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Annual Financial Report Letter

Introduction and Overview

Edith C. Murphree

Despite the continued economic uncertainties of FY2010, Emory continued to focus on what it could control to improve its financial strength with both short-term and long-term strategies supporting our mission of research, teaching, health care, and social action. This disciplined approach to managing our new resource envelope has been supported throughout the institution and has allowed us to finish FY2010 in a position of relative strength.

The external uncertainties also created opportunities, and we continually have monitored and pursued those opportunities to position Emory for the future. The combination of market growth and investment decisions enabled Emory to recapture some of the prior years' endowment losses. In addition, our solid research core enabled us to secure opportunities under the American Recovery and Reinvestment Act of 2009 and lower the bond interest rates allowed us in order to refinance certain segments of our debt portfolio. The following table provides a summary of key consolidated financial results for FY2010 and FY2009.

Emory Financial Trends ($ in thousands)

  2010 2009
Total Assets 9,400,760 9,255,651
Total Liabilities -3,393,724 -3,333,184
Total Net Assets 6,007,036 5,922,467
Operating Revenues 3,142,791 3,026,028
Operating Expenses -3,133,354 -3,022,079
Net Operating Revenues 9,437 3,949
Nonoperating Net Revenue / (Expenses) 75,132 -1,025,091
Change in Net Assets 84,569 -1,021,142

Consolidated Statement of Financial Position

Total Assets

Emory’s total assets increased from $9.3 billion in FY2009 to $9.4 billion in FY2010. This increase was due principally to an increase in the total market value of Emory’s investment portfolio. Although our investment portfolio experienced significant losses in FY2009, Emory has continued to pursue sound opportunities in the market and, as a result, we experienced growth of 7.92 percent in the managed funds portion of our investment portfolio for FY2010. This growth exceeded the portfolio benchmark of 6.5 percent for the same period. The net increase in the total investment portfolio—after accounting for market returns, spending distributions, and donor contributions—was 3.8 percent as investments grew from $5.8 billion in FY2009 to $6.0 billion in FY2010.


Emory’s students’ accounts receivable increased during the fiscal year while loans receivable and net contributions receivable each decreased. Students’ accounts receivable increased from $45.9 million to $46.1 million in FY2010, due mainly to growth in enrollment. Loans receivable decreased by 7.8 percent to $29.5 million. Net contributions receivable decreased by 14.2 percent to $165.6 million, due to pledge payments on outstanding pledges and lower new pledge receivables booked.

Other Assets

Cash and cash equivalents decreased from $413.9 million in FY2009 to $341.9 million in FY2010 as assets were shifted from short-term holdings to fixed-income investments in the operating cash portfolio. This shift rebalanced the operating cash portfolio in accordance with allocation policy while maintaining ample short-term liquidity and taking advantage of market opportunities. We closely monitor Emory’s short-term and long-term liquidity needs and have very strong procedures and structures in place to manage both liquidity risks and costs.

Emory’s property, plant, and equipment increased from $2.2 billion in FY2009 to $2.3 billion in FY2010 primarily due to the new Rollins School of Public Health facility coming online.

Total Liabilities

Total institutional liabilities reflected a slight increase to $3.4 billion from $3.3 billion in FY2009. This increase was due to net changes within a variety of liability categories. Operational spending decreases stabilized growth in accounts payable; however, the interest rate environment resulted in a decline in the fair value of Emory’s swap exchanges from a negative $63.8 million at the end of FY2009 to a negative $153.5 million on August 31, 2010. These mark-to-market adjustments have fluctuated widely, even week to week, in the current economic environment.

Emory’s total net assets increased from $5.9 billion in FY2009 to $6.0 billion in FY2010. The principal reason for the increase was the increase in the market value of investments.

Consolidated Statement of Activities

In spite of the economic challenges of FY2010 and FY2009, Emory’s consolidated statement of activities reflects positive trends in indirect cost recovery, sponsored research, and net patient service revenues. Total operating revenues grew by 3.9 percent to $3.1 billion in FY2010.

As anticipated, the demand for need-based financial aid increased significantly in FY2010. Although gross tuition and fee revenue increased 4.7 percent over the FY2009 total of $428.5 million, it was outpaced by the 14.2 percent increase in scholarship allowances. The economic climate necessarily will constrain the rate of tuition increases going forward. These factors will continue to impact Emory’s net income.

Endowment Spending

The University has adopted endowment investment and spending policies that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. In FY2010, spending from the endowment decreased by a net 3.0 percent to $176.6 million. The operating spending distribution decline from the endowment portfolio was partially offset by an increase in dividends received from a major trust.

