Budget and Finance

UNIVERSITY OF CINCINNATI JUNE 30, 2008

15. Commitments and Contingencies

The University is currently a defendant in various legal actions. Additional legal action regarding The Alliance of
Greater Cincinnati but not involving the University could negatively affect a portion of the education and
research payment received from the Alliance. Although the final outcome of such actions cannot currently be
determined, the University's administration is of the opinion that the eventual liability, if any, will not have a
material effect on the financial position or operations of the University.

The University receives grants and contracts from certain federal, state and local agencies to fund research and
other activities. The costs, both direct and indirect, that have been charged to the grants or contracts are
subject to examination and approval by the granting agency. It is the opinion of management that any
disallowance or adjustment of such costs would not have a material effect on the financial statements.

In 2005 the Department of Education conducted a program audit of certain aspects of the University’s Student
Financial Aid Program. As a result of various findings of the Department of Education, the University has
estimated a liability to the Department of Education approximating $13,900,000.

The University’s utility plant is exposed to market price fluctuations on its purchase of natural gas. Purchase
commitments have been issued with certain suppliers of natural gas whereby the University has locked into the
price of natural gas for specified amounts to stabilize costs.

16. University of Cincinnati Foundation

The University of Cincinnati Foundation is a legally separate, tax-exempt component unit of the University.
The principal function of the Foundation is to solicit, reserve, hold, invest and administer funds and to make
distributions to or for the benefit of the University. Since these resources held by the Foundation can be used
only by or for the benefit of the University, the Foundation is considered a component unit of the University and
is discretely presented in the University’s financial statements.

Accounts of the Foundation have been consolidated in the accompanying financial statements in accordance
with generally accepted accounting principles for not-for-profit organizations. Pledges receivable for the benefit
of the University totaling $11,095,000 in 2008 and $12,388,000 in 2007, and funds held in trust by the
Foundation for the University of $224,061,000 in 2008 and $224,903,000 in 2007, have been recorded by the
University and have, therefore, been eliminated from the amounts reported for the Foundation as of June 30,
2008 and 2007. Of these amounts, $202,068,000 and $203,257,000 has been invested as of June 30, 2008
and 2007, respectively, in the University endowment pool investment pool.

A) Cash & Cash Equivalents

The carrying amount of the Foundation’s cash and cash equivalents is $14,160,000 as compared to bank

balances of $14,213,000. The difference between the carrying amounts and the bank balances is caused

primarily by deposits in transit and outstanding checks.

Of the Foundation’s bank balances, $994,000 is covered by federal depository insurance, $11,280,000 is

uninsured and mutual funds hold $1,939,000 in cash equivalents.

B) Investments

The fair value of investments at June 30 is (in thousands):

2008 2007

U. S. government and treasury securities $ 4,605 $ 4,472

Corporate bonds 4,280 5,498

Mutual funds 5,948 8,574

Other securities 818 967

Total investments $15,651 $19,511