Independent Auditors’ Report

 

KPMG LLP
Suite 900
801 Second Avenue
Seattle, WA 98104

Independent Auditors’ Report

The Board of Regents
University of Washington:

We have audited the accompanying financial statements of the business-type activities of the University of Washington (the University), an agency of the state of Washington, as of and for the years ended June 30, 2010 and 2009, and its discretely presented component unit as of and for the 18-month period ended June 30, 2010. These financial statements are the responsibility of the University’s management. Our responsibility is to express opinions on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the University’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions.

As discussed in note 1, the financial statements of the University of Washington, an agency of the state of Washington, are intended to present the financial position, and the changes in financial position and cash flows of only that portion of the activities of the state of Washington that is attributable to the transactions of the University of Washington. They do not purport to, and do not, present fairly the financial position of the state of Washington as of June 30, 2010 and 2009, the changes in its financial position or its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the University of Washington as of June 30, 2010 and 2009, and the changes in its financial position and its cash flows for the years then ended, and the financial position of its discretely presented component unit as of June 30, 2010, and the changes in its financial position and its cash flows for the 18-month period then ended in conformity with U.S. generally accepted accounting principles.

The management’s discussion and analysis on pages 10 through 15 is not a required part of the basic financial statements but is supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it.

December 15, 2010

KPMG LLP is a Delaware limited liability partnership, 
the U.S. member firm of KPMG International Cooperative 
(“KPMG International”), a Swiss entity.

 

Management’s Discussion and Analysis

The discussion and analysis below provides an overview of the financial position and activities of the University of Washington (“University”) for the years ended June 30, 2010 and 2009. This discussion has been prepared by management and should be read in conjunction with the financial statements and accompanying notes which follow this section.

Financial Highlights for Fiscal Year 2010

The University recorded net income of $431 million in fiscal year 2010, compared to a net loss in fiscal year 2009 of $374 million: a bottom line improvement of $805 million. This is directly related to an increase in investment income of $778 million, a result of market value increases in the value of investments in fiscal year 2010. The University adjusts the carrying value of investments to market value each year, with the change recorded as investment income or loss.

Other significant, but offsetting, factors in the 2010 financial performance included a $150 million decline in operating and capital state support, a $70 million increase in tuition revenues, increased federal funding of research and instruction, and continued strong performance by the University of Washington Medical Center (UWMC).

Key Financial Results for Fiscal Years 2010, 2009 and 2008:
(in millions)	2010	2009	2008
Total operating revenues	$ 3,124	$ 2,902	$ 2,730
Operating expenses	3,493	3,429	3,284
Operating loss	(369)	(527)	(554)
State appropriations	303	385	388
Federal ARRA Education Funding	44	-	-
Investment income (loss)	309	(469)	77
Gifts	119	143	177
Other nonoperating revenue, net	25	94	75
Increase (decrease) in net assets	431	(374)	163
Net assets, beginning of year	4,763	5,137	4,974
Net assets, end of year	$ 5,194	$ 4,763	$ 5,137

Operating revenues minus operating expenses typically result in an operating loss in the University’s financial statements. Nonoperating items, including state support, investment income, and gifts have brought each year’s results to a modest increase in the net assets, or “equity” of the University, with the exception of 2009. This surplus has been reinvested within the University to add a margin of educational excellence, upgrade the University’s facilities, and provide a prudent reserve for contingencies such as the current period of economic instability.

Economic Factors Affecting the Future

A number of contingencies face the University over the next few years. The continuing economic downturn is a primary source of uncertainty. This economic downturn has already impacted the University directly through revenue reductions in state support, investment income, and contributions from donors.

The state of Washington, which provided 8% of the University’s total revenues in fiscal year 2010, compared to 10% in fiscal year 2009, and 11% in fiscal year 2008, continues to face declining tax revenues. As a result, the state’s funding of higher education will continue to erode in 2011. To help alleviate the effects of this educational shortfall, the legislature has granted the University the flexibility to increase undergraduate resident tuition rates up to 14% per year, but only through fiscal year 2011.

In 2010, the sharp decline in state funding was partially offset by $44 million of federal education funding under the American Recovery and Reinvestment Act of 2009 (ARRA); these funds were passed through to the University by the state of Washington.

Funding for research activities was temporarily boosted in 2010 by $86 million of Federal ARRA funding for basic research and activities in the health sciences. In addition, the University has $241 million of unspent ARRA research awards that will be completed in fiscal year 2011 and later.

Rising benefit costs, particularly for health care and pensions, continue to impact the University.

In March 2010, health care reform was passed by the U.S. Congress and signed into law by President Obama. The financial effects of this legislation may have significant financial impacts to health care providers. Thus, the environment in which health care organizations currently operate is dynamic and uncertain.

While 2010 remained relatively stable for UWMC compared with 2009 due to stable volumes and increasing surgical activity, the economic downturn continues to put pressure on operating results. Operating results of UW Medicine/Northwest (formerly Northwest Hospital & Medical Center) reflect a volume reduction in outpatient and inpatient activities; however, their recent affiliation with the University of Washington provides significant opportunities for joint program development and growth, facilities development and efficiencies. State budget changes to hospital reimbursement rates and medical assistance eligibility, as well as increased charity care and bad debts, have reduced hospital margins.

Using the Financial Statements

The University’s financial statements include the Balance Sheets, the Statements of Revenues, Expenses, and Changes in Net Assets, the Statements of Cash Flows and the Notes to the Financial Statements. These financial statements are prepared in accordance with Governmental Accounting Standards Board (GASB) principles, which establish standards for external financial reporting for public colleges and universities. GASB standards require that financial statements be presented on a consolidated basis in order to focus on the University as a whole.

On January 1, 2010, the University affiliated with Northwest Hospital & Medical Center. GASB standards require that this affiliation be presented discretely; therefore, a separate column displays its financial position at June 30, 2010 and the results of its operations for the 18 months ended June 30, 2010. (See Note 1 to the Financial Statements.)

The analysis presented below includes the consolidated balances of the University of Washington and its blended component units, but excludes the financial position and results of operations of UW Medicine/Northwest, unless otherwise noted.

