Consolidated Financial Statements and Report of Independent Certified Public Accountants ֱ and Affiliates June 30, 2021 and 2020 Contents Page Report of Independent Certified Public Accountants 3 Consolidated Financial Statements Consolidated statements of financial position as of June 30, 2021 and 2020 5 Consolidated statement of activities for the year ended June 30, 2021 6 Consolidated statement of activities for the year ended June 30, 2020 7 Consolidated statements of cash flows for the years ended June 30, 2021 and 2020 8 Notes to consolidated financial statements 9 GT.COM Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership. To the Board of Trustees of ֱ and Affiliates Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of Marist College and Affiliates (the “College”), which comprise the consolidated statements of financial position as of June 30, 2021 and 2020, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the College’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS GRANT THORNTON LLP 757 Third Avenue, 9th Floor New York, NY 10017 D +1 212 599 0100 F +1 212 370 4520 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ֱ and Affiliates as of June 30, 2021 and 2020, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. New York, New York November 19, 2021 2021 2020 ASSETS Cash and cash equivalents 70,292,671$ 35,458,326$ Short-term investments 16,655,595 23,148,543 Accounts receivable, net 2,801,222 4,238,880 Contributions receivable, net 4,251,468 5,739,100 Deposits with bond trustees 7,784,759 7,663,684 Other assets 1,899,488 1,750,663 Student loans receivable 3,995,681 4,993,921 Assets held in charitable remainder trust 554,270 509,390 Investments 416,457,408 312,536,578 Right-of-use lease assets 1,927,619 - Assets held for sale 19,500,000 22,103,858 Construction in progress 4,347,966 4,186,604 Land, buildings and equipment, net 433,829,760 449,606,083 Total assets 984,297,907$ 871,935,630$ LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued liabilities 25,990,972$ 28,341,848$ Deferred income 9,930,289 10,059,105 Annuities payable 335,231 284,991 Finance lease liabilities 981,252 986,289 Operating lease liabilities 1,989,383 - U.S. government advances refundable 3,979,388 4,950,976 Bonds payable, net 184,245,432 191,781,307 Note payable 384,000 384,000 Accrued post-retirement benefits 9,627,527 10,949,553 Interest rate swap obligation 4,839,276 6,806,346 Total liabilities 242,302,750 254,544,415 Net assets Without donor restrictions 629,330,803 526,886,005 With donor restrictions Restricted by time or purpose 71,516,252 50,849,360 Perpetual in nature 41,148,102 39,655,850 Total with donor restrictions 112,664,354 90,505,210 Total net assets 741,995,157 617,391,215 Total liabilities and net assets 984,297,907$ 871,935,630$ ֱ and Affiliates CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of June 30, 2021 and 2020 The accompanying notes are an integral part of these consolidated financial statements. 5 Without Donor With Donor Restrictions Restrictions Total Operating revenues Tuition, fees, room and board, net 185,051,047$ -$ 185,051,047$ Government grants 9,234,199 - 9,234,199 Private grants and contracts 1,036,810 - 1,036,810 Contributions 2,275,102 2,294,707 4,569,809 Investment return designated for operations, net 2,156,362 3,129,449 5,285,811 Other income 2,787,930 - 2,787,930 Net assets released from restrictions 2,868,109 (2,868,109) - Total operating revenues 205,409,559 2,556,047 207,965,606 Operating expenses Instructional 71,385,565 - 71,385,565 Research 148,909 - 148,909 Public service 509,692 - 509,692 Academic support 16,391,400 - 16,391,400 Student services 36,725,296 - 36,725,296 Institutional support 18,006,313 - 18,006,313 Scholarships and fellowships 2,418,943 - 2,418,943 Auxiliary enterprises 38,381,021 - 38,381,021 Total operating expenses 183,967,139 - 183,967,139 Changes in net assets from operating activities 21,442,420 2,556,047 23,998,467 Nonoperating activities Net gain on disposal of fixed assets 30,599 - 30,599 Write down of assets held for sale (2,209,233) - (2,209,233) Net investment return in excess of amounts designated for operations 79,657,788 19,479,532 99,137,320 Net loss from Sprout Creek Farm, Inc. (64,655) - (64,655) Change in value of interest rate swap obligation 1,967,070 - 1,967,070 Payment to beneficiaries - (69,245) (69,245) Post-retirement related changes other than net periodic benefit costs 1,813,619 - 1,813,619 Changes to donor’s restriction/net asset class (192,810) 192,810 - Changes in net assets from nonoperating activities 81,002,378 19,603,097 100,605,475 CHANGE IN NET ASSETS 102,444,798 22,159,144 124,603,942 Net assets, beginning of year 526,886,005 90,505,210 617,391,215 Net assets, end of year 629,330,803$ 112,664,354$ 741,995,157$ ֱ and Affiliates CONSOLIDATED STATEMENT OF ACTIVITIES For the year ended June 30, 2021 The accompanying notes are an integral part of this consolidated financial statement. 6 Lora.Gannon Highlight Lora.Gannon Highlight Without Donor With Donor Restrictions Restrictions Total Operating revenues Tuition, fees, room and board, net 195,793,110$ -$ 195,793,110$ Government grants 5,507,147 - 5,507,147 Private grants and contracts 937,200 - 937,200 Contributions 2,092,924 4,469,992 6,562,916 Investment return designated for operations, net 2,723,764 2,923,537 5,647,301 Other income 5,413,543 - 5,413,543 Net assets released from restrictions 2,789,673 (2,789,673) - Total operating revenues 215,257,361 4,603,856 219,861,217 Operating expenses Instructional 83,150,936 - 83,150,936 Research 139,609 - 139,609 Public service 573,507 - 573,507 Academic support 16,276,316 - 16,276,316 Student services 39,426,546 - 39,426,546 Institutional support 21,451,600 - 21,451,600 Scholarships and fellowships 1,602,703 - 1,602,703 Auxiliary enterprises 36,366,936 - 36,366,936 Total operating expenses 198,988,153 - 198,988,153 Changes in net assets from operating activities 16,269,208 4,603,856 20,873,064 Nonoperating activities Net gain on disposal of fixed assets 145,837 - 145,837 Net investment return (loss) in excess of amounts designated for operations 8,179,245 (402,276) 7,776,969 Net loss from Sprout Creek Farm, Inc. (1,015,331) - (1,015,331) Change in value of interest rate swap obligation (1,665,486) - (1,665,486) Payment to beneficiaries - (17,919) (17,919) Post-retirement related changes other than net periodic benefit costs 56,084 - 56,084 Changes to donor’s restriction/net asset class 11,666 (11,666) - Changes in net assets from nonoperating activities 5,712,015 (431,861) 5,280,154 CHANGE IN NET ASSETS 21,981,223 4,171,995 26,153,218 Net assets, beginning of year 504,904,782 86,333,215 591,237,997 Net assets, end of year 526,886,005$ 90,505,210$ 617,391,215$ ֱ and Affiliates CONSOLIDATED STATEMENT OF ACTIVITIES For the year ended June 30, 2020 The accompanying notes are an integral part of this consolidated financial statement. 7 2021 2020 Cash flows from operating activities: Changes in net assets 124,603,942$ 26,153,218$ Adjustments to reconcile changes in net assets to net cash provided by operating activities: Nonoperating items: Contributions restricted for investment in endowment (412,232) (3,803,624) Gifts of stock (131,184) (146,321) Interest and dividends restricted for endowment (932,283) (1,262,839) Net realized gain on investments (25,824,006) (7,773,376) Net realized loss (gain) on short-term investments 26,992 (903) Net investment (gain) loss on assets held in charitable remainder trust (44,880) 49,413 Noncash items: Depreciation 19,620,160 19,873,530 Amortization of bond issuance costs 122,902 122,904 Amortization of bond premium (678,953) (718,444) Bad debt expense (80,553) 51,050 Net unrealized gain on investments (52,812,301) (3,367,909) Net unrealized loss (gain) on short-term investments 130,249 (397,830) Net (gain) loss on interest rate swap obligation (1,967,070) 1,665,486 Non-cash contributions (26,500) - Non-cash lease expense 61,764 - Gain on disposal of fixed assets (30,599) (145,837) Write down of assets held for sale 2,209,233 - Accrued post-retirement benefits (1,322,026) 411,573 (Increase) decrease in: Accounts receivable 1,437,658 1,332,450 Contributions receivable 1,568,185 290,990 Other assets (148,825) 42,381 Increase (decrease) in: Accounts payable and accrued liabilities (1,114,511) 6,692,522 Deferred revenue (128,816) (1,725,330) Annuities payable 50,240 79,236 Net cash provided by operating activities 64,176,586 37,422,340 Cash flows from investing activities: Proceeds from sales and maturities of investments 97,352,329 105,059,326 Purchases of investments (122,505,668) (109,573,748) Purchase of short-term investments (5,491,523) (12,030,291) Proceeds from sale of short-term investments 11,827,230 10,881,382 Proceeds from sale of fixed assets 448,140 947,466 Purchase of property and equipment (4,660,812) (30,488,925) Repayments on student loans 998,240 999,785 Net cash used in investing activities (22,032,064) (34,205,005) Cash flows from financing activities: Repayments of principal on indebtedness (6,979,824) (6,684,070) Repayment of principal on finance lease liabilities (582,205) (390,790) Repayments of funds on U.S. government advances (971,588) (1,033,419) Change in deposits with bond trustees (121,075) 11,661,755 Interest and dividends restricted for endowment 932,283 1,262,839 Contributions restricted for investment in endowment 412,232 3,803,624 Net cash (used in) provided by financing activities (7,310,177) 8,619,939 NET INCREASE IN CASH AND CASH EQUIVALENTS 34,834,345 11,837,274 Cash and cash equivalents, beginning of year 35,458,326 23,621,052 Cash and cash equivalents, end of year 70,292,671$ 35,458,326$ Supplemental cash flow information: Cash paid during the year for interest 7,002,358$ 7,220,449$ Purchases of land, buildings and equipment within accounts payable and accrued liabilities 7,092,497$ 8,328,862$ Assets acquired in finance lease 577,168$ -$ ֱ and Affiliates CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended June 30, 2021 and 2020 The accompanying notes are an integral part of these consolidated financial statements. 