Boston College
Consolidated Financial Statements
May 31, 2014 and 2013
Boston College
Index
May 31, 2014 and 2013
Page(s)
Independent Auditor’s Report.......................................................................................................... 1–2
Financial Statements
Consolidated Statement of Financial Position ......................................................................................... 3
Consolidated Statement of Activities ....................................................................................................... 4
Consolidated Statement of Cash Flows................................................................................................... 5
Notes to Consolidated Financial Statements ..................................................................................... 6–18
Independent Auditor’s Report
To the Trustees of Boston College
We have audited the accompanying consolidated financial statements of Boston College
(the “University”), which comprise the consolidated statement of financial position as of May 31, 2014 and
the related consolidated statements of activities and cash flows for the year then ended.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the 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 the 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 our 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, we consider internal control relevant to the University’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 University’s internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
PricewaterhouseCoopers LLP, 125 High Street, Boston, MA 02110
T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Boston College at May 31, 2014, and the changes in its net assets and
its cash flows for the year then ended in accordance with accounting principles generally accepted in the
United States of America.
Other Matter
We have previously audited Boston College’s 2013 financial statements, and we expressed an unmodified
audit opinion on those audited financial statements in our report dated September 27, 2013. In our
opinion, the summarized comparative information presented herein as of and for the year ended May 31,
2013 is consistent, in all material respects, with the audited financial statements from which it has been
derived.
September 26, 2014
2
Boston College
Consolidated Statement of Financial Position
As of May 31, 2014
(with summarized financial information as of May 31, 2013)
(in thousands)
2014
Assets
Short-term investments
Accounts receivable, net (Note B)
Contributions receivable, net (Note C)
Notes and other receivables, net (Note B)
Investments (Note D)
Funds held by trustees (Note D)
Other assets
Property, plant and equipment, net (Note F)
Total assets
Liabilities
Accounts payable
Accrued liabilities
Deposits payable and deferred revenues
Bonds and mortgages payable (Note G)
U.S. Government loan advances
$
6,815
31,845
154,892
59,260
2,542,442
43,163
12,312
1,249,151
$
4,799
28,614
176,587
59,549
2,136,004
21,991
11,096
1,198,130
$
4,099,880
$
3,636,770
$
5,803
181,963
28,971
956,731
35,832
$
4,416
163,063
29,539
734,766
35,623
Total liabilities
Net Assets
Unrestricted (Note H)
Temporarily restricted (Note H)
Permanently restricted (Note H)
Total net assets
Total liabilities and net assets
2013
$
1,209,300
967,407
1,466,625
592,064
831,891
1,393,291
494,175
781,897
2,890,580
2,669,363
4,099,880
$
3,636,770
The accompanying notes are an integral part of these consolidated financial statements.
3
Boston College
Consolidated Statement of Activities
Year Ended May 31, 2014
(with summarized financial information for the Year Ended May 31, 2013)
(in thousands)
Temporarily
Restricted
Unrestricted
Operating
Revenues and other support
Tuition and fees before student aid
Auxiliary enterprises before student aid
Sponsored research and other programs
Government financial aid programs
Sales and services
Other revenues
Nonoperating assets utilized or released from
restrictions for operations
$
$
-
$
-
2014
Total
$
110,741
Total revenues and other support before student aid
862,379
Student aid applicable to tuition and fees
Student aid applicable to auxiliary enterprises
-
-
(155,025)
(4,640)
Net revenues
702,714
Expenses
Instruction
Academic support
Research
Student services
Public service
General administration
Auxiliary enterprises
-
-
264,396
63,379
35,927
54,054
3,353
117,979
163,504
Total expenses
Increase in net assets from operating activities
Nonoperating
Contributions
Realized and unrealized investment (losses) gains, net
Investment income, net
Other (losses) gains, net
Nonoperating assets utilized or released from restrictions
for operations
Net assets reclassified or released from restrictions
2013
Total
534,540
152,498
45,335
4,649
5,015
9,601
$
522,767
148,896
49,881
4,839
4,983
9,524
110,741
83,829
862,379
824,719
(155,025)
(4,640)
(149,676)
(3,986)
702,714
671,057
264,396
63,379
35,927
54,054
3,353
117,979
163,504
248,830
60,160
37,144
51,633
3,173
112,833
157,167
702,592
-
-
702,592
670,940
122
-
-
122
117
5,640
107,885
3,406
(13,056)
54,067
136,726
674
(3,361)
39,783
1,399
238
(1,565)
99,490
246,010
4,318
(17,982)
74,273
273,082
6,289
581
(38,492)
7,829
(72,249)
(17,968)
10,139
(110,741)
-
(83,829)
-
Increase in net assets from
nonoperating activities
73,212
97,889
49,994
221,095
270,396
Total increase in net assets
73,334
97,889
49,994
221,217
270,513
Net assets
Beginning of year
End of year
534,540
152,498
45,335
4,649
5,015
9,601
Permanently
Restricted
1,393,291
$
1,466,625
494,175
$
592,064
781,897
$
831,891
2,669,363
$
2,890,580
2,398,850
$
The accompanying notes are an integral part of these consolidated financial statements.
