Quarterly

QUARTERLYFINANCIAL REPORT

Quarterly Financial Statements and Financial Plan

Quarter ending September 30, 2007

Michelle AguilarAssoc Dir of Financial Accounting(518)[email protected]

Contents

Introduction...................................................1

Executive Summary.......................................1

Balance Sheet Review...................................3

Statement of Activities Review....................12

Statement of Cash Flow Review..................15

Financial Plan Review.................................17

IntroductionAs stated in its charter, the Finance Committee is charged with working with Research Foundation (RF) management to provide advice and input to the RF’s board of directors regarding fiscal management for the corporation, its subsidiaries and affiliated corporations. The duties of this committee include:

Identifying, assessing and managing financial risks and uncertainties Continuously improving financial systems Complying with legal and regulatory requirements Ensuring the overall financial health of the corporation

Key to the committee’s ability to fulfill these duties is a strong understanding of the RF’s quarterly financial activity, and the Treasurer’s Report was created to provide the data needed to effectively and efficiently monitor the corporation’s financial health. This report includes an analysis of the corporation’s balance sheet, statement of activities and statement of cash flows. This report is compiled on an accrual basis.

The quarterly review of the Financial Plan compares the board-approved operating budget to a projected budget and actual quarter-end results. The RF’s operating budget explains how the RF will earn and allocate revenue during its fiscal year that runs from July 1 through June 30. The Financial Plan is compiled on a cash basis.

Executive SummaryThe financial statements provide the amount and nature of the organization’s assets, liabilities and net assets. They present the effect transactions and events have on the amount of net assets, and the amount and kind of inflows and outflows of economic resources. The financial statements provide a basis for assessing the liquidity and financial flexibility of the organization.

Accounts Receivable for sponsored program activity has increased $6 million in comparison to fiscal year end. Included in the accounts receivable balances are “At-risk” deficit awards, those awards that have not received an official award document, which have decreased 41 percent compared to fiscal year end.

Investments totaled $302.6 million at the end of September 2007, a decrease of 2.3 percent for the fiscal year. (See Investment chart on page 6) The year-to-date rates of return by pool are:

Annual

3 months

Target

Operational pool 1.90% 6.00%

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Retiree health pool 1.00% 8.25%Endowment pool 0.90% 8.25%Liquid pool 1.20% n/aPlanned giving pool 2.00% 8.00%

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Corporate debt decreased $0.5 million compared to FYE 2007. All OASIS debt was paid off in fiscal year 2007 and no new capital leases were added during the first quarter (see Corporate Debt chart on page 10). The RF also has building-related debt for 35 State Street. The RF took advantage of an interest rate swap in fiscal year 2006 to eliminate interest rate exposure and for the current fiscal year the swap netted cost savings of $2,509.

Net assets of the RF represent funds that primarily consist of campus unexpended balances, accrual liabilities, corporate reserves and investment reserves as outlined in the RF’s board-approved Financial Plan. Net assets have increased $6.3 million or 12.1 percent from FYE 2007 due to the following: current year investment income and inventions and license income less payments due to inventors and the first quarter estimate for FAS 106 expense.

1st

quarter Septembe

r 30 FYE 2007Designated for development activity at the campuses as outlined in the RF's board approved Financial Plan $ 172,934

$ 162,848

Invested in fixed assets, net of related debt

11,858

11,705

Corporate reserve 4,

460 4,2

63

Investment reserve 22,

898 22,

898

Liabilities unfunded (154,071) (149,9

23)Total unrestricted net assets $ 58,079 $ 51,791

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Balance Sheet Review

Balance Sheet: As of September 30

ASSETS 1st quarter FYESeptember

30th2007

Current Assets Cash and cash equivalents $ 1,226,166 $ 647,707

Accounts receivable, net 155,956,035149,966,64

5 Advances to others 1,760,774 582,105

Short-term investments 105,860,686108,012,41

4 Short-term investments - designated for post-retirement benefit obligation 5,314,000 5,314,000

Total current assets 270,117,661264,522,87

1

Noncurrent Assets

Long-term investments 114,808,466124,439,12

6 Long-term investments – designated for post-retirement benefit obligation 77,450,228 74,723,719

Due from broker for securities sold 2,897,234 2,981,321 Fixed assets, net 20,242,372 20,637,193 Other assets 2,528,653 2,528,653

Total noncurrent assets 217,926,953225,310,01

2

Total assets $ 488,044,614$ 489,832,88

3

LIABILITIESCurrent Liabilities Accounts payable and accrued expenses $ 54,161,528 $ 60,167,825 Accrued compensation 8,982,920 15,085,530 Accrued vacation 22,861,802 22,563,534

Deferred revenue 107,086,852108,660,12

1 Current portion of post-retirement benefit obligation 5,314,000 5,314,000 Current portion of long-term debt 1,358,016 1,527,280 Line of credit 16,523,786 14,613,865

