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SANTA CLARA UNIVERSITY

Consolidated Financial Statements and Auditors’ Reports

in Accordance with the Uniform Guidance

June 30, 2016

(With Independent Auditors’ Report Thereon)


Table of Contents

Page

Independent Auditors’ Report 1

Consolidated Statement of Financial Position 3

Consolidated Statement of Activities 4

Consolidated Statement of Cash Flows 5

Notes to Consolidated Financial Statements 6

Independent Auditors’ 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 28

Independent Auditors’ Report on Compliance for Each Major Federal Program and Report on

Internal Control Over Compliance 30

Schedule of Expenditures of Federal Awards 32

Notes to Schedule of Expenditures of Federal Awards 33

Schedule of Findings and Questioned Costs 34

Independent Auditors’ Report

The President and Board of Trustees

Santa Clara University

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Santa Clara University

(the University) as of June 30, 2016, which comprise the consolidated statement of financial position as of

June 30, 2016, and the related consolidated statements of activities and cash flows for the year then ended,

and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial

statements in accordance with U.S. generally accepted accounting principles; this includes the design,

implementation, and maintenance of internal control relevant to the preparation and fair presentation of

consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We

conducted our audit 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 consolidated financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the

assessment of the risks of material misstatement of the consolidated financial statements, whether due to

fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the consolidated financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness

of the 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 consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,

the consolidated financial position of Santa Clara University as of June 30, 2016, and the changes in its net

assets and its cash flows for the year then ended, in accordance with U.S. generally accepted accounting

principles.

KPMG LLPMission Towers ISuite 1003975 Freedom Circle DriveSanta Clara, CA 95054

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

2

Report on Summarized Comparative Information

We have previously audited the University’s 2015 consolidated financial statements, and we expressed an

unmodified audit opinion on those audited consolidated financial statements in our report dated October 16,

2015. In our opinion, the summarized comparative information presented herein as of and for the year ended

June 30, 2015 is consistent, in all material respects, with the audited consolidated financial statements from

which it has been derived.

Other Matters

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as

a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of

additional analysis, as required by Title 2 U.S. Code of Federal Regulations, Part 200, Uniform

Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is not a

required part of the consolidated 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

consolidated financial statements. The information has been subjected to the auditing procedures applied in

the audit of the consolidated financial statements and certain additional procedures, including comparing and

reconciling such information directly to the underlying accounting and other records used to prepare the

consolidated financial statements or to the consolidated 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 expenditure of federal awards is fairly stated, in all material respects, in relation to

the consolidated financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 21, 2016

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 that report is 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. That report is 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.

Santa Clara, California

October 21, 2016


Consolidated Statement of Financial Position

June 30, 2016(With comparative financial information as of June 30, 2015)

(In thousands of dollars)

Assets 2016 2015

Cash and cash equivalents $ 34,100 48,152 Contributions receivable, net 41,224 40,275 Student and other receivables, net 11,930 13,442 Investments 953,546 1,032,750 Funds held in trust by others 48,200 8,000 Other assets 7,251 6,575 Plant facilities, net 799,968 732,901

Total assets $ 1,896,219 1,882,095

Liabilities and Net Assets

Liabilities:Accounts payable and accrued expenses $ 48,576 48,484 Deposits and deferred revenue 17,770 18,878 Amounts held on behalf of others 47,445 51,813 Annuity and trust obligations 5,040 3,685 Asset retirement obligations 3,750 3,219 Bonds and notes payable 234,293 176,149 Obligations under capitalized leases 70,316 72,834 U.S. government loan advances 7,448 7,366

Total liabilities 434,638 382,428

Net assets:Unrestricted 711,615 717,285 Temporarily restricted 440,767 486,903 Permanently restricted 309,199 295,479

Total net assets 1,461,581 1,499,667 Total liabilities and net assets $ 1,896,219 1,882,095

See accompanying notes to consolidated financial statements.

