As of June 30, 1995
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 Clinch Valley College Division 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. The board has recognized as affiliated foundations thirteen organizations 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 three 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 Real Estate Foundation, established to promote, support, and aid the University in matters pertaining to real estate.
- University of Virginia Auxiliary Services Foundation, established to promote, support, and aid the University in its operation and support of enterprises such as athletics, recreation, student health, and fellowship.
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 Blue Cross. 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. Mortgages held for investment by the endowment fund are recorded at book value representing principal amounts due. University-held real estate investments are recorded at cost.
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. Since 1991, the academic division has capitalized all equipment with an original cost of $2,000 or more, and with a useful life of at least two years.
Reclassifications
Certain 1994 activities and balances were reclassified to conform to classifications currently in use.
Note 1: Endowment and Similar Funds
The major portion of the investments of the endowment and similar funds is pooled under two major funds. The Growth and Income Fund is the general endowment pool for the University. The University has adopted an investment objective whereby the average annual return 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 Growth and Income Endowment Fund was 15.6 percent in 1995 and 3.6 percent in 1994. 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 7.5 percent in 1995 and 6.7 percent in 1994.
The Balanced Fund is the second major pooled fund. The primary investment objective of this fund is to earn a return each year that meets current spending requirements and maximizes participation by the Commonwealth of Virginia in the Eminent Scholars Program. A secondary objective is to provide growth in income. The annual return for the Balanced Fund was 13.7 percent in 1995 and 3.1 percent in 1994. These percentages have been computed using realized and unrealized gains and losses and investment income. Current spending requirements were 6 percent in 1995 and 5.75 percent in 1994.
Both the Growth and Income Fund and the Balanced Fund are 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 as follows:
| Endowment and Similar Funds Pooled Separately As of June 30, 1995 (in thousands) |
|||
| Pooled Endowment Funds |
Separately Invested Funds |
Total | |
| Cash | $ -- | $ 31 | $ 31 |
| Mutual and Money Market Funds | 96,505 | 5,078 | 101,583 |
| U.S. Government Securities | 81,690 | 1,890 | 83,580 |
| Corporate and Municipal Bonds | 17,338 | 660 | 17,998 |
| Corporate Notes | 13,332 | 533 | 13,865 |
| International Bonds and Notes | 18,026 | -- | 18,026 |
| Common and Preferred Stocks | 312,686 | 9,467 | 322,153 |
| Advances to Foundations (Note 3c) | 4,612 | 32,623 | 37,235 |
| Real Estate and Other Tangible Property | -- | 398 | 398 |
| Mortgages | 10,851 | -- | 10,851 |
| Other Intangible Property | 157,125 | 479 | 157,604 |
| Total Assets | $ 712,165 | $ 51,159 | $ 763,324 |
| Investment Income | $ 21,313 | $ 3,294 | $ 24,607 |
| Realized Net Gain | 18,218 | 5,648 | 23,866 |
| Unrealized Net Gain | 136,632 | 1,803 | 138,435 |
| Pooled Endowment Funds | Growth & Income Fund |
Balanced Fund |
| Number of Permanent Shares | 558,126 | 347,530 |
| Number of Participating Shares | 557,958 | 329,028 |
| Market Value Per Share | $ 1,081.23 | $ 299.55 |
| Earnings Per Share | $ 30.81 | $ 12.53 |
| Distribution Per Share | $ 42.57 | $ 16.52 |
| Endowment and Similar Funds As of June 30, 1994(in thousands) |
|||
| Pooled Endowment Funds |
Separately Invested Funds |
Total | |
| Cash | $ 1 | $ -- | $ 1 |
| Mutual and Money Market Funds | 104,918 | 3,939 | 108,857 |
| U.S. Government Securities | 83,172 | 1,313 | 84,485 |
| Corporate and Municipal Bonds | 14,802 | 429 | 15,231 |
| Corporate Notes | 14,921 | 834 | 15,755 |
| International Bonds and Notes | 16,752 | -- | 16,752 |
| Common and Preferred Stocks | 271,901 | 8,165 | 280,066 |
| Advances to Foundations (Note 3c) | 3,912 | 32,416 | 36,328 |
| Real Estate and Other Tangible Property | -- | 404 | 404 |
| Mortgages | 11,553 | -- | 11,553 |
| Other Intangible Property | 98,334 | 438 | 98,772 |
| Total Assets | $ 620,266 | $ 47,938 | $ 668,204 |
| Investment Income | $ 19,064 | $ 3,138 | $ 22,202 |
| Realized Net Gain | 59,180 | 342 | 59,522 |
| Unrealized Net Gain | 76,263 | 2,026 | 78,289 |
| Pooled Endowment Funds | Growth & Income Fund |
Balanced Fund |
| Number of Permanent Shares | 553,379 | 315,970 |
| Number of Participating Shares | 552,700 | 305,604 |
| Market Value Per Share | $ 963.70 | $ 275.26 |
| Earnings Per Share | $ 27.45 | $ 12.74 |
| Distribution Per Share | $ 40.93 | $ 16.25 |
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.
