2010 A-133 Report - Finance - University of Michigan

THE UNIVERSITY OF MICHIGAN
Management's Discussion and Analysis (Unaudited)--Continued
Current assets consist primarily of cash and cash equivalents, operating and capital
investments, and accounts receivable. Total current assets decreased $140 million, to $1.7
billion at June 30, 2010, primarily due to decreases in cash and investments. Cash, cash
equivalents and operating investments totalled $767 million at June 30, 2010, which represents
approximately two months of total expenses excluding depreciation.
Current liabilities consist primarily of accounts payable, accrued compensation, deferred
revenue, commercial paper, the current portion of bonds payable and net long-term bonds
payable subject to remarketing. Current liabilities decreased $323 million, to $1.3 billion at
June 30, 2010, primarily due to a decrease in net long-term bonds payable subject to
remarketing. The variable rate portion of bonds payable has remarketing features which allow
bondholders to put debt back to the University and is, accordingly, classified as a current
liability unless supported by long-term liquidity agreements which can refinance the debt on a
long-term basis.
Endowment, Life Income and Other Investments
The University’s endowment, life income and other investments increased $592 million, to
$6.8 billion at June 30, 2010. This increase primarily resulted from unrealized gains on
investments and the receipt of new endowment funds through gifts and transfers, offset by
endowment distributions to beneficiary units for operations. The composition of the
University’s endowment, life income and other investments at June 30, 2010 and 2009 is
summarized as follows:
6
2010 2009
(in millions)
Endowment investments $ 6,564 $ 6,001
Life income investments 94 89
Noncurrent portion of insurance and benefits
obligations investments 149 125
$ 6,807 $ 6,215
The University's endowment funds consist of both permanent endowments and funds
functioning as endowment. Permanent endowments are those funds received from donors with
the stipulation that the principal remain inviolate and be invested in perpetuity to produce
income that is to be expended for the purposes specified by the donors. Funds functioning as
endowment consist of amounts (restricted gifts or unrestricted funds) that have been allocated
by the University for long-term investment purposes, but are not limited by donor stipulations
requiring the University to preserve principal in perpetuity. Programs supported by endowment
funds include scholarships, fellowships, professorships, research efforts, and other important
programs and activities.