SETON HALL UNIVERSITY

Financial Statements as of and for the years ended and Uniform Guidance and State of New Jersey Department of the Treasury Circular 2015-08 Supplementary Information for the year ended June 30, 2016 Together With Reports of Independent Certified Public Accountants

FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Grant Thornton LLP 186 Wood Avenue Iselin, NJ 08830 T 732.516.5500 F 732.516.5502 GrantThornton.com linkd.in/grantthorntonus twitter.com/grantthorntonus REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Regents of Seton Hall University: Report on the financial statements We have audited the accompanying financial statements of Seton Hall University (the University ), which comprise the statements of financial position as of, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America 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 auditor s 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 University 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 University s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Seton Hall University as of, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other matters Supplementary information Our audits were conducted for the purpose of forming an opinion on the University s financial statements taken as a whole. The Schedules of Expenditures of Federal and New Jersey State Awards for the year ended June 30, 2016, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the State of New Jersey Department of the Treasury Circular 2015-08, Single Audit Policy for Recipients of Federal Grants, and State Aid, respectively, are presented for purposes of additional analysis and are not a required part of the financial statements. Such supplementary 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 audits of the financial statements and certain additional procedures. These additional procedures included comparing and reconciling the information directly to the underlying accounting and other records used to prepare financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other reporting required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report, dated December 8, 2016, on our consideration of the University s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of 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 University s internal control over financial reporting and compliance. Iselin, New Jersey December 8, 2016 2

Statements of Financial Position As of Assets 2016 2015 Cash and cash equivalents $ 16,834 $ 23,562 Student accounts receivable, net (Note 3) 4,504 4,058 Contributions receivable, net (Note 6) 12,275 8,268 Prepaid expenses and other assets, net (Note 10) 9,499 9,951 Student loans receivable, net (Note 3) 13,196 13,911 Deposits with bond trustees (Note 10) 4,438 5,814 Investments (Note 4) 264,321 281,994 Funds held in trust by others (Notes 4 and 5) 7,988 8,803 Property and equipment, net (Notes 2, 7 and 10) 285,337 281,520 Total assets Liabilities and Net Assets $ 618,392 $ 637,881 Liabilities Accounts payable and accrued expenses (Note 2 and 17) $ 37,830 $ 37,964 Deferred revenue and deposits (Note 2) 12,652 12,982 Conditional asset retirement obligations (Note 2) 8,536 8,312 Accrued postretirement benefit liability (Note 9) 1,032 1,017 Refundable U.S. government grants (Note 3) 11,491 12,785 Interest rate swap agreements (Note 10) 7,200 5,574 Bonds payable, net (Note 10) 119,246 126,777 Total liabilities 197,987 205,411 Commitments and contingencies (Notes 4, 8 and 17) Net assets (Notes 5 and 11) Unrestricted 247,187 257,821 Temporarily restricted 82,932 87,010 Permanently restricted 90,286 87,639 Total net assets 420,405 432,470 Total liabilities and net assets $ 618,392 $ 637,881 The accompanying notes are an integral part of these financial statements. 3

