As of June 30, 2000
Organization and Purpose
The University of Virginia is an agency of the Commonwealth of Virginia and is governed by the University's Board of Visitors. A separate report is prepared for the Commonwealth of Virginia which includes all agencies, boards, commissions, and authorities over which the Commonwealth exercises or has the ability to exercise oversight authority. The University is a component unit of the Commonwealth of Virginia and is included in the general purpose financial statements of the Commonwealth. The University consists of three divisions. The Academic Division and University of Virginia's College at Wise generate and disseminate knowledge in the humanities, arts, scientific, and professional disciplines through instruction, research, and public service. The Medical Center Division provides routine and ancillary patient services through a full-service hospital and clinics.
Summary of Significant Accounting Policies
The financial statements of the University have been prepared in accordance with the accounting guidance and reporting practices applicable to colleges and universities, as outlined in the American Institute of Certified Public Accountants' Industry Audit Guide, Audits of Colleges and Universities. In compliance with the aforementioned literature, the statement of current funds revenues, expenditures, and other changes is a statement of financial activities of current funds related to the respective reporting period. It does not purport to represent the results of operations or net income or loss for the period as would a statement of income or a statement of revenues and expenses. The significant accounting policies followed by the University are summarized below to enhance the usefulness of the financial statements.
Reporting Entity
The financial statements and the accompanying notes of the University include all funds and organizations for which the Board of Visitors has oversight responsibility. There are currently 16 affiliated foundations created and operated in support of the interests of the University. Affiliated foundations are not-for-profit corporations controlled by separate boards of directors and are not included in the basic financial statements of the University.
Condensed financial statements for the following foundations, whose boards include officers of the University, are disclosed in Note 6.
University of Virginia Health Services Foundation, an educational, scientific, and charitable organization established to assist the University in providing hospital and medical care services, medical education programs, medical research, and programs of public charity at the University.
University of Virginia Foundation and Subsidiaries, which includes the University of Virginia Real Estate Foundation, established to promote, support, and aid the University in matters pertaining to real estate, as well as to use and administer gifts, grants, and bequests for the benefit of the University.
Accrual Basis
The financial statements have been prepared on the accrual basis of accounting except for depreciation. The University records gifts and pledges when collected. No value is assigned to art, rare books, and other collections received as gifts.
Fund Accounting
In order to ensure observance of limitations and restrictions placed on the use of resources, the accounts of the University are maintained in accordance with the principles of fund accounting. The accounts relating to specified activities or objectives have been classified into separate funds. Similar funds have been combined into fund groups for financial reporting purposes. Within each fund group, fund balances restricted by outside sources are so indicated and are distinguished from designated funds allocated to specific purposes by action of the Board of Visitors. Externally restricted funds may only be utilized in accordance with the purposes established by the source of such funds and are in contrast with unrestricted funds over which the board retains full control to use in achieving its institutional purposes.
Restricted gifts, grants, contracts, appropriations, endowment income, and other restricted resources are accounted for in the appropriate restricted funds. Revenues from current restricted funds are recognized when expenditures are incurred for current operating purposes. The excess of restricted receipts over amounts expended for restricted purposes is recognized as a fund balance addition to current restricted funds.
Endowment funds are subject to the restrictions of gift instruments requiring that the principal be invested in perpetuity and that only the resulting income may be utilized. Term endowment funds are similar to endowment funds, except that, upon passage of a stated period of time or the occurrence of a particular event, all or part of the principal may be expended. Quasi-endowment funds have been established by the board for the same purposes as endowment funds, except that any portion of quasi-endowment funds may be expended at the board's discretion.
Medical Center Sales and Services
A significant portion of the Medical Center services is rendered to patients covered by Medicare, Medicaid, or Trigon Blue Cross Blue Shield of Virginia. The Medical Center has entered into contractual agreements with these third parties to accept payment for services in amounts less than scheduled charges. In accordance with these agreements, the difference between the contractual payments due and the Medical Center scheduled billing rates results in contractual adjustments. Contractual adjustments are recorded as deductions from Medical Center revenues in the period in which the related services are rendered.
Certain annual settlements of amounts due for Medical Center services covered by third parties are determined through cost reports which are subject to audit and retroactive adjustment by the third parties. Provisions for possible adjustments of cost reports have been estimated and reflected in the accompanying financial statements. Since the determination of settlements in prior years has been based on reasonable estimation, the difference in any year between the originally estimated amount and the final determination is reported in the year of determination as an adjustment to Medical Center revenues.
