the university of tennessee board of trustees

Finance and Administration Committee - Agenda

THE UNIVERSITY OF TENNESSEEBOARD OF TRUSTEES

FINANCE AND ADMINISTRATION COMMITTEE

October 22, 2020 Virtual/Student Union (Ballroom)8:00 a.m. – 9:30 a.m. (EDT) Knoxville, Tennessee

AGENDA

I. Call to Order and Roll Call

II. Opening Remarks of the Committee Chair

III. Requests to Address the Board (if appropriate for this Committee)

IV. CFO’s Report on the Committee’s Strategic Priorities—Information .......................................Tab 1A. Operating Budget Update......................................................................................................Tab 1.1B. Quarterly Financial Update...................................................................................................Tab 1.2C. Enterprise Resource Planning System .................................................................................Tab 1.3

V. FY 2021-22 Operating Budget Appropriations Request for Specialized Units—Action/Roll Call Vote..............................................................................Tab 2

VI. Use of UHS Proceeds—Action/Roll Call Vote.............................................................................Tab 3

VII. Revisions to Board Policy on Travel —Action/Roll Call Vote...................................................Tab 4

VIII. UT System Workforce Update—Information...............................................................................Tab 5

IX. FY 2020 Report on Endowment Investment Performance—Information ................................Tab 6

X. Consent Agenda — Action Items ...................................................................................................Tab 7

A. Minutes of the Last Meeting...................................................................................................Tab 7.1

B. Proposed Real Property Transactions...................................................................................Tab 7.2

1. Knox Blount Greenway Easement Expansion - UTIA..................................................Tab 7.3

2. Cumberland Forest Property Transfer - UTIA ..............................................................Tab 7.4

3. Sale of Gift Property at Hickory Orchard Way in Knoxville, Tennessee - UTK.......Tab 7.5

C. Proposed Naming of UTHS Building ...................................................................................Tab 7.6

D. Updated Corporate Authorization – Transfer of Securities ..............................................Tab 7.7

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Finance and Administration Committee - Agenda


XI. Other Business

[Note: Under the Bylaws of the Board, items not appearing on the agenda may be considered only upon an affirmative vote representing a majority of the total voting membership of the Committee. Other business necessary to come before the Committee at this meeting should be brought to the Committee Chair’s attention before the meeting.]

XII. Closing Remarks

XIII. Adjournment

Information Items.........................................................................................................................................Tab 8

A. Report on Use of Differential Tuition Funds at UTC......................................................................Tab 8.1

B. Report on Use of Differential Tuition Funds at UTK......................................................................Tab 8.2

C. FY 2020 Annual Flight Operations Report ......................................................................................Tab 8.3

D. Disclosure of Additional Revenue/Institutionally-Funded

Capital Projects for FY 2020-21...........................................................................................................Tab 8.4

E. Updated Committee Work Plan .......................................................................................................Tab 8.5

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Finance and Administration Committee - IV. CFO's Report on the Committee's Strategic Priorities - Information

AGENDA ITEM SUMMARY

Meeting Date: October 22, 2020

Committee: Finance and Administration

Item: Operating Budget Update

Type: Information

Presenter: David L. Miller, Senior Vice President and Chief Financial Officer

This operating budget update covers the last quarter of FY2019-20, the first quarter of FY2020-21, and current projections through December 2020. This period is used to be consistent with reporting required by the Tennessee Higher Education Commission (THEC) for all higher education institutions to provide insight into the impact of the Covid-19 pandemic. The pandemic has affected campuses by decreasing revenue in certain operations, increasing certain costs, but also decreasing certain budgeted expenses.

At the September 11, 2020 Executive Committee meeting we reported on known fiscal impacts through July 31. At that time we reported an overall negative impact of $83 million which was offset by $21 million of federal and state grants, $45 million in reduced expenditures, and a $10 million reduction in planned savings for a total of $76 million inoffsets. The net amount not offset was $7 million. However, those figures did not include estimates for the UTK football season.

This report provides details by campus and includes UTK football and more detail on potential lost revenue from all auxiliaries. However, strategies are being developed to offset revenue losses for football which are not reflected in this report. This report details an operating budget impact total of $147 million in lost revenue and Covid-19 related expenses. This total is partially offset by $21 million in federal and state grants, $54 million in reduced expenditures, and a $10 million reduction in budgeted savings. The net amount not offset is $62 million. The total impact of UTK football is $40 million and an estimated reduction of $13 million in other auxiliary revenue from special events, parking, vending, conferences, etc. The net impact without these additions is $9 million(see Table A). The estimate for UTC increased by $4.5 million attributable to auxiliary operations. This report does not include the potential impact on UTK basketball in 2021.

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Table A

Rounded to nearest mi l l ion $

August* Current* Including Football and Other Auxiliaries

Total Impact ($83) ($94) ($147)

Federal and State Grants $21 $21 $21

Reduced Expenditures $45 $54 $54

Decrease in budgeted savings $10 $10 $10

($7) ($9) ($62)*Excluding UTK footba l l and s pecia l events

Comparative Summary of August 2020 and Current Estimates through Dec. 2020

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Finance and Administration Committee - IV. CFO's Report on the Committee's Strategic Priorities - Information 1.1

COVID Fiscal Impact2020 Spring, Summer, and Fall TermsEstimates as of October 1, 2020

UTC UTK UTM HSC TOTALEstimated Fiscal ImpactRefunds & Revenue Reductions 16,009,000$ 95,335,000$ 4,448,000$ 2,857,000$ 118,649,000$ COVID-Response Expenses 2,082,000 22,302,000 1,510,000 2,449,000 28,343,000

Total Impact 18,091,000$ 117,637,000$ 5,958,000$ 5,306,000$ 146,992,000$

State & Federal Grant FundingCARES Act grants* 5,223,908$ 9,629,157$ 2,807,094$ 499,039$ 18,159,197$ State Coronavirus Relief Fund (CRF) grants 688,525 1,154,725 529,075 14,250 2,386,575

Total Available Grant Funding 5,912,433$ 10,783,882$ 3,336,169$ 513,289$ 20,545,772$

Net Fiscal Impact 12,178,568$ 106,853,119$ 2,621,831$ 4,792,711$ 126,446,228$

*CARES Act grants: Section 1 funding available for institutional aid and from Section 1 grants and Section 2 grants to Strengthening InstitutionsProgram (SIP) campuses (UTC & UTM). Does not inlcude $17.44 million in CARES Act funding that was distributed directly to students.

The disruption to normal operations and short-term controls has reduced spending in some operating categories such as travel, conferences,campus events, contractual/personal services, library acquisitions, utilities, and maintenance/repair. Expenses in these categories fromMarch 1 to September 30 were $54 million less than during the same period a year ago. We are likely to see continued reductions in some ofcategories during the months of September through December, especially travel, conferences, and events.

FY20 set asides for future renewal and replacement expenditures for auxiliary facilities and eqiupment were $10 million less than expected.

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CARES Act Funding UpdateEstimates as of October 5, 2020

UTC UTK UTM HSC TOTALCares Act HEER Available FundingEmergency Student Aid 4,756,890$ 9,629,157$ 2,555,156$ 499,039$ 17,440,241$ Institutional Aid 4,756,890 9,629,157 2,555,156 499,039 17,440,241 Strengthening Institutions Program (SIP) 467,018 - 251,938 - 718,956

Total 9,980,797$ 19,258,313$ 5,362,249$ 998,078$ 35,599,437$ Distributed/Expended 7,509,316 11,319,988 5,073,148 480,850 24,383,301

Remaining Funds 2,471,481$ 7,938,326$ 289,101$ 517,228$ 11,216,136$ % Distributed/Expended 25% 41% 5% 52% 32%

Status of Emergency Student Aid FundsAvailable Funds 4,756,890$ 9,629,157$ 2,555,156$ 499,039$ 17,440,241$ Distributed by Institution 4,756,890 9,629,157 2,453,897 480,850 17,320,793

Remaining Funds -$ -$ 101,259$ 18,189$ 119,448$ % Distributed 100% 100% 96% 96% 99%

Estimated number of eligible students 8,229 20,224 4,070 2,603 35,126 Students who have received a grant 5,068 9,773 4,028 978 19,847

Status of Institutional Aid & SIP FundsAvailable Funds 5,223,908$ 9,629,157$ 2,807,094$ 499,039$ 18,159,197$ Expended 2,752,426 1,690,831 2,619,251 - 7,062,508

Remaining Funds 2,471,481$ 7,938,326$ 187,843$ 499,039$ 11,096,688$ % Expended 53% 18% 93% 0% 39%

Uses:UTC: partial reimbursements for housing/dining/parking refunds; instruction and student suppport services; cleaning supplies/personnel.UTK: laptops, hotspots, PPE, isolation housing support, social distancing efforts on the classroom, and on-line course development.UTM: housing/dining/parking refunds; PPE; DL rooms; revenue losses (rodeo, daycare, camps, non-credit refunds); virtual orientation software.HSC: costs to modify instruction.

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COVID Fiscal Impact Estimates: Spring, Summer, and Fall 2020Estimates as of October 1, 2020

Refunds & Revenue Expenses TOTAL

UT KnoxvilleDining/Food Service 12,021,000$ 12,021,000$ Housing 18,309,000 18,309,000 Bookstore 5,270,000 5,270,000 Football 40,000,000 40,000,000 Summer sports revenues 3,984,000 3,984,000 Summer fee waivers 2,406,000 2,406,000 Facilities fee, transportation fee, study abroad fee.

Other revenue losses 13,345,000 13,345,000 Arena events, parking, vending, conferences, misc.

Instruction/Student Services 8,340,000 8,340,000 Cleaning supplies & personnel 2,109,000 2,109,000 Surveillance testing 3,256,000 3,256,000 For lab set up and annual operating expense

Isolation housing 5,622,000 5,622,000 Study abroad cancellations 687,000 687,000 spring and summer

Expanded Health Clinic Operations 1,330,000 1,330,000 Reimbursements cancelled trips 425,000 425,000 Study abroad cancellations, seminars, business trips

Contact tracing team annual cost 533,000 533,000 Total 95,335,000$ 22,302,000$ 117,637,000$

UT ChattanoogaOnline Access Fee Waivers 4,042,377$ 4,042,377$ Did not assess fee to traditional students during summer/fall.

Dining/Food Service 2,102,198 2,102,198 FY20 vs. FY19 commission revenue.

Housing 7,050,552 7,050,552 Compared to no positive net income (would be higher W/O CARES)

Athletics 2,108,212 2,108,212 FY20 vs. FY19 camp revenue.

Other 705,900 705,900 FY20 vs. FY19 parking and print/mail services revenue.

Instruction/Student Services 1,141,127 1,141,127 Laptops, notebooks, classroom technology, etc.

Cleaning supplies & personnel 939,997 939,997 Materials, equipment, cleaning supplies, PPE, etc.

Other 706 706 Total 16,009,238$ 2,081,829$ 18,091,068$

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COVID Fiscal Impact Estimates: Spring, Summer, and Fall 2020Estimates as of October 1, 2020

Refunds & Revenue Expenses TOTAL

UT MartinHousing 1,797,000$ 1,797,000$ Athletics 945,000 945,000 Tuition & Fees 718,000 718,000 Dining/Food Service 709,000 709,000 Rodeo Refunds/Revenues 150,000 150,000 NCAA revenues; game guarantee; concessions

Other Revenue 128,750 128,750 Parking; day care; non-degree courses; camps; Argentina trip

Instruction/Student Services 526,000 526,000 Work-from-home costs 39,000 39,000 Cleaning supplies, work lines transferred to cell phones; long distance

Cleaning supplies & personnel 126,000 126,000 Plexi Glass 25,000 25,000 Music Instruction Adjustments 120,000 120,000 Distance Learning Rooms 151,000 151,000 For online instruction

Emergency Grants/Scholarships 243,000 243,000 Student Wages 221,000 221,000 Other Costs 59,000 59,000 Laptops; virtual software; student grants; web cams; thermometers; etc.

Total 4,447,750$ 1,510,000$ 5,957,750$

UT Health Science CenterDentistry Clinic Revenues 1,780,020$ 1,780,020$ Medical Clinic Revenues 810,000 810,000 cancelled patients; conferences/courses; lost grants

CME Revenues 150,000 150,000 Student Refunds 116,872 116,872 Parking and printing services

Cleaning, PPE, medical supplies, etc. 2,449,201 2,449,201 13 extremely detailed spreadsheets support this estimate,

Total 2,856,892$ 2,449,201$ 5,306,093$

TOTALS 118,648,880$ 28,343,030$ 146,991,910$

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Spending Reductions in Selected Operating Line ItemsMarch 1 thru September 30

Expense Category 2019 2020 DifferenceTravel 22,081,346 4,403,460 (17,677,885) Maintenance & Repairs 24,007,973 19,275,075 (4,732,898) Commercial & Personal Services 16,412,565 11,880,525 (4,532,041) Utilities & Fuel 33,029,309 28,636,202 (4,393,107) General Supplies 35,937,625 31,601,454 (4,336,171) Library Acquisitions 10,131,297 6,421,379 (3,709,918) Group Events 4,896,120 1,634,173 (3,261,947) Other Expenditures 5,333,972 2,891,839 (2,442,134) Prof Svc/Memberships/Publicity 50,059,205 47,775,489 (2,283,716) Entertainment 2,723,618 500,024 (2,223,594) Seminar/Conf. Registration Fees 2,259,869 519,997 (1,739,872) Phone/Postage/Freight 7,920,677 6,658,588 (1,262,089) Printing/Duplication/Publications 2,793,469 1,726,749 (1,066,720) Conference Food/Lodging 817,302 285,406 (531,896)

Total Expense Reductions (54,193,987)

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Tennessee Higher Education Commission (THEC) Coronavirus Relief Fund (CRF) Grants

THEC awarded UT campuses grants totaling $2,386,575 to support UT’s coronavirus response. These are federal flow-through funds that are to be fully expended by November 15, 2020. The Coronavirus Relief Fund (CRF), authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, must cover necessary expenditures incurred due to COVID-19. This fund is intended to assist the higher education enterprise in dealing with challenges that have been created by the pandemic. Two primary focus areas are eligible for funding: efforts associated with preventing the spread of COVID-19 (e.g., expenses associated with social distancing) and technological improvements to facilitate distance learning.

