ML081560246
| ML081560246 | |
| Person / Time | |
|---|---|
| Site: | MIT Nuclear Research Reactor |
| Issue date: | 05/29/2008 |
| From: | Bernard J Massachusetts Institute of Technology (MIT) |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| TAC MA6084 | |
| Download: ML081560246 (33) | |
Text
MIT NUCLEAR REACTOR LABORATORY AN MIT INTERDEPARTMENTAL CENTER John A. Bernard Director of Reactor Operations Mail Stop: NW12-208a 138 Albany Street Cambridge, MA 02139 Phone: 617 253-4202 Fax: 617 253-7300 Email: bemardj@mit.edu May 29, 2008 U.S. Nuclear Regulatory Commission Attn: Document Control Room Washington, DC 20555 Re: Massachusetts Institute of Technology - Request for Additional Information License Renewal Request (TAC No. MA6084); License No. R-37; Docket No. 50-20;
Dear Sir or Madam:
The Massachusetts Institute of Technology hereby replies to the above request which consisted of these subquestions.
a)
Justification for 2005 $23M Decommissioning Estimate:
Duke Engineering provided MIT with a cost estimate of $23M. That study was completed in November 2001. It included a 10% contingency. Inflation was quite low and for some sectors of the economy slightly negative for the years 2001-2005. Accordingly, for our 2006 submittal, we used the uninflated detailed Duke estimate which was $23M.
b)
Decommissioning Estimate for 2008:
For 2008, we estimate the decommissioning cost of the MITR to be $29.8M. This figure is obtained by taking the $23M Duke estimate as a base and inflating it for both the cost of labor and burial as shown below:
Please note that labor was 89% of the total estimate and burial was 11%. The inflator figures are obtained from NUREG-1307, Rev. 12, Page D. 1, Example 2 (Northeast Region). We take the date of completion of the Duke study to be 2002 as this is closest to the actual date of November 2001. For labor, the cost index is 2.21 in 2006 and 1.862 for 2002. We assume that cost increases are linear through 2008 and obtain
/(02-0
[1.862 + [(2.21-1.862)/(2006 - 2002))12008 - 2002)) = 2.384
Nuclear Regulatory Commission May 29, 2008 Page 2 The inflation factor for 2008 as compared to 2002 is therefore 2.384/1.862 or 1.28. Hence, the labor portion of the cost is ($20,470,000)(1.28) or $26,200,000. For burial the same approach is used to yield a factor of 25.44 for 2008, as inflation factor of 1.42 and a cost $3,593,000.00. For burial the same approach is used to obtain the 25.49 figure.
c)
Mechanism to Update Cost:
The mechanism described above for response (b) will be followed as a subsequent revision to NUREG 1307 is issued.
If there are no further RAIs concerning this matter, we will revise our escrow account as to reflect the $29.8M figure. Enclosed please find supporting data for the Duke Engineering estimate.
Also enclosed is a copy of the most recent report of the MIT Treasurer.
Please contact the undersigned with any questions.
Sincerely, 6ýBernard, Ph.DE, CHP Director of Reactor Operations I declare under the penalty of perjury that the foregoing is true and correct.
(2 Executed on Date
(
Signature-7 cc:
w/enclosures w/o enclosures w/o enclosures Stephen Pierce, Project Manager Research and Test Reactors Branch A Division of Policy and Rulemaking Office of Nuclear Reactor Regulation Senior Project Manager Research and Test Reactors Branch A Division of Policy and Rulemaking Office of Nuclear Reactor Regulation Senior Reactor Inspector Research and Test Reactors Branch B Division of Policy and Rulemaking Office of Nuclear Reactor Regulation
N Report of the Treasurer For the year ended June 30, 2007 Massachusetts Institute of Technology
The Corporation 2006-2007 as ofJune 30, 2007 Chairman: Dana G. Mead*
President: Susan Hockfield*
Executive Vice President and Treasureri Theresa M. Stone*
Vice President and Secretary: Kirk D. Kolenbrander*
Life Members John S. Reed; Shirley A. Jackson; Raymond S. Stata*; David H. Koch; PatrickJ. McGovern; Robert A. Muh; Denis A.
Bovin*; James A. Champy*; Judy C. Lewent*; A. Neil Pappalardo*; Arthur Gelb; Edie N. Goldenberg; Robert M. Metcalfe; Kenan E. Sahin; John K. Castle; Susan E. Whitehead; Charles M. Vest; Brian G. R. Hughes.
Members Norman E. Gaut; Robert E. Wilhelm; Gerald J. Burnett; Anthony Sun; Barrie R. Zesiger*; Gordon M. Binder; Gururaj Deshpande; Linda C. Sharpe; John A. Thain; Thomas P. Gerrity; Mark P. Gorenberg; Scott P. Marks, Jr.; Marjorie M.T Yang; Mark R. Epstein; Jennifer A. Frank; L. Robert Johnson; Jorge E. Rodriguez; James H. Simons; Alan G. Spoon; Sudeb C. Dalai; Lawrence K. Fish*; Claude L. Gerstle; David D. Ho; Robert B. Millard*; Gregory E. Moore; Arthur J.
Samberg*; Carly S. Fiorina; Anita K. Jones; Paula J. Olsiewski; Sanjay K. Rao; Milton H. Roye, Jr.; Robert L. Blumberg; R. Erich Caulfield; Raymond C. Kurzweil; Kenneth Wang; David A. Berry; James A. Lash; Paul E Levy; Megan J. Smith; Henri A. Termeer; Chiquita V. White; Abigail P. Johnson.
President of the Association of Alumni and Alumnae Martin Y Tang Representatives of the Commonwealth Governor: Deval L. Patrick Chief Justice of the Supreme Judicial Court: Margaret H. Marshall Commissioner of Education: David P. Driscoll Life Members Emeriti Ir6n~e duPont, Jr.; John C. Haas; Norman B. Leventhal; George P. Gardner; Mitchell W Spellman; D. Reid Weedon, Jr.; Colby H. Chandler; Carl M. Mueller; Joseph G. Gavin, Jr.; Edward 0. Vetter; Louis W Cabot; Christian J. Mat-thew; Howard W. Johnson; Paul M. Cook; William S. Edgerly; Frank Press; Edward E. David, Jr.; Emily V Wade; Angus N. MacDonald; Kenneth H. Olsen; George N. Hatsopoulos; Charles H. Spaulding; Mary Frances Wagley; Alexander V d'Arbeloff; Michael M. Koerner; Morris Tanenbaum; Breene M. Kerr; W Gerald Austen; Richard P Simmons; Morris Chang; Paul E. Gray; Alexander W. Dreyfoos, Jr.; Ronald A. Kurtz; DuWayne J. Peterson, Jr.
Members' names are listed in chronological order of election to each category
- member of the Executive Committee
Table of Contents
- Report of theTreasurer.............................................
5-9
- Financial Statements The financial statements summarize the finances of MIT during the fiscal years 2006-2007 Statem ents of Financial Position............................................
11 Statem ents of Activities................................................
12-13 Statem ents of C ash Flow s..................................................
14 N otes to Financial Statem ents...........................................
15-28 Report of Independent Auditors............................................
29
- Additional Information Five-Year Trend Analysis...............................................
30-32
Report of theTreasurer To Members of the Corporation m Summary MIT strengthened its financial position during 2007. The Statements of Financial Position, on page 11, shows that total net assets were $12,695.3 million atJune 30, 2007, an increase of $2,635.5 million, or 26.2 percent, from the
$10,059.8 million on June 30, 2006. This increase was due primarily to investment gains being in excess of amounts distributed to operations, gifts, and the implementation of SFAS No. 158, Employers'Accounting for Defined Benefit Pension and Other Postretirement Plans, requiring the addi-tion of $847.8 million of retirement assets (See Note A.).
Without the change in accounting due to the adoption of SFAS No. 158, total net assets increased $1,787.7 mil-lion or 17.8 percent to $11,847.5 million. Total gifts and pledges received in 2007 were $332.9 million as compared with $232.5 million in 2006. Land, buildings and equip-ment were at $1,743.2 million, an increase of $55.4 million (net of depreciation) from the prior year. This increase compared to an increase of $79.1 million in 2006. Total borrowings outstanding decreased from $1,278.5 million to
$1,078.2 million atJune 30, 2007 due primarily to the sale of MIT's Technology Square property and the liquidation of related debt totaling $225 million. MIT's publicly held debt continues to be rated triple A by both Moody's and Standard & Poor's.
MIT's operations include tuition, research revenues, unre-stricted gifts and bequests for current use, fees and services, other programs, investment income, the portion of net investment gains distributed to funds under MIT's total return investment policy, auxiliary revenues, payments on pledges for unrestricted gifts and operating expenditures.
The Statements of Activities, on pages 12 and 13, show that operating expenses exceeded operating revenues by $27.3 million in 2007. This compares to 2006 when operating expenses exceeded operating, revenues by $41.0 million.
Financial Position Net assets are shown on the Statements of Financial Position on page 11. They are presented in three categories to recognize the significant ways in which universities are different from profit-making organizations. These cat-egories reflect the nature of the restrictions placed on gifts by donors.
Permanently restricted net assets represent those gifts for which the original principal can never be spent. This category includes gifts and pledges to true endowment together with assets held in trust, such as life income funds, which, when received or matured, will be added to the endowment. The increase in permanently restricted net assets of $167.1 million, or 10.3 percent, to a total of
$1,794.5 million, primarily reflects new gifts and pledges made to restricted endowment funds, increases in life income funds, and gains and losses on investments where the donor required investment gains to be retained permanently.
Temporarily restricted net assets represent those gifts that ultimately can become available to meet operating or capi-tal expenditures. They require an event or lapse of time to occur before they are available for spending. Over 90 per-cent of the assets in this category result from accumulated market gains on permanently restricted endowment funds.
This category also includes pledges not permanently re-stricted, gifts for construction projects that have not been expended, and life income funds, which, upon maturity, will be available for spending. The increase in temporarily restricted net assets of $984.1 million, or 20.9 percent, to a total of $5,684.0 million, primarily results from the increase in the market value of assets held in permanently restricted funds. The Commonwealth of Massachusetts requires that all universities located within the Commonwealth include accumulated market gains on both permanently and tem-porarily restricted net assets with temporarily restricted net assets. Most other states allow inclusion of these gains with unrestricted net assets. If MIT were allowed to follow the prevalent rule, unrestricted net assets would increase by $5,273.2 million to $10,490.1 million, and temporar-ily restricted net assets would decrease by a like amount to
$410.8 million.