Research Activity

For FY2010, Emory continues to show a favorable increase in revenue from research activities. Total revenues from indirect cost recoveries and government and other grants and contracts totaled $457.9 million for FY2010, up 12.5 percent from $407.1 million in FY2009. A significant portion of Emory’s revenue growth in this area was associated with the federal government’s research stimulus funding. 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 $312.5 million (FY2006) to $457.9 million (FY2010), representing a 46.5 percent increase. Indirect cost recovery increased by 10.2 percent to $112.9 million in FY2010. This included stimulus program revenue of $43.4 million, or 9.5 percent of the total in FY2010.

Research awards received during FY2010 were strong. During FY2010, Emory received awards totaling $535.1 million (3,628 awards). In FY2009, we received awards totaling $484.3 million (3,425 awards).

Research Awards

  FY2010 FY2009
  Awards % of Total Awards % of Total
Corporate $28,332,782 5.29% $25,232,513 5.21%
Federal 396,491,491 74.10% 343,636,121 70.96%
Foreign 4,938,732 0.92% 3,319,374 0.69%
Private 69,907,801 13.06% 76,473,457 15.79%
State 7,055,804 1.32% 9,216,173 1.90%
University 28,361,027 5.30% 26,372,715 5.45%
Total Awards 535,087,637   484,250,353  

Emory’s medical school continues to drive the majority of our research activity with 65 percent of total research awards received during the fiscal year. Yerkes National Primate Research Center’s activities accounted for 14.6 percent of total awards, and the Rollins School of Public Health represented 12 percent, with the remainder driven by Emory College of Arts and Sciences, the Nell Hodgson Woodruff School of Nursing, and other activities.

Emory Healthcare

Although the health care industry faces uncertainty as a result of the congressional proposals for universal insurance coverage and various new regulations, Emory Healthcare has closely monitored and taken steps to prepare for the future. In July 2010, HCA, Inc. exercised a contractual “put” of its interest in the EHCA Johns Creek Hospital and Emory Healthcare anticipates completing the purchase in early 2011.

Emory Healthcare continued to demonstrate its market strength through its $1.8 billion in net patient service revenue, but the economic downturn also continued to impact the insured and uninsured payor mix of patients. Net operating income at the end of the year was $96.2 million, which was approximately $3.7 million favorable to budget.


Campaign Emory continues to bring in new gifts despite the economic challenges and uncertainty in our donor base, and we are seeing a transition toward a wider donor population, providing more gifts but smaller on average. Emory’s operating revenues were supported by $39.5 million in gifts and contributions during FY2010, which was in line with our FY2009 base of $39.0 million.

Despite economic challenges, Emory ended FY2010 cumulatively having raised more than $1.1 billion of the $1.6 billion goal of Campaign Emory. New gifts and commitments of $133.2 million were secured during the course of the fiscal year. In addition, we launched the employee component of the campaign and already have surpassed the $50 million goal with a total of $52 million raised as of August 31, 2010. Of the $1.1 billion raised to date for Campaign Emory, gifts and contributions of $313.9 million have been received for capital projects, $177.4 million for endowment, and the remaining $608.7 million for expendable purposes in support of academic programs and research operations.

Operating Expenses

Emory’s total operating expenses increased in FY2010 to $3.1 billion, up slightly from $3.0 billion the preceding fiscal year. This increase was primarily due to an increase in salaries and fringe benefits (associated primarily with health care and research growth)—which increased to $1.87 billion from $1.83 billion in FY2009—and an 8 percent increase in other operating expenses, including purchased services and supplies.

Although the most significant spike in family-need profiles and aid-application increases came in FY2009, student financial aid expense continued to require significant investment in FY2010. Aid applications increased by 7 percent, and state funding decreased by 11 percent. Enrollments and aid recipients within our core undergraduate programs continue to rise. In FY2010, undergraduate aid funded from institutional sources increased by more than 19 percent over the prior year, while total financial aid dollars awarded from all sources increased approximately 9 percent. Emory remains committed to meeting demonstrated financial need for students attending traditional undergraduate programs in FY2011 and continues to develop future aid strategies with sustainability, competitiveness, student quality, and access in mind. It will be critical to raise additional endowment to support financial aid in the years ahead.


Emory’s financial core remains strong. The economic constraints of the past two years have been met with effective and disciplined spending reductions without impairing our institutional excellence. We will continue to focus on the highest priorities related to students, faculty, and staff, while strategically planning our financial future around a new resource envelope to ensure a solid financial foundation for the long-term success of Emory.

Edith C. Murphree
Vice President for Finance


Emory University Consolidated Financial Statements and Supplementary Information (PDF)

August 31, 2010 and 2009

(With Independent Auditors' Report Thereon)