USF Board of Trustees Finance & Audit Workgroup NOTES Wednesday, May 27, 2015 CAMLS Dining Room, Downtown Tampa I. Call to Order and Comments The meeting of the Finance and Audit Workgroup was called to order by Chair Hal Mullis at 10:45 am. The following members and liaisons were present: Hal Mullis, Stephanie Goforth, Scott Hopes (phone), John Ramil, Judy Genshaft and Roy Binger. Also present were Trustees Stephen Mitchell and Byron Shinn. II. Public Comments Subject to USF Procedure No requests for public comments were received. III. New Business Action Items a. Approval of February 26, 2015 Meeting Notes Upon request and receiving no changes to the draft meeting notes, Chair Mullis requested a motion for approval, it was seconded and the February 26th meeting notes were approved as submitted. b. 2015-16 Continuation Operating Budget Nick Trivunovich, Vice President for Business & Finance and CFO, presented the 2015-16 Continuation Operating Budget. The USF System Board of Trustees (the BOT) is required to adopt an annual budget for the operation of the University. The BOT must approve the budget prior to July 1, 2015 for the State Comptroller to process cash releases of state funds. The universities are still required to submit a detailed operating budget to the BOG by August 18, 2015. The 2015-16 Continuation Budget is requested at last year's level. We are requesting approval of a continuation budget due to pending legislative budget decisions and the Governor s approval of the legislative appropriations for FY 2016. Once those decisions have been finalized, the USF System will prepare an operating budget according to our guidelines and the laws and regulations of the Board of Governors. Since we do not have all the information from the legislative session, Chair Mullis has asked that the final budget come back to the Workgroup in late July or early August. The 5-Year CIP will also be brought forward at that time for approval. Trustee Ramil asked whether the continuation budget is just to keep things moving and we are respecting the process. Mr. Trivunovich replied in the affirmative.
A motion was made to 1) approve 2015-16 Continuation Operating Budget at last year s level with adjustments for reserves, transfers out and carry forward expenditures; 2) authorize the President (or the Designee) to make changes as needed between the 2015-16 Continuation Operating Budget and the budget to be submitted to the Board of Governors by August 18, 2015; and 3) authorize the President (or the Designee) to implement budget amendments issued by the state during the fiscal year or other changes approved by the Board Chair. The motion was seconded. The motion passed. c. 2015-16 Preliminary Fixed Capital Outlay Budget Mr. Trivunovich presented the 2015-16 Preliminary Fixed Capital Outlay Budget. Since the legislature has yet to approve a final state budget, the preliminary fixed capital outlay budget includes only prior year state appropriated funds and non-state appropriated funds. All fixed capital projects have been previously approved by the UBOT. This is an annual request and includes unspent funds from previous authority. This action will allow the university to spend capital funds that have been appropriated but not yet spent. Chair Mullis requested the Morsani College of Medicine project be brought back to the BOT due to the uniqueness of the project. Trustee Hopes asked whether or not trustees would have an opportunity to review, discuss and vote on the final project once planned and designed. Chair Mullis confirmed that there will be a presentation as appropriate. Chair Mullis and Trustee Mitchell stated that the project has already been approved to move forward and no reapproval is necessary. John Long, Senior Vice President and COO, described an overview of the design construction process and distinguished the funding approvals already received. Trustee Hopes compared the downtown project to the P3 initiative. Trustee Mitchell agreed with Mr. Long s description of the project construction and budget process and emphasized that the decision to move forward with developing the downtown site has already been supported by the BOT through unanimous voting. A motion was made to approve the 2015-16 Preliminary Fixed Capital Outlay Budget and to authorize the President, with the approval of the Chair, to make necessary adjustments to the 2015-16 Fixed Capital Outlay Budget. The motion was seconded. The motion passed. d. DSO/CU 2015-16 Financial Plans and Strategy Statements Fell Stubbs, University Treasurer, introduced the agenda item noting that the annual DSO financial plans are presented to the Trustees for review and approval pursuant to Florida statutes and DSO bylaws. These annual financial plans have been reviewed and approved by the DSO boards of directors and reviewed by University administration. In FY 2014, these enterprises collectively held $1.15B of assets and generated $52M of operating profit. 1. USF Health Professions Conferencing Corp. Controller Greg Vannette presented the financial plan for USF Health Professions Conferencing Corp. (HPCC). In FY 15, revenues are stronger than expected and non-cash items (depreciation) are less. In FY16, the projections related to competency based training are strong, the Innovation Center will generate a growing stream of revenue, and USF Health will be reduced. HPCC is making up lost revenue from FY14 from the robotics center, thus revenue shows as flat. HPCC is maintaining net cash flow year over year. A philanthropy strategy has
