College of Saint Elizabeth

Transcription

1 Financial Statements, Schedules of Expenditures of Federal and State Awards, Internal Control and Compliance and Independent Auditor s Reports June 30, 2016 and 2015

2 Index Page Independent Auditor's Report 2 Financial Statements Statements of Financial Position 4 Statements of Activities 5 Statements of Cash Flows 7 Notes to Financial Statements 8 Supplementary Information Schedule of Expenditures of Federal Awards 23 Schedule of Expenditures of State Awards 24 Notes to Schedules of Expenditures of Federal and State Awards 25 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 26 Independent Auditor's Report on Compliance for Each Major Federal and State Program and Report on Internal Control over Compliance Required by the Uniform Guidance and New Jersey OMB Circular Schedule of Findings and Questioned Costs 30 1

3 Independent Auditor's Report The Board of Trustees College of Saint Elizabeth Report on Financial Statements We have audited the accompanying financial statements of College of Saint Elizabeth, which comprise the statements of financial position as of June 30, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of College of Saint Elizabeth as of June 30, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 2

4 Other Matters Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedules of expenditures of federal and state awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and State of New Jersey, Department of Treasury, Office of Management and Budget Circular 15-08, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2016 on our consideration of College of Saint Elizabeth s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering College of Saint Elizabeth s internal control over financial reporting and compliance. Roseland, New Jersey November 8, 2016, except for the schedules of expenditures of federal and state awards, as to which the date is March 30,

5 Statements of Financial Position June 30, 2016 and 2015 Assets Cash and cash equivalents $ 2,283,296 $ 3,418,594 Student accounts receivable, less allowance for doubtful accounts of $915,433 and $1,064, , ,934 Contributions receivable, net of allowance of $5, , ,089 Grants receivable 109, ,059 Due from Sisters of Charity of Saint Elizabeth - 32,760 Prepaid expenses and other assets 494, ,476 Perkins loans to students, less allowance for doubtful accounts of $261,951 and $269, , ,376 Investments, at fair value 22,880,177 22,940,245 Funds held by bond trustee 762, ,167 Deferred financing costs, net of accumulated amortization of $172,469 and $153, , ,017 Land, buildings, and equipment, net 33,550,959 32,062,368 Total $ 61,496,794 $ 62,037,085 Liabilities and Net Assets Liabilities Accounts payable and accrued expenses $ 2,656,327 $ 2,392,853 Due to Sisters of Charity of Saint Elizabeth 69,393 - Deferred student tuition and fees 517, ,491 Long-term debt 20,302,103 21,132,840 Advances from government for student loans 394, ,069 Total liabilities 23,939,534 24,294,253 Net assets Unrestricted 14,041,890 12,494,721 Temporarily restricted 12,543,616 14,300,555 Permanently restricted 10,971,754 10,947,556 Total net assets 37,557,260 37,742,832 Total $ 61,496,794 $ 62,037,085 See Notes to Financial Statements. 4

6 Statement of Activities Year Ended June 30, 2016 Temporarily Permanently Unrestricted restricted restricted Total Revenues, gains, and other support Operating revenues Student tuition and fees $ 24,951,065 $ 24,951,065 Less student aid (9,707,884) (9,707,884) Student tuition and fees, net 15,243,181 15,243,181 Governmental appropriations 41,609 41,609 Grants and contracts 2,092,594 $ 202,500 2,295,094 Contributions 852, ,646 $ 114,757 1,716,306 Contributed services 31,251 31,251 Endowment spending rate income 124, ,489 1,041,148 Sales and services of auxiliary enterprises 4,289,331 4,289,331 Other revenue 955, ,667 Total operating revenues 23,631,195 1,867, ,757 25,613,587 Net assets released from restrictions 2,757,957 (2,667,398) (90,559) - Total revenue and support 26,389,152 (799,763) 24,198 25,613,587 Operating expenses Educational and general expenses Instructional 8,504,981 8,504,981 Sponsored programs 385, ,296 Library 1,544,697 1,544,697 Student services 3,798,143 3,798,143 General administration 1,599,609 1,599,609 General institutional 5,494,606 5,494,606 Total educational and general expenses 21,327,332 21,327,332 Auxiliary enterprise expenses 3,389,932 3,389,932 Total operating expenses 24,717,264 24,717,264 Changes in net assets from operating activities 1,671,888 (799,763) 24, ,323 Nonoperating activities Investment return, net of endowment spending rate income (124,719) (957,176) (1,081,895) Changes in net assets 1,547,169 (1,756,939) 24,198 (185,572) Net assets, beginning 12,494,721 14,300,555 10,947,556 37,742,832 Net assets, end $ 14,041,890 $ 12,543,616 $ 10,971,754 $ 37,557,260 See Notes to Financial Statements. 5

