PROVIDENCE COLLEGE. Financial Statements. June 30, 2017 and (With Independent Auditors Report Thereon)

Transcription

1 Financial Statements (With Independent Auditors Report Thereon)

2 Table of Contents Page(s) Independent Auditors Report 1 Financial Statements: Statements of Financial Position 2 Statements of Activities 3 Statements of Cash Flows

3 KPMG LLP One Financial Plaza, Suite 2300 Providence, RI Independent Auditors Report The Directors of the Corporation and Board of Trustees Providence College: We have audited the accompanying financial statements of Providence College, which comprise the statements of financial position as of, 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 U.S. generally accepted accounting principles; 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 financial statements based on our audits. We conducted our audits 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 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 auditors 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 the Providence College as of, and the changes in its net assets and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. September 22, 2017 KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 Statements of Financial Position Assets Cash and cash equivalents $ 14,821,506 20,966,117 Student and other accounts receivable, net (note 3) 1,956,012 2,490,415 Other assets 6,267,394 5,157,985 Contributions receivable, net (note 4) 18,437,577 22,167,239 Student loans receivable, net (notes 3 and 9) 7,008,554 6,975,502 Long-term investments (note 5) 228,376, ,815,461 Deposits with bond trustees (notes 5 and 8) 40,964,999 17,323,078 Property and equipment, net (note 7) 414,070, ,519,205 Total assets $ 731,903, ,415,002 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses $ 20,054,625 18,338,319 Student deposits and deferred revenue 10,152,485 9,176,957 Bonds and notes payable, net (note 8) 168,223, ,538,282 Refundable advances U.S. government grants (note 9) 5,724,078 5,829,394 Total liabilities 204,154, ,882,952 Net assets: Unrestricted 343,000, ,507,685 Temporarily restricted (note 10) 88,819,302 84,637,211 Permanently restricted (note 10) 95,929,358 90,387,154 Total net assets 527,748, ,532,050 Total liabilities and net assets $ 731,903, ,415,002 See accompanying notes to financial statements. 2

5 Statements of Activities Years ended Changes in unrestricted net assets: Operating: Revenues and other support: Tuition and fees $ 194,779, ,340,784 Residence and dining fees 44,895,443 43,544,107 Less scholarships and aid to students (72,421,225) (68,686,556) Student fees, net 167,253, ,198,335 Government grants and contracts 2,597,497 2,692,298 Contributions, grants, and contracts (note 12) 4,502,213 5,530,325 Other income 3,799,363 4,395,175 Other auxiliary enterprises 8,406,281 8,158,189 Long-term investment earnings, net (note 5) 11,492,477 11,073,302 Net assets released from restrictions (note 11) 5,363,998 4,933,732 Total revenues and other support 203,415, ,981,356 Expenses: Instruction 62,116,987 58,565,895 Research 791, ,516 Academic support 20,457,013 19,569,889 Student services 14,223,036 13,409,723 Institutional support 37,915,704 36,288,243 Auxiliary enterprises 57,872,173 54,731,256 Total expenses 193,376, ,506,522 Increase in unrestricted net assets from operating activities 10,039,068 11,474,834 Nonoperating: Long-term investment return, net (note 5) 1,209,636 (7,917,429) Postretirement benefit obligation changes other than net periodic cost (note 13) 248,518 (25,556) Loss on debt extinguishment (note 8) (146,789) Net assets released from restrictions (note 11) 7,995,184 3,900,649 Total nonoperating items, net 9,453,338 (4,189,125) Increase in unrestricted net assets 19,492,406 7,285,709 Changes in temporarily restricted net assets: Contributions 8,288,080 17,243,432 Net assets released from restrictions (note 11) (13,359,182) (8,834,381) Long-term investment return, net (note 5) 9,253,193 (8,914,716) Increase (decrease) in temporarily restricted net assets 4,182,091 (505,665) Changes in permanently restricted net assets: Contributions 5,426,454 7,442,233 Long-term investment return, net (note 5) 115,750 (70,712) Increase in permanently restricted net assets 5,542,204 7,371,521 Change in net assets 29,216,701 14,151,565 Net assets as of beginning of year 498,532, ,380,485 Net assets as of end of year $ 527,748, ,532,050 See accompanying notes to financial statements. 3

