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FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
FINANCIAL STATEMENT TEMPLATE
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FINANCIAL STATEMENT TEMPLATE

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  • 1. Fairfield University Financial Statements At and for the years ended June 30, 2008 and 2007
  • 2. Fairfield University Financial Statements Index to Financial Statements Page(s) Report of Independent Auditors................................................................................................................ 1 Financial Statements Statements of Financial Position at June 30, 2008 and 2007....................................................................... 2 Statements of Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets for the years ended June 30, 2008 and 2007 ........................................................ 3 Statements of Changes in Net Assets for the years ended June 30, 2008 and 2007 .................................. 4 Statements of Cash Flows for the years ended June 30, 2008 and 2007.................................................... 5 Notes to Financial Statements .............................................................................................................. 6 – 16
  • 3. PricewaterhouseCoopers LLP 300 Atlantic St. Stamford CT 06901 Telephone (203) 539 3000 www.pwc.com Report of Independent Auditors To the Board of Trustees of Fairfield University In our opinion, the accompanying statements of financial position and the related statements of unrestricted revenues and expenses and other changes in unrestricted net assets, changes in net assets and cash flows present fairly, in all material respects, the financial position of Fairfield University (the "University") at June 30, 2008 and 2007, and the changes in net assets and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the University’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the University's internal control over financial reporting. Accordingly, we express no such opinion. 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 audits provide a reasonable basis for our opinion. September 22, 2008 1
  • 4. Fairfield University Statements of Financial Position At June 30, 2008 and 2007 Assets 2008 2007 Cash and cash equivalents $ 15,119,835 $ 26,139,768 Deposits with trustee 12,849,777 13,483,089 Accounts receivable - students, less allowance for doubtful collections of $305,567 in 2008 and $318,986 in 2007 135,169 167,438 Student loans, less allowance for doubtful collections of $200,000 in 2008 and 2007 2,753,376 2,504,159 Contributions receivable, net (Note 2) 5,523,906 3,883,392 Other assets 6,876,319 8,844,157 Investments 274,153,435 269,836,102 Land, buildings and equipment, net 223,476,034 225,320,641 Total assets $ 540,887,851 $ 550,178,746 Liabilities and net assets Liabilities Accounts payable and accrued liabilities $ 13,006,235 $ 12,723,580 Accrued compensation 10,044,334 9,503,606 Deferred revenue 11,133,252 9,595,890 Government grants refundable - student loans 2,231,552 2,201,882 Long-term debt 161,063,165 163,485,894 Total liabilities 197,478,538 197,510,852 Net assets Unrestricted 241,914,603 252,050,382 Temporarily restricted 6,939,842 10,451,352 Permanently restricted 94,554,868 90,166,160 Total net assets 343,409,313 352,667,894 Total liabilities and net assets $ 540,887,851 $ 550,178,746 The accompanying notes are an integral part of these financial statements. 2
  • 5. Fairfield University Statements of Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets For the years ended June 30, 2008 and 2007 2008 2007 Operating revenues Educational and general Tuition and fees $ 142,963,619 $ 136,610,416 Less University sponsored student financial aid (33,127,927) (29,773,148) Student financial aid funded from donor contributions and government grants (2,711,795) (2,417,254) Net tuition and fees 107,123,897 104,420,014 Government grants and financial aid 2,401,456 1,980,985 Contributions 5,259,427 5,004,366 Investment return designated for current operations 10,672,104 11,382,359 Departmental and other revenues 4,868,169 4,430,650 Net assets released from restrictions 5,103,006 5,160,302 Total educational and general 135,428,059 132,378,676 Auxiliary services 27,774,115 27,742,715 Total operating revenues 163,202,174 160,121,391 Operating expenses Educational and general services Instruction 52,701,472 49,828,101 Research 5,936,808 5,515,783 Public service 1,367,254 1,344,192 Academic support 18,998,583 17,510,959 Institutional support 29,087,066 25,314,342 