Total current liabilities 216,288,904227,932,15

5

Noncurrent Liabilities Deposits held for others 3,781,159 3,755,609 Post-retirement benefit obligation, net of 196,811,509 190,835,00

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current portion 0 Due to broker for securities purchased 3,696,475 5,753,552 Long-term debt, net of current portion 7,026,525 7,404,332 Other liabilities 2,361,109 2,361,109

Total noncurrent liabilities 213,676,777210,109,60

2

Total liabilities 429,965,681438,041,75

7

NET ASSETS Unrestricted 58,078,933 51,791,126

Total liabilities and net assets $ 488,044,614489,832,88

3

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Balance Sheet

The balance sheet, also known as the statement of financial position, provides information about the RF’s liquidity, financial flexibility and financing needs. Three ratios that will help us measure how we are doing in these areas are: current ratio (see below, Current Assets below), primary reserve ratio (see page 11, Net Assets) and debt burden ratio (see page 9, Long Term Debt).

Current AssetsAn asset has economic value to its owner and includes real property, such as land or buildings, and personal property, such as cash and investments. The RF’s current assets, assets that can be converted to cash in less than one year, include cash and cash equivalents, net accounts receivables, advances to others and short-term investments.

An indication that an organization has the ability to meet its short-term obligations can be measured by using the Current Ratio. The Current Ratio equals current assets divided by current liabilities and is measured at 1.25:1 and 1.16:1, respectively, for quarter end September 2007 and FYE 2007. National Association of College and University Business Officers (NACUBO) standards hold that this should be about a 2:1 ratio. While the RF may not be meeting NACUBO standards, operational pool investments are classified as both short-term and long-term investments and the long-term can be liquidated at any time to meet operational needs.

Cash and Cash EquivalentsThe RF’s cash consists of bank account balances, money market funds and the line of credit. The RF’s cash and cash equivalents were $1.2 million as of September 30, 2007 compared to $0.6 million at fiscal year end. The fluctuations in daily bank activity and outstanding check balances cause this amount to increase or decrease.

Accounts Receivable, NetThis represents deficit amounts where the RF paid bills for sponsored programs activities before receiving money from sponsors, and reflects the amount due to the RF from sponsors. The accounts receivable balance also includes the fringe benefit pool balance, which is a deficit balance once accruals are accounted for.

In comparison to fiscal year end, sponsored programs accounts receivable increased $6 million or 4 percent. This increase is mainly due to an increase in campus deficit balances ($25 million), a decrease in accruals of $9 million and a decrease of $10 million in operational activity.

Advances to OthersThis represents net agency activity. “Agency” designates those university-related organizations, such as campus-based foundations or

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campus-based clinical practice plans, that use RF-provided human resources/payroll and purchasing/payables administration services. Each year the RF subtracts its working capital uses (or deficits) from its working capital (or surpluses). When this balance is negative, it’s reported as Advances to Others. When this balance is positive, it’s considered Deposits Held for Others and is reported under the Current Liabilities category.

At September 30, this balance was $1.8 million compared to $0.6 million at FYE 2007.

Short-term InvestmentsThe RF has two types of short-term investments: liquid and operational. A liquid money market fund is used as an investment tool for the major nanoelectronics program at the University at Albany. As of September 2007, short-term investments were $105.9 million. At quarter end, a reclassification is made to ensure that the short-term investment balance is equal to the deferred revenue balance less cash and cash equivalents.

Short-term Investments Designated for Post-retirement Benefit ObligationThis investment represents assets that are restricted by the board to pay post-retirement medical benefits for current and future retirees. (see page 6, Long-term Investments Designated for Post-retirement Benefit Obligation, for more information).

Non-current AssetsThe RF’s non-current assets are assets that generally will not be converted to cash for a period of one year or more. Assets include long-term investments, long-term investments designated for post-retirement benefit obligation, net fixed assets and other assets.

Long-term InvestmentsOperational Pool: Funds in this pool consist of cash advances from sponsors, agency funds that are received because the RF provides human resources and accounts payable administration services to the State University of New York (SUNY) and SUNY-related organizations; and campus reserve funds designated for campus development activities.

Endowment Pool: This pool is composed of gifts from donors who stipulate that the principal be maintained inviolate and in perpetuity as a condition of the gift. These are restricted funds.

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Planned Giving Pool: The Charitable Gift Annuity Pool consists of irrevocable charitable gifts from donors who receive lifetime annuity payments.

Long-term Investments Designated for Post-retirement Benefit Obligation

As health care costs continue to grow, the RF is committed to funding the liability for retiree health insurance. During FY 2005 the RF board of directors approved a funding policy whereby money from current grants (calculated by applying a fringe benefit rate to salaries and wages) will be collected and placed into the retiree health reserve fund over time. During FY 2007, $7.7 million was transferred from the regular fringe pool surplus to the retiree health insurance pool. It is anticipated that an additional $7.7 million will be funded in fiscal year 2008.