7 Statement of Activities Year Ended June 30, 2015 Temporarily Permanently Unrestricted restricted restricted Total Revenues, gains, and other support Operating revenues Student tuition and fees $ 27,914,370 $ 27,914,370 Less student aid (10,506,088) (10,506,088) Student tuition and fees, net 17,408,282 17,408,282 Governmental appropriations 27,703 27,703 Grants and contracts 980,464 $ 240,500 1,220,964 Contributions 1,003,351 2,008,747 $ 226,825 3,238,923 Contributed services 133, ,299 Endowment spending rate income 178, ,618 1,023,577 Sales and services of auxiliary enterprises 4,372,342 4,372,342 Other revenue 761, ,551 Total operating revenues 24,865,951 3,093, ,825 28,186,641 Net assets released from restrictions 1,687,260 (1,612,260) (75,000) - Reclassification of net assets (12,962) 12,962 - Total revenue and support 26,553,211 1,468, ,787 28,186,641 Operating expenses Educational and general expenses Instructional 9,451,917 9,451,917 Sponsored programs 467, ,097 Library 1,743,621 1,743,621 Student services 4,218,285 4,218,285 General administration 1,610,597 1,610,597 General institutional 5,567,682 5,567,682 Total educational and general expenses 23,059,199 23,059,199 Auxiliary enterprise expenses 3,487,658 3,487,658 Total operating expenses 26,546,857 26,546,857 Changes in net assets from operating activities 6,354 1,468, ,787 1,639,784 Nonoperating activities Investment return, net of endowment spending rate income 32,069 (66,015) (33,946) Changes in net assets 38,423 1,402, ,787 1,605,838 Net assets, beginning 12,456,298 12,897,927 10,782,769 36,136,994 Net assets, end $ 12,494,721 $ 14,300,555 $ 10,947,556 $ 37,742,832 See Notes to Financial Statements. 6

8 Statements of Cash Flows Years Ended June 30, 2016 and Cash flows from operating activities Changes in net assets $ (185,572) $ 1,605,838 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation 1,968,440 2,044,036 Amortization 19,101 19,842 Provision for uncollectible student accounts and loans receivable 441, ,797 Net realized and unrealized losses on investments 52,408 (979,310) Contributions permanently restricted for long-term use (114,757) (226,825) Contributions restricted for capital purposes (229,300) (190,800) Changes in operating assets and liabilities Student accounts receivable (14,119) 62,151 Contributions receivable (30,801) 96,413 Grants receivable 334,613 (444,059) Due to/from Sisters of Charity of Saint Elizabeth 102,153 (2,561) Prepaid expenses and other assets 41, ,056 Accounts payable and accrued expenses 263, ,622 Deferred student tuition and fees 289,188 (54,372) Advances from government for student loans (146,037) 79,251 Net cash provided by operating activities 2,791,361 2,951,079 Cash flows from investing activities Proceeds from sales of investments (136,734) 3,180,853 Purchases of investments 144,394 (4,992,974) Amounts transferred to funds held by bond trustee (777,668) (810,549) Amounts transferred out of funds held by bond trustee 798,849 59,244 Perkins loans issued to students (99,225) (80,042) Repayment of Perkins loans 87, ,451 Purchases of land, buildings, and equipment (3,457,031) (1,164,938) Net cash used in investing activities (3,439,979) (3,632,955) Cash flows from financing activities Repayments of long-term debt (830,737) (830,039) Proceeds from contributions permanently restricted for long-term use 114, ,825 Proceeds from contributions restricted for capital purposes 229, ,800 Net cash used in financing activities (486,680) (412,414) Net decrease in cash and cash equivalents (1,135,298) (1,094,290) Cash and cash equivalents, beginning 3,418,594 4,512,884 Cash and cash equivalents, end $ 2,283,296 $ 3,418,594 Supplemental disclosure of cash flow data Interest paid $ 748,409 $ 629,910 See Notes to Financial Statements. 7