The University of Virginia, through its agent, Fiduciary Trust Company International, lends securities to various brokers on a temporary basis for a fee. All security loan agreements are collateralized by cash, U.S. Government obligations, or irrevocable letters of credit issued by major banks having a market value equal to at least 102 percent of the market value of the loaned securities. At June 30, 1995, the market value of the securities on loan was $15,231,000 and the collateral value was $15,885,000. At June 30, 1994, the market value of the securities on loan was $53,157,000 and the collateral value was $55,499,000.
| Categorization of investment risk for assets held as of June 30, 1995 (in thousands): | |||||
| Description | Category 1 | Category 3 | Non-Categorized | Cost | Market Value |
| U.S. Government Securities | $ 249,479 | $ -- | $ -- | $ 249,479 | $ 251,845 |
| Corporate Bonds | 16,399 | -- | -- | 16,399 | 17,645 |
| Corporate Notes | 23,522 | -- | -- | 23,522 | 23,740 |
| Common and Preferred Stocks | 225,577 | -- | -- | 225,577 | 330,362 |
| Municipal Securities | 288 | -- | -- | 288 | 353 |
| International Bonds and Notes | 18,183 | -- | -- | 18,183 | 18,025 |
| Repurchase Agreements | 18,644 | -- | -- | 18,644 | 18,644 |
| Mutual and Money Market Funds | -- | -- | 114,365 | 114,365 | 130,117 |
| Real Estate and Other Tangible Property | -- | -- | 398 | 398 | 398 |
| Mortgages | -- | -- | 10,851 | 10,851 | 10,851 |
| Other Intangible Property | -- | -- | 146,185 | 146,185 | 160,057 |
| Total | $ 552,092 | $ -- | $ 271,799 | $ 823,891 | $ 962,037 |
| Categorization of investment risk for assets held as of June 30, 1994 (in thousands): | |||||
| Description | Category 1 | Category 3 | Non-Categorized | Cost | Market Value |
| U.S. Government Securities | $265,245 | $ 405 | $ -- | $265,650 | $262,264 |
| Corporate Bonds | 14,081 | 50 | -- | 14,131 | 14,899 |
| Corporate Notes | 27,770 | -- | -- | 27,770 | 26,427 |
| Common and Preferred Stocks | 223,445 | -- | -- | 223,445 | 280,066 |
| Municipal Securities | -- | 275 | -- | 275 | 332 |
| International Bonds and Notes | 17,587 | -- | -- | 17,587 | 16,752 |
| Repurchase Agreements | 7,515 | -- | -- | 7,515 | 7,515 |
| Mutual and Money Market Funds | -- | -- | 111,278 | 111,278 | 127,829 |
| Real Estate and Other Tangible Property | -- | -- | 403 | 403 | 403 |
| Mortgages | -- | -- | 11,553 | 11,553 | 11,553 |
| Other Intangible Property | -- | -- | 93,227 | 93,227 | 99,115 |
| Total | $555,643 | $ 730 | $216,461 | $772,834 | $847,155 |
The University uses, through its investments and through investments in pooled funds, a variety of derivative securities including futures, options, and forward foreign currency contracts. These financial instruments are used to modify market risk exposure. Futures contracts and options on futures contracts are traded on organized exchanges and require collateral or margin in the form of cash or marketable securities. The net change in the futures contract value is settled with a cash transaction on a daily basis. Holders of futures contracts look to the exchange for performance under the contract and not the entity holding the offsetting futures position. Accordingly, the amount of risk due to non-performance of counterparties to the futures contracts is minimal. Foreign exchange contracts are used to protect the University's portfolio against fluctuations in the values of foreign currencies. The credit risk of forward currency contracts traded over-the-counter lies with the counterparty. As of June 30, 1995, the market value of the University's derivative exposure consisted of $32,183,000 in commitments to sell futures contracts, $2,746,000 in commitments to purchase futures contracts, $1,474,000 in options and warrants, $390,000 in fixed income derivatives, $35,181,000 in commitments to sell forward foreign exchange contracts, and $6,590,000 in commitments to purchase forward foreign exchange contracts.
