The University of North Florida Foundation, Inc.

Transcription

1 The University of North Florida Foundation, Inc. Financial Statements and Supplementary Information as of and for the Years Ended June 30, 2015 and 2014, and Independent Auditors Report

2 Table of Contents June 30, 2015 and 2014 Independent Auditors Report... 1 Page Required Supplementary Information Management s Discussion and Analysis... 3 Basic Financial Statements Statements of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Notes to Financial Statements Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Supplemental Information Schedule of Expenditures of State Financial Assistance Note to Schedule of Expenditures of State Financial Assistance Report on Compliance with Requirements Applicable to Each Major State Financial Assistance Project and on Internal Control over Compliance in Accordance with the Florida EOG s State Projects Compliance Supplement Schedule of Findings and Questioned Costs Schedule I Schedule of Assets and Liabilities by Account Type as of June 30, Schedule II Schedule of Revenues and Expenses by Account Type for the year ended June 30,

3 INDEPENDENT AUDITORS REPORT To the Board of Directors The University of North Florida Foundation, Inc. We have audited the accompanying financial statements of the University of North Florida Foundation, Inc. (the Foundation ), a direct support organization and component unit of the University of North Florida, which comprise the statements of net position as of June 30, 2015 and 2014 and the related statements of revenues, expenses, and changes in net position and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the 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 opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Foundation as of June 30, 2015 and 2014, and the changes in its financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 1

4 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management s discussion and analysis on pages 3 through 13 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audits were performed for the purpose of forming an opinion on the basic financial statements of the Foundation taken as a whole. The accompanying Schedule of Expenditures of State Financial Assistance for the year ended June 30, 2015, as required by the Chapter , Rules of the Auditor General, State of Florida, and Schedules I and II as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 18, 2015, on our consideration of the Foundation s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal controls over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Foundation s internal control over financial reporting and compliance. Jacksonville, Florida September 18,

5 Management s Discussion and Analysis Overview of the Financial Statements and Financial Analysis The University of North Florida Foundation, Inc. (the Foundation ) presents comparative financial statements as of and for the years ended June 30, 2015 and The Foundation exists for the sole purpose of providing financial support to students and programs of the University of North Florida (the University ) and is a direct support organization and component unit of the University (a governmental agency). The Foundation s financial statements are presented on an accrual basis, including the recording of depreciation, which includes 1) assets and liabilities as current and non-current; 2) revenues and expenses as operating and non-operating; 3) the use of the direct method of statement of cash flows; 4) a management s discussion and analysis ( MD&A ) of the financial results. The MD&A focuses on current activities, resulting changes and currently known facts to provide the reader with an overall summary of the accompanying financial statements. It should be read in conjunction with the basic financial statements and accompanying notes. The financial statement report includes the following: 1. Basic financial statementsa. Statements of Net Position b. Statements of Revenues, Expenses, and Changes in Net Position c. Statements of Cash Flows d. Notes to the Financial Statements 2. Supplementary schedulesa. Schedule of Expenditures of State Financial Assistance b. Schedule I - Schedule of Assets and Liabilities by Account Type c. Schedule II - Schedule of Revenues and Expenses by Account Type FINANCIAL HIGHLIGHTS Fundraising. In fiscal 2015, the Foundation recorded a total of $8.040 million in contributions, which includes endowment contributions of $3.583 million. The Foundation has $2.397 million restricted pledges receivable that have been discounted to present value, and adjusted for allowance for doubtful accounts, to a net balance of $2.275 million, which is recorded on the Statement of Net Position. State Challenge Grant Programs (Courtelis and Major Gifts) are currently suspended. UNF has $9.2 million on the state priority list assigned to 65 endowments to be funded sometime in the future. 3

6 The 2015 annual Foundation Board Drive raised $371,884, which surpassed the goal of $357,000. Funds raised during this drive are unrestricted and used for scholarships, the Foundation s Board Initiatives projects, Presidential Lecture Series and board operations. Student academic support. In fiscal 2015, $2.264 million was provided to 998 students in scholarships, fellowships and study abroad programs. First Generation Matching Grant Program provided additional scholarship funding. Approved by the Florida Legislature, the program provides State matching funds for the gifts received by the Foundation for the program. In fiscal 2015, the Foundation s allotment of $299,128 in gifts and State match was a like amount for a total of $598,256. The primary focus of this program is to provide scholarship opportunities to students who are the first-generation college students in their family. Other student criterion includes admittance to the University, attending at least six credit hours per semester at a state university and demonstrated financial need. The Foundation executed a $1.200 million loan agreement with the UNF Financing Corporation, Inc. in December The funding assisted with the renovations to the University East Park Warehouse building, which is used for the Physical Facilities Department. The loan term is 10 years at an interest rate of 3.00% and quarterly note payments of $34,849. Foundation Investments. In fiscal 2015, the Foundation s endowed investments and restricted cash and cash equivalents increased by approximately $4.671 million. The non-endowed net investment earnings totaled $315,190. Net Position increased to $ million in fiscal 2015, an increase of $3.862 million or 3.5% over fiscal Fundraising. In fiscal 2014, the Foundation recorded a total of $8.616 million in contributions, of which $4.208 million was designated for the endowment. The Foundation has $2.920 million restricted pledges receivable that have been discounted to present value, and adjusted for allowance for doubtful accounts, to a net balance of $2.762 million, which is recorded on the Statement of Net Position. State Challenge Grant Programs (Courtelis and Major Gifts) are currently suspended. UNF has $9.2 million on the state priority list assigned to 65 endowments to be funded sometime in the future. The 2014 annual Foundation Board Drive raised $310,884, which surpassed the goal of $300,000. Funds raised during this drive are unrestricted and used for scholarships, the Foundation s Board Initiatives projects, Presidential Lecture Series and board operations. Student academic support. In fiscal 2014, $2.352 million was provided to 1,018 students in scholarships, fellowships and study abroad programs. 4

7 First Generation Matching Grant Program provided additional scholarship funding. This program provides State matching funds for the gifts received by the Foundation for the program. In fiscal 2014, the Foundation s allotment of $217,963 in gifts and State match was a like amount for a total of $435,926. The primary focus of this program is to provide scholarship opportunities to students who are the first-generation college students in their family. Other student criterion includes admittance to the University, attending at least six credit hours per semester at a state university and demonstrated financial need. Foundation Investments. In fiscal 2014, the Foundation s investment portfolio increased in endowed investments by approximately $ million. The non-endowed net investment earnings totaled $39,000. Net Position increased to $ million in fiscal 2014, an increase of $ million or 11.0% over fiscal Statements of Net Position The purpose of the Statement of Net Position is to present the reader with a look at the Foundation s financial condition as of the end of the fiscal year. In reading the Statement of Net Position, the reader will be able to determine the Foundation s ability to continue operations; how much it owes to vendors, and lending institutions; and to see a snapshot of the assets that are available to pay the expenditures of the Foundation. Condensed Summary of Net Position (In thousands of dollars) As of June 30, Increase (decrease) Change 2013 Increase (decrease) Change Assets Current assets $ 847 $ 1,399 $ (552) -39.5% $ 1,769 $ (370) -20.9% Non-current assets 113, ,531 4, % 98,231 11, % Total assets $ 114,639 $ 110,930 $ 3, % $ 100,000 $ 10, % Liabilities: Current liabilities $ 260 $ 327 $ (67) -20.5% $ 375 $ (48) -12.8% Non-current liabilities (86) -52.4% % Total liabilities (153) -31.2% 538 (47) -8.7% Net position: Restricted: Restricted by donors - expendable 14,350 14,356 (6) 0.0% 14,844 (488) -3.3% Restricted for gift annuity % % Permanent endowments - nonexpendable 98,307 94,883 3, % 83,557 11, % Unrestricted 1, % % Total net position 114, ,439 3, % 99,462 10, % Total liabilities and net position $ 114,639 $ 110,930 $ 3, % $ 100,000 $ 10, % The Statements of Net Position are presented as part of the basic financial statements. For fiscal year ended June 30, 2015, the total net position increased by $3.862 million, or 3.5%. This year s activity included the following: 5