9 Notes to Financial Statements June 30, 2016 and 2015 Note 1 - Organization and summary of significant accounting policies Organization The College of Saint Elizabeth (the College ), is an independent Catholic institution of higher learning, founded and sponsored by the Sisters of Charity of Saint Elizabeth, operates a college in the liberal arts tradition in Morris County, New Jersey. The College offers baccalaureate degrees, master s degree programs, and doctoral programs, and a variety of professional certifications and certificates for men, women and working adults. The mission of the College is to be a community of learning in the Catholic liberal arts tradition for students of diverse ages, backgrounds, and cultures. Basis of presentation The accompanying financial statements have been prepared to focus on the College as a whole and to present balances and transactions according to the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified as follows: Permanently restricted net assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the College. Generally, the donors of these assets permit the College to use all or part of the income earned on related investments for general or specific purposes. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that will be met by actions of the College and/or by the passage of time. Unrestricted net assets - Net assets not subject to any donor-imposed stipulations. Revenues are reported as increases in unrestricted net assets unless use of the related asset is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulations or by law. Expirations of temporary restrictions on net assets are reported as net assets released from restrictions. Board-designated endowment funds are included in unrestricted net assets. Revenue recognition Revenue is recorded on the accrual basis of accounting. The College derives its revenue primarily from student tuition and fees, government grants and aid, contributions and investment earnings. Tuition revenue is recognized as income on a pro rata basis over the length of the program, based on the percentage of time completed. Tuition billings over tuition payments received are reflected as student receivables in the statements of financial position. Deferred student tuition and fees represent the unearned portion of a term's billings. Contributions, including unconditional promises to give, are recognized as revenues in the period received. Conditional promises to give are not recognized until they become unconditional. Contributions of assets other than cash and cash equivalents are recorded at their estimated fair value at the date of contribution. Contributions to be received after one year are discounted at an appropriate discount rate. Amortization of the discount is recorded as additional contribution revenue in accordance with donor-imposed restrictions, if any, on the contributions. An allowance for uncollectible contributions receivable is provided based upon management s judgment, including such factors as prior collection history and type of contribution. 8

10 Notes to Financial Statements June 30, 2016 and 2015 The College reports gifts of cash and cash equivalents or other assets as temporarily restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Contributions of property and equipment without donor stipulations concerning the use of such longlived assets are reported as revenues of the unrestricted net asset class. Contributions of cash or other assets stipulated by the donor to be used to acquire property and equipment are reported as revenues of the temporarily restricted net asset class; the restrictions are considered to be released at the time of acquisition of such long-lived assets. Funds provided under the Federal Perkins loan program are loaned to qualified students and may be reloaned after collection. These funds are ultimately refundable to the U.S. government and are included in the statements of financial position in advances from government for student loans. Contributed services The monetary value of services contributed by members of the Sisters of Charity of Saint Elizabeth is recorded in the accounts and reported in the accompanying financial statements. The gross value of the services performed (as determined by reference to lay-equivalent salaries by type of personnel) is recorded as expenses by department, following the same classification as other expenses. The amount equal to these expenses, reduced by cash and cash equivalents payments to the resident communities identified by each Sister of Charity, is recorded as revenue from contributed services. For the years ended June 30, 2016 and 2015, $31,251 and $133,299, respectively, were recorded for contributed services. Functional allocation of expenses The costs of providing educational programs and supporting services of the College have been summarized on a functional basis in the statements of activities. Accordingly, depreciation of plant assets, staff benefits, and operation and maintenance of plant assets have been allocated among the educational programs and support services benefited. The functional categories are those recommended by the National Association of College and University Business Officers. The College s primary program service is instructional. Expenses reported as sponsored programs, library, student services, and auxiliary enterprises are incurred in support of this primary program service. Supporting services consist of general administration and general institutional. Fundraising costs of $659,539 and $543,691 are included in the accompanying statements of activities for the years ended June 30, 2016 and 2015, respectively. Advertising The College expenses the cost of advertising as incurred. Advertising costs amounted to $296,867 and $315,254 in 2016 and 2015, respectively. Cash and cash equivalents Cash and cash equivalents consist of highly liquid investment instruments with an original maturity of three months or less. Cash and cash equivalents that are reported as investments are held by the College s investment managers and are part of the College s overall long-term investment strategy. 9

