FINANCIAL STATEMENTS SAMPLE UNIVERSITY JUNE 30, 2010 AND 2009

Transcription

1 FINANCIAL STATEMENTS SAMPLE UNIVERSITY JUNE 30, 2010 AND 2009

2 STATEMENTS OF FINANCIAL POSITION June 30, Temporarily Permanently Temporarily Permanently ASSETS Unrestricted restricted restricted Total Unrestricted restricted restricted Total Cash and cash equivalents $ 2,980,738 $ 852,121 $ 3,084,235 $ 6,917,094 $ 5,804,277 $ 611,443 $ 2,619,482 $ 9,035,202 Student accounts receivable, less allowance of $1,361,634 in 2010 and $1,385,071 in ,761, ,761,110 3,254, ,254,273 Prepaid expenses, other receivables and other assets 2,083, , ,559 2,786, , ,577 1,107,168 2,343,589 Perpetual trust held by a third party , , , ,003 Contributions receivable from remainder trusts - 270,479 1,209,081 1,479, ,079 1,105,753 1,362,832 Contributions receivable from lead trust - 131, ,444-91,842-91,842 Pledges receivable, net - 2,687, ,173 3,508,570-3,501, ,044 4,337,979 Estate receivable ,500,000 1,500,000 Investments 33,861,835 8,356,145 33,265,747 75,483,727 33,787,846 5,532,636 29,797,263 69,117,745 Student loans receivable, less allowance of $260,777 in 2010 and $261,938 in ,284, ,398 3,854,630 3,231, ,398 3,801,940 Land, buildings and equipment, net 129,579, ,579, ,492, ,492,411 TOTAL ASSETS $ 175,550,930 $ 12,872,675 $ 39,921,958 $ 228,345,563 $ 166,484,193 $ 10,317,512 $ 38,339,111 $ 215,140,816 LIABILITIES AND NET ASSETS Liabilities Accounts payable, accrued liabilities and refundable deposits $ 6,854,092 $ 45,141 $ - $ 6,899,233 $ 8,825,439 $ 47,982 $ - $ 8,873,421 Deferred revenue 920, , , ,650 Short-term debt 2,500, ,500,000 1,750, ,750,000 Split-interest agreements 324,468 1,178, ,004 2,260,672-1,345, ,269 2,151,429 Refundable loan funds (Perkins loan) 1,364, ,364,442 1,351, ,351,320 Interest rate swap agreement liability 3,265, ,265,075 1,998, ,998,667 Capital lease obligations 229, , Bonds and mortgage payable 41,892, ,892,432 41,944, ,944,395 Total liabilities 57,351,033 1,223, ,004 59,332,378 56,656,471 1,393, ,269 58,855,882 Net assets Current funds 3,401,370 2,127,144-5,528,514 3,216,874 1,120,025-4,336,899 Loan funds 2,508, ,398 3,078,655 2,196, ,398 2,767,389 Plant funds 77,297, ,615-77,770,834 72,792, ,566-73,065,713 Quasi-endowment funds 33,671, ,671,630 30,860, ,860,557 Endowed earnings funds 1,321,421 4,110,283-5,431, ,153 1,492,476-2,253,629 Endowment funds - 2,751,964 37,113,708 39,865,672-2,500,000 35,684,066 38,184,066 Split-interest agreement funds - 2,186,328 1,479,848 3,666,176-3,538,303 1,278,378 4,816,681 Total net assets 118,199,897 11,649,334 39,163, ,013, ,827,722 8,924,370 37,532, ,284,934 TOTAL LIABILITIES AND NET ASSETS $ 175,550,930 $ 12,872,675 $ 39,921,958 $ 228,345,563 $ 166,484,193 $ 10,317,512 $ 38,339,111 $ 215,140,816 4

