net of estimated uncollectible amounts. Loans to Students the University makes loans to students under various federal and other loan programs. Such loans receivable are included in notes receivable on the Statement of Net Assets and recorded net of estimated uncollectible amounts. Investments in marketable securities (other than the University s alternative investments) are carried at fair value as established by the major securities markets (quoted market prices). Investment income is recorded on the accrual basis. Realized and unrealized gains and losses are reported as nonoperating revenues (expenses). The University s financial statements include alternative investments, such as limited partnerships, that are not publicly traded. Certain of these alternative investments are carried at estimated fair value as of March 31, 2012, as adjusted by cash receipts, cash disbursements and securities distributions through June 30, 2012, at a total estimated fair value of $76 million. In addition, the University also has alternative investments in investment funds that are not themselves publicly traded and thus do not have publicly reported market values, but whose underlying assets consist of publicly traded investments for which fair values are established by the major securities markets. Such alternative investments are carried at fair value of $136 million at June 30, The University believes that the total carrying amount of its alternative investments valued at $339 million at June 30, 2012 is a reasonable estimate of fair value. The University s outstanding commitment to alternative investments is $70 million as of June 30, The University s investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investments could occur in the near term and that such changes could materially affect the investment amounts reported in the accompanying Statement of Net Assets. Inventories are held primarily by the Hoxworth Blood Center and the University s utilities service center. Inventory is stated at the lower of cost or net realizable market value. The moving-average basis for all inventories is used to determine inventory cost. 20

27 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Capital Assets Land, land improvements, infrastructure, buildings and equipment are recorded at cost at date of acquisition, or market value at date of donation. The University s capitalization threshold is $100,000 for major capital projects and intangible assets except for internally generated software which has a threshold of $500,000. For all other items the capitalization threshold is $5,000. Interest on related borrowing, net of interest earnings on invested proceeds, is capitalized during the period of construction. The University and its blended component unit s property and equipment are depreciated using the straightline method over the estimated useful lives (from three to fifty years) of the respective assets. Land, collections of works of art and historical treasures are capitalized but not depreciated. When plant assets are sold or disposed of, the carrying value of such assets and the associated depreciation are removed from the University s records. Gift Pledges The Foundation receives pledges and bequests of financial support from corporations, foundations and individuals for the benefit of the University. Advances include receipts relating to tuition, student fees and athletic events received in advance of services to be provided. Advances also includes the amounts received from grant and contract sponsors that have not yet been earned under the terms of the agreement. The University will recognize such amounts into revenue when these services are provided over the coming fiscal year. Compensated Absences includes liabilities related to the vacation and sick leave accruals. University employees earn vacation and sick leave on a monthly basis. Vacation benefits may be accrued up to a maximum of three years credit, and earned but unused days are payable upon termination. The liability for accrued vacation approximated $35,974,000 as of June 30, Sick leave may be accrued without limit; however, unused days are payable only upon retirement from the University, subject to 30- or 60-day limits depending on the date of hire. The termination payment method is utilized to compute the liability for sick leave. The sick leave liability as of June 30, 2012 approximated $23,088,000. Endowment Spending Policy For donor restricted endowments, the Uniform Prudent Management of Institutional Funds Act, as adopted in Ohio, permits the University to distribute an amount of realized and unrealized endowment appreciation as the Board of Trustees determines to be prudent. The University s policy is to accumulate the undistributed realized and unrealized appreciation within the endowment, which is discussed in Note 2. Student Tuition and Fees are presented net of scholarship and fellowship allowances of $96,212,000 in 2012 and a bad debt provision of $2,194,000 in Payments made directly to students are presented as scholarship and fellowship expenses. Auxiliary Enterprise Revenues primarily represent revenues generated by athletics, bookstores, the conference center, dining, housing, and parking. Operating Activities, as reported on the Statement of Revenues, Expenses and Changes in Net Assets are those that generally result from exchange transactions such as payments received for providing services and payments made for services or goods received. Nearly all of the University s expenses are from exchange transactions. Certain significant revenue streams available to support operations are classified as nonoperating revenues (i.e. state operating appropriations, non-endowment gifts, and investment income) in accordance with GASB standards. Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Prior Period Restatement Certain components of the beginning of the year net assets have been restated for pledge receivables, endowment investments related to the Foundation s share of the Endowment Investment Pool A, and other trustee investments for $11,730,000, $212,474,000 and $225,627,000, respectively. These changes have been reflected as adjustments applicable to prior years on the Statement of Revenues, Expenses and Changes in Net Assets. 21

28 UNIVERSITY OF CINCINNATI JUNE 30, Cash and Investments Summary The University maintains centralized management for substantially all of its cash and investments. With the exception of insurance reserves and other endowment investments which require separate management by donor stipulation, the University invests its operating cash in relatively shortduration assets in the Temporary Investment Pool. A majority of the assets of the University s endowment assets are invested in the Endowment Investment Pool A. Distributions are made from the University endowment to the University entities that benefit from those funds. The endowment spending policy provides for an annual distribution of 5% of the twelve-quarter moving-average market value of endowment units. Effective June 1, 2009 Ohio s version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) became effective and replaced the Ohio Uniform Management of Institutional Funds Act. UPMIFA provides statutory rules for the management and investment of endowment funds owned and controlled by charitable institutions. Authorizations The Temporary Investment Pool is invested principally in investment-grade money-market and fixed-income securities. Balances in the Temporary Investment Pool are primarily for operating expenses or for funding capital projects. Investment policies are governed and authorized by University rules. For endowment investments the approved asset mix may range from 85% variable investments and 15% fixed income investments to 15% variable investments and 85% fixed income investments, at any one time, at the discretion of the University s investment committee. The University has an established set of investment guidelines related to targeted asset allocation and allowable ranges for alternative investments. For alternative investment categories, as defined by investment practitioners, the Investment Committee target allocations are: Private Real Estate 2%, Private Equity including Natural Resources 15.5%, and Hedge Funds 20%. Maximum allowable holdings for these three categories are 2%, 15.5% and 25%, respectively. Diversification is a fundamental risk-management strategy for the endowment portfolio. Accordingly, the portfolio includes investments in domestic and non-u.s. stocks, bonds and loans; real estate; and limited partnerships for investment in real estate, private equity and hedge funds. Off-Balance-Sheet Risk The University s investment strategy incorporates certain financial instruments which involve, to varying degrees, elements of market risk and credit risk in excess of amounts recorded in the financial statements. Market risk is the potential for changes in the value of financial instruments due to market movements, including interest and foreign exchange rate movements and fluctuations embodied in forward, futures, and commodity or security prices. Market risk is directly impacted by the volatility and liquidity of the markets in which the related underlying assets are traded. Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of the contract. The University s risk of loss in the event of counterparty default is typically limited to the amounts recognized in the Statement of Net Assets and is not represented by the contract or notional amounts of the instruments. Cash and Cash Equivalents The University considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At June 30, 2012, the carrying amount of the University s cash and cash equivalents for all funds is $112,016,000 as compared to bank balances of $119,210,000. The difference between the carrying amount and the bank balances is caused primarily by deposits in transit and outstanding checks and the Foundation s share of the Endowment Investment Pool A cash and cash equivalents. Of the University s bank balances, $3,262,000 is covered by federal depository insurance and money market funds account for $115,948,

29 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Investments The fair value of University investments at June 30 is (in thousands): 2012 U.S. government, agency and treasury securities $ 72,219 Municipal bonds and notes 53,498 Corporate notes and bonds 231,385 Corporate stocks 103,011 Mutual funds 241,040 Other securities 312,705 Real estate 12,635 Total investments including UC Foundation share of Pool A 1,026,493 Less UC Foundation share of Pool A 204,988 Total investments 821,505 Less current investments 194,050 Total noncurrent investments $ 627,455 Current investment detail (in thousands): 2012 U.S. government, agency and treasury securities $ 27,281 Corporate notes and bonds 127,147 Local mortgage secured loans and other 39, ,301 Less UC Foundation share of Pool A 251 Total current investments $ 194,050 Alternative investments of $339 million are included within mutual funds and other securities in the summary schedule of investments above (please refer to Note 1, Summary of Significant Accounting Policies, regarding valuation of alternative investments). At June 30, 2012, other securities included $72,894,000 net of $20,060,000 of loan loss reserves, of loans made to certain nonprofit entities for the purpose of developing residential and commercial facilities on the borders of the campus. Currently, these loans are secured primarily by mortgages on parcels of land purchased by these nonprofit entities. Some of these mortgages are subordinated to external financing arranged by these entities. These loans bear interest at 6%. The University expects repayment once the residential and commercial facilities have streams of rental income. Loan loss reserves are estimated based on aggregate cash flows projections for the projects and independent appraisals of the underlying undeveloped real estate. The change in loan loss reserves are reflected in nonoperating revenues (expenses), as a component of the increase in fair value of investments. At June 30, 2012, the fair (market) value of land and other real estate held as investments was $12,635,000. Independent real estate appraisals are obtained on a three-year cycle; however, relevant real estate markets are reviewed between appraisal periods to determine if the reported market values remain accurate. Appraisers usually consider the use of three approaches to value when developing a market value opinion for real property. These are the cost approach, sales comparison approach, and income capitalization approach. The most recent appraisals were received for June of The University has recorded the investments in the table above in the following categories: $314,281,000 is included in the temporary investment pool portfolio and $507,224,000 is included in endowment investments as reported on the Statement of Net Assets. 23

30 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Beneficial Interest in Irrevocable External Trusts The University is the beneficiary of numerous trusts held and controlled by external trustees. Income from those trusts is received annually and will continue to be received in perpetuity. These external trusts are irrevocable, and the University has a vested beneficial interest in the net income payable by the trusts. External trusts have been recorded on the University s financial statements since the early 1980 s. The University s position to previously include external trusts as endowment investments was supported by a clean opinion from its external auditors. The University has restated its beginning of the year net assets to exclude the fair value of these endowed trusts. While the income generated and distributed from these trusts is not expected to change significantly in future years, the University revised its policy on recording the interests in these perpetual trusts. There have been no changes to the terms of the agreements, including the rights of the University to receive distributions from the trusts. The 2012 change to no longer recognize the external trusts on the Statement of Net Assets resulted in a reduction to the amount reported on that Statement as endowment investment. The market value of the external trusts totaled $231,423,000 as of June 30, The University received income from these trusts of $7,427,000 for University Investment Pools Of the University investments, approximately $41,616,000 is separately invested by donor stipulation. The remaining funds are invested in one of three pools. The Temporary Investment Pool represents the investment of substantially all University cash not otherwise invested in the endowment. The Endowment Investment Pool A is the principal investment pool for the University and Foundation endowments that may be pooled legally or by donor concurrence. The University employs the share method of accounting for the Endowment Investment Pool A investments and for proportionate distribution of income to each fund that participates in the pool. At June 30, 2012, the Endowment Investment Pool A consisted of 8,950,000 shares. Effective July 1, 2002, substantially all endowments held in trust, by donor stipulation, by the University of Cincinnati Foundation were invested in the University's Endowment Investment Pool A. At June 30, 2012, such endowments own 2,671,000 pool shares with a market value of $210,209,000 ($204,988,000 included in investments and $5,221,000 included in cash and cash equivalents and interest receivable) equating to approximately 30% of the Endowment Investment Pool A. The Endowment Investment Pool B comprises real estate holdings received by bequest. The following tabulation summarizes the changes in relationships between cost and fair values of the Endowment Investment Pool A assets for the year (in thousands except per share amounts): Net Gains/ Fair Value Net Cost Fair Value (Losses) Per Share End of year $736,669 $703,923 $ (32,746) $ Beginning of year 742, ,230 (9,302) Unrealized net loss for year (23,444) Realized net gain for year 15,926 Total net loss for year $ (7,518) Total gain per share $ (0.88) The University has adopted a spending rate policy which limits the distribution of endowment income earned in the investment pool to 5% of the moving-average market value for the twelve-quarter period ending each December. 24

31 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Income allocated for spending during 2012 amounted to $4.27 per share of the Endowment Investment Pool A. The average annual earnings per share, exclusive of capital appreciation, amounted to $1.59. GASB standards require government entities to categorize investments by interest rate risk, credit risk, and custodial credit risk. Interest Rate Risk The University s investments total $1,026,493,000 including $204,988,000 of UC Foundation s share of the Endowment Investment A Pool. The segmented time distribution method is used to portray interest rate risk of $460,679,000 of bond and other fixed income investments. Investments for the year ended June 30, 2012 is summarized as follows (in thousands): Investment Maturities (In Years) 2012 Investment Type Fair Value Less than 1 1 to 5 6 to 10 More than 10 US Treasury $ 4,006 $ - $ 1,090 $ - $ 2,916 obligations US Government 67,556 26,624 30, ,424 Agencies US Treasury STRIPS Municipal bonds and notes 53,498 18,556 31,639 1,468 1,835 Corporate bonds 231, , ,229 18,538 2,027 and notes Bond mutual 49, ,921 - funds Local mortgage 52,738 39,506-7,432 5,800 secured loans Other Total $ 460,679 $ 194,301 $ 166,003 $ 77,373 $ 23,002 Local mortgage secured loans are comprised of demand notes receivable. Amounts reflected as maturities represent management s best estimate of anticipated collections of these receivables. The University s investment policy stipulates that the weighted average maturity of investments in the Temporary Investment Pool will be no longer than 6 years. The weighted average of fixed income maturities in the Endowment portfolio will not exceed 20 years. 25

32 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Credit Risk The Temporary Investment Pool permits investments in investment grade securities at the time of purchase. Securities downgraded below investment grade rating after purchase are permitted to be retained. Endowment investment-grade bonds are limited to those in the first four grades of any rating system. Below-investment grade high yield bond investments and certain unrated investments having strategic value to the University are permitted. In accordance with the University s investment policy, the University s bond and other fixed income investments are rated by nationally recognized rating organizations as follows as of June 30 (in thousands): Rating 2012 AAA $ 93,833 AA 116,238 A 150,862 BBB 36,311 M1G1 6,030 Not Rated 57,405 Total $ 460,679 Custodial Credit Risk Of the University s $1,026,493,000 total investments, which includes $204,988,000 of the UC Foundation s share of the Endowment Investment Pool A, $960,750,000 are uninsured, not registered in the name of the University, and are held by trust departments or agents in the University s name, and thus are exposed to custodial credit risk. The University does not have a policy for custodial credit risk. 3. Accounts and Notes Receivable Accounts and notes receivable as of June 30, 2012 are as follows (in thousands): 2012 Accounts receivable $ 42,680 Notes receivable 31,893 Accrued interest receivable 7,012 Total 81,585 Less current receivables 52,503 Noncurrent receivables $ 29,082 Allowances for uncollectible receivables have been provided in the amount of approximately $4,711,000 for accounts receivable and $6,588,000 for notes receivable as of June 30, An allowance for uncollectible accrued interest receivable has been provided in the amount of approximately $20,976,000 related to loans made to certain nonprofit entities as of June 30, 2012 (see Note 2). 26

