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Annual Financial Report Letter

Edith C. Murphree

Introduction and Overview

Despite the economic crisis that characterized FY2009, Emory continued to grow in several areas core to our mission of research, teaching, health care, and social action. We have focused on those initiatives key to our long-term success, and our goal is to ensure Emory’s excellence by creating a solid financial foundation for the future.

Although the global economic market had a significant negative impact on Emory’s endowment value, the fiscal year ended with solid results in light of the recessionary context, with increases in major revenue categories and positive net operating income. Responsible and coordinated financial management and a commitment to operational excellence were key to these results. The following table provides a summary of key financial results for FY2008 and 2009:

Emory Financial Trends ($ in millions)

  2009 2008
Total Assets 9,256 10,116
Total Liabilities -3,333 -3,173
Total Net Assets 5,923 6,943
Consolidated Operating Revenues 3,026 2,887
Consolidated Operating Expenses -3,022 -2,832
Consolidated Net Operating Revenues 4 55
Consolidated Nonoperating Net Expenses -1,025 -321
Change in Net Assets -1,021 -266

Consolidated Statement of Financial Position

Total Assets

Emory’s total assets decreased from $10.1 billion in FY2008 to $9.3 billion in FY2009. This decrease was due principally to a decrease in the total market value of Emory’s investment portfolio. Despite this overall decrease, two important asset categories increased during FY2009: cash and cash equivalents, and our investment in the physical plant via property and equipment, as noted below.

Investment Portfolio

With regard to our investment portfolio, Emory Investment Management continued to follow markets closely during the fiscal year and made prudent and responsible adjustments as needed. Owing to the slowing of the economy through FY2009, combined with steep decreases in virtually every asset class during the year, the value of our investment portfolio fell, ending the year with a decline of 17.1 percent—from $7.0 billion in FY2008 to $5.8 billion in FY2009. This was the net decline after accounting for the negative return, spending, and gifts. The managed-funds portion of our investment portfolio had a negative return of 14.5 percent for FY2009.


Emory’s students' accounts receivable, loans receivable, and net contributions receivable each decreased during the fiscal year. Students' accounts receivable dropped from $52.7 million to $45.9 million in FY2009, due to the increase in financial aid, which is disbursed directly to the students account. Similarly, loans receivable decreased by 7.5 percent to $32.0 million. Patient accounts receivable, however, increased from $212.0 million in FY2008 to $224.9 million in FY2009. This increase resulted from slower collections overall and a shift in the payer mix noted below.

Net contributions receivable decreased by 10.5 percent to $193.0 million, which is explained in part by the receipt of payments in 2009 on lead campaign pledges, as well as the economic downturn and its impact on new, large pledges made as part of Campaign Emory.

Other Assets

Cash and cash equivalents increased from $35.0 million in FY2008 to $413.9 million in FY2009 due to an increase in the short-term asset holdings in the operating cash portfolio for liquidity purposes and a $250.0 million taxable bond issuance during the year. We continue to monitor Emory’s short-term and long-term liquidity needs and have the necessary procedures to make adjustments required to optimize liquidity risk versus costs.

Emory’s property, plant, and equipment increased from $2.1 billion in FY2008 to $2.2 billion in FY2009 as a result of several new facilities coming online, including the Psychology and Interdisciplinary Science Building.

Total Liabilities

Total institutional liabilities increased 5.1 percent to $3.3 billion from $3.2 billion in FY2008. This increase was due to net changes associated with a number of liability categories; however, the majority of the change is due to an increase in bonds payable.

Accounts payable and accrued liabilities, which totaled $444.6 million in FY2009, grew 24.8 percent as a result of a decrease in the Voluntary Employees’ Beneficiary Association funded status and a large FICA legal settlement with the IRS. (Emory received a cash settlement of $54.1 million, but owed medical residents $38.1 million of that amount, which was paid out after the fiscal year ended.) The increase in bonds, notes, and mortgages payable was due largely to 2009 taxable and tax-exempt bond issues, offset by payments and refunding, as noted below.

The consolidated statement of financial position also was impacted by accounting standards, including FSP FAS 117-1 related to endowments and net asset classifications of funds, as required by Georgia’s passage of the Uniform Prudent Management of Institutional Funds Act. FAS 117-1 required Emory to reclassify roughly $2.5 billion in donor-restricted funds from unrestricted net assets to temporarily restricted net assets. Because Emory is an independent institution and Georgia adopted UPMIFA, FSP FAS 117-1 requires the restatement of Emory’s endowment net assets.

The total net assets for the institution fell from $6.9 billion in FY2008 to $5.9 billion in FY2009. The principal reason for the decrease was the decline in the market value of investments.

Consolidated Statement of Activities

Highlights from the consolidated statement of activities include the following: growth in tuition, indirect cost recovery, sponsored research, and net patient service revenue. Total operating revenues grew by 4.8 percent to $3.0 billion in FY2009.

For the year, total net tuition and fee revenue was $295.7 million, which represents an increase of 3.8 percent over the FY2008 total of $284.9 million. The economic climate necessarily will constrain the rate of tuition increases going forward. At the same time, the demand for need-based aid is increasing substantially. This dual dynamic will impact Emory’s net income in the future as well.

