Barnard College. Financial Statements for the Years Ended June 30, 2005 and 2004 and Independent Auditors Report

Transcription

1 Barnard College Financial Statements for the Years Ended June 30, 2005 and 2004 and Independent Auditors Report

2 BARNARD COLLEGE TABLE OF CONTENTS INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS: Balance Sheets as of 30, 2005 and Statement of Activities for the Year Ended June 30, 2005 (with comparative totals for the Year Ended June 30, 2004) 3 Statements of Cash Flows for the Years Ended June 30, 2005 and Notes to Financial Statements 5-16 Page

3 Deloitte & Touche LLP Two World Financial Center New York, NY USA Tel: Fax: INDEPENDENT AUDITORS REPORT The Board of Trustees of Barnard College We have audited the accompanying balance sheets of Barnard College (the College ) as of June 30, 2005 and 2004, the related statements of cash flows for the years then ended, and the statement of activities for the year ended June 30, These financial statements are the responsibility of the College s management. Our responsibility is to express an opinion on these financial statements based on our audits. The prior year summarized comparative information has been derived from the College s June 30, 2004 financial statements and, in our report dated October 1, 2004, we expressed an unqualified opinion on those financial statements. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the College at June 30, 2005 and 2004, its cash flows for the years then ended, and the changes in its net assets for the year ended June 30, 2005, in conformity with accounting principles generally accepted in the United States of America. October 14, 2005 Member of Deloitte Touche Tohmatsu

4 BARNARD COLLEGE BALANCE SHEETS JUNE 30, 2005 AND 2004 ASSETS CASH $ 1,108,440 $ 1,087,607 SHORT-TERM INVESTMENTS 18,425,747 12,214,563 STUDENT ACCOUNTS RECEIVABLE (less allowance for doubtful accounts of $14,200 and $14,000, respectively) 113, ,656 STUDENT NOTES RECEIVABLE (less allowance for doubtful notes of $359,000 at 2005 and at 2004, respectively) 3,829,342 3,367,262 OTHER ACCOUNTS RECEIVABLE 2,985,980 4,754,210 PLEDGES RECEIVABLE Net of allowances 26,476,340 20,789,792 OTHER ASSETS 3,599,328 3,367,385 INVESTMENTS Long-term 162,430, ,681,130 FUNDS HELD BY BOND TRUSTEE 29,356,966 30,651,793 PROPERTY, PLANT AND EQUIPMENT Net 65,350,087 63,436,929 TOTAL $ 313,676,127 $ 291,602,327 LIABILITIES AND NET ASSETS LIABILITIES: Accounts payable and accrued expenses $ 13,538,109 $ 11,698,921 Deferred revenues 2,693,032 2,614,881 Interest payable 661,598 1,186,523 Liability under split interest agreements 5,486,944 5,320,946 Refundable government loan program 2,382,367 2,328,756 Postretirement benefits payable 5,345,590 4,906,000 Notes and bonds payable (less unamortized bond discount) 53,820,258 54,641,435 Total liabilities 83,927,898 82,697,462 NET ASSETS: Unrestricted 70,108,848 69,170,684 Temporarily restricted 66,230,809 52,505,359 Permanently restricted 93,408,572 87,228,822 Total net assets 229,748, ,904,865 TOTAL $ 313,676,127 $ 291,602,327 See notes to financial statements

