Financial Overview and Issues October 15 2008 The Stewardship Role In the context of this dynamic and challenging environment a governing boards responsibility is to chart an institutions course and ensure it the institution has the resources it needs to fulfill its mission the ID: 1017736
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1. University of RochesterBoard of Trustees OrientationFinancial Overview and IssuesOctober 15, 2008
2. The Stewardship Role“In the context of this dynamic and challenging environment, a governing board’s responsibility is to chart an institution’s course and ensure it [the institution] has the resources it needs to fulfill its mission. ...the board must sustain the institution over the long term…”Source: Association of Governing Boards of Universities and Colleges – Financial Matters.
3. The Stewardship Role“For many reasons, colleges and universities have become subject to intensive scrutiny not only by the public, the press, governmental agencies, and financial institutions but also by alumni, donors, faculty and students.”Source: Association of Governing Boards of Universities and Colleges – Effective Committees
4. How is the Stewardship Role Fulfilled?Maintaining equity between generationsMonitoring strategic and financial planningMonitoring risk managementPreserving facilities Monitoring investments and endowmentSource: “Financial Responsibilities of Governing Boards”, by William S. Reed.
5. Key Financial Concepts in Higher EducationIntergenerational Equity - maintaining an appropriate balance between the present and the future
6. Key Financial Concepts in Higher EducationFinancial equilibriumComplementary short-term and long-term financial plansQuality of programs maintainedPhysical assets preservedEndowment purchasing power preservedHuman assets developed and maintained
7. Trustees’ Role and Board Involvement in Financial MattersReview and approve strategic plansAnnual approval of operating and capital budgetsApproval of major capital projectsTuition rate approval
8. Trustees’ Role and Board Involvement in Financial MattersEstablishment of endowment investment and spending policiesReview of major benefits program changes (intergenerational emphasis)Approval of debt issues and overall debt policiesReview of reports on financial position and institutional performance
9. Trustees’ Role and Board Involvement in Financial MattersApproval of executive compensationReview of annual financial statementsAssessment of institutional risk and complianceAppointment of the external auditorsGuidance and participation in the institution’s development efforts
10. Board ParticipationFinancial Planning CommitteeCommittee on Audit and Risk AssessmentPersonnel CommitteeFacilities CommitteeCommittee on Compliance and CompensationStrategic Planning Advisory Committee
11. Operating RevenuesHospital & Faculty Practice Patient Care Activities 63%Net Tuition & Fees7%Gifts & Pledges 4%Other 1%Grants &Contracts 15%Long-TermInvestment Income 3%AuxiliaryEnterprises 3%Educational Activities 1%Royalty Income 3%Scale of the Enterprise and the Financial Overview – FY2008$2.4 Billion
12. Operating ExpensesTotal Compensation 62%Business &Professional9%Maintenance &Facilities 4%Depreciation Expense 5%Other 3%Interest Expense 2%Supplies 13%Utilities 2%Scale of the Enterprise andFinancial Overview – FY2008$2.3 Billion
13. Key UR IssuesDecentralizationExposure to Health Care Institutional ResourcesAggregate Rate of Endowment UseCollege Financial Position and Endowment UseEastman School of Music and Simon School Financial Position and Revenue TrendsLimited Debt CapacityStrategic and Campus Master Plan PrioritizationImplication of the Current Economic Crisis
14. Endowment Market Values by Division ($ in millions)Total value as of June 30, 2008 = $1,530.8Nursing $21.7Other $43.6(includes University General & Memorial Art Gallery)The College $405.4Simon $86.0Warner$26.7Eastman$263.6Medicine & Dentistry/Health Sciences $683.8
15. Strong MemorialHospital43%Eastman 1.7%Warner0.4%Simon 1.6%The College15.1%Medical Center 80.9%Other 0.3%Medicine & Dentistry/Health Affairs20.7%Nursing1.0%FY2008 Total Budget – Composition by DivisionsMedical Center Faculty Practice/Eastman Dental Center 16.1%
16. The CollegeSchool of Medicine& DentistryGifts & Other 19%Indirect Cost Recovery 32%Endowment 18%Net Tuition & Fees9%Gifts/Transfers & All Other 8%Indirect CostRecovery 15%Endowment 19%Net Tuition & Fees58%FY2009 Divisional Budgets – Core Sources of FundsTransfers 22%
17. Eastman School of MusicSchool of NursingGifts, Transfers & All Other 10%Indirect Cost Recovery 8%Endowment 7%Net Tuition & Fees75%Gifts & All Others 5%Endowment 54%Net Tuition & Fees41%FY2009 Divisional Budgets – Core Sources of Funds
18. Simon SchoolWarner SchoolEndowment 15%Net Tuition & Fees85%Gifts/Transfers & All Other 7%Endowment 20%Net Tuition & Fees73%FY2009 Divisional Budgets – Core Sources of Funds
19. Financial Informational ResourcesAudited Consolidated Financial StatementsOperating Budget document (see page 3 for budget entity chart)Capital Budget document
20. University Financial AdministrationRonald J. PaprockiSenior Vice President for Administration & Finance & Chief Financial OfficerSalim M. AlaniDirector, Office of University AuditHolly G. CrawfordAssociate Vice President for Budgets & Planning & Deputy to the Sr. V.P. for Administration & Finance & CFOKathy A. King-GriswoldTreasury ManagerDouglas W. WylieUniversity Controller
21. Medical Center Financial AdministrationMichael C. GoonanMedical Center Vice President & Chief Financial OfficerLeonard J. ShuteSenior Director of Finance & Chief Financial Officer,Strong Memorial Hospital