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FINANCIAL STATEMENTS
Anti och University
Years ended June 30, 2002 and 2001 with Report of Independent Auditors
DRAFT
Antioch University
Financial Statements
Years ended June 30,2002 and 2001
Contents
Report of Independent Auditors ……………………………………………………………………………………..
Financial Statements
. . Statements of Financial Position …………………………………………………………………………………… 2
Statement of Activities-2002 ……………………………………………………………………………………… 3
Statement of Activities-200 1 ……………………………………………………………………………………… 4
Statements of Cash Flows …………………………………………………………………………………………… .5
Notes to Financial Statements ……………………………………………………………………………………… .6
ill ERNST&YOUNG m Ernst &Young LLP
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Report of Independent Auditors
Board of Trustees
Antioch University
We have audited the accompanying statements of financial position of Antioch University
(the University) as of June 30,2002 and 2001 and the related statements of activities and cash
flows for the years then ended. These financial statements are the responsibility of the
University’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes 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 the University at June 30, 2002 and 2001 and the changes
in its net assets and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States.
August 30,2002
A Member Practice of Ernst & Young Global
Antioch University
Statements of Financial Position
Assets
Cash and cash equivalents
Accounts receivable, less allowance
for doubtful accounts ($4 17,726
in 2002 and $280,058 in 2001)
Grants receivable
Prepaid expenses
Loans to students, less allowance for
uncollectible loans ($2,466,368
in 2002 and $2,486,246 in 2001)
Contributions receivable, less allowance
for uncollectible items ($890,255 in
2002 and $905,174 in 2001)
Investments
Land, buildings, and equipment-net
Total assets
Liabilities
Accounts payable
Accrued benefit liabilities
Other accrued liabilities
Deferred revenue
Notes and bonds payable
Annuities payable
Deposits held for others
Advances from government for student loans
Total liabilities
Net assets
Unrestricted
Temporarily restricted
Permanently restricted
Total net assets
Total liabilities and net assets
June 30
2002 2001
See accompanying notes.
An tioch University
Statement of Activities
Year ended June 30,2002
Revenues, gains, and other support
Tuition and fees
Less student aid
Contributions
Contracts and other exchange transactions
Investment income on life income and
annuity agreements
Investment income on endowments
Other investment income
Net realized losses on endowments
Net realized gains (losses’) on other
investments
Sales and service of auxiliary enterprises
Other income
Total revenues and gains
Net assets released from restrictions
Total revenues, gains, and other support
Expenses and losses
Educational and general:
Instruction
Public service
Academic support
Student services
Institutional support
Scholarships and fellowships
Total educational and general expenses
Auxiliary enterprises
Total expenses
Actuarial gain on annuity obligations
Payments to life income beneficiaries
Total expenses and losses
Revenues, gains, and other support
less expenses and losses
Net unrealized losses on investments
(Decrease) increase in net assets
Net assets at beginning of year
Net assets at end of year
Temporarily Permanently
Unrestricted Restricted Restricted Total
See accompanying notes.
i’f2’^. S’^¡T k%: S33 ^B3 &S $2 it, ^I^%~
Antioch University
Statement of Activities
Year ended June 30,2001
Temporarily Permanently
Revenues, gains, and other support
Tuition and fees
Less student aid
Contributions
Contracts and other exchange transactions
Investment income on life income and
annuity agreements
Investment income on endowments
Other investment income
Net realized losses on endowments
Net realized gains (losses) on other
investments
Sales and service of auxiliary enterprises
Other income
Total revenues and gains
Net assets released from restrictions
Total revenues, gains, and other support
Expenses and losses
Educational and general:
Instruction
Research
Public service
Academic support
Student services
Institutional support
Scholarships and fellowships
Total educational and general expenses
Auxiliary enterprises
Total expenses
Actuarial gain on annuity obligations
Payments to life income beneficiaries
Total expenses and losses
Revenues, gains, and other support
less expenses and losses
Net unrealized gains (losses) on investments
Changes in designation of gifts received
in prior year
(Decrease) increase in net assets
Net assets at beginning of year
Net assets at end of year
See accompanying notes.
