Concordia University Chicago - CONSOLIDATED FINANCIAL … · 2018-11-05 · CONCORDIA UNIVERSITY...
Transcript of Concordia University Chicago - CONSOLIDATED FINANCIAL … · 2018-11-05 · CONCORDIA UNIVERSITY...
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR’S REPORT
For the Year Ended June 30, 2018
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CONCORDIA UNIVERSITY CHICAGO
TABLE OF CONTENTS
Page(s)
INDEPENDENT AUDITOR’S REPORT ........................................................................ 3-4
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Financial Position ............................................................. 5
Consolidated Statement of Activities ........................................................................... 6
Consolidated Statement of Cash Flows ....................................................................... 7-8
Notes to Consolidated Financial Statements ................................................................ 9-38
SUPPLEMENTARY INFORMATION
Consolidating Statement of Financial Position ............................................................ 39
Consolidating Statement of Activities - Unrestricted .................................................. 40
Consolidating Statement of Activities - Temporarily Restricted ................................. 41
Consolidating Statement of Activities - Permanently Restricted ................................. 42
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1415 West Diehl Road, Suite 400
Naperville, IL 60563
630.566.8400
INDEPENDENT AUDITOR’S REPORT
To the Board of Regents
Concordia University Chicago
River Forest, Illinois
Report on Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Concordia University
Chicago (the University), which comprise the consolidated statement of financial position as of
June 30, 2018, and the related consolidated statements of activities and cash flows for the year
then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
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 consolidated 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 consolidated financial statements based on
our audit. We conducted our audit 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 consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness
of significant accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Concordia University Chicago as of June 30, 2018,
and the changes in its consolidated net assets and its consolidated cash flows for the year then
ended in accordance with accounting principles generally accepted in the United States of
America.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the consolidated financial
statements as a whole. The accompanying consolidating statement of financial position,
consolidating statement of activities - unrestricted, consolidating statement of activities -
temporarily restricted, and consolidating statement of activities - permanently restricted are
presented for purposes of additional analysis and are not a required part of the consolidated
financial statements. Such information is the responsibility of management and was derived from
and relates directly to the underlying accounting and other records used to prepare the
consolidated financial statements. The information has been subjected to the auditing procedures
applied in the audit of the consolidated financial statements and certain additional procedures,
including comparing and reconciling such information directly to the underlying accounting and
other records used to prepare the consolidated financial statements or to the consolidated
financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the information is
fairly stated, in all material respects, in relation to the consolidated financial statements as a
whole.
Naperville, Illinois
October 19, 2018
CONSOLIDATED FINANCIAL STATEMENTS
Cash and cash equivalents 207,193$
Investments 11,688,747
Accounts receivable - net 6,196,725
Prepaid expenses and other assets 5,426,810
Grants receivable 27,585
Contributions receivable - net 738,175
Loans receivable - net 309,350
Interest rate swap agreement 15,530
Assets restricted as to use 600,000
Charitable remainder and lead trusts 1,504,364
Investments restricted to endowment 14,289,752
Land, buildings, and equipment - net 63,128,149
TOTAL ASSETS 104,132,380$
LIABILITIES
Accounts payable and other liabilities 9,452,624$
Accrued payroll and other related liabilities 1,783,835
Deferred revenues 6,080,408
Refundable government student loan funds 351,926
Obligation under capital lease 105,113
Loans payable - net 33,149,143
Bonds payable - net 13,600,000
Total liabilities 64,523,049
NET ASSETS
Unrestricted 1,331,846
Temporarily restricted 24,564,910
Permanently restricted 13,712,575
Total net assets 39,609,331
TOTAL LIABILITIES AND NET ASSETS 104,132,380$
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
June 30, 2018
ASSETS
LIABILITIES AND NET ASSETS
- 5 -See accompanying notes to consolidated financial statements.
Budgeted Endowment Temporarily Permanently
Activities Related Total Restricted Restricted Total
OPERATING REVENUES AND GAINS
Tuition and fees 79,572,601$ -$ 79,572,601$ -$ -$ 79,572,601$
Less scholarship and fellowships (18,895,868) - (18,895,868) - - (18,895,868)
Net tuition and fees 60,676,733 - 60,676,733 - - 60,676,733
Government grants and contracts - - - 527,513 - 527,513
Private gifts and grants 997,535 1,980 999,515 2,427,749 - 3,427,264
Pooled investments endowment payout 547,049 - 547,049 492,654 - 1,039,703
Nonpooled investments return (9,652) - (9,652) - - (9,652)
Auxiliary services 6,647,083 - 6,647,083 - - 6,647,083
Other 2,059,478 - 2,059,478 11,565 - 2,071,043
Net assets released from restrictions 3,116,495 3,116,495 (3,116,495) - -
Total operating revenues and gains 74,034,721 1,980 74,036,701 342,986 - 74,379,687
OPERATING EXPENSES
Academic programs
Instruction - divisional 26,307,678 - 26,307,678 - - 26,307,678
Other instructional programs 2,435,959 - 2,435,959 - - 2,435,959
Academic support 5,934,442 - 5,934,442 - - 5,934,442
Student services 22,879,088 - 22,879,088 - - 22,879,088
Auxiliary enterprises 6,192,188 - 6,192,188 - - 6,192,188
Total program expenses 63,749,355 - 63,749,355 - - 63,749,355
Management and general 8,594,492 - 8,594,492 - - 8,594,492
Fundraising 1,638,780 - 1,638,780 - - 1,638,780
Total operating expenses 73,982,627 - 73,982,627 - - 73,982,627
Operating revenues and gains in excess of
operating expenses 52,094$ 1,980$ 54,074 342,986 - 397,060
NON-OPERATING ACTIVITIES
Private gifts and grants - - 460,039 460,039
Net change in funds held in trust - 54,174 - 54,174
Net change in charitable lead and remainder trusts - 16,158 (53,942) (37,784)
Other gains (losses) (62,643) 18,297 11,211 (33,135)
Unrealized gain on interest rate swap agreement 34,424 - - 34,424
Disposal of land, buildings, and equipment (49,317) - - (49,317)
Pooled endowment investment return
in excess of endowment payout 143,357 275,488 - 418,845
Net assets released from restrictions 102,414 - (102,414) -
CHANGE IN NET ASSETS 222,309 707,103 314,894 1,244,306
NET ASSETS, BEGINNING OF YEAR 1,109,537 23,857,807 13,397,681 38,365,025
NET ASSETS, END OF YEAR 1,331,846$ 24,564,910$ 13,712,575$ 39,609,331$
Unrestricted
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATED STATEMENT OF ACTIVITIES
For the Year Ended June 30, 2018
- 6 -See accompanying notes to consolidated financial statements.
CASH FLOWS FROM OPERATING ACTIVITIES
Change in net assets 1,244,306$
Adjustments to reconcile change in net assets to net
cash from operating activities
Depreciation expense 3,124,997
Amortization expense 331,521
Bad debt expense 245,857
Loans receivable cancellations and adjustments - net 1,868
Unrealized gain on interest rate swap agreement (34,424)
Net realized and unrealized gains on pooled
(705,242)
Net realized and unrealized gains included in
non pooled endowment investments return (44,522)
Contributions and change in value of charitable remainder and lead trusts (207,329)
Contributions restricted for long-term investment (575,762)
Contributions restricted for land, buildings, and equipment (4,777,137)
(Increase) decrease in
Accounts receivable 1,807,199
Prepaid expenses and other assets - net of amortization (2,010,176)
Grants receivable 11,246
Contributions receivable (111,959)
Increase (decrease) in
Accounts payable and other liabilities (1,054,993)
Accrued payroll and other related liabilities 82,220
Deferred revenues 748,256
Refundable government student loan funds (40,621)
Net cash from operating activities (1,964,695)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (10,276,979)
Proceeds from sales of long-term investments 1,917,420
Purchases of long-term investments (2,961,553)
Endowment payout in excess of dividends and interest 289,601
Loans receivable
Principal repayments 69,954
Advances (14,000)
Net cash from investing activities (10,975,557)
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2018
endowment investments not used in endowment payout
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CASH FLOWS FROM FINANCING ACTIVITIES
Contributions restricted for long-term investment 622,211$
Contributions restricted for land, buildings, and equipment 6,340,874
Net payments on Lutheran Church-Missouri Synod loan (335,068)
Payments on capital lease obligation (101,192)
Proceeds from issuance of 2016 LCEF Construction Loan 2,258,471
Proceeds from issuance of 2016 Huntington Construction Loan 2,331,356
Proceeds from issuance of 2018 Busey Bank Loan 12,710,971
Principal payments on 2013 Lutheran Church Extension Fund loan (344,183)
Principal Payment on 2016 Huntington Construction Loan (6,415,896)
Principal payments on 2014 Huntington Bank Loan (3,885,669)
Principal payments 2013 IFA Bonds (791,458)
Net cash from financing activities 12,390,417
NET DECREASE IN CASH AND CASH EQUIVALENTS (549,835)$
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 757,028
CASH AND CASH EQUIVALENTS, END OF YEAR 207,193$
SUPPLEMENTAL DATA
Interest paid 1,418,328$
Purchase of fixed assets included in accounts payable 1,223,322
Pledge payments on contributions restricted for long-term investment 46,449
Pledge payments on contributions restricted for for land, buildings, and equipment 1,563,737
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
For the Year Ended June 30, 2018
CONCORDIA UNIVERSITY CHICAGO
- 8 -See accompanying notes to consolidated financial statements.
