Boston College
Financial Statements
May 31, 2013 and 2012
Boston College
Index
May 31, 2013 and 2012
Page(s)
Independent Auditor’s Report.............................................................................................................. 1
Financial Statements
Statement of Financial Position............................................................................................................... 2
Statement of Activities ............................................................................................................................ 3
Statement of Cash Flows........................................................................................................................ 4
Notes to Financial Statements .......................................................................................................... 5–17
Independent Auditor’s Report
To the Trustees of Boston College
We have audited the accompanying financial statements of Boston College (the “University”),
“University”) which comprise the
statement of financial position as of May 31, 2013 and the related statements of activities and cash flows for the year
then ended.
Management’s
s Responsibility for the Financial Statements
Management
nt is responsible for the preparation and fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation
and maintenance of internal contro
controll relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America
America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The
he procedures selected depend on our judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error
error. In
n making those risk assessments, we
consider internal control relevant to the University
University’s
s preparation and fair presentation of the financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the University
University’s internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropr
appropriateness
iateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that the audit evidence we have obtained is sufficient
sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of Boston College at May 31, 2013, 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
College’s
s 2012 financial statements, and we expressed an unmodified audit
opinion on those audited financial statements in our report dated September 28, 2012. 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,
s, with the audited financial statements from which it has been derived.
September 27, 2013
PricewaterhouseCoopers LLP, 125 High Street, Boston, MA 02110
T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us
Boston College
Statement of Financial Position
As of May 31, 2013
(with summarized financial information as of May 31, 2012)
(in thousands of dollars)
2013
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
$
4,799
28,614
176,587
59,549
2,136,004
21,991
11,096
1,198,130
$
4,587
33,364
189,243
58,913
1,896,715
47,242
10,221
1,154,461
$
3,636,770
$
3,394,746
$
4,416
163,063
29,539
734,766
35,623
$
5,211
170,758
31,216
753,253
35,458
Total liabilities
Net Assets
Unrestricted (Note H)
Temporarily restricted (Note H)
Permanently restricted (Note H)
Total net assets
Total liabilities and net assets
2012
$
967,407
995,896
1,393,291
494,175
781,897
1,254,193
394,737
749,920
2,669,363
2,398,850
3,636,770
$
The accompanying notes are an integral part of these financial statements.
2
3,394,746
Boston College
Statement of Activities
Year Ended May 31, 2013
(with summarized financial information for the year ended May 31, 2012)
(in thousands of dollars)
Operating
Revenues and other support
Tuition and fees bef ore 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
Unrestricted
Tem porarily
Restricted
Perm anently
Restricted
$
$
$
-
-
$
83,829
Total revenues and other support bef ore student aid
-
-
(149,676)
(3,986)
Net revenues
671,057
Expenses
Instruction
Academic support
Research
Student services
Public service
General administration
Auxiliary enterprises
-
-
248,830
60,160
37,144
49,515
3,173
114,951
157,167
Total expenses
Increase in net assets f rom operating activities
Nonoperating
Contributions
Realized and unrealized investment gains (losses), net
Investment income, net
Other gains (losses)
Nonoperating assets utilized or released from restrictions
f or operations
Net assets reclassified or released from restrictions
505,297
144,067
52,819
4,839
4,743
9,930
74,124
824,719
795,819
(149,676)
(3,986)
(138,580)
(3,576)
671,057
653,663
242,740
58,152
37,432
48,367
2,822
113,240
150,797
670,940
-
-
670,940
653,550
117
-
-
117
113
5,832
122,958
4,915
4,181
39,926
150,901
1,552
(2,528)
28,515
(777)
(178)
(1,072)
74,273
273,082
6,289
581
92,692
(96,506)
7,127
(5,755)
(18,638)
19,733
(65,191)
(25,222)
5,489
(83,829)
-
(74,124)
-
138,981
99,438
Total increase (decrease) in net assets
139,098
99,438
1,254,193
$
$
248,830
60,160
37,144
49,515
3,173
114,951
157,167
Increase (decrease) in net assets from
nonoperating activities
Net assets
Beginning of year
522,767
148,896
49,881
4,839
4,983
9,524
2012
Total
83,829
824,719
Student aid applicable to tuition and fees
Student aid applicable to auxiliary enterprises
End of year
522,767
148,896
49,881
4,839
4,983
9,524
2013
Total
1,393,291
31,977
394,737
$
494,175
270,396
31,977
749,920
$
781,897
(76,453)
2,398,850
$
2,669,363
The accompanying notes are an integral part of these financial statements.