6 Statements of Cash Flows Years ended Cash flows from operating activities: Change in net assets $ 29,216,701 14,151,565 Adjustments to reconcile change in net assets to net cash and cash equivalents provided by operating activities: Depreciation and amortization, net 17,853,101 16,404,305 Contributions restricted for plant and endowment (11,105,802) (12,192,180) Net realized and unrealized (gain) loss on long-term investments (21,375,003) 6,401,469 Loss on debt extinguishment 146,789 Net changes in assets and liabilities: Student and other account receivables, net 534,403 (493,227) Other assets (1,109,409) (1,598,951) Contributions receivable, net 3,729,662 (5,877,426) Accounts payable and accrued expenses 856,642 1,523,348 Student deposits and deferred revenue 975, ,272 Net cash provided by operating activities 19,575,823 18,940,964 Cash flows from investing activities: Loans to students, net (1,088,766) (901,630) Repayment of loans to students 1,055,714 1,104,937 Purchases of property and equipment (56,661,884) (51,453,186) Change in deposits with bond trustees (23,641,921) (7,310,223) Sales and maturities of investments 127,237,737 84,774,966 Purchases of investments (127,424,053) (81,278,937) Net cash used in investing activities (80,523,173) (55,064,073) Cash flows from financing activities: Contributions restricted for plant and endowment 11,105,802 12,192,180 Proceeds from issuance of bonds at premium 50,394,917 51,061,015 Payment of bond issuance costs (381,819) (334,619) Payments on bonds and notes payable (6,210,845) (5,605,845) Redemption of bonds (15,480,000) Change in refundable advances U.S. government grants (105,316) (94,469) Net cash provided by financing activities 54,802,739 41,738,262 Change in cash and cash equivalents (6,144,611) 5,615,153 Cash as of beginning of year 20,966,117 15,350,964 Cash as of end of year $ 14,821,506 20,966,117 Supplemental disclosure: Cash paid for interest $ 5,302,137 4,797,944 Change in accounts payable from property, plant and equipment 859,664 1,049,121 See accompanying notes to financial statements. 4

7 (1) Description of the College Providence College, situated in the City of Providence, is a Catholic, Dominican, liberal arts institution of higher education and a community committed to academic excellence in pursuit of the truth, growth in virtue, and service of God and neighbor. The College holds itself to the highest standards in teaching, learning, and scholarship and welcomes qualified men and women of every background. The College was founded in 1917 by the Dominican Friars at the invitation of Bishop Harkins to provide a Catholic education in the arts and sciences. The College supports the Dominican mission of preaching the gospel of Jesus Christ to a new generation of students and helping them discover God s providence in their lives. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP) and 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. (b) Classification of Net Assets Unrestricted net assets Net assets not subject to donor-imposed stipulations and available for the general operations of the College. Such net assets may be designated by the Board of Trustees for specific purposes, including to function as endowment funds. Temporarily restricted net assets Net assets subject to donor-imposed stipulations as to the timing of their availability or use for a particular purpose. Investment returns on donor-restricted endowment funds are classified as changes in temporarily restricted net assets and are generally available for appropriation to support operational needs subject to the College s endowment spending policy and any restrictions on use imposed by donors. Permanently restricted net assets Net assets subject to donor-imposed stipulations requiring they be maintained in perpetuity by the College. The College classifies the following portions of donor-restricted endowment funds as permanently restricted net assets: (a) the original value of assets contributed to permanent endowment funds, (b) subsequent contributions to such funds valued at the date of contribution, and (c) reinvested earnings, if required by the donor. (c) Statements of Activities The statement of activities reports the changes in unrestricted, temporarily restricted, and permanently restricted assets from operating and nonoperating activities. Unrestricted operating revenues consist of those items attributable to the College s primary mission of providing education. It includes investment earnings on the College s operating funds and the Board approved apportionment of earnings on donorrestricted endowment funds. Investment earnings on the College s unrestricted long-term investments and all realized and unrealized gains and losses are classified as nonoperating, net of the amount appropriated for operations. Net assets released from restrictions for capital purposes are also classified as nonoperating. Unrestricted operating revenues and other support also include releases of temporarily restricted net assets in support of operating activities, and all unrestricted contributions. 5 (Continued)