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CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
1. NATURE OF ORGANIZATION
Concordia University, an Illinois not-for-profit corporation located in River Forest, Illinois
doing business as Concordia University Chicago, is a comprehensive private university
accredited by the Higher Learning Commission whose mission is based on liberal arts
education centered in the Gospel of Jesus Christ. It offers various bachelor’s degrees, masters
degrees, doctoral degrees (with Doctor of Education and Doctor of Philosophy
concentrations), and various certificate and licensure programs, as well as providing
education to young children through its early childhood program.
Concordia University is operated under the auspices of The Lutheran Church-Missouri
Synod (the Synod), a Missouri not-for-profit corporation headquartered in St. Louis,
Missouri. Concordia University Chicago’s Board of Regents, responsible for the
management of Concordia University Chicago, consists of 18 members (including eight
elected by its Board of Regents and four elected by the Synod).
Six not-for-profit corporate and trust entities operate as corporate-wide entities directly
under the auspices of the Synod:
• Lutheran Church Extension Fund (LCEF)
• Concordia Publishing House (CPH)
• The Lutheran Church-Missouri Synod Foundation (LCMS Foundation)
• Concordia Plan Services (CPS)
• Concordia Historical Institute
• Concordia University System (CUS)
CUS, a not-for-profit corporate entity, broadly oversees the activities of nine colleges and
universities and seminaries, including Concordia University Chicago, carrying out the
activities and policies of the Synod as it applies to the Synod higher education institutions.
The Concordia Administrative Information System (CAIS), a CUS department, oversees the
management of the software accounting system utilized by most of the Synod higher
education institutions.
Thirty-five Synodical districts, all separate entities operating under the auspices of the
Synod, represent the Synod to the various Synod congregations across the country and
around the world. The district in which Concordia University Chicago is located, the
Northern Illinois District (NID), elects five members of Concordia University Chicago’s
Board of Regents (including the NID president who serves ex officio as a voting member).
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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1. NATURE OF ORGANIZATION (Continued)
The majority of students enrolled at Concordia University Chicago receive funds through
federal financial aid and loan programs under Title IV of the Higher Education Act of 1965,
as amended, to pay for a substantial portion of their tuition. Concordia University Chicago
and its programs are subject to approval, licensure and/or regulatory requirements of various
accrediting authorities, state authorities, the United States Department of Education, and
other federal agencies.
Concordia University Foundation, Inc. (the Foundation) is a separate Illinois not-for-profit
corporation formed to promote Concordia University Chicago through solicitation of funds
to encourage various activities of Concordia University Chicago, to administer the
endowment assets of Concordia University Chicago, and to administer gifts and bequests
given to it by donors for purposes of supporting the educational and religious objectives of
Concordia University Chicago. Net assets of the Foundation which are not restricted by
donors are considered payable to Concordia University Chicago, and are therefore,
considered to be temporarily restricted net assets by the Foundation, although such net assets
are considered unrestricted net assets in the consolidated financial statements.
The Foundation is administered by a Board of Directors elected by its corporate member,
Concordia University Chicago.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying consolidated financial statements include the accounts of Concordia
University Chicago and the Foundation (collectively, the University). These statements have
been prepared on the accrual basis in conformity with accounting principles generally
accepted in the United States of America (USGAAP). All significant intercompany balances
and transactions have been eliminated in consolidation.
Basis of Presentation
The University follows the professional standards reporting requirements for the financial
statements of not-for-profit organizations. Accordingly, the University reports information
regarding its consolidated financial position and consolidated activities according to three
classes of net assets: unrestricted net assets, temporarily restricted net assets, and
permanently restricted net assets.
Unrestricted net assets include all net assets that are not subject to donor-imposed
restrictions.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Presentation (Continued)
Temporarily restricted net assets are limited by law or donor-imposed stipulations that
either expire by passage of time or can be fulfilled or removed by actions of the
University pursuant to those stipulations. 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 consolidated statement of activities as net assets released from restrictions.
Permanently restricted net assets are limited by donor-imposed stipulations that
neither expire by the passage of time nor can be fulfilled or otherwise removed by
actions of the University. Income derived by these assets is either unrestricted or is
used to support the donor-specified activity.
To help ensure observance of limitations and restrictions placed on the use of resources
available to the University, management maintains the accounts of the University in
accordance with the principles of fund accounting. Separate accounts are maintained for
each fund; however, in the accompanying consolidated financial statements, funds that have
similar characteristics are combined and presented by net asset class.
Net assets are further segregated by management into the following subclasses:
Operating Funds - All temporarily restricted and unrestricted net assets are classified
as operating net assets except as designated below.
Endowment and Similar Funds - Certain board-designated (designated by the
Concordia University Chicago’s Board of Regents) unrestricted and temporarily
restricted net assets have been pooled with permanently restricted net assets for the
purpose of investing the total of such assets as a single endowment fund.
Net Investment in Plant - Unrestricted and temporarily restricted net assets that have
been utilized for the investment in land, buildings, and equipment, net of accumulated
depreciation and capital debt.
Funds Held in Trust - Certain net assets are held by a third party trustee and are not in
the control of the University.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Presentation (Continued)
All revenues and expenses are considered operating revenues and expenses, with the
exception of the following:
• Permanently restricted contributions.
• All return on endowment investments in excess of (less than) the endowment
payout used to support operations.
• Gains or losses from the sale or disposition of land, buildings and equipment,
and art objects.
• Changes to amounts of funds held in trust.
• Unrealized gain or loss on the fair value of the interest rate swap agreement.
• Endowment and similar funds’ net assets meeting the requirements for the
release of net assets that are retained as endowment funds.
Unrestricted operating revenues and expenses are classified as either budgeted activities or
as endowment related.
Endowment related activities include the following:
Unrestricted Bequests - By policy adopted by the Board of Regents, the first $250,000
of unrestricted bequests are to be classified as budgeted activities, with the balance
being board designated for endowment and added to the endowment investment funds.
Cash and Cash Equivalents
Cash and cash equivalents include currency, demand deposits, and liquid investments with
a maturity, at time of purchase, of three months or less. Cash held by the University for long-
term purposes is included in investments. At June 30, 2018, the University’s cash balances
exceeded federally insured limits by $745,308. The University does not believe these funds
to be at substantial risk of loss due to the lack of federal insurance coverage.
Accounts Receivable and Related Allowance for Doubtful Accounts
Accounts receivable primarily include amounts due to the University for tuition and fees.
The University grants credit to students and generally does not require collateral or other
security in extending credit to students. Balances are stated net of an allowance for doubtful
accounts.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable and Related Allowance for Doubtful Accounts (Continued)
The allowance estimates are based on past collection experience, an aging analysis of
outstanding balances and expected payment information obtained from a third party
collection agency. The University writes off accounts receivable that have become
uncollectible. Payments subsequently received on such receivables are credited to the
allowance for uncollectible amounts. Concentration risk with respect to accounts receivable
is typically limited due to the large number of accounts and low average balance.