4
2,669,363
Boston College
Consolidated Statement of Cash Flows
Year Ended May 31, 2014
(with summarized financial information for the Year Ended May 31, 2013)
2014
(in thousands)
Cash flows from operating activities
Total increase in net assets
Adjustments to reconcile change in net assets to short-term
investments used in operating activities
Depreciation, amortization and accretion
Allowance for uncollectible contributions
Discount on contributions
Net loss on retirement or disposal of fixed assets
Contributions of property and equipment
Loan cancellations
Contributed securities
Realized and unrealized investment (gains) losses, net
Debt extinguishment gain
Cash premium received upon issuance of bonds
Change in assets and liabilities
Accounts receivable, net
Notes and other receivables
Contributions receivable
Accounts payable and accrued liabilities
Deposits payable and deferred revenue
Other assets
Contributions to be used for long-term investment
$
Net short-term investments used in operating activities
Cash flows from investing activities
Proceeds from sales of investments
Purchases of investments
Student loans granted
Student loans collected
Purchases of property, plant and equipment
Change in funds held by trustees
Net short-term investments used in investing activities
Cash flows from financing activities
Proceeds from issuance of debt
Repayment of debt
Payment of bonds and mortgages payable
Change in U.S. Government loan advances
Payments to beneficiaries of split interest agreements
Debt issuance costs
Contributions to be used for long-term investment
Net short-term investments provided by financing activities
Net change in short-term investments
Short-term investments
Beginning of year
End of year
Supplemental data
Interest paid, net of amounts capitalized
Change in asset retirement obligations recognized
Net fixed asset recognized related to asset retirement obligation
Contributed securities
221,217
2013
$
53,783
(587)
243
5,153
(821)
1,019
(18,405)
(246,010)
(610)
13,777
51,709
1,096
(4,252)
667
(292)
1,068
(13,793)
(273,082)
-
(3,231)
315
22,039
17,803
(568)
324
(80,764)
4,750
300
15,812
(10,172)
(1,677)
(875)
(53,196)
(15,323)
(11,424)
815,939
(956,537)
(6,636)
5,591
(108,640)
(21,172)
814,546
(765,536)
(7,777)
5,773
(95,681)
25,251
(271,455)
(23,424)
323,505
(94,420)
(17,751)
209
(1,425)
(2,088)
80,764
(16,877)
165
(1,424)
53,196
288,794
35,060
2,016
212
4,799
4,587
$
6,815
$
4,799
$
37,214
278
535
18,405
$
33,609
(152)
10
13,793
The accompanying notes are an integral part of these consolidated financial statements.
5
270,513
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
A.
Accounting Policies
The accompanying consolidated financial statements include certain other entities under the
financial control of Boston College, including Boston College Ireland, Ltd. (“BCI”) which is a
nonprofit entity established as an institute of education in the Republic of Ireland.
Boston College and entities included herein are referred to individually and collectively as
the “University.”
The significant accounting policies followed by 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 where 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 value of contributions (and in certain circumstances investment returns from
those contributions), 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
Nonoperating activity includes all contributions, investment income, gains and losses on
investments, gains and losses on postretirement healthcare benefits, unfulfilled promises to give,
gains and losses on sale or disposal of property, gains on debt extinguishment, and life income
adjustments. 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.”
Expirations of temporary restrictions on net assets or other clarifications from donors are presented
as “net assets reclassified or released from restrictions.”
