NOTE 7: Retirement Plans

Employees of the University are employees of the Commonwealth. Substantially all full-time classified salaried employees participate in a defined benefit pension plan administered by the Virginia Retirement System (VRS). Information relating to this plan is available at the statewide level only in the Commonwealth of Virginia's Comprehensive Annual Financial Report (CAFR). The Commonwealth, not the University, has overall responsibility for contributions to this plan.

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 benefits 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 $26.3 million and $24.3 million for the years ended June 30, 1999 and 1998, respectively. Contributions to the Optional Retirement Plans were calculated using base salaries of $251.3 million and $233.9 million for the years ended June 30, 1999 and 1998, respectively. The contribution percentage amounted to 10.5% and 10.4% for the years ended June 30, 1999 and 1998, respectively. 

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 benefits 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

All University employees have an option to participate in the University's self-funded, comprehensive medical care benefits 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, 1999 and 1998, cash and investments of $9,941,000 and $2,799,000 were in the account, respectively. The estimated liability for outstanding claims at June 30, 1999 and 1998, was $7,441,000 and $7,514,000, respectively.

NOTE 10: Funds Held in Trust By Others

Assets of funds held by trustees for the benefit of the University are not reæected 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 reæects the market value of these funds as of June 30, 1999 and 1998, and the amount of income received from the trustees during the years then ended (in thousands):

1999

1998

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

$ 147,540

$ 141,287

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

$ 5,864

$ 5,477

NOTE 11: Pledges

Outstanding pledges to the University amounted to $76.8 million and $60.8 million as of June 30, 1999 and 1998, respectively. Included in these totals are $19.7 million and $4.0 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 reæected in the accompanying financial statements.

NOTE 12: Commitments and Contingencies

Contractual commitments

As of June 30, 1999, the University was a party to construction contracts and commitments totaling approximately $133.5 million of which $76.1 million had been incurred. The University's commitments for equipment, leases, and services are as follows:

1999-00

$ 7,656,000

2000-01

3,461,000

2001-02

1,703,000

2002-03

914,000

2003-04

437,000

2004-05

65,000

The total rental expense for all property and equipment was approximately $10.1 million and $9.4 million for the years ended June 30, 1999 and 1998, 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 reæected in the accompanying financial statements. As of June 30, 1999, $12.8 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, 1999, the Current Restricted Fund additions for federal grants and contracts of $179.6 million and the Current Restricted Fund expenditures for scholarships and fellowships of $99.1 million include $53.1 million for direct lending, respectively. For the year ended June 30, 1998, the Current Restricted Fund additions for federal grants and contracts of $170.1 million and the Current Restricted Fund expenditures for scholarships and fellowships of $98.3 million include $54.5 million for direct lending, respectively.

NOTE 14: Year 2000 Compliance

From the beginning of computer technology development, a two-digit standard to represent the year was adopted. When the internal clocks on computers and other equipment roll over from 99 to 00, many programs will not be able to distinguish between the year 2000 and the year 1900 if not corrected.

In order to minimize the disruption to educational and administrative operations, the University has identified, assessed, remediated, and tested mission critical computer systems and other electronic equipment.

Because of the unprecedented nature of the Year 2000 issue, its effects and the success of the University's efforts will not be fully determinable until the year 2000 and thereafter. Management cannot assure that the University is or will be Year 2000 ready, that the University's remediation and testing efforts will be successful in whole or in part, or that parties with whom the University does business will be Year 2000 ready.

Finance Staff

Leonard W. Sandridge

Executive Vice President and Chief Financial Officer

Colette Sheehy

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

Note 1

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Note 3

Note 4

Note 5

Note 6

Notes 7 - 14