Loans Receivable
Loans receivable primarily consist of funds advanced to students under the Federal Perkins
Loan Program. Under the terms of the program, these loans are subject to forgiveness or
assignment back to the federal government under certain circumstances. Balances are stated
net of an allowance for doubtful accounts. Concentration risk with respect to loans receivable
is limited due to the large number of accounts and low average balance.
Prepaid Expenses and Other Assets
Accounts included in prepaid expenses and other assets include the following:
Marketing Fees Deposits - The University paid a deposit related to marketing services
being performed on behalf of the University. These amounts are owned by the
University until certain time and performance objectives are met.
Prepaid Admissions Marketing Costs and Expense - The University incurred certain
marketing fees and expenses directly attributable to the receipt of future tuition
revenues.
Inventories - Inventories include office supply inventories, buildings and grounds
repairs and maintenance supply inventories, and fuel inventories, and are stated at cost
(first-in, first-out method).
Cash Surrender Value of Life Insurance - The University is designated as the owner
and beneficiary of flexible premium adjustable life insurance policies. Contributions
of life insurance policies are recorded at the cash surrender value at the date of the gift,
which is assumed to approximate fair value. Premium payments are required to be
made by the donor to continue coverage to the maturity dates.
Unamortized Banner Cost - Banners are amortized over a five-year period.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Prepaid Expenses and Other Assets (Continued)
Unamortized Website Development Costs - The University incurred certain costs and
expenses in the development of its website. These costs are amortized over a five-year
period.
Unamortized Library Books and Hymnals Costs - Library books and hymnals for and
maintained in either the University’s library or the University’s chapel, are capitalized
and amortized over a period of ten years.
Unamortized Course Development Costs and Expenses - The University incurred
certain costs and expenses in the development of online courses. These costs are
amortized over a five-year period.
Investments
Investments are carried at fair value, with all returns on investments (including realized and
unrealized gains and losses) reflected in the consolidated statement of activities. Endowment
assets are managed by the University and pooled to the extent allowable for investment
purposes.
Funds held in trust that consist of irrevocable trusts from which the University is to receive
the income in perpetuity are recorded as investments. The principal is held in trust by LCMS
Foundation and is not available to be used by the University. Given the nature of the
promises, the University records the contributed principal as permanently restricted net
assets. Income received is recorded as either unrestricted or temporarily restricted activity
based on the presence or absence of donor restrictions. Increases or decreases in the fair
value of the trust assets are recorded on the consolidated statement of activities as changes
in permanently restricted net assets.
Investments subject the University to credit risk. The University’s investment policy
stipulates diversification of investments.
Assets Restricted as to Use
The University has agreed to maintain certain assets as a debt reserve fund as required by a
security agreement covering certain bonds and loans described in Note 13. These assets are
in the custody of a third party and may only be released when the underlying conditions are
met.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Land, Buildings, and Equipment
Land, buildings, improvements, and equipment are recorded at cost, except for property
received by gift, which is recorded at fair value on the date of receipt. Improvements and
equipment are capitalized when their purchase price is greater than $5,000. Title to land and
buildings is in the name of the University, with reversionary clauses to the Synod. These
reversionary clauses are subordinate to the collateralization interests associated with loans
and bonds payable described in Notes 13 and 14.
Buildings, improvements, and equipment are depreciated using the straight-line method over
the following estimated useful lives:
Buildings
Parking garage and athletic facilities 60 years
Other buildings 39 - 50 years
Athletic field 25 years
Building and other improvements 10 - 50 years
Equipment 5 - 30 years
Art Objects
The University has a collection of art objects, most of which were contributed to the
University. The value of these objects is not recorded in the accompanying consolidated
statement of financial position. Concordia University Chicago’s Board of Regents has given
management the authority to sell a significant portion of the collection to the extent that such
objects are not necessary for the furtherance of the mission of the University.
Compensated Absences
The University provides for and accrues vested compensated absences benefits that are
provided to most of its nontemporary employees.
Deferred Revenue
Deferred revenue primarily consists of unearned summer tuition and fees collected from
college students and parents of children in the Early Childhood Center (ECC), as well as
deposits made both by students and by parents of children in ECC for future school terms.
Accordingly, this deferred revenue will be recognized as tuition and fee revenue in the
subsequent fiscal year when it is earned.
Interest Rate Swap Derivative
The University records its interest rate swap agreements at fair value, with unrealized gains
and losses being recorded in the consolidated statement of activities.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Unamortized Debt Issuance Costs and Expenses Credit costs associated with the loans described in Note 13 are paid in advance and amortized
according to the period covered. Costs associated with the issuance of bonds described in Note 14 are amortized over the weighted-average life of the bonds, which approximates the effective interest method.
Tuition and Fees
Student tuition and fees are recorded as revenue during the year the related academic services are rendered.
Gifts, Grants, and Contracts Revenue Gifts, grants, and contracts are recorded as revenue when received or promised/contracted.
Irrevocable split-interest agreements, including charitable remainder trusts, charitable lead trusts and perpetual trusts, are recorded as revenue when the trust agreements are executed. Revenue from the split-interest agreements is recorded as contribution revenue based on the present value of the expected cash flows to be received by the University.
All contributions are considered to be available for the University’s unrestricted use, unless
specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes; however, donor-restricted contributions and investment income with restrictions that are met in the same reporting period are reported as unrestricted support. Pledges of contributions due in future periods, including amounts expected to be received from split-interest agreements, imply a time restriction and are stated net of estimated uncollectible pledges. Accordingly, pledges are accounted for as temporarily restricted net assets until both the implied time restriction is met and the purpose restriction, if any, has been fulfilled. Conditional promises to give are not included as support until the conditions are substantially met.
Unconditional promises to give that are expected to be collected within one year are
recognized as support and recorded as a receivable at net realizable value. Unconditional promises to give not expected to be collected within one year are recorded at the present value of their estimated future cash flows and are discounted at an appropriate risk-adjusted interest rate.
Gifts and grants, including unconditional pledges, that are restricted for buildings and
equipment are recognized as increases in temporarily restricted net assets and released over the useful lives of the underlying assets acquired or constructed.
Contributed services are reported in the consolidated financial statements at fair value for
voluntary donations of services when those services (1) create or enhance nonfinancial assets or (2) require specialized skills that are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Auxiliary Enterprises
The University's auxiliary enterprises exist primarily to furnish goods and services to
students, faculty, and staff. Managed as essentially self-supporting activities, the
University's auxiliary enterprises consist of residence halls, dining facilities, conference
services, and the University bookstore. Auxiliary enterprise revenues and expenses are
reported in the accompanying statements of activities in unrestricted net assets. Auxiliary
enterprises revenue is recognized as the University provides the goods and services.
Federal Student Aid Funds
During 2018, the University disbursed $3,011,204 to students under the Federal Pell Grant
Program. This activity is not included in the accompanying consolidated financial statements
as it is paid directly by the federal government.
Fair Value Measurements
USGAAP establishes a framework for measuring fair value. That framework uses a
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
USGAAP requires the organization to maximize the use of observable inputs when
measuring fair value. The hierarchy describes three levels of inputs, which are as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices
for identical assets or liabilities in inactive markets; or inputs that are derived
principally from or corroborated by observable market data by correlation or
other means.
Level 3: Significant unobservable inputs.
In many cases, a valuation technique used to measure fair value includes inputs from more
than one level of the fair value hierarchy. The lowest level of significant input determines
the placement of the entire fair value measurement in the hierarchy. The categorization of
an investment within the hierarchy reflects the relative ability to observe the fair value
measure and does not necessarily correspond to the perceived risk of that investment.
If an investment that is measured using net asset value (NAV) has a readily determinable
fair value (that is, it can be traded at the measurement date at its published NAV), it is
included in Level 1 of the hierarchy. Otherwise, investments measured using NAVs are not
included in Level 1, 2, or 3, but are separately reported.
The University recognizes transfers between levels at the end of the reporting period. For
the year ended June 30, 2018, no transfers were recorded.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 18 -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Valuation Techniques Following is a description of the valuation techniques used for assets and liabilities measured
at fair value on a recurring basis. There have been no changes to the techniques used during the year ended June 30, 2018.
• Charitable remainder and lead trusts: Valued using the fair value of the assets held in
the trust reported by the trustee as of June 30, 2018. The trust valuations are based on assumptions about the present value of distributions to be received from the trusts.