Financial Health

BALANCE SHEETS

The Balance Sheets present the financial condition of the University at the end of the last two fiscal years and report all assets and liabilities of the University. A summarized comparison of the University’s assets, liabilities and net assets as of June 30, 2010, 2009, and 2008, follows:

(in millions)	2010	2009	2008
Current assets	$ 851	$ 907	$ 1,406
Noncurrent assets:
Capital assets, net	2,958	2,840	2,714
Other	3,191	2,788	3,323
Total assets	7,000	6,535	7,443
Current liabilities	548	579	1,170
Noncurrent liabilities	1,258	1,193	1,136
Total liabilities	1,806	1,772	2,306
Net assets	$ 5,194	$ 4,763	$ 5,137

The excess of current assets over current liabilities of $303 million in 2010 reflects the continuing ability of the University to meet its short-term obligations. Current assets consist primarily of cash, short-term investments, collateral from securities lending (2008 only) and accounts receivable. The June 30, 2010 current asset balance of $851 million was a decrease of $56 million from 2009, due to changes in cash and short-term investments. The short-term portion of the University’s investment portfolio can fluctuate based upon changes in investment mix and the expected short-term needs for University funds.

Long-term investments as of June 30, 2010 increased by $390 million from 2009, as a result of significant market gains during the year in the value of the University’s investments. Realized and unrealized gains in fiscal year 2010 totaled $224 million, versus realized and unrealized losses of $544 million in 2009.

The difference between total assets and total liabilities, referred to as net assets or “equity,” is one indicator of the current financial condition of the University. The change in net assets measures whether the overall financial condition has improved or deteriorated during the year.

The University reports its “equity” in four categories:

• Invested in Capital Assets, net of related debt – This is the University’s total investment in capital assets, net of accumulated depreciation and amortization and outstanding debt obligations related to those capital assets;
• Restricted Net Assets:
  • Nonexpendable net assets, primarily endowments, consist of funds on which the donor or other external party has imposed the restriction that the corpus is not available for expenditures but rather for investment purposes only;
  • Expendable net assets are resources which the University is legally or contractually obligated to spend in accordance with time or purpose restrictions placed by donors and/or other external parties;
• Unrestricted Net Assets – are all other funds available to the institution for any purpose associated with its mission. Unrestricted assets are often internally designated for specific purposes.

The University’s net assets at June 30, 2010, 2009, and 2008 are summarized as follows:

(in millions)	2010	2009	2008
Invested in capital assets, net of related debt	$ 1,982	$ 1,944	$ 1,816
Restricted:
Nonexpendable	959	884	902
Expendable	1,090	1,005	1,396
Unrestricted	1,163	930	1,023
Total net assets	$ 5,194	$ 4,763	$ 5,137

Net investment in capital assets increased $38 million, or 2%, in 2010, and increased $128 million, or 7%, in 2009. This balance increases as debt is paid off or when the University funds fixed asset purchases without financing. This balance decreases as assets are depreciated.

Restricted nonexpendable net assets increased $75 million, or 8%, in 2010, due to new endowment gifts and a significant increase in the value of investments in the Consolidated Endowment Fund (CEF). The 2009 decrease of $18 million, or 2%, was a result of declines in the value of investments, partially offset by donor support.

Restricted expendable net assets increased $85 million, or 8%, in 2010, and decreased $391 million, or 28%, in 2009. This category is primarily affected by new operating and capital gifts, and earnings or losses in restricted investments, including endowments. The sharp decline in the market value of investments, which began in fiscal year 2008, had a significant effect in 2009; the University partially recovered its investment losses in 2010.

Unrestricted Net Assets increased in 2010 by $233 million, or 25%, primarily due to an increase in tuition and patient services revenue, together with an increase in the market value of investments related to unrestricted funds. The Unrestricted Net Asset decrease in 2009 of $93 million, or 9%, was driven by the decline in the market value of investments related to unrestricted funds, offset by increases in tuition revenue and patient services margins.

The ratio of expendable financial resources to operations (as defined by Moody’s) measures the strength of net assets. This ratio, illustrated in the chart below, shows that in 2010 the University had enough expendable resources from various sources to fund operations for a period of 7.9 months.

Endowment and Other Investments

The CEF returned 12.5% in fiscal year 2010, ending the year 
at $1.8 billion, compared to a negative return of 23.3% in the prior year. Over the past 10 years, the CEF has averaged a 4.5% annual return.

The Invested Funds (IF), invested operating monies of the University, are held in three pools: cash, liquidity, and the CEF. The IF (including the portion invested in the CEF) returned a positive 6.3% in fiscal year 2010, and a negative 5.0% in fiscal year 2009. The market value of the cash and liquidity pools was $1.1 billion at June 30, 2010.

Capital Improvements and Related Debt

During 2010, capital expenditures included $54 million on Phase 1 of PACCAR Hall for the business school, $43 million for the expansion of UWMC, $16 million for the new Molecular Engineering building and $13 million for Phase 3 of the UW Tacoma campus.

In 2009, capital expenditures included $47 million for renovation of Clark and Savery Halls, $22 million on Phase 1 of PACCAR Hall for the business school, $17 million for upgrading the Communications Data Center, and $14 million for the expansion of UWMC.

The 2010 ratio of expendable financial resources to debt (as defined by Moody’s) shows that the University has sufficient expendable resources to pay its long-term debt obligations 2.1 times over.

STATEMENTS OF REVENUES, EXPENSES, AND 
CHANGES IN NET ASSETS

The Statements of Revenues, Expenses, and Changes in Net Assets present the University’s results of operations and nonoperating items that result in the changes in net assets for the year. In accordance with GASB reporting principles, revenues and expenses are classified as either operating or nonoperating. 
A condensed comparison of the University’s revenues, expenses and changes in net assets for the years ended June 30, 2010, 2009, and 2008 follows:

(in millions)	2010	2009	2008
Total operating revenues	$ 3,124	$ 2,902	$ 2,730
Operating expenses	3,493	3,429	3,284
Operating loss	(369)	(527)	(554)
Nonoperating revenues, net of expenses	707	(62)	523
Other revenues	93	215	194
Increase (decrease) in net assets	431	(374)	163
Net assets, beginning of year	4,763	5,137	4,974
Net assets, end of year	$ 5,194	$ 4,763	$ 5,137

The University has a diversified revenue base. The following table summarizes revenues from all sources for the years ended June 30, 2010, 2009, and 2008:

(in millions)	2010	2009	2008
Tuition and fees	$ 528	$ 458	$ 420
Patient services	1,029	988	924
Grants and contracts	1,256	1,120	1,063
Sales and services of  educational departments	116	111	111
Auxiliary Enterprises	155	150	146
State funding for operations	303	385	388
Federal ARRA education funding	44	-	-
Gifts	119	143	177
Investment income (loss)	309	(469)	77
State funding for capital projects	33	101	71
Other	74	112	112
Total revenue – all sources	$ 3,966	$ 3,099	$ 3,489

Grant Revenue

The largest source of revenues continues to be grants and contracts. This revenue increased $136 million, or 12%, in 2010, compared to an increase of $57 million, or 5%, in 2009 
over 2008.