Student services 24,887,551 23,905,899 Total educational and general services 132,978,734 123,419,276 Auxiliary services 27,913,764 26,708,000 Total operating expenses 160,892,498 150,127,276 Increase in unrestricted net assets from operations 2,309,676 9,994,115 Nonoperating activities Investment return in (deficit) excess of amounts designated for current operations (12,294,474) 28,883,715 Realized and unrealized loss on interest rate swap agreement (6,430,709) (2,083,429) Debt extinguishment charges (1,137,837) - Nonoperating net assets released from restrictions 7,417,565 2,119,244 Total nonoperating activities (12,445,455) 28,919,530 (Decrease) increase in unrestricted net assets $ (10,135,779) $ 38,913,645 The accompanying notes are an integral part of these financial statements. 3
  • 6. Fairfield University Statements of Changes in Net Assets For the years ended June 30, 2008 and 2007 2008 2007 Unrestricted net assets Total unrestricted revenues $ 158,099,168 $ 154,961,089 Net assets released from restrictions 12,520,571 7,279,546 Total unrestricted expenses and losses (168,461,044) (152,210,705) Investment return in (deficit) excess of amounts designated for current operations (12,294,474) 28,883,715 (Decrease) increase in unrestricted net assets (10,135,779) 38,913,645 Temporarily restricted net assets Contributions 8,794,206 4,990,148 Investment income, net 214,855 339,292 Net assets released from restrictions (12,520,571) (7,279,546) (Decrease) in temporarily restricted net assets (3,511,510) (1,950,106) Permanently restricted net assets Contributions 4,371,386 9,036,299 Investment income 17,322 101,615 Increase in permanently restricted net assets 4,388,708 9,137,914 (Decrease) increase in net assets (9,258,581) 46,101,453 Net assets Beginning of year 352,667,894 306,566,441 End of year $ 343,409,313 $ 352,667,894 The accompanying notes are an integral part of these financial statements. 4
  • 7. Fairfield University Statements of Cash Flows For the years ended June 30, 2008 and 2007 2008 2007 Cash flows from operating activities (Decrease) increase in net assets $ (9,258,581) $ 46,101,452 Adjustments to reconcile changes in net assets to net cash provided by operating activities Depreciation and amortization 11,323,926 10,783,841 Debt extinguishment charges 1,137,837 Contributions restricted for long-term investment (4,111,026) (9,110,486) Realized and unrealized (gains) losses on investments, net 6,663,187 (34,989,664) Unrealized loss on interest rate swap agreement 5,303,430 1,771,992 Changes in operating assets and liabilities Contributions receivable (1,640,514) 1,357,118 Accounts receivable 32,269 (64,149) Other assets 878,927 18,797 Accounts payable and other accruals 823,383 2,072,133 Deferred revenue 1,537,362 (3,964,888) Government grants refundable-student loans 29,670 11,766 Net cash provided by operating activities 12,719,870 13,987,912 Cash flows from investing activities Proceeds from sale of investments 108,448,227 70,420,840 Purchase of investments (119,428,747) (89,197,936) Purchase of buildings and equipment (9,444,232) (12,702,168) Decrease in deposits with trustees 633,312 5,037,981 Issuance of student loans (620,750) (477,639) Repayment of student loans 371,533 435,583 Net cash used in investing activities (20,040,657) (26,483,339) Cash flows from financing activities Proceeds from contributions restricted for Investment in permanently restricted endowment 4,045,185 8,854,355 Investment in temporarily restricted funds 65,841 256,131 Net proceeds from long-term borrowing 37,844,064 Repayment of long-term debt (45,654,236) (3,520,000) Net cash (used in) provided by financing activities (3,699,146) 5,590,486 Net (decrease) in cash (11,019,933) (6,904,941) Cash and cash equivalents at beginning of period 26,139,768 33,044,709 Cash and cash equivalents at end of period $ 15,119,835 $ 26,139,768 Supplemental disclosure of cash flow information Interest paid on debt $ 6,631,401 $ 5,405,333 The accompanying notes are an integral part of these financial statements. 5
