lynn university single audit report - 2014 proforma · lynn university notes to financial...

Lynn University Financial and Compliance Report June 30, 2014

Contents

Independent Auditor’s Report 1 – 2

Financial Statements

Statements of financial position 3

Statements of activities 4 – 5

Statements of cash flows 6

Notes to financial statements 7 – 25

Internal Control and Compliance Matters

Schedule of Expenditures of Federal Awards

and State Financial Assistance 26

Notes to the Schedule of Expenditures of Federal

Awards and State Financial Assistance 27

Reports Required by Governmental Auditing Standards,

OMB Circular A-133, and Chapter 10.650, Rules of the

Auditor General of the State of Florida:

Independent Auditor’s Report on:

Internal Control over Financial Reporting

and on Compliance and Other Matters Based

on an Audit of Financial Statements Performed

in Accordance With Governmental Auditing Standards 28 – 29

Compliance for Each Major Federal Program

and State Project and Report on Internal Control Over Compliance in Accordance with OMB Circular A-133 and Chapter 10.650, Rules of the Auditor General of the State of Florida 30 – 31

Schedule of Findings and Questioned Costs 32 – 33

Summary Schedule of Prior Audit Findings 34

1

Independent Auditor’s Report To the Board of Trustees Lynn University Report on the Financial Statements

We have audited the accompanying financial statements of Lynn University (the “University”), which comprise the statements of financial position as of June 30, 2014 and 2013, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these 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 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 financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the 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 entity’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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

2

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the University as of June 30, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters

Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards and state financial assistance, as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and Chapter 10.650, Rules of the Auditor General of the State of Florida, are presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The schedule of expenditures of federal awards and state financial assistance has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards and state financial assistance is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our reports dated October 28, 2014 and October 15, 2013, on our consideration of the University’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of those reports are to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control over financial reporting and compliance.

Fort Lauderdale, Florida October 28, 2014

3

Lynn University

Statements of Financial PositionJune 30, 2014 and 2013

Assets 2014 2013

Cash and cash equivalents 6,929,943 $ 6,259,239 $ Student accounts receivable, less allowance for doubtful

accounts of $144,101 and $113,578, respectively 416,974 368,393 Other receivables 32,298 65,385 Contributions receivable, net 4,809,772 2,848,496 Inventory 241,629 401,841 Prepaid and other assets 1,180,299 1,313,359 Student notes receivable, less allowance for doubtful notes of

$1,456,265 and $1,363,209, respectively 2,055,010 2,230,055 Financial derivatives - 35,593 Investments 29,704,683 27,884,197 Cash, restricted for capital projects 1,247,098 9,393,145 Cash, restricted for bond payments 1,300,000 1,300,149 Property, plant and equipment, net 89,600,141 72,767,250

Total assets 137,517,847 $ 124,867,102 $

Liabilities and Net AssetsLiabilities Accounts payable 5,734,931 $ 2,813,272 $ Accrued salaries and wages and other benefits 2,842,477 2,390,306 Deferred revenue 9,990,793 9,775,011 Deferred compensation payable 2,631,615 2,505,595 Bonds and loans payable 34,752,196 35,943,317 Financial derivatives 135,888 - Other liabilities 211,700 207,164

Total liabilities 56,299,600 53,634,665

Commitments and contingencies

Net AssetsUnrestricted 41,666,900 36,868,708 Temporarily restricted 18,154,656 13,375,075 Permanently restricted 21,396,691 20,988,654

Total net assets 81,218,247 71,232,437 Total liabilities and net assets 137,517,847 $ 124,867,102 $

See Notes to Financial Statements.

4

Lynn University

Statements of Activities

Years Ended June 30, 2014 and 2013

Temporarily Permanently

Unrestricted Restricted Restricted TotalRevenues, gains, and other support:

Student tuition and related fees 65,191,719 $ -$ -$ 65,191,719 $

Residence-hall room and board fees 10,009,516 - - 10,009,516

Total tuition, fees, room and board 75,201,235 - - 75,201,235

Less student aid 15,148,217 - - 15,148,217

Net tuition, fees, room and board 60,053,018 - - 60,053,018

Private contributions 333,837 6,448,774 408,037 7,190,648

Federal and state grants 328,484 - - 328,484

Investment income 606,567 2,906,001 - 3,512,568

Bookstore sales 670,987 - - 670,987

Camps and conference income 2,473,291 - - 2,473,291

Miscellaneous income 1,281,767 - - 1,281,767

65,747,951 9,354,775 408,037 75,510,763

Net assets released from restrictions 4,575,194 (4,575,194) - -

Total revenue, gains, and other support 70,323,145 4,779,581 408,037 75,510,763

Expenses:

Programs:

Instruction 21,946,217 - - 21,946,217

Student services 17,078,558 - - 17,078,558

Residence halls 5,979,986 - - 5,979,986

Food services 2,857,827 - - 2,857,827

Bookstore 794,560 - - 794,560

Camps 1,672,018 - - 1,672,018

Institutional support 9,253,152 - - 9,253,152

Fund raising and institutional advancement 5,662,883 - - 5,662,883

Presidential debate - - - -

Total expenses 65,245,201 - - 65,245,201 .

Change in net assets before other changes 5,077,944 4,779,581 408,037 10,265,562

Other changes:

Gain (loss) on financial derivatives (171,481) - - (171,481)

Pension-related changes other than net

periodic pension costs (108,271) - - (108,271)

Change in net assets 4,798,192 4,779,581 408,037 9,985,810

Net assets at beginning of year 36,868,708 13,375,075 20,988,654 71,232,437

Net assets at end of year 41,666,900 $ 18,154,656 $ 21,396,691 $ 81,218,247 $


2014

5

Temporarily PermanentlyUnrestricted Restricted Restricted Total

58,682,122 $ -$ -$ 58,682,122 $

9,159,387 - - 9,159,387

67,841,509 - - 67,841,509

13,764,633 - - 13,764,633

54,076,876 - - 54,076,876

605,731 10,470,205 711,430 11,787,366

368,230 - - 368,230

619,266 1,229,991 - 1,849,257

861,485 - - 861,485

2,239,540 - - 2,239,540

629,168 - - 629,168

59,400,296 11,700,196 711,430 71,811,922

4,926,327 (4,926,327) - -

64,326,623 6,773,869 711,430 71,811,922

21,980,257 - - 21,980,257

16,734,575 - - 16,734,575

6,099,144 - - 6,099,144

2,614,406 - - 2,614,406

1,236,057 - - 1,236,057

1,733,071 - - 1,733,071

9,823,466 - - 9,823,466

6,359,909 - - 6,359,909

1,842,196 - - 1,842,196

68,423,081 - - 68,423,081 .

