From the Chair of the Board of Trustees
From the President
Cornerstones of Success University Administration Board of Trustees Financial Statements 2012–2013 From the CFO, Vice President and Treasurer Report of Independent Auditors Balance Sheets Statements of Activities Statements of Cash Flows Notes to Financial Statements 2
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From the Chair of the Board of Trustees
At a time when many universities across the nation are cutting back,
American University has approached this challenging economic
environment with confidence based on prudent strategy and wise
investment in our academic programs and the future of an AU degree.
We have momentum, and we intend to maintain it.
Five years into our strategic plan, American University in the Next Decade:
Leadership for a Changing World, we have made significant progress
on both our strategic and enabling goals. Solid budget planning and
investments have allowed us to devote sufficient resources to realizing
the ambitious objectives we set for ourselves.
College affordability is one of the most important issues facing students
and their families. AU’s increase for 2013 was lower than the national
average and was the university’s smallest increase in the past decade.
At the same time, we have increased financial aid substantially, with an
almost 50 percent increase in need-based funding over five years.
We appreciate the continued support of our donors—including the
generous $3 million in gifts from trustee Jack Cassell and his family.
And our faculty, staff, and alumni work tirelessly to support AU’s
teaching, research, and service goals.
American University is entering a new era with pride in its past
performance and a firm commitment to continuing its recent success.
Sincerely,
Jeffrey A. Sine
2
From the President
This past year saw unprecedented transformational change at American
University, as we began building the projects outlined in the 2011 campus
plan and continued implementing the academic and service goals of our
strategic plan.
We opened our two newest student residences—Cassell Hall and the
Nebraska Hall addition. Renovations were finished at 4401 Connecticut
Avenue as the new home of WAMU 88.5, University Communications
and Marketing, and the Office of Development and Alumni Relations.
Work continues on the McKinley Building, the new home of the School
of Communication; and we broke ground on the Tenley Campus, the new
home of the Washington College of Law.
These projects, along with the forthcoming East Campus residential and
academic community, are cornerstones of our strategic goals to ensure the
strength of AU’s future.
Also this past year, AU proudly welcomed three new deans and
outstanding new faculty members of the highest teaching and research
caliber, and we created a new academic unit—the School of Professional
and Extended Studies—to coordinate and strengthen programs that will
be vital to our academic future.
AU’s students continue to excel and earn prestigious awards, including
Boren, Truman, and Udall scholarships. Their accomplishments are
chronicled in this report. Externally, AU is earning recognition in new and
prestigious ways through rankings, ratings, and peer reviews.
We are proud of everything that American University has accomplished
over the past year through strategic planning and implementation, as AU
builds on its rich history and moves solidly into the future.
Sincerely,
Cornelius M. Kerwin
3
T
he past year has been notable for
achievements rising from cornerstones
both literal and figurative, as
American University continues to
build on already strong foundations
of intellectual exploration and innovation, service
to the surrounding Washington community, and
commitment to sustainability.
In June the university broke ground on the
historic Tenley Campus for the Washington College
of Law—a facility that will expand and strengthen
our outreach to the D.C. community and make
WCL even more accessible to students, faculty,
visitors, and residents.
August saw the completion of Cassell Hall,
designed to achieve Leadership in Energy and
Environmental Design (LEED) Gold certification.
Accommodating 360 upperclassmen and a fitness
facility that doubles the amount of on-campus
fitness space, the new residence hall has transformed
the northwest corner of campus.
The 10th anniversary of AU’s arboretum,
whose gardens, specimen trees, and shrubs create a
green oasis in the middle of the nation’s capital, is
a flourishing reminder of AU’s commitment to the
environment and the quality of life for all those who
live, work, or visit here.
We continue to expand and refocus academic
programs to ensure the greatest possible relevance to
the needs of today’s students and tomorrow’s world,
ranging from the rebirth of AU’s Russian studies
program to the arrival of the inaugural dean of the
School of Professional and Extended Studies.
We also revisited and honored profound events
from AU’s past, as activities on and off campus
marked the 50th anniversary of John F. Kennedy’s
iconic speech, delivered at the 1963 commencement,
which opened the door to nuclear disarmament and
a vision of a world without fear of “the bomb.”
A similar far-seeing, far-reaching vision
has shaped the development of our campus,
our curriculum, and our ties to the immediate
community and to the Washington that stretches
beyond our physical boundaries. It is the true
cornerstone of our success—and will continue to be.
#3
for most Presidential Management Fellowship finalists in the nation
American’s Center for Latin American and Latino Studies continues to
produce robust scholarship with practical applications. Among this year’s
highlights: an examination of the positive effect and potential benefits of an
arts-based after-school program on Latino students’ self-esteem, attitude
towards school, and academic performance; and an investigation of Latino
entrepreneurship
(with
Stephen
Bronskill, SPA/CAS
’13Kogod and the Latino Economic Development Corporation) and how faulty decision-making patterns constrain business growth.
T
alk to anyone who knows
Stephen Bronskill, SPA/
CAS/BA ’13, and you’ll
hear the same thing: he’s
motivated, engaging, a
natural leader, and a community builder.
The 21-year-old, who describes himself
as “interested in the intersection of the
political and environmental realms,” also
accumulated a notable number of honors
during his time at American University:
a White House internship; two degrees—
one in environmental science, the other
in political science; the President’s
first year, he became involved with the
College Democrats and with Eco-Sense,
a student environmental club of which
he would become president. It was while
still a freshman that Bronskill attended a
leadership conference at the U.S. Naval
Academy, where he heard journalist Tom
Brokaw talk about the need for civilian
leadership academies not unlike the
military service academies.
Inspired, Bronskill started and led
the on-campus Community Service
Coalition as part of an SPA Leadership
Program project. Composed of about 40
The desire to gain a more global
perspective on environmental issues
eventually took him to India for a
semester. Encouraged by faculty members
to make the trip, Bronskill saw this
as an opportunity to study firsthand
how a rapidly expanding economy and
population affect sustainability. Returning
to the United States, Bronskill took
time to work for the Washington Bus, a
Washington State–based organization
that encourages young people to get
involved in the political process.
After a senior year during which he
Award, AU’s highest undergraduate
honor; a national Udall Scholarship for
his commitment to environmentalism;
and the Stafford H. Cassell Award for his
dedication to the university.
As a freshman, Bronskill threw
himself into the many opportunities
offered through the SPA Leadership
Program and the university as a whole.
As part of University College, he and
other students lived and took seminars
together and participated in community
learning experiences.
Bronskill credits his time at AU with
fueling his interest in politics. “AU really
empowers students to figure out what it
is they want to do,” he says. During his
campus groups, the coalition facilitates
the exchange of resources and ideas for
community service projects. He followed
this initiative with a White House
internship in his junior year, working in
the Visitors Office. The experience was
intense and time consuming, but worth it,
he says: “It was an amazing opportunity
to see public servants at work.”
Along the way, Bronskill also found
time to intern with the environmental
justice organization Groundswell—one
of the several internships he had while at
AU. “The beauty of being in D.C. is that
there are so many organizations that
need interns for things,” he says. “This
city is a laboratory.”
was a program assistant in University
College and the student director of the
SPA Leadership Program, Bronskill is
now teaching ninth-grade biology in
the Mississippi Delta region through
Teach for America—a development he
traces back to another SPA Leadership
Program project, when he first got a
taste of teaching with a nonprofit that
served African American boys in D.C.’s
Wards 7 and 8. “I want to learn how the
policies I’ve studied over the last four
years actually affect people,” he says. “The
opportunity gap in education is one of the
biggest social justice issues.”
Seven Jack Kent Cooke Scholars Study at AU Guatemalan-born Lesli Flores recalls her reaction to hearing that a scholarship from the Jack
Kent Cooke Foundation would allow her to pursue her passion for juvenile law at AU: “I started
crying because . . . I can actually achieve all of my dreams and goals.” Flores is one of seven
scholarship recipients—from across the country and abroad—who chose to attend American.
The prestigious scholarship, established by the late Washington Redskins owner, recognizes
high-achieving students who demonstrate a passionate work ethic and financial need.
7
T
hey are the exact same
sounds Abraham Lincoln
would have heard: the
ticking of his pocket
watch, the bell tolling for
church services at St. John’s Episcopal
Church opposite the White House. These
auditory details help to build the stunning
on-screen reality of Lincoln, Stephen
Spielberg’s exploration of the president’s
life in Washington during the Civil
War. They were brought to the screen by
School of Communication film professor
and alum Greg Smith, who as assistant
the sounds needed were right here in D.C.
It was just a matter of trying to find them.”
Take the bell: working with one of
his students, Smith climbed into St. John’s
bell tower to record the same one that
pealed during Lincoln’s time. “We were
told that we were the first people to go
up into that bell tower in over 50 years,”
he says. “Lincoln also walked on the very
same floorboards that are in the church
today,” he adds. “I was able to get the
sounds of the wood creaking as well as
the creak from the pew where Lincoln
actually sat.”
able to record the sound of Lincoln’s
gold pocket watch. When the Lincoln
watch at the Smithsonian Institution
was unavailable because it was being
prepped for an exhibition, Smith found
another, passed down from Mary Todd
Lincoln, that was located at the Kentucky
Historical Society library.
Why does he go through so much
effort to record authentic sounds when
he could just mimic them using a modern
equivalent or digital technology? Smith
acknowledges that there are easier ways
of creating a movie soundtrack, but, “I
sound designer for the movie helped give
historical authenticity to the project by
walking in Lincoln’s footsteps to capture
what he heard during his presidency.
Smith, who also teaches audio
technology in the College of Arts and
Sciences, was recruited to the task by
his mentor, Ben Burtt, who called him
up one day to ask, “What sounds did
Lincoln hear?” The question set Smith
thinking not only about the noise-scape
of Washington 150 years ago but about
how to incorporate particulars into the
movie. Fortunately, Smith says, “many of
Gaining access to record in the
White House proved a challenge at first,
but once given the green light, Burtt and
Smith were able to record sounds made by
opening, closing, and knocking on doors
located in the East and Green Rooms, as
well as the sounds of three mantel clocks
from Lincoln’s time. At the Studebaker
National Museum in Indiana, the pair
found the carriage in which Lincoln took
that final ride to Ford’s Theatre the night
he was assassinated, recording the opening
and close of the door and the squeaky
suspension. Another highlight was being
figured, why not do it?” Smith says. “And
it’s fun. I’ve spent years recording sounds
all over the world, and in fact, donated
quite a few of them to the Bender Library
in a sound effects collection. It was also
fun to challenge myself to be historically
accurate. It made the project a lot more
important to those of us working on it.
If we have the opportunity to record
accurate, authentic sounds, we always try
to take advantage of it.”
soc professor researches web governance In her book The Global War for Internet Governance, School of Communication professor Laura DeNardis explores
the positives and pitfalls of a rapidly changing oversight process that increasingly relies on private companies rather than nation-states.
“Governance is set through some government policies, but also through the policies of private companies like Google, Twitter, AT&T, and Verizon,” she says. “When a government wants to control or regulate some aspect of behavior online, they can’t do it directly. They have to go through an information intermediary, a private company. This raises a lot of questions about accountability and the obligations that are being placed on private entities.” 8
#1
“Top Audio Engineering and Production Schools”
Education Portal
Greg Smith, Professorial Lecturer, SOC and CAS
P
resident John F. Kennedy’s 1963
commencement address, “Strategy
of Peace,” delivered at AU during the
height of Cold War tension, is one
of the most famous political speeches
of the twentieth century, with its game-changing
announcement that the United States would
stop testing nuclear weapons and work towards a
comprehensive test ban treaty.
A March panel discussion with MSNBC’s
Hardball host Chris Matthews and a student speechwriting contest—both sponsored by the School
of Communication—kicked off the universitywide celebration of the speech’s 50th anniversary.
Matthews led a lively discussion of the impact
of “Strategy of Peace” then and now, with Bob
Lehrman, SOC adjunct professor and a former Gore
speechwriter; journalist Marvin Kalb, who covered
the speech for CBS; and Adam Frankel, former
senior speechwriter for President Obama. The panel
was followed by SOC dean Jeffrey Rutenbeck’s
announcement of the speech contest winners. SOC,
West Wing Writers, the White House Writers
Group, and Lehrman underwrote awards to the
winner, Ryan Migeed, SOC/SPA/BA ’15; secondplace finalist Trevor Alford, SOC/MA ’14; and
third-place finalist Alannah Johnson, SIS/BA ’13, in
honor of JFK speechwriter Ted Sorenson.
Then on May 1, 2013, AU’s School of
Communication and the Newseum joined forces
to present “JFK Remembered” in the Newseum’s
theatre, with renowned journalist Tom Brokaw
and SOC distinguished journalist in residence
Nick Clooney sharing their recollections as young
reporters of JFK. Brokaw characterized the AU
speech as a turning point in Cold War history.
“[Y]ounger generations don’t realize in those days
. . . it was a bipolar world,” Brokaw said. “[T]he
speech became part of the evolution of John F.
Kennedy . . . who was looking to, if you will, take the
U.S. and the Soviet Union to a higher place.”
Both former anchormen emphasized that
Kennedy’s presidency exhibited a unique diplomacy
that is an example for U.S. citizens today. “I do think
that in the twenty-first century [America is] in a
period of transition about our standing in the world
and how we relate to the rest of the world,” Brokaw
observed. “You have to get involved, just as you have
always done.”
“I am talking about genuine
peace, the kind of peace that
makes life on earth worth
living, and the kind that enables
men and nations to grow, and
to hope, and build a better life
for their children—not merely
peace for Americans but peace
for all men and women, not
merely peace in our time but
peace in all time.”