Investments
Investments in corporate stocks and marketable bonds are recorded at market value. Certain less marketable investments, principally real estate and private equity investments, are generally carried at estimated values as determined by management. Because of the inherent uncertainty in the use of estimates, values that are based on estimates may differ from the values that would have been used had a ready market existed for the investments. Mortgages held for investment by the endowment fund are recorded at book value representing principal amounts due.
Inventories
Inventories are valued at the lower of cost (generally determined on the weighted average method) or market value.
Plant
Property, plant, equipment, and books (other than rare books) and materials that are part of a catalogued library are stated principally at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. Maintenance or renovation expenditures of $50,000 or more are capitalized only to the extent that such expenditures prolong the life of the asset, or otherwise enhance its capacity to render service. Consistent with current generally accepted accounting principles for public colleges and universities, depreciation on plant assets is not recorded. The Academic Division capitalizes all equipment with an original cost of $2,000 or more, and with a useful life of at least two years. The Medical Center Division capitalizes all equipment with an original cost of $500 or more and with a useful life of at least two years.
In accordance with newly adopted AICPA Statement of Position 98-1, the University capitalizes computer software developed or obtained for internal use. Capitalization begins at the application development stage, which consists of the design, coding, installation, and testing of the software and interfaces.
Reclassifications
Certain 1999 activities and balances were reclassified to conform to classifications currently in use.
|
NOTE 1: Endowment and Similar Funds The major portion of the University's endowment and similar funds is maintained in a single investment pool named the University Pooled Endowment Fund. The University has adopted an investment objective whereby the average annual return of the University Pooled Endowment Fund over rolling five-year periods should equal the rate of inflation (measured by the Consumer Price Index) plus its average level of spending from endowment income. The annual return for the Pooled Endowment Fund was 43.7 percent in 2000 and 18.4 percent in 1999. These percentages have been computed using realized and unrealized gains and losses and investment income. The rate of inflation plus the average level of spending from endowment income was 8.3 percent in 2000 and 7.0 percent in 1999. The Pooled Endowment Fund is pooled using a market value basis, with each individual fund subscribing to or disposing of units (permanent shares) on the basis of the market value per unit at the beginning of the calendar month within which the transaction takes place. A summary of endowment and similar funds at market value follows:
ENDOWMENT AND SIMILAR FUNDS AS OF JUNE 30, 1999 (in thousands)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 2: Investment Risk
The relative risk associated with the University's financial assets is detailed below. Cash: All cash of the University is maintained in accounts that are collateralized in accordance with the Virginia Security for Public Deposits Act, Section 2.1-359, et.seq., of the Code of Virginia. Investments: The investment policy goals, objectives, and guidelines are established by the Finance Committee of the Board. The University's cash equivalents and investments are categorized by levels of credit risk as described below: Category 1--Insured or registered securities or securities held by the University of Virginia or its agent in the University's name. Category 2--Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the University of Virginia's name. None of the University's investments are classified as category 2 investments. Category 3--Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent but not in the University of Virginia's name. None of the University's investments are classified as category 3 investments. Collateral held for securities lending transactions represents the University's allocated share of cash collateral received and reinvested and securities received for the State Treasury's securities lending program. Information related to the credit risk of these investments and the State Treasury's securities lending program is available on a statewide level in the Commonwealth of Virginia's Comprehensive Annual Financial Report.