8 Current Assets 2015 Current assets totaled $847,177, which is a decrease of approximately $552,000 or 39.5%. Cash decreased to $20,325. This was a decrease of approximately $350,000, or 94.5%. These funds are available for operational expenses. Pledges receivable, current portion decreased approximately $349,000, or 35.0%. Prepaid expenses at $31,361 decreased approximately $2,000, or 6.2%. Note receivable, current portion increased approximately $131,000, or 100%. Interest receivable increased approximately $18,000, or 100% Current assets totaled $1.399 million, which was a decrease of approximately $370,000, or 20.9%. Cash decreased to $370,562. This was a decrease of approximately $229,000, or 38.2%. These funds are available for operational expenses. Pledges receivable, current portion decreased approximately $143,000, or 12.6%. Prepaid expenses at $33,444 increased approximately $1,400, or 4.2%. Non-current assets 2015 Non-current assets totaled $113,792 million, which is an increase of $4.261 million, or 3.9%. Foundation investments (including restricted cash and cash equivalents) reflect a net increase of approximately $2.912 million or 2.8%. Restricted investments increased approximately $654,000 and restricted cash and cash equivalents increased approximately $2.258 million. The increase in restricted cash and cash equivalents is primarily due to funds needed to distribute the endowed spending allocation for next fiscal year. Notes receivable. The UNF TSI Investments LLC, through the UNF Training & Service Institute, Inc., has a line of credit of up to $4.800 million bearing interest at 4.5%. At June 30, 2015, the line of credit totalled $4.800 million. The funds were primarily used to assist in the purchase of the ADT property adjacent to the University during The terms of the loan (principal and interest) require payment in full on or before the eleventh anniversary of the date of the advance with restrictions that TSI not pledge, collateralize 6

9 or encumber the ADT property nor commit to any capital projects while the loan remains outstanding. The UNF Financing Corporation, Inc. executed a $1.200 million loan agreement with the Foundation in December The funds were used to assist with the renovation of the UNF East Park Warehouse building. The terms are 10 years at an interest rate of 3.0% and quarterly payments of $38,849. Pledges receivable. The non-current portion totaled $1.629 million, a decrease of approximately $138,000, or 7.8%. Other assets totaling $802,168 consists of interest receivable from UNF Training & Services Institute, Inc. and planned gift insurance policy Non-current assets totaled $ million, which was an increase of $ million, or 11.5%. Foundation investments (including restricted cash and cash equivalents) reflect a net increase of approximately $ million or 11.8%. This increase is in restricted investments of approximately $ million and a decrease in the Foundation s restricted cash and cash equivalents of approximately $512,000. The increase is due to the endowed investments appreciation. Note receivable. The UNF TSI Investments LLC, through the UNF Training & Services Institute, Inc., has a line of credit of up to $4.8 million bearing interest at 4.5%. The line of credit was approved in March 2010 by the Foundation s Board of Directors. At June 30, 2014, the line of credit totalled $4.589 million. The funds were used to assist in the purchase of the ADT property adjacent to the University. The terms of the loan (principal and interest) require payment in full on or before the eleventh anniversary of the date of the advance with restrictions that TSI not pledge, collateralize or encumber the ADT property nor commit to any capital projects while the loan remains outstanding. Pledges receivable. The non-current portion totaled $1.767 million, an increase of approximately $76,000, or 4.5%. Other assets totaling $595,785 consists of interest receivable from UNF Training & Services Institute (TSI) and planned gift insurance policy. Liabilities 2015 Current liabilities totaled $260,391, a decrease of approximately $67,000 or 20.3%. The net decrease is related to the decreases in accounts payable and accrued expenses of $105,207 and accrued compensated absences of $14,061 for University employees paid with Foundation funds offset by an increase in salaries payable of $44,660. Annuities payable of $73,057 is due for payments in the next fiscal year. 7

10 Non-current liabilities totaled $77,803, which represents the non-current portion of the gift annuities Current liabilities totaled $326,799, a decrease of approximately $48,000 or 12.9%. The net decrease was related to the decrease in accounts payable and accrued expenses of $66,920 offset by increases in salaries payable of $14,781 and accrued compensated absences of $3,768 for University employees paid with Foundation funds. Annuities payable of $64,857 was unchanged from prior year. Non-current liabilities totaled $163,765, which represents the non-current portion of the gift annuities. Net Position The net position at June 30, 2015, totaled $ million, an increase of $3.862 million or 3.5%. The net position section of the Statement of Net Position provides two classifications: 1. The restricted assets are listed in three categories: a) the restricted by donors category represents amounts which are available for spending in accordance with the donor s specified criteria; b) the restricted for gift annuity represents the estimated net amount available for future payments by the Foundation; and c) the permanent endowments category represents the Foundation s restricted nonexpendable funds, which are required to be held in perpetuity. 2. The unrestricted assets are the amounts available to the Foundation for any purpose in support of its mission. Statements of Revenues, Expenses, and Changes in Net Position The purpose of the Statement of Revenues, Expenses, and Changes in Net Position is to provide the details of the Foundation s operating and non-operating activities for the fiscal year. This includes the revenues (net of discounts and allowances) displayed by major source, expenses, and gains and losses received or incurred by the Foundation. For fiscal 2015, the Statements of Revenues, Expenses, and Changes in Net Position reflect a $3.862 million increase in net position or 3.5%. 8

11 Condensed Summary of Revenues, Expenses, and Changes in Net Position For the year ended June 30, Increase (decrease) Change 2013 Increase (decrease) Change Operating revenues: Contributions $ 4,456 $ 4,408 $ % $ 5,011 $ (603) -12.0% Programs % 652 (171) -26.2% Total operating revenues 5,043 4, % 5,663 (774) -13.7% Operating expenses 9,760 10,009 (249) -2.5% 10,085 (76) -0.8% Operating loss (4,717) (5,120) % (4,422) (698) 15.8% Non-operating revenue (expenses): Interest and dividends % % Investment management fees (422) (384) (38) 9.9% (342) (42) 12.3% Net unrealized and realized gains 5,093 11,975 (6,882) 57.5% 9,405 2, % Non-operating income 4,995 11,889 (6,894) 58.0% 9,343 2, % Change in net position before contributions to endowments 278 6,769 (6,491) 95.9% 4,921 1, % Contributions to permanent endowments 3,583 4,207 (624) -14.8% 3, % Change in net position 3,861 10,976 (7,115) 64.8% 8,325 2, % Net position, beginning of year 110,439 99,463 10, % 91,138 8, % Net position, end of year $ 114,300 $ 110,439 $ 3, % $ 99,463 $ 10, % The Statements of Revenues, Expenses, and Changes in Net Position include the following categories: Operating revenues are revenues received from donors (i.e. contributions, etc.) and services provided (i.e. workshops, lecture series, special events, etc.) to various customers and constituents of the Foundation. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the Foundation. They are detailed by expenditure type, which include educational items, program and professional fees, scholarships, fellowships, study abroad, etc. Net operating loss represents the amount of operating expenses in excess of the year s operating revenues and does not include non-operating revenue. Non-operating revenue is received from sources for which no service is provided by the Foundation, e.g. investments. Additions to endowments represent contributions received for the permanent endowments. The change in net position is the result of the fiscal year s excess (deficiency) of revenues over expenses, which is also the difference in total net position on the Statements of Net Position. The Statements of Revenues, Expenses and Changes in Net Position presented as part of the basic financial statements. For fiscal 2015, the Foundation s change in in net position before contributions to endowments was approximately $278,000. The Statements highlights are as follows: 9

