Notes to Financial Statements

As of June 30, 1997

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 market value.

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 1996 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, formerly segregated into the Growth and Income Fund and the Balanced Fund, is now 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 17.3 percent in 1997. The annual return for the Growth and Income Fund and Balanced Fund were 15.6 percent and 14.5 percent, respectively, in 1996. 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 7.3 percent in 1997 and 6.8 percent in 1996.

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 is shown here.

Endowment and Similar Funds as of June 30, 1997 (in thousands)

 

Pooled Endowment Fund

 

Separately Invested Funds

Total

Mutual and Money Market Funds

$ 118,869

$ 7,346

$ 126,215

Repurchase Agreements

--

236,451

236,451

U.S. Government Securities

134,911

2,905

137,816

Corporate and Municipal Bonds

22,131

1,483

23,614

Corporate Notes

18,475

--

18,475

International Bonds and Notes

18,501

--

18,501

Common and Preferred Stock

532,247

12,883

545,130

Advances to Foundations (Note 3c)

--

37,389

37,389

Real Estate and Other Tangible Property

--

1,287

1,287

Mortgages

8,404

--

8,404

Other Intangible Property

82,287

--

82,287

Total Assets

$ 935,825

$ 299,744

$ 1,235,569

Investment Income

$ 22,839

$ 4,139

$ 26,978

Realized Net Gain

48,905

1,041

49,946

Unrealized Net Gain

62,469

3,460

65,929

Pooled Endowment Fund

Number of Permanent Shares

672,202

 

 

Number of Participating Shares

665,336

 

 

Market Value Per Share

$ 1,372.98

 

 

Earnings Per Share

$ 39.22

 

 

Distribution Per Share - Class A

$ 51.16

 

 

Distribution Per Share - Class B

$ 69.24

 

 

 

Endowment and Similar Funds as of June 30, 1996 (in thousands)

 

Pooled Endowment Fund

 

Separately Invested Funds

Total

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

 

 

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, 1997 and 1996 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, 1997, the market value of the University's derivative exposure consisted of $268,000 in commitments to purchase futures contracts, $46,435,000 in commitments to sell futures contracts, $4,189,000 in commitments to purchase options and warrants, $605,000 in commitments to sell options and warrants, $237,000 in commitments to purchase fixed income derivatives, $5,846,000 in commitments to purchase forward foreign exchange contracts, $11,183,000 in commitments to sell forward foreign exchange contracts, $1,856,000 in commitments to purchase asset swap contracts, and $3,354,000 in commitments to sell asset swap contracts.

 

Categorization of investment risk for assets held as of June 30, 1997 (in thousands)

 

 

Category 1

 

Non-Categorized

Cost

Market Value

U.S. Government Securities

$ 201,369

$ 109,572

$ 310,941

$ 310,982

Corporate Bonds

35,161

--

35,161

45,025

Corporate Notes

18,187

--

18,187

18,640

Common and Preferred Stocks

234,432

87,629

322,061

545,130

Municipal Securities

562

--

562

621

International Bonds and Notes

17,290

--

17,290

17,445

Repurchase Agreements

262,449

--

262,449

262,449

Mutual and Money Market Funds

--

151,772

151,772

169,516

Real Estate and Other Tangible Property

--

398

398

1,287

Mortgages

--

8,404

8,404

8,404

Other Intangible Property

--

86,580

86,580

85,139

Total

$ 769,450

$ 444,355

$ 1,213,805

$ 1,464,638

Categorization of investment risk for assets held as of June 30, 1996 (in thousands)

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

 

 

NOTE 3: Balance Sheet Details


a. Accounts receivable
Current Fund accounts receivable as of June 30 include the following (in thousands):

 

 

1997

 

1996

Patient Care

$87,888

$71,244

Estimated Amounts Due from Third-Party Payors

15,343

17,999

Grants and Contracts

14,524

12,586

Health Services Foundation

11,664

3,569

Other

7,105

5,213

Less Allowance for Doubtful Accounts

(39,442)

(28,603)

Total

$97,082

$82,008

 

b. Notes receivable
Notes receivable as of June 30, 1997 and 1996, are reported net of the allowance for uncollectible student loans which amounted to $2.0 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):