- Unrestricted net assets comprise all the remaining econom-ic resources available to MIT This category includes MIT's working capital, and those assets designated by the Corpo-ration as "funds functioning as endowment," to be invested over the long term to generate support of MIT opera-tions and capital projects. Also included are current funds received from donors for restricted purposes that, under the accounting rules, are categorized as unrestricted if MIT spends an equivalent amount of unrestricted funds for the same purpose. Unrestricted net assets increased $1,484.3 million, 39.8 percent, to a total of $5,216.8 million. This compares to an increase of $454.8 million, or 13.9 percent, in 2006. A major portion of the increase in unrestricted net assets, $847.8 million, is due to the implementation of SFAS No. 158 as described in Note A, Adoption of New Accounting. Standards and Note I, Retirement Benefits.
The market value for all invested funds exceeds book value atJune 30, 2007.
Pledges receivable increased $8.3 million, or 2.6 percent, to $331.4 million atJune 30, 2007. During fiscal 2007, new
SUMMARY
5
pledges totaled $98.4 million. Payments on pledges totaled
$105.8 million. Change to discount and to allowance for unfulfilled pledges increased the pledge receivable by $15.7 million.
Operations Operating revenues increased $39.6 million, or 1.9 per-cent, to $2,180.4 million, due primarily to increases in gifts and bequests for current use, and an increase in fees and services revenues. Operating expenses increased $25.9 million, or 1.2 percent, to a total of $2,207.6 million. Areas of increased spending included utilities, rents and repairs, salaries and wages, and subrecipient agreements. These results are shown in the' Statements of Activities on pages 12 and 13.
Net tuition and other income increased $10.1 million, or 5.1 percent, to $209.3 million in 2007. As more fully described in the Notes to Financial Statements, tuition and related revenues before tuition discount grew $21.3 million, or 5.7 percent, to a total of $394.7 million including execu-tive and continuing education revenues. Tuition support provided from MIT sources increased $11.3 million, or 6.5 percent, to $185.4 million. Total student financial support from all sources increased $4.2 million, or 1.2 percent, to
$346.2 million.
Research revenues in departmental and interdepartmental laboratories were $570.8 million, a decrease of $11.7 mil-lion, or (2.0) percent from the prior year. While research spending at The Broad Institute increased $6.1 million, research elsewhere on campus declined $8.7 million; the Department of Health and Human Services (primarily through the National Institutes of Health) is the single largest sponsor on campus, with research support increas-ing 3.1 percent from $195.6 million to $201.6 million in 2007. The Department of Defense was the second largest sponsor, with research support of $90.6 million in 2007.
Industrial support continued to be significant, totaling
$79.7 million in 2007. The Department of Energy and the National Science Foundation also were significant spon-sors of research on campus in 2007 with support of $64.9 million and $65.1 million, respectively. Research revenues at Lincoln Laboratory decreased from $636.4 million in 2006 to $605.9 million in 2007, a decrease of 4.8 percent.
Research at the Lincoln Laboratory is funded primarily un-der a contract with the Department of Defense (Air Force).
Research revenues include reimbursement from sponsors for both direct and indirect (facilities and administration) costs.
MIT's direct research expenditures "base", used as the basis for recovery of indirect costs, decreased by $9.4 million, or 1.4 percent; with $4.4 million of the decrease on cam-pus and $5.0 million at Lincoln Laboratories. Research financed by MIT's unrestricted funds increased from $13.8 million in 2006 to $19.8 million in 2007.
Revenue from fees and services increased $22.8 million, or 19.6 percent, to $139.6 million. This was due primarily to strong revenue growth in technology licensing. Investment income, defined as dividends, interest and rents, increased
$8.3 million, or 3.4 percent to $252.7 million. The financial statements include both realized and unrealized gains on investments. The table at the end of this section displays the change in MIT's net assets, excluding the net investment gains. Net asset reclassifications to operations of $33.7 million reflect payments on unrestricted pledges received and released to operations in 2007.
Operating expenses increased $25.9 million or 1.2 percent to a total of $2,207.6 million in 2007. The largest com-ponent of the increase was instruction and unsponsored research, which grew $49.5 million, or 8.9 percent. A sig-nificant contributor to this expense growth was The Broad Institute, where spending for instruction and unsponsored research grew $22.8 million to a total of $46.6 million.
Research spending was down $34.3 million, or 3.3 percent, with most of the decrease, $28.6 million, at MIT's Lincoln Laboratory. General and administrative expenses increased
$8.1 million or 1.7 percent. Employee benefits decreased slightly due primarily to a decrease in the net periodic benefit cost of MIT's defined benefit plan, which decreased
$3.6 million to $4.5 million. This decrease was due to the continuing over-funded status of the defined benefit plan E (Decrease) Increase in Net Assets Excluding Net Investment Gains (in thousands of dollars)
Temporarily Permanently Unrestricted Restricted Restricted Total Increase in net assets..............................
$ 1,484,305* $
984,125 Deduct: net investment gains.......................
660,799 997,591 167,099 14,885
$ 2,635,529*
1,673,275 (Decrease) increase in net assets excluding net investment gains.........................
823,506* $
(13,466) 152,214 962,254*
- Includes $847,795 arising from overfunded retirement plan, net of underfunding of retiree health benefit plan due to the adoption of SPAS No.158.
6 MIT REPORT OF THE TREASURER 2007
and the requirements of generally accepted accounting principles. There were no contributions to the defined benefit plan in 2007 or 2006.
The Result of Operations changed by $13.7 million from a negative ($41.0) million in 2006 to a negative ($27.3) million in 2007. The Statements of Cash Flows, on page 14, show that the net cash provided by operating activities decreased from $183.4 million in 2006 to $143.8 million in 2007.
Gifts In 2007, MIT set a new record for gifts and pledges. The Campaign for Students'was initiated to support scholar-ships, fellowships, other educational programming, and stu-dent life activities. In addition, the MIT Energy Initiative is gaining interest from both individual donors and corpora-tions. The planning for MIT's new cancer research facility and supporting programs is also garnering support.
Gifts and pledges for 2007 totaled $332.9 million, includ-ing gifts-in-kind (primarily gifts of equipment) valued at
$0.4 million. Total gifts and pledges were $232.5 million in 2006. For 2007, gifts from individuals represented 40 per-cent of new gifts and pledges, down from 62 percent in the previous year. Gifts from foundations represented 46 per-cent of new gifts and pledges in 2007, up from 26 percent in 2006. Gifts from corporations and,' other sources repre-sented 14 percent, up from 12 percent in 2006. New gifts and payments on pledges for unrestricted purposes were 5 percent of the total in 2007, compared with 8 percent in 2006. The largest category of gifts for 20,07 was Research and Education at 61 percent.
Endowment and Similar Funds The market value of investments in the endowment and similar funds totaled $9,980.4 million at June 30, 2007, compared to $8,3 68. 1 million at June 3 0, 2 006, an increase of $1,612.3 million, or 19.3 percent. The market value at June 30, 2007 includes $9,803.0 million invested in Pool A, MIT's primary investment pool, and $177.4 million held in separately invested funds. The increase in the market value of endowed and similar funds was the result of investment
'performance as discussed in detail below.
The endowment assets are managed to maximize total investment return relative to appropriate risk. Investment income and a portion of gains are distributed for spending in a manner that, over the long term, retains for reinvest-ment an amount at least equal to the anticipated rate of inflation.
Endowment funds invested in Pool A receive distribu-tions based on the number of units held. Units are valued monthly and hiew gifts or other funds transferred to Pool A are credited with Pool A units based on the current month's market value of the units in Pool A.
Investments investments at market value were $11,061.1 million, an increase of $1,560.9 million, or 16.4 percent, from the
$9,500.2 million of the previous year..Over the past five years, total invested assets have increased from $6,174.1 million to $11,061.1 million while distributions for expen-diture have totaled $1,642.1 million. More specific infor-mation is included in the Notes to Financial Statements, Note B.
General Investments General investments at market value were $10,629.0 million, an increase of $1,466.7 million, or 16.0 percent from the $9,162.3 million of the previous year. General investments primarily include Pool A, MIT's long-term investment pool which holds primarily endowment funds and funds functioning as endowment, and Pool C which is the investment pool primarily for expendable funds and which holds funds invested with a shorter investment time horizon.
The asset allocation among fixed income, equity'and real estate investments remained essentially the same dur-ing the year. Equity and real estate investments at market value were 82.2 percent of the general investments at June 30, 2007. Net realized gains during the year amounted to $1,015.9 million. The increase in the market value of general investments resulted primarily from market action and rebalancing trades between asset classes. Real estate investments held in Pool A and Pool C decreased by $428.7 million to $622.3 million. The decrease was primarily due to the sale of Technology square in Cambridge.
Investment income in the form of dividends, interest and rents was $262.4 million. This compares to $252.5 million in the previous year, an increase of 3.9 percent. This mea-sure of investment income does not include any investment gains.
The Executive Committee of the Corporation provides for distributions for spending from the general investments from both investment income and market appreciation, and in the separately invested funds only of investment income. This policy is consistent with the investment policy which focuses on total investment return, a combination of both capital appreciation and income from interest, dividends, and rents. In 2007, the distribution rate was
$40.50 per Pool A unit, up from the $38.20 per Pool A unit distribution rate in 2006. In 2007, the amount distributed for spending from the general investments totaled $349.6 million, compared to $320.7 million distributed in the prior year. The amount distributed for spending from the general investments in 2007 included $92.6 million from investment gains, or 26.5 percent of the total distributed to funds. In 2006, the comparable amount distributed from the general investments included $62.3 million, or 19.4 percent, from, investment gains. During 2007 distributions
SUMMARY
7 7
from separately invested funds were $4.8 'million, compared to $2.7 million in 2006. The income earned in Pool C, currently invested funds, was fully distributed. In addition to the distributions from total return in Pool A and from income in Pool C and the separately invested funds, there was also a special distribution of $5.0 million from gains in Pool C in 2007 and 2006. Between 1998 and 2007, the distribution from Pool A increased from $17.55 to $40.50 per unit. For 2008, the approved distribution rate will be
$53.00 per unit.
Other Investments Separately invested assets increased by $56.7 million to a market value of $239.8 million. This increase was a result of new gifts and market activity. Investments held by the life income funds increased $16.6 million to a market value of
$165.2 million. This increase was the result of new gifts and market activity less transfers to general investments. Life income funds are invested primarily in two partnerships organized and managed by MIT, one for equity assets and the other for fixed income assets. The partnership pools simplify and bring greater uniformity to the investment process for MIT's life income funds.
The Board of Directors of the MIT Investment Man-agement Company ("MITIMCo") held four regularly scheduled meetings during the fiscal year. During 2007 MITIMCo continued its program to diversify international and emerging market equities management with multiple investment firms. The investment program in non-market-able and marketable alternative investments in the domestic and international markets continued to expand to meet the asset allocation policy adopted by MITIMCo. Non-market-able alternatives include investments such as venture capital and private equity. Marketable alternatives include invest-ments in event arbitrage, distressed debt and hedge funds.
