Boston College
Financial Statements
May 31, 2011 and 2010
Boston College
Index
May 31, 2011 and 2010
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,
2011, 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 2010 financial statements, and in our report dated September 13, 2010, 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 30, 2011
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, 2011
(with summarized financial information as of May 31, 2010)
(in thousands of dollars)
2011
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
$
6,461
29,144
186,683
58,733
2,011,726
96,796
9,692
1,088,079
$
8,271
27,635
191,962
58,876
1,732,479
25,732
8,372
1,039,611
$
3,487,314
$
3,092,938
$
5,098
168,006
34,147
769,560
35,200
$
4,739
156,056
38,162
671,687
34,870
Total liabilities
Net Assets
Unrestricted (Note H)
Temporarily restricted (Note H)
Permanently restricted (Note H)
Total net assets
Total liabilities and net assets
2010
$
1,012,011
905,514
1,297,156
447,985
730,162
1,165,688
336,926
684,810
2,475,303
2,187,424
3,487,314
$
The accompanying notes are an integral part of these financial statements.
2
3,092,938
Boston College
Statement of Activities
Year Ended May 31, 2011
(with summarized financial information for the year ended May 31, 2010)
(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
$
489,027
140,096
57,206
4,733
4,835
9,630
$
-
Permanently
Restricted
$
-
2011
Total
$
73,446
Total revenues and other support before student aid
778,973
Student aid applicable to tuition and fees
Student aid applicable to auxiliary enterprises
-
-
(132,048)
(3,271)
Net revenues
643,654
Expenses
Instruction
Academic support
Research
Student services
Public service
General administration
Auxiliary enterprises
-
-
240,523
56,295
37,741
46,269
2,392
111,540
148,784
Total expenses
Increase in net assets from operating activities
Nonoperating
Contributions
Realized and unrealized investment gains, net
Investment income, net
Other gains or (losses)
Debt extinguishment charges
Nonoperating assets utilized or released from restrictions
for operations
Net assets reclassified or released from restrictions
2010
Total
489,027
140,096
57,206
4,733
4,835
9,630
$
474,257
136,806
55,549
5,269
4,465
9,998
73,446
68,266
778,973
754,610
(132,048)
(3,271)
(122,773)
(3,483)
643,654
628,354
240,523
56,295
37,741
46,269
2,392
111,540
148,784
233,914
54,523
36,162
44,728
2,433
112,549
143,938
643,544
-
-
643,544
628,247
110
-
-
110
107
6,162
130,462
5,793
2,624
(1,506)
39,412
140,075
439
(5,052)
-
44,772
215
86
(2,267)
-
90,346
270,752
6,318
(4,695)
(1,506)
76,867
177,441
4,512
(13,468)
-
(18,780)
6,603
(54,666)
(9,149)
2,546
(73,446)
-
(68,266)
-
Increase in net assets from
nonoperating activities
131,358
111,059
45,352
287,769
177,086
Total increase in net assets
131,468
111,059
45,352
287,879
177,193
1,165,688
336,926
684,810
2,187,424
2,010,231
Net assets, beginning of year
Net assets, end of year
$
1,297,156
$
447,985
$
730,162
$
2,475,303
The accompanying notes are an integral part of these financial statements.
3
$
2,187,424
Boston College
Statement of Cash Flows
Year Ended May 31, 2011
(with summarized financial information for the year ended May 31, 2010)
(in thousands of dollars)
2011
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
Net loss/(gain) on retirement or disposal of fixed assets
Contributions of property and equipment
Loan cancellations
Contributed securities
Realized and unrealized investment 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 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
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
Net short-term investments provided by financing activities
Net change in short-term investments
Short-term investments, beginning of year
Short-term investments, end of year
Supplemental data
Interest paid
Change in asset retirement obligations recognized
Net fixed asset recognized related to asset retirement obligation
Contributed securities
287,879
2010
$
48,161
455
(939)
1,379
(19,385)
(270,752)
1,506
47,557
(3,703)
(1,093)
1,174
(7,849)
(177,441)
-
(1,509)
(1,462)
5,279
7,103
(4,015)
(1,650)
(60,974)
(3,436)
(14,479)
29,449
26,164
(4,040)
2,622
(77,272)
(8,924)
(5,154)
721,369
(710,479)
(5,434)
5,659
(92,199)
(71,064)
496,010
(524,691)
(4,005)
4,914
(45,871)
6,162
(152,148)
(67,481)
215,755
(106,325)
(11,472)
330
60,974
(6,978)
409
77,272
159,262
70,703
(1,810)
(1,932)
8,271
10,203
$
6,461
$
8,271
$
32,756
(673)
158
19,385
$
31,209
184
381
7,849
The accompanying notes are an integral part of these financial statements.