JOHN F. KENNEDY
T
he historic Tenley Campus
in northwest Washington,
D.C., will be the new site
of the American University
Washington College of Law
(WCL). More than 200 members of the
law school community—students, alumni,
faculty, staff, and friends—attended the
June groundbreaking. Claudio Grossman,
dean of the law school, underscored the
significance of the event, noting that the
advocacy classes. Two new light-filled
buildings will offer flexible teaching
spaces, faculty offices, expanded clinic
space, teaching courtrooms, and multiple
indoor and outdoor student study and
meeting spaces. The school’s 18,000
alumni will also appreciate the enhanced
Pence Law Library, which will provide
visiting alumni with research and business
resources. The new campus will retain its
central quadrangle as an open green space,
“This university and this law school
will continue to bring enlightenment,
diversity, access, and creativity to not only
the practice of law but to the behavior of
all legal institutions. This project is indeed
a bold statement, a confident statement,
of how badly the city of Washington, the
United States, and the world at large needs
the extraordinary work that is done by this
law school.”
Distinguished alumni, including
new campus would be a permanent home
“that reflects our standing and stature as
a world-class institution [and] that fully
realizes the vision of our founders in
today’s changing world, where diversity is
no longer a dream but a reality.”
The campus occupies eight acres
located one block south of the Tenleytown
Metro station, making it readily accessible
to the area’s legal community, business
leaders, government officials, and alumni,
as well as providing students with a direct
line to the heart of Washington, D.C., and
the courthouses of Judiciary Square.
When construction is complete in
summer 2015, WCL will join the most
technologically advanced law schools in
the country. Capital Hall, facing Tenley
Circle, will be renovated to accommodate
administrative offices and workspace for
the law school’s 17 student publications,
and its former chapel will be converted
to a 60-seat courtroom for use by trial
and improvements on the front lawn will
increase opportunities for public access
and enjoyment.
Innovation has always distinguished
WCL. Even its founding in 1896 was
remarkable for the fact that it was the first
law school in the country to be established
by women. More than 100 years later,
AU’s law school remains grounded in
the values of equality, diversity, and
intellectual rigor. Its nationally and
internationally recognized programs—in
clinical legal education, trial advocacy,
international law, and intellectual
property, among others—and dedicated
faculty annually provide 1,700 JD, LLM,
and SJD students with the critical skills
and values to have an immediate impact as
students and as graduates.
“This is a very important milestone
for American University and for the
Washington College of Law,” AU
president Neil Kerwin told the guests.
Robert Pence ’71, Stephen Skippy
Weinstein ’65, Judge Dorothy Beasley ’65,
Judge Gerald Lee ’76, Edna Ruth Vincent
’89, and Ken Lore, chair of the Dean’s
Advisory Council, were also on hand
to give brief remarks, reminiscing about
their experiences at the law school and
celebrating the potential of this new phase
in its history.
“It was really striking to see how
beautiful the new campus is. This campus
is the solution we have always hoped
for—we are going where we ought to be,”
said Elliott Milstein, former dean of WCL
and past president of the Association of
American Law Schools. “Being at this
event really makes us feel connected to
the long and glorious history of the law
school. The new Tenley Campus will also
be a fine place for our clinical program—a
great space for a teaching law office and
easy for our clients to find.”
Chief Legal Counsel Honored for Achievements
Mary Kennard, chief legal counsel for AU and a university vice president, was honored with the 2012
Corporate Counsel Career Achievement Award, given by the Washington Metropolitan Area Corporate
Counsel Association (WMACCA). As a longtime board member for WMACCA, Kennard helped create
a student internship to interest more law students in corporate counsel work—a program that has
since been replicated all over the country. “For me, helping law students is a great way to build the
pipeline.” she says. “My work with WMACCA is an extension of the work I’m doing at AU.”
12
#1
Washington College of Law
“Best Law Schools for Hispanics”
Hispanic Business
Washington College of Law at Tenley Campus
#9
“Coolest Schools”
Sierra Club
AU’s Community Garden
C
an an orange container
help save the planet? Yes, if
it’s one of the composting
bins introduced this year
to encourage the AU
community to recycle organic waste such
as food scraps, pizza boxes, even napkins.
The campus-wide composting
push, along with other initiatives like
a recent transition to biodiesel and an
effort to make campus office spaces
greener, moves the university ever closer
to its goal of carbon neutrality by 2020.
When AU president Neil Kerwin signed
sources; and initiated campus recycling,
composting, and repurposing plans.
The Terrace Dining Room and other
dining facilities around campus first began
composting organic waste in 2009, when
99 tons of food scraps were separated from
the regular garbage destined for landfill.
The following year, a group of students, led
by the university’s Office of Sustainability,
conducted an audit of waste generated
in the residence halls and discovered that
paper towels from restrooms accounted
for 13 percent of that waste. As a result,
they worked with housekeeping and
from landfill increased to 742 tons last
year—more than seven times since the
initial year.
The overall AU climate plan relies
on four strategies to achieve neutrality—
reduce consumption; produce renewable
energy in the form of wind, solar, and
waste; buy green power; and buy or
develop offsets for travel and other
unavoidable emissions. The university has
made great progress in most of those areas,
according to O’Brien.
Already key organizations have
recognized the university’s sustainability
the American College and University
Presidents’ Climate Commitment
(ACUPCC) in 2008, he pledged that the
university would take meaningful steps
to address climate change. Within two
years, an ambitious plan was unveiled
that would not just reduce but eliminate
altogether the institution’s greenhouse
gas emissions. Three years later, that
framework is transforming many facets of
AU community life.
In line with the ACUPCC
requirements, AU has adopted a green
building policy as well as a sustainable
purchasing policy; encouraged public
and multimodal transportation; sourced
100 percent of electricity from renewable
grounds staff to direct bags of used paper
towels from the restrooms to the same
containers where food scraps are collected
for composting.
This year, the Office of Sustainability
figured it was time for the entire university
to follow suit in an effort to reach zerowaste status. “A big source of our waste is
materials that can be composted,” Chris
O’Brien, AU’s director of sustainability,
says. “So composting is a really important
change for us.”
The Day-Glo bins are a highly visible
reminder of this latest phase of the
composting initiative. So far, they appear
to be making a significant difference. The
amount of compostable materials diverted
efforts. In 2012, American University
earned the Green Power Leadership
Award from the Environmental Protection
Agency (EPA) for its commitment to
purchasing renewable energy. AU ranks
among the top 20 on the EPA’s list of
green power users in higher education.
And for the third year in a row, the
Princeton Review named AU to its Green
Honor Roll for achieving the highest
possible green score in its college rating
system in 2013. Only 21 of 322 schools
reviewed this year in the Guide to Green
Colleges were named to the honor roll.
AU Combines Service with Sustainability “An Active Pursuit of Sustainability” was the theme for AU celebrations of Earth Month 2013. Partnering with the nonprofit
Anacostia Riverkeeper and the National Park Service, students, faculty, and alumni helped clear invasive species and litter from Kenilworth Aquatic Gardens, one of the last functioning wetlands in the Anacostia River watershed, as part of a first-ever Day of Sustainability Service.
Another step in the university’s Zero Waste Policy was the third annual Project Move-Out, an initiative
that collected thousands of unwanted clothes and household items at the end of the academic year and
donated them to local charities.
15
K
nockout roses are among the
hundreds of shrubs, perennials,
grasses, and trees to be found in
the superb collections of the AU
Arboretum and Gardens.
Dedicated in 2004, the arboretum is celebrating its
10th anniversary.
Encompassing the entire 84-acre campus, the
arboretum echoes the diversity that is a hallmark of
the university community. More than 2,500 trees—
over 130 different species and varieties—form the
graceful canopy beneath which striking beds of
formal and informal design invite passersby to
stop and smell not just roses but myriad fragrant
species. Distinctive features, including sculpture
gardens, pocket parks, ponds, and streams,
punctuate the intimate and unexpected spaces
that create a perfect backdrop for meditation
or mingling.
The original campus plan for AU, which
was founded in 1893, was created by the great
Frederick Law Olmsted Sr., America’s most noted
landscape architect and designer of the U.S. Capitol
grounds, the National Zoo, and New York’s Central
Park. While Olmsted’s plan was never implemented,
AU’s dedicated landscape architects and the staff
who tend the arboretum are now revisiting his
original vision to resurrect elements from this
distinguished historic approach and incorporate
them into the contemporary design.
In keeping with AU’s mission, today’s
arboretum is also a recognized leader in the
sustainable management of an urban landscape.
Already the new LEED Gold–certified School of
International Service building showcases many
new green technologies. Through green roofs,
rain gardens, the diversity of plantings, and other
features, the arboretum and gardens are an equally
visible reminder of AU’s pledge to promote
environmental stewardship and to use its campus as
an educational resource for all.
The arboretum also helps to build a sense
of community. Each April, more than 400 students,
faculty, staff, alumni, and neighbors join in on
Campus Beautification Day—learning about the
arboretum while picking up gardening tips and
helping to create new green spaces on AU’s campus.
Arboretum + Gardens
1 0 -y e a r c o m m e m o r at i v e
N
ew research by Terry
Davidson, director of AU’s
Center for Behavioral
Neuroscience, indicates
that diets high in saturated
fat and refined sugar may cause changes in
the brains of obese people. These changes
in turn can fuel overconsumption of those
same foods—a cycle that could explain
why obesity is so difficult to overcome.
Davidson’s research, described in
“The Effects of a High-Energy Diet on
Hippocampal-Dependent Discrimination
group included those from both the lowfat and high-energy diet groups.
However, this wasn’t a matter of
some having a super-high metabolism
that allowed them to eat large amounts
of the high-energy food and remain a
reasonable weight, Davidson says. “Those
without blood-brain barrier and memory
impairment also ate less of the highenergy diet,” he notes. “Some rats and
some people have a lower preference for
high-energy diets. Our results suggest that
whatever allows them to eat less and keep
Davidson’s findings are compatible
with other studies detecting a link
between human obesity in middle age
and an increased likelihood of developing
Alzheimer’s disease and other cognitive
dementias later in life.
“We are trying to figure out that
link,” Davidson says. “We have compelling
evidence that overconsumption of a highfat diet damages or alters the blood-brain
barrier. Now we are interested in the fact
that substances that are not supposed to
get to the brain are getting to it because of
Performance and Blood-Brain Barrier
Integrity Differ for Diet-Induced Obese
and Diet-Resistant Rats,” published in
the journal Physiology and Behavior,
focuses on the hippocampus—the area
of the brain responsible for memory and
learning. Davidson and his team trained
rats given restricted access to low-fat “lab
chow,” testing them on two problems—
one that measured hippocampaldependent learning and memory and one
that did not. Once the training phase was
completed, the rats were split into two
groups: one had unlimited access to the
low-fat lab chow, the other was given highenergy food containing saturated fat.
When both groups were retested,
the now-obese rats performed much
more poorly than their non-obese
counterparts on the problem designed
to test hippocampal-dependent learning
and memory. Interestingly, the non-obese
the pounds off also helps to keep their
brains cognitively healthy.”
The hippocampus is also responsible
for suppressing memories. If Davidson’s
findings apply to people, it could be that
a diet high in saturated fat and refined
sugar affects the hippocampus’s ability to
suppress unwanted thoughts, such as those
about high-calorie foods. This could make
it more likely that an obese person would
consume those foods and not be able to
stop at a reasonable serving.
“What I think is happening is a
vicious cycle of obesity and cognitive
decline,” Davidson explains. “The idea
is, you eat the high-fat, high-calorie diet
and it causes you to overeat because
this inhibitory system is progressively
getting fouled up. And unfortunately, this
inhibitory system is also for remembering
things and suppressing other kinds of
thought interference.”
this breakdown. You start throwing things
into the brain that don’t belong there, and
it makes sense that brain function would
be affected.”
In fact, two papers by Davidson, soon
to appear in the journals Neurobiology of
Learning and Memory and Neuroscience,
describe how brain pathologies that
produce cognitive dementias in old-age
may have their origins in early childhood.
Davidson is embarking on a research
project with colleagues in the School of
Education, Teaching, and Health that
will attempt to identify subtle cognitive
deficits in school children that are
produced by these pathologies. Davidson
says, “It is our hope that the earlier such
problems can be diagnosed, the more
effective will be treatments that aim to
alleviate them.”
AU Biologist Discovers New Crab Species Areopaguristes tudgei—
that’s the name of a new species of hermit crab recently discovered on the barrier reef off the coast of Belize by AU biology professor Christopher Tudge. Differentiated from others in its genus by such
characteristics as the hairs growing on some of its appendages, Tudge’s tiny namesake joins the list of
about three million known species.
18
89%
American’s Center for Latin American and Latino Studies continues to
produce robust scholarship with practical applications.ofAmong
this year’s
undergraduates
have a
highlights: an examination of the positive effect and potential
benefits
of an
job or attend grad school
six
arts-based after-school program on Latino students’ self-esteem,
attitude
months after graduation
towards school, and academic performance; and an investigation of Latino
entrepreneurship
(with
Kogod and the Latino Economic Development CorpoTerry Davidson,
Professor,
CAS
ration) and how faulty decision-making patterns constrain business growth.
303
AU students who served as D.C. Reads tutors
Mayra Rivera, CAS ’13
A
desire to serve and a
passion for working
with children have
helped Mayra Rivera,
CAS/BS ’13, chart her
postgraduation path. The daughter of El
Salvadoran immigrants, Rivera excelled
at Bell Multicultural High School in
the Columbia Heights neighborhood
of Washington, D.C., but was uncertain
about applying for college. Happily, a visit
to Bell from an AU representative changed
her mind—and, eventually, her life.
the Career Center’s student employment
coordinator Tasha Daniels—showed
Rivera the pressing need to educate
children about health basics and to
empower them to make healthy choices.
