Boston College
Financial Statements
May 31, 2006 and 2005
Boston College
Index
May 31, 2006
Page(s)
Report of Independent Auditors................................................................................................................ 1
Financial Statements
Statement of Financial Position .................................................................................................................... 2
Statement of Activities................................................................................................................................... 3
Statement of Cash Flows .............................................................................................................................. 4
Notes to Financial Statements .................................................................................................................5-15
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110-1707
Telephone (617) 530 5000
Facsimile (617) 530 5001
www.pwc.com
Report of Independent Auditors
To the Board of Trustees of
Boston College
In our opinion, the accompanying statement of financial position and the related statements of activities
and cash flows present fairly, in all material respects, the financial position of Boston College at
May 31, 2006, and the changes in its net assets and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of Boston College's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The prior year summarized
comparative information has been derived from Boston College's 2005 financial statements, and in our
report dated September 8, 2005, we expressed an unqualified opinion on those financial statements.
We conducted our audit of these statements 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 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, and evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
As described in Note E to the financial statements, in 2006 Boston College adopted a new principle of
accounting for conditional asset retirement obligations in accordance with Financial Accounting
Standards Board Interpretation ("FIN") No. 47, Accounting for Conditional Asset Retirement
Obligations. In accordance with the transition provisions of FIN No. 47, the 2006 financial statements
include the cumulative effect of adopting this new accounting principle as of May 31, 2006.
August 30, 2006
1
Boston College
Statement of Financial Position
As of May 31, 2006
(with summarized financial information as of May 31, 2005)
(in thousands of dollars)
2006
Assets
Short-term investments
Accounts receivable, net (Note B)
Contributions receivable, net (Note C)
Notes receivable, net (Note B)
Investments (Note D)
Funds held by trustees (Note D)
Other assets
Property, plant and equipment, net (Note E)
$
Total assets
Liabilities
Accounts payable
Accrued liabilities
Deposits payable and deferred revenues
Bonds and mortgages payable (Note F)
U.S. Government loan advances
Total liabilities
Net Assets
Unrestricted
Temporarily restricted (Note G)
Permanently restricted (Note G)
Total net assets
Total liabilities and net assets
8,368
19,032
112,862
41,784
1,588,368
36,823
7,300
854,603
$
8,494
18,586
126,304
42,111
1,347,212
46,205
8,242
837,157
$ 2,669,140
$ 2,434,311
$
$
4,790
106,285
54,354
536,114
35,328
4,196
91,248
45,545
545,064
34,571
736,871
720,624
1,186,838
338,811
406,620
1,069,775
273,431
370,481
1,932,269
1,713,687
$ 2,669,140
$ 2,434,311
The accompanying notes are an integral part of these financial statements.
2
2005
Boston College
Statement of Activities
For the Year Ended May 31, 2006
(with summarized financial information for the year ended May 31, 2005)
(in thousands of dollars)
Operating
Revenues and other support
Tuition and fees before student aid
Auxiliary enterprises before student aid
Sponsored research and training grants
Government grants and financial aid
Sales and services
Other revenues
Nonoperating assets utilized or released from
restrictions for operations
Unrestricted
$
Total revenues and other support
before student aid
Student aid applicable to tuition and fees
Student aid applicable to auxiliary enterprises
Net revenues
Expenses
Instruction
Academic support
Research
Student services
Public service
General administration
Auxiliary enterprises
Total expenses
377,834
126,038
39,080
4,967
4,702
7,514
$
-
Permanently
Restricted
$
-
2006
Total
$
2005
Total
377,834
126,038
39,080
4,967
4,702
7,514
$
355,552
118,253
35,808
5,289
4,819
7,455
70,517
-
-
70,517