Statements of Activities For the years ended Operating revenues and support Tuition and fees, net of scholarships of $103,094 in 2016 Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total and $92,986 in 2015 (Note 13) $ 199,301 $ - $ - $ 199,301 $ 193,760 $ - $ - $ 193,760 Grants, contracts, and government appropriations 7,346 - - 7,346 7,808 - - 7,808 Contributions 5,835 4,406-10,241 5,194 2,359-7,553 Endowment return used for operations (Note 5) 17,090 1,386-18,476 17,402 1,328-18,730 Other investment income (loss) (Note 4) 1,032 (17) - 1,015 868 29-897 Auxiliary activities 33,366 - - 33,366 31,172 - - 31,172 Other revenues 11,664 - - 11,664 12,420 - - 12,420 Net assets released from restrictions and reclassifications (Notes 2 and 12) 3,832 (3,172) (660) - 2,574 (2,713) 139-2016 Total operating revenues and support 279,466 2,603 (660) 281,409 271,198 1,003 139 272,340 2015 Operating expenses (Note 14) Instruction 82,803 - - 82,803 79,617 - - 79,617 Research and public service 7,582 - - 7,582 8,873 - - 8,873 Academic support 37,688 - - 37,688 35,313 - - 35,313 Student services 37,668 - - 37,668 36,504 - - 36,504 Auxiliary activities 10,825 - - 10,825 9,618 - - 9,618 Institutional support (Note 15) 43,905 - - 43,905 42,730 - - 42,730 Operations and maintenance 24,518 - - 24,518 25,190 - - 25,190 Depreciation and amortization 16,697 - - 16,697 15,510 - - 15,510 Interest expense 4,887 - - 4,887 5,469 - - 5,469 Total operating expenses 266,573 - - 266,573 258,824 - - 258,824 Changes in net assets from operating activities 12,893 2,603 (660) 14,836 12,374 1,003 139 13,516 Nonoperating activities Net endowment investment (loss) return (Notes 4 and 5) (634) (528) - (1,162) 3,467 4,913-8,380 Endowment return used for operations (Notes 4 and 5) (12,126) (6,350) - (18,476) (12,705) (6,025) - (18,730) Investment loss on funds held in trust by others (Note 4) - - (815) (815) - - (27) (27) Capital gifts for buildings and endowment - 797 4,424 5,221 3 1,150 2,794 3,947 Recovery (provision) for uncollectible contributions receivable 5 (530) (302) (827) 26 (459) (705) (1,138) Change in value of split-interest agreements - (29) - (29) - (6) - (6) Change in value of interest rate swap agreements (Note 10) (1,626) - - (1,626) 36 - - 36 Loss on asset dispositions (35) - - (35) (2,209) - - (2,209) Loss on debt defeasance (Note 10) (4,225) - - (4,225) - - - - Other (Note 2) (5,279) - - (5,279) (3,223) - - (3,223) Net assets released from restrictions for capital expenditures (Note 12) 41 (41) - - 69 (69) - - Grant revenue for capital expenditures (Notes 2 and 10) 352 - - 352 3,448 - - 3,448 Changes in net assets from nonoperating activities (23,527) (6,681) 3,307 (26,901) (11,088) (496) 2,062 (9,522) Changes in net assets (10,634) (4,078) 2,647 (12,065) 1,286 507 2,201 3,994 Net assets at beginning of year 257,821 87,010 87,639 432,470 256,535 86,503 85,438 428,476 Net assets at end of year $ 247,187 $ 82,932 $ 90,286 $ 420,405 $ 257,821 $ 87,010 $ 87,639 $ 432,470 The accompanying notes are an integral part of these financial statements. 4

Statements of Cash Flows For the years ended 2016 2015 Cash flows from operating activities Changes in net assets $ (12,065) $ 3,994 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Depreciation and amortization 16,697 15,510 Loss on debt defeasance 4,225 - Amortization of net bond premiums and deferred financing costs (461) (319) Change in provision for uncollectible student accounts and loans receivable 2,252 (556) Change in provision for uncollectible contributions receivable (533) 943 Change in discount allowance for contributions receivable 2,020 192 Net losses (gains) on investments 4,249 (6,151) Change in value of interest rate swap agreements 1,626 (36) Settlement of conditional asset retirement liability (290) (174) Accretion of interest on conditional asset retirement obligations 514 490 Change in value of split-interest agreements 29 6 Loss on disposition of property 35 2,209 Contributions restricted for long-term investment (4,772) (4,078) (Increase) decrease in student accounts receivable (2,678) 351 Increase in contributions receivable (5,494) (1,505) Decrease in prepaid expenses and other assets 452 6,486 Increase in accounts payable and accrued expenses 168 1,685 Increase (decrease) in accrued postretirement benefit liability 15 (133) Decrease in deferred revenue and deposits (330) (1,364) Net cash provided by operating activities 5,659 17,550 Cash flows from investing activities Proceeds from sales and maturities of investments 220,505 275,336 Purchases of investments (207,079) (264,959) Proceeds from sale of property 48 - Capital expenditures (20,926) (38,112) Student loans - disbursements (1,226) (1,898) Student loans - collections 1,921 2,097 Net cash used in investing activities (6,757) (27,536) Cash flows from financing activities Payments on debt obligations (9,464) (6,419) Payments on debt refinancing (22,030) - Proceeds from debt incurred 24,256 - Cost of debt issuance (308) - Contributions restricted for long-term investment 4,772 4,078 Depreciation in fair value of funds held in trust by others 815 27 Decrease in refundable U.S. government grants (1,294) (758) Change in deposits with bond trustees (2,377) 5,322 Net cash (used in) provided by financing activities (5,630) 2,250 Net decrease in cash and cash equivalents (6,728) (7,736) Cash and cash equivalents at beginning of year 23,562 31,298 Cash and cash equivalents at end of year $ 16,834 $ 23,562 Supplemental disclosures: Cash paid for interest on indebtedness $ 4,986 $ 4,851 Purchases of property and equipment in accounts payable $ 4,776 $ 5,106 The accompanying notes are an integral part of these financial statements. 5