The sum of the RF’s total investments was $302.6 million at the end of September 2007, a decrease of 2.3 percent for the fiscal year. Due to/Due from broker represents investment trade activity that has not been settled by the end of the period. These net amounts are included in the Investment Portfolio chart below.

The fiscal year-to-date rates of return by pool are: operational pool, 1.9 percent; retiree health insurance pool, 1.0 percent; endowment pool, 0.9 percent; liquid pool, 1.2 percent; and planned giving pool, 2.0 percent. The “Other” grouping on the chart below consists of the RF’s Investment in Equity Partnership of $1.8 million and the market value of equities received in lieu of royalties of $0.6 million.

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Investment Portfolio by Pool(In Thousands)

$80,844

$2,677

$-

$1,104

$80,038

$2,774

$981

$210,670

$2,480

$302,634

$4,859$6,577

$-

$2,480

$309,717

$216,867

- 50,000 100,000 150,000 200,000 250,000 300,000 350,000

Total

Operational

Retiree Health Ins

Liquid

Other

Endowment

Short Term

Planned Giving

September 2007 FYE 2007

Fixed Assets, NetThe RF’s office furniture, equipment, information system and the corporate office building are reported by subtracting each item’s accumulated depreciation from its actual cost. This is known as capitalization. Generally, title to equipment purchased using sponsored funds is retained by the sponsor until it is determined who will actually keep the item. This means that purchases of equipment charged to a grant or contract are not capitalized.

The RF’s recorded net fixed assets decreased from $20.6 million at FYE 2007 to $20.2 million at September 30, due to depreciation levels in excess of fixed asset purchases.

Other AssetsOther assets are comprised of the interest rate swap valuation and funds maintained as part of a deferred compensation plan set up in accordance with section 457(b) of the Internal Revenue Code. The RF entered into an interest rate swap (swapping a variable rate to a fixed rate of interest) to eliminate the interest rate exposure on the debt for the corporate office building located at 35 State Street. These amounts

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are only adjusted at year end and will remain the same from quarter to quarter.

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Current LiabilitiesA liability is a financial obligation, or the cash outlay that must be made at a specific time, to satisfy the contractual terms of such an obligation. The RF’s current liabilities, liabilities that must be paid within one year, include accounts payable, accrued expenses, compensation and vacation, deferred revenue, the current portion of the post-retirement benefit obligation and long-term debt, and the RF’s line of credit.

Accounts Payable and Accrued ExpensesThese are amounts the RF owes for vendor payments, abandoned property and interest payable. It also includes the IBNR (incurred but not recorded) accrual for benefit costs such as workers’ compensation, health care, prescription drugs, dental and vision.

Accounts payable and accrued expenses were $54.2 million as of September 30, a 10 percent decrease from FYE 2007, which is mainly due to a decrease in the IBNR and accounts payable accruals, and an increase in the interest payable to sponsors. Interest payable to sponsors includes $4.9 million earned on separately invested funds related to nanotechnology activity at the University at Albany.

Accrued CompensationThis represents amounts for payroll due to employees at the end of a financial period and accrued sick leave.

Accrued VacationThis represents amounts for employee accumulated vacation pay. The year end accrual is based on actual data received from campuses and is estimated for each quarter end during the fiscal year.

Deferred RevenueThis represents surplus amounts for sponsored programs activity that occur when the RF receives money from sponsors before it has to make expenditures for those sponsors’ programs. Deferred revenue decreased $1.6 million or 1.4 percent from year end.

Current Portion of Post-retirement Benefit ObligationThis liability represents the actuarially-determined amount incurred to pay current retiree medical benefits.

Current Portion of Long-term DebtCurrent portion of long-term debt is the current portion of amounts borrowed to finance the corporate office building, the RF information system and some capital leases. The balance as of September 30 was $1.4 million compared to $1.5 million as of FYE 2007.

Line of Credit

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The RF has two lines of credit. First, $35 million is allocated to use on an overnight basis to supplement the corporation’s daily cash flow needs. This minimizes the impact that routine fluctuations in daily cash flow have on the RF’s investment program by allowing investment managers to maintain a steady portfolio level and enhances long-term earnings. Second, $45 million is available to support campus sponsored programs debt.

As of September 30, the RF’s line of credit liability in support of daily cash flow needs was $16.5 million on an accrual basis. In July 2006, the RF advanced SUNY System Administration – Provost $8 million to cover temporary sponsored program deficits of which $2 million was paid back in October 2006. The remaining $10.5 million is the reclass of outstanding checks.

Non-current LiabilitiesThe RF’s non-current liabilities, liabilities that won’t be paid for a period of one year or more, include deposits held for others, the long-term portion of the post-retirement benefit obligation, long-term debt and other long-term liabilities.

Deposits Held for OthersIn contrast to current liabilities, this category represents money that was invested in the Endowment Pool because a condition of the gift was that the principal be maintained inviolate and in perpetuity. Also included are planned gifts of $1.1 million that were donated to campus foundations.