3
(76,566)
270,513
2,475,303
$
2,398,850
Boston College
Statement of Cash Flows
Year Ended May 31, 2013
(with summarized financial information for the year ended May 31, 2012)
(in thousands of dollars)
2013
Cash flows from operating activities
Total increase (decrease) 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 los s (gain) on retirement or disposal of fixed assets
Contributions of property and equipment
Loan cancellations
Contributed securities
Realized and unrealized investment (gains) losses, net
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 inves tment
$
Net short-term investments (used in) provided by operating activities
2012
270,513
$
51,709
1,096
(4,252)
667
(292)
1,068
(13,793)
(273,082)
50,762
398
(4,780)
(100)
(1,626)
1,155
(8,966)
96,506
4,750
300
15,812
(10,172)
(1,677)
(875)
(53,196)
(4,220)
760
1,822
6,276
(2,931)
(529)
(56,964)
(11,424)
Cash flows from investing activities
Proceeds from sales of inves tments
Purchases of investments
Student loans granted
Student loans collected
Purchases of property, plant and equipment
Change in funds held by trus tees
Net short-term investments used in investing activities
Cash flows from financing activities
Payment of bonds and mortgages payable
Change in U.S. Government loan advances
Contributions to be used for long-term investment
Net short-term investments provided by financing activities
Net change in short-term investments
1,110
813,122
(765,536)
(7,777)
5,773
(95,681)
25,251
565,179
(537,708)
(7,845)
5,749
(120,438)
49,554
(24,848)
(45,509)
(16,877)
165
53,196
(14,697)
258
56,964
36,484
42,525
212
Short-term investments
Beginning of year
(1,874)
4,587
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
6,461
$
4,799
$
4,587
$
33,609
(152)
10
13,793
$
32,586
(187)
30
8,966
The accompanying notes are an integral part of these financial statements.
4
(76,453)
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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 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 of property, 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.”
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.
5
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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
$19,395,000 and $19,970,000 for the years ended May 31, 2013 and 2012, respectively, are
included primarily in the general administration expense category on the 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 $29,013,000 and $27,630,000 as of May 31, 2013 and 2012, 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 $12,997,000 and $12,274,000
as of May 31, 2013 and 2012, respectively, is adjusted during the term of the agreement for
changes in actuarial assumptions.
Use of Estimates
The preparation of 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 financial
statements and the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
6
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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 GAAP. Accordingly, such
information should be read in conjunction with the University’s audited financial statements for the
year ended May 31, 2012, from which the summarized information was derived.
Subsequent Events
The University has assessed the impact of subsequent events through September 27, 2013, the
date the audited financial statements were issued, and has noted one such event that requires
disclosure in the notes to the audited financial statements (Note G).
Reclassifications
Certain amounts in the 2012 financial statements have been reclassified to conform to the 2013
presentation.
B.
Accounts, Notes and Other Receivables
Accounts receivable and notes receivable are stated net of allowances for doubtful accounts. As of
May 31, 2013 and 2012 the allowance related to accounts receivable is $3,439,000 and
$2,994,000, 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, 2013 and 2012, the amount due from the Weston Jesuit
Community, Inc. is $17,826,000 and $18,126,000, 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 both
May 31, 2013 and 2012, the allowance related to student notes receivable is $920,000.
C.
Contributions Receivable
Contributions receivable are summarized as follows as of May 31:
(in thousands)
2013
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
2012
$
100,152
94,082
6,700
(24,347)
$
59,065
142,956
14,725
(27,503)
$
176,587
$
189,243
A present value discount of $7,950,000 and $12,202,000 as of May 31, 2013 and 2012,
respectively, has been calculated using discount factors that approximate the risk and expected
timing of future contribution payments.
7
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
The University has reflected contributions received during fiscal 2013 and 2012 at fair value as
determined in accordance with fair value accounting guidance.
Conditional promises of $22,742,000 and $22,664,000 as of May 31, 2013 and 2012, respectively,
are not recorded in the 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,
2013 and 2012, 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, 2013 and 2012, include $3,562,000 and $28,257,000,
respectively, of construction funds held by trustees associated with certain University bond issues
that will be drawn down to fund various construction projects.
Investments, including funds held by trustees, consist of the following as of May 31:
(in thousands)
Equities
Fixed income
Real assets
2013
2012
Cost
Market
Cost
Market
$ 1,144,696
464,018
97,459
$ 1,613,893
463,377
80,725
$ 1,096,842
482,565
99,229
$ 1,315,684
548,913
79,360
$ 1,706,173
$ 2,157,995
$ 1,678,636
$ 1,943,957
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.
