As of June 30, 1996
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. There are currently 17 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 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 1995 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 1996 and 16.9 percent in 1995. 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 6.8 percent in 1996 and 7.5 percent in 1995.
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 14.5 percent in 1996 and 15.2 percent in 1995. These percentages have been computed using realized and unrealized gains and losses and investment income. Current spending requirements were 5.85 percent in 1996 and 5.75 percent in 1995.
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 follows:
| Endowment and Similar Funds As of June 30, 1996 (in thousands) |
Pooled Endowment Funds | Separately Invested Funds | Total |
| Cash | $ -- | $ -- | $ -- |
| Mutual and Money Market Funds | 100,291 | 6,897 | 107,188 |
| Repurchase Agreements | -- | 50,305 | 50,305 |
| U.S. Government Securities | 121,664 | 11,422 | 133,086 |
| Corporate and Municipal Bonds | 24,890 | 944 | 25,834 |
| Corporate Notes | 20,114 | 240 | 20,354 |
| International Bonds and Notes | 4,951 | -- | 4,951 |
| Common and Preferred Stock | 322,233 | 13,359 | 335,592 |
| Advances to Foundations (Note 3c) | -- | 42,384 | 42,384 |
| Real Estate and Other Tangible Property | -- | 398 | 398 |
| Mortgages | 9,774 | -- | 9,774 |
| Other Intangible Property | 218,663 | 519 | 219,182 |
| Total Assets | $ 822,580 | $126,468 | $949,048 |
| Investment Income | $ 22,653 | $ 4,121 | $ 26,774 |
| Realized Net Gain | 22,998 | 4,018 | 27,016 |
| Unrealized Net Gain | 56,619 | 570 | 57,189 |
| Pooled Endowment Funds | Growth & Income Fund | Balanced Fund |
| Number of Permanent Shares | 550,081 | 373,083 |
| Number of Participating Shares | 547,890 | 360,899 |
| Market Value Per Share | $ 1,203.84 | $ 325.16 |
| Earnings Per Share | $ 33.87 | $ 11.34 |
| Distribution Per Share | $ 44.27 | $ 17.52 |
| Endowment and Similar Funds As of June 30, 1995 (in thousands) |
Pooled Endowment Funds | Separately Invested Funds | Total |
| Cash | $ -- | $ 31 | $ 31 |
| Mutual and Money Market Funds | 96,505 | 10,239 | 106,744 |
| U.S. Government Securities | 81,690 | 6,502 | 88,192 |
| 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 Stock | 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 | $ 60,932 | $ 773,097 |
| Investment Income | $ 21,313 | $ 3,294 | $ 24,607 |
| Realized Net Gain | 18,218 | 5,648 | 23,866 |
| Unrealized Net Gain | 55,023 | 1,536 | 56,559 |
| 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 |
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.
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. Securities on loan at June 30, 1996 and 1995 are presented as non-categorized in the schedule of custodial credit risk. All security loans can be terminated on demand by either the University or the borrower and the average term of the loans is less than one week. This maturity is matched with the term to maturity of the investment of the cash collateral by investing in overnight repurchase agreements, in the agent's money market investment pool, or in the University's short-term investment pool.
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. Asset swap contracts are privately negotiated agreements between two participants to exchange the return stream derived from their assets to each other without exchanging underlying assets. The University uses asset swaps to gain exposure to certain market sectors in lieu of direct investment. The credit risk lies with the intermediary who arranges the asset swap. As of June 30, 1996, the market value of the University's derivative exposure consisted of $3,621,000 in commitments to purchase futures contracts, $42,976,000 in commitments to sell futures contracts, $165,000 in commitments to purchase options and warrants, $171,000 in commitments to sell options and warrants, $247,000 in commitments to purchase fixed income derivatives, $1,794,000 in commitments to purchase equity derivatives, $65,000 in commitments to sell equity derivatives, $7,722,000 in commitments to purchase forward foreign exchange contracts, $8,807,000 in commitments to sell forward foreign exchange contracts, $333,000 in commitments to purchase asset swap contracts, and $373,000 in commitments to sell asset swap contracts.