• Mutual funds: Valued at the NAV of shares on the last trading day of the fiscal year.
• Equity securities: Valued at the closing quoted price in an active market. • Notes, bonds, and debt securities: The notes, bonds, and debt securities held by the
University generally do not trade in active markets on the measurement date. These investments are valued using inputs including yields currently available on comparable securities of issuers with similar credit ratings, recent market price quotations (where observable), bond spreads, and fundamental data relating to the issuer.
• Funds held in trust: Valued using the fair value of the assets held in the trust reported
by the trustee as of June 30, 2018. The University considers the measurement of its beneficial interest in the perpetual charitable trust to be a Level 3 measurement within the hierarchy because even though that measurement is based on the unadjusted fair value of trust assets reported by the trustee, the University will never receive those assets or have the ability to direct the trustee to redeem them.
• Interest rate swap agreement: The fair value is estimated using forward-looking
interest rate curves and discounted cash flows that are observable or that can be corroborated by observable market data.
Use of Estimates The preparation of consolidated financial statements in conformity with USGAAP requires
management to make estimates and assumptions that affect the amounts recorded in the consolidated financial statements and disclosed in the accompanying notes. Actual results could differ from those estimates.
Functional Allocation of Expenses
The costs of supporting the various programs and other activities have been summarized on a functional basis in the statement of activities. Depreciation, interest, facilities operations and maintenance, insurance, and utilities expenses have been allocated among the educational program, institutional support, and fundraising categories based on the square footage of the space utilized by the different University departments. Certain information technology expenses have been allocated among the same categories based on the number of users in the different University departments.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 19 -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Accounting Standards
Financial Accounting Standards Board (FASB) has issued ASU 2014-09, Revenue from
Contracts with Customers, as amended by ASU 2015-14, which supersedes or replaces
nearly all USGAAP revenue recognition guidance. This standard establishes a new contract
and control-based revenue recognition model, changes the basis for deciding when revenue
is recognized over time or at a point in time, and will expand disclosures about revenue.
ASU 2014-09, as amended, is effective for nonpublic companies for annual reporting periods
beginning after December 15, 2018, and interim periods within the annual period beginning
after December 15, 2019. The University is currently assessing the impact of this new
standard.
FASB has issued ASU No. 2016-02, Leases (Topic 842) to increase the transparency and
comparability about leases among entities. The new guidance requires lessees to recognize
a lease liability and a corresponding lease asset for virtually all lease contracts. It also
requires additional disclosures about leasing arrangements. ASU 2016-02 is effective for
annual periods beginning after December 15, 2019, and interim periods within fiscal years
beginning after December 15, 2020, and requires a modified retrospective approach to
adoption. The University is currently assessing the impact of this new standard.
FASB has issued ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of
Financial Statements of Not-for-Profit Entities. ASU No. 2016-14 is intended to simplify
and improve current net asset classification requirements and the information presented in
financial statements and notes about a not-for-profit entity's liquidity, financial performance,
expense classifications and cash flows. ASU No. 2016-14 is effective for fiscal years
beginning after December 15, 2017, with early adoption permitted. The University is
currently assessing the impact of this new standard.
FASB has issued ASU No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the
Scope and the Accounting Guidance for Contributions Received and Contributions Made.
ASU No. 2018-08 is intended to assist entities in (1) evaluating whether transactions should
be accounted for as contributions (nonreciprocal transactions) within the scope of
contribution accounting guidance, or as exchange (reciprocal) transactions subject to other
guidance, and (2) determining whether a contribution is conditional. ASU No. 2018-08 is
effective for fiscal years beginning after December 15, 2018, for transactions in which the
entity serves as a resource recipient, and for fiscal years beginning after December 15, 2019,
for transactions in which the entity serves as a resource provider. Early adoption is
permitted. The University is currently assessing the impact of this new standard.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 20 -
3. ALLOWANCES FOR UNCOLLECTIBLE RECEIVABLES
Allowances for uncollectible receivables as of June 30, 2018 are summarized as follows:
Accounts
Receivable
Contributions
Receivable
Loans
Receivable
Beginning balance $ 1,524,546 $ 56,787 $ 271,307
Bad debt expense
Charged (credited)
to expense
243,766
2,091
-
Collection on
accounts previously
written off (24,247) - -
Accounts written off (70,702) - -
Other adjustments - - 1,691
ENDING BALANCE $ 1,673,363 $ 58,878 $ 272,998
4. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets as of June 30, 2018 are summarized as follows:
Unamortized costs
Banners $ 12,403
Website development 83,715
Library books and hymnals 121,438
Online course development 666,334
Total unamortized costs 883,890
Prepaid expenses and other assets
Admissions marketing costs 1,543,927
Other 1,290,155
Marketing fees deposit 1,000,000
Inventories 375,696
Cash surrender value of life insurance 333,142
TOTAL $ 5,426,810
Unamortized costs as of June 30, 2018 are summarized as follows:
BEGINNING OF THE YEAR UNAMORTIZED COSTS $ 880,442
Amortizable costs expended 334,969
Amortization (331,521)
END OF THE YEAR UNAMORTIZED COSTS $ 883,890
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 21 -
4. PREPAID EXPENSES AND OTHER ASSETS (Continued)
Estimated future amortization cost is as follows:
Years Ending
June 30,
2019
$ 286,382
2020 214,748
2021 155,996
2022 104,018
2023 49,584
2024 and thereafter 73,162
TOTAL $ 883,890
5. GRANTS RECEIVABLE
Grants receivable at June 30, 2018 are summarized as follows:
Amounts due within one year
State of Illinois Cooperative
Work-Study Program (ICWS)
$ 11,615
National Science Foundation (NSF) 15,970
TOTAL AMOUNTS DUE WITHIN ONE YEAR $ 27,585
6. CONTRIBUTIONS RECEIVABLE Contributions receivable at June 30, 2018 are summarized as follows:
Amounts due Within one year $ 361,168 One to five years 446,968 Thereafter 48,364
856,500 Less Present value discount (59,447) Estimated uncollectible pledges (58,878)
TOTAL $ 738,175
The discount rate was 5.50% for the year ended June 30, 2018.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 22 -
6. CONTRIBUTIONS RECEIVABLE (Continued) The underlying gifts associated with the contributions receivable are reflected in net assets
as follows:
Temporarily restricted $ 722,461 Permanently restricted 15,714
TOTAL $ 738,175
7. CREDIT QUALITY OF RECEIVABLES Student Loans Receivable The University makes uncollateralized loans to students based on financial need. Student
loans are funded through federal government loan programs or institutional resources. At June 30, 2018, student loans represented 0.30% of total assets.
At June 30, 2018, student loans consisted of the following:
Federal government programs $ 582,348
Less allowance for doubtful accounts Beginning of year (271,307) Accounts written off (1,691)
End of year (272,998)
STUDENT LOANS RECEIVABLE, NET $ 309,350
The University participates in the Perkins federal revolving loan program. The availability
of funds for loans under the program is dependent on reimbursements to the pool from
repayments on outstanding loans. Funds advanced by the federal government of $649,701 at
June 30, 2018, are ultimately refundable to the government and are classified as liabilities in
the consolidated statement of financial position. Outstanding loans cancelled under the
program result in a reduction of the funds available for loan and a decrease in the liability to
the government.
The authority to make new Perkins loans ended September 30, 2017, with disbursements
permitted through June 30, 2018, for students with existing Perkins loans. The University
will be required to return the federal contribution and may continue servicing their Perkins
loans or assign the Perkins loans to the Department of Education.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 23 -
7. CREDIT QUALITY OF RECEIVABLES (Continued)
At June 30, 2018, the following amounts were past due under student loan programs:
Less Than Two
Years Past Due
Two Years up
to Five Years
Past Due
More Than
Five Years Past
Due
Total Past Due
$ 64,014 $ 63,083 $ 208,531 $ 335,628
Allowances for doubtful accounts are established based on prior collection experience 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 to be permanently uncollectible. Amounts due under the
Perkins loan program are guaranteed by the government and, therefore, no reserves are
placed on any past due balances under the program.
8. CHARITABLE REMAINDER AND LEAD TRUSTS
The charitable remainder and lead trust agreements of which the University is the beneficiary
are administered by the LCMS Foundation as trustee or fiscal agent. Distributions are to be
made to the University (lead trusts) or to the donor’s designee (remainder trusts) during the
terms of the agreements, which vary in maturity through the year 2048 as of June 30, 2018.