62,549
630,652
-
-
630,652
589,725
(94,918)
(2,445)
-
-
(94,918)
(2,445)
(88,791)
(2,300)
533,289
-
-
533,289
498,634
195,295
44,283
27,683
37,605
1,953
94,832
131,553
-
-
195,295
44,283
27,683
37,605
1,953
94,832
131,553
185,219
41,041
24,462
35,587
1,873
89,701
120,668
533,204
-
-
533,204
498,551
85
-
-
85
83
Increase in net assets from
operating activities
Nonoperating
Contributions
Realized and unrealized investment gains, net
Investment income, net
Other losses
Nonoperating assets utilized or released from
restrictions for operations
Net assets reclassified or released from restrictions
Temporarily
Restricted
6,716
134,069
7,887
-
23,222
91,190
2,322
(2,310)
26,145
6,655
35
(2,630)
56,083
231,914
10,244
(4,940)
54,069
128,907
10,904
(4,871)
(38,816)
11,409
(31,701)
(17,343)
5,934
(70,517)
-
(62,549)
-
Increase in net assets from nonoperating activities
121,265
65,380
36,139
222,784
126,460
Total increase in net assets before
cumulative effect of change in
accounting principle
121,350
65,380
36,139
222,869
126,543
Cumulative effect of change in accounting
principle (Note E)
(4,287)
Total increase in net assets
117,063
Net assets, beginning of year
Net assets, end of year
1,069,775
$
1,186,838
-
-
65,380
36,139
273,431
$
338,811
(4,287)
370,481
$
406,620
126,543
1,713,687
$
1,932,269
The accompanying notes are an integral part of these financial statements.
3
-
218,582
1,587,144
$
1,713,687
Boston College
Statement of Cash Flows
For the Year Ended May 31, 2006
(with summarized financial information for the year ended May 31, 2005)
(in thousands of dollars)
2006
Cash flows from operating activities
Total increase in net assets
Adjustments to reconcile change in net assets to short-term
investments provided by operating activities
Cumulative effect of change in accounting principle
Depreciation and amortization
Net loss on disposal of fixed assets
Loan cancellations
Gifts of property and equipment
Realized and unrealized investment gains, net
(Increase) decrease in accounts receivable, net
Decrease in contributions receivable, net
Increase in accounts payable and accrued liabilities
Increase in deposits payable and deferred revenue
Decrease (increase) in other assets
Contributions to be used for long-term investment
$
Net short-term investments provided by operating activities
Cash flows from investing activities
Proceeds from sales of investments
Purchases of investments
Loans granted
Loans collected
Purchases of property, plant and equipment
Net short-term investments used by investing activities
Cash flows from financing activities
Payment of bonds and mortgages payable
Prepayment of debt
Decrease in funds held by trustees
(Decrease) increase in U.S. government loan advances
Contributions to be used for long-term investment
Net short-term investments provided by financing activities
Net (decrease) increase in short-term investments
218,582
2005
$
4,287
42,005
1,164
909
(386)
(231,914)
(446)
13,442
15,245
8,809
942
(43,643)
41,476
1,141
641
(393)
(128,907)
11
11,020
10,114
12,349
(994)
(42,508)
28,996
30,493
478,825
(488,067)
(8,734)
9,502
(63,930)
556,176
(463,460)
(9,556)
8,211
(173,132)
(72,404)
(81,761)
(2,150)
(7,000)
9,382
(593)
43,643
(9,080)
(9,000)
32,535
474
42,508
43,282
57,437
(126)
Short-term investments, beginning of year
6,169
8,494
Short-term investments, end of year
Supplemental data
Interest paid
Asset retirement obligations recognized
Net fixed asset recognized related to asset retirement obligation
2,325
$
8,368
$
8,494
$
15,767
5,687
1,400
$
20,153
-
The accompanying notes are an integral part of these financial statements.
4
126,543
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
A.
Accounting Policies
The significant accounting policies followed by Boston College (the "University”) are set forth below
and in other sections of these notes.
Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis with net assets,
revenues, expenses, gains, and losses classified into three categories based on the existence or
absence of externally imposed restrictions. The net assets of the University are classified and
defined as follows:
Unrestricted - Net assets that are not subject to donor-imposed stipulations. Unrestricted net
assets may be designated for specific purposes by action of the Board of Trustees.
Temporarily Restricted - Net assets whose use is limited by law or donor-imposed stipulations that
will either expire with the passage of time or be fulfilled or removed by actions of the University.