33 UNIVERSITY OF CINCINNATI JUNE 30, Capital Assets Capital assets activity for the year ended June 30, 2012 is summarized as follows (in thousands): Balance July 1, 2011 Additions Retirements/ Transfers Balance June 30, 2012 Land $ 26,711 $ 764 $ (1,055) $ 26,420 Land improvement 101, ,661 Buildings 1,881,791 2,426 21,394 1,905,611 Construction in progress 102,810 94,374 (24,164) 173,020 Infrastructure 116, ,020 Building equipment 15, ,866 Moveable equipment 180,497 14,622 (8,270) 186,849 Computer software 38, ,132 Library books 160,487 8,207 (4,235) 164,459 Collections 15, ,070 2,640, ,761 (15,872) 2,745,108 Less: Accumulated depreciation 1,195, ,157 (11,283) 1,284,726 Capital assets, net $1,444,367 $ 20,604 $ (4,589) $1,460,382 * Amounts include the beginning balances of UHCURC s capital assets and accumulated depreciation (see Note 16) Land, construction in progress and collections, as shown above, represent nondepreciable items. Therefore, there is no accumulated depreciation for those categories. 5. Accounts Payable and Accrued Liabilities Accounts payable and the current portion of accrued liabilities as of June 30, 2012 are as follows (in thousands): 2012 Compensated absences (Current portion) $ 37,818 Compensation 41,773 Accrued liabilities 36,832 Vendors payable 46,758 Total $ 163,181 27

34 UNIVERSITY OF CINCINNATI JUNE 30, Bonds and Notes Payable Bonds and notes payable at June 30, 2012 comprise the following (in thousands): Maturity Issue Dates Interest Bond Series Fixed Rate Debt Date Through Rate 2012 T, AA % $ 2, A % A % D % F % G % 4, C % 8, A % 45, D % 18, E % 15, A % 65, D % 20, A % 43, A % 73, G % 84, C % 35, G % 16, C % 101, E % 5, B % 1, C (Taxable Build America Bonds) % 94, F % 93, G (Taxable Build America Bonds) % 14, A % 14, C % 27, E % 29, A % 87,900 Total bonds payable fixed rate debt $904,500 28

35 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Maturity Issue Dates Interest Notes Payable/Other Debt Date Through Rate 2012 Bond Anticipation Notes 2010E July 2010 July % $ H December 2010 December % B May 2011 May % D July 2011 July % 7, F December 2011 December % 44, B May 2012 May % 31,960 Capital Lease Obligations Edwards Center (1998) % - Residence halls (2000) % - University Center (2005) % 49,970 Stetson capital lease % 31,255 Turner capital lease % 9,440 Equipment capital leases % 3,108 Total notes payable and other debt 177,773 Subtotal bonds and notes payable and other debt 1,082,273 UHCURC*/Hamilton County Bonds-Series % 51,165 Total bonds and notes payable and other debt 1,133,438 Premium net of unamortized costs and loss on refunding 19,340 Total bonds and notes payable and other debt, net $1,152,778 *University Heights Community Urban Redevelopment Corporation (see Note 16) Debt Issuances and Permanent Fundings General Receipt Bonds-Fixed Rate Debt During the year ended June 30, 2012, the University issued the following general receipt fixed rate bond series: Series 2011E tax exempt bonds were issued on October 6, 2011 in the amount of $29,125,000. This bond series was issued at a premium and bears interest at rates ranging from 3.00% to 5.00%. The final maturity of Series 2011E is June 1, The proceeds were used to pay associated bond issue costs and to refund a total of $29,915,000 of existing debt as follows: $715,000 of Series 2002A, $390,000 of Series 2002D and $10,055,000 of Series 2002F bonds were advance refunded; $8,495,000 of the Jefferson Avenue Residence Hall Certificates of Participation and $10,260,000 of Series 2001A bonds were current refunded. Series 2012A tax exempt bonds were issued on March 5, 2012 in the amount of $89,040,000. This bond series was issued at a premium and bears interest at rates ranging from 2.00% to 5.00%. The final maturity of Series 2012A is June 1, The proceeds were used to pay associated bond issue costs and to refund a total of $96,275,000 of existing debt as follows: $4,745,000 of Series 2002G, $45,820,000 of Series 2003C and $24,250,000 of Series 2004D were advance refunded and $21,460,000 of Series 2001A were current refunded. Derivative Transactions The University has one pay-fixed interest rate swap in effect at June 30, 2012, which has been in existence since May 1, The initial objective of this interest rate swap was to protect the University against the potential of rising interest rates within the fixed rate market. Through the evaluation process outlined in 29

36 UNIVERSITY OF CINCINNATI JUNE 30, 2012 GASB standards, the University has determined its interest rate swap to be ineffective, thus it is considered to be an investment derivative versus a hedging derivative. The fair value of the swap on June 30, 2012 was ($5,263,000). The change in fair value decreased by $3,201,000 in 2012 and is reported as an investment loss within the Statement of Revenues, Expenses and Changes in Net Assets and increases the interest rate swap liability on the Statement of Net Assets. The following table summarizes the University s pay-fixed interest rate swap agreement: Associated Debt Issue As of June 30, 2012 Outstanding Notional Amount Effective Date Fixed Rate Paid Variable Rate Index Received Fair Value Swap Termination Date Counterparty Rating 2012B BANS $24,075,000 5/1/ % USD- 67% LIBOR-BBA- 1M ($5,263,000) 6/1/2030 AA-/Aa3 Based on the swap agreement, the University pays to the swap counterparty interest calculated at a fixed rate. In return, the swap counterparty pays the University interest based on a specified index. Only the net difference in interest payments is actually exchanged between the parties. The University continues to pay interest on the 2012B BANS obligations as due. The University has no collateral posting requirements on this swap. Risks Credit Risk: There are no counterparty collateral posting requirements on the swap. The University was not exposed to credit risk of the counterparty as the swap had a negative fair value throughout fiscal year A derivative management guideline is in place at the University, which addresses diversifying counterparty risk and limiting the University s credit exposure on derivative transactions. Basis Risk: The swap exposes the University to basis risk should the interest rate received on the swap be less than the interest rate paid on the obligation. This mismatch will effectively result in a higher synthetic fixed rate and the expected savings may not be realized. As of June 30, 2012, the University is experiencing basis risk due to the issuance of a BAN at a higher rate of interest than what is being received on the swap. Termination Risk: The University or counterparty may terminate the swap if either party fails to perform under the terms of the agreement. Termination provisions may result in the University paying or receiving a termination payment, depending on the value of the swap at that point in time. Market-access Risk: Market conditions in the spring of 2009 prevented the University from issuing a variable rate bond series to coincide with the June 1, 2030 maturity date of the swap, therefore Series 2009A BANS was issued on May 12, Subsequent BANS have been issued on an annual basis to refund maturing notes; Series 2012B BANS is the current debt issue associated with the swap. The University will again reevaluate the municipal market and the fair value of the swap in the spring of 2013 to take appropriate actions relating to the Series 2012B BANS and the outstanding swap. Fair Value As of June 30, 2012, the fair value of the swap agreement was a liability of $5,263,000 (reported as interest rate swap liability on the Statement of Net Assets), indicating the amount that the University would be required to pay the counterparty to terminate the swap agreement. The fair value was estimated using the income approach, which converts future cash flows to a single present value using discounting. That value is then adjusted to incorporate non-performance risk for the University since the swap is a liability. The fair value of the swap agreement was developed by an independent third party with no vested interest in the swap transaction. 30

37 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Bond Anticipation Notes During the year ended June 30, 2012, the University issued the following Bond Anticipation Notes (BANS): Series 2011D was issued at a premium on July 21, 2011 in the amount of $15,990,000, at an interest rate of 2.00%, to current refund $8,990,000 of Series 2010E BANS and issue $7,000,000 to fund a portion of the Campus-Wide Wireless project. Series 2012B issued on May 12, 2012 current refunded $8,060,000 of the Series 2011D BANS; the remaining $7,930,000 was retired on July 19, Series 2011F was issued at a premium on December 16, 2011 in the amount of $44,110,000, at an interest rate of 2.00%, to current refund $32,110,000 of 2010H BANS and to fund $12,000,000 for the Rieveschl Phases 3 & 4 project. Series 2011F matures on December 13, Series 2012B was issued at a premium on May 12, 2012 in the amount of $31,960,000, at an interest rate of 2.00%, to current refund $23,900,000 of Series 2011B BANS and $8,060,000 of Series 2011D BANS. Series 2012B matures on May 9, Capital Lease Obligations At June 30, 2012, the capital lease obligation to finance the costs of the University s University Center project was $49,970,000. The lease for the University Center constitutes unconditional obligation of the University to make lease payments which pay principal and interest on certain certificates of participation issued by The Bank of New York Mellon Trust Company, N.A., as trustee, through the final maturity of such certificates to the extent of the University s general receipts. During FY12, the University refunded $8,495,000 of the Jefferson Avenue Residence Complex certificates of participation within Series 2011E general receipt bonds. This refunding did not change the University s obligation under the capital lease to make lease payments; University general receipts are now pledged for this portion of the capital lease payments. In addition, the University has capital lease obligations in connection with the financing of two buildings (One Stetson Square and the Turner Center) which are owned by King Highland Community Urban Redevelopment Corporation and occupied, all or in part, by the University. At June 30, 2012, the University s capital lease obligation for One Stetson Square was $31,255,000; at June 30, 2012, the University s capital lease obligation for Turner Center was $9,440,000. This financing was affected by the issuance of economic development revenue bonds by the County of Hamilton, Ohio (the King Highland Bonds ). The leases for One Stetson Square and the Turner Center also constitute unconditional obligations to make lease payments which pay the principal and interest on the King Highland Bonds. The University has not pledged its general receipts to the payment of these leases nor has the University pledged its general receipts to the payment of such Certificates of Participation. Holders of the Bond Anticipation Notes have a prior and superior claim to the general receipts than does King Highland and the trustee for the holders of such Certificates of Participation. The University also had $3,108,000 of financing obligations outstanding for equipment located in various departmental units at June 30, The obligations issued for equipment are unsecured except for an interest in the equipment. 31

38 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Refundings General Receipts Bond Anticipation Notes Series 2012B general receipt bond anticipation notes (BANS) were issued on May 12, 2012 in the amount of $31,960,000 for the purpose of current refunding $8,060,000 of Series 2011D BANS which matured July 19, 2012 and $23,900,000 of Series 2011B BANS which came due May 12, The $8,060,000 portion the 2011D BAN series was issued in advance of the receipt of gifts. The Series 2011B BANS were issued in May 2011 to current refund Series 2010A BANS issued in May 2010, which current refunded Series 2009A BANS issued in May 2009 to current refund $23,380,000 of the following June 1, 2009 fixed rate bond maturities: Series AL1 $240,000, Series AO $480,000, Series AQ $270,000, Series AT $30,000, Series AU $105,000, Series AV $35,000, Series AZ $80,000, Series 2001A $7,090,000, Series 2002A $240,000, Series 2002D $340,000, Series 2002F $1,725,000, Series 2002G $1,015,000, Series 2003C $4,430,000, Series 2004A $2,130,000, Series 2004D $975,000, Series 2004E $1,295,000, Series 2006A $2,120,000 and Series 2007A $780,000. The Series 2009A BANS were initially issued in place of variable rate bonds. The interest rate swap is now associated with the 2012B BAN issue. When bonds are issued to replace the BANS, they will have maturities corresponding to the swap amortization. There was no gain or loss on the refunding transaction. General Receipts Bonds Series 2011E general receipt bonds were issued on October 6, 2011 in the amount of $29,125,000. The proceeds were used to refund a total of $29,915,000 in existing debt which included current refunding $8,495,000 of the Jefferson Avenue Residence Hall Certificates of Participation and $10,260,000 of Series 2001A; and advance refunding $715,000 of Series 2002A, $390,000 of Series 2002D, and $10,055,000 of Series 2002F fixed rate bonds. The purpose of this transaction was to refund callable maturities to achieve future debt service savings. The economic gain to the University is $1,967,000 and will be realized over a period of 17 years as a reduction of interest expense. As a result of the refunding, $1,192,000 has been recorded as a deferred loss on refunding recorded within accrued liabilities on the Statement of Net Assets and will be amortized into income from 2012 through The deferred loss on refunding reflects the difference between the refunding reacquisition price for the respective portion of Series 2011E and the net carrying amount of the outstanding principal balances of the refunded debt issues. Series 2012A general receipt bonds were issued on March 5, 2012 in the amount of $89,040,000. The proceeds were used to refund a total of $96,275,000 in existing debt which included current refunding $21,460,000 of Series 2001A, and advance refunding $4,745,000 of Series 2002G, $45,820,000 of Series 2003C, and $24,250,000 of Series 2004D fixed rate bonds. The purpose of this transaction was to refund callable maturities to achieve future debt service savings. The economic gain to the University is $11,137,000 and will be realized over a period of 20 years as a reduction of interest expense. As a result of the refunding, $4,956,000 has been recorded as a deferred loss on refunding recorded within accrued liabilities on the Statement of Net Assets and will be amortized into income from 2012 through The deferred loss on refunding reflects the difference between the refunding reacquisition price for the respective portion of Series 2012A and the net carrying amount of the outstanding principal balances of the refunded debt issues. Collateralization and Debt Reserves The general receipts bonds and general receipts bond anticipation notes are collateralized by a pledge of general receipts of the University. The capital lease obligations and capital leases (Stetson and Turner) are secured by base rent payments under the leases. The net book value of assets under capital lease obligations is $109,307,000 as of June 30, Payment of base rents is subordinate to debt service payments on the University s general receipt bonds and bond anticipation notes. The capital leases related to equipment is collateralized by the specified equipment. The required debt service reserve under the Amended and Restated Trust Agreement amounted to approximately $2,236,000 at June 30, As provided for in the Amended and Restated Trust Agreement, this reserve is solely for the payment of debt service charges on the pre-amended bonds, with the exception that excess amounts may be transferred pursuant to Section 4.03 of the Amended and Restated Trust Agreement. 32

