Changes at UVA David Boling Deputy Comptroller, UVA May 17 th, 2012 1
Changes at UVA New Leadership A New Financial Model Financial Reporting to the Board 2
New Leadership New President August 2010 New Executive VP and COO July 2011 New Provost July 2011 VP and CFO search underway 3
New Leadership Teresa Sullivan Became UVA s first female president in August, 2010 Formerly the Provost at the University of Michigan 4
New Leadership Michael Strine Became UVA s Executive VP and COO in July, 2011 (Took over for Leonard Sandridge) Formerly the Vice President for Finance, Chief Financial Officer and Treasurer at Johns Hopkins University 5
New Leadership John Simon Became UVA s Executive VP and Provost in July, 2011 Formerly the Vice-Provost for Academic Affairs at Duke University 6
New Leadership VP and Chief Financial Officer vacancy Yoke San Reynolds retiring at the end of May Has been at UVA for 11 years 7
New Internal Financial Model President has mandated adoption of a new funding model that will emphasize: 1. Transparent decision making 2. Incentive based allocations 3. Prudent stewardship of the University s resources (Some know this approach as Responsibility Center Management (RCM) or Activity Based Costing ) 8
New Internal Financial Model Current model is highly centralized Tuition revenue State appropriations revenue F&A recoveries Unrestricted gifts and unrestricted endowment spending distribution O&M expense (facilities maintenance) Central admin and other support costs 9
New Internal Financial Model Goals of the New Model: 1. Decentralize authority and accountability for resource planning 2. Empower and increase self-reliance of the schools, and other major units 10
New Internal Financial Model How will this happen? By associating institutional revenues and expenditures with the activities that generate them. In effect, ALL sources of revenue will be identified and attributed to the units that generate them, and ALL support costs will be either be charged out or allocated out to the academic units 11
New Internal Financial Model In the new (decentralized) model, what happens to.? Tuition revenue State appropriations revenue F&A recoveries Unrestricted gifts and endowment spending distribution O&M expense (facilities maintenance) Central admin and other support costs 12
FY11 Operating Revenues and Expenditures, Actual (DRAFT UNOFFICIAL AND UNAUDITED DRAFT (for illustration purposes only!) ACADEMIC UNITS Total A&S Architecture Batten Curry Darden Engineering Law Libraries McIntire Medicine Nursing SCPS Acad Units Revenues: State Appropriations 0 0 0 0 0 0 0 0 0 0 0 0 Tuition and Fees (Note 1 and 3) 788,239 78,640 11,650 87,829 35,463,773 219,365 40,642,517 1,011 12,056,797 238,407 37,937 14,407,864 104,034,029 Less RP1 Revenue already in T&F and St Approp (note 2) (698,348) (43,140) (10,740) (71,341) 0 (163,441) 0 (66,268) (78,375) (214,400) (25,200) (11,598,597) (12,969,850) SG/SR Funding Allocation (E&G, Research, and Fin Aid) (note 3) 112,873,167 7,609,106 427,999 14,861,776 686,220 31,302,038 6,289,081 21,194,466 7,436,664 54,957,351 6,967,187 14,181,871 278,786,926 Sponsored Programs (Note 4) 39,239,265 264,005 20,798 13,868,706 272,070 43,024,970 1,673,999 1,817,964 0 182,753,598 2,535,564 694,830 286,165,766 Endowment Spending Distribution Received (Note 5) 13,981,767 742,624 4,949,338 570,596 4,979,291 