5 BARNARD COLLEGE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2005 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2004) Temporarily Permanently Total Unrestricted Restricted Restricted REVENUE GAINS AND OTHER SUPPORT: Tuition and fees $ 62,980,761 $ - $ - $ 62,980,761 $ 58,048,410 Less financial aid allowance (17,847,216) (17,847,216) (16,400,424) Net tuition and fees 45,133,545 45,133,545 41,647,986 State appropriations 245, , ,703 Investment return designated for current operations 3,380,644 5,696,356 9,077,000 9,070,000 Other investment income 538, , , ,675 Federal grants and contracts 2,367, ,329 3,220,224 2,708,834 State grants 687, , ,623 Private gifts and grants 7,548,194 5,356,273 12,904,467 13,920,398 Auxiliary enterprises 22,412,536 22,412,536 21,369,261 Other sources 613,296 54, , ,598 Total revenue 82,240,283 12,817,490 95,057,773 90,931,078 NET ASSETS RELEASED FROM RESTRICTIONS TO FUND OPERATIONS 9,938,161 (9,938,161) EXPENSES: Instruction 34,506,027 34,506,027 32,883,206 Research 3,191,545 3,191,545 2,998,156 Public services 950, , ,051 Academic administration 5,524,559 5,524,559 5,264,732 Student services 9,751,612 9,751,612 10,125,577 Institutional support 17,577,490 17,577,490 17,962,195 Auxiliary enterprises 21,194,602 21,194,602 21,735,541 Interest on bonds and notes payable 2,255,255 2,255,255 1,806,265 Total expenses 94,951,904 94,951,904 93,577,723 RESULTS FROM OPERATIONS (2,773,460) 2,879, ,869 (2,646,645) OTHER CHANGES: Investment return less amounts designated for current operations 593,010 3,548,984 4,141,994 10,331,059 Contributions for long-term purposes 796,926 6,129,707 6,926,633 5,743,380 Contributions for plant improvements 9,757,632 9,757,632 5,538,325 Net assets released for plant improvements 4,579,871 (4,579,871) Redesignation of Net Assets for endowment accounts (1,461,257) 1,461,257 Donor designations (50,043) 50,043 Changes in value of split interest agreements (88,764) (88,764) (133,161) Total other changes 3,711,624 10,846,121 6,179,750 20,737,495 21,479,603 Change in net assets 938,164 13,725,450 6,179,750 20,843,364 18,832,958 NET ASSETS Beginning of year 69,170,684 52,505,359 87,228, ,904, ,071,907 NET ASSETS End of year $ 70,108,848 $ 66,230,809 $ 93,408,572 $ 229,748,229 $ 208,904,865 See notes to financial statements

6 BARNARD COLLEGE STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2005 AND 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 20,843,364 $ 18,832,958 Adjustments to reconcile change in net assets to net cash used in operating activities: Nonoperating items: Contributions for long-term purposes (6,926,633) (5,743,380) Contributions for plant improvements (9,757,632) (5,538,325) Net gain on investments (11,017,475) (17,145,617) Noncash items: Depreciation and amortization 6,108,758 6,208,825 Changes in assets and liabilities: (Increase) Decrease in short-term investments (9,989,709) 5,569,040 Decrease in student accounts receivable 138, ,020 Decrease (Increase) in other receivables 1,768,230 (1,594,943) Increase in pledges receivable for operations (1,540,945) (1,786,694) Increase in other assets (284,769) (1,968,129) Increase in accounts payable and accrued expenses 1,491, ,032 (Decrease) Increase in interest payable (524,925) 487,800 Increase in refundable government loan program 83,841 93,152 Increase in deferred revenues 78, ,242 Increase in postretirement benefits payable 439, ,000 Net cash used in operating activities (9,090,904) (1,602,019) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (59,381,929) (27,668,179) Proceeds from the sale of investments 63,757,007 27,694,806 Building renovations and purchase of equipment (7,888,599) (6,072,873) Student loans granted (1,027,748) (745,697) Student loans repaid 535, ,639 Net cash used in investing activities (4,005,831) (6,197,304) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bonds issued 28,880,374 Decrease (Increase) in deposits with bond trustee 1,294,827 (27,845,098) Payment of principal notes and bonds payable (881,919) (846,919) Increase in liability under split interest agreements 165, ,220 Contributions for long-term purposes 7,934,883 3,284,894 Contributions for plant improvements 4,603,779 4,143,493 Net cash provided by financing activities 13,117,568 8,166,964 NET CHANGE IN CASH 20, ,641 CASH Beginning of year 1,087, ,966 CASH End of year $ 1,108,440 $ 1,087,607 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 3,087,121 $ 1,379,321 See notes to financial statements