(4,096,458) 6,773,869 711,430 3,388,841

542,440 - - 542,440

837,284 - - 837,284

(2,716,734) 6,773,869 711,430 4,768,565

39,585,442 6,601,206 20,277,224 66,463,872

36,868,708 $ 13,375,075 $ 20,988,654 $ 71,232,437 $

2013

6

Lynn University

Statements of Cash FlowsYears Ended June 30, 2014 and 2013

2014 2013Cash Flows From Operating Activities

Change in net assets 9,985,810 $ 4,768,565 $ Adjustments to reconcile change in net assets to net cash

provided by operating activities:Depreciation 4,308,405 4,182,365 Contributions restricted for long-term investment (408,037) (711,430) Contributions restricted for purchases of property and equipment (4,431,516) (9,025,754) Change in value of interest rate swaps 171,481 (542,440) Net realized and unrealized investment gains (3,813,010) (2,070,062) (Gain) loss on disposal of property and equipment 86,495 (43,848) Contribution of depreciable assets (16,331) (175,383) Contribution of art and other non-depreciable assets (14,425) (41,750) Contributed investments (67,105) (380,432) Changes in assets and liabilities:

Student accounts and notes receivable 126,464 113,440 Other receivables 33,087 (7,046) Contributions receivable (1,963) (42,508) Inventory, prepaid and other assets 293,272 171,176 Accounts payable and accrued expenses 815,308 575,738 Deferred compensation payable 126,020 66,953 Deferred revenue 215,782 3,727,910 Other liabilities 4,536 112,524

Net cash provided by operating activities 7,414,273 678,018 Cash Flows From Investing Activities

Proceeds from sale of equipment 16,998 54,900 Purchase of property and equipment (18,655,511) (8,536,320) Purchase of investments (1,701,349) (5,646,438) Sales of investments 3,760,978 6,534,986 Bond proceeds restricted for capital projects - (2,560,235) Release of restricted cash for capital projects 8,146,047 2,316,923 Bond proceeds restricted for bond repayment - (1,300,149) Release of restricted cash for bond payments 149 -

Net cash from investing activities (8,432,688) (9,136,333) Cash Flows From Financing Activities

Contributions and pledge payments restricted for long-term investment 408,037 711,430 Contributions and pledge payments restricted for purchases of property

and equipment 2,472,203 8,879,591 Proceeds from tax-exempt bonds and loan - 25,000,000 Principal payments on bonds and loans payable (1,191,121) (21,056,992) Repayment of interest rate swap liability - (1,315,669)

Net cash provided by financing activities 1,689,119 12,218,360

Net increase in cash and cash equivalents 670,704 3,760,045

Cash and cash equivalents:Beginning 6,259,239 2,499,194 Ending 6,929,943 $ 6,259,239 $


Lynn University Notes to Financial Statements

7

Note 1. Nature of Organization and Significant Accounting Policies

Nature of organization: Founded in 1962, Lynn University (the University) is an accredited, independent, co-educational institution located in Boca Raton, Florida, offering a variety of undergraduate, graduate and post-graduate degrees. The University also owns and operates Pine Tree Camps, a summer camp offering educational and recreational services to individuals between the ages of 3 and 15 years. A summary of the University’s significant accounting policies follows: Basis of presentation: The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America (GAAP). The University’s resources are classified for accounting and reporting purposes into three net asset categories based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the University and changes therein are classified and reported as follows:

Unrestricted Net Assets: Net assets that are not subject to donor-imposed conditions. Temporarily Restricted Net Assets: Net assets subject to donor-imposed stipulations that may or will be met either by actions of the University and/or the passage of time. Permanently Restricted Net Assets: Net assets subject to donor-imposed stipulations that are 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.

Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue recognition:

Tuition revenue: Tuition and fee revenue is recognized in the period when educational services are provided. Scholarships and fellowships awarded to students for tuition, fees and room and board are based upon need and merit and are netted against the related revenue. Residence-hall room and board fees: Residence-hall room and board fee revenue is recognized in the period when room and board is provided to students. Federal and state grants: Federal and state grants revenue is recognized when the grants are expended on eligible costs.


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Note 1. Nature of Organization and Significant Accounting Policies (Continued)

Contribution revenue: Contributions are recognized at fair value in the period received in the form of cash, unconditional promises to give, other assets or reductions in liabilities. Conditional promises to give are not recognized as revenue until the conditions are substantially met. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Contributions that are designated for future periods, receivables to be collected in future periods or restricted by the donor for specific purposes are reported as temporarily or permanently restricted revenue that increases those net asset classes. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported as released from restriction. When restrictions are met in the year of contribution receipt, donations are shown as temporarily restricted contributions and as net assets released from restrictions. Investment income: Realized gains and losses are recognized at date of disposition based on the difference between the net proceeds received and the purchased value of the investment sold, using the specific identification method. Unrealized gains and losses are recognized for the change in fair value between reporting periods. Interest and dividend income is recognized when earned. Investment income is included in the change in unrestricted net assets, unless its use is temporarily or permanently restricted by donor stipulations or law. When a donor restriction is met the amount is reclassified and reported as released from restriction. Camp, conference and bookstore revenue: Camp, conference and bookstore revenue is recognized when earned, which is when the services and/or goods are provided.

Cash and cash equivalents: Short-term debt investments with an original maturity of three months or less are classified as cash equivalents. At times, the University maintains deposits with financial institutions in amounts that are in excess of federally insured limits. Cash and cash equivalents for statement of cash flow reporting excludes cash and cash equivalents held in the University’s investment accounts and restricted cash. Student accounts receivable: Accounts receivable are uncollateralized student obligations due under normal trade terms requiring payment within 30 days or on receipt, depending upon the invoice date. It is not a common practice of the University to charge interest on delinquent accounts. Accounts receivable are stated at the amounts billed to the student. Payments of accounts receivable are allocated to the specific billings identified on the student’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices. An allowance for loss on accounts receivable is provided based on a review of the accounts along with an analysis of historical losses and recoveries. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recognized when payment is received. Student notes receivable: The University makes uncollateralized loans to students based on financial need. Notes receivable are stated at the principal amount loaned to students plus accrued interest. Interest is charged at a fixed rate (5% at June 30, 2014) commensurate with the Federal Perkins student loan program. Student loans are funded through the Federal Perkins revolving loan program or institutional resources. At June 30, 2014 and 2013, student loans, net of allowance, represented 1.5% and 1.8% of total assets, respectively.


