FINANCIAL REPORT

The College has made important progress on two fronts since the Spring Board meeting. First, the Finance Committee has developed a formal investment policy for the College. The investment policy sets forth guidelines for allocating the College's assets and defines allowable levels of risk. Second, we have retained Merrill Lynch as our new investment advisors. This places our investments in the hands of a leading financial management organization. Behind this brief financial report are our new investment policy and the proposal we received from Merrill Lynch regarding the allocation of our investments.

While these developments should improve our financial position in the long run, we face serious budget challenges. The attached draft audited financial statements for Fiscal Year 1998 show a sizeable loss for the year. There are many reasons for the deficit we incurred in FY 1998. These include higher indirect costs than anticipated, the use of consultants to carry out several important projects, a loss associated with PREVENTION 98, and development of our managed care course which had not resulted in revenues as of the end of the fiscal year.

Because the draft financial statements included in this tab were received just before this Board briefing book was to be mailed, we did not have time to revise the FY 1999 budget based on our FY 1998 experience. Clearly, though, our budget for FY 1999 will be very tight, and this will be a major topic for discussion at the Board meeting. Among other things, our budget situation underscores the need for the College to bring in additional revenues.