CATEGORIZATION OF INVESTMENT RISK FOR ASSETS HElD AS OF JUNE 30, 1999 (in thousands)
Derivative Financial Instruments: Derivative instruments are financial contracts whose values depend on the values of one or more underlying assets, reference rates, or financial indexes. A derivative instrument generally has one or more underlying investment, requires little or no initial net investment, and requires or permits a net settlement. In addition, some traditional securities can have derivative--like characteristics. Examples of common derivatives include, but are not limited to, futures, forwards, options or swap contracts. Although the contract or notional amount of the derivative is not recorded on the financial statements, all derivative instruments are recognized as either an asset or a liability depending on the rights or obligations of the contract measured at fair value. The University has exposure, both directly and indirectly, to various derivative financial instruments that are used in the normal course of business to enhance returns on investments and manage risk exposure to changes in value due to fluctuations in market conditions. These investments may involve, to varying degrees, elements of credit and market risk in excess of amounts recognized on the financial statements. Credit risk is the possibility that losses may occur from the failure of a counterparty to perform according to the terms of the agreement. The University minimizes the credit (or repayment) risk in its direct derivative instrument by entering into transactions with high quality counterparties and a legally enforceable master netting agreement. The "net" mark to market exposure represents the netting of the positive and negative exposures with the same counterparty. Market risk arises due to adverse changes in market price, interest rate and foreign exchange rate fluctuations that may result in a decrease in the market value of a financial investment and/or increases, in its funding cost. The University manages market risk by establishing and monitoring limits as to the type and degree of risk that may be undertaken. Fair Value Hedge: The University has directly entered into a fair value hedge to manage returns on a portion of its endowment investments having limited liquidity. The University's fair value hedge is subject to a master netting agreement. An assessment of the effectiveness of the fair value hedge is performed at least monthly and has been highly effective in offsetting changes in fair value of the hedged items since inception. In order to secure its obligations under the derivative instrument agreement, the counter-party required the ability to retain a perfected security interest in collateral provided from the University's endowment assets. The agreement requires the University to maintain collateral in cash or margin eligible securities in acceptable value equivalent to the greater of $73,000,000 or the University's obligation, if any, under the agreement. At June 30, 2000, the University has made available to the counter-party more than sufficient collateral in the form of $137,065,000 of US government securities and $591,000 of cash. The collateral is maintained with the University's custodian in a segregated account. Summary of the University's outstanding derivatives at June 30, 2000 and 1999 (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 3: Balance Sheet Details
a. Accounts receivable
Current Fund accounts receivable as of June 30 include the following (in thousands):
|
|
2000 |
1999 |
|
Patient Care |
$ 110,393 |
$ 102,298 |
|
Estimated Amounts Due from Third-Party Payors |
11,781 |
18,391 |
|
Grants and Contracts |
20,815 |
19,841 |
|
Health Services Foundation |
5,046 |
7,965 |
|
Other |
10,368 |
7,206 |
|
Less Allowance for Doubtful Accounts |
(58,029) |
(61,544) |
|
TOTAL |
$ 100,374 |
$ 94,157 |
b. Notes receivable
Notes receivable as of June 30, 2000 and 1999, are reported net of the allowance for uncollectible student loans which amounted to $2.2 million and $2.4 million, respectively.
c. Advances to foundations
The University advances funds to affiliated foundations to enable the foundations to acquire real property in areas near the University and to enhance foundation operations. Foundations are expected to make principal repayments as funds become available. The Board of Visitors has authorized up to $55 million for advances to the University of Virginia Real Estate Foundation from unrestricted quasi-endowment funds. Advances as of June 30 include the following (in thousands):
|
2000
|
1999
|
|
| Unrestricted Quasi-Endowment Funds |
|
|
| University of Virginia Real Estate Foundation |
$36,578
|
$36,351
|
d. Investment in plant
Investment in plant as of June 30 consists of the following (in thousands):
|
|
2000 |
1999 |
|
Land |
$ 30,073 |
$ 17,376 |
|
Improvements Other than Buildings |
77,109 |
76,007 |
|
Buildings |
913,374 |
898,453 |
|
Equipment |
473,047 |
459,134 |
| Software Capitalization |
7,884
|
--
|
|
Library Books |
76,641 |
66,946 |
|
Construction in Process |
166,453 |
92,229 |
|
Unamortized Bond Issue/Discount Cost |
(1,419) |
(1,529) |
|
TOTAL |
$ 1,743,162 |
$ 1,608,616 |
e. Restatement of prior year balances
Certain June 30, 1999 balances have been restated. Current Unrestricted, Current Restricted, and Loan Funds have been reduced by $78,680, $30, and $35,630, respectively.
f. Interfund obligations
Interfund obligations are recorded on each fund as due to/due from other funds. Such borrowings are authorized in advance by the Board of Visitors or administrative action. The borrowings have identifiable repayment schedules in most instances and provide needed working capital or cash advances for special projects. Interest is charged in appropriate instances. Amounts due from and payable to other funds as of June 30 are as listed on chart below.
g. Goodwill
On October 1, 1997 the Medical Center acquired from the University of Virginia Health Services Foundation the Medicine Clinical Laboratories in a transaction accounted for as a purchase. Accordingly, $1,800,000 was recorded as goodwill and is being amortized over five years.
On May 12, 2000 the Medical Center acquired from Augusta Health Care, Inc. the Kidney Dialysis Assets in a transaction accounted for as a purchase. Accordingly, $987,188 was recorded as goodwill for the purchase of the assets and is being amortized over five years. An additional $800,000 was recorded as goodwill for a Non-Competition Agreement and is being amortized over its ten year life.