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At June 30, student loans consisted of the following:

2014 2013

Federal Perkins revolving loan program 178,354 $ 188,625 $ Institutional programs 3,332,921 3,404,639

Gross student notes receivable 3,511,275 3,593,264 Less: allowance (1,456,265) (1,363,209)

Net student notes receivable 2,055,010 $ 2,230,055 $

The availability of funds under the Federal Perkins student loan program is dependent on reimbursements to the pool of repayments on outstanding loans. Funds advanced by the Federal government are ultimately refundable to the government and are classified as liabilities in the statement of financial position. Outstanding loans cancelled under the program result in a reduction of funds available for loan and a decrease in the liability to the government. At June 30, 2014 and 2013, the following amounts were past due under student loan programs:

1-8 months 8-24 months 24-60 months 60+ months Total June 30, past due past due past due past due past due

2014 108,335 $ 144,571 386,327 817,032 1,456,265 $ 2013 96,397 $ 171,029 376,348 719,435 1,363,209 $

An allowance for loss on notes receivable is provided based on a review of the notes along with an analysis of historical loss and recoveries. Notes are written off when deemed uncollectible. Recoveries of notes previously written off are recognized when payment is received. Contributions receivable: Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on contributions receivable are computed using a market rate commensurate with the risk of the contributions receivable in accordance with GAAP. Amortization of the discount is included in contribution revenue. Inventories: Inventories, consisting primarily of books, supplies and camp uniforms, are valued at the lower of cost (first-in, first-out method) or market. Investments: Investments are generally reported at fair value based upon quoted market prices. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Investments received by gift are recorded at fair value at the date of donation. In the case of certain less marketable investments, fair value is established by using the net asset value of each investment fund as provided by the investment fund manager.


10


The University’s investments include various types of investment securities which are exposed to various risks such as interest rate, market and credit risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is possible that changes in risks in the near term could materially affect the University’s investment balance reported in the statements of financial position. Property, plant and equipment: Property, plant and equipment are recorded at historical cost at the date of purchase or fair market value at the date of donation. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the University reports the expiration of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. Depreciation is computed on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years for furniture and equipment, and 15 to 30 years for buildings and improvements. Nondepreciable items represent works of art or antiques and are valued similar to property and equipment. Upon sale or retirement, the costs and related accumulated depreciation are eliminated from the respective accounts and resulting gains or losses are included in the consolidated statements of activities. The University reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment, there was no impairment at June 30, 2014 or 2013. Deferred financing costs: Costs incurred with debt issuances (see Note 7) are carried at cost less accumulated amortization. The bond issuance costs are being amortized over the life of the bonds on a method that approximates the effective interest method. Deferred financing costs are included in prepaid and other assets in the statements of financial position. Deferred revenue: Deferred revenue primarily consists of tuition and fees collected for academic instruction not yet rendered, amounts collected for room and board prior to the start of the semester, and camp fees collected for which services have not been rendered. These amounts will be recognized as revenue in the periods in which they are earned. Financial derivatives: Under GAAP, the University is required to record all derivative instruments at their respective fair values in the statement of financial position. The University’s derivatives consist solely of interest rate swaps. See Note 8 for further details. All changes in fair value are reflected in the statement of activities. Income tax: The University is exempt from federal income taxation as defined by Sections 501(c)(3) of the Internal Revenue Code and is generally exempt from state income taxes under the provisions of the Florida Nonprofit Corporation Act. Therefore, no provision for income taxes has been reflected in the accompanying consolidated financial statements.


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Management evaluated the University’s tax positions and concluded that the University had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of the Income Taxes Topic of the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC). With few exceptions, the University is no longer subject to income tax examinations by the U.S federal, state, or local tax authorities for years before 2011. Functional expenses: Direct expenses are allocated to the applicable functional expense category. Indirect expenses are allocated to program and supporting activities based on management’s estimate of benefit received by each activity. The University’s primary program service is instruction. Expenses reported as student services, residence halls, food services, bookstore, institutional support, fundraising, and presidential debate is incurred in support of this primary program service. Advertising costs: Advertising costs are expensed as incurred and amounted to $677,992 and $615,944, in fiscal 2014 and 2013, respectively. Subsequent events: The University has evaluated its subsequent events (events occurring after June 30, 2014) through October 28, 2014, which represents the date the financial statements were available to be issued.

Note 2. Contributions Receivable

2014 2013Contributions receivable restricted to:

Investment in buildings and equipment 3,824,176 $ 2,329,094 $ Time restricted 985,596 519,402

Total contributions receivable, net 4,809,772 $ 2,848,496 $

Anticipated collections of contributions receivable are summarized as follows at June 30, 2014 and 2013:

2014 2013Amounts expected to be collected in:

Less than one year 3,437,999 $ 1,240,000 $ One year to five years 1,703,310 2,013,310

Subtotal 5,141,309 3,253,310 Less:

Discount (331,537) (404,814) Total contributions receivable, net 4,809,772 $ 2,848,496 $

The discount rate on outstanding pledges as of June 30, 2014 and 2013, respectively, was 7%. As of June 30, 2014 and 2013, the University’s management has evaluated the collectability of contributions receivable and determined that no allowance for doubtful contributions is necessary. During the years ended June 30, 2014 and 2013, members of the Board of Trustees made cash and in-kind contributions as well as multi-year promises to give. Of the net balance of contributions receivable, approximately $2,961,000 and $500,000 were receivable from these members of the Board of Trustees at June 30, 2014 and 2013, respectively. Approximately 62% of the contribution receivable balance as of June 30, 2014, is due from a single donor of the University.


