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U of L Research Foundation Inc. Board of Directors Meeting

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November 11, 2004, In Open Session

The University of Louisville Research Foundation Inc. Board of Directors met on November 11, 2004, in the Jefferson Room, Grawemeyer Hall, with members present and absent as follows:

Present:
Ms. Sandra Metts Snowden, Vice Chair, Presiding
Ms. Marie Abrams
Judge Angela McCormick Bisig
Mr. Ulysses L. Bridgeman, Jr.
Ms. Donna Tinsley Denny
Mr. Bill Forman
Mr. Nathaniel Green
Ms. Margaret Handmaker
Mr. Grant Helman
Ms. Jessica Loving
Mr. Ryan McKinley
Prof. William Pierce
Mr. Steve Poe
Mr. Bill Stone
Ms. Beth Worland

Absent:
Mr. Kevin Cogan, Chair
Mr. Tommie Burns
Mr. Owsley Frazier
Mr. Milton M. Livingston
Mr. J. Chester Porter

From the University:
Dr. James R. Ramsey, President
Dr. Shirley Willihnganz, Executive Vice President and Provost
Ms. Angela D. Koshewa, University Counsel
Dr. Larry Cook, Interim Executive Vice President for Health Sciences
Mr. Joseph S. Beyel, Vice President for University Advancement
Dr. Denise D. Gifford, Vice President for Student Affairs
Dr. Nancy C. Martin, Senior Vice President for Research
Mr. Ronald L. Moore, Vice President for Information & Technology
Mr. Larry Owsley, Vice President for Business Affairs
Dr. Mickey Wilhelm, Dean, Speed School of Engineering
Dr. Waldemar Karwowski, Speed School of Engineering
Dr. David Howarth, Associate Provost
Mrs. Terri Rutledge, Associate Vice President for Business Affairs
Mr. David Barker, Director of Audit Services
Ms. Susan I. Howarth, Director of Budget Planning
Ms. Susan Magness, Associate Controller
Ms. Anne Rademaker, Controller’s Office
Ms. Rae Goldsmith, Associate V. P. for Communications
Ms. Carolyn Cochran, Assistant to the Provost
Mrs. Kathleen M. Smith, Assistant Secretary, Board of Trustees
Ms. Debbie Dougherty, Board Liaison, President’s Office

Guests: Mr. Jim Carpenter, Deloitte & Touche

I. Call to Order

Having determined a quorum present, Vice Chair Snowden called the meeting to order at 1:50 p.m. Vice Chair Metts welcomed new directors, Bill Forman, Margaret Handmaker, Bill Pierce, Steve Poe and Bill Stone.

II. Approval of Minutes

Ms. Abrams made a motion, which Ms. Denny seconded, to approve the minutes of June 24, 2004. The motion passed unanimously.

III. Action Item: Approval of Recommendation Regarding Security Clearance and Managerial Group

President Ramsey reviewed the recommendation to the Board concerning the security clearance and managerial group. He noted this resolution updates the managerial group of the University of Louisville Research Foundation with full authority and responsibility for administering contracts involving access to classified material. The President stated that to carry out the purposes of this delegation and to meet federal regulations, the Board must take formal action to waive access to classified information for all directors not designated in the managerial group and must waive access to classified information for each new director. Ms. Worland made a motion, which Ms. Abrams seconded, to approve

The President’s recommendation that the Board of Directors adopt the attached Resolution revising the Managerial Group of the Board of Directors of the University of Louisville Research Foundation, Inc. and waiving of security clearance for directors not a part of the managerial group; and

that the President be authorized to take any other steps necessary with regard to agreements or assurances to the Defense Investigative Service to effect the facility security clearance of the University of Louisville Research Foundation, Inc. and clearance of its personnel including compliance with the provisions of the Industrial Security Manual or other Federal government policy relating to safeguarding of classified information.

The motion passed unanimously.

IV. Action Item: Approval of Revision to Bylaws

President Ramsey reported this action stems from the administrative reorganization implemented in July 2003 adding Mike Curtin as Vice President for Finance. This amendment adds the Vice President for Finance, as chief financial officer of the University of Louisville, as a voting member of the Board of Directors of ULRF. Ms. Denny made a motion, which Mr. Poe seconded, to approve the

President’s recommendation that the Board of Directors ratify the amended and restated By-Laws of the University of Louisville Research Foundation, Inc. (copy available upon request).

The motion passed unanimously.

V. Action Item: Approval of Amendments to Articles of Incorporation

President Ramsey reported that while the U of L Research Foundation has always been regarded and treated as an affiliated corporation of the University of Louisville, the original Articles of Incorporation filed in 1983 did not include language to specifically identify it as such according to KRS 164A.610. Ms. Koshewa noted that such language is included in the Articles of ULAA, QCCT, and CII. Judge Bisig made a motion, which Ms. Handmaker seconded, to approve the

President’s recommendation that the Board of Directors approve the Amendment to the Articles of Incorporation of the University of Louisville Research Foundation, Inc. (copy available upon request).