been developed to offset some of the expenses at CAMLS a giving campaign through USF Foundation. HPCC has been operating for 3 years and 3 months. Trustee Ramil noted that a positive income statement within 3 years is very good. A motion was made to approve the 2015-16 Financial Plan for USF Health Professions Conferencing Corp. The motion was seconded. The motion passed. 2. University Medical Services Assoc., Inc. Rich Sobieray, CEO USF Physicians Group, presented the financial plan for University Medical Services Assoc., Inc. (UMSA). (A detailed presentation was made at the earlier Joint Workgroup meeting.) The FY16 projection is driven by the EPIC installation and faculty compensation changes (protect highly productive faculty). Other key drivers include improving access, improving ancillary revenues, improving the call center, and continuing to make investments to improve operations. Deficits generated in FY15 and FY16 need to be viewed as investments in the future of USFPG. USFPG had a healthy cash reserve at the beginning of FY15 ($50M or 75 days cash on hand) from which to draw this investment. The plan is to draw down cash reserves to 64 days in FY16 and grow it back to 90 days over a 5 year period. A motion was made to approve the 2015-16 Financial Plan for University Medical Services Assoc. Inc. The motion was seconded. The motion passed. 3. USF Medical Services Support Corp. Mr. Sobieray presented the financial plan for USF Medical Services Support Corp (MSSC). This is a cash in/cash out operation funded by UMSA (subsidizes staff support). MSSC is tied directly to support from the Faculty Practice Plan. As MSSC is primarily structured to be a beak-even organization, all payroll and operating expenses are funded by UMSA in the form of service revenue. No issues for funding this enterprise going forward. In the future, would like to see UMSA and MSSC combined into one organization. A motion was made to approve the 2015-16 Financial Plan for USF Medical Services Support Corp. The motion was seconded. The motion passed. 4. Sun Dome, Inc. Yulander Wells, CFO for USF Athletics, presented the financial plan for Sun Dome, Inc. (SDI). Trent Merritt, general manager from Global Spectrum was also present. SDI operates the arena with Global Spectrum. Revenues are event-based. Improved operating profit over FY14 is due primarily to increased rental rates from users which also stabilized cash flow. We are continuing to pursue naming rights for the arena however, potential revenue for this initiative is not in the budget numbers. If successful, this will increase net operating profits and cash flows. Mr. Merritt stated that the Sun Dome is a nationally ranked facility and anticipates growing business in years to come. A motion was made to approve the 2015-16 Financial Plan for Sun Dome, Inc. The motion was seconded. The motion passed.
5. USF Alumni Association, Inc. Bill McCausland presented the financial plan for USF Alumni Association, Inc. The Alumni Association continues to implement new programs and strengthen existing programs to draw alumni back to the University. Growing membership is the focus, especially lifetime memberships. Membership dues will increase in FY16 (for the first time in 10 years) to be more in line with other institutions. At USF, 10.6% of alumni are members (national average is 13%). License plate revenue is steady at 1% growth (FSU is up 2% and most others in SUS are up 1%). A motion was made to approve the 2015-16 Financial Plan for USF Alumni Association, Inc. The motion was seconded. The motion passed. 6. USF Financing Corp. & USF Property Corp. Mr. Stubbs presented the financial plan for USF Financing Corp. & USF Property Corp. The Financing Corp. is the financing arm of the university and creates value by providing low cost, low risk, long-term financing for the University's major capital projects. The Financing Corp. and the Property Corp. operate jointly as pass-thru (conduit) entities, with revenues matching expenditures. The investment in INTO USF is an exception to the pass-thru activity. The Financing Corp. also manages relationships with credit rating agencies. Chair Mullis expressed his appreciation for the good work with the credit agencies this is very important. A motion was made to approve the 2015-16 Financial Plan for USF Financing Corp. and USF Property Corp. The motion was seconded. The motion passed. 7. USF Research Foundation, Inc. Allison Madden, Director of Research Foundation Operations, presented the financial plan for USF Research Foundation, Inc. The Research Foundation is the economic development arm of the university. Revenues are projected to increase in FY16, driven by rental revenues in the research park and incubator program revenues. Expenditures are projected to increase modestly. FY15 expenditures are lower than expected due to a litigation settlement payment that did not occur. Noted a trend of increasing cash generated from operating activities. President Genshaft asked how the Research foundation will be affected by the exit of Draper Laboratory from the USF Connect building. Ms. Madden responded that we have a lease with Draper and they are expected to pay through 2018. A motion was made to approve the 2015-16 Financial Plan for USF Research Foundation, Inc. The motion was seconded. The motion passed. 8. USF Foundation, Inc. Joel Momberg and CFO Rob Fischman presented the financial plan for USF Foundation, Inc. The Foundation had a superb, record year, including four significant namings this year, three of which were from alumni. The Foundation entered into the second phase of the comprehensive campaign to reach a total $1B in giving overall. $856M has been raised through the 3 rd quarter of FY15 85% of