Unrestricted Restricted Restricted Total
Antioch University
Statements of Cash Flows
Cash flows from operating activities
Increase (decrease) in net assets
Adjustments to reconcile (decrease) increase in net assets
to net cash provided by operating activities:
Depreciation
Loss (gain) on sale of equipment
(Increase) in accounts and grants receivable
Decrease (increase) in contributions receivable
Decrease in prepaid expenses
Increase (decrease) in accounts payable, accrued benefit
liabilities and other accrued liabilities
(Decrease) increase in annuities payable
Increase in deferred revenue
(Decrease) increase in deposits held for others
Net realized and unrealized losses (gains) on sales
of investments
Contributions restricted for permanent investment
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from sales and maturities of investments
Purchases of investments
Purchases of land, building, and equipment
Proceeds from the sale of equipment
Disbursements of loans to students
Repayments of loans from students
Net cash used in investing activities
Cash flows from financing activities
Contributions restricted for permanent investment
Proceeds from issuance of indebtedness
Repayments of principal of indebtedness
Increase in advances from government
for student loans
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended June 30
2002 2001
See accompanying notes.
Antioch University
Notes to Financial Statements
June 30,2002
1. Summary of Significant Accounting Policies
Founded in 1852 as an undergraduate college in Yellow Springs, Ohio, Antioch College (the
College) was recreated in the 1920s as one of America’s most distinctive and innovative
liberal arts colleges. During the last three decades, the College has evolved into a multi-
campus university that is unified through shared educational and cultural values and
consistent business practices. All degree programs strive to balance the academic and
experiential by giving students opportunities to test theory against practice.
Approximately 5,000 students currently study at the five campuses of Antioch University
(University): Antioch College at Yellow Springs, Ohio; the Antioch New England Graduate
School at Keene, New Hampshire; Antioch Seattle at Seattle, Washington; Antioch Southern
California with campuses at Los Angeles and Santa Barbara, California; and The
McGregor
School at Yellow Springs. Each campus has considerable academic and operating autonomy
within a “federal system” that encourages cooperation and sharing to produce economies of
scale. The University’s administrative offices are in Yellow Springs, and it is here that the
Chancellor and his staff provide University-wide planning, fiscal review and accountability
for all operations, and advice to the Board of Trustees on University-wide policies.
Basis of Presentation
The financial statements of the University, which are presented on the accrual basis of
accounting, have been prepared to focus on the organization as a whole and to present
balances and transactions in accordance with the existence or absence of donor-imposed
restrictions.
Net assets, revenues, gains, and losses are classified based on the existence or absence of
donor-imposed restrictions. Accordingly, net assets and changes therein are classified as
follows:
Unrestricted – Net assets that are not subject to donor-imposed stipulations.
Temporarily restricted – Net assets subject to donor-imposed stipulations that may
or will be met either by actions of the University
andlor
the passage of time.
Permanently restricted – Net assets subject to donor-imposed stipulations that they
will be maintained permanently by the University. Generally, the donors of these
assets permit the University to use all or part of the income earned on related
investments for general or specific purposes.
Antioch University
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Basis of Presentation (continued)
The expiration of a donor-imposed restriction on a contribution or on endowment income is
recognized in the period in which the restriction expires and, at that time, the related
resources are reclassified to unrestricted net assets. A restriction expires when the stipulated
time has elapsed, when the stipulated purpose for which the resource was
restric,ted
has been
fulfilled, or both.