The motion passed unanimously.

VI. Action Item: Approval of Audited Financial Statements for Year Ended June 30, 2004 and 2003 and Independent Auditor's Report

Vice Chair Snowden asked Vice President Curtin and Mr. Carpenter to review the audited financial statements. Vice President Curtin reported the UofL Research Foundation is in strong financial position. During fiscal year 2004, the National Institute of Environmental Health Sciences awarded the Research Foundation its first ever NIH Program Project Grant. The $7 million award will fund four projects, as well as related core services and laboratories over the next five years. He referenced the following funding highlights:

  • $1.6 million for “Genotype/Phenotype Correlations in Williams Syndrome” and “Early Development: Children with Williams or Down Syndrome;”
  • $1.0 million from the Center for Disease Control and Prevention, designating the Institute for Bioethics, Health Policy and Law as one of two collaborating Centers for Public Health Law;
  • $1.4 million two-year grant from the U.S. Health Resources and Services Administration as part of a national initiative to prepare health care professional to act quickly and effectively should there be a bioterrorism attack; and
  • Five cancer researchers at UofL’s James Graham Brown Cancer Center received $11.1 million for their studies to develop disease-fighting drugs and technologies, the largest single-source grant in the history of the Research Foundation.

Mr. Curtin reported the Research Foundation’s net assets is highly liquid with few capital assets and no capital or long-term debt. Of the $61.2 million in current assets, $31.1 million, or 51%, consists of cash and cash equivalents. Of the remaining $30.1 million, $29.1 million, or 48%, of total current assets represents account receivables that are to be collected within the next year. He noted the cash decrease during the year by $8.6 million was due mainly to increased payments to employees and suppliers.

Mr. Curtin stated current liabilities consist of $10.5 million, or 62%) of unexpended cash advances for sponsored research activities. Deferred revenue decreased by $4.5 million from fiscal year 2003, due mainly to an upward trend of receiving a larger number of cost reimbursable awards verses paid in advance awards. The Research Foundation is required to set up a deferred liability when awards are paid in advance as well as responsible for paying back any unused funds to the sponsor. Trade accounts payable and amounts due to the Research Foundation account for the remaining $6.4 million of current liabilities due at June 30, 2004.

Mr. Curtin reported the Research Foundation recognized $242.1 million in operating revenues for the year ended June 30, 2004. This represented a 20% increase in revenues from the $201 million reported for year ended June 30, 2003. After deducting operating expenses of $241 million, the net income from operations amounted to $670 thousand. Mr. Curtin observed fiscal year 2004 was a very good year. In response to Mr. Poe’s inquiry concerning the cash balance, Mr. Curtin reported it was derived mostly from money accumulated over a long period of time, and the School of Medicine withdraws the money as needed for initiatives.

Mr. Carpenter concurred. Deloitte and Touche has issued a clean, unqualified report with no exceptions. Mr. Carpenter added that in looking forward with the state appropriations decreasing, it is important to increase federal funding via grants and contracts. The UofL Research Foundation was doing a great job, and he stressed the importance of continuing this effort. Judge Bisig made a motion, which Mr. Helman seconded, to approve the

President’s recommendation that the Board of Directors accept the audited financial statements for the University of Louisville Research Foundation, Inc. for the year ended June 30, 2004 and 2003 and Independent Auditor’s Report as prepared by Deloitte & Touche.

The motion passed unanimously.

VII. Action Item: Approval of the Consolidated Schedule of Expenditures of Federal Awards and Other Reports Required by OMB Circular A-133 for the Year Ended June 30, 2003

Vice President Curtin explained this report has been supplied to the federal government. As a condition of that reporting, the government requires that the governing board approve this document. Mr. Curtin noted that Deloitte & Touche had audited the consolidated financial statements of the University and issued reports thereon. In planning and performing this audit, Deloitte & Touche considered the University’s internal control over financial reporting. During the audit, Deloitte and Touche noted a certain issue involving the University’s internal control over financial reporting and its operation that it considered to be a reportable condition. The report explains reportable conditions involve matters relating to significant deficiencies in the design or operations of the internal control over financial reporting that, in Deloitte & Touche’s judgment, could adversely affect the University’s ability to record, process, summarize and report financial data consistent with the assertions of management in financial statements. The reportable condition noted in the report was that the University was unable to timely and accurately reconcile the primary bank account. The University accounting staff was three to four months behind in reconciling the consolidated bank account during the year. The difficulties in reconciling the bank account resulted in University accounting management and staff spending well over 1000 hours in researching and clearing reconciling items in the June 30, 2003 consolidated cash bank reconciliations. Upon completing the reconciliation, the University made an adjustment to credit consolidated cash on the books by $5,000,000; the debit was made to the Due to the University of Louisville Foundation account. Mr. Curtin noted that the University’s management has reviewed the business and accounting processes that affect cash and implemented procedures resulting in consistency in the use of transaction source codes and adequate explanations for journals. Pre-numbered deposits slips are entered into the cashiering system rather than correcting in the period the error was made. Mr. Curtin said the University has provided additional training for staff to become more familiar and understand the newly implemented accounting system. Mr. Carpenter concurred with Mr. Curtin’s assessment. Judge Bisig made a motion, which Mr. Bridgeman seconded, to approve the