At the end of the terms, a portion of the remaining trust assets, as defined in the trust
agreements, is to be distributed to the University. As of June 30, 2018, the present value was
estimated using an annualized growth rate of 5.90% and a discount rate of 3.50%. The
change in value of these split-interest agreements for the year ended June 30, 2018 resulted
in losses of $(37,784).
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 24 -
9. INVESTMENTS
Investments at June 30, 2018 are summarized as follows:
Endowment Fund
Other
Total
Mutual funds Equities $ 14,307,235 $ - $ 14,307,235 Fixed income 6,279,043 - 6,279,043 Real estate 1,337,832 - 1,337,832 Commodities 1,009,538 - 1,009,538 Master limited partnerships
1,763,118
-
1,763,118
Cash 29,994 - 29,994 Equity securities 30,796 - 30,796 Notes, bonds and debt securities
9,285
-
9,285
Cash and cash equivalents
51,795
-
51,795
Funds held in trust - 1,159,863 1,159,863
TOTAL $ 24,818,636 $ 1,159,863 $ 25,978,499
Investments are reported in the consolidated statement of financial position as follows: Investments $ 11,688,747 Investments restricted to endowment 14,289,752
TOTAL $ 25,978,499
Total investment return consists of the following:
Interest and dividend income $ 813,840 Net realized and unrealized gains on investments reported at fair value
749,764
Less investment expenses (60,534)
TOTAL $ 1,503,070
Investment return is reported in the consolidated statement of activities as follows:
Operating revenues and gains Pooled investments endowment payout $ 1,039,703 Nonpooled investments return (9,652) Non-operating revenue Net changes in funds held in trust 54,174 Pooled investments endowment return in excess (less than) endowment payout
418,845
TOTAL $ 1,503,070
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 25 -
10. LAND, BUILDINGS, AND EQUIPMENT Land, buildings, and equipment as of June 30, 2018 are summarized as follows:
Land $ 2,269,643 Construction in progress 8,265,419 Buildings 77,923,308 Building - other improvements and athletic field 15,114,835 Equipment 23,092,902
Subtotal 126,666,107 Less accumulated depreciation (63,537,958)
TOTAL $ 63,128,149
Not included in construction in progress is $1,602,719 of outstanding commitments on
construction contracts as of June 30, 2018. Purchases of land, buildings, and equipment for the year ended June 30, 2018 are funded as
follows:
Temporarily restricted net assets $ 4,777,137 Unrestricted net assets 6,723,164
TOTAL $ 11,500,301
Included in temporarily restricted purchases of land, buildings, and equipment is $26,778 of
accounts payable as of June 30, 2018. 11. ACCOUNTING FOR CONDITIONAL ASSET RETIREMENT OBLIGATIONS Professional accounting standards require that an entity recognize the fair value of a liability
for a conditional asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. An asset retirement obligation would be reasonably estimable if: (a) it is evident that the fair value of the obligation is embodied in the acquisition price of the asset, (b) an active market exists for the transfer of the obligation, or (c) sufficient information exists to apply to an expected present value technique. In applying this professional guidance to the University, it was necessary to determine if the University will undertake any major renovation, sell, dispose, or abandon any related assets; what liability would be associated with such action; and the date such action would be taken.
The University’s conditional asset retirement obligations primarily relate to the remediation
of asbestos contained in buildings that the University owns. Environmental regulations exist that require the University to handle and dispose of asbestos in a special manner if a building undergoes major renovations or is demolished. Determination of the recorded liability is based on a number of estimates and assumptions including discount rate, abatement cost estimates, and estimates of dates of abatement. The University estimated its liability at June 30, 2018 to be $289,577, which is included in the accounts payable and other liabilities line in the consolidated statement of financial position.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 26 -
12. OBLIGATIONS UNDER CAPITAL LEASES
The University leases equipment under a capital lease; the assets and liabilities under this capital lease are recorded at the present value of the minimum lease payments. The assets are being depreciated over their estimated productive lives. Depreciation of assets under this capital lease was included in depreciation expense for year ended June 30, 2018.
Following is a summary of property held under capital leases:
Telephone equipment $ 316,983 Less: accumulated depreciation (47,547)
PROPERTY HELD UNDER CAPITAL LEASES, NET
$ 269,436
Minimum future lease payments under capital leases of June 30, 2018 are:
2019 $ 109,186 2020 - 2021 - 2022 - 2023 -
Total minimum lease payments 109,186 Less: amount representing interest (4,073)
PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS $ 105,113
The interest rate on the capitalized lease is 3.875% and was imputed based on the University’s borrowing rate at the inception of the lease.
13. LOANS PAYABLE
Loans payable at June 30, 2018 are summarized as follows:
2013 LCEF Loan $ 10,893,849 2016 LCEF Construction Loan 6,524,011 2018 Busey Bank Loan 12,800,000 Synod Loan 3,155,789
Total loans payable 33,373,649
Unamortized costs - beginning of year (189,389) Amortizable costs expended (123,807) Amortization 88,690
Unamortized costs - end of year (224,506)
TOTAL DEBT NET OF AMORTIZABLE DEBT COSTS
$ 33,149,143
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 27 -
13. LOANS PAYABLE (Continued)
2013 LCEF Loan
On July 1, 2013, the University obtained a loan from LCEF in the amount of $12,500,000.
The loan matures on July 1, 2033. The loan carries an initial interest rate of 3.875%, to be
adjusted every five years. Monthly payments of $65,120 (principal and interest, combined),
to be adjusted every five years, are required to be made, with a balloon payment of all
remaining amounts due on the maturity date. Effective July 1, 2018, the interest rate was
adjusted to 3.50%, and the monthly payments were adjusted to $62,999. Interest expense on
this loan reported in the consolidated statement of activities for the year ended June 30, 2018
was $425,025.
The loan is subject to various covenants as well as a security agreement (the 2013 Security
Agreement) covering both the 2013 LCEF Loan and the 2013 IFA Bonds, including the
establishment of a $600,000 debt reserve fund.
The campus property, as well as one residential property owned by the University, is
considered collateral under the 2013 Security Agreement. The 2013 Security Agreement
requires the University to meet all obligations associated with the underlying agreements for
the 2013 LCEF Loan and the 2013 IFA Bonds. LCEF and Huntington Bank share this
collateral under an intercreditor agreement.
Effective July 2, 2018, the 2013 Security Agreement was replaced with a new security
agreement (the 2018 Security Agreement) covering the 2013 LCEF Loan, the 2016 LCEF
Construction Loan, the 2018 LCEF Loan, and the 2013 IFA Bonds as amended on July 2,
2018 (the Amended 2013 IFA Bonds). The campus property, as well as one residential
property owned by the University, continues to be considered collateral under the 2018
Security Agreement. The 2018 Security Agreement does not require the establishment of a
debt reserve fund, but it does require the University to meet all obligations associated with
the underlying agreements for the 2013 LCEF Loan, the Amended 2016 LCEF Construction
Loan, the 2018 LCEF Loan, and the Amended 2013 IFA Bonds. LCEF and Busey Bank
share this collateral under an intercreditor agreement (the 2018 Intercreditor Agreement).
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 28 -
13. LOANS PAYABLE (Continued)
2014 Huntington Bank Loan
On July 2, 2014, the University obtained a bank loan from The Huntington National Bank
(who acquired FirstMerit Bank on August 16, 2016) in the amount of $5,500,000, maturing
on July 1, 2019. The loan carries an interest rate based off LIBOR plus 175 basis points,
which ranged from 2.976% to 3.732% during the year ended June 30, 2018. Monthly
principal payments of $45,833 are required to be made, with a balloon payment of all
remaining amounts due on the maturity date. This loan requires a security interest in the
investments held by the University. Interest expense on this loan reported in the consolidated
statement of activities for the year ended June 30, 2018 was $118,177. This loan was paid
off on June 29, 2018, through proceeds received from the 2018 Busey Bank Loan as
described below.
2016 Huntington Bank Construction Loan
On August 18, 2016, the University entered into an agreement for a 24-month construction
loan commitment of $13,500,000 to be used to construct a new residence hall on its campus.