39 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Debt Service Commitments For bonds and notes payable at June 30, 2012 (including the UHCURC/Hamilton County bonds), scheduled annual debt service payments subsequent to June 30, 2012 are as follows (in thousands): Fiscal Year Principal * Interest** Total 2013 $121,340 $48,464 $169, ,495 45,328 88, ,700 43,442 90, ,275 41,387 88, ,330 39,268 91, , , , ,825 95, , ,565 48, , ,405 19,729 91, ,430 2,628 30,058 Total $1,039,665 $542,584 $1,582,249 * Fiscal year 2012 principal includes $84,000,000 of BANS that are outstanding as of June 30, These BANS are expected to be retired, renewed or refunded into long term debt. ** Amounts do not reflect federal subsidies to be received for Build America Bonds interest. The University s $24,075,000 LIBOR swap is currently attached to Series 2012B BANS. Principal and associated interest for this BAN series is reflected within FY13 in the debt service table; the swap payments associated with the LIBOR swap are not reflected in the table. Scheduled principal and interest payments on capital leases subsequent to June 30, 2012 are (in thousands): Fiscal Year Principal Interest Total 2013 $5,378 $4,666 $10, ,990 4,400 10, ,231 4,117 10, ,202 3,805 11, ,734 3,449 8, ,818 13,534 40, ,765 6,882 26, ,340 3,057 17, , ,481 Total $93,773 $44,076 $137,849 33

40 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Defeased Debt Debt defeased by the University for which amounts remain outstanding at June 30, 2012, is (in thousands): Bond/BANS Series Maturity Dates Interest Rate(s) Amount Outstanding General Receipts Bonds/BANS: Series 2002G % $4,745 Series 2003C % 45,820 Series 2004D % 24,250 Series 2011D BANS 7/19/ % 8,060 Total $82,875 Neither the outstanding indebtedness nor the related trust accounts are reflected in the accompanying financial statements for the fully defeased bonds listed above. United States Treasury obligations and/or cash in an amount sufficient to pay principal and interest on the defeased obligations, when due, has been deposited with a trustee in accordance with the defeasance of the debt. Other Interest expense incurred on indebtedness for the year ended June 30, 2012 is $44,218,000. In 2012, interest expense on construction-related debt of $8,498,000 net of $792,385 interest earned on invested funds, was capitalized. Subsequent to June 30, 2012 the University retired $7,930,000 of Series 2011D BANS on July 19,

41 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Long-Term Liabilities Long-term liabilities as of June 30, 2012 are as follows (in thousands): Balance July 1, 2011 Additions Year Ended June 30, 2012 Balance Reductions June 30,2012 Current Portion Noncurrent Portion Bonds, notes and capital leases: Bonds and notes payable $1,063,340 $210,225 $233,900 $1,039,665 $121,340 $918,325 Capital lease-equipment 5,220-2,112 3, ,650 Capital lease obligations 104,955-14,290 90,665 4,920 85,745 Premium net of unamortized costs and loss on refunding 12,802 11,070 4,532 19,340 3,308 16,032 Total bonds, notes and capital leases 1,186, , ,834 1,152, ,026 1,022,752 Other long-term liabilities: Compensated absences 60,304 1,350 2,592 59,062 37,818 21,244 Refundable advances, federal loans 24, ,168 25,168 Deposits held in trust for others 5,861 70,828 69,129 7,560 7,560 Interest rate swap liability 2,062 3,201-5,263-5,263 Total other long-term liabilities 93,125 75,693 71,765 97,053 37,818 59,235 Total $1,279,442 $296,988 $326,599 $1,249,831 $167,844 $1,081, State Support The University is a state-assisted institution of higher education and receives from the State of Ohio a state share of instruction that is student-enrollment based. This subsidy is determined annually by the Ohio Board of Regents. The State also provides line-item appropriations that support, in part, the current operations of various activities including clinical teaching expenditures. In addition to the operating subsidies, the State of Ohio provides funding for and constructs major plant facilities on the University s campuses. The state passes a capital-appropriations bill biannually for both major capital projects and basic renovation projects of which the University receives a share. Such facilities are reported as capital assets on the Statement of Net Assets. Due to state budget constraints, the Ohio legislature did not enact a biennium capital bill. 35

42 UNIVERSITY OF CINCINNATI JUNE 30, Retirement Plans and Other Post Employment Benefits Retirement benefits are available for substantially all employees under one of several contributory retirement plans. Prior to July 1, 1977, when the University became a state institution, employees were covered by either the City of Cincinnati Retirement System (CRS) or the Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF). Certified teachers appointed on or after July 1, 1977, are covered by the State Teachers Retirement System (STRS Ohio). Non-certified employees appointed on or after that date are covered by the Ohio Public Employees Retirement System (OPERS). Employees may opt out of STRS Ohio and OPERS and participate in the Alternative Retirement Plan (ARP) if they meet certain eligibility requirements. STRS Ohio and OPERS are statewide systems that offer three separate plans: (1) a defined benefit plan, (2) a defined contribution plan, and (3) a combined plan. Each of the three options is discussed in greater detail in the following sections. Defined Benefit Plans The OPERS, STRS Ohio and CRS plans are cost-sharing, multiple-employer, defined-benefit, public-employee retirement systems. Each provides retirement, disability, and survivor benefits to plan members and beneficiaries. These plans also provide health care benefits to vested retirees. Benefits provided under the plans are established by state statute or the Cincinnati Municipal Code. The CRS plan is no longer available to new employees hired on or after July 1, The remaining number of employees covered by this plan and the related employer contributions are not significant. OPERS provides postemployment health care benefits to retirees with ten or more years of qualifying Ohio service credit under the Traditional Pension and Combined Plans. Members of the Member-Directed Plan do not qualify for ancillary benefits, including postemployment health care coverage. The plan benefits include a medical plan, prescription drug program and Medicare Part B premium reimbursement. The Ohio Revised Code permits, but does not mandate, OPERS to provide Other Post Employment Benefits (OPEB) to its eligible members and beneficiaries. Authority to establish and amend benefits is provided in Chapter 145 of the Ohio Revised Code. STRS Ohio provides access to health care coverage to eligible retirees who participated in the Defined Benefit or Combined Plans. Coverage under the current program includes hospitalization, physicians fees, prescription drugs, and partial reimbursement of monthly Medicare Part B premiums. Pursuant to Chapter 3307 of the Ohio Revised Code, STRS Ohio has discretionary authority over how much, if any, of the associated health care costs will be absorbed by STRS Ohio. All benefit recipients pay a portion of the health care cost in the form of monthly premiums. All three plans issue separate, publicly available financial reports that include financial statements and required supplementary information. These reports may be obtained by contacting each organization as follows: OPERS 277 East Town Street, Columbus, Ohio Telephone (800) STRS Ohio 275 East Broad Street, Columbus, Ohio Telephone (888) City of Cincinnati Retirement System 801 Plum Street, Cincinnati, Ohio Telephone (513)

43 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Defined Contribution Plans On June 23, 1998, pursuant to Ohio House Bill 586, the University created an Ohio Alternative Retirement Plan (ARP), which is designed to aid the University in recruiting and retaining employees by offering a portable retirement option. The ARP is a defined contribution plan that provides full and immediate vesting of all contributions made on behalf of the participant. Contributions are directed to one of eight investment management companies, which allow the participant to manage the investment of all retirement funds. New employees who qualify for the ARP have 120 days from the date of hire to elect the ARP option. Once this window has passed, the employee will not have the option to elect into the ARP. ARP does not provide disability benefits, annual cost-of-living adjustments, postretirement health care benefits or death benefits to plan members and beneficiaries. Benefits are entirely dependent on the sum of contributions and investment returns earned by each participant s choice of investment options. At June 30, 2012, there were 1,996 members of the plan. During 2012 the employer contributions were $14,134,000. The employer contribution rate for participants electing out of OPERS and STRS Ohio was 14% for OPERS also offers a defined contribution plan, the Member-Directed Plan (MD). The MD plan does not provide disability benefits, annual cost-of-living adjustments, postretirement health care benefits or death benefits to plan members and beneficiaries. Benefits are entirely dependent on the sum of contributions and investment returns earned by each participant s choice of investment options. STRS Ohio also offers a defined contribution plan in addition to its long established defined benefit plan. All employee contributions and employer contributions at a rate of 10.5% are placed in an investment account directed by the employee. Disability benefits are limited to the employee s account balance. Employees electing the defined contribution plan receive no postretirement health care benefits. Combined Plans OPERS offers a combined plan. This is a cost-sharing, multiple-employer defined benefit plan that has elements of both a defined benefit and defined contribution plan. In the combined plan, employee contributions are invested in self-directed investments, and the employer contribution is used to fund a reduced defined benefit. Employees electing the combined plan receive postretirement health care benefits. OPERS provides retirement, disability, survivor and postretirement health benefits to qualifying members of the combined plan. STRS Ohio offers a combined plan with features of both a defined contribution plan and a defined benefit plan. In the combined plan, employee contributions are invested in self-directed investments, and the employer contribution is used to fund a reduced defined benefit. Employees electing the combined plan receive postretirement health care benefits. Funding Policy The Ohio Revised Code provides OPERS and STRS Ohio statutory authority over employer and employee contributions. The Cincinnati Municipal Code provides CRS statutory authority. The required actuarially determined contribution rates (as a percentage of covered payroll) for the employee and the University are as follows for the year ending June 30, 2012: OPERS OPERS (Law (staff) Enforcement staff) STRS Ohio CRS Employee: All year 10% 10% 7/11 12/ % 8.0% 1/12 6/ % 8.5% University: All year 14% 18.10% 14% 17% 37

44 UNIVERSITY OF CINCINNATI JUNE 30, 2012 The University s contributions, representing 100% of employer contributions for the year ended June 30, 2012 (in thousands): Fiscal Year OPERS STRS Ohio CRS 2012 $21,405 $17,843 $ 61 OPERS Post Employment Health Care plan was established under, and is administrated in accordance with, Internal Revenue Code 401(h). Each year the OPERS Board of Trustees determines the portion of the employer contribution rate that will be set aside for funding of post employment health care benefits. For the year ended December 31, 2011, OPERS allocated 4.0% of the employer contribution rate to fund the health care program for members in the Traditional Plan. The portion of employer contributions allocated to health care for members in the Combined Plan was 6.05%. The OPERS Board of Trustees is also authorized to establish rules for the payment of a portion of the health care benefits provided, by the retiree or their surviving beneficiaries. Payment amounts vary depending on the number of covered dependents and the coverage selected. Of the $21,405,000 University employer contributions to OPERS for 2012, approximately $6,115,000 was to fund OPEB. For the fiscal year ended June 30, 2011, STRS Ohio allocated employer contributions equal to 1.0% covered payroll to a Health Care Stabilization Fund from which payments for health care benefits are paid. University employer contributions to STRS Ohio to fund OPEB for 2012 were approximately $1,274, Restricted Net Assets Restricted net assets are either nonexpendable or expendable. Nonexpendable restricted net assets consist primarily of endowments whose corpus is held in perpetuity. Only the income and net appreciation is used for the purpose specified by the donor. The principal of expendable restricted net assets may be used for the donor-specified purpose. Restricted nonexpendable and expendable net assets are held for the following purposes (in thousands): 2012 Restricted nonexpendable: Instruction $ 94,525 Research 33,868 Academic support 39,832 College/programs 77,345 Scholarships 68,481 Interest in UC Health 420,645 Other 11, ,082 Less: UHCURC Elimination 16,998 Total $ 729, Restricted expendable: Instruction $ 28,938 Research 91,874 Academic support 25,172 College/programs 91,262 Scholarships 35,674 Student loans 9,922 Grants and contracts 3,122 Capital projects 4,250 Other 2,755 Total $ 292,969 38

45 UNIVERSITY OF CINCINNATI JUNE 30, Investment in UC Health On June 28, 2012, an Affiliation Agreement was entered into between the University, UC Health, and UC Healthcare System which amended, restated, replaced and superseded in its entirety the Operating and Affiliation Agreement between UC and The Health Alliance of Greater Cincinnati (the Alliance ). UC Health is an Ohio private nonprofit corporation that is qualified as a tax-exempt organization and is a public hospital agency within the meaning of Chapter 140 of the Ohio Revised Code. The educational and research programs of the College of Medicine contribute to the success of UC Health and financial support of such programs is a strategic priority of UC Health. Although the Affiliation Agreement between the University, UC Health and UC Healthcare System was signed on June 28, 2012, there was an understanding between the parties that the guiding principles and general terms and conditions under which the entities conducted business during the entire fiscal year 2012, beginning on July 1, 2011, would be those outlined in the Affiliation Agreement. Beginning on July 1, 2011, the University changed accounting methods from the equity method to the cost method to record the University s investment value for UC Health. Therefore, the investment value of $421 million reported on the June 30, 2011 Statement of Net Assets will remain at that value for the June 30, 2012 financial report. This amount will remain constant going forward unless there are any future changes to the investment valuation such as impairment. The investment in the UC Health is included in other assets and long-term investments in the Statement of Net Assets. UC Health provides the University an annual education and research payment and programmatic support that must be used exclusively for Academic Health Center purposes. The total of these payments and support for the years ended June 30, 2012 was $12,549,000. The University also provides various shared services, consisting mainly of utilities, security and various administrative services to UC Health for which the University is reimbursed on a cost basis. The total cost of these services for the years ended June 30, 2012 was approximately $18,185, Capital Project Commitments At June 30, 2012, the University is committed to future capital expenditures as follows (in thousands): Contractual commitments $ 71,485 Estimated completion costs of projects 158,274 Total $ 229,759 These projects are being funded through various resources, including the State of Ohio, as follows (in thousands): Approved state appropriations requested and released as of June 30, 2012 $ 4,101 Approved state appropriations not yet requested 8,500 University funded prior to June 30, ,780 Funds to be provided subsequent to June 30, 2012, from various available sources 115,378 Total $ 229,759 The $115,378,000 of funding to be provided subsequent to June 30, 2012 will come from state funds, debt, and University funds. 39

