Financial Statements Together with Report of Independent Certified Public Accountants ITHACA COLLEGE. May 31, 2011 and 2010

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1 Financial Statements Together with Report of Independent Certified Public Accountants ITHACA COLLEGE

2 TABLE OF CONTENTS Page Report of Independent Certified Public Accountants 1 Financial Statements: Statements of Financial Position as of 2 Statement of Activities for the year ended May 31, Statement of Activities for the year ended May 31, Statements of Cash Flows for the years ended

3 Audit Tax Advisory Grant Thornton LLP 666 Third Avenue, 13th Floor New York, NY T F REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Trustees of Ithaca College: We have audited the accompanying statements of financial position of Ithaca College (the College ) as of, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the College s management. 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 established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ithaca College as of, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 10 to the financial statements, the College adopted the provisions of Financial Accounting Standards Board Accounting Standards Codification during fiscal New York, New York October 24, 2011 Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

4 Statements of Financial Position As of ASSETS Cash $ 740,228 $ 140,276 Short-term investments 87,935,632 81,583,720 Accounts receivable, net of allowances of $162,100 in 2011 and $163,400 in ,051,453 2,419,895 Inventories, deferred charges and prepaid expenses 5,556,867 5,230,948 Contributions receivable, net 4,638,913 16,245,111 Deposits held with bond trustee 14,992,105 - Notes receivable, net of allowances of $405,000 and $388,783 in 2011 and 2010, respectively 9,382,787 9,060,084 Long-term investments 209,450, ,490,395 Interest rate swap agreements 2,162, ,141 Property, plant and equipment, net 348,888, ,553,042 Total assets $ 685,798,549 $ 607,707,612 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable and accrued expenses $ 37,931,375 $ 34,010,477 Deposits and deferred revenues 5,866,665 6,332,289 Debt obligations, net 190,469, ,633,305 Conditional asset retirement obligations 1,162,499 1,128,470 U.S. Government grants refundable 8,324,265 8,329,660 Interest rate swap agreements 13,403,012 12,565,581 Capital lease obligation - 41,415,599 Total liabilities 257,157, ,415,381 Commitments and contingencies NET ASSETS UNRESTRICTED Current operations 23,255,627 20,855,689 Matching funds under Federal Government loan program 1,688,393 1,198,393 Quasi-endowment 144,251, ,578,392 Debt service, property, plant and equipment renewal and replacement funds 31,096,032 25,506,324 Unexpended bond proceeds 14,992,105 - Net investment in property, plant and equipment 83,265,482 80,597,305 Interest rate swap agreements (11,240,977) (11,581,440) Total unrestricted 287,308, ,154,663 TEMPORARILY RESTRICTED Current operations 304, ,620 Temporarily restricted endowments 30,211,887 59,484 Term endowments and life income funds 215, ,923 Property, plant and equipment purposes 75,152,978 53,906,833 Land and buildings 460,433 15,180,449 Total temporarily restricted 106,345,889 69,858,309 PERMANENTLY RESTRICTED Endowment 34,987,084 34,279,259 Total permanently restricted 34,987,084 34,279,259 Total net assets 428,641, ,292,231 Total liabilities and net assets $ 685,798,549 $ 607,707,612 The accompanying notes are an integral part of these financial statements

5 Statement of Activities For the year ended May 31, 2011 OPERATING REVENUES AND SUPPORT Temporarily Permanently Unrestricted Restricted Restricted Totals Tuition and fees $ 224,779,050 $ - $ - $ 224,779,050 Less financial aid (85,729,885) - - (85,729,885) Net tuition and fees 139,049, ,049,165 Sales of auxiliary services 60,001, ,001,553 Investment income 537,391 (273) - 537,118 Private gifts and grants 5,327, ,452-5,458,597 Federal grants and contracts 2,577,950 24,815-2,602,765 State appropriations 1,028, ,028,775 Sales and services of educational departments 4,606, ,606,955 Other revenues 1,329,769 44,282-1,374,051 Net investment return designated for operations 8,369, ,369,245 Net assets released from restrictions for facilities 469, ,948 Net assets released from restrictions for operating purposes 379,357 (379,357) - - Total operating revenues and support 223,677,253 (179,081) - 223,498,172 OPERATING EXPENSES Instruction, research and public service 83,242, ,242,727 Academic support 19,440, ,440,090 Student services 20,006, ,006,152 Institutional support 34,199, ,199,265 Auxiliary activities 40,203, ,203,360 Total expenses 197,091, ,091,594 Increase (decrease) in net assets from operating activities 26,585,659 (179,081) - 26,406,578 NONOPERATING ACTIVITIES Net assets released from restrictions for facilities - (469,948) - (469,948) Net assets released from restrictions for nonoperating purposes (88,535) 88, Capital gifts 1,190,048 4,724,142 1,239,510 7,153,700 Higher education capital grant - 2,281,026 2,281,026 Net realized and unrealized gains 25,775,431 12,559,949-38,335,380 Net investment appreciation designated for operations (5,796,721) (2,572,524) - (8,369,245) Postretirement benefits expense other than net periodic benefit cost (1,987,448) - - (1,987,448) Change in value of interest rate swap agreements 340, ,463 Gain on termination of college circle lease agreement 2,658, ,658,455 Increase in net assets from nonoperating activities 22,091,693 16,611,180 1,239,510 39,942,383 Changes in net assets before cumulative effect of reclassification of net assets due to change in law 48,677,352 16,432,099 1,239,510 66,348,961 Reclassification of net assets due to change in law (19,523,796) 20,055,481 (531,685) - Changes in net assets 29,153,556 36,487, ,825 66,348,961 Net assets, beginning of year 258,154,663 69,858,309 34,279, ,292,231 Net assets, end of year $ 287,308,219 $ 106,345,889 $ 34,987,084 $ 428,641,192 The accompanying notes are an integral part of this financial statement

