FRESNO PACIFIC UNIVERSITY AND SUBSIDIARY

Transcription

1 FRESNO PACIFIC UNIVERSITY AND SUBSIDIARY Consolidated Financial Statements With Independent Auditors Report

2 Table of Contents Independent Auditors' Report 1 Consolidated Financial Statements Consolidated Statement of Financial Position 3 Consolidated Statement of Activities 4 Consolidated Statement of Cash Flows 5 6 Page

3 INDEPENDENT AUDITORS REPORT Board of Trustees Fresno Pacific University and Subsidiary Fresno, California We have audited the accompanying consolidated financial statements of Fresno Pacific University and Subsidiary (the University), which comprise the consolidated statements of financial position as of, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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. Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the University's preparation and fair presentation of the consolidated 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 University'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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 Board of Trustees Fresno Pacific University and Subsidiary Fresno, California Basis for Qualified Opinion As discussed in Note 15 to the consolidated financial statements, the University excludes consolidation of Fresno Pacific University Foundation (Foundation). In our opinion, accounting principles generally accepted in the United States of America require the Foundation be accounted for as a consolidated subsidiary due to control and economic interest. If the consolidated financial statements of the Foundation had been consolidated with those of the University, total assets and total liabilities would be increased by approximately 26,668,000 and 8,836,000, respectively, and revenues and expenses would be increased by approximately 1,851,000 and 592,000, respectively, for the year then ended. Qualified Opinion In our opinion, except for the effects of not consolidating Fresno Pacific University Foundation, as discussed in the Basis for Qualified Opinion paragraph, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Fresno Pacific University as of, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter The consolidated financial statements of Fresno Pacific University as of April 30, 2014, were audited by other auditors whose report dated September 23, 2014, expressed an unmodified opinion on those statements. Prior Period Adjustment As described in Note 16 of the consolidated financial statements, adjustments to previously reported net assets as of April 30, 2014, were identified during the current year. Accordingly, retrospective adjustments have been made to net assets. Our opinion is not modified with respect to this matter. Pleasanton, California December 17, 2015

5 Consolidated Statement of Financial Position Year Ended ASSETS: Cash and cash equivalents 604,081 Restricted cash 333,087 Investments 10,902,780 Accounts and other receivables 4,722,454 Notes receivable 921,120 Prepaid expenses 883,426 Other assets 87,148 Property and equipment, net 33,763,284 Total Assets 52,217,380 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable 1,027,096 Accrued expenses and other liabilities 4,190,718 Amounts held for others 237,238 Deposits and deferred revenue 2,883,483 Capital lease obligation 386,261 Interest rate swap obligation 536,649 Long-term debt 12,562,554 21,823,999 Net assets: Unrestricted 16,803,132 Temporarily restricted 8,727,725 Permanently restricted 4,862,524 30,393,381 Total Liabilities and Net Assets 52,217,380 See notes to consolidated financial statements -3-

6 Consolidated Statement of Activities Year Ended Temporarily Permanently Unrestricted Restricted Restricted Total REVENUE, SUPPORT, AND RECLASSIFICATIONS: Student tuition and fees 60,795, ,795,242 Less student aid (14,548,783) - - (14,548,783) 46,246, ,246,459 Auxiliary services 5,095, ,095,712 Private gifts and grants 1,922,921 1,801,143 24,722 3,748,786 Investment income 260, , ,465 Other income 635, ,371 54,160,919 2,452,152 24,722 56,637,793 Net assets released from restrictions 2,213,242 (2,213,242) - - Total Revenue, Support, and Reclassifications 56,374, ,910 24,722 56,637,793 EXPENSES: Instruction 19,300, ,300,547 Academic support 9,925, ,925,269 Student services 8,698, ,698,325 Institutional support 9,370, ,370,982 Auxiliary enterprises 4,593, ,593,542 Fundraising 1,227, ,227,301 Public service 1,538, ,538,082 Total Expenses 54,654, ,654,048 Change in Net Assets 1,720, ,910 24,722 1,983,745 Net Assets, Beginning of Year As previously reported 16,365,409 9,721,100 4,857,862 30,944,371 Prior period adjustments (1,282,390) (1,232,285) (20,060) (2,534,735) As restated 15,083,019 8,488,815 4,837,802 28,409,636 Net Assets, End of Year 16,803,132 8,727,725 4,862,524 30,393,381 See notes to consolidated financial statements -4-