The alternative investments are managed by more than one hundred independent organizations primarily through pooled investment partnerships. At June 30, 2007, alterna-tive investments, marketable and non-marketable, plus real estate assets, represented slightly more than 56 percent of the assets in Pool A.
Land, Buildings and Equipment Fixed assets had a net book value of $1,743.2 million at June 30, 2007, an increase of 3.3 percent from $1,687.8 million at June 30, 2006. The most significant area of increase this past fiscal year was in the area of construction in progress.
The PDSI project in the Green Building (named for the Departments of Physics and Materials Science and En-gineering, Spectroscopy Lab and Infrastructure renewal enhancements) is nearly complete. PDSI consists of a new 49,000 square foot infill building in the courtyard encom-passed by Buildings 2, 4, 6, and 8, along with the compre-hensive renovation of 79,000 square feet of adjacent space, and infrastructure for an additional 127,000 square feet.
The major renovation of Building E25 to accommodate the Department of Earth, Atmospheric, and Planetary Sciences.
and the Harvard-MIT Program in Health Sciences and Technology will be completed this fall. A new graduate residence at 235 Albany Street moved into the construc-tion phase this fiscal year. New Ashdown House will be a five-story building with 548 beds and has a planned oc-cupancy date of late summer 2008. Significant improve-ments to Vassar Street west of Massachusetts Avenue are well underway. Incorporating spring plantings, the project will be completed in the spring of 2009. The Media Lab and School of Architecture and Planning building, a new six-story 163,000 square foot structure, began construc-tion during fiscal year 2008. Adjacent to the Media Lab's Wiesner building, it will be completed in the fall of 2009.
Construction has begun on a three-level underground East Campus Garage. The structure will accommodate approxi-mately 430 cars and will be located directly beneath the new Sloan building. The Sloan School expansion will be a six-story, 217,000 square foot building providing offices, classrooms, team study rooms, and executive education space. The project will be completed during the summer of 2010. The estimated cost of these projects is over $550 million.
Further academic and research projects include a new can-cer research facility and related activities in bioengineering.
In addition there will be substantial investment in infra-structure and utilities.
Smaller projects completed during the fiscal year include the renovation of the third and fourth floors of Building E2 3, and the expansion of the exhibit space for the MIT Museum on the first floor of Building N5 1.
Our new capital initiative will add state-of-the-art facili-ties for emerging areas of research, increase educational infrastructure that supports residential and community life, as well as revitalize the physical campus. The new campus development program will further advance the Institute's historic mission to generate new knowledge, fuel innova-tion and educate leaders for the next generation.
8 MIT REPORT OF THE TREASURER 2007
General Under the leadership of President Susan Hockfield and Provost Rafael Reif, the Institute embarked upon the current fiscal year with leadership strength in all academic and administrative areas.
We are pleased to report that the Institute's financial strength has grown, thanks to generous donations and the outstanding performance of our endowment investments.
MIT's endowment fund posted investment gains of 22.1 percent for the year ended June 30, 2007. For the past 10 years the Institute's endowment has had an annualized return of 15.3 percent. With total net assets of $12,695.3 million, an increase of 26.2 percent for the year, we are well positioned to increase our support for research and educational initiatives as well as our new and renewal capital projects.
Our purpose remains to support MIT's mission of advancing knowledge and educating students in science, technology and the humanities, and to serve the nation and the world in 2008 and beyond.
Respectfully submitted, Theresa M. Stone Executive Vice President and Treasurer September 21, 2007
SUMMARY
9 9
10 MIT REPORT OF THE TREASURER 2007
Massachusetts Institute of Technology Statements of Financial Position at June 30, 2007 and 2006 (in thousands of dollars) 2007 2006 Assets C ash......................................................................
A ccounts receivable, net......................................................
Pledges receivable, net.......................................................
Contracts in progress, principally U.S. Government...............................
Deferred charges, inventories and other assets....................................
Student notes receivable, net..................................................
Investm ents, at fair value......................................................
Collateral for securities lending and other assets...................................
Retirement plan asset-overfunded status.........................................
Land, buildings and equipment, at cost
($2,477,000 for 2007 and $2,342,029 for 2006),
net of accum ulated depreciation................................................
T o tal assets..............................................................
Liabilities and Net Assets Liabilities:
Accounts payable, accruals and other liabilities....................................
Liabilities due under life income fund agreements.................................
Collateral for securities lending and minority interest..............................
Accrued benefits, deferred revenue and other credits...............................
A dvance paym ents...........................................................
B orrow in gs................................................................
Government advances for student loans..........................................
T otal liabilities...........................................................
Net Assets:
Unrestricted (includes $970,766 for 2007 and $127,448 for 2006 arising from the overfunded defined benefit plan, net of underfunding of the post-retirem ent benefit plan).............................................
Tem porarily restricted........................................................
Perm anently restricted..................................
T otal net assets..........................................................
Total liabilities and net assets...............................................
91,744 207,335 331,443 53,145 60,780 49,781 11,061,142 328,008 1,019,788 1,743,203
$ 14,946,369 247,214 74,661 328,008 211,442 278,750 1,078,234 32,756 2,251,065 5,216,844 5,684,006 1,794,454 12,695,304
$ 14,946,369 71,321 207,989 323,187 56,105 55,687 54,702 9,500,178 277,999 127,448 1,687,835
$ 12,362,451 243,233 76,996 277,999 139,202 254,200 1,278,489 32,557 2,302,676 3,732,539 4,699,881 1,627,355 10,059,775
$12,362,451 The accompanying notes are an integral part of the financial statements.
FINANCIAL STATEMENTS I1I
Massachusetts Institute of Technology Statements of Activities for the years ended June 30, 2007 and 2006 (in thousands of dollars) r-Unrestricted -1 F-Temporarily Restricted 2007 2006 2007 2006 Operating Activities Operating Revenues:
Tuition and other income, net of discount of
$185,399 in 2007 and $174,140 in 2006...........
Research revenues:
Campus direct...............................
Campus indirect.............................
Lincoln Laboratory direct......................
Lincoln Laboratory indirect.....................
Total research revenues........................
Gifts and bequests for current use...................
Fees and services................................
Other programs.................................
Investment income..............................
Net gains on investments, distributed................
Auxiliary enterprises.............................
Net asset reclassifications and transfers...............
Total operating revenues..........................
Operating Expenses:
Salaries and wages...............................
Employee benefits...............................
Supplies and services.............................
Subrecipient agreements..........................
Utilities, rent and repairs..........................
Depreciation...................................
Interest expense.................................
Total operating expenses..........................
Results of operations.............................
Non-Opeinating Revenues, Gains and Losses Pledges........................................
Gifts and bequests...............................
Investment income..............................
Net gain on investments and other assets.............
Distribution of accumulated investment gains..........
Net change in life income funds....................
Net asset reclassifications and transfers...............
Total non-operating activities......................
Increase in net assets before cumulative effect of change in accounting principles..................
- Retirement benefits..............
- Asset retirement obligation....................
Increase in net assets...........................
Net assets at the beginning of the year...............
Net assets at the end of the year....................
The accompanying notes are an integral part of the financial statements.
209,253 407,650 163,148 573,696 32,234 1,176,728 120,064 139,602 93,962 252,675 68,808 85,603 33,676 2,180,371 836,686
ý193,826 778,649 73,692 161,831 111,597 51,340 2,207,621 (27,250) 652,749 (25,180) 3,087 33,104 663,760 636,510 847,795 1,484,305 3,732,539
$ 5,216,84 199,168 419,144 163,340 602,426 33,968 1,218,878 96,832 116,766 97,571 244,386 55,557 82,000 29,577 2,140,735 816,999 195,198 770,235 68,001 153,216 118,981 59,066 2,181,696 (40,961) 533,8(
(20,57 4,52 11,45 529,2(
488,3 (
(33,50 454,79 3
,277,7z
$ 3,732,53
-71,094
-9,541
-7,044 9
997,591
~8)
(43,628) 18,630 6
(66,147) i8 984,125 7
984,125
)9) 8 984,125 1d 4,699,881
- 9
$5,684,006 72,968 9,782 4,748 895,30.8 (34,979) 1,130 (41,105) 907,852 907,852 907,852 3,792,029
$ 4,699,881 12 12 MIT REPORT OF THE TREASURER 2007
Massachusetts Institute of Technology Statements of Activities for the years ended June 30, 2007 and 2006 (in thousands of dollars) r-Permanently Restricted -
2007 2006 F
Total 2007 2006 209,253
$ 199,168 42,966 89,209 2,715 14,885 17,957 (633) 167,099 167,099 1,627,355
$ 1,794,454 6,215 46,675 3,411 3,375 11,807 72 71,555 407,650 163,148 573,696 32,234 1,176,728 120,064 139,602 93,962 252,675 68,808 85,603 33,676 2,180,371 836,686 193,826 778,649 73,692 161,831 111,597 51,340 2,207,621 (27,250) 114,060 98,750 9,759 1,665,225 (68,808) 29,674 (33,676) 1,814,984 419,144 163,340 602,426 33,968 1,2 18,878 96,832 116,766 97,571 244,386 55,557 82,000 29,577 2,140,735 816,999 195,198 770,235 68,001 153,216 118,981 59,066 2,181,696 (40,961) 79,183 56,457 8,159 1,432,552 (55,557) 17,458 (29,577) 1,508,675_
1,467,714 (33,509) 1,434,205 8,625,570
$10,059,775 Operating Activities Operating Revenues:
Tuition and other income, ner of discount of
$185,399 in 2007 and $174,140 in 2006 Research revenues:
Campus direct Campus indirect Lincoln Laboratory direct Lincoln Laboratory indirect Total research revenues Gifts and bequests for current use Fees and services Other programs Investment income Net gains on investments, distributed Auxiliary enterprises Net asset reclassifications and transfers Total operating revenues Operating Expenses:
Salaries and wages Employee benefits Supplies and services Subrecipient agreements Utilities, rent and repairs Depreciation Interest expense Total operating expenses Results of operations Non-Operating Revenues, Gains and Losses Pledges Gifts and bequests Investment income Net gain on investments and other assets Distribution of accumulated investment gains Net change in life income funds Net asset reclassifications and transfers Total non-operating activities Increase in net assets before cumulative effect of change in accounting principles
- Retirement benefits
- Asset retirement obligation Increase in net assets Net assets at the beginning of the year Net assets at the end of the year 71,555 1,787,734 847,795 71,555 2,635,529 1,555,800 10,059,775
$ 1,627,355
$12,695,304 The accompanying notes are an integral part of the financial statements.
