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Annual Financial Report Letter

Edith C. Murphree

Overview of Finances for FY2011

As we celebrate Emory University’s anniversary, we are reminded of the solid financial foundation left to us by the business stewards of the past. Although the global economic pressures continued in FY2011, it is not the first financial storm faced by Emory nor will it be the last. In this spirit, we reflect on the past year’s financial results as we anticipate and prepare for the future.

The continued rising cost of higher education has been a national focus during the past few years, and Emory is committed to constraining net tuition growth without sacrificing educational excellence. This commitment calls for strengthening the net asset base by growing our investment portfolio, using debt capacity effectively, and closely managing liquidity. We were pleased to see market recoveries in our investment portfolio as our total investments grew by more than $600 million during the year.

Our academic medical center must respond to the changing governmental and health care industry environments with both agility and discipline. As Emory moves into FY2012, we do so with additional health care opportunities embraced during FY2011, including the full ownership of Emory Johns Creek Hospital and the merger with Saint Joseph’s Health System. Emory Specialty Associates continues to grow as we expand our physician network in the broader Atlanta metropolitan area.

The following table summarizes the key financial results for FY2011 and FY2010:

Emory Financial Trends ($ in thousands)

  2011 2010
Total Assets 10,061,834 9,398,934
Total Liabilities -3,401,131 -3,393,724
Total Net Assets 6,660,703 6,005,210
Consolidated Operating Revenues 3,369,395 3,142,791
Consolidated Operating Expenses -3,367,734 -3,133,354
Consolidated Net Operating Revenues 1,661 9,437
Consolidated Nonoperating Net Expenses 653,832 75,141
Change in Net Assets Related to Noncontrolling Interests 4,872 -9
Change in Net Assets Controlled by Emory 660,365 84,569

Consolidated Statement of Financial Position

Emory’s total assets increased from $9.4 billion in FY2010 to $10.1 billion in FY2011, reflecting growth on the asset side and stability on the liability side of the equation.

Cash and cash equivalents increased from $342 million in FY2010 to $363.8 million in FY2011 as cash generated by investing activities outpaced the combined requirements for operational and financing activity needs. As part of our risk-management process, we closely monitor Emory’s short-term and long-term liquidity needs and have solid procedures and structures in place to manage both liquidity risks and costs.

Even as the global investment markets remained volatile, Emory is pursuing opportunities with discipline. As a result, we experienced growth of 13.6 percent in the managed-funds portion of our investment portfolio for FY2011, which slightly exceeded our benchmark of 13.4 percent. The net increase in investments (including interests in perpetual funds held by others), after accounting for market returns, spending distributions, and donor/internal contributions, was 5.5 percent as investments grew from $6.0 billion in FY2010 to $6.4 billion in FY2011.

Patient accounts receivable increased 11.6 percent to $252.0 million, with the majority due to the additional ownership interest in Emory Johns Creek Hospital. Net contributions receivable increased by 5.8 percent to $175.2 million, due to new donor commitments exceeding the payments on prior pledges as well as positive valuation adjustments related to changes in payment schedule plans. Other accounts receivable were higher than normal due to the delay in the receipt of government student aid funds of approximately $50 million, but this receivable was eliminated in early September when funds were received.

Emory’s total liabilities were $3.4 billion for both FY2010 and FY2011, but the components within showed some variability. Growth in university research activities, operational initiatives, and the additional interest in Emory Johns Creek Hospital led to an increase in accounts payable and accrued liabilities from $283.2 million in FY2010 to $357.1 million in FY2011. Accrued liabilities for benefit obligations and professional liabilities decreased by $33.8 million in FY2011 to $243.9 million. This decline primarily resulted from curtailment of the Emory Healthcare defined benefit pension plan and the impact of discount rate assumption changes.