President’s recommendation that the Board of Directors accept the Consolidated Schedule of Expenditures of Federal Awards and Other Reports Required by OMB Circular A-133 for the Year Ended June 30, 2003.

The motion passed unanimously.

VII. President's Report

Research Update

President Ramsey introduced Senior Vice President Martin and asked her for an update on research activities. Dr. Martin distributed the Office of Technology Development’s annual report for activities for fiscal year 2004. Dr. Martin acknowledged the University’s goal to become a premier nationally recognized metropolitan research university. She highlighted research activities for fiscal year 2004:

  • First ever NIH Program Project Grant -- $7 million for studies in Environmental Cardiology
  • $3 million for Nanotechnology studies with the Army’s Strategic Missile Defense Command
  • University’s third COBRE award for a program in Molecular Targets -- $11 million over 5 years
  • The University was selected to join the NIH Pediatrics Pharmacology Research Network--$1.85 million over 5 years

Dr. Martin recognized other sponsored programs that support the community include the:

  • National Science Foundation support for Groundwork in Science and Math Education
  • Partnership with the Kent School of Social Work and the Kentucky Cabinet for Families and Children to train and assess the Child Welfare workforce
  • Funding from the Dept. of Health and Human Services to train Health Professionals to respond to Bioterrorism
  • CBPA received funding from the State Division of Water for Flood Management planning

Dr. Martin acknowledged research activities that enhance the University’s reputation as a metropolitan research university attract peer recognition in areas important to our community, increase extramural funding, enhance students’ educational experience, and result in technology transfer and local economic development.

Dr. Martin stated the following undergraduate summer research formal programs for 2004 include:

  • Summer Research Opportunity Program (SROP)
  • Scholarship and Creative Activity Summer Institute (SCAI)
  • Kentucky Biomedical Research Infrastructure Network (KBRIN) – NIH
  • EPSCoR – NSF
  • Physiology Cardiovascular Minority Program – NIH
  • Cancer Education Program – NIH

Dr. Martin reported the University has filed 38 patent applications to date: 3 were issued last year.

In looking to the future, Dr. Martin said the University hopes to implement the research strategic plan by recruiting additional faculty and adding research space. It will develop infrastructure by utilizing the People Soft Grants module and compliance enhancements. She reiterated the great importance of faculty and the infrastructure necessary for the faculty to do the work. The University continues to recruit exceptional faculty.

Dr. Martin summarized FY04 as a great year with remarkable growth and proposed UofL would to continue that trend. She noted that ULRF was the fastest growing institution in NIH funding. NIH funding grew by 270%, and the University moved up 25 positions in the ranking in the medical school. Vice Chair Snowden thanked Dr. Martin for an informative and thorough presentation.

President Ramsey recognized Prof. Pierce and Dr. Bhatnagar’s research work. Dr. Ramsey noted the University has an additional application for a program project pending. The University’s goal by 2010 is to reach $200 million in funded research. The goal is aggressive and the University is working hard to reach that goal. Dr. Ramsey acknowledged that increases in federal funding for research have grown at a modest 3% per year. He praised Dr. Martin’s development of a strong business plan to guide the University toward reaching its ambitious goals.

Technology Transfer Update

Senior Vice President Martin introduced Dean Mickey Wilhelm and Dr. Waldemar Karwowski, Professor and Director of the Center for Industrial Ergonomics. Dr. Karwowski briefed the Board about ergonomics and how the research contributes to the design and evaluation of tasks, consumer products, work environments and systems in order to make them compatible with the needs, abilities and limitations of people. He noted the Center for Industrial Ergonomics’ research and educational activities focus on integrating people, organization, information and technology at work, and improving quality and productivity through ergonomics and safety management. Examples include workplace design, office ergonomics, system/project usability testing and evaluation, ergonomics audits, prevention of musculoskeletal disorders, development of ergonomics program in harmonization with OSHA, and other work system design issues. Vice Chair Metts thanked Dr. Karwowski for an excellent and informative presentation.

IX. Adjournment

Judge Bisig made a motion, which Mr. Helman seconded, to adjourn the meeting at 2:35 p.m. The motion passed unanimously.


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