1. THE UNIVERSITY Seton Hall University (the University ), established in 1856, is an independent institution of higher education, which operates under the auspices of the Roman Catholic Archdiocese of Newark, New Jersey. The University offers undergraduate degrees and advanced graduate degrees in a variety of studies and is composed of the College of Arts and Sciences, the College of Communication and the Arts, the Stillman School of Business, the College of Education and Human Services, the College of Nursing, the School of Diplomacy and International Relations, the Division of Continuing Education and Professional Studies, the Immaculate Conception Seminary School of Theology and the School of Health and Medical Sciences, all on the University s South Orange Campus, and the School of Law in Newark. The University is fully accredited by the Middle States Association of Colleges and Schools. The University derives its revenues principally from student tuition, fees, grants and contracts, gifts and investment earnings. Additional support is generated through auxiliary activities carried out by the University, such as dining services and residence facilities. The University expends its resources to meet the instructional and educational mission of the University. The University is exempt from federal income taxes under Section 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(3) and similar State of New Jersey provisions. Donations to the University qualify for tax deduction as charitable contributions. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies employed by the University in the preparation of its financial statements are described below. Basis of Presentation The accompanying financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ( US GAAP ). University resources are classified and reported in the accompanying financial statements as separate classes of net assets based on the existence or absence of donor-imposed restrictions as follows: Permanently Restricted - Net assets subject to donor-imposed stipulations that require the corpus to be maintained in perpetuity by the University. The donors of these assets permit the University to use the income earned on related investments for general or specific purposes. Temporarily Restricted - Net assets subject to donor-imposed stipulations that will be met either by actions of the University or the passage of time. Temporarily restricted net assets also include earnings on permanently restricted endowment funds that have not yet been appropriated by the University s Board of Regents for expenditure. Unrestricted - Expendable resources that are used to carry out the University s operations and are not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by the University s Board of Regents or may be limited by contractual agreements with outside parties. Revenues and gains and losses on investments and other assets are reported as changes in unrestricted net assets unless limited by explicit donor-imposed stipulations. Expenses are reported as decreases in unrestricted net assets. Expirations of temporary restrictions on net assets, that is, the donor-imposed stipulated purpose has been accomplished, or the stipulated time period has elapsed, are reported as net assets released from restrictions. Because of changes or clarifications in donor-imposed stipulations, certain net assets may be reclassified amongst permanently restricted, temporarily restricted or unrestricted net assets. 6

Contributions Contributions, including unconditional promises to give (pledges), are reported as revenues in the period received or pledged at their net realizable value. Unconditional promises to give, which are to be received after one year, are discounted using an appropriate discount rate commensurate with the risks involved. Amortization of the discount is recorded as additional contribution revenue in accordance with donor-imposed restrictions, if any. An allowance for uncollectible contributions receivable is provided in the net asset class in which the contribution receivable resides based on an assessment of the creditworthiness of the respective donor and nature of fundraising activity. Contributions receivable are written-off in the period deemed uncollectible. Also included within contributions receivable are certain third-party trusts in which the University is the sole or partial beneficiary. Under the terms of these trusts, the University has the irrevocable right to receive an income stream over the life of the trust. The University does not control the assets held by outside trusts. The third-party trusts are recorded as increases to net assets at the fair value of trust assets, less the present value of the estimated future payments to outsiders to be made under the specific terms of the trusts. Contributions with purpose or time restrictions are reported as increases in temporarily restricted net assets and subsequently released when the restrictions on which they depend are met. The University has determined that any donor-imposed restrictions for current programs and activities met within the operating cycle of the University are recorded directly as unrestricted support. Contributions subject to donor-imposed stipulations that the corpus be maintained permanently are recognized as increases in permanently restricted net assets. Contributions to be used to acquire or construct long-lived assets are reported as temporarily restricted revenues. The restriction is satisfied when the assets are acquired or constructed and placed in service. Conditional promises to give and intentions to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Investments Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the statement of financial position and reported based on quoted market prices. Reported fair values for private equities, venture capital limited partnership interests, hedge funds and similar interests (collectively, alternative investments ) are estimated by the respective external investment manager if ascertainable fair values are not readily available. Such valuations involve assumptions and methods that are reviewed by the University. Because the University s alternative investments are not readily marketable, their estimated fair value is subject to uncertainty and, therefore, may differ significantly from the fair value that would have been reported had a ready market for such investments existed. Due to inherent risks and potential volatility in investment valuations, the amounts reported in the accompanying financial statements can vary substantially from year to year and such differences could be material. Concentrations of Credit Risk Cash, cash equivalents, and investments are exposed to interest rate, market, and credit risk. The University maintains its cash and cash equivalents in various bank deposit accounts that, at times, may exceed federally insured limits. To minimize risk, the University s cash accounts are placed with high credit quality financial institutions and the University s investment portfolio is diversified with several investment managers in a variety of asset classes. The University regularly evaluates its depository arrangements and investments, including performance thereof. 7