12 Operating Revenues 2015 Operating revenues totaled $5.043 million, an increase of approximately $154,000 or 3.1%. The non-endowed contributions totaled $4.456 million, which is an increase of $48,000 or 1.1%. Contributions shown under Operating Revenues are exclusive of the contributions to permanent endowments. The increase in contributions is attributed to an increase in gifts to the unrestricted and restricted funds. Program revenues totaled $586,908, an increase of $105,735 or 22.0%. The increase is due primarily to sponsorships Operating revenues totaled $4.889 million, a decrease of approximately $774,000 or 13.7%. The non-endowed contributions totaled $4.408 million, which was an increase of $602,000 or 12.0%. Contributions shown under Operating Revenues are exclusive of the contributions to permanent endowments. The decrease in contributions is attributed to an increase in gifts to the unrestricted and restricted funds. Program revenues totaled $481,172, a decrease of $171,169 or 26.2%. The decrease was due to a reduced number of workshops, seminars and sponsored activities. Operating Expenses 2015 Operating expenses totaled $9.760 million, which is a decrease of approximately $249,000 or 2.5%. The following details several expense categories: Education Programs totaled $334,008, a decrease of $74,558 or 18.2% over fiscal The decrease is due primarily to the amount of equipment and software that were purchased or donated. Scholarships, Fellowships and Study Abroad. The Foundation disbursed $2.563 million to the University for its scholarships ($2.072 million), fellowships ($192,370) and First Generation Matching Program ($299,128). In total, this was a 0.3% decrease. Program fees totaled $2.716 million, a decrease of $78,474 or 2.8%. The decrease is attributed to the number of employees salaries and fringe benefits paid with Foundation funds and people hired for contract services representing workshop and seminar leaders. 10

13 Professional Fees totaled $346,175, an increase of $10,857 or 3.2% from fiscal 2014 of $335,318. The increase represents the expenses associated with the Foundation s consultant fees, and outsourced Phonathon vendor. General and administrative expenses totaled $3.801 million, a decrease of $99,549 or 2.6%. These expenses are operational expenses, which include educational material, printing, telephone, meeting, travel, public relations, registrations, memberships and other fees, etc Operating expenses totaled $ million, which was a decrease of approximately $76,000 or 0.7%. The following details several expense categories: Education Programs totaled $408,565, a decrease of $348,289 or 46.0% over fiscal The decrease was due primarily to the amount of software that was purchased or donated. Scholarships, Fellowships and Study Abroad. The Foundation disbursed $2.571 million to the University for its scholarships ($2.139 million), fellowships ($205,017), study abroad ($8,500) and First Generation Matching Program ($217,963). In total, this was a 2.5% increase. Program fees totaled $2.795 million, an increase of $62,726 or 2.3%. The increase was attributed to the number of employees salaries and fringe benefits paid with Foundation funds and people hired for contract services representing workshop and seminar leaders. Professional Fees totaled $335,318, an increase of $13,165 or 4.1% from fiscal 2013 of $322,153. The increase represents the expenses associated with the Foundation s consultant fees, and outsourced Phonathon vendor. General and administrative expenses totaled $3.900 million, an increase of $134,033 or 3.6%. These expenses are operational expenses, which include educational material, printing, telephone, meeting, travel, public relations, registrations, memberships and other fees, etc. Non-operating Revenues/Expenses 2015 Non-operating revenue/expenses totaled $4.995 million net gain. The endowed funds net decrease of approximately $6.894 million is attributed to investment market performance under the leadership of the Perella Weinberg Partners/Agility Comprehensive Solutions. The non-endowed funds had a net gain of approximately $12,000 in investment earnings. 11

14 2014 Non-operating revenue/expenses totaled $ million net gain. The endowed funds increased net was approximately $2.546 million and was attributed to investment market performance under the leadership of the Perella Weinberg Partners/Agility Comprehensive Solutions. The non-endowed funds had a net gain of approximately $39,000 in investment earnings. The investment performance for both the endowed and non-endowed investment balances is reflected below: For the year ended June 30, (in thousands of dollars) Increase (decrease) Change 2013 Increase (decrease) Change Endowed investment income: Endowed - Interest & Dividends $ 16 $ 14 $ % $ 12 $ % Endowed - Realized (35) 40.7% % Endowed - Unrealized 4,613 11,451 (6,838) 59.7% 9,152 2, % Total endowed investment income 4,680 11,551 (6,871) 59.5% 9,176 2, % Non-Endowed investment income: Interest & Dividends % % Non-Endowed - Realized - 17 (17) 100.0% 40 (23) 57.5% Non-Endowed - Unrealized (12) 37 (49) % (153) % Total non-endowed investment income (23) -6.8% % Total investment income $ 4,995 $ 11,889 $ (6,894) 58.0% $ 9,343 $ 2, % Additions to Endowments 2015 Permanent Endowments. The Foundation received $3.583 million in donor contributions to its permanent endowments. There were no State matching funds received in fiscal Permanent Endowments. The Foundation received $4,208 million in donor contributions to its permanent endowments. There were no State matching funds received in fiscal Statements of Cash Flows The Statements of Cash Flows show the cash provided and used for operating, capital and related financing activities and investing activities. Operating activities include funds received (i.e. from private donors, student rentals, parking fees, matching programs, etc.) and payments (i.e. for programs, employee services, and suppliers for goods and services) made for Foundation operations. Capital and related financing activities include funds received from donor annuities and contributions to permanent endowments; and funds used to pay annuity payables and a note payable. 12

15 Investing activities represent funds used to purchase investments and loan funds to a related party; and funds received from proceeds of investment sales, interest and dividends. Capital Assets 2015 There are no capital assets or operational functions on the Foundation s financial statements There were no capital assets or operational functions on the Foundation s financial statements. Economic Outlook The Foundation has no knowledge of any current facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year. Management believes the Foundation s overall financial position is strong. With detailed monitoring of each account, the Foundation has sufficient funds to cover its obligations. Requests for Information This financial report is designed to provide a general overview of the Foundation s finances for all those with an interest therein. Questions concerning any of the information provided in this report or requests for additional information may be addressed to: Beverly A. Evans, Director University of North Florida TSI/Foundation Accounting Hicks Hall, Suite UNF Drive Jacksonville, FL (904)

16 STATEMENTS OF NET POSITION June 30, 2015 and 2014 ASSETS CURRENT ASSETS Cash $ 20,325 $ 370,562 Prepaid expenses 31,361 33,444 Note receivable, current portion 131,088 - Pledges receivable, restricted 646, ,089 Interest receivable 17,851 - Total current assets 847,179 1,399,095 NONCURRENT ASSETS Restricted cash and cash equivalents 5,108,055 2,849,990 Restricted investments 100,383,729 99,729,296 Notes receivable 5,868,912 4,588,819 Pledges receivable, restricted 1,628,774 1,766,693 Other assets 802, ,784 Total non-current assets 113,791, ,530,582 Total assets $ 114,638,817 $ 110,929,677 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable and accrued expenses $ 47,676 $ 152,883 Salaries payable - due to UNF 99,557 54,897 Accrued compensated absences, current portion 40,101 54,162 Annuities payable, current portion 73,057 64,857 Total current liabilities 260, ,799 NONCURRENT LIABILITIES Annuities payable 77, ,765 Total liabilities 338, ,564 NET POSITION Restricted Restricted by donors - expendable 14,350,071 14,355,917 Restricted for gift annuity 289, ,741 Permanent endowments - nonexpendable 98,307,174 94,883,700 Unrestricted 1,353, ,755 Total net position 114,300, ,439,113 Total liabilities and net position $ 114,638,817 $ 110,929,677 The accompanying notes are an integral part of these financial statements. 14