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Note 3. Investments

Investments consisted of the following at June 30, 2014 and 2013:

2014 2013

Debt securities 2,020,487 $ 3,825,605 $ Equity securities 3,284,006 2,564,403 Limited Partnership 24,400,190 21,494,189

29,704,683 $ 27,884,197 $

See Note 11 for disaggregated information regarding investments. The following schedule summarizes total investment income (loss) for the years ended June 30, 2014 and 2013:

2014 2013

Interest and dividends 124,564 $ 194,390 $ Investment fees (425,006) (415,195) Net realized and unrealized gains 3,813,010 2,070,062

3,512,568 $ 1,849,257 $

The University has invested $24,400,190, which includes all endowed funds, or 82% of all University investments in a Limited Partnership. Such investment is considered to be a concentration of credit risk.

Note 4. Endowments

The University’s endowment consists of approximately 45 individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds classified by the Board of Trustees to function as endowments. As required by GAAP, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.


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Note 4. Endowments (Continued)

Interpretation of Relevant Law The Board of Trustees has interpreted the Florida Uniform Prudent Management of Institutional Funds Act (FL UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the University classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment, the original value of subsequent gifts to the permanent endowment, and 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 fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the University in a manner consistent with the standard of prudence prescribed by FL UPMIFA. In accordance with FL UPMIFA, the University considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

The duration and preservation of the fund. The purposes of the University and the donor-restricted endowment fund. General economic conditions. The possible effect of inflation and deflation. The expected total return from income and the appreciation of investments. Other resources of the University. The investment policies of the University.

Endowment net asset composition by type of fund as of June 30, 2014:


Donor-restricted endowment funds -$ 2,734,572 $ 21,396,691 $ 24,131,263 $ Board-designated endowment funds 250,000 - - 250,000

250,000 $ 2,734,572 $ 21,396,691 $ 24,381,263 $

Changes in endowment net assets for the fiscal year ended June 30, 2014, is as follows:


Endowment net assets,as of July 1, 2013 250,000 $ 924,214 $ 20,988,654 $ 22,162,868 $

Investment Return:Interest and dividend income - - - - Investment fees - (368,422) - (368,422) Net realized and unrealized gains - 3,274,423 - 3,274,423 Total investment return - 2,906,001 - 2,906,001

Contributions - - 408,037 408,037 Appropriation of endowment assets

for expenditure - (1,095,643) - (1,095,643) Endowment net assets,

as of June 30, 2014 250,000 $ 2,734,572 $ 21,396,691 $ 24,381,263 $


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Endowment net asset composition by type of fund as of June 30, 2013:


Donor-restricted endowment funds -$ 924,214 $ 20,988,654 $ 21,912,868 $ Board-designated endowment funds 250,000 - - 250,000

250,000 $ 924,214 $ 20,988,654 $ 22,162,868 $

Changes in endowment net assets for the fiscal year ended June 30, 2013 is as follows:


Endowment net assets,as of July 1, 2012 250,000 $ 746,625 $ 20,277,224 $ 21,273,849 $

Investment Return:Interest and dividend income - 98 - 98 Investment fees - (344,865) - (344,865) Net realized and unrealized gains - 1,574,758 - 1,574,758 Total investment return - 1,229,991 - 1,229,991

Contributions - - 711,430 711,430 Appropriation of endowment assets

for expenditure - (1,052,402) - (1,052,402) Endowment net assets,

as of June 30, 2013 250,000 $ 924,214 $ 20,988,654 $ 22,162,868 $

Endowment Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or FL UPMIFA requires the University to retain as a fund of perpetual duration. In accordance with GAAP, deficiencies of this nature are reported in unrestricted net assets. There were no donor-restricted endowment funds with deficiencies at June 30, 2014 and 2013. Return Objectives and Risk Parameters The University has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the University must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner outlined in the investment policy adopted by the Board of Trustees. The investment policy’s purpose is to provide guidance to the Investment Managers regarding the University’s objectives and goals with regard to the endowment investing. Specifically, it outlines the risk tolerance areas of the University as well as defining the limitations in the portfolio of investments. The University expects its endowment funds, over time to provide an average rate of return that permits a predictable and sustainable spending rate of the average market value of endowment assets by achieving annual growth in value at a rate equal to the sum of the annual spending rate and the annual rate of inflation.


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Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the University relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The University targets a diversified asset allocation to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The University has a policy of appropriating for distribution each year the lesser of actual earnings or 5% of the ending market value of its endowment fund for the previous fiscal year. In establishing this policy, the University considered the long-term expected return on its endowment. Accordingly, over the long term, the University expects the current spending policy to allow its endowment to grow at an inflationary rate. This is consistent with the University’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return.

Note 5. Supplemental Cash Flow Information

Cash paid for interest during the years ended June 30, 2014 and 2013, totaled $672,769 and $919,001, respectively. Change in contributions receivable restricted for the purchase of property and equipment received during the years ended June 30, 2014 and 2013, was an increase of $1,961,276 and $318,536, respectively. Noncash investing activities for the years ended June 30, 2014 and 2013, included the receipt of $67,105 and $380,432, respectively, of marketable securities donated to the University. Noncash investing activities for the years ended June 30, 2014 and 2013, also included the receipt of $30,756 and $217,133 of depreciable assets and artwork and other non-depreciable assets donated to the University. Noncash investing activities for the years ended June 30, 2014 and 2013, included $3,750,615 and $1,192,093 of increases in property, plant and equipment associated with a corresponding amount in accounts payable.


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Note 6. Property, Plant and Equipment

Property, plant and equipment are summarized as follows at June 30, 2014 and 2013:

EstimatedUseful Lives

2014 2013 in Years

Land 1,145,045 $ 1,145,045 $ -Land held for investment 110,000 110,000 -Construction in progress 24,970,241 10,259,903 -Artworks and other non-depreciable items 2,148,799 2,134,374 -Land improvements 6,718,707 6,718,707 25Buildings and improvements 97,552,056 93,650,253 25 to 40Equipment 29,390,698 28,325,886 5 to 10Library books 3,242,280 3,191,088 5 to 10

165,277,826 145,535,256 Less accumulated depreciation (75,677,685) (72,768,006)

89,600,141 $ 72,767,250 $

Depreciation expense included in the statements of activities amounted to $4,308,405 and $4,182,365 for the years ended June 30, 2014 and 2013, respectively.

