Approval of minutes: Minutes of the meeting of March 14, 2000 were approved as distributed. The minutes will be posted to the website.

Operating results through February 29, 2000 and projections to year end

The projections to year-end are better than budget by $819 thousand. The $8.4 million year-to-date surplus is attributable to significant surpluses in the Applied Physics Laboratory ($10.0 million), Academic and Cultural Centers ($3.3 million), Krieger School of Arts and Sciences ($2.7 million), the School of Professional Studies in Business and Education ($2.5 million) and Homewood Student Affairs ($642 thousand). These divisions are, however, projecting much smaller surpluses or break-even by year-end. Divisions currently reporting deficits include the School of Medicine ($11.4 million), School of Hygiene and Public Health ($862 thousand), School of Nursing ($746 thousand), Peabody Institute ($36 thousand) and Milton S. Eisenhower Library ($31 thousand). However, these divisions are not projecting year-end deficits. All divisions are currently expected to meet or exceed budget. Attachment I shows year-to-date and projected year-end results. Notable items are the following.

Applied Physics Laboratory: The $10.0 million surplus at the Applied Physics Laboratory is attributable to lower than expected expenditures and the receipt of $1.4 million from the APL capital reserve. APL's general funds revenue to date is $27.7 million, 69.4% of budget. APL is projecting general funds revenue at $42.0 million, $2.1 million higher than budget. The Lab is projecting revenue increases in capital reserve ($1.4 million), interest earned ($751 thousand), and investment return ($639 thousand). APL's total expenditures to date are $275.2 million, 63.9% of budget. APL is projecting general funds expenditures at $39.6 million, $2.0 million higher than budget. The Lab expects to spend an additional $4.3 million in capital to purchase modular buildings that were previously leased ($2.5 million) and to fund expenditures encountered by delays in fiscal 1999 in outfitting another building ($1.4 million). An additional $1.1 million in non-reimbursable costs is also projected. Savings in cost sharing and new business ($2.3 million) and stabilization, contingency and research costs ($1.3 million) are offsetting these additional costs.

Homewood Divisions: The surpluses at both the Krieger School of Arts and Sciences (KSAS) and the School of Professional Studies in Business and Education (SPSBE) are attributable to high summer and fall enrollments and increased facilities and administrative cost recoveries. Homewood Student Affairs year-to-date surplus is attributable to lower instruction and research expenditures and lower auxiliary enterprises expenditures than budgeted. The Krieger School of Arts and Sciences (KSAS) and the Whiting School of Engineering (WSE) are projecting to end the year with a $126 thousand surplus and break-even, respectively. However, both divisions expect to use less from reserves than budgeted. KSAS does not expect to use any of the $726 thousand budgeted reserves and WSE projects to use $1 million less than budgeted. Both Schools are projecting significant revenue increases in tuition and fees and facilities and administrative cost recoveries. WSE also does not project to use any of the $600 thousand in budgeted gifts.

Academic and Cultural Centers: The surplus in the Academic and Cultural Centers (ACC) is primarily attributable to a $2.2 million surplus reported by the Center for Talented Youth (CTY). CTY has already realized 99% of its tuition revenues with a successful summer program, having approximately 700 more students than budgeted. Further within ACC, JHU Press has a $673 thousand surplus because expenditures in the publishing division are lower than expected. The Press is projecting to end the year in balance, or $448 thousand better than budget. The Press expects to hold the line on expenditures, receive higher than budgeted revenues, and to transfer in $81 thousand from reserves to cover a small operating deficit. The Press anticipates expenditures to be slightly higher than budget while revenues are projected over budget in all three divisions of the Press. The Foreign Language Center is projecting a $73 thousand surplus attributed to increased facilities and administrative cost recoveries. CTY is projecting to finish the year with a $19 thousand surplus after a projected $720 thousand transfer to reserves. JHPIEGO is projecting a $71 thousand deficit, $116 thousand lower than budget. JHPIEGO is significantly under budget in governmental facilities and administrative cost recoveries, as their expenditure rates are lower than budgeted. Overall, Academic and Cultural Centers (ACC) is projecting a $424 thousand surplus, $423 thousand higher than budget.

School of Medicine: The School of Medicine, which includes the Clinical Services division, is reporting a year-to-date deficit of $11.4. Medicine's deficit is primarily a result of lower year-to-date revenues in facilities and administrative cost recoveries coupled with increased expenditures in instruction and research. Clinical revenues are at 67.8% of budget. The School of Medicine projects to break-even at year-end due to increased gift and clinical services revenues and lower than budgeted plant operations and maintenance expenditures. Due to concerns raised by the Trustees about the combined reporting of the two divisions, Dr. McGill and Mr. Grossi promise to create another presentation tool for the Committee. Dr. McGill also assured the Committee that key revenue indicators would continue to present the two divisions separately.