3


Consolidated Statement of Activities

Year ended June 30, 2016(With summarized financial information for the year ended June 30, 2015


2016Temporarily Permanently

Unrestricted restricted restricted Total 2015

Operating:Revenues:

Tuition and fees $ 327,406 — — 327,406 322,198 Financial aid (88,365) — — (88,365) (82,876)

Net tuition and fees 239,041 — — 239,041 239,322

Contributions to annual funds 3,888 — — 3,888 3,669 Grant revenues 5,163 — — 5,163 5,030 Net return on operating investments 1,898 — — 1,898 1,423 Other revenues 14,329 — — 14,329 13,801 Auxiliary activities 38,956 — — 38,956 36,592

Operating revenues before nonoperating netassets used in operations 303,275 — — 303,275 299,837

Nonoperating net assets used in operations:Long-term investment income used in operations 32,715 — — 32,715 28,986 Released contributions used in operations 12,881 — — 12,881 11,219

Total operating revenues and other support 348,871 — — 348,871 340,042

Expenses:Educational and general:

Instruction 136,268 — — 136,268 129,214 Research 5,407 — — 5,407 3,756 Public service 9,378 — — 9,378 8,556 Academic support 48,760 — — 48,760 39,664 Student services 53,067 — — 53,067 48,502 Institutional support 68,712 — — 68,712 64,744 Scholarships and fellowships 1,281 — — 1,281 1,223

Total educational and general expenses 322,873 — — 322,873 295,659

Auxiliary activities 31,853 — — 31,853 30,901

Total expenses 354,726 — — 354,726 326,560

(Decrease) increase in net assets from operations (5,855) — — (5,855) 13,482

Nonoperating:Contributions 7,269 23,740 13,907 44,916 56,782 Net (loss) return on nonoperating long-term

investments 2,446 (25,290) (209) (23,053) 23,634 Loss on disposal of assets (3,792) — — (3,792) — Loss on defeasance of bonds (6,688) — — (6,688) — Nonoperating net assets used in operations (45,596) — — (45,596) (40,205) Net assets released from restrictions 45,765 (45,765) — — — Other changes, net 781 1,179 22 1,982 201

Change in net assets (5,670) (46,136) 13,720 (38,086) 53,894

Net assets at beginning of year 717,285 486,903 295,479 1,499,667 1,445,773 Net assets at end of year $ 711,615 440,767 309,199 1,461,581 1,499,667


4


Consolidated Statement of Cash Flows

Year ended June 30, 2016(With comparative financial information for the year ended June 30, 2015)


2016 2015

Cash flows from operating activities:Change in net assets $ (38,086) 53,894 Adjustments to reconcile change in net assets to net cash provided by operating activities

Depreciation and amortization 41,586 36,618 Accrued interest on zero coupon bonds (1,230) (967) Amortization of original bond issue discount/premium (65) (171) Interest expense on negative amortization capital lease — 1,179 Loss on defeasance of debt 6,688 — Loss on disposal of assets 3,792 148 Noncash gifts (10,229) (13,293) Proceeds from sale of donated securities 546 3,336 Net realized and unrealized loss (gain) on investments 28,881 (18,390) Contributions restricted for long-term investment (27,889) (22,404) Changes in operating assets and liabilities:

Contributions receivable (949) (18,799) Student and other receivables 1,512 (832) Other assets 1,343 (903) Accounts payable and accrued expenses 92 3,888 Deposits and deferred revenue (1,108) (12) Amounts held on behalf of others (4,368) 2,835 Annuity and trust obligations 1,355 (1,795) Asset retirement obligations 531 36

Net cash provided by operating activities 2,402 24,368

Cash flows from investing activities:Purchase of investments (205,444) (205,390) Proceeds from sale of investments 257,224 217,076 Change in deposits in trust, net (40,200) — Purchase of plant facilities (107,389) (60,171) Proceeds from sale of plant facilities 877 —

Net cash used in investing activities (94,932) (48,485)

Cash flows from financing activities:Proceeds from issuance of bonds 59,051 — Payments on bonds and notes payable (6,300) (6,460) Principal payments on capital lease obligations (4,537) (1,916) Change in U.S. government loan advances, net 82 50 Proceeds from sale of donated securities 2,293 9,918 Contributions restricted for long-term investment 27,889 22,404

Net cash provided by financing activities 78,478 23,996

Net decrease in cash and cash equivalents (14,052) (121)