Just as important for Rivera’s
commitment to community, with both
FWS opportunities she was able to stay
local while focused on her educational
goals. Through D.C. Reads, she worked
with students one-on-one at CentroNía,
a bilingual charter school in Columbia
Heights located just five minutes from her
also be applied to other areas of their
lives. Although Rivera hasn’t ruled out
attending graduate school or volunteering
with other health- or children-focused
nonprofit organizations, her eventual goal
is to get hired for a paid position where
she can continue introducing students to
healthy recipes and eating habits.
Without these FWS opportunities,
Rivera says she’s not sure how she would
have been able to so effectively prepare for
her career. “I never heard of Kid Power
or D.C. Reads before federal work-study,
“I never heard of American
University, even though I lived here in
Washington, D.C.,” Rivera says. “But
during my junior and senior year, we
had a representative from AU come over
and give us a presentation, and I started
thinking about it.” Rivera decided to
apply and, with the help of a competitive
financial package, was able to attend.
Aware that she was blazing a trail for
other members of her extended family,
throughout her four years at AU Rivera
sought out student employment and
volunteer opportunities as a way to hone
her skills and give back to her community.
Federal work-study (FWS) positions—
including a year with D.C. Reads and two
at Kid Power, obtained with the help of
family’s home. Kid Power, which offers
after-school and summer programs to
more than 350 D.C. children, is located
in D.C.’s Shaw district. At Kid Power,
Rivera worked as an FWS employee and
an intern, developing and teaching lessons
for Veggie Time, an acclaimed, handson program that introduces students to
gardening and nutrition through eight
garden sites in the city; its innovative
approach has been featured on local radio
and television.
Energized by her experience at Kid
Power, Rivera decided to apply her degree
in health promotion to create programs
that will empower kids to take control
of their bodies through exercise and
good nutrition habits—lessons that can
but it’s my interest to work with kids and
to help them,” Rivera says. “If it weren’t for
[FWS], I don’t know how I would get
this experience.”
In fact, the Kid Power organization
has been and remains a popular
employment and volunteer opportunity
for other AU students and alumni. In
fall 2012 alone, five to six AU volunteers
could be found at each of Kid Power’s 10
sites, working alongside 44 FWS students
from the university. “We had this close
connection,” Rivera says of her AU peers
who also worked with Kid Power at its
summer camp. “We hung out, we had
dinner and stuff together—we created this
little AU family.”
Research Center Focuses on Issues for Latinos AU’s Center for Latin American and Latino Studies continues to produce robust scholarship with
practical applications. Among this year’s highlights: an examination of the positive effect and potential benefits of an arts-based after-school program on Latino students’ self-esteem, attitude towards
school, and academic performance; and an investigation of Latino entrepreneurship and how faulty
decision-making patterns constrain business growth.
21
85%
graduates with
“As AUofcontinues
its momentum and is further recognized among the leading
bachelor’s degrees are employed, in graduate
school, or both
college-centered research institutions, Deans Romzek, Rutenbeck, and Weil
have impressively led the development of their schools—enhancing existing
academic programs, supporting faculty-led innovations, and promoting the
scholar-teacher ideal. Their impact has been significant, garnering accolades
from colleagues at AU and within the broader higher education community.”
SCOTT A. BASS, PROVOST
C
arola Weil, veteran administrator in higher
education, nonprofit, and international
settings, was named the inaugural dean of
AU’s School of Professional and Extended
Studies (SPExS). Building on the renowned
Washington Semester Program, SPExS was established
in 2012 to provide unique courses and programs to
meet the needs of today’s diverse learners. Before being
tapped for the new school, Weil directed international
and strategic partnerships for the University of Southern
California (USC) Annenberg School for Communication
and Journalism. During her career at USC–Annenberg,
Weil helped launch the school’s first online MA in
communication management; a new innovation and design
laboratory; and interdisciplinary programs in economic
literacy, sports media, and entrepreneurship. In addition,
she served there as assistant dean and later associate dean
for planning and strategic initiatives. Weil has also held
appointments at the U.S. Institute of Peace, the George
Washington University, Harvard University’s Belfer Center,
the University of Maryland’s Center for International
Development and Conflict Management, Women in
International Security, and the Friedrich-Ebert Foundation.
S
ince becoming dean of the School of Public
Affairs, Barbara Romzek has logged some
serious frequent flier miles to promote SPA and
its reputation as a leader in the field of public
affairs. Recognized for her expertise in the area
of public management and accountability with emphases
on government reform, contracting, and network service
delivery, Romzek has focused her research on complex work
settings, including NASA, Congress, and the Air Force, as
well as state agencies, local governments, and nonprofits. She
is a fellow of the National Academy of Public Administration
and has received research awards from the American Society
for Public Administration and the American Political
Science Association. She served on the governing boards for
the Academy of Management, American Political Science
Association, Midwest Political Science Association, and
National Association of Schools of Public Affairs and
Administration; currently she is a member of the Board of the
Public Management Research Association. Before joining AU,
Romzek held a number of academic leadership positions at
the University of Kansas.
A
confirmed video game aficionado in his
youth, School of Communication dean
Jeffrey Rutenbeck carries his love of the
sophistication and complexity of game
theory and design with him into his current
role. Since joining AU in June of 2012, Rutenbeck has
focused on growing the Campaign for SOC and building
on established partnerships to expand the dean’s internships,
launch a new Investigative Journalism Practicum with the
Washington Post, and join the first D.C.-area team to enter
the DOE Solar Decathlon. He also has found time to
launch an initiative with the College of Arts and Sciences
to develop a center for persuasive gaming at AU. Prior to
joining AU, Rutenbeck was founding dean of the Division
of Communication and Creative Media at Champlain
College in Burlington, Vermont, where he implemented
and grew programs in game design, game art and animation,
public relations, broadcast and streaming media, and
emergent media. Previously, as a professor and administrator
at the University of Denver, Rutenbeck founded the
interdisciplinary bachelor’s and master’s programs in digital
media studies.
A
lliances are key to
entrepreneurial success,
potentially playing a
role in every stage of
start-up evolution,
according to Stevan Holmberg, professor
of management at the Kogod School
of Business and director of the Kogod
Entrepreneurship Initiative. Innovative
firms use alliances to overcome weaknesses
ranging from insufficient funds to gaps in
distribution channels. The right alliances
can even boost a firm’s reputation, if it
manufacturers, or OEMs, used by Tesla
to develop and launch its electric vehicle
(EV) Roadster in 2008.
All alliances are not created equal,
but Holmberg believes that Tesla has
figured them out. Even as it partnered
with other companies, Tesla protected its
core technology by assembling the cars at
its own manufacturing facility. Tesla also
created R&D partnerships. The Dana
Holding Corporation, for example, helped
it overcome a technological obstacle by
designing a system that could control heat
its RAV4 SUV and to develop the electric
powertrain for the RAV4. In turn, Toyota
has helped Tesla source parts and provided
production and engineering expertise for
Tesla’s Model S. The Toyota alliance also
enabled Tesla to secure its manufacturing
facility, Holmberg notes.
“This is a huge, transforming kind of
alliance for this stage of Tesla,” Holmberg
says. “They couldn’t have done it early on.
It wouldn’t have been appropriate, and
Tesla didn’t have the pieces put together to
be attractive at that point.”
partners with a well-known brand whose
participation yields a stamp of approval.
Holmberg points out that
entrepreneurs whose alliances work
tend to do two things correctly. They
think strategically, asking two questions:
What are the critical success factors for
my entrepreneurial venture? What are
the roles of alliances in those critical
success factors? They also choose partners
carefully, performing due diligence to
ensure that conflicts in culture, resources,
or relationships do not cause an alliance
to implode. “It’s not an uncommon
strategy, but it is one that’s fraught with a
lot of problems, and a high proportion of
alliances fail,” Holmberg says.
Focusing on Tesla Motors, an
entrepreneurial company well outside the
automobile manufacturing establishment,
Holmberg has analyzed the alliances
with suppliers, research and development
experts, and original equipment
buildup in the cars’ batteries.
In some cases, Tesla has served as the
OEM for other companies, providing
battery packs and chargers for Daimler’s
“Smart Car.” The benefits were both
financial—Daimler reportedly gave Tesla
$50 million for a 10 percent stake in
the start-up’s equity—and reputational.
“The Daimler alliance represented an
endorsement by a premier automotive
manufacturer that further enhanced and
verified for the broader market Tesla’s
competencies, technologies, and ability to
deliver results,” he maintains.
Holmberg emphasizes that alliances
also have a role to play as a company
matures and can help companies survive
the “valley of death” that strikes many
middle-stage businesses, when they have
gained some traction but lack funding for
full-scale production.
In a series of deals, Tesla agreed to
help Toyota create a plug-in EV version of
Holmberg is now working on a
comparative study of electric vehicles
and hybrid electric vehicles in the United
States and Scandinavia, which has been
a global leader in adopting innovative
and clean vehicle technologies. America’s
current interest in EVs marks the fourth
time in history such cars have been on the
market. More than 100 years ago, electric
cars actually outnumbered gas-fueled
cars, thanks to Thomas Davenport’s 1834
invention of a battery-powered car.
EVs also enjoyed short-lived resurgences in
the late 1960s and early 1970s, and in the
early 1990s.
Now, however, a confluence of factors
is taking shape that may enable EVs to take
hold. Holmberg’s work is analyzing this
landscape in which companies like Tesla,
trying to put down a very different kind
of root in an entrenched industry, might
actually have a chance to succeed.
Kogod Provides Forum for Idea Exchange Kogod’s Center for Information Technology and the Global Economy aims to close the gap between private- and publicsector producers, providers, and users of new technology. “No place is better suited for CITGE than D.C.,”
says Mike Carleton, a senior research fellow at the center. “There’s such a rich blend of government,
business, and academic resources here.”
24
#1
Kogod School of Business
“Best in Sustainability” Bloomberg BusinessWeek
Stevan Holmberg, Professor, Kogod
360
new suite-style rooms in Cassell Hall
Jack Cassell, SOC ’77
I
n January 2013, AU announced that
its newest residence hall would be
named Cassell Hall in recognition
of $3 million in gifts made by Jack
Cassell (SOC/BA ’77), his wife,
Denise, and the Cassell family to support
the residence hall’s construction and AU’s
Department of Athletics and Recreation.
Cassell Hall embodies many firsts:
first major building initiative of the
university’s 2011 campus plan; first
AU residence hall to be named for a
philanthropic gift; first residence hall to
be built on campus since Centennial Hall
trustee, never missing a meeting during a
nearly 10-year tenure.
But Cassell’s AU roots go back
even further than his student and
adult involvement. He was only four
years old when his father, Stafford H.
“Pop” Cassell, CAS/BA ’36—an AU
student, coach, athletic director, and
vice president—moved the family into a
rented apartment on campus. It was the
first time the younger Cassell remembers
feeling like a part of the AU community.
When his father died just six years later,
Pop’s colleagues looked out for Cassell’s
in other areas, as president of Phi Sigma
Kappa fraternity and recipient of the
Stafford H. Cassell Student Achievement
Award—named for his father.
Armed with a communications degree
and with the encouragement of his mentor
and former dean of students Edward
Boehm, Cassell applied for a job at Visual
Aids Electronics (VAE) and became a
rental technician at the firm. Advancing
rapidly through every position, he became
president of VAE 10 years later and soon
after bought the company. When Cassell
started with the firm, it had 25 employees
opened in 1987. Designed to achieve
Leadership in Energy and Environmental
Design (LEED) Gold certification, it
accommodates 360 upperclassmen in
suite-style rooms, while a 8,000-squarefoot fitness facility, named the Stafford
H. Cassell Jr. Fitness Center in honor
of Cassell’s twin brother and fellow AU
alumnus, will double the amount of fitness
space on the main campus.
The residence also celebrates the
Cassell family’s long relationship with AU.
A recipient of the Alumni Achievement
Award and AU President’s Award, Jack
Cassell also has served as chair of the AU
Athletics Committee and is a devoted
widowed mother, Carolyn, and the rest
of the family. Cassell never forgot that
generosity; he became determined to give
back to the community that had shown so
much support.
Cassell followed his father to AU
for college, where he was the starting
goalie on the varsity soccer team, tying
the record for the least number of goals
allowed in a single season. One of his
proudest moments came when he earned
a letter jacket for his soccer achievements.
“It was so special to me because it
reminded me of my dad. He always wore
his AU letter jacket around campus on the
weekends,” Cassell says. He also excelled
and three offices; today, it boasts more
than 900 employees in 80 offices across
the country.
Discussing his family’s gift, Cassell
expresses the hope that it will spur further
alumni giving. He also maintains that
none of his contributions to AU would
have happened if not for his father’s
passion for AU. “It’s not my legacy we are
honoring; it’s my dad’s,” he says. “I’m sure
my father would be floored at how far the
university has come over the years. It’s a
gorgeous campus now.”
Donors Create a Legacy of Art at the AU Museum Mitchell Berliner, Kogod/BS ’70, and his wife, Debra Moser, share a passion for American craft—artwork created from wood, glass, metal, and textiles. Over the last 40 years, the couple
has amassed a noteworthy collection, including works by Dale Chihuly and John Cederquist. They
recently made provisions in their charitable estate plans to leave the collection to the Katzen Arts
Center’s American University Museum. “The Katzen is a beautiful arts center and, given our ties to
AU and the community, the perfect home for our collection,” says Moser.