Permanently Restricted - Reflects the historical cost of gifts (and in certain circumstances earnings
from those gifts), subject to donor-imposed stipulations, which require the corpus to be invested in
perpetuity to produce income for general or specific purposes.
Revenues are reported as increases in unrestricted net assets unless use of the related assets is
limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net
assets. Realized and unrealized gains and losses on investments are reported as increases or
decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by
law.
Nonoperating activity includes all contributions, investment income, gains and losses on
investments, and losses relating to unfulfilled promises to give. All other activity is classified as
operating revenue or expense.
To the extent contributions, investment income, and gains are used for operations, they are
reclassified as "nonoperating assets utilized or released from restrictions for operations" in the
statement of activities.
Expirations of temporary restrictions on net assets or other clarifications from donors are presented
as "net assets reclassified or released from restrictions" in the statement of activities.
Contributions
Contributions, including unconditional promises to give, are recognized as unrestricted, temporarily
restricted, or permanently restricted revenues in the year received. Contributions receivable are
recorded at the present value of expected future cash flows, net of an allowance for estimated
unfulfilled promises to give. Conditional promises to give are not recognized until the conditions on
which they depend are substantially met. Contributions of noncash assets are recorded at fair
market value.
Contributions and investment return with donor-imposed restrictions, which are reported as
temporarily restricted revenues, are released to unrestricted net assets when an expense is
incurred that satisfies the restriction.
5
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
Contributions restricted for the purchase of property, plant and equipment are reported as
nonoperating temporarily restricted revenues and are released to unrestricted net assets upon
acquisition of the assets.
Contributions received for which the designation is pending by the donor are classified as
temporarily restricted net assets. Once a designation is made by the donor, the contributions are
reclassified to the appropriate net asset category as part of “net assets reclassified or released
from restrictions."
Endowment Income Spending
The University has an endowment income spending and distribution policy that aims to preserve
the purchasing power of the endowment. Under this policy, as approved by the University’s Board
of Trustees, 5% of a three-year quarterly moving average of market values can be expended for
operations.
Sponsored Activities
Revenues associated with research and other contracts and grants are recognized when related
costs are incurred. Facilities and administrative cost recovery on U.S. Government contracts and
grants is based upon a predetermined negotiated rate and is recorded as unrestricted revenue.
Fund-raising Activities
Expenses incurred in carrying out the fund-raising activities of the University, which amounted to
$15,881,000 and $13,945,000 for the years ended May 31, 2006 and 2005, respectively, are
included primarily in the general administration expense category on the statement of activities.
Short-Term Investments
Short-term investments that consist of cash, operating funds deposited in cash management
accounts, and other investments with maturities at the time of purchase of 90 days or less, are
carried at market value. Cash and cash equivalents held in the investment portfolio are excluded
from short-term investments.
Split-Interest Agreements
The University has split-interest agreements consisting primarily of charitable gift annuities, pooled
income funds, and charitable remainder trusts, for which the University may or may not serve as
trustee. All split-interest agreements are included in investments. Contributions are recognized at
the date the trusts are established net of a liability for the present value of the estimated future
cash outflows to beneficiaries. The present value of payments is discounted at a risk-free rate of
return with rates that range from 3.53% to 9.61%. The liability of $6,794,000 and $7,055,000 at
May 31, 2006 and 2005, respectively, is adjusted during the term of the agreement for changes in
actuarial assumptions.
Conditional Asset Retirement Obligations
The University recognizes the fair value of a liability for legal obligations associated with asset
retirements in the period in which the obligation is incurred, in accordance with Statement of
Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, and
Financial Accounting Standards Interpretation (FIN) No. 47, Accounting for Conditional Asset
Retirement Obligations. When the liability is initially recorded, the cost of the asset retirement
obligation is capitalized by increasing the carrying amount of the related long-lived asset. The
liability is accreted to its present value each period, and the capitalized cost associated with the
6
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
retirement obligation is depreciated over the useful life of the related asset. Upon settlement of the
obligation, any difference between the cost to settle the asset retirement obligation and the liability
recorded is recognized as a gain or loss in the statement of activities.
