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Finance Committee Minutes -- Oct. 14, 2004 -- Board of Trustees -- University of Louisville

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MINUTES OF THE FINANCE COMMITTEE
UNIVERSITY OF LOUISVILLE BOARD OF TRUSTEES

October 14, 2004

In Open Session

The Finance Committee of the University of Louisville Board of Trustees met Thursday, October 14, 2004, in Room 207, Burhans Hall, Shelby Business & Technology Park, with members present and absent as follows:

Finance Committee Present:

Prof. William Pierce, Chair
Mr. Nathaniel Green, Vice Chair
Mr. Ryan McKinley
Ms. Sandy Metts Snowden
Mr. William Stone

Finance Committee Absent:

Mr. Kevin Cogan
Mr. Owsley B. Frazier

Other Trustees Attending:

Ms. Marie Abrams
Mr. Ulysses L. Bridgeman, Jr.
Mr. Bill Forman
Ms. Donna Tinsley Denny
Mr. Milton Livingston
Ms. Jessica Loving
Mr. Steven Poe

From the University:

Dr. James R. Ramsey, President
Dr. Shirley Willihnganz, Executive Vice President and Provost
Dr. Larry Cook, Acting Executive Vice President and Chancellor for HSC
Ms. Angela D. Koshewa, University Counsel
Mr. Larry Owsley, Vice President for Business Affairs
Mr. Joseph S. Beyel, Vice President for University Advancement
Dr. Nancy C. Martin, Vice President for Research
Mr. Ronald L. Moore, Vice President for Information & Technology
Mr. Michael J. Curtin, Vice President for Finance
Dr. Denise Gifford, Vice President for Student Affairs
Dr. David Howarth, Associate University Provost
Ms. Terri Rutledge, Assistant Vice President for Business Affairs
Ms. Rae Goldsmith, Associate V. P. for Communications & Marketing
Mr. Larry Zink, Controller
Ms. Susan Magness, Assistant Controller
Ms. Anne Rademaker, Controller's Office
Ms. Carolyn Cochran, Assistant to the Provost
Ms. Kathleen M. Smith, Assistant Secretary
Ms. Debbie Dougherty, Board Liaison, President’s Office

Guest:

Ms. Anita Morrison, BAE
Mr. Jim Carpenter, Deloitte & Touche
Ms. Gretchen Newton, Deloitte & Touche

I. Call to order

Having determined a quorum present, Chair Pierce called the meeting to order at 1:40 p.m.

Approval of Minutes, May 13, 2004

Ms. Snowden made a motion, which Mr. Green seconded, to approve the minutes of May 13, 2004. The motion passed unanimously.

II. Action Item: Approval of Audited Financial Statements for Year Ending

June 30, 2004.

Chair Pierce asked Vice President Curtin and Mr. Carpenter (Deloitte & Touche) to review the audited financial statements. Vice President Curtin reported the consolidated financial statements of the University, UofL Research Foundation, and the UofL Athletic Association represent the University’s good management of its assets. Vice President Curtin reported the external auditors issued a clean, unqualified opinion. The University’s bottom line is very strong. Mr. Carpenter concurred and shared the following:

  • The University’s financial position remains strong at June 30, 2004, with assets of $764.6 million and liabilities of $260.8 million. Net assets, which represent the residual interest in the University’s assets after liabilities are deducted, were $503.8 million as of June 30, 2004.

  • Gross tuition and fees were $113.7 million for the year ended June 30, 2004, an increase of $14.3 million, or 14.4% compared to the $99.4 million reported in the previous year. Approved tuition rate increases for 2003-04 generated approximately $7.2 million in additional tuition revenues. Additionally, enrollments were up approximately 3% to 4% during the fall and spring semesters, which resulted in an additional $4.4 million.

  • Total general fund appropriations from the Commonwealth were $155.5 million for the year. Appropriations and certain other revenues and expenses are reported under Government Accounting Standards Boards (GASB) Statement No. 35 as nonoperating revenues.

  • Operating revenues amount to $383.6 million and operating expenses were $553.7 resulting in a net operating loss of $170.1 million. When adjusted for $155.5 million in state appropriations, and $32.9 million in other net nonoperating revenues, net assets of the University increased by $18.3 million for the year ended June 30, 2004.

Mr. Carpenter stated that as of June 30, 2004 total assets ($764.6 million) exceeded liabilities ($260.8 million) by a ratio of 3:1, which was consistent with the ratio as of June 30, 2003. Current assets amounting to $163.5 million consist primarily of cash ($44.2 million), short-term investments ($47.5 million), and loans, accounts and contributions receivables ($49.2 million). The largest increase was in cash, which increased by $10.0 million, or 29%. This increase was due mainly to decreases in loans, accounts and contributions receivables of $2.9 million and receipts from the University of Louisville Foundation, Inc. of $5.4 million, which increased the current assets.

Mr. Carpenter acknowledged revenues for research grants and contracts were $123.0 million and $93.0 million in 2004 and 2003, respectively. The increase was due primarily to federal grants of $16.1 million and increased state and local grants. These data reflect the Research Foundation’s commitment to the research goals in the Challenge for Excellence. Facilities and administrative cost recoveries for the year ended June 30, 2004 and 2003 were $14.9 million and $12.9, respectively.