Funds are drawn down as needed to pay for construction costs. The Huntington National
Bank is providing $6,750,000 of this total at an annual interest rate (on 50% of the drawn
funds) equal to LIBOR plus 175 basis points with a security interest in investments held by
the University. Interest expense on this loan reported in the consolidated statement of
activities for the year ended June 30, 2018 was $196,407. This loan was paid off on June 29,
2018, through proceeds received from the Busey Bank Loan as described below.
2016 - LCEF Construction Loan
Of the $13,500,000 construction loan discussed above, the remaining $6,750,000 is being
provided by LCEF at an annual interest rate (on 50% of the drawn funds) equal to the LCEF
cost of funds (currently 1.875%) plus 150 basis points with a security interest in all property
covered by the intercreditor agreement discussed above. At the end of term, the loan will be
converted into a new 20-year loan, the interest rate to be calculated in the same manner and
with the same security interest as the construction loan. Interest expense on this loan reported
in the consolidated statement of activities for the year ended June 30, 2018 was $201,850.
Subsequent to year end, the loan was converted into a 20-year loan, effective July 2, 2018,
with a maturity date of August 2, 2038 (the Amended 2016 LCEF Construction Loan). The
loan carries an initial interest rate of 3.375%, to be adjusted every five years, with a security
interest in all property covered by the 2018 Intercreditor Agreement. Monthly payments of
$38,715 (principal and interest, combined), to be adjusted every five years, are required to
be made, with a balloon payment of all remaining amounts due on the maturity date.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 29 -
13. LOANS PAYABLE (Continued)
2018 - Busey Bank Loan
On June 29, 2018, the University obtained a bank loan from Busey Bank in the amount of
$12,800,000, maturing on June 29, 2025. The proceeds of the loan were applied as follows:
Payoff 2014 Huntington Bank Loan $ 3,355,580 Payoff 2016 Huntington Bank Construction Loan 6,542,950 Residence Hall construction, renovation and related costs 2,901,470
TOTAL $ 12,800,000
The loan carries an interest rate based of LIBOR plus 135 basis points, which was 3.44% at June 30, 2018. Monthly payments of accrued interest are required to be made beginning August 1, 2018, with monthly principal payments beginning August 1, 2020, amortized on a 20-year basis, and a balloon payment of all remaining amounts due on the maturity date. This loan requires a security interest in the investments held by the University. No interest expense on this loan was reported in the consolidated statement of activities for the year ended June 30, 2018.
2018 LCEF Loan Subsequent to year-end, effective July 2, 2018, the University obtained a loan from LCEF
in the amount of $1,500,000 for the purchase of two residential properties. The loan matures on July 2, 2038. The loan carries an initial interest rate of 3.75%, to be adjusted every five years, with a security interest in all property covered by the 2018 Intercreditor Agreement discussed above as well as a security interest in the properties being purchased. Monthly payments of $8,893 (principal and interest, combined), to be adjusted every five years, are required to be made, with a balloon payment of all remaining amounts due on the maturity date.
Synod Loan The Synod provides a line of credit to the University. The available line of credit is
$8,000,000 as of June 30, 2018, and is renewable on July 1 of each year. The line of credit was renewed for the period July 1, 2018 through June 30, 2019 in the amount of $7,350,000. The floating interest rate paid on funds advanced to the University was 4.000% on June 30, 2018, and ranged from 3.875% to 4.000% during the year ended June 30, 2018. Interest expense on the line of credit reported in the consolidated statement of activities for the year ended June 30, 2018 was $54,752.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 30 -
13. LOANS PAYABLE (Continued) Minimum Payment Schedule The University’s minimum principal payments under the terms of the loan agreements above
are as follows:
Years Ending June 30,
2019 $ 627,959 2020 3,824,899 2021 1,279,256 2022 1,356,891 2023 2024 and thereafter
1,382,047 24,902,597
TOTAL $ 33,373,649
14. BONDS PAYABLE Bonds payable at June 30, 2018 is summarized as follows:
2013 IFA Bonds $ 13,600,000
Unamortized costs - beginning of year (57,715) Amortization 57,715
Unamortized costs - end of year -
Total debt net of amortizable debt costs $ 13,600,000
2013 Illinois Finance Authority Bonds On July 1, 2013, the University issued $17,000,000 in variable rate tax-exempt revenue
bonds through the IFA (2013 IFA Bonds). The 2013 bonds, which mature on July 1, 2033, are revenue refunding tax-exempt bonds
issued through the IFA. The interest rate during the initial interest period (ending June 30, 2018) equals 72% of the sum of the applicable margin plus the one-month LIBOR. The applicable margin, initially set at 300 basis points and adjustable semiannually, ranges from 250 basis points to 325 points, depending upon certain financial ratios maintained by the University. Effective October 1, 2013, quarterly principal payments of $170,000 are required to be made with a balloon payment of all remaining amounts due on the maturity date. The interest rate must be renegotiated upon termination of the initial interest period. The interest rates paid on the 2013 IFA Bonds ranged from 2.682% to 3.230% during the year ended June 30, 2018. Interest expense on the bonds reported in the consolidated statement of activities for the year ended June 30, 2018 was $402,117.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 31 -
14. BONDS PAYABLE The bonds, held by Huntington Bank, a single purchaser, are subject to various covenants as
well as covenants and security interests defined in the 2013 Security Agreement as discussed above.
The University’s minimum principal payments under the terms of the bond agreement above
are as follows:
Years Ending
June 30,
2019 $ 680,000
2020 680,000
2021 680,000
2022 680,000
2023
2024
680,000
10,200,000
TOTAL $ 13,600,000
2013 Amended Illinois Finance Authority Bonds
Subsequent to year end, effective July 2, 2018, the bonds were remarketed to Busey Bank
as a single purchaser, requiring an amendment to the 2013 IFA Bonds agreement, the
cancellation of the bonds held by Huntington Bank, and the re-issuance of the Amended
2013 IFA Bonds to Busey Bank in the amount of $13,600,000. The interest rate equals 70.5%
of the sum of the applicable margin of 175 basis points plus the one-month LIBOR and is
adjusted monthly. The University’s minimum principal payments under the terms of the
amended bond agreement are unchanged. The Amended 2013 Illinois Finance Authority
Bonds are subject to various covenants as well as covenants and security interests defined in
the 2018 Security Agreement.
15. INTEREST RATE SWAP DERIVATIVE
The University entered into a $2,750,000 interest rate swap agreement effective July 1, 2015
to manage the impact of future interest rate changes on underlying floating rate debt. The
agreement, which terminates July 1, 2019, requires the University to pay a monthly fixed
rate (3.58% annual interest rate) to the counterparty in exchange for variable rate payments
from the counterparty based on a percentage of one-month LIBOR. The increase in the fair
value of the interest rate swap for the year ended June 30, 2018 is $34,424 and is reflected
as an increase in unrestricted net assets in the consolidated statement of activities. During
the year ended June 30, 2018, interest expense recognized in the consolidated statement of
activities includes $8,914 for the interest rate swap activity.