University of Tennessee Chattanooga (UTC) $688,525 The CRF grant will assist UTC offset necessary expenditures to respond to the unprecedented COVID-19 pandemic. UTC is committed to delivering a high-quality instructional experience and overall comprehensive experience typically gained from the institution. In order to do so, certain expenditures must be made, and any funds received through the CRF will assist in offsetting those expenditures. These are directly related to social distancing and online transition expenditures:

1) Enhanced air purification; 2) Additional cleaning and supplies in residence halls and other areas of the institution; 3) Additional health affairs, contract tracing, and student affairs staffing; and 4) Additional technology for students and faculty in order to maintain instruction.

University of Tennessee Knoxville (UTK) $1,154,725 In consultation with health experts, UTK will coordinate self-isolation for residential students who test positive for COVID-19, have symptoms of COVID-19, or may have had close contact with a COVID-19 case. Self-isolation spaces have been identified in on-campus residential housing and supplemented with contracts for off campus apartments and local hotel usage. We are planning for 7,050 on-campus residents this fall. Our goal is to secure isolation spaces for a minimum of three percent of this residential population. To ensure continuity of meal programs, Aramark will provide food service delivery to students in isolation housing, including students assigned to off campus apartment and hotel space. A flat delivery rate of $300 has been established to cover three meal deliveries per day. CRF funds will support the cost of off campus isolation housing and meal delivery for our residential students. Lease space is being secured with 303 Flats and Quarry Trail apartment complexes. Embassy Suites and the Hilton will supplement leased spaces with immediate room blocks through September 20th and plans for extended room blocks through November 30th. Invoices for room utilization may include housekeeping and parking fees. Leases have been extensively discussed and approved by the State Building Commission (SBC) with the exception of extended Hilton Hotel use. This unexpected cost for leased space ($1,161,608) and food delivery ($27,900) is not included in the fiscal year 2021 budget. Such cost is also not represented in historical housing data. Housing and meal delivery cost will be applied to the estimated award balance of $1,154,725 as cost is incrementally incurred based on student utilization of meals.

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Tennessee Higher Education Commission (THEC) Coronavirus Relief Fund (CRF) Grants

University of Tennessee Martin (UTM) $529,075 Expenses to promote social distancing and online instruction will be significant in instructional and social settings that produce high aerosol transmission, such as music and dining. Planned expenditures include:

A. Plastic woodwind instruments which can be used outside and cleaned regularly without damage to the instrument. Music instruction will be moved outdoors, where heat and humidity can damage woodwinds.

B. Storage containers for music equipment, housing furniture and supplies, and dining furniture. The need for social distancing will require movement of furniture to space the remaining furniture at the required distances.

C. Outside picnic tables to allow students to adequately social distance and to address any student concerns regarding high aerosol transmission in the internal dining space.

D. Distance learning classroom equipment to allow faculty members to provide synchronous instruction to multiple locations, which will expand class offerings and separate students.

E. Additional cleaning and disinfecting supplies. Although PPE has been purchased, we have not been able to purchase everything we need due to supply availability and as recommendations from CDC have changed.

F. MiFi's and laptops will be made available to students in need. Once the student need is met MiFi's and laptops will also be made available to Faculty. Any remaining MiFi's and laptops will be made available to staff directly supporting students service needs to encourage social distancing and allow for flexibility of instruction and services to students.

G. Enterprise Zoom Pro Account Licenses will enable and enhance online classes and advising for students and faculty. This will give all faculty, staff, and students a Zoom Pro account. The addition of 325 Creative Cloud user licenses for students will allow them to participate in the necessary courses.

H. Lab kits for courses with a lab component will be shipped to students who will otherwise have no access to on-campus labs, encouraging both social distancing and hands on learning

University of Tennessee Health Science Center (UTHSC) $14,250 The purpose of the expenses to promote social distancing and protection within the classroom, lab, clinical and simulation environments on campus. UTHSC will utilize the CRF relief funds to promote social distancing within the classroom, lab, clinical and simulation environments. The funding will focus on:

1) The use of plexiglass and other materials to provide protective spaces within the various learning and clinical spaces on campus.

2) Software to enable students to remotely participate in simulation exercises and other learning activities in lieu of coming to campus.

Specialized equipment to ensure safety and protection in various clinical settings.

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AGENDA ITEM SUMMARY



Item: Quarterly Financial Update

Type: Information

Presenter: David L. Miller, Senior Vice President & Chief Financial Officer

The attached materials are presented to contribute to the body of financial reports periodically provided to the Board of Trustees. This set of tables provides details summarizing the first quarter of fiscal year 2020-21 compared to the same time last year. The table below summarizes Unrestricted E&G revenue and auxiliary revenue. The tables on the following pages provide revenue and expense data by institution and for the System as a whole.

UT System Quarterly Financial SummaryFirst Quarter of FY 2020-21 (July 1 through September 30)

Unrestricted Revenue SummaryYear-to-Year Comparisons

First Quarter Comparison FY 2019-20 FY 2020-21 ChangeUnrestricted E&GKnoxville 325,281,262$ 334,767,909$ 9,486,647$ 2.9%Health Science Center 93,320,454 92,538,444 (782,010) -0.8%Chattanooga 79,933,761 78,811,968 (1,121,793) -1.4%Agriculture 43,203,915 46,128,062 2,924,147 6.8%Martin 41,833,325 41,590,301 (243,024) -0.6%Public Service 5,885,200 6,220,524 335,324 5.7%System Administration 1,831,915 2,071,617 239,702 13.1%

TOTAL E&G 591,289,832$ 602,128,825$ 10,838,993$ 1.8%AuxiliariesKnoxville 86,708,145$ 58,613,528$ (28,094,617)$ -32.4%Chattanooga 14,896,594 12,980,417 (1,916,177) -12.9%Martin 5,231,640 4,420,370 (811,270) -15.5%Health Science Center 532,409 508,948 (23,461) -4.4%

TOTAL AUXILIARY 107,368,788$ 76,523,263$ (30,845,524)$ -28.7%

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Current Operating Funds (Unrestricted & Restricted)FY 2020-21 thru

Sept. 30% of same time

last year% of current year budget

REVENUESUnrestricted E&G Funds 602,128,824$ 101.8% 39.2%Unrestricted Auxiliary Funds 76,523,263 71.3% 29.1%Restricted Funds (E&G/Aux.) 210,973,070 105.8% 28.9%

TOTAL 889,625,157$ 99.1% 35.2%EXPENDITURESUnrestricted E&G Funds 378,022,013$ 98.2% 24.7%Unrestricted Auxiliary Funds 47,497,784 80.6% 18.1%Restricted Funds (E&G/Aux.) 211,192,525 101.9% 28.9%

TOTAL 636,712,322$ 97.8% 25.2%

25% of the fiscal year has been completed.

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Current Operating Funds (Unrestricted & Restricted)Year-to-Year Comparisons

First Quarter Comparison FY 2019-20 FY 2020-21 ChangeREVENUESTuition & Fees 396,791,090$ 407,295,602$ 2.6%

Tuition/Fee Revenue per Student $7,692 $7,749 0.7%State Appropriations 163,159,078 161,537,052 -1.0%Grants & Contracts 192,493,543 204,033,704 6.0%Gifts & Endowments 15,540,422 15,338,132 -1.3%Auxiliaries 107,368,788 76,523,263 -28.7%Other 22,733,113 24,897,404 9.5%

TOTAL 898,086,034$ 889,625,157$ -0.9%EXPENDITURESBy Natural ClassificationSalaries & Benefits 341,901,486 340,342,404 -0.5%Operating 144,460,953 123,020,227 -14.8%Equipment 15,943,109 14,587,698 -8.5%Scholarships/Fellowships 148,722,357 158,761,993 6.8%

TOTAL 651,027,905$ 636,712,322$ -2.2%By Functional AreaInstruction 160,684,860$ 160,269,889$ -0.3%Research 78,014,681 75,069,831 -3.8%Public Service 35,297,801 34,992,437 -0.9%Academic Support 59,059,204 54,450,390 -7.8%Student Services 24,997,443 22,832,921 -8.7%Institutional Support 48,652,338 47,595,805 -2.2%Op/Maint Physical Plant 36,697,602 35,241,272 -4.0%Scholarships/Fellowships 148,722,357 158,761,993 6.8%Auxiliaries 58,901,618 47,497,784 -19.4%

TOTAL 651,027,905$ 636,712,322$ -2.2%Tuition/Fee Revenue per Student $7,692 $7,749 0.7%Scholarship/Fellowship Exp per Student $2,883 $3,021 4.8%Total Expenditure per Student $12,621 $12,114 -4.0%

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Unrestricted Educational & General (E&G) FundsYear-to-Year Comparisons

First Quarter Comparison FY 2019-20 FY 2020-21 ChangeREVENUESTuition & Fees 396,791,090$ 407,295,602$ 2.6%State Appropriations 159,217,391 157,399,488 -1.1%Grants & Contracts (F&A recoveries) 12,567,586 12,534,458 -0.3%Sales & Services 16,380,256 13,278,984 -18.9%Other 6,333,508 11,620,292 83.5%

TOTAL 591,289,831$ 602,128,824$ 1.8%EXPENDITURESBy Natural ClassificationSalaries & Benefits 234,993,591 234,909,977 0.0%Operating 80,557,913 69,781,190 -13.4%Equipment 7,688,705 6,883,579 -10.5%Scholarships/Fellowships 61,605,908 66,447,267 7.9%

TOTAL 384,846,117$ 378,022,013$ -1.8%By Functional AreaInstruction 118,400,893$ 117,415,316$ -0.8%Research 28,993,821 29,180,893 0.6%Public Service 18,628,147 17,551,522 -5.8%Academic Support 47,542,291 43,468,438 -8.6%Student Services 24,834,662 22,168,218 -10.7%Institutional Support 48,201,754 46,637,023 -3.2%Op/Maint Physical Plant 36,638,641 35,153,336 -4.1%Scholarships/Fellowships 61,605,908 66,447,267 7.9%

TOTAL 384,846,117$ 378,022,013$ -1.8%Tuition/Fee Revenue per Student $7,692 $7,749 0.7%Scholarship/Fellowship Exp per Student $1,194 $1,264 5.9%Total Expenditure per Student $7,461 $7,192 -3.6%

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Unrestricted Educational & General (E&G) FundsYear-to-Year Comparisons

First Quarter Comparison FY 2019-20 FY 2020-21 ChangeKnoxvilleRevenues 325,281,262$ 334,767,909$ 9,486,647$ 2.9%Expenses 183,268,355 182,076,400 (1,191,955) -0.7%

Net 142,012,907$ 152,691,509$ 10,678,602$ 7.5%Health Science CenterRevenues 93,320,454$ 92,538,444$ (782,010)$ -0.8%Expenses 72,052,123 69,369,217 (2,682,906) -3.7%

Net 21,268,331$ 23,169,227$ 1,900,896$ 8.9%ChattanoogaRevenues 79,933,761$ 78,811,968$ (1,121,793)$ -1.4%Expenses 49,511,648 48,937,120 (574,528) -1.2%

Net 30,422,113$ 29,874,848$ (547,265)$ -1.8%AgricultureRevenues 43,203,915$ 46,128,062$ 2,924,147$ 6.8%Expenses 32,530,174 31,863,748 (666,426) -2.0%

Net 10,673,741$ 14,264,314$ 3,590,573$ 33.6%MartinRevenues 41,833,325$ 41,590,301$ (243,024)$ -0.6%Expenses 26,946,047 25,305,798 (1,640,249) -6.1%

Net 14,887,278$ 16,284,503$ 1,397,225$ 9.4%Public ServiceRevenues 5,885,200$ 6,220,524$ 335,324$ 5.7%Expenses 5,382,735 5,217,483 (165,252) -3.1%

Net 502,465$ 1,003,041$ 500,576$ 99.6%

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Auxiliary Enterprises: UTK, UTC, UTMUT Knoxville* UT Chattanooga UT Martin

FY 2019-20 FY 2020-21 Change FY 2019-20 FY 2020-21 Change FY 2019-20 FY 2020-21 ChangeHOUSINGRevenues 29,045,214$ 21,880,030$ (7,165,184)$ -25% 12,264,993$ 11,293,875$ (971,118)$ -8% 4,180,723$ 3,684,324$ (496,399)$ -12%Expenses 8,746,606 5,813,423 (2,933,183) -34% 3,458,140 3,204,105 (254,035) -7% 2,056,166 1,460,917 (595,249) -29%

NET 20,298,608$ 16,066,607$ (4,232,001)$ 8,806,853$ 8,089,770$ (717,083)$ 2,124,557$ 2,223,407$ 98,850$ DININGRevenues 3,108,551$ 1,084,184$ (2,024,367)$ -65% 121,578$ 43,817$ (77,761)$ -64% 382,962$ 318,855$ (64,107)$ -17%Expenses 1,509,551 514,364 (995,187) -66% 83,598 361,480 277,882 332% 81,844 64,461 (17,383) -21%

NET 1,599,000$ 569,820$ (1,029,180)$ 37,980$ (317,663)$ (355,643)$ 301,118$ 254,394$ (46,724)$ BOOKSTORESRevenues 9,626,516$ 7,820,213$ (1,806,303)$ -19% 232,978$ 47,562$ (185,416)$ -80% 133,580$ 110,069$ (23,511)$ -18%Expenses 8,561,400 7,014,125 (1,547,275) -18% 14,331 1,699 (12,632) -88% 99,030 125,152 26,122 26%

NET 1,065,116$ 806,088$ (259,028)$ 218,647$ 45,863$ (172,784)$ 34,550$ (15,083)$ (49,633)$ PARKINGRevenues 4,535,215$ 3,419,413$ (1,115,802)$ -25% 1,998,241$ 1,562,209$ (436,032)$ -22% 404,626$ 284,973$ (119,653)$ -30%Expenses 1,039,945 835,195 (204,750) -20% 801,350 739,037 (62,313) -8% 121,800 64,889 (56,911) -47%

NET 3,495,270$ 2,584,218$ (911,052)$ 1,196,891$ 823,172$ (373,719)$ 282,826$ 220,084$ (62,742)$ ATHLETICSRevenues 38,714,499$ 21,840,869$ (16,873,630)$ -44%Expenses 30,909,943 24,270,830 (6,639,113) -21%

NET 7,804,556$ (2,429,961)$ (10,234,517)$ OTHERRevenues 1,678,149$ 2,568,819$ 890,670$ 53% 278,804$ 32,955$ (245,849)$ -88% 129,749$ 22,149$ (107,600)$ -83%Expenses 1,074,156 900,175 (173,980) -16% 290,477 824,266 533,789 184% 102,831 113,735 10,904 11%

NET 603,994$ 1,668,644$ 1,064,650$ (11,673)$ (791,311)$ (779,638)$ 26,918$ (91,586)$ (118,504)$ GRAND TOTALSRevenues 86,708,145$ 58,613,528$ (28,094,617)$ -32% 14,896,594$ 12,980,418$ (1,916,176)$ -13% 5,231,640$ 4,420,370$ (811,270)$ -16%Expenses 51,841,601 39,348,112 (12,493,489) -24% 4,647,896 5,130,587 482,691 10% 2,461,671 1,829,154 (632,517) -26%

NET 34,866,544$ 19,265,416$ (15,601,128)$ 10,248,698$ 7,849,831$ (2,398,867)$ 2,769,969$ 2,591,216$ (178,753)$

*Includes UTSI

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AGENDA ITEM SUMMARY



Item: Enterprise Resource Planning System

Type: Information


The University of Tennessee implemented a systemwide enterprise resource planning (ERP) system in 2001 on a Systems Applications and Products (SAP) platform. The implemented software (called IRIS) has served UT very well in managing financial and payroll operations. However, the on-premise software will cease to be supported by SAP in 2025.