As a component of the debt portfolio, the university has various interest-rate swap agreements that effectively convert certain variable-rate debt to fixed rate. Fluctuations in the fair value of these exchanges continue as interest rates change, but the consistent lower rates in FY2010 and FY2011 created a negative position, or mark-to-market liability, for Emory. The liability for derivative instruments of $153.5 million in FY2010 decreased to $140.2 million in FY2011 and represents the estimated amount the university would pay to terminate the exchange agreement as of the last day of the fiscal year.

Consolidated Statement of Activities Operating Revenues

Emory’s operating revenue strength prevailed in the midst of the economic challenges faced during FY2011, as almost all major lines reflected an increase from FY2010. Tuition revenue, net of tuition discounts from direct Emory support, increased by 6 percent to $316.0 million in FY2011. Though a portion of the increase was related to rate increases, we are pleased that increased student enrollment was a key driver and reflects the continued competitiveness and desire for an Emory education. Total financial aid continued to increase at a higher rate than tuition prices with financial aid increasing by 8.9 percent in FY2011.

As a result of the 2009 investment declines, the university’s endowment spending distribution decreased by approximately 4.0 percent to $169.5 million in FY2011. The university targets a 4.75 percent distribution from the endowment annually while exercising prudence to protect donors’ multigenerational support intentions. The operating spending distribution declines from the endowment portfolio were offset by dividends received from a major trust not subject to the spending formula.

In FY2010 Emory benefited from significant research revenue growth associated with the federal government’s stimulus funding; however, research funding continued to grow in FY2011 without major stimulus funding. In FY2011, total revenues from indirect cost recoveries and government and other grants and contracts totaled $497.0 million, up 8.6 percent from $457.9 million in FY2010.

Research Awards

  FY2011 FY2010
  Awards % of Total Awards % of Total
Corporate $43,190,867 8.00% $28,332,782 5.29%
Federal 370,658,751 68.68% 396,491,491 74.10%
Foreign 6,766,299 1.25% 4,938,732 0.92%
Private 79,153,303 14.67% 69,907,801 13.06%
State 7,754,043 1.44% 7,055,804 1.32%
University 32,185,247 5.96% 28,361,027 5.30%
Total Awards 539,708,510   535,087,637  

During FY2011, Emory received awards totaling $539.7 million (4,192 awards). During FY2010, Emory received awards totaling $535.1 million (3,628 awards).

Emory’s medical school continues to drive the majority of our research activity with 64.6 percent of total research awards received during the fiscal year. Yerkes National Primate Research Center’s activities accounted for 13.1 percent of total awards, and the School of Public Health represented 14.1 percent, with the remainder driven by Emory College, the nursing school, and other activities.

In February 2011, the remaining 50 percent of the previous joint venture with HCA Holdings was acquired by Emory Healthcare. As a result, Emory Johns Creek Hospital positively impacted net patient revenue for FY2011. Of the net patient revenue increase in FY2011 of 8.4 percent to $2.0 billion, $53 million is attributable to the full inclusion of Emory Johns Creek Hospital operations.

Operating Expenses

Emory’s total operating expenses increased in FY2011 to $3.4 billion, an increase from $3.1 billion in FY2010. Along with research growth and Emory Healthcare expansions, we experienced growth in operating expenses as well. Salaries and fringe benefits increased 9.25 percent to $2.0 billion in FY2011 from $1.9 billion in FY2010.

Other operating expenses increased by 3.6 percent over FY2010. This reflects both support for key activities and expense reductions implemented throughout the university. We continue to focus on this area and search for ways to reduce or constrain growth in expenses so that resources can be focused on our core mission.

Nonoperating Revenue (Expenses)

The investment portfolio growth is represented by net unrealized gains on investments of $270.8 million and investment income and gains in excess of spending distribution for current operations of $247.2 million for FY2011.


We are pleased to report the solid operating performance and growth in net assets during FY2011; it represents the stewardship of Emory’s thousands of dedicated employees. With these results, we enthusiastically continue to build the Emory legacy.

Edith C. Murphree
Vice President for Finance


Emory University Consolidated Financial Statements and Supplementary Information (PDF, 1MB)

August 31, 2011 and 2010

(With Independent Auditors' Report Thereon)