6 Statement of Activities For the year ended May 31, 2010 OPERATING REVENUES AND SUPPORT Temporarily Permanently Unrestricted Restricted Restricted Totals Tuition and fees $ 212,673,125 $ - $ - $ 212,673,125 Less financial aid (83,732,886) - - (83,732,886) Net tuition and fees 128,940, ,940,239 Sales of auxiliary services 59,150, ,150,875 Investment income 1,454, ,454,427 Private gifts and grants 4,933, ,012-5,149,407 Federal grants and contracts 2,597, ,597,772 State appropriations 819, ,420 Sales and services of educational departments 3,862, ,862,549 Other revenues 2,045, ,045,517 Net investment return designated for operations 8,171, ,171,409 Net assets released from restrictions for facilities 412, ,736 Net assets released from restrictions for operating purposes 355,090 (355,090) - - Total operating revenues and support 212,743,370 (139,019) - 212,604,351 OPERATING EXPENSES Instruction, research and public service 81,785, ,785,980 Academic support 17,473, ,473,696 Student services 19,181, ,181,034 Institutional support 34,051, ,051,388 Auxiliary activities 40,176, ,176,868 Total expenses 192,668, ,668,966 Increase in net assets from operating activities 20,074,404 (139,019) - 19,935,385 NONOPERATING ACTIVITIES Net assets released from restrictions for facilities - (412,736) - (412,736) Net assets released from restrictions for non-operating purposes 52,255 (52,255) - - Capital and endowment gifts 386,836 8,555, ,768 9,201,769 Net realized and unrealized gains (losses) 16,862,895 (41,544) (981) 16,820,370 Net investment appreciation designated for operations (8,171,409) - - (8,171,409) Postretirement benefits expense other than net periodic benefit cost (340,436) - - (340,436) Change in value of interest rate swap agreements (1,305,879) - - (1,305,879) Gain on termination of interest rate swap agreement 746, ,090 Loss on bond refinance, unexpended bond proceeds investment and arbitrage rebate tax (2,162,222) - - (2,162,222) Write-off of college circle leasehold improvements (1,836,888) - - (1,836,888) Increase in net assets from nonoperating activities 4,231,242 8,048, ,787 12,538,659 Changes in net assets 24,305,646 7,909, ,787 32,474,044 Net assets, beginning of year 233,849,017 61,948,698 34,020, ,818,187 Net assets, end of year $ 258,154,663 $ 69,858,309 $ 34,279,259 $ 362,292,231 The accompanying notes are an integral part of this financial statement

7 Statements of Cash Flows For the years ended CASH FLOWS FROM OPERATING ACTIVITIES Changes in net assets $ 66,348,961 $ 32,474,044 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization 16,026,276 15,682,942 Net realized and unrealized gains on investments (38,335,380) (16,820,370) Change in value of interest rate swap agreements (340,463) 1,305,879 Gain on termination of interest rate swap agreement - 733,910 Change in unamortized discount on contributions receivable (600,348) (222,110) Gifts of property and equipment (24,410) (26,485) Amortization of bond discount and bond premium (450,340) (674,263) Accretion of interest on conditional asset retirement obligations 34,029 (133,315) Contributions and investment income restricted for investment (1,493,485) (706,431) Changes in assets and liabilities: Decrease (increase) in accounts receivable 368,442 (821,137) Decrease in contributions receivable 12,206,546 1,172,122 (Increase) decrease in inventories, deferred charges and prepaid expenses (325,919) 896,448 Increase in accounts payable and accrued expenses 3,920,898 1,857,785 (Decrease) increase in deposits and deferred revenues (465,624) 921,251 Increase in accrued interest payable on capital lease obligation - 301,354 Gain on termination of college circle lease agreement (2,658,455) - Net cash provided by operating activities 54,210,728 35,941,624 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (86,093,969) (45,168,067) Purchases of investments (61,726,197) (108,896,603) Proceeds from the sales of investments 43,757, ,421,858 Increase in notes receivable (322,703) (856,610) Net cash used in investing activities (104,385,442) (33,499,422) CASH FLOWS FROM FINANCING ACTIVITIES Contributions and investment income restricted for investment 1,493, ,431 Payments on debt obligations (4,825,898) (5,895,000) Premium received on conversion of debt - 2,823,141 Proceeds from debt borrowings 54,112,474 - Decrease in U.S. Government grants refundable (5,395) (46,413) Net cash provided by (used in) financing activities 50,774,666 (2,411,841) Net increase in cash 599,952 30,361 Cash, beginning of year 140, ,915 Cash, end of year $ 740,228 $ 140,276 Supplemental disclosure: Cash paid for interest on debt obligations $ 7,171,770 $ 4,913,012 Cash paid for interest on capital lease obligation $ - $ 2,521,147 The accompanying notes are an integral part of these financial statements