The University received 15% more individual research awards in fiscal year 2010 than in 2009. The increase is primarily due to federal ARRA research funding, which generated revenues of $86 million in fiscal year 2010.

Grant and contract revenue is earned when direct expenditures (such as researchers’ compensation or purchases of goods and services) are made; therefore, there is little effect on the University’s operating margin as a result of this direct expense reimbursement process.

Facility and administrative expenses necessary to support grants and contracts are reimbursed by an indirect cost recovery. The current indirect cost recovery for research grants is approximately 29 cents on every direct expenditure dollar.

Primary Nongrant Funding Sources

The University relies primarily on student tuition and fees and state appropriations as revenue sources to support its nongrant funded educational operating expenses. State support for education has declined since fiscal year 2008, with a sharp cut in fiscal year 2010, although part of the reduction in state support was offset by federal ARRA education funding in 2010, as reflected in the table, above right:

Operating Support for Instruction
(in millions)	2010		2009		2008
State operating appropriations	$ 303	35%	$ 385	46%	$ 388	48%
Federal ARRA education funding	44	5%	-	-	-	-
Operating tuition and fees	351	40%	296	35%	271	34%
Fees for self-sustaining education programs	177	20%	162	19%	149	18%
Total educational support	$ 875	100%	$ 843	100%	$ 808	100%

Noncapital state appropriations are considered nonoperating revenue under GASB Statement No. 35, “Basic Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities,” and are reflected in the nonoperating section of the Statements of Revenues, Expenses and Changes in Net Assets; however, they are used solely for operating purposes.

Tuition and fees, net of scholarship allowances, increased from $420 million in 2008 to $458 million in 2009, and to $528 million in 2010. The increases were primarily due to a 7% increase in average undergraduate resident tuition rates in 2008 and 2009, and a 14% increase in 2010, as permitted by the state legislature. The University also has flexibility in its ability to set non-undergraduate resident tuition rates, which helps to compensate for shortfalls in state funding.

The impact of these tuition increases was partially offset by the increase in scholarships and scholarship allowances of $21 million in 2010, $15 million in 2009, and $16 million in 2008.

Self-sustaining educational programs include $63 million for UW Educational Outreach (the continuing education branch of the University), $33 million for summer quarter, and $28 million for Business School and School of Medicine programs.

Patient Services – UW Medicine

The financial statements of the University include the operations of the School of Medicine, two hospitals, associated physicians and clinics, and the University’s share of two joint ventures. These entities, plus a third hospital, Harborview Medical Center (activities not included in the University’s financial statements — see Footnote 14) and Airlift Northwest (affiliated as of July 1, 2010), comprise UW Medicine, an umbrella organization serving to coordinate these activities and promote quality health care in the Pacific Northwest and beyond, and to conduct cutting edge medical research with worldwide benefit.

Patient care activities included in the University’s financial statements include:

University of Washington Medical Center (UWMC) is a 450-bed hospital that provides comprehensive health care services to the Puget Sound community and patients from throughout the Pacific Northwest. UWMC also serves as the major clinical, teaching and research site for students and faculty in the Health Sciences at the University. Over 19,000 patients receive inpatient care at UWMC each year. Specialized inpatient care needs are met by the Cancer Center, the Regional Heart Center, Neonatal ICU and Organ Transplantation program. During fiscal year 2010, work was in progress on Phase 1 of a new five-story UWMC tower, which will create significant space for expansion of patient care activities with an emphasis on neonatal and oncology patients.

UW Medicine/Northwest (Northwest) is a full-service medical facility with 281 beds, and treats approximately 11,000 inpatients per year. Northwest joined UW Medicine in January 2010. Northwest’s Balance Sheet as of June 30, 2010 and Statement of Revenues, Expenses and Changes in Net Assets for the 18 months ended June 30, 2010 are presented in a discrete column on the financial statements of the University.

UW Physicians Network (UWPN) operates seven neighborhood clinics throughout the greater Seattle area, providing primary and selected speciality care with a staff of nearly 70 health care providers.

University of Washington Physicians (UWP) is the physician practice group for more than 1,500 faculty physicians and health care providers associated with UW Medicine. The revenues, expenses, assets and liabilities of UWP are included in the University’s financial statements.

The University is also a participant in two joint ventures: Seattle Cancer Care Alliance and Children’s University Medical Group. The University’s share in these activities is reflected in the University’s financial statements.

In combination, these organizations (not including Northwest) contributed $1,029 million in patient service revenues in fiscal year 2010, $988 million in fiscal year 2009, and $924 million in 2008. UWMC generated 74% of this revenue in 2010, 71% in 2009, and 70% in 2008. UWMC admissions remained stable in 2010 compared to 2009, and increased 2% in 2009 over 2008. Patient length of stay (shorter average length of stay, or higher turnover, is financially favorable) remained relatively constant at 5.9 days in 2010 and 2009, and decreased from 6.1 days in 2008. Other factors contributing to the increase in hospital revenue over the period have been the increased acuity of patients and improved documentation and coding.

