NOTES TO FINANCIAL STATEMENTS


NOTE 7: Retirement Plans

Substantially all full-time classi fied salaried employees of the University participate in the de fined bene fit retirement plan administered by the Virginia Retirement System (VRS). VRS is an agent multiple-employer public employee retirement system (PERS) that acts as a common investment and administrative agency for the Commonwealth of Virginia and its political subdivisions.

The University's payroll costs for employees covered by VRS were $181 million and $172 million for the years ended June 30, 1997 and 1996, respectively. The University's total payroll costs were $491.2 million and $465.5 million for the years ended June 30, 1997 and 1996, respectively.

Information regarding types of employees covered, bene fit provisions, employee eligibility requirements including eligibility for vesting, and the authority under which bene fit provisions as well as employer and employee obligations to contribute are established can be found in the Commonwealth's Comprehensive Annual Financial Report (CAFR).

The University's total VRS contributions were $16.5 million and $15.9 million for the years ended June 30, 1997 and 1996, respectively, which included the 5 percent employee contribution assumed by the employer. These contributions represent 9.1 percent and 9.2 percent of covered payroll for the respective years.

The VRS does not measure assets and pension bene fit obligations separately for individual state institutions. The CAFR provides disclosure of the Commonwealth's unfunded pension bene fit obligation at June 30, 1996. The same report contains historical trend information showing VRS's progress in accumulating suf ficient assets to pay benefits when due.

Substantially all full-time faculty, certain administrative staff, and Health Care Professionals participate in Faculty Optional Retirement Plans. These are fixed-contribution plans where the retirement bene fits received are based upon the employer and employee contributions (all of which are paid by the University), and the interest and dividends. Individual contracts issued under the plans for full-time faculty and certain administrative staff provide for full and immediate vesting of both the University's and the participant's contributions. Health Care Professional's employer contributions fully vest after one year of employment. Total pension costs under the plans were approximately $22.5 million and $21.7 million for the years ended June 30, 1997 and 1996, respectively. Contributions to the Optional Retirement Plans were calculated using base salaries of $215.9 million and $208.4 million for the years ended June 30, 1997 and 1996, respectively. The contribution percentage amounted to 10.4 percent in 1997 and 10.4 percent in 1996.


NOTE 8: Postemployment Benefits Other Than Pension Benefits

The Commonwealth of Virginia participates in the VRS administered statewide group life insurance program which provides postemployment life insurance bene fits to eligible retired and terminated employees. The Commonwealth also provides health care credits against the monthly health insurance premiums of its retirees who have at least 15 years of state service and participate in the state health plan. Information related to these plans is available at the statewide level in the Commonwealth's Comprehensive Annual Financial Report.


NOTE 9: Self-Insurance

Beginning July 1, 1995, all University employees had an option to participate in the University's self-funded, comprehensive medical care bene fits program. The cost of medical care is paid out of employee and employer contributions and is held in a separate bank account. The University has contracted with QualChoice of Virginia of Blue Ridge Health Alliance, Inc., a third-party administrator, to provide administrative services for this health care benefits program. As of June 30, 1997 and 1996, assets of $602,000 and $2,602,000 were in the account, respectively. The estimated liability for outstanding claims at June 30, 1997 and 1996, was $2,821,000 and $2,813,000, respectively.


NOTE 10: Funds Held in Trust By Others

Assets of funds held by trustees for the bene fit of the University are not reflected in the accompanying balance sheet. The University has irrevocable rights to all or a portion of the income of these funds, but the assets of the funds are not under the management of the University. The following reflects the market value of these funds as of June 30, 1997 and 1996, and the amount of income received from the trustees during the years then ended (in thousands):

1997

1996

Market Value of Funds Held by Trustees for the Benefit of the University

$ 136,936

$ 113,862

Income Received from Funds Held by Trustees for the Benefit of the University

$ 3,995

$ 4,234


NOTE 11: Pledges

Outstanding pledges to the University amounted to $62.1 million and $63.2 million as of June 30, 1997 and 1996, respectively. Included in these totals are $6.7 million and $8.7 million, respectively, of pledges relating to plant construction. It is not practicable to estimate the net realizable value of such pledges and, therefore, they are not reþected in the accompanying financial statements.


NOTE 12: Commitments and Contingencies

Contractual commitments
As of June 30, 1997, the University was a party to construction contracts and commitments totaling approximately $78.5 million of which $67.6 million had been incurred. The University's commitments for equipment, leases, and services are as follows (in thousands):

1997-1998

$ 6,992

1998-1999

2,586

1999-2000

1,869

2000-2001

1,275

2001-2002

737

2002-2003

287

The total rental expense for all property and equipment was approximately $7.9 million and $7.7 million for the years ended June 30, 1997 and 1996, respectively.

Prior bond defeasance
In prior years, certain outstanding bonds have been defeased by placing assets in irrevocable trusts with escrow agents. Accordingly, these assets and the liability for the defeased bonds are not reþected in the accompanying financial statements. As of June 30, 1997, $57.5 million of the defeased bonds remain outstanding.

Litigation
The University is a defendant in a number of legal actions. While the final outcome cannot be determined at this time, management is of the opinion that the liability, if any, for these legal actions will not have a material effect on the University's financial position.


NOTE 13: Direct Lending

The University began participating in the Federal Direct Lending Program in July, 1995. For the year ended June 30, 1997, the Current Restricted Fund additions for federal grants and contracts of $158,535,000 and the Current Restricted Fund expenditures for scholarships and fellowships of $96,288,000 include $53,953,000 for direct lending, respectively. For the year ended June 30, 1996, the Current Restricted Fund additions for federal grants and contracts of $148,355,000 and the Current Restricted Fund expenditures for scholarships and fellowships of $89,670,000 include $49,522,000 for direct lending, respectively.

Finance Staff

Leonard W. Sandridge

Executive Vice President and Chief Financial Officer

Colette Capone

Vice President for Management and Budget

Charles T. Gillet

Assistant Vice President for Finance and University Comptroller

Alice W. Handy

University Treasurer

Internal Audit

Barbara J. Deily

Director of Audits

Notes to Financial Statements | Note 1 | Note 2 | Note 3 | Note 4 | Note 5 | Note 6 | Note 7 | Note 8 | Note 9 | Note 10 | Note 11 | Note 12 | Note 13


President's Report 1996-97 Contents

Financial Report 1996-1997