Fiscal Year 2011:
Responsible stewardship positions DU for a robust future
Financial Summary(click to enlarge)
Thanks to prudent budgeting, sound management of its resources and growing demand for a DU education, the University of Denver concluded fiscal year 2011 in excellent condition. While many colleges and universities across the country continued to face steep challenges associated with an uncertain economy, DU was able to make significant investments in new faculty and academic programs. The University also continued to improve its physical infrastructure, breaking ground on a $33 million transformation of Penrose Library into a state-of-the-art Academic Commons.
For fiscal year 2011, the University’s operating margin grew to $42.8 million on revenues of $374 million. (In fiscal year 2010, the operating margin was $37.5 million on revenues of $360 million.) The majority of the 2011 operating surplus was designated to quasi-endowment and to enhancing reserves.
Endowment(click to enlarge)
The University’s operating revenue and expense profile remained consistent, with nearly 70 percent of revenues coming from student tuition. Auxiliary enterprises made up 8.3 percent of revenues, while gifts, endowment income, grants, contracts and other sources made up 21.7 percent. Total operating expenses were $330 million, of which almost 62 percent was associated with compensation of faculty, staff and students.
Endowment(click to enlarge)
Capital funding remained a significant emphasis in the operating budget. The University has continued to fund a reserve for renovation, renewal and deferred maintenance of the plant. In fiscal year 2011, $8 million was designated for these purposes.
As of June 30, 2011, the University had $133.7 million of debt outstanding. The entire tax-exempt bond portfolio is fixed-rate with a 4.4 percent weighted average cost of capital. Debt service constitutes only 3.3 percent of the University’s operating budget.
The University’s endowment was valued at $345 million at the end of the fiscal year. This represents an increase of $56.2 million from the previous year. Only 2.6 percent of the University’s operating revenue is supported by endowment income. Although market volatility does not materially affect the University’s operations, development of the endowment will remain a priority for the foreseeable future.
Revenues & Expenses(click to enlarge)
The University maintains a diversified portfolio relying on 32 investment managers investing in asset categories that include private equity, hedged equity, real assets and absolute return, as well as other equity, fixed-income and real estate investments. As University management continues to emphasize liquidity, “cash-like” investments comprise almost 24 percent of the portfolio.
The University’s solid financial health was affirmed in a recent update from Moody’s Investors Service, which renewed the University’s A1 rating. In summarizing DU’s strengths, Moody’s noted that the institution enjoys “healthy balance sheet liquidity, a given history of operating surpluses and conservative asset allocation including a large pool of working capital invested in fixed-income instruments.”
As the University looks to sustain its investments in the academic core, including select graduate and professional programs, fiscal vigilance will be a key component of the budget strategy. In addition, in hopes of limiting increases in the net price of attendance, DU will work to boost its investment in financial aid and limit increases in nonacademic staffing. This strategy positions the University for a deft response to any financial challenges that may lie ahead.