Endowment Spending

Because of inherent lags in endowment spending formulas, decreases to spending from the endowment occur in the years following an economic downturn. Thus, total dollars in operating revenue resulting from spending from the endowment actually increased in FY2009 to $182.1 million, representing a 4.9 percent increase from the spending distribution in FY2008 of $173.6 million. Emory is projecting declines in spending from endowment for FY2010 and 2011.

Research Activity

Taken together, Emory’s research activities continue to drive growth in operating revenue. Total revenues from indirect cost recoveries and government and other grants and contracts totaled $407.1 million, up significantly from $391.5 million in FY2008. Further, the majority of Emory’s revenue growth in this area was not tied to the federal government’s research stimulus funding. Although Emory’s faculty actively sought research awards through the stimulus programs, the fiscal year results show Emory’s continued growth in its true research base and its enviable market share of federal and other research dollars.

During the past five years, Emory’s total revenue from indirect cost recoveries as well as government and other grants and contracts has grown from $336.3 million (FY2005) to $407.1 million (FY2009), representing a 21.1 percent increase during the past five years. Indirect cost recovery, government, and other grant and contract revenue from the federal government amounted to 79.4 percent of the $407.1 million in awards ($246.0 million from the National Institutes of Health); Emory received private and corporate awards constituting 17.1 percent of the total. The remainder came from state and other sources. Emory’s medical school continues to drive the majority of our research activity with 64.8 percent of total research awards. Yerkes National Primate Research Center’s activities accounted for 14.3 percent of total awards, and the Rollins School of Public Health represented 13.1 percent, with the remainder driven by Emory’s College of Arts and Sciences, the Nell Hodgson Woodruff School of Nursing, and other activities.

Health Care

With $1.8 billion in net patient service operating revenue, the economic downturn did not appear—on the surface—to impact Emory Healthcare’s inpatient or outpatient volumes as much as one might expect; both increased compared to the prior fiscal year. Compared to budget projections, however, the fiscal year brought challenges to Emory’s portfolio of health care operations. The downturn impacted the insurance payer mix from patients and the number of under- or uninsured patients being treated by our physicians.

The end result was an unfavorable relationship between budget and net patient revenue, which required significant reductions in compensation and fringe benefits, supply contracts, and other management actions throughout the year in order to produce a positive operating margin from health care operations.


Emory’s campaign continues to bring in new gifts despite the economy, but at rates lower than the prior year, as one might expect given the economic turmoil. Emory’s operating revenues were augmented by $39.0 million in gifts and contributions during FY2009, which was a 15.1 percent decrease from FY2008 of $45.9 million.

However, Emory ended FY2009 having cumulatively raised more than $971.2 million toward the goals of Campaign Emory, securing $133.0 million in new commitments during the course of the fiscal year. Although overall cash receipts decreased, the total number of gifts remained constant. Stronger fund-raising results in the second half of the fiscal year mitigated a portion of the recession’s effect on the first half of the fiscal year. Of the $971.2 million raised to date in Campaign Emory, gifts and contributions toward capital projects amount to $316.2 million, with $163.6 million raised for the endowment. The remainder, more than $491.4 million, is expendable and geared toward academic programs and research expenditures.

Operating Expenses

Emory’s total operating expenses increased in FY2009 to $3.0 billion, up from $2.8 billion the preceding fiscal year. This increase was primarily due to an increase in salaries and fringe benefits, which increased to $1.8 billion from $1.7 billion in FY2008. A major portion of this increase was due also to the opening of Emory University Hospital Northlake in September 2008.

In addition, student financial aid expense increased in FY2009 due to the economic decline and the resulting shift in family-need profiles. Aid applications increased by approximately 12 percent and appeals for additional aid due to exceptional financial circumstances increased by 143 percent over the prior year. Emory will continue its commitment to meet undergraduate students’ financial need as assessed by our Office of Financial Aid.

The increase in operating expenses resulting from other activities included an increase in interest expense as a result of a new taxable debt issuance to manage Emory’s liquidity needs. During 2009 the University issued debt with a par value of $250 million in taxable and $339 million in tax-exempt bonds. The taxable bonds were issued for general and liquidity purposes, while the tax-exempt bond proceeds were used to refund approximately $309 million of outstanding debt and fund various capital projects. Emory also experienced an increase in depreciation expense due to the addition of new facilities.

Overall, total operating expenses increased by 6.7 percent from FY2008, primarily as a result of new health care operations and growth in the sponsored research arena.


Fiscal year 2009 certainly presented major challenges; nonetheless, despite these constraints, Emory continues to operate from a strong financial foundation. We have responded to the challenges in a thoughtful and disciplined manner. We will continue to focus on the highest priorities related to students, faculty, and staff, while planning our financial future around a new resource envelope to ensure a solid financial foundation from which we will continue to build institutional excellence.

Edith C. Murphree
Vice President for Finance


Emory University Consolidated Financial Statements and Supplementary Information (PDF, 536K)

August 31, 2009 and 2008

(With Independent Auditors' Report Thereon)