DUE FROM OTHER FUNDS (see section f above) -- 2000 (in thousands)
|
Due to Other Funds |
Current Funds |
Endowment Funds |
Plant Funds |
Agency Funds |
Total |
|
Current Funds |
$ -- |
$ 3,713 |
$ 525 |
$ 475 |
$ 4,713 |
|
Endowment and Similar Funds |
-- |
-- |
-- |
45,379 |
45,379 |
|
Plant Funds |
8,886 |
-- |
-- |
-- |
8,694 |
| Agency Funds |
10,856
|
--
|
--
|
--
|
10,856
|
|
TOTAL |
$ 19,742 |
$ 3,713 |
$ 525 |
$ 45,854 |
$ 69,834 |
DUE FROM OTHER FUNDS (see section f above) -- 1999 (in thousands)
|
Due to Other Funds |
Current Funds |
Endowment Funds |
Plant Funds |
Agency Funds |
Total |
|
Current Funds |
$ -- |
$ 3,133 |
$ 398 |
$ 37 |
$ 3,568 |
|
Endowment and Similar Funds |
-- |
-- |
-- |
33,730 |
33,730 |
|
Plant Funds |
8,694 |
-- |
-- |
-- |
8,694 |
|
TOTAL |
$ 8,694 |
$ 3,133 |
$ 398 |
$ 33,767 |
$ 45,992 |
NOTE 4: Long-Term Debt
|
|
|
|
As of June 30 | |
|
|
Interest Rate | Maturity | 2000 | 1999 |
|
Plant Funds |
|
|
(in thousands) | |
|
Revenue Bonds |
|
|
|
|
|
4.1% to 5.2% |
2000-2015 |
$33,230 |
$ 36,770 |
|
3.5% to 5.0% |
2001-2018 |
6,290 |
6,525 |
|
4.5% to 5.25% |
2001-2013 |
51,985 |
51,985 |
|
variable |
2020 |
4,680 |
5,060 |
|
4.0% to 5.125% |
2000-2024 |
71,925 |
73,720 |
|
4.25% to 5.375% |
2000-2020 |
51,905 |
53,800 |
|
5.6% to 5.875% |
2000-2011 |
280 |
295 |
|
Commonwealth of Virginia Bonds |
3.8% to 9.25% |
2000-2016 |
55,805 |
55,553 |
|
Notes Payable to VCBA |
3.75% to 5.0% |
2000-2017 |
4,305 |
4,455 |
|
Notes Payable to VCBA |
4.5% to 6.0% |
2000-2019 |
32,425 |
-- |
|
UVA's College at Wise Notes |
variable |
2000 |
675 |
1,175 |
|
Higher Education Equipment Trust |
|
|
|
|
|
3.85% to 5.0% |
2000-2003 |
10,430 |
15,079 |
|
Other |
various |
2000-2003 |
174 |
270 |
|
TOTAL |
|
|
$ 324,109 |
$ 304,687 |
On March 3, 1999, the University issued on behalf of the Medical Center $51,985,000 in series 1999A General Revenue Pledge Bonds to advance refund $55,875,000 of outstanding Series E Hospital Revenue Refunding Bonds. The net proceeds together with the funds available in the depreciation reserve fund were used to purchase U.S. Government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for the redemption of the 1989 Series E Revenue Refunding Bonds. The refunded Series E Bonds were redeemed on June 1, 1999. Though the advanced refunding resulted in the recognition of an accounting loss of $2,925,551 for the year ended June 30, 1999, the Medical Center in effect reduced its aggregate debt service by $13,664,428 over the next 14 years. This represents a net present value savings of $5,475,598.
LONG-TERM DEBT MATURES FOR EACH OF THE NEXT
FIVE YEARS AND IN THE AGGREGATE (in thousands):
|
2000-2001 |
$ 19,036 |
|
2001-2002 |
18,139 |
|
2002-2003 |
16,103 |
|
2003-2004 |
14,460 |
|
2004-2005 |
15,084 |
|
Later years |
241,287 |
|
TOTAL |
$ 324,109 |
Note 5: Affiliated Companies
Blue Ridge Health Alliance, Inc. The Medical Center is a participant with the Health Services Foundation (HSF) in Blue Ridge Health Alliance, Inc. (Blue Ridge Health Alliance or the Corporation), a joint venture to develop and operate a managed health care organization in central and western Virginia and certain counties in West Virginia. Blue Ridge Health Alliance, a for-profit corporation, was formed in April 1994, to develop a regional network of physicians, hospitals, and other health care providers through which to deliver health benefits to insured and self-funded employers and other groups. QualChoice of Virginia Health Plan, Inc. (QualChoice), is a wholly-owned subsidiary of the Corporation formed to operate a health maintenance organization (HMO) serving employers and other groups in the Commonwealth of Virginia. QualChoice commenced operations on January 4, 1995.