Long-term Portion of Post-retirement Benefit ObligationThis liability represents the actuarially-determined amount incurred to pay future retiree medical benefits pursuant to Financial Accounting Standards (FAS).

In addition, the board authorized management to change the contribution level for retirees to mitigate the future cost of this benefit. This change is still pending.

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Post-retirement Benefit Obligation

50.960.8

117.0

91.6

116.8

80.0

105.9

132.0

196.1

0.0

50.0

100.0

150.0

200.0

250.0

FY 2005 FY 2006 FY 2007

Assets Funding Liability Balance Sheet Liability

Long-term DebtThis liability comprises amounts borrowed to finance the corporate office building located at 35 State Street in Albany, the RF information system, and capital leases from Xerox and Sun for equipment used to support the Oracle applications.

The Corporate Debt chart below depicts the total short- and long-term debt. Regarding the 35 State Street building debt, the RF took advantage of an interest rate swap in fiscal year 2006 to eliminate interest rate exposure that occurred as a result of rising variable interest rates. In FY 2006, the RF entered into a new four-year lease with SUN Microsystems for an equipment upgrade to support the Oracle Upgrade.

The debt burden ratio displays the RF’s dependence on debt as a source of financing its mission and the relative cost of debt to overall expenses. It compares the current level of debt service with the corporation’s operating expenses. The RF’s annualized debt burden ratio for FYE 2008 is 4.85% compared to 5.13% for FYE 2007. A declining trend in ratios, means that additional resources can be used for general operating purposes and that debt service has sufficient coverage. Investment bankers have identified an upper threshold for this ratio at 7 percent, meaning that debt service should not be greater than 7 percent of operating costs.

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Corporate Debt (In Thousands)

5,8456,125 5,990

6,2556,380

2,736

2,540

4,2052,7083,350

0

2,500

5,000

7,500

10,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Building - Related Capital Leases

Other Long-term LiabilitiesOther long-term liabilities comprise funds maintained as part of a Deferred Compensation Plan set up in accordance with section 457(b) of the Internal Revenue Code. This amount is only adjusted at year end and will remain the same from quarter to quarter.

Net AssetsThe net assets of the RF represent funds that primarily consist of campus unexpended balances, corporate reserves and investment reserves as outlined in the RF’s board-approved Financial Plan. Net assets have increased $6.3 million or 12.1 percent from FYE 2007 due to the following: current year investment income and inventions and license income less payments due to inventors and the first quarter estimate for FAS 106 expense.

1st

quarter Septembe

r 30 FYE 2007

Designated for development activity at the campuses as outlined in the RF's board approved Financial Plan $ 172,934

$ 162,848

Invested in fixed assets, net of related debt

11,858

11,705

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Corporate reserve 4,

460 4,2

63

Investment reserve 22,

898 22,

898

Liabilities unfunded (154,071) (149,9

23)Total unrestricted net assets $ 58,079 $ 51,791

The Primary Reserve Ratio measures the financial strength of the organization by comparing net assets that an institution can quickly access and spend to satisfy its obligations. It also describes the organization’s ability to support its current operations from all available expendable resources without relying on additional net assets. A positive ratio and an increasing ratio over time denotes strength. The RF’s Primary Reserve Ratio on an annualized basis for FY 2008 is .36 and .30 for FYE 2007. This means the RF could operate for three months without additional net assets.

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Statement of Activities Review

Statement of Activities: Period ending September 30

The amount of money earned and spent by the RF is stated on the corporation’s statement of activities. The RF monitors and controls this activity through the RF’s annual board approved Financial Plan that ensures that allocations equal revenue for each fiscal year. Campuses can use unspent revenues from prior years to cover expenditures that exceed the current year’s revenue allocation.

1st quarter September

30FYE 2007

REVENUES Grants awarded for research and other sponsored activities $ 196,566,661 $

790,877,032

Investment income 4,193,08232,527,22

1

Inventions and licenses income 9,826,77611,108,62

4

Other income 3,599,75323,779,19

6

Total revenues 214,186,272858,292,0

73

EXPENSES

Sponsored programs and other activities 162,182,978666,572,4

87

Administration and support 45,715,488174,230,8

88

Total expenses 207,898,466840,803,3

75

Net increase (decrease) in net assets before 6,287,806

17,488,698

cumulative effect of change in accounting principle Cumulative effect of change in accounting principle -

(51,290,000)

Net increase (decrease) in net assets 6,287,806(33,801,3

02)

Net assets at beginning of year 51,791,126 85,592,42

8 -16-

Net assets at end of year $ 58,078,932 $51,791,12

6

RevenuesGrants and gifts awarded for sponsored research activities totaled $196.6 million for the first quarter and represents 92 percent of the RF’s total revenue.