7 BARNARD COLLEGE NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2005 AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Barnard College (the College ) is a not-for-profit independent liberal arts college for women. The College is exempt from Federal income taxes under the provisions of Section 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(3). Basis of Accounting The financial statements are prepared on the accrual basis of accounting. The reporting of contributions and pledges distinguishes between contributions received that increase permanently restricted net assets, temporarily restricted net assets, and unrestricted net assets. Recognition of the expiration of donor-imposed restrictions occurs in the period in which the restrictions expire. Net assets and revenue, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Amounts for each of the three classes of net assets - permanently restricted, temporarily restricted and unrestricted are displayed in the Statement of Activities. Certain donations are received without designation and are classified as temporarily restricted. Such amounts are redesignated to permanently restricted or unrestricted in the period in which the donor makes the designation. The College has elected to present a balance sheet that sequences assets and liabilities based on their relative liquidity. Categories of Expense Expenses are reported in functional categories. Each category includes salaries and benefits, supplies and other expenses, including operation and maintenance of physical plant and depreciation related to the function. a. Instruction includes expenses for all activities that are part of the College s instruction program. b. Research includes all expenses for governmental and privately sponsored research. c. Public Services includes activities established to provide noninstructional services such as the Women s Center, and the New York State Science and Technology Entry Program ( STEP ) and Liberty Partnership Program. d. Academic Administration includes expenses incurred to provide administrative support to the instructional program. This category includes the Provost, Library, Academic Computing and Media Services. e. Student Services includes expenses incurred for the offices of Dean of the College, Admissions, Registrar, Financial Aid administration, Career Development, Disability Services and the New York State Higher Education Opportunity Program ( HEOP ). In addition, it - 5 -

8 includes expenses for student related activities outside the context of the formal instructional program such as intramural and intercollegiate athletics. f. Institutional Support includes expenses for college wide activities such as the offices of the President, Finance and Planning, Development, Administration, Administrative Computing, General Counsel and Public Affairs. g. Auxiliary Enterprises provides services to students for a fee that is directly related to, although not necessarily equal to, the cost of the services. This category includes Housing, Dining Services, Health and Counseling Services, and The Summer and Pre-college Programs. 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. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Short-Term Investments Short-term investments include money market funds, government securities and marketable securities. These investments are reported at fair value. Realized and unrealized gains and losses are reported in the statement of activities. Investments Long-Term Investments long- term include debt, equity securities and mutual funds that are reported at fair value, based upon quoted market prices with realized and unrealized gains and losses included in the Statement of Activities. Fair values for partnership interests are estimated by the partnerships general partners. Realized gains and losses on the sale of investments long-term are based on the average cost of the investment. All investment transactions are recorded on a trade date basis. Student Accounts Receivable Student accounts receivable are reported at the estimated net realizable amount. Student Notes Receivable Student notes receivable are loans to students, which are made from the College s restricted loan funds and the Federal Perkins Loan program. The notes are reported at the estimated net realizable value. Temporarily- and Permanently-Restricted Net Assets Temporarily-restricted net assets are restricted by donors for designated purposes. Gifts of cash and other assets are reported as restricted contributions if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activities as net assets released from restrictions. Temporarily-restricted net assets include annuity and life income funds subject to the restrictions of gift instruments requiring that the College periodically pay stipulated amounts of annuity funds or the income earned on the assets of life income funds to designated beneficiaries. Such payments terminate at the time specified by the donor, which is usually upon the death of the beneficiaries. At such time, the assets of life income funds become available to the College for its unrestricted use or for use as restricted by the donor