Use of Estimates
The preparation of financial statements in accordance 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 at the date of the financial
statements and the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
Income Taxes
The University is a qualified tax-exempt organization under section 501(c)(3) of the Internal
Revenue Code.
Prior-Year Summarized Information
The financial statements include certain prior-year summarized comparative information, but do 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
University’s audited financial statements for the year ended May 31, 2005, from which the
summarized information was derived.
Reclassifications
Certain May 31, 2005 balances previously reported have been reclassified to conform to the
May 31, 2006 presentation.
B.
Accounts and Notes Receivable
Accounts receivable and notes receivable are stated net of allowances for doubtful accounts. At
May 31, 2006 and 2005, the allowance related to accounts receivable is $1,208,000 and
$1,045,000, respectively.
At May 31, 2006 and 2005, the allowance related to notes receivable is $650,000 and $2,000,000,
respectively. Notes receivable are principally amounts due from students under U.S. Government sponsored loan programs, which are subject to significant restrictions. Accordingly, it is not
practicable to determine the fair value of such amounts.
C.
Contributions Receivable
Contributions receivable are summarized as follows at May 31 (in thousands):
2006
Unconditional promises scheduled to be collected in:
Less than one year
Between one year and five years
More than five years
Less discount and allowance for unfulfilled promises to give
Contributions receivable, net
7
2005
$
55,423
63,763
24,705
(31,029)
$
56,386
74,460
26,248
(30,790)
$
112,862
$
126,304
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
A present value discount of $11,998,000 and $14,716,000 at May 31, 2006 and 2005, respectively,
has been calculated using a discount factor based on the applicable U.S. Treasury Note rates that
approximate the expected timing of future contribution payments.
Conditional promises of $7,151,000 and $3,821,000 at May 31, 2006 and 2005, respectively, are
not recorded in the financial statements.
D.
Investments
Investments are stated at market value and include accrued income. The value of publicly traded
securities is based upon quoted market prices and net asset values. Other securities, for which no
such quotations or valuations are readily available, are carried at fair value as estimated by
management using values provided by external investment managers. The University believes that
these valuations are a reasonable estimate of fair value as of May 31, 2006 and 2005, but are
subject to uncertainty and, therefore, may differ from the value that would have been used had a
ready market for the investments existed.
Included in the investment balances and investment return amounts, which follow, are funds held
by trustees consisting principally of investments in United States Government obligations. These
funds are maintained by the University to meet the requirements of certain licensing, secured note,
and bond agreements, and at May 31, 2006, include $18,822,000 of construction funds held by
trustees associated with the MHEFA Series N and O bond issues that will be drawn down to fund
various construction projects.
Investments, including funds held by trustees, consist of the following at May 31 (in thousands):
2006
Cost
2005
Market
Money market funds
Fixed income
Equities
Private equities
Real estate
$
55,973
219,139
811,645
88,221
69,484
Total
$ 1,244,462
$
55,973
215,930
1,181,003
91,053
81,232
$ 1,625,191
Cost
$
61,865
187,843
770,745
77,425
47,901
$ 1,145,779
Market
$
61,865
191,725
1,010,160
74,699
54,968
$ 1,393,417
Included in fixed income, equities, and real estate are alternative investments (as described in the
American Institute of Certified Public Accountants’ document, A Practice Guide for Auditors:
Alternative Investments-– Audit Considerations) with a market value of $475,268,000 and
$366,015,000 at May 31, 2006 and 2005, respectively.
8
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
Investment return for the year ended May 31, 2006 is comprised of the following (in thousands):
Investment income (net of investment advisory fees of $10,276)
Realized gains, net
Unrealized gains, net
Total investment return
$
10,244
98,823
133,091
$
242,158
The University is committed to invest up to an additional $118,500,000 in private equity
investments at May 31, 2006.
The University participates in a securities lending program whereby individual securities are loaned
to approved financial institutions with each loan collateralized by daily cash deposits based on the
market value of the securities loaned. There were no securities on loan at May 31, 2006 and 2005.
E.