8 Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Net unrealized and realized gains 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 law. Upon the expirations of temporary restrictions on net assets, that is, the donor-imposed stipulated purpose has been accomplished and/or the stipulated time period has elapsed, such assets are released from restrictions and reclassified to unrestricted. Contributions, including unconditional promises, are recognized in the period received. Contributions and earnings subject to donor-imposed stipulations are reported as temporarily restricted revenue. Contributions receivable that are scheduled to be received after the statement of financial position date are shown as increases in temporarily restricted net assets. Temporarily restricted net assets are reclassified to unrestricted net assets when the purpose or time restrictions are met. Promises to give subject to donor-imposed stipulations that the corpus be maintained permanently are shown as increases in permanently restricted net assets. Unconditional promises to give are recorded at their net realizable value using appropriate discount rates and the discount is amortized as additional contribution revenue. Conditional promises to give are not recognized until such time as the conditions are substantially met. Dividends, interest, and net unrealized and realized gains (losses) on long-term investments are reported as follows: increases in permanently restricted net assets if the terms of the contributions require these to be added to the principal; increases (decreases) in temporarily restricted net assets if the terms of the contributions impose restrictions on the use of the income and gains; or increases (decreases) in unrestricted net assets in all other cases. Depreciation, interest, and operations and maintenance expenses have been allocated to functional classifications based upon building square footage. Additionally, fundraising costs for the years ended were $6,151,569 and $5,998,933, respectively, and are primarily included in institutional support expense in the statements of activities. (d) Cash and Cash Equivalents Cash equivalents include money market funds and other short-term investments with a maturity at date of purchase of three months or less. (e) Fair Value Measurements Fair value represents the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants as of the measurement date. GAAP establishes a fair value hierarchy that prioritizes inputs used to measure fair value into three levels: Level 1 quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities; 6 (Continued)

9 Level 2 observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. The College utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The College uses NAVs reported by fund managers as a practical expedient to estimate the fair values of its investments held through limited partnerships and other funds. The investments reported at NAV as the practical expedient to fair value are not required to be included in the fair value hierarchy. (f) Land, Buildings, and Equipment Land, constructed and purchased property, and equipment are carried at historical cost. Long-lived fixed assets, with the exception of land, are depreciated using the straight-line method over their estimated useful lives, which range from three to fifty years. (g) Deferred Revenue Students advance payments for tuition, room, and board and advances for other programs and agreements are deferred and then reported as unrestricted revenues when earned. (h) Income Tax Status The College is a tax-exempt organization as described in Section 501(c)(3) of the Internal Revenue Code (the Code) and is generally exempt from income taxes pursuant to Section 501(a) of the Code, as amended. Accordingly, it is generally not subject to income taxes except to the extent it has taxable income from activities that are not related to its exempt purpose. The College has generated unrelated business income for the year ended June 30, 2017, but it is not significant to the financial statements. The College believes it has taken no significant uncertain tax positions. (i) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. (j) Bond Premiums, Discounts and Issuance Costs Bond premiums, discounts, and issuance costs are amortized through the final maturity date of the respective bond issue. (k) Split-Interest Obligations The College s split-interest obligations consist principally of charitable gift annuities and irrevocable charitable remainder trusts for which the College serves as trustee. Contribution revenue is recognized at the date a gift annuity or trust is established after recording a liability at fair value of the estimated future payments to be made to the beneficiaries. Liabilities are adjusted during the terms of the agreements to reflect payments to beneficiaries, returns on trust assets, accretion of discounts and other considerations that affect the estimates of future payments. 7 (Continued)