  • 8. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 1. Summary of Significant Accounting Policies Background The accompanying financial statements, which include the accounts of Fairfield University and its Preparatory School (the “University”), which together are a 501(c)(3) tax-exempt institution, have been prepared on the accrual basis and in conformity with accounting principles generally accepted in the United States of America. Basis of Statement Presentation General Net assets, revenues, gains and losses are classified based on the existence or absence of donor- imposed restrictions. Accordingly, net assets and changes therein are classified as follows: • Permanently restricted net assets – Net assets subject to donor-imposed stipulations that they be maintained permanently by the University. Generally, the donor of these assets permits the University to use all or part of the return on the related investments. • Temporarily restricted net assets – Net assets subject to donor-imposed stipulations that will be met by actions of the University or the passage of time. • Unrestricted net assets – Net assets not subject to donor-imposed stipulations. 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. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulations or law. Expirations of temporary restrictions on net assets, that is, the donor-imposed stipulated purpose has been accomplished or the stipulated time period has elapsed, are reported as net assets released from restrictions. Donor contributions restricted for capital expenditures are released to unrestricted net assets when the assets are placed in service and time restrictions have been met. Contributions Contributions, including unconditional promises to give, are recognized as revenues in the period received at their fair value. Promises to give that are scheduled to be received after the date of the statement of financial position are shown as increases in temporarily restricted net assets and are released to unrestricted net assets when the purpose or time restrictions are met. Promises to give subject to donor-imposed stipulations that the corpus be maintained permanently are recognized as increases in permanently restricted net assets. Conditional promises to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value. Contributions to be received after one year are discounted based upon a risk free interest rate. Amortization of the discount is recorded as additional contribution revenue in accordance with the donor-imposed restrictions, if any, on the contributions. 6
  • 9. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 Investment Income (Loss) Dividends, interest and net gains (losses) on investments are reported as follows: • as increases (decreases) in permanently restricted net assets if the terms of the gift require that they be added to the principal of a permanent endowment fund; • as increases (decreases) in temporarily restricted net assets if the terms of the gift impose restrictions on the current use of the income or net gains (losses); and • as increases (decreases) in unrestricted net assets in all other cases. Measure of Operations The Statements of Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets report the change in unrestricted net assets from operating and nonoperating activities separately. For this purpose, operations include operating revenues consisting of those items attributable to the University's educational programs or research conducted by the academic departments and operating expenses include the costs of providing University programs and other activities. Unrestricted investment return on the University’s long-term investments in excess of (deficit) of the amount appropriated under the University spending plan, as discussed in Note 3, donor contributions restricted for capital expenditures, change in value of split-interest agreements, realized and unrealized gain (loss) on interest rate swap agreements, and gain (loss) on sale of assets are reported as nonoperating revenues (expenses). Additionally, nonoperating revenues consist of contributions that are not in direct support of the annual operating budget. Such contributions are typically multi-year gifts which the University will designate as quasi-endowment. This measure of operations is different from cash flows from operating activities reported in the Statements of Cash Flows which include the cash effects of all transactions and other events (including certain nonoperating items) that enter into the determination of the change in net assets. Other Included in institutional support expenses are fund raising costs of $4,573,369 and $3,784,767 in fiscal 2008 and 2007, respectively. Cash The University has several bank accounts at June 30, 2008 containing balances which exceed FDIC limits. The University believes that no significant risk exists at June 30, 2008 with respect to these balances. Accounts payable and accrued liabilities include book overdrafts of $995,863 and $1,501,807 at June 30, 2008 and 2007 respectively. Cash Equivalents Cash equivalents are held for reinvestment and are highly liquid in nature and have original maturities at the time of purchase of three months or less. The cash equivalents reported on the statement of financial position are principally invested in one fund. Government Grants and Contracts Revenues associated with Government grants for educational purposes and contracts are recognized as the related direct costs are incurred and are accounted for with unrestricted net assets. The University records reimbursement of indirect costs relating to such grants and contracts at authorized rates for each fiscal year as unrestricted revenue. 7