9 Permanently-restricted net assets include endowment funds received by the College for which only the income and gains can be expended for scholarships and other programs. Principally all gains on permanently-restricted net assets are available for the designated purpose specified by the donor. Pledges Pledges, less an allowance for uncollectible amounts, are recorded at the net present value, determined using a discount rate commensurate with the rate on U.S. Treasury bills whose maturities correspond to the maturities of the pledges, as receivables in the year made. Restricted pledges are reported as additions to the appropriate restricted net assets. Property, Plant and Equipment Property, plant and equipment is stated at cost or, in the case of gifts, at fair market value at the date of the gift, less accumulated depreciation and amortization. Depreciation and amortization is computed by the straight-line method based upon the estimated useful lives of the assets. Deferred Revenues Deferred revenues consist primarily of student tuition and fee payments that are received for future terms. Split-Interest Agreements The College is the beneficiary of trusts, annuities and pooled income funds. The College s interest in these split interest agreements is reported as a contribution in the year received and is calculated as the difference between the fair value of the assets contributed to the College, and the estimated liability to the beneficiary. This liability is computed using actuarially determined rates and is adjusted annually. The assets held by the College under these arrangements are recorded at fair value as determined by quoted market price and are included as a component of investments long- term. Allocation of Certain Expenses The College allocates operation and maintenance of plant and depreciation of buildings in the Statement of Activities based upon building square footage. Reclassifications Certain 2004 amounts have been reclassified to conform to the 2005 presentation. Prior Period Information The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the College s financial statements for the year ended June 30, 2004, from which the summarized information was derived

10 2. PLEDGES The pledges from various corporations, foundations, trusts and individuals were as follows: Pledges due: In less than one year $ 1,209,696 $ 1,354,585 In one to five years 26,261,486 19,541,916 In more than five years 2,361,988 1,920,732 Gross pledges receivable 29,833,170 22,817,233 Allowance for uncollectible pledges (1,232,128) (464,063) Allowance for net present value (2,124,702) (1,563,378) Net pledges receivable $ 26,476,340 $ 20,789, INVESTMENTS Short-term investments are composed of the following: Money market funds $ 1,086,507 $ 1,005,463 U.S. Government obligations 17,339,240 11,209,100 Total $ 18,425,747 $ 12,214,563 Investments long- term are composed of the following: Money market funds $ 858,275 $ 717,500 U.S. Government obligations 18,804,176 16,098,934 Corporate bonds 12,910,585 17,964,543 Investments in partnerships real estate 6,796,163 5,067,503 Investments in partnerships other 37,320,736 23,751,640 Domestic equity 60,048,727 70,027,227 International equity 25,691,762 18,053,783 Total $ 162,430,424 $ 151,681,

11 Investments long-term are held in the following funds: Trust and pooled life income funds $ 9,821,049 $ 9,261,933 Endowment and designated as endowment funds 152,609, ,419,197 Total $ 162,430,424 $ 151,681,130 The College has a total return policy of utilizing its endowment resources. To the extent that the total return requirement for the current year is not achieved by income from investments, the College utilizes cumulative appreciation of its pooled investment funds. At June 30, 2005, the College identified individual funds underlying the endowment and designated as endowment where the fair value ($35,248,000) has dropped below the original value ($39,971,000). The decline in the fair value was caused by market conditions that have occurred over the course of the past several years. Where the fair value of individual endowment funds has declined below the original value, use of accumulated appreciation under the College s total return policy has been suspended. Going forward, these certain funds will not be charged their share of the spending rate until the fair value is restored to their original value. The following schedule summarizes the investment return of endowment and funds designated for endowment and its classification in the Statement of Activities: Temporarily Permanently Total Unrestricted Restricted Restricted Interest and dividends (net of expenses of $802,000) $ 495,475 $ 1,706,044 $ - $ 2,201,519 $ 2,255,442 Net realized gain 1,916,464 3,588,521 5,504,985 2,601,727 Unrealized gain 1,561,715 3,950,775 5,512,490 14,543,890 Return on long-term investments 3,973,654 9,245,340 13,218,994 19,401,059 Investment return designated for current operations (3,380,644) (5,696,356) (9,077,000) (9,070,000) Investment return less amounts designated for current operations $ 593,010 $ 3,548,984 $ $ 4,141,994 $ 10,331,