4
177,193
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
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, voluntary retirement incentive
expenses 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, 2011 and 2010
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
$19,617,000 and $18,391,000 for the years ended May 31, 2011 and 2010, 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 $28,881,000 and $20,472,000 as of May 31, 2011 and 2010, 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 2% to 10.6%. The liability of $12,808,000 and $9,537,000 as
of May 31, 2011 and 2010, 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, 2011 and 2010
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, 2010, from which the summarized information was derived.
Subsequent Events
The University has assessed the impact of subsequent events through September 30, 2011, 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, 2011 and 2010 the allowance related to accounts receivable is $2,294,000 and
$2,287,000, 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. 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, 2011 and 2010, the allowance related to student
notes receivable is $650,000.
On July 1, 2009, the University entered into a ground lease agreement with the Weston Jesuit
Community, Inc. under which the University constructed a community residence for members of the
Society of Jesus. The net costs incurred under this agreement will be repaid to the University over
a 30 year period with interest of 5%. At May 31, 2011 and 2010 the total receivable outstanding for
the community residence is $18,616,000 and $17,154,000, respectively.
C.
Contributions Receivable
Contributions receivable are summarized as follows as of May 31:
(in thousands)
2011
Unconditional promises scheduled to be collected in:
Less than one year
Between one year and five years
More than five years
Less: Discount and allowance for unfulfilled promises to give
Contributions receivable, net
7
2010
$
53,351
136,263
28,954
(31,885)
$
56,669
137,220
42,619
(44,546)
$
186,683
$
191,962
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
A present value discount of $16,982,000 and $22,284,000 as of May 31, 2011 and 2010,
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 2011 and 2010 at fair value as
determined in accordance with fair value accounting guidance.
Conditional promises of $24,273,000 and $8,616,000 as of May 31, 2011 and 2010, 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, 2011
and 2010, 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, 2011 and 2010, include $78,512,000 and $3,777,000,
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:
(in thousands)
Equities
Fixed income
Real assets
Total
2011
2010
Cost
Market
Cost
Market
$ 1,119,052
452,132
111,673
$ 1,509,775
512,059
86,688
$ 1,067,944
349,644
126,973
$ 1,257,890
391,546
108,775
$ 1,682,857
$ 2,108,522
$ 1,544,561
$ 1,758,211
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.
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, 2011 and 2010
The following tables present the financial instruments carried at fair value as of May 31:
(in thousands)
2011
Level II
Level I
Equities
Fixed income
Real assets
Total
$
$
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
2010
Level II
Level I
Total
Total
707,952
413,654
-
(in thousands)
Equities
Fixed income
Real assets
Level III
Level III
Total
$
551,880
304,380
9,711
$
512,172
7,055
28,679
$
193,838
80,111
70,385
$ 1,257,890
391,546
108,775
$
865,971
$
547,906
$
344,334
$ 1,758,211
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, 2011 and 2010, respectively:
(in thousands)
2011
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
Total
Fixed
Income
Equities
$
$
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
9
$
86,859
$
52,615
$
941,257
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
(in thousands)
2010
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
Total
$
$
81,759
51,290
$
Real
Assets
-
$
Total
-
$
81,759
51,290
112,545
-
12,321
124,866
266,577
77,167
16,359
360,103
126,533
67,267
-
22,100
14,715
148,633
81,982
705,971
$
77,167
$
65,495
$
848,633
The University is committed to invest in private equity investments up to an additional amount of
$124,400,000 and $149,700,000 as of May 31, 2011 and 2010, respectively.