46 UNIVERSITY OF CINCINNATI JUNE 30, Self-Insurance Funds The University currently provides for medical professional and general liability insurance through a combination of an actuarially funded self-insurance program sponsored by the University and has purchased commercial insurance in excess of the self-insurance amount. The medical professional liability insurance program also includes a qualified not-for-profit physician practice corporation. Medical professional self-insurance limits were $4 million per occurrence for An additional $15 million in commercial excess professional liability insurance was provided above the self-insured retention. General liability coverage is also provided as part of a group insurance program of Ohio state universities known as the Inter-University Council of Ohio Insurance Consortium (IUC-IC). This program provided for $1 million retention per occurrence with the first $100,000 funded by UC, and the remaining $900,000 funded by pool funds held through the IUC-IC. Excess commercial coverage for general liability was provided with total limits of $50 million, of which $45 million was shared with the other participating universities. In addition, educators legal liability coverage was provided through the IUC-IC program with $25 million in total limits, of which $20 million was shared among the participating institutions. The IUC-IC self-insurance pools are funded by an agreed formula among the participating universities. This program qualifies as a public entity risk pool as defined by GASB standards and is classified as a risk-sharing pool. Under this arrangement there is a transfer of risk from the University to the pool. Therefore, there is no recognition in the University s financial statements of assets or liabilities related to the IUC-IC program. The University s self-insurance program is based on calculations by independent actuaries and funds are deposited directly into two irrevocable self-insurance trust funds, one for medical and professional liability and one for general liability. In the opinion of management, trust assets totaling approximately $29,108,000 are adequate to cover estimated liabilities resulting from known claims and incidents and incurred-but-not-reported incidents as of June 30, 2012 for the University and University of Cincinnati Physicians, Inc. Trust assets recorded on the University financial report total $3,801,000 included in other assets and long-term investments and liabilities of $623,000 included in accounts payable and accrued liabilities in the Statement of Net Assets as of June 30, Property insurance is also provided through the IUC-IC program, consisting of commercial property insurance with a $350,000 retention, and a self-insurance pool to fund losses between $100,000 and $350,000. The University is also self-insured for a portion of medical, dental, and pharmacy benefits provided to employees. The cost of such self-insured benefits provided during 2012 was approximately $80,821,000. In addition, $6,135,000 was accrued for 2012, for estimated claims incurred but not reported. 13. Other Commitments and Contingencies The University is currently a defendant in various legal actions. Although the final outcome of such actions cannot currently be determined, the University's administration is of the opinion that the eventual liability, if any, will not have a material effect on the financial position or operations of the University. The University receives grants and contracts from certain federal, state and local agencies to fund research and other activities. The costs, both direct and indirect, that have been charged to the grants or contracts are subject to examination and approval by the granting agency. It is the opinion of management that any disallowance or adjustment of such costs would not have a material effect on the financial statements. The University s utility plant is exposed to market price fluctuations on its purchase of natural gas. Purchase commitments have been issued with certain suppliers of natural gas whereby the University has locked into the price of natural gas for specified amounts to stabilize costs. 40

47 UNIVERSITY OF CINCINNATI JUNE 30, University of Cincinnati Foundation The University of Cincinnati Foundation is a legally separate, tax-exempt component unit of the University. The principal function of the Foundation is to solicit, reserve, hold, invest and administer funds and to make distributions to or for the benefit of the University. Since these resources held by the Foundation can be used only by or for the benefit of the University, the Foundation is considered a component unit of the University and is discretely presented in the University s financial statements. Accounts of the Foundation have been presented in the accompanying financial statements in accordance with generally accepted accounting principles for not-for-profit organizations. Cash & Cash Equivalents The carrying amount of the Foundation s cash and cash equivalents is $3,093,000 as compared to bank balances of $3,859,000. The difference between the carrying amounts and the bank balances is caused primarily by deposits in transit and outstanding checks. Of the Foundation s bank balances, $3,252,000 is covered by federal depository insurance and money market funds account for $608,000 in cash equivalents. Investments The fair value of investments at June 30, 2012 is (in thousands): 2012 U.S. Government and agency obligations $ 1,997 Corporate bonds 10,808 Mutual funds 18,103 Common stocks and exchange traded funds 10,548 Other 2,053 University pooled investments 210,209 Total investments $ 253,718 GASB standards require government entities to categorize investments of interest rate risk, credit risk, and custodial risk. Interest Rate Risk The Foundation s investments total $253,718,000 as of June 30, The segmented time distribution method is used to portray interest rate risk for $20,629,000 of bond and other fixed income investments as of June 30, Investments for the year ended June 30, 2012 are summarized as follows (in thousands): Investment Maturities (In Years) 2012 Investment Type Fair Value Less than 1 1 to 5 6 to10 More than 10 U.S. Government and agency obligations $ 1,997 $ 56 $ 891 $ 156 $ 894 Corporate bonds 10,808 3,594 5,357 1, Bond mutual funds 7, , Total Investments $ 20,629 $ 3,650 $ 6,831 $ 8,993 $ 1,155 The Foundation does not have a policy for interest rate risk. 41

48 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Credit Risk Bond and other fixed income investments are rated by nationally recognized rating organizations as follows, as of June 30 (in thousands): 2012 U.S. Government and agency obligations $ 1,997 AAA 559 AA 3,413 A 6,687 BBB 5,291 BB 23 B 583 Not rated 2,076 Total $ 20,629 Foundation investment grade bonds are limited to those in the first four grades of any rating system. The average rating of the portfolio of investment grade bonds must be in the top two grades of any rating system. Limited investments having strategic value to the University are permitted. Custodial Credit Risk Of the Foundation s $253,718,000 total investments, approximately $253,144,000 are uninsured, not registered in the name of the Foundation, and are held in trust departments or assets in the Foundation s name and are thus not exposed to custodial credit risk. The Foundation does not have a policy for custodial credit risk. Beneficial Interest in Trusts External Trustees These funds represent trusts held by other trustees where the remainder interest will irrevocably benefit the University. In addition, the Foundation has been notified of other charitable lead unitrusts held by other trustees where annual payments are received by the Foundation. The Foundation values these assets by projecting the value of the trust assets to future periods and then discounting the anticipated cash flows at a rate effective of the credit risk involved. Beneficial interest in trusts held by other trustees amounted to approximately $8,162,000 as of June 30, Pledges Receivable Contributors to the Foundation have made unconditional pledges totaling $68,293,000 as of June 30, These pledges receivable have been discounted at a rate ranging from 1% to 6% to a net present value of $55,433,000 as of June 30, 2012, which represents fair market value. As of June 30, these pledges are due as follows (in thousands): 2012 Less than one year $ 20,738 One to five years 18,568 More than five years 16,127 Subtotal 55,433 Less allowance for uncollectible pledges 3,555 Total $ 51,878 Separate financial information regarding the Foundation may be obtained by contacting the Foundation at University of Cincinnati Foundation, University Hall, Suite 100, 51 Goodman Drive, Cincinnati, Ohio

49 UNIVERSITY OF CINCINNATI JUNE 30, University of Cincinnati Physicians, Inc. The University of Cincinnati Physicians, Inc. (UCP) is a legally separate nonprofit corporation formed under Chapter 1702 of the Ohio Revised Code through which the faculty of the University of Cincinnati s College of Medicine engage in clinical practice. During 2010, UCP amended and restated its Code of Regulations including changes in its governance structure. As a result, UCP was determined to be a discretely presented component unit of the University effective On July 1, 2011, UCP entered into an integration of operations and assets agreement with UC Health and UC Health s wholly-owned subsidiary, University of Cincinnati Physicians Company (UCPC), an Ohio non-profit corporation, to form a common medical enterprise. This agreement facilitated the legal arrangements for UCP to lease to UCPC certain of its employees and provide administrative and operational support services to UCPC. The agreement also facilitated the conveyance, transfer, and deliverance to UCPC those assets and liabilities used in connection with the operational medical practice and related business. In addition, the agreement transferred the responsibility for providing practice plan reimbursements and practice plan contributions to the University s College of Medicine Enrichment Fund from UCP to UCPC. With the transfer of this responsibility, a financial benefit/burden relationship no longer exists between UCP and the University. Therefore, UCP does not meet the requirements to be reported as a University component unit beginning fiscal year The University continues to be responsible for appointing a voting majority of UCP s Board of Directors and therefore, is considered a related organization. However, the University s accountability for UCP does not extend beyond making these appointments. The net assets previously reported as University Related Organizations have been restated to exclude UCP from the financial statements for all periods presented. More specifically, the beginning net assets reported on the 2012 Statement of Revenues, Expenses and Changes in Net Assets have been reduced by $114,442, University Heights Community Urban Redevelopment Corporation University Heights Community Urban Redevelopment Corporation (UHCURC) is organized as a not-for-profit corporation under the laws of the state of Ohio. Its mission is to revitalize the University Heights neighborhood adjacent to the University of Cincinnati. UHCURC was organized by three founding members: The Heights Community Council, the Greek Affairs Council and the University of Cincinnati. The corporation owns a student housing complex that consists of 20 buildings with the capacity to house approximately 700 students. Effective September 1, 2009, the structure of UHCURC s Board of Trustees was changed giving the University a voting majority on the board. Due to this governance change and the fact the University can impose its will on UHCURC, the organization is reported as a blended component unit of the University. Accordingly, all significant intercompany accounting transactions have been eliminated as required by generally accepted accounting principles. UHCURC s fiscal year end is August 31. As GASB standards require, the reporting entity should incorporate financial statements for the blended component unit s fiscal year ending during the reporting entity s fiscal year. Therefore, UHCURC s financial statements for the year ending August 31, 2011 has been blended with the University s financial statements for the fiscal year ending June 30,

50 UNIVERSITY OF CINCINNATI JUNE 30, 2012 Condensed statement of net assets for UHCURC as of August 31, 2011 and the related statement of revenues, expenses and changes in net assets and statement of cash flows for the year then ended are as follows: Statement of Net Assets 8/31/2011 Cash and cash equivalents $44,142 Accounts receivable University of Cincinnati 12,968 Capital assets not being depreciated 4,788,026 Capital assets being depreciated, net 47,942,367 Other assets 2,092,227 Total assets 54,879,730 Long-term debt current portion 965,000 Long-term debt 50,617,146 Accrued interest payable University of Cincinnati 7,357,744 Note payable University of Cincinnati 16,998,436 Other liabilities 595,637 Total liabilities 76,533,963 Investment in capital assets, net of related debt 1,148,247 Unrestricted (22,802,480) Tot net assets $(21,654,233) Statement of Revenues, Expenses and Changes in Net Assets 8/31/2011 Operating revenues $2,816,888 Operating expenses 3,525,511 Depreciation 1,584,798 Operating loss (2,293,421) Other nonoperating expenses (18,564) Decrease in net assets (2,311,985) Net assets, beginning of the year (19,342,248) Net assets, end of the year $(21,654,233) Statement of Cash Flows 8/31/2011 Net cash from operating activities $778,750 Net cash used for capital and financing activities (773,443) Net increase in cash and cash equivalents 5,307 Cash and cash equivalents, beginning of the year 38,835 Cash and cash equivalents, end of the year $44,142 44

51 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures CCFC (CHILD CARE AND DEVELOPMENT) CLUSTER CCFC (CHILD CARE AND DEVELOPMENT) - PASS THROUGH FUNDS Department of Health and Human Services Administration for Children and Families HAM CO JOB & FAM SVC ,648 Administration for Children and Families OHIOCHILD CARE RES & REF ASSN Yr Administration for Children and Families OHIOCHILD CARE RES & REF ASSN Yr 3 10,650 TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES 96,030 TOTAL CCFC (CHILD CARE AND DEVELOPMENT) - PASS THROUGH FUNDS 96,030 TOTAL CCFC (CHILD CARE AND DEVELOPMENT) CLUSTER 96,030 HEAD START CLUSTER HEAD START - DIRECT FUNDS Department of Health and Human Services Administration for Children and Families Head Start 773,507 TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES 773,507 TOTAL HEAD START - DIRECT FUNDS 773,507 HEAD START - PASS THROUGH FUNDS Department of Health and Human Services Administration for Children and Families CHCCAA CONTRACT # ,364 Administration for Children and Families CHCCAA Headstart FY ,494 Administration for Children and Families CHCCAA Headstart FY ,228 TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES 883,086 TOTAL HEAD START - PASS THROUGH FUNDS 883,086 TOTAL HEAD START CLUSTER 1,656,593 HIGHWAY PLANNING AND CONSTRUCTION CLUSTER HIGHWAY PLANNING AND CONSTRUCTION - PASS THROUGH FUNDS Department of Transportation Highway Administration (FHWA) ODOT #11569 Job # ,669 Highway Administration (FHWA) ODOT # ,685 Highway Administration (FHWA) ODOT # ,273 Highway Administration (FHWA) ODOT # ,422 Highway Administration (FHWA) ODOT # ,469 Highway Administration (FHWA) Ohio U UT15194 ODOT # ,940 Highway Administration (FHWA) OSURF RF GRT ,327 Highway Administration (FHWA) U Toledo ODOT # 23317B 18,558 Highway Administration (FHWA) U Toledo ODOT #23317B -393 TOTAL DEPARTMENT OF TRANSPORTATION 199,950 TOTAL HIGHWAY PLANNING AND CONSTRUCTION - PASS THROUGH FUNDS 199,950 TOTAL HIGHWAY PLANNING AND CONSTRUCTION CLUSTER 199,950 45

52 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures HIGHWAY SAFETY CLUSTER HIGHWAY SAFETY - PASS THROUGH FUNDS Department of Transportation National Highway Traffic Safety Administration (NHTSA) ODPS SC BROWN 10,476 National Highway Traffic Safety Administration (NHTSA) CTY ODPS SC BROWN 12,407 CTY TOTAL DEPARTMENT OF TRANSPORTATION 22,883 TOTAL HIGHWAY SAFETY - PASS THROUGH FUNDS 22,883 TOTAL HIGHWAY SAFETY CLUSTER 22,883 JUSTICE ASSISTANCE GRANT PROGRAM CLUSTER (JAG) CLUSTER JUSTICE ASSISTANCE GRANT PROGRAM CLUSTER (JAG) - PASS THROUGH FUNDS Department of Justice Bureau of Justice Assistance Conn. Dept. of Corrections 11DOC0125AA 58,599 Bureau of Justice Assistance CPD 25X0028 3,547 Bureau of Justice Assistance CPD Contract 15X ,499 Bureau of Justice Assistance CPD Contract 15X0055 8,009 Bureau of Justice Assistance OCJS 2009-JG-E0R ,824 Bureau of Justice Assistance OCJS 2009-JG-EOR ,208 Bureau of Justice Assistance OCJS 2009-JG-EOR ,269 Bureau of Justice Assistance OCJS 2010-JG-A0V-V6950 8,616 Bureau of Justice Assistance OCJS 2010-JG-A0V-V Bureau of Justice Assistance OCJS 2010-JG-B ,055 Bureau of Justice Assistance OCJS 2010-JG-E0R ,665 Bureau of Justice Assistance Solano County , CA 10,422 Bureau of Justice Assistance Virginia Beach Court Services Unit EPICS 18,001 Department of Justice ARRA OCJS 2009-RA-EOR ,243 Department of Justice ARRA OCJS 2009-RA-R ,570 TOTAL DEPARTMENT OF JUSTICE 497,764 TOTAL JUSTICE ASSISTANCE GRANT PROGRAM CLUSTER (JAG) - PASS THROUGH 497,764 TOTAL JUSTICE ASSISTANCE GRANT PROGRAM CLUSTER (JAG) CLUSTER 497,764 OTHER - DIRECT FUNDS Department of Education Other Department of Education Office of Postsecondary Education Fund for the Improvement of Postsecondary 25,866 Institute of Education Sciences Education Education Research, Development and 319,855 Office of Special Education and Rehabilitative Services Dissemination Special Education_Technology and Media 158,478 Office of Postsecondary Education Services for Individuals with Disabilities Gaining Early Awareness and Readiness for 3,479,956 Undergraduate Programs TOTAL OTHER DEPARTMENT OF EDUCATION TOTAL DEPARTMENT OF EDUCATION 3,984,155 3,984,155 46