  • 10. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 Investments Investments are reflected in the financial statements at fair value. Quoted market prices are used to value short-term investments, fixed income securities, and equity securities. Values for investments in limited partnerships, which are generally subject to certain withdrawal restrictions, are provided by the general partner, and may be based on historical cost, appraisals, obtainable prices for similar assets, or other estimates. Because of the inherent uncertainty of valuation for the University’s investments in investment partnerships and for certain of the underlying investments held by the investment partnerships, values for those investments may differ significantly from values that would have been used had a ready market for the investments existed. Unrealized gains or losses are determined by comparison of cost to fair value at the beginning and end of the reporting period. Purchases and sales of securities are reflected on a trade-date basis. Gains or losses on sales of securities are based on average cost. Deferred Revenue The University recognizes revenues from student tuition and fees predominantly within the fiscal year in which the academic term is conducted. Depreciation Investment in plant is stated at cost less accumulated depreciation, computed on a straight-line basis over the estimated useful lives of buildings (40-60 years) and equipment and library books (3- 10 years). Depreciation expense is $11,288,838 and $10,748,754 for the years ended June 30, 2008 and 2007, respectively. Recent Accounting Pronouncements In June 2006, FASB issued FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109. The interpretation limits the recognition of uncertain tax positions to only those positions that are more likely than not to be sustained on audit based solely on the technical merits of the position. The interpretation is effective for fiscal years beginning after December 15, 2006. However FSP FIN 48-2 defers the effective date of that interpretation to fiscal years beginning after December 15, 2007, for certain nonpublic enterprises as defined by paragraph 289 of FASB Statement No. 109, including not-for- profit organizations. FIN 48 is effective for the University beginning July 1, 2008. The University is currently evaluating the impact on its financial statements of adopting FIN 48. In September 2006, FASB issued FASB Statement No. 157 ("FAS 157"), Fair Value Measurements, which provides guidance for how to measure the fair value of financial and nonfinancial assets and liabilities. It replaces more general guidance for determining fair value currently found in many existing FASB standards. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. However FSP FAS 157-2, Effective Date of FASB Statement No. 157, delays the effective date of FAS 157 until fiscal years beginning after November 15, 2008 for fair value measurements of all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption of FAS 157 is not expected to have a material impact on the University' financial statements. In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“FAS 161”). This statement is effective for fiscal years beginning after November 15, 2008, with early application encouraged. SFAS No. 161 is intended to improve financial reporting by requiring transparency about the nature, purpose, location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities; and how derivative instruments and 8
