Boston College
Financial Statements
May 31, 2012 and 2011
Boston College
Index
May 31, 2012 and 2011
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 .......................................................................................................... 5–17
Report of Independent Auditors
To the 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,
2012, 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 2011 financial statements, and in our report dated September 30, 2011, 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.
September 28, 2012
Boston College
Statement of Financial Position
As of May 31, 2012
(with summarized financial information as of May 31, 2011)
(in thousands of dollars)
2012
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
$
4,587
33,364
189,243
58,913
1,896,715
47,242
10,221
1,154,461
$
6,461
29,144
186,683
58,733
2,011,726
96,796
9,692
1,088,079
$
3,394,746
$
3,487,314
$
5,211
170,758
31,216
753,253
35,458
$
5,098
168,006
34,147
769,560
35,200
Total liabilities
Net Assets
Unrestricted (Note H)
Temporarily restricted (Note H)
Permanently restricted (Note H)
Total net assets
Total liabilities and net assets
2011
$
995,896
1,012,011
1,254,193
394,737
749,920
1,297,156
447,985
730,162
2,398,850
2,475,303
3,394,746
$
The accompanying notes are an integral part of these financial statements.
2
3,487,314
Boston College
Statement of Activities
Year Ended May 31, 2012
(with summarized financial information for the year ended May 31, 2011)
(in thousands of dollars)
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
$
$
-
$
-
2012
Total
$
74,124
Total revenues and other support before student aid
795,819
Student aid applicable to tuition and fees
Student aid applicable to auxiliary enterprises
-
-
(138,580)
(3,576)
Net revenues
653,663
Expenses
Instruction
Academic support
Research
Student services
Public service
General administration
Auxiliary enterprises
-
-
242,740
58,152
37,432
48,367
2,822
113,240
150,797
Total expenses
Increase in net assets from operating activities
Nonoperating
Contributions
Realized and unrealized investment (losses) gains, net
Investment income, net
Other losses
Debt extinguishment charges
Nonoperating assets utilized or released from restrictions
for operations
Net assets reclassified or released from restrictions
2011
Total
505,297
144,067
52,819
4,839
4,743
9,930
$
489,027
140,096
57,206
4,733
4,835
9,630
74,124
73,446
795,819
778,973
(138,580)
(3,576)
(132,048)
(3,271)
653,663
643,654
242,740
58,152
37,432
48,367
2,822
113,240
150,797
240,523
56,295
37,741
46,269
2,392
111,540
148,784
653,550
-
-
653,550
643,544
113
-
-
113
110
5,803
(41,184)
5,644
(2,938)
-
49,184
(45,030)
1,331
(600)
-
37,705
(10,292)
152
(2,217)
-
92,692
(96,506)
7,127
(5,755)
-
90,346
270,752
6,318
(4,695)
(1,506)
(17,303)
6,902
(56,821)
(1,312)
(5,590)
(74,124)
-
(73,446)
-
(Decrease) increase in net assets from
nonoperating activities
(43,076)
(53,248)
19,758
(76,566)
287,769
Total (decrease) increase in net assets
(42,963)
(53,248)
19,758
(76,453)
287,879
Net assets
Beginning of year
End of year
505,297
144,067
52,819
4,839
4,743
9,930
Permanently
Restricted
1,297,156
$
1,254,193
447,985
$
394,737
730,162
$
749,920
2,475,303
$
2,398,850
The accompanying notes are an integral part of these financial statements.
