meeting of the board of visitors finance committee september … commit… · virginia foundation...

Meeting of the Board of Visitors Finance Committee September 17, 2015

Agenda I. CONSENT AGENDA

• 2016-2022 State Six Year Plan for the Academic Division

II. ACTION ITEMS • 2016-2018 Biennial Budget Operating Amendments and Revisions to the

2016-2018 Capital Program

III. REPORTS

A. Organizational Excellence Vision and Progress

B. UVIMCO Report: Long-Term Pool Market Value and Performance as of June 30, 2015

C. AAU Salary for Full-Time Instructional Faculty

D. Unaudited Academic Division Financial Report for Year Ending June 30, 2015

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2016-2022 STATE SIX-YEAR PLAN FOR THE ACADEMIC DIVISION

PAT H O G AN E X E C U T I V E V I C E P R E S I D E N T A N D C H I E F O P E R AT I N G O F F I C E R

2016-2022 State Six-Year Plan

• 16 Strategies/Priorities reviewed with Board in June

• Aligns with Cornerstone Plan and Multi-Year Financial Plan

• Advances objectives in the Statewide Strategic Plan and the Higher Education Opportunity Act

• State Comments:

– Provide information about the University’s involvement with the higher education centers. Please include information such as courses offered, enrollment information, course completions, collaborations, etc.

– Provide more detail about the methodology used to establish the guaranteed four-year tuition prices.

• Final submission due October 1

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• Is there additional information you need to be informed about our Six-Year Plan submission to the state?

• Do you have specific questions about the feedback provided by the state?

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Discussion Questions

C O L E T T E S H E E H Y, V I C E P R E S I D E N T F O R M A N A G E M E N T & B U D G E T D O N N A H E N RY , C H A N C E L L O R O F T H E C O L L E G E AT W I S E

2016-2018 BIENNIAL BUDGET OPERATING AMENDMENTS AND REVISIONS TO

THE 2016-2018 CAPITAL PROGRAM

2016-18 Biennial Budget Requests

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• Requests are for General Fund support from the State, as part of the Governor’s budget development process for the next biennium.

• Align with the Cornerstone Plan and the State Six-Year Plan.

• Resolution grants authority to resubmit requests to the General Assembly in January, after the Governor’s budget is presented in December.

2016-18 Biennial Budget General Fund Requests Academic Division

Operating Request (in millions) FY2016-17 FY2017-18

Undergraduate Enrollment Growth $5.10 $5.63

Building Research Capacity Faculty Start-up Packages (Equipment Trust Fund) Faculty Retention Pan-University Research Teams Commercialization Seed Funds

$7.00

$10.00 $2.00 $2.75

$11.00 $10.00 $2.00 $2.75

Information Technology Security $7.77 $5.24

HR Service Delivery Transformation Enabling Technology $10.50 $6.50

Blandy Farm – Support for preK-12 Outreach Efforts $.07 $.07

Virginia Foundation for the Humanities $.50 $.50

Line item language for Center for Politics N/A N/A

Total $45.69 $43.69

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2016-18 Capital Program Revisions – Academic Division

Capital Program Revisions (in millions) Project Cost Source

Thornton Hall Clean Room Renovation $18.00 State

Center for Human Therapeutics $9.00 State

Medical Research Building #4 (MR4) Renovation, Phase I $43.00 $21.50 State; $21.50 Indirect Cost Recoveries

Blandy Experimental Farm Greenhouse Replacement Residential Housing Expansion

$.92 $.65

Gifts Gifts

Total $71.57

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2016-18 Biennial Budget General Fund Requests College at Wise

Operating Request (in millions) FY 2016-17 FY 2017-18

NMR for Chemistry Accreditation $.52 -

Enrollment Growth $.08 $.16

Retention and Graduation $.17 $.19

STEM Early College Academy and High Need (STEM-H) Degrees

$.16 $.16

Federal Mandates $.31 $.35

Outreach $.04 $.04

Undergraduate Research $.03 $.03

Total $1.31 $0.93

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• Is there additional information you would like to see regarding our submission to the state?

• Do you have specific questions about any of the operating amendments?

• Do you have specific questions about any of the capital projects?