3,844,911 1,938,546 2,243,310 3,423,731 31,174,200 1,760,149 56,761 69,665,224 Endowment Admin Fee Received (Note 5) 813,269 35,288 235,554 27,004 236,981 178,902 93,235 105,885 165,275 1,584,614 83,686 157 3,559,850 Spendable Gifts 12,254,714 524,872 3,505 364,039 10,172,811 4,260,342 3,805,021 444,638 2,113,613 23,641,820 780,947 18,351 58,384,673 Sales and Services (Note 6) 1,635,503 358,116 11,050 2,485,311 2,021,179 1,086,231 535,148 557,439 20,868 4,452,357 132,263 208,903 13,504,368 Interest Earnings, net (Note 7) 112,339 (182) 521 32,872 50,149 (27,868) 2,615 151,990 325,709 3,891 7,975 660,011 Other 3,200 0 4,079 21,144,249 (320) 21,151,208 Total Revenues 181,003,116 9,569,329 5,649,154 32,194,439 53,865,197 83,803,467 54,949,679 26,301,060 25,294,642 320,057,905 12,276,103 17,978,115 822,942,206 Expenditures (Unit Based): (Note 8) Instruction 100,522,377 6,633,930 2,804,863 11,683,491 26,089,746 26,643,732 27,236,152 17,909,365 64,130,408 5,663,440 5,548,844 294,866,347 Research 41,755,111 547,279 86,320 12,566,744 2,612,905 43,364,062 711,797 622,426 89,080 189,877,515 1,798,909 0 294,032,149 Public Service 3,883,694 214,258 2,076 3,465,050 1,561,389 1,536,832 14,624 110,571 0 6,018,029 254,455 1,166,852 18,227,831 Academic Support 11,414,428 1,435,730 968,118 2,724,842 7,066,729 5,259,536 4,679,943 (13,800) 3,286,478 20,730,693 2,326,848 7,225,643 67,105,187 Libraries 232,140 0 0 923,920 0 3,705,469 26,924,712 0 4,480,089 0 36,266,330 Student Services 458,835 220,120 473,647 533,844 4,044,161 490,320 2,740,344 149,175 1,187,835 437,903 1,129,550 11,865,735 Financial Aid to Students 22,500,745 1,244,133 165,733 3,051,643 6,895,431 4,868,567 10,000,391 772,034 9,677,645 1,496,176 71,600 60,744,098 Institutional Support 3,132,299 30,712 0 1,217 0 0 0 0 6,012 243 186,907 3,357,391 Operation & Maintenance of Plant 181,569 31,008 0 1,817,870 1,195,061 3,792,761 90,174 0 1,702,808 818,118 9,629,369 Auxiliaries 10,000 0 250,989 260,989 Other 0 1,881,796 7,148 0 (1,337) 1,887,607 Total Expenditures 184,091,198 10,357,170 4,500,757 34,026,831 51,012,151 83,358,110 52,881,482 27,734,082 24,087,928 297,818,182 11,977,974 16,397,166 798,243,033 GL Transfers: (Note 9) Self-Sufficiency Tax (3,150,561) (4,824,485) (1,127,017) (9,102,063) In-State Subsidy 325,000 1,010,000 1,335,000 (To)/From Reserves, Debt, or Capital Projects (Note 10) (1,848,494) (217,018) (9,416,400) 26 (2,275,301) (172,172) (3,910,964) 260,781 1,871,276 (28,207,311) (62,474) (1,537,977) (45,516,026) Total GL Transfers (1,848,494) (217,018) (9,416,400) 26 (5,100,862) (172,172) (7,725,449) 260,781 744,259 (28,207,311) (62,474) (1,537,977) (53,283,089) Net Increase/(Decrease) for FY11 (4,936,576) (1,004,859) (8,268,003) (1,832,365) (2,247,817) 273,185 (5,657,252) (1,172,241) 1,950,973 (5,967,588) 235,656 42,972 (28,583,916) 13
FY11 and FY10 Operating Revenues and Expenditures, ACTUALS (DRAFT) UNOFFICIAL AND UNAUDITED DRAFT (for illustration purposes only!) A&S FY11 FY10 Change in $ Change in % Revenues: State Appropriations 0 0 Tuition and Fees (Note 1) 788,239 1,915,630 (1,127,391) -58.9% Less RP1 Revenue already in T&F and St Approp (note 2) (698,348) (658,242) (40,106) 6.1% SG Funding Allocation (E&G, Research, and Fin Aid) (note 3) 112,873,167 110,271,154 2,602,013 2.4% Sponsored Programs (Note 4) 39,239,265 36,913,076 2,326,189 6.3% Endowment Spending