12 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, at cost, and accumulated depreciation are summarized as follows: Land $ 1,233,967 $ 1,233,967 Buildings 127,716, ,788,928 Furniture, fixtures and equipment 19,893,803 18,170,567 Construction in progress 4,547,172 1,459, ,391, ,653,127 Less accumulated depreciation (88,041,041) (82,216,198) Total $ 65,350,087 $ 63,436,929 During fiscal year 2005, the College wrote off approximately $151,000 of fully depreciated equipment taken out of service. 5. RETIREMENT PLANS Substantially, all employees of the College are covered under two defined contribution pension plans established with Teachers Insurance and Annuity Association. The College s contributions to the pension plans are based on specified percentages, ranging from 8% to 15%, of each employee s annual salary. Total pension expense for the years ended June 30, 2005 and 2004 was $4,256,202 and $4,049,902 respectively. In addition to providing pension benefits, the College sponsors an unfunded defined benefit postretirement medical plan. For nonunion employees to be eligible for the medical benefits, the employee must be at least 62 years old with at least ten years of continuous service immediately prior to retirement or a total of age and years of service equal to 80 with a minimum of 15 years of service. To be eligible, union employees must be 62 years old and employed by the College for at least 10 years. The following sets forth several tables which identify the Accumulated Postretirement Medical Benefit Obligation, the Postretirement Benefit Payable recognized in the Balance Sheet and the related assumptions:

13 Accumulated postretirement medical benefit obligation $ (8,026,000) $ (6,552,000) Unrecognized Prior Service Cost 84, ,000 Unrecognized net (gain) or loss 2,597,000 1,519,000 Accrued benefit cost recognized in the Balance Sheet $ (5,345,000) $ (4,906,000) Net periodic postretirement medical benefit cost $ 788,000 $ 763,000 Weighted average actuarial assumptions used to determine benefit obligations at June 30th: Discount rate 5.00 % 6.25 % Weighted average actuarial assumptions used to determine net periodic benefit cost for the fiscal years ended June 30th: Discount rate 6.25% 5.75 % Assumed health care cost trend rates: (Union/NonUnion) (Union/NonUnion) Health care cost trend rate 9% - 12% 10% - 13% Health care cost trend assumed to decline 5%/5% 5%/5% Ultimate trend rate achieved The College makes contributions to the postretirement medical plan equal to the benefits paid on a payas-you-go basis. During the years ended June 30, 2005 and 2004, the College paid $315,000 and $313,000 for medical benefits, respectively. For the years ending June 30, 2006 through June 30, 2015, the College plans to make contributions to the plans as follows: 2006 $ 370, , , , , ,779,958 The Medicare Modernization Act of 2003 (the Act ) was signed into law on December 8, The Act created a new prescription drug program under Part D of Medicare and also provided a subsidy to employers who provide prescription drug coverage which is at least equivalent to the Part D program provided by Medicare. The College has obtained an actuarial attestation confirming that the College s postretirement medical benefit plan is equivalent to Medicare Part D