FINANCIAL STATEMENTS 13
Massachusetts Institute of Technology Statements of Cash Flows for the years ended June 30, 2007 and 2006 (in thousands of dollars) 2007 2006 Cash Flow from Operating Activities:
Increase in net assets.....................................................
Adjustments to reconcile change in net assets to net cash provided by operating activities:
Net gain on investments...................................
I............
Cumulative effect of change in accounting principle, asset retirement obligation...
- Change in retirement plan asset, net of accrued benefits........................
Depreciation........................................................
Net (gain) on life income funds..........................................
Other adjustments....................................................
Change in operating assets and liabilities:
Pledges receivable.....................................................
Accounts receivable....................................................
Contracts in progress..................................................
Deferred charges, inventories and other assets...............................
Accounts payable, accruals and other liabilities...............................
Liabilities due under life income fund agreements............................
Deferred revenue and other credits.......................................
Advance payments....................................................
Reclassify investment income...............................................
Reclassify contributions restricted for long-term investment.......................
Net cash provided by operating activities.................................
Cash Flow from Investing Activities:
Purchase of land, buildings and equipment.....................................
Purchases of investments..................................................
Proceeds from sale of investments............................................
Student notes issued......................................................
Collections from student notes..............................................
Net cash (used in) investing activities....................................
Cash Flow from Financing Activities:
Proceeds from contributions restricted for:
Investment in endowment..............................................
Investment in plant and other...........................................
Total proceeds from contributions......................................
Increase in investment income for restricted purposes............................
Increase (decrease) in collateral for securities lending and minority interest............
Proceeds from borrowings.................................................
Repayment of borrowings..................................................
Increase in government advance for student loans...............................
Net cash (used in) financing activities....................................
Net increase in cash.......................................................
Cash at the beginning of the year............................................
Cash at the end of the year.................................................
$ 2,635,529
$ 1,434,205 (1,673,275)
(843,291) 111,597 (24,495) 6,624 (8,256) 654 2,960 (5,093) 3,981 (2,335) 23,191 24,550 (9,759)
(98,750) 143,832 (173,132)
(23,658,438) 23,792,872 (30,435) 34,900 (34,233) 89,211 9,539 98,750 9,759 2,371 37,800 (238,055) 199 (89,176) 20,423 71,321
$ 91,744 (1,432,552) 33,509 118,981 (11,273)
(419)
(8,387) 17,543 (13,128)
(3,041) 9,826 (2,423) 60,340 44,829 (8,159)
(56,457) 183,394 (204,079)
(7,32 3,177) 7,377,107 (34,668) 41,884 (142,933) 46,675 9,782 56,457 8,159 (87,628) 34,900 (14,512) 138 (2,486) 37,795 33,346
$ 71,321 The accompanying notes are an integral part of the financial statements.
14 14 MIT REPORT OF THE TREASURER 2007
Notes to Financial Statements A. Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in accordance with Generally Accepted Accounting Prin-ciples (GAAP).
The financial statements include MIT and its wholly owned subsidiaries.
Net assets, revenues, expenses, gains and losses are classi-fied into three categories based on the existence or absence of donor-imposed restrictions. The categories are perma-nently restricted, temporarily restricted and unrestricted net assets. Unconditional promises to give (pledges) are recorded as receivables and revenues within the appropriate net asset category.
Permanently restricted net assets include gifts, pledges, trusts and remainder interests, and income and gains that are required by donors to be permanently retained.
Pledges, trusts and remainder interests are reported at their estimated fair market values.
Temporarily restricted net assets include gifts, pledges, trusts and remainder interests, and income and gains which can be expended but for which restrictions have not yet been met. Such restrictions include purpose restrictions where donors have specified the purpose for which the net assets are to be spent, or time restrictions imposed by donors or implied by the nature of the gift (capital projects, pledges to be paid in the future, life income funds) or by interpretations of law (gains available for appropriation but not appropriated in the current period).
Unrestricted net assets are all the remaining net assets of MIT.
Donor-restricted gifts and unexpended restricted endow-ment income which are received and either spent or the restriction is otherwise met within the same year are reported as unrestricted revenue. Gifts of long-lived assets are reported as unrestricted revenue. Gifts specified for the acquisition or construction of long-lived assets are reported as temporarily restricted net assets until the monies are ex-pended and the assets placed in service at which point they are reclassified to unrestricted net assets.
MIT administers its various funds, including endowments, funds functioning as endowments, school or departmental funds and related accumulated gains in accordance with the principles of "fund accounting." Gifts are recorded mn fund accounts and investment income is distributed to funds an-nually. Income distributed to funds may be a combination of capital appreciation and yield pursuant to MIT's total return investment policy. Each year, the Executive Com-mittee of the Corporation approves the rates of distribution of investment income to the funds from MIT's investment pools. See Note B for further information on income dis-tributed to funds.
MIT's operations include tuition, research revenues, unre-stricted gifts and bequests for current use, fees and services, other programs, investment income, the portion of net investment gains distributed to funds under MIT's total return investment policy, auxiliary revenues, payments on pledges for unrestricted gifts, and operating expenditures.
Results of operations are displayed in the Statements of Activities.
MIT is a non-profit organization that is tax exempt under Section 501(c)(3) of the Internal Revenue Code, originally recognized in October 1926, with the most recent affirma-tion letter dated July 2001.
Cash Current banking arrangements do not require outstanding checks and wires to be funded until actually presented for payment. Outstanding checks and wires in the amount of
$19.8 million and $18.6 million in 2007 and 2006, re-spectively, are recorded in accounts payable until they are presented to our banks for payment. Certain cash balances, totaling $60.1 million and $53.2 million in 2007 and 2006, respectively, are restricted for use in connection with gov-ernment research.
Sponsored Research Revenue associated with contracts and grants is recognized as related costs are incurred. The capital costs of buildings and equipment are depreciated over their life cycle and the sponsored research recovery allowance for depreciation is treated as indirect research revenue. MIT has recorded reimbursement of indirect costs relating to sponsored re-search at negotiated fixed billing rates. The income gener-ated by the negotiated rates is adjusted each fiscal year to reflect any variance between the negotiated fixed rates and rates based on actual cost. The actual cost rate is audited by the Defense Contract Audit Agency (DCAA) and a final fixed-rate agreement is signed by the U.S. Government and MIT The variance between the negotiated fixed rate and the final audited rate results in a carry-forward (over or under recovery). The carry-forward will be included in the calculation of negotiated fixed billing rates in future years.
Any adjustment in the rate is charged/(credited) to unre-stricted net assets.
FINANCIAL STATEMENTS 15
A. Accounting Policies (continued)
Land, Buildings and Equipment Land, buildings and equipment are shown at cost or fair value as of the date of a gift, net of accumulated deprecia-tion. When expended, costs 'associated with the construc-tion of new facilities are shown as construction in pr~ogress until such projects are completed. Depreciation is com-puted on a straight-line basis over the estimated useful lives of 2 5 to 50 years for buildings, 3 to 2 5 years for equipment, and 4 years for software. Fully depreciated 'buildings and equipment were removed from the financial statements in the amount of $25.2 million and $54.9 million during 2007 and 2006, respectively. Land, buildings and equipment are as follows atJune 30:
Land, Buildings and Equipment (in thousands of dollars) 2007 2006 Tuition and Financial Aid Tuition and similar revenues include tuition and fees in de-gree programs as well as tuition and fees for executive and continuing education programs at MIT Tuition and Similar Revenue (in thousands of dollars) 2007 2006 Tuition revenue..........
Executive and continuing 373,265 356,214 Land..................
48,283 Educational buildings....
2,033,987 Equipment................
188,057 Software..................
33,988 Total...................
2,304,315 Less: accumulated depreciation (733,797)
Construction in progress..
164,766 Software projects in progress 7,919 42,768 2,030,924 163,690 24,747 2,262,129 (654,194) 67,749 12,151 education revenues....
21,387 17,094 Total...................
394,652 373,308 Less: tuition discount...
(185,399)
(174,140)
Net tuition............
209,253 199,168 Tu ition support is awarded to undergraduate students by MIT based on need. Graduate students are provided with tuition support in connection with research assistant, teach-ing assistant and fellowship appointments. Total financial aid granted to students by MIT was $ 346.2 million and
$342.0 million in 2007 and 2006, respectively. Of that amount, $122.3 million in 2007 and $128.4 million in 2006, was aid from sponsors. Tuition support from MIT sources is displayed as tuition discount. Components of financial aid are detailed in Table 1.
Gifts and Pledges Gifts~and pledges are recognized when received. Gifts of securities are recorded at their fair market value at the date of contribution. Gifts of equipment received from manu-facturers and other donors during 2007 and 2006 were put into use and recorded by MIT at fair market value and totaled $0.4 million and $0.9 million in 2007 and 2006, respectively. Pledges in the amount of $3 31.4 million and
$323.2 million are recorded as receivables with the revenue assigned to the appropriate classification of restriction for 2007 and 2006, respectively. Pledges consist of uncondi-tional written promises to contribute to MIT in the future.
Pledges are recorded after discounting the future cash flows to the present value.
Land, buildings and equipment.............
$ 1,743,203
$ 1,687,835 Depreciation expense was $111.6 million and $125.9 million during 2007 and 2006, respectively. Net interest expense of $0.5 million and $1.3 million was capitalized during fiscal 2007 and 2006, respectively, in relation to MIT's construction.
Table 1. Financial Aid (in thousands of dollars)
I2007 I
2006 Institute External Total Institute External Total Sources Sponsors Financial Aid Sources Sponsors Financial Aid Tuition support.,.......... $
185,399 58,076. $
243,475
$ 174,140 56,903 231,043 Stipends...................
12,688 12,332 25,020 14,522 17,918 32,440 Student salaries..............
25,877 51,855 77,732 24,957 53,546 78,503
'total..................
$ 223,964 S 122,263
$346,227
$ 213,619
$128,367
$ 341,986 16 16 MIT REPORT OF THE TREASURER 2007
A. Accounting Policies (continued)
Pledges receivable at June 30 are expected to be realized in the following time periods:
Revenue is recognized upon MIT fulfilling the terms of the agreement.
Pledges Receivable (in thousands of dollars)
In one year or less.......
Between one year and five years...........
More than five years.....
Less: allowance for unfulfilled pledges.......
Pledges receivable, net of discount.........
$ 3 Life Income Funds 2007 2006 MIT's life income fund agreements with donors consist 88,693 121,150 primarily of irrevocable charitable gift annuities, pooled in-come funds and charitable remainder trusts for which MIT
.25,937 115,517 serves as trustee. Assets are invested and payments are made 53,643 136,520 to donors and other beneficiaries in accordance with the respective agreements. MIT records at fair value the assets (36,830)
(50,000) that are associated with each life income fund and records the present value of the estimated future payments at cur-rent interest rates to be made to the donors and beneficia-31,443 323,187 ries under these agreements as a liability.