Blue Ridge Health Alliance has authorized capital stock consisting of one million two (1,000,002) shares of common stock, par value $0.01 per share (the "Common Stock"). The authorized shares of common stock consist of 1,000,000 shares of Class A Voting Common Stock and two shares of Class B Voting Common Stock. In 1994, the Medical Center and the HSF each executed a Shareholders Subscription Agreement under which each agreed to contribute $4,550,000 as equity capital. Subsequently, the Medical Center and HSF each were issued one share of Class B Voting Common Stock and shares of Class A Voting Common Stock. Except for the original obligations of the founding shareholders under the Founding Shareholders Subscription Agreements, no shareholder has an obligation to make any loans, advances or additional equity contributions whatsoever to the capital of the Corporation. The shareholders have acknowledged and agreed that the Corporation is expected to retain its earnings in order to finance growth and that there is no expectation that the Corporation will pay any cash dividends in the foreseeable future.
The Medical Center contributed a total of $15,000,000 to Blue Ridge Health Alliance during the period ended June 30, 1998. Also, on April 6, 1998 the Medical Center loaned $3,800,000 to the Corporation due on July 6, 1998 and bearing interest at 6.25% per annum. In July 1998, the Board of Directors of the Corporation issued a capital call to HSF and the Medical Center for $5,000,000. HSF elected not to participate in this capital call in accordance with their rights prescribed in the Shareholders Agreement; accordingly, the Medical Center contributed the entire $5,000,000, by converting the $3,800,000 loan to capital and contributing $1,200,000 in cash. This contribution increased the Medical Center's percentage ownership to 52.05%. By agreement between HSF and the Medical Center, HSF relinquished its share of Class B Voting Common Stock to the Medical Center. Corporate actions enumerated in the Amended Articles of Incorporation require approval of the holders of all of the shares of the Class B Voting Common Stock. Except for this special voting requirement, the shares of Class A and Class B Voting Common Stock have equal rights, privileges, and dividend distribution rights. On November 25, 1998 the Medical Center provided a loan to the corporation as evidenced by a promissory note in the amount of $6,678,595 due February 24, 1999 at 4.50 percent per annum. This note was renewed on February 25, 1999 with a due date of March 26, 1999. The note was renewed again on March 27, 1999 and was structured to have an optional renewal each month. On March 5, 1999, the Medical Center loaned $250,000 to the Corporation, which was to be due December 31, 1999 bearing interest at 4.50 percent per annum. Effective September 15, 1999, Blue Ridge Health Alliance revised its Shareholders' Agreement to provide additional capital and to affect a transfer of shares among the shareholders. Under this agreement, the debt owed to the Medical Center was converted to capital. HSF contributed an additional $9,500,000 and Martha Jefferson Hospital contributed an additional $336,393. Once these additional contributions had been made the Medical Center owned 49.9% of the class A stock, HSF owned 46.2% and Martha Jefferson Hospital owned 3.9%. In addition, the University transferred to HSF one share of class B common stock so that both HSF and the University each own one of the two shares, which have been authorized.
The net investment in Blue Ridge Health Alliance is summarized below. Complete financial statements for Blue Ridge Health Alliance, Inc. can be obtained from the corporate offices: Towncenter 1, 1000 Research Park Blvd., Charlottesville, Virginia 22911.
Central Virginia Health Network, Inc. In May 1995, the Medical Center joined the Central Virginia Health Network, Inc. (CVHN), a partnership of eight Richmond area hospitals. Central Virginia Health Network was formed to provide an efficient and coordinated continuum of care, with services ranging from acute hospital treatment to primary physician care and home health services.
The Medical Center originally paid $100 for 10,000 shares of common stock and $109,900 as additional paid-in capital. In addition, the Medical Center is obligated for monthly dues to Central Virginia Health Network of $16,750. The net investment in CVHN is summarized below. Complete financial statements can be obtained from the registered agent: Steven D. Gravely, Esq., Mezzullo and McCandlish, Post Office Box 796, Richmond, Virginia 23206.
