DOWLING COLLEGE Financial Statements June 30
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DOWLING COLLEGE Financial Statements June 30, 2008 and 2007 (With Independent Auditors’ Report Thereon) KPMG LLP 345 Park Avenue New York, NY 10154 Independent Auditors’ Report The Board of Trustees Dowling College: We have audited the accompanying balance sheets of Dowling College (the College) as of June 30, 2008 and 2007, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the College’s management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit also includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dowling College as of June 30, 2008 and 2007, and the changes in its net assets and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. October 24, 2008 KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative. DOWLING COLLEGE Balance Sheets June 30, 2008 and 2007 Assets 2008 2007 Cash and cash equivalents $ 259,355 251,064 Student accounts receivable (net of allowance for doubtful accounts of $929,000 and $300,000 in 2008 and 2007, respectively) 2,901,664 2,492,325 Grants receivable 366,473 409,013 Contributions receivable, net (note 4) 2,591,895 2,398,595 Other receivables, net 236,407 311,600 Prepaid expenses and other assets (note 8) 4,715,952 4,712,883 Investments (note 3) 7,898,416 10,245,956 Cash and investments on deposit with bond trustees (note 5) 8,863,352 17,380,572 Federal Perkins student loans receivable (net of allowance for doubtful loans of $109,000 and $112,000 in 2008 and 2007, respectively) 1,863,824 1,896,035 Land, buildings, equipment, and library books, net (notes 6, and 8) 73,857,721 63,249,160 Total assets $ 103,555,059 103,347,203 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses (note 10) $ 9,033,332 7,197,329 Deferred revenue 2,628,526 2,459,997 Obligations to financial institution (note 7) 3,000,000 3,000,000 Long-term debt, net (note 8) 63,635,949 64,233,962 U.S. government grants refundable 1,777,179 1,777,179 Total liabilities 80,074,986 78,668,467 Commitments and contingencies (notes 12 and 13) Net assets: Unrestricted 18,296,149 19,522,917 Temporarily restricted (note 2) 3,484,660 3,510,305 Permanently restricted (note 2) 1,699,264 1,645,514 Total net assets 23,480,073 24,678,736 Total liabilities and net assets $ 103,555,059 103,347,203 See accompanying notes to financial statements. 2 DOWLING COLLEGE Statements of Activities Years ended June 30, 2008 and 2007 2008 2007 Changes in unrestricted net assets: Revenues: Tuition and fees (net of scholarship allowances of $11,463,683 and $10,470,169 in 2008 and 2007, respectively) $ 61,001,239 58,462,157 Sales and services of auxiliary enterprises 5,210,814 4,536,226 Government grants and contracts 2,913,955 2,863,612 State appropriations 529,709 605,450 Private gifts and grants 486,055 167,070 Investment income 973,207 2,428,327 Net depreciation in fair value of investments (455,566) (679,558) Other revenue (note 14) 900,453 1,008,845 Net assets released from restriction 689,594 563,761 Total revenues 72,249,460 69,955,890 Expenses (note 11): Instruction and research 31,961,299 32,106,850 Academic support 10,656,675 9,788,976 Student services 13,438,792 12,797,024 Institutional support 13,394,680 14,193,955 Auxiliary enterprises 4,024,782 3,881,241 Total expenses 73,476,228 72,768,046 Decrease in unrestricted net assets (1,226,768) (2,812,156) Changes in temporarily restricted net assets: Private gifts and grants 551,979 1,008,092 Net appreciation in fair value of investments 111,970 198,541 Net assets released from restriction (689,594) (563,761) (Decrease) increase in temporarily restricted net assets (25,645) 642,872 Changes in permanently restricted net assets: Private gifts and grants 53,750 337,425 Increase in permanently restricted net assets 53,750 337,425 Decrease in net assets (1,198,663) (1,831,859) Net assets at beginning of year 24,678,736 26,510,595 Net assets at end of year $ 23,480,073 24,678,736 See accompanying notes to financial statements. 3 DOWLING COLLEGE Statements of Cash Flows Years ended June 30, 2008 and 2007 2008 2007 Cash flows from operating activities: Decrease in net assets $ (1,198,663) (1,831,859) Adjustments to reconcile decrease in net assets to net cash provided by operating activities: Depreciation 2,989,082 2,857,354 Net depreciation in fair value of investments 343,596 481,017 Permanently restricted private gifts and grants (53,750) (337,425) Grant for capital purposes (400,000) — Amortization of original issue discount and bond issuance costs 257,312 334,444 Changes in operating assets and liabilities: Student accounts receivable (409,339) (283,173) Grants receivable 42,540 (109,864) Contributions receivable (193,300) (78,082) Other receivables 75,193 250,292 Prepaid expenses and other assets (237,851) 128,032 Accounts payable and accrued expenses 285,183 473,877 Deferred revenue 168,529 332,000 Net cash provided by operating activities 1,668,532 2,216,613 Cash flows from investing activities: Increase (decrease) in accounts payable and accrued expenses related to capital projects 1,550,820 (104,527) Capital expenditures (13,597,643) (4,565,715) Decrease in other receivables relating to insurance recovery — 1,138,726 Decrease in accounts payable and accrued expenses due to losses from flood damage — (949,438) Proceeds from sale of investments 14,545,680 6,737,130 Purchases of investments (12,541,736) (6,073,403) Decrease in Federal Perkins student loans receivable 32,211 37,106 Net cash used in investing activities (10,010,668) (3,780,121) Cash flows from financing activities: Proceeds from issuance of long-term debt 651,098 2,700,000 Bond costs related to issuance of long-term debt — (227,635) Principal payments on long-term debt (1,271,641) (3,468,641) Decrease in cash and investments on deposit with bond trustees 8,517,220 2,167,259 Permanently restricted private gifts and grants 53,750 337,425 Grant for capital purposes 400,000 — Net cash provided by financing activities 8,350,427 1,508,408 Net increase (decrease) in cash and cash equivalents 8,291 (55,100) Cash and cash equivalents at beginning of year 251,064 306,164 Cash and cash equivalents at end of year $ 259,355 251,064 Supplemental disclosure: Interest paid $ 3,765,368 3,677,442 See accompanying notes to financial statements. 4 DOWLING COLLEGE Notes to Financial Statements June 30, 2008 and 2007 (1) Summary of Significant Accounting Policies (a) Nature of Operations Dowling College (the College) is an independent, comprehensive coeducational institution of higher learning. The College, founded in 1955 and named in honor of its benefactor Robert W. Dowling, noted financier and patron of the arts, serves approximately 6,500 undergraduate, graduate, and post-graduate students. The College is located in Suffolk County, New York, with its Rudolph Campus situated in Oakdale, and the Brookhaven Center located in Shirley. The College grants degrees and certifications to students through programs offered by its Schools of Arts & Sciences, Business, Education, and Aviation. Degree programs can be completed on a part-time or full-time basis. (b) Basis of Accounting The financial statements have been prepared on the accrual basis of accounting in accordance with standards established by the Financial Accounting Standards Board (FASB) for not-for-profit organizations. (c) Basis of Presentation The College’s net assets and revenues, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Unrestricted net assets – Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets – Net assets that are subject to donor-imposed restrictions that will be met by actions of the College and/or the passage of time. Permanently restricted net assets – Net assets that are subject to donor-imposed restrictions that require the original contribution to be maintained in perpetuity by the College, but permit the College to use all or part of the income earned on related investments for general or specific purposes. Grants and contracts are treated as exchange transactions, and are reported as revenues when expenses are incurred in accordance with the terms of the agreement.