 

 

 

1997

 

1996

Unrestricted Current Funds

University of Virginia
Auxiliary Services Foundation

$ 500

$ 500

Unrestricted Quasi-Endowment Funds

University of Virginia
Real Estate Foundation

$ 37,389

$ 42,384

Expendable Plant Funds

University of Virginia
Law School Foundation

$ 6,500

$ 6,500

 

d. Investment in plant
Investment in plant as of June 30 consists of the following (in thousands):

 

 

 

1997

 

1996

Land

$ 15,098

$ 13,358

Improvements Other than Buildings

66,970

66,120

Buildings

802,957

787,192

Equipment

413,382

388,641

Library Books

58,412

56,537

Construction in Process

93,633

60,245

Unamortized Bond Issue/Discount Cost

1,735

1,916

Total

$1,452,187

$1,374,009

 

e. Restatement of prior year balances
Certain June 30, 1996 balances have been restated to reflect their true classification. Current Funds have been adjusted by $340,000 to reflect a reclassification of investment balances from Current Restricted to Current Unrestricted and $2,000 for other miscellaneous adjustments to Current Unrestricted 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 * 1997 * (in thousands)

 

 

Due to Other Funds

 

Current Funds

 

Endowment Funds

 

Plant Funds

 

Agency Funds

 

Total

Current Funds

$ --

$ 3,034

$ 460

$ 320

$ 3,814

Endowment and Similar Funds

 

 

 

23,076

23,076

Plant Funds

12,180

 

 

 

12,180

Total

$ 12,180

$ 3,034

$ 460

$ 23,396

$ 39,070

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

 

 

NOTE 4: Long-Term Debt

 

 

 

 

 

 

As of June 30

 

 

 

 

1997

 

1996

Plant Funds

Interest Rate

Maturity

 

(in thousands)

Revenue Bonds

Medical Center Series A

4.0%-5.2%

1998-2015

$ 43,445

$ 46,600

Medical Center Series E

6.0%-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%-5.375%

1998-2020

57,360

59,035

Clinch Valley College Series B

5.6%-5.875%

1998-2011

325

340

Commonwealth of Virginia Bonds

3.6%-9.25%

1998-2013

64,192

69,299

Higher Education Equipment Trust

Fund Leases Payable

3.85%-5.35%

1997-2001

18,699

15,435

Other

various

1997-2002

725

1,076

Total

$ 246,721

$ 253,760

 

 


Long-term debt matures for each of the next five years and in the aggregate (in thousands):

 

 

1997 - 1998

$ 15,447

1998 - 1999

14,317

1999 - 2000

13,658

2000 - 2001

14,252

2001 - 2002

20,827

Later years

168,220

Total

$ 246,721

   

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 University received gifts from these and other foundations amounting to approximately $25.9 million and $28.9 million during 1997 and 1996, respectively. The condensed summary below is based solely upon the reports of other auditors and the management of the foundations:

 

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

 

Unaudite 1997

Audited 1996

Audited 1996

Audited 1995

Unaudited 1997

Audited 1996

Assets

 

 

 

 

 

 

Current Assets Due From the University

$ 465

$ 298

$ 16

$ 19

$ --

$ --

Other Current Assets

56,518

40,851

290

246

1,797

3,661

Other Assets

80,200

84,057

281

295

53,345

52,514

Total

$ 137,183

$ 125,206

$ 587

$ 560

$ 55,142

$ 56,175

Liabilities and Fund Balance

Current Liabilities Due To the University

$ 14,544

$ 3,526

$ --

$ --

$ --

$ --

Other Current Liabilities

26,515

22,918

52

54

6,025

2,468

Long-term Debt Due to the University

--

--

500

500

37,389

42,384

Other Long-term Debts

41,724

37,509

--

--

5,016

4,123

Fund Balance

54,400

61,253

35

6

6,712

7,200

Total

$ 137,183

$ 125,206

$ 587

$ 560

$ 55,142

$ 56,175 

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 (Parent Only) For the Years Ended June 30

 

 

Unaudited 1997

 

Audited 1996

 

Audited 1996

 

Audited 1995

 

Unaudited 1997

 