Note 3: Balance Sheet Details
a. Accounts receivable
Current Fund accounts receivable as of June 30 include the following (in thousands):
| 1995 | 1994 | |
| Patient Care | $ 50,764 | $ 41,831 |
| Estimated Amounts Due from Third-Party Payors | 8,174 | 14,562 |
| Grants and Contracts | 12,600 | 12,009 |
| Health Services Foundation | 4,339 | 5,098 |
| Other | 4,447 | 3,246 |
| Less Allowance for Doubtful Accounts | (4,830) | (4,910) |
| Total | $ 75,494 | $ 71,836 |
b. Notes receivable
Notes receivable as of June 30, 1995 and 1994 are reported net of the allowance for uncollectible student loans which amounted to $1.9 million and $1.8 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 $39 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):
| 1994 | 1993 | |
| Unrestricted Current Funds University of Virginia Auxiliary Services Foundation |
$ 500 | $ 500 |
| Unrestricted Quasi-Endowment Funds University of Virginia Real Estate Foundation |
$ 37,235 | $ 36,328 |
d. Investment in plant
Investment in plant as of June 30 consists of the following (in thousands):
| 1995 | 1994 | |
| Land | $ 13,358 | $ 12,831 |
| Improvements Other than Buildings | 58,531 | 54,725 |
| Buildings | 686,750 | 620,140 |
| Equipment | 363,151 | 339,627 |
| Library Books | 53,287 | 50,436 |
| Construction in Process | 97,304 | 89,614 |
| Unamortized Bond Issue/Discount Cost | 2,098 | 2,288 |
| Total | $1,274,479 | $1,169,661 |
e. Restatement of prior year balances
Certain June 30, 1994 balances have been restated to reflect their true classification. Current Funds have been adjusted by $189,000 to reflect a reclassification of endowment income accounts from Current Restricted to Current Unrestricted. Current Funds have also been adjusted by $1,805,000 to reflect a reclassification of patent income from Current Restricted to Current Unrestricted. Finally, Endowment balances have been decreased by $45,000 to reflect a reclassification of Deferred Compensation accounts to agency funds.
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 follows:
| Due From Other Funds, 1995 (in thousands) | |||||
|---|---|---|---|---|---|
| Due to Other Funds | Current Funds | Endowment Funds | Plant Funds | Agency Funds | Total |
| Current Funds | $ -- | $ 313 | $ 498 | $ 559 | $ 1,370 |
| Endowment and Similar Funds | -- | -- | -- | 32,834 | 32,834 |
| Plant Funds | 1,577 | -- | -- | -- | 1,577 |
| Total | $ 1,577 | $ 313 | $ 498 | $ 33,393 | $ 35,781 |
| Due From Other Funds, 1994 (in thousands) | |||||
|---|---|---|---|---|---|
| Due to Other Funds | Current Funds | Endowment Funds | Plant Funds | Agency Funds | Total |
| Current Funds | $ -- | $ -- | $ 501 | $ 571 | $ 1,072 |
| Endowment and Similar Funds | -- | -- | -- | 27,101 | 27,101 |
| Plant Funds | 971 | -- | -- | -- | 971 |
| Total | $ 971 | $ -- | $ 501 | $ 27,672 | $ 29,144 |
Note 4: Long-Term Debt
| As of June 30, | ||||
| Description | Interest Rate | Maturity | 1995 1994 (in thousands) |
|
|---|---|---|---|---|
| Plant Funds
Revenue Bonds |
||||
| Medical Center Series A | 3.5% to 5.2% | 1996-2015 | $ 49,205 | $ 49,205 |
| Medical Center Series C | 8.1% | 1996 | 425 | 3,775 |
| Medical Center Series E | 6.0% to 7.0% | 2001-2013 | 55,875 | 55,875 |
| University of Virginia Series A | variable | 2020 | 6,100 | -- |
| University of Virginia Series B | 3.75% to 5.375% | 1996-2020 | 60,650 | 61,380 |
| Clinch Valley College Series B | 5.6% to 5.875% | 1996-2011 | 350 | 360 |
| Commonwealth of Virginia Bonds | 3.5% to 9.25% | 1996-2013 | 58,102 | 62,649 |
| Higher Education Equipment Trust Fund Leases Payable | 3.5% to 5.35% | 1995-2000 | 12,603 | 9,706 |
| Other | various | 1995-1999 | 1,752 | 732 |
| Total | $ 245,062 | $ 243,682 | ||
| Long-term debt matures for each of the next five years and in the aggregate (in thousands): | |
| 1995-1996 | $ 12,972 |
| 1996-1997 | 12,621 |
| 1997-1998 | 11,814 |
| 1998-1999 | 11,365 |
| 1999-2000 | 10,596 |