3
2,187,424
$
2,475,303
Boston College
Statement of Cash Flows
Year Ended May 31, 2012
(with summarized financial information for the year ended May 31, 2011)
(in thousands of dollars)
2012
Cash flows from operating activities
Total (decrease) increase in net assets
Adjustments to reconcile change in net assets to short-term
investments used in operating activities
Depreciation, amortization and accretion
Net (gain) loss on retirement or disposal of fixed assets
Contributions of property and equipment
Loan cancellations
Contributed securities
Realized and unrealized investment losses (gains), net
Debt extinguishment charges
Change in assets and liabilities
Accounts receivable, net
Notes and other receivables
Contributions receivable, net
Accounts payable and accrued liabilities
Deposits payable and deferred revenue
Other assets
Contributions to be used for long-term investment
$
Net short-term investments provided by (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
(76,453)
2011
$
287,879
50,762
(100)
(1,626)
1,155
(8,966)
96,506
-
48,161
455
(939)
1,379
(19,385)
(270,752)
1,506
(4,220)
760
(2,560)
6,276
(2,931)
(529)
(56,964)
(1,509)
(1,462)
5,279
7,103
(4,015)
(1,650)
(60,974)
1,110
(8,924)
565,179
(537,708)
(7,845)
5,749
(120,438)
49,554
721,369
(710,479)
(5,434)
5,659
(92,199)
(71,064)
(45,509)
(152,148)
(14,697)
258
56,964
215,755
(106,325)
(11,472)
330
60,974
Net short-term investments provided by financing activities
42,525
159,262
Net change in short-term investments
(1,874)
Net short-term investments used in investing activities
Cash flows from financing activities
Net proceeds from issuance of debt
Repayment of debt
Payment of bonds and mortgages payable
Change in U.S. Government loan advances
Contributions to be used for long-term investment
Short-term investments
Beginning of year
(1,810)
6,461
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
4,587
$
6,461
$
32,586
(187)
30
8,966
$
30,266
(673)
158
19,385
The accompanying notes are an integral part of these financial statements.
4
8,271
$
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
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, debt extinguishment charges, 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, 2012 and 2011
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
$19,970,000 and $19,617,000 for the years ended May 31, 2012 and 2011, 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 $27,630,000 and $28,881,000 as of May 31, 2012 and 2011, 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 1.4% to 10.6%. The liability of $12,274,000 and $12,808,000
as of May 31, 2012 and 2011, 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, 2012 and 2011
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, 2011, from which the summarized information was derived.
Subsequent Events
The University has assessed the impact of subsequent events through September 28, 2012, the
date the audited financial statements were issued, and has concluded that there were no such
events that require adjustment to the audited financial statements or disclosure in the notes to the
audited financial statements.
B.
Accounts, Notes and Other Receivables
Accounts receivable and notes receivable are stated net of allowances for doubtful accounts. As of
May 31, 2012 and 2011 the allowance related to accounts receivable is $2,994,000 and
$2,719,000, 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, 2012 and 2011, the amount due from the Weston Jesuit Community,
Inc. is $18,126,000 and $18,616,000, 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, 2012 and 2011, the
allowance related to student notes receivable is $920,000 and $650,000, respectively.
C.
Contributions Receivable
Contributions receivable are summarized as follows as of May 31:
2012
(in thousands)
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
2011
$
59,065
142,956
14,725
(27,503)
$
53,351
136,263
28,954
(31,885)
$
189,243
$
186,683
A present value discount of $12,202,000 and $16,982,000 as of May 31, 2012 and 2011,
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, 2012 and 2011
The University has reflected contributions received during fiscal 2012 and 2011 at fair value as
determined in accordance with fair value accounting guidance.
Conditional promises of $22,664,000 and $24,273,000 as of May 31, 2012 and 2011, 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. The
University believes that these valuations are a reasonable estimate of fair value as of May 31, 2012
and 2011, 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, 2012 and 2011, include $28,257,000 and $78,512,000,
respectively, of construction funds held by trustees associated with certain Boston College 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:
2012
(in thousands)
Cost
Equities
Fixed income
Real assets
2011
Market
Cost
Market
$ 1,096,842
482,565
99,229
$ 1,315,684
548,913
79,360
$ 1,119,052
452,132
111,673
$ 1,509,775
512,059
86,688
$ 1,678,636
$ 1,943,957
$ 1,682,857
$ 2,108,522
Equities include common stock, mutual funds, commingled funds and limited partnership interests.