Loans and Accounts Receivable The University s loans and accounts receivable relate to tuition and fees for student attendance and auxiliary activities. Accounts receivable are due at the beginning of each semester and are stated at amounts due from students, net of an allowance for doubtful accounts. The University determines its allowance based on the anticipated net realizable value of collections expected. Receivables are written-off in the period in which they are deemed uncollectible. Student loans receivable represent institutional loans to students and loans issued under federal student loan programs and are reported net of an allowance for doubtful accounts. Certain student loans are guaranteed by the federal government (see Note 3). Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, student accounts receivable, contributions receivable, prepaid expenses and other assets, and accounts payable and accrued expenses approximate fair value due to the short maturity of these financial instruments. The carrying value of student receivables has been reduced by an appropriate allowance for uncollectible accounts, based on historical collection experience and therefore approximates net realizable value. The carrying value of contributions receivable is believed to approximate the amounts which will ultimately be realized and is presented at the net present value of anticipated future cash flows. The fair values of investments, except for alternative investments, are based on the quoted fair values of the underlying securities as of the reporting date. The fair value of bonds payable is calculated by comparing the stated yield to current market yield and imputing a value that approximates what a purchaser would reasonably pay for a similar bond given current interest rates and credit quality (see Note 10). A reasonable estimate of the fair value of student loans receivable under government loan programs could not be made because the notes are not saleable and can only be assigned to the U.S. government or its designees. The Financial Accounting Standards Board ( FASB ) issued Topic 820, under the Accounting Standards Codification ( ASC ), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value, which focuses on an exit price between market participants in an orderly transaction. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the transparency of information used in the valuation of the asset or liability at the measurement date. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories: Level I - Quoted prices are available in active markets for identical assets and liabilities at the measurement date. The type of assets and liabilities in Level I include listed equities held in the name of the University, and exclude listed equities and other securities held indirectly through commingled funds. Level II - Pricing inputs, including broker quotes, are generally those other than exchange quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of models or other valuation methodologies. Level III - Pricing inputs are unobservable for the assets and liabilities and include situations where there is little, if any, market activity for the respective assets and liabilities. The inputs into the determination of fair value require significant management judgment or estimation. Assets and liabilities included in this category generally include alternative investments. Funds held in trust by others are also included in Level III. 8

In May 2015, the FASB issued Accounting Standards Update ( ASU ) 2015-07, Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The ASU eliminates the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value per share (or its equivalent) using the practical expedient in the FASB s fair value measurement guidance. The ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted and applied retrospectively. The University has elected to adopt the ASU early, effective for the years ended. The adoption of this new guidance by the University only amended disclosure requirements and did not have an impact on the University s financial statements for the periods presented. Funds Held in Trust by Others Funds held in trust by others represent perpetual trusts that are neither in the possession nor under the control of the University, but held and administered by outside trustees, with the University deriving income or a residual interest from the assets of such funds. Funds held in trust by others are recognized at the estimated fair value of the underlying assets, which consist primarily of mutual funds, fixed income securities, equity securities and limited partnership interests. Gains or losses in the fair value of funds held in trust by others are reported as increases or decreases in permanently restricted net assets. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid financial instruments, except for those assigned to the University s investment managers as part of the University s long-term investment strategies, and debt securities with original maturities of three months or less from the date of purchase. Property and Equipment The University capitalizes property and equipment acquired for greater than $5 and with useful lives greater than one year. Gifts of land, buildings and equipment are recorded at fair value at the date of donation as part of unrestricted nonoperating activities, unless explicit donor stipulations specify how the donated assets must be used. No value was assigned to the University s main campus in South Orange, New Jersey when title was conveyed to the University by the Roman Catholic Archdiocese of Newark in 1864. Such value is deemed to be immaterial to the University s financial statements. Maintenance, repairs, and minor improvements are charged to operations as incurred. Major improvements, which substantially extend the useful lives of assets, are capitalized. Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts of the University and the resulting gain or loss, if any, is reflected as part of nonoperating activities. Depreciation is computed on the straight-line basis over the estimated useful lives of the property and equipment as follows: Buildings Land and building improvements Computers and software Furniture, fixtures and equipment 30 to 50 years 7 to 20 years 3 to 10 years 3 to 10 years The University records its collections of art, historical treasures, and similar assets at appraised value if donated determined at the date of acquisition. These collections are held for public exhibition, education and research in furtherance of the University s educational and public service mission. The University s collections are not depreciated. 9