11 Notes to Financial Statements June 30, 2016 and 2015 Concentrations of credit risk Financial instruments which potentially subject the College to concentrations of credit risk consist principally of cash and cash equivalents and student accounts receivable. The College places its cash and cash equivalents with high credit quality financial institutions. At times, the College's cash and cash equivalents balances with these institutions exceed the current insured amount under the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. At June 30, 2016, the College has cash and cash equivalent balances that exceed federally insured limits in the amount of approximately $2,727,000. Concentrations of credit risk with respect to student accounts receivable are limited due to the large number of students enrolled in the College, generally short payment terms and the participation in government financial aid programs. On a periodic basis, the College evaluates its student accounts receivable and establishes an allowance for doubtful accounts, based on a history of collections and current credit considerations. Investments The College s investments are reported at fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Realized and unrealized gains and losses are included in the statements of activities. See Note 5 for discussion on fair value measurements. Land, buildings and equipment Land, buildings and equipment are carried at their acquisition or construction cost. If donated, these assets are recorded at fair market value at the date of donation. The College s assets are depreciated using the straight-line method based on the estimated useful lives of the assets, which are 5 to 20 years for furniture, fixtures, and equipment, 25 years for land improvements, and 40 years for facilities, buildings, and building improvements. Repairs and maintenance are charged to expense as incurred. Expenditures that significantly extend the useful life of an asset are capitalized. Deferred financing costs Expenses incurred in connection with debt financing are deferred and amortized over the life of the related debt. Operating measure The operating activities of the College include all income and expense related to carrying out its mission of educating students. In accordance with the endowment spending rate policy, included in operating revenues is the budgeted return from endowment assets, net of investment management fees. Nonoperating activities include the excess (deficiency) of total investment return over the endowment spending rate, gifts and donations to the permanent endowment, and gifts and donations for capital purposes. From time to time, the College conducts development activities to raise funds for capital purposes. Contributions and pledges received in connection with those capital activities are recorded as temporarily restricted nonoperating revenues in the statements of activities. 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 disclosures of contingent assets and liabilities 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. 10

12 Notes to Financial Statements June 30, 2016 and 2015 Income taxes The College has been classified by the Internal Revenue Service as an organization described under Section 501(c)(3) of the Internal Revenue Code (the Code ) and, therefore, is exempt from federal income taxes under Section 501(a) of the Code. Accordingly, no provision for income taxes was required for 2016 and There are certain transactions that could be deemed unrelated business income and would result in a tax liability. Management reviews transactions to estimate potential tax liabilities using a threshold of more likely than not. It is management s estimation that there are no material tax liabilities that need to be recorded. The College has no unrecognized tax benefits at June 30, 2016 and The College's federal and state tax filings prior to fiscal year 2013 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The College recognizes interest and penalties associated with tax matters as operating expenses and includes accrued interest and penalties with accrued expenses in the statements of financial position. There were no interest and penalties paid for the years ended June 30, 2016 and Subsequent events The College has evaluated subsequent events through November 8, 2016, which is the date the financial statements were available to be issued (see Note 10). Note 2 - Contributions receivable The anticipated receipt of contributions receivable is as follows: Year ending June 30 Less than 1 year $ 59,000 $ 104,820 1 to 5 years 90,000 12, , ,425 Less Allowance for uncollectible receivables 5,000 5,000 Present value discount (1.49%-2.63%) 1, Total $ 142,890 $ 112,089 11

13 Notes to Financial Statements June 30, 2016 and 2015 Note 3 - Investments The carrying values and cost of investments as of June 30, 2016 and 2015 are as follows: Fair Fair Cost value Cost value Cash and cash equivalents $ 5,757 $ 5,757 $ 1,830,840 $ 1,830,840 Commingled funds 13,010,285 20,621,533 11,279,324 18,852,012 Money market funds 2,007,777 2,007,777 2,006,805 2,006,805 Mutual funds 240, , , ,588 Total $ 15,264,395 $ 22,880,177 $ 15,360,709 $ 22,940,245 Investment income, net for the years ended June 30, 2016 and 2015 consisted of the following: Interest and dividends $ 11,661 $ 10,321 Net realized and unrealized gain 83,996 1,117,460 Gross investment gain 95,657 1,127,781 Less investment management fees (136,404) (138,150) Total investment income (loss) $ (40,747) $ 989,631 Unrestricted operating investment income $ 124,659 $ 178,959 Unrestricted nonoperating investment income (loss) (124,719) 32,069 Temporarily restricted operating investment income 916, ,618 Temporarily restricted nonoperating investment income (loss) (957,176) (66,015) Total income (loss) on investments $ (40,747) $ 989,631 Note 4 - Funds held by bond trustee Under terms of the College's 2008 Series F Bonds (see Note 10) with the New Jersey Educational Facilities Authority (the "Authority"), funds are required to be placed on deposit with specified financial institutions acting as trustee for the bonds issued by the Authority for specified purposes. These funds are reported in the statements of financial position as funds held by bond trustee. As of June 30, 2016 and 2015, funds held by bond trustee, consisting entirely of U.S. money market funds, were composed of funds held for the following purposes: Principal fund $ 754,469 $ 754,353 Interest fund 8,517 29,814 Total $ 762,986 $ 784,167 12