Fixed income includes money market funds, treasury and agency securities and limited partnership
interests. 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, 2012 and 2011
The following tables present the financial instruments carried at fair value as of May 31:
2012
(in thousands)
Level I
Equities
Fixed income
Real assets
$
Level II
Level III
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
(in thousands)
2011
Level I
Equities
Fixed income
Real assets
Total
$
Level II
Level III
Total
707,952
413,654
-
$
569,801
8,207
11,814
$
232,022
90,198
74,874
$ 1,509,775
512,059
86,688
$ 1,121,606
$
589,822
$
397,094
$ 2,108,522
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, 2012 and 2011, respectively:
2012
(in thousands)
Redemption Terms
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
Fixed
Income
Equities
$
$
90,798
35,425
$
Real
Assets
-
$
Total
-
$
90,798
35,425
132,672
-
-
132,672
204,378
95,915
-
300,293
265,825
18,767
-
43,429
2,081
309,254
20,848
747,865
9
$
95,915
$
45,510
$
889,290
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
2011
(in thousands)
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
$
$
115,865
60,253
$
Real
Assets
-
$
Total
11,814
-
$
127,679
60,253
139,801
-
-
139,801
253,882
86,859
-
340,741
161,222
70,760
-
37,769
3,032
198,991
73,792
801,783
$
86,859
$
52,615
$
941,257
The University is committed to invest in private equity investments up to an additional amount of
$131,200,000 and $124,400,000 as of May 31, 2012 and 2011, respectively.
The following tables include rollforwards of investments classified by the University within Level III
as defined previously as of May 31:
2012
(in thousands)
Fixed
Income
Equities
Fair value, June 1, 2011
$
Transfers to Level II
Investment income, net
Realized gains/(losses)
Unrealized gains
Purchases
Sales
Fair value, May 31, 2012
232,022
$
(18,755)
(1,133)
8,390
6,884
50,407
(22,965)
$
90,198
254,850
$
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
2011
Fixed
Income
Equities
$
Investment income, net
Realized gains/(losses)
Unrealized gains
Purchases
Sales
Fair value, May 31, 2011
$
(1,497)
(693)
10,935
744
-
(in thousands)
Fair value, June 1, 2010
Real
Assets
193,838
$
(1,033)
13,077
31,191
31,622
(36,673)
$
80,111
Real
Assets
$
(930)
(484)
10,315
9,189
(8,003)
232,022
$
10
90,198
70,385
Total
$
(463)
(1,118)
1,924
6,712
(2,566)
$
74,874
344,334
(2,426)
11,475
43,430
47,523
(47,242)
$
397,094
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
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 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.
The University recognized net realized and unrealized gains of $270,752,000 and investment
income of $6,318,000, net of investment advisory fees of $13,530,000, for the year ended
May 31, 2011.
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 donorimposed 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, 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.
This was reflected as a reduction of unrestricted net assets and will be restored to unrestricted net
assets when the market value exceeds historical value. This deficit resulted from unfavorable
market fluctuations. As of May 31, 2011 there were no endowment funds with market values less
than historical value.
11
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
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:
2012
(in thousands)
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
238,168
1,113,092
199,909
161,591
20,823
2,855
76,870
1,813,308
(658,847)
Property, plant and equipment, net
$ 1,154,461
2011
$
235,193
1,026,711
200,569
153,433
20,485
2,855
67,898
1,707,144
(619,065)
$ 1,088,079
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, 2012 and 2011 amounted to $48,754,000 and $45,956,000, 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 $3,232,000 and $3,069,000
for the years ended May 31, 2012 and 2011, 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 $12,278,000 and $3,839,000 in gross plant assets for the years ended
May 31, 2012 and 2011, respectively.