the money in 75% of the time. The Foundation is projecting a slight increase in revenue in FY16 and will maintain a strong cash position. A motion was made to approve the 2015-16 Financial Plan for USF Foundation, Inc. The motion was seconded. The motion passed IV. New Business Information Items a. University Audit & Compliance Work Plan FY 2016 Debra Gula, Executive Director, University Audit & Compliance, gave a status report on the 2- year Work Plan approved last year. Ms. Gula reported no significant changes to the two-year Work Plan. Additional hours were required for the Performance-Based Funding Data Integrity Audit and came from the contingency budget. Of the 10 audits originally scheduled for Year 1, 6 projects have been completed, 2 are in progress and 2 were pushed to Year 2 due to scheduling issues (USFH IT and HPCC IT). These were exchanged for 2 projects from Year 2 (College of Engineering and Research Technologies). Trustee Ramil was pleased to hear that UAC is involved in the EPIC project this involvement is a best practice. Trustee Goforth stated the plan is working well with the flexibility. Chair Mullis congratulated UAC on a good job with the data integrity audit and thanked Trustee Goforth for her oversight. b. BOG Draft Audit Regulations Ms. Gula presented the BOG draft audit regulations. This is an impactful item to UAC and the university. The BOG Audit and Compliance Committee has issued four draft regulations as follows: 1) SUS Compliance and Ethics Programs (potentially the most impactful to the other SUS institutions; USF has been recognized as a leader in this area); 2) SUS Chief Audit Executives; 3) SUS Complaint Handling; and 4) BOG Oversight Enforcement Authority. Comments on the regulations are due 07/31/15. The promulgation period is unknown. Chair Mullis reported that he and Ms. Gula recently attended the first joint audit committee meeting in Tallahassee (all SUS universities). Chair Mullis further remarked that USF s program is one of the most robust of the SUS universities and USF is a leader to which others aspire. c. Completed USF Bond Financings - Moody s and S&P s Ratings Mr. Stubbs presented the agenda item. The USF Financing Corporation realized an opportunity to refund $152M par amount for 3 bonds issued in 2005, now at the end of 10-year call provisions and the expiration of a 10-year interest rate swap, and issue new bonds to the original maturities and capture current low market interest rates and reduce variable rate structure remarketing, renewal and interest rate swap exposures. The University and the USF Financing Corporation accomplished each of its key transaction objectives which included: 1) maintain strong credit ratings (hallmark of the university); 2) eliminate liquidity risks; 3) reduce cost of capital; 4) eliminate interest rate swap; 5) release Andros Complex from Housing Ground Lease to accommodate USF P3 Project; and 6) manage strong finance teams. The total present value savings generated by the refundings equals $8.8 million. Both Moody s and S&P visited campus in February 2015 to meet with campus leadership. USF s ratings (Moody s Aa2 and S&P AA-) were affirmed with stable outlooks, and strong ratings on bond systems were issued (Parking Aa3, Marshall Center Aa3, Housing A1).
d. College of Arts & Sciences Shared Services Center Dean Eric Eisenberg gave a presentation on the College of Arts & Sciences (CAS) Shared Services Center. CAS is phasing in a new shared service center called Business Support Services (BSS). The center is currently designed to assist faculty and academic units in managing travel and the purchasing process. BSS is made up of professional grade staff whose role is focused on the hands on activities and tasks required in the USF business systems for travel, the purchasing goods and services via requisition/purchase order and/or p-card, as well as the monthly reconciliation of p-cards held by faculty in the academic units. The investment for BSS has been generated through a reallocation of the existing staff salaries. The goal is to transition staff from low paying fragmented jobs to higher paying comprehensive jobs. The new BSS center has created efficiencies, improved customer satisfaction among faculty, and improved compliance with USF policy and standard business procedures. BSS provides the opportunity for the staff and faculty in CAS academic units to become more focused on needs of students and spend less time dealing with transactions processed in the USF business systems. Currently BSS provides services to 13 academic units in CAS and processes 75% of all travel transactions and 65% of all purchasing transactions. Continuing to phase in academic units two of the largest areas (Psychology and Chemistry) are next. Will process 90% of all transactions by Fall 2015. Mr. Long stated that shared service centers will continue to grow on campus, all stemming from the President saying we need to find a better way to do things. V. Adjournment Chair Mullis noted that the status of the P3 project was not on the agenda as it is an action item at the full board meeting next week (June 4). Mr. Long reported that we are ready to release the intent to award for the P3 (this allows us to continue to negotiate with the preferred partner and does not obligate the BOT) and then it will go to the BOG. The next 6-12 weeks will be very busy. Trustee Mitchell has been the lead trustee on this project Chair Mullis thanked him for a great job. Having no further business, Chair Mullis adjourned the Finance and Audit Workgroup meeting at 12:35 pm.