7 Consolidated Statement of Cash Flows Year Ended CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets 1,983,745 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 2,342,178 Net realized and unrealized gain on investments (695,915) Change in value of interest rate swaps (30,025) Change in restricted cash (10,331) Net change in: Accounts and other receivables (822,483) Prepaid expenses (136,843) Other assets 162,800 Accounts payable (361,754) Accrued expenses and other liabilities (727,991) Deposits and deferred revenue 10,315 Net Cash Provided by Operating Activities 1,713,696 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,035,190) Proceeds from the sales of investments 4,506,681 Purchases of investments (2,461,722) Collections on notes receivable 177,914 Net Cash Provided by Investing Activities 1,187,683 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt (18,616,676) Proceeds from long-term debt 15,216,670 Payments on capital lease obligation (37,302) Net Cash Used in Financing Activities (3,437,308) Change in Cash and Cash Equivalents (535,929) Cash and Cash Equivalents, Beginning of Year 1,140,010 Cash and Cash Equivalents, End of Year 604,081 SUPPLEMENTAL INFORMATION: Cash paid during the year for interest (none capitalized) 665,187 Equipment acquired through capital lease 423,563 See notes to consolidated financial statements -5-

8 1. NATURE OF ORGANIZATION: Fresno Pacific University (the University), was established in 1944 in California. The University develops students for leadership and service through excellence in Christian higher education. Located in Fresno, California, the University has five locations throughout California's Central Valley and is home to approximately 3,500 undergraduate, graduate, and adult degree completion students. The University is accredited by the Western Association of Schools and Colleges (WASC). MBBS-US, Inc. (MBBS) is a nonprofit corporation whose purpose is the advancement and support of the seminary operated by the University. The University is a nonprofit, religious corporation exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code (the Code). As such, it is also exempt from state income taxes. FPU has been classified as a publicly supported organization, which is not a private foundation, under section 509(a) of the Code. Contributions by the public are deductible for income tax purposes. The primary source of revenue for FPU is tuition and fee income from students. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The consolidated financial statements of the University have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. A summary of significant accounting policies followed are described below to enhance the usefulness of the consolidated financial statements to the reader. PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the University include the combined financial resources and activities of MBBS. All inter-organization balances and transactions have been eliminated in the consolidation. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, cash on deposit, and money market accounts. The University considers short-term highly liquid investments with a maturity date of three months or less from the date of purchase. These accounts often exceed federally insured limits. However, the University has not experienced any losses in such accounts. RESTRICTED CASH The University has entered into certain agreements which require cash and cash equivalents be maintained in separate bank accounts. The University has complied with these requirements. INVESTMENTS Investments in readily-marketable securities are measured at fair value and investment held in art is recorded at the lower of cost or fair value. Investment income or loss (including realized and unrealized gains and losses on investments, interest, and dividends) is included in the consolidated statements of activities as unrestricted gains and losses unless a donor has restricted their purpose. -6-

9 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: ACCOUNTS AND OTHER RECEIVABLES Accounts and other receivables are reported net of any anticipated losses due to uncollectible accounts. The University s policy for determining when receivables are past due is if an account balance remains unpaid after the semester deadline. The allowance for doubtful accounts is maintained at a level which, in management's judgment, is adequate to absorb potential losses inherent in the receivable portfolio. The amount of the allowance is based on management's evaluation of the collectability of the receivable portfolio, including the age of the receivable, the history for each student's account balance, and economic conditions. NOTES RECEIVABLE Notes receivable consist of amounts due under the Federal Perkins Program and are stated at their outstanding principal amount, net of an allowance for doubtful notes. Loans are made to students based on demonstrated financial need for such loans and satisfaction of federal eligibility requirements. Principal and interest payments on loans generally do not commence until after the borrower graduates or otherwise ceases enrollment. The University provides an allowance for doubtful notes, which is based upon a review of outstanding loans, historical collection information and existing economic conditions. Interest income is recorded as received, which is not materially different from the amount that would have been recognized on the accrual basis. Loans that are delinquent continue to accrue interest. Loans that are past due for at least one payment are considered delinquent. Delinquent loans are written off based on individual credit evaluation and specific circumstances of the student. PROPERTY AND EQUIPMENT Property and equipment are stated at cost at date of acquisition or fair market value at date of donation in the case of gifts. Depreciation is computed by the straight-line method with estimated useful lives ranging from five to 60 years. Computers with costs greater than 1,000 and other assets with costs greater than 2,500 are capitalized; expenditures for routine maintenance are expensed. NET ASSETS The consolidated financial statements report amounts by class of net assets: Unrestricted net assets are those amounts currently available at the discretion of the board for use in the University s operations and those resources invested in property and equipment. Temporarily restricted net assets contain donor-imposed restrictions that require the University to use or expend the assets as specified. These restrictions are satisfied either bythe passage of time or byactions of the University. Permanently restricted net assets contain donor-imposed restrictions and stipulate that the resources be maintained permanently but permit the University to use or expend part or all of the income derived from the donated assets for either specified or unspecified purposes. -7-