Property, plant and equipment additions of $8,448,000 and $12,058,000 included in accrued
liabilities are reflected as a noncash item in the statement of cash flows for the years ended
May 31, 2012 and 2011, respectively.
The University recognized $386,000 and $398,000 of operating expenses relating to the accretion
of liabilities associated with the retirement of long-lived assets, for the years ended May 31, 2012
and 2011, respectively. Conditional asset retirement obligations of $7,578,000 and $7,379,000 as
of May 31, 2012 and 2011, respectively, are included in accrued liabilities.
The University has commitments of $25,676,000 to complete various construction projects as of
May 31, 2012.
12
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
G.
Bonds and Mortgages Payable
Bonds and mortgages payable consist of the following as of May 31:
(in thousands)
2012
Massachusetts Health and Educational Facilities Authority (MHEFA)
Boston College Issues (fixed rate)
Series K, 5.38%, due 2012 - 2014
Series M, 5.00 - 5.50%, due 2023 - 2035
Series N, 4.13 - 5.25%, due 2012 - 2037
$
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 2012-2029
Series R, 4.00 - 5.00%, due 2012-2040
Department of Education
Library building bonds, 3.41%, due 2012 - 2022
Secured note, 3.00%, due 2012 - 2018
Bonds and mortgages payable, par
Net unamortized original bond issue premium
14,825
134,285
98,610
2011
$
176,980
88,525
191,365
176,980
92,145
195,460
6,785
1,012
7,270
1,164
712,387
727,084
40,866
Bonds and mortgages payable, net
$
19,270
134,285
100,510
753,253
42,476
$
769,560
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, 2012, principal payments due on all long-term bonds and mortgages payable are as
follows: 2013 - $16,876,000; 2014 - $17,751,000; 2015 - $18,681,000; 2016 - $19,606,000; 2017
- $20,021,000 and thereafter - $619,452,000.
As of May 31, 2012 and 2011, the estimated fair values of bonds and mortgages payable are
$823,947,000 and $794,871,000, 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, 2012 and 2011 amounted to $29,397,000 and
$31,382,000, 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 $5,001,000 and $2,489,000 for the years ended May 31, 2012 and
2011, respectively.
The University has an agreement for a $75,000,000 unsecured line of credit. As of May 31, 2012
and 2011, there was no balance outstanding on the line of credit.
13
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
In November 2010, the University issued Massachusetts Development Finance Agency (MDFA)
Series R Revenue Bonds in the amount of $195,460,000. The proceeds from this issue were used
to retire outstanding debt, finance the construction of a new academic building and fund project
costs. The University recognized a debt extinguishment charge of $1,506,000 and incurred costs
of $1,373,000 associated with this issue which have been capitalized and are being amortized over
the life of the bonds. The MDFA Series R Revenue Bonds were issued with an original issue
premium of $20,295,000 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
2012
2011
2012
2011
Unrestricted
2012
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
810,539
-
2011
$
717,070
-
$
348,378
5,958
$
245,773
7,227
$
730,162
37,705
$
684,810
44,772
863
(39,120)
230
131,506
1,110
(45,030)
287
140,075
152
(10,292)
86
215
(38,257)
131,736
(43,920)
140,362
(10,140)
301
(42,164)
(42,727)
(46,852)
(44,880)
4,267
(183)
4,635
(175)
9,309
452
1,454
(1,558)
-
-
(5,590)
(2,217)
2,546
(2,267)
Endowment net assets, end of year
Board designated
734,202
810,539
91,477
428,514
-
90,255
396,362
-
Donor restricted
Designated for specific purposes
Net investment in plant
Program support
Contributions for plant assets
Student loans
Total net assets
I.
$
1,254,193
$
1,297,156
$
273,325
348,378
749,920
730,162
45,650
74,892
870
41,700
57,013
894
-
-
394,737
$
447,985
$
749,920
$
730,162
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, 2012 and 2011, the University’s contributions to the
retirement program were $21,336,000 and $20,612,000, respectively.