Property, Plant and Equipment
The physical plant assets of the University are stated at cost on the date of acquisition or at fair
market or appraised value on the date of donation in the case of gifts. Physical plant assets
consist of the following at May 31 (in thousands):
2006
Land and improvements
Buildings
Equipment
Library books
Rare book and art collections
Land purchase options
Plant under construction
$
Property, plant and equipment, gross
146,613
807,349
154,713
118,386
16,093
5,969
18,209
2005
$
1,267,332
Accumulated depreciation/amortization
1,212,383
(412,729)
Property, plant and equipment, net
$
854,603
138,721
774,751
147,202
111,626
15,685
5,969
18,429
(375,226)
$
837,157
Annual provisions for depreciation of physical plant assets are computed on a straight-line basis
over the expected useful lives of the individual assets, averaging 20 years for land improvements,
25-60 years for buildings, and 2-15 years for equipment. Depreciation for the years ended May 31,
2006 and 2005 amounted to $39,437,000 and $39,243,000, respectively, and are allocated to
functional expense categories on the statement of activities based on square foot usage
calculations.
9
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
Library books are amortized over 50 years. Amortization thereon was $2,368,000 and $2,233,000
for the years ended May 31, 2006 and 2005, respectively. Rare book and art collections are
reflected at historical cost.
Maintenance and repairs are expensed as incurred, and improvements are capitalized. When
assets are retired or disposed of, the cost and accumulated depreciation thereon are removed from
the accounts, and gains or losses are included in operations in the statement of activities. The
University retired $6,246,000 and $2,568,000 in gross plant assets for the years ended May 31,
2006 and 2005, respectively.
Property, plant and equipment additions of $6,164,000 included in accounts payable are reflected
as a noncash item in the statement of cash flows for the year ended May 31, 2006.
In March 2005, the Financial Accounting Standards Board (FASB) issued FIN No. 47. This
interpretation clarifies the recognition of conditional asset retirement obligations as referred to in
SFAS No. 143. A conditional asset retirement obligation is defined as a legal obligation to perform
an asset retirement activity in which the timing and/or method of settlement are conditional on a
future event that may or may not be within the control of the entity. Uncertainty with respect to the
timing and/or method of settlement of the asset retirement obligation does not defer recognition of
a liability. The obligation to perform the asset retirement activity is unconditional, and accordingly,
a liability should be recognized. SFAS No. 143 requires the fair value of a liability for a legal
obligation associated with an asset retirement be recorded in the period in which the obligation is
incurred. When the liability is initially recorded, the cost of the asset retirement obligation is
capitalized.
The University adopted FIN No. 47 effective May 31, 2006 and recorded net building assets of
$1,400,000 and a related liability of $5,687,000, of which $4,287,000 was recorded as a cumulative
effect of a change in accounting principle. The cumulative effect reflects the cumulative accretion
of the liability and cumulative depreciation of the related asset component from the date the liability
would have been recognized had the provisions of the interpretation been in effect when the liability
was incurred through May 31, 2006. Substantially all of the impact of adopting FIN No. 47 relates
to estimated costs to remove asbestos that is contained within the University’s facilities. If FIN
No. 47 was applied retroactively, the impact to fiscal 2005 would not have been materially different
than what was recorded in fiscal 2006.
The University has commitments of $15,738,000 to complete various construction projects at
May 31, 2006. In July 2006, the University acquired an additional 3.25 acres of land for
$8,000,000.
10
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
F.
Bonds and Mortgages Payable
Bonds and mortgages payable consist of the following at May 31 (in thousands):
2006
Massachusetts Health and Educational Facilities Authority (MHEFA):
Boston College Issues (fixed rate)
Series K, 5.25 - 5.28%, due 2008 - 2023
$
Series L, 4.75 - 4.90%, due 2007 - 2031
Series N, 4.00 - 5.25%, due 2007 - 2037
Boston College Issues (variable rate)
Series M, 3.65%, due 2022 - 2035
Series O, 3.65%, due 2013
Capital Asset Program, Variable Rate Demand Revenue Bonds
Series C, 5.00%, due 2007 - 2009
Series D, 4.75%, due 2007 - 2013
Series E, 4.25%, due 2012
68,695
112,500
114,815
2005
$
68,695
112,500
114,815
145,000
11,000
145,000
18,000
2,734
30,047
42,000
3,383
31,041
42,000
Department of Education:
Library building bonds, 3.41%, due 2007 - 2023
Secured note, 3.00%, due 2007 - 2018
9,420
1,859
9,800
1,986
Bonds and mortgages payable, par
538,070
547,220
Less: Net unamortized original bond issue discount/premium
Bonds and mortgages payable, net
(1,956)
$
536,114
(2,156)
$
545,064
The Series E bond agreement with MHEFA requires the maintenance of certain financial ratios if
credit ratings fall below set levels.