The University capitalizes certain computer software costs which are amortized consistent with University policy upon being placed in service. Amortization of capitalized software is included in depreciation expense. Capitalized software placed in service amounted to $69 in 2016 and $566 in 2015. The University expenses the cost of library books upon acquisition. Grants, Contracts and Government Appropriations Revenues associated with research and other grants, and contracts are recognized as unrestricted support when related costs are incurred in accordance with the terms of the respective agreements. Amounts received in advance are recorded as deferred revenue. Indirect cost recoveries by the University on grants and contracts are based upon predetermined or negotiated rates and are recorded as unrestricted revenue. Indirect cost recoveries totaled $213 and $387 in 2016 and 2015, respectively. Government appropriations from the State of New Jersey totaled $168 in 2016 and $112 in 2015. On July 19, 2013, the University was notified by the State of New Jersey s Office of the Secretary of Higher Education that it had been awarded amounts not to exceed $11,714 in total from the State s Higher Education Capital Facilities Programs. These funds are to be used to finance all or a portion of certain University capital projects. Of this amount, grants total $10,368 with $1,346 in loans repayable to the State of New Jersey (Note 10) comprising the balance of the amounts awarded. The University must provide $2,598 in matching funds to these capital projects. The University received $7,536 in 2015 from these programs and had received the full award amount of $11,714 as of June 30, 2015, of which $1,562 is in an unearned deposit status in prepaid expenses and other assets and deferred revenue and deposits at June 30, 2016. The University recognized $352 in 2016 and $3,448 in 2015 as unrestricted nonoperating grant revenues based on capital expenditures incurred associated with these programs. Effective July 1, 2016, the University executed a $1,500 grant agreement with the New Jersey Educational Facilities Authority ( NJEFA ) pursuant to the provisions of the New Jersey Higher Education Capital Improvement Fund Act, as amended. These funds are to be used to finance certain University capital projects. Of this amount, $750 is repayable, with interest, to the NJEFA. Deferred Revenue and Deposits Deferred revenue and deposits consist of amounts received for educational, research, auxiliary and athletics goods and services that have not yet been earned as the underlying obligation has not been satisfied by the University. The University apportions revenues and the related expenses of academic semesters, which span fiscal years, between the fiscal years to which they pertain. Refundable U.S. Government Grants Funds provided by the federal government under the Perkins Student and Nursing Faculty Loan Programs are loaned to qualified students and may be reloaned after collection. These funds are ultimately refundable to the U.S. government and are presented in the statement of financial position as a liability (see Note 3). Split-Interest Agreements and Annuities Payable Under the University s charitable gift annuities program, liabilities are recorded at the present value of the estimated future payments expected to be made to donors or other designated beneficiaries. Assets pertaining to the University s charitable gift annuities program are measured at fair value and are included in investments. Contribution revenue is recognized at the date the agreements are established, net of annuities payable to beneficiaries, which are actuarially determined, and is reported as an increase in unrestricted or temporarily restricted net assets, based on the existence or absence of donor stipulated use restrictions. 10

Changes in the life expectancy of the donor or beneficiary(ies), amortization of the discount, and other changes in the estimates of future annuity payments are recognized annually by the University and are reported as change in value of split-interest agreements in the statement of activities. For the years ended June 30, 2016 and 2015, the discount rates used to value split-interest agreements ranged between 6.2% and 1.2% and represented the applicable Internal Revenue Service discount rate in effect at the time the gift arrangement originated. Upon termination of a life interest, the share of the corpus attributable to the life interest holder becomes available to the University. Annuities payable, included in accounts payable and accrued expenses on the accompanying statements of financial position, totaled $644 and $679 at June 30, 2016 and June 30, 2015, respectively. The following table summarizes the changes in the University s annuities payable balance for the years ended : 2016 2015 Beginning of year $ 679 $ 704 New agreements 6 23 Payments to annuitants (81) (81) Termination of life interest - (19) Change in value due to actuarial valuations 40 52 End of year $ 644 $ 679 Asset Retirement Obligations Asset retirement obligations ( ARO s ) are legal obligations associated with the eventual retirement of longlived assets. These liabilities, which for the University primarily relate to the cost of asbestos and lead paint abatement, were initially recorded at fair value and the related asset retirement costs capitalized by increasing the carrying amount of the related assets by the same amount as the liability. Significant assumptions utilized in the determination of such obligations include the selection of relevant discount factors, which articulate with the timing of performance related to the respective project, inflation factors, and the probabilities assigned to cost estimates. Asset retirement costs are subsequently depreciated over the estimated useful lives of the related assets. Subsequent to initial recognition, the University records period-to-period changes in the ARO liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. The University derecognizes ARO liabilities when the related obligations are settled. The cost of abatement was estimated following a site-specific survey of the campus. As of June 30, 2006, the initial adoption date of ASC Topic 410, Accounting for Conditional Asset Retirement Obligations, the University recorded an addition to property and equipment, net of depreciation, of $385, and recognized a conditional asset retirement obligation in the amount of $7,020, which included interest accretion of $426 for fiscal 2006. The University recognized $514 and $490 of accretion expense in 2016 and 2015, respectively, relating to this obligation. The following table summarizes the activity for the ARO s for the years ended : 2016 2015 Beginning of year $ 8,312 $ 7,996 Obligations settled during the period (290) (174) Accretion expense 514 490 End of year $ 8,536 $ 8,312 11