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PAT H O G AN E X E C U T I V E V I C E P R E S I D E N T A N D C H I E F O P E R AT I N G O F F I C E R

ORGANIZATIONAL EXCELLENCE VISION AND PROGRESS

Organizational Excellence

Established in the Cornerstone Plan as a means of increasing operating efficiencies and effectiveness

Purpose: To enable institutional strategic goals and priorities through resource alignment and optimization

Outcomes: • High quality and performance through best-in-class service

models and processes • Service-oriented, collaborative, innovative culture • Reinvest in core mission • $150 million in savings over seven years

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Organizational Excellence Framework – “The Design”

Cent

ers o

f Exc

elle

nce

Inno

vatio

n

Shar

ed R

esou

rces

Uni

t Alig

nmen

t

Colla

bora

tion

Cont

inuo

us

Impr

ovem

ent

Shared Governance Productive Partnerships Performance Excellence

Measures for Continuous Success

Best-in-Class Services and Processes Standard Practices and Policies Key Performance Indicators

IT Enablement Return on Investment

Right Sourcing

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• 2014 Benchmarking Study of Key Support Functions with External Consultant

– Assessment of costs, structure and, performance

– Examined 90 processes

• IT, HR, Finance, Procurement, Research Administration, Student Services

• Surveyed Deans about priorities required of these functions

• Alignment with Strategic Plan

Key Cross-Functional Findings Structure: 1/3 FTEs central; 2/3 FTEs distributed. Highly fragmented roles create overlap and many duplicative efforts Costs: Large labor portion, underinvested in technology, little outsourcing Activity: High volume of transactional activity in Finance, HR, Procurement Enabling Technology: Limited Service-orientation: Gatekeeper/ administrator, rather than valued partner, volume of processing overtakes analytical capabilities Initial areas for focus: Human resources, research administration, procurement

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Assessment of Opportunities

Organizational Excellence Portfolio Roadmap

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2013 2020-2022

Enterprise-wide

Administrative Function

Transformation

High-quality, effective, efficient service delivery

models

Prio

ritize

Opport

unitie

s

Human Resources

Finance

Procurement

Information Technology

Research Administration

Other Key Initiatives

Path to Transformation

Process/Service Improvements

Enabling

Technology

Service Delivery

Organizational Design

Major Initiatives

Manager Development

• Strengthen the leadership competency of managers within an effective organizational design strategy, including span of control

Early Retirement Incentive Program • Providing management tools to restructure roles and optimize staffing levels

Service Model Transformation – HR Strategic Design Initiative

• Transforming to a future-state model that delivers highly effective and efficient services across the academic division and health system

• Aligning staffing levels and skills sets to enable the new service delivery model

• Business case supports quality and efficiency gains of 25-30%

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Human Resources Function

2020 2013 Integrated Transformation Service Delivery Model; Enabling Technology; Organizational Design

Process Improvements

2018

Major Initiatives

Managerial Reporting

• Providing access to accurate, consistent, accessible and

reliable data and reporting to inform decision-making

Gift Processing

• Redesigning processing of gifts for accuracy, efficiency, and timeliness

• Creating a Center of Excellence

Service Model Transformation • Transforming to a future-state model that delivers highly effective and efficient services


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Finance Function

2013 2020 Enabling Technology Organizational Design Process Improvements

Service Delivery

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Procurement Function

Major Initiatives

Strategic Sourcing • Increasing strategic sourcing strategy for volume discount pricing; multi-year road map developed for 10 commodities

• Participating in state-wide procurement cooperative • Savings of 5-15% per commodity

Travel and Expense Management

• Redesigning and streamlining travel and expense processes for simplification, automation, enhanced safety and compliance and better pricing

Administrative Unit Review

• Conducting a comprehensive unit review with a self-study and review by an external group

• Resulting in prioritized recommendations for quality, efficiency and effectiveness

Service Model Transformation • Transforming to a future-state Center of Excellence model that delivers highly effective and efficient services


Process/service Improvements Organizational Design

Service Delivery 2013 2020

2017

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Information Technology Function

Major Initiatives

Major Technology Refreshes

• Implementation of Core Network Refresh, VoIP, and Wireless Refresh for enhanced performance

Improved Service Delivery & Secure Environment

• Transforming to a future-state model that delivers highly effective and efficient services


• Implementing a Security Enhancement Program • Improving incident management and change management • Standardizing and automating management of central IT systems

Email and Server Consolidation/Virtualization

• Consolidating central email systems and centralizing management of department servers

• Virtualizing servers, where appropriate

Service Improvements –

Standardize/Centralize

Organizational Design

Service Delivery 2013 2022

Major Initiatives

Research@UVa

• Providing faculty with one-stop portal to view awards and status and access to related systems

• Implementing a streamlined workflow process for electronic proposals

• Increasing access to data and analytical capacities

Service Model and Design Transformation

• Transforming to a future-state model that delivers highly effective and efficient services


• Delivering increased value to faculty and staff while decreasing administrative burden

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Research Administration Function

Integrated Transformation Enabling Technology; Service Delivery Model; Organizational

Design 2013 2020

2017

Beyond significant internal strides made, the work of Organizational Excellence also addresses the recent JLARC recommendations:

Review organizational structure and identify opportunities to streamline.