  • 11. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 related hedged items affect its financial position, financial performance and cash flows. The University is currently evaluating the effects, if any, that FAS 161 may have on its financial statements. In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (FAS 162). This statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in accordance with GAAP. With the issuance of this statement, the FASB concluded that the GAAP hierarchy should be directed toward the entity and not its auditor, and reside in the accounting literature established by the FASB as opposed to the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of our financial results. Fair Value of Financial Instruments The estimated fair value of all significant financial instrument amounts have been determined by the University using available market information and appropriate valuation methodologies. The following methods and assumptions were used to estimate the fair value of each class of financial instrument. Long Term Debt The fair value of bonds is estimated based upon quoted market prices for the same or similar bond issuances. The fair value of the University’s bonds at June 30, 2008 and 2007 is $160,627,094 and $165,012,738. Other The University considers the carrying amounts of all other financial instruments to be a reasonable estimate of fair value. Accounts and Loans Receivable Accounts and loans receivable are stated net of allowances for doubtful accounts. Loans receivable are principally amounts due from students under federally sponsored loan programs which are subject to significant restrictions. Accordingly, it is not practicable to determine the fair value of such amounts. Allocation of Certain Expenses The financial statements report expenses by functional classification. Certain natural expenses associated with the operation and maintenance of University plant assets are allocated to the respective functional classifications based on square footage occupancy. The expenses are allocated as follows for the years ended June 30: 2008 2007 Plant operations and maintenance $ 18,387,722 $ 17,084,941 Depreciation 11,288,838 10,748,754 Interest on indebtedness 6,896,184 6,105,588 9
  • 12. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Contributions Receivable Contributions receivable at June 30, 2008 and 2007 are expected to be collected as follows: 2008 2007 2008 $ - $ 2,397,980 2009 2,111,052 990,379 2010 1,526,094 583,788 2011 835,501 232,500 2012 750,084 10,000 2013 798,083 - 6,020,814 4,214,647 Less Present value discount (296,908) (131,255) Allowance for doubtful collections (200,000) (200,000) Total $ 5,523,906 $ 3,883,392 The discount rates used in 2008 and 2007 were 3.5% and 5% respectively. 3. Investments Investments at June 30, 2008 and 2007 consisted of the following: 2008 2007 Fair Fair Cost Value Cost Value Cash and cash equivalents held for reinvestment $ 6,226,918 $ 6,226,918 $ 17,961,989 $ 17,961,989 Auction rate securities 10,000,000 10,000,000 - - Corporate bonds 1,313,106 1,327,390 1,297,802 1,319,413 Corporate stocks 41,014,247 44,043,803 44,158,422 51,775,305 Limited partnerships 48,142,835 49,378,049 34,888,460 37,626,568 Investment funds Equities 67,337,240 70,936,293 52,635,890 80,338,740 Bonds 30,947,058 34,147,349 31,180,413 35,500,021 Hedge 30,000,000 47,916,358 30,000,000 45,314,066 Multi Asset 10,000,000 10,177,275 - - $ 244,981,404 $ 274,153,435 $ 212,122,976 $ 269,836,102 10
  • 13. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 The University's policy is to distribute a portion of the total investment return for current operations at a predetermined rate set annually (currently at 5%) by the Board of Trustees on the average market value of endowment and quasi-endowment assets for the preceding three fiscal years. Any difference between actual investment income and the amounts distributed is retained to support operations of future years. These retained balances would be used in any year that the actual total investment return is below the spending rate. State law allows the Board of Trustees to appropriate net realized gains (unless temporarily or permanently restricted by explicit donor stipulation) as is prudent considering the University's long- term and short-term needs, present and anticipated financial requirements, expected total return on its investments, price level trends and general economic conditions. The following schedule summarizes the investment return for the years ended June 30, 2008 and 2007: Unrestricted 2008 Dividends and interest $ 2,012,530 Net realized and unrealized (losses) (6,639,856) Return on long-term investments (4,627,326) Interest on short-term investments 3,004,956 Total return on investments (1,622,370) Investment return designated for Investment return designated for current operations (10,672,104) Investment return less than amounts designated for current operations $ (12,294,474) 2007 Dividends and interest $ 2,597,699 Net realized and unrealized gains 34,992,436 Return on long-term investments 37,590,135 Interest on short-term investments 2,675,939 Total return on investments 40,266,074 Investment return designated for current operations (11,382,359) Investment return in excess of amounts designated for current operations $ 28,883,715 Assets of endowment and quasi-endowment are pooled on a market value basis, with each individual asset subscribing to or disposing of units on the basis of the market value per unit at the end of the quarter within which the transaction takes place. At June 30, 2008 and 2007, the University had capital commitments of approximately $26,040,000 and $42,435,000, respectively, remaining to private capital programs with Alinda Infrastructure Fund, Commonfund Capital Funds, Energy Capital Partners, European Strategic Partners, Northgate Private Equity and Venture Partners, Parish Capital and Dune Real Estate Funds. 11
  • 14. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 Deposits with trustee of $12,849,777 at June 30, 2008 and $13,483,089 at June 30, 2007 were primarily invested in guaranteed investment contracts or treasury bills with an interest rate of 6.54%, 5.67% related to Connecticut Health and Educational Facilities Authority (“CHEFA”) Revenue Bonds, Series I, J and 2.52% related to CHEFA Revenue Bonds, Series K, L1, L2, L1 (second tranche), respectively, at June 30, 2008. 4. Land, Buildings and Equipment, Net The University's investments in plant assets are stated at cost at date of acquisition or fair market value at date of donation in the case of gifts. The cost of plant assets at June 30, 2008 and 2007 and most recent appraisal values are as follows: Replacement Cost Based Upon Latest 2008 2007 Independent Appraisal Cost Cost Appraisal Date (Unaudited) Land and land improvements $ 10,853,134 $ 10,779,999 $ 25,000,000 4/01/86 Buildings 297,342,817 283,739,181 449,126,127 6/30/08 Equipment and library books 41,635,575 40,565,563 98,305,452 6/30/08 Construction in progress 2,935,684 9,405,588 - 352,767,210 344,490,331 572,431,579 Less - Accumulated depreciation (129,291,176) (119,169,690) - Land, buildings and equipment, net $ 223,476,034 $ 225,320,641 $ 572,431,579 For the years ended June 30, 2008 and 2007, net investment in plant included in unrestricted net assets totaled $78,052,637 and $73,696,735, respectively. 5. Long-Term Debt Bonds payable at June 30, 2008 and 2007 consisted of the following: Average Coupon 2008 2007 Interest Principal Principal Facility Financed Bonds of CHEFA Rate Balances* Balances* Various campus facilities 1998-H, due 2028 4.97% $ 10,342,737 $ 10,866,854 Various campus facilities 1999-I, due 2029 5.34% 1,722,751 3,366,928 Various campus facilities 2001-J, due 2029 4.89% 1,204,083 1,577,112 Various campus facilities 2004-K, due 2034 Variable - 31,100,000 Various campus facilities 2005-L1, due 2029 Variable 47,423,744 47,725,000 Various campus facilities 2005-L2, due 2029 Variable 58,473,430 58,850,000 Various campus facilities 2005-L1(Second Tranche) due 2029 Variable - 10,000,000 Various campus facilities 2008-M, due 2034 4.76% 38,145,697 - $ 157,312,442 $ 163,485,894 (*) Amounts are net of unamortized discounts. 12
  • 15. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 The above listed Connecticut Health and Educational Facilities Authority (“CHEFA”) bonds are payable in annual installments on a graduating scale. The principal balances of the 1998-H, 1999- I, and 2001-J bonds are net of unamortized debt discounts at June 30, 2008 of $131,565 $26,536 and $5,916 respectively, and of the 1998-H, 1999-I and 2001-J bonds at June 30, 2007 of $138,143, $53,072 and $7,888, respectively. In April 2008, the University advance refunded the Series K and Series L1 Second Tranche bonds with principal balances remaining of $31,100,000 and $10,000,000 through the issuance of CHEFA Series M bonds. The refunded bonds were issued in the principal amount of $39,440,000 and bear interest at an average total all-in fixed interest cost of 4.76%. In connection with this refunding the University incurred debt extinguishment charges of $1,137,837 included within nonoperating activities in the Statement of Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets. Principal payments are due in annual installments maturing in 2034. The Series K Revenue Bonds which were advance refunded in April 2008 were insured auction rate security bonds that bore interest at a variable rate based on an auction rate which was reset every 7 days. The average interest rate paid during the year ended June 30, 2008 and 2007 respectively was approximately 3.87% and 3.18%. The Series L1 Second Tranche bonds which were also advance refunded in April 2008 were insured auction rate security bonds that bore interest at a variable rate based on an auction rate which is reset every 