New Pronouncements In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. The ASU requires that deferred bond and letter of credit issuance costs be presented net of related debt on the statements of financial position. The ASU is effective for fiscal years beginning after December 15, 2015, with early adoption permitted and applied retrospectively. Management has elected to early adopt the ASU, effective for the year ended June 30, 2016 and has applied the guidance retroactively for all periods presented. Tuition and Fees Tuition and fee revenues are reported net of scholarships and financial aid. Scholarships and financial aid are provided from unrestricted University resources, endowment earnings, donor-restricted gifts, or government grants awarded to students by the University. Contributed Services The University recognizes in its financial statements the fair value of services contributed by members of religious orders who provide instructional, student or other institutional services. The difference between the amounts paid and the fair value of room and board provided to religious personnel and the fair value of the services performed, as determined by reference to comparable lay salaries, is added to contribution revenues and expenses on the statement of activities. Contributed services amounted to $511 in 2016 and $493 in 2015, and are allocated amongst the functional expense categories benefited. Accounting for Uncertainty in Income Taxes The University has adopted the provisions of the Accounting Standard Codification ( ASC ) 740, Accounting for Uncertainties in Income Taxes. ASC 740-10 clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. This section provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more-likely-than-not to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. The University is exempt from Federal and New Jersey State income taxation by virtue of being an organization described in Section 501(c)(3) of the IRC and similar provisions of the New Jersey State tax code. Nevertheless, The University may be subject to tax on income unrelated to its exempt purpose, unless that income is otherwise excluded by the Code. The tax years ended June 30, 2013, 2014, 2015, and 2016 are still open to audit for both federal and state purposes. The University believes that there are no material uncertain tax positions within its financial statements. Use of Estimates The preparation of financial statements, in conformity with US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant management estimates and assumptions relate to the determination of allowances for doubtful accounts for student accounts, loans and contributions receivable; the determination of the University s postretirement benefit obligation; year-end operating accruals; useful lives assigned to fixed assets; conditional asset retirement obligations; and the reported fair values of certain of the University s assets and liabilities, in particular, alternative investments, interest rate swap agreements and debt obligations. Actual results could differ from those estimates. 12

Operations The accompanying statements of activities present the changes in net assets distinguishing between operating and nonoperating activities. Operating activities principally include all revenues and expenses that relate to the University s educational programs, research, training, and supporting activities. Operating revenues include investment return pursuant to the University s endowment spending policy and earned on working capital funds. Operating revenues also include the release of temporarily restricted net assets in support of operating activities, all unrestricted contributions, and temporarily restricted contributions, except for those intended for capital or endowment purposes. The University has defined nonoperating activities principally to include endowment investment return (loss), net of amounts distributed to support operations in accordance with the endowment spending policy (see Note 5); contributions and bequests added to the endowment or supporting major capital acquisition or construction; net assets released from restrictions for capital expenditures; gains or losses on financial instruments; activity related to annuity and unitrust agreements; and grant revenue associated with capital expenditures. Certain other gains and losses considered to be of a more unusual or non-recurring nature are also included as part of nonoperating activities. For the year ended, amounts of $5,279 and $3,223, respectively, have been reflected as other in nonoperating activities in the accompanying statements of activities. In 2016, the amount is composed of a $2,249 charge associated with a voluntary early retirement program, $3,151 of start-up costs related to the University s joint venture with Hackensack University Health Network ( HUHN ) (see Note 18), and a $121 credit related to the student services program charge included in other in nonoperating activities in 2015. The 2015 amount included a $1,500 charge for a student services program and $1,723 of start-up costs related to the aforementioned joint venture with HUHN. Subsequent Events The University has evaluated events occurring subsequent to June 30, 2016 through December 8, 2016, the date the financial statements were issued, and determined that, except as disclosed in Notes 2, 3 and 10, all significant events and disclosures are included in the accompanying financial statements. 3. STUDENT ACCOUNTS AND LOANS RECEIVABLE, NET Student accounts receivable are reported net of an allowance for uncollectible amounts of $7,633 at June 30, 2016 and $5,401 at June 30, 2015. Adjustments to the provision are recorded as part of institutional support in the statement of activities. Student receivables are written-off when deemed uncollectible. The University makes uncollateralized loans to students based on financial need. Student loans are funded mainly through federal government loan programs. The following is an analysis of net student loans receivable as of June 30: 2016 2015 Current, including balances for students in school $ 9,418 $ 10,226 1-120 days past due 914 851 More than 120 days past due 226 162 Receivables with collection agencies 3,726 3,742 Total gross student loans receivable 14,284 14,981 Allowance for uncollectible amounts (1,088) (1,070) Student loans receivable, net $ 13,196 $ 13,911 13