As reported to the Board in November 2019 the UT System is embarking on a long-term project to replace the ERP system for finance and human resource operations. That report indicated the first step in planning was to engage a “readiness assessment” consultant to evaluate the state of financial and human capital management operations and how best to prepare for vendor selection and the transition to a new ERP system.

Through a competitive process Huron Consulting was selected in March 2020 just before the coronavirus outbreak. The official project kick-off was paused until July when Huron began working with UT staff systemwide. The planning goals of the consultancy include:

∑ Advising on an appropriate implementation governance structure.∑ Assisting in determining overall project goals and outcomes.∑ Conducting a series of surveys with systemwide staff to determine functional

needs of the new system.∑ Extensive interviews with institutional leaders to determine workflow “pain

points” and opportunities for improvement.∑ Developing a draft request for proposals (RFP) for vendor selection.∑ Determining distinct needs of UT institutions to be included in the RFP.∑ Developing a cost model and schedule for the entire ERP process.∑ Assisting in evaluating the vendor RFP responses if requested.

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It is anticipated that the draft RFP will be completed in late fall and prepared for release in early 2021. Part of the planning process will include vendor demonstrations for a broad audience of UT staff systemwide. The demonstrations will take place in November and will be managed by Huron. The Huron team has interviewed 112 staff members representing all institutions. The team has also completed an analysis of the University’s chart of accounts including 4.5 hours of interviews with managing staff. A complete project update will be presented during the Board meeting.

A critical part of a successful project is the development and use of guiding principles. Huron consultants and UT System staff developed a draft set of principles and then sought input from the project systemwide steering committee. The revised principles were then presented for review by the President and One UT Leadership team. The attached principles will serve as a reference and focal point throughout the project in setting goals and determining outcomes.

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Guiding PrinciplesThese principles serve as the foundation for decision-making in the Enterprise Resource Planning (ERP) Program and will guide program team members as they partner with the University community to achieve the Program’s goals and

Governance, Transparency, and InclusionThe ERP Program will be led by the UT System Administration Executive Sponsor and Executive Steering Committee who will work closely with all stakeholders throughout the University and the Program team. The ERP Program is committed to broad system-wide collaboration and transparent decision-making. The Program team will communicate frequently and fully to ensure accurate information and data are shared with the wider UT community and will seek input and feedback throughout.

Simplification & StandardizationThe ERP Program will simplify operations and processes while ensuring the processes meet user needs. Processes will be redesigned based on higher education best practices and ERP functionality. Standardization of processes and data definitions across the UT System will maximize the opportunity for collaboration, facilitating the One UT culture.

Measurable ImprovementsImprovements to transformed business processes will be measured by qualitative or quantitative standards as appropriate—for example, by the number of approvals eliminated or by stakeholders’ judgement that reports contain more useful data.

Integrating TechnologyUT System will adopt a culture of continuous improvement through technology. Rather than configuring software to current operations, the way we work will change as we adopt new functionality. Increased operational efficiency will be achieved while maintaining compliance with State laws and UT policies. The University will first use the ERP platform functionality to its fullest extent before considering additional software packages or alternative business processes.

ERP PROGRAM GOAL, OBJECTIVES, AND VISIONThe ERP Program’s principle goal is to relieve administrative burdens associated with the University’s business processes so that individuals can focus on accomplishing their work and achieving results in their areas of responsibility. This transformation will be achieved by implementing the latest technology, streamlining business processes, and revising policies where indicated. As a result, individuals will be able to access timely, accurate, relevant and useful information without the need for manual manipulation of data or access to multiple systems.

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Finance and Administration Committee - V. FY 2021-22 Operating Budget Appropriations Request for Specialized Units - Action/Roll Call Vote

AGENDA ITEM SUMMARY



Item: FY 2021-22 Operating Budget Appropriations Request for Specialized Units

Type: Action


Each year the University has the opportunity to present a state appropriations budget request for improvement funding at its specialized units―the Health Science Center, Institute of Agriculture, Space Institute, Institute for Public Service, and System Administration. The Tennessee Higher Education Commission (THEC) formula funding model generates funding recommendations for the Chattanooga, Knoxville, and Martin campuses.

THEC, working with the state Department of Finance and Administration, has asked that the request be formatted in priority order and articulated in a way that aligns with state initiatives. A summary of the improvement request for FY 2021-22 follows this memorandum.

The Operating Budget Submission Guidelines approved by the Board of Trustees state that the Finance and Administration Committee shall review, approve, and recommend to the Board the improvement request submitted to THEC.

As requested by the Committee Chair, the requests and outcomes for the past five fiscal years appear in the table on the following page.

Committee Action

The Committee Chair will call for a motion to recommend adoption of the following Resolution by the Board of Trustees:

Resolved: The Board of Trustees hereby approves the FY 2021-22 Operating Budget Appropriations Request for Specialized Units as presented in the meeting materials, which shall be attached to this Resolution after adoption, with authorization for the President and Chief Financial Officer to revise or add to these requests in response to (1) developments related to state funding priorities that may arise during the upcoming legislative session or (2) modified requests by the Chancellor/Vice President of a specialized unit.

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FY UT RequestTHEC

Recommendation

Governor's Budget

Proposal

Actual Appropriation

Notes

2016-17 $18,859,510 $4,353,500 - -

2017-18 $41,424,436 $1,400,000 - -Does not include $6M non-recurring received by UTK for the Bredesen Center, which was received through a different process.

2018-19 $6,299,872 $3,000,000 $860,000 $860,000 Genomics Center (UTIA)

2019-20 $14,857,020 $4,849,600 - -Does not include $10M non-recurring for campus safety projects, which was received through a different process.

THEC: $6,595,100 for UTIA initiatives plus $13,482,600 operating funds for all units.Governor: $2,190,000 for new Extension agents plus operating funds of $5,945,900 for HSC and $33,100 for Veterinary Medicine.

2021-22 $20,077,700 TBD TBD TBDRequesting THEC to recommend the same funding as last year.

UT Specialized Unit Funding Request History

2020-21

$16,095,400 + general

operating funds

$20,077,700 $8,169,000 -

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FY 2021-22 Appropriations Request for Specialized Units

The University requests additional appropriations for two priorities in its specialized units. These are summarized below. Additional details on each can be found in the following pages. These requests do not include appropriations allocated to UTChattanooga, UT Knoxville, and UT Martin through the THEC funding formula or state funding for salary pools and fringe benefits inflation.

PrioritySpecialized

UnitsProposal Summaries

Amount Requested

1Institute of Agriculture

(UTIA)

Adds Extension agents to address the challenges of Tennessee's distressed rural counties and increases UTIA faculty salaries, which have fallen far behind the competition in surrounding states. This funding is vital to the success of the strategic alignment between UTIA and UT Knoxville.

$ 6,595,100

2 All Funds to sustain current programs, services, and operations:

Health Science Center

(UTHSC)

For cost increases experienced over several years related to a 13.7% increase in enrollment and the rapidly increasing costs of instructional technology in medicine: simulation center equipment replacement, information technology replacementand enhancement, library acquisition costs, growth in accreditation costs, and the operation and maintenance of new spaces required to accommodate higher enrollments.

$ 9,796,500

Institute of Agriculture

(UTIA)

Needed to fund incremental operating costs of UTIA’s statewide teaching, research, and service programs; includes a complex veterinary hospital, ten major research and education centers, and Extension offices in each of Tennessee’s 95 counties.

$ 3,023,900

Institute for Public Service (UTIPS)

To offset growth in costs such as consultant travel, IT systems supporting online training and knowledge databases, leases for office space, training venues and materials, and supplies for client materials. Provides vital programs to Tennessee manufacturers, local governments, and law enforcement.

$ 352,800

SpaceInstitute (UTSI)

Funding needed to maintain state-of-the-art technology, equipment, facilities, and systems supporting UTSI’s internationally recognized graduate education and research programs in engineering, physics, mathematics and aviation systems.

$ 309,400

TOTAL UT SPECIALIZED UNIT REQUESTS $ 20,077,700

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FY 2021-22 Operating Budget Appropriations Request for Specialized Units

1. The University of Tennessee Institute of Agriculture (UTIA) $6,595,100 recurring for competitive salaries and extension agents for distressed rural counties.

UTIA has identified several areas where additional funding is needed to more fully realize UTIA’s potential value to Tennessee. UT Extension plays a critical role in addressing the challenges found in Tennessee's distressed rural counties. An additional investment of $2.19 million to the UT Extension budget would allow UT Extension to provide at least one full-time UT Extension county agent in the 4-H, family and consumer sciences and agriculture and natural resources program area to the citizens of every county in Tennessee. The requested budget would support the hire of 32 additional county agents that would fully implement a three-county agent model in each of Tennessee’s 95 counties.

Meeting our responsibility to the land-grant mission is tied directly to the professional quality of our faculty and staff, but we often find ourselves losing this talent to our competitors. No peer veterinary college pays its faculty less than UT. Over the past 5-8 years, we have found ourselves replacing roughly 10 of our existing 110-115 College of Veterinary Medicine faculty, annually. We are concerned we may be hiring the “best of the rest,” after our peers capture top talent. To improve our prospects of attracting and retaining the best scientific talents, and further our contributions to The University of Tennessee's goal of becoming a true comprehensive research-extensive institution, it is imperative that our salaries for research faculty also be increased to a level on par with other land-grant institutions. A recent compensation study indicates that $2.3M is needed to retain and recruit competitively with our veterinary college peers and $2.1 million is needed for research salaries.

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2. All UT Specialized UnitsFunding to sustain current programs, services, and operations

UT’s specialized units include the Health Science Center (UTHSC), Institute of Agriculture (UTIA), Institute for Public Service (UTIPS), Space Institute (UTSI), and System Administration (UTSA). They are facing challenges to long-term financial sustainability due to a lack of reliable funding streams to offset recurring growth in non-personnel operating costs.

UT “formula units” (UTC, UTK, UTM) receive state appropriations through the THEC performance-based funding formula. In most years, state funding growth, along with modest tuition increases, are sufficient to fund salary increase pools, employee benefits inflation, non-personnel operating cost increases, and enhancements to high-priority programs. UT’s specialized units also receive state funding for salary increase pools and benefits inflation, but they do not receive state funding for needs that go beyond this.

Each specialized unit has a unique financial model, but all share similar constraints regarding funding streams for operating expenditure increases.

∑ Combined operating costs at UT specialized units increased by $27.7 million from FY 2013-14 to FY 2018-19. The average annual increase was over 5% a year.

∑ Each unit has a few key operating cost drivers that are increasing at rates that exceed general inflation as measured by HEPI or CPI. Major areas include medical technology, scientific equipment, and regulatory compliance.

∑ There is little potential to use revenue growth as an offset. Less than 20% of specialized unit unrestricted operating revenues come from student tuition & fees, compared to 62% for UT’s formula units. The pricing environment for these units is very competitive.

∑ Efficiency efforts have been, and continue to be, used to reallocate resources, but these are not sufficient to offset all unavoidable cost increases.

∑ Unfunded operating cost increases have resulted in recurring operating deficits at UTHSC and significantly reduced reserves.

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The University of Tennessee Health Science Center (UTHSC)

Without a reliable source of annual funding growth to offset increases in non-personnel operating costs, the UT Health Science Center faces an unsustainable financial future. During the years since UTHSC last received state funding for general operations, enrollment has grown 14%, educational and general (E&G) square footage has grown 10%, UTHSC opened a state-of-the-art simulation center, and there were few increases to tuition & fees. There have been no increases in state funding to offset growing demand for programs and services, resulting in several years of operating deficits and a significant decline in unrestricted net assets.

Costs for medical supplies and technology are growing at higher rates than general inflation:

∑ Constantly evolving medical procedures and technology is driving some operating costs up at rates much higher than general inflation. For example, the funds that will be needed to keep pace with cutting edge technology for UTHSC’s $25 million medical simulation center will be higher than other types of operating costs.

∑ Below are annual cost increases experienced in key operating categories since FY 2013-14:

o Library acquisitions: up $1,519,199 (average annual rate of 41.3%)o Laboratory supplies: up $630,714 (average annual rate of 4.0%)o General supplies & equipment: up $3,004,459 (average rate of 5.9%)

∑ These kinds of cost increases show no signs of slowing in the near future.Efficiency efforts can only go so far in offsetting these kinds of cost increases:

∑ An aggressive energy management program has resulted in significant efficiencies, but overall utilities expenditures have not declined.

∑ Energy efficiency gains have been offset by the growth in square footage required by enrollment growth and the need for additional space to house and utilize sophisticated instructional technology.

Most UTHSC programs are in a competitive pricing environment:∑ There is little flexibility to use tuition & fee increases to offset cost increases

resulting from growing enrollments, normal operating cost inflation, and the need to invest in new medical and instructional technologies that are critical to educating medical professionals.