Contributions, including unconditional promises to give, are recognized as revenues in the
period received. Conditional promises to give are not recognized until the conditions on
which they depend are substantially met. Contributions of assets other than cash are recorded .
at their estimated fair value at the date of gift. Contributions to be received after one year are
discounted at a rate commensurate with the risk involved. Amortization of the discount is
recorded as additional contribution revenue and used in accordance with donor-imposed
restrictions, if any, on the contributions. Allowance is made for uncollectible contributions
based upon management’s judgment and analysis of the creditworthiness of the donors, past
collection experience and other relevant factors.
Investments
Investments are recorded on a market value basis and gains and losses on such investments
are recognized in the period during which they occur.
Net appreciation on endowment funds is reported as unrestricted net assets, unless such net
appreciation has been permanently restricted by the donor or by law.
Land, Buildings, and Equipment
Land, buildings, and equipment are recorded at cost at the date of acquisition or fair value at
date of donation in the case of gifts. Depreciation is provided on the straight-line basis over
the estimated useful lives of the applicable assets.
Antioch University
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Annuities Payable
Annuities payable are recorded at fair value, which is estimated using discounted cash flow
analyses based on the University’s current investment income rate for instruments similar to
those underlying the
annuities.
For
unitrust
agreements where the annual payment is
contingent upon the fair value of the investments over the life of the agreement, a liability is
recorded based on fair value of the investments at the end of the current year.
Advances from Government for Student Loans
Funds provided by the United States government under the Federal Perkins Loan program are
loaned to qualified students and may be
reloaned
after collections. These funds are ultimately
refundable to the government and, therefore, recorded as a liability in the accompanying
financial statements.
Income Taxes
The University is a qualifying organization under Section 501(c)(3) of the Internal Revenue
Code (IRC) and is, therefore, exempt from income taxes under RC Section 501(a).
Liquidity
Assets and liabilities are listed in their estimated order of liquidity. For those accounts for
which such liquidity is unclear, additional disclosures have been made in the accompanying
notes to the University’s financial statements.
Cash Equivalents
Cash equivalents consist primarily of commercial paper, money market accounts, and other
interest-bearing instruments with maturities of less than three months.
Reclassifications
Certain reclassifications were made to the 2001 financial information to conform to the 2002
presentation.
Antioch University
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Use of Estimates
Management of the University has made estimates and assumptions relating to the reporting
of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with accounting principles generally accepted in the
United States. Actual results could differ from those estimates.
2. Investments
Investments of the University at June 30,2002 and 2001 are composed of the following:
Certificates of
deposit and
money market
funds
Equity securities
Debt securities
Rental properties
and other
investments
– –
Market or Market or
Carrying Carrying
Value Cost Value Cost
The University holds common stock investments in certain companies that are not publicly
traded. The investments are recorded at market value, which is determined by the
management of the University and the investee company. The recorded value of these
investments at June 30 is as follows:
Unrestricted net assets
Permanently restricted net assets
Antioch University
Notes to Financial Statements (continued)
3. Land, Building, and Equipment
The following is a summary of land, building, and equipment as of June 30:
Building .
Building improvements
Equipment
Furniture and fixtures
Land and land improvements
Library books
Vehicles
Construction in progress
Accumulated depreciation (33,255,921) (30,926,397)
Net book value $29,235,964 $ 30,171,627
Antioch University
Notes to Financial Statements (continued)
4. Notes and Bonds Payable
Notes and bonds payable consist of the following:
June 30
2002 2001
New Hampshire bonds bearing interest at 7.875%;
secured by first mortgage on facility and first
security interest in equipment, due in escalating
annual principal installments through 2022 $ 5,000,000 $ 5,095,000
$2,400,000 adjustable rate mortgage loan bearing
interest at 5.00% in 2002 and 8.96% in 2001;
secured by University facilities, due in monthly
principal installments of $1 1,607 through 2008 858,939 998,225
Seattle Series A Nontaxable Nonprofit Bonds
bearing interest at 6.35%; secured by mortgage on
Seattle facility, due in escalating annual principal
installments beginning in 2007 through 2027 6,400,000 6,400,000
Seattle Series B Taxable Nonprofit Bonds bearing
interest at 7.55% in 2002 and 7.4% in 2001,
secured by mortgage on Seattle facility, due in
escalating annual principal installments through
2005 500,000 640,000
1997 Series State of Ohio Higher Education Facility
Revenue Bonds; due in semi-annual principal
installments through March 2008; variable
interest rate historically fluctuating from 4% to
6%
2000 Series C State of Ohio Higher Education
Facility Revenue Bonds; principal due in annual
principal installments beginning in September
2001 through September 2020; variable interest
rate historically fluctuating from 4% to 6%
Other obligations, including capitalized leases
Antioch University
Notes to Financial Statements (continued)
4. Notes and Bonds Payable (continued)
The New Hampshire and Seattle bonds contain certain restrictive covenants that include,
among other things, minimum requirements for annual debt service, liquidity and
debt-to-
equity ratios. At June 30, 2002 the University was in technical violation of certain of these
covenants. The lenders have waived compliance with those covenants at June 30,2002.