17 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION Years ended June 30, 2015 and OPERATING REVENUES Contributions $ 4,456,268 $ 4,408,304 Programs 586, ,172 5,043,176 4,889,476 OPERATING EXPENSES Program services: Education programs 334, ,565 Scholarships, fellowships and study abroad 2,563,012 2,570,615 2,897,020 2,979,180 Supporting services: Program fees 2,716,076 2,794,550 Professional fees 346, ,318 3,062,251 3,129,868 Other expenses: General and administrative expenses 3,800,736 3,900,285 Total operating expenses 9,760,007 10,009,333 Operating loss (4,716,831) (5,119,857) NON-OPERATING REVENUES (EXPENSES) Interest and dividends 323, ,523 Net appreciation in investments 4,671,107 11,590,513 Total non-operating revenues 4,994,943 11,889,036 Change in net position before contributions to endowments 278,112 6,769,179 Contributions to permanent endowments 3,583,398 4,207,541 Change in net position 3,861,510 10,976,720 Net position, beginning of year 110,439,113 99,462,393 Net position, end of year $ 114,300,623 $ 110,439,113 The accompanying notes are an integral part of these financial statements. 15

18 STATEMENTS OF CASH FLOWS Years ended June 30, 2015 and CASH FLOWS FROM OPERATING ACTIVITIES Received from private donors $ 4,942,722 $ 4,475,106 Received from other sources 586, ,172 Payments to the University for programs (2,897,020) (2,979,180) Payments to employees for services (3,076,312) (3,126,100) Payments to suppliers for goods and services (3,859,200) (3,953,785) Net cash used in operating activities (4,302,902) (5,102,787) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Additions to annuity payable 24,472 80,524 Payments on annuity payable (102,234) (79,661) Contributions to permanent endowments 3,583,398 4,207,541 Net cash provided by capital and related financing activities 3,505,636 4,208,404 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments (13,974,483) (22,001,447) Proceeds from sales of investments 17,992,049 22,440,157 Interest and dividends received 98, ,279 Loans to related parties (1,411,181) (393,416) Net cash provided by investing activities 2,705, ,573 Net increase (decrease) in cash and cash equivalents 1,907,828 (740,810) Cash and cash equivalents, beginning of year 3,220,552 3,961,362 Cash and cash equivalents, end of year $ 5,128,380 $ 3,220,552 Reconciliation of operating loss to net cash used in operating activities: Operating loss $ (4,716,831) $ (5,119,857) Adjustments to reconcile operating loss to net cash used in operating activities: Change in allowance of pledges receivable (15,045) (2,066) Changes in assets and liabilities: Prepaid expenses 2,083 (1,361) Pledges receivable 501,499 68,868 Accounts payable and accrued expenses (60,547) (52,139) Accrued compensated absences (14,061) 3,768 Net cash used in operating activities $ (4,302,902) $ (5,102,787) Reconciliation of cash and cash equivalents to the statements of net position: Cash $ 20,325 $ 370,562 Restricted cash and cash equivalents 5,108,055 2,849,990 Total cash and cash equivalents $ 5,128,380 $ 3,220,552 The accompanying notes are an integral part of these financial statements. 16

19 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Reporting entity The University of North Florida Foundation, Inc. (the Foundation ), is a not-for-profit entity organized to provide financial support to the students and programs of the University of North Florida (the University ). It is a direct support organization ( DSO ) and proprietary fund component unit of the University. 2. Basis of accounting The financial statements of the Foundation have been prepared using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recognized when they are incurred. The Foundation follows GASB Statement No. 34, Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments, GASB Statement No. 35, Basic Financial Statements - and Management s Discussion and Analysis - for Public Colleges and Universities, GASB Statement No. 37, Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments: Omnibus - an amendment of GASB Statements No. 21 and No. 34, GASB Statement No. 38, Certain Financial Statement Note Disclosures as applicable to proprietary funds, and GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB Statements No. 34, 35 and 63 establish standards for external financial reporting which include a statement of net position, a statement of revenues, expenses and changes in net position, and a statement of cash flows using the direct method. GASB Statements No. 34, 35 and 63 also include a requirement that management provide a discussion and analysis of the basic financial statements and it requires the classification of net position into three components net investment in capital assets; restricted net position; and unrestricted net position. These classifications are defined as follows: Net investment in capital assets consist of capital assets, net of accumulated depreciation, reduced by outstanding balances of any debt that is attributable to those assets. Restricted net position consist of assets that have externally imposed constraints placed upon their use, either by donors (such as through debt covenants) or through laws, regulations, or restrictions imposed by law through constitutional provisions or enabling legislation, reduced by any liabilities to be paid from these assets. Unrestricted net position consists of net position that does not meet the definition of restricted. 17

20 Notes to Financial Statements, Continued As provided by GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, the Foundation has elected to adopt Financial Accounting Standards Board statements that do not conflict with GASB. 3. Cash and cash equivalents For purposes of the statement of cash flows, the Foundation includes cash on hand, cash on deposit, and investments with original maturities of ninety days or less to be cash and cash equivalents. 4. Investments Investments are stated principally at fair value based on quoted market prices with the exception of the alternative investments (hedge, private equity and other fund investments) which are based on external valuation sources. To the extent investments are held in commingled funds, the recorded amount is based on an allocation of the fair value based on the underlying securities of the fund. The Foundation intends to hold its investments for the long term. However, the needs of the Foundation may require the sale of a portion of these assets on a short-term basis, subject to the approval of the Investment Committee. 5. Notes receivable The notes receivable are stated at the amount the Foundation expects to collect from the outstanding balances. An allowance for uncollectible amounts is estimated and recorded based on management s judgment of the collectability of the notes receivable in future years. At June 30, 2015 and 2014, the Foundation considered the full balance of the notes receivable to be collectible. Accordingly, there was no allowance for doubtful accounts. 6. In-kind contributions Donated educational materials, equipment, books and other non-cash contributions are recorded at their estimated fair values, if determinable, at the date of the donations. Nominal values are recorded if fair values are not determinable. Administrative and fiscal services, office space and other miscellaneous support services are provided to the Foundation by the University at no cost. No value has been assigned to these services in the accompanying statement of revenues, expenses, and changes in net position, since there is no objective basis for determining the value. 7. Pledges receivable The Foundation accounts for its pledges in accordance with GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions ( GASB 33 ). GASB 33 establishes reporting standards for nonexchange transactions, which in the case of the Foundation are restricted pledges to be contributed in the future. Pledges are presented at fair value and recorded net of allowances for uncollectible accounts. The allowance for uncollectible pledges is based on historical collection rates estimated at 3% of receivables. 8. Income taxes 18

21 Notes to Financial Statements, Continued The Foundation is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code; accordingly, the accompanying financial statements do not reflect a provision or liability for federal and state income taxes. The Foundation has determined that it does not have any material uncertain tax positions as of June 30, Years ending on or after June 30, 2012 remain subject to examination by federal and state tax authorities. 9. Operating income Operating revenues and expenses for a proprietary fund are those that result from providing services and producing and delivering goods and or services. Also included are all revenues and expenses not related to capital and related financing, non-capital financing, or investing activities. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Interest and dividends, net gains and losses on investments, and contributions received for endowments or from State matching funds are considered non-operating. When both restricted and unrestricted resources are available for use, the Foundation s policy is to use restricted resources first, then unrestricted resources as needed. 10. Vacation and sick leave accrual Employees earn the right to be compensated during absences for annual leave ( vacation ) and sick leave pursuant to Section 6C of the Florida Administrative Code. Employees earn annual and sick leave based on their years of service. For annual leave, a maximum of 352 hours can be carried forward from one year to the next or paid upon termination for administrative and professional ( A&P ) employees and 240 hours can be carried forward from one year to the next or paid upon termination for University support personnel services ( USPS ) employees. Employees who have completed at least ten years of service are eligible to receive payment for one fourth of their accrued sick leave hours, upon termination, not to exceed 480 hours. Vacation pay and sick leave payments are expensed in the period earned by the employee. Accrued compensated absences as of June 30, 2015 and 2014 were as follows: Beginning Balance $ 54,162 $ 50,394 Additions 66,299 13,309 Reductions (80,361) (9,541) Ending Balance $ 40,100 $ 54, Non-cash transactions The Foundation s change in the fair value of its investments due to net unrealized gains was $5,023,313 and $11,864,180 for the years ended June 30, 2015 and 2014, respectively. 12. Use of estimates 19