27
Aung San Suu Kyi
Dennis Ross
Fifteen years after being given an AU honorary degree while
under house arrest in Burma, Nobel Peace Prize winner Aung
San Suu Kyi used the occasion of her first visit to the United
States after her release to accept the honor in person. Addressing
an enthusiastic crowd of Burmese Americans, Buddhist monks,
and democracy advocates of every ethnicity and nationality in
September 2012, she began by thanking the university for being
one of the very first institutions of higher learning to recognize
the Burmese people’s efforts to achieve democracy when it gave
her the honorary degree back in January 1997. Because she was
not allowed to travel at the time, it was accepted by her late
husband, who also read her acceptance speech. “The message
that I sent to this university, to use your liberty to promote
ours, resounded throughout the world,” she recalled. “That
became a motto for many who wanted to help us.”
Back in 1993 when President Clinton chose Ambassador
Dennis Ross, currently serving on the SIS Dean’s Council, to
become Middle East envoy, the outlook was very different than
it is today. Following Iraq’s defeat in the Gulf War, peace at last
seemed attainable. In fact, Ross and fellow diplomats were able
to broker several historic peace accords. These days, in the
aftermath of the “Arab Awakening”—his umbrella term for
the Arab Spring, the rise of Hamas and Hezbollah, and Iran’s
nuclear power aspirations—Ross sees changes being driven by a
dramatically different worldview. Speaking in November 2012
as a part of the SIS Dean’s Discussion series, he described the
distinction: “It’s an awakening,” Ross said, “because you have
many in the Arab world for the first time seeing themselves as
citizens, not subjects. That’s a profound difference. Citizens
have rights, they have expectations, they have demands, they
can hold their government accountable.”
Olympia Snowe
Anita McBride
In early 2013, former Maine Republican Senator Olympia
Snowe returned to Washington and to AU, delivering her
first speech since announcing she would leave the Senate the
previous year. Her subject: the state of American politics. “I
decided to take the fight in a different direction,” she said. “What
better place to start than American University?” During her
address, Snowe examined the current level of dysfunction in
Congress, the political crises produced by brinkmanship at the
expense of compromise, and the reasons behind her decision
to retire from the Senate. “Policy making has devolved into a
series of gotcha votes,” she said. “It’s all about campaigning and
not about governing.” The talk ended with the announcement
that Snowe was forming her own political action committee,
Olympia’s List, to support political candidates willing to build
consensus. “I know that Congress can be the solution-driven
powerhouse that it was in the past,” she declared.
How do first ladies survive and thrive in their roles? Anita
McBride, former chief of staff to First Lady Laura Bush, has the
answers. An executive in residence in the School of Public
Affairs who has launched a program studying first ladies,
McBride spoke at the lecture series “American Women:
Conversations with AU’s Inspirational Women.” She cited
Michelle Obama, “a reluctant warrior” in her husband’s
campaign. Aware that she would be heavily scrutinized as the
first African American first lady, Obama chose to connect with
the public through fashion. But beyond “what to wear,” first
ladies must contend with hectic schedules and must develop
their own initiatives. “You can be an advocate for policy, but
you can’t be a policy maker,” McBride explained. “But issues
can be delegated to you, you have a convening authority, people
are not going to say no to the first lady calling a meeting on an
initiative she’s being asked to lead.”
I
t’s no coincidence that Alan Kraut—
University Professor of History,
affiliate faculty member in the
School of International Service,
and president of the Organization
of American Historians—chose to focus
his studies on immigration in the United
States, the topic of his latest book in
progress, tentatively called The Ultimate
Bargain: Negotiating Identity, Becoming
American. “My own forebears were
immigrants,” Kraut said. “When I was
born, my family had been in this country
for less than 40 years.” Kraut grew up in New York City,
which he describes as a “world of
immigrants” that seemed closer to Europe
than the New World, with its multiplicity
of languages, foods, and cultural customs.
Kraut’s mother’s family was from Hungary
and Prussia, his father’s family from
Poland. It was his father, a factory worker,
who sparked his son’s interest in history.
The two of them would either go see the
George Washington statue in front of
Federal Hall and the George Washington
museum above Fraunces Tavern, or the toy
soldiers in Macy’s toy department.
he says. “Only a historian can say how we
did it in the past.”
Kraut notes that one way immigrants
past and present have integrated
themselves is by changing their foreign
names to something more easily
understood, and pronounced, by English
speakers. More radically, immigrants
sometimes undergo surgery to change
their appearance. They also immerse
themselves in American culture through
television and sports. “Sports are very
important in America,” Kraut points out,
quoting cultural historian Jacques Barzun,
He’s motivated by a lifelong passion
to understand the immigrant experience
and how it has shaped not only the people
coming to these shores but the country
receiving them. Not only has Kraut
written, coauthored, or coedited nine
books on immigration, but he also chairs
the Statue of Liberty–Ellis Island History
Advisory Committee, is a consultant to
the Lower East Side Tenement Museum,
and is past president of the Immigration
and Ethnic History Society. His most
recent coedited book, Ethnic Historians
and the Mainstream: Shaping the Nation’s
Immigrant Story, is a compilation of essays
by prominent scholars of immigration
and ethnic history linking their personal
pasts with the topics they have chosen to
address in their work.
“We couldn’t buy those toy soldiers,”
Kraut recalls, “but we could look at them
and talk about them and the wars in which
they participated. That’s really where I got
my first taste of history, in the museums
and in the parts of New York City when
we would walk together.”
Kraut’s book will explore the process
of integration of immigrants and their
children that follows a big wave of
immigration—in this case, three different
time periods from the 1850s to the
present. Today, the presence of 38 million
foreign-born people in the United States
makes immigrant integration a hot issue,
as the battles over major immigration
legislation at the state and federal level
demonstrate. “People are interested and
want to know how did we do this before,”
who wrote, “To understand America, you
must understand baseball” for the way it
reflects American values.
Kraut views this as a fortuitous
time for a book dealing with the topics
of immigration and integration into
American society. Though the intensity of
the waves may ebb and flow, immigrants
have never stopped coming to the
United States. “They’re going to be
your neighbors. They’re going to be the
people that work with you and for you, or
whom you work for,” he says. “They pay
taxes. Shouldn’t we be concerned about
integrating them into society?”
New Book Examines FDR’s Response to the Holocaust
A new book by American University history professors Richard Breitman and Allan J. Lichtman, FDR and the Jews, probes accounts of Franklin Delano Roosevelt’s response to the suffering and
slaughter of Jews in Nazi-occupied Europe to uncover and re-evaluate Roosevelt’s true strengths
and failings. The conclusion? FDR did far more to help European Jews than did any other world leader of his time.
30
#75
“Best National University”
U.S. News and World Report
Alan Kraut, University Professor, CAS
1st
fully online master’s degree in
international studies
Maina Singh, Scholar in Residence, SIS
U
p to 20 million Indians live
overseas in about 110 host
countries. Those diaspora
experiences are as diverse
as the countries that host
them, according to Maina Singh, scholar
in residence at the School of International
Service, whose research explores this
diversity and delves into questions of
identity, gender, and ethnicity.
Singh knows her subject firsthand,
having lived in six different countries and
studied immigrant experiences in several
others, including Israel, Ethiopia, Japan,
communities. Her research revealed a
deep respect on the part of Indian Israelis
toward India, which “had always embraced
their Jewishness without antagonism
or prejudice.” On the other hand, many
Indians faced color bias, downward
mobility, and social stratification in the
early days of the Israeli nation.
As a sequel to this project, Singh
focused on migration narratives from 40
first-generation Indian Jewish women,
born in Israel and living in India for
the last 40 years. “My articles focus on
such narrations of an Indian Jewish
also featured Noah Kowalski, SIS/MA
’13, and Priyanka Srinivasa, SIS/BA ’14,
who discussed how their studies of India
and South Asia have contributed to their
current work and future career planning.
At AU, Singh is studying another
under-researched diaspora community,
second-generation Indian Americans and
their role in U.S. politics. “Today, there is
an increasing number of U.S-born Indian
Americans working in government and
in electoral politics. It is time to examine
the implications of this generational shift,”
Singh says. She’s already observed some
and the United States. “My personal
experience of negotiating several different
social, religious, and linguistic cultures has
deepened my own sensitivity to diaspora
identity and assimilation,” she says.
In her most recent book, Being
Indian, Being Israeli: Migration, Ethnicity,
and Gender in the Jewish Homeland,
Singh explores the experience of a rarely
researched community—that of Indian
Jews who migrated to Israel after 1948
and now number an estimated 70,000.
For three years she traveled throughout
Israel, conducting extensive fieldwork
and hundreds of in-depth interviews and
conversations among three Indian Jewish
girlhood untainted by anti-Semitism, and
negotiating ‘Indian-ness’ and ‘Jewish-ness’
almost seamlessly,” she explains.
Since Singh’s arrival at American
University four years ago, there has been
a tangible increase in South Asian studies
and programming at SIS. In February
2013, she was instrumental in organizing
a discussion and dinner at the Embassy of
India, where SIS dean James Goldgeier,
AU Board of Trustees chair Jeffrey Sine,
and the embassy’s deputy chief of mission,
Arun Singh, a former ambassador of India
to Israel, debated the future of the world’s
largest democracy and its relationship
with the United States. The program
40 events and performed interviews with
Indian Americans on the Hill.
The “Global Indians” Singh studies
share a homeland and heritage expressed
through food, family, and even Bollywood.
However, she stresses that the important
thing is the unique assimilation experience
of each community. “Indians in Ethiopia
or Saudi Arabia are very different from the
community in the U.S. or in Israel. Each
one is a different model, shaped by the
time of migration and the skills and social
capital they bring with them,” she explains.
Jackson NAMED U.S. Professor of the Year Baseball, anyone?
Tossing a ball after throwing out a question is one way Patrick Thaddeus Jackson keeps students
alert and engaged. Eschewing the traditional role of classroom lecturer, the associate dean for
undergraduate education at SIS strives to encourage inquiry and debate among his students: “I know
I’m doing a good job when a student comes to me and says ‘I never thought about this quite this way
before. I hadn’t really put those pieces together like that.’”
Jackson’s unconventional approach caught the attention of the Carnegie Foundation for the Advancement
of Teaching and the Council for Advancement and Support of Education. The organizations named him
the 2012 U.S. Professor of the Year for the District of Columbia.
33
UNIVERSITY ADMINISTRATION
Cornelius M. Kerwin,* President
Scott A. Bass, Provost
Donald L. Myers,* Chief Financial Officer, Vice President and Treasurer
Mary E. Kennard, Vice President and General Counsel
Thomas J. Minar, Vice President of Development and Alumni Relations
Gail S. Hanson, Vice President of Campus Life
Teresa Flannery, Vice President of Communication
David E. Taylor, Chief of Staff and Secretary, Board of Trustees
Phyllis A. Peres, Senior Vice Provost and Dean of Academic Affairs
Nancy Davenport, University Librarian
Michael J. Ginzberg, Dean, Kogod School of Business
James M. Goldgeier, Dean, School of International Service
Claudio M. Grossman, Dean, Washington College of Law
Barbara S. Romzek, Dean, School of Public Affairs
Jeffrey B. Rutenbeck, Dean, School of Communication
Peter Starr, Dean, College of Arts and Sciences
Jonathan G. Tubman, Vice Provost for Research and Dean of Graduate Studies
Carola Weil, Dean, School of Professional and Extended Studies
BOARD OF TRUSTEES
Jeffrey A. Sine,* Chair
Patrick Butler,* Vice Chair
Gary M. Abramson,* Chair Emeritus
Gina F. Adams*
Stephanie M. Bennett-Smith
D. Barlow Burke Jr.
Kim Cape
Jack C. Cassell*
Gary D. Cohn*
Pamela M. Deese*
David R. Drobis*
Marc N. Duber*
Hani M. S. Farsi*
C. A. Daniel Gasby
Thomas A. Gottschalk
* alumna or alumnus of American University
34
Gisela B. Huberman*
C. Nicholas Keating Jr.*
Cornelius M. Kerwin*
Margery Kraus*
Gerald Bruce Lee*
Charles H. Lydecker*
Robyn Rafferty Mathias*
Marcus Matthews
Alan L. Meltzer*
Regina L. Muehlhauser*
Candice J. Nelson
Arthur J. Rothkopf
Peter L. Scher*
Mark L. Schneider
Randall M. Warnas*
From the CFO, Vice President and Treasurer
Walking the grounds of American University this past year, one cannot
help but notice the vibrant atmosphere on campus. All around, there are
reminders of the university’s distinguished past, the excitement of current
activities, and the anticipation of dramatic new enhancements to come. Our
many years of prudent financial management, disciplined investment, and
continued strong financial position (as shown on the following pages) have
allowed us to embark on the most ambitious and largest capital expansion in
the university’s history.
This past year already has seen the successful completion of a number of
capital projects. Cassell Hall, our new on-campus residence hall, and the
Nebraska Hall addition were both completed in time for students to move
in for the fall 2013 semester, providing 510 new beds in a combination
of apartment and suite-style accommodations. We also completed the
renovation of our newly acquired seven-story building at 4401 Connecticut Avenue NW as the new home of
WAMU 88.5 FM, the public radio news and information station licensed to AU. Construction also is under way
on the new Washington College of Law facility on the eight-acre Tenley Campus, with an expected completion date
of summer 2015.
The university’s financial position has never been stronger. Total assets now stand at $1.4 billion, a 52 percent increase
in just four years, and net assets have increased 60 percent to $876 million during the same period. Our operating
margins remain strong, and our use of debt is both measured and strategic.
American University’s national and international reputation resulted in more than 17,000 applications for the Class
of 2017, and the demographics are shifting. In this new class, almost 30 percent come from the southern and western
states, 11 percent are first generation, and 30 percent are minority. The average GPA is 3.74, up from 3.40 only 10
years ago. Our percentage of international undergraduates is climbing to almost 11 percent, reflecting our global span.