∑ UTHSC tuition & fee increases have been very low for several years. It has been common to see no increases for most UTHSC programs over the last six years.

∑ Due to competitive pressures, UTHSC has received Board approval to reduce some out-of-state tuition rates in order to attract the best students. This has not reduced revenue, but neither has it increased revenue.

∑ UTHSC derives less than one-third of its unrestricted revenues from tuition & fees.

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Specific UTHSC Needs

The University of Tennessee Health Science Center provides academic instruction and encourages research exploration to improve human health through disciplines in Dentistry, Health Professions, Nursing, Medicine, and Pharmacy. The University intends to be the preeminent research and teaching university linking the people of Tennessee to the nation and the world. The campus is growing programs to meet these goals as shown in the table below of enrollment and degrees awarded over the past 6 years.

Enrollment Degrees Awarded2013-14 2,859 7802014-15 2,976 8582015-16 3,075 9292016-17 3,097 9422017-18 3,199 9872018-19 3,280 1,014

Utilities: $1,000,000With this growth, it is critical the campus maintain pace with increasing costs such as utilities; which has been difficult over the past few years. The campus has implemented an energy management program that is showing some control over utility cost increases, yet with new spaces and cost factors, expenditures rose by 6% over the last 5 years.

2015-16 $9,365,971

$592,277 6.3%2016-17 $10,454,7952017-18 $9,462,6972018-19 $9,958,248

Library Acquisitions: $1,500,000At the same time, the HSC must also insure a solid academic base on which students and faculty can rely. Library acquisition costs continue to increase at a pace greater than other consumer products. Over the past several years, the HSC library has reviewed and reduced the number of subscriptions in order to maintain costs as best possible. Even with these efforts, costs have increased nearly 20%.

2015-16 $1,897,735

$348,701 18.4%2016-17 $2,032,4082017-18 $2,230,3922018-19 $2,246,436

Operational Funding for New Facilities: $2,500,000

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Over the past several years, the HSC has opened new or significantly remodeled facilities (including the Translational Science Research Building and Simulation Center) requiring operations funding for utilities, maintenance, janitorial services, etc. to keep the facilities operating at proper levels. In the coming year, totally renovated office and lab space in the Crow, Nash, and Mooney buildings will be complete and require standard services to maintain these newly renovated spaces. In coming years, the Delta Dental Building will also be opening.

Simulation Center Equipment Replacement: $2,000,000With growing programs across all disciplines and to foster an environment of learning and innovation, the academic facilities need to support the students' efforts with classroom settings and research laboratories which will take advantage of improved technology and will enhance research productivity. Such facilities will enable students to enter the workforce with the ability to access all available resources to deliver premium healthcare. Instructional delivery greatly impacts the learning and retention of information. UTHSC needs to enhance the classrooms and research laboratories with innovations that will make them more conducive to learning. Recognizing this need, the State generously funded a $25 million state-of-the-art multi-disciplinary simulation center.

But the HSC funded $15 million in medical, technical and communications technology. Over time these equipment (such as high-tech simulators and “cadavers”) will require enhancement and replacement. To that end, the campus initiated a student fee to generate $1 million per year but assuming a 5-year life for most of this high-tech equipment, the annual budget will require an additional $2 million per year.

Information Technology Replacement and Enhancement: $2,300,000The HSC is fast approaching a crisis in obsolescence of its technology equipment. For many years, a facility “Master Plan” and “Deferred Maintenance” program have been used to schedule preventative or planned repair and replacement of equipment and property before deterioration. A technology replacement program will help the HSC establish a predictable and reliable fleet of technology equipment. If left further unaddressed this crisis will impact the ability to achieve university’s missions and ultimately become a detriment to best practices and student learning at one of the state’s most critical university campuses, the Health Science Center.

Technology is a key component of the academic and research platform of an academic medical center like UTHSC. In some cases, technology is used as an accelerant to learning, engaging students and informing educators like never before; transforming the very process of learning that helps create relevant 21st century experiences. In other cases, technology has become a requirement; necessary and fundamental to perform certain clinical and research tasks. The technology environment is instrumental for staff and

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faculty in maintaining records, communication, procurement, state and federal reporting, assessments, and professional development. These digital tools in some cases help drive revenue, and in others are necessary simply to remain contemporary and relevant. It is reasonable to state that just about every staff member relies on technology equipment to do their job, and/or perform it effectively; and every student deserves frequent access to technology to receive a relevant learning experience. When technology is unreliable, there are two typical results: 1) it is abandoned—hindering progress; or 2) it becomes a liability—with lost productivity, or students missing learning opportunities.

Accreditation Costs: $496,500In 2014, SACS required that the Health Science Center achieve independent accreditation from other campuses of the University of Tennessee. There are significant requirements in order to achieve accreditation.

The University of Tennessee Institute for Public Service (IPS)

The UT Institute for Public Service (IPS) is unique in higher education. IPS is the university’s source of outreach for public service entities. The consulting and training that it provides to state and local governments, law enforcement, manufacturers andsmall businesses and those seeking language instruction and services makes a big difference in the communities of rural Tennessee where professional expertise in specialized disciplines is lacking.

IPS cost drivers do not look like a typical campus. It does not have the kinds of facilities and equipment found at a complex medical center like UTHSC. Key operating areas include consultant travel, IT systems supporting online training and knowledge databases, leases for office space, training venues and materials, and supplies for client materials.

Travel ∑ Many IPS consultants and trainers are on the road four to five days a week. ∑ The typical county government management consultant covers an eight- county

territory and spends most of their working time in county offices. Municipal management consultants cover similar territories. Most of their travel consists of mileage reimbursements.

∑ Consultants in specialized fields such as Six-Sigma lean manufacturing, jail management, fire safety and water treatment may cover half the state or even the entire state. These costs often include lodging, per diems, and mileage.

∑ Total travel costs increased by nearly $320,000 since FY 2014-15, around $80,000 per year. That is an average annual growth rate of nearly 8 percent a year.

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Information Technology ∑ In addition to basic IT hardware, software and support for staff, IPS uses IT to

deliver many of its services and resources to clients across the state. Examples include online training for government officials and manufacturers, a sophisticated online knowledgebase for municipal officials, an e-library for county officials covering every aspect of county government, and a registration system to manage events from small training sessions to major conferences.

∑ IT costs increased by nearly $170,000 since FY 2014-15, around $43,000 per year. That is an average annual growth rate of over 11 percent a year.

Leases ∑ In order to serve a diverse, statewide client base, IPS leases office and training

space in 14 locations across the state of Tennessee. ∑ Lease costs increased by over $267,000 since FY 2014-15, around $53,000 per year.

That is an average annual growth rate of nearly 9 percent a year.

Training ∑ IPS delivers a wide range of training to each client group, ranging from safety

compliance training required by TOSHA for Tennessee manufacturers, to certification programs for local economic development professionals, to one of the nation’s most highly regarded forensic training programs for crime scene investigators.

∑ Training costs include rental of training venues, contractual payments to curriculum specialists and instructors, and training materials (these can be especially costly for crime scene training).

∑ Training costs increased by nearly $515,000 since FY 2014-15, around $129,000 per year. That is an average annual growth rate of nearly 35 percent a year.

Supplies ∑ The bulk of IPS supply costs are driven by materials provided to external clients

in the course of providing consulting, technical assistance, and training services.∑ Supply costs increased by nearly $235,000 since FY 2014-15, around $59,000 per

year. That is an average annual growth rate of nearly 12 percent a year.

IPS lives on a fixed income

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∑ Most IPS unrestricted funding comes from state appropriations and local appropriations (the majority from a share of municipal sales taxes and a share of TVA in-lieu of property tax payments to counties). There are some fee revenues, but many IPS services are considered pre-paid services by local government clients.

∑ The average annual cost increases described above total $363,000. While this may look fairly small, it represents 5 percent of IPS FY 2018-19 operating expenditures.

∑ While IPS is relatively well funded for current operations today, it is not well positioned to absorb future cost increases. It needs a recurring revenue stream to offset at least part of these recurring cost increases to avoid program reductions in the future.

The University of Tennessee Institute of Agriculture (UTIA)

The UT Institute of Agriculture (UTIA) consists of three units with distinct business models. Much about its needs related to operating costs are included in the special funding request being made for UTIA this year and will not be repeated here. Below are a few major points on the need for recurring funds related to non-personnel operating costs in future years.

College of Veterinary Medicine (UTCVM)∑ Most of the points made about rapidly growing costs of medical technology and

instructional materials regarding the UT Health Science Center (UTHSC) apply to the UTCVM. Costs for these items are growing much more rapidly than general inflation.

∑ In addition to this, UTCVM operates a large, complex teaching hospital. Costs for operations, maintenance, repair, and equipment are very different than the typical academic building.

∑ UTCVM expenditures for laboratory supplies and scientific equipment grew by nearly $2 million since FY 2014-15. That is an average annual growth rate of over 8% a year.

∑ Like UTHSC, UTCVM faces a very competitive pricing environment that limits its flexibility to use tuition & fee increases to offset these costs. UTCVM derives less than 22% of its unrestricted funding from tuition & fees.

UT Extension and UT AgResearch

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∑ AgResearch operates ten (10) research and education centers across the state. In addition to the normal operation and maintenance costs that come from large facilities, there are unique cost drivers related to scientific equipment, farm machinery, crops, and livestock that exceed the general rate of inflation. For example, the average rate of growth in expenditures for vehicles and heavy equipment has averaged 8.4% since FY 2013-14.

∑ Like IPS, travel expenditures are an important cost driver for Extension. County agents are on the road almost every day. Each regional specialist serves several counties. State specialists cover the entire state (bear in mind that Mountain City, Tennessee is closer to Windsor, Ontario than it is to Memphis). Travel expenditures grew by over $400,000 since FY 2013-14 (4% per year).

∑ Like IPS, these two units live on fixed incomes. They have no tuition revenue. Fee-based services are growing, but the potential for these to become a major revenue stream is limited.

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Finance and Administration Committee - VI. Use of UHS Proceeds - Action/Roll Call Vote

AGENDA ITEM SUMMARY



Item: Use of UHS Proceeds

Type: Action


Background

In 1999, with legislative authorization, the Board of Trustees approved a Lease and Transfer Agreement to transfer management and operation of the UT Memorial Research Center and Hospital in Knoxville (commonly known as UT Medical Center) to a newly created non-profit entity, University Health System, Inc. (UHS).

The agreement included the grant of a license to UHS for continued use of the University’s name and trademarks in business, marketing, and promotion. The consideration to be paid by UHS under the agreement includes an annual payment based on a formula. The annual payment was originally due to expire in 2021, but in November 2018, the Board of Trustees approved an amendment to the agreement modifying and extending the payment of consideration through the original lease period ending in 2049. The amendment also extended the lease through 2099.

In its sole discretion, the Board of Trustees determines how proceeds received from UHS under the agreement will be used for the benefit of the University; use of the proceeds is not limited to any particular campus or unit. A significant portion of the proceeds has been used to fund at least one research center of excellence at each of the four campuses, the Institute of Agriculture, and the Space Institute.

The current uncommitted fund balance is approximately $4,239,000. The UT system administration is recommending that up to $1,550,000 of UHS proceeds be used in support of the UTHSC Campus Master Plan.

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Finance and Administration Committee - VI. Use of UHS Proceeds - Action/Roll Call Vote

Phasing and implementation of the Campus Master Plan includes the acquisition of a vivarium facility and adjacent land from Memphis Bioworks Foundation or its subsidiary Memphis Specialized Laboratory. UTHSC currently leases the 26,171 square foot vivarium to support its tradition of excellence in basic, clinical and translational research. With an ongoing need for this facility, UTHSC proposes to acquire it along with an adjacent 5.5 +/- acre parcel of land to be used for future development. Both properties are on the eastern side of the campus with easy access to and from other UTHSC facilities.

The purchase price for both properties is $16,000,000 with $14,450,000 coming from Tennessee State School Bond Authority (TSSBA) bonds and $1,550,000 from the UHS proceeds. Annual debt service will be funded by existing revenues generated throughresearch activities and associated Facilities & Administrative (F&A) cost reimbursement. Current rent for the facility is paid from these revenues and would be transferred to debt service to meet the annual payments. In addition, it is expected that F&A revenues will continue to grow with this new facility. Over the period of FY 2016 through FY 2020 projected, F&A revenues have increased from $12.5 million to $16.0 million annually.

The acquisitions are in the Governor’s Budget, on the Tennessee Higher Education Committee disclosure list and have been approved by the TSSBA for bond funding. Upon approval by the Board of Trustees, the University will seek all required state government approvals.

Committee Action

The Committee Chair will call for a motion to recommend adoption of the following Resolution by the Board of Trustees.

Resolved: The Board of Trustees hereby approves the transfer of up to $1,550,000 of proceeds from the USH lease payment account to the UT Health Science Center, which funds shall be used for support of the acquisitions as described herein.

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Finance and Administration Committee - VII. Revisions to Board Policy on Travel - Action/Roll Call Vote

AGENDA ITEM SUMMARY



Item: Revised Policy Statement on Travel (BT0003)

Type: Action

Presenter: Cynthia C. Moore, Secretary and Special Counsel

Background

Currently, there are two outstanding Board policies that pertain to travel, which are as follows:

∑ BT0003 – Policy Statement on Travel; and∑ BT0019 – Policy on University Aircraft.

Following governance best practices, it is appropriate to periodically review outstanding Board policies. In this regard, it is being recommended that the Policy on University Aircraft be incorporated into the broader Policy Statement on Travel. In addition to streamlining the number of outstanding Board policies, the revised policy would be in parallel with the proposed format for the University’s Fiscal Policy 10705, which outlines administrative and fiscal policies and procedures pertaining to both travel for university business and the use of university aircraft. The revised policy also reflects use of a plane that has been received by the University from a donor that is designated for use by UT Knoxville athletics.

In connection with consolidating the two policies, the section headings have been reorganized to allow for a better organizational structure, and redundant provisions have been eliminated. Further, upon review, it was also determined that certain provisions contained in the existing policies were more administrative in nature and not policy level considerations. These provisions included details as to: (i) who to contact to schedule a flight (including phone number), (ii) what information needs to be included on the request form, (iii) how interdepartmental charges are to be handled, and (iv) what information the pilot must record on a flight log. Moving forward, these types of administrative details will be specified solely within the University’s fiscal policies and procedures issued by the Chief Financial Officer’s office.