22 Notes to Financial Statements, Continued The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. NOTE B - CASH, CASH EQUIVALENTS AND INVESTMENTS Investment decisions are made subject to guidelines established by the Foundation s Investment Committee and approved by the Board. All deposits and investments are held at the financial institutions in the name of the Foundation. Cash As of June 30, unrestricted cash included bank demand accounts and consisted of the following: Cash on deposit $ 20,325 $ 370,562 As of June 30, restricted cash equivalents included money market funds subject to immediate withdrawal and consisted of the following: Custodial credit risk - deposits. Custodial credit risk for deposits is the risk that, in the event of a depository financial institution s failure, the Foundation s deposits may not be returned to it. The Foundation periodically maintains cash balances in excess of the Federal Deposit Insurance Corporation (FDIC) limit. The Foundation s total restricted cash and cash equivalents are restricted for endowment purposes. Investments Money market funds $ 5,108,055 $ 2,849,990 Investments are recorded at fair value and consist of government and agency mortgage backed securities, corporate bonds, mutual funds, and alternative investments which include hedge funds, private equity funds, global equities/fixed income funds, absolute return fund, and real assets funds. The Foundation s investment policy states equity securities will be broadly diversified (e.g. country, economic sector, industry, etc.) to minimize the impact during sudden and severe market downturn, as equity markets have historically displayed a high degree of such correlation during these periods. The role of the alternative investment funds described above is to reduce the overall volatility of the equity fund performance. Fixed income securities will be diversified among different sectors of the fixed income market. With the exception of obligations of the U.S. 20

23 Notes to Financial Statements, Continued Government and its agencies, no purchase will be made that will cause more than 5% of the fixed income fund to be invested in the securities of any one issuer. The estimated fair values of investments were based on valuations provided by external investment managers at June 30, and consisted of the following: Investment Type U.S. Government bonds and agency securities $ 4,025,468 $ 4,758,163 Corporate Bonds 2,139,763 2,660,434 Fixed income mutual funds 216, ,630 Equity mutual funds 1,008,802 1,242,306 Absolute return fund 13,294,662 12,331,250 Global equities fund 46,172,342 44,813,731 Global fixed income fund 6,300,675 6,087,355 Hedge funds 66, ,624 Private equity funds 24,152,002 25,069,644 Real assets funds 3,007,066 2,286,159 $ 100,383,729 $ 99,729,296 Credit risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. At June 30, 2015 and 2014, the quality ratings of the Foundation s investments are as follows: 2015 Quality Rating Investment Type Fair Value AAA AA A Unrated U. S. Government bonds and agency securities $ 4,025,468 $ 1,388,986 $ - $ 2,636,482 $ - Corporate Bonds 2,139, ,878 1,612,885 - Fixed income mutual funds 216, ,468 Equity mutual funds 1,008, ,008,802 Absolute return fund 13,294, ,294,662 Global equities fund 46,172, ,172,342 Global fixed income fund 6,300, ,300,675 Hedge funds 66, ,481 Private equity funds 24,152, ,152,002 Real assets funds 3,007, ,007,066 $ 100,383,729 $ 1,388,986 $ 526,878 $ 4,249,367 $ 94,218,498 21

24 Notes to Financial Statements, Continued 2014 Quality Rating Investment Type Fair Value AAA AA A Unrated U. S. Government bonds and agency securities $ 4,758,163 $ 1,868,151 $ 275,583 $ 2,614,429 $ - Corporate Bonds 2,660, ,019 2,078,415 - Fixed income mutual funds 253, ,630 Equity mutual funds 1,214, ,214,717 Real estate mutual funds 27, ,589 Absolute return fund 12,331, ,331,250 Global equities fund 44,813, ,813,731 Global fixed income fund 6,087, ,087,355 Hedge funds 226, ,624 Private equity funds 25,069, ,069,644 Real assets fund 2,286, ,286,159 $ 99,729,296 $ 1,868,151 $ 857,602 $ 4,692,844 $ 92,310,699 Money market funds are presented in restricted cash and cash equivalents on the Foundation s Statements of Net Position. Interest rate risk. Interest rate risk is the risk that changes in the interest rates will adversely affect the fair value of an investment. The Foundation s policy for managing its exposure to fair value loss occurring from interest rate risk is through maintaining diversification of its investments and investment maturities so as to minimize the impact of downturns in the market as stated above. As of June 30, 2015, the Foundation s investments and money market funds had the following maturities: Investment Maturities (in Years) Fair Value Less than U.S. Government bonds and agency securities $ 4,025,468 $ 400,672 $ 3,624,796 Corporate bonds 2,139, ,184 2,023,579 Money market funds 5,108,056 5,108,056 - $ 11,273,287 $ 5,624,912 $ 5,648,375 Investment income. The following summarizes net investment income for the years ended June 30, 2015 and 2014: Net unrealized and realized gains $ 5,092,977 $ 11,974,701 Investment management fees (421,870) (384,188) Net appreciation in investments 4,671,107 11,590,513 Interest and dividends 323, ,523 Non-operating revenues $ 4,994,943 $ 11,889,036 The calculation of realized gains or losses is independent of the calculation of the net change in the fair value of the investments. 22

25 Notes to Financial Statements, Continued In accordance with the policies of the Foundation s Board, the Foundation received $1,523,268 and $1,386,622 in investment management fees from the permanently endowed accounts during the years ended June 30, 2015 and 2014, respectively. These fees are to be utilized for unrestricted purposes. The investment management fees are calculated as 1.60% of the respective fair value of the endowed investments for the years ended June 30, 2015 and 2014, respectively, and deducted quarterly from the total return of the pooled and non-pooled endowment funds. The fees assessed by the Foundation are for expenses related to the operation of the Foundation such as management of the endowment, audit and accounting functions, development and alumni related activities, as they relate to the operations and fund-raising, gift receipting, acknowledging, and recognition of donors. Permanent endowment pooled and non-pooled cash and investments The aggregate amount of deficiencies for all donor-restricted endowment funds for which the fair value of the assets was less than the level required by donor stipulations was $7,709,627 and $7,406,913 as of June 30, 2015 and 2014, respectively. NOTE C - FAIR VALUE MEASUREMENTS The Foundation has provided additional information about fair value measurements which is based on the assumptions that market participants would use when pricing an asset or liability. A fair value hierarchy was established that prioritizes the information used to develop these assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that an entity has the ability to access at the measurement date; Level 2 Level 3 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and Inputs that are unobservable, about which little or no market data exists, therefore requiring an entity to develop its own assumptions. Inputs broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. The Foundation uses the market approach valuation technique to value its investments. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the unobservable inputs. Prices for certain cash equivalents and investment securities, such as U.S. Government bonds and agency securities, fixed income and equity mutual funds, and corporate bonds, are readily available in the active markets in which those securities are traded, and the resulting fair values are categorized as Level 1. 23