The following tables include rollforwards of investments classified by the University within Level III
as defined previously as of May 31:
(in thousands)
2011
Fixed
Income
Equities
Fair value, June 1, 2010
$
Investment income, net
Realized and unrealized
gains/(losses), net
Purchases and sales, net
Fair value, May 31, 2011
193,838
$
(1,033)
80,111
232,022
$
90,198
$
344,334
(2,426)
806
4,146
$
74,874
54,905
281
$
397,094
2010
Fixed
Income
Equities
$
Classified to Level II
Investment income, net
Realized and unrealized
gains/(losses), net
Purchases and sales, net
Fair value, May 31, 2010
70,385
Total
(463)
9,831
1,186
(in thousands)
Fair value, June 1, 2009
$
(930)
44,268
(5,051)
$
Real
Assets
$
596,467
$
87,167
Real
Assets
$
113,723
Total
$
797,357
(413,843)
(3,439)
(6,347)
(893)
(30,218)
(605)
(450,408)
(4,937)
29,897
(15,244)
13,561
(13,377)
(10,588)
(1,927)
32,870
(30,548)
193,838
$
80,111
$
70,385
$
344,334
In 2010, as a result of new guidance related to estimating fair value of investments, certain
investments which could be redeemed in the near term were classified to Level II.
10
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
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.
The University recognized net realized and unrealized gains of $177,441,000 and investment
income of $4,512,000, net of investment advisory fees of $12,127,000, for the year ended
May 31, 2010.
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, 2011 there were no endowment funds with market values less than historical value.
As of May 31, 2010 the market value attributable to certain endowment funds was less than the
historical value of the related permanently restricted contribution by an aggregate of $2,463,000.
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.
11
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
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)
2011
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
235,193
1,026,711
200,569
153,433
20,485
2,855
67,898
1,707,144
(619,065)
Property, plant and equipment, net
$ 1,088,079
2010
$
231,345
1,004,577
191,622
145,851
18,888
2,855
17,610
1,612,748
(573,137)
$ 1,039,611
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, 2011 and 2010 amounted to $45,956,000 and $45,042,000, 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 $3,069,000 and $2,917,000
for the years ended May 31, 2011 and 2010, 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 $3,839,000 and $7,865,000 in gross plant assets for the years ended May 31, 2011
and 2010, respectively.
Property, plant and equipment additions of $12,058,000 and $6,577,000 included in accrued
liabilities are reflected as a noncash item in the statement of cash flows for the years ended
May 31, 2011 and 2010, respectively.
The University recognized $398,000 and $369,000 of operating expenses relating to the accretion
of liabilities associated with the retirement of long-lived assets, for the years ended May 31, 2011
and 2010, respectively. Conditional asset retirement obligations of $7,379,000 and $7,654,000 as
of May 31, 2011 and 2010, respectively, are included in accrued liabilities.
The University has commitments of $81,858,000 to complete various construction projects as of
May 31, 2011.
12
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
G.
Bonds and Mortgages Payable
Bonds and mortgages payable consist of the following as of May 31:
(in thousands)
2011
Massachusetts Health and Educational Facilities Authority (MHEFA)
Boston College Issues (fixed rate)
Series K, 5.38%, due 2011 - 2015
Series L, 4.75 - 5.25%, due 2011 - 2031
Series M, 5.00 - 5.50%, due 2023 - 2035
Series N, 4.13 - 5.25%, due 2011 - 2037
Massachusetts Development Finance Agency (MDFA)
Boston College Issue (fixed rate)
Series P, 4.75 - 5.00%, due 2019-2042
Series Q, 3.00 - 5.00%, due 2011-2029
Series R, 4.00 - 5.00%, due 2011-2040
Department of Education
Library building bonds, 3.41%, due 2011 - 2023
Secured note, 3.00%, due 2011 - 2018
$
19,270
134,285
100,510
2010
$
23,495
107,665
134,285
102,255
176,980
92,145
195,460
176,980
95,695
-
7,270
1,164
7,735
1,312
Bonds and mortgages payable, par
727,084
649,422
Net unamortized original bond issue premium
42,476
22,265
Bonds and mortgages payable, net
$
769,560
$
671,687
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, 2011, principal payments due on all long-term bonds and mortgages payable are as
follows: 2012 - $14,697,000; 2013 - $16,876,000; 2014 - $17,751,000; 2015 - $18,681,000;
2016 - $19,606,000 and thereafter - $639,473,000.
As of May 31, 2011 and 2010, the estimated fair values of bonds and mortgages payable are
$794,871,000 and $706,466,000, 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, 2011 and 2010 amounted to $31,382,000 and
$31,909,000, 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 $2,489,000 and $198,000 for the years ended May 31, 2011 and
2010, respectively.