We welcomed 80 new faculty of outstanding quality to campus this fall, including 23 tenured or tenure-track
professors. Their research, scholarship, and varied academic interests are all quite remarkable and indicative of the
high-quality academic focus of American University.
AU also has joined the ranks of other top universities in exploring the benefits of online education by entering into two
partnerships to deliver high-quality graduate programs. With the newest technology and delivery platforms, we are
able to deliver superior instruction and collaboration on a global scale, thus opening new markets for these programs.
We continue to focus on controlling college costs and ensuring affordability. By limiting the rise in tuition and
increasing financial aid dollars for the next two years, AU is working to help students reduce debt levels. For the
second consecutive year, the average debt of AU graduates with loans declined from the previous year. The loan default
rate of AU graduates is very low (2.8 percent) compared with the national average (13.4 percent), and 45 percent of AU
graduates have no loan debt at graduation.
Tremendous progress has been made this past year, but much more work lies ahead. I am proud that we are able to
contribute to the “cornerstones of success” that are inherent to a world-class university.
Sincerely,
Donald L. Myers
37
Report of Independent Auditors
To Board of Trustees of American University:
We have audited the accompanying consolidated financial statements of American University (the University), which
comprise the consolidated balance sheets as of April 30, 2013, and April 30, 2012, and the related consolidated statements of
activities and cash flows for the years then ended.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our
audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
we consider internal control relevant to the University’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the University’s internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of American University at April 30, 2013, and April 30, 2012, and the changes in its net assets and its cash flows for
the years then ended in accordance with accounting principles generally accepted in the United States of America.
August 30, 2013
38
BALANCE SHEETS APRIL 30, 2013 AND 2012
(In thousands)
2013
2012
$57,174
$57,743
Assets
1
Cash and cash equivalents
2
Accounts and University loans receivable, net
27,716
27,242
3
Contributions receivable, net
10,849
10,130
4
Prepaid expenses and inventory
1,824
2,585
5
Investments
750,057
690,134
6
Deposits with trustees/others
1,414
418
7
Deposits for collateralized swaps
32,724
30,896
8
Property, plant, and equipment, net
519,380
437,076
9
Deferred financing costs
2,340
2,454
Interest in perpetual trust
15,922
14,597
$1,419,400
$1,273,275
$58,994
$46,997
16,113
18,566
383,930
340,875
70,876
67,917
10
Total assets
11
Liabilities and Net Assets
Liabilities:
12
Accounts payable and accrued liabilities
13
Deferred revenue and deposits
14
Notes payable and long-term debt
15
Swap agreements
16
Assets retirement obligations
4,747
4,856
17
Refundable advances from the U.S. government
8,688
8,542
543,348
487,753
8,271
7,803
172,498
171,046
Total liabilities
18
Net assets:
Unrestricted
19
20
General operations
Internally designated
Capital
21
Designated funds functioning as endowments
374,040
320,564
22
Designated for plant
134,084
114,988
688,893
614,401
23
Total unrestricted
24
Temporarily restricted
91,903
80,124
25
Permanently restricted
95,256
90,997
876,052
785,522
$1,419,400
$1,273,275
26
Total net assets
27
Total liabilities and net assets
See accompanying notes to the financial statements
39
Statements of Activities Year ended April 30, 2013
Unrestricted net assets
(in thousands)
General
operations
Internally
designated
$456,154
$ 1,431
Capital
Temporarily
restricted
net assets
Total
Permanently
restricted
net assets
Total
Operating revenues and support
1
Tuition and fees
$
- $457,585
$
-
$
- $457,585
2
Less scholarship allowances
(94,258)
(8,068)
-
(102,326)
-
-
(102,326)
3
Net tuition and fees
361,896
(6,637)
-
355,259
-
-
355,259
4
Federal grants and contracts
1,116
17,908
-
19,024
-
-
19,024
5
Private grants and contracts
8,609
8,617
-
17,226
-
-
17,226
6
Indirect cost recovery
2,170
-
-
2,170
-
-
2,170
7
Contributions
10,236
5,201
2,315
17,752
3,615
2,141
23,508
8
Endowment income
2,778
5,168
187
8,133
4,869
117
13,119
9
Investment income
5,724
376
58
6,158
176
-
6,334
Auxiliary enterprises
67,900
132
-
68,032
-
-
68,032
11
Other sources
971
1,507
2
2,480
-
-
2,480
12
Net asset release
214
6,181
2,216
8,611
-
-
461,614
38,453
4,778
504,845
49
2,258
507,152
126,725
3,972
17,114
147,811
-
-
147,811
10
13
Total operating
revenues and support
(8,611)
Operating expenses
14
Instruction
15
Research
30,740
18,555
-
49,295
-
-
49,295
16
Public service
19,767
343
693
20,803
-
-
20,803
17
Academic support
49,888
4,698
5,616
60,202
-
-
60,202
18
Student services
37,460
344
2,636
40,440
-
-
40,440
19
Institutional support
72,572
662
10,050
83,284
-
-
83,284
20
Auxiliary enterprises
35,164
19
26,967
62,150
-
-
62,150
21
Facilities operations
and maintenance
40,351
-
(40,351)
-
-
-
-
22
Interest expense
11,755
-
(11,755)
-
-
-
-
23
Total operating expenses
424,422
28,593
10,970
463,985
-
-
463,985
24
Total operating activities
37,192
9,860
(6,192)
40,860
49
2,258
43,167
(37,416)
(5,955)
43,371
-
-
-
-
-
-
-
-
-
446
130
25
Transfer among funds
Nonoperating items
40
26
Investment income
-
27
Other revenue and transfers
-
(116)
-
28
Realized and unrealized
net capital gains
692
(2,337)
35,393
33,748
11,930
1,555
47,233
-
(116)
(200)
29
Total nonoperating
activities
692
(2,453)
35,393
33,632
11,730
2,001
47,363
30
Change in net assets
468
1,452
72,572
74,492
11,779
4,259
90,530
7,803
171,046
435,552
614,401
80,124
90,997
785,522
$ 8,271
$172,498
$508,124 $688,893
$ 91,903
31
Net assets at beginning of year
32
Net assets at end of year
See accompanying notes to the financial statements
$ 95,256 $876,052
Statements of Activities Year ended April 30, 2012
Unrestricted net assets
(in thousands)
general
operations
internally
designated
$440,314
$ 1,224
capital
temporarily
restricted
net assets
total
permanently
restricted
net assets
total
Operating revenues and support
1
Tuition and fees
$
-
$441,538
$
-
$
- $441,538
2
Less scholarship allowances
(88,282)
(8,485)
-
(96,767)
-
-
(96,767)
3
Net tuition and fees
352,032
(7,261)
-
344,771
-
-
344,771
4
Federal grants and contracts
835
15,107
-
15,942
-
-
15,942
5
Private grants and contracts
8,516
9,055
-
17,571
-
-
17,571
6
Indirect cost recovery
1,546
-
-
1,546
-
-
1,546
7
Contributions
10,284
5,068
1,325
16,677
3,076
3,891
23,644
8
Endowment income
793
6,785
189
7,767
4,909
119
12,795
9
Investment income
6,015
360
11
6,386
146
-
6,532
Auxiliary enterprises
71,342
100
-
71,442
-
-
71,442
1,629
1,285
1
2,915
-
-
2,915
167
5,148
3,468
8,783
(8,783)
-
-
453,159
35,647
4,994
493,800
(652)
4,010
497,158
129,182
3,625
17,921
150,728
-
-
150,728
10
11
Other sources
12
Net asset release
13
Total operating
revenues and support
Operating expenses
14
Instruction
15
Research
24,028
15,270
-
39,298
-
-
39,298
16
Public service
19,472
633
753
20,858
-
-
20,858
17
Academic support
41,223
5,613
5,902
52,738
-
-
52,738
18
Student services
37,097
327
2,734
40,158
-
-
40,158
19
Institutional support
66,825
4,220
12,020
83,065
-
-
83,065
20
Auxiliary enterprises
38,649
7
27,879
66,535
-
-
66,535
21
Facilities operations
and maintenance
39,462
-
(39,462)
-
-
-
-
22
Interest expense
13,033
-
(13,033)
-
-
-
-
-
-
453,380
4,010
43,778
23
Total operating expenses
408,971
29,695
14,714
453,380
24
Total operating activities
44,188
5,952
(9,720)
40,420
(43,941)
4,268
39,673
-
-
-
-
-
-
-
-
24
24
2,453
1,133
25
Transfer among funds
(652)
Nonoperating items
26
Investment income
-
27
Other revenue and transfers
-
28
Realized and unrealized
net capital gains
(46,404)
(6,091)
(10,598)
(35,952)
(46,661)
(7,154)
2,262
(51,553)
(378)
(5,999)
(6,241)
(7,806)
6,272
(7,775)
84,725
30
Change in net assets
136
Net assets at end of year
(1,063)
(36,312)
(111)
Net assets at beginning of year
(257)
(9,981)
Total nonoperating
activities
32
360
(111)
29
31
(617)
7667
171,424
441,551
620,642
87,930
$ 7,803
$171,046
$435,552
$614,401
$ 80,124
See accompanying notes to the financial statements
(215)
(52,710)
793,297
$ 90,997 $785,522
41
Statements of Cash Flows Years ended April 30, 2013 and 2012
(In thousands)
2013
2012
Cash flows from operating activities
1
Increase (decrease) in net assets
$
90,530
$
(7,775)
Adjustments to reconcile increase in net assets to net cash
provided by operating activities:
2
Contributed art and property
3
Net realized and unrealized capital (gains) losses
4
Loss on disposal of fixed assets
2,361
-
5
Change in fair value of interest rate swaps
2,959
30,782
6
Depreciation, amortization, and accretion
26,134
24,895
(2,011)
(60,758)
(923)
13,328
Changes in assets and liabilities
7
Decrease (increase) in accounts and university loans receivable, net
8
Increase in contributions receivable, net
(719)
9
Decrease (increase) in prepaid expenses
761
10
Increase in accounts payable and accrued liabilities
171
5,871
(37)
(1,554)
(856)
3,641
11
Decrease in deferred revenue, deposits, and other refundable advance
(2,307)
(252)
12
Contributions collected and revenues restricted for long-term investment
(5,268)
(5,437)
57,724
55,812
(176,020)
(270,970)
13
Net cash provided by operating activities
Cash flows from investing activities
14
Purchases of investments
15
Proceeds from sales and maturities of investments
175,530
194,392
16
Purchases of property, plant, and equipment
(77,578)
(26,392)
17
Capitalized interest
(1,879)
18
Decrease in deposits with trustees/other, net
(2,824)
(26,364)
(82,771)
(129,334)
19
Net cash used in investing activities
-
Cash flows from financing activities
Student loans issued
(2,032)
(1,800)
21
Student loans repaid
1,387
1,268
22
Issuance of debt
20,000
85,000
23
Repayment of mortgage note payable
20
(145)
-
Proceeds from contributions restricted for
24
Investment in plant
25
Investment in endowment
26
Net cash provided by financing activities
27
Net (decrease) increase in cash and cash equivalents
28
Cash and cash equivalents at beginning of year
29
Cash and cash equivalents at end of year
2,028
2,275
3,240
3,162
24,478
89,905
(569)
16,383
57,743
41,360
$ 57,174
$ 57,743
$ 14,889
$ 13,314
2,011
923
Supplemental disclosure of cash flow information
30
42
Cash paid during year for interest
31
Contributed art and property
32
Mortgage payable
33
Accrued payment for property, plant, and equipment
See accompanying notes to the financial statements
23,200
-
6,126
-
Notes to Financial Statements April 30, 2013 and 2012
1. American University
American University (the University) is an independent, coeducational university located on an 85-acre campus in northwest Washington, D.C. It was chartered by an Act of Congress in 1893 (the Act). The Act empowered the establishment and
maintenance of a university for the promotion of education under the auspices of the Methodist Church. While still maintaining its Methodist connection, the University is nonsectarian in all of its policies.
American University offers a wide range of graduate and undergraduate degree programs, as well as nondegree study. There are approximately 800 full-time faculty members in six academic divisions, and approximately 12,000 students, of which 6,800 are undergraduate students and 5,200 are graduate students. The University attracts students from all 50 states, the District of Columbia, Puerto Rico, and nearly 140 foreign countries.
2.Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the University have been reported on the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
Classification of Net Assets
Net assets, revenues, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the University and changes therein are classified and reported as follows:
Unrestricted—Net assets not subject to donor-imposed stipulations.
Temporarily Restricted—Net assets subject to donor-imposed stipulations that either expire by passage
of time or can be fulfilled by actions of the University pursuant to those stipulations.
Permanently Restricted—Net assets subject to donor-imposed stipulations that they be maintained
permanently by the University.
Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Contributions are reported as increases in the appropriate category of net assets. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulations or by law. Expirations of temporary restrictions recognized on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications from temporarily restricted net assets to unrestricted net assets. Temporary restrictions on gifts to acquire long-lived assets are considered met in the period in which the assets are acquired or placed in service.
Contributions, including unconditional promises to give, are recognized as revenues in the period received. Conditional promises to give are not recognized until the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value at the date of gift. Contributions to be received after one year are discounted at a rate commensurate with the risk involved. Amortization of the discount is recorded as bad debt expense. Allowance is made for uncollectible contributions based upon management’s judgment and analysis of the creditworthiness of the donors, past
collection experience, and other relevant factors.
The University follows a practice of classifying its unrestricted net asset class of revenues and expenses as general operations, internally designated, or capital. Items classified as general operations include those revenues and expenses included in the
University’s annual operating budget. Items classified as capital include accounts and transactions related to endowment funds and plant facilities and allocation of facilities operations and maintenance, depreciation, and interest expense. All other accounts and transactions are classified as internally designated.
