Achievement & Celebration

Annual Report of the President 2014
Emory Expands Its Positive Societal Impact

Emory Expands Its Positive Societal Impact

Fiscal year 2014 provided Emory with both planned and unforeseen opportunities to elevate our impact on society within the context of the university's mission. It was indeed a good year.

Michael J. Mandl, Executive Vice President, Business and Administration

The university’s financial position is strong. Our endowment posted a record high of $6.7 billion as of August 31, 2014, ahead of where we were at the start of the Great Recession. Endowment growth was boosted by very strong investment gains and inflows from gifts. Emory invested approximately $250 million from endowment for academic programs, operations, and capital. The endowment and its growth going forward will continue to play an instrumental role in Emory’s ability to provide an exceptional learning, teaching, and research environment for faculty, students, and society at large.

The Emory faculty continues to attract an increasing share of a shrinking pool of federal research dollars. For the fifth consecutive year, Emory celebrated its faculty for receiving more than $500 million in external research awards in FY14. Our receipt of $521.8 million, a 2.56 percent increase over last fiscal year, included more than $356 million from federal agencies, with 84 percent of that federal funding, or nearly $300 million, from the National Institutes of Health. Emory researchers tackle complex and daunting health challenges such as Alzheimer's, infectious disease and surveillance, the genetics of mental health, cancer clinical trials, and many others. This funding demonstrates confidence in our renowed researchers and recognizes the positive impact and high societal value of their work.

Emory used the reaccreditation process as an opportunity to show relentless focus on enhancing the undergraduate educational and student-faculty learning experiences that are uniquely Emory by developing a Quality Enhancement Plan (QEP), "The Nature of Evidence." The QEP creates new opportunities for first-year undergraduates to evaluate and analyze different forms of evidence and ultimately empowers students as independent scholars capable of supporting arguments, understanding and knowing based on different types of evidence in a world of proliferating, ubiquitous information. This academically invigorating new endeavor supports both our education and research goals. Emory is investing several million dollars during the next few years to implement this groundbreaking approach. All of Emory’s schools and colleges continue to innovate their educational programs to deliver the value that students, their families, and the public have come to expect from Emory.

Emory Healthcare improved its financial performance in FY14 in a highly fragmented and competitive local health care market and a challenging national health care environment. For the third year in a row, the University HealthSystem Consortium—a national organization comprising most of the nation’s leading academic medical centers with a focus on high-quality care and safety excellence—ranked Emory University 
Hospital in the top 10 nationally. Also for the third year in a row, US News & World 
Report ranked Emory University Hospital the No. 1 hospital in both Georgia and metro Atlanta in its 2014–2015 Best Hospitals guide.

And, of course, during the last month of the fiscal year (August 2014), Emory University Hospital admitted the first two patients to be treated in the US for the Ebola virus. Years of planning, preparation, and simulation by hospital physicians, nurses, and staff for such a crisis proved critical as our colleagues successfully helped these patients become Ebola survivors. The patients’ treatment represented the best of Emory’s faculty physicians, staff, and leadership—all of whom rose to the occasion during a time of concern regarding a potential national health crisis.

In addition to the exemplary Ebola care provided, the protocols that Emory 
Healthcare developed and shared will help other health providers worldwide. The lasting impact of this patient treatment will provide physicians and medical staff with an opportunity to improve outcomes for others with the disease, and represents precisely the kind of groundbreaking medical treatment, research, and education that we strive for in pursuit of our mission. Had the Emory University Hospital isolation unit deployed for the care and treatment of these Ebola patients been evaluated based on a financial return on investment throughout the years prior to the patients’ arrival, it likely would not have survived. Mission matters.

On the physical front, progress continues on Emory University Hospital’s new bed tower and patient bridge system that will connect all clinical facilities and parking. This significant new addition will open in 2017. In the meantime, the hospital’s emergency department was renovated in FY14 and nearly doubled in size to provide more treatment spaces, shorter stays, and improved service.

Our campus facilities support the Emory experience, and new projects enhance our campus even as we near the end of Emory’s successful Campus Master Plan for 2005–2015. Of note, our final residence hall in Emory’s new freshman housing complex was completed in FY14 and occupied by more than 300 first-year students in August. This facility, Raoul Hall, is the sixth residence hall built since 2005. It supports our overall housing strategy to enhance the residential learning experience, with new rooms located at the center of the university’s main campus.

In FY14 Candler School of Theology celebrated both its centennial and the opening of its second academic facility. The new construction includes instructional areas where students can develop skills in preaching, worship leadership, and music direction. The addition also provides a new home for the world-renowned collection of Pitts Theology Library. In sum, more than 10,000 theologians have graduated from Emory since 1914; the school is recognized as one of the top theology schools in the nation, with world-class treasures housed in the library.

Emory’s innovative water-reclamation facility neared completion; it can reclaim up to 400,000 gallons of water per day for use in Emory’s chillers and for its irrigation needs, achieving water conservation and cost savings. This project is the first of its kind in the country. It demonstrates our leadership in adopting new technologies to improve our operations and, in this case, embracing innovation that supports Emory’s ongoing efforts to create a sustainable community and conserve water—a precious commodity 
in metropolitan Atlanta and nationwide.

Finally, Emory continues to enhance business operations that support mission 
activities. An array of organizational, process, and technology initiatives is under way to drive continuous improvement. To this end, leadership success matters now more than ever. During the past year, Emory University hired a new chief finance officer and a new chief university budget officer who work in tandem to improve our financial organization and create a comprehensive finance and budgeting model with less complexity, more clarity, and—ultimately—more cost effectiveness.