26 Notes to Financial Statements, Continued There is little or no observable market data for the prices of hedge funds, private equity funds, absolute return fund, global equities fund, global fixed income fund, real assets funds (collectively alternative investments ) and pledges receivable that are held by the Foundation, and the resulting fair values of these investments are categorized as Level 3. Following is a description of the valuation methodologies use for assets measured at fair value. Level 1 Fair Value Measurements The fair value of U.S. government bonds and agency securities, corporate bonds, and mutual funds are based on quoted prices in active markets. Level 3 Fair Value Measurements The investments presented as hedge funds, absolute return fund, global equities fund, global fixed income fund, and real assets funds are generally open-end funds as they typically offer subscription and redemption options to investors. The frequency of such subscriptions or redemptions is dictated by such funds governing documents. The amount of liquidity provided to investors in a particular fund is generally consistent with the liquidity and risk associated with the underlying portfolio (i.e., the more liquid the investments in the portfolio, the greater the liquidity provided the investors). Liquidity of individual hedge funds varies based on various factors and may include gates, holdbacks and side pockets imposed by the manager of the hedge fund, as well as redemption fees which may also apply. These investments are generally illiquid in whole or in part, and classified as Level 3. Most private equity funds are structured as closed-end, commitment-based investment funds where the entity commits a specified amount of capital upon inception of the fund (i.e., committed capital) which is then drawn down over a specified period of the fund s life. Such funds generally do not provide redemption options for investors, and subsequent to final closing, do not permit subscriptions by new or existing investors. Accordingly, the entity generally holds interests in such funds for which there is no active market. These interests, in the absence of a recent and relevant secondary market transaction, are classified as Level 3. Pledges receivable represent unconditional promises to give, and are presented at their estimated net realizable value. Pledges are discounted using a risk free interest rate, and are recorded net of allowances for uncollectible amounts. These assets, in the absence of observable market data, are classified as Level 3. The following tables present the assets carried on the Statements of Net Position by level within the valuation hierarchy as of June 30, 2015 and

27 Notes to Financial Statements, Continued Assets at Fair Value as of June 30, 2015 Level 1 Level 2 Level 3 Total U.S. government bonds and agency securities $ 4,025,468 $ - $ - $ 4,025,468 Corporate bonds 2,139, ,139,763 Fixed income mutual funds 216, ,468 Equity mutual funds 1,008, ,008,802 Absolute return fund ,294,662 13,294,662 Global equities fund ,172,342 46,172,342 Global fixed income fund - - 6,300,675 6,300,675 Hedge funds ,481 66,481 Pledges receivable, net - - 2,275,328 2,275,328 Private equity funds ,152,002 24,152,002 Real assets funds - - 3,007,066 3,007,066 Total $ 7,390,501 $ - $ 95,268,556 $ 102,659,057 Assets at Fair Value as of June 30, 2014 Level 1 Level 2 Level 3 Total U.S. government bonds and agency securities $ 4,758,163 $ - $ - $ 4,758,163 Corporate bonds 2,660, ,660,434 Fixed income mutual funds 253, ,630 Equity mutual funds 1,242, ,242,306 Absolute return fund ,331,250 12,331,250 Global equities fund ,813,731 44,813,731 Global fixed income fund - - 6,087,355 6,087,355 Hedge funds , ,624 Pledges receivable, net - - 2,761,782 2,761,782 Private equity funds ,069,644 25,069,644 Real assets funds - - 2,286,159 2,286,159 Total $ 8,914,533 $ - $ 93,576,545 $ 102,491,078 The following table includes rollforwards of the amounts for the years ended June 30, 2015 and 2014 for assets classified within Level 3. The classification of an asset within Level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement. 25

28 Notes to Financial Statements, Continued Fair value, beginning of year $ 93,576,545 $ 81,441,167 Purchases of investments 2,013,436 6,331,400 Sales of investments (4,413,917) (5,618,652) Net unrealized gains on investments 4,578,946 11,489,432 Additions to pledge receivables 709,841 1,300,426 Payments received on pledge receivable (1,084,472) (1,093,508) Writeoffs of pledge receivables (210,963) (233,254) Transfers of pledge receivables 62,578 (37,815) Change in discount and allowance of pledge receivables 36,562 (2,651) Fair value, end of year $ 95,268,556 $ 93,576,545 NOTE D NOTES RECEIVABLE UNF Training & Service Institute, Inc. The Foundation entered into a Memorandum of Understanding ( MOU ) in May 2010 between the UNF Foundation, Inc., UNF Training & Services Institute, Inc. ( TSI ) and UNF TSI Investments, LLC ( LLC ) to purchase the ADT property. The MOU includes a) loan funding to the LLC in an amount not to exceed $4,800,000; b) terms for the loan: interest will accrue at the rate of 4.50% per annum, and the principal and all accrued interest on the loan will be payable in full on or in part at any time prior to its due date in ten years (May 2021); c) no additional encumbrance or loan to any party a security interest in or otherwise pledge, collateralize or encumber the ADT Property; and d) no TSI funding of capital projects for as long as any portion of the loan or interest thereon remains unpaid, TSI will not advance, loan or contribute to UNF or a UNF-related entity any sum for the purpose of funding a UNF capital project. At June 30, 2015 and 2014, the loan totaled $4,800,000 and $4,588,819 respectively. At June 30, 2015 and 2014, the related loan interest receivable totaled $807,916 and $600,640, respectively. UNF Financing Corporation, Inc. In December 2014, the Foundation executed a $1,200,000 agreement with the UNF Financing Corporation, Inc. for the purpose of renovations to the East Park Warehouse. The loan terms include a maturity date of April 2025, interest rate of 3.00% and quarterly principal and interest payments of $38,849. At June 30, 2015, the loan principal totaled $1,174,174 and related loan interest receivable totaled $17,851. The current portion of the loan totaled $105,262. NOTE E - ANNUITIES PAYABLE Annuity trusts are gift agreements and are fixed, irrevocable contributions at the time of the gift. The donor and/or beneficiary annually receive a payout that is stated in the trust agreement, which is established at the time the trust is created, and additions are not allowed. Income in excess of the annual payment is added to the principal to support 26

29 Notes to Financial Statements, Continued future payouts. The trust assets are invested according to investment guidelines established by the Foundation s Investment Committee. At June 30, 2015, the Foundation had five gift annuity accounts with the following changes: Beginning Ending Due within balance Additions Reductions balance one year Annuities payable $ 228,622 $ 24,473 $ (102,234) $ 150,861 $ 73,057 NOTE F - PLEDGES RECEIVABLE Pledges receivable are recorded in the Statements of Net Position for restricted accounts at net realizable value in accordance with GASB 33. Pledge receivables were discounted using a risk free interest rate ranging from 1.2% to 7.6% as of June 30, Pledges receivable as of June 30, 2015 are summarized as follows: Due in year ending June 30: 2015 $ 650, , , , ,923 Thereafter 365,064 Subtotal restricted pledges 2,397,254 Less: Allowance for bad debts (70,371) Less: Present value discounts (51,555) Total pledges receivable, net 2,275,328 Less: Current portion of pledges receivable (646,554) Long-term portion of pledges receivable $ 1,628,774 Unrestricted and endowment pledge receivables not recognized in the Statements of Net Position under the provisions of GASB 33 were $13,673,291 and $13,381,799 at June 30, 2015 and 2014, respectively. NOTE G - RELATED PARTY TRANSACTIONS The Foundation makes contributions to the University for equipment purchases. The University maintains title to all such equipment purchases with the Foundation having use of all equipment without further charges. Contributions to the University for equipment purchases were $216,403 and $285,887 for the years ended June 30, 2015 and 2014, respectively. The Foundation advances funds to the University of North Florida Training and Services, Inc. (the Institute ) for reimbursement of Foundation operating costs paid by the Institute. Advances for the above costs were $538,000 and $527,245 for the years ended June 30, 2015 and 2014, respectively. 27