Transfers consist primarily of funding designations for specific purposes and for future plant acquisitions and improvements.
Non-operating activities represent transactions relating to the University’s long-term investments and plant activities, including contributions to be invested by the University to generate a return that will support future operations, contributions to be received in the future or to be used for facilities and equipment, and investment gains or losses.
43
Notes to Financial Statements April 30, 2013 and 2012
Principles of Consolidation
Our consolidated financial statements include our accounts and that of our wholly owned and controlled subsidiary, American University at Connecticut Avenue LLC, after elimination of intercompany accounts and transactions.
Cash and Cash Equivalents
All highly liquid cash investments with maturities at date of purchase of three months or less are considered to be cash
equivalents. Cash equivalents consist primarily of money market funds.
Receivables
Receivables consist of tuition and fee charges to students and auxiliary enterprises’ sales and services, loans receivable primarily related to donor-structured loans and federal student financial aid programs, and amounts due from the federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to grants and contracts. Receivables are recorded net of estimated uncollectible amounts. The University reviews the individual receivables as well as the history of collectability to determine the collectible amount as of the balance sheet date. Additionally, loans
receivable are evaluated annually by looking at both unsecured and secured loans.
Deposits for Collateralized Swaps
Deposits consist of the cash held as collateral for the University’s interest rate swaps.
Investments
Equity securities with readily determinable fair values and all debt securities are recorded at fair value in the balance sheet. See Note 7 for an explanation as to methodology for determining fair value. Endowment income included in operating revenues consists of annual amounts allocated for spending of endowment funds in accordance with the University’s spending policy. All realized and unrealized gains and losses from investments of endowment funds are reported as non-operating revenues.
Investment income included in operating revenues consists primarily of interest and dividends from investments of working
capital funds and unexpended plant funds.
The University has interests in alternative investments consisting of limited partnerships. Alternative investments are less liquid than the University’s other investments. Furthermore, the investments in these limited partnerships, as well as certain mutual funds classified as equity securities, may include derivatives and certain private investments which do not trade on public markets and therefore may be subject to greater liquidity risk.
In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-04, Fair Value Measurement (“ASU 2011-04”). ASU 2011-04 requires new disclosures for valuation techniques and unobservable inputs related to Level 3 fair value measurements, excluding investments that measure fair value using an NAV. The new guidance also requires the disclosure of transfers between Level 1 and Level 2 investments. The new disclosures and clarifications of existing disclosures were effective for the year ended April 30, 2013. The adoption of this guidance is included in the University’s fair value disclosures.
Investment income is reported net of management fees and rental real estate property expenses.
Property, Plant, and Equipment, Net
Property, plant, and equipment are stated at cost on the date of acquisition or at estimated fair value if acquired by gift including interest capitalized on related borrowings during the period of construction, less accumulated depreciation. Certain costs
associated with the financing of plant assets are deferred and amortized over the terms of the financing. Depreciation of the
University’s plant assets is computed using the straight-line method over the asset’s estimated useful life, generally over 50 years for buildings, 20 years for land improvements, 5 years for equipment, 10 years for library collections, and 50 years for art collections. The University’s capitalization policy is to capitalize all fixed assets and collection items that have a cost of $5,000 or more per unit and a useful life of two years or more.
Refundable Advances from the U.S. Government
44
Funds provided by the United States Government under the Federal Perkins Loan Program are loaned to qualified students and may be reloaned after collections. Such funds are ultimately refundable to the government. Approximately 46% and 48% of net tuition and fees revenue for the years ended April 30, 2013 and 2012, respectively, was funded by federal student financial aid programs (including loan, grant, and work-study programs).
Notes to Financial Statements April 30, 2013 and 2012
Asset Retirement Obligations
The University records asset retirement obligations in accordance with the accounting standard for the Accounting for
Conditional Asset Retirement Obligations. This standard requires the fair value of the liability for the asset retirement
obligations (ARO) be recognized in the period in which it is incurred and the settlement date is estimable, even if the exact
timing or method of settlement is unknown. The ARO is capitalized as part of the carrying amount of the long-lived asset retro
actively to the time at which legal or contractual regulations created the obligation. The University’s ARO is primarily associated with the cost of removal and disposal of asbestos, lead paint, and asset decommissioning. For the years ended April 30, 2013 and 2012, the accretion expenses were $226,000 and $231,000, respectively. No obligations were settled during the fiscal year ended April 30, 2013.
Income Taxes
The University has been recognized by the Internal Revenue Service as exempt from federal income tax under Section 501(c)(3) of the U.S. Internal Revenue Code, except for taxes on income from activities unrelated to its exempt purpose. Such activities resulted in no net taxable income in fiscal years 2013 and 2012.
Functional Expenses
The University has developed and implemented a system of allocating expenses related to more than one function. These expenses are depreciation, interest, and operations and maintenance of plant. Depreciation is allocated by individual fixed assets to the function utilizing that asset. Interest is allocated based on the use of borrowed money in the individual functional category.
The operations and maintenance of plant is divided into expenses used for the total institution not charged back to the operating units, and those expenses charged to some units but not all units. The allocation was determined through a study of departmental uses of the operations and maintenance budget within each category.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities; (2) disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions are the value of alternative investments, the asset retirement obligations, the postretirement benefit plan, and swap agreements. Actual results could differ materially, in the near term, from the amounts reported.
3. Consolidation of Wholly Owned Subsidiary
In May 2012, the University became the sole member of American University at Connecticut Avenue LLC (“the LLC”). The LLC purchased an office building to house the University’s public radio station, WAMU 88.5 FM, and other administrative offices. The University has
consolidated the mortgage liability along with the rental revenue of the LLC in our consolidated financial statements for the current fiscal year.
4. Accounts and University Loans Receivable, Net
Accounts and loans receivable, net, at April 30, 2013 and 2012, are as follows (in thousands):
2013
2012
Accounts receivable
1
Student
2
Grants, contracts, and other
3
4
Accrued interest
Student loans
5
6
7
Less allowance for uncollectible accounts and loans
$
9,812
7,024
$
8,483
7,608
468
454
12,932
11,976
30,236
28,521
(2,520)
(1,279)
$ 27,716
$ 27,242
45
Notes to Financial Statements April 30, 2013 and 2012
At April 30, 2013 and 2012, the University had an outstanding student loans receivable balance in the amount of $12.9 million and $12.0 million, respectively. Management does not believe it has significant exposure to credit risk related to the federal student financial aid programs, as these accounts receivable amounts are backed by the U.S. Government. Additionally, management has considered the credit and market risk associated with all other outstanding balances and believes the recorded cost of these loans
approximates fair market value at April 30, 2013 and 2012.
5. Contributions Receivable, Net
As of April 30, 2013 and 2012, unconditional promises to give were as follows (in thousands):
2013
2012
$ 10,139
$ 11,023
5,537
5,460
855
225
4
16,531
16,708
5
Less unamortized discount
(1,026)
(854)
6
Less allowance for doubtful accounts
(4,656)
(5,724)
Amounts due in:
1
Less than one year
2
One year to five years
3
Over five years
$ 10,849
7
$ 10,130
Contributions receivable over more than one year are discounted at rates ranging from 3.0% to 6.5%. New contributions received during fiscal years 2013 and 2012 were assigned a discount rate which is commensurate with the market and credit risk involved.
As of April 30, 2013 and 2012, the University had also received bequest intentions and conditional promises to give of $26.4 million and $23.2 million, respectively. These intentions to give are not recognized as assets. If the bequests are received, they will generally be restricted for specific purposes stipulated by the donors, primarily endowments for faculty support, scholarships, or general operating support of a particular department of the University. Conditional promises to give are recognized
as contributions when the donor-imposed conditions are substantially met.
6.Property, Plant, and Equipment, Net
Property, plant, and equipment and related accumulated depreciation and amortization at April 30, 2013 and 2012,
are as follows (in thousands):
2013
2012
$ 56,494
$ 51,069
581,484
546,131
8
Land and improvements
9
Buildings
Equipment
103,945
97,888
13,595
90,525
10
11
Construction in progress
65,811
12
Library and art collections
99,614
907,348
799,208
(387,968)
(362,132)
$519,380
$437,076
13
14
15
46
Less accumulated depreciation and amortization
Construction in progress at April 30, 2013 and 2012, relates to building improvements and renovations.
Capitalized interest as of April 30, 2013, was $1.9 million. There was no capitalized interest included in plant, property, and equipment as of April 30, 2012.
Notes to Financial Statements April 30, 2013 and 2012
For the years ended April 30, 2013 and 2012, depreciation expense was approximately $26.1 million and $24.6
million, respectively.
7.Fair Value Measurements
The University determines fair value in accordance with fair value measurement accounting standards. These standards establish a framework for measuring fair value, a fair value hierarchy based on the observability of inputs used to measure fair value, and disclosure requirements for fair value measurements. Financial assets and liabilities are classified and disclosed in one of the following three categories based on the lowest level input that is significant to the fair value measurement in its entirety:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: Inputs other than Level 1 that are observable either directly or indirectly, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active; or inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the
assets or liabilities.
Assets and Liabilities Measured at Fair Value
The following table displays the carrying value and estimated fair value of the University’s financial instruments as of
April 30, 2013 (in thousands):
Quoted Prices
in Active
Markets for
Identical
ASSETS (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Total Fair
Value as of
April 30, 2013
Assets
Investments
1
Cash and cash equivalents
$ 8,512
-
$ 8,512
2
Equity—corporate stocks
80,708
$
-
$
-
80,708
-
125,978
3
Equity—domestic funds
-
125,978
4
Equity—international funds
-
150,418
-
150,418
5
Equity—hedge funds
-
83,559
2,159
85,718
6
Equity—real asset funds
-
20,320
-
20,320
7
Equity—private equity funds
-
-
12,333
12,333
8
Fixed income—corporate bonds
-
14,301
-
14,301
9
Fixed income—government agency bonds
-
16,826
-
16,826
Fixed income—international bonds
-
2,344
-
2,344
Fixed income—domestic bond funds
-
232,599
-
232,599
1,414
-
-
1,414
-
-
15,922
15,922
$90,634
$646,345
$ 30,414
$767,393
10
11
12
Deposits with trustees
13
Interest in perpetual trust
14
Total assets at fair value
Liabilities
15
16
Swap agreements
$
-
$ 70,876
$
-
$ 70,876
$
-
$ 70,876
$
-
$ 70,876
47
Notes to Financial Statements April 30, 2013 and 2012
The following table displays the carrying value and estimated fair value of the University’s financial instruments as of
April 30, 2012 (in thousands):
Quoted Prices
in Active
Markets for
Identical
ASSETS (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
$
$
Total
Fair Value as of
April 30, 2012
Assets
Investments
1
Cash and cash equivalents
$ 38,248
-
$ 38,248
2
Equity—corporate stocks
76,659
-
-
76,659
3
Equity—domestic funds
-
104,427
-
104,427
4
Equity—international funds
-
122,519
-
122,519
5
Equity—hedge funds
-
76,540
6,587
83,127
6
Equity—real asset funds
-
20,749
-
20,749
7
Equity—private equity funds
-
-
7,641
7,641
8
Fixed income—corporate bonds
-
13,491
-
13,491
9
Fixed income—government agency bonds
-
16,365
-
16,365
Fixed income—international bonds
-
38
-
38
Fixed income—domestic bond funds
-
206,870
-
206,870
10
11
12
Deposits with trustees
13
Interest in perpetual trust
14
Total assets at fair value
418
-
-
418
-
-
14,597
14,597
$115,325
$560,999
$ 28,825
$705,149
$
-
$ 67,917
$
-
$ 67,917
$
-
$ 67,917
$
-
$ 67,917
Liabilities
15
Swap agreements
16
The University determines a valuation estimate based on techniques and processes which have been reviewed for propriety and consistency with consideration given to asset type and investment strategy. In addition, the funds and fund custodians may also use established procedures for determining the fair value of securities which reflect their own assumptions. Management makes best estimates based on information available. The following estimates and assumptions were used to determine the fair value of the financial instruments listed above:
• Cash Equivalents—Cash equivalents primarily consist of deposits in money market funds and short-term investments. These are priced using quoted prices in active markets and are classified as Level 1.
• Equity Investments—Equity investments consist of, but are not limited to, separate accounts, common trust funds, and hedge funds. These assets consist of both publicly traded and privately held funds.
48
o
Publicly Traded Securities—These investments consist of domestic and foreign equity holdings. Securities traded on active exchanges are priced using unadjusted market quotes for identical assets and are classified as Level 1. Securities that are traded infrequently or that have comparable traded assets are priced using available quotes and other market data that are observable and are classified as Level 2.
o
Privately Held Funds—These investments consist of domestic, international, hedge, real asset, and private equity funds which are privately held. The valuations of the funds are calculated by the investment managers based on valuation
techniques that take into account the market value of the underlying assets to arrive at a net asset value or interest in the fund shares. The funds are commingled funds and limited partnerships and shares may not be readily redeemable. If an active market exists for the fund and shares are redeemable at net asset value, these investments are classified as Level 2.
If no active market exists for these investments and/or there are significant redemption restrictions, they are classified Notes to Financial Statements April 30, 2013 and 2012
•
Level 3. In the absence of readily determinable fair value, fair value of each investment is determined based on a review of the audited financial statements of the underlying funds, when available, and other information from independent third parties, including information provided by the fund managers. Investments in such funds do carry certain risks, including lack of regulatory oversight, interest rate risk, and market risk.