A review of pledges is made with regard to collectibility. As a result, the allowance for pledges that may not be fulfilled is adjusted, and some pledges have been canceled and are no longer recorded in these statements. In addition, pledges are discounted in the amount of $109.7 million and $112.2 million in 2007 and 2006, respectively, using discount rates based on the applicable U.S. Treasury rates atJune 30, 2007, and 2006. MIT has gross conditional pledges, not recorded, for the promotion of education and research in the amount of $159.2 million and $197.7 million in: 2007 and 2006, respectively.
MIT records items of collections as a gift at nominal value.
They are received for educational purposes and generally displayed throughout MIT. They are not disposed of for financial gain or otherwise encumbered in any manner.
Advance Payments Amounts received by MIT from the U.S. Government, cor-porations, industrial sources, foundations and other non-MIT sponsors under the terms of agreements that generally require the exchange of assets, rights or privileges between MIT and the sponsor are recorded as advance payments.
Adoption of New Accounting Standards SFAS No. 158 In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 158, Employers'Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) ("SFAS No.
158"). SFAS No. 158 requires recognition in the state-ments of financial position of the over or underfunded status of defined pension and other postretirement plans, measured as the difference between the fair value of plan and the projected benefit obligation ("PBO") for pension plans and the accumulated postretirement benefit obliga-tion ("APBO") for other benefit plans. This effectively requires the recognition of all previously unrecognized actuarial gains and losses, prior service cost and transition liability in unrestricted net assets upon adoption, and pro-vides additional annual disclosure.
FASB Statement No. 87, Employers'Accounting for Pension
("SFAS No. 87") and FASB Statement No. 106, Employ-ers' Accounting for Postretiremeni Benefits Other Than Pension The following table sets forth the incremental effect of applying SFAS No. 158 on individual line items in the statement of financial position at June 30, 2007.
(in thousands of dollars)
Prior to adopting SFAS No. 158 Effect of adopting SFAS No. 158 As Reported at June 30, 2007 Retirement plan asset-overfunded status..................
122,944
$ 896,844 1,019,788 Total assets..........................................
14,049,525 896,844 14,946,369 Accrued benefits, deferred revenue and other credits...................................
162,393 49,049 211,442 Total liabilities.......................................
2,202,016 49,049 2,251,065 Unrestricted net assets................................
4,369,049 847,795 5,216,844 Total net assets.......................................
11,847,509 847,795 12,695,304 Total liabilities and net assets...........................
14,049,525 896,844 14,946,369 FINANCIAL STATEMENTS 17
A. Accounting Policies (continued)
("SFAS No. 106") continue to apply in measuring plan assets and benefit obligations, as of the date of the fiscal year-end statement of financial position, and in determin-ing the amount of net periodic benefit income or cost. The provisions of SFAS No. 158 are effective for fiscal years ending after December 15, 2006 and were applied prospec-tively in fiscal year 2007.
MIT's adoption of SFAS No. 158 atJune 30, 2007 xýesulted in an $847.8 million increase to unrestricted net assets. The adoption of SAFS No. 158 had no effect on MIT's results of operations or liquidity for the year ended June 30, 2007, or for any prior period presented, and it will not affect MIT's operating results in future periods as SFAS No. 158 does not affect the determination of net periodic benefit income or cost.
ELTF 04-5 In the year ended June 30, 2007, MIT adopted EITF (Emerging Issues Task Force) 04-5, Determining "hether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights. The impact of the implemen-tation was an increase in MIT's investments and collateral due in relation to securities lending and minority interest by $161.8 million.
FIN 47 MIT adopted FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, ("FIN 47"), as of July 1, 2005. FIN 47 is an interpretation of SFAS No. 143, Accounting for Asset Retirement Obligations and requires that asset retirement obligations that are conditional on a future event, such as the obligation to safely dispose of asbestos when a building is remodeled or demolished, be recognized when the fair value of the obligation can be reasonable estimated. In 2 006 MIT recorded an obligation of $3 9.9 million reflecting its asset retirement obligations. Total expenses recorded in 2006 were $3 5.8 million, including accretion expense of $1.9. million and depreciation expense of $0.3 million relating to 2006, and $33.5 million for years prior to 2006. In fiscal 2007, accretion expense net of spending for asset retirements was $0.8 million, and depre-ciation was $0.6 million.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabili-ties at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications Certain June 3 0, 2 006 balances previously reported have been reclassified to conform to June 3 0, 2007 presentation.
Net asset reclassifications and transfers consist primarily of payments on unrestricted pledges and use of building funds in accordance with donor restrictions. Expirations of temporary restrictions on net assets and the release of per-manent restrictions by a donor are also reported as reclas-sifications of net assets from temporarily or permanently restricted net assets to unrestricted net assets. In 2006, net asset reclassifications and transfers also reflect the return of
$14.4 million of gains over-distributed in 2005, restored to the balance of accumulated undistributed gains.
18 18 MIT REPORT OF THE TREASURER 2007
B. Investments Total market value of investments approximated $11,06 1.1 million and $9,5 00.2 million at June 3 0, 2 007 and 2 006, respectively. The market values of publicly traded invest-ments are generally determined based upon quoted market prices. MIT's privately held equity investments include both publicly-traded and private equity investments held in private partnerships. MIT's positions in these private partnerships are carried at estimated fair value provided by the management of the privately held equity investments and validated by MIT management. The majority of these funds have been valued based upon estimated fair values provided to MIT as of June 3 0, with the remainder valued as of March 3 1, adjusted for cash receipts, cash disburse-ments and securities distributions through June 30. MIT believes that the carrying value of its privately held equity investments, based upon the valuation methodologies above, is a reasonable estimate of the fair value as of June
- 30. These estimated values are subject to uncertainty and, therefore, may differ significantly from the value that would have been used had a market for such investments existed.
Market values of certain real estate assets were determined by professional appraisers. Cash equivalents include money market funds, commercial paper, banker acceptances and negotiable certificates of deposit, maturing within 30 days.
Table 2 provides a detailed breakdown of investments by type as of June 3 0, 2 007 and 2 006.
MIT has two interest rate swap agreements, one expiring in 2011 and one expiring in 203 1, to manage the interest cost and risk associated with its Massachusetts Health and Edu-cational Facilities Authority (MHEFA) variable rate debt portfolios. Under the terms of these swap agreements, MIT pays fixed rates, ranging from 4.46 percent to 4.91 percent, determined at inception, and receives the Bond Market Association Index (BMA) rate on the respective notional principal amounts. MIT's interest rate swaps had a notional value of $250.0 million at June 30, 2007 and 2006. These agreements are recorded at an estimated market value of
($14.4) million and ($10.9) million at June 3 0, 2 007 and 2006, respectively, and the change in market value of $(3.5) million and $19.0 million in 2007 and 2006, respectively is included in non-operating net gain on investments and other assets. These financial instruments involve coun-ter-party credit exposure. The counter parties for these swap transactions are major financial institutions that meet MIT's criteria for financial stability and creditworthiness.
MIT maintains its investments primarily in two major investment pools: Pool A, principally for endowment and Table 2. Investments (in thousands of dollars)
F--
June30, 2007----l June 30, 200 6
Book Market Book Market General Investments Cash equivalents.............................
Fixed income................................
Equities:
Publicly traded...........................
Privately held.............................
Total equities.............................
Real estate:
Held in Pool A...........................
Held in Pool C...........................
Total real estate...........................
Total general investments.....................
Separately invested.........
Life income funds............................
MHEFA Series J-1 & J-2 interest rate swap agreements.............................
Other investments............................
Receivables (Payables) arising from securities transactions.........................
Total investments..........................
$ 1,044,990 856,685 2,068,506 3,345,041
$ 5,413,547 254,079 198,881 452,960
$ 7,768,182 225,749 149,943 18,319 23,228 S 8,185,421
$ 1,044,990 847,974 2,830,724 5,282,940
$ 8,113,664 423,462 198,881 622,343
$10,628,971 239,847 165,161 (14,384) 18,319 23,228
$11,061,142
$ 334,971 912,276 2,137,981 2,753,490
$4,891,471 625,595 183,225 808,820
$ 6,947,538 176,664 147,573 10,700 6,222
$ 7,288,697 334,971 884,943 2,697,779 4,193,605
$6,891,384 867,776 183,225 1,051,001
$9,162,299 183,178 148,599 (10,820) 10,700 6,222
$9,500,178 FINANCIAL STATEMENTS 19 FINANCIAL STATEMENTS 19
B. Investments (continued) funds functioning as endowment and Pool C, principally for investment of current funds of the schools and depart-ments and MIT's operating funds. Pool A operates as a mu-tual fund with units purchased and redeemed at month end at that month's fair value. The total market value of Pool A was $10,161.5 million and $8,550.1 million atJune 30, 2007 and 2006, respectively. The total value of Pool A includes Pool C investment of $358.5 million and $318.0 million at June 30, 2007 and 2006, respectively. The unit market values atJune 30, 2007 and 2006 were $ 1,340.1420 and
$1,135.3265, respectively. Changes in unit values reflect investment results less distributions for spending. On a unit basis, the ownership assigned to each net asset classification at June 30, 2007 and 2006 was as follows:
a portion of accumulated realized gains and losses are reported as part of MIT's unrestricted resources, their use is availed of in a manner consistent with MIT's spending policy and long-term goal of preservation of the purchas-ing power of the endowment. The distribution rate on Pool A is declared by the Executive Committee each year for the next fiscal year. Pool A per unit distribution rates were $40.50 and $38.20 for fiscal years 2007 and 2006, respectively. Pool C distributed 4% on average balances to participating funds in 2007 and 2006, in the amounts of
$8.8 and $6.8 million respectively, with earnings in excess of that amount distributed for general operations.
Pool A Units 2007 Unrestricted..............
2,476,655 Permanently restricted..
5,105,730 Total units..............
7,582,385 2,502,813 5,028,146 7,530,959 The decrease in the number of unrestricted units resulted from new gifts less distributions to support general opera-tions. Fund balances in Pool C are at the dollar amount "deposited" and earn income at rates as determined by the Executive Committee, with reference to short-term money market rates. The total value of Pool C as of June 30, 2007 was $1,119.1 million and was $986.3 million at June 30, 2006.
Table 3 summarizes the total investment gains by classifi-cation of net assets for the years ended June 3 0, 2 007 and 2006.