3 STATEMENT OF ACTIVITIES Year ended June 30, 2010 Temporarily Permanently Unrestricted restricted restricted Total Revenues Tuition and fees $ 64,192,807 $ - $ - $ 64,192,807 Less financial aid (25,963,452) - - (25,963,452) Net tuition and fees 38,229, ,229,355 Community education programs 639, ,462 Contributions 4,061,054 2,303,281 1,385,685 7,750,020 Grants 5, , ,277 Investment gain 4,373,387 4,006,821-8,380,208 - Other support - Auxiliary enterprises 11,120, ,120,367 Rental 414, ,096 Other sources 1,937,982 47,891-1,985,873 Net assets released from restrictions 4,931,725 (4,919,740) (11,985) - Total revenues and other support 65,712,428 2,165,530 1,373,700 69,251,658 Expenses Instruction 20,330, ,330,485 Academic support 5,539, ,539,435 Intercollegiate athletics 3,177, ,177,449 Student services 6,297, ,297,615 Institutional support 10,618, ,618,792 Auxiliary enterprises 10,032, ,032,777 Total expenses 55,996, ,996,553 Increase in net assets 9,715,875 2,165,530 1,373,700 13,255,105 Other changes in net assets Change in fair value of interest rate swap agreement (1,266,410) - - (1,266,410) Change in value of split-interest agreements - 559, , ,846 Loss on disposal of long-lived assets (77,290) - - (77,290) CHANGE IN NET ASSETS 8,372,175 2,724,964 1,631,112 12,728,251 Net assets Beginning of year 109,827,722 8,924,370 37,532, ,284,934 End of year $ 118,199,897 $ 11,649,334 $ 39,163,954 $ 169,013,185 5

4 STATEMENT OF ACTIVITIES Year ended June 30, 2009 Temporarily Permanently Unrestricted restricted restricted Total Revenues Tuition and fees $ 59,478,124 $ - $ - $ 59,478,124 Less financial aid (22,429,897) - - (22,429,897) Net tuition and fees 37,048, ,048,227 Community education programs 738, ,384 Contributions 2,793,435 4,436,505 4,421,167 11,651,107 Grants - 584, ,875 Investment loss (9,116,632) (5,456,666) - (14,573,298) Other support Auxiliary enterprises 10,161, ,161,495 Rental 361, ,366 Other sources 1,562,811 48,111-1,610,922 Net assets released from restrictions 6,480,655 (6,498,016) 17,361 - Total revenues and other support 50,029,741 (6,885,191) 4,438,528 47,583,078 Expenses Instruction 19,956, ,956,767 Academic support 5,555, ,555,666 Intercollegiate athletics 2,897, ,897,617 Student services 5,584, ,584,152 Institutional support 10,079, ,079,150 Auxiliary enterprises 9,499, ,499,621 Total expenses 53,572, ,572,973 (Decrease) increase in net assets (3,543,232) (6,885,191) 4,438,528 (5,989,895) Other changes in net assets Change in fair value of interest rate swap agreement (1,529,749) - - (1,529,749) Change in value of split-interest agreements - (780,642) (763,618) (1,544,260) Other transfers 3,448,823 (57,384) (3,391,439) - Loss on disposal of long-lived assets (15,740) - - (15,740) CHANGE IN NET ASSETS (1,639,898) (7,723,217) 283,471 (9,079,644) Net assets Beginning of year 111,467,620 16,647,587 37,249, ,364,578 End of year $ 109,827,722 $ 8,924,370 $ 37,532,842 $ 156,284,934 6

5 STATEMENTS OF CASH FLOWS Years ended June 30, Cash flows from operating activities Change in net assets $ 12,728,251 $ (9,079,644) Adjustments to reconcile change in net assets to net cash provided by operating activities Non-cash contributions (3,944,605) (1,065,917) Change in pledge discount 56, ,056 Loss on disposal of long-lived assets 77,290 15,740 Provision for doubtful accounts (45,865) 257,736 Change in value of remainder and lead trusts (156,330) 414,580 Change in fair value of interest rate swap agreement 1,266,408 1,529,749 Change in amounts payable under split-interest agreements 109,243 (560,255) Realized and unrealized (gains) losses on marketable securities (6,819,019) 16,866,698 Realized losses (gains) on other investments 99,130 (10,018) Depreciation and amortization 4,560,182 3,707,977 Contributions restricted for permanent investment (1,385,685) (5,421,167) Investment income restricted for permanent investment (45,531) (55,431) Changes in operating assets and liabilities Student accounts receivable (483,400) (773,165) Prepaid expenses, other receivables and other assets (470,828) (927,801) Perpetual trust held by a third party (39,762) 279,106 Pledges receivable 794, ,247 Estate receivable 1,500,000 (1,500,000) Student loans receivable (51,530) (18,025) Accounts payable, accrued liabilities and refundable deposits (1,974,188) 271,927 Deferred revenue 134,186 (226,828) Refundable loan funds 13, Net cash provided by operating activities 5,921,744 4,403,377 Cash flows from investing activities Purchases of land, buildings and equipment (11,959,785) (31,546,567) Purchases of investments (16,851,260) (19,529,723) Proceeds from sales of investments 18,641,940 23,118,516 Net cash used in investing activities (10,169,105) (27,957,774) 7