Gifts, Endowments and Investment Revenues

Net investment returns for the years ended June 30, 2010, 2009, and 2008 consisted of the following:

(in millions)	2010	2009	2008
Interest and dividends	$ 78	$ 66	$ 70
Metropolitan Tract net income	8	6	7
Investment in Seattle Cancer Care Alliance	7	8	5
Net appreciation (depreciation) of fair value of investments	224	(544)	3
Investment expenses	(8)	(5)	(8)
Net investment income (loss)	$ 309	$ (469)	$ 77

Net appreciation includes both realized and unrealized gains and losses; however, the unrealized gains are not expendable until the underlying securities have been sold. Net investment income increased by $778 million in 2010 over 2009, and decreased by $546 million in 2009 from 2008. The change in unrealized gain or loss was the major factor in the variance each year. The sharp decline in the University’s investment performance in 2009 and 2008 was related to market declines which began in the latter part of fiscal year 2008.

Donor support declined in 2010 and 2009 after years of dramatic growth – a direct result of the worsening economy during that period. Gifts are a key, necessary source of support for a variety of purposes including capital improvements, scholarships, research and endowments for various academic and research positions.

Expenses

A comparative summary of the University’s expenses by functional classification (purpose for which the costs are incurred) for the years ended June 30, 2010, 2009, and 2008 follows:

(in millions)	2010	2009	2008
Operating expenses:
Educational and general instruction	$ 905	$ 908	$ 824
Research	700	640	623
Public service	34	33	31
Academic support	259	265	265
Student services	34	34	34
Institutional support	141	143	156
Operation and maintenance of plant	155	178	169
Scholarships and fellowships	93	71	71
Auxiliary enterprises	166	171	162
Medical-related	777	779	749
Depreciation/amortization	229	207	200
Total operating expenses	$ 3,493	$ 3,429	$ 3,284

Research expenditures, which represent sponsored research, increased $60 million, or 9%, from the prior year, reflective of the increase in grant and contract revenue.

Operation and maintenance of plant decreased $23 million, or 13%, compared to 2009. The state of Washington appropriated $12 million for operations and maintenance and $4 million for the Guggenheim renovation in the prior fiscal year. These appropriations were not continued in fiscal year 2010.

Scholarships and fellowships increased $22 million, or 31%, primarily due to an increase in federal funding for Pell Grants.

Depreciation/amortization increased $22 million, or 11%, during fiscal year 2010 compared to 2009. This increase was due to asset additions of $106 million for equipment and intangibles, and $149 million for buildings.

Operating expenses increased $63.7 million, or 1.9%, in fiscal year 2010. Salaries decreased $20.7 million, or 1.2%, due to reductions in staffing and restrictions on rate increases; however, the decrease was moderated by increased activities on grants, due to ARRA, and by federal funding for education. Expenses associated with the rental of office space also decreased, due to increasing utilization of the University Tower for housing administrative offices.

Supplies and purchased services expense increased $44.3 million, or 5.9%, due to ARRA research activities and benefits expense increased $12.8 million, or 2.5%, due to increases in health care and retirement costs.

In 2009, the University’s operating expenses increased $145 million, or 4%, over 2008, primarily driven by increased salaries and benefits expense. Salary rate increases ranging from 2% to 4% had an impact on salary costs, but were moderated by a one-time decrease in health care rates related to favorable claims experience.

OPERATING LOSS

The University’s operating loss decreased to $369 million in 2010 from $527 million in 2009. The 2009 operating loss was a decrease from $554 million in 2008.

State appropriations have declined; however, they are shown as nonoperating, pursuant to GASB standards. If state appropriations were classified as operating, the operating loss would be as follows for 2010, 2009, and 2008, respectively: $21 million, $142 million, and $166 million. The University continues to rely on nonoperating revenues, in addition to state appropriations, to fund its operations including operating gift revenues and investment income distributions.

OPERATING MARGIN

Moody’s measures the net result of revenue and expense activity by including several nonoperating revenues in the margin.

The 2010 operating margin increased to 5.50% from 1.12% in 2009; increases in tuition, patient services revenue and operating gifts, as well as conservative spending, accounted for much of the higher margin. The 2009 margin was a slight increase over 2008.

Operating margin calculations include an estimated return on the University’s investments rather than actual investment income. Therefore, variances in investment performance in a given year will not impact the operating margin.

 

Balance Sheets

	University Of Washington		UW Medicine / Northwest1
	June 30,		June 30,
ASSETS	2010	2009	2010
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS (NOTE 2)	$ 31,902	$ 35,754	$ 15,018
INVESTMENTS (NOTE 6)	314,721	376,787	2,159
ACCOUNTS RECEIVABLE (NET OF $92,341 AND $82,873 ALLOWANCE) (NOTE 5)	470,194	461,936	31,031
INVENTORIES	29,934	28,066	4,328
OTHER CURRENT ASSETS	4,536	4,185	5,579
TOTAL CURRENT ASSETS	851,287	906,728	58,115
NONCURRENT ASSETS:
DEPOSIT WITH STATE OF WASHINGTON (NOTE 3)	72,170	72,002	-
INVESTMENTS, NET OF CURRENT PORTION (NOTE 6)	2,847,279	2,456,877	51,427
METROPOLITAN TRACT (NOTE 7)	115,902	117,759	-
STUDENT LOANS RECEIVABLE (NET OF $9,136 AND $9,499 ALLOWANCE) (NOTE 4)	70,507	68,467	-
OTHER ASSETS	85,393	72,759	2,887
CAPITAL ASSETS (NET OF $2,530,064 AND $2,352,246 ACCUMULATED DEPRECIATION) (NOTE 8)	2,957,777	2,839,901	132,715
TOTAL NONCURRENT ASSETS	6,149,028	5,627,765	187,029
TOTAL ASSETS	$ 7,000,315	$ 6,534,493	$ 245,144
LIABILITIES
CURRENT LIABILITIES:
ACCOUNTS PAYABLE	$ 93,705	$ 109,938	$ 12,128
ACCRUED LIABILITIES	221,587	223,440	25,896
COMMERCIAL PAPER (NOTE 11)	30,000	30,000	-
DEFERRED REVENUES	121,486	143,000	-
FUNDS HELD FOR OTHERS	16,752	11,469	-
LONG-TERM LIABILITIES, CURRENT PORTION (NOTES 9-12)	64,857	61,135	6,068
TOTAL CURRENT LIABILITIES	548,387	578,982	44,092
NONCURRENT LIABILITIES:
DEFERRED REVENUES, NET OF CURRENT PORTION	18,055	21,799	-
U.S. GOVERNMENT GRANTS REFUNDABLE	50,873	51,618	-
LONG-TERM LIABILITIES, NET OF CURRENT PORTION (NOTES 9-12)	1,189,331	1,119,324	106,765
TOTAL NONCURRENT LIABILITIES	1,258,259	1,192,741	106,765
TOTAL LIABILITIES	1,806,646	1,771,723	150,857
NET ASSETS
INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT	1,981,797	1,943,511	50,089
RESTRICTED:
NONEXPENDABLE	959,442	883,942	1,715
EXPENDABLE	1,089,464	1,005,154	967
UNRESTRICTED	1,162,966	930,163	41,516
TOTAL NET ASSETS	5,193,669	4,762,770	94,287
TOTAL LIABILITIES AND NET ASSETS	$ 7,000,315	$ 6,534,493	$ 245,144