Subsequent to year-end, the interest rate swap agreement was terminated, reflecting a gain
of $15,199.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 32 -
16. NET ASSETS
Net assets are summarized by fund as follows:
Temporarily Permanently
Unrestricted Restricted Restricted Total
Operating funds $ (9,135,492) $ 3,686,200 $ - $ (5,449,292)
Endowment and similar
funds (Note 17)
9,402,210
2,738,662
11,556,387
23,697,259
Net investment in plant 1,065,128 18,140,048 - 19,205,176
Funds held in trust - - 2,124,599 2,124,599
Other - - 31,589 31,589
TOTAL NET ASSETS $ 1,331,846 $ 24,564,910 $ 13,712,575 $ 39,609,331
17. TEMPORARILY RESTRICTED NET ASSETS
Temporarily restricted net assets contain donor-imposed restrictions that expire upon the
passage of time or once specific actions are undertaken by the University. Temporarily
restricted net assets are available for the following specific purposes:
Purpose restrictions
Academic programs
Instruction/divisional $ 323,170
Other instructional programs 103,518
Student services 1,276,275
Institutional support 192,381
Fundraising 9,858
Auxiliary enterprises 20,000
Student aid 1,345,478
Net investment in plant 18,140,048
Debt repayment 1,413,432
Future capital expenditures 499,587
Time restrictions 1,241,163
TOTAL $ 24,564,910
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 33 -
17. TEMPORARILY RESTRICTED NET ASSETS (Continued)
Net assets shown above as debt repayment are associated with term endowments which the
donors have indicated may be used as collateral on debt, if necessary. The income associated
with these term endowments is available for the following purposes:
Academic programs
Instruction/divisional $ 109
Other instructional programs 38,266
Student services 85,414
Institutional support 798
Student aid 1,288,845
TOTAL $ 1,413,432
18. PERMANENTLY RESTRICTED NET ASSETS
Permanently restricted net assets as of June 30, 2018 consist of various individual funds that
are subject to donor-imposed restrictions that the principal be invested in perpetuity. The
income associated with the permanently restricted net assets is available for the following
purposes:
Academic programs $ 346,507
Academic support 234,404
Student services 49,973
Institutional support 113,466
Auxiliary enterprises 272,236
Student aid 11,926,774
Student loans 15,874
General operating purposes 753,341
TOTAL $ 13,712,575
Assets making up permanently restricted net assets as of June 30, 2018 consist of the
following:
Cash and investments $ 12,669,608
Prepaid expenses and other assets 158,873
Contributions receivable - net 15,714
Charitable remainder and lead trusts 868,380
TOTAL $ 13,712,575
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 34 -
18. PERMANENTLY RESTRICTED NET ASSETS (Continued) The University accounts for endowment net assets by preserving the fair value of the original
gift as of the gift date of the donor-restricted endowment fund absent explicit donor stipulations to the contrary. As a result, the University classifies as permanently restricted net assets: (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund, if any. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets, according to donor stipulations, until those amounts are appropriated for expenditure by the University for the donor-stipulated purpose.
The University considers the following factors in making a determination either to
appropriate or to accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund. 2. The purposes of the University and the donor-restricted endowment fund. 3. General economic conditions. 4. The possible effects of inflation and deflation. 5. The expected total return from income and the appreciation of investments. 6. Other resources of the University. 7. The investment policies of the University. From time-to-time, the fair value of assets associated with individual donor-restricted
endowment funds may fall below the level that the donor or state law requires the University to retain as a fund of perpetual duration. In accordance with USGAAP, deficiencies of this nature that are reported in unrestricted net assets were $5,297 as of June 30, 2018. These deficiencies resulted from unfavorable investment market fluctuations, as well as continued appropriation of endowment assets for expenditures for certain programs that were deemed prudent by the Board of Regents.
The University has adopted investment and spending policies for endowment assets that
attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Under these policies, as approved by the Board of Regents, the endowment assets are invested in a manner that is intended to produce results over the long-term that exceed its endowment payout (not expected to exceed 4.50% annually) plus inflation as measured by the Consumer Price Index, while assuming a moderate level of investment risk. Actual returns in any given year may vary from this objective.
The University has a policy of appropriating for distribution each year a percentage of the
endowment fund net assets’ average fair value over the prior 12 quarters through the end of the prior fiscal year in which the distribution is planned. In an effort to increase the endowment market value over time, the nominal spending rate was decreased from 4.75% during fiscal year 2018 to 4.50%, decreasing the fiscal year 2018 endowment payout by $50,888. Future spending rates are projected to be 4.25% in fiscal year 2019 and 4.00% thereafter.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 35 -
18. PERMANENTLY RESTRICTED NET ASSETS (Continued)
To satisfy its long-term rate-of-return objective, the University relies on a total return
strategy in which the investment returns are achieved through both capital appreciation
(realized and unrealized) and current yield (interest and dividends). The University targets a
diversified asset allocation that places a greater emphasis on equity-based investments to
achieve its long-term return objectives within prudent risk constraints. The endowment
assets are managed by the Foundation through an investment committee consisting of
members of the Foundation’s Board of Directors that meets quarterly at a minimum to ensure
the objectives of the investment policy are being met and that the strategies used to meet the
objectives are in accordance with the approved investment policy.
The composition of endowment funds by type of fund as of June 30, 2018:
Temporarily Permanently
Unrestricted Restricted Restricted Total
Donor-restricted endowment funds $ (5,297) $ 2,738,662 $ 11,556,387 $ 14,289,752
Board-designated endowment funds 9,407,507 - - 9,407,507
TOTAL FUNDS $ 9,402,210 $ 2,738,662 $ 11,556,387 $ 23,697,259
During the year ended June 30, 2018, the University had the following endowment related
activities:
Temporarily Permanently
Unrestricted Restricted Restricted Total
ENDOWMENT NET ASSETS,
BEGINNING OF YEAR
$ 9,154,459
$ 2,255,600
$ 11,246,144
$ 22,656,203
Investment return
Investment income 355,117 395,100 - 750,217
Net appreciation (realized
and unrealized)
335,289
373,042
-
708,331
Total investment return 690,406 768,142 - 1,458,548
Contributions and transfers to board-
designated endowment funds
1,980
207,574
412,657
622,211
Reclassifications 102,414 - (102,414) -
Appropriations of endowment
assets for expenditures
(547,049)
(492,654)
-
(1,039,703)
ENDOWMENT NET ASSETS,
END OF YEAR
$ 9,402,210
$ 2,738,662
$ 11,556,387
$ 23,697,259
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 36 -
19. NET ASSETS RELEASED FROM RESTRICTIONS
Temporarily restricted net assets released from donor restrictions for the year ended June 30,
2018 are summarized as follows:
Purposes restrictions accomplished
Academic programs
Instructional/divisional $ 876,266
Other instructional programs 76,470
Academic support -
Student services 79,009
Institutional support 19,196
Fundraising 9,332
Auxiliary services 1,419
Student aid 950,276
Net investment in plant 1,104,527
TOTAL $ 3,116,495
20. FAIR VALUE MEASUREMENTS
The following table summarizes assets and liabilities by fair value input levels as of June 30,
2018:
Level 1 Level 2 Level 3 Total
ASSETS
Charitable remainder and lead trusts $ - $ - $ 1,504,364 $ 1,504,364
Investments
Mutual funds
Equities 14,307,235 - - 14,307,235
Fixed income 6,279,043 - - 6,279,043
Real estate 1,337,832 - - 1,337,832
Commodities 1,009,538 - - 1,009,538
Master limited partnerships 1,763,118 - - 1,763,118
Equity securities 30,796 - - 30,796
Notes, bonds, and debt securities - 9,285 - 9,285
Funds held in trust - - 1,159,863 1,159,863
Cash and cash equivalents* 81,789
Total investments 24,727,562 9,285 1,159,863 25,978,499
Interest rate swap agreement - 15,530 - 15,530
TOTAL ASSETS $ 24,727,562 $ 24,815 $ 2,664,227 $ 27,498,393
* Reported at cost.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 37 -
20. FAIR VALUE MEASUREMENTS (Continued)
A rollforward of the fair value measurements using unobservable inputs (Level 3) for the
year ended June 30, 2018 is as follows:
Charitable
Lead and
Remainder
Trusts
Funds Held
in Trusts
Total
FAIR VALUE, JULY 1, 2017 $ 1,297,035 $ 1,114,290 $ 2,411,325
Net change in value (37,784) 54,174 16,390
Trust assets added 245,113 - 245,113
Trust assets distributed - (8,601) (8,601)
FAIR VALUE, JUNE 30, 2018 $ 1,504,364 $ 1,159,863 $ 2,664,227
21. INCOME TAXES
Concordia University Chicago and the Foundation are organizations described in Section
501(c)(3) of the Internal Revenue Code (IRC) of 1986, as amended and, as such, are exempt
from federal income tax on income earned related to exempt activities under IRC Section
501(a). In addition, the Internal Revenue Service has determined that Concordia University
Chicago and the Foundation are not private foundations within the meaning of
Section 509(c) of the IRC.
22. EMPLOYEE BENEFITS AND DEFINED BENEFIT PLANS
The University participates in the retirement and disability/survivor benefit programs
provided by CPS through the Concordia Retirement Plan, the Concordia Retirement Savings
Plan, and the Concordia Disability and Survivor Plan. Substantially all full-time employees
are covered by these retirement and survivor programs. The University contributes to CPS
8.7% of the salaries of covered employees for retirement plans and a range from 1.20% to
2.25% of the salaries of covered employees for disability and survivor programs. Retirement
and survivor program expenses for the year ended June 30, 2018 totaled $2,547,208.