Grants Awarded for Research and Other Sponsored ActivitiesThis is comprised of direct revenue awarded for sponsored activities, and facilities and administrative (F&A) cost recoveries for sponsored activities. Revenues are indicating a slight increase for the fiscal year due to industry and other sponsors.

Investment IncomeThe RF invests the cash it receives from sponsors, agencies and its own operating reserves in its operational pool to earn income. The money is invested according to the RF’s investment policy and guidelines.

Investment income was $4.2 million as of September 2007 and the operating pool rate of return for the first quarter was 1.9 percent.

Inventions and Licenses IncomeInventions that result from sponsored research belong to the RF, which is responsible for protecting the intellectual property and commercializing these technologies as part of its technology transfer service.

The RF’s inventions and licenses income for the first quarter was $9.8. This includes $8 million for a new royalty license at Stony Brook University.

Other IncomeOther income includes non-program gift income, non-sponsored income, agency fee income and third party recharges.

Revenues:

1st quarter September

30 FYE 2007

Federal grants and contracts

$ 139,677,116

$ 507,836,783

State grants and contracts 22,598,936 139,023,333Local grants and contracts 2,831,638 12,352,061Private grants and 31,458,971 131,664,855

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contractsInvestment income 1,607,800 9,803,414Net realized and unrealized gains 2,585,282 22,723,807Gifts 3,828 184,892Capital gifts and grants - 130,000Inventions and licenses income 9,826,776 11,108,624Other income 3,595,925 23,464,304 Total Revenues

$ 214,186,272

$ 858,292,073

ExpensesTotal expenses for the RF for the first quarter of FY 2008 were $207.9 million. Expenditures are segregated into two areas:

Sponsored programs: expenses for externally-funded research Corporate: administration and support expenses for campus and central

office operations.

Sponsored ProgramsSponsored programs revenue is driven by sponsored programs expenditures. Direct expenditures through the first quarter were $162.2 million. The RF’s total direct expenditures include the categories of salaries, fringe benefits, equipment, subawards and other.

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Administration and SupportThe RF’s campus and central office locations incur costs to have the infrastructure and staff in place to administer sponsored programs and other services. The RF uses the money it receives from F&A cost recovery, investments and agency fees to pay for these expenditures. The RF’s expenditures through the first quarter totaled $45.7 million

Expenses by Function:

1st Quarter September

30 FYE 2007

Instruction$

31,241,427 $

121,420,686

Research 90,826,631 410,941,27

2

Public Service 32,583,283 119,851,96

7

Academic support 2,992,519 11,153,86

6

Student services 540,990 1,867,45

6 Operations & maintenance 7,155,613

18,688,064

Institutional support 40,575,450 146,117,49

7 Scholarships & Fellowships 670,341

4,194,083

Auxiliary enterprises 4,379 688,996Hospitals - 733 Depreciation and amortization expense 1,002,153

4,304,629

Interest expense on capital related debt 113,595

379,462

Loss on disposal of plant assets 192,085

1,194,664

Other operating expenses - - Total Expenses

$ 207,898,466

$ 840,803,375

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Statement of Cash Flow Review

Statement of Cash Flow: 1st quarter, September 30

1st quarter September

30 FYE 2007Cash flows from operating activities

Federal grants and contracts

$ 131,789,06

3 $

497,430,258State and local grants and contracts 17,131,706 114,700,479Private gifts and grants 32,422,827 119,732,748Other receipts 48,509,720 164,879,453Salaries and wages payments

(110,296,856)

(363,868,262)

Employee benefits payments(34,549,354

)(112,122,94

8)Payments to suppliers/vendors

(90,042,497)

(424,760,533)

Operating interest, dividends and investment gains 1,607,800 8,332,762Equity investment partnership income 1,470,652Interest payments on capital debt/notes (113,595) (379,462)Other payments (5,972,936) (16,194,053)

Net cash (used in) provided by operating activities (9,514,122) (10,778,906)

Cash flows from financing activities

Principal payments on long-term debt (547,071) (2,123,249)Proceeds from line of credit 18,146,708 124,926,544

Payments on line of credit(16,236,787

)(125,312,67

9)Net cash (used in) provided by financing activities 1,362,850 (2,509,384)

Cash flows from investing activities

Proceeds from sales of investments190,400,32

8 478,413,143

Purchases of investments(99,871,180

)(467,799,91

6)Equity investment partnership distribution - 1,045,869Cash paid for purchases of fixed assets (799,417) (3,528,429)

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Net cash provided by (used in) investing activities 8,729,731 8,130,667Net (decrease) increase in cash and cash equivalents 578,459 (5,157,623)

Cash and cash equivalents, beginning of year 647,707 5,805,330Cash and cash equivalents, end of year

$ 1,226,166

$ 647,707

Reconciliation of change in net assets to net cash (used in) provided by operating activities

Change in net assets$

6,287,806 $

(33,801,302) Adjustment to reconcile change in net assets to net cash provided by operating activities