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: SUPPORT, REVENUE, AND EXPENSES Contributions are recorded when cash or unconditional promises-to-give have been received or ownership of donated assets is transferred to the University. The University records contributions as unrestricted unless they are received with donor stipulations that limit their use either through purpose or time restrictions, or both. When donor restrictions expire, that is, when the purpose restriction is fulfilled or the time restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. Contributions of cash or other assets to be used to acquire property and equipment with such donor stipulations are reported as revenues of the temporarily restricted net assets class. The restrictions are considered to be released at the time of acquisition of such long-lived assets. The University records tuition and other fees as earned. Expenses are recorded when incurred in accordance with the accrual basis of accounting. FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing various program services and supporting activities of the University have been summarized on a functional basis in note 11. Accordingly, certain costs have been allocated among the program services and supporting activities benefited based on management estimates. USE OF ESTIMATES The preparation of consolidated 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 amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. ADVERTISING The University advertises to promote its academic programs as well as various special events occurring on campus. Advertising costs are expensed as incurred. For the year ended, advertising costs were approximately 710,000. STUDENT FINANCIAL ASSISTANCE PROGRAMS The University participates in the delivery of student financial assistance programs under various programs administered by the Department of Education. The related activity is subject to audit both by independent certified public accountants and by representatives of the administering agency regarding compliance with applicable regulations. Any resultant findings of noncompliance could potentially result in the required return of related funds received and/or the assessment of fines or penalties or the discontinuation of eligibility for participation. -8-

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: UNCERTAIN TAX POSITIONS The consolidated financial statement effects of a tax position taken or expected to be taken are recognized in the consolidated financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Interest and penalties, if any, are included in expenses in the consolidated statement of activities. As of, the University had no uncertain tax positions that qualify for recognition or disclosure in the consolidated financial statements. The University files information tax returns in the U.S. and California. The University is subject to income tax examinations for the current year and certain prior years based on the applicable laws and regulations. 3. INVESTMENTS: Investments at, consist of: Fair value: Mutual funds: Fixed-income 3,709,452 International equities 1,499,626 Large and small cap value 2,451,442 Large and small cap growth 2,396,105 REIT 530,619 10,587,244 Cost: Cash surrender value of life insurance 125,530 Other 190, ,536 10,902,780 Investment income for the year ending, consists of: Interest income 215,550 Realized and unrealized gains 695, ,465 Investment income as reported in the consolidated statement of activities is net of management fees. Investment fees amounted to approximately 77,000 during the year ended. -9-

12 4. ACCOUNTS AND OTHER RECEIVABLES: Accounts and other receivables at, consist of: Student accounts receivable 3,790,681 Receivables from the Foundation (a related party) 1,276,573 Other receivables 942,040 6,009,294 Less allowance for doubtful accounts (1,286,840) 4,722, PROPERTY AND EQUIPMENT: Property and equipment at, consists of: Land and improvements 2,767,569 Buildings and improvements 49,702,389 Equipment 12,662,344 Vehicles 872,467 Library books 5,011,493 71,016,262 Less accumulated depreciation (37,398,563) 33,617,699 Construction in progress 145,585 Less notes payable and capital lease obligation (12,622,115) Net investment in property and equipment 21,141,

13 6. CAPITAL LEASE OBLIGATION: The University acquired office equipment during the year ended, through a capital lease, which will mature in October The assets and related accumulated amortization for the year ended April 30, 2015, is as follows: Equipment 423,563 Less accumulated amortization (33,356) 390,207 Future minimum payments are as follows: Year Ending April 30, , ,565 90,565 90,565 48, ,447 Less amount representing interest (24,186) 386, INTEREST RATE SWAP OBLIGATION: The University has entered into fixed-rate interest swaps on several of its notes payable. These swaps effectively convert variable-rates to fixed-rates, thereby reducing the impact of future interest rate changes on future interest expense. The swaps were issued at market terms and had no fair value. Contractual terms at, are as follows: 2004 Swap: Fixed rate 5.06% Variable rate-libor plus 2.5% 2.68% Remaining term of contract (in years) 5 Original notional amount 3,000,000 Notional amount outstanding at year-end 1,275, ,554 45,