MITIMCo and the Executive Committee of the Corpora-tion have adopted a total return investment policy. MIT's endowment spending policy thus allows for consumption of both investment yield and gains to support academic and research programs. The spending rate is managed to pre-serve the purchasing power of the endowment. Although The total distribution to all funds was $347.5 million in 2007 and $323.0 million in 2006. The amount distributed in 2007 is net of adjustments of $8.3 million of investment earnings held in temporarily restricted net assets pending compliance with donor restrictions. Without these adjust-ments, the 2007 distribution would have totaled $355.8 million. Total distributions include amounts distributed to non-operating activities, internal rents and internal interest charges eliminated for financial statement purposes, and other adjustments totaling $26.1 million in 2007 and $23.1 million in 2006. MIT has recorded perpetual trusts held by outside trustees of $61.9 million for 2007 and $48.9 million for 2006. These amounts are included in the investments reported in Table 2 as part of separately invested funds. In 2007 and 2006, net asset reclassifications include certain distributions made in previous years to unrestricted funds that have not yet been expended for the donor's restricted purpose, where the donor requires reinvestment, or where the donor has not yet stipulated the use of the funds.
These amounts were reclassified from unrestricted net as-sets to temporarily or permanently restricted net assets as appropriate.
Realized gains and losses are recorded by MIT using the average cost basis. Investment transactions are recorded on trade date. Net gains and losses are classified as unrestricted Table 3. Investment Gains (in th ousa nds of dolIla rs)
Temporarily Permanently Unrestricted Restricted Restricted Total 2007 Realized gains.................................
379,007 643,628 6,274
$ 1,028,909 Change in net unrealized gains......................
281,792 353,963 8,611 644,366 Total......................................
660,799 997,591 14,885
$ 1,673,275 2006 Realized gains.................................
185,371 362,247 3,382 551,000 Change in net unrealized gains (losses)................
348,498 533,061 (7) 881,552 Total......................................
533,869 S
895,308 3,375
$ 1,432,552 20 20 MIT REPORT OF THE TREASURER 2007
B. Investments (continued) net assets unless they are restricted by the donor or by law.
Market value for all invested funds exceeds book value at June 30, 2007, Net gains on permanently restricted gifts are classified as temporarily restricted until appropriated for spending by MIT in accordance with the Massachusetts Management of Institutional Funds Act and guidance from the Attorney General of the Commonwealth of Massachusetts.
MIT has an agreement with a major financial institution to lend Institute securities in exchange for a fixed annual fee less a contractual rebate on the cash collateral received.
All securities are returnable on demand and are collateral-ized by daily cash deposits based on the market value of the securities loaned. MIT manages the investment process for all cash collateral received. MIT is indemnified against borrower default by the financial institution. MIT had investment securities with an aggre Igate market value of
$161.2 million and $2 71.7 million on loan at June 3 0, 2 007 and 2006, respectively. Cash collateral under management was $166.2 million and $278.0 million at June 30, 2007 and 2006, respectively. The cash collateral received is shown as an asset and a liability on the Statements of Financial Position.
C. Derivative Instruments From time to time, MIT will enter into various forward currencies at specific future dates in return for U.S. dollars currency exchange contracts solely as partial offset of at fixed exchange rates and are recorded at market value.
exchange rate movements affecting the U.S. dollar values MIT had open contracts with a market value of $3.5 mil-of portfolio holdings on securities denominated in foreign lion at June 30, 2007. MIT had no open contracts at June currencies. These contracts obligate MIT to deliver 30, 2006. Additional information is included in Note F.
D. Student Notes Student notes consisted of the following atJune 30, 2007 Perkins student notes receivable are funded by the U.S.
and 2006:
Government and by MIT to the extent required by the Student Notes Receivable Perkins National Direct Student Loan Program. Funds advanced by the U.S. Government for this program, $32.8 (in thousands of dollars) 2007 2006 million and $32.6 million atJune 30, 2007 and 2006, Institute-funded student respectively, are ultimately refundable to the U.S. Govern-notes receivable..........
22,946 26,775 ment and are classified as liabilities. Due to the nature and Perkins student notes terms of the student loans, which are subject to significant receivable.................
29,835 30,927 restrictions, it is not feasible to determine the fair value of Total student notes such loans.
receivable................
52,781 57,702 Less: allowance for doubtful accounts....
(3,000)
(3,000)
Student notes receivable, net..................
49,781 54,702 E. Accounts Payable, Accruals and Other Liabilities MIT's accounts payable, accruals and other liabilities con-sisted of the following at June 3 0:
Accounts Payable, Accruals and Other Liabilities (in thousands of dollars) 2007 2006 MIT is currently self-insured for health insurance, long-term disability, workers' compensation and unemploy-ment compensation. Liabilities recorded for these benefits totaled $32.4 million and $30.3 million for 2007 and 2006, respectively.
Accounts payable and accruals
$ 195,555 Accrued vacation.............
48,946 Accounts payable U.S. Government......
2,713 Total...................
$ 247,214
$ 187,109 49,498 6,626
$243,233 FINANCIAL STATEMENTS 221
E Borrowings Table 4. Borrowings (in thousands of dollars / due dates are calendar based).20 20 2007 2006 EDUCATIONAL PLANT, Massachusetts Health and Educational Facilities Authority (MHEFA)
Series 1, 4.75%-5.20%, due 2028, par value $59,200........................
Series J-1, variable rate, due 2031.......................................
Series J-2, variable rate, due 2 03 1.......................................
Series K, 5.25%-5.50%, due 2012-2032, par value $230,000..................
Series L, 3.0%-5.25%, due 2005-2033, par value $184,860....................
Series M, 5.25%, due 2014-2030, par value $13 1,110.........
I...............
Total MIJ1EFA...................................................
Medium Term Notes Series A, 7.12 5%, due 2026.............
I.............
Medium Term Notes Series A, 7.25%, due 2096...........................
Notes payable to bank, variable rate, due 2008.............................
Total Educational Plant...........................................
STUDENT LOANS Notes payable to bank, variable rate, due 2008.............................
Sub-total.......................................................
Technology Square Loan, 5.26%, due 2005-2039 9...........................
Total Borrowings................................................
59,713 125,000 125,000 245,261 194,848 147,937 897,759 17,339 45,436 112,700 1,073,234 5,000 1,078,234 S 1,078,234 59,738 125,000 125,000 245,897 197,816 148,869 902,320 17,335 45,434 74,900 1,039,989 13,500 1,053,489 225,0010
$ 1,278,489 The aggregate amount of debt payments and sinking fund requirements for each of the next five fiscal years is as fol-lows:
Debt Obligations (in thousands of dollars)
The carrying value of the outstanding debt approximates fair value based on estimates using current interest rates available for similarly rated debt of the same remaining maturities. MIT maintains a line of credit with a major financial institution for an aggregate commitment of $118.5 million. As of June 3 0, 2 007, $0.8 million was available under this line of credit. AtJune 30, 2007, the interest rate would have been 5.3 7 %. The line of credit expires on September 30, 2007.
Variable interest rates were as follows at June 3 0, 2007:
Borrowings Amount Rate 2008.................
2009.................
2010.................
2011.................
2012.................
Thereafter............
$ 119,785 2,190 2,260 2,370 28,990 874,499 Cash paid for interest on long-term debt in 2007 and 2006 was $48.8 million and $56.4 million, respectively.
MHEFA Series J-1I........
MHEFA Series J-2........
Notes payable to bank.'....
S 125,000
$ 125,000
$ 117,700 3.63%
3.69%
5.3 7%
22 22 MIT REPORT OF THE TREASURER 2007
G. Commitments and Contingencies Federal Government Funding MIT receives funding or reimbursement from Federal Government agencies for sponsored research under Gov-ernment grants and contracts. These grants and contracts provide for reimbursement of indirect costs based on rates negotiated with the Office of Naval Research (ONR),
MIT's cognizant Federal agency. MIT's indirect cost reim-bursements have been based on fixed rates with carry for-ward of under or over recoveries. MIT's net over recovery decreased from $4.1 million in 2006 to $2.0 million in 2007.
The DCAA is responsible for auditing both direct and in-direct charges to grants and contracts in support of ONR's negotiating responsibility. MIT has final audited rates through the 2003 fiscal year. MIT's 2007 research revenues of $1,176.7 million include reimbursement of indirect costs of $195.4 million, which includes the adjustment for the variance between the indirect cost income determined by the fixed rates and that based on actual costs for 2007.
In 2006, research revenues were $1,218.9 million which included reimbursement of indirect costs of $197.3 million.
Leases At June 30, 2007 there were no capital lease obligations.
MIT is committed under operating (rental) leases. Rent expense was $62.8 million and $42.1 million in 2007 and 2006, respectively. Certain leases expiring in fiscal year 2007 are subject to renewal. Future minimum payments under operating leases are as follows:
Lease Obligations (in th ousa nds of dolIla rs)
Investments As ofJune, 2007, MIT is committed to invest approximate-ly $2,285.4 million with equity managers and with private partnerships for hedge funds, private equity and other alternative investments. As ofJune 30, 2007, $40.8 million of investments were pledged as collateral to various supplier and government agencies, the largest being to the Nuclear Regulatory Commission and for self-insured workers' com-pensation insurance.
Future Construction MIT has contracted for Educational Plant in the amount of $12 3.5 million at June 3 0, 2 007. It is expected that the resources to satisfy these commitments will be provided from unexpended plant funds, anticipated gifts, unrestricted funds and future borrowings. MIT will be committing ad-ditional resources to planned major construction projects and improvements to the current infrastructure over the next several years.
Related Entities MIT has entered into agreements, including collaborations with third-party not-for-profit and for-profit entities for education, research and technology transfers. Some of these agreements involve funding from foreign governments.
These agreements subject MIT to greater financial risk than do its normal operations. In the opinion of manage-ment, the realization of increased financial risks by MIT under these agreements is remote. Revenue received from the related entities was $3.3 million and $9.1 million during 2007 and 2006, respectively.
General MIT is subject to certain other legal proceedings and claims that arise in the normal course of operations. In the opinion of management, the ultimate outcome of these actions will not have a material effect on MIT's financial position.
2008....................
2009....................
2010....................
2011....................
2012...................
63,553 65,861 68,515 71,301 74,227 H. Functional Expense Classification MIT's expeniditures on a functional basis are shown below:
Institute Expenditures by Functional Classification (in thousands of dollars) 2007 2006 General and administrative..................................................
488,452 480,389 Instruction and unsponsored research...........................................
608,423 558,956 Sponsored research........................................................
1,001,144 1,035,417 Auxiliary enterprises.........................................................
98,327 96,417 Operation of alumni association................................................
11,275 10,517 Total operating expenses................................................