Through exceptional faculty and students, unwavering commitment to mission, and strong financial performance, Emory is fulfilling its vision of courageous leadership for positive transformation in the world. I thank all who have invested their time, talents, and resources during the past year, without whom Emory could not deliver on its promise to do what only Emory is uniquely positioned to do. 

Michael J. Mandl
Executive Vice President, Business and Administration

Annual Financial Report Letter

Annual Financial Report Letter

The consolidated financial report for FY14 reflects a strong year after delivering Emory's core mission: education, research and scholarship, and health care. Resources support these activities, with real impact to the quality of student experience, faculty excellence, reputational value, and the wise use of assets entrusted to Emory.

The table summarizes key consolidated financial results for FY14 and FY13:

Chart: FY2013 Total Operating Revenue, in thousands

Consolidated Statement of Financial Position


Carol Dillon Kissal,
Chief Finance Officer and Vice President for Finance

Emory’s total assets increased from $11.5 billion in FY13 to $12.6 billion in FY14, primarily as a result of an increase in the market value of investments and additions to the endowment.

Cash and cash equivalents increased from $463.4 million in FY13 to $557.3 million in FY14 primarily due to an increase in cash equivalents. For the fiscal year ended August 31, 2014, the investment return on the managed-funds portion of our investment portfolio was 18.24 percent. The net increase in the total investment portfolio, after accounting for market returns, spending distributions, and donor/internal contributions, was 13 percent, as investments grew from $7.2 billion in FY13 to $8.2 billion in FY14. The chart below reflects the total (operating and nonoperating) dollar amount of annual endowment and trust distributions and related market value for the past five years.

Patient accounts receivable increased 5 percent to $342 million due to higher volumes and rates for Emory Healthcare. Net contributions receivable decreased by 29 percent to $135.7 million, thanks to pledge payments received during the year. Emory’s total liabilities were $4.1 billion as of August 31, 2014. Accrued liabilities for benefit obligations and professional liabilities increased by $55.3 million in FY14 to $456 million. This increase primarily resulted from the increase in the postretirement and pension plan liability due to a decrease in the discount rate in FY14.

Long-term debt decreased by $37.6 million, or 2 percent, due to bond payments made as scheduled during the year. 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 occur as interest rates change. The liability for derivative instruments of $100.8 million in FY13 increased to $150.5 million in FY14 and represents the estimated amount the university would pay if it chose to terminate the exchange agreement as of the last day of the fiscal year.

Consolidated Statement of Activities

The total change in net assets for FY14 was approximately $880 million, driven primarily by investment-related activities reported in net nonoperating activities. This was the strongest growth reported since FY07, prior to the recession. Net operating revenue for FY14 was $16 million, continuing a positive trend that has endured in the past five years despite all the challenges in the economic and health care environments.

Revenue by Source

Chart: Endowment and Trust Market Values and Annual Distributions, $ in millions

Chart: FY2013 Total Operating Revenue, in thousands

Chart: FY 2013 Academic and Research Revenue, in thousands

Emory’s operating revenues remained strong during FY14 as almost all major lines reflected an increase over FY13. Net tuition revenue increased 6 percent to $376.9 million in FY14. Strong enrollments coupled with planned rate increases were the primary drivers of this favorable change. The university’s endowment spending distribution for operations, excluding capital amounts, increased by approximately 1 percent to $187.2 million in FY14. The university targets a 4.75 percent annual distribution from the endowment while exercising prudence to protect donors’ multigenerational support intentions.

During the past five years, Emory’s total sponsored revenue—including indirect cost recoveries as well as government and other grants and contracts—has grown from $457.9 million (FY10) to $476.2 million (FY14), representing a 4 percent increase during the past five years. However, as a result of reduced government spending, indirect cost recoveries in FY14 of $110.5 million decreased from $118.5 million in FY13. During FY14 Emory received awards totaling $521.8 million (2,813 awards).

The School of Medicine continues to drive research activity with 64 percent of total research awards during FY14. Yerkes National Primate Research Center and the Rollins School of Public Health accounted for approximately 14 percent each of total award funds, with the remainder driven by Emory College, the Nell Hodgson Woodruff School of Nursing, and other activities.

Net patient revenue for Emory Healthcare appears flat in FY14, as losses in the Emory Children's Center joint venture were balanced by significant revenue growth in other clinical and hospital services. Following termination of the joint 
venture, a lease agreement for physicians serving the Emory Chidren's Center resulted in an increase of $80.6 million in revenue for university medical services in FY14. 

Chart: Sponsored Awards Revenue by Source, in thousands

Operating Expenses

Emory’s total operating expenses increased in FY14 to $4.1 billion, an increase from $4.0 billion in FY13. Emory Healthcare expansions and depreciation expense from new facilities were principal reasons for growth in operating expenses. Salaries and fringe benefits increased 3 percent to $2.54 billion in FY14 from $2.46 billion in FY13, largely associated with the inclusion of the new Pediatric Center and the increase in health insurance cost. The average outstanding debt during FY14 was higher than in FY13, which contributed to an increase in interest expense of 8 percent to $78.3 million in FY14.

Nonoperating Revenue / (Expenses)

Investment portfolio growth included net unrealized gains on investments and trusts and income from investments and trusts in excess of spending distributions for current operations of $829.5 million for FY14. Also reflected in the nonoperating section are gifts and contributions of $110.1 million and a negative change in the fair value of derivative instruments of $49.7 million.


The financial strength of Emory has a direct impact on the priorities of the university and serves to advance value and innovation in health care, research, and education. 
On this solid foundation, Emory pursues its growth in value to its constituents and society via intentional investments in a community that values integrity, optimism, and excellence.

Carol Dillon Kissal
Chief Finance Officer and Vice President for Finance