8 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Ithaca College (the College ) is a four-year, primarily undergraduate institution which offers a diversified program of professional and liberal arts studies. The College was founded in 1892 as the Ithaca Conservatory of Music, and became a nonprofit, private college in The current campus is relatively new, as its construction began in approximately Today, Ithaca College offers a wide variety of programs through the School of Business, the Roy H. Park School of Communications, the School of Health Sciences and Human Performance, the School of Humanities and Sciences, the School of Music, and the Division of Graduate and Professional Studies. The College s programs are designed to address the need for rigorous academic preparation in highly specialized professional fields and the need for students to prepare themselves for the complex demands of modern society by acquiring intellectual breadth beyond the bounds of their chosen profession. The College is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code ( IRC ). Accordingly, no provision for income taxes has been reflected in the accompanying financial statements. Basis of Presentation The accompanying financial statements of the College have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ( US GAAP ). Classifications of Net Assets The College reports its net assets and changes therein based on the existence or absence of donor-imposed restrictions as follows: Unrestricted Net Assets Unrestricted net assets represent expendable resources that are generally available for support of the College s activities, with certain designations. Specifically, certain unrestricted net assets are committed through contractual agreements. Such amounts primarily consist of matching funds under a student loan program of the federal government and required trusteed balances under debt obligation agreements. Temporarily Restricted Net Assets Temporarily restricted net assets are net assets subject to donor-imposed stipulations that will be met either by actions of the College or the passage of time. The College reports gifts of cash and other assets as 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 statement of activities as net assets released from restrictions. Temporarily restricted net assets also include earnings on permanently restricted endowment funds that have not yet been appropriated by the College s Board of Trustees

9 Permanently Restricted Net Assets Permanently restricted net assets result from donors who stipulate that their donated resources be maintained in perpetuity by the College. Generally, the College is permitted to expend part or all of the income and gains derived from these donated assets, restricted only by donors stipulations as to their use. Fair Value Measurements In September 2006, the Financial Accounting Standards Board ( FASB ) issued topic 820, Fair Value Measurements, which was effective for the College s fiscal year beginning June 1, This standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price between market participants in an orderly transaction as prescribed by the standard. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the transparency of information used in the valuation of the respective asset or liability as of the measurement date. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments in Level 1 include listed equities held in the name of the College, and exclude listed equities and other securities held indirectly through commingled funds. Level 2 - Pricing inputs, including broker quotes, are generally those other than exchange quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Also included in Level 2 are investments measured using a net asset value ( NAV ) per share, or its equivalent, that may be redeemed at that NAV at the date of the statement of financial position or in the near term, which the College has generally considered to be within 90 days. Level 3 - Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs used in the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include privately held investments, partnership and similar interests. Also included in Level 3 are investments measured using a NAV per share, or its equivalent, that can never be redeemed at NAV or for which redemption at NAV is uncertain due to lockup periods or other investment restrictions

10 Revenue Recognition Tuition revenues for the fall and spring are recognized in the academic semester to which they relate. Revenues and expenses relating to summer session activities that are completed prior to fiscal year-end are recognized in the current fiscal year. The carrying value of student receivables has been reduced by an appropriate allowance for uncollectible accounts, based on historical collection experience and therefore approximates net realizable value. Short-Term Investments Short-term investments are reported at fair value and consist principally of U.S. treasuries, commercial paper and money market funds. These investments are intended to be used for current operations. Long-Term Investments The estimated fair value of investments is based on quoted market prices, except for certain investments, principally limited partnerships and similar interests, for which quoted market prices are not available. The estimated fair value of these investments is based on valuations provided by external investment managers as of the measurement date. Because the private equity, real estate partnership investments and similar interests are not readily marketable, their estimated value is subject to uncertainty and therefore may differ from the value that would have been used had a ready market for such investments existed. Such differences could be material. Investment securities are exposed to various risks, such as interest rate, market, economic conditions, world affairs and credit risks. Due to the level of risk associated with certain investment securities, it is possible that changes in their values could occur in the near term and such changes could materially affect the reported amounts in the accompanying financial statements. Property, Plant and Equipment The College capitalizes computer equipment with a cost of $5,000 or more and other equipment and fixed assets with costs of $2,000 or more which have useful lives greater than one year. Property, plant and equipment are stated at cost and are depreciated on the straight-line basis over the estimated useful lives of the assets as follows: Land improvements 10 years Buildings 4 to 60 years Building improvements 10 years Equipment 5 to 10 years Enterprise software 15 years Assets acquired under capital lease obligations are depreciated over the shorter of their economic useful life or the lease term