$ 2,207,621
$ 2,181,696 FINANCIAL STATEMENTS 223
- 1. Retirement Benefits MIT offers retirement and post-retirement benefits to its employees, consisting of a defined benefit plan and a defined con-tribution plan. The plans cover substantially all employees of MIT MIT contributes to the defined benefit plan amounts that are actuarially determined to provide the retirement plan with sufficient assets to meet future benefit requirements.
There were no contributions to the defined benefit plan in 2007 or 2006.
For purposes of calculating net periodic pension cost for the defined benefit plan, plan amendments are amortized in a straight line basis over the average future service to expected retirement of active participants at the date of the amend-ment. Cumulative gains and losses (including changes in assumptions) in excess of 10% of the greater of the projected benefit obligation and the market related value of assets are amortized over the average future service of active participants.
The annual amortization shall not be less than the total amount of unrecognized gains and losses up to $1 million.
The amount contributed and expenses recognized during 2007 and 2006 related to the defined contribution plan were
$35.5 million and $34.3 million, respectively.
MIT also provides retiree welfare benefits (certain health-care and life insurance benefits) for retired employees. Substan-tially all of MIT's employees may become eligible for those benefits if they reach a qualifying retirement age while working for MIT. Retiree health plans are paid for in part by retirees and covered retirees, their covered dependents and benefi-ciaries. Benefits are provided through various insurance companies whose charges are based either on the benefits and administrative expenses paid during the year or annual insured premiums. Substantially all retiree life insurance plans are non-contributory and cover the retiree only. MIT also maintains a trust to pay for retiree welfare benefits. MIT's contribu-tions to the trust during 2007 and 2006 were $20.1 million and $24.5 million, respectively.
For purposes of calculating net periodic postretirement benefit cost, a portion of current obligation related to transition to SFAS No. 106 is being amortized in a straight line basis over 20 years from the date of adoption of that statement in 1994.
Plan amendments are amortized in a straight line basis over the average future service to full eligibility of active partici-pants at the date of amendment. Cumulative gains and losses (including changes in assumptions) in excess of 10% of the greater of the plan's obligation and the market related value of assets are amortized over the average future service of active participants. The annual amortization shall not be less than the total amount of unrecognized gains and losses up to $1 mil-lion.
As discussed in Note A, MIT adopted the recognition and related disclosure provisions of SFAS No. 158, as required, prospectively in 2007.
The estimated net actuarial gain and prior service cost for the defined benefit plan that will be amortized from unrestricted net assets into net periodic benefit income over the 'next fiscal year are $7.8 million and $2.1 million, respectively. The estimated net actuarial loss, prior service cost and transition obligation for the other postretirement plans that will be am-ortized from unrestricted net assets into net periodic benefit cost over the next fiscal year are $1.0 million, $3.5 million and
$4.8 million, respectively.
Components of Net Periodic Benefit Cost The following table summarizes the components of net periodic benefit cost recognized in the statement of activities for the years ended June 3 0, 2 00 7 and 2 006.
(in th ousa nds of dola rs)
Pension Benefits i
Other Benefits 2007 2006 2007 2006 Service cost..................................
57,707 63,451 11,915 13,524 Interest cost.....................................
117,660 103,608 17,999 17,392 Expected return on plan assets......................
(172,044)
(162,141)
(17,163)
(17,102)
Amortization of transition amount......................
4,775 4,775 Amortization of net actuarial (gain) loss................
(1,000) 1,000 (1,000) 2,368 Amortization of prior service cost.....................
2,181 2,185 3,557 3,557 Net periodic benefit cost......................
4,504 8,103 20,083 24,514 24 24 MIT REPORT OF THE TREASURER 2007
I. Retirement Benefits (continued)
Benefit Obligations and Fair Value of Assets The following table summarizes the funded status, benefit obligations, amounts recognized in the statements of financial position, and amounts recognized in unrestricted net assets for the MIT's benefit plans. MIT uses a June 30 measurement date for its pension and postretirement benefit plans.
(in thousands of dollars) 0Pension Benefits-Other Benefits2-2007 2006 2007 2006 Change in benefit obligation Benefit obligation at beginning of year.............
Service cost...............
Interest cost.....................
Retiree contributions............................
Net benefit payments and transfers................
Assumption changes and actuarial net loss (gain).....
Benefit obligation at end of year...............
Change in plan assets Fair value of plan assets at beginning of year.........
Actual return on plan assets...................
Employer contributions........................
Retiree contributions............................
Net benefit payments and transfers..............
Fair value of plan assets at end of year...........
Reconciliation of prepaid benefit cost and total amount recognized Funded (unfunded) status of the plans..............
Unrecognized net transition liability...............
Unrecognized prior service costs...............
Unrecognized net gain.......................
Net amount recognized......................
Amounts recognized in the statements of financial position consist of:
Benefit assets..................................
Prepaid benefit cost............................
Benefit liability.................................
T otal.....................................
Amounts recognized in unrestricted net assets consist of:
N et actuarial loss (gain).........................
Prior service cost.............................
Transition liability.............................
T otal.....................................
- not applicable in 2007 due to the application of SFAS No. 158.
- not applicable in 2006 due to the application of SFAS No. 158.
$1,880,847 57,707 117,660 (108,797) 95,312
$ 2,042,729
$ 2,648,070 523,244 (108,797)
$ 3,062,517
$ 1,019,788 S 1,019,788
$ 1,019,788
$ 1,019,788 (908,710) 11,866
$ (896,844)
$ 1,963,321 63,451 103,608 (108,801)
(140,732)
$ 1,880,847
$ 2,266,599 490,272 (108,801)
$ 2,648,070 767,223 14,048 (653,823) 127,448 127,448 127,448 284,472 11,915 17,999 2,741 (21,643) 38,952 334,436 243,772 40,461 20,083 2,741 (21,643) 285,414 (49,022)
(49,022)
(49,022)
(49,022) 6,168 14,226 28,655 49,049 327,315 13,524 17,392 2,418 (18,563)
(57,614) 284,472 217,306 18,097 24,514 2,418 (18,563) 243,772 (40,700) 33,429 17,782 (10,485)
.26 26 26 FINANCIAL STATEMENTS 25
I. Retirement Benefits icontinued)
The accumulated benefit obligation for MIT's defined benefit pension plan was $1,933.8 million and $1,825.5 million at June 30, 2007 and 2006, respectively.
In accordance with the provision of FASB Staff Position 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, MIT has recognized the effect of the expected Medicare sub-sidy by reducing its accumulated postretirement benefit obligation of $53.6 million and $49.6 million as of June 30, 2007 and 2006, respectively. This initial reduction was recognized as an actuarial gain. Additionally, the service and interest cost components of postretirement benefits cost were reduced in 2007 and future periods.
Assumptions and Health Care Cost Trend Rate Sensitivity Pension Benefits --
Other Benefits--
2007 2006 2007 2006 Assumptions used to determine benefit obligation as of June 30:
Discount rate..................................
6.25%
6.25%
6.25%
6.25%
Rate of compensation increase....................
4.00%
4.00%
Assumptions used to determine net periodic benefit (income) cost for year ended June 30:
Discount rate...................................
6.25%
5.25%
6.25%
5.25%
Expected long-term return on plan assets............
8.00%
8.00%
7.25%
8.00%
Rate of compensation increase....................
4.00%
4.00%
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year.....
8.00%
8.00%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate).........................
5.00%
5.00%
Year that the rate reaches the ultimate trend rate.....
2010 2009 The expected long-term rate of return assumption represents the expected average rate of earnings on the funds invested or to be invested to provide for the benefits included in the benefit obligation. The long-term rate of return assumption is determined based on a number of factors, including historical market index returns, the anticipated long-term asset alloca-tion of the plans, historical plan return data, plan expenses and the potential to outperform market index returns.
As an indicator of sensitivity, a one-percentage-point change in the assumed health care cost trend rate would have the fol-lowing effects for 2007:
(in thousands of dollars) 1% point increase 1% point decrease Effect on 2007 post-retirement service and interest cost............................
Effect on post-retirement benefit obligation as of June 30, 2007......................
4,758 3,946 36,910 31,322 26 MIT REPORT OF THE TREASURER 2007
I. Retirement Benefits (continued)
Plan Assets The weighted-average asset allocations of the investment portfolio for its pension plan and other postretirement benefit plans at June 30 and target allocations are as follows:
Pension Benefits Other Benefits Plan Assets as of June 30 Plan Assets as of June 30
'Target Target Allocation 2007 2006 Allocation 2007 2006 Asset Category Equity Securities..............
35.0%
35.2%
37.7%
75.0%
75.0%
76.8%
Fixed Income Securities........
15.0%
21.5%
19.6%
25.0%
22.6%
23.2%
Real Estate....................
10.0%
6.5%
6.2%
Other.......................
40.0%
36.8%
36.5%
2.4%
Total...................
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
The investment objectives for the assets of the plans are to minimize expected funding contributions and to meet or exceed the rate of return assumed for plan funding purposes over the long term. The nature and duration of benefit obligations, along with assumptions concerning asset class returns and return correlations, are considered when determining an appro-priate asset allocation to achieve the investment objectives.
Investment policies and strategies governing the assets of the plans are designed to achieve investment objectives within prudent risk parameters. Risk management practice's include the use of external investment managers and the maintenance of a portfolio diversified by asset class, investment approach and security holdings, and the maintenance of sufficient liquid-ity to meet benefit obligations as they come due. The defined benefit plan also participates in securities lending programs in order to generate additional income by loaning plan assets to borrowers on a fully collateralized basis.
Contributions MIT does not expect to contribute to its defined benefit pension plan, and expects to contribute approximately $24.0 mil-lion to its other postretirement benefit plan in fiscal year 2008. These contributions have been estimated based on the same assumptions used to measure MIT's benefit obligation at year end, except for expected long term return of the plan's assets increases from 8% to 8.2 5% for the defined benefit pension plan, and from 7.2 5% to '7.5% for the post-retirement benefit plan.
Expected Future Benefit Payments The following table reflects total expected benefit payments for the defined benefit and other postretirement benefit plans, as well as expected receipt of the federal subsidy. These payments have been estimated based on the same assumptions used to measure MIT's benefit obligation at year end.
(in thousands of dollars)
Pension Other Federal Benefits Benefits' Subsidy2 2008............................................
$ 109,419 24,942 2,393 2009............................................
114,727 26,667 2,612 2010............................................
119,398 28,167 2,814 2011............................................
123,711 29,406 2,999 2012 127,694 30,415 3,212 Years 2013-2017..................................
694,841 168,874 19,488 Other benefits reflect the total net benefits expected to be paidfrom the plans and exclude the participants' share of the cost, which is funded by participant contributions to the plans, and does not reflect any subsidy expected to be received from the government for MIT's retiree prescription drug coverage 2 Federal subsidy reflects the amount MIT is expected to receive from the government and reflects MIT's expected drugs claims experience.