University of Virginia/HEALTHSOUTH L.L.C. The Medical Center entered into a joint venture with HEALTHSOUTH Corporation to establish an acute rehabilitation facility. The new facility, located at the Fontaine Research Park in Charlottesville, Virginia, provides patient services to the region. The Medical Center made a capital contribution of $2,230,000 to capitalize the joint venture in May 1996, which represents a 50 percent interest in the joint venture. The net investment in HEALTHSOUTH is summarized below. Complete financial statements can be obtained from the managing member: HEALTHSOUTH Corporation, 7700 East Parham Road, Richmond, VA 23294.
Valiance Health, L.L.C. In November 1997, the Medical Center became a participant with Rockingham Memorial Hospital and Augusta Health Care, Inc. in Valiance Health, L.L.C. (Valiance), a joint venture engaging in the business of integrating and coordinating the delivery of health care services in Central and Western Virginia. The Medical Center contributed $100,000 in initial capital which entitles it to a pro-rata distribution of any profits and losses of Valiance.
HealthCare Partners, Inc.In May 1995, HealthCare Partners, Inc. (HealthCare Partners), a non-stock, non-profit corporation, was established to support networking, external business relationships with neighboring hospitals and physicians groups and expansion of primary care activities. The Medical Center and the Health Services Foundation are the primary contributors to the funding of the corporation. The corporation is governed by a board of directors composed of Health Sciences Center staff, community members and University Board of Visitors appointees.
AFFILIATED COMPANIES AS OF JUNE 30, 2000 (in thousands)
|
|
Blue Ridge Health Alliance
|
Central Virginia Health Network
|
HEALTHSOUTH
|
Valiance
|
| Common Stock and Equity Contributions |
$36,139
|
$232
|
$2,230
|
$100
|
| Share of Income/(Loss) |
(29,570)
|
(54)
|
(1,974)
|
12
|
| Net Investment |
$6,569
|
$178
|
$256
|
$112
|
AFFILIATED COMPANIES AS OF JUNE 30, 1999 (in thousands)
|
Blue Ridge Health Alliance
|
Central Virginia Health Network
|
HEALTHSOUTH
|
Valiance
|
|
| Common Stock and Equity Contributions |
$28,958
|
$232
|
$2,230
|
$100
|
| Share of Income/(Loss) |
(28,733)
|
(111)
|
(1,291)
|
6
|
| Net (Liability) /Investment |
$225
|
$121
|
$939
|
$106
|
NOTE 6: Affiliated Foundations
AFFILIATED FOUNDATIONS CONDENSED BALANCE SHEET (in thousands)
|
|
Health Services Foundation
As of June 30 |
University of Virginia Endowment
As of June 30 |
||
|
|
2000
|
1999
|
2000
|
1999
|
| ASSETS |
|
|
|
|
| Current Assets Due from the University |
$200
|
$316
|
$--
|
$--
|
| Other Current Assets |
43,509
|
43,166
|
11,389
|
3,423
|
| Other Assets |
80,751
|
76,124
|
116,267
|
98,070
|
|
|
|
|
|
|
| TOTAL |
$124,460
|
$119,606
|
$127,656
|
$101,493
|
|
|
|
|
|
|
| LIABILITIES AND FUND BALANCE |
|
|
|
|
| Current Liabilities Due to the University |
$7,339
|
$3,620
|
$--
|
$--
|
| Other Current Liabilities |
35,904
|
31,981
|
15,883
|
6,502
|
| Long-term Debt Due to the University |
--
|
--
|
36,351
|
45,592
|
| Other Long-term Debts |
45,354
|
40,751
|
54,925
|
30,570
|
| Obligations to the University Under Trust Agreements |
--
|
--
|
9,410
|
7,206
|
| Net Assets |
35,863
|
43,254
|
11,087
|
11,623
|
|
|
|
|
|
|
| TOTAL |
$124,460
|
$119,606
|
$127,656
|
$101,493
|
AFFILIATED FOUNDATIONS STATEMENT OF REVENUES AND EXPENDITURES (in thousands)
|
|
Health Services Foundation
For the Year Ended June 30 |
University of Virginia Foundation
For the Year Ended June 30 |
||
|
2000
|
1999
|
2000
|
1999
|
|
| REVENUES |
|
|
|
|
|
|
|
|
|
|
| Professional and Technical Services Provided by the University |
$19,200
|
$23,700
|
$--
|
$--
|
| Rental Income from the University |
--
|
--
|
3,637
|
2,436
|
| Other |
149,682
|
148,187
|
17,581
|
16,417
|
|
|
|
|
|
|
| TOTAL |
$168,882
|
$171,887
|
$21,218
|
$18,853
|
|
|
|
|
|
|
| EXPENDITURES |
|
|
|
|
|
|
|
|
|
|
| Office Space and Administrative Services Provided by the University |
$655
|
$612
|
$--
|
$--
|
| Clinical Operations Provided by the University |
4,840
|
4,840
|
--
|
--
|
| Gifts to the University |
6,758
|
6,507
|
226
|
87
|
| Other |
164,020
|
158,669
|
21,647
|
18,071
|
| TOTAL |
$176,273
|
$170,628
|
$21,873
|
$18,158
|
The financial statements do not include the assets, liabilities, or fund balances of the University of Virginia Health Services Foundation, the University of Virginia Foundation and Subsidiaries, or any other foundation. These foundations are separately incorporated entities and the related financial statements are examined by other auditors. The University received gifts from these and other foundations amounting to approximately $21.8 million and $17.5 million during 2000 and 1999, respectively. The condensed summary above is based solely upon the reports of other auditors.