Cash and cash equivalents at beginning of year 48,152 48,273 Cash and cash equivalents at end of year $ 34,100 48,152

Supplemental disclosures of cash flow information:Cash paid during the year for interest $ 14,729 10,540 Prepaid equipment maintenance financed by capital lease 2,019 —

The University received noncash gifts of:Marketable securities $ 3,646 13,293 Real estate 650 — Equipment 5,933 —

Noncash investing and financing activities:Building acquired under capital leases $ — 23,800 Equipment acquired under capital leases — 631 Defeasance of bonds 58,122 —


5


Notes to Consolidated Financial Statements

June 30, 2016 and 2015

6 (Continued)

(1) Organization and Summary of Significant Accounting Policies

(a) Organization

Santa Clara University is an independent, coeducational institution of higher learning offering

undergraduate and graduate degrees in more than 50 fields of study. Santa Clara University was

founded in 1851 by the Society of Jesus on the site of Mission Santa Clara de Asis in Northern

California. The Jesuit School of Theology of Santa Clara University (JST-SCU) is an affiliated entity

and its financial information has been consolidated with Santa Clara University (collectively referred

to as the University) and all interaffiliate transactions have been eliminated.

(b) Basis of Presentation

The University displays its net assets and activities based on the existence or absence of donor-imposed

restrictions. Accordingly, net assets of the University and changes therein are classified and reported

as unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.

(c) Cash and Cash Equivalents

Cash and cash equivalents consist primarily of operating cash, money market funds, and treasury

instruments.

(d) Contributions

Contributions, including unconditional promises to give, are recognized as revenues when donors’

commitments are received. Conditional promises to give become unconditional and are recognized as

revenues when the conditions are substantially met. Unconditional promises to give are recognized

initially at fair value as contribution revenue in the period such promises are made by donors. In

subsequent periods, unconditional promises to give are recognized at the estimated net present value,

net of an allowance for uncollectible amounts, and are classified by net asset category in accordance

with donor-imposed restrictions. Contributions and promises to give with temporary restrictions are

reported as temporarily restricted net assets until donor restrictions are met. The University records

contributions of land, buildings, or equipment as unrestricted revenue unless the donor places

restrictions on their use. Restrictions on contributions related to construction projects are released

when such amounts have been spent.

(e) Investments

In accordance with U.S. generally accepted accounting principles, the University reports investments

at fair value based upon a three-level valuation hierarchy for disclosure of fair value measurements.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability

as of the measurement date. The three levels are defined as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs of other than quoted prices included in Level 1 that are observable for the asset or

liability, either directly or indirectly. This includes quoted prices for similar assets or

liabilities in active markets, quoted prices for identical or similar assets or liabilities in

markets that are not active, inputs other than quoted prices that are observable for the asset



June 30, 2016 and 2015

7 (Continued)

or liability, or inputs that are derived principally from or corroborated by observable market

data.

Level 3 – Inputs are unobservable for the asset or liability. Unobservable inputs reflect the

University’s own assumptions about the assumptions that market participants would use in

pricing the asset or liability developed based on the best information available in the

circumstances.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level

of input that is significant to the fair value measurement.

The majority of the University’s investments are held through limited partnerships and commingled

funds for which fair value is estimated using net asset value (NAV) reported by fund managers as a

practical expedient. Such assets are not classified in the fair value hierarchy.

In fiscal year 2015, the University retroactively adopted the provisions of Accounting Standards

Update No. 2015-07 (ASU 2015-07), Fair Value Measurement: Disclosures for Investments in

Certain Entities that Calculate NAV per Share (or its Equivalent). ASU 2015-07 removed the

requirement to classify within the fair value hierarchy investments measured at NAV.

(f) Fair Value of Financial Instruments

The University did not elect fair value accounting for any asset or liability that is not currently required

to be measured at fair value.

Fair value of the University’s financial instruments is determined using the estimates, methods, and

assumptions as set forth below. See note 5 for further information regarding investments and their fair

value.

i) Cash Equivalents, Student and Other Receivables, Funds Held in Trust by Others, Accounts

Payable, and Accrued Expenses

Fair value approximates book value due to the short maturity of these instruments.