FINANCIAL STATEMENTS 27
J. Components of Net Assets The following table presents the three categories of net assets by purpose as of June 30, 2007. The amounts listed in the unrestricted column labeled Endowment Funds Principal are those gifts received over the years which MIT designated as funds functioning as endowment and invested with the endowment funds. The larger components of temporarily restricted net assets are (1) pledges, which will be reclassified to unrestricted net assets when cash is received and (2) accumulated net gains on investments of gifts which the donor required to be permanently retained; such gains will be reclassified to unrestricted net assets when appropriated for spending in accordance with MIT's spending policy and the Massachusetts Management of Institutional Funds Act and guidance from the Massachusetts Attorney General.
Fund Category (in thousands of dollars) 2007 Temporarily Permanently I2006 Unrestricted Restricted Restricted Total Total Endowment Fund Principal General Purpose...............
Departments and Research.......
Library......................
Salaries and W/ages.............
Graduate General..............
Graduate Departments..........
Undergraduate.................
Prizes....................'***'**
Miscellaneous.................
Investment income held for distribution Endowment funds before pledges..
Pledges......................
Total Endowment Funds............
Other Invested Funds Student Loan Funds............
Building Funds................
Designated Purposes:
- Departments and Research....
- Other Purposes..............
Reserve Funds.................
Real Estate gifts held for sale....
Life Income Funds.............
Pledges......................
Accumulated net gains..........
Total Other Invested.............
Funds available for current expenses...
Total Funds....................
Funds expended for Educational Plant...
Retirement benefits overfunded.........
Total Net Assets at Market...........
786,108 417,353 10,214 364,022 53,348 54,057 183,615 6,121 953,417 319,003 3,147,258 3,147,258 19,251 54,916 227,336 20,945 7,255 9,430 7,315 119,478 465,926 217,169 3,830,353 415,725 970,766
$ 5,216,844 905,644 821,442 18;835 2,179,671 103,846 266,576 884,000 24,842 68,366 5,273,222 5,273,222 145,874 212,418 325,879 7,221 526,639 50,281 140,747 255,200 16,276 25,268 1,559,929 124,629 1,684,558 16,936
$ 1.,904,170 1,564,674 36,270 3,070,332 207,475 461,380 1,322,815 47,239 1,047,051 319,003 9,980,409 124,629 10,105,038 36,187 200,790 227,336
- 20,945 7,255 9,430 128,234
- 206,814 149,615 986,606 217,169 11,308,813 415,725 970,766
$12,695,304
$ 1,652,567 1,252,144 30,142 2,591,406 173,831 377,505 1,112,599 37,950 869,672 270,250 8,3 68,066 110,021 8,478,087 35,139 168,159 191,357 12,416 15,581 2,252
-101,898 213,166 89,542 829,510 212,130
.9,519,727 412,600 127,448
$10,059,775 39,405 195,368 30,137 410,784 5,684,006
$ 5,684,006 81,514 11,446 109,896 1,794,454
$1,794,454 28 28 MIT REPORT OF THE TREASURER 2007
I CEWVATERHOUSECOo)PES PricewaterhouseCoopers LLP 125 High Street Boston MA 02110 Telephone (617) 530 5000 Facsimile (617) 530 5001 Report of Independent Auditors To the Audit Committee of the Massachusetts Institute of Technology In our opinion, the accompanying statement of financial position and the related statements of activities and cash flows present fairly, in all material respects, the financial position of the Massachusetts Institute of Technology (the "Institute") at June 30, 2007 and 2006, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Institute's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements 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 financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As described in Note A to the financial statements, in 2007 the Institute changed its method of accounting for defined benefit pension and other post retirement obligations by adopting Statement of Financial Accounting Standard No. 158, Employers'Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment ofJFASB Statements No. 87, 88, 106, and 132R ("SFAS No. 1 58"). In accordance with the transition provisions of SFAS No. 158, the 2007 financial statements include the cumulative effect of adopting this new accounting principle as of June 30, 2007.
September 21, 2007 REPORT OF INDEPENDENT AUDITORS 29
Massachusetts Institute of Technology Five-YearTrend Analysis - Financial Highlights (Dollars in thousands) 2007 2006 2005 2004 2003 Financial Position:
Investments, at fair value..............
Land, Building and Equipment:
at cost less accumulated depreciation..
Borrowings........................
Student Notes Receivable, net.........
Total Assets........................
Total Liabilities.....................
Unrestricted Net Assets, at market....
Temporarily Restricted Net Assets, at market.......................
Permanently Restricted Net Assets, at market.......................
Total Net Assets.................
Market Value of Endowment Funds....
Principal Sources of Revenue:
Tuition and Other Income..........
Research Revenues:
Campus........................
Lincoln Laboratory...............
Gifts, Bequests and Pledges...........
Net gains (losses) on Investments.......
Investment Distribution..............
Principal Purposes of Expenditures:
Total Operating Expenditures..........
General and Administrative...........
Instruction and Unsponsored Research...
Direct Cost of Sponsored Research -
Current Dollars..................
Direct Cost of Sponsored Research -
Constant Dollars (2 003 =100)........
Scholarships and Fellowships..........
$ 11,061,142 1,743,203.
1,078,2 34 49,781 14,946,369 2,251,065 5,216,844
$ 9,500,178 1,687,835 1,278,489 54,702 12,362,451 2,302,676 3,732,539
$ 8,022,655 1,608,719 1,249,591 62,408 10,856,158 2,230,588 3,277,741
$ 7,250,527 1,563,641 1,286,131 69,394 10,263,280 2,521,896 3,014,458
$ 6,174,059 1,365,470 912,135 76,778 8,351,406 1,420,781 2,697,089 5,684,006 4,699,881 3,792,029 3,248,635 2,881,496 1,794,454 12,695,304 9,980,409 394,652 570,798 605,930 332,874 1,673,275 355,848
$ 2,207,621 488,452 608,423 1,627,355 10,059,775 8,368,066 373,308 582,484 636,394 232,472 1,432,552 329,375
$ 2,181,696 491,089 548,256 1,555,800 8,625,570 6,712,436 362,299 559,704 611,125 177,305 885,605 318,067
$ 2,036,545 428,798 503,901 996,943 926,733 165,458 1,478,291 7,741,384 5,869,810 344,009 517,419 497,938 205,759 852,030 332,419
$ 1,839,905 395,088 494,426 850,564 814,456 168,194 1,352,040 6,930,625 5,133,613 322,525 450,105 442,300 237,063 (114,275) 335,772
$ 1,686,573 382,810 451,092 754,519 754,519 154,692 1,001,144 1,035,417 874,059 185,399 927,188 174,140 30 30 MIT REPORT OF THE TREASURER 2007
Massachusetts Institute of Technology Five-YearTrend Analysis - Financial Highlights (continued)
(Dollars in thousands) 2007 2006 2005 2004 2003 Research Revenues:(A)
Campus:
Federal Government Sponsored:
Health and Human Services............
Department of Energy................
Department of Defense................
National Science Foundation..........
National Aeronautics and Space Administration..............
O ther Federal.......................
Total Federal.........................
Non-Federal Sponsored:
State/Local/Foreign Governments.......
N on-profits.........................
Industry............................
Total N on-Federal....................
Total Federal & Non Federal.........
F&A and other adjustments..........
Total Cam pus.........................
Lincoln Laboratory:
Federal Government Sponsored..........
Non-Federal Sponsored...............
F&A and other adjustments............
Total Lincoln Laboratory..............
Total Research Revenues............
201,557 64,899 90,571 65,057 27,889 14,431 464,404 13,055 32,200 79,725 124,980 589,384 (18,586) 570,798 607,270 4,602 (5,942) 605,930
$ 1,176,728 195,573 67,265 89,552 65,163 31,228 15,570 464,351 15,137 24,833 72,743 112,713 577,064 5,420 582,484 631,292 5,102 636,394
$ 1,218,878 180,682 69,927 86,096 66,768 32,170 11,954 447,597 17,912 19,744 65,108 102,764 550,361 9,343 559,704 606,441 4,684 611,125
$ 1,170,829 159,029 69,183 86,948 65,443 93,254 65,175 85,866 57,718 31,442 12,114 424,159 18,930 15,721 60,498 95,149 519,308 (1,889) 517,419 492,463 5,475 497,938
$ 1,015,357 35,735 13,120 350,868 15,949 18,355 73,265 107,569 458,437 (8,332) 450,105 434,666 7,634 442,300 892,405 The amounts in this table reflect revenues from the original source of funds.
ADDITIONAL INFORMATION 31
Massachusetts Institute of Technology Five-YearTrend Analysis - Financial Highlights (continued) 2007 2006 2005 2004 2003 Students:
Undergraduate Full T im e........................
Part T im e.......................
Undergraduate Applications Applicants......................
A ccepted........................
Acceptance Rate..................
Enrolled.........
Y ield............................
Freshmen Ranking in the top 10%
of their C lass...................
Average SAT Scores (Math and Verbal)
Graduate Full T im e........................
Part T im e.......................
/
Graduate Applications Applicants.......................
Accepted........................
Acceptance Rate...................
Enrolled.......................
Y ield............................
Student Financial Aid (in thousands of dollars):
Undergraduate Tuition Support.........
Graduate Tuition Support..............
Fellowship Stipends...................
Student Loans.......................
Student Employment.................
Total Financial Assistance............
Tuition (in dollars):
Tuition and Fees.....................
Average Room and Board..............
Faculty and Staff:
F aculty.............................
Em ployees..........................
4,068 59 11,374 1,514 13%
1,002 66%
97%
1,460 5,924 202 16,154 3,187 20%
1,980 62%
4,014 52 10,440 1,494 14%
996 67%
97%
1,461 5,865 275 15,040 3,389 23%
2,003 59%
4,078 58 10,466 1,665 16%
1,077 65%
97%
1,471 5,907 277 15,654 3,308 21%
1,900 57%
4,070 42 10,549 1,735 16%
1,019 59%
97%
1,463 5,928 300 16,292 3,251 20%
1,858 57%
4,115 63 10,664 1,724 -
16%
980 57%
99%
1,460 5,789 350 16,133 3,416 21%
2,071 61%
71,454 172,021 25,020 8,962 77,732
$ 355,189 33,600 9,950 63,746 167,297 32,440 9,542 78,503 351,528 58,677 161,384 31,717 11,052 75,917 338,747 52,106 157,722 30,176 13,544 78,219 331,767 47,857 147,240 28,760 25,928 73,646 323,431 28,230 7,830 32,300 9,500 30,800 29,600 9,100 8,710 998 12,453 992 11,970 983 11,490 971 11,091 966 10,832 32 MIT REPORT OF THE TREASURER 2007