Distribution Received (Note 5) 13,981,767 13,374,550 607,217 4.5% Endowment Admin Fee Received (Note 5) 813,269 739,578 73,691 10.0% Spendable Gifts 12,254,714 11,736,600 518,114 4.4% Sales and Services (Note 6) 1,635,503 1,628,047 7,456 0.5% Interest Earnings, net (Note 7) 112,339 60,689 51,650 85.1% Other 3,200 (232,678) 235,878-101.4% Total Revenues 181,003,116 175,748,404 5,254,713 3.0% Expenses (Unit Based): (Note 8) Instruction 100,522,377 101,228,300 (705,923) -0.7% Research 41,755,111 43,424,559 (1,669,448) -3.8% Public Service 3,883,694 3,919,743 (36,049) -0.9% Academic Support 11,414,428 12,779,143 (1,364,715) -10.7% Libraries 232,140 232,813 (673) -0.3% Student Services 458,835 1,174,740 (715,905) -60.9% Financial Aid to Students 22,500,745 22,402,324 98,421 0.4% Institutional Support 3,132,299 3,799,842 (667,543) -17.6% Operation & Maintenance of Plant 181,569 638,052 (456,483) -71.5% Auxiliaries 10,000 9,954 46 0.5% Other 0 0 0 #DIV/0! Total Expenditures 184,091,198 189,609,470 (5,518,272) -2.9% GL Transfers: (Note 9) Self-Sufficiency Tax In-State Subsidy (To)/From Reserves, Debt, or Capital Projects (Note 10) (1,848,494) (9,148,657) 7,300,163-79.8% Total GL Transfers (1,848,494) (9,148,657) 7,300,163-79.8% Net Increase/(Decrease) (4,936,576) (23,009,723) 18,073,148-78.5% 14
New Internal Financial Model Lots of Issues/Questions to Resolve and Decisions to be Made 1. Winners and Losers 2. Subsidies to the have-nots 3. Charge out support services, apply a tax, or some combination of both? 4. Can academic units opt out of services? 5. Are admin units right sized to be most efficient and lowest cost? (Benchmarking!) 15
Board of Visitors Reporting New approach by the new leadership Reports on results of operations throughout the year, to include interim financial statements Multi-year trends analysis for revenues and expenditures Comparisons across UVA schools for key measures and trends 16
UNIVERSITY OF VIRGINIA - Academic Division Only Fiscal Year 2012 (July 1, 2011 June 30, 2012) Statement of Net Assets (Unaudited) at Mid-year As of December 31, 2011 and June 30, 2011 12/31/2011 6/30/2011 Change in $ % Change ASSETS Current Assets Cash and short te rm inve stme nts $ 318,190,312 $ 210,518,665 107,671,647 51.1% Receivables (accounts, notes, other) 267,700,935 33,599,542 234,101,393 696.7% Receivable from Medical Center 12,507,016 2,450,649 10,056,367 410.4% Receivable from UPG 219,844-219,844 100.0% Receivable from SWVHEC & agencies 2,756,258-2,756,258 100.0% Inventories, prepaids and other 299,265 299,265-0.0% Total curre nt asse ts 601,673,630 246,868,121 354,805,509 143.7% Noncurre nt Asse ts Endowment and other long-term investments 3,510,815,540 3,694,182,732 (183,367,192) -5.0% Notes receivables 19,437,576 18,888,318 549,258 2.9% Medical Center pooled bond receivable 321,603,342 331,458,157 (9,854,815) -3.0% De posits with bond truste e s 63,181,013 109,600,506 (46,419,493) -42.4% Capital asse ts, ne t 1,992,860,053 1,953,769,983 39,090,070 2.0% Total noncurre nt asse ts 5,907,897,524 6,107,899,696 (200,002,172) -3.3% Total Assets $ 6,509,571,154 $ 6,354,767,817 154,803,337 2.4% LIABILITIES Curre nt Liabilitie s Accounts payable and accrue d liabilitie s $ 34,311,052 $ 13,896,154 20,414,898 146.9% Deferred revenues and deposits 148,114,496 186,648,956 (38,534,460) -20.6% Deferred revenues, spring