53 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Department of Homeland Security Department of Homeland Security Degrees at a Distance Program 4,330 TOTAL DEPARTMENT OF HOMELAND SECURITY 4,330 Department of Justice Bureau of Justice Assistance Edward Byrne Memorial Competitive Grant 2,885 Program TOTAL DEPARTMENT OF JUSTICE 2,885 Environmental Protection Agency Office of Research and Development Science To Achieve Results (STAR) 14,957 Fellowship Program TOTAL ENVIRONMENTAL PROTECTION AGENCY 14,957 National Archives and Records Administration National Archives and Records Administration National Historical Publications and Records 20,975 Grants TOTAL NATIONAL ARCHIVES AND RECORDS ADMINISTRATION 20,975 National Endowment for the Arts National Endowment for the Arts Promotion of the Arts_Grants to 9,903 Organizations and Individuals TOTAL NATIONAL ENDOWMENT FOR THE ARTS 9,903 National Endowment for the Humanities National Endowment for the Humanities Promotion of the Humanities_Division of 87,005 Preservation and Access TOTAL NATIONAL ENDOWMENT FOR THE HUMANITIES 87,005 National Science Foundation National Science Foundation Engineering Grants 97,659 National Science Foundation Mathematical and Physical Sciences 340 National Science Foundation Education and Human Resources 246,329 TOTAL NATIONAL SCIENCE FOUNDATION 344,328 TOTAL OTHER - DIRECT FUNDS 4,468,538 OTHER - PASS THROUGH FUNDS Corporation for National and Community Service Corporation for National and Community Service OTTERBEIN SUB CNCS GC01 LRN & SRV AM -2,135 Corporation for National and Community Service Ohio Campus Compact-CNCS 2,000 TOTAL CORPORATION FOR NATIONAL AND COMMUNITY SERVICE -135 Department of Agriculture Department of Agriculture 10 Miss State U ,801 Food and Nutrition Service ODE CACFP SUB USDA Program 2 34,138 Food and Nutrition Service ODE/USDA CACFP ,467 TOTAL DEPARTMENT OF AGRICULTURE 124,406 Department of Education Office of Postsecondary Education U Louisville # US-Brazil 17,139 Office of Educational Research and Improvement CPS Academy of World Languages After 99,551 School Office of Educational Research and Improvement CPS Mt. Washington After School Program 42,809 Office of Educational Research and Improvement CPS Mt. Washington Castle Connections Year 156,

54 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Office of Educational Research and Improvement Northwest Local Schools SES ,250 Office of Educational Research and Improvement Winton Woods City Schools US DEPT ED SES 12,052 Office of Elementary and Secondary Education CPS SES / USED SUP SES ,388 Office of Elementary and Secondary Education CPS SES / USED SUP ED SVCS 483,611 Office of Elementary and Secondary Education CPS SES SUB USED SES ,360 Office of Elementary and Secondary Education ODE OMSP EDU ,547 Office of Elementary and Secondary Education ODE OMSP EDU YEAR 2 298,400 Office of Elementary and Secondary Education OBR sub USED 5-12 ITQP Program ,180 Office of Elementary and Secondary Education OBR sub USED ITQP Grades ,186 Office of Elementary and Secondary Education OBR SUB USED ITQP 9-14TQP 588 Office of Elementary and Secondary Education OBR sub USED K- 5 ITP Program ,521 Office of Elementary and Secondary Education OBR sub USED K- 5 ITQP 56,714 Department of Education ARRA ODE ,642 Department of Education A ARRA Battelle RTTT No ,334 TOTAL DEPARTMENT OF EDUCATION 1,427,336 Department of Housing and Urban Development CDBG - Entitlement Grants Cluster Office of Community Planning and Development Urban League Cinci Sub HUD-SYEP 9,732 TOTAL CDBG - ENTITLEMENT GRANTS CLUSTER 9,732 TOTAL DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 9,732 Department of Justice Bureau of Justice Assistance Kansas Juvenille Justice Authority-STAR 24,000 Office of Juvenile Justice and Delinquency Prevention Arizona Supreme Court ,444 Office of Juvenile Justice and Delinquency Prevention Arizona Supreme Court ,733 Office of Juvenile Justice and Delinquency Prevention Arizona Supreme Court / ,210 Office of Juvenile Justice and Delinquency Prevention City of Richmond, VA PD ,025 Office of Juvenile Justice and Delinquency Prevention HCJC Services to Youth on Probation ,838 Office of Juvenile Justice and Delinquency Prevention HCJC Services to Youth on Probation ,290 Office of Juvenile Justice and Delinquency Prevention Humboldt County, CA CPC-CSA / EPICS 29,184 Office of Juvenile Justice and Delinquency Prevention Yolo Cty, CA Probation Dept Sub DOJ CPC 16,003 Training Violence Against Women Office Legal Aid Society LawLink Project ,502 TOTAL DEPARTMENT OF JUSTICE 338,229 Department of Labor Employment Training Administration ARRA Cincinnati State GC-J A-39 1,615 TOTAL DEPARTMENT OF LABOR 1,615 Environmental Protection Agency Office of the Administrator CenSara EPA Teaching Contract 6,794 TOTAL ENVIRONMENTAL PROTECTION AGENCY 6,794 National Aeronautics and Space Administration National Aeronautics and Space Administration OAI OSGC/NASA 81,007 National Aeronautics and Space Administration OAI OSGC/NASA Seed Grant -183 TOTAL NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 80,824 National Endowment for the Humanities National Endowment for the Humanities OHC M ,000 National Endowment for the Humanities OSURF ,383 48

55 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Endowment for the Humanities OHC TOTAL NATIONAL ENDOWMENT FOR THE HUMANITIES 40,422 National Science Foundation National Science Foundation CPS DRL Sub NSF 120,147 TOTAL NATIONAL SCIENCE FOUNDATION 120,147 U.S. Department of State Bureau of Near Eastern Affairs Academy Ed Devmt 4273-UCN-02 FHI ,149 TOTAL U.S. DEPARTMENT OF STATE 303,149 TOTAL OTHER - PASS THROUGH FUNDS 2,452,519 TOTAL OTHER CLUSTER 6,921,057 RESEARCH AND DEVELOPMENT CLUSTER RESEARCH AND DEVELOPMENT - DIRECT FUNDS Department of Agriculture Department of Agriculture 10 USDA FOREST SERVICE #10-JV ,613 Agricultural Research Service Agricultural Research_Basic and Applied 37,609 National Institute of Food and Agriculture Research Agriculture and Food Research Initiative 1,015 Foreign Agricultural Service (AFRI) Scientific Cooperation and Research 37,856 TOTAL DEPARTMENT OF AGRICULTURE 83,093 Department of Defense Department of Defense 12 ARMY W81XWH ,298 Department of Defense 12 Army W911QX-11-P ,563 Department of Defense 12 ARMY W911QY-10-C ,996 Department of Defense 12 ARMY W911QY-10-C ,946 Department of Defense 12 ARMY W912HQ-10-P ,267 Department of Defense 12 Army W912HQ-11-P ,525 Department of Defense 12 W911NF ARMY - 392,019 Department of the Navy, Office of the Chief of Naval Research Basic and Applied Scientific Research 262,447 Office of the Secretary of Defense Basic Scientific Research - Combating 286,326 Weapons of Mass Destruction U.S. Army Medical Command Military Medical Research and Development 2,767,784 U.S. Army Materiel Command Basic Scientific Research 174,626 Department of the Air Force, Materiel Command Air Force Defense Research Sciences Program 1,821,463 National Security Agency Mathematical Sciences Grants Program 33,728 Advanced Research Projects Agency Research and Technology Development 102,054 TOTAL DEPARTMENT OF DEFENSE 6,079,508 Department of Education Office of Postsecondary Education Overseas Programs - Faculty Research 6,247 Office of Special Education and Rehabilitative Services Special Education - Personnel Development 406,845 to Improve Services and Results for Children with Disabilities TOTAL DEPARTMENT OF EDUCATION 413,092 49

56 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Department of Energy Department of Energy Office of Science Financial Assistance Program 869,918 Department of Energy Renewable Energy Research and 300,322 Development Department of Energy Fossil Energy Research and Development 195,238 Department of Energy University Reactor Infrastructure and -89 Department of Energy Education Support Nuclear Energy Research, Development and 106,567 Department of Energy A Demonstration ARRA-Geologic Sequestration Training and 115,683 Research Grant Program TOTAL DEPARTMENT OF ENERGY 1,587,639 Department of Health and Human Services Department of Health and Human Services 93 CDC / NIOSH M ,668 Department of Health and Human Services 93 CDC / NIOSH M ,486 Department of Health and Human Services 93 CDC / NIOSH M ,143 Department of Health and Human Services 93 CDC / NIOSH M Department of Health and Human Services 93 CDC / NIOSH ,006 Department of Health and Human Services 93 CDC / NIOSH M Department of Health and Human Services 93 CDC / NIOSH M ,556 Department of Health and Human Services 93 CDC / NIOSH M ,018 Department of Health and Human Services 93 CDC / NIOSH M ,833 Department of Health and Human Services 93 CDC / NIOSH M ,993 Department of Health and Human Services 93 HHSN P PO# NIH/NLM 20,980 Space Medicine Pionee Department of Health and Human Services 93 HHSN I 362,640 Department of Health and Human Services 93 N01-WH ; -2,212 Mod.21,22,23,24,25,26 Department of Health and Human Services 93 NICHHD HHSN TASK 1-1 Department of Health and Human Services 93 NICHHD HHSN TASK 5 185,615 Department of Health and Human Services 93 NICHHD HHSN N01-HD-4- -3, Department of Health and Human Services 93 NICHHD HHSN I TASK 8 48,322 Department of Health and Human Services 93 NICHHD HHSN I TASK 4 254,666 Department of Health and Human Services 93 NICHHD HHSN I TASK 7 68,475 Department of Health and Human Services 93 NICHHD HHSN I TASK 6 36,011 Department of Health and Human Services 93 NIDA HHSN C 10,000 Food and Drug Administration Food and Drug Administration_Research 2,178 Health Resources and Services Administration Maternal and Child Health 942,355 Consolidated Programs National Institutes of Health Environmental Health 10,221,637 National Institute of Environmental Health Sciences Biometry and Risk Estimation Health Risks 24,512 from Environmental Exposures National Institutes of Health Oral Diseases and Disorders Research 372,502 Health Resources and Services Administration Nurse Anesthetist Traineeships 8,616 Centers for Disease Control and Prevention Injury Prevention and Control Research and 225,247 National Institutes of Health State and Community Based Programs NIEHS Hazardous Waste Worker Health and 1,669,354 National Institutes of Health Safety Training Human Genome Research 35,442 50

57 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Institutes of Health Research Related to Deafness and 468,329 Centers for Disease Control and Prevention Communication Disorders Childhood Lead Poisoning Prevention 50 National Institutes of Health Projects_State and Local Childhood Lead Poisoning Prevention and Surveillance of Blood Lead Levels in Children Research and Training in Complementary 140,823 Agency for Healthcare Research and Quality and Alternative Medicine Research on Healthcare Costs, Quality and 30,750 Outcomes National Institutes of Health Mental Health Research Grants 4,781,478 Health Resources and Services Administration Geriatric Academic Career Awards 139,257 Centers for Disease Control and Prevention Occupational Safety and Health Program 2,658,598 National Institutes of Health Alcohol Research Career Development -1 Awards for Scientists and Clinicians National Institutes of Health Alcohol Research Programs 154,343 National Institutes of Health Drug Abuse and Addiction Research Programs 4,981,706 National Institutes of Health Mental Health Research Career/Scientist 473,809 National Institutes of Health Development Awards Mental Health National Research Service 78,457 National Institutes of Health Awards for Research Training Discovery and Applied Research for 2,335,825 Technological Innovations to Improve Human Health National Center for Research Resources Comparative Medicine -1,686 National Institutes of Health National Center for Advancing Translational 283,416 Sciences Health Resources and Services Administration Advanced Nursing Education Traineeships 184,035 Health Resources and Services Administration Sickle Cell Treatment Demonstration 410,912 National Institutes of Health National Center for Research Resources 4,357,753 National Institutes of Health Cancer Cause and Prevention Research 547,197 National Institutes of Health Cancer Detection and Diagnosis Research 446,896 National Institutes of Health Cancer Treatment Research 728,037 National Institutes of Health Cancer Biology Research 2,378,302 National Institutes of Health Cancer Research Manpower 503,889 National Institutes of Health Cancer Control 739 Administration for Children and Families University Centers for Excellence in 456,074 Developmental Disabilities Education, Research, and Service National Institutes of Health Trans-NIH Recovery Act Research Support 8,321,030 National Institutes of Health National Center for Research Resources, 377,003 Recovery Act Construction Support National Institutes of Health Cardiovascular Diseases Research 10,563,276 National Institutes of Health Lung Diseases Research 275,143 National Institutes of Health Blood Diseases and Resources Research 474,001 National Institutes of Health Arthritis, Musculoskeletal and Skin Diseases 1,463,279 National Institutes of Health Research Diabetes, Digestive, and Kidney Diseases 9,124,826 Extramural Research National Institute of Diabetes and Digestive and Kidney Disease Digestive Diseases and Nutrition Research 1,542,603 National Institute of Diabetes and Digestive and Kidney Disease Kidney Diseases, Urology and Hematology 337,002 Research 51