10 (3) Allowances for Uncollectible Student Accounts and Loans Receivable Student accounts receivable are net of allowance for uncollectible accounts of $289,475 and $409,997 as of, respectively. Student loans receivable are net of allowance for uncollectible loans of $224,227 and $227,227 as of, respectively. (4) Contributions Receivable Contributions receivable consist of the following as of June 30: Unconditional promises expected to be collected in: Less than one year $ 7,923,849 6,579,423 One to five years 10,908,549 15,636,330 More than five years 606,018 1,188,000 Less allowance for uncollectibles and discount (0.11% 3.18%) (1,000,839) (1,236,514) Contributions receivable, net $ 18,437,577 22,167,239 Unconditional promises are discounted at a rate commensurate with the time period of the pledge and its deemed collectability. (5) Long-Term Investments Strategy The investment objective of the College is to invest its assets in a prudent manner to achieve a long-term rate of return sufficient to fund a portion of its spending and to increase investment value after inflation. The College diversifies its investments among asset classes by incorporating several strategies and managers. Major investment decisions are authorized by the College s Trustees Investment Committee that oversees the College s investments. In addition to traditional stocks and fixed-income securities, the College may also hold shares or units in institutional funds as well as in alternative investment funds involving hedged strategies and partnership investments. Hedged strategies involve funds whose managers have the authority to invest in various asset classes at their discretion, including the ability to invest long and short. Funds with hedged strategies generally hold securities or other financial instruments for which a ready market exists and may include stocks, bonds, put or call options, swaps, currency hedges and other instruments, and are valued accordingly. Partnership investments include private equity, venture, distressed, real estate, and natural resource funds, which therefore often require the estimation of fair values by fund managers. Reporting Basis Investments are reported at estimated fair value. The values of publicly traded fixed income and equity securities are based upon quoted market prices at the close of business on the last day of the fiscal year. Investments in units of nonpublicly traded pooled funds are valued at the unit value determined by the fund s administrator based on quoted market values of the underlying securities. Alternative investments which 8 (Continued)

11 consist of hedge funds and partnership investments are valued using current estimates of fair value based upon the net asset value (NAV) of the funds determined by the general partner or investment manager for the respective funds as these investments do not have a readily determinable fair value. NAV is used as a practical expedient to estimate the fair value of the College s interest in these funds, unless it is probable that all or a portion of the investment will be sold for an amount different than NAV. The College has assessed the NAV provided by the external managers and believes the amounts reported represent a reasonable estimate of fair value. The College s assets at that are reported at fair value are summarized in the following tables by their fair value hierarchy classification, as applicable: June 30, 2017 Level 1 Level 3 Total Investments at fair value: Cash and cash equivalents $ 10,156,600 10,156,600 Fixed income 4,732,123 4,732,123 Mutual funds 45,597,238 45,597,238 Equities: U.S. 1,008,491 1,008,491 Non-U.S. 68,622,559 68,622,559 Real estate 2,585,000 2,585,000 Total investments at fair value 130,117,011 2,585, ,702,011 Liquidity Days notice Investments measured at net asset value: Hedge funds 73,286,260 Monthly to annually 45 to 95 Partnership Investments 22,388,509 Illiquid Not applicable Total investments 228,376,780 Deposits with bond trustees: Cash equivalents 40,964,999 40,964,999 Total deposits with bond trustees $ 40,964,999 40,964,999 9 (Continued)

12 June 30, 2016 Level 1 Level 3 Total Investments at fair value: Cash and cash equivalents $ 5,228,579 5,228,579 Fixed income 3,924,895 3,924,895 Mutual funds 46,056,723 46,056,723 Equities: U.S. 7,827,934 7,827,934 Non-U.S 53,342,584 53,342,584 Real estate 2,585,000 2,585,000 Total investments at fair value 116,380,715 2,585, ,965,715 Liquidity Days notice Investments measured at net asset value: Hedge funds 68,532,898 Monthly to annually 45 to 90 Partnership Investments 19,316,848 Illiquid Not applicable Total investments 206,815,461 Deposits with bond trustees: Cash equivalents 17,323,078 17,323,078 Total deposits with bond trustees $ 17,323,078 17,323,078 There have been no changes in fair value for the fiscal year ended for investments measured at fair value on a recurring basis using unobservable inputs (Level 3). At June 30, 2017, the College s outstanding commitments to alternative investments totaled $27,355,753. The following summarizes investment return for the years ended June 30: Interest and dividends, net of fees $ 696, ,914 Net realized and unrealized losses 21,375,003 (6,401,469) Total investment return $ 22,071,056 (5,829,555) Investment return allocated in the statements of activities for the years ended June 30 are as follows: Unrestricted net assets operating $ 11,492,477 11,073,302 Unrestricted net assets nonoperating 1,209,636 (7,917,429) Temporarily restricted net assets 9,253,193 (8,914,716) Permanently restricted net assets 115,750 (70,712) Total investment return $ 22,071,056 (5,829,555) Total investment management and advisory fees for the years ended were $1,044,352 and $838,063, respectively. 10 (Continued)