11 Maintenance, repairs, and minor improvements are charged to operations as incurred. Major improvements, which substantially extend the useful lives of assets, are capitalized. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts of the College and the resulting gain or loss, if any, is reflected as part of nonoperating activities. Contributions Contributions received, including unconditional promises to give (pledges), are reported as revenues in the period received or pledged at fair value. In addition, contributions are distinguished between and recorded as contributions that increase unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. Gifts are reported as either temporarily or permanently 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 statement of activities as net assets released from restrictions. Donor-restricted contributions as well as donor-restricted income and gains whose restrictions are met within the same year as received are reflected as unrestricted revenue in the statement of activities. Contributions of long-lived assets, cash or other assets to be used to acquire or construct long-lived assets are reported as temporarily restricted revenues. The release of the restriction occurs over the depreciable life of the constructed asset. Grants and Contracts Revenue from grants and contracts is recognized as the related expenses are incurred in accordance with the terms of the respective grant or contract agreement. Amounts received in advance are reported as deferred revenues. Functional Expenses Expenses are reported in the statement of activities in categories recommended by the National Association of College and University Business Officers. The College s primary program services are instruction, research and public service. Expenses reported as academic support, student services, institutional support and auxiliary activities are incurred in support of these primary program services. The College allocates operation and maintenance of plant, depreciation and amortization and interest expense based on proportional expenditures using estimates of building square footage and the functional use of each facility financed by debt. Operations The accompanying statements of activities report the changes in unrestricted, temporarily restricted and permanently restricted net assets, distinguishing between operating and nonoperating activities. Unrestricted operating revenues consist of those activities attributable to the College s primary mission of providing education, research and public service. They include investment earnings on the College s operating cash flows and a portion of the return on long-term investments as determined in accordance with the College s spending rate policy. The remaining return on long-term investments is classified as part of nonoperating activities. Nonoperating activities also include capital and endowment contributions; net assets released from restrictions for capital purposes; changes in the value of certain financial instruments; and, other activities considered to be more of an unusual or nonrecurring nature

12 Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant management estimates and assumptions relate to the determination of allowances for doubtful accounts for student accounts, notes and contributions receivable; the determination of the College s postretirement benefit obligation; provision for operating accruals; useful lives assigned to fixed assets; conditional asset retirement obligations; and the reported fair values of certain of the College s assets and liabilities. Actual results could differ from those estimates. Concentrations of Credit Risk Financial instruments that potentially subject the College to concentrations of credit risk consist principally of cash and investments in fixed income funds, equity funds and limited partnership and similar interests. The College maintains its cash in various bank deposit accounts that, at times, may exceed federally insured limits. The College s cash investments were placed in high quality financial institutions. To minimize risks associated with investments, the College has a diversified investment portfolio in a variety of asset classes. The College does not anticipate any losses in such accounts. Income Taxes The College follows the FASB s accounting guidance topic 740, Accounting for Uncertainty in Income, Taxes which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. This section provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more-likely-than-not to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. The College is exempt from income tax under IRC Section 501(c)(3), though it is subject to tax on income unrelated to its exempt purposes, unless that income is otherwise excluded by the Code. The tax years ending May 31, 2008, 2009 and 2010 are still open to audit for both federal and state purposes. The adoption of this topic did not have any impact on the College s financial statements. New Accounting Pronouncements In January 2010, the FASB issued ASU , Improving Disclosures about Fair Value Measurements. This standard amends ASC 820 to require additional disclosures. The guidance requires entities to disclose transfers of assets in and out of Levels 1 and 2 of the fair value hierarchy, and the reasons for such transfers. These disclosures will be effective for the College in fiscal In addition, the guidance requires a separate presentation of purchases and sales in the Level 3 asset reconciliation which will also be effective for the College in fiscal The adoption of this guidance in subsequent years is not expected to have a material effect on the College s financial statements

13 Subsequent Events The College evaluated its May 31, 2011 financial statements for subsequent events through October 24, 2011, the date the financial statements were issued. The College is not aware of any material subsequent events which would require recognition or disclosure in the financial statements. 2. CONTRIBUTIONS RECEIVABLE, NET Contributions, including unconditional promises to give, are recognized as revenues in the period received. Of the contributions receivable outstanding at, $3,983,673 and $16,151,331, respectively, are temporarily restricted for land, property improvements and other purposes, and represent pledges for the Park Center for Business and the Athletics and Events Center. At May 31, 2011, of the remaining contributions receivable, $433,179 was temporarily restricted for other purposes, $12,356 was time restricted and $581,774 was permanently restricted for endowment purposes. At May 31, 2010, of the remaining contributions receivable, $223,046 was temporarily restricted for other purposes, $31,274 was time restricted and $811,878 was permanently restricted for endowment purposes. Contributions receivable, net, are summarized as follows at : Unconditional promises expected to be collected in: Less than one year $ 1,686,243 $ 9,682,109 One to five years 2,635,323 4,702,921 After five years 689,417 2,832,499 5,010,983 17,217,529 Less: Unamortized discount (372,070) (972,418) Contributions receivable, net $ 4,638,913 $ 16,245,111 Contributions to be received after one year are discounted using a credit-adjusted rate. Discount rates on all outstanding contributions ranged between 3.05% and 5.13% at. No allowance for uncollectible contributions receivable is provided at based upon management s judgment including such factors as prior collection history, type of contribution and nature of fund-raising activity. Conditional promises to give are not recognized until the conditions on which they depend are substantially met. During fiscal 2011 and 2010, the College was notified of certain intentions to give. These conditional gifts, if received, would be used in support of capital development. Consistent with US GAAP, such amounts have not been included in contributions receivable due to their conditional nature