14 6. NOTES AND BONDS PAYABLE Notes and bonds payable consist of the following: Noninterest-bearing note payable to the Power Authority of the State of New York due in monthly installments of $10,160 through October 2007 $ 284,477 $ 406,395 Dormitory Authority of the State of New York Barnard College Insured Revenue Bonds, Series 1996 Interest currently at 5% to 5.25%, due serially to ,355,000 26,115,000 Dormitory Authority of the State of New York Barnard College Insured Revenue Bonds, Series 2004 Interest currently at 2% to 4.75%, due serially to ,915,000 28,915,000 Total 54,554,477 55,436,395 Less unamortized bond discount for Power Authority of the State of New York note, Dormitory Authority of the State of New York College and University Series 1996 Bonds and Series 2004 Bonds (734,219) (794,960) Total notes and bonds payable $ 53,820,258 $ 54,641,435 In February 2004, the College entered into a loan agreement with the Dormitory Authority of the State of New York to issue $28,915,000 Dormitory Authority of The State of New York Barnard College Insured Revenue Bonds, Series The loan agreement is a general and unsecured obligation of the College. In accordance with the provisions of the bond agreement, the College is required to deposit reserve funds with a trustee. These funds which totaled $26,457,947 and $ 27,805,819 at June 30, 2005 and June 30, 2004, respectively, were invested in an investment repurchase agreement. A portion of the bond proceeds will be used to acquire condominium units totaling approximately 66,000 square feet to house the College s students, faculty and certain community facilities. See Cathedral Gardens section in Note 11- Commitments and Contingencies for further information. In April 1998, the College completed a loan agreement with the Power Authority of The State of New York to finance the implementation of approved energy conservation improvement projects. This noninterest-bearing loan amounted to $1,097,267 and is repayable over a term of 108 months. Interest imputed at 5.5% in the amount of $237,273 is being amortized over the term of the loan. In December 1996, the College entered into a loan agreement with the Dormitory Authority of the State of New York to issue $30,000,000 Dormitory Authority of The State of New York Barnard College Insured Revenue Bonds, Series The loan agreement is a general obligation of the College. As security under the loan agreement, the College has pledged tuition and fee revenues of $2,125,000 annually, has granted a mortgage on certain buildings and properties and a security interest in certain fixtures, furnishings and equipment now or hereafter located therein. In accordance with the provision of the bond agreement, the College is required to deposit reserve funds with the trustee. These funds, which totaled $ 2,899,019 at June 30, 2005 and $2,845,974 at June 30, 2004, were invested in U.S. Government securities

15 Annual aggregate principal and interest payments applicable to notes and bonds payable for years subsequent to June 30, 2005 are: Principal Interest Total 2006 $ 921,919 $ 1,922,696 $ 2,844, ,919 2,501,196 3,463, ,480,639 2,452,596 3,933, ,495,000 2,389,893 3,884, ,560,000 2,317,770 3,877,770 Thereafter 48,135,000 29,239,063 77,374,063 $ 54,554,477 $ 40,823,214 $ 95,377, ALLOCATION OF DEPRECIATION EXPENSE Depreciation expense is allocated to functions, as follows: Instruction $ 1,281,607 $ 1,317,133 Research 407, ,496 Public services 3,571 4,402 Academic support 553, ,249 Student services 323, ,616 Institutional support 434, ,924 Auxiliary enterprises 2,971,193 2,902,601 $ 5,975,441 $ 5,959, INTERCORPORATE AGREEMENT An intercorporate agreement between the College and Columbia University provides for payment for the exchange of certain services between the two institutions. These services include cross-registration for students, library services, faculty exchange and certain special services and support costs. The Statements of Activities includes expenses in the amount of $ 2,210,000 and $2,100,000 for the years ended June 30, 2005 and 2004, respectively, for services provided under the terms of the agreement

16 9. NET ASSETS Unrestricted net assets are designated as follows: Endowment Funds $ 41,797,312 $ 40,465,726 Invested in plant, net of debt 19,471,663 16,489,452 Other 8,839,873 12,215,506 Temporarily restricted net assets are available for the following purposes: $ 70,108,848 $ 69,170,684 Program services: Instruction, research and library $ 28,191,955 $ 24,194,005 Financial aid 16,537,713 12,340,726 Plant improvements 20,849,526 15,596,703 Gifts to be designated 651, ,925 Permanently restricted net assets are restricted to: $ 66,230,809 $ 52,505,359 Investments to be held in perpetuity, the earnings from which are expendable to support: Financial aid $ 53,669,653 $ 51,795,653 Instruction and other programs 39,738,919 35,433,169 $ 93,408,572 $ 87,228,822 At June 30, 2005 and June 30, 2004, the College identified individual funds underlying the endowment and designated as endowment where the fair value has dropped below the original value. Where the fair value of individual endowment funds has declined below the original value, use of accumulated appreciation under the College s total return policy has been suspended. During Fiscal 2005, it was determined by the College that its calculation of underwater values did not include cumulative total return spending. Accordingly, temporarily restricted net assets at June 30, 2004 have been redesignated by an increase of $1,850,723 for spending that was previously charged to these funds but should have been charged to the College s unrestricted net assets. Due to the identification of its underwater accounts at June 30, 2004, the College undertook an in-depth analysis of its endowment accounts in Fiscal 2005 including a review of the allocation calculations for gains, income, total return spending and underwater values. Based on the review, the College determined that to properly allocate the endowment gains and spending to the net asset categories, the College s methodologies governing gain, income and spending allocations had to be changed. Accordingly, at June 30, 2004, unrestricted net assets and permanently restricted net assets have been redesignated by decreases of $1,432,236 and $86,834, respectively, for gains (net of spending) which were previously allocated to temporarily restricted net assets