| Later years | 185,694 |
| Total | $ 245,062 |
Note 5: Affiliated Company
The Medical Center is a participant with the Health Services Foundation in a joint venture to develop and operate a managed health care organization in central and western Virginia and certain counties in West Virginia. The Blue Ridge Health Alliance, Inc. (BRHA), a for-profit corporation, was formed on April 11, 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. As of June 30, 1995, the Medical Center has purchased one share of common stock for $1,000 and made equity contributions of $3,191,000. The net investment in BRHA, after including an operating loss of $1,250,000, is $1,941,000.Note 6: Affiliated Foundations
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The financial statements do not include the assets, liabilities, or fund balances of the University of Virginia Health Services Foundation, the University of Virginia Auxiliary Services Foundation, or the University of Virginia Real Estate Foundation. These foundations are separately incorporated entities and the related financial statements are examined by other auditors. The following condensed summary is based solely upon the reports of other auditors:
| Affiliated Foundations Condensed Balance Sheet (in thousands) | ||||||
| Health Services Foundation As of June 30, | Auxiliary Services Foundation As of December 31, | Real Estate Foundation As of June 30, | ||||
| 1995 | 1994 | 1994 | 1993 | 1995 | 1994 | |
| Assets Current assets due from the University |
$ $ 3,588 | $ $ 2,943 | $ $ 7 | $ $ -- | $ $ -- | $ $ $ -- |
| Other current assets | 39,409 | 30,599 | 268 | 205 | 2,964 | 2,552 |
| Other assets | 75,095 | 79,719 | 313 | 331 64,149 62,068 | 64,149 | 62,068 |
| Total | $ 118,092 | $113,261 | $ 588 | $ 536 | $ 67,113 | $ 64,620 |
| Liabilities and Fund Balance Current liabilities due to the University |
$ 7,114 | $ 7,549 | $ -- | $ -- | $ -- | $ -- |
| Other current liabilities | 16,324 | 16,517 | 57 | 59 | 4,214 | 3,829 |
| Long-term debt due to the University | -- | -- | 500 | 500 | 37,235 | 36,328 |
| Other long-term debts | 31,058 | 30,626 | -- | -- | 17,589 | 16,106 |
| Fund balance | 63,596 | 58,569 | 31 | (23 ) | 8,075 | 8,357 |
| Total | $ 113,261 | $ 588 | $ 536 | $ 67,113 | $ 64,620 | |
| Affiliated Foundations Condensed Statement of Revenues and Expenditures (in thousands): | ||||||
| Health Services Foundation For the Years Ended June 30, | Auxiliary Services Foundation For the Years Ended December 31, | Real Estate Foundation For the Years Ended June 30, | ||||
|---|---|---|---|---|---|---|
| 1995 | 1994 | 1994 | 1993 | 1995 | 1994 | |
| Revenues Professional and technical services provided to the University |
$ 19,136 | $ 16,737 | $ -- | $ -- | $ -- | $ -- |
| Rental income from the University | -- | -- | -- | -- | 298 | 279 |
| Other | 116,683 | 109,469 | 1,012 | 1,001 | 13,152 | 12,969 |
| Total | $ 135,819 | $ 126,206 | $ 1,012 | $ 1,001 | $ 13,450 | $ 13,248 |
| Expenditures Office space and administrative services provided by the University |
$ 562 | $ 546 | $ -- | $ -- | $ -- | $ -- |
| Clinical operations provided by the University | 4,389 | 4,834 | -- | -- | -- | -- |
| Gifts to the University | 6,438 | 6,629 | -- | -- | 97 | 19 |
| Other | 119,403 | 113,510 | 958 | 955 | 13,688 | 13,284 |
| Total | $ 130,792 | $ 125,519 | $ 958 | $ 955 | $ 13,785 | $ 13,303 |
The University received gifts from the above and other foundations amounting to approximately $23.3 million and $13.8 million during 1995 and 1994, respectively.
Note 7: Retirement Plans
Substantially all full-time classified salaried employees of the University participate in the defined benefit retirement plan administered by the Virginia Retirement System (VRS). VRS is an agent multiple-employer public employee retirement system (PERS) that acts as a common investment and administrative agency for the Commonwealth of Virginia and its political subdivisions.