NOTE 7: Retirement Plans
Employees of the University are employees of the Commonwealth. Substantially all full-time classified salaried employees participate in a defined benefit pension plan administered by the Virginia Retirement System (VRS). Information relating to this plan is available at the statewide level only in the Commonwealth of Virginia's Comprehensive Annual Financial Report (CAFR). The Commonwealth, not the University, has overall responsibility for contributions to this plan.
Substantially all full-time faculty, certain administrative staff, and Health Care Professionals participate in Faculty Optional Retirement Plans. These are fixed-contribution plans where the retirement benefits received are based upon the employer and employee contributions (all of which are paid by the University), and the interest and dividends. Individual contracts issued under the plans for full-time faculty and certain administrative staff provide for full and immediate vesting of both the University's and the participant's contributions. Health Care Professionals' employer contributions fully vest after one year of employment. Total pension costs under the plans were approximately $27.3 million and $26.3 million for the years ended June 30, 2000 and 1999, respectively. Contributions to the Optional Retirement Plans were calculated using base salaries of $260.7 million and $251.3 million for the years ended June 30, 2000 and 1999, respectively. The contribution percentage amounted to 10.5 percent and 10.4 percent for the years ended June 30, 2000 and 1999, respectively.
NOTE 8: Postemployment Benefits Other Than Pension Benefits
The Commonwealth of Virginia participates in the VRS administered statewide group life insurance program, which provides postemployment life insurance benefits to eligible retired and terminated employees. The Commonwealth also provides health care credits against the monthly health insurance premiums of its retirees who have at least 15 years of state service and participate in the state health plan. Information related to these plans is available at the statewide level in the Commonwealth's Comprehensive Annual Financial Report.
All University employees have an option to participate in the University's self-funded, comprehensive medical care benefits program. The cost of medical care is paid out of employee and employer contributions and is held in a separate bank account. The University has contracted with QualChoice of Virginia of Blue Ridge Health Alliance, Inc., a third-party administrator, to provide administrative services for this health care benefits program. As of June 30, 2000 and 1999, cash and investments of $18,330,000 and $9,941,000 were in the account, respectively. The estimated liability for outstanding claims at June 30, 2000 and 1999, was $7,846,000 and $7,441,000, respectively.
The risk management insurance plans are administered by the Department of General Services, Division of Risk Management. Risk management insurance includes property, boiler and machinery, crime, employee faithful performance of duty bond, general (tort) liability, professional liability (includes medical malpractice), aviation and watercraft coverage, and automobile liability. The University is self-insured for the first $100,000 of each property and boiler and machinery loss, and for the first $20,000 of each vehicle physical damage loss. The University also maintains excess crime and vehicle physical damage insurance coverage.
NOTE 10: Funds Held in Trust By Others
Assets of funds held by trustees for the benefit of the University are not reflected in the accompanying balance sheet. The University has irrevocable rights to all or a portion of the income of these funds, but the assets of the funds are not under the management of the University. The following reflects the market value of these funds as of June 30, 2000 and 1999, and the amount of income received from the trustees during the years then ended (in thousands):
|
2000
|
1999
|
|
| Market Value of Funds Held by Trustees for the Benefit of the University |
$142,991
|
$147,540
|
| Income Received from Funds Held by Trustees for the Benefit of the University |
$5,497
|
$5,864
|
Outstanding pledges to the University amounted to $99.2 million and $76.8 million as of June 30, 2000 and 1999, respectively. Included in both totals are $19.7 million of pledges relating to plant construction. It is not practicable to estimate the net realizable value of such pledges and, therefore, they are not reflected in the accompanying financial statements.