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The revised Policy Statement on Travel (attached) has been reviewed by the Chief Financial Officer and General Counsel of the University and is being recommended to the Committee for its consideration.

Committee Action

The Committee Chair will call for a motion to recommend adoption of the following Resolution by the Board of Trustees.

Resolved:

1. The Board of Trustees hereby approves the Board Policy Statement on Travel (BT0003) in the form presented in the meeting materials.

2. The Board Policy on University Aircraft (BT0019) is hereby repealed.

3. The Secretary is authorized to make any necessary edits to correct spelling, grammatical, or format errors or other technical errors subsequently identified.

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System-wide Policy:BT0003 - Policy Statement on Travel

Version: [4] Effective Date: [10/23/2020]

Page | 1

BOARD OF TRUSTEESPOLICY STATEMENT ON TRAVEL

PURPOSE

The purpose of this policy is to establish broad principles governing travel by University employees, members of the Board of Trustees, and other University guests, including the use and operation of aircraft owned by the university (hereinafter university aircraft”)

TRAVEL EXPENSES

1. Except in the case of direct billing authorized by this policy or through the University’s travel card program, the University shall pay travel expenses incurred by an employee or Trustee on a reimbursement basis and only upon submission of the written documentation required by University fiscal policies on travel. Under no circumstances shall the University pay a personal credit card statement issued to an employee or Trustee, even if the statement includes travel expenses incurred by the employee or Trustee on University business.

2. University fiscal policies on travel may authorize direct billing to the University for: (1) expenses associated with group travel to a University event; (2) airfare and conference registrations for employees or Trustees authorized to travel at University expense; and (3) other individuals authorized to travel at University expense.

3. The University will reimburse an employee or Trustee for economy airfare. No exception may be made to this principle without the prior approval of the State Comptroller and then only in the event of an emergency.

UNIVERSITY AIRCRAFT

1. University aircraft are to be used to conduct university business when it cannot be conducted more economically through the use of regularly scheduled commercial aircraft. Specifically, it is appropriate to use university aircraft when the destination is not served by commercial carriers; when the time required to use such a carrier interferes with university obligations; to avoid overnight stays; or when the number of officials and employees traveling makes the use of university aircraft cost effective.

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Page | 2

2. Time is an important consideration for the President, Vice Presidents, Chancellors, and other senior staff.

3. University guests may be authorized to travel aboard the university aircraft while on University business. The Chief Financial Officer and/or the General Counsel shall review and approve all guest use.

4. University aircraft donated by a private donor for the use of an athletics department may be used to conduct athletics business, including the fulfillment of contractual obligations of the athletics department to its coaches.

5. The Chief Financial Officer shall submit the flight logs each quarter to the Chief Audit and Compliance Officer to review for compliance with policy.

6. The Chief Financial Officer shall submit an annual summary report on use ofuniversity aircraft to the University of Tennessee Board of Trustees for review by the Finance and Administration Committee. The summary report should contain, at a minimum, information on users, destinations, maintenance performed and operating costs.

DELEGATIONS OF AUTHORITY

1. The Chief Financial Officer shall be responsible for the development and oversight of the University’s fiscal policies on travel and use of university aircraft to ensure compliance with this Board policy statement.

2. The Chief Financial Officer shall be responsible for approving exceptions to the fiscal policies on travel and use of university aircraft. The Chief Financial Officer may delegate this approval responsibility in writing to other University officials; however, the following exceptions are subject to specific approvals that cannot be delegated:

(a) Exceptions for the Chief Financial Officer must be approved in writing by the President in advance of any reimbursement and reported to the Audit and Compliance Committee at its next meeting;

(b) Exceptions for the President or employees in the President’s office must be approved in writing by the Chief Financial Officer or the Chair of the Audit and Compliance Committee in advance of any reimbursement

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Page | 3

and reported to the Audit and Compliance Committee at its next meeting;

(c) Exceptions for officers of the University, as defined in the Bylaws of the Board, must be approved in writing by the Chief Financial Officer in advance of any reimbursement and reported to the Audit and Compliance Committee at its next meeting;

(d) Exceptions for Trustees must be approved in writing by the Chair of the Audit and Compliance Committee in advance of any reimbursement and reported to the Audit and Compliance Committee at its next meeting; and

(e) Exceptions for the Chair of the Audit and Compliance Committee must be approved in writing by the Chair of the Board of Trustees in advance of any reimbursement and reported to the Audit and Compliance Committee at its next meeting.

3. The Chief Financial Officer and his or her delegee(s) are not authorized to approve any exception that would be contrary to federal or state law.

COMPLIANCE WITH LAW

University fiscal policies on travel and aircraft use shall be in compliance with any applicable federal and state law and regulations and with this Board policy statement.

Related Policies:F10705 Travel

History:

Adopted 06/24/2004Revised 10/09/2009

06/21/2019[10/23/2020]

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Finance and Administration Committee - VIII. UT System Workforce Update - Information

AGENDA ITEM SUMMARY



Item: UT System Workforce Update

Type: Information

Presenter: Dr. Brian K. Dickens, Chief Human Resources Officer

This presentation is intended as an annual update to the Board of Trustees on the UT System Workforce. It details point and time data elements and human resource metrics, as of September 1, 2020, to provide a general overview of the workforce demographics, characteristics, numbers, and trends associated with the University of Tennessee campuses, institutes and centers in aggregate and detail where appropriate. This highlevel overview is provided to start a conversation and solicit trustees’ input as to what other information they would like to see as this gets built out.

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UT System Workforce UpdateDr. Brian K. Dickens, CHROOctober 22, 2020

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Workforce Overview (September 1, 2020)

12,738 Regular Employees(12,467.3 FTE)

By Category

By Campus and Institute

13953288

170

1508

5206812 77

282

UTC HSC IPS UTIA

UTK UTM UTSI UTSA

Minority Representation

23.6%

46.1%

53.9%

MaleFemale

GenderRepresentation

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Workforce Overview Con’d (September 1, 2020)

Number of Employees with Post-secondary Education – 10,688

Associate's/TradeSchool/1 or MoreYears of College

Bachelor's Degree Master's Degree Doctorate Degree

Number 1064 2516 2635 4276Percent 10.1 24.0 25.1 40.8

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Traditionalists BabyBoomers Gen X Millennials

(Gen Y) Gen Z

Employees 85 3424 5008 4055 166

0

1000

2000

3000

4000

5000

60000-10 11-20 21-30 31-40 41-50 50+

64.7% 20.0% 9.90% 4.50% 0.80% 0.10%

Eligible for Retirement

25%

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New Hires & Terminations (September 1, 2019 – September 1, 2020)

Sept Oct Nov Dec Jan Feb March April May June July August Sept# of Hires 177 161 112 82 150 113 115 49 73 94 137 302 40# Terminations 125 115 69 133 143 88 99 60 87 164 228 89 0

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New Hires By CategoryVoluntary Promotions, Lateral Transfers, Demotions

Terminations By Category

Top 5 Reasons for Termination

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Workforce Overview Con’d (September 1, 2019 v. September 1, 2020)

0

1000

2000

3000

4000

5000

6000

UTC HSC IPS UTIA UTK UTM UTSI UTSA

September 1, 2019

Headcount FTE

Totals

FTE: 12,323.2

Headcount:12,604 0

1000

2000

3000

4000

5000

6000

UTC HSC IPS UTIA UTK UTM UTSI UTSA

September 1, 2020

Headcount FTE

Totals

FTE: 12,467.3

Headcount:12,738

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CHALLENGEISSUES

PROJECTRESULTS MGMT.

REVIEWS

GOLIVE

• BOT – Market gap study• July 2017 kick-off

• Current job titles• Current pay structure• Job titles w/ multiple pay grades

• 27 job families• 299 unique roles and levels• New market ranges• 9500 PDs reviewed

• Began August 2020

• Implementation set for January 2021

A Compensation Journey

*regular staff only

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Compensation Results - Distribution of Salaries (Using Employee Subgroup)

6.38%

29.59%32.31%

20.91%

7.48%

3.32%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Below Q1 Q2 Q3 Q4 Above

EMPL

OYE

E DI

STRI

BUTI

ON

QUARTILES

University of Tennessee EmployeeDistribution by Quartile

Non-exempt Exempt-Professional

Exempt-Executive

Average Salary $36,592 $63,644 $116,172

$- $20,000 $40,000 $60,000 $80,000

$100,000 $120,000 $140,000

SALA

RY R

ANG

E

EMPLOYEE BREAKDOWN

Averages Salaries by Employee Subgroup

Non-exempt Exempt-Professional Exempt-Executive

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Questions?Thank You!

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Finance and Administration Committee - IX. FY 2020 Report on Endowment Investment Performance - Information

AGENDA ITEM SUMMARY



Item: FY 2020 Report on Endowment Investment Performance

Type: Information


Investment of University funds is under the jurisdiction of the Finance and Administration Committee of the Board of Trustees, which makes recommendations to the Board on matters requiring Board action. Prior to each regularly scheduled Board meeting, the Finance and Administration Committee receives for review an investment report and recommends to the Board any actions deemed necessary. The FY 2020 Report on Endowment Investment Performance follows.

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Investment Summary as of June 30, 2020• Consolidated Investment Pool (CIP) Cash-flow Activity for 12-month Period:

o $57 million in New Giftso $48 million in Spending Plan Distributionso $11 million in Administrative Support

• Consolidated Investment Pool (CIP)* and Benchmark 1-year Returns:o Trailed Broad Policy B-mark (60/40 stock & bond mix): -3.2% vs +2.9%o Outperformed the Target Weighted B-mark (Multi-asset benchmark): -3.2% vs -7.9%

-

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Index & Benchmark Summary:Broad Policy Benchmark: 60.0% MSCI ACWI IMI Index

+ 39.0% Bloomberg Barclays Global Aggregate Bond Index + 1.0% U.S. 91-Day Treasury Bills

This benchmark is intended to assess the overall asset allocation and risk profile of the portfolio. The Bloomberg Barclays Global Aggregate Bond Index consists of a wide range of global investment grade bonds, including sovereigns, corporate bonds, and various asset-backed securities. MSCI ACWI IMI Index includes large, mid, and small-cap stock market exposure across both Developed and Emerging Markets.

Target Weighted Benchmark:This benchmark is comprised of multiple public and private indices which represent the various asset classes in which the CIP invests. These include equity, real estate, natural resources, hedged strategies, bonds, and cash. The weightings of the underlying indices are dynamic and rebalanced periodically to align with those of the CIP at the beginning of a measurement period.

CPI + 5.5%:This is the 1-year inflation-measuring Consumer Price Index + 5.5%.

Cambridge Associates (CA) Notes: Notes: Performance is preliminary as of June 30, 2020. Totals may not sum due to rounding. 100% of Private investment performance is as of March 31, 2020. Private investment market values have been updated with capital calls and distributions through the current month. A 0% return is assumed for all private investments for the current quarter. Returns provided by FEG through October 31, 2018.

Please note that CA uses CPI – All Urban Consumers as a measure of inflation. The primary data source for information is the investment manager and/or fund administrator, therefore data may not match custodial or other client records due to differences in data sourcing, methodology, valuation practices, etc. Estimated values may include prior quarter end data adjusted by a proxy benchmark or by subsequent cash flows. CA makes no representations that data reported by unaffiliated parties is accurate.

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Finance and Administration Committee - X. Consent Agenda - Action Items

AGENDA ITEM SUMMARY



Item: Committee Consent Agenda

Type: Action

Certain action items and information items have been placed on the Committee Consent Agenda. These items will not be presented or discussed in the Committee unless a Committee member requests that an item be removed from the Consent Agenda. In accordance with the Bylaws, before calling for a motion to approve the Consent Agenda, the Committee Chair will ask if any member of the Committee requests that an item beremoved from the Consent Agenda. The Bylaws provide that an item will not be removed from the Consent Agenda solely for the purpose of asking questions for clarification. Those questions should be presented to the Secretary before the meeting.

Committee Action

If there are no requests to remove items on the Consent Agenda, the Chair will call for a motion that:

1. The reading of the minutes of the June 25, 2020 meeting of the Committee be omitted and that the minutes be approved as presented in the meeting materials, provided that the Secretary is authorized to make any necessary edits to correct spelling errors, grammatical errors, format errors, or other technical errors subsequently identified.

2. The action items set forth on the Consent Agenda be recommended for adoption by the Board of Trustees.

If the Motion passes, the items requiring Board approval will go forward to the Consent Agenda of the full Board meeting.

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Page 1Finance and Administration Committee

June 25, 2020


MINUTES OF THE FINANCE AND ADMINISTRATION COMMITTEEJune 25, 2020

Knoxville, Tennessee

The Finance and Administration Committee of The University of Tennessee Board of Trustees met at 2:00 p.m. (EDT) on Thursday, June 25, 2020. Following continuing guidance from the U.S. Centers for Disease Control and Prevention (CDC) regarding COVID-19 and in compliance with the Tennessee Pledge and other state and local guidelines, the meeting was held virtually with Committee members participating electronically or by telephone. The meeting was hosted from the University of Tennessee, Knoxville campus.

I. Call to Order and Roll Call.

Committee Chair Bill Rhodes called the meeting to order. Board Secretary Cynthia Moore called the roll, and the following members of the Committee were present: William (Bill) C. Rhodes III, Committee Chair; John C. Compton, Board Chair; Amy E. Miles; and Kim H. White. In addition, the following trustees were in attendance: Decosta E. Jenkins; Donald J. Smith; and Alan D. Wilson.

Others present included: President Randy Boyd; David Miller, Senior Vice President and Chief Financial Officer; Linda Martin, Vice President for Academic Affairs and Student Success; Tiffany Carpenter, Vice President for Communications and Marketing; Mr. Ron Loewen, Assistant Vice President for Budget and Planning, Mr. Austin Oakes, Executive Director for Capital Projects; Chancellors Angle, Carver, and Plowman; and other members of the UT senior leadership and administrative staff. The meeting was webcast for the convenience of the University community, the general public, and the media.

Ms. Moore addressed the Open Meetings Act requirements for meetings conducted with members participating electronically and announced the presence of a quorum.

III. Requests to Address the Board

There were no requests to address the Board that were referred to the Committee.