Reduce unnecessary supervisory positions and promote broader spans of control.

By focusing on unit alignment, management layers and span of control, goal is to increase span of control from 3.5 to 4.5 by 2017, significantly reducing number of managers with fewer than three direct reports.

Maximize standardization of purchases and use of institution-wide contracts.

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JLARC Recommendations

• How often and at what level of detail would the Board of

Visitors want to see milestone updates?

• Are there other near-term opportunities we should assess?

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L AWRENCE KOCHARD

CH I E F E X ECUT I V E O F F I C E R /CH I E F I NVE S TMENT OF F I C E R

UVIMCO REPORT LONG-TERM POOL MARKET VALUE AND

PERFORMANCE AS OF JUNE 30, 2015

Outline

– Governance and Staffing

– Performance Review

– Asset Allocation

– Risk Management

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Governance and Staffing

Board of Directors 12 members led by David MacFarlane as Chair, three appointed by the BOV, and

one by the President BOV representatives are Mac Caputo, John Harris, and John Macfarlane President’s representative is Pat Hogan Meets four times a year

Staff 38 UVIMCO team members Investment team comprised of CEO/CIO, six Managing Directors, three Associates,

three Senior Analysts, and two Analysts New senior staff members:

• Lindsay Larsen, Managing Director • Steve Peterson, Managing Director of Risk & Asset Allocation • Melanie Davis, Managing Director of Marketable Alternatives & Credit

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Performance Review As of June 30, 2015

$ Millions % 1 YR 3 YR 5 YR 10 YR 20 YR

Long Term Pool 7,528 100.0 7.7 13.3 13.7 10.1 12.2Policy Benchmark 100.0 1.9 9.8 10.0 6.5 7.2Equity

Public 1,691 22.5 7.2 18.6 18.7 12.5 12.3Long / Short 1,794 23.8 6.4 11.6 11.5 9.1 10.5Private 1,415 18.8 25.8 23.9 22.9 14.9 21.7

Total Equity 4,899 65.1 12.0 17.4 17.2 12.2 14.6MSCI All Country World Equity 60.0 1.2 13.6 12.5 7.0 7.1

Real Assets Real Estate 496 6.6 21.8 14.9 12.2 (1.2) 3.9Resources 278 3.7 (21.2) 1.6 12.2 15.1 --

Total Real Assets 774 10.3 3.0 9.6 14.2 8.4 11.1MSCI Real Estate 10.0 3.3 8.2 12.9 5.9 8.5

Fixed Income, Cash & MACMarketable Alternatives and Credit 747 9.9 (2.4) 9.0 7.9 6.5 7.2Government Bonds 679 9.0 0.7 0.4 0.4 4.0 6.3Cash & Currency 425 5.6 0.0 0.0 0.1 -- --

Total Fixed Income, Cash & MAC 1,851 24.6 (0.8) 4.3 4.1 5.3 6.8Barclays Aggregate Bond 30.0 2.4 2.5 3.5 4.4 5.7

Portfolio Overlays 4 0.1 (0.2) -- -- -- --0

Market Value Annualized

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Performance Review

Annualized Returns of the Long Term Pool Versus Benchmarks and PeersPeriods Ending June 30, 2015 1 YR 3 YR 5 YR 10 YR 20 YR

Long Term Pool 7.7 13.3 13.7 10.1 12.2

Policy Portfolio Benchmark 1.9 9.8 10.0 6.5 7.2

Comparative Industry DataTUCS All Master Trusts Top Quartile (1) 4.0 11.3 11.3 7.1 8.6TUCS All Master Trusts Median 2.9 9.9 10.3 6.6 7.9TUCS All Master Trusts Bottom Quartile 1.7 8.1 8.6 5.9 7.4

(1) Trust Universe Comparison Service (TUCS) reports performance of over 800 institutions representing $3.6 trillion in assets under management.