6
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
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.
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 or when the asset is placed into service.
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.”
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.
Fundraising Activities
Expenses incurred in carrying out the fundraising activities of the University, which amounted to
$19,864,000 and $19,395,000 for the years ended May 31, 2014 and 2013, respectively, are
included primarily in the general administration expense category on the consolidated statement of
activities.
Investments
Short-term investments consist of cash and cash equivalents, operating funds deposited in cash
management accounts, and other investments with maturities at the time of purchase of 90 days or
less, and are carried at market value. Cash and cash equivalents held in the investment portfolio
are excluded from short-term investments.
Investment transactions are recorded on the trade date, realized gains and losses are recorded
using the weighted average basis, and dividend income is recorded on the ex-dividend date.
Split-Interest Agreements
The University has split-interest agreements consisting primarily of charitable gift annuities, pooled
income funds, and charitable remainder trusts. Split-interest agreements which are included in
investments amount to $30,161,000 and $29,013,000 as of May 31, 2014 and 2013, respectively.
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 with rates that range from 1.2% to 10.6%. The liability of $12,666,000 and $12,997,000
as of May 31, 2014 and 2013, respectively, is adjusted during the term of the agreement for
changes in actuarial assumptions.
7
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
Use of Estimates
The preparation of consolidated financial statements in accordance with generally accepted
accounting principles (GAAP) 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 consolidated 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 consolidated financial statements include certain prior year summarized comparative
information, but do not include sufficient detail to constitute a presentation in conformity with GAAP.
Accordingly, such information should be read in conjunction with the University’s audited financial
statements for the year ended May 31, 2013, from which the summarized information was derived.
Subsequent Events
The University has assessed the impact of subsequent events through September 26, 2014, the
date the audited consolidated financial statements were issued, and concluded there were no such
events that require adjustment to the audited consolidated financial statements or disclosure in the
notes to the audited consolidated financial statements.
Reclassifications
Certain amounts in the 2013 financial statements have been reclassified to conform to the 2014
presentation.
B.
Accounts, Notes and Other Receivables
Accounts receivable and notes receivable are stated net of allowances for doubtful accounts. As of
May 31, 2014 and 2013 the allowance related to accounts receivable is $3,079,000 and
$3,439,000, respectively.
Notes and other receivables consist of amounts due from students under U.S. Government
sponsored loan programs and from the Weston Jesuit Community, Inc. under a ground lease
agreement. As of May 31, 2014 and 2013, the amount due from the Weston Jesuit
Community, Inc. is $17,511,000 and $17,826,000, respectively. The notes receivable due from
students under U.S. Government sponsored loan programs are subject to significant restrictions
and, accordingly, it is not practicable to determine the fair value of such amounts. As of May 31,
2014 and 2013, the allowance related to student notes receivable is $920,000.
8
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
C.
Contributions Receivable
Contributions receivable are summarized as follows as of May 31:
(in thousands)
2014
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
2013
$
72,672 $
103,544
2,679
(24,003)
100,152
94,082
6,700
(24,347)
$
154,892
176,587
$
A present value discount of $8,193,000 and $7,950,000 as of May 31, 2014 and 2013, respectively,
has been calculated using discount factors that approximate the risk and expected timing of future
contribution payments.
The University has reflected contributions received during fiscal 2014 and 2013 at fair value as
determined in accordance with fair value accounting guidance.
Conditional promises of $76,690,000 and $22,742,000 as of May 31, 2014 and 2013, respectively,
are not recorded in the consolidated financial statements.
D.
Investments
Investments are stated at fair 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 or appraisers. Management
has established procedures in place to evaluate and monitor third party valuations, including
regular communication with fund managers, the review of partnership financial statements and
monthly performance metrics, prior to investment and on a regular basis going forward. The
University believes that these valuations are a reasonable estimate of fair value as of May 31, 2014
and 2013, 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 as of May 31, 2014 and 2013, include $29,103,000 and $3,562,000,
respectively, of construction funds held by trustees associated with certain University bond issues
that will be drawn down to fund various construction projects.