8 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 9 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization ֱ (the “College”) is an independent, comprehensive institution located on a 210 acre main campus in the Hudson River Valley of New York, a branch campus in Florence, Italy, and educational offerings around the world through its online and study abroad programs. ֱ is dedicated to helping students develop the intellect, character and skills required for enlightened, ethical, and productive lives in the global community of the 21st century. The consolidated financial statements of the College have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the College’s wholly owned subsidiaries, Sprout Creek Farm, Inc., Marist Real Property Service, Inc., Marist Real Property Service II, Inc., and VAYU, LLC. All significant intercompany transactions have been eliminated. Marist Real Property Services, Inc. and Marist Real Property Services II, Inc. are corporations that were formed by the College to purchase and hold real estate for the benefit and use of the College. The College is the single member of VAYU, LLC which holds real and personal property in Esopus, New York. Sprout Creek Farm, Inc. (the “Farm”) is a New York 501(c)3 corporation which has provided educational experiences for children and adults. The College took over control of the Farm in January 2018. During the year ended June 30, 2020 all operations of the Farm were ceased (see Note 25). Basis of Presentation Resources are reported for accounting purposes in separate classes of net assets based on the existence or absence of donor-imposed restrictions. In the accompanying consolidated financial statements, net assets that have similar characteristics have been combined into the following categories: Net Assets Without Donor Restrictions Net assets without donor restrictions are net assets that are not subject to donor-imposed stipulations. Net assets without donor restrictions may be designated for specific purposes by action of the Board of Trustees or may otherwise be limited by contractual agreements with outside parties (see also Notes 16 and 17). Net Assets With Donor Restrictions Net assets with donor restrictions are net assets subject to donor-imposed stipulations that will be met either by actions of the College and/or the passage of time. The College reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends and/or a purpose restriction is accomplished, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the consolidated statements of activities as net assets released from restrictions. Net assets with donor restrictions also include earnings on donor-restricted endowment funds that have not yet been appropriated by the College’s Board of Trustees for expenditure. Net assets with donor restrictions also include gifts from donors who stipulate that their donated resources be maintained in perpetuity by the College. Generally, the College is permitted to expend part or all of the income and gains derived from these donated assets, restricted only by donors’ stipulations. Fair Value Measurements The College follows guidance that provides a consistent definition of fair value which focuses on an exit price between market participants in an orderly transaction. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 10 The guidance also prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level hierarchy for fair value measurements based on the transparency of information used in the valuation of the respective asset or liability as of the measurement date. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. The types of investments in Level 1 include listed equities held in the name of the College, and exclude listed equities and other securities held indirectly through commingled funds; Level 2 - Pricing inputs, including broker quotes, are generally those other than exchange quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies; and Level 3 - Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs used in the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include privately held investments, partnerships and similar interests. The categorization of a financial instrument within the fair value hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the College’s perceived risk of that instrument. As permitted by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic, 820-10, the College has excluded investments that are measured at fair value using the net asset value (“NAV”) per share practical expedient from the fair value hierarchy. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments consisting of demand deposit accounts, money market funds, and debt instruments with original maturities of three months or less at the time of purchase. Cash and cash equivalents held in the investment portfolio are excluded as a result of the College’s intent to segregate these designated funds from cash available for current operations. Accounts Receivable Accounts receivable include student accounts receivable, grants receivable and other receivables and are reported net of allowance for doubtful accounts. The College provides for potentially uncollectible amounts through a provision for bad debts and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Receivables are written-off when deemed uncollectible and payments subsequently collected are recorded as revenue in the period received. Revenue Recognition and Receivables In accordance with FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the College recognizes revenue when control of the promised goods or services are transferred to the College’s students or outside parties in an amount that reflects the consideration the College expects to be entitled to in exchange for those goods or services. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 11 ASC 606 also requires expanded disclosures regarding revenue recognition to ensure an understanding as to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The College has identified student revenues, sales and services of educational activities and sales of other auxiliary enterprise revenue as revenue categories subject to the adoption of ASC 606. The College recognizes contracts with customers, as goods or services transferred or provided in accordance with ASC 606. Tuition revenues for the fall and spring terms are recognized in the academic semester to which they relate. Revenues and expenses relating to summer session activities are recognized as earned. The carrying value of student receivables has been reduced by an appropriate allowance for uncollectible accounts, based on historical collection experience and therefore approximates net realizable value. Receivables are written-off in the period in which they are deemed uncollectible. The College also generates other revenue through Cloud Computing and Analytics contracts, NCAA and MAAC distributions as part of the athletics program, as well as various camps and events on campus. Generally, this revenue is recognized over time with the completion of the specific performance obligations. Contributions, Grants and Contracts The College recognizes revenue from contributions, grants and contracts in accordance with Accounting Standards Update (“ASU”) 2018-08, Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. Accordingly, the College evaluates whether a transfer of assets is (1) an exchange transaction in which a resource provider is receiving commensurate value in return for the resources transferred or (2) a contribution. If the transfer of assets is determined to be an exchange transaction, the College applies guidance under ASC 606. If the transfer of assets is determined to be a contribution, the College evaluates whether the contribution is conditional based upon whether the agreement includes both (1) one or more barriers that must be overcome before the College is entitled to the assets transferred and promised and (2) a right of return of assets transferred or a right of release of a promisor’s obligation to transfer assets. Unconditional contributions are recognized as revenues when donors’ commitments are received. Contributions of assets other than cash are recorded at their estimated fair value. Conditional pledges are recognized as revenues when conditions are substantially met. Contributions, including unconditional promises to give (pledges), are reported as revenues in the period received or pledged. Pledges, less an allowance for uncollectible amounts, are recorded as receivables at the net present value, determined using a credit-adjusted rate. Amortization of the discount is recorded as additional contribution revenue in accordance with the donor-imposed restrictions, if any. Restricted pledges are reported as additions to the with donor restrictions’ net asset class. Contributions of cash or other assets that must be used to acquire or construct long-lived assets are reported with donor restrictions until the assets are placed in service. Conditional promises to give and intentions to give are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. The College has recorded revenue from conditional promises of $110,000 and $126,304 for the years ended June 30, 2021 and 2020, respectively, as the conditions on these pledges have been met. There were $100,000 of conditional pledges received during the year ended June 30, 2021. Contributions with donor-imposed restrictions are reported as revenues restricted by time or purpose and are released to net assets without donor restrictions when donor-imposed restrictions are satisfied. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 12 Contributions restricted for the acquisition of land, buildings and equipment or for the construction of assets are reported as revenues with donor restrictions. These contributions are released to net assets upon acquisition of the assets or when the assets are placed into service. Government grants and contracts have been deemed to be conditional contributions. Accordingly, revenue is recognized when conditions have been met, that is, generally as related costs are incurred under the grant or contract. Amounts expended in excess of reimbursements are reported as accounts receivable on the consolidated statements of financial position. Student Loans Receivable and U.S. Government Advances Refundable Student loans receivable are carried at unpaid principal balances, which represent net realizable value. These loans have mandated interest rates and repayment terms subject to significant restrictions as to their transfer and disposition. Amounts received from the federal government to fund a portion of the student loans are ultimately refundable to the federal government and are classified as U.S. Government advances refundable in the consolidated statements of financial position. Investments The estimated fair value of investments is based on quoted market prices, except for certain investments, principally limited partnerships and similar interests, for which quoted market prices are not available. The estimated fair value of limited partnerships and similar investments is based on valuations provided by external investment managers as of the measurement date. Because alternative investments are not readily marketable, their estimated fair value is subject to uncertainty and therefore may differ from the value that would have been used had a ready market for such investments existed. Such differences could be material. Investment securities are exposed to various risks, such as interest rate, market, economic conditions, world affairs and credit risks. Due to the level of risk associated with certain investment securities, it is possible that changes in their values could occur in the near term and such changes could materially affect the reported amounts in the consolidated financial statements. Deposits with Bond Trustees Deposits with bond trustees represent funds held by designated bond trustees for debt service payments and construction building projects. Deposits with trustees are held