58 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Institutes of Health Extramural Research Programs in the 16,327,070 National Institutes of Health Neurosciences and Neurological Disorders Allergy, Immunology and Transplantation 6,726,563 National Institutes of Health Research Microbiology and Infectious Diseases Research 142,791 National Institutes of Health Biomedical Research and Research Training National Institutes of Health Child Health and Human Development 2,985, ,966 Extramural Research National Institutes of Health Aging Research 956,168 National Institutes of Health Vision Research 2,396,201 National Institutes of Health Medical Library Assistance 8,741 Health Resources and Services Administration Grants for Training in Primary Care Medicine 319,684 National Institute of Environmental Health Sciences and Dentistry Resource and Manpower Development in the 754 Environmental Health Sciences TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES 104,128,651 Department of Housing and Urban Development Department of Housing and Urban Development 14 HUD OHLHH ,709 Office of Healthy Homes and Lead Hazard Control Lead Technical Studies Grants 92,778 Office of Healthy Homes and Lead Hazard Control Healthy Homes Technical Studies Grants 96,716 TOTAL DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 441,203 Department of Justice Office of Juvenile Justice and Delinquency Prevention Title V_Delinquency Prevention Program 16,134 National Institute of Justice National Institute of Justice Research, 231,996 Bureau of Prisons Evaluation, and Development Project Grants Corrections_Research and Evaluation and 69,200 Policy Formulation TOTAL DEPARTMENT OF JUSTICE 317,330 Department of the Interior U.S. Geological Survey Earthquake Hazards Reduction Program 33,601 TOTAL DEPARTMENT OF THE INTERIOR 33,601 Department of Transportation Department of Transportation 20 USDOT/RITA/Volpe Ctr DTRT57-09-D ,547 Aviation Administration (FAA) :Task 1 & Aviation Research Grants 42,278 TOTAL DEPARTMENT OF TRANSPORTATION 47,825 Department of Veterans Affairs Department of Veterans Affairs 64 VAMC VA250-P ORDER NO ,271 C05441 TOTAL DEPARTMENT OF VETERANS AFFAIRS 257,271 Environmental Protection Agency Environmental Protection Agency 66 EPA 68-C TO # Environmental Protection Agency 66 EPA 68-C TO # Environmental Protection Agency 66 EPA EP-11-H ,424 Environmental Protection Agency 66 EPA EP-C ,170 Environmental Protection Agency 66 EPA EP-C Req# PR-ORD ,989 52

59 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Office of Research and Development Science To Achieve Results (STAR) Research 164,464 Office of Research and Development Program Office of Research and Development 443,535 Office of Research and Development Consolidated Research/Training/Fellowships Science To Achieve Results (STAR) 16,425 Office of Research and Development Fellowship Program P3 Award: National Student Design 11,075 Competition for Sustainability TOTAL ENVIRONMENTAL PROTECTION AGENCY 716,060 National Aeronautics and Space Administration National Aeronautics and Space Administration 43 NASA NNX10AQ44G ,650 National Aeronautics and Space Administration 43 NNX07AB38A-NASA -11,167 National Aeronautics and Space Administration 43 NNX08AC43A 132,954 National Aeronautics and Space Administration Science 94,356 National Aeronautics and Space Administration Aeronautics 128,183 TOTAL NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 477,976 National Science Foundation National Science Foundation Engineering Grants 2,306,083 National Science Foundation Mathematical and Physical Sciences 2,005,848 National Science Foundation Geosciences 163,471 National Science Foundation Computer and Information Science and 220,944 Engineering National Science Foundation Biological Sciences 937,201 National Science Foundation Social, Behavioral, and Economic Sciences 424,006 National Science Foundation Education and Human Resources 1,765,399 National Science Foundation Polar Programs 118,490 National Science Foundation International Science and Engineering (OISE) 14,534 National Science Foundation Trans-NSF Recovery Act Reasearch Support 893,798 TOTAL NATIONAL SCIENCE FOUNDATION 8,849,774 Nuclear Regulatory Commission Nuclear Regulatory Commission U. S. Nuclear Regulatory Commission 21,695 Nuclear Education Grant Program TOTAL NUCLEAR REGULATORY COMMISSION 21,695 Office of Personnel Management Office of Personnel Management Student Temporary Employment 103,832 Office of Personnel Management Program Intergovernmental Personnel Act (IPA) 2,616,727 Mobility Program TOTAL OFFICE OF PERSONNEL MANAGEMENT 2,720,559 TOTAL RESEARCH AND DEVELOPMENT - DIRECT FUNDS 126,175,277 RESEARCH AND DEVELOPMENT - PASS THROUGH FUNDS Agency for International Development Agency for International Development ACE HED ZAF ,415 Agency for International Development ACE HED ZAF Travel 4,415 TOTAL AGENCY FOR INTERNATIONAL DEVELOPMENT 488,830 Corporation for National and Community Service Corporation for National and Community Service United Way 93 CNKYSIF 121,062 53

60 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures TOTAL CORPORATION FOR NATIONAL AND COMMUNITY SERVICE 121,062 Department of Defense Department of Defense 12 Cornerstone Research sub ONR 7,734 Department of Defense 12 CRM Subcontract No CIN_09-0 Sub Army 87,064 Department of Defense 12 CRM Subcontract No CIN_09-01 Sub Army 9,049 Department of Defense 12 DAGSI RX7-UC-09-3CG SUB ARFL -27,673 Department of Defense 12 Edaptive PO# UC-01 sub DOD 6,447 Department of Defense 12 Edaptive PO# UC-01 sub DOD 24,983 Department of Defense 12 Eng.& Scientific Innovations W911NF11C ARMY Department of Defense 12 Enogotek Inc / Army ,579 Department of Defense 12 GE Research ,831 Department of Defense 12 GEN DYNAMICS SUB AF SC ,916 Department of Defense 12 General Nano/AF FA M ,928 Department of Defense 12 General Nano/NAVY N M ,178 Department of Defense 12 General Nano/NAVY N M ,629 Department of Defense 12 General Nano/Navy N C ,402 Department of Defense 12 Giner sub Army W911NF-11-C ,407 Department of Defense 12 HemCom Med Tech 2009-I-LYP-1 Sub Army 9,269 Department of Defense 12 HEMERUS SUB ARMY - LEUKOSEP 294,326 Department of Defense 12 High Perf Tech Sub HPTI-PETTT-CIN / DOD 88,723 Department of Defense 12 High Perf Tech Sub HPTI-PETTT-CIN / DOD 2,003 TO#2 Department of Defense 12 HONEYWELL 5067 Sub AF 187 Department of Defense 12 ISSI #SB01010 / SUB AFF D ,821 Department of Defense 12 Jackson State Univ Grant # sub ONR 80,722 Department of Defense 12 JACOBS SUB AIR FORCE PO#AFRL- 96, Department of Defense 12 JACOBS SUB AIR FORCE PO#AFRL- 22, Department of Defense 12 Knite Inc Sub No. 21 / AF FA C ,518 Department of Defense 12 Neuron Pharm EGG INTREPID sub ARMY 160,497 Department of Defense 12 RNET CIRE-T1-UC/FA D-1750 Sub 15,034 Department of Defense 12 SkySentry SCAN-2, SCAN-3 -sub Army 43,720 Department of Defense 12 Spectral Engeries SB Sub Navy 20,302 Department of Defense 12 Systran sub AF PO ,027 Department of Defense 12 UCSD PO# Sub Army 10,261 Department of Defense 12 UES S SUB AF 1,908 Department of Defense 12 UES S SUB AF 71,098 Department of Defense 12 UES S PO S AF 75,708 Department of Defense 12 UES S sub DTRA via AF 3,665 Department of Defense 12 UES S Project # P ,366 Department of Defense 12 UES S AF PO S ,265 Department of Defense 12 UES S Sub AF 57,460 Department of Defense 12 UES S SUB AF 1,374,512 Department of Defense 12 UES S Sub AF 51,541 Department of Defense 12 UES S MR003 Sub AF 12,885 54

61 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Department of Defense 12 Universal Tech Corp 09-S C1 Sub 39,792 AF Department of Defense 12 Universal Tech Corp 10-S C1 AF 15,214 Department of Defense 12 Universal Tech Corp C3 AF 12,559 Department of Defense 12 University of Dayton RSC09034 sub AF 25,520 Department of Defense 12 URS EGG sub NAVY 29,600 Department of Defense 12 UTHSCH C SUB ARMY -1,681 Department of the Navy, Office of the Chief of Naval Research Amer Burn Assn sub Army W81XWH , Department of the Navy, Office of the Chief of Naval Research NJ Inst of Tech NJIT sub ONR 112,539 Office of the Secretary of Defense Johns Hopkins Contract No Sub DOD 56,422 U.S. Army Medical Command CFBRE Sub Army 8,110 U.S. Army Medical Command Rutgers AFIRM PO#S sub Army 274,884 U.S. Army Medical Command Soluble Systems sub Army P ,588 U.S. Army Medical Command UCSD PO# Sub Army 351,499 U.S. Army Medical Command UCSD PO# Sub Army 248,293 U.S. Army Medical Command UCSD PO# sub Army 24,914 U.S. Army Medical Command UCSD PO# Sub Army 2,897 U.S. Army Materiel Command Penn State 4408-UC-USA-0124 sub Army 227,437 U.S. Army Materiel Command Rice U Sub DARPA 104,854 U.S. Army Materiel Command U Missouri Sub sub Army 22,108 Department of the Air Force, Materiel Command HM Jackson Fnd Phase ll -1,278 Department of the Air Force, Materiel Command HM Jackson Fnd Sub AF 265,524 Department of the Air Force, Materiel Command HM Jackson Fnd Sub AF -15,715 Department of the Air Force, Materiel Command HM Jackson Fnd Sub AF 198,180 Department of the Air Force, Materiel Command OHSU _UCIN Sub AF 193,840 Department of the Air Force, Materiel Command U Illinois / A5274 SUB AF 55,844 Department of the Air Force, Materiel Command A ARRA GE Aircraft Engines 200-1J-14E ,630 Department of the Air Force, Materiel Command A ARRA GE Aircraft Engines PO14G Advanced Research Projects Agency UC Irvine sub Navy 16,129 TOTAL DEPARTMENT OF DEFENSE 5,543,986 Department of Education Office of Special Education and Rehabilitative Services SCHOOL STUDY COUNCIL OF OHIO SEPDAC -1,746 SUB ED Office of Special Education and Rehabilitative Services U Kansas IFIG Subcontract sub USED 45,189 Office of Innovation and Improvement Campbellsville Univ sub USEd YRS ,750 TOTAL DEPARTMENT OF EDUCATION 72,193 Department of Energy Department of Energy 81 Alliance Sustainable Energy NO AAM-0-24, Department of Energy 81 Argonne 1F / DOE 176,147 Department of Energy 81 Argonne / DOE 33,705 Department of Energy 81 B&W Y-12 No /DOE 23,169 Department of Energy 81 Battelle Contract No sub DOE 263,077 Department of Energy 81 Battelle Contract No Mod 12 sub DOE 26,847 Department of Energy 81 Battelle Contract No sub DOE 233,551 Department of Energy 81 Battelle Contract No DOE 29,548 Department of Energy 81 Battelle-PNNL No Sub DOE 423,771 55

62 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Department of Energy 81 Battelle-PNNL No /DOE 6,093 Department of Energy 81 Battelle-PPNL No /DOE 41,677 Department of Energy 81 Brookhaven National Lab/DOE 8,786 Department of Energy 81 ORISE/DOE - Herr 62,332 Department of Energy 81 ORISE/DOE Conrady 7,771 Department of Energy 81 ORISE/DOE Martins 46,270 Department of Energy 81 ORISE/DOE/AFRL/HEP Fellow -5,108 Department of Energy 81 ORISE/DOE/AFRL/HEP Fellowship 61,782 Department of Energy 81 Siemens #038/AHTFFG/DE-FC26-05NT ,230 Department of Energy ARRA ODOD SEP-12-39/DE-EE ,044 Department of Energy Battelle Contract No Sub DOE 136,429 Department of Energy Battelle Contract No sub DOE 237,465 Department of Energy BETTERGY/DOE DE-SC ,000 Department of Energy CPWR /DOE EH06004 HANFORD '11-34, Department of Energy CPWR /DOE EH06004 HANFORD '12-22, Department of Energy NM INST MINING PO # P Sub DOE 57,609 Department of Energy B&W RCD 1481/DOE DE-FE ,468 Department of Energy U Missouri Sub DOE 30,132 Department of Energy MUSC DOE ID ,596 TOTAL DEPARTMENT OF ENERGY 2,939,010 Department of Health and Human Services Department of Health and Human Services 93 Brown Univ Sub # ,423 Department of Health and Human Services 93 CCHMC M3 PO ,265 Department of Health and Human Services 93 CWRU RES ACCORDION -UC-1 29,668 Department of Health and Human Services 93 Dystonia Fndn Coalition Career Dev Awd 19,692 Department of Health and Human Services 93 FEFA Sub FDA 30,346 Department of Health and Human Services 93 HCPHD / CDC VIA ODH HIV PREVENTION 15, Department of Health and Human Services 93 Healthy Housing Solutions Inc ,392 Department of Health and Human Services 93 ODJFS JFS G ,568 Department of Health and Human Services 93 ODJFS JFS G ,901 Department of Health and Human Services 93 U ILLINOIS AT CHICAGO Sub 5,000 NLM Department of Health and Human Services 93 U Toledo NS Substance Abuse and Mental Health Services Administration CCMHRB Sub SAMHSA Fast Track Year 3 97,211 Substance Abuse and Mental Health Services Administration CCMHRB Sub SM Fast Track Year 2 41,526 Substance Abuse and Mental Health Services Administration HCMHRSB Nat. Eval of Journey Sub SAMHSA 231,611 Health Resources and Services Administration MODEL STATE AHEC F Sub HRSA 23,266 Health Resources and Services Administration U Toledo F /Ohio AHEC PSME Proj 63,068 Health Resources and Services Administration HFM-5H ,000 National Institutes of Health CCHMC - ES ,879 National Institutes of Health CCHMC M3 8,591 National Institutes of Health CCHMC ,417 National Institutes of Health CCHMC ,794 National Institutes of Health CCHMC M1 350,623 56