Mr. Carpenter reported operating expenses increased by $43.1 million, or 8%, over the previous year.

Vice President Curtin thanked Controller Larry Zink, Assistant Controller Susan Magness, and Account Manager Anne Rademaker for their dedication and hard work with the audit.

In response to Mr. Stone’s inquiry regarding bonds payable, Vice President Curtin said the UofL Foundation is comprised of two corporate entities, UofL Foundation and ULH, Inc. (Foundation funded housing). The University borrowed money through ULH to build new dorms and residence halls using bonds issued through ULH. Mr. Curtin explained the UofL Foundation’s strong financial position enhanced the handling process. Mr. Curtin also stated the university uses a straight line method of depreciation over 40 years.

Mr. Carpenter pointed out that in June, 2004, GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other Than Pensions. This statement established standards for the measurement, recognition and display of other post-employment benefit expenses/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information in the financial reports of employers subject to governmental accounting standards. This statement becomes effective for fiscal periods beginning after December 15, 2006. The University has not yet evaluated the effect of this statement on its financial reporting. In response to Mr. Green’s inquiry, Mr. Carpenter reported the University has implemented all reporting requirements. Mr. Stone made a motion, which Ms. Snowden seconded, to approve the

President recommends that the Board of Trustees approve the attached financial statements for the period ending June 30, 2004, as presented under Governmental Accounting Standards Board (GASB) 34.

The motion passed unanimously. Chair Pierce called for a brief recess of the Finance Committee meeting at 2:03 p.m. to allow the Personnel Committee to meet. Ms. Abrams departed at 2:10 p.m. The Finance Committee resumed its meeting at 2:15 p.m.

III. Information Item: Presentation of Master Plan for Shelby Business &
Technology Park

Chair Pierce noted at the June 24, 2004 Board of Trustees meeting, the Trustees approved the master plan for Shelby Campus in the conceptual format presented. Following that meeting, a draft business plan was to be considered. He invited Vice President Owsley to present the business plan. Vice President Owsley noted subsequent to the June meeting, the University has conducted meetings with community groups. (Ms. Abrams departed the meeting.) Vice President Owsley asked Ms. Anita Morrison, consultant on the project, to update the Board on progress. Ms. Morrison presented a Powerpoint with information concerning anticipated development through 100 years. In response to Mr. Poe’s inquiry concerning feasibility of comparables, Ms. Morrison noted their review was still in progress. Mr. Poe expressed concern regarding the housing component of the project. He further recommended utilizing the 16 acres earmarked as residential for research building space. Ms. Morrison noted the University’s need for cash and liquidity to launch the project. Mr. Stone recommended adding Mr. Poe to the Shelby Campus Advisory Board. President Ramsey agreed. Ms. Morrison will reevaluate the plan based upon the Board’s discussion. Ms. Snowden noted the University’s commitments to the neighborhoods and the discussions of the Advisory Board with area developers. President Ramsey stated the report was in draft and expressed appreciation to trustees for their feedback. Dr. Ramsey also observed Ms. Snowden had expressed similar reservations regarding residential development. President Ramsey acknowledged that any development would be consistent with the University’s academic mission. Ms. Loving said the University must respond to many different constituencies regarding the use of this very valuable piece of property. In response to Ms. Loving’s statement, Dr. Ramsey reported the state owns the property and the University must obtain permission from the legislative branch for the disposition of the property. Vice President Owsley stated the University acquired the land before entering the state system. Ms. Koshewa added that when the University entered the state system real property of the University of Louisville became property of the Commonwealth held for the benefit of the University.

Chair Pierce thanked Ms. Morrison and Vice President Owsley for the presentation and noted additional information will be provided at a subsequent meeting.

IV. Other Business

Chair Pierce thanked Mr. Bridgeman for the appointment as chair of the Finance Committee. He further expressed appreciation to Mr. Green for his past leadership as chair of the Finance Committee. The information sessions with Vice President Curtin launched by former Finance Committee Chair, Mr. Green will continue on the regular schedule, i.e., the Tuesday prior to the Finance Committee meetings.

Chair Pierce reported the University soon will begin its open enrollment process for health insurance. The University may implement changes in the way health care services and products are used. Chair Pierce asked President Ramsey to explain further. Dr. Ramsey reported health care claims exceed premiums. At the time the University implemented a self insurance program, it did not have a reserve established. He said the University administration was reviewing a combination of cost utilization and containment, rewarding employees with a plan more consumer-focused, and conducting campus-wide discussions. In response to Mr. Stone’s inquiry about employee accountability, President Ramsey suggested the University could do a better job in promoting fitness and health education. Chair Pierce suggested the possibility of a two-tier premium which would incorporate premium reductions for those who voluntarily participate in health wellness programs. President Ramsey recognized the excellent job Vice President Owsley has done with this very difficult issue.

V. Adjournment

Ms. Snowden made a motion, which Mr. Green seconded, to adjourn the meeting at 2:50 p.m. The motion passed unanimously.


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