NOTE 12: Commitments and Contingencies
Contractual commitments
As of June 30, 2000, the University was a party to construction contracts and commitments totaling approximately $191.4 million of which $130.2 million had been incurred. The University's commitments for equipment, leases, and services are as follows:
|
2000-01
|
$8,226,000
|
|
2001-02
|
8,495,000
|
|
2002-03
|
3,367,000
|
|
2003-04
|
2,669,000
|
|
2004-05
|
1,904,000
|
|
2005-06
|
7,244,000
|
The total rental expense for all property and equipment was approximately $12.2 million and $10.1 million for the years ended June 30, 2000 and 1999, respectively.
Prior bond defeasance
In prior years, certain outstanding bonds have been defeased by placing assets in irrevocable trusts with escrow agents. Accordingly, these assets and the liability for the defeased bonds are not reflected in the accompanying financial statements. As of June 30, 2000, $6.6 million of the defeased bonds remain outstanding.
Litigation
The University is a defendant in a number of legal actions. While the final outcome cannot be determined at this time, management is of the opinion that the liability, if any, for these legal actions will not have a material effect on the University's financial position.
Settlements
During fiscal year 2000, the Department of Justice reviewed outpatient billings submitted to Government Payers by the University of Virginia Health Services Foundation (HSF) and the University of Virginia Medical Center. This review revealed a small number of billing errors. To avoid protracted legal and operational costs, the Justice Department, Medical Center, and HSF negotiated a tentative settlement of this issue. A final settlement has not been reached, but the parties believe they are close to agreement. The settlement will have several provisions, one of which will be a payment to the Government of $3,000,000. Internal controls have been implemented which will prevent a re-occurrence of the problems identified during the investigation.
The University began participating in the Federal Direct Lending Program in July 1995. For the year ended June 30, 2000, the Current Restricted Fund additions for federal grants and contracts of $191.4 million and the Current Restricted Fund expenditures for scholarships and fellowships of $100.0 million include $52.1 million for direct lending, respectively. For the year ended June 30, 1999, the Current Restricted Fund additions for federal grants and contracts of $179.6 million and the Current Restricted Fund expenditures for scholarships and fellowships of $99.1 million include $53.1 million for direct lending, respectively.
Provider-Based Clinics
On April 7, 2000, the Health Care Financing Administration (HCFA) published its final rules concerning a new prospective payment system (PPS) for most hospital services. In addition to establishing the outpatient PPS, the rules also established complex requirements for obtaining provider-based status for clinic facilities that are operated by a hospital. The new PPS rules clearly defined a provider-based clinic and established specific criteria that must be met to obtain this designation. The existing organization of the clinics in the University of Virginia Health System did not comply with the new regulations. In order to be in compliance, the Health System was required to transfer ownership of most of the clinics to the Medical Center. The revenues and expenses of the clinics had historically been included in the HSF and Clinical Department financial statements. The transfer of the operation of the clinics was finalized August 1, 2000.
Real Property Transactions
During fiscal year 2000, the Medical Center entered into an agreement to purchase a newly constructed child care center. The center, named in honor of the late Malcolm W. Cole, was dedicated on May 31, 2000. It contains 15,000 square feet of space and will accommodate 170 children from infants to pre-schoolers. The property was initially leased from the builder and subsequently purchased by the Medical Center for $2.4 million on July 18, 2000.
In May 2000, the Medical Center entered into an agreement to purchase the University Towers building from Genesis ElderCare National Centers, Inc. dba Jefferson Park Center, a Florida for-profit corporation. Genesis operated the property as a 173-bed nursing home. It contains 88,593 square feet of building space that rests on 58,238 square feet of land. The closing date is tentatively scheduled for mid-November. The purchase price is expected to be $7.3 million.
Finally, the Medical Center has agreed to purchase the building it currently operates as the Zion's Crossroads Dialysis Center. The building is currently owned by the Health Services Foundation and is leased by the Medical Center. It contains 5,013 square feet of space and is used to treat dialysis patients exclusively. Closing is scheduled to take place pending the resolution of the ground lease with Virginia Oil, Inc. The purchase price is expected to be $1.1 million.