14 Notes to Financial Statements June 30, 2016 and 2015 Note 5 - Fair value of financial instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the fullterm of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liabilities. Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial asset, including estimates of timing, amount of expected future cash flows, and the credit standing of the issuer. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial asset and do not reflect any premium or discount that could result from offering for sale at one time an entire holding of a particular financial asset. Potential taxes and other expenses that would be incurred in an actual sale or settlement are not reflected in amounts disclosed. Financial assets carried at fair value at June 30, 2016 and 2015 are classified in the tables below in one of the three categories described above: 2016 Level 1 Level 2 Level 3 Total Mutual funds Large cap funds $ 75,554 $ 75,554 Small cap funds 39,302 39,302 International funds 25,321 25,321 Fixed income funds 104, ,933 Total mutual funds 245, ,110 Commingled funds Large cap funds $ 7,318,346 7,318,346 Small cap funds 3,321,779 3,321,779 International funds 1,029,379 1,029,379 Fixed income funds 8,952,029 8,952,029 Total commingled funds 20,621,533 20,621,533 Money market fund 2,770,763 2,770,763 Cash and cash equivalents 5,757 5,757 Total financial assets at fair value $ 250,867 $ 23,392,296 $ - $ 23,643,163 13

15 Notes to Financial Statements June 30, 2016 and Level 1 Level 2 Level 3 Total Mutual funds Large cap funds $ 94,987 $ 94,987 Small cap funds 29,547 29,547 International funds 29,179 29,179 Fixed income funds 96,875 96,875 Total mutual funds 250, ,588 Commingled funds Large cap funds $ 6,655,002 6,655,002 Small cap funds 3,365,157 3,365,157 International funds 1,030,257 1,030,257 Fixed income funds 7,801,596 7,801,596 Total commingled funds 18,852,012 18,852,012 Money market fund 2,790,972 2,790,972 Cash and cash equivalents 1,830,840 1,830,840 Total financial assets at fair value $ 2,081,428 $ 21,642,984 $ - $ 23,724,412 Total assets at fair value include investments of $22,880,177 and $22,940,245 and investments funds held by bond trustee of $762,986 and $784,167 at June 30, 2016 and 2015, respectively (see Note 4). Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2016 and Registered mutual funds are classified in Level 1 of the fair value hierarchy because their fair values are based on quoted prices for identical securities. Investments classified in Level 2 consist of shares in commingled funds as opposed to direct interests in the fund s underlying securities and money market funds. Because each commingled fund s reported net asset value ( NAV ) is used as a practical expedient to estimate the fair value of the College s interest therein, the level in which a fund s fair value measurement is classified is based on the College s ability to redeem its interest at or near the date of the statements of financial position. Accordingly, the inputs or methodology used for valuing or classifying investments for financial reporting purposes are not necessarily an indication of the risks associated with those investments or a reflection of the liquidity of or degree of difficulty in estimating the fair value of each fund s underlying assets and liabilities. Money market fund valuations are obtained from readily-available pricing sources for comparable instruments. The College invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near-term and such changes could materially affect the amounts reported in the statements of financial position. The commingled funds in the tables above are valued at the respective NAV as reported by such funds, which are reported at fair value. There are no restrictions as to the redemption of these investments nor does the College have any contractual obligations to further invest in any of these funds. The investments in this category can be redeemed immediately at the current NAV. The NAV is a quoted price in a market that is not active and classified within Level 2 of the valuation hierarchy. 14