63 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Institutes of Health CCHMC M2 7,217 National Institutes of Health Columbia U National Institutes of Health Columbia U National Institutes of Health Columbia U ,972 National Institutes of Health Illinois U Chicag SUB ,280 National Institutes of Health Illinois U Chicago /U01 ES ,361 National Institutes of Health U PITT / National Institutes of Health UAB National Institutes of Health UCSF 6375SC 24,720 National Institute of Environmental Health Sciences U PITT ( ) -77 Health Resources and Services Administration LIFELINE SUB HRSA R39OT ,751 Health Resources and Services Administration LIFELINE SUB HRSA R39OT ,561 National Institutes of Health ICWU Sub ES HWWT 7,467 National Institutes of Health ICWU SUB ES HDPTP 3,880 National Institutes of Health ICWU SUB ES HWWT 49,062 National Institutes of Health ICWU Sub ES DOE -951 National Institutes of Health ICWU SUB ES DOE 5,115 National Institutes of Health UCLA 2105 G PA025 7,876 Health Resources and Services Administration U PITT ( ) -716 Health Resources and Services Administration U PITT ( ) 241,700 National Institutes of Health CWRU RES National Institutes of Health STAR Corp Sub 1R43DC ,02 11,791 National Institutes of Health STAR Corp Sub 2R44DC Phase 2 15,134 National Institutes of Health STAR Corp sub R43-DC ,390 National Institutes of Health STAR Sub R43-DC ,669 Centers for Disease Control and Prevention HFM sub CDC11-12-HTC434 7,294 National Institutes of Health Mass General SUOI AT ,316 Agency for Healthcare Research and Quality ACHN RFA-HS Sub 1 R18 HS ,578 Agency for Healthcare Research and Quality CCHMC ,213 National Institutes of Health CCHMC M4 20,353 National Institutes of Health FIMR CIN National Institutes of Health Tulane University Sub TLU /09 M3 70,019 Substance Abuse and Mental Health Services Administration TALBERT HOUSE/SAMHSA 1H ,679 Health Resources and Services Administration OSURF sub HRSA UB6HP ,757 National Institutes of Health U Virginia RAA019720A 15,780 National Institutes of Health Battelle Contract No ,002 National Institutes of Health UTHSCH A 7030B 29,927 National Institutes of Health VACSP via NIDDA4006 CSP 1029 study 3,054 Centers for Disease Control and Prevention AAMC MM /07 SUB CDC 43,467 Centers for Disease Control and Prevention HFM sub DD CDC 5,490 Centers for Disease Control and Prevention ODH BC0411 SUB CDC / BCCP 4,900 Centers for Disease Control and Prevention ODH BC0512 Sub CDC BCCP 184,160 National Institutes of Health U Mich EB ,608 National Institutes of Health Miami U FUND Sub R25OD ,800 National Institutes of Health BAYLOR ,365 National Institutes of Health Brig&Wms Hosp ,158 National Institutes of Health CREAL RAD/08/10-52 National Institutes of Health U PITT

64 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Institutes of Health ARDENT/1 R43 CA SBIR 202 National Institutes of Health ACR RTOG SUB #2113 RTOG 57,673 National Institutes of Health B&W/ACOSOG/7U10CA National Institutes of Health Bexion Pharm 2R44 sub CA A1 71,913 National Institutes of Health Bexion Pharm 2R44 sub CA A ,399 National Institutes of Health DUKE UNIV GCID SITE CDE103 Study Z4031 1,997 SUB 7 National Institutes of Health GOG ( ) 182,152 National Institutes of Health NCCF SUB U10 CA National Institutes of Health NSABP SUB NCI TFED 187 2/1/10-1/31/13 11,935 National Institutes of Health NSAPB SUB NCI TFED National Institutes of Health SWOG/U Mich/NCI CA ,507 National Institutes of Health Thermedical, Inc sub CA ,429 National Institutes of Health U South Florida A 8,000 National Institutes of Health CCHMC M1-2,566 National Institutes of Health CCHMC M2 12,412 National Institutes of Health CCHMC M3 5,741 National Institutes of Health UCSD PO# ,506 National Institutes of Health NSABP STAR SUB NCI/PFED24-CN01 27,496 National Institutes of Health NSABP SUB NCI TIND 187 1,693 National Institutes of Health U South Florida s 2,741 Administration for Children and Families Univ Tennesse Administration for Children and Families Univ Tennessee National Institutes of Health ARRA Boston University Core B 620 National Institutes of Health ARRA Boston University Project National Institutes of Health ARRA Boston University ,132 National Institutes of Health ARRA Boston University Core B 47,906 National Institutes of Health ARRA Boston University Project 3 220,636 National Institutes of Health ARRA CCHMC ,730 National Institutes of Health ARRA CCHMC ,814 National Institutes of Health ARRA CCHMC ,428 National Institutes of Health ARRA CCHMC ,367 National Institutes of Health ARRA CCHMC M1 5,482 National Institutes of Health ARRA Columbia U Sub #1 3 P50 ES ,097 03S1 National Institutes of Health ARRA Emory U Sub S National Institutes of Health ARRA Illinois U Chicago E National Institutes of Health ARRA Illinois U Chicago E4779-2,392 National Institutes of Health ARRA Indiana U Sub IUPUI CINN -3,082 National Institutes of Health ARRA JWCI MSLT-II 659 National Institutes of Health ARRA Mass General 8 MGH ,595 National Institutes of Health ARRA Titan Pharmaceutical Sub DA ,493 National Institutes of Health ARRA U Mich Sub PNT ,521 National Institutes of Health ARRA U Washington Z ,714 National Institutes of Health ARRA U Washington Z ,819 National Institutes of Health ARRA UTMC 28751/ National Institutes of Health ARRA UTMC 33324/ ,020 Agency for Healthcare Research and Quality ARRA CFBRE 003 Sub ACR

65 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Agency for Healthcare Research and Quality ARRA Mass General ,839 Centers for Disease Control and Prevention ARRA HCPHD PO# ,809 Office of the Secretary ARRA GCHB 90BC ,456 Centers for Medicare and Medicaid Services OBR SUB A ODJFS MEDTAPP 53,274 Centers for Medicare and Medicaid Services OBR SUB A ODJRS MEDTAPP 28,123 Centers for Medicare and Medicaid Services OBR Sub A MEDTAPP; 203,939 SUB/ODJFS Centers for Medicare and Medicaid Services OBR Sub A ODJFS MEDTAPP 12,877 Centers for Medicare and Medicaid Services OBR Sub A MedTapp 11,098 Centers for Medicare and Medicaid Services OSU /OCM /ODJFS Sub ,324 Centers for Medicare and Medicaid Services OSU Direct Service Workforce -2,411 Centers for Medicare and Medicaid Services OSU Sub ODJFS 28,546 Centers for Medicare and Medicaid Services OSU Direct Service Workforce Project Year 2 2,522 National Institutes of Health ACSI ,512 National Institutes of Health Brig&Wms Hosp ,516 National Institutes of Health CCHMC ,484 National Institutes of Health CCHMC ,482 National Institutes of Health CCHMC ,346 National Institutes of Health CCHMC M1 219,471 National Institutes of Health CCHMC ,141 National Institutes of Health CCHMC ,892 National Institutes of Health CCHMC ,679 National Institutes of Health OSURF RF ,213 National Institutes of Health SSS CRB-UCLAA-S ,765 National Institutes of Health SSS CRB-UWAS1-S ,902 National Institutes of Health U Iowa ,378 National Institutes of Health U Iowa W ,279 National Institutes of Health U Iowa W ,407 National Institutes of Health UTHSC A 55,080 National Institutes of Health UTHSC A s 34,636 National Institutes of Health UTHSC A ,993 National Institutes of Health UTHSC A 211,981 National Institutes of Health Vanderbilt UMC33500-R s 13,194 National Institutes of Health Vanderbilt UMC ,205 National Institutes of Health CCHMC ,205 National Institutes of Health CCHMC M1 16,723 National Institutes of Health CCHMC ,555 National Institutes of Health CCHMC M1 5,108 National Institutes of Health UCSF 4914SC 93,315 National Institutes of Health CCHMC M3-459 National Institutes of Health CCHMC M5 47,957 National Institutes of Health CCHMC ,581 National Institutes of Health CCHMC M1 25,728 National Institutes of Health CCHMC ,997 National Institutes of Health CCHMC ,595 National Institutes of Health CCHMC ,536 National Institutes of Health CCHMC M1 17,860 National Institutes of Health CCHMC M2 16,959 59

66 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Institutes of Health CCHMC ,124 National Institutes of Health CCHMC ,362 National Institutes of Health CCHMC ,118 National Institutes of Health CCHMC ,784 National Institutes of Health U Minnesota N ,979 National Institutes of Health CCHMC ,812 National Institutes of Health CCHMC ,095 National Institutes of Health CCHMC National Institutes of Health CCHMC ,426 National Institutes of Health CCHMC ,176 National Institutes of Health CCHMC ,826 National Institutes of Health CCHMC M1 620 National Institutes of Health Medical College of Georgia ,900 National Institutes of Health P2D ,799 National Institutes of Health P2D ,548 National Institutes of Health SBMRI 8 SBMRI UC-01 4,985 National Institutes of Health U Utah ,367 National Institutes of Health UC Davis ,141 National Institutes of Health UC Davis M1 202,206 National Institute of Diabetes and Digestive and Kidney Disease CCHMC M5 2,469 National Institute of Diabetes and Digestive and Kidney Disease CCHMC ,940 National Institute of Diabetes and Digestive and Kidney Disease CCHMC 5 P30 DK ,726 National Institute of Diabetes and Digestive and Kidney Disease P2D/SUB R43 DK ,467 National Institutes of Health CCHMC M4-128 National Institutes of Health CCHMC M5 288,188 National Institutes of Health CCHMC ,283 National Institutes of Health City of Hope ,846 National Institutes of Health Cleveland Medical Devices 1 R43 NS , National Institutes of Health Columbia U Mod 3 2,164 National Institutes of Health Columbia U ,500 National Institutes of Health Columbia U ,479 National Institutes of Health Cornell Univ 089 sub NS ,315 National Institutes of Health Gr Lakes Neurotechnologies ,267 National Institutes of Health Johns Hopkins ,440 National Institutes of Health Johns Hopkins ,809 National Institutes of Health Johns Hopkins ,039 National Institutes of Health Mass General 2CARE NS ,442 National Institutes of Health Med College Wisconsin Sub #1 Sub NS ,155 National Institutes of Health Medical Univ of South Carolina MUSC ,650 National Institutes of Health MSU UC Project 4 118,095 National Institutes of Health U Akron R8423-UC 4,335 National Institutes of Health U Maryland Sub ,136 National Institutes of Health U Mich RPT 117,848 National Institutes of Health U Mich RPT07 146,027 National Institutes of Health U Mich PIII 367,511 National Institutes of Health U Mich SHN 6,074 National Institutes of Health U Mich ,342 60

67 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Institutes of Health U Mich ,735 National Institutes of Health U North Carolina COSS sub NS ,504 National Institutes of Health U Rochester ,250 National Institutes of Health U Rochester National Institutes of Health U Washington ,870 National Institutes of Health U Washington ,868 National Institutes of Health UAB 003 sub NS ,518 National Institutes of Health UCLA CK 7,135 National Institutes of Health UMDNJ/NS ,317 National Institutes of Health UTSMC PO#RGC ,516 National Institutes of Health Washington U WU0915 PO N 14,950 National Institutes of Health Washington U WU ,362 National Institutes of Health Yale U A08082 M01A ,256 National Institutes of Health CCHMC Yr 5 2,447 National Institutes of Health CCHMC ,114 National Institutes of Health CCHMC ,542 National Institutes of Health Duquesne sub 1 R01 AI A1 18,918 National Institutes of Health Mayo sub R01 AI ,437 National Institutes of Health SRI Sub ,577 National Institutes of Health SSS BRS-ACURE-Q T007 13,397 National Institutes of Health SSS BRS-ACURE-S ,000 National Institutes of Health SSS BRS-ACURE-S ,694 National Institutes of Health SUNY Subaward ,642 National Institutes of Health U Chicago ,666 National Institutes of Health U Chicago ,671 National Institutes of Health U Colorado National Institutes of Health UCSF 3563SC ,647 National Institutes of Health UPITT ( ) 62,272 National Institutes of Health MatTEK Corp Sub 1RGM ,495 National Institutes of Health UAB ,393 National Institutes of Health UT-Austin Sub UTA ,510 National Institutes of Health Baylor College of Medicine ,582 National Institutes of Health CCHMC ,874 National Institutes of Health CCHMC ,708 National Institutes of Health CCHMC ,188 National Institutes of Health PURDUE ,664 National Institutes of Health Washington U WU ,731 National Institutes of Health ORISE/NLM/DOE Associate Fellowship Program 2,657 National Institutes of Health OSURF ,905 National Institutes of Health OSURF ,620 Health Resources and Services Administration Cin Health Network 5H75HA ED EIP 57,244 Health Resources and Services Administration Cin Health Network 5H75HA ED EIP 15,679 Health Resources and Services Administration Cin Health Network 5H76HA /19-572, Centers for Disease Control and Prevention CBH Contract No 05X Centers for Disease Control and Prevention CBH Contract No 15x ,355 61

68 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Centers for Disease Control and Prevention ODH HT ,868 Substance Abuse and Mental Health Services Administration ODADAS CPREV-P Health Resources and Services Administration UKRF ,211 Centers for Disease Control and Prevention ODH CC ,491 Centers for Disease Control and Prevention ODH CC ,182 Health Resources and Services Administration ODH DOH ,369 Department of Health and Human Services 93.ARRA ARRA CWRU RES ,553 Department of Health and Human Services 93.ARRA ARRA SSS CRB-DCR01-S TASK 2 68,153 Department of Health and Human Services 93.ARRA ARRA SSS CRB-DCR01-S Task 3 20,179 TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES 11,947,160 Department of Homeland Security Department of Homeland Security 97 UKRF ,546 TOTAL DEPARTMENT OF HOMELAND SECURITY 165,546 Department of Housing and Urban Development Department of Housing and Urban Development 14 NCHH SUB HUD 3,850 TOTAL DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 3,850 Department of Justice Office of Juvenile Justice and Delinquency Prevention City of Richmond, VA PD ,846 Office of Juvenile Justice and Delinquency Prevention ODYS 2009-JJ-SI ,764 National Institute of Justice Yale U P00294 M10P ,002 TOTAL DEPARTMENT OF JUSTICE 44,612 Department of Labor Office of Workers' Compensation Programs CPWR /DOL J059E ,093 Office of Workers' Compensation Programs CPWR Yr 5 38,336 TOTAL DEPARTMENT OF LABOR 56,429 Department of the Interior U.S. Geological Survey OSURF RF SUB USGS -3,750 U.S. Geological Survey Univ S Cal SUB USGS -5,437 TOTAL DEPARTMENT OF THE INTERIOR -9,187 Department of Transportation Department of Transportation 20 UPITT sub DOT 23,456 Department of Transportation 20 URS CORP PID Sub ODOT 92 Department of Transportation 20 URS CORP-OHIO Sub ODOT ,104 Research and Innovative Technology Administration CSUMB Sub A S-A GT ,030 Research and Innovative Technology Administration U Akron R7330-UC /DTRT06-G ,562 TOTAL DEPARTMENT OF TRANSPORTATION 58,184 Environmental Protection Agency Environmental Protection Agency 66 Emory U Sch Pub Hlth RD ,791 Environmental Protection Agency 66 Pegasus WA ,106 Environmental Protection Agency 66 Pegasus WA ,730 Environmental Protection Agency 66 Pegasus WA ,603 Environmental Protection Agency 66 Pegasus WA ,272 Environmental Protection Agency 66 Pegasus WA ,472 Environmental Protection Agency 66 Pegasus WA ,314 Environmental Protection Agency 66 Pegasus WA ,599 62