13 (6) Endowments The College s endowment consists of approximately 520 individual funds established for a variety of purposes, including both donor-restricted endowment funds (true endowment) and funds designated by the Board of Trustees to function as endowments. 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. (a) Relevant Law The Uniform Prudent Management of Institutional Funds Act enacted by the State of Rhode Island (the Act) requires 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 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 College in a manner consistent with the standard of prudence prescribed by the Act. In accordance with the Act, the College considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1) The duration and preservation of the fund; 2) The purposes of the College and the donor-restricted endowment fund; 3) General economic conditions; 4) The possible effect of inflation and deflation; 5) The expected total return from income and the appreciation of investments; 6) Other resources of the College; 7) The investment policies of the College. (b) Funds with Deficiencies From time to time, due to market fluctuations, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor requires the College to retain as a fund of perpetual duration. Deficiencies of this nature were funded by operations and amounted to $9,415 and $93,738 as of, respectively. Subsequent gains that restore the fair value of the assets of the endowment fund to the required level will be classified as increases in unrestricted net assets. (c) Return Objectives and Risk Parameters The primary objective of the investments for endowment, quasi-endowment, and similar funds is to provide for preservation of capital adjusted for inflation with an emphasis on long-term growth of principal and with a risk profile which would be deemed to be prudent by institutional fiduciaries generally. Consistent with this objective, a reasonable return is expected. Since short-term market fluctuations may cause variations in investment performance, it is intended that the objectives will be achieved over a full market cycle. (d) Strategies Employed for Achieving Objectives The College targets a diversified asset allocation that places emphasis on investment in: U.S. Equity (22%), Global Equity (19%), Marketable Alternatives (19%), Fixed Income (15%), Inflation Hedging (12%), NonMarketable Alternatives (8%), and Emerging Markets (5%). The portfolio is reviewed quarterly and rebalanced as needed. 11 (Continued)

14 (e) Spending Policy The College s Endowment Spending Policy for qualifying Donor funds (True Endowment) and nondonor funds (Quasi Endowment) is 4.5% of a moving 12 quarter average of the market value of such funds. A qualified donor fund into which the donor has contributed $50,000 or more and has been unitized by the endowment custodian for a minimum of four quarters is available for disbursement in the same manner, and time table, of all similar donor funds in its category/purpose. In the event that a donor fund has greater than four quarters but less than twelve quarters, as reported by the custodian, the average shall be calculated on the total quarters since the inception of the fund. Donor funds are utilized for the purpose stated at the time of the give and expended in accordance with Federal and State law. Nondonor funds are used to support nonrecurring, one time expenditures. The Board of Trustees may authorize the transfer of funds from the Quasi Endowment for special purposes. Net assets comprising true endowment funds and funds designated by the Board of Trustees to function as endowments were as follows at June 30: Temporarily Permanently Unrestricted restricted restricted Total 2017: Donor-restricted endowment funds $ (9,415) 60,878,058 89,303, ,172,029 Board-designated endowment funds 70,899,414 70,899,414 Total endowment net assets $ 70,889,999 60,878,058 89,303, ,071,443 Temporarily Permanently Unrestricted restricted restricted Total 2016: Donor-restricted endowment funds $ (93,738) 51,678,403 83,102, ,687,592 Board-designated endowment funds 63,913,734 63,913,734 Total endowment net assets $ 63,819,996 51,678,403 83,102, ,601,326 Changes in endowment net assets for the year ended June 30, 2017 are as follows: Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, June 30, 2016 $ 63,819,996 51,678,403 83,102, ,601,326 Realized and unrealized losses, net 6,858,290 14,256,992 21,115,282 Dividends and interest 184, , ,892 Contributions 6,200,459 6,200,459 Transfers from operations 6,077,961 6,077,961 Distributions for operating purposes (6,135,348) (5,357,129) (11,492,477) Additions (deductions) from operations 84,323 (84,323) Endowment net assets, June 30, 2017 $ 70,889,999 60,878,058 89,303, ,071, (Continued)