The primary federal loan program that the University participates in is the federal Perkins Loan program. The availability of funds for loans under this program is dependent on reimbursements to the pool from repayments on outstanding loans. Funds advanced by the federal government under all programs of $11,491 and $12,785 at, respectively, are ultimately refundable to the government and are classified as liabilities in the accompanying statements of financial position. Outstanding loans cancelled under these programs result in a reduction of the funds available for future loans and a decrease in the liability to the government. Allowances for uncollectible loan amounts are established based on prior collection experience, student default rates, and current economic factors which, in management s judgment, could influence the ability of loan recipients to repay the amounts per the loan terms. Institutional loan balances are written-off only when they are deemed uncollectible. Loans disbursed under the Federal Perkins Loan program are able to be assigned to the Federal Government in certain nonrepayment situations. In these situations, the federal portion of the loan balance is guaranteed. On September 30, 2015, the Federal Perkins Loan Program expired. It was then extended on December 18, 2015 under The Perkins Loan Extension Act of 2015 to permit institutions to issue new loans, under amended guidelines, until September 30, 2017. No new Perkins loans can be issued under this Act subsequent to September 30, 2017. In addition, as part of this Act, prior to October 1, 2017, the University is required to annually return the federal share of excess liquid capital, as defined, to the federal government. Beginning on October 1, 2017, the federal share of all Perkins funds, including future collections of principal and interest, must be returned to the federal government. In compliance with this Act, the University returned $1,734 to the federal government in December 2015 and $1,159 in November 2016. 4. INVESTMENTS A summary of investments at, follows: 2016 2015 Charitable gift annuity funds $ 1,173 $ 1,232 Scholarship funds 2,058 2,005 Building and capital project funds 24,244 23,628 Endowment 236,798 255,129 Other 48-264,321 281,994 Funds held in trust by others 7,988 8,803 $ 272,309 $ 290,797 At June 30, 2016, included in endowment funds is $1,887 for unrestricted working capital purposes. 14

The following table is a summary of investments, at fair value, including accrued income of $311 and $290, at, respectively. 2016 Level I Level II Level III NAV Total Corporate equities $ 108,526 $ - $ - $ - $ 108,526 Corporate bonds 68,271 3,987 - - 72,258 Hedge fund - - - 23,331 23,331 Commingled fund - - - 29,924 29,924 Private equities - - - 8,308 8,308 Venture capital limited partnerships - - - 3,034 3,034 Principal Global Real estate - - - 9,031 9,031 Emerging market equities - - - 6,556 6,556 Cash and other short-term investments 3,353 - - - 3,353 180,150 3,987-80,184 264,321 Funds held in trust by others - - 7,988-7,988 Total investments $ 180,150 $ 3,987 $ 7,988 $ 80,184 $ 272,309 2015 Level I Level II Level III NAV Total Corporate equities $ 124,740 $ - $ - $ - $ 124,740 Corporate bonds 63,766 4,229 - - 67,995 Hedge fund - - - 25,808 25,808 Commingled fund - - - 36,058 36,058 Private equities - - - 10,668 10,668 U.S. government securities 106 - - - 106 Venture capital limited partnerships - - - 2,928 2,928 Principal Global Real estate - - - 8,208 8,208 Cash and other short-term investments 3,183 2,300 - - 5,483 191,795 6,529-83,670 281,994 Funds held in trust by others Total investments - - 8,803-8,803 $ 191,795 $ 6,529 $ 8,803 $ 83,670 $ 290,797 The following table summarizes the changes in the University s funds held in trust by others (i.e. perpetual trusts) (Level III) for the years ended : 2016 2015 Beginning of year $ 8,803 $ 8,830 Net realized and unrealized (depreciation) (815) (27) End of year $ 7,988 $ 8,803 The University has outstanding commitments of approximately $5.7 million to invest in private equity and venture capital funds at June 30, 2016. The University estimates that it will satisfy these outstanding commitments by the end of fiscal 2020. 15