Note 7. Bonds and Loans Payable

Palm Beach County Educational Facilities Revenue Bond, Series 2013 In June 2013, the University issued $25,000,000 in tax-exempt variable rate demand educational facilities revenue serial bonds to pay a portion of the cost of the acquisition, construction, installation and equipping of certain educational facilities located at the University’s campus in Boca Raton, Florida and to refinance the University’s then outstanding debt under the Palm Beach County Educational Facilities Revenue Bonds, Series 2009 and 2001. The bonds were issued through Palm Beach Educational Facilities Authority (the Issuer), and BankUnited, N.A. was assigned as the bond holder. The bond proceeds were loaned to the University through a finance agreement with the Issuer and Bank United, N.A. dated June 19, 2013. In connection with the finance agreement, the University entered into a mortgage and security with BankUnited, N.A; which effectively collateralized the University’s obligations with all of the assets owned by the University, excluding those assets assigned as collateral in connection with Palm Beach County Educational Facilities Financing Agreement, 2012. The mortgage and security agreement requires the University to maintain a certain loan to collateral value. If the loan to collateral value is not achieved, reductions in the outstanding principal amounts, as specified in the agreement, are required. The bonds require the University to maintain a debt service reserve fund, in a segregated bank account, of an amount at least equal to the lesser of $1,300,000 or the maximum amount of principal and interest scheduled to come due on the bonds in the current or any future year. The bonds bear interest at 65% of the 30-day LIBOR plus 2.4% (2.5% at June 30, 2014). The bonds require monthly principal payments on an escalating basis beginning in August 2013 and mature on June 18, 2038. Under the terms of the bond financing agreement, the University is subject to several restrictive covenants, including financial covenants.


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Note 7. Bonds and Loans Payable (Continued)

Palm Beach County Educational Facilities Financing Agreement, 2012 In May 2012, the University entered into an $11,000,000 Master Financing Agreement (the Agreement) with the Palm Beach County Educational Facilities Authority, as Issuer, and a financial institution, as lender. Under the terms of the Agreement, a tax-exempt loan, in effect, was provided by the financial institution to the University to finance certain capital projects on the University’s campus related to energy conservation initiatives. The tax-exempt loan is collateralized by the equipment purchased with loan proceeds and by the loan proceeds held in escrow. At June 30, 2014, $1,247,098 was held in escrow to fund capital projects. The tax-exempt loan bears interest at 4.13% per annum. Beginning in August 2012, quarterly interest payments were due until February 2013. Beginning May 2013, quarterly principal payments of $248,603 are due until the loan matures in February 2028. Under the terms of the Agreement, the University is subject to several restrictive covenants, including financial covenants. Principal maturities on the bonds and loan payable anticipated by the University are as follows: Year EndingJune 30, Series 2013 Tax-exempt loan Total

2015 716,000 $ 574,018 $ 1,290,018 $ 2016 736,300 598,095 1,334,395 2017 755,600 623,181 1,378,781 2018 780,300 649,320 1,429,620 2019 803,300 676,555 1,479,855 Thereafter 20,568,289 7,271,238 27,839,527

24,359,789 $ 10,392,407 $ 34,752,196 $

Interest costs for all outstanding long-term debt totaled $715,627 and $906,370 for the years ended June 30, 2014 and 2013, respectively.

Note 8. Financial Derivatives

In June 2013, the University entered into an interest rate swap arrangement having a notional amount of $25,000,000, which effectively fixes the interest rate on the bonds payable at 2.81% through June 2020. The notional amount decreases each month to mirror the principal amounts outstanding on the Series 2013 bonds. The University receives interest at a variable rate and makes payments at 2.81% and settles with the counterparty on a monthly basis. The University entered into the swap agreement to reduce the variability of cash flows related to changes in interest rates on borrowings from the variable rate bonds. The change in the net settlement amount on the swap is included in interest expense. In June 2013, the University paid $1,315,669 to a financial institution to satisfy its then obligation and terminate an interest swap agreement with a financial institution.


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Note 8. Financial Derivatives (Continued)

At June 30, 2014 and 2013, the fair value of the interest rate swap in place resulted in a liability of $135,888 and an asset of $35,593, respectively, in the statements of financial position. The change in fair value of the interest rate swaps for the years ended June 30, 2014 and 2013, was a loss of $171,481 and a gain of $542,440, respectively, and is recorded as gain (loss) on financial derivatives in the statements of activities. The effect of the University’s credit worthiness has been factored into the fair value measurement of the interest rate swap in a liability position.

The University is exposed to credit loss in the event of nonperformance by the counterparty to the interest rate swap agreement. The University, however, does not anticipate nonperformance by the counterparty.

Note 9. Temporarily Restricted Net Assets and Net Assets Released from Restrictions

Changes in temporarily restricted net assets are summarized as follows for the years ended June 30, 2014 and 2013:

Beginning Investment Satisfaction of EndingRestriction Balance Additions Gain Restrictions Balance

Instruction 829,565 $ 55,625 $ 1,386,031 $ (666,458) $ 1,604,763 $ Scholarships 597,244 606,777 1,425,311 (731,508) 1,897,824 Student services 348,251 369,260 - (354,381) 363,130 Time restricted - 985,596 - - 985,596

1,775,060 2,017,258 2,811,342 (1,752,347) 4,851,313 Buildings and

equipment 11,600,015 4,431,516 94,659 (2,822,847) 13,303,343 13,375,075 $ 6,448,774 $ 2,906,001 $ (4,575,194) $ 18,154,656 $

Beginning Investment Satisfaction of Ending Balance Additions Gain Restrictions Balance

Instruction 814,491 $ 512,979 $ 605,651 $ (1,103,556) $ 829,565 $ Scholarships 430,198 511,072 583,556 (927,582) 597,244 Student services 919,994 335,605 - (907,348) 348,251 Time restricted 331,518 84,795 - (416,313) -

2,496,201 1,444,451 1,189,207 (3,354,799) 1,775,060 Buildings and

equipment 4,105,005 9,025,754 40,784 (1,571,528) 11,600,015 6,601,206 $ 10,470,205 $ 1,229,991 $ (4,926,327) $ 13,375,075 $

2014

2013


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Note 10. Permanently Restricted Net Assets

Income from the following balances of permanently restricted net assets as of June 30, 2014 and 2013, is available to support the University’s programs:

2014 2013

Instruction 9,803,362 $ 9,803,362 $ Scholarships 10,897,830 10,489,793 Buildings and equipment 695,499 695,499

21,396,691 $ 20,988,654 $

Note 11. Fair Value Disclosures

The carrying values of the University’s cash, accounts receivable, accounts payable, and other accruals approximate the fair value of these financial instruments at June 30, 2014 and 2013, due to the short maturities of these instruments. The fair value of receivables under the University’s loan programs approximates carrying value. A reasonable estimate of the fair value of notes receivable from students under government loan programs cannot be made because such loans are not sellable and can only be assigned to the U.S. government or its designees. The carrying amounts of the bonds payable approximates the fair value due to the variable rates associated with the instruments. The fair value of fixed rate long-term debt is estimated using assumptions that market participants would use in pricing the liability. The University follows the provisions of the Fair Value Measurement Topic of the FASB ASC for financial assets and liabilities. This Statement applies to all financial assets and liabilities that are being measured and reported on a fair value basis, and establishes a framework for measuring fair value of assets and liabilities and expands disclosures about fair value measurements. The Fair Value Measurement Topic of the FASB ASC requires that fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Financial instruments with unadjusted, quoted prices listed on active market exchanges.

Level 2: Financial instruments determined using prices for recently traded financial instruments

with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3: Financial instruments that are not actively traded on a market exchange. This category

includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.

In determining the appropriate levels, the University performs a detailed analysis of the assets and liabilities that are subject to the Fair Value Measurement Topic of the FASB ASC. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.


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Note 11. Fair Value Disclosures (Continued)

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for financial assets and financial liabilities measured at fair value. There have been no changes in the methodologies used at June 30, 2014 and 2013.

Investments: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include equities of preferred and common stock, corporate bonds, government security bonds and other debt securities. Level 3 securities would include hedge funds of funds which are valued at net asset value per share which are not redeemable in the near term. Alternative investments are recorded at estimated fair values which are determined using a reasonable methodology based primarily on the net asset value of each investment. Interest rate swap: The University’s interest rate swap is a pay-fixed, receive-variable interest rate swap based on the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index. The SIFMA Municipal Swap Index is observable at commonly quoted intervals for the full term of the swap and, therefore, is considered a Level 2 item. The Fair Value Measurement Topic of the FASB ASC states that the fair value measurement of a liability must reflect the nonperformance risk of the entity. Therefore, the effect of the University’s creditworthiness has also been considered in the fair value measurement of the interest rate swap in a liability position.

Level 1 instruments carried at fair value, and Level 2 and Level 3 instruments carried at estimated fair value, are comprised of the following at June 30, 2014:

Quoted Prices Significant

in Active Markets Other Significant

for Identical Observable Unobservable

Assets Inputs Inputs

June 30, 2014 (Level 1) (Level 2) (Level 3)

Financial assets:

Investments:

Debt securities:

Corporate bonds and notes 579,622 $ 579,622 $ -$ -$

Government securities 1,440,865 1,440,865 - -

Other debt securities - - - -

Equity securities:

Large cap 1,266,619 1,266,619 - -

Mid cap 286,570 286,570 - -

Small cap 152,431 152,431 - -

International 1,360,324 1,360,324 - -

Mutual funds and other 218,062 218,062 - -

Alternative investments 24,400,190 - - 24,400,190

29,704,683 $ 5,304,493 $ -$ 24,400,190 $

Financial liabilities:

Financial derivatives 135,888 $ -$ 135,888 $ -$

Fair Value Measurements at Reporting Date Using


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Level 1 instruments carried at fair value, and Level 2 and Level 3 instruments carried at estimated fair value, are comprised of the following at June 30, 2013:

Quoted Prices Significant

in Active Markets Other Significant

for Identical Observable Unobservable

Assets Inputs Inputs

June 30, 2013 (Level 1) (Level 2) (Level 3)

Financial assets:

Investments:

Debt securities:

Corporate bonds and notes 480,150 $ 480,150 $ -$ -$

Government securities 1,466,861 1,466,861 - -

Other debt securities 1,878,594 1,878,594 - -

Equity securities:

Large cap 1,038,475 1,038,475 - -

Mid cap 172,144 172,144 - -

Small cap 159,329 159,329 - -

International 1,016,192 1,016,192 - -

Mutual funds and other 178,263 178,263 - -

Alternative investments 21,494,189 - - 21,494,189

27,884,197 $ 6,390,008 $ -$ 21,494,189 $

Financial derivatives 35,593 $ -$ 35,593 $ -$

Fair Value Measurements at Reporting Date Using

For the year ended June 30, 2014, the changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows:

Realized

Balance as of gains Unrealized Balance as of

July 1, 2013 (losses) gains Contributions Fees Dividends June 30, 2014

Investments:

High Vista II, LP 21,494,189 $ -$ 3,274,423 $ -$ (368,422) $ -$ 24,400,190 $

For the year ended June 30, 2013, the changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows:

Realized

Balance as of gains Unrealized Balance as of

July 1, 2012 (losses) gains Contributions Fees Dividends June 30, 2013

Investments:

High Vista II, LP 19,046,296 $ -$ 1,574,758 $ 1,218,000 $ (344,865) $ -$ 21,494,189 $

The unrealized gains on Level 3 investments relate to investments held as of June 30, 2014 and 2013, respectively.


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The fair value of the University’s investment in High Vista II, LP (High Vista) is measured using the net asset value per share (or equivalent) valuation technique in accordance with ASC 820. The University’s fair value of their investment in High Vista was $24,400,190 and $21,494,189 at June 30, 2014 and 2013, respectively, and there are no unfunded commitments. The limited partnership agreement between the University and High Vista calls for an initial 2-year lockup, which ended July 2013, after which a redemption request can be submitted quarterly with at least a 60-day notice as long as the University complies with other terms, conditions and standards as may be established by the General Partner from time to time. During the initial 2-year lockup, the University is allowed to redeem up to 6% of its investment in High Vista on a yearly basis, if needed. High Vista seeks capital appreciation by investing in multiple asset classes, including traditional assets (such as marketable equity, fixed income, derivative contracts and other securities) and alternative assets (such as real estate, commodities, timber, absolute return/hedge funds, private equity, and venture capital investments).