Audited 1996 

Revenues

Professional and Technical Services Provided to the University

$ 18,831

$ 20,345

$ --

$ --

$ --

$ --

Rental Income From the University

--

--

--

--

817

187

Other

151,059

126,607

1,089

1,009

835

597

Total

$ 169,890

$ 146,952

$ 1,089

$ 1,009

$ 1,652

$ 784

Expenditures

Office Space and Administrative Services Provided by the University

$ 584

$ 584

$ --

$ --

$ --

$ --

Clinical Operations Provided by the University

4,840

4,840

--

--

--

--

Gifts to the University

--

6,859

--

--

--

--

Other

161,319

135,373

1,060

1,034

1,072

799

Total

$ 166,743

$ 147,656

$ 1,060

$ 1,034

$ 1,072 

$ 799

    NOTE 7: Retirement Plans

 

Substantially all full-time classi fied salaried employees of the University participate in the de fined bene fit 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 $181 million and $172 million for the years ended June 30, 1997 and 1996, respectively. The University's total payroll costs were $491.2 million and $465.5 million for the years ended June 30, 1997 and 1996, respectively.

Information regarding types of employees covered, bene fit provisions, employee eligibility requirements including eligibility for vesting, and the authority under which bene fit 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 $16.5 million and $15.9 million for the years ended June 30, 1997 and 1996, respectively, which included the 5 percent employee contribution assumed by the employer. These contributions represent 9.1 percent and 9.2 percent of covered payroll for the respective years.

The VRS does not measure assets and pension bene fit obligations separately for individual state institutions. The CAFR provides disclosure of the Commonwealth's unfunded pension bene fit obligation at June 30, 1996. The same report contains historical trend information showing VRS's progress in accumulating suf ficient 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 bene fits 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 $22.5 million and $21.7 million for the years ended June 30, 1997 and 1996, respectively. Contributions to the Optional Retirement Plans were calculated using base salaries of $215.9 million and $208.4 million for the years ended June 30, 1997 and 1996, respectively. The contribution percentage amounted to 10.4 percent in 1997 and 10.4 percent in 1996.


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 bene fits 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 bene fits 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, 1997 and 1996, assets of $602,000 and $2,602,000 were in the account, respectively. The estimated liability for outstanding claims at June 30, 1997 and 1996, was $2,821,000 and $2,813,000, respectively.


NOTE 10: Funds Held in Trust By Others

 

Assets of funds held by trustees for the bene fit 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, 1997 and 1996, and the amount of income received from the trustees during the years then ended (in thousands):

 

 

 

1997

 

1996

Market Value of Funds Held by Trustees for the Benefit of the University

$ 136,936

$ 113,862

Income Received from Funds Held by Trustees for the Benefit of the University

$ 3,995

$ 4,234

 


NOTE 11: Pledges

 

Outstanding pledges to the University amounted to $62.1 million and $63.2 million as of June 30, 1997 and 1996, respectively. Included in these totals are $6.7 million and $8.7 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 reþected in the accompanying financial statements.


NOTE 12: Commitments and Contingencies

 

Contractual commitments
As of June 30, 1997, the University was a party to construction contracts and commitments totaling approximately $78.5 million of which $67.6 million had been incurred. The University's commitments for equipment, leases, and services are as follows (in thousands):

 

1997-1998

$ 6,992

1998-1999

2,586

1999-2000

1,869

2000-2001

1,275

2001-2002

737

2002-2003

287

 

The total rental expense for all property and equipment was approximately $7.9 million and $7.7 million for the years ended June 30, 1997 and 1996, 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 reþected in the accompanying financial statements. As of June 30, 1997, $57.5 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, 1997, the Current Restricted Fund additions for federal grants and contracts of $158,535,000 and the Current Restricted Fund expenditures for scholarships and fellowships of $96,288,000 include $53,953,000 for direct lending, respectively. For the year ended June 30, 1996, the Current Restricted Fund additions for federal grants and contracts of $148,355,000 and the Current Restricted Fund expenditures for scholarships and fellowships of $89,670,000 include $49,522,000 for direct lending, respectively.

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

Internal Audit

 

Barbara J. Deily

Director of Audits