The University follows FASB guidance related to fair value measurements and disclosure of investments in certain entities that do not have a quoted market price but that calculate NAV per share or its equivalent. As a practical expedient, this guidance permits, but does not require, an entity to measure fair value of an investment in an investee within the scope of the amendments based on the investee s NAV per share or its equivalent. As a result of applying the practical expedient, the fair value of the University s investments in certain investments as of, as detailed below, is determined based on the reported NAV per share or its equivalent, as follows: 2016 Alternative Alternative Amount Timing to Investment Investment # of NAV Remaining of Unfunded Draw Down Redemption Redemption Type Strategy Funds in Funds Life Commitments Commitments Terms Restrictions Private equities Multiple strategies to diversify risk through investing in private equities and secondary investments in pooled investment vehicles 3 $ 8,308 4-12 years, which includes possible extensions. $ 5,083 2017-2020 Redemptions not permitted. Distributions received as underlying investments are liquidated. N/A Venture capital LPs Seeks long-term capital appreciation through equity and venture partnership investments 2 3,034 Ends March, 2017 and March, 2024, but both may be extended. 629 2017-2020 Redemptions not permitted. Distributions received as underlying investments are liquidated. N/A Hedge fund Hedge fund of funds. Multiple strategies to diversify risk and produce absolute returns 1 23,331 N/A - N/A Quarterly, with 90 days notice. N/A Principal Global Real estate Seeks long-term capital appreciation by investing in real estate securities 1 9,031 N/A - N/A Within 10 days unless market conditions prohibit N/A Emerging markets equities Invests in merging markets' companies that offer long-term growth potential along with current income 1 6,556 N/A - N/A Within 7 business days N/A Commingled fund Seeks long-term capital appreciation by investing in small-cap securities that track the performance of the Russell 2000 Index 1 29,924 N/A - N/A 10 business days notice. N/A Total $ 80,184 $ 5,712 16

2015 Alternative Alternative Amount Timing to Investment Investment # of NAV Remaining of Unfunded Draw Down Redemption Redemption Type Strategy Funds in Funds Life Commitments Commitments Terms Restrictions Private equities Multiple strategies to diversify risk through investing in private equities and secondary investments in pooled investment vehicles 3 $ 10,668 5-13 years, which includes possible extensions. $ 5,515 2016-2020 Redemptions not permitted. Distributions received as underlying investments are liquidated. N/A Venture capital LPs Seek long-term capital appreciation through equity and venture partnership investments 2 2,928 Ends March, 2017 and March, 2024, but both may be extended. 1,016 2016-2020 Redemptions not permitted. Distributions received as underlying investments are liquidated. N/A Hedge fund Hedge fund of funds. Multiple strategy to diversify risk and produce absolute returns 1 25,808 N/A - N/A Quarterly, with 90 days notice. N/A Principal Global Real estate Seeks long-term capital appreciation by investing in real estate securities 1 8,208 N/A - N/A Within 10 days unless market conditions prohibit N/A Commingled fund Seeks long-term capital appreciation by investing in small-cap securities that track the performance of the Russell 2000 Index 1 36,058 N/A - N/A 10 business days notice. N/A Total $ 83,670 $ 6,531 Investment return (loss) for the years ended consists of the following: 2016 2015 Interest and dividends $ 5,242 $ 5,476 Net realized and unrealized (depreciation) appreciation in fair value of investments (5,063) 6,211 Investment management and custodian fees (1,141) (2,437) Investment (loss) return, net $ (962) $ 9,250 The University had investment income of $1,015 and $897 on short-term and other non-pooled investments in 2016 and 2015, respectively, which has been included as part of operating activities in the accompanying statements of activities. 5. ENDOWMENT The University s donor-restricted (gifted) endowment consists of 358 individual funds established primarily for scholarships and academic programs. The University s endowment includes both donor-restricted endowment funds and funds designated by the University s Board of Regents to function as endowments (quasi-endowments). Net assets associated with endowment funds, including quasi-endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Some endowment assets are held, controlled and administered by third-party trustees (funds held in trust by others). Interpretation of Relevant Law New Jersey s Uniform Prudent Management of Institutional Funds Act ( UPMIFA ) was enacted in June 2009. The University s Board of Regents has interpreted UPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the respective donor-restricted endowment fund absent explicit donor 17