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Asset Allocation As of June 30, 2105

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Risk Management

• Risk is the likelihood of a random, undesirable outcome – For the University of Virginia, risk is the impact that a portfolio

loss may have on the operations of the institution – Short term – volatility in payout from the endowment – Long term – decline in the real value of the endowment – Trade-off between short term and long term risk

– We bear risks only if doing so generates higher long-term returns

– Types of Risk: Market, Manager, and Liquidity

– Risk Committee

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Liquidity Risk Defined as an inability to meet any of the following four primary

liquidity requirements: • Redemptions and payouts for the University and foundations • Capital calls from our private managers • Rebalancing efforts • The ability to deploy cash opportunistically as new investment opportunities arise

We manage liquidity risk by: • Maintaining a portfolio of Treasury bills and bonds • Maintaining sufficient liquidity within our public equity and hedge fund managers • Managing the pace of commitments to private investments

Liquidity constraints are re-assessed annually as part of the Investment Policy Statement review by the Board of Directors

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Liquidity Risk Liquidity Measures as of June 30, 2015% of NAV Target Minimum Maximum Actual

Unfunded Commitments 15% N/A 25% 13%Private Investments 30% N/A N/A 33%Cash Available within 3 Months N/A 20% N/A 30%Cash Available within 12 Months N/A 30% N/A 47%

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AAU SALARY FOR FULL-TIME INSTRUCTIONAL FACULTY

T O M K AT S O U L E A S E X E C U T I V E V I C E P R E S I D E N T A N D P R O V O S T

Summary and Guiding Principles

• UVa is slightly above the median of AAU peers

• Fairly aggressive raise pools for the next couple of years are indicated to be and remain market competitive

• UVa should not focus on a single number – a high salary average

never retained anybody! But…

• Rewarding performance is essential for retention and recruitment in a competitive market – equity with respect to both internal and external comparisons is an essential core value

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Instructional Faculty Salary Compared to AAU Peers

28 26

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27 28

0

10

20

30

40

2010-11 2011-12 2012-13 2013-14 2014-15

Top 20 AAU Ranking of Average Faculty Salary

AAU Median

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NOTE: 4.75% merit pool was available in 2013-14 and 2014-15.

UVa Position by Instructional Faculty Average Salary Rank, 2014-15

AAU Rank Average Increase Increase Rank

Assistant Professor 31 4.05% 14 Associate Professor 26 5.45% 4 Full Professor 24 4.04% 15

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Predicted Impact of Raise Possibilities

• 4.75% for next three years: UVa will be ~#20 in 2018-19

• 5% for next two years: UVa will be ~#20 in 2017-18, estimated dollar cost: $1.2 million per year, ongoing

• 7% next year: UVa will be ~# 20 in 2016-17

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Summary and Guiding Principles

• UVa is slightly above the median of AAU peers

• Fairly aggressive raise pools for the next couple of years are indicated to be and remain market competitive

• UVa should not focus on a single number – a high salary average

never retained anybody! But…

• Rewarding performance is essential for retention and recruitment in a competitive market – equity with respect to both internal and external comparisons is an essential core value

39


• Is the Board supportive of the Administration’s recommended course of action?

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M E L O D Y B I AN C H E T T O , A S S O C I AT E V I C E P R E S I D E N T F O R F I N A N C E

UNAUDITED ACADEMIC DIVISION FINANCIAL REPORT FOR YEAR ENDING

JUNE 30, 2015

June 30, 2015 Academic Division Financial Report

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• Unaudited, modified GAAP-basis Financial Statements, as compared to prior year – Statement of Net Assets – Statement of Revenues, Expenses, and Changes in Net

Assets

• Cash Basis Operating Budget vs. Actual Results

Academic Division Financial Report Modified GAAP-Basis Financial Statement (Unaudited)

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Year ending Year ending6/30/2015 6/30/2014

Balance Sheet Highlights:Net Position 6,590.4$ 6,336.9$ Income Statement Highlights:

Net Tuition 478.8$ 448.2$ Grants & Contracts 276.4 269.7 State Appropriations 136.7 145.7 Gifts 142.1 146.1 Other 190.2 181.2

Operating Revenues 1,224.2 1,190.9 Operating Expenses 1,364.8 1,293.1 Net Operating Margin (140.6) (102.2) Net Non-operating Contribution 394.1 823.3 Change in Net Position 253.5$ 721.1$

(in millions)

Academic Division Financial Report Cash Basis Operating Budget vs. Actual Results

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(in millions) FY15 Budget FY15 Actual

Net Tuition and Fees $ 490.2 $ 494.0

Grants and Contracts 284.5 285.5

Endowment Distribution and Gifts 284.8 297.7

State Appropriations 136.7 136.7

Other 227.9 247.9

Sources of Funds 1,424.1 1,461.8

Instruction 374.4 367.4

Research and Public Service 291.2 306.9

Academic Support 146.7 149.2

Other Education and General 249.1 233.8

Financial Aid, Auxiliary, Debt, and Other 355.4 362.3

Uses of Funds 1,416.9 1419.6

Net Sources in Excess of Uses $ 7.2 $ 42.2

meeting of the board of visitors finance committee september … commit… · virginia foundation...

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