in cash, money market funds, and fixed income and are recorded at fair value as of June 30, 2021 and 2020. Land, Buildings and Equipment Land, buildings and equipment purchased in excess of $5,000 are recorded at cost or, if donated, at fair value at the date of the donation. Depreciation is computed on a straight-line basis, using the half-year convention, over the estimated useful lives of the related assets as follows: Years Buildings and building improvements 20 - 45 Ground improvements 15 - 20 Equipment, furniture and fixtures 3 - 10 Library books 5 Vehicles 5 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 13 Works of art, historical treasures and similar assets (collectively, “collections”) have been recognized at their estimated fair value based upon appraisals or similar valuations at the date of acquisition or donation. Collections are capitalized but not depreciated. The College has capitalized its collections since its inception. If purchased, items accessioned into the collection are capitalized at cost and, if donated, they are capitalized at their fair value as of the accession date. Gains or losses on the deaccession of collection items are classified on the consolidated statements of activities as with or without donor-restricted support depending on donor restrictions, if any, placed on the item at the time of accession. Deferred Income Deferred income primarily consists of tuition and matriculation deposits and other payments for upcoming semesters that have been billed and/or received prior to the fiscal year end. Interest Rate Swap Obligation The College makes limited use of derivative financial instruments, specifically an interest rate swap, for the purpose of managing interest rate risks associated with its variable rate debt obligations. An interest rate swap agreement is used to mitigate the variability of future changes in net assets and cash flows caused by movement in interest rates. The differentials paid or received on the interest rate swap agreement are recognized as adjustments to interest expense. The reported fair value of the interest rate swap obligation represents the cost to terminate the agreement at the measurement date, taking into account current and projected market interest rates. Changes in fair value are reported as part of nonoperating activities on the consolidated statements of activities. Conditional Asset Retirement Obligation The College is required to recognize the costs associated with the eventual remediation and abatement of asbestos located within the construction of certain of its buildings. However, based on the results of surveys performed by independent environmental consultants, the College concludes that the cost of remediation is immaterial to the accompanying consolidated financial statements and, accordingly, has not recognized a liability for this obligation as of June 30, 2021 and 2020. Functional Expenses Facilities operations and maintenance expenses, depreciation and amortization of plant assets and interest on long-term debt are allocated to program and supporting activities based on the primary use of the facilities (see Note 20). Income Taxes Tax effects from an uncertain tax position are recognized in the consolidated financial statements only if the position is “more-likely-than-not” to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. The College is exempt from income tax under Internal Revenue Code (the “Code”) Section 501(c)(3), though it is subject to tax on income unrelated to its exempt purposes, unless that income is otherwise excluded by the Code. Advertising Advertising costs are expensed as incurred. Advertising expense amounted to $1,496,864 and $1,816,464 for the years ended June 30, 2021 and 2020, respectively. Such amounts are included in student services on the accompanying consolidated statements of activities. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 14 Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. In addition, estimates and assumptions are used to determine disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used in the determination of depreciation, post-retirement benefits, allowance for doubtful accounts, contributions receivable, certain accrued liabilities and certain overhead allocations, among others. Concentrations of Credit Risk The College maintains its cash and money market funds with high credit quality financial institutions, which at times may exceed federally insured limits. The College has not experienced, nor does it anticipate, any losses with respect to such accounts. The College has a significant investment in equities, fixed income securities, mutual and exchange-traded funds and alternative investments, both marketable and non- marketable, and is therefore subject to concentrations of credit risk. Measure of Operations The accompanying consolidated statements of activities present the changes in net assets distinguishing between operating and nonoperating activities. Operating activities principally include all revenues and expenses that relate to the College’s educational programs, research, training and supporting activities. Operating revenues also include investment return pursuant to the College’s spending rate policy earned on long-term investments held for endowment and similar purposes. The College has defined nonoperating activities principally to include investment income earned, and gains and losses on investments held for long-term purposes, net of amounts distributed to support operations in accordance with the endowment spending policy; gains or losses on its interest rate swap obligation; activities related to the Farm; and activity related to post-retirement benefit plans. Certain other gains and losses considered to be of a more unusual or non-recurring nature are also included as part of nonoperating activities. New Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the consolidated statements of financial position and disclosing key information about leasing arrangements. ASU 2016-02 requires not-for-profit lessees to report a right-of-use (“ROU”) asset along with a lease liability. The College adopted ASU 2016-02 effective July 1, 2020 and, as a result, the accompanying consolidated statement of financial position as of June 30, 2021 includes the ROU assets and lease liabilities, which are not reflected in the accompanying consolidated statement of financial position as of June 30, 2020 (see Note 24). The College elected to apply practical expedients allowing it to: (1) not reassess whether any expired or existing contracts previously assessed as not containing leases are, or contain, leases; (2) not reassess the lease classification for any expired or existing leases; and (3) not reassess initial direct costs for any existing leases. The College also elected to apply the practical expedient to use hindsight in determining the lease term. The adoption of Topic 842 did not have a material impact on the College’s consolidated financial statements. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 15 In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. The provisions of ASU No. 2020-04 are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04. Subsequent Events The College evaluated its June 30, 2021 consolidated financial statements for subsequent events through November 19, 2021, the date the consolidated financial statements were issued. Except as disclosed in Note 11, the College is not aware of any other subsequent events which would require recognition or disclosure in the consolidated financial statements. NOTE 2 - SHORT-TERM INVESTMENTS Short-term investments consist of certificates of deposit with original maturities of greater than 90 days and short-term corporate and municipal bond funds maturing within a 5 year period in accordance with the short- term investment policy. The fair value as of June 30, 2021 and 2020 is $16,655,595 and $23,148,543, including $130,249 and $397,830 in unrealized depreciation and appreciation, respectively. NOTE 3 - ACCOUNTS RECEIVABLE, NET Accounts receivable, net, consists of the following at June 30, 2021 and 2020: 2021 2020 Student accounts receivable $ 1,265,451 $ 1,154,229 Less: allowance for doubtful accounts (265,700) (213,500) 999,751 940,729 Grants and contracts receivable 996,820 2,135,576 Other receivables 804,651 1,162,575 Accounts receivable, net $ 2,801,222 $ 4,238,880 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 16 NOTE 4 - CONTRIBUTIONS RECEIVABLE, NET Contributions receivable, net, consists of unconditional promises to give and are summarized as follows at June 30, 2021 and 2020: 2021 2020 Unconditional promises to give are expected to be collected in: Less than one year $ 1,658,744 $ 2,272,700 One to five years 2,968,677 3,747,078 More than five years 100,000 259,428 4,754,421 6,279,206 Less: Allowance for uncollectible amounts (398,979) (479,532) Discount to present value (with rates ranging from 0.07% to 1.21%) (103,974) (60,574) $ 4,251,468 $ 5,739,100 At June 30, 2021 and 2020, approximately 69% and 62%, respectively, of gross pledges receivable were due from four donors. At June 30, 2021 and 2020, the College had outstanding conditional pledges and bequests of $3,075,393 and $3,085,393, respectively, which, in accordance with U.S. GAAP, have not been recorded in the accompanying consolidated financial statements. NOTE 5 - STUDENT LOANS RECEIVABLE The College makes uncollateralized loans to students based on financial need. Student loans are funded through federal government loan programs or institutional resources. At June 30, 2021 and 2020, student loans totaled $3,995,681 and $4,993,921, respectively, and represented 0.4% and 0.6% of total assets, respectively. The College participates in the Federal Perkins revolving loan program. The availability of funds for loans under this program is dependent on reimbursements to the pool from repayments on outstanding loans. Funds advanced by the federal government of $3,979,388 and $4,950,976 at June 30, 2021 and 2020, respectively, are ultimately refundable to the government and are classified as liabilities in the accompanying consolidated statements of financial position. Outstanding loans cancelled under the program result in a reduction of the funds available for future loans and a decrease in the College’s liability to the government. Amounts due under the Federal Perkins loan program are almost fully guaranteed by the government and, therefore, no reserves are placed on any past due balances. On September 30, 2015, the Federal Perkins Loan Program expired. It was then extended on December 18, 2015 under The Perkins Loan Extension Act of 2015 to permit institutions to issue new loans, under amended guidelines, until September 30, 2017. No new Perkins loans can be issued under this Act subsequent to September 30, 2017. In addition, as part of this Act, prior to October 1, 2017, the College is required to annually return the federal share of excess liquid capital, as defined, to the federal government. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 17 At June 30, 2021 and 2020, the following amounts were past due under student loan programs: 2021 2020 1-60 days past due $ 4,703 $ 4,866 60-90 days past due 5,885 8,567 90+ days past due 1,001,231 993,301 Total past due $ 1,011,819 $ 1,006,734 NOTE 6 - INVESTMENTS The fair value of investments at June 30, 2021 and 2020, is as follows: 2021 2020 Endowments and other investible funds: Cash and cash equivalents $ 29,212,170 $ 19,265,803 Investments made in advance 10,250,000 - Fixed income securities 23,673,423 18,021,667 Domestic equity securities 12,526,591 5,023,906 International equity securities 28,661,837 22,847,163 Commingled fund 177,704,709 150,318,684 Hedge funds 70,377,444 54,456,903 Private equity 63,527,379 41,785,536 Total pooled investments 415,933,553 311,719,662 Operating and other investments: Domestic equity securities 292,321 213,401 Investment in TIAA annuities and mutual funds 231,534 603,515 Total operating and other investments 523,855 816,916 Total investments $ 416,457,408 $ 312,536,578 NOTE 7 - CONSTRUCTION IN PROGRESS Construction in progress consists of the following at June 30, 2021 and 2020: 2021 2020 Dyson Center addition/upgrades $ 4,322,169 $ 3,434,923 Other projects and renovations 25,797 751,681 Total construction in progress $ 4,347,966 $ 4,186,604 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 18 NOTE 8 - LAND, BUILDINGS AND EQUIPMENT, NET AND ASSETS HELD FOR SALE Land, buildings and equipment consist of the following at June 30, 2021 and 2020: 2021 2020 Buildings and building improvements $ 591,710,847 $ 588,867,591 Equipment, furniture and fixtures 80,587,207 80,828,430 Equipment acquired under finance leases 3,431,853 2,854,685 675,729,907 672,550,706 Less: accumulated depreciation (267,017,134) (248,035,110) 408,712,773 424,515,596 Land 17,239,362 17,239,362 Artwork and collectibles 7,877,625 7,851,125 Land, buildings and equipment, net $ 433,829,760 $ 449,606,083 The net ROU asset relating to equipment acquired under finance leases is $1,055,767 at June 30, 2021, and is included in land, buildings and equipment in the above chart. Depreciation expense for the years ended June 30, 2021 and 2020 totaled $19,620,160 and $19,873,530, respectively, and is allocated to functional expense categories on the accompanying consolidated statements of activities (Note 20). During the year ended June 30, 2020, the Board of Trustees and management decided to cease using space it had purchased in a New York City building, obtained an appraisal to determine the fair value of the asset, and began to actively market the asset for sale. As the appraised value approximated the carrying value, management reclassified the carrying value to assets held for sale, which totaled $21,709,233 at June 30, 2020. During 2021, based on a recent market valuation, the College took a write down of approximately $2.2 million on the New York City building to reflect the current market value of $19,500,000. In addition, during the year ended June 30, 2020, the College has reclassified the carrying value of a gifted condominium totaling $394,625, which is approximately its fair market value. During the year ended June 30, 2021, the College sold the gifted condominium. NOTE 9 - PENSION PLANS Defined Contribution Plans The College has a defined contribution pension plan for all eligible employees as defined in the “Retirement Resolution.” Pension obligations under the plan are funded each pay period by the College as they become due. Contributions are applied to annuities for each participant by the Teachers Insurance and Annuity Association (“TIAA”) and/or College Retirement Equities Fund (“CREF”). College contributions are dependent upon employee contributions in accordance with a schedule of percentages in the plan agreement. Employee contributions are normally made on a pre-tax basis unless an after tax agreement is so authorized by the employee. The College’s contributions to the plan for the years ended June 30, 2021 and 2020 totaled $5,543,603 and $6,081,120, respectively. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 19 The College funds a pension plan for all eligible employees in the SEIU Local 200 Union by participating in the pension plan provided by the 1199 Health Care Employees Pension Fund. The College’s contribution is a fixed percentage of monthly gross wages for all employees covered under the agreement. The College’s contributions for the years ended June 30, 2021 and 2020 totaled $662,763 and $748,468, respectively. Deferred Compensation Plans The College has deferred compensation plans for several employees based on years of service, which provide for cash payments at the end of the employment contract which are not guaranteed. The cost of the plans is being accrued over the period of active employment from the contract date. The liability under the agreements is determined based on the contributions required by the plans. The plans require annual contributions from $25,000 to $85,000, ranging from one to three years and coincide with the end of the respective employee’s contract. The plans require that the contributions be deposited in separate investment accounts. The assets related to these plans are maintained at TIAA-CREF, and are included in investments on the accompanying consolidated statements of financial position. The obligation related to and fair value of the assets of these plans at June 30, 2021 and 2020 was $401,534 and $728,514, respectively, and is included in the accompanying consolidated statements of financial position as part of accounts payable and accrued liabilities. Total contributions to these plans for the years ended June 30, 2021 and 2020 totaled $110,000 and $65,000, respectively. NOTE 10 - CHARITABLE REMAINDER TRUST A donor has established and funded a trust under which the College serves as the custodian and trustee. Assets held in this trust are stated separately in the consolidated statements of financial position. The fair value of the assets at June 30, 2021 and 2020 totaled $554,270 and $509,390, respectively. Specified distributions are to be made to a designated beneficiary over the trust’s term. Upon termination of the trust, the College receives the assets remaining in the trust. The trust is recorded at the fair value of the trust’s assets, less the present value of estimated future payments to be made under the specific terms of the trust and is revalued at the end of each fiscal year. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 20 NOTE 11 - BONDS PAYABLE, NET Bonds payable, net consists of the following at June 30, 2021 and 2020: June 30, 2021 Maturity Date Interest Rate Total Dutchess County Industrial Development Agency Series 2008-A Variable Rate Demand Bonds July 1, 2038 0.09% * $ 14,405,000 A Dutchess County Local Development Corp. Series 2012-A Revenue Bonds July 1, 2021 2.43% 2,070,000 B Series 2013-A Fixed Rate Bonds July 1, 2043 4.04% 12,575,000 C Series 2013B-1 Revenue Bonds July 1, 2028 0.53% ** 3,733,354 D Series 2013B-2 Revenue Bonds July 1, 2028 0.53% ** 5,701,902 D Series 2013B-3 Revenue Bonds July 1, 2035 0.53% ** 12,555,629 D Series 2015-A Revenue Bonds July 1, 2045 4.09% 76,520,000 E Series 2016 Revenue Bonds July 1, 2031 0.61% ** 10,340,000 F Series 2018 Revenue Bonds July 1, 2048 3.98% 35,790,000 G Total principal 173,690,885 Unamortized bond premium 12,499,431 Unamortized bond issuance costs (1,944,884) Total bonds payable, net $ 184,245,432 June 30, 2020 Maturity Date Interest Rate Total Dutchess County Industrial Development Agency Series 2008-A Variable Rate Demand Bonds July 1, 2038 1.14% * $ 14,970,000 A Dutchess County Local Development Corp. Series 2012-A Revenue Bonds July 1, 2021 2.43% 4,035,000 B Series 2013-A Fixed Rate Bonds July 1, 2043 4.04% 12,910,000 C Series 2013B-1 Revenue Bonds July 1, 2028 1.51% ** 4,182,086 D Series 2013B-2 Revenue Bonds July 1, 2028 1.51% ** 6,387,244 D Series 2013B-3 Revenue Bonds July 1, 2035 1.51% ** 13,211,379 D Series 2015-A Revenue Bonds July 1, 2045 4.09% 78,045,000 E Series 2016 Revenue Bonds July 1, 2031 1.61% ** 11,140,000 F Series 2018 Revenue Bonds July 1, 2048 3.98% 35,790,000 G Total principal 180,670,709 Unamortized bond premium 13,178,384 Unamortized bond issuance costs (2,067,786) Total bonds payable, net $ 191,781,307 * The variable interest rate is the interest rate which, in the best judgment of the remarketing agent, is the lowest rate of interest which would permit the remarketing agent to sell such bonds in a secondary market at par plus accrued interest. Amounts shown represent the rate in effect as of June 30, 2021 and 2020. ** The interest rate presented represents the average interest paid directly to TD Bank covering the same period as the financial statements. This rate does not include interest paid related to the interest rate swap with Morgan Stanley. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 21 A. Series 2008-A On January 1, 2008, the College entered into an agreement with the Dutchess County IDA and Morgan Stanley & Company to issue variable rate demand bonds in the amount of $20,000,000. Proceeds were used to finance construction of additional student townhouses, parking lots and roadways on Fulton Street in Poughkeepsie, New York. Interest is reset weekly by a remarketing agent and payable monthly. Principal payments will be made annually through July 1, 2038 based upon a predetermined schedule. The initial principal payment was $380,000 and gradually increases to $1,065,000 in the final year. The Series 2008- A bonds are secured by a letter of credit issued by TD Bank, N.A. that expires in January 2022. The College’s obligation to the letter of credit provider is an unsecured general obligation of the College with a springing mortgage on certain College property upon a default under the bank agreement. The Bonds contain certain financial covenants including an annual liquidity covenant defined as unrestricted cash and investments to long-term debt of not less than 0.45:1.00 which expires upon defeasance of the 2013B Bonds, a debt service coverage covenant of 1.00:1.00 and an additional bonds test which expire upon defeasance of the Series 2012-A and 2013-A Bonds. B. Series 2012-A On May 17, 2012, the College entered into an agreement with the Dutchess County Local Development Corporation and RBC Capital Markets to issue fixed rate serial bonds in the par amount of $13,420,000. The College also recorded a premium amount on the bond of $1,995,962. Proceeds were used to refund the Series 2003 bonds issued by the Dutchess County Industrial Development Agency. The Series 2003 bonds were issued to refund the Series 1990 and 1992 bonds issued by the Dormitory Authority of the State of New York. Interest is payable semi-annually based on predetermined interest rates starting at 4.0% in the initial year and increasing to 5.0% in 2017. The last principal payment of $2,070,000 was made on July 1, 2021. The Bonds are unsecured general obligations of the College. Financial covenants include a debt service coverage ratio of 1.00:1.00 and an additional bonds test. C. Series 2013-A On March 28, 