15 Changes in endowment net assets for the year ended June 30, 2016 are as follows: Temporarily Permanently Unrestricted restricted restricted Total Endowment net assets, June 30, 2015 $ 68,869,031 60,663,191 79,206, ,738,341 Realized and unrealized losses, net (2,074,666) (4,180,270) (6,254,936) Dividends and interest 158, , ,915 Contributions 3,896,808 3,896,808 Transfers from operations 2,817,500 2,817,500 Distributions for operating purposes (5,866,444) (5,206,858) (11,073,302) Additions (deductions) from operations (83,610) 83,610 Endowment net assets, June 30, 2016 $ 63,819,996 51,678,403 83,102, ,601,326 (7) Property and Equipment Property and equipment consist of the following as of June 30: Land $ 5,575,655 5,575,655 Buildings and improvements 589,098, ,048,401 Furniture and equipment 64,186,742 57,578,371 Software 10,513,981 9,690,958 Construction in progress 23,002,811 29,184, ,377, ,077,927 Less accumulated depreciation (278,306,762) (261,558,722) Property and equipment, net $ 414,070, ,519,205 Depreciation expense was $18,970,185 and $17,931,386 for the years ended, respectively. 13 (Continued)

16 (8) Bonds and Notes Payable Outstanding bonds and notes payable consist of the following as of June 30: % 5.0%, Rhode Island Higher Education (RIHEBC) Facility Revenue Bonds, Providence College Issue, Series These bonds require annual payments that range from $605,000 to $7,130,000 beginning November 1, 2025 through November 1, 2047 $ 46,415, % 5.0%, Rhode Island Higher Education Facility Revenue Refunding Bonds, Providence College Issue, Series These bonds require annual payments that range from $790,000 to $2,490,000 through November 1, ,970,000 45,690, % 5.0%, RIHEBC Higher Education Facility Revenue Refunding Bonds, Providence College Issue, Series 2012B. These bonds require annual payments that range from $1,855,000 to $4,670,000 through November 1, ,365,000 29,365, % 3.1%, RIHEBC Higher Education Facility Revenue Refunding Bonds, Providence College Issue, Series 2012C. These bonds require annual payments that range from $455,000 to $1,350,000 through November 1, ,440,000 5,775, % 5.0%, RIHEBC Higher Education Facility Revenue Corporation, Higher Education Facility Bonds, Providence College Issue, Series These bonds require annual payments that range from $595,000 to $2,280,000 through November 1, ,105,000 35,945,000 Total bonds payable before premium 157,295, ,775,000 Net premium and debt issue costs 9,349,229 6,868,210 Bonds payable, net 166,644, ,643,210 Notes payable 1,579,225 1,895,072 Bonds and notes payable, net $ 168,223, ,538,282 In March 2017, the College entered into an agreement with RIHEBC which provided for the issuance of $46,415,000 in fixed rate Revenue Bonds. The interest rate was 5.00% as of June 30, The proceeds will be used for capital projects of the College. In July 2015, the College entered into an agreement with RIHEBC which provided for the issuance of $46,910,000 in fixed rate Revenue Bonds. The interest rate was 2% as of June 30, 2017 and June 30, 2016, respectively. A portion of the proceeds was used to finance the current refunding of the remaining outstanding Series 2008 Bonds ($15,480,000), resulting in a loss on debt extinguishment of $146,789. The remaining portion of the proceeds are being used for capital projects of the College. 14 (Continued)

17 In November 2012, the College entered into an agreement with RIHEBC which provided for the issuance of the Series 2012B and 2012C fixed rate (taxable) Bonds. Interest on the 2012B and 2012C Bonds was 3.00% and 1.75% respectively as of June 30, 2017; and 4.00% and 1.55%, respectively, as of June 30, The proceeds of the issuance were used to pay the principal and interest on the prior bonds. In December 2012, the College entered into a $3,842,607 note payable with the City of Providence to purchase City-owned streets adjacent to the campus. The note calls for an initial payment of $1,000,000 and annual payments of $315,845 until July 1, In January 2012, the College entered into an agreement with RIHEBC which provided for the issuance of the Series 2012 fixed rate Bonds. The interest rate was 3.0% as of June 30, 2017 and June 30, 2016, respectively. The proceeds were utilized to finance several construction projects. Under the terms of the Series 2012, Series 2015, and Series 2017 Bonds, the College must meet certain financial covenants. The College was in compliance with all such covenants at. The aggregate required principal and sinking fund payments for the bonds and notes payable for each of the next five fiscal years and thereafter are as follows: 2018 $ 6,370, ,600, ,870, ,145, ,470,845 Thereafter 124,415,000 $ 158,874,225 Interest expense for the years ended was $3,978,237 and $3,087,046, respectively. (9) Refundable Advances U.S. Government Grants Student loans receivable include amounts advanced to the College by the U.S. government under the Federal Perkins Loan Program (the Program). Such amounts may be re-loaned by the College after collection, but in the event that the College no longer participates in the Program, the amounts are generally refundable to the U.S. government. 15 (Continued)