A reasonable estimate of the fair value of student loans extended under government loan programs

has not been made as the loans can only be assigned to the U.S. government or its designees.

ii) Contributions Receivable

Contributions receivable are reported based on the discounted value of estimated cash flows.

Pledges are discounted at an interest rate that reflects the risks inherent in those cash flows. These

inputs to the fair value estimate are considered Level 3 in the fair value hierarchy. Book value

approximates fair value.



June 30, 2016 and 2015

8 (Continued)

iii) Bonds and Notes Payable

Fair value of bonds and notes payable is estimated with Level 2 inputs, based on the discounted

value of contractual cash flows. The discount rate is estimated using the rates currently offered for

similar maturities and credit quality. Fair value of bonds and notes payable was approximately

$225,555,000 and $191,029,000 as of June 30, 2016 and 2015, respectively.

iv) Capital Lease Obligations

The University’s capital lease obligations bear interest at rates which approximate prevailing

market rates for instruments with similar characteristics and, accordingly, the carrying value

approximates fair value.

v) Alternative Investments

Alternative investments, such as private equity interests, are recorded based on valuations

provided by the general partners or external investment managers. As these generally are

investments without a ready market to compare, the inputs into the determination of fair value

require significant judgment. Due to the inherent uncertainty of these estimates, these values may

differ materially from the values that would have been used had a ready market for these

investments existed. Management reviews and evaluates the valuations and has determined that

the valuation methods and assumptions result in reasonable estimates of fair value. Refer to note 5

for fair value determination.

vi) Annuity and Trust Obligations

The carrying amount of annuity and trust obligations approximates fair value as the instruments

are recorded at the estimated net present value of future cash flows. The estimated fair value,

however, involves unobservable inputs considered to be Level 3 in the fair value hierarchy.

(g) Collections

The University’s collections are made up of artifacts of historical significance and art objects that are

held for educational, research, and curatorial purposes. The collections, which have been acquired

through contributions since the University’s inception, are not recognized as assets in the

accompanying consolidated statement of financial position.

(h) Plant Facilities

Plant facilities are stated at cost at the date of acquisition, or fair value at the date of donation in the

case of gifts in kind. Depreciation of plant facilities is computed using the straight-line method over

estimated useful lives of 3 to 50 years. Amortization of capital leases is provided over the estimated

useful lives of the assets or over the life of the lease, as applicable, using the straight-line method.

(i) Deposits and Deferred Revenue

Deposits and deferred revenue consist of deposits and fees collected for not yet completed summer

and fall terms and other miscellaneous deferred revenue.



June 30, 2016 and 2015

9 (Continued)

(j) Annuity and Trust Obligations

The University has a variety of gift agreements, including charitable gift annuities and charitable

remainder trusts, for which the University is the trustee. An estimated liability has been recorded for

charitable gift annuities based upon Internal Revenue Service (IRS) actuarial tables. For charitable

remainder trusts, the difference between the fair value of trust investments and the estimated

University’s remainder interests has been recorded as a liability.

(k) Bond Discounts, Premiums, and Issuance Costs

Bond discounts, premiums, and issuance costs are amortized using a method that approximates the

effective interest method over the life of the associated bond issue. Bond discounts and premiums are

included in bonds and notes payable, and issuance costs are included in other assets in the

accompanying consolidated statement of financial position.

(l) Credit Concentration

Financial instruments that potentially subject the University to concentration of credit risk are cash,

cash equivalents, investments, and receivables. The University’s cash, cash equivalents, and

investments are held by recognized financial institutions. The University deposits its cash with several

financial institutions and its deposits, at times, exceed insured amounts. The University requires its

investment managers to follow the University’s investment policy, and the investment managers are

subject to periodic review by the University’s investment committee. The University’s investments

are comprised primarily of a diversified portfolio of marketable equity securities, investment-grade

debt and alternative assets. The credit risk with respect to student receivables is considered minimal

due primarily to the wide dispersion of the receivables. Gross contributions receivable due from twelve

donors was $35,487,000 of the $47,449,000 as of June 30, 2016.