Fixed Income Investments—Fixed income securities include, but are not limited to, U.S. Treasury issues, U.S. Government Agency issues, corporate debt, and domestic and international bond funds. Fixed income securities assets are valued using quoted prices in active markets for similar securities and are classified as Level 2. If an active market exists for fixed income funds and shares are redeemable at net asset value, these investments are classified as Level 2. If no active market exists for these investments and/or there are significant redemption restrictions, they are classified Level 3.
• Deposits with Trustees—Deposits with trustees consist of debt service funds and the unexpended proceeds of certain bonds payable. These funds are invested in short-term, highly liquid securities and will be used for construction of, or payment of debt service on, certain facilities.
• Interest in Perpetual Trust—Beneficial and perpetual trusts held by third parties are valued at the present value of the future distributions expected to be received over the term of the agreement.
•
Swap Agreements—Interest rate swaps are valued using both observable and unobservable inputs, such as quotations received from the counterparty, dealers, or brokers, whenever available and considered reliable. In instances where models
are used, the value of the interest rate swap depends upon the contractual terms of, and specific risks inherent in, the
instrument as well as the availability and reliability of observable inputs. Such inputs include market prices for reference
securities, yield curves, credit curves, measures of volatility, prepayment rates, assumptions for nonperformance risk, and
correlations of such inputs. Certain of the interest rate swap arrangements have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the University believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Changes in Level 3 Assets
The following table is a roll-forward of the statement of financial position amounts for financial instruments classified by the University within Level 3 of the fair value hierarchy defined above for the years ended April 30, 2013 and 2012 (in thousands):
Investments
Equity—Hedge
Funds
1
Beginning balance at May 1, 2012
2
Total gains or losses (realized/unrealized)
included in earnings
Investments
Equity—Private
Equity Funds
$ 6,587
Interest in
Perpetual
Trust
$ 7,641
465
1,116
Total
$ 14,597
1,325
$ 28,825
2,906
Purchases, issuances, sales, and settlements
Purchases
-
4,851
-
4,851
4
Issuances
-
-
-
-
5
Sales
-
3
6
Settlements
7
Transfers into Level 3
8
Transfers out of Level 3
9
Ending balance at April 30, 2013
10
Total gains or losses for the period included in
earnings attributable to the change in unrealized
gains or losses relating to assets still held at
period end
(1,275)
-
(1,275)
-
-
-
-
-
-
-
-
-
-
$ 2,159
$ 12,333
$ 15,922
$ 30,414
$465
$1,116
$1,325
$2,906
(4,893)
(4,893)
49
Notes to Financial Statements April 30, 2013 and 2012
Investments
Equity—Hedge
Funds
1
Beginning balance at May 1, 2011
2
Total gains or losses (realized/unrealized)
included in earnings
Investments
Equity—Private
Equity Funds
$ 14,637
$
(171)
Interest in
Perpetual
Trust
3,650
Total
$ 14,683
23
$ 32,970
(86)
(234)
Purchases, issuances, sales, and settlements
3
Purchases
4
2,500
Issuances
-
5
Sales
-
6
Settlements
-
Transfers into Level 3
Transfers out of Level 3
9
Ending balance at April 30, 2012
$
-
Total gains or losses for the period included in
earnings attributable to the change in unrealized
gains or losses relating to assets still held at
period end
$
(171)
6,593
-
-
-
-
(125)
-
-
-
-
-
-
$
7,641
$ 14,597
$ 28,825
$
23
$
$
(10,379)
6,587
-
(125)
-
7
8
10
4,093
(10,379)
(86)
(234)
Transfers into and out of Level 3 are typically the result of a change in the availability and the ability to observe market data which is considered a significant valuation input required by various models. Generally, as markets evolve, the data required to support valuations becomes more widely available and observable.
There were no significant transfers between Levels 1 and 2 for the year ended April 30, 2013.
Investments in certain entities that calculate net asset values at April 30, 2013 and 2012, are as follows (in thousands):
Investments that Calculate Net Asset ValuE
April 30, 2013
Fair Value
11
12
13
14
$
Redemption
Frequency
Redemption
Notice Period
-
daily
same day
International equity funds
150,418
-
daily, biweekly
same day—5 days
Domestic bond funds
232,599
-
daily
same day
Domestic equity funds
$125,978
Unfunded
Commitments
Real asset funds
20,320
-
daily, monthly
1–10 days
15
Hedge funds
85,718
-
monthly, annually
30–90 days
16
Private equity funds
12,333
28,002
n/a
n/a
17
Total
$627,366
$ 28,002
April 30, 2012
Fair Value
50
18
Domestic equity funds
19
$104,427
Unfunded
Commitments
$
Redemption
Frequency
Redemption
Notice Period
-
daily
same day
International equity funds
122,519
-
daily, biweekly
same day—5 days
20
Domestic bond funds
206,870
-
daily
same day
21
daily, monthly
1–10 days
Real asset funds
20,749
-
22
Hedge funds
83,127
-
23
Private equity funds
7,641
16,647
24
Total
$545,333
$ 16,647
monthly, annually
30–90 days
N/A
N/A
Notes to Financial Statements April 30, 2013 and 2012
At April 30, 2013 and 2012, the assets of endowments and funds functioning as endowments were approximately $535 million and $466 million, respectively.
Investments in debt securities and equity securities consist primarily of investments in funds managed by external
investment managers.
For the years ended April 30, 2013 and 2012, the University’s investment management fees were approximately $1.5 million and $1.3 million, respectively.
Investment Income
Total net investment income for the years ended April 30, 2013 and 2012, consists of the following (in thousands):
2013
Unrestricted
1
Endowment income
2
Investment income
3
Realized and unrealized net capital losses
4
Total
Temporarily
restricted
Permanently
restricted
$ 8,133
$ 4,869
6,158
176
$
33,748
11,930
$ 48,039
$ 16,975
$
$ 6,158
$
$
Total
117
$ 13,119
-
6,334
1,555
47,233
1,672
$ 66,686
Operating
-
$ 6,334
2,291
117
3,775
6,766
2,578
-
9,344
40,514
14,508
1,555
56,577
5
Investment income
6
Endowment income
1,367
Allocated from non-operating
7
176
Non-operating
8
Realized and unrealized net capital losses
9
Allocation to operations
10
Total
(6,766)
$ 48,039
(2,578)
$ 16,975
$ 1,672
(9,344)
$ 66,686
2012
Unrestricted
11
Endowment income
12
Investment income
13
Realized and unrealized net capital gains
14
Total
$ 7,767
Temporarily
restricted
$ 4,909
6,386
Permanently
restricted
$
146
Total
119
-
(46,404)
(6,091)
$ (32,251)
$ (1,036)
$
$ 6,386
$
$
$ 12,795
6,532
(215)
(52,710)
(96)
$ (33,383)
Operating
15
Investment income
-
$ 6,532
16
Endowment income
1,511
2,482
146
119
4,112
17
Allocated from non-operating
6,256
2,427
-
8,683
(40,148)
(3,664)
(6,256)
(2,427)
$ (32,251)
$ (1,036)
Non-operating
18
Realized and unrealized net capital gains
19
Allocation to operations
20
Total
(215)
$
(96)
(44,027)
(8,683)
$ (33,383)
51
Notes to Financial Statements April 30, 2013 and 2012
8.Notes Payable and Long-term Debt
The University classifies its notes payable and long-term debt into two categories: core debt and special purpose debt. Core debt represents debt that will be repaid from the general operations of the University and includes borrowings for educational and auxiliary purposes. Special purpose debt represents debt that is repaid from sources outside of general operations and includes borrowings for buildings, which house some administrative offices, along with rental space.
Notes payable and long-term debt at April 30, 2013 and 2012, consists of the following (in thousands):
2013
2012
Core debt
1
District of Columbia University Revenue Bonds, American University
$ 21,000
$ 21,000
37,000
37,000
99,975
99,975
60,900
60,900
Term loan maturing in 2021
75,000
75,000
Taxable commercial paper note program
30,000
10,000
323,875
303,875
Issue Series 1999 maturing in 2028
2
District of Columbia University Revenue Bonds, American University
3
District of Columbia University Revenue Bonds, American University
Issue Series 2003 maturing 2033
Issue Series 2006 maturing 2036
4
District of Columbia University Revenue Bonds, American University
Issue Series 2008 maturing 2038
5
6
Total core debt
7
Special purpose debt
8
Note payable due in full in 2021
22,000
22,000
9
Note payable due in full in 2020
15,000
15,000
Mortgage payable due in full in 2018
23,055
-
60,055
37,000
$383,930
$340,875
10
11
Total special purpose debt
12
Total indebtedness
The principal balance of notes payable and long-term debt outstanding as of April 30, 2013, is due as follows (in thousands):
Year ending April 30:
13
2014
$ 30,254
14
2015
271
15
2016
285
16
2017
308
17
2018
21,937
18
Thereafter
19
52
330,875
$383,930
Due to the nature of certain variable rate bond agreements, the University may receive notice of an optional tender on its
variable rate bonds. In that event, the University would have an obligation to purchase the tendered bonds if they were unable to be remarketed. The University has entered into letter of credit agreements with various financial institutions to support the
$218.9 million of variable rate demand obligations all of which expire in fiscal year 2016. Under these agreements, the financial institutions have agreed to purchase the bonds if the bonds are unable to be remarketed. Should that occur, payment would be accelerated and ultimately differ from the dates stated above. In accordance with the terms of the agreements, $58.0 million would convert to a term loan with principal and interest payable over three years and $161.0 million would be payable in fiscal year 2014.
Notes to Financial Statements April 30, 2013 and 2012
The estimated fair value of the University’s notes payable and long-term debt at April 30, 2013 and 2012, was $383.9 million and $340.9 million, respectively, and was determined using quoted market prices.
District of Columbia Bonds Payable
In October 2008, the University refunded and reissued the Series 1985 and Series 1985A bonds as Series 2008 variable rate demand bonds with interest payable weekly. These bonds are general unsecured obligations of the University. The interest rate
at April 30, 2013, was 0.18%.
The Series 1999 bonds are general unsecured obligations of the University and bear interest at a variable rate, payable weekly.
The proceeds from the bonds were used to repay a mortgage note prior to its scheduled maturity. The interest rate at April 30, 2013, was 0.21%.
The Series 2003 bonds are general unsecured obligations of the University and bear interest at a variable rate, payable weekly.
The proceeds were used to fund construction and renovation of Katzen Arts Center and Greenberg Theatre. The interest rate at April 30, 2013, was 0.20%.
The Series 2006 bonds are general unsecured obligations of the University and bear interest at a variable rate, payable weekly.
The proceeds were used to advance refund the Series 1996 bond issue, thus reducing the University’s overall interest costs, and
to fund construction and renovation projects, including Nebraska Hall and the School of International Service building. The interest rate at April 30, 2013, was 0.21%.
On June 7, 2012, the University replaced the letters of credit for the 2006 and 2008 bonds that were held as of April 30, 2012,
with new letters of credit from JP Morgan Chase. The letter of credit for the 2003 Bonds and supporting the 1999 Bonds held as of April 30, 2012, were replaced with new letters of credit from Wells Fargo on June 28, 2012, and August 15, 2012, respectively.
Term Loan
In 2011, the University entered into a $75 million term loan with JPMorgan Chase Bank, N.A., to fund its facilities development projects. The term loan is due in full in June 2021 and has a fixed 4.19% interest rate, payable monthly.
Taxable Commercial Paper Note Program
On December 15, 2011, the University established a $125.0 million taxable commercial paper note program which will be used to fund long-term projects for a temporary period until long-term financing is implemented. The notes can be issued for a maximum of 270 days and carry a floating taxable interest rate.
In 2013, the University issued $20.0 million in additional commercial paper notes. The average interest rate on outstanding commercial paper at April 30, 2013, is 0.17%.
Notes Payable
In 2001, the University issued a $22.0 million note for the purchase of a building. The note is payable in full in September 2021 and bears an interest rate of LIBOR plus 0.45%, payable monthly. The interest rate at April 30, 2013, was 0.6537%.
In 2003, the University issued a $15.0 million note payable to replace a 1998 note incurred for the purchase of a building.
The note is payable in full in April 2020 and bears an interest rate of LIBOR plus 0.45%, payable monthly. The interest rate at April 30, 2013, was 0.6537%.
Mortgage Payable
In 2012, the LLC purchased an office building to house its public radio station, WAMU 88.5 FM, and other administrative
offices. The University, as the sole owner of the LLC, assumed the existing mortgage on the property of $23,200,000, which is payable in full in August 2017. The interest rate on April 30, 2013, was 6.37%.
9. Interest Rate Swaps
The University has entered into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate long-term debt. The interest rate swap agreements were not entered into for trading or speculative purposes. At April 30, 2013, the University had outstanding interest rate swap agreements with Bank of America and Morgan Stanley Capital Services. The 53
Notes to Financial Statements April 30, 2013 and 2012
interest rate swap agreement with Bank of America has a total notional principal amount of approximately $61 million. This agreement effectively changes the interest rate to a 4.31% fixed rate for the Series 2008 bonds. Four interest rate swap agreements are in place with Morgan Stanley with a total notional principal amount of approximately $134 million. These agreements
effectively change the University’s interest rate to a 4.12% fixed rate for the Series 1999 bonds, fixed rates of 5.26% and 4.37% on portions of the Series 2006 bonds, and a fixed rate of 4.46% on a portion of the Series 2003 bonds. The interest rate swap
agreements mature at the time the related notes mature. An interest rate swap with Morgan Stanley Capital Services on the $15 million term loan expired in September 2011.
The interest rate swap agreements contain provisions that require the University’s debt to maintain an investment grade credit
rating from each of the major credit rating agencies. If the University’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The University is currently in compliance with these provisions.
The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position on April 30, 2013 is $71 million, for which the University has posted collateral of $33 million in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on April 30, 2013, the University would be required to post an additional $38 million of collateral to its counterparties. The University is also exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements. However, the University does not anticipate nonperformance by the counter parties.