• 1 A component unit of the University of Washington (NOTE 1)
• See accompanying notes to basic financial statements.
• Dollars in thousands

 

Statements of Revenues, Expenses and Changes in Net Assets

	University Of Washington		UW Medicine / Northwest1
	Year Ended June 30,		18-Month Period Ended June 30,
REVENUES	2010	2009	2010
OPERATING REVENUES:
STUDENT TUITION AND FEES (NET OF SCHOLARSHIP ALLOWANCES OF $82,461 AND $82,813)	$ 527,958	$ 458,061	$ -
PATIENT SERVICES (NET OF CHARITY CARE OF $46,945 AND $33,058)	1,029,057	988,370	389,838
FEDERAL GRANTS AND CONTRACTS	982,413	865,053	-
STATE AND LOCAL GRANTS AND CONTRACTS	73,540	69,002	-
NONGOVERNMENTAL GRANTS AND CONTRACTS	155,876	150,943	-
SALES AND SERVICES OF EDUCATIONAL DEPARTMENTS	115,999	111,405	-
AUXILIARY ENTERPRISES:
HOUSING AND FOOD SERVICES	58,508	54,486	-
PARKING SERVICES	10,764	9,661	-
SPORTS PROGRAMS (NET OF SCHOLARSHIP ALLOWANCES OF $3,858 AND $3,977)	39,445	37,041	-
OTHER AUXILIARY ENTERPRISES	46,592	48,946	-
OTHER MEDICAL-RELATED REVENUE	39,868	47,361	15,016
OTHER OPERATING REVENUE	44,055	62,093	-
TOTAL OPERATING REVENUES	3,124,075	2,902,422	404,854
EXPENSES
OPERATING EXPENSES (NOTE 13)
SALARIES	1,710,227	1,730,957	175,816
BENEFITS	513,855	501,091	40,881
SCHOLARSHIPS AND FELLOWSHIPS	93,219	71,394	-
UTILITIES	51,190	55,434	4,204
SUPPLIES AND MATERIALS	324,133	308,736	82,755
PURCHASED SERVICES	468,717	439,852	69,506
DEPRECIATION/AMORTIZATION	228,714	206,978	26,444
OTHER	102,600	114,518	-
TOTAL OPERATING EXPENSES	3,492,655	3,428,960	399,606
OPERATING INCOME (LOSS)	(368,580)	(526,538)	5,248
NONOPERATING REVENUES (EXPENSES)
STATE APPROPRIATIONS	303,454	384,810	-
FEDERAL ARRA EDUCATION FUNDING (NOTE 1)	43,971	-	-
GIFTS	65,300	38,753	1,199
INVESTMENT INCOME (LOSS) (NET OF INVESTMENT EXPENSE OF $7,788 AND $5,759)	308,752	(469,492)	2,792
INTEREST ON CAPITAL ASSET-RELATED DEBT	(42,980)	(44,732)	(5,263)
PELL GRANT REVENUE	37,356	25,332	-
OTHER NONOPERATING REVENUES (EXPENSES)	(8,861)	2,486	499
NET NONOPERATING REVENUES (EXPENSES)	706,992	(62,843)	(773)
INCOME (LOSS) BEFORE OTHER REVENUES	338,412	(589,381)	4,475
CAPITAL APPROPRIATIONS	32,539	101,304	-
CAPITAL GRANTS AND GIFTS	16,005	27,453	580
GIFTS TO PERMANENT ENDOWMENTS	43,943	86,084	-
TOTAL OTHER REVENUES	92,487	214,841	580
INCREASE (DECREASE) IN NET ASSETS	430,899	(374,540)	5,055
NET ASSETS
NET ASSETS – BEGINNING OF YEAR	4,762,770	5,137,310	89,232
NET ASSETS – END OF YEAR	$ 5,193,669	$ 4,762,770	$ 94,287

• 1 A component unit of the University of Washington (NOTE 1)
• See accompanying notes to basic financial statements.
• Dollars in thousands

 