6 STATEMENTS OF CASH FLOWS - CONTINUED Years ended June 30, Cash flows from financing activities Proceeds from bond issuance $ - $ 17,000,000 Disbursements to pay off short-term debt (1,750,000) - Proceeds from short-term debt 2,500,000 1,750,000 Proceeds from contributions restricted for investment in endowment 1,385,685 5,421,167 Investment income restricted for permanent investment 45,531 55,431 Payments on long-term debt (51,963) (48,020) Net cash provided by financing activities 2,129,253 24,178,578 NET CHANGE IN CASH AND AND CASH EQUIVALENTS (2,118,108) 624,181 Cash and cash equivalents, beginning of year 9,035,202 8,411,021 Cash and cash equivalents, end of year $ 6,917,094 $ 9,035,202 Supplemental disclosure of cash flow information Equipment obtained through capital lease obligations $ 287,470 $ - Interest paid 1,045, ,051 8

7 NOTES TO FINANCIAL STATEMENTS ACCOUNTING POLICIES is an independent, comprehensive college of the liberal arts and sciences that offers more than 55 undergraduate majors and graduate programming in six areas. With more than 2,300 full-time undergraduates and nearly 450 part-time undergraduate and graduate students (fall 2009), the College is committed to academic excellence, a climate that emphasizes leadership, ethics, values and service, a curriculum that balances job-related knowledge with a liberal arts foundation and a caring environment with small classes. The College is accredited by the North Central Association of Colleges and Schools and has been in continuous operation since its founding. Basis of Presentation The financial statements of the College have been prepared in accordance with accounting principles generally accepted in the United States of America. These financial statements, presented on the accrual basis of accounting, have been prepared to focus on the College as a whole, and present balances and transactions classified according to the existence or absence of donor-imposed restrictions. This presentation has been accomplished by classifying of net assets and activities into three classes: permanently restricted, temporarily restricted or unrestricted. Accounting Pronouncements In July 2009, the Financial Accounting Standards Board ( FASB ) implemented the Accounting Standards Codification (the Codification ) as the single source of Generally Accepted Accounting Principles ( GAAP ). The Codification did not change GAAP, but it introduced a new structure to the accounting language and changed reference to accounting standards and other authoritative accounting guidance. Management has determined that this pronouncement has no impact on the College s financial statements. Classification of Net Assets The accompanying financial statements have been prepared to present balances and transactions according to the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified as follows: Unrestricted net assets are not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by actions of the Board of Trustees or may otherwise be limited by contractual agreements with outside parties. 9

8 NOTES TO FINANCIAL STATEMENTS - CONTINUED ACCOUNTING POLICIES - Continued Classification of Net Assets - Continued Temporarily restricted net assets are subject to donor-imposed stipulations that can be fulfilled by actions of the College pursuant to those stipulations or expire by the passage of time. Permanently restricted net assets are subject to donor-imposed stipulations that the funds be maintained permanently by the College. Generally, the donors of these assets permit the College to use all or part of the income earned on these assets. Such assets primarily include the College s permanent endowment and certain loan funds. 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. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulations or by law. Expirations of donor-imposed stipulations that simultaneously increase one class of net assets and decrease another are reported as a reclassification between applicable classes of net assets (assets released from restriction). Fund Accounting In order to ensure observance of limitations and restrictions placed on the use of the resources available to the College, the accounts of the College are maintained in accordance with the principles of fund accounting. This is the method by which resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified. Separate accounts are maintained for each fund; however, in the accompanying financial statements, the various funds are grouped into unrestricted, temporarily restricted or permanently restricted net assets in accordance with accounting guidance. Cash and Cash Equivalents Cash and cash equivalents are reported at cost, which approximates fair value. Cash equivalents represent short-term investments with original maturities of three months or less. The College maintains its cash balance in financial institutions which, at times, may exceed federally insured limits. The College has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. 10