16 Notes to Financial Statements June 30, 2016 and 2015 Russell Institutional Funds LLC Large Cap Equity Fund The fund seeks to provide long-term capital growth of capital by investing primarily in domestic large cap equity securities. Russell Institutional Funds LLC Small Cap Equity Fund The fund is a small capitalization fund designed to provide maximum long-term appreciation through investments that are diversified by industry. Russell Institutional Funds LLC International Equity Fund The fund seeks to provide appreciation of capital by investing in international financial markets, primarily those of developed economies in Europe and the Pacific Basin. Russell Institutional Funds LLC Core Bond Fund The fund provides participation in the full spectrum of investment opportunities in primarily U.S. debt markets. There were no transfers between Level 1 and Level 2 financial assets during the fiscal years ended June 30, 2016 and The carrying value of cash and cash equivalents, student account receivables, contributions receivable, Perkins loans to students, accounts payable and accrued expenses approximate their fair value due to the short-term nature of these instruments. The fair value of the long-term debt is estimated based on market prices for similar issues is approximately $20,302,000 and $21,133,000 at June 30, 2016 and 2015, respectively. Note 6 - Land, buildings, and equipment Land, buildings, and equipment as of June 30, 2016 and 2015 consist of the following: Land and land improvements $ 1,744,686 $ 1,744,686 Facilities (buildings and contents) made available for College purposes by the Sisters of Charity of Saint Elizabeth 6,493,791 6,493,791 Buildings and building improvements 50,833,946 50,640,867 Equipment 12,316,314 12,248,834 Furniture and fixtures 4,759,786 4,690,772 Construction in progress 3,903, ,654 80,051,635 76,594,604 Less accumulated depreciation 46,500,676 44,532,236 Total $ 33,550,959 $ 32,062,368 Approximately 12 acres of land, on which Mahoney Library and Founders Hall have been constructed, were transferred to the College by the Sisters of Charity of Saint Elizabeth, based on its appraised value in In addition, land, buildings, and contents made available to the College by the Sisters of Charity of Saint Elizabeth are leased to the College for $1 per year. The improvements related to this lease are included in land, buildings, and equipment in the accompanying statements of financial position. 15

17 Notes to Financial Statements June 30, 2016 and 2015 Estimated costs to complete the projects classified as construction in progress as of June 30, 2016 approximated $47,000. Interest expense capitalized on construction in progress was $79,000 for the year ended June 30, Note 7 - Related-party transactions The Sisters of Charity of Saint Elizabeth Generalate The Sisters of Charity of Saint Elizabeth Generalate (the "Generalate") makes certain payments for the benefit of the College for which the College generally reimburses the Generalate. Advance payments made by the College exceeded the allocated expenses of the Generalate by $32,760 as of June 30, Allocated expenses of the Generalate exceeded the advance payments made by the College by $69,393 as of June 30, The amounts due from and due to the Generalate are recorded as a liability and an asset in the accompanying statements of financial position as of June 30, 2016 and 2015, respectively. Total operating expenses allocated by the Generalate to the College and recorded as expense in the accompanying statements of activities in 2016 and 2015 were $1,117,935 and $1,115,428, respectively. Expenses primarily for operations and maintenance of plant assets are allocated on various bases as agreed upon by both parties. Alumnae Association Appropriations from the College to the Alumnae Association for operations amounted to $93,299 and $142,132 during 2016 and 2015, respectively, and are included as general institutional expenses in the accompanying statements of activities. Note 8 - Pension plans Defined-contribution plan All employees classified as full-time, at their option, may participate in a retirement plan carried by Teachers Insurance and Annuity Association and/or College Retirement Equities Fund (TIAA/CREF), which is a privately owned, multi-employer defined-contribution plan. Participating employees' own individual, self-directed annuity contracts, and retirement and survivor benefits are determined by the amount of employee and College contributions, the investment decisions made by the employee and the retirement option selected. Participating employees may contribute up to 5%, not to exceed the maximum federal statutory limit, on a pre-tax basis. The College may match the employee's contribution after the employee has completed two years of service. Effective July 1, 2013, the College suspended its match; as a result, there were no employer contributions in either 2016 or Defined-benefit plan The College also participates with the Generalate, the Academy of Saint Elizabeth, and Saint Vincent Academy in a noncontributory defined multi-employer defined-benefit pension plan for the benefit of all full-time lay employees of these entities not covered by the plan noted above. Normal retirement age is 65. Annual contributions are shared proportionately by the participating entities based on the relative number of participating employees. The plan was frozen as of December 31, The risks of participating in these multi-employer defined-benefit pension plans are different from single-employer plans because (a) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (b) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be required to be 16