The University provides certain health care benefits for retired employees who meet 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.
14
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
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 is recognized as prior
service cost related to a plan amendment. Effective January 1, 2012, 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 future retirees are 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.
In fiscal 2011, the University increased the cost sharing for pre-65 retirees by an additional 1%.
The net impact of the change was a decrease in the benefit obligation of $18,000, and is
recognized as prior service cost related to a plan amendment. In May 2011, the University
announced a plan change, effective January 1, 2012, moving employees who were hired on or
after January 1, 2006, or were hired before that date but did not have age plus service totaling at
least 55 “points” on January 1, 2006 from the traditional benefit structure to instead receiving an
annual fixed contribution in a Retiree Medical Savings Account (RMSA). The RMSA will be an
unfunded account that will be funded as benefits are paid. The net impact of the change was a
decrease in the benefit obligation of $1,471,000, and is recognized as prior service cost related to a
plan amendment. In addition, it was announced that as of January 1, 2012, the current prescription
drug coverage for Medicare-eligible retirees will be converted to a separate Medicare Part D
prescription drug plan. The net impact of the change was a decrease in the benefit obligation of
$9,406,000, and is recognized as part of the net (gain) loss in other changes in plan assets and
benefit obligation.
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:
2012
(in thousands)
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
$
2,586
2,874
(1,256)
-
2011
$
3,081
3,445
(1,047)
1,030
4,204
6,509
(67)
1,334
1,256
-
(1,489)
(1,991)
1,047
(1,030)
2,523
(3,463)
6,727
$
3,046
In fiscal 2013, the prior service cost credit of $(1,120,000) and unrecognized net loss of $830,000
are expected to be amortized as a component of net periodic postretirement benefit cost.
15
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
For measurement purposes, the assumed annual rates of increase for the year ending
May 31, 2012 were; 7.50% in the per capita cost of covered health care benefits for post-65
benefits and 9.25% 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.
A one percentage point change in the assumed health care cost trend rates would have the
following effect:
Increase
(in thousands)
Effect on total of service and interest cost components
Effect on postretirement benefit obligation
$
822
9,614
Decrease
$
(674)
(7,980)
The discount rate used to determine the accumulated benefit obligation is 4.50% and 5.50% as of
May 31, 2012 and 2011, respectively. The discount rate used to determine the net periodic
postretirement benefit cost is 5.50% and 5.75% as of May 31, 2012 and 2011, respectively.
A reconciliation of the accumulated postretirement benefit obligation and plan assets are as follows
as of May 31:
2012
(in thousands)
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
2011
$
62,312
2,586
2,874
450
206
1,334
(2,248)
(67)
$
61,125
3,081
3,445
397
147
(1,991)
(2,403)
(1,489)
Benefit obligation, end of year
$
67,447
$
62,312
Amounts recognized in statement of financial position
consist of
Accrued liabilities
$
67,447
$
62,312
$
(4,206)
14,535
$
(5,396)
13,201
$
10,329
$
7,805
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 and expected Medicare retiree drug
subsidy are as follows: 2013 - $2,098,000; 2014 - $2,654,000; 2015 - $2,883,000; 2016 $3,072,000; 2017 - $3,343,000; and the five fiscal years thereafter - $20,060,000.
16
Boston College
Notes to Financial Statements
May 31, 2012 and 2011
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, 2012 and 2011
amounted to $1,370,000 and $1,775,000, respectively, and is included in the University’s real
estate investments.
The University has mortgages, loans and notes due from various related parties of $24,028,000
and $24,187,000 as of May 31, 2012 and 2011, 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 $4,779,000 and $4,474,000 for
the years ended May 31, 2012 and 2011, respectively. At May 31, 2012, the minimum aggregate
commitments for all current operating leases are as follows: 2013 - $897,000; 2014 - $400,000;
2015 - $333,000; 2016 - $342,000; 2017 - $342,000 and thereafter - $841,000.
17