(m) Operations

Operating revenues consist of those items attributable to the University’s academic programs, research

conducted by the academic departments, and auxiliary operations. It is the policy of the Board of

Trustees to designate a portion of the University’s cumulative investment return for support of current

operations; the remainder is retained to support operations in future years and to offset potential market

declines. The amount computed under the endowment spending policy of the investment pool and all

investment income earned by investing cash in excess of daily requirements are used to support current

operations.

Expenses associated with fundraising activities of the University were $13,916,000 and $11,197,000

in 2016 and 2015, respectively, which are included in institutional support in the accompanying

consolidated statement of activities.

(n) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting

principles 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



June 30, 2016 and 2015

10 (Continued)

statements and the reported amounts of revenues and expenses during the reporting period. Actual

results could differ from those estimates.

(o) Prior Year Summarized Comparative Information

The consolidated financial statements include certain prior year summarized comparative information

in total but not by net asset class. Such information does not include sufficient detail to constitute a

presentation in conformity with U.S. generally accepted accounting principles. Accordingly, such

information should be read in conjunction with the University’s financial statements for the year ended

June 30, 2015, from which the summarized information was derived.

(p) Reclassifications

Certain reclassifications have been made to the 2015 comparative information to conform to the 2016

financial statement presentation.

(2) Net Assets

Net assets are reported in three classes based on the existence or absence of donor-imposed restrictions, as

follows:

Permanently restricted net assets consist of assets donated with stipulations that they be invested to

provide a permanent source of income. It is the policy of the University to maintain the historic dollar

value of these gifts in perpetuity.

Temporarily restricted net assets represent amounts received from donors with temporary restrictions

and consist primarily of (a) resources held in support of particular operating activities, (b) investments

for a specified term, (c) assets for use in a specified future period, (d) resources restricted for the

acquisition of long-lived assets, or (e) unexpended endowment earnings in excess of the historic dollar

value. Donors’ restrictions may require that resources be used in a later period or after a specified date,

or that resources be used for a specified purpose, or both. When restrictions expire or assets are

expended according to donor restrictions, temporarily restricted net assets are reclassified to

unrestricted net assets and are reported in the consolidated statement of activities as net assets released

from restrictions.

Unrestricted net assets consist of amounts with no donor-imposed restrictions.

Net assets released from donor-imposed restrictions are summarized as follows (in thousands):

2016 2015

Purpose restrictions accomplished:Scholarships $ 16,162 13,868 Departmental and other expenses 22,736 18,839 Additions to and renovations of plant facilities 6,867 9,940

$ 45,765 42,647



June 30, 2016 and 2015

11 (Continued)

Donor restricted net assets consisted of the following as of June 30, 2016 and 2015 (in thousands):

Temporarily Permanently Temporarily Permanently

restricted restricted restricted restricted

Scholarships $ 178,750 151,759 200,678 146,917Departmental and

other expenses 221,597 152,286 248,070 145,957Additions to and

renovations of plant facilities 5,490 — 1,433 —

Passage of time 34,930 5,154 36,722 2,605

$ 440,767 309,199 486,903 295,479

2016 2015

Temporarily restricted net assets at June 30, 2016 and 2015 include $385,494,000 and $433,674,000,

respectively, of appreciation on donor restricted endowment funds available to support University programs

through the spending appropriation.

(3) Contributions Receivable

Contributions receivable consisted of the following as of June 30, 2016 and 2015 (in thousands):

2016 2015

Unconditional promises to be collected in:Less than one year $ 16,777 14,199 One to five years 21,191 22,044 More than five years 9,481 11,948

47,449 48,191

Less allowance for uncollectible contributions (1,998) (2,454) Less discount to present value (4,227) (5,462)

Contributions receivable, net $ 41,224 40,275

The discount rate utilized for purposes of calculating the present value of contributions receivable is 2.5%

and 4.5% percent, respectively, for unconditional promises received in the years ended June 30, 2016 and

June 30, 2015, and 5.5% for unconditional promises received in prior years. The discount rate is determined

at the time the unconditional promise to give is initially recognized and is not revised subsequently.