9
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
Investments, including funds held by trustees, consist of the following as of May 31:
(in thousands)
2014
Cost
Equities
Fixed income
Real assets
2013
Market
Cost
Market
$
1,263,511
631,435
93,754
$
1,859,819
633,773
92,013
$
1,144,696
464,018
97,459
$
1,613,893
463,377
80,725
$
1,988,700
$
2,585,605
$
1,706,173
$
2,157,995
Equities include common stock, mutual funds, commingled funds and limited partnership interests.
Fixed income includes money market funds, treasury and agency securities. Real assets include
limited partnership interests and real estate.
A three level hierarchy of valuation inputs has been established based on the extent to which the
inputs are observable in the marketplace. Level I is considered observable based on inputs such
as quoted prices in active markets. Level II is considered observable based on inputs, other than
quoted prices in active markets, and Level III is considered unobservable. The University’s
investments included in Level II and III primarily consist of alternative investments (principally
limited partnership interests). Limited partnership interests with redemption provisions between
quarterly and annual are classified as Level II, others are classified as Level III.
The following tables present the financial instruments carried at fair value as of May 31:
(in thousands)
2014
Level I
Equities
Fixed income
Real assets
Level II
Total
$
888,026
620,532
-
$
639,124
9,970
-
$
332,669
3,271
60,138
$
1,859,819
633,773
60,138
$
1,508,558
$
649,094
$
396,078
$
2,553,730
(in thousands)
2013
Level I
Equities
Fixed income
Real assets
Level III
Level II
Level III
Total
$
690,978
450,548
-
$
612,701
9,743
-
$
310,214
3,086
47,662
$
1,613,893
463,377
47,662
$
1,141,526
$
622,444
$
360,962
$
2,124,932
Excluded from the table above are $31,875,000 and $33,063,000 of real estate investments valued
at cost as of May 31, 2014 and 2013, respectively.
As of May 31, 2014, $16,921,000, $9,969,000 and $3,271,000 of split interest agreements are
included in Level I, Level II and Level III, respectively. As of May 31, 2013, $15,753,000,
$9,743,000 and $3,517,000 of split interest agreements are included in Level I, Level II and
Level III, respectively.
10
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
The fair values of limited partnerships are represented by the net asset value of the partnership.
The objective of these investments is to generate long term returns significantly higher than public
equity markets on a risk adjusted basis. Redemption terms for those investments valued at net
asset value consist of the following as of May 31, 2014 and 2013, respectively:
(in thousands)
Redemption Terms
Within 30 Days
Quarterly
30-90 days prior written notice
Semi-Annually, Annually
30-180 days prior written notice
1-5 years
6-10 years
2014
Real
Assets
Equities
$
$
177,316
$
Within 30 Days
Quarterly
30-90 days prior written notice
Semi-Annually, Annually
30-180 days prior written notice
1-5 years
6-10 years
$
$
177,316
-
100,812
414,843
250,468
28,354
42,339
17,799
414,843
292,807
46,153
971,793
$
177,013
60,138
$
2013
Real
Assets
Equities
$
-
100,812
(in thousands)
Redemption Terms
Total
$
1,031,931
Total
-
$
177,013
113,654
-
113,654
363,674
255,536
13,038
42,357
5,305
363,674
297,893
18,343
922,915
$
47,662
$
970,577
The University is committed to invest in private equity investments up to an additional amount of
$172,300,000 and $132,600,000 as of May 31, 2014 and 2013, respectively.
11
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
The following tables include rollforwards of investments classified by the University within Level III
as defined previously as of May 31:
(in thousands)
2014
Fixed
Income
Equities
Fair value, June 1, 2013
$
Transfers
Investment income, net
Realized gains/(losses)
Unrealized gains
Purchases
Sales
Fair value, May 31, 2014
310,214
$
(3,423)
25,496
29,920
27,941
(57,479)
$
332,669
3,086
$
3,271
47,662
Total
$
(562)
(3,832)
10,853
11,469
(5,452)
$
60,138
360,962
(3,795)
21,664
40,768
39,410
(62,931)
$
396,078
2013
Fixed
Income
Equities
$
Transfers
Investment income, net
Realized gains/(losses)
Unrealized gains
Purchases
Sales
Fair value, May 31, 2013
$
190
(5)
-
(in thousands)
Fair value, June 1, 2012
Real
Assets
254,850
$
75,915
(3,218)
41,977
(4,505)
29,479
(84,284)
$
310,214
99,687
Real
Assets
$
(95,915)
445
(70)
(69)
8
(1,000)
$
3,086
45,510
Total
$
(476)
(961)
3,069
4,782
(4,262)
$
47,662
400,047
(20,000)
(3,249)
40,946
(1,505)
34,269
(89,546)
$
360,962
Transfers between levels are recognized at the beginning of the fiscal year and are the result of
changes in liquidity provisions.