The School of Hygiene and Public Health: The School of Public Health's deficit of $862 thousand is attributable to a shortfall in facilities and administrative cost recoveries. Additionally, the School has increased expenditures in general services and administration and auxiliary enterprises. Public Health projects finishing the year at break-even as facilities and administrative cost recoveries are anticipated to be over budget by year-end. Also, instruction and research costs are projected to be lower than budget by $1.3 million.

The School of Nursing: The School of Nursing's current deficit ($746 thousand) is a result of shortfalls in several revenue sources, including facilities and administrative cost recoveries (51.7% of budget), gifts (22.2% of budget), affiliated organizations (52.6% of budget) and clinical services (25.7% of budget). Nursing projects to end the year with a slight surplus by applying some of its proceeds from the sale of a service called InteliHealth. The School received $2.5 million and will use $1.7 million to pay loan principal. The remaining $761 thousand will be used to fund future expenditures.

Review of Operating Budget for fiscal 2001 and Five-Year Plan 2001-2005

The Committee reviewed the five-year plan for fiscal years 2001 through 2005. A slide presentation described the recent finances of the University, including both operating results and balance sheet items. The presentation also covered key Plan assumptions, changes in budget presentation, divisional review and projected results for the next five years. Year one of the Plan is the fiscal 2001 budget. The five-year Plan projects a period of continued financial stability, with slightly improved overall surpluses. Of particular note are improvements to the School of Medicine in fiscal 2002 and 2003, annual improvements at the Applied Physics Laboratory, and a contingency plan for the Milton S. Eisenhower Library. A summary of surplus or deficit by division is included as Attachment II.

Each operating division of the University faces unique risks associated with its individual revenue sources and projected capital investments. A major area of vulnerability in Plan 2001 is in the School of Medicine, where declining reimbursement rates for clinical care and the need for significant new investments in human and physical capital place an increasingly heavy burden on the School's reserves.

Although a short-term solution has been found to the Milton S. Eisenhower Library funding problem, the problem can only be solved by a substantial addition of new endowment.

The current Plan includes tuition rate increases generally growing at about 4% and endowment payouts growing at 2.5% annually. These increases compare with overall expenditure rate increases in the 3.5% to 4.0% range. The current Plan project substantial increases in research. Finding the capital to allow Hopkins to continue to invest in its buildings that support its faculty and programs remains a critical challenge in the next few years. The facility and administrative cost rates have been budgeted with lower rates than those negotiated. The anticipated surplus -- the difference between actual and budgeted rates -- will be used for one-time activities at the discretion of the various schools.

Endowment payout policy

Dr. Snow reported that the Investment Committee has approved a 2.5% increase in endowment payout for FY2001. This is in line with the endowment payout policy approved by the Trustees, which aims to reduce payout rates to under 5% by FY2000. Dr. Young asked whether a process exists for balancing the financial goals of the university, as perceived by the Trustees, with the academic goals, as perceived by the Deans and faculty. Dr. Knapp suggested that topic be revisited at a future meeting.

Managing debit balances in sponsored research accounts

Mr. Bridges reported on the ongoing process to clear deficit balances in sponsored accounts. This was a management letter comment in last year's KPMG audit. The debit balances as of 6/30/99 were $77 million dollars and have improved to balances totaling $39 million as of 4/30/00. In many cases, the business offices are working closely with the Controller's Office with very positive results. Possible solutions to ongoing problems include implementation of spending controls using the prospective BASIS system, implementation of electronic billing as of July 1, 2000, and reorganization within the Controller's Office to isolate collections of outstanding accounts. There is also an initiative to add an additional schedule to the account statements that will show accounts receivables for that account.

There was an issue raised by Dr. Ellis that decisions on how to clean up accounts must be made cooperatively by all parties involved in the process. It was agreed that Dr. McGill, Dr. Ellis and Mr. Bridges will work together to draft a document describing a process for communicating account cleanup requirements among relevant faculty, departmental administrators, divisional business offices and central administration, and send it out for comment.

Financial aid for graduate students -- issues and trends

Dr. Knapp discussed the sources of graduate student support in two contrasting departments in the Krieger School of Arts & Sciences, Biology and English. Funding comes from a combination of general funds, teaching assistantships, and graduate research fellowships. Typically these are managed at the department level, not by the School of Arts and Sciences as a whole, and differ markedly among departments. The committee felt it would be desirable to make a more systematic study of this issue, and to have a comparison with peer institutions in different areas of graduate student aid. This could be an issue for future meetings.

The meeting adjourned at 5:15 p.m.

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Last updated 30Jan01 by dgips@jhu.edu