The University's payroll costs for employees covered by VRS were $167.7 million and $164.3 million for the years ended June 30, 1995 and 1994, respectively. The University's total payroll costs were $451.3 million and $436.9 million for the years ended June 30, 1995 and 1994, respectively. Information regarding types of employees covered, benefit provisions, employee eligibility requirements including eligibility for vesting, and the authority under which benefit provisions as well as employer and employee obligations to contribute are established can be found in the Commonwealth's Comprehensive Annual Financial Report (CAFR).
The University's total VRS contributions were $15.4 million and $14.7 million for the years ended June 30, 1995 and 1994, respectively, which included the 5 percent employee contribution assumed by the employer. These contributions represent 9.2 percent and 8.9 percent of covered payroll for the respective years.
The VRS does not measure assets and pension benefit obligations separately for individual State institutions. The CAFR provides disclosure of the Commonwealth's unfunded pension benefit obligation at June 30, 1994. The same report contains historical trend information showing VRS's progress in accumulating sufficient assets to pay benefits when due.
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 Professional's employer contributions fully vest after one year of employment. Total pension costs under the plans were approximately $20.7 million and $19.5 million for the years ended June 30, 1995 and 1994, respectively. Contributions to the Optional Retirement Plans were calculated using base salaries of $197 million and $189.6 million for the years ended June 30, 1995 and 1994, respectively. The contribution percentage amounted to 11.2 percent in 1995 and 10.3 percent in 1994.
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.
Note 9: 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, 1995 and 1994, and the amount of income received from the trustees during the years then ended (in thousands):
| 1995 | 1994 | |
| Market value of funds held by trustees for the benefit of the University | $98,546 | $86,721 |
| Income received from funds held by trustees for the benefit of the University | $ 3,695 | $ 3,461 |
Note 10: Pledges
Outstanding pledges to the University amounted to $26.9 million and $11.9 million as of June 30, 1995 and 1994, respectively. Included in these totals are $6.1 million and $3.2 million, respectively, 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 11: Commitments and Contingencies
Contractual commitments
As of June 30, 1995, the University has construction contracts and commitments totaling approximately $98.7 million of which $81 million had been incurred.The University's commitments for equipment, leases, and services are as follows (in thousands):
| 1995-1996 | $7,996 |
| 1996-1997 | 1,881 |
| 1997-1998 | 1,078 |
| 1998-1999 | 858 |
| 1999-2000 | 647 |
The total rental expense for all property and equipment was approximately $6.2 million and $5.3 million for the years ended June 30, 1995 and 1994, respectively.
The Board of Visitors authorized the Medical Center to participate with the University of Virginia Health Services Foundation in establishing Healthcare Partners, Inc., a non-profit joint venture designed to provide clinical and related services, as well as to support and promote medical, educational, scientific, and research purposes. The Board authorized the Medical Center to invest $4 million to capitalize the corporation.
The Board of Visitors also authorized the Medical Center to establish an acute rehabilitation facility through a joint venture with HEALTHSOUTH Corporation. The Board authorized a capital contribution of $2 million upon approval of the Certificate of Public Need. .
Prior bond defeasance
In prior years, certain outstanding bonds have been defeas-ed 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, 1994, $150 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.
Finance Staff
| Leonard W. Sandridge | Executive Vice President and Chief Financial Officer |
| Colette Capone | Vice President for Management and Budget |
| Charles T. Gillet | Assistant Vice President for Finance and University Comptroller |
| Alice W. Handy | University Treasurer |
| Peter L. Munger | Chief Financial Officer, University of Virginia Medical Center |
Internal Audit
Barbara J. Deily, Director of Audits
Non-Discrimination Policy
In accordance with federal law, the law of the Commonwealth of Virginia, and the policies of the Rector and Visitors of the University of Virginia, the University does not discriminate in any of its programs, procedures, or practices against any person on the basis of age, citizenship, color, handicap, national origin, political affiliation, race, religion, sex, sexual orientation, or status as a disabled veteran or veteran of the Vietnam era. The University operates equal opportunity and affirmative action programs for faculty, staff, and students. The University of Virginia is an Equal Opportunity/Affirmative Action Employer. The Section 504 Coordinator is Patricia M. Lampkin, Associate Dean of Students, Dabney House, Station 1, University of Virginia, Charlottesville, VA 22903, (804) 924-3736. The Title IX Coordinator is John Garland, Acting EO/AA Officer, Equal Opportunity/Affirmative Action Office, Poe Alley, West Lawn, Charlottesville, VA22903, (804) 924-3200.