The University recognized net realized and unrealized gains of $246,010,000 and investment
income of $4,318,000, net of investment advisory fees of $14,423,000, for the year ended May 31,
2014.
The University recognized net realized and unrealized gains of $273,082,000 and investment
income of $6,289,000, net of investment advisory fees of $12,983,000, for the year ended May 31,
2013.
E.
Endowment
The net assets associated with the University’s endowment funds are classified in accordance with
relevant state law as interpreted by the Board of Trustees. These classifications are unrestricted,
temporarily restricted, and permanently restricted based on the existence or absence of
donor-imposed restrictions. Unrestricted net assets include Board-designated funds, and any
accumulated income and appreciation thereon. Temporarily restricted net assets include
contributions not yet designated by donors and accumulated appreciation on temporarily and
12
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
permanently restricted funds. Permanently restricted net assets include contributions designated
by donors to be invested in perpetuity to produce income for general or specific purposes.
The long-term performance objective of the endowment portfolio is to attain an average annual
total return that exceeds the University’s spending rate plus inflation within acceptable levels of risk
over a full market cycle. To achieve its long-term rate of return objectives, the University relies on
a total return strategy in which investment returns are achieved through both capital appreciation
and current yield.
The University has a spending policy for its donor restricted endowment, as approved by the
University’s Board of Trustees, that aims to provide a stable and predictable source of funding for
the University’s academic and strategic initiatives and also to protect the real value of the
endowment over time. Under this policy the amount that can be expended for current operations is
a weighted average based on two components; prior year spending adjusted for an inflationary
factor, and 5% of a twelve quarter moving average of market values.
As of May 31, 2014 and 2013, there were no endowment funds with a market value less than
historical value.
F.
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 contributions. Physical plant
assets consist of the following as of May 31:
(in thousands)
2014
Land and improvements
Buildings
Equipment
Library books
Rare book and art collections
Purchase options
Plant under construction
$
Property, plant and equipment, gross
248,987
1,239,313
218,615
178,417
22,310
2,855
91,708
2013
$
2,002,205
Accumulated depreciation/amortization
1,901,613
(753,054)
Property, plant and equipment, net
$
1,249,151
244,983
1,218,970
205,604
170,064
21,288
2,855
37,849
(703,483)
$
1,198,130
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,
2014 and 2013 amounted to $51,796,000 and $49,523,000, respectively, and is allocated to
functional expense categories on the statement of activities based on square foot usage
calculations.
Library books are amortized over 50 years. Amortization amounted to $3,568,000 and $3,401,000
for the years ended May 31, 2014 and 2013, respectively. Rare book and art collections are
reflected at historical cost and are not amortized.
13
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
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 the statement of activities. The University retired
or disposed of $14,911,000 and $9,310,000 in gross plant assets for the years ended May 31,
2014 and 2013, respectively.
Property, plant and equipment additions of $11,686,000 and $9,886,000 included in accrued
liabilities are reflected as a noncash item in the statement of cash flows for the years ended
May 31, 2014 and 2013, respectively.
The University recognized $407,000 and $395,000 of operating expenses relating to the accretion
of liabilities associated with the retirement of long-lived assets, for the years ended May 31, 2014
and 2013, respectively. Conditional asset retirement obligations of $8,506,000 and $7,821,000 as
of May 31, 2014 and 2013, respectively, are included in accrued liabilities.
The University has commitments of $38,071,000 to complete various construction projects as of
May 31, 2014.
G.
