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

Finance and Administration Committee - V. Annual Report of the Treasurer, 2011 - InformationTable 25.1 Property and EquipmentResearch FoundationOffice furniture and equipment $ 164,467Less accumulated depreciation (74,971)Ending balance $ 89,496GeneraLand $ 182,549Buildings 37,900,469Leasehold improvements 61,314Machinery and equipment 20,754,566Furniture and fixtures 146,227Vehicles 141,427Construction in progress 4,776,06663,962,618Less accumulated depreciation (3,452,231)60,510,387Ending balance $60,599,883Marketable Equity Securities: The fair value of marketableequity securities is based on quoted prices times the number ofthe shares held by the foundation at June 30, 2011.The preceding methods described may produce a fair valuecalculation that may not be indicative of net realizable valueor reflective of future fair values. Furthermore, although thefoundation believes its valuation methods are appropriate andconsistent with other market participants, the use of differentmethodologies or assumptions to determine the fair value ofcertain financial instruments could result in different fair valuemeasurement at the reporting date.At June 30, 2011, the foundation had no liabilities carriedat fair value subject to remeasurement on a recurring basis.The following table provides the assets carried at fair valuemeasured on a recurring basis as of June 30, 2011:Table 24.2. Assets at Fair ValueJune 30, 2010 Level 1 Level 2 Level 3 TotalRegistered investmentcompanies $ 7,516 — — $ 7,516Marketable equity securities 106,142 — — 106,142Total $113,658 — — $113,6583to revenue over the twenty-five years beginning January 28,2010, the date when DDCE first occupied their portion of thefacility. Revenue of $901,084 was recognized in fiscal year 2011.FAIR VALUE MEASUREMENTSThe foundation reports under FASB Accounting StandardsCodification (ASC) Topic 820 which defines fair value as theexchange price that would be received for an asset or paid totransfer a liability in the principal or most advantageous marketfor the asset or liability in an orderly transaction betweenmarket participants on the measurement date. A valuationhierarchy has been established for disclosure of the inputs usedto measure fair value. This hierarchy prioritizes the inputs intothree broad levels. Level 1 inputs are quoted prices (unadjusted)in active markets for identical assets or liabilities. Level 2 inputsare quoted prices for similar assets and liabilities in activemarkets or inputs that are observable for the asset or liability,either directly or indirectly through market corroboration, forsubstantially the full term of the financial instrument. Level3 inputs are unobservable inputs based on management’sassumptions used to measure assets and liabilities at fair value.A financial asset or liability’s classification within the hierarchyis determined based on the lowest level input that is significantto the fair value measurement.Following is a description of the valuation methodologies usedfor assets measured at fair value.Registered Investment Companies: The fair value ofregistered investment companies (mutual funds) is based onquoted net asset values of the shares held by the foundation atJune 30, 2011.The foundation also has $215,177 of investments (equitysecurities) for which there is no readily determinable marketvalue. These investments are valued at cost, as managementbelieves that any variance in valuation from historical costwould not be material to the operations of the foundation.NATURAL CLASSIFICATIONS WITHFUNCTIONAL CLASSIFICATIONSThe foundation’s operating expenses by functional classificationfor the year ended June 30, 2011, are as follows:Table 25.3. Natural ClassificationFunctionalClassificationSalaryandBenefitsUtilities,Supplies,and OtherServices Depreciation TotalResearch Support $ 1,274,256 $ 3,924,435 $ — $ 5,198,691Research 1,105,467 2,357,738 — 3,463,205Public service 893,175 26,001,476 — 26,894,651Depreciation — — 3,000,448 3,000,448Total Expenses $3,272,898 $32,283,649 $3,000,448 $38,556,995Note 25: Subsequent EventsThe University of Tennessee Foundation, Inc., is a not-for-profitcomponent unit created in 2001 to support the University ofTennessee’s educational, research, and public activities by securingand administering private funds to support programs beyond thescope of the university’s general budget. (See also Note 23).3567