2007 Reaffirmation Teams :: 3.10.1 - 2007 Reaffirmation Teams

2007 Reaffirmation Teams

3.10.1 - 2007 Reaffirmation Teams

The institution's recent financial history demonstrates financial stability

Compliance Judgment

Compliance

Narrative

The University of Texas at Dallas’ (UT Dallas) recent financial history [1] demonstrates strong financial stability. UT Dallas provides high quality teaching, research, and public service, and the university’s strong financial base [1] enables it to pursue its aspiration to become a top-tier research university [2]. Although state appropriations are declining as a percentage of operating expenditures [3], UT Dallas remains true to its mission to produce engaged graduates, to advance excellent educational and research programs, and to transform ideas into actions [4]. UT Dallas streamlines its business operations and makes strategic uses of available resources. The university adjusts student revenues as needed, and increases its sponsored research and development revenue streams as demonstrated in the 2004, 2005, and 2006 Exhibit B - Combined Statement of Revenues, Expenses, and Changes in Net Assets reports [5] [6] [7].

UT Dallas’ strong composite financial index (CFI), a four dimensional measurement of its financial health [1], demonstrates its ability to “direct and focus resources to compete in future state [8].” UT Dallas’ operating expense coverage ratios [1], which measure its ability to cover future operating expenses with available year-end balances, was 2.7, 2.9, and 2.6 months as of the end of 2004, 2005 and 2006 respectively. The ratios are above The University of Texas System’s (UT System) standard of 2 months. UT Dallas’ annual operating margin ratios [1] were negative during two of the three preceding years due to management’s decision to draw down its available resources for strategic purposes, one of which was to minimize increases to student tuition and fees. This decision is in alignment with KPMG, Prager, Sealy & Co., and BearingPoint’s “Scale for Charting CFI Performance” which indicates that, given UT Dallas’ CFI ranking, the institution should focus its fiscal resources to compete in the future state [8]. Therefore, UT Dallas’ strategic plan, “Creating the Future,” calls for investments in buildings and infrastructure to accommodate future growth [2]. The president has recently released a draft of an implementation plan that begins to define where and when the growth will occur [9]. UT Dallas’ strong growth in enrollment [1] has contributed to the institution’s strong financial base.

The UT System Board of Regents approves and finances investments in buildings and infrastructure through the use of long term financing. The UT System Finance Office administers and manages the investments. Although the debt is maintained on the UT System’s books, UT System ensures that each component institution has the capacity for debt repayment. At the end of fiscal year 2006, UT Dallas’ expendable resources to debt ratio of 1.9x was above the 1.0x minimum requirement; the debt burden ratio of 3.3% was below the 5.0% suggested limit; and the debt service coverage ratio of 2.5x was above the 1.8x minimum required [1]. UT System bonds continue to maintain the highest uninsured AAA credit ratings from the three major bond rating agencies [10].

Gifts and Endowments

UT Dallas’ most recent history of fundraising activity shows an increase in gifts for endowments, gifts for operating expenses, and gifts for capital projects [11].

UT Dallas endowments are part of the UT System Long Term Fund (LTF). The LTF is an internal UT System mutual fund that consists of the pooled investment of privately raised endowments and other long-term funds of the 15 institutions of the UT System. The LTF has been under the management of The University of Texas Investment Management Company (UTIMCO) since 1996. The sole purpose of UTIMCO is to manage the investment assets under the fiduciary care of the UT System Board of Regents. A nine-member Board of Directors appointed by the UT System Board of Regents governs UTMICO. The UTIMCO Board of Directors includes three members of the UT System Board of Regents, the UT System Chancellor, and five independent investment professionals. Annual and quarterly information, including the audited financial statements of the LTF, are available to the public on UTIMCO’s website [12] [13].

The primary investment objective of the LTF is to preserve the purchasing power of the assets by earning an average annual real return of 5.1% over rolling ten year periods or longer. This objective permits the LTF to accomplish two goals: provide for current beneficiaries by increasing the annual distribution at a rate at least equal to the current rate of inflation so that real purchasing power is maintained, and provide for future beneficiaries by increasing the market value of endowment funds after the annual distribution at a rate at least equal to the rate of inflation so that future distributions maintain purchasing power as well.