14 7. INTEREST RATE SWAP OBLIGATION, continued: 2005 Swap: Fixed rate 4.80% Variable rate-libor plus 2.5% 2.68% Remaining term of contract (in years) 1 Original notional amount 2,120,655 Notional amount outstanding at year-end 861,995 Fair value of swap obligation (liability on the consolidated statement of financial position) 7,247 Gain on swap (other income on consolidated statement of activities) 43, Swap: Fixed rate 4.97% Variable rate-libor plus 2.5% 2.68% Remaining term of contract (in years) 6 Original notional amount 6,000,000 Notional amount outstanding at year-end 4,875,000 Fair value of swap obligation (liability on the consolidated statement of financial position) 403,848 Loss on swap (other income on consolidated statement of activities) (58,767) 8. LONG-TERM DEBT: Long-term debt at, consists of: Note payable secured by real property with a variable interest rate of LIBOR plus 2.5% with an effective fixed interest rate of 4.97% due to the interest rate swap. Monthly payments are 25,000 consisting of principal plus interest. The note matures in April Note payable secured by real property with a variable interest rate of LIBOR plus 2.5% with an effective fixed interest rate of 4.9% due to the interest rate swap. Monthly payments are variable and consist of principal and interest. The note matures in December Note payable secured by real property with a variable interest rate of LIBOR plus 2.5% (2.68% at ). Monthly payments consist of approximately 5,300 in principal plus interest. The note matures in October ,875,000 2,231, ,

15 8. LONG-TERM DEBT, continued: Long-term debt at, consists of: Note payable secured by real property with a variable interest rate of LIBOR plus 2.5% (2.68% at ). Monthly payments consist of approximately 2,600 in principal plus interest. The note matures in February Line of credit secured byreal property with a variable interest rate of LIBOR plus 2.5% (2.68% at ). Interest is due monthly and matures in April The line has a maximum borrowing capacity of 6,600,000 at and is reduced by 600,000 annually. Other unsecured loans with interest rates between 3-7%. Principal is due at various times. Loans mature May ,080 4,500, ,700 12,562,554 LOAN COVENANTS Notes payable contain various financial covenants. As of, the University was in compliance with or had waivers for all covenants. Annual minimum payments are as follows: Year Ending April 30, , , , , ,551 Thereafter 8,185,179 12,562,

16 9. NET ASSETS: Net assets at, consist of: Unrestricted: Undesignated (5,238,037) Board-designated 900,000 Net investment in property and equipment 21,141,169 16,803,132 Temporarily restricted: Capital improvements 3,921,210 University programs 1,710,633 Scholarships 525,789 Other 2,570,093 8,727,725 Permanently restricted: Endowments 4,862,524 30,393, LEASE COMMITMENTS: The University leases four campuses and certain equipment under non-cancelable operating lease agreements. Total rent expense was approximately 3,183,000 for the year ended. Future minimum lease payments under non-cancelable operating leases with initial terms of one year or more as follows: Year Ending April 30, ,817, ,628, ,610, ,651, ,552,757 Thereafter 1,031,085 13,291,

17 11. FUNCTIONAL EXPENSE ALLOCATION: The allocation of expenses by function for the year ended, is as follows: Program services 44,055,765 Supporting activities: General and administrative 9,370,982 Fundraising 1,227,301 54,654, EMPLOYEE BENEFIT PLANS: The University participates in the TIAA-CREF retirement plan (the Plan). All regular faculty, administrators, and administrative staff are covered upon beginning service and all other regular staff who work 20 hours a week or more are covered after two years of service. For the year ended, the University reduced the employer contributions from 6% to 3%. The University's contribution to the Plan for the year ended April 30, 2015, was approximately 355, ENDOWMENTS: The University s endowment consists of approximately 300 individual funds. The endowment includes donorrestricted endowment funds (the significant majority of which were established to provide scholarships to University students). As required by accounting principles generally accepted in the United States of America (GAAP), net assets associated with endowment funds, including funds designated by the board of trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The board of trustees of the University has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donorrestricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the University 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 remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by SPMIFA. -15-