9 NOTES TO FINANCIAL STATEMENTS - CONTINUED ACCOUNTING POLICIES - Continued Student Accounts Receivable The majority of the College s accounts receivable are due from students of the College for tuition and fees. Credit is extended based on evaluation of a student s financial condition and collateral is not required. Student accounts receivables are stated at amounts due, net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The College determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, the College s previous loss history, and the individual student s current ability to pay his or her obligation to the College. Perpetual Trust Held by a Third Party The perpetual trust balance represents funds that are held and administered by an outside trustee. These funds represent certain endowed scholarship funds. Contributions Receivable from Remainder Trusts The College is a beneficiary of certain remainder trusts that are controlled by independent trustees. The contributions receivable from the trusts are measured at fair value of the trust s investments less an aggregate actuarial liability. The net amount represents the present value of expected cash flows. In the temporarily restricted classification, the actuarial liability is $297,848 ($305,177 in 2009), with a net receivable amount of $270,479 ($257,079 in 2009). In the permanently restricted classification, the actuarial liability is $226,309 ($254,444 in 2009), with a net receivable amount of $1,209,081 ($1,105,753 in 2009). Contribution Receivable from Lead Trust The College is a beneficiary of a lead trust held and controlled by an independent trustee. The contribution receivable is measured at the present value of the expected cash flows to be received by the College over the term of the trust agreement. Upon termination of the trust, the remaining assets will be paid to the beneficiaries of the donor s estate. The contribution receivable of $131,444 ($91,842 in 2009) is net of a present value discount of $20,867 ($19,385 in 2009). 11

10 NOTES TO FINANCIAL STATEMENTS - CONTINUED ACCOUNTING POLICIES - Continued Investments Investments in marketable equity and debt securities are stated principally at published market quotations. Real estate holdings are stated at cost at date of acquisition or the appraised value at the time of donation, less accumulated depreciation. Investments in certificates of deposit are stated at cost, which approximates fair value. Investments in real estate funds, limited partnerships, venture capital funds and private equity funds are recorded at cost unless the investment or the underlying assets are deemed to be permanently impaired, at which time the asset would be adjusted down to market value. Based on this methodology, this adjusted value would become the new cost basis. Investments are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with investments, it is at least reasonably possible that changes in risk in the near term would materially affect the amounts reported in the statements of financial position. Dividends and interest earned on investments are recorded on the accrual basis. Land, Buildings and Equipment Land, buildings and equipment are stated at cost at the date of acquisition or estimated fair value at the date of donation less accumulated depreciation. Only major replacements and improvements are capitalized. Depreciation is computed over estimated useful lives of the assets using the straight-line method. Buildings and improvements are depreciated over 40 to 45 years and equipment is depreciated over a range of 3 to 20 years. Furniture and equipment is capitalized when its purchase price is greater than $1,000 and it has a useful life of more than 2 years. In addition, items that are part of a group purchase with a useful life greater than 2 years may also be capitalized even though individually the items may fall under the $1,000 threshold. Deferred Revenue The majority of deferred revenue represents students tuition for the summer term and other College programs, received in advance, to be held substantially after year-end. Also included in deferred revenue are the following: (1) summer camp fees received prior to year-end for camps occurring in July or August of the subsequent fiscal year; (2) Fine Arts subscriptions and single ticket sales for shows taking place in the following fiscal year; and (3) advanced payments for study abroad programs starting on or after July 1st. 12

11 NOTES TO FINANCIAL STATEMENTS - CONTINUED ACCOUNTING POLICIES - Continued Split-Interest Agreements The College s split-interest agreements consist principally of irrevocable charitable remainder trusts for which the College serves as trustee. Assets held in these trusts are included in investments at fair value. Such assets totaled $4,140,283 at June 30, 2010 ($5,608,399 at June 30, 2009). Contribution revenues are recognized at the date the trusts are established after recording liabilities for the present value of the estimated future payments to be made to beneficiaries. Amounts payable under split-interest agreements represent the present value of the aggregate liability for split-interest agreement payments to be made over the expected lives of the beneficiaries. The discount rates used to calculate the liability for present value of estimated future payments under the split-interest agreements were 3.2% in 2010 and 2.8% in During 2010 real estate was donated that had a fair market value of $2,250,000. The property is recorded in property, plant and equipment in the accompanying statement of financial position. Related revenue recognized during this year was $1,949,235. As part of the split-interest agreement, the donor will receive five annual payments of approximately $65,000 per year. The College has included this obligation in the unrestricted split-interest agreements liability on the accompanying statement of financial position. The College also has split-interest agreements with donors that consist of charitable remainder trusts, perpetual trusts held by a third party and charitable lead trusts. Under these agreements, the College is either the remainder beneficiary, lead beneficiary or both the trustee and remainder or lead beneficiary. These agreements are recorded at the present value of estimated future payments to be received by the College. Interest Rate Swap Agreement The College uses an interest rate swap agreement to manage the impact of interest rate changes on underlying floating-rate debt. The College s swap portfolio consists of a pay fixed/receive floating swap, which synthetically converts a floating-rate obligation into a fixed-rate instrument. The College accounts for its interest rate swaps by using FASB guidance that defines Accounting for Derivative Instruments and Hedging Activities. Accordingly, the College has recorded its interest rate swap on the statement of financial position based on fair value. If the fair value is positive, the interest rate swap agreement will be listed in the asset section of the statements of financial position and if the fair value is negative, the interest rate swap agreement will be listed in the liabilities section of the statements of financial position. Changes in fair value are recorded as other changes in net assets in the statements of activities. 13