30 Notes to Financial Statements, Continued Effective January 21, 2015, the Haskell Foundation (the Donor ) entered into an agreement with the Foundation to make an endowment contribution to the Foundation to provide unrestricted operational support to the Museum of Contemporary Art Jacksonville, Inc. ( MOCA ). The endowment gift agreement includes a total cash contribution of $4,576,221 that includes payment of $1,000,000 to be provided by March 31, 2016 and the remaining balance to be paid by March 1, In June 2015, the Donor gifted stock to the Foundation valued at $2,016,311 that was sold and converted into cash. The corpus of the endowment contribution will remain permanently restricted and investment income will be utilized to support the operations and activities of MOCA. As a result, MOCA has an ongoing economic interest in the assets of the Foundation in the amount of $2,005,176, net of realized losses of $11,135, at June 30, NOTE H - PENSIONS Employees paid with Foundation funds are eligible to be covered by the State of Florida, Florida Retirement System, which is a cost-sharing, multiple-employer, defined-benefit pension plan. Pension benefits vest for employees who have completed at least six years of creditable service. Effective July 1, 2011, employees are assessed a 3% of salary mandatory retirement contribution on a bi-weekly basis. Benefits may be received upon 30 years of service, death or disability, or at retirement age of 62. Benefits may be received upon 30 years of service, death or disability, or at retirement age of 62. Reduced benefits may be received prior to age 62 for vested employees with terminated employment. The Foundation makes contributions to the plan in accordance with rates determined by Chapter 121 of the Florida Statutes. The retirement plan is funded by employer contributions at a rate of 7.37% and 6.95% of the gross pay for regular employees for 2015 and 2014, respectively. The Pension Plan issues a publicly available financial report that includes financial statements, ten-year historical trend information and other required supplementary information. That report may be obtained by writing to the: State of Florida Division of Retirement Department of Management Services P.O. Box 9000 Tallahassee, Florida Faculty members and A&P employees can also elect to participate in an optional retirement program ( ORP ), a defined contribution pension plan. This program provides full and immediate vesting of all contributions. The Foundation contributes a percentage of earnings and the participants can also contribute up to 10.69% and 10.34% of salary in various investment options for 2015 and 2014, respectively. There is no age or length of service requirements to participate in the ORP. Annuity income at retirement is based on the investment value and the type of annuity selected. During the years ended June 30, 2015 and 2014, total pension costs were $76,970 and $116,210 respectively. Such amounts are included in program fees in the accompanying statements of revenues, expenses, and changes in net position. The Foundation s liability for any unfunded pension benefit obligation is limited to the payment of the required contribution at the rates established by law on future payrolls of the Foundation. The Foundation is current in its payments to the Florida Retirement System at June 30,

31 Notes to Financial Statements, Continued The Deferred Retirement Optional Program ( DROP ) is a program under which an eligible member of the Florida Retirement System may elect to participate, deferring receipt of retirement benefits while continuing employment with a Florida Retirement System employer. The deferred monthly benefit accrues on behalf of the participant, plus interest compounded monthly for the specified period of the DROP participation. Upon termination of employment, the participant receives the total DROP benefits and begins to receive previously determined retirement benefits. NOTE I - COMMITMENTS AND CONTINGENCIES Investment Manager Subscription Agreements The Foundation is a party to various subscription agreements with hedge fund managers. Due to the illiquid nature of the investments in these types of funds, there is redemption, notification requirements before an account can be closed, and proceeds paid to the Foundation. The redemption notice on the majority of funds is approximately 95 days. The Foundation is also a party to various subscription agreements with private equity managers which provide for capital contributions as requested by the funds. At June 30, 2015, the Foundation has future funding commitments to the following funds: NOTE J - CONCENTRATIONS OF MARKET, CREDIT AND CURRENCY RISKS Investments Morgan Creek Partners I $ 607,500 Morgan Creek Partners II 450,000 Morgan Creek Partners III 1,170,000 Morgan Creek Partners IV 90,000 Agility Private Capital II 3,274,645 Agility Private Capital III 4,915,999 Total $ 10,508,144 The Foundation had approximately 93% ($92,993,228) and 91% ($90,814,762) of its total portfolio invested in alternative investments as of June 30, 2015 and 2014, respectively. The fund s investments are subject to various risk factors including market, credit, and currency risk. The fund s investments are made in the United States and internationally and thus have concentrations in such regions. The fund s investments are also subject to the risk associated with investing in private equity securities. The investments in private equity securities are generally illiquid, and there can be no assurance that the fund will be able to realize the value of such investments in a timely manner. The funds have invested, for purposes of capital appreciation, in various underlying funds that vary by size, industry and geographical concentration. Investment performance of an industry sector in which the funds have a concentration of investments may have a significant impact on the performance of the fund. 29

32 Notes to Financial Statements, Continued The funds participate in assets and securities of non-u.s. issuers. Investments of this type may be subject to significant price fluctuations and above-average risk. Investments in non-u.s. securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to currency exchange matters, differences between the U.S. and non-u.s. securities markets, certain economic and political risks, and the possible imposition of non-u.s. taxes on income and gains recognized with respect to such securities. NOTE K - SUBSEQUENT EVENTS The Foundation has evaluated the effect subsequent events would have on the financial statements through September 18, 2015, which is the date the financial statements were available to be issued. 30

33 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors The University of North Florida Foundation, Inc. We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to the financial audits contained in the Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the University of North Florida Foundation, Inc. (the Foundation ) as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements and have issued our report thereon dated September 18, Internal Control over Financial Reporting In planning and performing our audits, we considered the Foundation s internal control over financial reporting (internal control) to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Foundation s internal control. Accordingly, we do not express an opinion on the effectiveness of the Foundation s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency, or a combination of deficiencies, in internal control that is less severe than material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Foundation s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 31

