Meeting of the Board of Visitors Finance Committee September 17, - - PowerPoint PPT Presentation

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
• ur 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
• f 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
• ur 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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Discussion Questions

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

• perating 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”

Centers of Excellence Innovation Shared Resources Unit Alignment Collaboration Continuous Improvement

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

• vertakes 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

Prioritize Opportunities

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

• f control

Early Retirement Incentive Program

• Providing management tools to restructure roles and
• ptimize 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

• Aligning staffing levels and skills sets to enable the new

service delivery model

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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

• Aligning staffing levels and skills sets to enable the new

service delivery model

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

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

delivery model

• 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
• f 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

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

delivery model

• 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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Discussion Questions

L AW R E N C E KO C H A R D C H I E F E X E C U T I V E O F F I C E R / C H I E F I N V E S T M E N T O F 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
• ne 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 o

• f J

June 30, 30, 201 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 12.2 Policy Benchmark 100.0 1.9 9.8 10.0 6.5 7.2 Equity Public 1,691 22.5 7.2 18.6 18.7 12.5 12.3 Long / Short 1,794 23.8 6.4 11.6 11.5 9.1 10.5 Private 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 14.6 MSCI 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) 3.9 Resources 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 11.1 MSCI Real Estate 10.0 3.3 8.2 12.9 5.9 8.5 Fixed Income, Cash & MAC Marketable Alternatives and Credit 747 9.9 (2.4) 9.0 7.9 6.5 7.2 Government Bonds 679 9.0 0.7 0.4 0.4 4.0 6.3 Cash & 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 6.8 Barclays Aggregate Bond 30.0 2.4 2.5 3.5 4.4 5.7 Portfolio Overlays 4 0.1 (0.2)

• Market Value

Annualized

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Performance Review

Annualized Returns of the Long Term Pool Versus Benchmarks and Peers

Periods En Ending J June 30, 201 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 Data TUCS All Master Trusts Top Quartile (1) 4.0 11.3 11.3 7.1 8.6 TUCS All Master Trusts Median 2.9 9.9 10.3 6.6 7.9 TUCS 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. 28

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

TO 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 34 27 28 10 20 30 40 2010-11 2011-12 2012-13 2013-14 2014-15 Top 20 20 AAU AU Rank nking ng of Average Facul ulty Salary AAU AAU M 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,

• ngoing
• 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

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Discussion Questions

• 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 TO , 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 ending 6/30/2015 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

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