Derivatives at April 30, 2013 and 2012, are as follows (in thousands):
Liability Derivatives
2013
Balance Sheet
Location
2012
Fair Value
Balance Sheet
Location
Fair Value
Derivatives not designated as hedging instruments:
1
Interest rate contracts
Swap agreements
$ 70,876
Location of Gain (Loss) Recognized in Statement of Activities
Swap agreements
$ 67,917
Amount of Gain (Loss) Recognized in
Statement of Activities
2013
2012
Derivatives not designated as hedging instruments:
2
Interest rate contracts
Realized and unrealized net capital gains
$ (2,959)
$ (30,782)
10.Endowments
54
The University’s endowment consists of approximately 400 individual funds established for scholarships and related academic activities. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.
Permanently Restricted Net Assets—Interpretation of Relevant Law
The Board of Trustees has interpreted the District of Columbia enacted version of Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the University classifies as permanently restricted net assets (a) the original value of gifts to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund not classified in permanently restricted net assets is classified as temporarily restricted net assets until purpose and timing restrictions are met and amounts are appropriated for expenditure by the Board of Trustees of the University in a manner consistent with the standard of prudence prescribed by UPMIFA.
Notes to Financial Statements April 30, 2013 and 2012
In accordance with UPMIFA, the University considers the following factors in making a determination to appropriate or
accumulate donor-restricted endowment funds:
(1) The duration and preservation of the fund
(2) The purposes of the University and the donor-restricted endowment fund
(3) General economic conditions
(4) The possible effect of inflation and deflation
(5) The expected total return from income and the appreciation of investments
(6) Other resources of the University
(7) The investment policies of the University
The endowment net assets composition by type of fund at April 30, 2013, is as follows (in thousands):
Temporarily
Restricted
Unrestricted
1
Donor-restricted endowment funds
2
Board-designated endowment funds
3
Total endowment funds
$
(20)
Permanently
Restricted
Total
$ 72,271
$ 85,099
$157,350
327,582
-
-
327,582
$327,562
$ 72,271
$ 85,099
$484,932
The changes in endowment net assets for the year ended April 30, 2013, are as follows (in thousands):
Temporarily
Restricted
Unrestricted
4
Endowment net assets, May 1, 2012
Permanently
Restricted
Total
$283,070
$ 60,529
$ 80,006
$423,605
36,309
14,273
1,322
51,904
1,357
2,536
-
3,893
37,666
16,809
1,322
55,797
-
-
3,771
3,771
Investment return:
5
Net depreciation on investments
6
Interest, dividends, and capital distributions
7
Total investment return
8
Contributions to endowment
9
Appropriation of endowment assets
for expenditure
(8,111)
(5,067)
-
(13,178)
-
15,950
Other changes:
10
11
12
Transfers to create board-designated
endowment funds
Transfers to remove board-designated
endowment funds
Endowment net assets, April 30, 2013
15,950
(1,013)
$327,562
-
-
$ 72,271
$ 85,099
(1,013)
$484,932
55
Notes to Financial Statements April 30, 2013 and 2012
The endowment net assets composition by type of fund at April 30, 2012, is as follows (in thousands):
Temporarily
Restricted
Unrestricted
1
Donor-restricted endowment funds
2
Board-designated endowment funds
3
Total endowment funds
$
(41)
Permanently
Restricted
$ 60,529
Total
$ 80,006
$140,494
283,111
-
-
283,111
$283,070
$60,529
$ 80,006
$423,605
The changes in endowment net assets for the year ended April 30, 2012, are as follows (in thousands):
Temporarily
Restricted
Unrestricted
4
Endowment net assets, May 1, 2011
$280,758
Permanently
Restricted
$66,641
Total
$74,437
$421,836
Investment return:
5
Net appreciation on investments
6
Interest, dividends, and capital distributions
7
Total investment return
8
Contributions to endowment
9
Appropriation of endowment assets
for expenditure
(8,090)
(3,635)
1,604
2,625
(6,486)
(1,010)
(7,776)
(190)
(190)
-
5,759
(5,102)
(11,915)
4,229
(7,686)
5,759
-
(12,878)
Other changes:
10
11
Transfers to create board-designated
endowment funds
Endowment net assets, April 30, 2012
16,574
-
-
16,574
$283,070
$ 60,529
$ 80,006
$423,605
Funds with Deficiencies
From time to time, the fair value of the assets associated with individual restricted endowments may fall below the level the donor or UPMIFA requires the University to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, deficiencies of this nature reported in unrestricted net assets were $20,000 and $41,000 at April 30, 2013 and 2012, respectively. These deficiencies resulted from market fluctuations that occurred shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs deemed prudent by the Board of Trustees.
Return Objectives, Risk Parameters, and Strategies
The University’s objective is to earn a respectable, long-term, risk-adjusted total rate of return to support the designated
programs. The University recognizes and accepts that pursuing a respectable rate of return involves risk and potential volatility. The generation of current income will be a secondary consideration. The University has established a policy portfolio, or normal asset allocation. The University targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. While the policy portfolio can be adjusted from time to time, it is designed to serve for long-time horizons based upon long-term expected returns.
Spending Policy and How the Investment Objectives Relate to Spending Policy
56
The University has a policy of appropriating for distribution each year 5% of the endowment fund’s average fair value calculated on an annual basis over the preceding three fiscal years. In establishing this policy, the University considered the long-term expected return on its endowment. Accordingly, over the long term, the University expects the current spending policy to allow its endowment to grow at an average of 3% annually. This is consistent with the University’s objective to provide additional real growth through new gifts and investment return.
Notes to Financial Statements April 30, 2013 and 2012
11.Employee Benefit Plans
Eligible employees of the University may participate in two contributory pension and retirement plans, one administered by the Teachers Insurance and Annuity Association and College Retirement Equities Fund and the other administered by Fidelity Investments. Under these plans, contributions are fully vested and are transferable by the employees to other covered employer plans. Participating employees contribute a minimum of 1% up to a maximum of 5% of their base salary. The University
contributes an amount equal to twice the employee’s contribution.
The University’s contribution to these plans was approximately $15.0 million and $14.4 million for the years ended April 30, 2013 and 2012, respectively.
Postretirement Healthcare Plan
The University provides certain healthcare benefits for retired employees. The plan is contributory and requires payment of deductibles. The University’s policy is to fund the cost of medical benefits on the pay-as-you-go basis. The plan’s measurement dates are April 30, 2013, and April 30, 2012, respectively.
Net periodic postretirement benefit cost for the years ended April 30, 2013 and 2012, includes the following components
(in thousands):
2013
$
2012
939
$
701
1
Service cost
2
Interest cost
969
1,041
3
Amortization of transition obligation over 20 years
503
667
4
Amortization of net loss
5
Net periodic postretirement benefit cost
332
174
$ 2,743
$ 2,583
The following table sets forth the postretirement benefit plan’s funded status and the amount of accumulated postretirement benefit plan costs for the years ended April 30, 2013 and 2012, using a measurement date of April 30 (in thousands):
2013
2012
Change in accumulated postretirement benefit obligation:
6
Accumulated postretirement benefit obligation at beginning of year
$ 24,869
$ 21,434
7
Service cost
939
701
8
Interest cost
969
1,041
9
Net actuarial (gain)/loss
(19)
2,883
Plan participants’ contributions
518
10
11
12
(1,677)
Benefits paid
Accumulated postretirement benefit obligation at end of year
502
(1,692)
$ 25,599
$ 24,869
$
$
Change in fair value of plan assets:
13
14
Fair value of plan assets at beginning of year
Plan participants’ contributions
15
Employer contributions
16
Benefits paid
17
Fair value of plan assets at end of year
$
-
-
518
502
1,159
1,190
(1,677)
(1,692)
-
$
-
Reconciliation of funded status:
18
Funded status
19
Postretirement benefit liability
(25,599)
(24,869)
$ (25,599)
$ (24,869)
57
Notes to Financial Statements April 30, 2013 and 2012
The following table sets forth the amounts not recognized in the net periodic benefit cost for the years ended April 30, 2013
and 2012 (in thousands):
2013
2012
Amounts not recognized in net periodic benefit cost:
1
Net actuarial loss
2
Transition obligation
3
Amounts included in unrestricted net assets
$ 7,448
-
503
$ 7,097
$ 7,951
The amounts expected to be amortized from unrestricted net assets into net periodic benefit cost for the year ended
April 30, 2014, are as follows (in thousands):
4
Net actuarial loss
5
Transition obligation
6
Total
$
303
$
303
-
Other changes in benefit obligations recognized in unrestricted net assets are as follows (in thousands):
$
7
Actuarial loss
8
Amortization of transition obligation
9
Total other changes in benefit obligations recognized in unrestricted net assets
19
503
$
522
The weighted discount rate used in the actuarial valuation at the April 30, 2013, and April 30, 2012, measurement dates is as follows:
10
11
2013
2012
End of year benefit obligation
3.50%
4.00%
Net periodic postretirement benefit cost
4.00%
5.00%
An 7% healthcare cost trend rate was assumed for fiscal year 2013, with the rate in the following fiscal years assumed to be 6.5%, 6.0%, 5.5%, 5.2% and 5.1% until reaching an ultimate rate of 5% in fiscal year 2019, and thereafter. An increase in the assumed healthcare cost trend rate of 1% would increase the aggregate of the service and interest cost by approximately $225,000
and $171,000 for 2013 and 2012, respectively, and the accumulated postretirement benefit obligation at April 30, 2013 and 2012, by approximately $1,547,000 and $1,455,000, respectively. A decrease in the assumed healthcare cost trend rate of 1% would decrease the net periodic postretirement benefit cost by approximately $188,000 and $146,000 for 2013 and 2012,
respectively, and the accumulated postretirement benefit obligations at April 30, 2013 and 2012, by approximately $1,328,000 and $1,267,000, respectively.
The expected contributions by the University to the plan are as follows:
Year ending April 30
Payment with
Medicare
Part D Subsidy
Payment
without
Medicare
Part D Subsidy
Medicare
Part D Subsidy
Receipts
12
2014
$1,312,388
$1,454,293
$141,905
13
2015
1,434,069
1,600,696
166,627
14
2016
1,477,786
1,661,512
183,726
15
2017
1,501,345
1,697,755
196,410
16
2018
1,519,767
1,729,957
210,190
17
2019-2023
8,811,538
9,035,508
223,970
58
$ 7,097
Notes to Financial Statements April 30, 2013 and 2012
12.Expenses
For the years ended April 30, 2013 and 2012, the University’s program services and supporting services were as follows
(in thousands):
2013
2012
Program services
$147,811
$150,728
Research
49,295
39,298
1
Instruction
2
3
Public service
20,803
20,858
4
Academic support
60,202
52,738
5
Student services
40,440
40,158
318,551
303,780
83,284
83,065
6
Total program services
Supporting services
7
Institutional support
8
Auxiliary enterprises
9
62,150
66,535
$463,985
$453,380
For the years ended April 30, 2013 and 2012, the University’s fundraising expenses totaled approximately $16.9 million and $16.3 million, respectively. The expenses are included in institutional support in the accompanying statements of activities.
13.Net Assets
Temporarily restricted net assets consist of the following at April 30, 2013 and 2012 (in thousands):
2013
10
Unspent contributions and related investment
income for instruction and faculty support
11
Term endowment
12
Gifts received for construction of facilities
13
2012
$ 84,180
$ 71,660
-
1,200
7,723
7,264
$ 91,903
$ 80,124
Permanently restricted net assets were held, the income of which will benefit the following at April 30, 2013 and 2012
(in thousands):
2013
14
Permanent endowment funds, for scholarships
and related academic activity
15
Interest in trust assets
16
Student loans
17
2012
$ 73,158
$ 70,544
15,922
14,597
6,176
5,856
$ 95,256
$ 90,997
59
Notes to Financial Statements April 30, 2013 and 2012
14.Operating Lease
The University leases office space and buildings used for student housing with terms ranging from three to ten years. The leases for student housing will expire at various times throughout 2014 and 2015. The office space lease does not expire until 2018.
Minimum lease payments under these agreements are as follows (in thousands):
Year ending April 30:
1
2014
$ 4,568
2
2015
969
3
2016
409
4
2017
249
5
2018
168
6
Thereafter
$ 6,363
7
Rent expense in 2013 and 2012 was approximately $6.0 million and $11.8 million, respectively.
15.Commitments and Contingencies
At April 30, 2013 and 2012, commitments of the University under contracts for construction of plant facilities amounted
to approximately $47.4 million and $11.4 million, respectively. Subsequent to April 30, 2013, the University entered into
commitments with various investment fund managers totaling $14.8 million.
Amounts received and expended by the University under various federal programs are subject to audit by governmental agencies. In the opinion of the University’s administration, audit adjustments, if any, will not have a significant effect on the financial
position, changes in net assets, or cash flows of the University.
The University is a party to various litigations, arising out of the normal conduct of its operations. In the opinion of the
University’s administration, the ultimate resolution of these matters will not have a materially adverse effect on the University’s financial position, changes in net assets, or cash flows.
16.Related Parties
Members of the University’s Board of Trustees and their related entities contributed approximately $3.6 million and $731,000 during the years ended April 30, 2013 and 2012, respectively, which is included in contribution revenue in the accompanying statements of operations. Also for the years ended April 30, 2013 and 2012, approximately $5.2 million and $5.3 million,
respectively, were included in contribution receivable in the accompanying balance sheets.
17.Subsequent Events
60
The University has performed an evaluation of subsequent events through August 30, 2013, which is the date the financial
statements were issued. Nothing was noted which affect the financial statements as of April 30, 2013.