7 days. The average interest rate paid during the year ended June 30, 2008 and 2007 respectively was approximately 3.13% and 3.06%.The bonds were sold as a synthetic fixed rate structure that employs insured auction rate bonds and a SIFMA swap to fixed contract in the amount of $8,425,000 with JPMorgan as counterparty. This has enabled the University to lock in a fixed rate of 3.998% and receive the SIFMA (minus 20 basis points) reset weekly. The realized and unrealized loss associated with the agreement of $495,969 and $167,574 for the year ended June 30, 2008 and 2007 is included within nonoperating activities in the Statement of Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets. The fair value of the swap is recorded as a liability within long term debt in the amount of ($343,411) as of June 30, 2008 and an asset within other assets in the amount of $60,725 as of June 30, 2007. As of June 30, 2008 the swap was still outstanding. The Series L1/L2 bonds are insured auction rate security bonds that bear interest at a variable rate based on an auction rate which is reset every 7 days. The average interest rate paid during the year ended June 30, 2008 and 2007 respectively on the L1 bonds was approximately 3.35% and 3.19% and on the L2 bonds 3.54% and 3.30%.The bonds were sold as a synthetic fixed rate structure that employs insured auction rate bonds and a Securities Industry and Financial Markets Association (SIFMA) swap to fixed contract for the par amount with JPMorgan as counterparty. This has enabled the University to lock in a fixed rate of 3.711% and receive SIFMA (minus 20 basis points) reset weekly. The use of synthetic fixed refunding yields the lowest cost of capital with substantial future financing flexibility after the call date of the refunded bonds. The realized and unrealized loss of $6,465,713 and $2,174,535 at June 30, 2008 and at 2007 is included within nonoperating activities in the Statement of Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets. The fair value of the swap is recorded as a liability within long term debt in the amount of ($3,527,057) as of June 30, 2008 and an asset within other assets in the amount of $1,796,663 as of June 30, 2007. As of June 30, 2008 the swap was still outstanding. In accordance with each of the bond indentures, the University maintains a sinking fund with bank trustees at an amount sufficient to pay interest and principal during the succeeding twelve months. The amounts on deposits with trustee in the Statement of Financial Position as of June 30, 2008 and 2007, respectively, are $490,500 as required by the CHEFA I bond indenture, $229,000 as 13
  • 16. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 required by the CHEFA J bond indenture and the reserve fund insurance policy for the 1998-H bonds and $181,000 and reserve funds of $8,887,752 and $3,051,849 as required by the CHEFA Series L1/L2 and Series M bond indentures. The University has guaranteed reimbursement for any payments made from the 1998-H bond reserve fund insurance policy. The University’s long-term debt agreements contain various covenants which may restrict the ability of the University to incur or guarantee debt. These agreements also require the University to meet a debt service ratio as defined in the agreements. During 2004, the University entered into an interest rate swap agreement to manage its interest costs associated with a portion of its outstanding bonds payable. The interest rate swap agreement was not entered into for trading or speculative purposes. Under the terms of the agreement, the University pays a variable interest rate based on the Municipal Swap Index which is reset each week and it receives a fixed interest rate determined at the inception of the agreement. The notional amount of the swap agreement is $20,000,000 and the agreement expires in 2014. The University accounts for the agreement under the terms of Financial Accounting Standards Board Statement No. 133, as amended. The realized and unrealized gain associated with the agreement of $530,973 and $258,680 for the years ended June 30, 2008 and 2007, respectively, is included within nonoperating activities in the Statement of Unrestricted Revenues and Expenses and Other Changes in Unrestricted Net Assets. The fair value of the swap is recorded as an asset within other assets in the amount of $119,744 as of June 30, 2008 and as a liability within long term debt in the amount of ($304,682) as of June 30, 2007. As of June 30, 2008 the swap was still outstanding. Interest expense for the years ended June 30, 2008 and 2007 was $6,896,184 and $6,382,910, respectively. The aggregate amount of principal due in respect of long-term debt within each of the five fiscal years subsequent to June 30, 2008 is as follows: 2009 $ 4,595,000 2010 4,925,000 2011 5,135,000 2012 5,285,000 2013 5,510,000 Thereafter 132,025,000 $ 157,475,000 In August 2008, the University refunded its CHEFA Series L1/L2 bonds with principal outstanding in total of $105,900,000 by issuing CHEFA Series N bonds in the principal amount of $108,210,000. In addition to refunding the Series L1/L2 bonds, the proceeds of the Series N bonds were also used to fund a deposit in a debt service reserve fund, fund a swap termination payment and pay costs of issuance of the bonds. The bonds will bear interest at an average total fixed interest cost of 4.92%. Principal payments are due in annual installments maturing in 2029. 14
  • 17. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 6. Retirement Benefits The University has a 403(b) defined contribution retirement plan which covers substantially all of its employees, other than those of the Jesuit Community, and which is funded through direct payments to the Teachers' Insurance and Annuity Association and College Retirement Equities Fund and/or Fidelity Investment Tax Exempt Services Company for the purchase of individual annuities. For each eligible employee, the University generally contributes an amount equal to 10% of the employee's salary or base compensation and the employee contributes 2-1/2%. With respect to faculty and administrative members of the Jesuit Community, an equivalent 10% of their salaries are paid directly to the Jesuit Community. Retirement contributions paid by the University and charged to unrestricted operations for the years ended June 30, 2008 and 2007 were approximately $4,779,883 and $4,324,422, respectively. 7. Temporarily Restricted and Permanently Restricted Net Assets Temporarily restricted net assets at June 30, 2008 and 2007 were available for the following purposes: 2008 2007 Educational and general services $ 6,838,759 $ 5,991,187 Acquisition of buildings and equipment 101,083 4,460,165 Total temporarily restricted net assets $ 6,939,842 $ 10,451,352 Permanently restricted net assets at June 30, 2008 and 2007 consist primarily of endowment corpus, with donor stipulations that they be invested in perpetuity to provide a permanent source of income. Such income is primarily restricted for instruction and student scholarship expenses. Endowment and quasi-endowment, including undistributed income, gains, and losses consists primarily of invested securities and endowment contributions receivable and other assets, included in net assets at June 30, 2008 and 2007 were as follows: 2008 2007 Permanently restricted $ 94,554,868 $ 90,166,160 Unrestricted quasi endowment 171,164,676 181,070,400 Total permanent endowment and unrestricted quasi endowment net assets $ 265,719,544 $ 271,236,560 15
  • 18. Fairfield University Notes to Financial Statements June 30, 2008 and 2007 8. Net Assets Released from Restrictions Net assets released from donor restrictions when expenses were incurred to satisfy the restricted purposes or by occurrence of other events as specified by donors for the years ended June 30, 2008 and 2007 were as follows: 2008 2007 Purpose of restrictions Student financial aid $ 520,983 $ 546,019 Educational and general programs 4,564,077 4,437,675 Auxiliary services 17,946 176,608 Total operating 5,103,006 5,160,302 Capital expenditures 7,417,565 469,494 Contributions released from time restrictions - 1,649,750 $ 12,520,571 $ 7,279,546 9. Operating Leases The University has various equipment lease agreements, for printers, copiers, and other types of similar equipment, with obligations that extend through 2011. Future minimum rental payments at June 30, 2008, under agreements classified as operating leases with terms in excess of one year, are as follows: 2009 $ 296,024 2010 269,150 2011 142,044 2012 59,270 2013 27,420 Total future minimum lease payments $ 793,908 10. Commitments and Contingencies At June 30, 2008, the University had a line of credit agreement which allows for borrowings up to $5,000,000. The agreement expires on January 24, 2010. Interest on any borrowings is at the LIBOR rate plus 0.75%. At June 30, 2008 and 2007, there were no outstanding borrowings. The University is involved in various legal actions, arising in the normal course of operations. The University is of the opinion that the resolution of these matters will not have a significant effect on the financial condition of the University. 16

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