| Categorization of investment risk for assets held as of June 30, 1996 (in thousands): | ||||
| Description | Category 1 | Non-Categorized | Cost | Market Value |
| U.S. Government Securities | $314,178 | $ 4,084 | $318,262 | $ 316,000 |
| Corporate Bonds | 25,621 | -- | 25,621 | 34,454 |
| Corporate Notes | 23,607 | -- | 23,607 | 23,351 |
| Common and Preferred Stocks | 114,823 | 93,943 | 208,766 | 335,592 |
| Municipal Securities | 266 | -- | 266 | 319 |
| International Bonds and Notes | 4,679 | -- | 4,679 | 4,685 |
| Repurchase Agreements | 93,268 | -- | 93,268 | 93,268 |
| Mutual and Money Market Funds | -- | 93,835 | 93,835 | 118,946 |
| Real Estate and Other Tangible Property | -- | 398 | 398 | 398 |
| Mortgages | -- | 9,774 | 9,774 | 9,774 |
| Other Intangible Property | -- | 212,069 | 212,069 | 244,125 |
| Total | $576,442 | $414,103 | $990,545 | $1,180,912 |
| Categorization of investment risk for assets held as of June 30, 1995 (in thousands): | ||||
| Description | Category 1 | Non-Categorized | Cost | Market Value |
| U.S. Government Securities | $234,354 | $ 15,125 | $249,479 | $251,846 |
| 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 | -- | 122,321 | 122,321 | 138,074 |
| Real Estate and Other Tangible Property | -- | 398 | 398 | 398 |
| Mortgages | -- | 10,851 | 10,851 | 10,851 |
| Other Intangible Property | -- | 154,115 | 154,115 | 167,985 |
| Total | $536,967 | $302,810 | $839,777 | $977,923 |
Note 3: Balance Sheet Details
a. Accounts receivable
Current Fund accounts receivable as of June 30 include the following (in thousands):
| 1996 | 1995 | |
| Patient Care | $ 71,244 | $ 68,713 |
| Estimated Amounts Due from Third-Party Payors | 17,999 | 8,174 |
| Grants and Contracts | 12,586 | 12,600 |
| Health Services Foundation | 3,569 | 4,339 |
| Other | 5,213 | 4,447 |
| Less Allowance for Doubtful Accounts | (28,603) | (22,779) |
| Total | $ 82,008 | $ 75,494 |
b. Notes receivable
Notes receivable as of June 30, 1996 and 1995 are reported net of the allowance for uncollectible student loans which amounted to $1.9 million and $1.9 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):
| 1996 | 1995 | |
| Unrestricted Current Funds -- University of Virginia Auxiliary Services Foundation | $ 500 | $ 500 |
| Unrestricted Quasi-Endowment Funds -- University of Virginia Real Estate Foundation | $42,384 | $37,235 |
| Expendable Plant Funds -- University of Virginia Law School Foundation | $ 6,500 | $ -- |
d. Investment in plant
Investment in plant as of June 30 consists of the following (in thousands):
| 1996 | 1995 | |
| Land | $ 13,358 | $ 13,358 |
| Improvements Other than Buildings | 66,120 | 58,531 |
| Buildings | 787,192 | 686,750 |
| Equipment | 388,641 | 363,151 |
| Library Books | 56,537 | 53,287 |
| Construction in Process | 60,245 | 97,304 |
| Unamortized Bond Issue/ Discount Cost | 1,916 | 2,098 |
| Total | $1,374,009 | $1,274,479 |
e. Restatement of prior year balances
Certain June 30, 1995 balances have been restated to reflect their true classification. Current Funds have been adjusted by $455,000 to reflect a reclassification of state appropriations from Current Restricted to Current Unrestricted. Current Funds have also been adjusted by $610,000 to reflect a reclassification of Medical Center investment balances from Current Restricted to Current Unrestricted.