Realized and unrealized gain on investments (2,585,282)

(22,723,807)

Unrealized loss (gain), interest rate swap - 21,852Depreciation expense 1,002,153 4,304,629Loss on disposal of fixed assets 192,085

1,286,764

Donated fixed assets - (37,900) Cumulative effect of change in accounting principle -

51,290,000

Change in assets and liabilities

Accounts receivable and other assets (7,168,059)

(24,257,077)

Accrued investment income (139,023) (183,153) Accounts payable and accrued expenses (6,006,296) 9,503,174

Other accruals and other liabilities (5,804,342)

3,704,025

Deferred revenue (1,573,269) (28,375,306)Deposits held for and advances

to others 25,550591,724

Post-retirement benefit obligation 5,976,509

27,897,471

Net cash (used in) provided by operating activities

$ (9,514,122)

$ (10,778,906)

Statement of Cash FlowThis statement provides relevant information about the corporation’s activities in generating cash through operations, its financing activities, and its expenditures for operations, debt repayment and maintaining operating capacity. The bottom line is the net increase or decrease in cash for the period.

Cash Flows from Operating ActivitiesCash flow from operating activities adds the net cash from each type of operating activity to get the total net cash for all operating activities.

Cash Flows from Financing Activities

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Cash flow from financing activities includes the sources and uses of cash for financing activities such as the corporate debt and line of credit.

Cash Flows from Investing ActivitiesCash flow from investing activities includes purchasing investments (a use of cash) and selling investments (a source of cash).

In the first quarter of FYE 2008, operational cash flow was a negative $9.5 million due to increases in sponsored program deficits. The operational shortfall was offset by net financing activity of $1.4 million and net investment activity of $8.7 million.

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Quarterly Financial Plan

Operating Budget(In Thousands)

FY 2008FY 2008 FY 2008 Actual

Plan Projected As of 9/30/07

Revenues

Restricted RevenueSponsored Programs Direct 644,182 644,182 172,137Agency Direct 139,

469 139,

469 38,960

Total Restricted Revenue 783,651 783,651 211,097

Unrestricted RevenueSponsored Programs F&A Cost Recovery

127,132 128,00035,657

Agency Service Fees 4,757 4,869 1,386Investment Income - Operations Pool

14,760

14,760 3,809

Equity Distribution from LLCs 1,471

1,471 368

Royalties 10,373

18,343

12,635

Gifts and Other 9,530

9,530

1,903

Total Unrestricted Revenue 167,991

176,972

55,757

Allocations

SUNY Campuses 136,969 142,624 44,900Central Office 25,638 25,139 6,514SUNY System Administration 2,460 2,460 615Royalty Inventors' share 4,137 7,337 3,876Corporate Reserve 3,268 3,892 973Investment Income Reserve (4,480) (4,480) (1,120)

Total Allocations 167,991 176,972 55,757

Note:

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Fiscal 2008 Plan numbers represent preliminary estimates made prior to fiscal year end 2007.Fiscal 2008 Projected numbers represent revised estimates based on fiscal year end 2007 actual results. Fiscal 2008 Actual numbers represent actual revenue and allocations received to date

Sponsored Programs Direct According to the 2008 Financial Plan, the RF estimated a slight decrease in sponsored program direct activity for FY 2008. Through the first quarter, sponsored program direct activity is up 3.2 percent compared to last September.

Sponsored Program Direct Revenue (In Thousands)

172,137166,782167,459160,855

139,144

0

50,000

100,000

150,000

200,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Agency DirectAccording to the 2008 Financial Plan, the RF estimated an increase in agency direct activity for FY 2008. Through the first quarter, agency direct activity is up 15.3 percent compared to last September.This increase is primarily due to a new fiscal services agreement with Kaleida Health at University at Buffalo.

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Agency Direct Revenue(In Thousands)

38,960

33,80033,089

25,64723,773

0

10,000

20,000

30,000

40,000

50,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Sponsored Programs F&A Cost RecoveryAccording to the 2008 Financial Plan, the RF estimated a slight increase in sponsored programs F&A cost recovery for FY 2008. For the first quarter, actual F&A cost recovery was $35.7 million, a 2.7 percent increase in comparison to September 2006.

Sponsored Programs F&A Cost Recovery(In Thousands)

35,65734,73332,41832,924

28,688

0

10,000

20,000

30,000

40,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Agency Service FeesAccording to the 2008 Financial Plan, the RF estimated a slight decrease in agency service fees for FY 2008. Actual fees received for the first quarter decreased 2 percent compared to September 2006.

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Agency Service Fees(In Thousands)

911

1,110

1,403 1,416 1,386

-

500

1,000

1,500

2,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Royalty IncomeAccording to the 2008 Financial Plan, the RF estimated a slight decrease in royalty income for FY 2008. Actual royalty revenue has increased significantly due to a new royalty license at Stony Brook University.