17 10. RELEASED FROM RESTRICTIONS FOR OPERATIONS Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by the occurrence of other events specified by donors. Purpose restrictions accomplished were as follows for the year ended June 30, 2005: Expenses: Instruction $ 3,554,818 Research 328,630 Public service 402,589 Academic support 51,296 Student services 681,811 Institutional support 178,105 Financial aid 4,687,212 Auxiliary enterprises 53,700 Total $ 9,938,161 Net assets released from restriction in plant improvements are reflected in the Statement of Activities as a component of other changes. 11. COMMITMENTS AND CONTINGENCIES Cathedral Gardens In February 2004, the College entered a loan agreement with the Dormitory Authority of the State of New York to issue $28,915,000 Dormitory Authority of the State of New York Barnard College Insured Revenue Bonds, Series 2004 (the Series 2004 Bonds ). A portion of the bond proceeds will be used to fund a construction project named Cathedral Gardens. Cathedral Gardens consists of the acquisition of five condominium units to be used primarily to provide residential space for 91 students and 26 faculty apartments. The five condominium units, together with related rights (the Barnard Unit ) will comprise approximately 66,000 square feet in a building to be located near the Barnard campus. The building will also include private condominium dwelling units. The new building will be constructed by 110th Street Equities, LLC ( Seller ), an unrelated entity that owns the land upon which the new building is to be constructed. Barnard and Seller have entered into an agreement (the Purchase and Sale Agreement ) providing for the sale and purchase of the Barnard Unit. The Purchase and Sale Agreement provides that when the new building is substantially complete, the condominium has been created and certain other conditions precedent to the obligations of Barnard to purchase the Barnard Unit have been met, Barnard will purchase the Barnard Unit from Seller at a purchase price of $24,790,065 using a portion of the proceeds from the Series 2004 bonds. Construction began in the Spring of 2004 and is estimated to be completed by January In the event of the failure of Seller to complete the Barnard Unit in accordance with the Purchase and Sale Agreement and the subsequent failure of the defaults to be cured, Barnard may terminate the Purchase and Sale Agreement at the end of the allowable construction period. In such event, the Series 2004 Bonds will be subject to redemption. Investments Certain of the College s investments in partnerships and private market placements, involve future cash commitments. The future cash commitments amounted to approximately $11,800,000 at June 30, 2005 and $11,700,000 at June 30, All commitments will be funded from other endowment investments

18 Legal Matters The College is a party in certain claims and litigation. Management, based on the advice of legal counsel and because of its insurance coverage, is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on the operating results or financial condition of the College. 12. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the College in estimating the fair value of its financial instruments: a. Short-Term Investments Fair value is based on quoted market prices. b. Investments Long-Term Fair values of debt, equity securities and mutual funds are based on quoted market prices. Fair values for partnerships are estimated by the management of the related investments. c. Pledges Receivable Pledges receivable are recorded at their net present value. d. Notes Receivable The fair value of the notes receivable is estimated at $3,002,000 using the current federal student s lending rate. e. Accounts Payable and Accrued Expenses The carrying amount reported in the balance sheet approximates fair value. f. Notes and Bonds Payable The fair value of the notes and bonds payable is estimated to be $61,489,000 based on prevailing available rates. ******