Interest paid to external sources amounted to $796,957 in 2002 and $1,393,932 in 2001.
Interest expense amounted to $1,018,671 in 2002 ($1,156,360 in 2001). Additionally, the
University has an unused line of credit of $1,000,000 at June 30,2002.
Maturities of the notes and bonds for the years succeeding June 30,2002 are:
2003 $ 873,528
2004 872,802
2005 773,183
2006 784,286
2007 759,286
Thereafter
12.042.5
1 1
5. Retirement Plans
The University has a defined contribution retirement plan for eligible faculty and nonfaculty
personnel managed by Teachers Insurance and Annuity Association-College Retirement
Equities Fund (TIAA-CREF). Contributions to this plan by the University were $2,649,073 in
2002 ($2,520,190 in 2001). Participants may also contribute at their option to TIAA-CREF
through individual retirement annuity contracts.
The University also maintains separate, self-administered, noncontributory pension plans for
certain individuals, who were faculty employees at June 30, 1970 or non-faculty personnel at
June 30, 1973. Substantially all benefits previously earned under these plans are paid directly
by the University and amounted to approximately $80,000 in 2002 ($83,000 in 2001). The
unfunded, actuarially determined liability utilizing an average interest assumption of 7.5
percent for benefits earned under these plans was approximately $508,000 at June 30, 2002
and ($547,000 at June 30, 2001) and is included in accrued liabilities in the accompanying
statements of financial position. The net periodic pension benefit cost included as income in
the statement of activities amounted to $39,982 in 2002 ($18,619 in 2001).
Antioch University
Notes to Financial Statements (continued)
6. Other Postretirement Benefit Plans
In addition to the University’s defined contribution retirement plan; the University has three
defined benefit postretirement plans covering most salaried employees. One plan provides
medical benefits, another provides prescription drug benefits, and the third provides life
insurance benefits. The postretirement health care and prescription drag plans are
contributory, with retiree contributions adjusted annually, and contain other cost-sharing
features such as deductibles and coinsurance. The accounting for the health care and
prescription drug plans anticipates future cost-sharing changes to the written plan that are
consistent with the University’s expressed intent to increase the retiree contribution rate
annually for the expected general inflation rate for that year. The University’s policy is to pay
the cost of retirees’ postretirement health care and drug benefit claims as incurred and to pay
the premiums to the life insurance plan for participants on an annual basis.