The University has an agreement for a $75,000,000 unsecured line of credit. As of May 31, 2011
and 2010, there was no balance outstanding on the line of credit.
13
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
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
2011
2010
2011
2010
Unrestricted
2011
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
717,070
-
2010
$
659,934
-
$
245,773
7,227
$
196,740
7,448
$
684,810
44,772
$
634,484
44,371
230
131,506
(928)
89,663
287
140,075
(313)
85,910
86
215
54
4,912
131,736
88,735
140,362
85,597
301
4,966
(42,727)
(42,453)
(44,880)
(40,651)
-
-
4,635
(175)
10,957
(103)
1,454
(1,558)
(2,137)
(1,224)
2,546
(2,267)
3,414
(2,425)
Endowment net assets, end of year
Board designated
810,539
717,070
90,255
396,362
-
77,874
370,744
-
Donor restricted
Designated for specific purposes
Net investment in plant
Program support
Contributions for plant assets
Student loans
Total net assets
I.
$
1,297,156
$
1,165,688
$
348,378
245,773
730,162
684,810
41,700
57,013
894
31,891
58,326
936
-
-
447,985
$
336,926
$
730,162
$
684,810
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, 2011 and 2010, the University's contributions to the
retirement program were $20,612,000 and $20,229,000, 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, 2011 and 2010
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.
In fiscal 2010, the University increased the cost sharing for pre-65 retirees by 1%. The net impact
of the change was a decrease in the benefit obligation of $16,000.
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)
2011
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 (gain) loss
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
$
3,081
3,445
(1,047)
1,030
2010
$
2,364
3,175
(1,044)
387
6,509
4,882
(1,489)
(1,991)
1,047
(1,030)
(16)
10,766
1,044
(387)
(3,463)
11,407
3,046
$
16,289
In fiscal 2012, the prior service cost credit of $(1,260,000) and unrecognized net loss of $790,000
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, 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.
15
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
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
$
1,199
7,547
Decrease
$
(953)
(6,389)
The discount rate used to determine the accumulated benefit obligation is 5.50% and 5.75% as of
May 31, 2011 and 2010, respectively. The discount rate used to determine the net periodic
postretirement benefit cost is 5.75% and 6.50% as of May 31, 2011 and 2010, respectively.
A reconciliation of the accumulated postretirement benefit obligation and plan assets are as follows
as of May 31:
(in thousands)
2011
Reconciliation of accumulated postretirement
benefit obligation
Benefit obligation, beginning of year
Service cost
Interest cost
Plan participant contributions
Part D subsidy received
Actuarial (gain) loss
Benefits paid
Plan amendment
2010
$
61,125
3,081
3,445
397
147
(1,991)
(2,403)
(1,489)
$
46,556
2,364
3,175
302
216
10,766
(2,238)
(16)
Benefit obligation, end of year
$
62,312
$
61,125
Amounts recognized in statement of financial position
consist of:
Accrued liabilities
$
62,312
$
61,125
$
(5,396)
13,201
$
(4,954)
16,222
$
7,805
$
11,268
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: 2012 - $2,257,000; 2013 - $3,094,000; 2014 - $3,359,000; 2015 $3,630,000; 2016 - $3,876,000; and the five fiscal years thereafter - $23,227,000. The expected
Medicare retiree drug subsidy is as follows: 2012 - $559,000; 2013 - $0; 2014 - $0; 2015 - $0;
2016 - $0; and the five fiscal years thereafter - $0.
16
Boston College
Notes to Financial Statements
May 31, 2011 and 2010
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, 2011 and 2010
amounted to $1,775,000 and $1,671,000, respectively, and is included in the University's real
estate investments.
The University has mortgages, loans and notes due from various related parties of $24,187,000
and $23,482,000 as of May 31, 2011 and 2010, 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 2020. The University incurred operating lease expenses of $4,474,000 and $4,993,000 for the
years ended May 31, 2011 and 2010, respectively. At May 31, 2011, the minimum aggregate
commitments for all current operating leases are as follows: 2012 - $4,952,000; 2013 $1,021,000; 2014 - $400,000; 2015 - $333,000; 2016 - $342,000 and thereafter - $1,183,000.
17