Royalty Income(In Thousands)

6,6545,530

5,459

12,635

7,180

-

3,000

6,000

9,000

12,000

15,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Investment Income The RF works with an investment consultant and uses trend data to project the expected return on the portfolio. The operational investment pool has a long-term targeted rate of return of 8.4 percent. The Financial Plan projected the return for FY 2008 at 7 percent which would produce annual income of approximately $14.8 million.

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Investment income for the year is down compared to last fiscal year but appears to be on target with financial plan estimates.

Investment Income(In Thousands)

8,1376,051

3,809

6,273

27,993

-

5,000

10,000

15,000

20,000

25,000

30,000

Jun-05 Jun-06 Jun-07 Sep-06 Sep-07

Equity Distributions, Gifts & OtherEquity distributions from limited liability companies (LLCs) represent the RF’s partnership in the affiliated corporation Brookhaven Science Associates, LLC.

Campuses and central office receive gifts and other unrestricted revenue that does not fit into the other major revenue categories. Examples include revenue from sales of equipment, unrestricted donations, nonsponsored income and revenue from third party recharge awards.

Gifts & other income received for the first quarter was $1.9 million. Gifts and other income have a large increase due to new activity from third party recharges. Third party recharges are when outside parties utilize the services of a RF service center.

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Equity Distributions, Gifts & Other (In Thousands)

1,186253

368

1,933 1,299

387

14,732

234

1,395 1,903

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Jun-05 Jun-06 Jun-07 Sep-06 Sep-07

LLCs Other Income

Financial BudgetThe allocation methods are described in detail in the Operating Budget of the Financial Plan approved by the board in October. Once the allocations are approved, central office forecasts the corporation’s cash needs based on its projected expenditures in the fiscal year. The RF makes expenditures in three areas:

Sponsored Programs: Expenses for externally-funded research Agency: Expenses for campus-related organizations Corporate: Expenses for campus and central office operations

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Sponsored Programs ExpendituresFor FY 2008, the RF projected it would have $772 million in sponsored program expenditures. At the end of the first quarter, sponsored program expenditures were $207.8 million compared to $201.5 million last year.

Sponsored Program Expenditures by Type (In Thousands)

98,83397,350100,55097,636

90,000

23,806

30,619

14,957

29,741

18,404

49,40645,70943,98540,23936,659

26,16322,76940,385

27,837

35,749

193,779

167,832

199,877 201,515 207,794

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

250,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Federal State Federal Flow Through Industry/ Other Total

The RF has three sources of cash to pay these expenditures:

Surplus sponsored programs balance – currently at $102 million, a decrease of 30 percent from last September mainly attributed to University at Albany activity

Federal draw down – the RF uses an automated system to request funds on a weekly basis for federal programs, $67.3 million has been drawn for the first quarter.

Working capital – when the sponsor doesn’t pay in advance and the RF can’t draw down federal funds, the RF uses working capital to fund expenditures. The total accounts receivable balance at the end of the first quarter is $124.7 million, an increase of $32.8 million or 36 percent. At-risk deficit awards, those awards that have not received an official award document, increased 5 percent.

Agency ExpendituresThe RF’s agency activity is growing and the RF projects agency expenditures to total $144 million in FY2008. Technically, an agency should have funds in its account with the RF before the RF pays any human resources, payroll,

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accounts payable or purchasing expenses for its award. Agency expenditures through the first quarter are $40.3 million compared to $35.2 million last September.

Agency Expenditures by Location(In Thousands)

16,723

11,826

17,72516,093

12,459

8,869

12,38412,028 11,809

9,839

1,2282,596

8903,041

6,865

3,2323,643

3,371

3,7753,099

-

5,000

10,000

15,000

20,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Stony Brook University Upstate Medical UniversityUniversity at Buffalo Others

Corporate ExpendituresThe RF’s campus and central office locations incur costs to have the infrastructure and staff in place to administer sponsored programs and provide other services. The allocations for central office and campus locations are placed in an RF-funded account. Historically, most campuses don’t spend more than they’re allocated, and even if they do exceed their allocation, most campuses have money in their RF-funded balance from prior years to cover the loss. There are currently six campuses with at-risk RF-funded awards that total $523 thousand because they spent more than their allocation and didn’t have money in their RF-funded balance to cover the losses.

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Corporate Expenditures$49,918

Campus Royalties 6,404

Central Office Administration

7,312

Oracle Upgrade 531

SUNY Campuses 28,329

SUNY System Administration

1,847Other 5,495

Working CapitalWorking capital primarily consists of campus and central office unexpended balances, corporate reserves and investment income reserves. Campus unexpended balances include service and facility (S&F), RF funded, non-sponsored, suspense and gift awards (see chart on page 26). The RF’s working capital also includes any surplus payments received for the fringe benefit (FB) pool. The RF operates like a recharge center for these payments: each grant is charged a rate to recover the RF’s costs to provide these services. These payments should break even. However, there are times when the amount received by the RF is greater than what is owed and when this happens the RF puts that surplus towards its working capital. At other times the amount owed is greater than what the RF received, and the RF uses its working capital to cover the expenditures.