tuition 230,000,000-230,000,000 100.0% Comme rcial Pape r 87,491,000 76,850,000 10,641,000 13.8% De posits he ld for UVA-Wise and SWVHEC 8,632,781 6,600,669 2,032,112 30.8% Total curre nt liabilitie s 508,549,329 283,995,779 224,553,550 79.1% Noncurre nt Liabilitie s Long-term debt 1,085,499,455 1,093,062,659 (7,563,204) -0.7% Othe r long-te rm liabilitie s 25,622 25,622-0.0% Total noncurre nt liabilitie s 1,085,525,077 1,093,088,281 (7,563,204) -0.7% Total Liabilities 1,594,074,406 1,377,084,060 216,990,346 15.8% NET ASSETS Invested in capital assets, net of related debt 1,183,635,917 1,154,553,281 29,082,636 2.5% Re stricte d: None xpe ndable 475,596,883 449,391,529 26,205,354 5.8% Expe ndable 2,132,441,799 2,257,581,756 (125,139,957) -5.5% Unre stricte d 1,123,822,149 1,116,157,191 7,664,958 0.7% Total Net Assets 4,915,496,748 4,977,683,757 (62,187,009) -1.2% 17
UNIVERSITY OF VIRGINIA - Academic Division Only Statement of Changes in Net Assets (Unaudited) For the Six Months Ended December 31, 2011 and 2010 FY12 FY11 OPERATING REVENUES AND EXPENSES: 12/31/2011 12/31/2010 Change in $ % Change Operating Revenues Student tuition and fees, net 207,888,812 189,208,106 18,680,706 9.9% Grants and contracts (federal, state, nongovernmental) 170,284,898 175,842,465 (5,557,567) -3.2% State appropriations (including federal stimulus) 126,918,232 138,406,177 (11,487,945) -8.3% Auxiliary enterprises revenues, net 83,933,947 74,484,220 9,449,727 12.7% Gifts, current 48,696,679 50,580,851 (1,884,172) -3.7% Sales and services of educational departments 11,064,672 11,479,180 (414,508) -3.6% Pell grants 4,280,789 4,508,796 (228,007) -5.1% Total operating revenues 653,068,029 644,509,795 8,558,234 1.3% Operating Expenses Instruction 150,468,949 156,010,870 (5,541,921) -3.6% Research 151,590,570 156,853,068 (5,262,498) -3.4% Public service 15,496,069 14,190,637 1,305,432 9.2% Academic support 71,287,380 67,751,669 3,535,711 5.2% Student services 18,508,415 18,988,400 (479,985) -2.5% Institutional support 39,526,868 37,928,431 1,598,437 4.2% Operation of plant 49,543,885 48,984,781 559,104 1.1% Student aid, net 25,374,732 23,810,715 1,564,017 6.6% Auxiliary 59,299,500 58,492,969 806,531 1.4% Depreciation 47,295,364 45,813,061 1,482,303 3.2% Other 3,252,321 3,791,106 (538,785) -14.2% Total operating expenses 631,644,053 632,615,707 (971,654) -0.2% Operating revenues less operating expenses 21,423,976 11,894,088 9,529,888 80.1% NONOPERATING REVENUES AND EXPENSES Nonoperating Revenues Capital appropriations, gifts, and grants 17,770,383 30,491,597 (12,721,214) -41.7% Investment income (loss) (112,976,962) 312,208,004 (425,184,966) -136.2% Additions to permanent endowments 25,680,580 5,683,275 19,997,305 351.9% Other 16,142,609 19,489,658 (3,347,049) -17.2% Total nonoperating revenues (53,383,390) 367,872,534 (421,255,924) -114.5% Nonoperating Expenses Interest on capital asset related debt, net 14,510,606 15,687,211 (1,176,605) -7.5% Loss on capital assets (gain) 385,941 1,127,185 (741,244) -65.8% Other 15,331,048 3,158,946 12,172,102 385.3% Total nonoperating expenses 30,227,595 19,973,342 10,254,253 51.3% Nonoperating revenues less nonoperating expenses (83,610,985) 347,899,192 (431,510,177) -124.0% Total Revenues 599,684,639 1,012,382,329 (412,697,690) -40.8% Total Expenses 661,871,648 652,589,049 9,282,599 1.4% Increase in net assets (62,187,009) 359,793,280 (421,980,289) -117.3% NET ASSETS Net assets - July 1 (Beginning) 4,977,683,757 4,251,643,417 Net assets -- December 31 (ending) 4,915,496,748 4,611,436,697 304,060,051 6.6% 18