14 Total costs incurred for fund-raising activities, which are recorded as an expense when incurred, totaled $2,732,570 and $2,453,876 in 2011 and 2010, respectively, and are included as part of institutional support in the accompanying statements of activities. 3. INVESTMENTS Investments, which include long-term and short-term investments and deposits held with trustee, consist of the following at : Fair Value Cost Fair Value Cost Commercial paper, money market funds and foreign currency securities $ 104,980,866 $ 104,660,931 $ 79,646,806 $ 79,538,399 Government and corporate bonds 18,298,822 18,065,307 18,170,975 19,252,400 Common stock 82,476,072 75,514,794 70,663,299 83,781,217 Hedge funds and absolute return 47,567,609 30,320,559 42,698,036 30,320,559 Private equities 21,305,061 19,220,647 17,016,963 17,446,291 Real estate partnerships 37,749,835 42,902,623 27,878,036 39,303,176 $ 312,378,265 $ 290,684,861 $ 256,074,115 $ 269,642,042 Long-term investments were held for the following purposes at : Fair Value Cost Fair Value Cost Endowment and similar purposes $ 209,450,528 $ 188,084,160 $ 174,490,395 $ 189,810,991 For investment purposes, a portion of the long-term investments is pooled with assets owned by separate funds based upon shares purchased by the funds when they enter the pool. The pooled assets are valued on a monthly basis and a per share fair value is determined and used to calculate the number of shares applicable to funds entering or exiting the pool. The College has adopted a total return spending policy on its endowment and similar investments. Under this policy, the College utilizes an amount ranging between 4% and 6% of the average quarterly fair value of its pooled investment portfolio for the preceding five years. The College utilized 4.55% of the average quarterly fair value of its pooled investment portfolio in fiscal 2011 and To the extent that the total spending requirement for the current year is not fulfilled by interest and dividends, the College utilizes unrealized and realized appreciation of the endowment and assets held for similar purposes. Net realized and unrealized gains and losses, which are recognized as either unrestricted, temporarily restricted, or permanently restricted, depending upon donor stipulations, if any, are also maintained within the portfolio of endowment and other assets held for similar purposes

15 The following schedule summarizes the net investment return (loss) and its classification in the 2011 and 2010 statements of activities: Temporarily Permanently Unrestricted Restricted Restricted Total Dividends and interest, net $ 537,391 $ (273) $ - $ 537,118 Net realized and unrealized gains 25,775,431 12,559,949-38,335,380 Total return on investments $ 26,312,822 $ 12,559,676 $ - $ 38,872,498 Investment income designated for operations $ 537,309 $ (273) $ - $ 537,036 Income on unexpended bond proceeds Net investment appreciation designated for operations 5,796,721 2,572,524-8,369,245 Return on investments available for reinvestment 19,978,710 9,987,425-29,966,135 Total return on investments $ 26,312,822 $ 12,559,676 $ - $ 38,872, Temporarily Permanently Unrestricted Restricted Restricted Total Dividends and interest, net $ 1,415,397 $ 59 $ - $ 1,415,456 Net realized and unrealized gains (losses) 16,862,895 (41,544) (981) 16,820,370 Total return (loss) on investments $ 18,278,292 $ (41,485) $ (981) $ 18,235,826 Investment income designated for operations $ 1,454,368 $ 59 $ - $ 1,454,427 Fees, net of income on unexpended bond proceeds (38,971) - - (38,971) Net investment appreciation designated for operations 8,171, ,171,409 Return (loss) on investments available for reinvestment 8,691,486 (41,544) (981) 8,648,961 Total return (loss) on investments $ 18,278,292 $ (41,485) $ (981) $ 18,235,826 Investment management and custodian fees are netted against investment returns and totaled $715,093 and $979,480 in 2011 and 2010, respectively