23. STUDENT FINANCIAL ASSISTANCE PROGRAMS
The University participates in various student financial aid programs. These programs are
subject to periodic review by the United States Department of Education (USDOE).
Disbursements under each program are subject to disallowance and repayment by the
University.
CONCORDIA UNIVERSITY CHICAGO
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- 38 -
24. INTEREST
The University made cash payments for interest totaling $1,418,328 for the year ended
June 30, 2018. A reconciliation of the University’s total interest paid to interest expense
included in the consolidated statement of activities is as follows:
Total interest expense $ 1,082,791
Interest expense capitalized 330,485
Interest expense (accrued) deferred 5,052
TOTAL INTEREST PAID $ 1,418,328
25. RELATED PARTIES
During the year ended June 30, 2018, the University received contributions of $173,770
from members of Concordia University Chicago’s Board of Regents and $35,143 from
members of the Foundation’s Board of Directors.
Auxiliary enterprises revenue includes income from student housing, employee housing,
food service, computer services, bookstore, transportation, convention and conferences,
athletics, and music performances. Accordingly, the auxiliary enterprise expenses include
all costs incurred in providing these services. During the year ended June 30, 2018, the
University paid CAIS $676,529 for certain computer and software services provided to the
University, allocated among the various functions of the University in the consolidated
statement of activities.
The Synod contracts certain insurance coverages on behalf of the University. During the
year ended June 30, 2018, total expenses of these coverages was $1,297,157, including
$729,224 related to worker’s compensation claims.
26. SUBSEQUENT EVENTS
Subsequent events have been evaluated through October 19, 2018, which is the date the
consolidated financial statements were available to be issued.
SUPPLEMENTARY INFORMATION
University Foundation Eliminations Total
ASSETS
Cash and cash equivalents 207,193$ 51,789$ (51,789)$ 207,193$
Due from (to) Concordia University Foundation 1,121,372 (1,121,372) - -
Investments 1,159,868 10,477,090 51,789 11,688,747
Accounts receivable - net 6,196,725 - - 6,196,725
Prepaid expenses and other assets 5,426,810 - - 5,426,810
Grants receivable 27,585 - - 27,585
Contributions receivable - net 738,175 - - 738,175
Loans receivable - net 309,350 - - 309,350
Interest rate swap agreement 15,530 - - 15,530
Assets restricted as to use 600,000 - - 600,000
Charitable remainder and lead trusts 1,504,364 - - 1,504,364
Investments restricted to endowment - 14,289,752 - 14,289,752
Land, buildings, and equipment - net 63,128,149 - - 63,128,149
TOTAL ASSETS 80,435,121$ 23,697,259$ -$ 104,132,380$
LIABILITIES AND NET ASSETS
LIABILITIES
Accounts payable and other liabilities 9,452,624$ -$ -$ 9,452,624$
Accrued payroll and other related liabilities 1,783,835 - - 1,783,835
Deferred revenues 6,080,408 - - 6,080,408
Refundable government student loan funds 351,926 - - 351,926
Obligation under capital lease 105,113 - - 105,113
Loans payable 33,149,143 - - 33,149,143
Bonds payable 13,600,000 - - 13,600,000
Total liabilities 64,523,049 - - 64,523,049
NET ASSETS
Unrestricted (deficit) (4,173,819) (5,297) 5,510,962 1,331,846
Temporarily restricted 17,929,703 12,146,169 (5,510,962) 24,564,910
Permanently restricted 2,156,188 11,556,387 - 13,712,575
Total net assets 15,912,072 23,697,259 - 39,609,331
TOTAL LIABILITIES AND NET ASSETS 80,435,121$ 23,697,259$ -$ 104,132,380$
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATING STATEMENT OF FINANCIAL POSITION
June 30, 2018
- 39 -
University Foundation Eliminations Total
OPERATING REVENUES AND GAINS
Tuition and fees 79,572,601$ -$ -$ 79,572,601$
Less scholarship and fellowships (18,895,868) - - (18,895,868)
Net tuition and fees 60,676,733 - - 60,676,733
Private gifts and grants 999,515 - - 999,515
Pooled investments endowment payout 547,049 - - 547,049
Nonpooled investments return (9,652) - - (9,652)
Auxiliary services 6,647,083 - - 6,647,083
Other 2,059,478 - - 2,059,478
Net assets released from restrictions 3,116,495 - - 3,116,495
Total operating revenues and gains 74,036,701 - - 74,036,701
OPERATING EXPENSES
Academic programs
Instruction - divisional 26,307,678 - - 26,307,678
Other instructional programs 2,435,959 - - 2,435,959
Academic support 5,934,442 - - 5,934,442
Student services 22,879,088 - - 22,879,088
Auxiliary enterprises 6,192,188 - - 6,192,188
Total program expenses 63,749,355 - - 63,749,355
Management and general 8,594,492 - - 8,594,492
Fundraising 1,638,780 - - 1,638,780
Support to Concordia University Chicago - 1,039,703 (1,039,703) -
Total operating expenses 73,982,627 1,039,703 (1,039,703) 73,982,627
Operating revenues and gains in excess of
(less than) operating expenses 54,074 (1,039,703) 1,039,703 54,074
NON-OPERATING ACTIVITIES
Other losses (62,643) - - (62,643)
Unrealized gain on interest rate swap agreement 34,424 - - 34,424
Disposal of land, buildings, and equipment (49,317) - - (49,317)
Pooled endowment investment return
in excess of endowment payout - 12,993 130,364 143,357
Net assets released from restrictions - 1,039,703 (937,289) 102,414
CHANGE IN NET ASSETS (23,462) 12,993 232,778 222,309
NET ASSETS (DEFICIT), BEGINNING OF YEAR (4,150,357) (18,290) 5,278,184 1,109,537
NET ASSETS (DEFICIT), END OF YEAR (4,173,819)$ (5,297)$ 5,510,962$ 1,331,846$
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATING STATEMENT OF ACTIVITIES - UNRESTRICTED
For the Year Ended June 30, 2018
- 40 -
University Foundation Eliminations Total
OPERATING REVENUES AND GAINS
Government grants and contracts 527,513$ -$ -$ 527,513$
Private gifts and grants 2,264,644 163,105 - 2,427,749
Poled investments endowment payout 492,654 - - 492,654
Other 11,565 - - 11,565
Net assets released from restrictions (3,162,944) 46,449 - (3,116,495)
Total operating revenues and gains 133,432 209,554 - 342,986
NON-OPERATING ACTIVITIES
Net change in funds held in trust 54,174 - - 54,174
Net change in charitable lead and remainder trusts 16,158 - - 16,158
Other gains 18,297 - - 18,297
Pooled endowment investment return
in excess of (less than) endowment payout - 405,852 (130,364) 275,488
Net assets released from restrictions - 102,414 (102,414) -
CHANGE IN NET ASSETS 222,061 717,820 (232,778) 707,103
NET ASSETS, BEGINNING OF YEAR 17,707,642 11,428,349 (5,278,184) 23,857,807
NET ASSETS, END OF YEAR 17,929,703$ 12,146,169$ (5,510,962)$ 24,564,910$
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATING STATEMENT OF ACTIVITIES - TEMPORARILY RESTRICTED
For the Year Ended June 30, 2018
- 41 -
University Foundation Eliminations Total
NON-OPERATING ACTIVITIES
Private gifts and grants 64,150$ 412,657$ (16,768)$ 460,039$
Net change in charitable lead and remainder trusts (53,942) - - (53,942)
Other losses 11,211 - - 11,211
Net assets released from restrictions - (102,414) - (102,414)
Change in net assets before
equity transfer 21,419 310,243 (16,768) 314,894
Equity transfer from Concordia University
Chicago to Concordia University Foundation (16,768) - 16,768 -
CHANGE IN NET ASSETS 4,651 310,243 - 314,894
NET ASSETS, BEGINNING OF YEAR 2,151,537 11,246,144 - 13,397,681
NET ASSETS, END OF YEAR 2,156,188$ 11,556,387$ -$ 13,712,575$
CONCORDIA UNIVERSITY CHICAGO
CONSOLIDATING STATEMENT OF ACTIVITIES - PERMANENTLY RESTRICTED
For the Year Ended June 30, 2018
- 42 -