8
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
The following tables present the financial instruments carried at fair value as of May 31:
(in thousands)
2013
Level I
Equities
Fixed income
Real assets
$
Level II
Total
690,978
450,548
-
$
612,701
9,743
-
$
310,214
3,086
80,725
$ 1,613,893
463,377
80,725
$ 1,141,526
$
622,444
$
394,025
$ 2,157,995
(in thousands)
2012
Level I
Equities
Fixed income
Real assets
Level III
$
Level II
Level III
Total
567,819
440,993
-
$
493,015
8,233
-
$
254,850
99,687
79,360
$ 1,315,684
548,913
79,360
$ 1,008,812
$
501,248
$
433,897
$ 1,943,957
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. As of May 31, 2012, $16,163,000,
$8,233,000 and $3,234,000 of split interest agreements are included in Level I, Level II and
Level III, respectively.
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, 2013 and 2012, respectively:
(in thousands)
2013
Redemption Terms
Fixed
Income
Equities
Within 30 Days
$
Monthly
30-60 days prior written notice
Quarterly
30-90 days prior written notice
Semi-Annually, Annually
30-180 days prior written notice
1-5 years
6-10 years
147,139
$
893,041
$
Real
Assets
-
$
Total
-
$
147,139
-
-
-
-
113,654
-
-
113,654
363,674
255,536
13,038
-
42,357
5,305
363,674
297,893
18,343
9
$
-
$
47,662
$
940,703
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
(in thousands)
2012
Redemption Terms
Fixed
Income
Equities
Within 30 Days
$
Monthly
30-60 days prior written notice
Quarterly
30-90 days prior written notice
Semi-Annually, Annually
30-180 days prior written notice
1-5 years
6-10 years
90,798
$
747,865
$
Real
Assets
-
$
Total
-
$
90,798
35,425
-
-
35,425
132,672
-
-
132,672
204,378
265,825
18,767
95,915
-
43,429
2,081
300,293
309,254
20,848
$
95,915
$
45,510
$
889,290
The University is committed to invest in private equity investments up to an additional amount of
$132,600,000 and $131,200,000 as of May 31, 2013 and 2012, respectively.
The following tables include rollforwards of investments classified by the University within Level III
as defined previously as of May 31:
(in thousands)
2013
Fixed
Income
Equities
Fair value, June 1, 2012
$
Transfers
Investment income, net
Realized gains/(losses)
Unrealized gains/(losses)
Purchases
Sales
Fair value, May 31, 2013
254,850
$
75,915
(3,218)
41,977
(4,505)
29,479
(84,284)
$
310,214
99,687
$
79,360
Total
$
433,897
(636)
(961)
3,135
7,183
(7,356)
3,086
$
80,725
(20,000)
(3,409)
40,946
(1,439)
36,670
(92,640)
$
394,025
2012
Fixed
Income
Equities
$
Transfers
Investment income, net
Realized gains/(losses)
Unrealized gains/(losses)
Purchases
Sales
Fair value, May 31, 2012
$
(95,915)
445
(70)
(69)
8
(1,000)
(in thousands)
Fair value, June 1, 2011
Real
Assets
232,022
$
(18,755)
(1,133)
8,390
6,884
50,407
(22,965)
$
90,198
Real
Assets
$
(1,497)
(693)
10,935
744
-
254,850
$
10
99,687
74,874
Total
$
(549)
(1,205)
1,424
6,779
(1,963)
$
79,360
397,094
(18,755)
(3,179)
6,492
19,243
57,930
(24,928)
$
433,897
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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 $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.
The University recognized net realized and unrealized losses of $96,506,000 and investment
income of $7,127,000, net of investment advisory fees of $11,879,000, for the year ended
May 31, 2012.
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
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, 2013 there were no endowment funds with a market value less than historical value.
As of May 31, 2012 the market value attributable to certain endowment funds was less than the
historical value of the related permanently restricted contribution by an aggregate of $1,356,000
due to unfavorable market fluctuations. This was reflected as a reduction of unrestricted net assets
which was restored to unrestricted net assets in the year ended May 31, 2013.