$500,000 Tuition & Fees Revenue $450,000 $400,000 in Thousands $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Gross Tuition and Fees Scholarship Discount & Allowance Net Tuition and Fees 19
Negotiated F&A Rates FY2002 through FY2015
50.0% 45.0% Effective F&A Recovery Rate by School 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 SoM Engineering A&S Curry Other Nursing All UVa 22
$80,000,000 F&A Recoveries by School $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 SoM Engineering A&S Curry Other Nursing 23
$3,600 UVA Endowment Growth (In $1,000's) As of June 30, 2011 $3,400 $3,200 $3,000 $2,800 $2,600 $2,400 $2,200 $2,000 $1,800 Market Value 6/30/84 $ 213 New Gifts to Endowment 484 Net Adds to Quasi Endowments 398 Inflation on (1984 MV & Gifts) 603 Subtotal 1,698 Performance, net of distributions: Market Appreciation 3,261 Distributions (1,587) Performance, net 1,674 Market Value 06/30/11 $ 3,372 $1,600 $1,400 Performance, net of distributions $1,200 $1,000 $800 Additions to Quasi Endowment $600 $400 New Endowment Gifts $200 $- 1984 Market Value 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1984 MV New Gifts Adds to Quasi Performance (Mkt Apprec less Distrib) Inflation 24
Net Income (Modified GASB) FY2003 through FY2011 $1,000,000 $800,000 $600,000 $400,000 in Thousands $200,000 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 -$200,000 -$400,000 -$600,000 -$800,000 -$1,000,000 Net Operating income (loss) Net Nonoperating income (loss) Total Net Income (loss)
Net Assets by Category FY2003 through FY2011 $7,000 $6,000 $5,000 $4,000 in Millions $3,000 $2,000 $1,000 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Invested in Capital Assets, net of Debt Restricted - Nonexpendable Restricted - Expendable Unrestricted
Billions 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Unrestricted Net Assets 2003 2004 2005 2006 2007 2008 2009 2010 2011 29
O&M Cost Per Square Foot FY2003 through FY2011 $200,000,000 $22.00 $180,000,000 $20.00 $160,000,000 $18.00 $140,000,000 $16.00 Total O&M Cost $120,000,000 $100,000,000 $80,000,000 $14.00 $12.00 $10.00 Total O&M Cost Per Square Foot $60,000,000 $8.00 $40,000,000 $6.00 $20,000,000 $4.00 $0 $2.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total O&M Cost Total O&M Cost per Square Foot
Long Term Debt by Component FY2003 through FY2011 $1,300,000 $1,200,000 $1,100,000 $1,000,000 $900,000 $800,000 $700,000 in Thousands $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Current portion of long-term debt Commercial paper Long-term debt
What are the colleges spending their money on? Instructional vs. administrative spending (2002-2003 to 2008-2009) at public institutions Average increase in instruction 45.1% UVa increase 42.4% or $125.3 million Increase as a percent of E&G 39.3% to 41.6% Average increase in administration 65.1% UVa increase 68.9% or $33.6 million Increase as a percent of E&G 6.5% to 8.2%
What is behind the growth in administrative expenditures? % of $ chg. FY09 over FY03 Fundraising and alumni relations 40.0% Research administration 11.3% New functions 5.6% Compliance 6.3% Annual compensation increases 36.8% 100.0%
Questions? 34