Statements of Cash Flows

	University Of Washington
	Year Ended June 30,
CASH FLOWS FROM OPERATING ACTIVITIES	2010	2009
STUDENT TUITION AND FEES	$ 531,730	$ 432,411
PATIENT SERVICES	963,710	978,666
GRANTS AND CONTRACTS	1,171,348	1,064,735
PAYMENTS TO SUPPLIERS	(320,184)	(310,333)
PAYMENTS FOR UTILITIES	(51,522)	(55,373)
PURCHASED SERVICES	(464,839)	(441,676)
OTHER OPERATING DISBURSEMENTS	(103,653)	(125,057)
PAYMENTS TO EMPLOYEES	(1,707,863)	(1,727,376)
PAYMENTS FOR BENEFITS	(467,299)	(497,527)
PAYMENTS FOR SCHOLARSHIPS AND FELLOWSHIPS	(93,219)	(71,394)
LOANS ISSUED TO STUDENTS	(29,102)	(26,541)
COLLECTION OF LOANS TO STUDENTS	26,317	24,966
OTHER MEDICAL-RELATED RECEIPTS	39,868	47,361
AUXILIARY ENTERPRISE RECEIPTS	167,322	133,013
SALES AND SERVICES OF EDUCATIONAL DEPARTMENTS	115,472	114,051
OTHER RECEIPTS	84,403	79,588
NET CASH USED BY OPERATING ACTIVITIES	(137,511)	(380,486)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
STATE APPROPRIATIONS	286,098	385,097
FEDERAL ARRA EDUCATION FUNDING	43,971	-
GIFTS AND GRANTS FOR OTHER THAN CAPITAL PURPOSES	37,356	25,332
PRIVATE GIFTS	55,600	29,279
PERMANENT ENDOWMENT RECEIPTS	43,942	86,084
DIRECT LENDING RECEIPTS	227,033	189,153
DIRECT LENDING DISBURSEMENTS	(217,575)	(187,752)
RECEIPTS FROM OUTSIDE AFFILIATED AGENCIES	600,562	562,573
DISBURSEMENTS TO OUTSIDE AFFILIATED AGENCIES	(611,240)	(568,805)
OTHER	(8,730)	1,791
NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES	457,017	522,752
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
PROCEEDS FROM CAPITAL DEBT	121,461	109,162
STATE CAPITAL APPROPRIATIONS	42,559	95,864
CAPITAL GRANTS AND GIFTS RECEIVED	15,302	27,453
ACQUISITION AND CONSTRUCTION OF CAPITAL ASSETS	(353,206)	(323,274)
PRINCIPAL PAYMENTS ON CAPITAL-RELATED DEBT AND LEASES	(77,098)	(49,512)
INTEREST PAYMENTS ON CAPITAL-RELATED DEBT AND LEASES	(47,538)	(47,237)
OTHER	1,474	(5,277)
NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES	(297,046)	(192,821)
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM SALES OF INVESTMENTS	3,987,515	5,873,091
PURCHASES OF INVESTMENTS	(4,091,814)	(5,878,173)
INVESTMENT INCOME	77,987	74,684
NET CASH PROVIDED BY INVESTING ACTIVITIES	(26,312)	69,602
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(3,852)	19,047
CASH AND CASH EQUIVALENTS – BEGINNING OF THE YEAR	35,754	16,707
CASH AND CASH EQUIVALENTS – END OF THE YEAR	$ 31,902	$ 35,754
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES
OPERATING LOSS	$ (368,580)	$ (526,538)
ADJUSTMENTS TO RECONCILE OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
DEPRECIATION/AMORTIZATION EXPENSE	228,714	206,978
CHANGES IN ASSETS AND LIABILITIES:
RECEIVABLES	3,920	(35,532)
INVENTORIES	(1,868)	1,139
OTHER ASSETS	(12,982)	806
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES	12,364	(688)
DEFERRED REVENUE	(25,258)	277
OTHER LONG-TERM LIABILITIES	28,964	(25,353)
U.S. GOVERNMENTAL GRANTS REFUNDABLE	(745)	366
LOANS TO STUDENTS	(2,040)	(1,941)
NET CASH USED BY OPERATING ACTIVITIES	$ (137,511)	$ (380,486)

• See accompanying notes to basic financial statements.
• Dollars in thousands

 

Notes to Financial Statements

NOTE 1:

Summary of Significant Accounting Policies

FINANCIAL REPORTING ENTITY

The University of Washington (University), an agency of the state of Washington, is governed by a 10-member Board of Regents, appointed by the Governor and confirmed by the state Senate.

The financial statements include the individual schools, colleges and departments of the University, the University of Washington Medical Center (UWMC), Portage Bay Insurance (a wholly-owned subsidiary of the University) and certain affiliated operations determined to be a part of the University’s financial reporting entity. Affiliated organizations are evaluated for inclusion in the reporting entity as component units based on the significance of their relationship with the University.

Component units are legally separate organizations for which the University is financially accountable. These entities may be reported in the financial statements of the primary government in one of two ways: the component units’ amounts may be blended with the amounts reported by the primary government, or they may be shown in a separate column, depending on the application of the criteria of Governmental Accounting Standards Board (GASB) Statement No. 14, “The Financial Reporting Entity” as amended by GASB Statement No. 39, “Determining Whether Certain Organizations Are Component Units, an amendment of GASB Statement No. 14.” All component units of the University meet the criteria for blending except UW Medicine/Northwest. It is reported discretely since it has a separate board of directors and it does not provide services exclusively to the University.

BLENDED COMPONENT UNITS

The following entities are presented as blended component units because they provide service exclusively or almost exclusively to the University. Financial information for these affiliated organizations is available from their respective administrative offices.

The University of Washington Alumni Association was established as a tax-exempt entity to connect and celebrate alumni and to support the University’s mission. The Alumni Association had operating revenues of $5,304,000 and $5,644,000 in 2010 and 2009, respectively.

The Association of University Physicians dba UW Physicians (UWP) was established as a tax-exempt entity for the exclusive benefit of the University of Washington School of Medicine (UWSOM). UWP employs UWSOM faculty and bills and collects for their clinical services as an agent for UWSOM. UWP had operating revenues of $174,998,000 and $173,572,000 in 2010 and 2009, respectively.

UW Physicians Network (UWPN) was established as a tax-exempt entity for the benefit of UWSOM, UWP and its affiliated medical centers, Harborview Medical Center (HMC) and UWMC, exclusively for charitable, scientific and educational purposes. UWPN was organized to coordinate and develop patient care in a community clinical setting. It enhances the academic environment of UWSOM by providing additional sites of primary care practice and training for faculty, residents and students. UWPN had operating revenues of $10,928,000 and $10,187,000 in 2010 and 2009, respectively.

Real estate financing entities – The entities listed below are nonprofit corporations that were formed to acquire, construct or renovate certain real properties for the benefit of the University in fulfilling its educational, medical or scientific research missions. These entities issue tax-exempt and taxable bonds to finance these activities.

Community Development Properties C-D
Educational Research Properties
Radford Court Properties
TSB Properties
Twenty-Fifth Avenue Properties
Washington Biomedical Research Properties I
Washington Biomedical Research Properties II
Washington Biomedical Research Facilities 3

These entities collectively have net capital assets of $262,577,000 and $273,836,000 in 2010 and 2009, respectively. They collectively have long-term debt of $300,325,000 and $307,358,000 in 2010 and 2009, respectively. These amounts are reflected in the University’s financial statements.