IV. CFO’s Report on Financial Performance June 2020

David Miller, Senior Vice President and Chief Financial Officer, reviewed the University’s financial performance for the period from July 1, 2019 through May 31, 2020 compared against: (i) the FY 2019-20 Budget, and (ii) the same period for the prior fiscal year. The review focused on variations of revenues and expenses, which were attributable to certain COVID-related impacts (e.g., housing and dining refunds), timing considerations associated with year-end adjustments, and non-recurring items (e.g., one-time state funding for security upgrades).

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June 25, 2020

In addition, Mr. Miller provided background information on the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including an overview of the funding made available to higher education institutions for the benefit of their students and for institutional costs. He highlighted that the University received an aggregate total of approximately $17.4 million for Student Grants and $18.2 million for Institutional Costs. To date, the aggregate amount of the COVID-related impacts is estimated to be $69.4 million, comprised of $27.8 million in refunds, $19.9 million of additional expenses, and $21.6 million in lost revenues. It was explained that the net impact to the University of approximately $51 million ($69.4 million less $18.2 million in CARES funding) does not reflect other operating expense savings of approximately $21 million.

V. FY 2020-21 Operating Budget (including Salary Plan, Student Tuition and Fees, and Room and Board Rates)

Mr. Miller prefaced the discussion on the proposed FY2020-21 Operating Budget by indicating that it has been prepared based on the best information currently available. He stated that, while public higher education institutions in other states are facing significant reductions in stateappropriations, the University is fortunate as its state funding for the upcoming year will be essentially flat. Mr. Miller also advised that, at present, it is anticipated that the financial impacts associated with COVID should be manageable through adjustments to non-recurring expenses and the use of reserves, as needed.

Ron Loewen, Assistant Vice President for Budget and Planning, provided an overview of the proposed operating budget. It was noted that the reduction in the budget reflects changes primarily in non-recurring items. In the final state budget the increases originally provided to UTC, UTK, and UTM through performance funding were eliminated. However, the state reallocated the existing level of funding through the competitive-formula and UT Martin’s funding decreased approximately $1 million.

In response to questions and comments from Committee members, Mr. Loewen compared and contrasted the current situation from that of the “Great Recession.” He reported that one of the primary differences was that recurring revenues were impacted significantly in connection with the last recession. Over time, the University was able to recover primarily due to federal stimulus funding (under the American Recovery and Reinvestment Act of 2009) and increases in tuition and fees. The pandemic has had a more concentrated impact on auxiliary revenues given that students have returned home for remote instruction (resulting in housing, dining and other refunds) and athletic programs have been disrupted (cancellation of events).

Mr. Loewen confirmed that the proposed FY2020-21 Operating Budget is similar to the prior year’s budget. It reflects steady enrollment figures, based on summer enrollment figures and fall enrollment estimates. A cautious approach has been undertaken in preparing the budget,recognizing that it may be a very different year. He reviewed the changes in In-State Undergraduate Tuition and Mandatory Fees over the last three fiscal years. For the upcoming year,no increases in tuition and mandatory fees are planned. He finished his presentation by reviewing

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June 25, 2020

the primary components of recurring revenues and expenses, noting that the composition mix for each has remained fairly consistent over time.

In response to questions from the Committee members regarding options for addressing possible budget shortfalls, Mr. Miller advised that the course of action may vary (by department, school, campus, etc.). He indicated that different strategies could apply based on the individual circumstances and the anticipated duration. In addition to the potential use of unrestricted reserves, the University’s primary focus would be eliminating, reducing, or postponing nonrecurring expenses (travel, professional development, supplies, etc.) in order to protect the instructional side of the University.

The Committee members encouraged the Administration to examine where permanent changes might be appropriate as part of a new “normal” post-pandemic and to act on opportunities that may result in savings or allow for reallocation of funds to strategic priorities. President Boyd highlighted that there may be certain changes (i.e., space needs) through the adoption of more flexible alternative work practices. The Committee members requested further detail pertaining to the amount of reserves being used to address COVID-related impacts for more insight as to the level of reserves should the pandemic continue for an extended period of time.

Mr. Miller reminded the Committee members that a revised budget is presented to the Committee each year at the winter meeting. Given the circumstances, it is anticipated that a budget update will be presented at the upcoming fall meeting. Upon further discussion, it was determined that afinancial update should also be presented to the Executive Committee at its next meeting given the fluid nature of the situation. Mr. Miller and others then responded to individual clarifyingquestions associated with the proposed budget.

Upon motion duly made and seconded, a roll call vote was taken, and the Committee approved a recommendation that the Board of Trustees adopt the Resolution approving the FY 2020-21 Operating Budget (as presented in Tab 2 of the meeting materials).

VI. Capital Projects

Mr. Miller introduced Austin Oakes, Executive Director for Capital Projects, who reviewed the Administration’s Capital Budget recommendations. The presentation focused on the following items:

ÿ Capital Outlay Funding Requests (FY 2021-22 through FY 2025-26);ÿ Capital Maintenance Funding Requests (FY 2021-22 through FY 2025-26); andÿ Revenue/Institutionally-Funded Capital Projects (FY 2020-21 and FY 2021-22).

In addition, Mr. Oakes provided an historical summary of the University’s approved funding requests and the actual appropriations received for the last five fiscal years. In this regard, he emphasized that the level of funding provided for both capital outlays and capital maintenance has varied widely from year-to-year.

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June 25, 2020

Upon motion duly made and seconded, a roll call vote was taken, and the Committee approved a recommendation that the Board of Trustees adopt the three Resolutions pertaining to the Capital Outlay Funding Requests, the Capital Maintenance Funding Requests, and the Revenue/Institutionally-Funded Capital Projects (as set forth in Tabs 3-5 of the meeting materials).

VII. Report of UT Martin Five-Year Plan

Chancellor Keith Carver provided a progress update on the strategic enrollment planning efforts for UT Martin. As a guiding principle, all new initiatives being considered must align with UT Martin’s Mission Statement and its Core Values. Working with an external consultant (Ruffalo Noel Levitz), there has been a very intentional, phased approach to the project, including the following:

ÿ Phase 1 – Preparation and Data Analysisÿ Phase 2 – Strategy Developmentÿ Phase 3 – Plan Formation and Goal Settingÿ Phase 4 – Track Progress Toward Goals

As a result of this work, 11 critical strategies have been identified, and each strategy has its own financial projections and implementation plan. Chancellor Carver shared the compilation of the financial analysis, which considers possible duplications and a risk/fail factor (15%). The figures for the upcoming FY 2020-21 will need to be monitored and reviewed based on COVID-19.Chancellor Carver concluded his remarks discussing the differential in cumulative net revenue (approximately $ 9 million), depending on the type of marketing employed.

In response to the questions from Committee members, Chancellor Carver, President Boyd and Dr. Martin discussed the periodic review of underperforming programs by the University and by the Tennessee Higher Education Commission (THEC). President Boyd also highlighted that UT Martin’s enrollment strategy encompasses product development, competition assessment, advertising, and student recruitment. He further discussed how the campus has undertaken structural, cost-cutting reforms and that future strategy for success is based on growth. The Committee members expressed their desire to learn more about the new academic programs under consideration and thanked Chancellor Carver and his leadership team for their efforts.

VIII. Use of UHS Proceeds

Mr. Miller advised that under an existing Lease and Transfer Agreement with University Health System, Inc. (UHS), the University receives annual payments that can be used at the discretion of the Board. The Administration is recommending that up to $12.6 million of the outstanding balance of $16.8 million in UHS proceeds be used to support three capital projects associated with the UTHSC Campus Master Plan. Upon motion duly made and seconded, a roll call vote was taken, and the Committee approved a recommendation that the Board of Trustees adopt the

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June 25, 2020

Resolution approving the allocation of the UHS proceeds (as set forth in Tab 7 of the meeting materials).IX. Review of Committee Work Plan

Committee Chair Rhodes thanked Ms. Moore for the work done in preparing work plans for the Board committees. Mr. Miller advised that the work plans are intended to capture key reports, special focus topics, and action items that will come before the Committee over the next year. The work plan was placed on the meeting agenda in order to solicit feedback from the Committee members as to any other items that they would like to consider for future meetings. Committee Chair Rhodes stated that the work plan provides a framework that should serve as a useful guide in shaping the work of the Committee.

X. Consent Agenda

Committee Chair Rhodes called the Committee’s attention to the Consent Agenda and asked if there were any requests to remove an item from the agenda. There being none, upon motion duly made and seconded, a roll call vote was taken, and the Committee approved: (i) the Resolution to adopt the minutes of the February 19, 2020 meeting of the Committee, and (ii) the Resolutions pertaining to the other action items included on the Consent Agenda. (A complete list of the approved items appears at the end of these minutes.)

XI. Other Business

Mr. Miller indicated that the endowment investment performance report for March 31, 2020 shows a fair market balance for the consolidated investment pool (CIP) of approximately $943 million. As of April 30, 2020, the CIP has rebounded to $992 million. Committee Chair Rhodes indicated that he has been impressed with the University’s investment advisor, Cambridge Associates.

XII. Adjournment

There being no other business to come before the Committee, the Committee Chair adjourned the meeting.

Respectfully Submitted,

________________________________Cynthia C. MooreSecretary and Special Counsel

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June 25, 2020

Approved Consent Agenda Items

∑ Minutes of the Last Meeting (February 19, 2020)∑ Distribution of Corpus from Haslam College of Business Quasi-Endowment∑ Ratification of Quasi-Endowments Created during FY 2019-20 ∑ Granting of Easements ∑ FY 2020-2021 President Emeritus Agreement with Joseph E. Johnson ∑ Procedures Governing Compensation Increases during FY 2020-21

List of Information Items Presented to the Committee

∑ Annual Report of Naming Interior Spaces and Grounds∑ Report on Use of Student Programs and Services Fee Funds∑ Endowment Investment Report∑ Disclosure of Additional Revenue/Institutionally-Funded Capital Projects for FY 2019-20 and

2020-21

Attachments. Copies of the following documents are filed with the official minutes of this meeting.

∑ Presentations: ÿ Financial Performance (July 1, 2019 through May 31, 2020)ÿ FY2020-21 Proposed Operating Budgetÿ Capital Budget Recommendationsÿ Strategic Enrollment Planning at UTM: Progress Update

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INDEX OF REAL PROPERTY TRANSACTIONS

1. Knox Blount Greenway Easement Expansion – UTIA2. Cumberland Forest Property Transfer – UTIA3. Sale of Gift Property at Hickory Orchard Way in Knoxville, TN

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AGENDA ITEM SUMMARY



Item: Knox Blount Greenway Easement Expansion - UTIA

Type: Action

Background

In May 2008, the State Building Commission Executive Subcommittee approved the disposal of permanent and temporary construction easements to Knox County for the construction of greenway trails in two phases. Phase I, the section along the Tennessee River on the University of Tennessee Research Park at Cherokee Farm has been constructed.

Phase II, located on the University of Tennessee Institute of Agriculture (UTIA) Plant Sciences Experiment Station off Alcoa Highway, is now substantially complete. The initial approval was for a 20 +/- foot wide permanent easement and a 100 +/- foot wide temporary construction easement which would be released once construction was complete. To meet ADA requirements, a portion of the greenway required significant cut resulting in steep banks on either side of the permanent easement. The University requests approval of disposal by easement of an additional 0.70 +/- acres to Knox County to allow for slope maintenance along this portion of the greenway. This disposal will not negatively impact UTIA operations on the site.

Since the easement will benefit UTIA, the University is not seeking consideration from Knox County. Upon approval by the Board of Trustees, the University will seek all required State approvals.

Resolved: The Board of Trustees hereby approves the disposal by easement of an additional .70 +/- acres to Knox County, without consideration, as contemplated in the meeting materials presented.

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AGENDA ITEM SUMMARY



Item: Cumberland Forest Property Transfer - UTIA

Type: Action

Background

The University of Tennessee Institute of Agriculture (UTIA) Forest Resources AgResearch and Education Center is composed of three forest units including the Oak Ridge Forest, Cumberland Forest, and Highland Rim Forest. Cumberland Forest includes approximately 8,361 +/- acres in Morgan and Scott counties and is used for research, demonstration, teaching, and extension activities.

In 1952, the University granted Stevens Baptist Church (Church) the right to use approximately 0.42 +/- acres (the “Premises”) of Cumberland Forest property to build and operate a Church building. If the Church ceases using the property for this use, the property reverts back to the University.

It has been determined that a portion of the building was constructed outside thespecified Premises. In addition, over time and likely inadvertently, the Church has used an additional area outside the Premises for events and parking.

In recognition of the original agreement with the Church and to avoid negatively impacting their operations, the University proposes to transfer fee simple ownership of approximately 1.8 +/- acres of property to the Church, at no cost. This includes the Premises included under the original agreement and the additional property usedcurrently by the church. This action will resolve prior boundary issues and clearly delineate the property to be utilized by the Church, while minimizing liability for the University.

This proposed transfer will include a requirement that if the property ceases to be used for the previously stated purposes, the property will revert back to the University, subject to University approval at such time. The University will reserve the right to perform research studies on a portion of the property to be transferred and plans to continue an agreement that allows for occasional UT parking in the Church parking lot. This action will not negatively impact UTIA’s use or operations at Cumberland Forest.

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Given the prior agreement and unique situation, approval is requested to transfer the fee simple interest of approximately 1.8 +/- acres of Cumberland Forest, at no cost, to the Church with reversionary rights stated above.

Upon approval by the Board of Trustees, the University will seek all required State approvals.

Resolved:

1. The Board of Trustees hereby approves the transfer to the Stevens Baptist Church of the fee simple interest of approximately 1.8 +/- acres of Cumberland Forest, at no cost and subject to reversion rights, as presented in the meeting materials.

2. The definitive agreement shall be in form and substance as is acceptable to the Senior Vice President and Chief Financial Officer, in consultation with the General Counsel, consistent with the terms presented to the Board of Trustees and subject to all necessary approvals by the appropriate state agencies.

3. The proper officers of the University be and hereby are authorized to take any and all such actions as may be required or which they may deem necessary or appropriate in order to accomplish the foregoing.

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AGENDA ITEM SUMMARY



Item: Sale of Gift Property at Hickory Orchard Way, Knoxville, Tennessee - UTK

Type: Action

Background

In 2007, the University received a gift of approximately 10.98 +/- acres of residential, undeveloped land at Hickory Orchard Way in Knoxville, TN. The University has no use for the property and the Board previously approved its sale at or above appraised value.