2013, the College entered into an agreement with the Dutchess County Local Development Corporation and RBC Capital Markets to issue fixed rate serial and term bonds in the par amount of $14,710,000. The College also recorded a premium amount on the bond of $552,546. Proceeds were used to finance construction of multi-purpose academic building in Poughkeepsie, New York. Interest is payable semi-annually based on predetermined interest rates starting at 2.0% in the initial year and increasing to 5.0% in 2033. Principal payments will be made annually through July 1, 2043 based upon a predetermined schedule ranging from $280,000 to $835,000. The Bonds are unsecured general obligations of the College. Financial covenants include a debt service coverage ratio of 1.00:1.00 and an additional bonds test. D. Series 2013-B On September 12, 2013, the College refinanced the Series 1998-A, 1999-A, and 2005-A bonds totaling $33,045,000 from letter of credit enhanced variable rate demand bonds to variable rate revenue bonds, whereby TD Bank (the “Purchaser”) became the sole holder of these bonds. Proceeds from the Series 2013B-1 bonds of $6,505,000 were used primarily to refund the Dutchess County IDA Series 1998-A bonds which were previously used for the construction of the West Cedar student housing facility. Proceeds from the Series 2013B-2 bonds of $9,935,000 were used primarily to refund the Dutchess County IDA Series 1999-A bonds which were previously used for the construction of the library facility and humanities building. Proceeds from the Series 2013B-3 bonds of $16,605,000 were used primarily to refund the Dutchess County IDA 2005-A bonds which were previously used for the construction of the Upper Fulton Street student housing facility. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 22 The Purchaser can tender the 2013-B Bonds to the College for purchase on September 12, 2023 provided that it has provided at least 120 days’ notice to the College. The 2013-B Bonds are secured by a Bond Purchase and Loan Agreement by and between the Issuer, the Purchaser and the College which provides for an unconditional College obligation to make debt service payments. The 2013-B Bonds also contain certain financial covenants including an annual liquidity covenant defined as unrestricted (i.e. net assets without donor restrictions) and temporarily restricted (i.e. net assets with donor restricted less those to be held in perpetuity) liquid assets to long-term debt, of 0.45:1.00 and an additional bonds test of maximum annual debt service on pro-forma debt of less than 10% of the College’s unrestricted (i.e. net assets without donor restrictions) operating revenues. The Series 2013-B bonds are variable rate bonds with monthly interest that resets as a percentage of LIBOR plus a credit spread. Both interest and principal are payable monthly; principal payments will be made monthly through July 1, 2028 for the Series 2013B-1 and 2013B-2 bonds and through July 1, 2035 for the Series 2013B-3 bonds, based on a predetermined schedule ranging from $1,274,390 to $2,352,598. E. Series 2015-A On June 25, 2015, the College entered into an agreement with the Dutchess County Local Development Corporation to issue fixed rate serial and term bonds in the par amount of $80,885,000. The College also recorded a premium amount on the bond of $9,672,609. Proceeds were used to finance construction of the Science and Allied Health Building and Phase I of the North Campus student housing facility in Poughkeepsie, New York. Interest is payable semi-annually based on a coupon rate of 5.0%. Principal payments will be made annually through July 1, 2045 based upon a predetermined schedule ranging from $1,385,000 to $5,170,000. The Bonds are unsecured general obligations of the College. Financial covenants include a debt service coverage ratio of 1.00:1.00 and an additional bonds test which expire upon defeasance of the Series 2012-A and 2013-A Bonds. F. Series 2016 In 2016, the College refinanced the Series 2000-A bonds totaling $13,795,000 from letter of credit enhanced variable rate demand bonds to variable rate revenue bonds, whereby TD Bank, N.A. became the sole holder of these bonds until they mature in 2031; the bank does not have a put option prior to maturity. The Series 2016 Bonds are variable rate bonds with monthly interest that re-sets as a percentage of LIBOR plus a credit spread. Principal payments will be made annually through July 1, 2031, based on a predetermined schedule ranging from $140,000 to $1,075,000. The Bonds also contain certain financial covenants including an annual liquidity covenant defined as unrestricted cash and investments to long-term debt of not less than 0.45:1.00 which expires upon defeasance of the 2013B Bonds, a debt service coverage covenant of 1.00:1.00 and an additional bonds test which expire upon defeasance of the Series 2012-A and 2013-A Bonds. G. Series 2018 On October 4, 2018, the College entered into an agreement with the Dutchess County Local Development Corporation and Wells Fargo Securities to issue fixed rate serial and term bonds in the par amount of $35,790,000. The College also recorded a premium amount on the bond of $4,747,062. Proceeds were used to finance construction on the Steel Plant Studios and McCann Fitness Center Building, both located in Poughkeepsie, New York. Interest is payable semi-annually based on a coupon rate of 5.0%. Principal payments, starting on July 1, 2022, will be made annually through July 1, 2048 based on a predetermined schedule ranging from $640,000 to $2,355,000. The Bonds are unsecured general obligations of the College. Financial covenants include a debt service coverage ratio of 1.00:1.00 and an additional bonds test which expire upon defeasance of the Series 2012-A and 2013-A Bonds. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 23 For the years ended June 30, 2021 and 2020, interest expense related to long-term debt totaled $6,929,032 and $7,027,036, respectively. The College is in compliance with all required financial loan covenants at June 30, 2021 and 2020. At June 30, 2021, aggregate principal maturities of long-term debt for each of the next five years and in total thereafter are as follows: Fiscal year ending: 2022 $ 7,281,405 2023 6,065,617 2024 6,311,100 2025 6,587,813 2026 6,856,408 Thereafter 140,588,542 173,690,885 Plus: unamortized bond premium 12,499,431 Less: unamortized bond issuance costs (1,944,884) Total $ 184,245,432 Bond issuance costs consist of the following at June 30, 2021 and 2020: 2021 2020 Bond issuance costs $ 2,930,774 $ 2,930,774 Less: accumulated amortization (985,890) (862,988) Bond issuance costs, net $ 1,944,884 $ 2,067,786 Amortization expense for the years ended June 30, 2021 and 2020 amounted to $122,902 and $122,904, respectively. NOTE 12 - NOTE PAYABLE On January 1, 2018, the College entered into a change of Control Agreement with the Society of Sacred Heart United States-Canada Province, Inc. (the “Society”) for the Farm. As a condition of the agreement, the College assumed a note and mortgage from the Society in the amount of $480,000. The Society agreed to forgive the note on a straight-line basis annually over ten years provided that the College continues to operate the Farm for agricultural and educational purposes. For the years ended June 30, 2021 and 2020, no amounts were forgiven by the Society. The balance on the note and mortgage is $384,000 at June 30, 2021 and 2020, respectively, and is included in note payable on the accompanying consolidated statements of financial position. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 24 NOTE 13 - INTEREST RATE SWAP OBLIGATION In order to mitigate the College’s interest rate exposure on variable rate debt obligations, the College entered into an interest rate swap agreement with Morgan Stanley Capital Services, Inc. (the “Counterparty”). The notional principal amount of the swap was $33,015,000 and $35,425,000 at June 30, 2021 and 2020, respectively. The swap agreement matures on July 1, 2035. Under the terms of the agreement, the Counterparty will pay the College a variable interest rate at 68% of LIBOR (0.10% and 0.21% at June 30, 2021 and 2020, respectively) while the College is obligated to pay the Counterparty a fixed rate of 3.42%. The fair value of this obligation as of June 30, 2021 and 2020 totaled $4,839,276 and $6,806,346, respectively, and is categorized as Level 2 within the fair value hierarchy. The change in the fair value of this obligation totals $1,967,070 and ($1,665,486) for the years ended June 30, 2021 and 2020, respectively, and is included in the accompanying consolidated statements of activities as change in fair value of interest rate swap obligation. Additional interest paid by the College related to the swap agreement amounted to approximately $1,081,447 and $827,726 for the years ended June 30, 2021 and 2020, respectively. Under the terms of the agreement, cash serves as collateral when the fair value of the swap liability exceeds a threshold of $10 million. The cash is restricted as to withdrawal or use and would be held in custody by the Counterparty. The swap agreement contains provisions that require the College to meet certain financial covenants. The College was in compliance with these covenants at June 30, 2021 and 2020. Had the College not been in compliance, an additional termination event could occur and the Counterparty has the right to early terminate the agreement and the College could be responsible for a settlement amount based on market quotation. NOTE 14 - POST-RETIREMENT HEALTH CARE BENEFITS The College sponsors three defined benefit post-retirement plans (the “plan”) which cover substantially all employees that attain either pre-defined ages and/or years of service, or retirement with a disability benefit. The College offers a medical benefits plan, a dental benefits plan and a life insurance benefits plan. Under the medical plan, eligible retirees have a choice of one indemnity plan and one PPO. Both the indemnity plan and the PPO plan are contributory with retiree contributions adjusted annually. For all active and new employees, only the PPO plan is available. Effective July 1, 2012, the College’s Board of Trustees froze the post-retirement plan and it is now closed to new participants. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 25 The following table provides a reconciliation of the changes in the plan’s benefit obligations and fair value of assets for the years ended June 30, 2021 and 2020: 2021 2020 Reconciliation of benefit obligation: Obligation at beginning of year $ 10,949,553 $ 10,537,980 Service cost, including expenses 344,604 297,967 Interest cost 232,938 298,320 Plan participants’ contributions 1,819 122,057 Actuarial (gain) loss (1,510,717) 278,237 Benefits payments and expected expenses (390,670) (585,008) Medicare Part D reimbursements - - Obligation at end of year 9,627,527 10,949,553 Reconciliation of fair value of plan assets: Fair value of plan assets at beginning of year - - Employer contributions 388,851 462,951 Plan participants’ contributions 1,819 122,057 Benefit payments and actual expenses (390,670) (585,008) Medicare Part D reimbursements - - Fair value of plan assets at end of year - - Unfunded status at end of year $ 9,627,527 $ 10,949,553 The effect of a one-percentage-point increase/decrease in the assumed health care cost trend rates for each future year on the accumulated post-retirement benefit obligation for health care benefits and the aggregate on the service and interest cost components of net periodic post-retirement health care benefit cost are shown below. Post-Retirement Benefits Accumulated Post- Retirement Benefit Obligation Service Cost Plus Interest Cost At trend $ 9,627,527 $ 577,542 The amounts recognized in net assets without donor restrictions on the consolidated statements of financial position at June 30, 2021 and 2020, consisted of: 2021 2020 Prior service credit $ (559,755) $ (575,748) Actuarial gain (2,375,368) (934,607) Total $ (2,935,123) $ (1,510,355) ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 26 Components of net periodic cost on the consolidated statements of activities for the years ended June 30, 2021 and 2020 consist of the following: 2021 2020 Net periodic benefit cost: Service cost $ 344,604 $ 297,967 Interest cost 232,938 298,320 Amortization of prior service credit (15,993) (17,272) Amortization of net gain (69,956) (111,358) Net periodic benefit cost $ 491,593 $ 467,657 Amounts recognized in net assets without donor restrictions as of June 30, 2021 and 2020 are as follows: 2021 2020 Actuarial (gain) loss $ (1,510,717) $ 278,237 Amortization of prior service credit 15,993 17,272 Amortization of net gain 69,956 111,358 Total other amounts recognized in net assets without donor restrictions $ (1,424,768) $ 406,867 The expected effect in net assets without donor restrictions of the estimated transition obligation, prior service cost, and net gain for the plan that will be recognized as components of net periodic benefit cost for the year ended June 30, 2021 are $0, $15,993, and $69,956, respectively. Weighted average assumptions as of June 30th (measurement date): 2021 2020 Discount rate 2.62% 2.42% The following schedule summarizes the benefits to be paid by the plan in each of the next five years along with the aggregate to be paid for the five years thereafter: Net Benefits Fiscal year ending June 30: 2022 $ 404,276 2023 421,239 2024 432,495 2025 448,129 2026 461,762 2027 through 2031 2,495,622 Total $ 4,663,523 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 27 The College’s post-retirement benefit plan prescription drug coverage is at least actuarially equivalent to the new Medicare coverage. The disclosure reflects, as of June 30, 2021 the subsidy payments from Medicare that commenced in 2007. The value of the subsidy is reflected as an actuarial gain and reduces the plan’s accumulated post-retirement benefit obligation, service cost and the net periodic post-retirement benefit cost. NOTE 15 - FAIR VALUE MEASUREMENTS Assets and liabilities measured at fair value on a recurring basis at June 30, 2021 are as follows: Level 1 Level 2 Level 3 Total Fair Value Assets Short-term investments: Cash and cash equivalents $ 4,137,355 $ - $ - $ 4,137,355 Fixed income securities 12,518,240 - - 12,518,240 Total short-term investments 16,655,595 - - 16,655,595 Assets held in charitable remainder trusts: Cash equivalents, fixed income securities and equities - 554,270 - 554,270 Pooled endowment investments at fair value: Cash and cash equivalents 29,212,170 - - 29,212,170 Fixed income securities 23,673,423 - - 23,673,423 Domestic equity securities 12,526,591 - - 12,526,591 International equity securities 28,661,837 - - 28,661,837 Total pooled investments at fair value 94,074,021 94,074,021 Total investments at NAV 311,609,532 Investments made in advance 10,250,000 Total pooled endowment investments 415,933,553 Other investments: Domestic equity securities 292,321 - - 292,321 Investment in TIAA annuities and mutual funds - 231,534 - 231,534 Total assets $ 111,021,937 $ 785,804 $ - $ 433,667,273 Liabilities Interest rate swap obligation $ - $ 4,839,276 $ - $ 4,839,276 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 28 Assets and liabilities measured at fair value on a recurring basis at June 30, 2020 were as follows: Level 1 Level 2 Level 3 Total Fair Value Assets Short-term investments: Fixed income securities $ 23,148,543 $ - $ - $ 23,148,543 Assets held in charitable remainder trusts: Cash equivalents, fixed income securities and equities - 509,390 - 509,390 Pooled endowment investments at fair value: Cash and cash equivalents 19,265,803 - - 19,265,803 Fixed income securities 18,021,667 - - 18,021,667 Domestic equity securities 5,023,906 - - 5,023,906 International equity securities 22,847,163 - - 22,847,163 Total pooled investments at fair value 65,158,539 - - 65,158,539 Total investments at NAV 246,561,123 Total pooled endowment investments 311,719,662 Other investments: Domestic equity securities 213,401 - - 213,401 Investment in TIAA annuities and mutual funds - 603,515 - 603,515 Total assets $ 88,520,483 $ 1,112,905 $ - $ 336,194,511 Liabilities Interest rate swap obligation $ - $ 6,806,346 $ - $ 6,806,346 The College uses the NAV to determine the fair value of all the underlying investments which (a) do not have a readily determinable fair value and (b) prepare their consolidated financial statements consistent with the measurement principles of an investment company or have the attributes of an investment company. The following tables list investments by major category as of June 30, 2021 and 2020: 2021 Fund Strategy Number of Funds NAV Remaining Life $ Amount of Unfunded Commitments Timing to Draw Down Commitments Notice Required Lock-up and Redemption Terms Commingled funds 22 $ 177,704,709 N/A None N/A 1 - 60 days Redemptions range from daily to annually Multi-Strategy Hedge funds 25 70,377,444 N/A None N/A 2 - 126 days Redemptions range from daily to triennially; 8 funds have a quarterly gate of 25%, 3 funds have annual liquidity, 1 fund has biannual liquidity, 1 fund has triennial liquidity Private equity 25 63,527,379 3 – 15 years $ 31,370,144 N/A N/A N/A Total 72 $ 311,609,532 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 29 2020 Fund Strategy Number of Funds NAV Remaining Life $ Amount of Unfunded Commitments Timing to Draw Down Commitments Notice Required Lock-up and Redemption Terms Commingled funds 26 $ 150,318,684 N/A None N/A 1 - 60 days Redemptions range from daily to annually Multi-Strategy Hedge funds 24 54,456,903 N/A None N/A 30 - 126 days Redemptions range from monthly to triennially; 5 funds have a quarterly gate of 25%, 1 fund has a semiannual gate of 25%, 2 funds have annual liquidity, 1 fund has biannual liquidity, 2 funds have triennial liquidity Private equity 24 41,785,536 3 – 15 years $ 28,084,521 N/A N/A N/A Total 74 $ 246,561,123 NOTE 16 - NET ASSETS Net assets consist of the following at June 30, 2021 and 2020: 2021 2020 Without donor restrictions: For general operations $ 304,506,176 $ 283,153,170 Designated for quasi-endowment 324,824,627 243,732,835 Total net assets without donor restrictions 629,330,803 526,886,005 With donor restrictions: Instruction, research and divisional support 4,190,360 4,014,884 Building and construction activities 16,616,183 17,337,628 Scholarship and endowment 50,709,709 29,496,848 Endowment funds held in perpetuity 41,148,102 39,655,850 Total net assets with donor restrictions 112,664,354 90,505,210 Total net assets $ 741,995,157 $ 617,391,215 NOTE 17 - ENDOWMENT The College’s endowment consists of both donor-restricted endowment funds established for a variety of purposes and funds designated by the College’s Board of Trustees to function as quasi-endowments. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. On September 17, 2010, New York State passed the New York State Prudent Management of Institutional Funds Act (“NYPMIFA”), its version of the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”). All not-for-profit organizations formed in New York must apply this law. The College classifies donor-restricted endowment funds as net assets with donor restrictions, unless otherwise stipulated by the donor as follows: (a) the original value of gifts donated to the permanent endowment; (b) the original value of subsequent gifts to the permanent endowment; and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the funds. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 30 From time to time, the fair value of assets associated with an individual donor-restricted endowment fund may fall below the fund’s historic dollar value. Under NYPMIFA, the College may spend below the historical dollar value of its endowment funds, if determined to be prudent, unless specific donors have stipulated to the contrary. The College has received instructions from donors, who have contributed $397,558 and $397,308 in donor-restricted contributions (with a fair value of $733,661 and $567,549 as of June 30, 2021 and 2020, respectively), for which the College must maintain the historical dollar value of these funds. At June 30, 2021 and 2020, the College had spent below the historical dollar value of its endowments by $0 and $12,428, respectively. The investment objectives for the College’s endowment are to preserve the principal value of those funds, in both absolute as well as real terms, and to maximize, over the long term, the total rate of return earned without assuming an unreasonable degree of risk. In connection with these investment objectives, the Board of Trustees has adopted a spending policy. The amount available for spending is determined annually by applying a rate of 5% to the average fair value of the endowment for the preceding three fiscal years. The remaining portion of the donor-restricted endowment fund that is not classified in net assets with donor restrictions held in perpetuity are classified as net assets with donor restrictions until such amounts are appropriated for expenditure by the College’s Board of Trustees in a manner consistent with the standard of prudence prescribed by NYPMIFA. In accordance with NYPMIFA, the College considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the endowment fund; (2) The purposes of the College and its donor-restricted endowment fund; (3) General economic conditions; (4) The possible effect of inflation and deflation; (5) The expected total return from income and the appreciation of investments; (6) Other resources of the College; (7) The investment policies of the College; and (8) Where appropriate, alternatives to spending from the donor-restricted endowment fund and the possible effects on the College. The table which follows presents information with respect to the College’s endowment, inclusive of pledges of $1,202,390, as of June 30, 2021: Net Assets Without Donor Restriction Net Assets With Donor Restriction Total Funds as of June 30, 2021 Original Gift Accumulated Gains Total Board-designated endowment funds $ 324,824,627 $ - $ - $ - $ 324,824,627 Donor-restricted endowment funds - 41,148,102 