11
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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)
2013
Land and improvements
Buildings
Equipment
Library books
Rare book and art collections
Purchase options
Plant under construction
$
Property, plant and equipment, gross
Accumulated depreciation/amortization
Property, plant and equipment, net
244,983
1,218,970
205,604
170,064
21,288
2,855
37,849
2012
$
238,168
1,113,092
199,909
161,591
20,823
2,855
76,870
1,901,613
1,813,308
(703,483)
(658,847)
$ 1,198,130
$ 1,154,461
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,
2013 and 2012 amounted to $49,523,000 and $48,754,000, 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 $3,401,000 and $3,232,000
for the years ended May 31, 2013 and 2012, respectively. Rare book and art collections are
reflected at historical cost and are not amortized.
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 $9,310,000 and $12,278,000 in gross plant assets for the years ended May 31,
2013 and 2012, respectively.
Property, plant and equipment additions of $9,886,000 and $8,448,000 included in accrued
liabilities are reflected as a noncash item in the statement of cash flows for the years ended
May 31, 2013 and 2012, respectively.
The University recognized $395,000 and $386,000 of operating expenses relating to the accretion
of liabilities associated with the retirement of long-lived assets, for the years ended May 31, 2013
and 2012, respectively. Conditional asset retirement obligations of $7,821,000 and $7,578,000 as
of May 31, 2013 and 2012, respectively, are included in accrued liabilities.
The University has commitments of $68,975,000 to complete various construction projects as of
May 31, 2013.
12
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
G.
Bonds and Mortgages Payable
Bonds and mortgages payable consist of the following as of May 31:
(in thousands)
2013
Massachusetts Health and Educational Facilities Authority (MHEFA)
Boston College Issues (fixed rate)
Series K, 5.38%, due 2013 - 2014
$
Series M, 5.00 - 5.50%, due 2023 - 2035
Series N, 4.13 - 5.25%, due 2013 - 2037
10,140
134,285
96,300
Massachusetts Development Finance Agency (MDFA)
Boston College Issue (fixed rate)
Series P, 4.75 - 5.00%, due 2019-2042
Series Q, 4.00 - 5.00%, due 2013-2029
Series R, 4.00 - 5.00%, due 2013-2040
176,980
85,035
185,635
176,980
88,525
191,365
6,280
856
6,785
1,012
Bonds and mortgages payable, par
695,511
712,387
Net unamortized original bond issue premium
39,255
40,866
Department of Education
Library building bonds, 3.41%, due 2013 - 2022
Secured note, 3.00%, due 2013 - 2018
Bonds and mortgages payable, net
$
734,766
2012
$
$
14,825
134,285
98,610
753,253
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, 2013, principal payments due on all long-term bonds and mortgages payable are as
follows: 2014 - $17,751,000; 2015 - $18,681,000; 2016 - $19,606,000; 2017 - $20,021,000;
2018 - $20,532,000 and thereafter - $598,920,000.
As of May 31, 2013 and 2012, the estimated fair values of bonds and mortgages payable based on
Level II inputs are $840,654,000 and $823,947,000 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, 2013 and 2012 amounted to $31,580,000 and
$29,397,000, 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 $2,034,000 and $5,001,000 for the years ended May 31, 2013 and
2012, respectively.
The University has an agreement for a $75,000,000 unsecured line of credit. As of May 31, 2013
and 2012, there was no balance outstanding under the line of credit.
13
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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 will be used to retire existing debt, finance the new Student Information
System, and fund project costs. The proceeds from Series 2013 are expected to be 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 will be capitalized
and amortized over the life of the bonds, and will recognize a net gain on debt extinguishment of
$612,000. The Series S Revenue Bonds were issued with an original issue premium of
$13,777,000 which will be amortized over the life of the bonds.
H.
Net Assets
Net assets consist of the following as of May 31:
(in thousands)
Donor Restricted
Tem porarily Restricted
Perm anently Restricted
2013
2012
2013
2012
Unrestricted
2013
2012
Endow ment net assets,
beginning of year
Board designated
Donor restricted
Contributions
Investment return:
Investment income
Net appreciation (depreciation)
$
Total investment return
Appropriation of endow ed assets
for expenditure
Net assets reclassified or released
from restrictions
Other (losses) and gains, net
734,202
-
$
810,539
-
$
273,325
10,405
$
348,378
5,958
$
749,920
28,515
$
730,162
37,705
1,016
124,886
863
(39,120)
1,362
150,712
1,110
(45,030)
(178)
(777)
152
(10,292)
125,902
(38,257)
152,074
(43,920)
(955)
(10,140)
(41,725)
(42,164)
(49,481)
(46,852)
-
-
3,291
(149)
4,267
(183)
(6,822)
(1,569)
9,309
452
5,489
(1,072)
(5,590)
(2,217)
Endow ment net assets, end of year
Board designated
821,521
734,202
106,068
465,702
-
91,477
428,514
-
Donor restricted
Designated for specific purposes
Net investment in plant
Program support
Contributions for plant assets
Student loans
Total net assets
I.