16 The following table serves to prioritize the inputs used to value the College s investments within the fair value hierarchy as of May 31, 2011: Commercial Paper, Money Market Funds Alternative Investment Assets Hedge and Foreign Government Funds and Currency Corporate Common Absolute Private Real Estate Total Securities Bonds Stock Return Equities Partnerships Investments Level 1 $ 104,980,866 $ - $ 5,642,202 $ - $ - $ - $ 110,623,068 Level 2-18,298,822 76,833,870 8,087,158-16,961, ,181,052 Level ,480,451 21,305,061 20,788,633 81,574,145 $ 104,980,866 $ 18,298,822 $ 82,476,072 $ 47,567,609 $ 21,305,061 $ 37,749,835 $ 312,378,265 The following table serves to prioritize the inputs used to value the College s investments within the fair value hierarchy as of May 31, 2010: Commercial Paper, Money Market Funds Alternative Investment Assets Hedge and Foreign Government Funds and Total Currency and Corporate Common Absolute Private Real Estate Investment Securities Bonds Stock Return Equities Partnerships Assets Level 1 $ 79,646,806 $ - $ 7,681,631 $ - $ - $ - $ 87,328,437 Level 2-18,170,975 62,981,668 6,893,156-15,630, ,675,937 Level ,804,880 17,016,963 12,247,898 65,069,741 $ 79,646,806 $ 18,170,975 $ 70,663,299 $ 42,698,036 $ 17,016,963 $ 27,878,036 $ 256,074,115 The following table summarizes the changes in the College s Level 3 investments for the year ended May 31, 2011: Hedge Funds and Private Real Estate Absolute Return Equities Partnerships Total Balance, beginning of year $ 35,804,880 $ 17,016,963 $ 12,247,898 $ 65,069,741 Purchases of investments - 2,458,108 7,155,361 9,613,469 Proceeds from sales, redemptions and distributions of investments - (686,398) (2,176,742) (2,863,140) Net unrealized gains 3,675,571 2,516,388 3,562,116 9,754,075 Balance, end of year $ 39,480,451 $ 21,305,061 $ 20,788,633 $ 81,574,

17 The following table summarizes the changes in the College s Level 3 investments for the year ended May 31, 2010: Hedge Funds and Private Real Estate Absolute Return Equities Partnerships Total Balance, beginning of year $ 39,696,560 $ 12,588,109 $ 13,612,613 $ 65,897,282 Reclassifications to Level 2 (6,044,319) - - (6,044,319) Purchases of investments 577 2,698,922 2,541,007 5,240,506 Proceeds from sales, redemptions and distributions of investments (2,155,976) (201,402) (152,841) (2,510,219) Net unrealized gains (losses) 4,308,038 1,931,334 (3,752,881) 2,486,491 Balance, end of year $ 35,804,880 $ 17,016,963 $ 12,247,898 $ 65,069,741 The College uses the Net Asset Value ( NAV ) per share for purposes of reporting the fair value of all its underlying investments which: (a) do not have a readily determinable fair value and (b) prepare their financial statements consistent with the measurement principles of an investment company or have the attributes of an investment company. Per ASU , the following table lists investments by major category: At May 31, 2011, investments classified as Level 2 are as follows: Redemption $ Amount Timing to Restrictions Significant NAV # of Life of of Unfunded Draw Down Redemption in Place Strategy Investment Strategy in Funds Funds Fund Commitments Commitments Redemption Terms Restrictions at Year End Hedge funds and absolute High growth and long-term $ 8,087,158 1 N/A $ - N/A Quarterly within 45 days N/A N/A return capital appreciation notice Fixed income High quality sovereign 18,298,822 2 N/A - N/A Daily to 10 business days N/A N/A bonds notice Real estate partnerships Real assets 16,961,202 2 N/A - N/A Daily N/A N/A Equity Global equities 76,833,870 6 N/A - N/A Daily to 30 days notice N/A N/A Total $ 120,181, $ - At May 31, 2011, investments classified as Level 3 investments are as follows: $ Amount Timing to Restrictions Significant NAV # of Life of of Unfunded Draw Down Redemption in Place Strategy Investment Strategy in Funds Funds Fund Commitments Commitments Redemption Terms Restrictions at Year End Absolute return hedge High growth and long-term $ 39,480,451 3 N/A $ - N/A April 1 with 90 days notice N/A N/A funds capital appreciation December 31, with 90 days notice Private equities High growth private companies and capital appreciation 21,305, Up to 15 years 5,490,843 Over the life of the funds Illiquid N/A N/A Real estate partnerships Real estate equity and debt investments 20,788,633 6 Up to 10 years 5,693,780 Over the life of the funds Total $ 81,574, $ 11,184,623 Illiquid N/A N/A

18 At May 31, 2010, investments classified as Level 2 investments are as follows: Redemption $ Amount Timing to Restrictions NAV # of Life of of Unfunded Draw Down Redemption in Place Strategy In Funds Funds Fund Commitments Commitments Redemption Terms Restrictions at Year End Hedge funds and absolute $ 6,893,156 1 N/A $ - N/A Quarterly within 45 days N/A N/A return notice Fixed income 18,170,975 2 N/A - N/A Daily to 10 business days N/A N/A notice Real estate partnerships 15,630,138 2 N/A - N/A Daily N/A N/A Equity 62,981,668 6 N/A - N/A Daily to 30 days notice N/A N/A Total $ 103,675, $ - At May 31, 2010, investments classified as Level 3 investments are as follows: $ Amount Timing to Restrictions NAV # of Life of of Unfunded Draw Down Redemption in Place Strategy In Funds Funds Fund Commitments Commitments Redemption Terms Restrictions at Year End Absolute return hedge $ 35,804,880 5 N/A $ - N/A April 1 with 90 days notice N/A N/A funds December 31, with 90 days notice Private equity 17,016, Up to 15 years 7,905,967 Over the life of the funds Liquid N/A N/A Real estate partnerships 12,247,898 6 Up to 10 years 12,806,548 Over the life of the funds Liquid N/A N/A Total $ 65,069, $ 20,712, STUDENT LOANS RECEIVABLE AND REFUNDABLE GOVERNMENT GRANTS The College makes uncollateralized loans to students based on financial need under the Perkins Federal loan program. Student loans are funded through Federal government loan programs or institutional resources. At, student loans represented 1.4% and 1.5% of total assets, respectively Federal government programs $ 9,771,571 $ 9,448,868 Less allowance for doubtful accounts: Beginning of year (388,784) (388,784) Increases - - End of year (388,784) (388,784) Student loans receivable, net $ 9,382,787 $ 9,060,