UT Dallas’ Administrative Policies and Procedures Manual, page B4.100.0 [14], describes the university’s management of LTF distributions. The policy addresses the Endowment Annual Compliance Plan [15], the Endowment Records Maintenance Guidelines [16], and the Endowment Compliance Team Members [17]. The Fiscal 2006 Endowment Compliance Report is included below in the supporting documents [18].

Depreciation

UT Dallas calculates depreciation using the State of Texas Comptroller Capital Asset Guidelines [19]. In accordance with the guidelines, the vice president for business affairs a) develops a depreciation methodology that is based on the State Property Accounting System, b) chooses a depreciation method, such as the Comptroller suggested straight-line method, to calculate asset deprecation, and c) develops an index of capital assets by function and program. A detailed description of UT Dallas’ procedure for capital assets accounting is contained in “Accounting for Unexpended Plant Fund and the Investment in Plant Fund [20].”

Qualifications

To ensure that qualified financial professionals are hired who can, in turn, help to ensure that UT Dallas’ finances remain stable, the Office for Business Affairs closely monitors the hiring process to make certain that those individuals hired have the skills, training, and education necessary to perform their jobs. As part of the credentialing process, resumes and transcripts are compared with written job descriptions. The credentialing documents for all Business Affairs personnel in supervisory positions have been collected and can be viewed in UT Dallas’ Staff Credentialing Navigator [21]. All critical personnel have been found to have the requisite credentials to perform their jobs.

Supporting Documents

Footnote Document
[1]UT Dallas Analysis of Financial Condition as of August 31, 2006
PDF Document, 12 Pages, 147.36 KB (report1119)
[2]UT Dallas Strategic Plan
PDF Document, 25 Pages, 137.29 KB (plan1033)
[3]Appropriated Revenue as a Percentage of Operating Expenses
PDF Document, 1 Page, 5.97 KB (report1160)
[4]UT Dallas Mission Statement
PDF Document, 2 Pages, 11.70 KB (statement1017)
[5]Annual Financial Report FY04 Income Statement
PDF Document, 2 Pages, 14.24 KB (report1108)
[6]Annual Financial Report FY05 Income Statement
PDF Document, 2 Pages, 14.08 KB (report1111)
[7]Annual Financial Report FY06 Income Statement
PDF Document, 2 Pages, 14.07 KB (report1114)
[8]Scale for Charting CFI Performance
PDF Document, 1 Page, 10.84 KB (chart1078)
[9]Implementation of the UT Dallas Strategic Plan White Paper
PDF Document, 30 Pages, 145.55 KB (report1217)
[10]UT System Audited Financial Statements
PDF Document, 86 Pages, 598.45 KB (report1161)
[11]UT Dallas Development Activities FY04-FY06
PDF Document, 1 Page, 10.71 KB (table1021)
[12]UTIMCO Homepage
PDF Document, 1 Page, 15.53 KB (statement1153)
[13]UTIMCO LTF 2006 Annual Report
PDF Document, 3 Pages, 485.15 KB (report1162)
[14]University Endowment Policy: Purpose and Scope B4-100.0
PDF Document, 2 Pages, 53.53 KB (procedure1011)
[15]UT Dallas Endowment Compliance Plan
PDF Document, 6 Pages, 75.63 KB (charter1000)
[16]Endowment Compliance Plan Record Maintenance Guidelines
PDF Document, 3 Pages, 28.14 KB (procedure1033)
[17]Endowment Compliance Team
PDF Document, 1 Page, 8.21 KB (roster1001)
[18]UT Dallas Endowment Compliance Annual Report 2006
PDF Document, 12 Pages, 150.93 KB (report1163)
[19]GASB 34 Manual The Texas Comptroller of Public Accounts: Chapter 12 Capital Assets and Accumulated Depreciation
PDF Document, 3 Pages, 105.90 KB (instruction1015)
[20]Accounting for Unexpended Plant Fund and Investment in Plant
PDF Document, 8 Pages, 111.91 KB (procedure1034)
[21]Credential Navigator - Administration - VPBA and the Leadership Team (BALT)
http://sacs.utdallas.edu/crednav/index.zog?s=scred_business#report
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