Bonds and Mortgages Payable
Bonds and mortgages payable consist of the following as of May 31:
(in thousands)
2014
Massachusetts Health and Educational Facilities Authority (MHEFA)
Boston College Issues (fixed rate)
Series K, 5.38%, due 2014
Series M, 5.00 - 5.50%, due 2023 - 2035
Series N
$
5,205
134,285
-
2013
$
10,140
134,285
96,300
Massachusetts Development Finance Agency (MDFA)
Boston College Issues (fixed rate)
Series P, 4.75 - 5.00%, due 2019-2042
Series Q, 4.00 - 5.00%, due 2014-2029
Series R, 4.00 - 5.00%, due 2014-2040
Series S, 2.00 - 5.00%, due 2014-2038
176,980
80,810
179,610
142,475
176,980
85,035
185,635
-
Trustees of Boston College (fixed rate)
Taxable Bonds, Series 2013, 0.73 - 5.09%, due 2015-2043
181,030
-
5,755
695
6,280
856
Bonds and mortgages payable, par
906,845
695,511
Net unamortized original bond issue premium
49,886
39,255
Department of Education (fixed rate)
Library building bonds, 3.41%, due 2014 - 2022
Secured note, 3.00%, due 2014 - 2018
Bonds and mortgages payable, net
$
956,731
$
734,766
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.
As of May 31, 2014, principal payments due on all long-term bonds and mortgages payable are as
follows: 2015 - $18,661,000; 2016 - $25,271,000; 2017 - $26,256,000; 2018 - $27,367,000;
2019 - $28,580,000 and thereafter - $780,710,000.
14
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
As of May 31, 2014 and 2013, the estimated fair values of bonds and mortgages payable based on
Level II inputs are $1,068,414,000 and $840,654,000, respectively. The fair value of bonds and
mortgages payable is determined by discounting the future cash flows using rates currently
available for instruments with similar maturities.
Interest expense for the years ended May 31, 2014 and 2013 amounted to $38,440,000 and
$31,580,000, 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 $1,901,000 and $2,034,000 for the years ended May 31, 2014 and
2013, respectively.
The University has an agreement for a $75,000,000 unsecured line of credit. As of May 31, 2014
and 2013, there was no balance outstanding on the line of credit.
In August 2013, the University issued $142,475,000 of MDFA Series S Revenue Bonds (Series S)
and $181,030,000 of Trustees of Boston College Taxable Bonds Series 2013 (Series 2013). The
proceeds from Series S retired existing debt, are financing the new Student Information System,
and funding other project costs. The proceeds from Series 2013 are being used to finance the
construction of dormitory facilities, upgrades to St. Mary’s Hall, and other capital needs. The
University incurred costs of $2,088,000 associated with these issues which have been capitalized
and are being amortized over the life of the bonds, and recognized a net gain on debt
extinguishment of $610,000. The Series S Revenue Bonds were issued with an original issue
premium of $13,777,000 which is being amortized over the life of the bonds.
H.
Net Assets
Net assets consist of the following as of May 31:
(in thousands)
Donor Restricted
Temporarily Restricted
Permanently Restricted
2014
2013
2014
2013
Unrestricted
2014
Endowment net assets,
beginning of year
Board designated
Donor restricted
Contributions
Investment return:
Investment income
Net appreciation (depreciation)
$
Total investment return
Appropriation of endowed assets
for expenditure
Net assets reclassified or released
from restrictions
Other (losses) and gains, net
821,521
-
2013
$
734,202
-
$
377,932
17,413
$
273,325
10,405
$
781,897
39,783
$
749,920
28,515
321
109,155
1,016
124,886
516
136,726
1,362
150,712
238
1,399
(178)
(777)
109,476
125,902
137,242
152,074
1,637
(955)
(41,597)
(41,725)
(51,691)
(49,481)
-
(128)
(10)
3,291
(149)
(2,947)
(820)
(6,822)
(1,569)
-
10,139
(1,565)
5,489
(1,072)
Endowment net assets, end of year
Board designated
889,262
821,521
132,847
444,516
-
106,068
465,702
-
Donor restricted
Designated for specific purposes
Net investment in plant
Program support
Contributions for plant assets
Student loans
Total net assets
$
1,466,625
$
1,393,291
15
$
477,129
377,932
831,891
781,897
54,667
59,403
865
49,997
65,404
842
-
-
592,064
$
494,175
$
831,891
$
781,897
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
I.
Retirement Programs
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, 2014 and 2013, the University’s contributions to the
retirement program were $22,756,000 and $22,095,000, respectively.