Over the years, the property has been marketed for sale by several different realtors and there has been minimal interest. The current appraised value is $82,000. Given the long holding period and minimal interest, the Administration requests approval to sell the property for a price at or above $70,000. The University is currently negotiating a sale now, subject to Board approval of this item.

Per the gift agreement, a portion of the sales proceeds shall be distributed to Pellissippi State Community College – Blount County Campus and the remainder to The University of Tennessee – Knoxville William and Elaine Jenkins endowed scholarship.

Resolved:

1. The Board of Trustees hereby authorizes the administration to sell the gift property located at Hickory Orchard Way, Knoxville, TN, comprised of approximately 10.98 +/- acres of residential, undeveloped land (the “Property”) at a price equal to or greater than $70,000.

2. The definitive agreement shall be in form and substance as is acceptable to the Senior Vice President and Chief Financial Officer, in consultation with the General Counsel, consistent with the terms presented to the Board of Trustees.

3. The proper officers of the University be and hereby are authorized to take any and all such actions as may be required or which they may deem necessary or appropriate in order to accomplish the foregoing.

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AGENDA ITEM SUMMARY



Item: Proposed Naming of UTHSC Building

Type: Action

Background Information

Pursuant to the Board Policy on the Naming of Facilities and Other Assets of the University of Tennessee (BT0008), the Board of Trustees approves the naming of facilities and other significant assets of the University upon the recommendation of the President.

The University of Tennessee Health Science Center (UTHSC) seeks Board approval to name its new dental building and the entire grounds of the University of the Tennessee College of Dentistry (COD) complex in honor of Delta Dental. The attached letter from Chancellor Schwab provides more information in support of this naming recommendation.

The naming is consistent with the aforementioned Board policy and related guidelines. Further, the naming has been approved by Randy Boyd, President of the UT System, and Kerry Witcher, Vice President for Development & Alumni Affairs and President & CEO of the University of Tennessee Foundation.

Resolved: In recognition and in appreciation of Delta Dental’s generous support toThe University of Tennessee and its University of Tennessee Health Science Center(UTHSC), the Board of Trustees hereby approves the naming of the new dental building and the entire grounds of the University of the Tennessee College of Dentistry complex located at UTHSC the “Delta Dental of Tennessee Building and the Delta Dental of Tennessee Oral Health Complex.”

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October 2, 2020

President Randy Boyd

University of Tennessee System

800 Andy Holt Tower

Knoxville, TN 37996-0180

Dear President Boyd:

In accordance with the University of Tennessee Board of Trustees Policy on Naming of Facilities

and Other Assets, and Board-Approved Guidelines for Naming Opportunities and Endowments, the

University of Tennessee Health Science Center (UTHSC) seeks approval to name the new dental

building and the entire grounds of the University of Tennessee College of Dentistry (COD) located

at 875 Union Avenue, Memphis, TN 38103 after generous donor Delta Dental of Tennessee.

Delta Dental of Tennessee is the largest donor of the CoD. Since 1997, Delta Dental of Tennessee

has provided financial support to the CoD totaling more than $16,500,000, including $6,300,000 for

construction costs toward the $45,000,000+ new building, and $1,400,000 in equipment. Below are

just a few of the projects and initiatives their giving has benefitted:

Delta Dental of Tennessee Endowed Scholarship

Equipment in numerous dental labs

The annual CoD Scholarship Dinner

The annual Slagle Dental Meeting

In addition to financial support, Delta Dental of Tennessee personnel have provided expert advice

on strategic matters, speakers to address alumni and students, and fundraising leadership to raise the

needed funds to complete the existing Dunn Dental Building. Delta Dental of Tennessee is led by

its president and CEO Phil Wenk, DDS. As CEO, Phil is a strong advocate for the CoD. He earned

a Doctor of Dental Surgery from the UTHSC in 1977, after earning a Bachelor’s degree at UTK in

1973. Phil is the current chair of the University of Tennessee Foundation Board of Trustees as well

as the chair of the University of Tennessee Health Science Center Advisory Board.

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In recognition of the strong partnership between DDTN and the CoD and the influential leadership

of DDTN CEO and UT alumnus Phil Wenk, we request approval from the Board of Trustees to

name the University of Tennessee Health Science Center new dental building and the dental

complex, the Delta Dental of Tennessee Building and the Delta Dental of Tennessee Oral Health

Complex. If you have questions regarding this request, please contact me.

Sincerely,

Steve J. Schwab, MD

Chancellor, UTHSC

Approved:

Kerry Witcher Date Vice President for Development & Alumni Affairs

President & CEO, UT Foundation, Inc.

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AGENDA ITEM SUMMARY



Item: Corporation Authorization to Transfer Securities

Type: Action

The following Resolution is being updated to include the Treasurer as an authorized officer to execute written instruments for the assignment and transfer of securities held by the University.

RESOLVED: That the Chief Financial Officer and the Treasurer of this Corporation, individually, be and hereby are fully authorized and empowered to transfer, convert, endorse, sell, assign, set over and deliver any and all shares of stocks and bonds, debentures, notes, subscription warrants, stock purchase warrants, evidences of indebtedness, or other securities now or hereafter standing in the name of or owned by this Corporation and to make, execute and deliver, under the corporate seal of this Corporation as affixed by the Secretary, any and all written instruments of assignment and transfer necessary or proper to effectuate the authority hereby conferred; and

FURTHER RESOLVED: That whenever there shall be annexed to any instrument of assignment and transfer, executed pursuant to and in accordance with the foregoing resolution, a certificate of the Secretary of this Corporation in office at the date of such certificate, and such certificate shall set forth these resolutions and shall state that these resolutions are in full force and effect and shall also set forth the names of the persons who are then officers of this Corporation, then all persons to whom such instrument with the annexed certificate shall thereafter come, shall be entitled, without further inquiry or investigation and regardless of the date of such certificate, to assume and to act in reliance upon the assumption that the shares of stock or other securities named in such instrument were theretofore duly and properly transferred, endorsed, sold, assigned, set over and delivered by this Corporation, and that with respect to such securities the authority of these resolutions and of such officers is still in full force and effect.

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Finance and Administration Committee - Consent Agenda - Information Items

INDEX OF CONSENT AGENDA INFORMATION ITEMS

A. Report on Use of Differential Tuition Funds at UTCB. Report on Use of Differential Tuition Funds at UTKC. FY 2020 Annual Flight Operations ReportD. Disclosure of Additional Revenue/Institutionally-Funded Capital Projects for FY

2020-21E. Updated Committee Work Plan

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AGENDA ITEM SUMMARY



Item: Report on Use of Differential Tuition Funds at UTC

Type: Information

Differential Tuition is a per-credit-hour fee assessed for a specific course or group of courses as dictated by increasing demand for educational excellence in specific areas. The Board of Trustees has authorized UT Chattanooga to assess differential tuition for upper level courses offered in the Colleges of Business, Engineering, Nursing, Occupational Therapy, and Physical Therapy.

At the request of the former Board, an annual report is presented to the Finance and Administration Committee on how Differential Tuition revenues were used. The report for Fiscal Year 2019-20 is included.

The table below illustrates the annual revenue less expenses for the last five years and the June 30, 2020year-end balance.

University of Tennessee ChattanoogaDifferential Tuition Five-Year Trend Summary

Revenue Less Expenses

College FY 2015-16

FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 7/1/20 Balance

Business $862,638 $391,469 $719,627 $427,954 $462,505 $1,126,191Engineering $149,361 $417,854 $418,535 $244,536 $252,700 $663,336Nursing $35,522 ($2,864) $22,118 $13,410 $152,446 $202,901Occupational Therapy - $17,781 $33,917 $47,254 $70,994 $147,855Physical Therapy - $77,204 $80,386 $94,438 $7,515 $161,166Total $1,047,521 $901,444 $1,274,583 $827,592 $946,161 $2,301,449

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The University of Tennessee, Chattanooga

Differential Tuition Summary For the Fiscal Year Ended 2019-20

College

FY20 per Credit

Hour Fee Total

Revenue Program Expenses

Need-Based Scholarships/Aid

Total Expenses

Revenue less

Expenses

Gary W. Rollins Business $57 $2,785,919 $1,976,039 $347,375 $2,323,414 $462,505

Engineering $57 1,549,309 1,096,123 200,486 1,296,609 252,700

Nursing $100 1,008,399 769,532 86,421 855,953 152,446

Occupational Therapy $57 158,698 70,799 16,904 87,703 70,994

Physical Therapy $57 290,204 263,671 19,017 282,688 7,515

Total $5,792,529 $4,176,164 $670,203 $4,846,367 $946,161 Primary Expenditures

- Scholarships - Faculty - Advising and Student Success

Gary W. Rollins College of Business The Gary W. Rollins College of Business maintains seven full-time faculty members, four academic advisors, a four-person staff in its Center for Career Success, a communication specialist, a business manager, an assessment director, a program coordinator and three administrative support staff. The differential fee also provided funds for faculty development. The College used 12.5% of the fee collected to provide need-based scholarships to students. In addition, funds were used for programming for student organizations. The unspent revenue will be used for planning and improvements in Fletcher Hall. College of Engineering & Computer Science The College of Engineering and Computer Science maintains full and partial funding of seven full-time faculty members, an administrative support position, and a lab engineer on its differential tuition. These funds also provided additional programming support to the growing operations of the College inclusive

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UTC FY 20 Differential Summary 2

of the Student Success Center. The College used 13% of the fee collected to provide merit and need-based scholarships to students. The unspent revenue will be used for improvements and renovation of the Student Success Center. School of Nursing The School of Nursing increased their differential tuition fee last year, with the UT BOT approval, from $57 to $100 per credit hour fee. The School of Nursing maintains full and partial funding of four full-time faculty members and an academic advisor to focus on the needs of the RN to BSN students. The School used a percentage of the fee collected to provide need-based scholarships to students. Funding was also provided for memberships and accreditation purposes, along with needed clinical equipment. The unspent revenue is earmarked to provide additional resources for course offerings and refreshing costly clinical equipment. Department of Occupational Therapy The Department of Occupational Therapy maintains part-time need-based graduate assistants. These funds were mostly used to enhance lab related experiences for students by purchasing lab supplies and cadavers. They were also used to cover student liability insurance, CPR training, memberships to national organizations, vaccinations, and other in-class student experiences. The Department used 10.6% of the fee collected to provide need-based scholarships to students. The unspent revenue will be used this year to further enhance the student clinical experience and provide need-based scholarships. Department of Physical Therapy The Department of Physical Therapy maintains part-time need-based graduate assistants. These funds were used to enhance lab related experiences for students by purchasing lab supplies, cadavers, and computer software. They were also used to cover student liability insurance, CPR training, memberships to national organizations, vaccinations, and other in-class student experiences. The Department used a percentage of the fee collected to provide merit and need-based scholarships to students. The unspent funds will be used this year to further enhance the student clinical experience and provide need-based scholarships.

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AGENDA ITEM SUMMARY



Item: Report on Use of Differential Tuition Funds at UTK

Type: Information

Differential Tuition is a per-credit-hour fee assessed for a specific course or group of courses as dictated by increasing demand for educational excellence in specific areas. The Board of Trustees has authorized UT Knoxville to assess differential tuition for upper level courses offered in the Colleges of Business, Engineering, Nursing, and Architecture and Design.

At the request of the former Board, a report has been presented annually to the Finance and Administration Committee on how Differential Tuition revenues were used. The report for Fiscal Year 2019-20 is included.

The table below illustrates the annual revenue less expenses for the last five years and the June 30, 2020 year-end balance.

University of Tennessee KnoxvilleDifferential Tuition Five-Year Trend Summary

Revenue Less Expenses

College FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 7/1/2020Balance

Business $2,044,052 $2,509,140 $899,776 ($751,635) ($1,359,926) $986,159Engineering $236,340 $81,616 $74,121 ($362,539) $17,495 $469,293Nursing - $91,228 $201,745 ($106,481) ($281,147) $198,981Architecture & Design $240,235 $60,843 ($20,453) ($118,796) ($6,552) $185,883Total $2,520,627 $2,742,827 $1,155,189 ($1,339,451) ($1,630,130) $1,840,316

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College

FY20 per Credit Hour

Fee RevenueProgram Expenses

Need Based Scholarships Total Expenses

Revenues less Expenses

Business 101$ 11,497,985$ 11,746,632$ 1,111,279$ 12,857,911$ (1,359,926)$ Engineering 65$ 4,882,978 4,341,510 523,973 4,865,483 17,495 Nursing 135$ 1,541,279 1,686,426 136,000 1,822,426 (281,147) Architecture and Design 111$ 1,695,634 1,593,623 108,563 1,702,186 (6,552) Total 19,617,876$ 19,368,191$ 1,879,815$ 21,248,006$ (1,630,130)$

Primary Expenditures - Need-based scholarships - Faculty - Advising - Instructional equipment - Laboratories

Business

Engineering

Nursing

Architecture and DesignSupports a design-build laboratory which is essential to the pedagogical experience of a design education, hire nationally and internationally recognized faculty, grow existing programs, and attract top quality students by offering awards.

The University Of Tennessee, KnoxvilleDifferential Tuition Summary

for the Fiscal Year Ended 2020

Provides direct faculty and staff support of the undergraduate student population. Staff support is in the form of student academic advising and career management advising. Expenditures on faculty make possible expanded teaching capacity facilitating timely progress to degree completion and more moderate course section sizes than would otherwise be possible. In addition, a modest amount of the revenue is allocated toward technology, undergraduate diversity and inclusion initiatives, communications, and supplies.

An essential resource to the College, the revenue supported further development and improvement in all academic programs and student services. In support of recruitment and retention of the best students, the funds are used for technology, equipment, and facility improvements. Funds were also used to fund Diversity Engineering summer programs, and faculty positions to address teaching loads as a result of increased enrollment.

A key resource for the College, supporting faculty for additional enrollment and providing resources towards student learning through the Health Information Technology and Stimulation (HITS) Lab.