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, 1996 (in thousands) | |||||
|---|---|---|---|---|---|
| Due to Other Funds | Current Funds | Endowment Funds | Plant Funds | Agency Funds | Total |
| Current Funds | $ -- | $6,209 | $470 | $ 14 | $ 6,693 |
| Endowment and Similar Funds | 221 | -- | -- | 50,621 | 50,842 |
| Plant Funds | 13,352 | -- | -- | -- | 13,352 |
| Total | $13,573 | $6,209 | $470 | $50,635 | $70,887 |
| 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 |
Note 4: Long-Term Debt
| As of June 30, (in thousands) | ||||
|---|---|---|---|---|
| Description | Interest Rate | Maturity | 1996 | 1995 |
| Plant Funds Revenue Bonds Medical Center Series A |
3.75% to 5.2% | 1997-2015 | $ 46,600 | $ 49,205 |
| Medical Center Series C | 8.1% | 1997 | -- | 425 |
| Medical Center Series E | 6.0% to 7.0% | 2001-2013 | 55,875 | 55,875 |
| University of Virginia Series A | variable | 2020 | 6,100 | 6,100 |
| University of Virginia Series B | 4.0% to 5.375% | 1997-2020 | 59,035 | 60,650 |
| Clinch Valley College Series B | 5.6% to 5.875% | 1997-2011 | 340 | 350 |
| Commonwealth of Virginia Bonds | 3.5 to 9.25% | 1997-2013 | 69,299 | 58,102 |
| Higher Education Equipment Trust Fund Leases Payable | 3.7% to 5.35% | 1996-2001 | 15,435 | 12,603 |
| Other | various | 1996-1999 | 1,076 | 1,752 |
| Total | $253,760 | $245,062 | ||
On January 31, 1996, the Commonwealth of Virginia, on behalf of the University of Virginia, issued $896,000 of Series 1996 Refunding Bonds with interest rates ranging from 4.75% to 5.13% to refund $840,000 of outstanding 1990 Series B and 1991 Series A with interest rates ranging from 6.3% to 6.5%. Though the refunding resulted in the recognition of an accounting loss of $56,000 for the year ended June 30, 1996, the University in effect reduced the aggregate debt service obligation by $30,000 over the next seven years and obtained an economic gain (difference between the present values of the old and new debt service) of $30,000.
Long-term debt matures for each of the next five years and in the aggregate (in thousands):
| 1996 - 1997 | $ 13,154 |
| 1997 - 1998 | 13,409 |
| 1998 - 1999 | 13,037 |
| 1999 - 2000 | 12,307 |
| 2000 - 2001 | 12,842 |
| Later years | 189,011 |
| Total | $253,760 |
Note 5: Affiliated Companies
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. 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, 1996, the Medical Center has purchased one share of common stock for $1,000 and made equity contributions of $7,049,000, of which $3,858,000 was made during the year ended June 30, 1996. The net investment in BRHA, after including operating losses of $1,528,000 for the year ended June 30, 1996, is $4,271,000.
In May, 1995, the Medical Center joined the Central Virginia Health Network, Inc., a partnership of eight Richmond-area hospitals, formed to provide an efficient and coordinated continuum of care. As of June 30, 1996, the Medical Center has paid $100 for 10,000 shares of common stock and $110,000 as additional paid-in-capital. The net investment in Central Virginia Health Network, Inc., after including operating gains of $68,000 for the year ended June 30, 1996, is $91,000.
In May, 1996, the Medical Center entered into a joint ven- ture (University of Virginia/HEALTHSOUTHL.L.C.) with HEALTHSOUTH Corporation to establish an acute rehabilitation facility and made a capital contribution of $2,000,000 which represents a fifty percent interest in the joint venture.
In May, 1995, HealthCare Partners, Inc., a non-stock, non-profit corporation was established to employ primary care physicians from the wider community served by the Medical Center and to integrate these physicians into the teaching faculty of the University of Virginia Medical School. The Medical Center and University of Virginia Health Services Foundation are contributing to the funding of the corporation. During 1996, the Medical Center made a $3,000,000 contribution. The Board of Visitors has authorized an additional contribution of $5,000,000 to HealthCare Partners, Inc.