18 Notes to Financial Statements June 30, 2016 and 2015 borne by the remaining participating employers, and (c) if the College chooses to stop participating in one of its multi-employer plans, it may be required to pay a withdrawal liability to the plan. In connection with ongoing renegotiation of collective bargaining agreements, the College may discuss and negotiate for the complete or partial withdrawal from one or more multi-employer pension plans. Depending on the number of employees withdrawn in any future period and the financial condition of the multi-employer plan at the time of withdrawal, the associated withdrawal liabilities could be material to the College s changes in net assets in the period of the withdrawal. Except as described in the following paragraph, the College has no plans to withdraw from its multiemployer pension plans. Due to the commingling of assets and limited availability of data, it is not possible to determine the actuarial present value of accumulated benefit and net assets available for benefits separately related to the College. The College s contribution for this pension plan was $89,731 and $73,211 for 2016 and 2015, respectively, and represents in excess of 5% of total plan contributions. The following table discloses the name and funded status of the pension plan as of June 30, 2015 (the date of the last actuarial valuation): Accumulated benefit Market value Legal name and plan number EIN obligation plan assets Retirement Plan for the Employees of the Sisters of Charity of Saint Elizabeth and the College of Saint Elizabeth (Plan number ) $ 21,850,146 $ 8,158,288 The accumulated benefit obligation and market value of plan assets are not reflected in the accompanying statements of financial position of the College. Note 9 - Line of credit The College maintains a $2,000,000 unsecured line of credit agreement with a bank which matures on January 31, Borrowings under the line of credit bear interest at the bank s prime rate, which was 3.50% at June 30, At June 30, 2016 and 2015, there were no outstanding borrowings under the line of credit. Note 10 - Long-term debt On May 29, 2008, the Authority issued $24,090,000 Variable Rate Revenue Refunding Bonds, The College of Saint Elizabeth Issue, 2008 Series F ("2008 Series F Bonds"), which bear interest at a floating rate determined on a seven-day basis. The proceeds were used to provide funds to refund The College of Saint Elizabeth Issue, 2000 Series C Bonds and The College of Saint Elizabeth Issue, 2006 Series K Bonds and pay certain costs of issuing the 2008 Series F Bonds. Payments of the principal and interest on the 2008 Series F Bonds, including any payments to be made with respect to an optional or mandatory redemption of the 2008 Series F Bonds and payments of the purchase price of 2008 Series F Bonds tendered or deemed tendered for purchase and not remarketed, are to be secured by and payable from amounts drawn by the trustee under an irrevocable, direct-pay letter of credit issued by RBS Citizens Bank, N.A. The 2008 Series F Bonds are secured by a first lien on certain land, buildings, improvements, and fixtures of the College and 17

19 Notes to Financial Statements June 30, 2016 and 2015 a pledge of and lien on tuition and other revenue of the College. In connection with the letter of credit, the College is required to meet certain loan covenants as of the end of each year. On October 13, 2016, the Authority issued $21,435,000 New Jersey Educational Facilities Authority Revenue Bonds, The College of Saint Elizabeth Issue, 2016 Series D ("2016 Series D Bonds"), which bear interest at various interest rates (2.85% through July 1, 2021, 3.31% from July 2, 2021 through July 1, 2026, and 4.27% from July 2, 2026 through July 1, 2046) payable semi-annually beginning on January 1, The proceeds were used to provide funds to refund The College of Saint Elizabeth Issue, 2008 Series F Bonds and pay certain costs of issuing the 2016 Series D Bonds. The 2016 Series D Bonds require annual installments beginning on July 1, The 2016 Series D Bonds are secured by a first lien on certain land, buildings, improvements, and fixtures of the College and a pledge of and lien on tuition and other revenue of the College. Interest rate Bonds payable New Jersey Educational Facilities Authority Revenue Bonds Floating rate $ 19,590,000 $ 20,340, Series F Bonds, averaged 0.26% due serially to July 1, 2036 (0.55% at June 30, 2016) Other long-term debt Higher Education Capital Improvement 4.52% to 5.25% 7,144 7,144 Fund Bonds, due serially to 2022 Higher Education Capital Improvement 5.00% 82, ,232 Fund Bonds, due serially to 2017 Higher Education Capital Improvement 3.00% to 5.50% 79,094 92,942 Fund Bonds, due serially to 2020 Higher Education Capital Improvement 5.00% to 5.25% 543, ,467 Fund Bonds, due serially to 2024 Note payable to the State of New Jersey 5.00% - 26,055 Dormitory Safety Trust Fund Bonds, due serially to 2016 Total $ 20,302,103 $ 21,132,840 Scheduled principal repayments of the bonds payable and other long-term debt subsequent to June 30, 2016 are as follows: 2017 $ 807, , , , ,158 Thereafter 20,667,041 Total $ 22,897,103 Interest expense on long-term debt for the years ended June 30, 2016 and 2015 was $748,409 and $629,910, respectively. Of the amounts in interest expense in 2016, $79,000 was capitalized into construction-in-progress. 18