The Department of Education building bonds are collateralized by a mortgage on the O'Neill Library
and the secured note is collateralized by funds held by trustees.
Principal payments due on all long-term bonds and mortgages payable are as follows: 2007 $8,108,000; 2008 - $12,669,000; 2009 - $9,400,000; 2010 - $8,996,000; 2011 - $47,107,000 and
thereafter - $451,790,000.
As of May 31, 2006 and 2005, the estimated fair values of bonds and mortgages payable are
$553,399,000 and $571,609,000, respectively. The fair value of bonds and mortgages payable is
based on rates currently available for instruments with similar maturities.
Interest expense for the years ended May 31, 2006 and 2005 amounted to $21,598,000 and
$18,932,000, respectively. Interest expense has been allocated to the functional expense
categories on the statement of activities based on each functional area’s corresponding use of the
related space or equipment that was constructed or acquired through debt financing. The
University capitalized interest of $1,366,000 and $1,590,000 for the years ended May 31, 2006 and
2005, respectively.
11
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
G.
Restricted Net Assets
Restricted net assets consist of the following at May 31 (in thousands):
2006
Temporarily restricted:
Contributions and earnings for operating purposes
Contributions for the acquisition of buildings and equipment
Student loans
Split-interest agreements
Endowment funds
Total temporarily restricted
Permanently restricted:
Endowment funds
Split-interest agreements
Total permanently restricted
H.
2005
$
25,177
31,412
878
5,518
275,826
$
19,685
36,562
801
5,209
211,174
$
338,811
$
273,431
$
405,116
1,504
$
368,927
1,554
$
406,620
$
370,481
Retirement Program
All eligible full-time personnel may elect to participate in a defined contribution retirement program.
Under the program, the University makes contributions, currently limited to 8-10% of the annual
wages of participants, up to defined limits. Voluntary contributions by participants are made
subject to IRS limitations. The limitation applicable to University contributions is on a combined
plan basis. For the years ended May 31, 2006 and 2005, the University's contributions to the
retirement program were $16,195,000 and $15,236,000 respectively.
I.
Postretirement Health Care Benefits
The University provides certain health care benefits for retired employees who meet certain age
and service requirements. Employees will become eligible for those benefits if they reach
retirement while employed by the University. The plan is funded as claims are paid.
The University accounts for these benefits under SFAS No. 106, Employer's Accounting for
Postretirement Benefits Other Than Pensions. The estimated future cost of providing
postretirement health care benefits is recognized on an accrual basis over the period of service
during which benefits are earned.
12
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
The net periodic postretirement health care benefits cost was determined as follows for May 31 (in
thousands):
2006
Service cost
Interest cost
Amortization of transition obligation
Amortization of prior service cost
Amortization of loss
Net periodic postretirement benefits cost
2005
$
2,398
2,419
(499)
904
$
2,663
2,558
330
293
$
5,222
$
5,844
The components of the University's accumulated postretirement benefits obligation, which was
unfunded at May 31, are as follows (in thousands):
2006
Accumulated postretirement benefits obligation
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions
Unrecognized net prior service cost
Accrued postretirement benefits cost
$
43,434
2005
$
(8,721)
3,359
$
38,072
46,883
(16,560)
3,858
$
34,181
For measurement purposes, a 9.0% annual rate of increase in the per capita cost of covered health
care benefits for post-65 benefits was assumed for fiscal 2007. The rate was assumed to decrease
gradually to 5.0% for fiscal 2013 and remain at that level thereafter. An 8.5% annual rate of
increase in the per capita cost of covered health care benefits for pre-65 benefits was assumed for
fiscal 2007. The rate was assumed to decrease gradually to 5.0% for fiscal 2013 and remain at that
level thereafter. A 9.5% annual rate of increase in the Medicare Part D subsidy integration
threshold was assumed for fiscal 2007. The rate was assumed to decrease gradually to 5.0% for
fiscal 2013 and remain at that level thereafter.