$
1,393,291
$
1,254,193
$
377,932
273,325
781,897
749,920
49,997
65,404
842
45,650
74,892
870
-
-
494,175
$
394,737
$
781,897
$
749,920
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, 2013 and 2012, the University’s contributions to the
retirement program were $22,095,000 and $21,336,000, respectively.
14
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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.
In fiscal 2012, the University increased the cost sharing for pre-65 retirees by an additional 1%.
The contribution percentage for pre-65 retirees will continue to increase annually by 1% per year
through fiscal 2014 when they reach 20% for HMO coverage and 25% for PPO coverage. The net
impact of the change was a decrease in the benefit obligation of $67,000 and was recognized as
prior service cost related to a plan amendment. Effective January 1, 2012, the defined benefit
retiree medical offerings were consolidated to two plans, the Tufts Supplement and Tufts HMO
Plans. All current post-65 retirees not enrolled in the Tufts HMO Plan and all qualifying future
retirees were assumed to move into the Tufts Supplement Plan as of January 1, 2012. Current
retirees enrolled in the Tufts HMO Plan are assumed to stay in that plan. Contributions made by
the retiree will be based on the premium for the plan plus half of the imputed Part D subsidy. The
net impact of this change was a decrease in the benefit obligation of approximately $6,918,000.
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)
2013
Service cost
Interest cost
Amortization of prior service cost
Amortization of loss
$
Net periodic postretirement benefit cost
Prior service cost related to plan amendments
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
$
3,035
2,706
(1,121)
220
2012
$
2,586
2,874
(1,256)
-
4,840
4,204
(6,301)
1,121
(220)
(67)
1,334
1,256
-
(5,400)
2,523
(560)
$
6,727
In fiscal 2014, the prior service cost credit of $(757,000) and unrecognized net loss of $160,000 are
expected to be amortized as a component of net periodic postretirement benefit cost.
For measurement purposes, the assumed annual rates of increase for the year ending
May 31, 2013 were 7.50% in the per capita cost of covered health care benefits for post-65 benefits
and 8.50% 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 University has decided that starting January 1, 2014, the annual interest crediting rate on the
Retiree Medical Savings Accounts will be equal to the ultimate trend rate which is currently 5.00%.
The interest crediting rate for 2013 and all prior years was 4.50%.
15
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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
$
887
9,030
Decrease
$
(721)
(7,521)
The discount rate used to determine the accumulated benefit obligation is 4.50% as of both
May 31, 2013 and 2012. The discount rate used to determine the net periodic postretirement
benefit cost is 4.50% and 5.50% as of May 31, 2013 and 2012, respectively.
A reconciliation of the accumulated postretirement benefit obligation and plan assets are as follows
as of May 31:
(in thousands)
2013
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
Plan amendment
2012
$
67,447
3,035
2,706
482
310
(6,301)
(2,185)
-
$
62,312
2,586
2,874
450
206
1,334
(2,248)
(67)
Benefit obligation, end of year
$
65,494
$
67,447
Amounts recognized in statement of financial position
consist of
Accrued liabilities
$
65,494
$
67,447
$
(3,085)
8,015
$
(4,206)
14,535
$
4,930
$
10,329
Amounts not yet recognized as a
component of net periodic benefit cost
Prior service cost
Net actuarial loss
Expected benefit payments, net of participant contributions, are as follows: 2014 - $2,400,000;
2015 - $2,658,000; 2016 - $2,857,000; 2017 - $3,093,000; 2018 - $3,315,000; and the five fiscal
years thereafter - $19,547,000.
16
Boston College
Notes to Financial Statements
May 31, 2013 and 2012
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 as of May 31, 2013 and 2012
amounted to $1,278,000 and $1,370,000, respectively, and is included in the University’s real
estate investments.
The University has mortgages, loans and notes due from various related parties of $21,957,000
and $24,028,000 as of May 31, 2013 and 2012, respectively.
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 $897,000 and $4,779,000 for
the years ended May 31, 2013 and 2012, respectively. At May 31, 2013, the minimum aggregate
commitments for all current operating leases are as follows: 2014 - $400,000; 2015 - $333,000;
2016 - $342,000; 2017 - $342,000; 2018 - $342,000 and thereafter - $499,000.
17