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1 | P a g e

THE UNIVERSITY OF TENNESSEEFY 2020 UT FLIGHT OPERATIONS REPORT

In accordance with the Board Policy on University Aircraft (Policy BT0019), the Senior Vice President and Chief Financial Officer shall submit an annual summary report of university aircraft operations to the University of Tennessee Board of Trustees for review by the Finance and Administration Committee. The summary report should contain, at a minimum, information on users, destinations, maintenance performed, and operating costs.

The UT Flight Operations Department provides University personnel and guests with safe, reliable and efficient flight services using University owned and leased aircraft and various charter flight operators as appropriate. In FY 2020, the UT airplane, a Beechcraft King Air 350, was flown 221.2 flight hours, a 13% decrease from FY 2019.

The UT airplane was flown on 255 separate legs, an 18% increase over FY 2019. A total of 55 flights, or 87%, were flown between Knoxville and other UT entities and the state capitol in Nashville. A total of 357 passengers were transported, a 3% increase compared to FY 2019.

In FY 2020, the total UT Flight Operations Department expenditures were$1,092,128, a 10% increase over FY 2019. The costs for pilot salaries and benefits were $559,428. The fuel expense was $94,828. On the cost per flight hour basis, the FY 2020 fuel cost of $428.70/hour was 8% higher than the $/hour in FY 2019. The cost of Routine Maintenance & Inspections was $179,180, compared to $154,792 in FY 2019.

Since its acquisition in March 2008, the UT airplane has given exceptional and reliable service. Prompt attention was given to maintenance issues as they arose in order to ensure the plane was available for subsequent departures. Usage of the UT airplane decreased significantly during last quarter of FY 2020 because of Covid-19 travel restrictions.

To reduce reliance on costly charters during peak recruiting periods and conflicting scheduling with the King Air, UT leased an aircraft primarily for UTK athletics. The leased plane flew 71.9 hours with a total of 25 flights, 78 legs, and 102 passengers.The one-year lease has now expired.

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In July 2019, UT received a 2004 Cessna Citation XLS as a gift and there was no longer a need for a leased plane. The gift included a complete refurbishment and was put into service in late November 2019. The total donation was $4,029,213. The University invested $535,364 in a state-of-the-art avionics and flight safety system. The donor agreement specified that the plane was for the benefit of the UTK athletic department. The new plane flew 64.4 hours for the balance of the fiscal year.

The flyUT aircraft scheduling program has been more fully utilized during the year. It provides effective and timely flight schedule information sharing as intended. The Office of Information Technology staff is working with Flight Operations to fully integrate a Crew Scheduling component into the program.

The operating cost of the UT airplane is funded from department recoveries and support from the system administration. In FY 2020, University departments paid $950 per flight hour, and UTK Athletics paid $2,000 per flight hour. These charges fund the variable operating and routine maintenance costs of the airplane. The system administration funds pilots’ salaries, benefits, insurance and extraordinary maintenance.

For FY 2020, Flight Operations had four pilots to service University administration and UTK Athletic flights. The University can draw upon several well qualified local contract pilots as needed during Athletics recruiting and other peak times.

In utilizing the UT airplane, passengers make much more efficient and productive use of their time, especially while traveling within Tennessee, as most destinations within the state are not served by commercial airlines. On other trips, the flight schedules of the airlines cannot accommodate the needs of the travelers.

We continuously make every effort to use the UT airplane before making use of charter flight services. However, the charter flight services are essential to meeting travel needs of the University, especially for athletics during their recruiting periods.

FY 2020 was a year of continued excellent services provided by UT Flight Operations to University. The department continues to emphasize strong customer service and promotes the most efficient use of the UT airplane by maintaining the highest safety standards.

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Citation XLS Leased Jet King Air Leased Jet King Air2020 2020 2020 2019 2019 2018 2017 2016 2015

Recoveries/SupportDepartmental Recoveries 145,318 318,678 316,798 848,477 250,138 389,041$ 436,081$ 374,341$ 359,608$ System Support (1) 215,131 7,407 775,330 241,760 744,698 357,340 339,665 171,840 195,807 Athletic Support (2) - - 160,000 160,000

Total Recoveries/Support 360,449 326,085 1,092,128 1,090,237 994,836 746,381 775,746 706,181 715,414 Expenditures

Salaries & Benefits 2,087 559,428 63,669 425,467 357,897$ 327,558$ 311,416$ 291,870$ Contract Pilots/Extra Service 25,700 46,650 10,575 21,350 32,300 7,825 10,400 Fuel 63,415 68,724 94,828 180,331 77,615 128,936 148,543 144,366 170,063 Routine Maintenance/Inspections 216,812 33,792 179,180 126,026 154,792 63,498 133,024 151,643 99,312 Airplane lease 127,061 564,000 Travel 19,117 5,508 44,324 35,277 59,207 31,399 34,649 30,817 25,868 Printing 79 Phone & Postage 34,206 3,835 3,354 3,861 3,449 3,580 3,009 Pilot Training 10,690 115,120 68,026 32,900 15,060 42,900 Supplies 3,643 5,488 8,398 5,756 1,498 1,562 Computer Services 1,989 1,838 1,683 Office and Hangar Rent 19,471 6,224 27,922 24,412 27,362 23,702 27,332 25,236 25,236 Liability Insurance 20,642 32,710 38,468 16,876 19,117 1,522 32,157 Subscriptions 7,428 36,347 88,131 96,522 76,569 19,194 9,902 10,099 10,076 Misc Operational Exp 708 817 1,255 1,216 1,281 1,281

Total Expenditures 360,449$ 326,085$ 1,092,128$ 1,090,237$ 994,836$ 746,381$ 775,746$ 706,181$ 715,414$ Net Gain/(Loss) -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Flight Hours 64.4 71.9 221.2 211.90 195.60 315.00 390.90 387.90 373.60 Capital Maintenance 535,364$ 1,275,047$

(1) System Support covers salaries, benefits, and capital maintenance/enhancements.

(2) Direct support from Knoxville athletic department.

Operating Costs Per Operational HourFY 2020-2015

UT Flight Operations (UT Plane)

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AGENDA ITEM SUMMARY



Item: Disclosure of Additional Revenue/Institutionally-Funded Capital Projects for FY 2020-21

Type: Information

The University administration has identified additional revenue/institutionally-funded projects for FY 2020-21. The projects, totaling $2,373,000, are listed below:

1. UTC – Residence Hall Indoor Air Quality Enhancements - $210,0002. UTHSC – 955 Madison Ave Renovation - $255,000 3. UTHSC – 959 Madison Ave Renovation - $284,0004. UTHSC – Food Bank Building Renovation - $193,0005. UTHSC – GMP Cleanroom Storage and Restrooms Renovation - $192,0006. UTHSC – Madison Plaza Deck - $270,0007. UTIA – McCord Hall Improvements - $340,0008. UTIA – REC-Residence Improvements - $190,0009. UTK – Communications Refresh & Water Intrusion Repairs - $221,00010. UTK – Conference Center Boiler Replacement - $218,000

These projects are in addition to the list of FY 2020-21 revenue/institutionally-funded projects approved by the Board on June 21, 2019.

The Board’s action in June 2019 included authorization, with the President’s approval, to enter into design and construction contracts for additional revenue/institutionally-funded projects identified during the fiscal year. Accordingly, with the President’s approval, the University sought approval by the Tennessee Higher Education Commission and the State Department of Finance and Administration for these additional projects. In accordance with the Board’s June 21, 2019 authorization, these additional projects are reported for information, and no action is required.

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AGENDA ITEM SUMMARY



Item: Updated Committee Work Plan

Type: Information

In response to findings set forth in the 2019 Performance Audit conducted by the Comptroller of the Treasury (the “Sunset Audit”), work plans for the standing committees of the Board are being developed.

Draft work plans have been prepared for each standing committee of the Board, using a standardized approach. Each plan has an opening narrative that describes the role and responsibilities of the committee. This description is consistent with the duties set forth in each committee’s charter, which language reflects various obligations under the University’s Bylaws and/or statutory requirements.

Following the narrative, there is a chart that encompasses the following categories:

ÿ Key Reports and Special Focus Topics, ÿ Action Items, andÿ Other Standing Reports.

The chart is intended to identify what information is planned to come before the committee, along with the associated timing (i.e., whether discussed at every meeting or presented more periodically and, if so, when). The draft work plans have been prepared with a 2-year time horizon to provide more insight as to the long-range schedule.

This item is being presented for discussion only to solicit feedback to assist with planning future meetings. No action is required.

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FINANCE AND ADMINISTRATION COMMITTEEWORK PLAN (2020-2021)

Draft: 4/2110/22/20Page 1

PURPOSE:

The Finance and Administration Committee (“Committee”) assists the Board in overseeing the University’s finances, operations, facilities, and Health Science Center clinical activities; and in ensuring that the University operates within available resources and applicable laws and policies in a manner supportive of the University’s strategic plan. The Committee has specific responsibilities included in the Committee Charter, as approved by the Board, further described below.

RESPONSIBILITIES:

The Committee is responsible for formulating and recommending action or necessary policies in all matters relating to finance, business, and administration, including the investment of University funds. Specifically, the Committee shall recommend to the Board of Trustees, or to the Executive Committee when necessary between meetings of the Board, the following and similar matters within the scope of the Committee’s purpose:

1. Guidelines to govern the administration’s submission of a proposed annual operating budget and appropriation request to stateagencies and officials;

2. The University’s final operating and capital outlay budgets for the fiscal year (after the General Assembly has enacted annual appropriations for the University);

3. Student tuition and fees for which Board approval is required by Board policy and any proposal for waiver or discount of student tuition and fees unless mandated by state law;

4. The process through which each campus advisory board must provide a recommendation to the President on the proposed annual operating budget, including tuition and fees, as it relates to the respective campus;

5. Any policies to improve the availability of financial aid deemed necessary and in the best interest of students, the University, and the state following a periodic evaluation of student financial aid in relation to the cost of attendance;

6. The University’s compensation plan and any benefit programs requiring Board approval;

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Draft: 4/2110/22/20Page 2

7. The University’s proposed annual capital outlay budget and appropriation request, prior to their submission to other state agencies and officials;

8. Construction of specific buildings and other capital improvements to be funded by revenues or other institutional funds not specifically appropriated for capital outlay; provided that the Board may authorize the President to approve additional projects identified during the fiscal year, and these additional projects shall be reported to the Board at a subsequent meeting;

9. With the approval of the Tennessee State School Bond Authority, issuance of debt to erect buildings, purchase real estate, or cooperate with agencies of the United States;

10. A facilities master plan for each campus;

11. Acquisition of any interest in real property, including acquisition by gift or devise if the acquisition obligates the University or the State of Tennessee to expend state funds for capital improvements or continuing operating expenditures;

12. Sale or other disposal of real property owned by the University, including but not limited to sale in fee, grant of an easement, or grant of a right-of-way;

13. Naming of buildings and other assets of the University, including colleges, schools, and programs, except as may be delegated to the administration from time to time by Board policy;

14. Creation of legal entities that will bear the University’s name and the governance structure of such entities;

15. Proposals to implement a voluntary retirement incentive plan for a campus or institute or for a particular unit within a campus or institute;

16. Policies relating to the University’s finances, operations, and facilities for which Board approval is necessary or deemed appropriate by the Committee, including without limitation policies governing approval of student tuition and fees, cash management, debt management, investment of University funds, and operation of University aircraft; and

17. University rules required to be promulgated under the Uniform Administrative Procedures Act, except rules governing student conduct, rights, and responsibilities, which shall be recommended by the Education, Research, and Service Committee.

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Draft: 4/2110/22/20Page 3

OTHER RESPONSIBILITIES:

The Committee shall review the University’s debt obligations annually.

The Committee Chair, in consultation with the Chief Financial Officer, shall review the Committee Charter prior to each Annual Meeting of the Board to determine whether the Committee is carrying out its responsibilities effectively and whether any revisions to the charter should be submitted to the Committee for recommendation to the Board.

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Draft: 4/2110/22/20Page 4

W-2020 A-2020 F-2020 W-2021 A-2021 F-2021KEY REPORTS AND SPECIAL FOCUS TOPICSv Chief Financial Officer Report X X X X X Xv Composite Financial Index X Xv Treasurer’s Financial Report (Audited Financial Statements) X Xv Endowment Review X X X Xv Debt Review X Xv Financial Report – Athletics Programs X Xv Strategic Initiatives – [ERP, Efficiencies/Effectiveness] X X X X X Xv Campus Master Plans UTHSC

ACTION ITEMSv FY Operating Budget (Salary, Student Tuition and Fees,

Room and Board Rates)X X

v FY Tuition and Fees UTHSC X Xv Revised FY Operating Budget X Xv Operating Budget Request – Specialized Units X Xv FY Capital Budget X Xv Capital Constructions/Maintenance Projects X Xv Compensation/Benefit Plans/Procedures X Xv Ratification of Quasi-Endowments X Xv UC Foundation Grant Allocation to UTC X Xv President Emeritus Agreement X Xv Naming of Buildings/Colleges/Programs (*) (*) (*) (*) (*) (*)v Real Property (Leases, Easements, Gifts, Dispositions, etc.) (*) (*) (*) (*) (*) (*)v Quasi-Endowments (Creation, Redemptions, etc.) (*) (*) (*) (*) (*) (*)v Affiliation Agreements, New Entities, etc. (*) (*) (*) (*) (*) (*)v Treasury (Banking Signature Authorizations, etc.) (*) (*) (*) (*) (*) (*)v Board Policies – Finance/Administration (*) (*) (*) (*) (*) (*)v University Rules (Uniform Administrative Procedures Act) (*) (*) (*) (*) (*) (*)

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Draft: 4/2110/22/20Page 5

W-2020 A-2020 F-2020 W-2021 A-2021 F-2021OTHER STANDING REPORTS (Information Only)

v Endowment Investment Performance (Since Prior Meeting) X X X X X Xv Disclosure of Additional Revenue/Capital Projects (*) (*) (*) (*) (*) (*)v Annual Report Tuition and Fee Revenues X X Xv Annual Report UT Foundation Xv Annual Report UC Foundation Xv Annual Report Naming Interior Spaces/Grounds Xv Report on Use of Student Programs and Services Fee Funds Xv FY Flight Operations Xv FY Year-End Fund Balances X Xv Use of Differential Tuition Funds

∑ UTC∑ UTK

X

v Biennial State Report – Federal Funding (Due: 10/31) X

(*) As needed.

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the university of tennessee board of trustees

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