The closing of FY2010 is significant in several important ways. We completed the budget and operational changes necessary to adjust to the reduction in investment and endowment income as a result of the 2008 global economic crisis. At the same time, we reflected on and celebrated the many accomplishments achieved by the midpoint of Emory’s ten-year strategic plan. And, perhaps most important, we look forward to the new opportunities and the clear challenges for Emory’s particular sector of higher education that we see in the years ahead.
Even as much of our effort during the last two years has, appropriately, been focused on specific actions and strategies to manage effectively through the worst global financial environment in more than seventy-five years, we simultaneously continued to develop the broader framework necessary to operate from a position of strength for the long term.
At this juncture, the five-year point of the strategic plan, it is worth highlighting concrete indicators of our progress in advancing this broader resource-management framework. In the years prior to the downturn, Emory achieved savings of approximately $20 million in ongoing annual operating costs through debt restructuring, strategic sourcing, benefit audits, maintenance and housekeeping staffing consolidations, and many other initiatives, all for reinvestment toward objectives articulated in the strategic plan.
And, in direct response to the 2008 financial crisis, having to adjust to approximately $50 million less in annual investment and endowment income, we reduced the number of administrative positions by approximately 6 percent over the two-year period ending in 2010.
During the 2005–2010 period, Emory implemented a Trust Line, a Financial Attestation Process, a Fraud Awareness and Detection Program and, as noted by President Wagner, an Enterprise Risk Management framework and process that is recognized among best practices in higher education. These and other actions are focused on creating an environment of trust, proper reporting, fiduciary responsibility, and accountability so necessary in our environment today and going forward.
These efforts, in conjunction with the development of best-practice liquidity and debt management tools and processes, have enabled us not only to manage effectively through the financial storm, but also to strengthen Emory’s foundation for ongoing effectiveness.
During 2010, Emory’s credit ratings were reaffirmed by Standard and Poor’s (AA) and Moody’s (As2), and here I note an excerpt from the Moody’s July 2010 report:
Emory’s governance and management is viewed as a credit strength for the University. Management has implemented, with Board support, active monitoring of the investment markets, liquidity within the operating and endowment funds as well as debt management tools—all regularly reported up to the University’s Board of Trustees. Emory’s management was proactive in recognizing the looming investment market issues in 2008, forecasting scenarios for the impact on the endowment, the endowment spend and on operations. The Board approved and implemented various measures to address the expected financial impact, including reducing the endowment draw and cost management efforts while continuing to make its planned strategic investments. The University also established a regular surveillance of its variable rate debt, investment commitments and liquidity to meet its forecasted needs. As a result, we expect Emory to continue to demonstrate good management, best business practices and board engagement with these creditworthy approaches.
Although we have significant ongoing work to do on the many business-related fronts, several of which are noted in President Wagner’s letter, Emory adjusted to the new financial climate, strengthened its financial practices and framework for the future, and is committed to further enhancement going forward.
Among the most visible symbols of progress since launching the strategic plan, culminating particularly with the work completed in FY2010, are the physical changes on campus. For example, Emory has reinvented the freshman experience through programming and by designing and building an innovative first-year residential community that supports transformational learning beyond the classroom. Our freshman complex reached a critical mass in 2010 with the opening of the new Longstreet-Means Halls.
Currently, 774 first-year students live in the three phases of the freshman village built since 2005, and this progress will continue with the groundbreaking for phase four in February 2011. When the village is complete, the entire freshman class will live in the center of campus in close proximity, uniquely positioned to take full advantage of the remarkable learning and growth opportunities that our undergraduate residential experience provides during that crucial first year.
New academic facilities rose across the campus to support the exemplary research, scholarship, teaching, and learning activities that occur here. The sheer magnitude of what has been accomplished can be seen in the above map, which depicts the new construction completed on the main campus between 2005 and 2010. These dynamic new facilities, coupled with the significant renovation and upgrading of existing ones, demonstrate the breadth and magnitude of the investments that have been made to support Emory’s faculty and students in their pursuit of excellence. Our master plan, designed to support the strategic plan goals, is by no means fully realized, but it is clearly advancing with great strides. With the help of Emory’s donor community, we can continue to fulfill the promise of the plan in the years ahead.
As Emory celebrates these and many other accomplishments noted by President Wagner, we remain very mindful that the economic framework for higher education and health care was not just temporarily altered by the global economic events of 2008, but will continue to change significantly in the years ahead due to changes in the broader economic, social, and technological context in which we live. We recognize such change will take place in the overall models for our three primary lines of business: education, research, and patient care. It will be the quality of the people who constitute Emory’s community that will determine the level of success and excellence achieved throughout these periods of change.
Emory’s leadership is calling on the creative and resourceful minds throughout the University to examine their work and establish innovative ways to fulfill the University’s mission through new revenue and cost-reduction opportunities. These activities must become an ongoing part of Emory’s daily fabric.
In preparation for the next fiscal planning cycle, all schools and major units have been specifically charged to identify and develop creative net-revenue growth opportunities; continue to develop cost-saving strategies such as increased productivity, elimination of unnecessary activity, and restructuring or reorganizations; and establish synergies and strategies to make current programs more effective and efficient.
Join me in thanking the Emory community for its tireless work and dedication and for the genuine positive spirit with which it carries out the mission of the University. With the ongoing support and commitment of Emory’s faculty, students, staff, and public and private supporters, I am confident that Emory will continue to adapt to changing conditions. Most important, Emory will continue to deliver great value in education, research, and patient care that contributes in such a meaningful way to positive transformation in the world.
Michael J. Mandl
Executive Vice President for Finance and Administration
August 31, 2010 and 2009
(With Independent Auditors' Report Thereon)