12 NOTES TO FINANCIAL STATEMENTS - CONTINUED ACCOUNTING POLICIES - Continued Contributions Contributions, including unconditional promises to give and grants accounted for as contributions, are recognized as revenues when the donor s commitment is received. Unconditional promises are recognized at the present value of expected future cash flows net of allowances. Promises made and collected in the same reporting period are recorded when received in the appropriate net asset category. Promises of non-cash assets are recorded at their estimated fair value. Conditional promises are recorded when conditions are substantially met. Auxiliary Enterprises The College s auxiliary enterprises exist primarily to furnish goods and services to students, faculty and staff. Managed as essentially self-supporting activities, the College s auxiliary enterprises consist of residence halls, dining halls, the activities center and the College bookstore. Auxiliary enterprise revenues and expenses are reported in the accompanying statements of activities in unrestricted net assets. Endowment Spending Rate Policy The College s endowment fund investments are managed to achieve the maximum long-term total return. The College s Board of Trustees has authorized a policy permitting the use of total returns at a rate ( spending rate ) of up to 6.0% of the average market value of the endowment portfolio on the last day of the three preceding fiscal years for current operations. The remainder is retained to support operations in future years. This policy is designed to preserve the value of the portfolio in real terms (after inflation) and provide a predictable flow of funds to support operations currently and into the future. In 2010, the actual spending rate was 4.0%, and in 2009 it was 0.0%. Due to the economic conditions for the year, the Board of Trustees deemed it prudent to not draw down from the endowment. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 14

13 NOTES TO FINANCIAL STATEMENTS - CONTINUED ACCOUNTING POLICIES - Continued Tax Status The College has received a favorable determination letter from the Internal Revenue Service stating that it is a not-for-profit entity, as described in Section 501(c)(3) of the Internal Revenue Code ( IRC ), and is exempt from federal income taxes on related income pursuant to Section 501(a) of the IRC. Reclassification In the course of internal evaluation of endowment fund classifications, it was determined that certain endowment funds should have been classified as quasi or unrestricted endowment funds. The correction to move these funds to the correct classification was made as of July 1, The total amount reclassified to unrestricted net assets was $3,448,823 and is reported as other transfers in the accompanying statement of activities. Fair Value Measurements Effective July 1, 2008, adopted FASB guidance that defines fair value measurements, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and enhances disclosure requirements for fair value measurements. This guidance maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the transparency of inputs as follows: Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the report date. A quoted price for an identical asset or liability in an active market provides the most reliable fair value measurement because it is directly observable to the market. These include active listed equities, certain U.S. Government and sovereign obligations, and certain money market securities. 15

14 NOTES TO FINANCIAL STATEMENTS - CONTINUED ACCOUNTING POLICIES - Continued Fair Value Measurements - Continued Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the report date. The nature of these securities includes investments for which quoted prices are available but which are traded less frequently and investments that are fairly valued using other securities, the parameters of which can be directly observed. These include certain U.S. Government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, certain bank loans and bridge loans, less liquid listed equities, state, municipal and provincial obligations, most physical commodities and certain loan commitments and interest rate swap agreements. Also included in Level 2 are investments measured using a net asset value ( NAV ) per share, or its equivalent, that may be redeemed at that net asset value at or near the reporting date. Level 3 - Securities and trusts that have little to no observable pricing as of the report date. These instruments are measured using management s best estimate of fair value, where the inputs into the determination of fair value are not observable and require significant management judgment or estimation. These primarily consist of trust receivable accounts. The inputs used by the College in estimating the value of Level 3 instruments is the fair value of the assets held by the trusts, less any projected obligations to the donor beneficiary. Also included in Level 3 are investments measured using a NAV per share, or its equivalent, that cannot be redeemed at NAV at or near the reporting date, or for which redemption at net asset value is uncertain due to lockup periods or other investment restrictions. Subsequent Events In May 2009, the FASB issued new guidance related to subsequent events to incorporate the accounting and disclosure requirements for subsequent events into U.S. GAAP. This guidance introduces new terminology, defines a date through which management must evaluate subsequent events, and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the balance-sheet date. The College adopted these amended principles as of June 30, 2009, which was the required effective date. 16