18 (10) Restricted Net Assets (a) Temporarily restricted net assets consist of the following as of June 30: Nonendowed: Purpose restrictions: Buildings and facilities $ 4,669,706 7,748,499 Time restricted property 1,900,000 1,900,000 Scholarships and other programs 6,558,313 5,712,600 Contributions receivable, net 14,813,225 17,597,709 Total nonendowed 27,941,244 32,958,808 Endowed: Purpose restrictions: Scholarships 47,815,299 40,867,964 Other 13,062,759 10,810,439 Total endowed 60,878,058 51,678,403 Total $ 88,819,302 84,637,211 (b) Permanently restricted net assets consist of the following as of June 30: Endowment assets for which long-term investment earnings are restricted for: Scholarships $ 71,584,832 66,596,690 Other 17,718,554 16,506,237 Total endowed 89,303,386 83,102,927 Contributions receivable, net 3,624,352 4,569,530 Assets held in trust 3,001,620 2,714,697 Total $ 95,929,358 90,387,154 (11) Net Assets Released from Restrictions Net assets released from temporary donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of events specified by the donors were as follows for the years ended June 30: Buildings and facilities $ 7,995,184 3,900,649 Scholarships and other programs 5,363,998 4,933,732 Total $ 13,359,182 8,834, (Continued)

19 (12) Contributed Services The contributed services of the Dominican Friars have been recognized at the estimated fair value of such services and are included in unrestricted contributions, grants and contracts net of Priory housing and related expenses paid by the College on behalf of the Dominican Friars. Contributed services, prior to being reduced for Priory housing and related expenses, amounted to $3,159,796 and $3,292,119 for the years ended, respectively. Priory housing and related expenses consisting of direct costs, depreciation and maintenance on Priory housing amounted to $2,744,572 and $2,688,886 for the years ended, respectively. (13) Retirement Plans The College has two noncontributory retirement plans covering substantially all of its employees. (a) Defined Contribution Plan College personnel, typically those who have completed two years of service, are eligible to participate in a defined contribution plan administered by TIAA-CREF and T. Rowe Price. Contributions by the College ranging from 4.5% to 10.0% of eligible salary are forwarded to the plan administrators for credit to the participants accounts. Contributions by the College to this plan amounted to $5,608,425 and $5,344,857 for the years ended, respectively. (b) Defined Benefit Plan Nonprofessional employees who had reached twenty-one years of age and completed one year of service prior to May 31, 1989, the date the plan was frozen, are covered by a defined benefit plan (the Plan). All participants in the Plan retained their interests in the Plan as of May 31, 1989, and became participants of the College s defined contribution plan, described above. The College s annual contribution to the Plan is based upon standards established by the Employee Retirement Income Security Act of The contribution is based on an actuarial method intended to provide for benefits attributable to services rendered. The funded status of the plan at was ($436,569) and ($491,186). The plan assets at were $2,135,645 and $2,203,716 and are classified in Level 1 in the GAAP fair value hierarchy. (14) Contingencies The College is engaged in legal cases that have arisen in the normal course of its operations. The College believes that the outcome of these cases will have no material adverse effect on the financial position of the College. (15) Related Parties Members of the College s Board of Trustees and senior management may, from time to time, be associated, either directly or indirectly, with companies doing business with the College. The College s conflict of interest policy requires, among other things, that no member of the Board of Trustees or its committees can participate in any decision in which he or she (or an immediate family member) has a material financial interest. For members of the Board of Trustees and senior management, the College requires an annual disclosure of significant financial interests in, or employment or consulting relationships with, entities doing business with the College. When such relationships exist, measures are taken to address the actual or perceived conflict to ensure the best interests of the College and ensure compliance with relevant conflict of interest laws or policy. 17 (Continued)

20 (16) Subsequent Events For purposes of determining the effects of subsequent events on these financial statements, management has evaluated events subsequent to June 30, 2017 and through September 22, 2017, the date on which the financial statements were issued. 18