The University provides certain health care benefits for retired employees through either a defined
benefit retirement medical program or a Retirement Medical Savings Account depending upon
certain age and service requirements. Employees will become eligible for this benefit if they reach
retirement while employed by the University. The plan does not hold assets and is funded as
benefits are paid. 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.
The net periodic postretirement health care benefit cost and other changes in plan assets and
benefit obligation recognized in unrestricted net assets were determined as follows for the years
ended May 31:
(in thousands)
2014
Service cost
Interest cost
Amortization of prior service cost
Amortization of loss
$
Net periodic postretirement benefit cost
Net loss (gain)
Amortization of prior service cost
Amortization of loss
Other changes in plan assets and benefit obligation
Total recognized in net periodic benefit cost and
unrestricted net assets
$
3,329
2,965
(757)
287
2013
$
3,035
2,706
(1,121)
220
5,824
8,284
757
(287)
4,840
(6,301)
1,121
(220)
8,754
(5,400)
14,578
$
(560)
In fiscal 2015, the prior service cost credit of $(757,000) and unrecognized net loss of $830,000 are
expected to be amortized as a component of net periodic postretirement benefit cost.
The assumed annual rates of increase for measuring the obligation at May 31, 2013 and
determining the cost for the year ending May 31, 2014 were: 7.5% in the per capita cost of covered
health care benefits for post-65 benefits and 8.0% in the per capita cost of covered health care
benefits for pre-65 benefits. Both rates were assumed to decrease gradually to 5.00% in 2018 and
remain at that level thereafter. The assumed annual rates of increase for measuring the obligation
at May 31, 2014 and the cost for the year ending May 31, 2015 were: 7.0% in the per capita cost of
covered health care benefits for post-65 benefits and 7.0% in the per capita cost of covered health
care benefits for pre-65 benefits. Both rates were assumed to decrease gradually to 5.00% in 2020
and remain at that level thereafter.
16
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
A one percentage point change in the assumed health care cost trend rates would have the
following effect:
(in thousands)
Increase
Effect on total of service and interest cost components
Effect on postretirement benefit obligation
$
981
12,421
Decrease
$
(711)
(10,140)
The discount rate used to determine the accumulated benefit obligation is 4.50% as of both
May 31, 2014 and 2013. The discount rate used to determine the net periodic postretirement
benefit cost is also 4.50% as of both May 31, 2014 and 2013.
A reconciliation of the accumulated postretirement benefit obligation and plan assets are as follows
as of May 31:
(in thousands)
2014
Reconciliation of accumulated postretirement
benefit obligation
Benefit obligation, beginning of year
Service cost
Interest cost
Plan participant contributions
Part D subsidy received
Actuarial loss (gain)
Benefits paid
2013
$
65,494
3,329
2,965
529
8,284
(2,319)
$
67,447
3,035
2,706
482
310
(6,301)
(2,185)
Benefit obligation, end of year
$
78,282
$
65,494
Amounts recognized in consolidated statement
of financial position consist of
Accrued liabilities
$
78,282
$
65,494
$
(2,328)
16,012
$
(3,085)
8,015
$
13,684
$
4,930
Amounts not yet recognized as a
component of net periodic benefit cost
Prior service cost
Net actuarial loss
The change in the post-retirement benefit obligation is principally due to the use of an
updated mortality table and is reflected in the 2014 actuarial loss.
Expected benefit payments, net of participant contributions, are as follows: 2015 - $2,408,000;
2016 - $2,627,000; 2017 - $2,849,000; 2018 - $3,069,000; 2019 - $3,276,000; and the five fiscal
years thereafter - $19,878,000.
J.
Related Party
The University has mortgages, loans and notes due from various related parties of $21,881,000
and $21,957,000 as of May 31, 2014 and 2013, respectively.
17
Boston College
Notes to Consolidated Financial Statements
May 31, 2014 and 2013
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 under various operating lease agreements, the last of which expires
in fiscal 2020. The University incurred operating lease expenses of $446,000 and $897,000 for the
years ended May 31, 2014 and 2013, respectively. At May 31, 2014, the minimum aggregate
commitments for all current operating leases are as follows: 2015 - $377,000; 2016 - $377,000;
2017 - $378,000; 2018 - $380,000; 2019 - $351,000 and thereafter - $157,000.
18