2005 - 2006: Yale University Finance Annual Financial Report

This September, the University launched its $3 billion “Yale Tomorrow” capital campaign. Building upon the strong foundation made possible by current and past donors, the funds raised in this new campaign will literally create the future! This year’s financial report focuses on the new capital campaign and how the University uses donations to improve academic programs, student learning experiences, infrastructure, and Endowment support to allow Yale to remain competitive and fulfill its mission of creating, disseminating, and preserving knowledge in an increasingly global environment. While we are excited by the potential of the campaign, it is also important for us to continuously look for ways to enhance, streamline and make more productive the operations of the University. In fiscal 2006, the University was able to keep expenses within the limits of available revenue, and closed the year with a net increase of $7 million in operating funds. The University continues to improve the accuracy and e∞ciency of all of its processes. In addition to the continued rollout of expense management systems, e-procurement, and online travel applications, the University completed the implementation of Yale’s “eBillePay” system. This internet-based system allows students to receive, manage and pay their tuition and other bills electronically 24 hours a day, every day of the year. In other areas, Yale strengthened its oversight of workers’ compensation by implementing new controls and a new system to ensure better claims management and tracking. The University has engaged the leading supplier of electronic staffing solutions to enhance our staffing capabilities. New business processes and a new system to support this initiative will be fully implemented in fiscal 2007. The University also completed a plan to upgrade and simplify its core Oracle Financial applications. Endowment growth was very strong, with a 22.9% return on investments that resulted in increased net assets of $3.3 billion. The continued generosity of donors, combined with prudent management and strong investment returns, has allowed the University to continue to meet its ambitious current and long-term goals. One of the strategies to help maintain the University’s competitiveness includes continued investment in the physical infrastructure, which helps attract faculty, support ground-breaking research, and provide students an environment to foster excellence and creativity. The University spent $265 million on facilities renovations and plans to spend more than $300 million a year over the next ten years to bring facilities up to modern standards and complete planned new state-of-the-art buildings supporting key initiatives across campus. The University was notified in June of 2006 that the federal government was initiating an investigation into our grant and contract financial practices. The University is cooperating with the investigation fully. In addition, we launched a comprehensive “100 day plan” to identify and correct any potential issues with University practices in this important area. While we will be working on this for a while, already controls have been tightened, new and revised policies put in place, and a significant investment made to train business office personnel, lab personnel, and principal investigators to improve all aspects of financial accounting and controls for grants and contracts. Rules and regulations for grant activity continue to grow in complexity, but we are determined to be fully compliant and to become a model for best practices in this area. A new position has been created–Associate Vice President for Research Administration–and this unified leadership and organizational structure has already strengthened our capacity to meet federal requirements. I will continue to work personally in this critical area to ensure we have the appropriate infrastructure in place to administer this important activity in the most efficient and transparent manner. John Pepper retired from his position as Vice President for Finance and Administration this past January and I was appointed in June 2006. While John led Finance and Administration for only two years, he had a significant impact on the University, especially in the development of staff. We appreciate all of the good work John did for the

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