20 Notes to Financial Statements June 30, 2016 and 2015 Note 11 - Contingencies Federal and state financial aid The College participates in various federal and state financial aid programs for the benefit of students who attend the College. These programs have strict requirements for participation and the College is subject to government program reviews covering compliance with laws and regulations. Specific areas of review include student program eligibility, coordination of financial aid programs and other matters. Self-insurance The College participates in a self-insured health plan covering all of its employees during 2016 and The Company has purchased stop-loss insurance in order to limit exposure, which will reimburse the Company for individual claims in excess of $75,000 or an annual aggregate deductible of $1,000,000. The College records its estimated ultimate liability for open claims, as determined by its insurance carriers for medical, plus an estimate for claims incurred but not reported. The estimated accrual for these liabilities could be affected if future occurrences and claims differ from these assumptions and historical trends. As of June 30, 2016 and 2015, accrued expenses included $164,882 and $249,222 for accrued self-insurance claims, respectively. Note 12 - Restrictions and limitations on net asset balances The following schedule details ending balances in the respective net asset accounts as of June 30, 2016 and 2015: Unrestricted Available for current operations $ 12,184,690 $ 10,631,470 Funds functioning as endowment 1,857,200 1,863,251 Total unrestricted 14,041,890 12,494,721 Temporarily restricted Student aid 1,085,247 1,206,085 Other programs 3,296,979 4,053,015 Capital projects 3,713,474 3,673,463 Earnings on endowment primarily used for student aid 4,447,916 5,367,992 Total temporarily restricted 12,543,616 14,300,555 Permanently restricted Endowment funds primarily for student aid 10,971,754 10,947,556 Total $ 37,557,260 $ 37,742,832 During 2016, the College received notice from the acting attorney general of New Jersey not objecting to the release from restrictions of $90,559 in permanently restricted net assets to temporarily restricted net assets to be used for scholarships consistent with the original charitable purposes of the contributions. During 2015, the College received authorization from a donor to transfer $75,000 of permanently restricted net assets to temporarily restricted net assets. Also during the 2015, the College reclassed $12,962 of temporarily restricted net assets to permanently restricted net assets based on a request from a donor. 19

21 Notes to Financial Statements June 30, 2016 and 2015 Included in unrestricted net assets are current quasi-endowment funds whose assets have been designated by the board of trustees to be used for operating expenses. Included in temporarily restricted net assets are unspent donor-restricted gifts to be used to support future operations and earnings on permanently restricted endowments, which will be spent in accordance with the terms of the endowment in subsequent periods. Included in permanently restricted net assets are endowment funds that include assets whose earnings have been donor-restricted for the following purposes: Scholarship endowment funds for named scholarships to students Geraldine D. Riordan endowment fund for operations of the Geraldine D. Riordan Volunteer Center Science endowment fund for the purchase of equipment for the science departments Seton endowment fund for the operations of the graduate program in education Maloney endowment fund for faculty development Note 13 - Endowment Interpretation of relevant law The board of trustees of the College has approved management's interpretation of the New Jersey Uniform Prudent Management of Institutional Funds Act as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. The College classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The investment income earned on the accumulations to the permanently restricted endowment funds is classified as temporarily restricted net assets until the donorimposed restrictions have been met or have been appropriated in accordance with the spending policy. Spending policy The College's endowment spending policy is designed to stabilize annual spending levels to preserve the real value of the endowment portfolio over time. The policy allows the College, with board approval, to exceed current year spending levels if prior year earnings were not fully utilized. To meet these objectives, the policy limits spending of endowment return to a percentage of the three-year moving average of the fair value of endowment assets, net of investment management fees, and other endowment-related expenses. The endowment spending rate percentage was 5.00% for fiscal years 2016 and In addition, when a deficit exists, the College has historically used board-designated endowment spending to cover these deficits and this is in excess of the spending rate percentage. The return from applying this endowment spending rate policy is recorded in the operating revenues section in the statements of activities. Return objectives and risk parameters The College has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of income and growth, while seeking to maintain the purchasing power 20