19 Of these amounts, as of, $6,916,202 and $7,010,842, respectively, were not in repayment status. Amounts due under the Perkins loan program are guaranteed by the government and therefore, no reserves are placed on any past due balances under the program. At, the following amounts were past due under the student loan program. In default > 240 June 30, In default < 240 days (monthly installments) or 270 days (other installments) days (monthly installments) or 270 days (other installments) and < 2 years In default > 2 years, up to 5 years In default > 5 years Total past due 2011 $ 465,591 $ 131,847 $ 72,180 $ 106,032 $ 775, , ,576 51,605 98, ,062 The availability of funds for loans under the Perkins Federal loan program is dependent on reimbursement to the pool from repayments on outstanding loans. Funds advanced by the Federal government of $8,324,265 and $8,329,660 at, respectively, are ultimately refundable to the government and are classified as liabilities in the statement of financial position. Outstanding loans cancelled under the program result in a reduction of the funds available for loan and a decrease in the liability to the government. 5. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net, consists of the following at : Land $ 13,000,233 $ 6,204,751 Land improvements 1,892,236 2,596,161 Buildings and building improvements 436,482, ,507,147 Equipment and software 76,530,941 75,764, ,906, ,072,168 Less: Accumulated depreciation (179,018,040) (171,519,126) Property, plant and equipment, net $ 348,888,001 $ 317,553,

20 Interest expense totaling $108,858 and $175,207 was capitalized to construction projects for the years ended, respectively. Earnings, in excess of trustee fees, on unspent bond proceeds, which offset interest capitalized, totaled $82 for the year ended May 31, Trustee fees, in excess of earnings, on unspent bond proceeds, which offset interest capitalized, totaled $38,971 for the year ended May 31, On March 20, 2006, the College entered into a lease agreement with the Colgate Rochester Crozer Divinity School for approximately 27,000 square feet of dedicated and shared space to house the Rochester base of the College s Physical Therapy Program. The College paid $187,941 and $183,958, plus pro-rated occupancy expenses under the terms of this lease, for the years ending, respectively. The base term is 10 years with the option for two additional 10-year renewals. 6. DEBT OBLIGATIONS Debt obligations at consist of the following: Original Outstanding Balance Principal Tompkins County Industrial Development Agency Ithaca College insured revenue bonds: Series 2004, variable rate demand bonds due 2034 (a) $ 31,100,000 $ 28,195,000 $ 28,955,000 Series 2005A, 3.00% % fixed rate bonds due 2013 (net of $19,284 and $25,183 unamortized premium at May 31, 2011 and 2010, respectively) (b) Series 2005B, variable rate demand bonds due 2026 (net of $208,547 unamortized premium at, respectively) (b) Series 2007, 2.00%-5.00% fixed rate bonds due 2016 (net of $494,368 and $646,760 unamortized premium at May 31, 2011 and 2010, respectively) (c) 9,080,000 40,290,000 31,075,000 3,844,284 40,498,547 29,419,368 5,020,183 40,498,547 30,571,760 Dormitory Authority of the State of New York ( DASNY ) Ithaca College insured revenue bonds: Series 2008, 2.75%-5.00% fixed rate bonds due 2017 (net of $1,215,568 and $1,507,815 unamortized premium at May 31, 2011 and 2010, respectively) (d) Tompkins County Development Corporation Ithaca College insured revenue bonds: Series 2011, 3.00%-5.50% fixed rate bonds due 2041 (net of $35,460 unamortized discount at May 31, 2011) (f) 38,505,000 34,825,568 36,587,815 25,905,000 25,869,540 - Nationwide Life Insurance Company: College Circle Loan #1, 6.78% fixed rate loan maturing in 2033(g) 19,702,685 19,403,425 - College Circle Loan #2, 6.63% fixed rate loan maturing in 2033(g) 619, ,568 - College Circle Loan #3, 7.26% fixed rate loan maturing in 2033(g) 3,085,787 3,041,994 - College Circle Loan #4, 6.80% fixed rate loan maturing in 2033(g) 4,835,486 4,762,247 - $ 204,198,131 $ 190,469,541 $ 141,633,