DISCRETELY PRESENTED COMPONENT UNIT

UW Medicine and Northwest Hospital & Medical Center, a 281-bed full-service acute care hospital, entered into an affiliation agreement effective January 1, 2010. Northwest Hospital & Medical Center has been reorganized and renamed UW Medicine/Northwest (Northwest). The University is the sole corporate member of Northwest.

The change in the reporting entity was retrospectively applied to the combined University and Northwest financial statements. The 2010 Northwest financial information is presented to show activity starting January 1, 2009, the beginning of its most recent fiscal year. In conjunction with this change in entity, Northwest changed its fiscal year-end from December 31 to June 30, in order to be consistent with the University. Accordingly, the discretely presented component unit reports activity for the 18 months ended June 30, 2010 in the Statements of Revenues, Expenses and Changes in Net Assets.

The audited financial statements of Northwest are available by contacting UW Medicine/ Northwest at 1550 N. 115th Street, Seattle, WA 98133-9733, Mailstop X-112.

JOINT VENTURES

In 1998, the University entered into an agreement with Seattle Children’s Hospital and Fred Hutchinson Cancer Research Center to establish the Seattle Cancer Care Alliance (SCCA). The SCCA integrates the cancer research, teaching and clinical cancer programs of all three institutions to provide state-of-the-art cancer care. Each member of the SCCA has a one-third interest. The University accounts for its interest in SCCA under the equity method and has recorded $63,390,000 and $55,998,000 in “Other Assets,” together with $7,392,000 and $7,755,000 in “Investment Income,” for its share of the joint venture in 2010 and 2009, respectively.

In 1986, the University entered into an agreement with Seattle Children’s Hospital to establish Children’s University Medical Group (CUMG) to assist the organizations in carrying out their pediatric patient care, charitable, educational, and scientific missions. CUMG employs UWSOM faculty physicians, and bills and collects for their services as an agent for UWSOM. The University records revenue from CUMG based on the income distribution plan effective December 31, 2008. The University’s patient services receivable (Note 5) includes amounts due from CUMG of $15,229,000 and $13,408,000 in 2010 and 2009, respectively.

BASIS OF ACCOUNTING

The financial statements of the University have been prepared in accordance with GASB Statement No. 34, “Basic Financial Statements — and Management’s Discussion and Analysis — for State and Local Governments,” as amended by GASB Statemnet No.35, “Basic Financial Statements — and Management’s Discussion and Analysis — for Public Colleges and Universities.” The University is reporting as a special-purpose government engaged in business-type activities (BTA). In accordance with BTA reporting, the University presents management’s discussion and analysis, balance sheets, statements of revenues, expenses and changes in net assets, statements of cash flows and notes to the financial statements. The financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting.

Under the accrual basis of accounting, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All intra-agency transactions have been eliminated. The University has elected not to apply any Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989. The University reports capital assets net of accumulated depreciation/amortization (as applicable), and reports depreciation/amortization expense in the Statements of Revenues, Expenses and Changes in Net Assets.

On July 1, 2008, the University adopted GASB Statement No. 52, “Land and Other Real Estate Held as Investments by Endowments.” This Statement requires endowments to report their land and other real estate held for investment at fair value. The University increased the carrying value of real estate held for investment in its endowment by $1,040,000 during 2009.

On July 1, 2009, the University adopted GASB Statement No. 51, “Accounting and Financial Reporting for Intangible Assets.” This Statement requires that all intangible assets not specifically excluded by its scope be classified as capital assets. The University recognized $2,707,000 in new intangible assets and $2,540,000 in intangible projects in process in the fiscal year ended June 30, 2010.

On July 1, 2009, the University adopted GASB Statement No. 53, “Accounting and Financial Reporting for Derivative Instruments.” This Statement prescribes rules for the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments. A key provision is that derivative instruments are to be reported at fair value. Changes in the fair value of derivative instruments that are used for investment purposes, or that are reported as investment derivative instruments because of ineffectiveness, are reported as investment income. Changes in the fair value of derivative instruments that are classified as hedging derivative instruments are reported in the Balance Sheets as deferrals. There was no financial statement impact to the University as a result of the implementation. Additional disclosure is included in Note 6.

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP involves management estimates that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates; however, in each case, the University believes that allowances, reserves and estimates of expected liabilities are adequate.

The University estimates the pollution remediation liability by reviewing the current status of known polluted sites and developing estimates of cleanup costs. These estimates are subject to change due to improvements in technology, inflation, changes in the scope of work and the pursuit of reimbursement from other responsible parties.

Allowances for doubtful accounts (Notes 4 and 5) are estimates based on the historical experience of the University and current economic circumstances with respect to the collectability of accounts and loans receivable.

The liability and expense related to the supplemental component of the University of Washington Retirement Plan (UWRP) (Note 16) is based on an actuarial valuation. The results of an actuarial valuation are estimates based on historical data and the demographics of the employee population.

The self-insurance reserve (Note 17) is estimated through an actuarial calculation using individual case-basis valuations and statistical analyses. Considerable variability is inherent in such estimates.

OTHER ACCOUNTING POLICIES

Investments. Investments, other than miscellaneous investments, are stated at fair value. Miscellaneous investments are stated at cost or, in the case of gifts, at fair values at the date of donation. The fair value of all debt and equity securities with a readily determinable fair value is based on quotations from national securities exchanges. The alternative investments, which are not readily marketable, are carried at the estimated fair values provided by the investment managers. The University reviews and evaluates the values provided by the investment managers and agrees with the valuation methods and assumptions used in determining the fair value of the alternative investments. Those estimated fair values may differ significantly from the values that would have been used had a ready market for these securities existed.

Investments under long-term strategies are considered noncurrent. Short-term investments consist primarily of cash equivalents and fixed income vehicles with maturities of less than one year.

Inventories. Inventories are carried at the lower of cost or market value. Consumable inventories, consisting of expendable materials and supplies held for consumption, are generally valued using the weighted-average method. Merchandise inventories are generally valued using the first-in, first-out method.

Capital Assets. Land, buildings, equipment, library books and intangibles are stated at cost or, if acquired by gift, at fair market value at the date of the gift. Additions, replacements, major repairs and renovations are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, generally 15 to 50 years for building components, 20 to 50 years for infrastructure and land improvements, 5 to 7 years for equipment, 15 years for library books, and 3 to 15 years for intangibles.