Note 6: Affiliated Foundations
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 or the foundation's management:
| Affiliated Foundations Condensed Balance Sheet (in thousands) | ||||||
|---|---|---|---|---|---|---|
| Health Services Foundation As of June 30, |
Auxiliary Services Foundation As of December 31, |
Real Estate Foundation (Parent Only) As of June 30, |
||||
| Unaudited 1996 |
Audited 1995 |
Audited 1995 |
Audited 1994 |
Unaudited 1996 |
Audited 1995 |
|
| Assets Current Assets Due From the University |
$ 298 | $ 3,588 | $ 19 | $ 7 | $ -- | $ -- |
| Other Current Assets | 46,041 | 39,409 | 246 | 268 | 3,631 | 1,981 |
| Other Assets | 85,126 | 75,095 | 295 | 313 | 52,439 | 47,438 |
| Total | $131,465 | $118,092 | $560 | $588 | $56,070 | $49,419 |
| Liabilities and Fund Balance Current Liabilities Due to the University |
$ 8,584 | $ 7,114 | $ -- | $ -- | $ -- | $ -- |
| Other Current Liabilities | 21,136 | 16,324 | 54 | 57 | 2,468 | 2,136 |
| Long-Term Debt Due to the University | -- | -- | 500 | 500 | 42,384 | 37,235 |
| Other Long-Term Debts | 37,910 | 31,058 | -- | -- | 4,048 | 1,973 |
| Fund Balance | 63,835 | 63,596 | 6 | 31 | 7,170 | 8,075 |
| Total | $131,465 | $118,092 | $560 | $588 | $56,070 | $49,419 |
| Affiliated Foundations Condensed Statement of Revenues and Expenditures (in thousands) | ||||||
|---|---|---|---|---|---|---|
| Health Services Foundation As of June 30, |
Auxiliary Services Foundation As of December 31, |
Real Estate Foundation (Parent Only) As of June 30, |
||||
| Unaudited 1996 |
Audited 1995 |
Audited 1995 |
Audited 1994 |
Unaudited 1996 |
Audited 1995 |
|
| Revenues Professional and Technical Services Provided to the University |
$ 20,840 | $ 19,136 | $ -- | $ -- | $ -- | $ -- |
| Rental Income From the University | -- | -- | -- | -- | 187 | 298 |
| Other | 128,113 | 116,683 | 1,009 | 1,012 | 567 | 573 |
| Total | $148,953 | $135,819 | $1,009 | $1,012 | $ 754 | $871 |
| Expenditures Office Space and Administrative Services Provided by the University |
$ 584 | $ 562 | $ -- | $ -- | $ -- | $ -- |
| Clinical Operations Provided by the University | 4,840 | 4,389 | -- | -- | -- | -- |
| Gifts to the University | 6,982 | 6,438 | -- | -- | 3 | 97 |
| Other | 136,308 | 119,403 | 1,034 | 958 | 1,266 | 775 |
| Total | $148,714 | $130,792 | $1,034 | $ 958 | $1,269 | $872 |
The University received gifts from the above and other foundations amounting to approximately $28.9 million and $23.3 million during 1996 and 1995, 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 $172 million and $165.9 million for the years ended June 30, 1996 and 1995, respectively. The University's total payroll costs were $465.5 million and $446.8 million for the years ended June 30, 1996 and 1995, 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 $15.9 million and $16.4 million for the years ended June 30, 1996 and 1995, respectively, which included the 5 percent employee contribution assumed by the employer. These contributions represent 9.2 percent and 9.9 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, 1995. 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 $21.7 million and $20.4 million for the years ended June 30, 1996 and 1995, respectively. Contributions to the Optional Retirement Plans were calculated using base salaries of $208.4 million and $194 million for the years ended June 30, 1996 and 1995, respectively. The contribution percentage amounted to 10.4 percent in 1996 and 10.5 percent in 1995.
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: Self-Insurance
Beginning July 1, 1995, all University employees had 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, 1996, assets of $2,602,000 were in the account. The estimated liability at June 30, 1996 for outstanding claims was $2,813,000.
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, 1996 and 1995, and the amount of income received from the trustees during the years then ended (in thousands):
| 1996 | 1995 | |
| Market Value of Funds Held by Trustees for the Benefit of the University | $113,862 | $98,546 |
| Income Received from Funds Held by Trustees for the Benefit of the University | $ 4,234 | $ 3,695 |
Note 11: Pledges
Outstanding pledges to the University amounted to $63.2 million and $26.9 million as of June 30, 1996 and 1995, respectively. Included in these totals are $8.7 million and $6.1 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 12: Commitments and Contingencies
Contractual commitments
As of June 30, 1996, the University has construction contracts and commitments totaling approximately $127.5 million of which $96.8 million had been incurred. The University's commitments for equipment, leases, and services are as follows (in thousands):
| 1996-1997 | $7,471 |
| 1997-1998 | 2,703 |
| 1998-1999 | 2,378 |
| 1999-2000 | 2,290 |
| 2000-2001 | 2,164 |
| 2001-2002 | 180 |
The total rental expense for all property and equipment was approximately $7.7 million and $6.2 million for the years ended June 30, 1996 and 1995, 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, 1996, $74.9 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.
Note 13: Direct Lending
The University began participating in the Federal Direct Lending Program in July, 1995. For the year ended June 30, 1996, the Current Restricted Fund additions for federal grants and contracts of $148,355,000 includes $49,522,000 for direct lending. Additionally, for the year ended June 30, 1996, the Current Restricted Fund expenditures for scholarships and fellowships of $105,802,000 includes $49,522,000 for direct lending.