21 a. Tompkins County Industrial Development Agency Series 2004 The Series 2004 bonds are special limited obligations secured by a guarantee of the College and a pledge of its gross tuition and an insurance policy issued by XL Capital Assurance, Inc. guaranteeing the timely payment of principal and interest on the bonds. The Series 2004 bonds were issued at full face value of $31,100,000 with a variable rate of interest, which is reset on a weekly basis. The interest rate ranged between.18% and.34% during fiscal 2011 and 0.14% and 0.31% during fiscal A liquidity facility has been provided by HSBC Bank USA ( HSBC ). The proceeds of the issue were used to fund the renovation of the Garden Apartments student housing complex, the design and implementation of a new student information system, the upgrade of the campus electrical infrastructure, and other campus renovation projects. On April 10, 2008, HSBC issued a direct-pay Letter of Credit to provide additional credit enhancement for the Series 2004 bonds. The insurance policy issued by XL Capital Assurance, Inc. remains in place and the HSBC liquidity facility is suspended while the Letter of Credit is in effect. On August 5, 2009, TD Bank, N.A. ( TD Bank ), issued a direct pay Letter of Credit to replace the expiring Letter of Credit previously issued by HSBC, and provided additional credit enhancement for the Series 2004 bonds. The Letter of Credit expires December 31, The insurance policy issued by Syncora Guarantee Inc. (formerly known as XL Capital Assurance, Inc.) remains in place. Concurrent with the issuance of the Series 2004 bonds, the College entered into an interest rate swap agreement for the notional amount of $10,420,000 with UBS AG wherein the College agreed to pay to UBS AG a fixed rate of interest equal to 3.405% on the Series 2004 bonds and to receive from UBS AG a payment equal to 59% of LIBOR plus 40 basis points (.51820% at May 31, 2011). The interest rate received by the College is reset on a weekly basis. The agreement expires coincident with the maturity of the bonds on July 1, The estimated fair value of the swap at is $(1,252,703) and $(1,191,782), respectively, and is included as a liability in the accompanying statement of financial position. The unrealized loss due to changes in the valuation of the swap amounted to $(60,921) in fiscal 2011 and $(69,711) in fiscal 2010 and is recorded as a nonoperating item in the accompanying statements of activities, respectively. The College made principal payments of $760,000 and $740,000 in fiscal years 2011 and 2010 respectively, and net interest payments of $367,027 and $362,456 on these bonds for the years ended May 31, 2011 and 2010, respectively. b. Tompkins County Industrial Development Agency Series 2005A and 2005B The Series 2005 bonds are special limited obligations secured by a guarantee of the College and a pledge of its gross tuition and an insurance policy issued by XL Capital Assurance, Inc. guaranteeing the timely payment of principal and interest on the bonds

22 The Series 2005A and Series 2005B bonds were issued at discounts of $45,778 and $208,547, respectively, resulting in net proceeds to the College of $49,115,675. The premiums are being amortized over the term of the bonds using the effective interest method. The net proceeds of the Series 2005A and Series 2005B bonds were used to advance refund the entire Series 1997 bonds and $5,955,000 of the Series 1998 bonds. The interest rate on the Series 2005B variable rate bonds ranged between.18% and.34% during fiscal 2011 and 0.14% and 0.72% during fiscal A liquidity facility for the Series 2005B bonds is provided by HSBC. On April 10, 2008, HSBC issued a direct-pay Letter of Credit to provide additional credit enhancement for the Series 2005B bonds which expired April 9, 2009 (see below for renewal). The insurance policy issued by XL Capital Assurance, Inc. remains in place and the HSBC liquidity facility is suspended while the Letter of Credit is in effect. Concurrent with the issuance of the Series 2005B bonds, the College entered into an interest rate swap agreement for the notional amount of $40,290,000 with Dexia Credit Local ( Dexia ) wherein the College agreed to pay Dexia a fixed rate of interest equal to 3.11% on the Series 2005B bonds, and to receive from Dexia a payment equal to 67% of USD-LIBOR-BBA. The interest rate received by the College is reset on a weekly basis. The agreement expires coincident with the maturity of the bonds on July 1, On August 20, 2009, HSBC extended its Letter of Credit to provide an additional credit enhancement expiring December 13, Additionally, the College entered into a novation agreement with Bank of America, whereby Bank of America will stand in place of Dexia as the new counterparty for the existing swap agreement for the notional amount of $40,290,000. In consideration of this agreement, the College agreed to pay Bank of America a fixed rate of interest equal to 3.22% on the notional amount, and to receive from Bank of America a payment equal to 67% of USD-LIBOR-BBA ( % and % at, respectively). The interest rate received by the College is reset on a weekly basis. The agreement expires coincident with the maturity of the Series 2005B bonds on July 1, The estimated fair value of the swap at was $(4,177,109) and $(3,678,233), respectively, and is included as a liability in the accompanying statements of financial position. The unrealized loss due to the change in the valuation of the swap amounted to $(498,876) and $(1,533,318) for the years ended, respectively, and was recorded as a nonoperating item in the fiscal 2011 and 2010 accompanying statements of activities, respectively. The College made principal payments of $1,170,000 and $1,130,000 on the Series 2005A bonds in fiscal years 2011 and 2010, respectively, and net interest payments of $1,497,919 for the year ended May 31, 2011 and $1,600,401 for the year ended May 31, 2010 on the Series 2005A and Series 2005B bonds. c. Tompkins County Industrial Development Agency Series 2007 The Series 2007 bonds are special limited obligations secured by a guarantee of the College and an insurance policy issued by XL Capital Assurance, Inc. guaranteeing the timely payment of principal and interest on the bonds