50,709,709 91,857,811 91,857,811 Total endowment funds $ 324,824,627 $ 41,148,102 $ 50,709,709 $ 91,857,811 $ 416,682,438 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 31 The table which follows presents information with respect to the College’s endowment, inclusive of pledges of $1,321,651, as of June 30, 2020: Net Assets Without Donor Restriction Net Assets With Donor Restriction Total Funds as of June 30, 2020 Original Gift Accumulated Gains Total Board-designated endowment funds $ 243,732,835 $ - $ - $ - $ 243,732,835 Donor-restricted endowment funds: Underwater endowment funds - 166,770 (12,428) 154,342 154,342 Other endowment funds - 39,489,080 29,509,276 68,998,356 68,998,356 - 39,655,850 29,496,848 69,152,698 69,152,698 Total endowment funds $ 243,732,835 $ 39,655,850 $ 29,496,848 $ 69,152,698 $ 312,885,533 Changes in endowment net assets for the year ended June 30, 2021 are as follows: Net Assets Without Donor Restriction Net Assets With Donor Restriction Total Funds as of June 30, 2021 Original Gift Accumulated Gains Total Endowment net assets, beginning of year $ 243,732,835 $ 39,655,850 $ 29,496,848 $ 69,152,698 $ 312,885,533 Transfer to board-designated endowment 591,034 - - - 591,034 Net investment return 80,931,833 4,809 22,587,571 22,592,380 103,524,213 Payment to beneficiaries - - (69,245) (69,245) (69,245) Contributions 102,200 1,157,137 15,718 1,172,855 1,275,055 Change in donor designation/transfers - 330,306 65,564 395,870 395,870 Awards made (533,275) - (1,386,747) (1,386,747) (1,920,022) Endowment net assets, end of year $ 324,824,627 $ 41,148,102 $ 50,709,709 $ 91,857,811 $ 416,682,438 Changes in endowment net assets for the year ended June 30, 2020 are as follows: Net Assets Without Donor Restriction Net Assets With Donor Restriction Total Funds as of June 30, 2020 Original Gift Accumulated Gains Total Endowment net assets, beginning of year $ 232,891,417 $ 36,413,214 $ 28,285,538 $ 64,698,752 $ 297,590,169 Transfer to board-designated endowment 1,951,255 - - - 1,951,255 Net investment return 9,258,319 859 2,520,402 2,521,261 11,779,580 Payment to beneficiaries - - (17,919) (17,919) (17,919) Contributions 130,071 3,253,443 60,452 3,313,895 3,443,966 Change in donor designation/transfers - (11,666) - (11,666) (11,666) Awards made (498,227) - (1,351,625) (1,351,625) (1,849,852) Endowment net assets, end of year $ 243,732,835 $ 39,655,850 $ 29,496,848 $ 69,152,698 $ 312,885,533 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 32 NOTE 18 - NET ASSETS RELEASED FROM RESTRICTIONS Net assets released from donor restrictions due to the passage of time and/or satisfying the restricted purposes specified by the donors are as follows: 2021 2020 Capital projects $ 487,857 $ 467,857 Scholarships 1,401,877 1,108,859 Instruction, research and divisional support 978,375 1,212,957 Total $ 2,868,109 $ 2,789,673 NOTE 19 - TUITION, FEES, ROOM AND BOARD, NET The College has various revenue streams that revolve primarily around student enrollment and instruction. Revenue is generated mainly through tuition, housing, meals and various fees associated with enrollment in the College. Generally, enrollment and instructional services are billed prior to when a course or term begins and due within thirty days of the bill date. Other fee revenue is recognized when the fee is charged to the student which coincides with the completion of the specific performance obligation to the student. In the following table, revenue is disaggregated by type of service provided: For the year ended June 30, 2021 Tuition & Fees Room Board Total Revenues $ 227,543,197 $ 37,054,224 $ 8,071,230 $ 272,668,651 Less: student aid (86,380,337) (908,182) (329,085) (87,617,604) Net $ 141,162,860 $ 36,146,042 $ 7,742,145 $ 185,051,047 For the year ended June 30, 2020 Tuition & Fees Room Board Total Revenues $ 235,609,340 $ 33,340,720 $ 9,492,695 $ 278,442,755 Less: student aid (81,249,838) (1,025,157) (374,650) (82,649,645) Net $ 154,359,502 $ 32,315,563 $ 9,118,045 $ 195,793,110 The College has taken a portfolio approach in determining whether student aid should apply across tuition and fees, room, and board. In general, the College awards student aid factoring in the total cost of attendance including tuition, fees, room and board and the students’ expected ability to contribute towards such charges. Unless specifically earmarked, the College first applies student aid to tuition and fees charges. Any remaining student aid is applied to room and board. Accordingly, student aid has been applied against all student revenues. For the year ended June 30, 2021 and 2020, the College recognized revenue of $9,044,121 and $9,990,820, respectively, from amounts that were included in deferred revenue at the beginning of the fiscal year. At June 30, 2021, deferred revenue totaled $9,930,289. Performance obligations related to $9,415,305 of this balance are expected to be met in one year. The remaining deferred revenue will be recognized as revenue as earned over the remainder of contract terms of 2 years. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 33 NOTE 20 - FUNCTIONAL TO NATURAL EXPENSES 2021 Instruction Research Public Service Academic Support Student Services Institutional Support Scholarships and Fellowships Auxiliary Total Salaries and wages $ 40,010,661 $ 85,168 $ 39,697 $ 7,386,905 $ 15,894,743 $ 9,341,291 $ - $ 6,381,002 $ 79,139,467 Employee benefits 15,319,828 17,574 837 3,462,492 7,128,231 3,988,709 - 3,947,677 33,865,348 Scholarships and fellowships - - - - - - 2,418,943 - 2,418,943 Travel 34,296 - - 1,169 650,415 17,559 - 7,517 710,956 Supplies 2,585,492 6,804 585 1,916,310 2,337,539 758,431 - 871,089 8,476,250 Utilities 872,171 - - 201,050 451,278 58,641 - 1,968,193 3,551,333 Other contractual services 3,078,307 - 430,288 1,016,549 5,548,028 2,273,193 - 11,169,119 23,515,484 Depreciation 5,772,501 11,758 - 1,792,183 2,657,045 760,923 - 8,748,651 19,743,061 Interest 2,186,806 - - 183,702 1,130,524 33,516 - 3,415,269 6,949,817 Other 1,525,503 27,605 38,285 431,040 927,493 774,050 - 1,872,504 5,596,480 Total expenses $ 71,385,565 $ 148,909 $ 509,692 $ 16,391,400 $ 36,725,296 $ 18,006,313 $ 2,418,943 $ 38,381,021 $ 183,967,139 2020 Instruction Research Public Service Academic Support Student Services Institutional Support Scholarships and Fellowships Auxiliary Total Salaries and wages $ 41,919,258 $ 75,181 $ 33,303 $ 7,697,225 $ 16,732,738 $ 11,037,929 $ - $ 7,286,768 $ 84,782,402 Employee benefits 14,426,064 13,154 425 3,102,654 6,616,357 4,469,964 - 3,736,321 32,364,939 Scholarships and fellowships - - - - - - 1,602,703 - 1,602,703 Travel 458,148 13,234 2,153 152,740 2,185,682 158,124 - 11,441 2,981,522 Supplies 2,878,669 2,593 1,054 1,784,785 2,657,685 876,825 - 1,013,215 9,214,826 Utilities 754,095 - - 176,148 376,731 180,685 - 1,728,327 3,215,986 Other contractual services 4,950,762 6,211 520,113 782,358 6,437,171 2,873,041 - 8,712,686 24,282,342 Depreciation 6,426,866 13,193 - 1,758,374 2,286,748 980,110 - 8,531,143 19,996,434 Interest 2,114,232 - - 202,712 930,530 36,586 - 3,812,184 7,096,244 Other 9,222,842 16,043 16,459 619,320 1,202,904 838,336 - 1,534,851 13,450,755 Total expenses $ 83,150,936 $ 139,609 $ 573,507 $ 16,276,316 $ 39,426,546 $ 21,451,600 $ 1,602,703 $ 36,366,936 $ 198,988,153 Allocations In the above analysis, the costs of operation and maintenance of plant, information technology, depreciation, interest expense, post-retirement costs, medical plan costs and insurance have been allocated across all functional expense categories to reflect the full cost of those activities. Costs are allocated using the following methods: • Expenses for the administration, supervision, operation, maintenance, preservation, and protection of the institution’s physical plant are allocated based on square footage. • Depreciation expenses for buildings are allocated based on the square footage used to support each function. Depreciation on equipment is allocated to other functions based on the original purchase and usage of the equipment. These allocations are based on information obtained through a periodic inventory of space and usage. • Interest expense on capital debt is allocated based on usage of debt-financed space. • Post-retirement periodic pension costs are allocated based on participants enrolled in the medical plan within each function. • Information technology costs which support the institution, including enterprise computing, systems and technology, telecom and network, digital publication center and postal services are allocated to other functions based on total labor costs by function. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 34 • The College has a self-insured hospitalization and medical coverage program for its employees. An estimation of annual plan costs is calculated each year, and are expensed throughout the year through the payroll labor distribution system. At year end, a medical liability analysis is performed, and additional or reduction of expense is allocated across functions based on medical participants currently in each function. • The College’s insurance costs, including general liability, property, professional liability, automobile and crime policies are allocated across functions based on square footage. Worker’s compensation insurance costs are allocated based on total labor distribution per function. NOTE 21 - DEVELOPMENT EXPENSES The College incurred expenses amounting to $1,413,239 and $1,617,569 related to development and fundraising for the years ended June 30, 2021 and 2020, respectively. Such amounts are included in institutional support on the accompanying consolidated statements of activities. NOTE 22 - SELF-INSURED MEDICAL BENEFITS The College has a self-insured hospitalization and medical coverage program for its employees. The College is limiting its losses through the use of stop-loss policies through reinsurers. Specific individual family losses for claims are limited to $200,000 per plan year, respectively. Healthcare costs of $13,306,162 and $10,348,719 are included in the accompanying consolidated statements of activities for the years ended June 30, 2021 and 2020, respectively. The amount reserved for claims incurred at June 30, 2021 and 2020 totals $1,817,613 and $1,518,585, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated statements of financial position. Management believes they have adequately provided for all claims incurred in the accompanying consolidated financial statements, however, since the accrued liability is based on estimates, the College’s ultimate liability may exceed or be less than the amounts accrued. The methods of making such estimates and establishing the accrual are reviewed continually and any resulting adjustments are reflected in change in net assets for the current year. NOTE 23 - RELATED PARTY TRANSACTIONS Unconditional promises to give include approximately $2.3 million and $2.8 million due from Board members and entities related to Board members for the years ended June 30, 2021 and 2020, respectively. Additionally, the College had approximately $71,000 and $102,000, due from employees as of June 30, 2021 and 2020, respectively. NOTE 24 - COMMITMENTS, CONTINGENCIES AND LEASES The College is subject to various litigation incidental to its business activities. Management and its counsel believe that existing insurance policies are sufficient and that pending litigation will not have a material adverse effect on the College’s financial position, operations and cash flows. The College is a member of the New York College & University Risk Management Group Trust. The Trust was created for the purpose of providing and securing workers compensation insurance for its members. There is a statutory requirement that each member be jointly and severally liable with all other members for the compensation and medical liability accruing during its participation in the Group Trust. Such liability shall survive the member’s termination from the Group or active participation in the Program. As of June 30, 2021 and 2020, the College believes there is no exposure for future liabilities. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 35 In addition to the benefits described in Note 9 above, the College has employment agreements in place that extend through fiscal 2023. The future commitments for employment agreements are as follows: Fiscal year ending: 2022 $ 1,522,796 2023 308,848 Total $ 1,831,644 The College has multiple leases for residential and classroom space in Florence, Italy for its international program. Leases expiring through August 2023. Additionally, the College leases automobiles, copier equipment, and other equipment under finance and operating leases with terms ranging from three to five years. The College assesses contracts at inception to determine whether an arrangement includes a lease, which conveys the College’s right to control the use of an identified asset for a period of time in exchange for consideration. The College has several non-cancelable operating leases for building space used in the delivery of College programs and the operation of the College bookstore, for which a ROU asset and a lease liability are recorded in the accompanying 2021 consolidated statement of financial position. The College measures its lease assets and liabilities using a risk-free rate of return selected based on the term lease. The College considered the likelihood of exercising renewal or termination terms in measuring its ROU assets and lease liabilities. The College’s lease payments include both fixed and variable payments. Variable payments are based on indices specified in the leases. The leases contain no termination options or residual value guarantees. The College has elected the practical expedient to forgo applying the recognition requirements in Accounting Standards Codification 842 to short-term leases. The College has short-term leases for a vehicle and copiers, which are expensed as paid. The College has finance leases for computer equipment. The components of lease cost for the year ended June 30, are as follows: 2021 Operating lease cost $ 1,349,185 Short-term lease cost 2,750,000 Finance lease cost: Amortization of ROU assets 76,519 Interest on lease liabilities 65,861 Variable lease cost 7,219 Total lease cost $ 4,248,784 ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 36 The maturity of the lease liability as of June 30, 2021 is as follows: Fiscal year ending: Finance Leases Operating Leases 2022 $ 683,156 $ 1,085,625 2023 372,887 710,629 2024 17,097 223,548 2025 - 41,130 Total lease liability, gross 1,026,140 2,060,933 Less: amounts representing interest rates from 0.17% to 9.16% (44,888) (71,550) Total lease liability $ 981,252 $ 1,989,383 Weighted average remaining lease term (expressed in years) 1.6 2.4 Weighted average discount rate 5.64% 0.41% NOTE 25 - OPERATIONS OF SPROUT CREEK FARM INC. As previously referred to in Note 1, the College determined the Farm could not sustain its operations. The Board of Directors of the Farm authorized operations to cease and implemented protocols for its shutdown. The Board of Directors are evaluating several options for future of the Farm. The following table summarizes the assets and liabilities reflected on the accompanying consolidated statements of financial position: Cash $ 309,872 Property and equipment 2,800,734 Other assets 12,024 Accounts payable due to Marist (3,128,921) Accounts payable and accrued expenses (286,747) Note and mortgage payable (384,000) Net assets $ (677,038) The College recorded a net nonoperating loss relating to the Farm of $64,655 on the accompanying consolidated statement of activities for the year ended June 30, 2021. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 37 NOTE 26 - LIQUIDITY AND AVAILABILITY OF RESOURCES As of June 30, 2021 and 2020, the following financial assets could readily be made available within one year of the consolidated statement of financial position date to meet general expenditures: 2021 2020 Cash and cash equivalents $ 70,292,671 $ 35,458,326 Less: Cash with donor restrictions (6,849,968) (6,604,484) Perkins cash (1,099,806) (1,126,607) Short-term investments 16,655,595 23,148,543 Accounts receivable due within one year 2,801,222 4,238,880 Contributions (without donor restrictions) due in one year or less 443,658 1,191,907 Payout on donor-restricted endowments 3,278,068 2,926,773 Payout on board-designated endowments 12,157,584 11,701,680 $ 97,679,024 $ 70,935,018 The College regularly monitors liquidity required to meet its operating needs and other contractual commitments, while also striving to maximize the investment of its available funds. For purposes of analyzing resources available to meet general expenditures over a 12-month period, the College considers all expenditures related to its ongoing mission-related activities as well as the conduct of services undertaken to support those activities to be general expenditures. Student loans receivable are not considered to be available to meet general expenditures because principal and interest on these loans are not available for operating activities of the College. In addition to financial assets available to meet general expenditures over the next 12-months, the College operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures not covered by donor-restricted resources. Refer to the consolidated statements of cash flows, which identifies the sources and uses of the College’s cash and shows positive cash generated by operations for fiscal years 2021 and 2020. The College’s governing board has designated a portion of its resources without donor restrictions for endowment and other purposes. These funds are invested for long-term appreciation and current income but remain available and may be spent at the discretion of the Board. At June 30, 2021, board-designated funds totaled $324,824,627. NOTE 27 - IMPACT OF COVID-19 During the fiscal years ended June 30, 2021 and 2020, the federal government provided higher education institutions with Higher Education Emergency Relief Funding (“HEERF”), which was allocated under various acts of Congress. The Coronavirus Aid, Relief, and Economic Securities Act (“CARES”) was signed into law on March 27, 2020 and provided the College with total funding of $3,344,611 under HEERF I. The Coronavirus Response and Relief Supplemental Appropriations Act (“CRRSAA”) was signed into law on December 27, 2020 and provided the College with total funding of $5,195,563 under HEERF II. The American Rescue Plan (“ARP”) was signed into law on March 11, 2021 and provided the School with total funding of $9,312,724 under HEERF III. Each of these awards has a student aid portion and an institutional portion. The Department of Education provided required uses of the funds for both the student portion and institutional portion and until the conditions associated with those requirements are satisfied, revenue cannot be recognized, in accordance with ASU 2018-08. ֱ and Affiliates NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED June 30, 2021 and 2020 38 For the years ending June 30, 2021 and 2020, the College has recognized revenue as follows: Revenue Recognition Amount Remaining to be Recognized Institutional Share Student Share Total Total Award 2021 2020 2021 2020 2021 2020 HEERF I $ 3,344,611 $ 510,780 $ 1,161,525 $ 510,781 $ 1,161,525 $ 1,021,561 $ 2,323,050 $ - HEERF II $ 5,195,563 3,523,257 - 1,672,306 - 5,195,563 - - HEERF III $ 9,312,724 9,312,724 $ 4,034,037 $ 1,161,525 $ 2,183,087 $ 1,161,525 $ 6,217,124 $ 2,323,050 $ 9,312,724 Student distributions were prioritized for those with the greatest financial need, according to their Expected Family Contribution as reflected on their FAFSA. The institutional portion of HEERF funding was utilized to defray the costs of dining and housing refunds made during the Spring of 2020 and Fall of 2021, technology costs, quarantining and isolation capacity, surveillance testing for COVID-19 for students and staff during the fall of 2020 and spring of 2021, and other costs to mitigate the spread of COVID-19. These funds are subject to Single Audit and compliance with federal regulations. The College believes it has met the conditions to retain these funds, and no amounts are reserved for repayment at June 30, 2021 in the consolidated statements of financial position. Report on the consolidated financial statements Management’s responsibility for the consolidated financial statements Auditor’s responsibility Opinion NOTE 1 - ORGANIZATION AND Summary of Significant Accounting Policies Organization Basis of Presentation Net Assets Without Donor Restrictions Net Assets With Donor Restrictions Fair Value Measurements Cash and Cash Equivalents Accounts Receivable Revenue Recognition and Receivables Contributions, Grants and Contracts Student Loans Receivable and U.S. Government Advances Refundable Investments Deposits with Bond Trustees Land, Buildings and Equipment Deferred Income Interest Rate Swap Obligation Conditional Asset Retirement Obligation Functional Expenses Income Taxes Advertising Estimates Concentrations of Credit Risk Measure of Operations New Pronouncements Subsequent Events NOTE 2 - Short-Term Investments NOTE 3 - Accounts Receivable, NET NOTE 4 - CONTRIBUTIONS Receivable, NET NOTE 5 - Student loanS receivable NOTE 6 - Investments NOTE 7 - Construction in Progress NOTE 8 - Land, Buildings and Equipment, net and assets held for sale NOTE 9 - Pension Plans Defined Contribution Plans Deferred Compensation Plans NOTE 10 - charitable remainder trust NOTE 11 - BONDS PAYABLE, net NOTE 12 - NOTE PAYABLE NOTE 13 - Interest Rate Swap obligation NOTE 14 - Post-retirement Health Care Benefits NOTE 15 - Fair Value Measurements NOTE 16 - NET Assets NOTE 17 - Endowment NOTE 18 - Net Assets Released From Restrictions NOTE 19 - Tuition, Fees, RoOm AND Board, NET NOTE 20 - Functional to Natural Expenses Allocations NOTE 21 - Development Expenses NOTE 22 - Self-Insured Medical Benefits NOTE 23 - Related Party Transactions NOTE 24 - Commitments, contingencies and leases NOTE 25 - OPERATIONS OF SPROUT CREEK FARM INC. NOTE 26 - LIQUIDITY and Availability of Resources NOTE 27 - IMPACT OF COVID-19