A one percentage point increase in the assumed health care cost trend rate would have increased
the accumulated benefits obligation by $6,016,000 at May 31, 2006 and the aggregate of the
service and interest cost components of the net periodic postretirement benefits cost for the year
then ended by $908,000. Likewise, a one percentage point decrease in the assumed health care
cost trend rate would have decreased the accumulated postretirement benefits obligation by
$5,020,000 at May 31, 2006 and the aggregate of the service and interest cost components of the
net periodic postretirement benefits cost for the year then ended by $732,000. The discount rate
used to determine the accumulated benefits obligation was 6.25% and 5.50% at May 31, 2006 and
2005, respectively.
13
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
A reconciliation of the accumulated postretirement benefits obligation and plan assets are as
follows at May 31 (in thousands):
2006
Reconciliation of accumulated postretirement
benefits obligation
Benefits obligation, beginning of year
Service cost
Interest cost
Plan participant contributions
Actuarial (gain) loss
Plan amendments
Benefits paid
Benefits obligation, end of year
Reconciliation of plan assets
Fair value of plan assets, beginning of year
Actual return on plan assets
Employer contribution (net of expected Part D subsidy)
Plan participant contributions
Benefits paid
Fair value of plan assets, end of year
2005
$
46,883
2,398
2,419
130
(6,854)
(1,542)
$
43,195
2,663
2,558
108
6,473
(6,493)
(1,621)
$
43,434
$
46,883
$
1,412
130
(1,542)
$
1,513
108
(1,621)
$
-
$
-
On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of
2003 was enacted. The University’s Post-Retirement Medical Benefits Program is actuarially
equivalent to Medicare Part D. As such, the calculation of the annual net periodic postretirement
benefit cost and the accumulated postretirement benefit obligation reflect the expected subsidy
from Medicare Part D.
Expected Medicare Part D subsidies, are as follows: 2007 - $233,000; 2008 - $253,000; 2009 $270,000; 2010 - $285,000; 2011 - $299,000 and the five fiscal years thereafter - $1,715,000.
Expected benefit payments, net of participant contributions and expected Medicare Part D
subsidies, are as follows: 2007 - $1,924,000; 2008 - $2,066,000; 2009 - $2,240,000; 2010 $2,436,000; 2011 - $2,614,000 and thereafter - $15,821,000. The expected employer contribution
in 2007 is $1,924,000.
J.
Related Party
Boston College Ireland, Ltd. ("BCI") is a nonprofit entity established as an institute of education in
the Republic of Ireland. The University has an investment in the real estate used by BCI for
educational and rental purposes. The value of the investment, for the years ending May 31, 2006
and 2005, amounted to $10,712,000 and $9,517,000, respectively, and is included in the
University’s real estate investments.
The University has mortgages, loans and notes due from various related parties of $18,151,000
and $15,221,000 at May 31, 2006 and 2005, respectively.
14
Boston College
Notes to Financial Statements
May 31, 2006 and 2005
K.
Commitments and Contingencies
The University has several legal cases pending that have arisen in the normal course of its
operations. The University believes that the outcome of these cases will have no material adverse
effect on the financial position of the University.
The University leases facilities and campus transportation under various operating lease
agreements, the last of which expires in 2013. The University incurred operating lease expenses
of $1,737,000 and $1,698,000 for the years ended May 31, 2006 and 2005, respectively. At
May 31, 2006, the minimum aggregate commitments for all current operating leases are as follows:
2007 - $4,386,000; 2008 - $5,045,000; 2009 - $4,700,000; 2010 - $4,428,000; 2011 - $4,495,000
and thereafter - $5,187,000.
15