34 Purpose of the Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Jacksonville, Florida September 18,

35 SUPPLEMENTAL INFORMATION

36 UNIVERSITY OF NORTH FLORIDA FOUNDATION, INC. SCHEDULE OF EXPENDITURES OF STATE FINANCIAL ASSISTANCE For the Fiscal Year Ended June 30, 2015 CSFA No Agency: State of Florida Department of Education and Commissioner of Education Program: University Major Gift Challenge Grant Program State Matching Account Number Account Name Appropriation received June 30, 2009 and prior FY 2015 State Matching Appropriation Received State Expenditures Total 7001 Andrew Robinson Scholarship Endowment $ 63,746 $ - $ 4, Lovee and Hy Kliman Family Scholars Endowment 50,000-4, Captain Blanchart Maritime Endowed Scholarship 55,000-89, Wells Fargo Bank Scholarship Endowment 50,000-8, Herman & Virginia Terry Scholars Endowment 1,231, , Mayor Jake Godbold Endowed Scholarship 50,000-4, Presidential Endowed Scholarship 50,000-15, Eminent Scholar Char in American Music 400,000 60, Danciger Scholarship Endowment 52,200-2, Madison-Mullis Endowment 50,016-6, Richard deraimes Kip Professor of International Business 50, de R. Kip Endowment 1,522, , de R. Kip Professorship in Financial Services 100,000-9, Eminent Scholalr Chair in Wholesaling 400,000-50, Eminent Scholar Chair in Transportation 400, AT&T Scholarship Endowment 50,000-6, Alumni Association Scholarship Endowment 50,180-6, Hercules Scholarship Endowment - COAS 25, Hercules Scholarship Endowment - COCSE 25, Fred and Rose Cobb Endowment Scholarship 50,000-6, Martinez Family Scholarship Endowment 109,500-9, Eminent Scholar Chair in Education 400,000-82, R Ernest & D Ferrell Endowed Scholarship 92,500-9, Elizabeth Larsen Music Scholarship 60,451-10, John E Mathews Endowment 50,000-1, Marcus E Drewa Distinguished Professorship Endowment 117,118-10, Jacksonville Kennel Club Scholarship Endowment 50,000-5, William Sheffield Real Estate Professorship Endowment 100, Delores Kesler Scholarship Endowment 750,019-81, Pre-Law: Brown, Terrell, Hogan et al 12,500-5, Pre-Law: Coker Visiting Professorship 12,500-6, Pre-Law: RP & KR Liles Lecture 12,500-3, Pre-Law: Child Advocacy Program 12,500-2, Hicks and Gray Scholars Endowment 862, , Fidelity National Financial - Ann &David Hicks Scholarship 20, Florida Book Depository Endowed Graduate Fellows 50,000-6, Coggin Professorship Endowment 100,000-8, Coggin Endowment Scholarship 50,000-9, Adam W. Herbert Scholarship Endowment 93,693-3, E & I Zekaria Scholarship Endowment 62,724-8, Bank of America Information Technology Endowed Professorship 100,000-9, Bank of America Endowed Scholarship 55,000-7, Jacksonville Jaguars Foundation Endowed Scholarship 165,000-10, Brooks Health Endowment Scholarships, Professorships 1,050,000-54, Gerson Yessin Distinguished Endowed Professorship 50, David A Stein Business Ethics Scholarship Endowment 1,000,000-51, Donna L Harper Endowment Professor Business Admin 100,000-10, M & H Scheidel Scholarship Endowment 1,811, , Jody & Layton Smith Professorship and Osprey Financial Group 646,203-33, Jody & Layton Smith Scholarship Endowment 187,500-16, Pat H Foster Graduate Nurse Fellowship Endowment 50,953-1, University Scholars Endowment 63,526-10, Memorial Hospital Jaxcksonville Auxiliary Endowment Scholarship 50,000-5, St. Joe Company Endowed Scholarship 50,000-3, Dixon, Hughes, Goodman LLP Endowed Accounting Scholarship 100,000-13, Weaver Family Foundation Business Endowment Scholarship 1,000,000-61, CSX Transportation Scholarship Endowment 50,000-1, Lazzara Family Scholarship Endowment 125,000-9, Elkins Constructors Endowment Scholarship 50,000-6, Fidelity National Financial Distinguished Professorship in CIS 200,000-18, The Haskell Company Endowed Scholarship 50,000-5, Let Us Play Scholarship Endowment 55,000-2,500 33

37 UNIVERSITY OF NORTH FLORIDA FOUNDATION, INC. SCHEDULE OF EXPENDITURES OF STATE FINANCIAL ASSISTANCE For the Fiscal Year Ended June 30, 2015 CSFA No Agency: State of Florida Department of Education and Commissioner of Education Program: University Major Gift Challenge Grant Program State Matching Account Number Account Name Appropriation received June 30, 2009 and prior FY 2015 State Matching Appropriation Received State Expenditures Total 7130 Bill & Angie Halimandaris Endowed Scholarship 50,000-6, Dr. Reza Vaghefi Endowed Scholarship 50,000-2, David A. Smith & PSS World Medical Inc., Endowed Scholar 50,000-3, Ann C. Hicks Endowed Merit Scholarship 50,381-10, Compass Bank Endowed Scholarship in International Business 50,000-5, Baptist Health MSN Endowed Fellowships 150,000-30, James Van Vleck Endowed Scholarship 12, Dannehl & Kevin Twomey Endowed Scholarship 50,000-6, Blue Cross Blue Shield - Florida Ethics Center, Public Policy Professorship, Scholarships, Fellowships 761,998-32, Stellar Group Scholarship Endowment 50,000-5, Coggin Scholarships, Fellowships, Professorships 5,000, , Mayor John A. Delaney Endowed Scholarship 50,000-7, James Van Vleck Endowed Leadership & Ethics 50,000-10, Pajcic Scholars Program Endowment 100,790-18, Katherine H. Lovett Endowed Scholarship 50,012-26, Mark E. Workman Endowed Professorship 150,000-4, Thomas F & Eleanor H Aretz Endowed Nursing Scholarship 173,457-22, Crawford Early Literacy Faculty Fellow Corpus/Early Childhood Research Prof 225,000-91, Women & Girls Health Research Professorship Endowment 50,083-37, Terry Presidential Professorship Endowment 100, Pre-Law Scholarship Endowment 12,500-1, Paul Mucciolo MD Pre-Medical Scholarship 12,500-1, Panides-Doughty Memorial Endowed Scholarship 37,500-3, Debra Doughty-Jason Panides Endowed Memorial Scholarship 37,500-7, Betty Lawson Endowed Physical Therapy Fellowship 50,284-5, James Kufeldt Memorial Endowed Scholarship 50,000-8, Gate Petroleum Company Entrepreneurial Endowed Scholarship 50,000-5, Sam E Mousa Endowed Merit Scholarship 55,675-9, Linda Carter & Tom H Slade III Endowed Prof of Entrepreneural Studies 125,000-4, James Van Vleck Promising Future Endowed Scholarship 12,500-1, The Wachovia Foundation Endowed Scholarship 100,000-10, Blue Cross Blue Shield Endowed Nursing Professorship 420,000-29, Brooks College of Health Physical Theraphy Professorship 1 500,000-42, Brooks College of Health Physical Theraphy Professorship 2 500,000-66, Brooks College of Health Physical Theraphy Professor 3 500,000-30, Brooks College of Health Physical Theraphy Professor 4 500,000-31, Brooks College of Health Nursing Professorship 1 500,000-13, Brooks College of Health Nursing Professorship 2 500,000-24, Pamela S Chally Distinquished Professorship 600,000-8, Taylor Engineering Endowed Professorship 50,000-5, Charles M & Doris B Nevasier Endowed Nursing Scholarship 175,000-37, River Branch Foundation Endowment 87,500-2, Thad M Moseley, MD Endowed Scholarship 50,000-5, Donald Loop Spanish Scholarship Endowment 50,000-3,600 Total State Appropriations $ 26,954,927 Grand Total State Approriations $ 26,954,927 Total State Expenditures $ 2,555,026 34

38 NOTE TO SCHEDULE OF EXPENDITURES OF STATE FINANCIAL ASSISTANCE June 30, 2015 NOTE A BASIS OF PRESENTATION The accompanying Schedule of Expenditures of State Financial Assistance includes the state grant activity of the Foundation and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Chapter , Rules of the Auditor General, State of Florida. 35

39 REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR STATE FINANCIAL ASSISTANCE PROJECT AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE FLORIDA EOG S STATE PROJECTS COMPLIANCE SUPPLEMENT To the Board of Directors The University of North Florida Foundation, Inc. Report on Compliance for Each Major State Project We have audited the University of North Florida Foundation, Inc. s (the Foundation ) compliance with the types of compliance requirements described in the Florida Executive Office of the Governor s (EOG) State Projects Compliance Supplement, and Chapter 27D-1, Florida Administrative Code, that could have a direct and material effect on the Foundation s major state project for the year ended June 30, Foundation s major state financial assistance projects are identified in the summary of auditors results of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state projects. Auditors Responsibility Our responsibility is to express an opinion on compliance for the Foundation s major state projects based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and chapter , Rules of the Auditor General. Those standards and Chapter , Rules of the Auditor General, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state financial assistance project occurred. An audit includes examining, on a test basis, evidence about the Foundation s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major state project. However, our audit does not provide a legal determination of the Foundation s compliance. Opinion on Each Major State Project In our opinion, the Foundation complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect to its major state project for the year ended June 30,

40 Report on Internal Control Over Compliance Management of the Foundation is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit, we considered the Foundation s internal control over compliance with the requirements that could have a direct and material effect on a major state financial assistance project to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for each major state financial project and to test and report on internal control over compliance in accordance with Florida EOG s State Projects Compliance Supplement, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Foundation s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a state program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirements of a state program that is less severe than a material in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements with Florida EOG s State Projects Compliance Supplement. Accordingly, this report is not suitable for any other purpose. Jacksonville, Florida September 18,