18 13. ENDOWMENTS, continued: In accordance with SPMIFA, the University considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: The duration and preservation of the fund The purposes of the University and the specific donor-restricted endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other resources of the University The investment policies of the University FUNDS WITH DEFICIENCIES From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or SPMIFA requires the University to retain as a fund of perpetual duration. There were no deficiencies in the fund at. RETURN OBJECTIVES AND RISK PARAMETERS The University has adopted investment and spending policies for donor-restricted endowment assets that attempt to provide a predictable stream of funding for student scholarships while seeking to maintain the purchasing power of the endowment assets. Under these policies, the endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of selected benchmarks for each investment asset class while assuming a moderate level of investment risk. The University expects its endowment funds, over time, to provide an average annual rate of return greater than the corresponding benchmark index. Actual returns in any given year may vary from this amount. STRATEGIES EMPLOYED FOR ACHIEVING OBJECTIVES To satisfy its long-term rate-of-return objectives, the University relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The University targets a diversified asset allocation to achieve its long-term return objectives within prudent risk constraints. SPENDING POLICY AND HOW THE INVESTMENT OBJECTIVES RELATE TO SPENDING POLICY The University has a policy of appropriating up to 5% for distribution each year of the endowment fund's fiscal year beginning balance, limited to current year earnings, with the exception of the AIMS Math and Science Chairs funds. The distribution of the AIMS Math and Science Chairs funds is the sum of the Chairs' compensation packages limited to the spendable portion of those funds. In establishing this policy, the University considered long-term expected return on its endowments. Accordingly, over the long-term, the University expects the current spending policy to allow its endowment to grow at an average of 2% annually. This is consistent with the University's objective to maintain the purchasing power of the endowment fund as well as to provide additional real growth through new gifts and investment. -16-

19 13. ENDOWMENTS, continued: Endowment net asset composition by type of fund as of : Unrestricted Temporarily Restricted Permanently Restricted Total Donor restricted endowment funds - 3,010,965 4,862,524 7,873,489 Changes in endowment net assets for the fiscal year ended : Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, beginning of year - 2,715,682 4,837,802 7,553,484 Investment return: Investment income - 142, ,919 Net gains (realized and unrealized) - 508, ,090 Total investment return - 651, ,009 Contributions ,722 24,722 Appropriation of endowment assets for expenditure - (355,726) - (355,726) Endowment net assets, end of year - 3,010,965 4,862,524 7,873,

20 14. FAIR VALUE MEASUREMENTS: The University uses appropriate valuation techniques to determine fair value based on inputs available. When available, the University measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs are only used when Level 1 or Level 2 inputs were not available. Fair values of assets measured on a recurring basis at, are as follows: Fair Value Measurements Using: Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Investments: Mutual funds: Fixed-income 3,709, ,616 3,567,836 - International equities 1,499,626-1,499,626 - Large and small cap value 2,451,442 92,865 2,358,577 - Large and small cap growth 2,396,105-2,396,105 - REIT 530, ,619-10,587, ,481 10,352,763 - Interest rate swap obligation 536, ,649 - VALUATION TECHNIQUES Level 1: Fair value of mutual funds are based upon quoted market prices. Level 2: Fair value of mutual funds are based upon significant other observable inputs in proprietary mutual funds held at MB Foundation. The fair value of the interest rate swap agreement is the estimated amount the financial institution would receive or pay to terminate the swap agreement at the reporting date, taking into account current interest rates and the current credit worthiness of the swap counter parties. Changes in valuation techniques: None. -18-

21 15. RELATED PARTIES: The University is part of the Pacific District Conference of Mennonite Brethren Churches. The following is a summary of related party transactions: The Fresno Pacific University Foundation (Foundation) is required under accounting standards to be consolidated with the University through board control and economic interest. The lack of consolidation has led to a modified opinion on page 1. The information provided below is based on the Foundation's year-end of December 31, 2014: Assets 28,638,975 Liabilities 9,555,395 Net assets 19,083,580 Revenue 1,851,351 Expenses 599,814 Change in net assets 1,251,537 Furthermore, the University had the following related party transactions with the Foundation: Accounts receivable from the Foundation 1,276,573 Expenses paid on behalf of the Foundation 378,077 Scholarships received from the Foundation 126,

22 16. PRIOR PERIOD ADJUSTMENTS: During the year ended, there were several adjustments identified, which were required to be posted to a prior period. The most significant prior period adjustments resulted from increasing the allowance for doubtful accounts and recognizing the federal Perkins funding as a liability. As a result, the following summarizes the adjustments made to each affected consolidated financial statement line item for the year ended April 30, 2014: As Previously Stated Adjustment As Restated Change in net assets: Unrestricted (2,253,640) (873,806) (3,127,446) Temporarily restricted 308,662 (1,584,412) (1,275,750) Permanently restricted 9,092 (20,060) (10,968) (1,935,886) (2,478,278) (4,414,164) 17. SUBSEQUENT EVENTS: Subsequent events have been evaluated through the report date, which represents the date the consolidated financial statements were available to be issued. Subsequent events after that date have not been evaluated. -20-