The following table shows the Plans’ combined liability-reconciled with the amounts
recognized in the accrued benefit liabilities in the University’s statement of financial position
as of June 30,2002 and 2001:
Medical and Life
Prescription Insurance
Drug Plans Plan Total
June 30,2002
Accumulated postretirement benefit
obligation:
Retirees
Fully eligible active plan
participants
Other active plan participants
Accumulated postretirement benefit
obligation
Unrecognized prior service cost
Unrecognized net gain
Accrued postretirement benefit cost
Antioch University
Notes to Financial Statements (continued)
6. Other Postretirement Benefit Plans (continued)
Medical and Life
Prescription Insurance
Drug Plans Plan Total
June 30,2001
Accumulated postretirement benefit
obligation:
Retirees
Fully eligible active plan
participants
Other active plan participants
Accumulated postretirement benefit
obligation
Unrecognized prior service cost
Unrecognized net gain
Accrued postretirement benefit cost
Net periodic postretirement benefit cost included the following components:
Service cost of benefits earned $ 14,109 $ 52,376
Interest cost on liability 2 1,333 79,196
Amortization of prior service costs 5,278 (30,204)
Amortization of losses (gains) 9,280 (1 7,507)
Net periodic postretirement benefit cost $ 50,000 $ 83,861
Benefits paid under these plans in 2002 and 2001 were $275,895 and $333,587, respectively.
The weighted-average annual assumed rate of increase in the per capita cost of covered
benefits
(i.e.,
health care-cost trend rate) is 10 percent for 2002 and is assumed to decrease
112
percent per year to 5.0 percent for 2012 and remain at that level thereafter.
The weighted-average discount rate used in determining the accrued postretirement benefit
cost was 7.5 percent at June 30,2002 and 2001.
Antioch University
Notes to Financial Statements (continued)
7. Lease Commitments
Certain of the University’s education centers lease their facilities. These leases are non-
cancelable operating agreements for varying periods through 2003, with renewal options for
additional periods in some cases. Rental expense under these leases was approximately
$1,246,000 in 2002 ($1,156,000 in 2001). The University generally pays real estate taxes,
insurance, and specified maintenance costs.
Future minimum rentals on non-cancelable leases are as follows:
Year Amount
8. Contributions Receivable
Contributions receivable consist of the following:
Temporarily Permanently
Restricted Restricted Total
Unconditional promises expected to
be collected in:
Less than one year $ 304,226 $ 2,500 $ 306,726
One to five years 5,083,513 453,315 5,536,828
More than five years 2,753,433 305,558 3,058,991
$ 8,141,172 $ 761,373 8,902,545
Allowance for uncollectible contributions 890,255
Net contributions receivable
The amounts are recorded after discounting to the present value of the future cash flows.
Antioch University
Notes to Financial Statements (continued)
9. Nature and Amount of Temporarily Restricted Net Assets
Temporarily restricted net assets are available for the following purposes at June 30:
Instruction
Research
Public service
Academic support
Student services
Institutional support
Scholarships
Construction
Annuity payments
10. Nature and Amount of Permanently Restricted Net Assets
Permanently restricted net assets are restricted to the following purposes at June 30:
Instruction
Public service
Academic support
Student services
Institutional support
Plant
Scholarships
Loans
Annuity payments
Antioch University
Notes to Financial Statements (continued)
11. Net Assets Released From Restrictions
Donor-imposed restrictions expired on temporarily restricted net assets during the years
ended June 30, as follows:
Purpose restricted contributions for:
Instruction
Research
Public service
Academic support
Student aid
Institutional support
Scholarship
Construction
Total net assets released from restriction
12. Fair Values of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, grants receivable,
accrued benefit liabilities, other accrued liabilities, and deferred revenue approximate fair
value because of the short maturity of these financial instruments. The carrying value, which
is the fair value of investments, is based upon values provided by an external investment
manager or quoted market values.
A reasonable estimate of the fair value of the loans to students under government loan
programs and advances from federal government for student loans could not be made because
the notes receivable are not salable and can only be assigned to the U.S. government or its
designees.
The carrying amount of contributions receivable approximates fair value as these donations
are recorded at the net present value of amount pledged. The carrying amount for annuities
payable, which approximates fair value, is estimated using discounted cash flow analyses
based on the University’s current investment income rate for instruments similar to those
underlying the annuities.
The fair value of notes and bonds payable is approximately
$17,6
10,936.
