FY2010 Financial Results
September 27, 2010
Dear friends,
I am pleased to report the FY 2010 financial results for the Division of Biology & Medicine. Our annual financial statements have been posted to http://biomed.brown.edu/bmfp/reports. Before I get into the highlights of our year, I would like to thank the entire BioMed Finance & Planning office staff and all those involved in financial management who work in our academic departments, research centers and administrative offices. Your efforts are much appreciated and made the closing process run smoothly over the summer.
Statement of Operations
FY10 was an extraordinary year in our history. The original budget for the year, established late 2008/early 2009, did not assume the NIH would get a $10 billion/2 year windfall from the stimulus act, which was passed in February 2009. As a result of this legislation and the success of our faculty in winning new research grants, revenues from sponsored funding (direct & indirect) increased by $10.6M. Additional revenue growth was realized from an enrollment expansion in the Public Health masters programs, expanded use of the animal care facility and enhanced startup support from the University for new recruitments under the Plan for Academic Enrichment. Total revenues from all sources rose to $137.9M, an increase of 9% from FY09.
On the expense side, enhancements to faculty productivity (i.e. salaries charged to grants), together with careful spending and some vacancy savings for unfilled faculty lines, resulted in a $1.9M improvement from FY09 performance for the campus based academic departments and research centers. I would highlight the Departments of Neuroscience and Community Health as particularly strong performers. These savings were partially offset by an increase of $661K for institutional support of research (startup spending, the grant incentive program, core facility subsidies and other cost sharing arrangements). Additionally, reduced 121 South Main renovation debt service costs were partially offset by increased facility operating costs for Sidney Frank Hall and the Ship Street building. University overhead increased by $762K due to a revenue sharing arrangement on indirect cost recoveries, inflation of the "interface fee" and the reclassification of telephone charges from departmental budgets.
As a result of these revenue & expense changes, the Division recorded a $6.6M surplus in FY10. This amount has been credited to BioMed reserves and has served to partially replenish our capital foundation in advance of future challenges, including a projected operating deficit in FY12.
Statement of Reserves
BioMed began the year with $17.1M in working capital and $10.8M of internal debt, resulting in net working capital of $6.4M. In addition to repaying $6.7M of internal debt incurred to renovate the Public Health facility, the Division also funded $1.6M of capital projects from the plant account. After accounting for this capital spending and recording the FY10 operating surplus, the Division ended FY10 with $13.6M in working capital and $3.7M of internal debt, resulting in net working capital of $9.9M.
We consider these levels of unrestricted (though internally designated) working capital reserves adequate to deal with operating budget risk going forward. However, based on preliminary development of a BioMed Capital Plan, it appears that the capital reserve – at $1.2M - is currently inadequate to deal with the deferred maintenance requirements of BioMed facilities (i.e. $30M + in proposed projects). We are working closely with Peter Holden and Division leadership to identify top priorities and secure funding for the most pressing needs over the next 5-10 years. We will also strive to set aside funds from the operating budget each year to provide for our capital needs responsibly.
The remainder of this financial statement identifies the changes in various restricted accounts, including the high-profile $45M Medical Education Building renovation project at 222 Richmond Street. Advancement continues to work on the $20M capital campaign and we expect to occupy the building next summer, at which time we will assume significant new facility operating costs for utilities and related expenses.
The BioMed endowment recovered somewhat over the past year. Market value as of June 30, 2010 was $251M, an increase of $12M (5.4%). Of this increase, $7M was attributable to market appreciation and $5M related to new gifts to endowed funds. We continue to monitor endowments on an individual level to ensure funds are spent in compliance with donor intent, and preserve the purchasing power of each fund for the long term.
Total reserves from all categories of funds under BioMed management closed the year at $303.5M, with the vast majority restricted for specific purposes.
FY11 and Beyond
The Corporation approved a balanced budget plan for FY11 last February. Current forecasts indicated that this plan is achievable based on the continued positive effects of the stimulus grants, most of which do not expire until the 2011/2012 timeframe. Beginning in FY12 (next July), we are planning for several changes, including an expanded medical school class size, enhanced financial aid support, the assumption of new facility costs and the expiration of stimulus grants, among other factors. Current projections indicate that we will run operating deficits – drawing on reserve funds – for a few years until revenues are able to match our increased expense base.
This fall’s budget hearings will serve as a venue for departments to inform the leadership about their success & challenges, and propose budget reallocations or enhancements for consideration by the Dean. Please feel free to contact me with any questions you may have on our results, and many thanks for your own individual contribution to our success.
Best regards,
James W. Patti
Associate Dean for Finance & Planning
Division of Biology & Medicine