Note 12. Retirement Plans

The University offers participation in its Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIAA – CREF) defined contribution retirement plan to all full-time employees (other than adjunct faculty and student employees) who have completed one year of service and attained age 21. This plan permits each eligible employee to contribute, tax-deferred, up to 5% of his/her annual salary and the University to contribute up to 5% of each participant’s annual salary as well. For the years ended June 30, 2014 and 2013, the employer’s contribution totaled $922,111 and $947,111, respectively. The University also offers participation in its TIAA – CREF tax-deferred annuity plan to these same employees. This plan allows each eligible employee to make tax-deferred contributions in addition to any contributions made under the retirement plan referred to in the preceding paragraph. Each participant’s calendar year contributions to the above plans are subject to a combined annual dollar limitation as defined in the Internal Revenue Code. During the year ended June 30, 2007, the University’s Board of Trustees approved a Supplemental Deferred Compensation Plan for the current President, Dr. Kevin M. Ross, to supplement the benefits and retirement program currently maintained by the University, and to promote the retention of the President’s services for a substantial period of time. Each year of service rendered by the President, beginning July 1, 2006, shall be credited with an annual award equal to 10% of the base salary of the President for the year preceding each grant date. The plan is unfunded and vests on July 1, 2016, or earlier upon death or disability of the President, change in control of the University or early termination of the Plan. During the year ended June 30, 2005, the University’s Board of Trustees approved an additional Supplemental Executive Retirement Plan (the Executive Plan) to recognize the vital and substantial services rendered by the University’s Senior Executives who contribute to the success of Lynn University, and to provide appropriate benefits rewarding the Senior Executives in recognition of long service and to supplement other broad-based retirement arrangements of the University. The financial statements for the years ended June 30, 2014 and 2013, include $194,965 and $527,795, respectively, of expense associated with the Executive Plan.


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Note 12. Retirement Plans (Continued)

The Executive Plan is unfunded and constitutes a promise by the University to make benefit payments in the future. The benefits payable are based on the average of the highest base salary of each Executive during three of the last five years of service with the University and the number of completed years of service with the University. The Executives will be 100% vested in the Executive Plan only upon the attainment of the retirement age of 65, as specified in the Executive Plan. The Executives’ services to the University are required on a continuous basis to meet this vesting requirement. Benefit payments will commence at the end of the calendar month following attainment of retirement age. Vested benefits will be paid in the form of a lump-sum distribution, which will be calculated based on the actuarial equivalent of the initial benefit payable calculated under the method described above. The University’s Board of Trustees will have the discretion to evaluate the financial position of the University to determine, on a periodic basis, whether the University is financially able to meet all or any portion of any benefit payment. No benefits were paid under the Executive Plan for the years ended June 30, 2014 and 2013. In the event of a change in control of the University or termination of the Executive Plan, the Executives will immediately receive a lump-sum payment equal to the actuarially determined value of the plan benefit. The following projected benefit obligations for the two plans offered by the University as described previously have been recognized as deferred compensation payable on the statement of financial position as follows:

2014 2013

Benefit obligation 2,381,615 $ 2,305,595 $

No benefits are expected to be paid in fiscal years 2015 through 2017, however, approximately $1,235,000 will need to be paid in fiscal year 2018. There are no contributions expected to be paid to the plan during the next fiscal year. The following have been recognized as changes in unrestricted net assets separate from expenses but not yet included in net periodic benefit costs for the years ended June 30, 2014 and 2013:

2014 2013

Prior service cost 53,394 $ 165,941 $ Actuarial gain (loss) (161,665) 671,343

(108,271) $ 837,284 $


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Note 12. Retirement Plans (Continued)

The following amounts previously recognized as changes in unrestricted net assets but not included in net periodic costs when they arose were reclassified to net period benefit costs during the years ended June 30, 2014 and 2013:

2014 2013

Amortization of prior service costs 53,394 $ 53,394 $

The following amounts have not been recognized as components of net periodic benefit costs as of June 30, 2014 and 2013:

2014 2013

Prior service cost (210,069) $ (263,463) $ Actuarial gain (loss) (161,665) 671,343

(371,734) $ 407,880 $

The University expects to recognize the following components of net periodic benefit costs over the next fiscal year:

2014 2013

Prior service cost 53,394 $ 53,395 $ Actuarial gain (loss) 16,167 (67,134)

69,561 $ (13,739) $

The following weighted average assumptions were used in accounting for the plan:

2014 2013Discount rate used to value end of year accumulated postretirement

benefit obligations 4.33% 4.5%

Discount rate used to value net periodic postretirement benefit cost 6% 6%

Annual salary increase 1.5% 1.5%

The University also has a non-qualified deferred compensation plan on behalf of the University’s President. In connection with an employment agreement, the President is credited an amount each year for service provided to the University. As of June 30, 2014 and 2013, the University had recorded a liability of $250,000 and $200,000, respectively, for its obligation under this non-qualified deferred compensation plan.


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Note 13. Related Party Transactions

The University received contributions from certain University trustees of approximately $3,803,000 and $1,116,000 for the years ended June 30, 2014 and 2013, respectively.

Note 14. Contingencies and Commitments

In June 2013, the University entered into a Food Services Agreement (the Agreement) with a third party service provider. The Agreement allows the service provider exclusive rights to provide and manage the University’s food service program including the dining facility and catering services through June 2020. As part of the Agreement, the service provider is required to fund improvements to the University’s facilities in the amount of $1,500,000 in year one of the Agreement (the Funded Amount). If the Agreement is terminated before full amortization of the Funded Amounts received, the Agreement requires the University to refund the unamortized portion of the service provider’s investment in the University. During the year ended June 30, 2013, the service provider funded approximately $1,500,000, of which approximately $1,200,000 and $1,500,000 has been reported as deferred revenue in the Statement of Financial Position as of June 30, 2014 and 2013, respectively. The University is under contractual commitment for the construction of an International School of Business as well as a non-denominational sanctuary. As of June 30, 2014, the University’s commitments are approximately $2,410,000 and $2,080,000, respectively, for these projects.