Capitalized construction-related interest was $5,848,000 and $1,960,000 during 2010 and 2009, respectively.

Deferred Revenues. Deferred revenues occur when funds have been collected in advance of an event, such as advance ticket sales, summer quarter tuition and unspent cash advances on certain grants.

Deferred Giving – Split-Interest Agreements. Under these agreements, donors make initial gifts to trusts or directly to the University. The University has beneficial interest, but is not necessarily the sole beneficiary. The University records an asset related to these agreements at fair market value at year-end. The University also records a liability related to the split-interest agreements equal to the present value of expected future distributions; the discount rates applied range from 5.1% to 8.0%.

Compensated Absences. University employees accrue annual leave at rates based on length of service and for sick leave at the rate of one day per month. Annual leave accrued at June 30, 2010 and 2009 was $72,797,000 and $73,163,000, respectively, and is included in Accrued Liabilities. Sick leave accrued as of June 30, 2010 and 2009 was $29,014,000 and $29,991,000, respectively, and is included in Long-Term Liabilities.

Scholarship Allowances. Tuition and Fees are reported net of scholarship allowances that are applied to students’ accounts from external funds that have already been recognized as revenue by the University. Student aid paid directly to students is reported as scholarships and fellowships expense.

State Appropriations. The state of Washington appropriates funds to the University on both annual and biennial bases. These revenues are reported as nonoperating revenues in the Statements of Revenues, Expenses, and Changes in Net Assets.

Federal ARRA Education Funding. As a result of the American Recovery and Reinvestment Act of 2009 (ARRA), the federal government granted funds to the state of Washington to support K-12 and higher education. Accordingly, the state of Washington passed through $43,971,000 to the University in fiscal year 2010. These revenues are reported as nonoperating revenues in the Statements of Revenues, Expenses and Changes in Net Assets.

Operating Activities. The University’s policy for reporting operating activities in the Statements of Revenues, Expenses, and Changes in Net Assets is to include activities that generally result from exchange transactions. Examples of exchange transactions are payments received for tuition, patient services or grants under which services are performed, as well as payments made for the delivery of goods or services. Certain other significant revenue streams used for operations, such as state appropriations, Pell grants, gifts and investment income are recorded as nonoperating revenues, as prescribed by GASB Statement No. 35.

Net Assets. The University’s net assets are classified as follows:

Invested in capital assets, net of related debt: The University’s investments in capital assets, less accumulated depreciation/amortization, net of outstanding debt obligations related to capital assets;

Restricted net assets – nonexpendable: Net assets subject to externally-imposed requirements that they be maintained permanently by the University, including permanent endowment funds and annuity and life income funds;

Restricted net assets – expendable: Net assets which the University is obligated to spend in accordance with restrictions imposed by external parties, generally scholarships, research and department uses;

Unrestricted net assets: Net assets not subject to externally imposed restrictions and which may be designated for specific purposes by management, or the Board of Regents.

Tax Exemption. The University, as an agency of the state of Washington, is not subject to federal income tax pursuant to Section 115 of the Internal Revenue Code, except for tax on unrelated business income.

NOTE 2:

Cash and Cash Equivalents

Cash includes cash on hand, petty cash and bank deposits. Most cash, except for cash held at the University, is covered by federal depository insurance (FDIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). At June 30, 2010 and 2009, bank balances of $4,770,000 and $2,917,000, respectively, were insured by the FDIC and balances of $30,020,000 and $33,395,000, respectively, were collateralized under the PDPC.

NOTE 3:

Deposit with State of Washington

State law requires the University to deposit certain funds with the State Treasurer, who holds and invests the funds. The deposits include amounts held for the University’s permanent land grant funds, the University of Washington building fee collected from students and certain general obligation bond reserve funds. The fair value of these funds approximates the carrying value.

NOTE 4:

Student Loans Receivable

Net student loans of $70,507,000 and $68,467,000 at June 30, 2010 and 2009, respectively, consist of $50,873,000 and $51,618,000 from federal programs and $19,634,000 and $16,849,000 from University programs. Interest income from student loans for the years ended June 30, 2010 and 2009 was $1,306,000 and $1,225,000, respectively. These unsecured loans are made primarily to students who reside in the state of Washington.

NOTE 5:

Accounts Receivable

The major components of accounts receivable as of June 30, 2010 and 2009 were:

(Dollars in thousands)	2010	2009
PATIENT SERVICES	$ 267,083	$ 241,342
GRANTS AND CONTRACTS	151,380	152,528
SALES AND SERVICES	10,406	9,880
TUITION	12,094	32,957
DUE FROM OTHER AGENCIES	35,135	28,361
ROYALTIES	14,839	20,863
STATE APPROPRIATIONS	19,852	12,516
OTHER	51,746	46,362
	562,535	544,809
LESS: ALLOWANCE FOR DOUBTFUL ACCOUNTS	(92,341)	(82,873)
TOTAL	$ 470,194	$ 461,936

NOTE 6:

Investments

INVESTMENTS – GENERAL

The Board of Regents of the University of Washington is responsible for the management of the University’s investments. The Board establishes investment policy, which is carried out by the Chief Investment Officer. The University of Washington Investment Committee, comprising Board members and investment professionals, advises on matters relating to the management of the University’s investment portfolios. The composition of the carrying amounts of investments by type at June 30, 2010 and 2009 is listed in Table 1.

TABLE 1 – UNIVERSITY INVESTMENTS (Dollars in thousands)
Investment Type	Carrying Value
	2010	2009
CASH EQUIVALENTS	$ 337,842	$ 440,742
DOMESTIC FIXED INCOME	1,105,961	968,847
FOREIGN FIXED INCOME	18,909	12,272
DOMESTIC EQUITY	421,489	279,589
FOREIGN EQUITY	479,014	399,056
NONMARKETABLE ALTERNATIVES	407,847	377,946
ABSOLUTE RETURN	376,730	341,032
REAL ASSETS	9,737	8,463
MISCELLANEOUS	4,471	5,717
TOTAL INVESTMENTS	$ 3,162,000	$ 2,833,664