Finance and Administration - Board of Trustees - The University of ...

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Finance and Administration Committee - V. Annual Report of the Treasurer, 2011 - InformationINVESTMENTSA summary of foundation investments at June 30, 2011, isrepresented in the table below:Table 22.1Equity Securities (cost of $14,532,742) $ 16,882,172Mutual Funds (cost of $41,130,271) 45,152,591Real estate 1,800,700Limited partnerships 29,761,154Other 9,998Total $ 93,606,615The foundation also has investments restricted by the terms ofthe revenue bonds described below totaling $6,593,678.PROPERTY AND EQUIPMENTA summary of foundation property and equipment at June 30,2011, is as follows:Table 22.2Land $ 8,241,032Buildings 74,915,812Furniture, fixtures, and equipment 4,924,27388,081,117Accumulated depreciation (26,501,798)Total $ 61,579,319REVENUE BONDS PAYABLEDuring May 2005, the Health, Educational, and HousingFacility Board of the City of Chattanooga issued two seriesof tax-exempt revenue refunding bonds totaling $91,510,000.The LLC is the borrower on the bonds. The proceeds of therefunding bonds were primarily used to retire early the threeseries of tax-exempt revenue bonds issued in 2000 and 2001.The 2000 and 2001 bonds were used to acquire land, fundconstruction of the student housing, and develop an elementaryschool near the student housing.Revenue bonds payable at June 30, 2011, consist of thefollowing:Table 22.3Series 2005A revenue refunding bonds, interest rates fixed at5.0 percent to 5.125 percent payable semi-annually, annualredemption payments due through October 1, 2035 $ 63,610,000Series 2005B revenue refunding bonds, interest rates fixedat 5.5 percent to 6.0 percent payable semi-annually, annualredemption payments due through October 1, 2035 20,270,00083,880,000Less: unamortized discount (1,791,054)$ 82,088,946Sinking fund requirements for scheduled redemptions of therevenue bonds for the next 5 years and thereafter is displayed inTable 22.4 below:Table 22.4Year EndedJune 30, 2012 $ 1,715,000June 30, 2013 1,800,000June 30, 2014 1,895,000June 30, 2015 1,990,000June 30, 2016 2,090,000Thereafter 74,390,000$ 83,880,000RESTRICTED CASH AND CASHEQUIVALENTSThe revenue bonds described above restrict the use of certaincash and cash equivalents at June 30, 2011, as follows:Table 22.5Renewal and replacement reserves $ 315,326Restricted for debt service payments 3,130,765Surplus 936,259Total $ 4,382,350FAIR VALUE MEASUREMENTSThe foundation reports under FASB Accounting StandardsCodification (ASC) Topic 820 which defines fair value,establishes a framework for measuring fair value underaccounting principles generally accepted in the United States,and prescribes disclosures about fair value measurements.FASB ASC Topic 820 applies under other accountingpronouncements that require or permit fair value measurementsand does not require any new fair value measurements.FASB ASC Topic 820 requires the categorization of assets andliabilities into three levels based upon the assumptions (inputs)used to value the assets or liabilities. Level 1 provides themost reliable measure of fair value, whereas Level 3 generallyrequires significant management judgment. The three levels aredefined as follows:Level 1: Quoted prices (unadjusted) in active markets foridentical assets or liabilities that the foundation has the ability toaccess.Level 2: Significant other observable inputs other than Level1 prices, such as quoted prices for similar assets or liabilitiesin active markets, quoted prices in markets that are not activeand other inputs that are observable or can be corroborated byobservable market data.Level 3: Significant unobservable inputs that reflectmanagement’s own assumptions about the assumptions thatmarket participants would use in pricing an asset or liability.32759
Finance and Administration Committee - V. Annual Report of the Treasurer, 2011 - InformationThe table below (Table 22.6) presents the recorded amount ofassets and liabilities measured at fair value on a recurring basis.3Table 22.6ASSETSBalance as ofJune 30, 2011Quoted Prices in ActiveMarkets For Identical Assets(Level 1)Significant OtherObservable Inputs(Level 2)Significant OtherUnobservable Inputs(Level 3)Equity securities $ 16,882,172 $ 16,882,172 $ — $ —Mutual funds 45,152,591 35,016,020 10,136,571 —Guaranteed investment contracts 5,011,430 — 5,011,430 —Money market accounts 1,582,248 1,582,248 — —Real estate 1,800,700 — 1,800,700 —Limited partnerships 29,761,154 — — 29,761,154Other 9,998 9,998 — —Total assets $ 100,200,293 $ 53,490,438 $ 16,948,701 $ 29,761,154LIABILITIESDeposits received for the benefit of University ofTennessee at Chattanooga $ 2,153,743 $ — $ 2,153,743 $ —Total liabilities $ 2,153,743 $ — $ 2,153,743 $ —Table 22.7 below presents additional information about assetsand liabilities measured at fair value on a recurring basis byreliance on Level 3 inputs to determine fair value.Table 22.7. Limited PartnershipsBeginning balance $ 29,659,592Total realized and unrealized gains and losses includedin earnings 3,047,713Purchases, issuances, and settlements (2,946,151)Ending balance $ 29,761,154endowment made in accordance with the direction of theapplicable donor gift instrument at the time the accumulationis added to the fund. The remaining portion of the donorrestrictedendowment fund that is not classified in permanentlyrestricted net assets is classified as temporarily restricted netassets until those amounts are appropriated for expenditure bythe organization in a manner consistent with the standard ofprudence prescribed by UPMIFA. In accordance with UPMIFA,the organization considers the following factors in making adetermination to appropriate or accumulate donor-restrictedendowment funds:(1) The duration and preservation of the fund.ENDOWMENTSThe foundation’s endowment consists of approximately 280individual funds established for a variety of purposes. Itsendowment includes both donor-restricted endowment fundsand funds designated by the Board of Trustees to function asendowments. As required by accounting principles generallyaccepted in the United States of America (GAAP), net assetsassociated with endowment funds, including funds designatedby the Board of Trustees to function as endowments, areclassified and reported based on the existence or absence ofdonor-imposed restrictions.Interpretation of Relevant Law: The Board of Trustees of thefoundation has interpreted the Uniform Prudent Management ofInstitutional Funds Act (UPMIFA) as requiring the preservationof the fair value of the original gift as of the gift date of thedonor-restricted endowment funds absent explicit donorstipulations to the contrary. As a result of this interpretation,the foundation classifies as permanently restricted net assets(a) the original value of gifts donated to the permanentendowment, (b) the original value of subsequent gifts to thepermanent endowment, and (c) accumulations to the permanent(2) The purposes of the foundation and the donor-restrictedendowment fund.(3) General economic conditions.(4) The possible effect of inflation and deflation.(5) The expected total return from income and the appreciationof investments.(6) Other resources of the foundation.(7) The investment policies of the foundation.Tthe tables on the opposite page represent endowment netassets at June 30, 2011 by type of fund. Due to GASBreformatting, temporarily restricted net assets are reportedas expendable restricted net assets and permanentlyrestricted net assets are reported as nonexpendable restrictednet assets on the statement of net assets.2860
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