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Lynn UniversitySchedule of Expenditures of Federal Awards

and State Financial AssistanceYear ended June 30, 2014

CFDA / Federal /Federal Grantor/State Agency, Pass-through Grantor CSFA State Total Federal Program or Cluster Title/State Project Number Expenditures Match Expenditures

Federal Awards

U.S. Department of Education:Student Financial Aid - Cluster:

Federal Supplemental EducationalOpportunity Grant 84.007 91,425 $ 30,475 $ 121,900 $

Federal Work-Study 84.033 93,431 28,783 122,214 Federal Perkins Loan 84.038 1,500 - 1,500 Federal Pell Grant 84.063 1,499,677 - 1,499,677 Federal Direct Student Loans 84.268 13,585,844 - 13,585,844 TEACH Grant 84.379 1,980 - 1,980

Total Student Financial Aid - Cluster 15,273,857 59,258 15,333,115

TOTAL EXPENDITURES OFFEDERAL AWARDS 15,273,857 $ 59,258 $ 15,333,115 $

State Projects

Florida Department of Education:Florida Minority Teacher's Fund 48.049 8,000 $ -$ 8,000 $ Florida Resident Access Grant 48.064 928,750 - 928,750 Florida Work Experience Program 47.053 4,344 - 4,344 Florida Private Student

Assistance Grant 48.054 86,560 - 86,560 Florida CSDDV 48.055 4,984 - 4,984 Florida Bright Futures

Scholarship Project 48.059 193,893 - 193,893 TOTAL EXPENDITURES OF STATE

FINANCIAL ASSISTANCE 1,226,531 $ -$ 1,226,531 $

See Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance

Lynn University Notes to Schedule of Expenditure of Federal Awards and State Financial Assistance Year Ended June 30, 2014

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Note 1. Basis of Presentation

The accompanying schedule of expenditures of federal awards and state financial assistance (the Schedule) includes the federal and state grant activity of Lynn University (the University) under programs/projects of the federal/state government for the year ended June 30, 2014. The information in this Schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133 and Ch. 10.650, Rules of Auditor General of the State of Florida. Because the Schedule presents only a select portion of the operations of the University, it is not intended to and does not present the financial position, changes in net assets or cash flows of the University.

Note 2. Summary of Significant Accounting Policies

Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-21, Cost Principles for Education Institutions, wherein certain types of expenditures are not allowable or are limited as to reimbursement.

Note 3. Federal Student Loan Programs

The federal student loan program listed below is administered directly by the University and balances and transactions relating to this program are included in the University’s basic financial statements. Loans made during the year are included in the federal expenditures presented in the Schedule. The balance of loans outstanding at June 30, 2014 consists of:

Cluster / Program Title Federal CFDA Number Balance Outstanding

Student Financial Aid: Federal Perkins Loan Program

84.038 $178,354

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Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters

Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

To the Board of Trustees Lynn University We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Lynn University (the “University”), which comprise the statement of financial position as of June 30, 2014 and the related statement of activities, and cash flows for the year then ended, and, the related notes to the financial statements, and have issued our report thereon dated October 28, 2014.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the University’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University’s internal control. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters

As part of obtaining reasonable assurance about whether the University's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.


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Independent Auditor’s Report on Compliance for Each Major Federal Program and State Project and Report on Internal Control Over Compliance Required by OMB Circular

A-133 and Chapter 10.650, Rules of the Auditor General of the State of Florida To the Board of Trustees Lynn University Report on Compliance for Each Major Federal Program and State Project

We have audited Lynn University’s (the “University”) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement, and the requirements described in the Executive Office of the Governor’s State Projects Compliance Supplement, that could have a direct and material effect on the University’s major federal program and major state project for the year ended June 30, 2014. The University’s major federal program and state project are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs and state projects. Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for the University’s major federal program and state project based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations; and Chapter 10.650, Rules of the Auditor General of the State of Florida. Those standards, OMB Circular A-133, and Chapter 10.650, Rules of the Auditor General of the State of Florida, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state project occurred. An audit includes examining, on a test basis, evidence about the University’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program and major state project. However, our audit does not provide a legal determination of the University’s compliance. Opinion on Each Major Federal Program and State Project

In our opinion, the University complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program and major state project for the year ended June 30, 2014.

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Report on Internal Control Over Compliance

Management of the University is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the University’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program or state project to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program or state project and to test and report on internal control over compliance in accordance with OMB Circular A-133 and Chapter 10.650, Rules of the Auditor General of the State of Florida but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program or state project that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Purpose of this Report

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133 and Chapter 10.650, Rules of the Auditor General of the State of Florida. Accordingly, this report is not suitable for any other purpose.


Lynn University Schedule of Findings and Questioned Costs Year Ended June 30, 2014

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I - Summary of Auditor's Results

Financial Statements

Type of auditor's report issued:

Internal control over financial reporting:Material weakness(es) identified? Yes X NoSignificant deficiency(ies) identified Yes X None Reported

Noncompliance material to financial statements noted? Yes X No

Federal Awards

Type of auditor's report issued on compliance formajor programs:

Internal control over major programs:Material weakness(es) identified? Yes X NoSignificant deficiency(ies) identified Yes X None Reported

Any audit findings disclosed that are requiredto be reported in accordance with Section 510(a)of OMB Circular A-133? Yes X No

Identification of Major Programs:

CFDA Number(s)various

Dollar threshold used to distinguish between type A and type B programs:

Auditee qualified as low-risk auditee? X Yes No

(Continued)

300,000 $

Unmodified

Name of Federal Program or ClusterStudent Financial Aid Cluster

Unmodified

Lynn University Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2014

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State Financial Assistance

Type of auditor's report issued on compliance formajor projects:

Internal control over major projects:Material weakness(es) identified? X NoSignificant deficiency(ies) identified Yes X None Reported

Any audit findings disclosed that are required to be reported in accordance with Chapter 10.650, Rulesof the Auditor General of the State of Florida ? Yes X No

Identification of Major Project:

CSFA Number(s)48.064

Dollar threshold used to distinguish between type A and type B projects:

Unmodified

300,000 $

Assistance ProjectName of State Financial

Florida Resident Access Grant

II – Financial Statements Findings None reported III – Findings and Questioned Costs for Federal Awards None reported IV – Findings and Questioned Costs for State Financial Assistance None reported

Lynn University Summary Schedule of Prior Audit Findings Year Ended June 30, 2014

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None reported in the prior year.

lynn university single audit report - 2014 proforma · lynn university notes to financial...

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