Audit Committee Presentation DRAFT Annual Financial Report

1. Audit Committee Presentation DRAFT Annual Financial Report October 28, 2011

2. 2011 Revenues (in thousands) Total: $9,212,653

3. Revenue Comparison (in thousands)

4. REVENUES • Net Tuition and Fees ($1.15 billion in 2011 vs. $1.1 billion in 2010) – Increased $44 million over 2010, mainly driven by increases in the professional and nonresident tuition rates. Gross receipts for tuition and fees were $1.62 billion, net of scholarships of $471.2 million. Tuition assistance (TAP), grants (Pell, etc.) and scholarships are reported as reductions of tuition and fee revenue up to the amount billed. • Hospitals and Clinics ($2.04 billion vs. $1.88 billion) – Grew $165 million due to increased inpatient and outpatient volume and rates as well as an increase in Medicaid Disproportionate Share funding of approximately $21 million. • Federal Grants and Contracts ($722.2 million vs. $710.6 million) – Slight increase of $12 million over 2010. This represents sponsored program and research revenue for projects funded by the federal government and administered by the Research Foundation, Cornell and Alfred Ceramics . The largest federal sponsor in the 2011 fiscal year was the Department of Health and Human Services. • State, Local, and Private Grants and Contracts, and Other Sources ($629.9 million vs. $649.8 million) • State and Local ($195.3 million vs. $225.9 million) - Declined $31 million compared to 2010. Comprised primarily of State grants administered by the Research Foundation and Cornell. • Private Grants and Contracts ($328.9 million vs. $328.5 million) - Consistent with 2010 revenue of $328.5 million and represents private sponsored program revenue administrated by the Research Foundation, Cornell and Alfred Ceramics. Also, includes student service fees. • Other Sources ($105.7 million vs. $95.4 million) - Increased $10 million over 2010 and consists primarily of Cornell educational activities ($51.6 million) , and inventions, licenses, and other Research Foundation revenue ($32.6 million).

5. REVENUES (continued) • Auxiliary Enterprises ($840.1 million vs. $818.5 million) – Sales and services related primarily to residence halls ($378 million), food service ($233 million), and other activities (including vending, transportation, intercollegiate athletics, parking, etc., $229 million). Total auxiliary revenue increased $22 million largely due to modest increases in room rates and occupancy levels. • State Appropriations ($2.92 billion vs. $2.97 billion) – Declined $44 million compared to the prior year. Includes direct state tax dollar support for campus operations and the hospital state subsidy totaling $1.18 billion. Also, the State University received indirect state appropriations of $1.74 billion, comprised of state tax dollar support for fringe benefits ($1.15 billion), debt service ($492 million), and litigation expenses ($96 million). • Other Nonoperating ($905.8 million vs. $770.6 million) – Consists primarily of revenues from Federal and State student financial aid programs (Pell $275 million, TAP $187 million, other $68 million) as well as gifts ($114 million), investment gains ($115 million), investment income ($34 million), and capital grants ($95 million).

6. 2011 Expenses (in thousands)Total: $9,647,209

7. Expense Comparison (in thousands)

8. EXPENSES • Instruction ($2.21 billion in 2011 vs. $2.04 billion in 2010) – Increased $165 million. Represents expenses for all activities that are part of an institution’s instructional program. The increase over the prior year was predominantly from an increase in postemployment benefit obligations and fringe benefit expenses. • Research ($765 million vs. $663 million) – Includes all expenses for activities specifically organized to produce research. Increase of $101 million due to growth in sponsored program grant activity administered at the Research Foundation driven by federal stimulus funds, as well as an increase in postretirement benefit costs. • Support Services ($2.22 billion vs. $2.1 billion) – Increased $122 million largely due to postemployment benefit obligations and fringe benefit expenses. Comprised of the following: • Academic Support ($482.6 million vs. $440.2 million) –Support services for the institution’s primary instructional mission (e.g., libraries, educational media services, academic support information technology, course and curriculum development, etc.). • Student Services ($265.6 million vs. $258.4 million) – Offices with the primary purpose of contributing to students’ emotional and physical well-being and intellectual, cultural and social development outside the context of the formal instruction program (e.g., student services administration, counseling and career guidance, financial aid administration, student admissions, etc.). • Institutional Support ($844.5 million vs. $809.1 million) – Central, executive-level activities concerned with management and long-range planning for the entire institution (e.g., executive management, fiscal operations, general administration, public relations, etc.). • Operation and Maintenance of Plant ($622.9 million vs. $586.8 million) – Expenses for the administration of the University’s physical plant, including utilities.

9. EXPENSES, continued • Public Service ($315.1 million in 2011 vs. $295 million in 2010 )– Expenses for activities established primarily to provide non-instructional services beneficial to individuals and groups external to the institution (community service, cooperative extension services, etc.). • Hospitals and Clinics ($2.3 billion vs. $2.23 billion) – All expenses associated with the patient care operations of the hospitals, including postemployment and fringe benefit costs. Growth of $74 million due to core operating and personal service costs. Also expenses related to Long Island College Hospital (LICH). • Auxiliary Enterprises($839 million vs. $792 million) – Exists to furnish goods or services to students, faculty, staff, other institutional departments, or incidentally to the general public, and charges a fee directly related to the cost of the goods or services (e.g., residence halls, food service, campus store, etc.). Increase due primarily to increase in occupancy levels using auxiliary services. • Depreciation and Amortization ($440 million vs. $432 million) – On the University’s capital assets calculated in accordance with the University’s capitalization and depreciation policy. • Other Nonoperating Expenses ($392.1 million vs. $341.7 million)– Increase was mainly due to acquisition of LICH offset by decrease in Research Foundation’s postretirement benefit obligation. Also, an increase in interest expense on capital related debt. • Scholarships and Fellowships ($167.7 million vs. $172.2 million) – Relatively flat and represents student financial aid and restricted and unrestricted resources received in excess of institutional charges to students (refunds to students).

10. Financial Position (in thousands) • Total assets have grown to $13.5 billion driven by growth in capital assets, investments, and deposits held with trustee for capital. • Total liabilities were $13.2 billion at June 30, 2011 and increased $2.1 billion due to an increase in long-term debt of $1 billion mainly for the educational and residence hall facilities. The liabilities for postemployment benefit obligations and compensated absences also increased $597 million in 2011.

11. Composition of Net Assets (in thousands) • Unrestricted net assets continue to decline due to the recognition requirements related to postemployment benefits. • Acquisition of Long Island College Hospital also contributed to the decrease in 2011. • Other net asset categories have risen as a result of capital grants, 3rd party gifts, and investment return.