69 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures Environmental Protection Agency 66 Pegasus WA ,323 Environmental Protection Agency 66 Pegasus WA ,218 Environmental Protection Agency 66 Pegasus WA ,210 Environmental Protection Agency 66 Pegasus WA ,829 Environmental Protection Agency 66 Pegasus WA ,573 Environmental Protection Agency 66 Pegasus WA ,028 Environmental Protection Agency 66 Pegasus WA ,809 Environmental Protection Agency 66 Pegasus WA 0-A 11,874 Environmental Protection Agency 66 Pegasus WA 0-B 3,959 Environmental Protection Agency 66 Pegasus WA ,829 Environmental Protection Agency 66 Pegasus WA ,099 Environmental Protection Agency 66 Pegasus WA ,102 Environmental Protection Agency 66 Pegasus WA ,404 Environmental Protection Agency 66 Pegasus WA ,689 Environmental Protection Agency 66 Pegasus WA ,742 Environmental Protection Agency 66 Pegasus WA ,787 Environmental Protection Agency 66 Pegasus WA ,363 Environmental Protection Agency 66 Pegasus WA ,969 Environmental Protection Agency 66 Pegasus WA ,617 Environmental Protection Agency 66 Pegasus WA ,482 Environmental Protection Agency 66 Pegasus WA ,395 Environmental Protection Agency 66 Pegasus WA 1-45 Task 1 45,608 Environmental Protection Agency 66 Pegasus WA 1-45 Task 2 & 3 - A 15,146 Environmental Protection Agency 66 Pegasus WA 1-45 TASK 2 & 3 - B 33,010 Environmental Protection Agency 66 Pegasus WA ,226 Environmental Protection Agency 66 Pegasus WA ,073 Environmental Protection Agency 66 Pegasus WA ,227 Environmental Protection Agency 66 Pegasus WA Environmental Protection Agency 66 Pegasus WA 4-52 T2 - A 3,000 Environmental Protection Agency 66 Waterstone #804 TO # Office of Research and Development Health Effects Institute 4784-RFA-1/09-5 2,544 TOTAL ENVIRONMENTAL PROTECTION AGENCY 958,175 National Aeronautics and Space Administration National Aeronautics and Space Administration 43 Aurora Flight Sciences AFS Sub NASA 3,578 National Aeronautics and Space Administration 43 CFD RESEARCH CORP 1467 Sub NASA 22,092 National Aeronautics and Space Administration 43 Cornerstone Research Sub NASA 64,413 National Aeronautics and Space Administration 43 General Nano/NASA NNX11CD79P 20,739 National Aeronautics and Space Administration 43 Jet Propulsion Laboratory No ,839 National Aeronautics and Space Administration 43 OAI Sub NASA 5,745 National Aeronautics and Space Administration 43 Spectral Energies SB Sub NASA 2,149 National Aeronautics and Space Administration EUREKA SCIENTIFIC SUB#021 SUB NASA -50 National Aeronautics and Space Administration OAI OSGC/NASA 16,805 TOTAL NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 144,310 National Science Foundation National Science Foundation BETTERGY Sub NSF 28,295 National Science Foundation General Nano/NSF IIP ,775 National Science Foundation GVD Corp Sub NSF 36,002 63

70 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures National Science Foundation NCA&T B NSF YEARS ,240 National Science Foundation NCA&T C NSF Supplement 33,925 National Science Foundation SUNY Sub REU 5,756 National Science Foundation SUNY Subaward ,647 National Science Foundation UWM K sub NSF 11,134 National Science Foundation Notre Dame Sub NSF 223 National Science Foundation Notre Dame sub NSF PHY ,951 ( ) National Science Foundation CCHMC ,984 National Science Foundation U Illinois / A0691 Sub NSF 881 National Science Foundation WSU DUE ,002 TOTAL NATIONAL SCIENCE FOUNDATION 922,815 TOTAL RESEARCH AND DEVELOPMENT - PASS THROUGH FUNDS 23,456,975 TOTAL RESEARCH AND DEVELOPMENT CLUSTER 149,632,252 STUDENT FINANCIAL AID CLUSTER STUDENT FINANCIAL AID - DIRECT FUNDS Department of Education Office of Student Financial Assistance Programs Supplemental Educational 1,257,764 Opportunity Grants Office of Student Financial Assistance Programs Work-Study Program 1,668,187 Office of Student Financial Assistance Programs Perkins Loan Program_ 29,537,962 Capital Contributions Office of Student Financial Assistance Programs Pell Grant Program 41,121,269 Office of Student Financial Assistance Programs Direct Student Loans 289,891,433 Office of Postsecondary Education Academic Competitiveness Grants -4,024 Office of Student Financial Assistance Programs National Science and Mathematics Access to 8,336 Department of Education Retain Talent (SMART) Grants Teacher Education Assistance for College 139,997 and Higher Education Grants (TEACH Grants) TOTAL DEPARTMENT OF EDUCATION 363,620,924 Department of Health and Human Services Health Resources and Services Administration Health Professions Student Loans, Including 785,620 Primary Care Loans/Loans for Disadvantaged Students Health Resources and Services Administration Nursing Student Loans 656,689 Health Resources and Services Administration Scholarships for Health Professions Students 43,230 from Disadvantaged Backgrounds TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES 1,485,539 TOTAL STUDENT FINANCIAL AID - DIRECT FUNDS 365,106,463 TOTAL STUDENT FINANCIAL AID CLUSTER 365,106,463 TANF (TEMPORARY ASSISTANCE FOR NEEDY FAMILIES) CLUSTER TANF (TEMPORARY ASSISTANCE FOR NEEDY FAMILIES) - PASS THROUGH FUNDS Department of Health and Human Services Administration for Children and Families ODRC SUB DHHS 17,942 TOTAL DEPARTMENT OF HEALTH AND HUMAN SERVICES 17,942 64

71 University of Cincinnati A Component Unit of the State of Ohio Schedule of Expenditures of Awards for the period ending June 30, 2012 Program Title or Agency CFDA Pass Through Entity ID Expenditures TOTAL TANF (TEMPORARY ASSISTANCE FOR NEEDY FAMILIES) - PASS THROUGH FUNDS 17,942 TOTAL TANF (TEMPORARY ASSISTANCE FOR NEEDY FAMILIES) CLUSTER 17,942 TRIO CLUSTER TRIO - DIRECT FUNDS Department of Education Office of Postsecondary Education TRIO_Student Support Services 245,303 Office of Postsecondary Education TRIO_Talent Search 283,042 Office of Postsecondary Education TRIO_Upward Bound 838,582 Office of Postsecondary Education TRIO_Educational Opportunity Centers 251,543 Office of Postsecondary Education TRIO_McNair Post-Baccalaureate 247,194 TOTAL DEPARTMENT OF EDUCATION 1,865,664 TOTAL TRIO - DIRECT FUNDS 1,865,664 TOTAL TRIO CLUSTER 1,865,664 TOTAL FEDERAL AWARDS EXPENDITURES 526,016,598 65

72 UNIVERSITY OF CINCINNATI NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant transactions of the University of Cincinnati ( University ) and is recorded on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Subrecipients Certain funds are passed through to subgrantee organizations by the University. Expenditures incurred by the subgrantees and reimbursed by the University are presented in the schedule of expenditures of federal awards. The University is also the subrecipient of federal funds which have been subjected to testing and are reported as expenditures and listed as federal pass-through funds. Negative Expenditures Certain grant expenditures are negative as a result of various adjustments made during the year. 2. CATALOG OF FEDERAL DOMESTIC ASSISTANCE NUMBERS Catalog of Domestic Assistance ( CFDA ) numbers are presented for those programs for which such numbers are available. 3. FEDERAL DIRECT STUDENT LOANS PROGRAM (CFDA ) The University also participates in the Direct Student Loan Program. Loan awards under this program for the year ended June 30, 2012 approximated $289,891, FEDERAL LOAN PROGRAMS The University administers the Perkins, Health Professions Student and Nursing Student Loan Programs. Total loan expenditures and disbursements of the Department of Education and Department of Health and Human Services student financial assistance programs for the year ended June 30, 2012 are as follows: Perkins Loan Program (CFDA ) $ 5,367,112 Health Professions Student Loan Program (CFDA ) 59,521 Nursing Student Loan Program (CFDA ) 70,600 Total $ 5,497,233 The above expenditures include disbursements and expenditures such as loans to students and administrative expenditures. 66

73 UNIVERSITY OF CINCINNATI NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2012 Outstanding loans at June 30, 2012 include the following: Perkins Loans $ 24,170,850 Health Professions Student Loans 726,099 Nursing Student Loans 586,089 $ 25,483, INDIRECT COSTS The University recovers indirect costs by means of predetermined indirect cost rates. The predetermined rates are a result of negotiated agreements with the U.S. Department of Health and Human Services. On June 11, 2009 the University received approval for indirect cost recovery rate effective from July 1, 2009 through June 30, The indirect cost rates structure is as follows: Effective July 1, 2009 Rate Type through June 30, 2012 Organized research: On-campus 57.0 % Off-campus 26.0 % Instruction: On-campus 57.0 % Off-campus 26.0 % Public Service: On-campus 30.0 % Off-campus 26.0 % 6. FUNDS PASSED TO SUBRECIPIENTS The University passed funds to subgrantees for the following programs during the year ending June 30, 2012: CFDA Number Program Total Highway Planning and Construction $ 32, Gaining Early Awareness and Readiness 791, Mathematics and Science Partnerships 9, Head Start 375,219 Various Research and Development 22,617,606 $ 23,826,393 67

74 Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Board of Trustees University of Cincinnati Cincinnati, Ohio We have audited the basic financial statements of the University of Cincinnati (University) and its discretely presented component unit, collectively a component unit of the State of Ohio, as of and for the year ended June 30, 2012, and have issued our report thereon dated October 15, 2012 which contained references to the report of other auditors and explanatory paragraphs regarding changes in accounting principles and recording of changes in a reporting entity. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Other auditors audited the financial statements of the University of Cincinnati Foundation, as described in our report on the University s financial statements. This report does not include the results of the other auditors testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control over Financial Reporting Management of the University is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the University s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the University s internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses and, therefore, there can be no assurance that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as discussed in the accompanying schedule of findings and responses, we identified a certain deficiency in internal control over financial reporting that we consider to be a material weakness. 68

75 A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the University s financial statements will not be prevented or detected and corrected on a timely basis. We consider the deficiency described in the accompanying schedule of findings and responses as item 12-1 to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the University s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to the University s management in a separate letter dated October 15, The University s response to the finding identified in our audit is described in the accompanying schedule of findings and responses. We did not audit the University s response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of the governing body, management and others within the University and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. October 15,

76 Independent Auditors Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 Board of Trustees University of Cincinnati Cincinnati, Ohio Compliance We have audited the compliance of the University of Cincinnati (University), a component unit of the State of Ohio, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, The University s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the University s management. Our responsibility is to express an opinion on the compliance of the University based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the University s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the University s compliance with those requirements. In our opinion, the University complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Internal Control Over Compliance The management of the University is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants 70

77 applicable to federal programs. In planning and performing our audit, we considered the University s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the governing body, management, others within the University, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. October 15,

78 UNIVERSITY OF CINCINNATI SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 Summary of Auditor s Results 1. The opinion expressed in the independent accountants report was: Unqualified Qualified Adverse Disclaimed 2. The independent accountants report on internal control over financial reporting disclosed: Significant deficiency(ies)? Yes None reported Material weakness(es)? Yes No 3. Noncompliance considered material to the financial statements was disclosed by the audit? Yes No 4. The independent accountants report on internal control over compliance with requirements that could have a direct and material effect on major federal awards programs disclosed: Significant deficiency(ies)? Yes None reported Material weakness(es)? Yes No 5. The opinion(s) expressed in the independent accountants report on compliance with requirements that could have a direct and material effect on major federal awards was (were): Unqualified Qualified Adverse Disclaimed 6. The audit disclosed findings required to be reported by OMB Circular A-133? Yes No 7. The University s major programs were: Cluster/Program CFDA Number Research and development Various Gaining Early Awareness and Readiness for Undergraduate Programs

79 UNIVERSITY OF CINCINNATI SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, The threshold used to distinguish between Type A and Type B programs as those terms are defined in OMB Circular A-133 was $3,000, The University qualified as a low-risk auditee as that term is defined in OMB Circular A-133? Yes No 73

80 UNIVERSITY OF CINCINNATI SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2012 Findings Required to be Reported by Government Auditing Standards Reference Number Finding Questioned Costs 12-1 Criteria or specific requirement Financial reporting None Condition The University restated its beginning of the year net assets. Context The University changed its method of accounting for endowment investments held by external trustees, certain pooled investments and pledges of the University of Cincinnati Foundation resulting in material changes to the overall financial statements. Effect The University s beginning net assets were restated to properly reflect the accounting for endowment investments held by external trustees, certain pooled investments and pledges of the University of Cincinnati Foundation in accordance with Governmental Accounting Standards Board pronouncements. Cause - The University changed its method of accounting. Recommendation The University should continue to monitor its financial reporting standards and provide for continued improvement in its financial reporting process. Views of responsible officials and planned corrective actions Management of the University will continue to evaluate its financial reporting standards in the future to determine that they are in accordance with Governmental Accounting Standards Board authoritative standards. 74

81 UNIVERSITY OF CINCINNATI SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2012 Findings Required to be Reported by OMB Circular A-133 Reference Number Finding No matters are reportable. Questioned Costs 75

82 UNIVERSITY OF CINCINNATI SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2012 Reference Number Summary of Finding Status 11-1 The University s process for verifying that goods and services purchased directly with federal awards were not purchased from federally suspended or debarred vendors was decentralized and undocumented; therefore, included no audit trail to facilitate management review. However, during 2011 the process was centralized and includes appropriate level of management. Corrected 76

83 Sponsored Research Services John G. Ungruhe, Director Accounting Division University Hall, Suite Goodman Drive University of Cincinnati P.O. Box Cincinnati, OH Phone: Fax: /19/12 Management of the University will continue to evaluate its financial reporting standards in the future to determine that they are in accordance with Governmental Accounting Standards Board authoritative standards. Carol Metzger, Assistant Vice President, Financial Services/Controller is responsible for overseeing the review of the financial statements and the necessary adjustments have been recorded in the June 30, 2012 financial statements. This finding has been corrected as of October 15, 2012.