Like any business, the RF uses working capital to pay for expenses before money is received to cover those expenditures. At any given time during the fiscal year the RF uses working capital to pay for the following expenditures:

Sponsored programs deficits Agency deficits Payroll suspense (payments to an employee prior to identifying the

account to which the charge belongs). Central office and campuses monitor payroll suspense accounts to ensure timely reconciliations, so the working capital needs are minimal.

Income Fund Reimbursable (payments to SUNY for salaries and fringe benefits of SUNY employees who perform services on RF sponsored projects while remaining on the SUNY payroll). The agreement with SUNY allows the RF discretion on the use of these funds.

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The SUNY/RF 1977 agreement allows the RF to use IFR reimbursement payments to SUNY as a potential working capital tool, this allows the RF to identify the payment schedule to SUNY to support cash flow requirements. In addition, the RF can work with the campus to use their IFR payment to reimburse the RF for any potential losses.  The first quarter IFR reimbursements in FY 2008 was $7.1 million, the average monthly payment was $2.4 million.

The following charts show sponsored programs and agency deficits:

Sponsored Programs Accounts Receivable (Deficits)

117,293

84,811

95,16695,708

109,758

7,4277,053

29,12235,107

10,554

124,720

91,864

130,815

120,312

124,288

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Excludes At Risk At Risk Total Deficits

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Agency Advances to Others (Deficits)

10,581

8,347

13,126

8,246

1,0631,1031,644 1,476

0

11,644

9,450

14,602

9,890

13,117

0

4,000

8,000

12,000

16,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

Excludes At Risk At Risk Total Deficits

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The fringe benefit pool remains in a surplus due to a $2.3 million balance carried forward from the FY 2007, and fringe benefit grant charges are $2.3 million above total expenses through the first quarter.

The following two charts compare major benefit costs to the grant charges and the fringe benefit pool balance. The fringe benefit rate is negotiated based on estimates; actual costs will be different. The difference is either a surplus that must be reduced in the next year’s rate or a deficit that requires an increase the next year’s rate

Fringe Benefit Pool(FYTD Expenses)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Sep-04 Sep-05 Sep-06 Sep-07

Pension Health Insurances Other Total Expense FB Grant Charges

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Fringe Benefit Pool Balances ( In Thousands)

4,626

3,810

(1,672)

(3,675)

2,292

(4,500)

(3,000)

(1,500)

0

1,500

3,000

4,500

6,000

Sep-03 Sep-04 Sep-05 Sep-06 Sep-07

In the event that there is not enough working capital to cover its sponsored programs expenditures, the RF incurs debt to pay its bills. Currently, the RF has a $35 million line of credit to cover sponsored programs debt and an additional $45 million line of credit that was authorized by the board of directors to provide more borrowing power and to respond to additional requests for financial assistance. If the RF incurs debt to cover campus expenditures, that campus is responsible for paying the interest on that debt. At September 30, System Administration-Provost had a $6 million balance in the project line of credit which was advanced to cover temporary sponsored program deficits.

Campus Unrestricted Fund BalanceThe fund balance provides additional liquidity to cover cash flow needs and working capital for the RF. Historically, the corporation has not used the unspent allocations to campuses for corporate needs. The RF board, however, has the authority to designate these fund balances for purposes other than campus allocations. Unfunded liabilities are future obligations against the fund balance.

Campus1st Quarter

September 30University at Albany $ 13,137,658Binghamton University 12,606,595University at Buffalo 30,839,202Stony Brook University 82,256,425SUNY Downstate Medical Center 6,146,205Upstate Medical University 7,004,147

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SUNY Brockport 168,600Buffalo State College 8,810,478SUNY Cortland 307,593SUNY Fredonia 234,085SUNY Geneseo 228,226

Campus1st Quarter

September 30Old Westbury 139,136SUNY New Paltz (5,689)College at Oneonta 643,042SUNY Oswego 2,286,844SUNY Plattsburgh 158,557SUNY Potsdam 316,932Purchase College 344,092SUNYIT 358,686Empire State College 355,082Alfred State College (966)SUNY Canton 115,981SUNY Cobleskill (56,077)SUNY Delhi (11,797)Farmingdale State College (371,456)Morrisville State College 127,477SUNY ESF 3,762,418Maritime College 27,949College of Optometry 522,571Central Office 1,210,762Sys. Admin - Provost 887,870Sys. Admin - Chancellor 460,570Levin Institute (77,150)

Sub Total 172,934,018Invested in fixed assets, net of

related debt 11,857,831Corporate Reserve 4,460,626

Investment Reserve 22,898,008Liabilities unfunded (154,071,551)

Unrestricted Net Cash Position $ 58,078,932

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