June 30, 2016 and 2015

12 (Continued)

(4) Student and Other Receivables

Student and other receivables consisted of the following as of June 30, 2016 and 2015 (in thousands):

2016 2015

Government grants $ 911 1,332 Notes, loans, and other receivables 9,712 10,811 Student receivables 1,417 1,401 Accrued interest receivable 498 470

12,538 14,014

Less allowance for doubtful accounts (608) (572)

$ 11,930 13,442

The University makes uncollateralized loans to students based on financial need. Student loans are funded

through federal government loan programs or institutional resources.

At June 30, 2016 and 2015, student loans held by the University included in notes, loans, and other

receivables above consisted of the following (in thousands):

2016 2015

Federal government programs $ 7,970 7,836 Institutional programs 33 49

8,003 7,885

Less allowance for doubtful accounts (3) (3)

Student loans receivable, net $ 8,000 7,882

The University participates in the Federal Perkins Loan Program (the Program). The availability of funds for

loans under the Program is dependent on reimbursements to the pool from repayments on outstanding loans.

Funds advanced by the federal government of $7,448,000 at June 30, 2016 and $7,366,000 at June 30, 2015

are ultimately refundable to the government and are classified as liabilities in the consolidated 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, 2016 and 2015, no material amounts were

past due under other student loan programs.

Allowances for doubtful accounts are established based on prior collection experience and current economic

factors which, in management’s judgment, could influence the ability of loan recipients to repay the amounts

per the loan terms. Institutional loan balances are written off only when they are deemed to be permanently

uncollectible. Amounts due under the Program are guaranteed by the government and, therefore, no reserves

are placed on past due balances.



June 30, 2016 and 2015

13 (Continued)

(5) Investments

Investments as of June 30, 2016 and 2015 are summarized as follows (in thousands):

2016 2015

Pooled cash and cash equivalents $ 36,706 57,541 Certificate of deposit investments 8,252 9,407 Mutual funds (2016 – bonds $24,547, equity $40,990,

international equity $15,153, and real estate $1,529;2015 – bonds $24,065, equity $38,140, internationalequity $41,802, and real estate $1,354) 82,219 105,361

Equity holdings 34,303 36,580 Fixed income holdings 65,374 65,458 Commingled funds 168,752 192,545 Hedge funds 221,796 229,302 Private equity 83,049 84,180 Real assets 110,369 102,301 Venture capital 96,226 95,981 Real estate, net of accumulated depreciation of $1,477 and

$2,080 as of June 30, 2016 and 2015, respectively 26,009 34,526 Beneficial interest in funds held by others 7,079 7,812 Notes and other 3,369 3,083 Net pending trades 10,043 8,673

$ 953,546 1,032,750



June 30, 2016 and 2015

14 (Continued)

The following tables summarize investment values by category of investment as of June 30, 2016 and 2015.

Consistent with ASU 2015-07, investments measured at net asset value (NAV) are not classified in the fair

value hierarchy:

2016

Investments Investments classified in

measured the fair value hierarchy Total

at NAV Level 1 Level 2 Level 3 fair value

Pooled cash and cash equivalents $ — 36,706 — — 36,706

Certificate of deposit investments — — 8,252 — 8,252

Mutual funds:

Bonds — 24,547 — — 24,547

Equity — 40,990 — — 40,990

International equity — 15,153 — — 15,153

Real estate — 1,529 — — 1,529

Equity holdings:

Domestic — 34,303 — — 34,303

Fixed income holdings:

Corporate bonds — — 53,206 — 53,206

Municipal bonds — — 9,055 — 9,055

U.S. treasury bonds — — 3,113 — 3,113

Commingled funds:

International equity 123,772 — — — 123,772

Corporate bonds 10,878 — — — 10,878

International government bonds 34,102 — — — 34,102

Hedge funds:

Equity 31,337 — — — 31,337

Distressed debt 24,353 — — — 24,353

Fund of funds 156,485 — — — 156,485

Global opportunistic 9,621 — — — 9,621

Private equity 83,049 — — — 83,049

Real assets 106,443 — — 3,926 110,369

Venture capital 95,026 — — 1,200 96,226

Real estate — — 26,009 — 26,009

Beneficial interest in funds held

by others 7,079 — — — 7,079

Notes and other — 111 — 3,258 3,369

Net pending trades — 10,043 — — 10,043

$ 682,145 163,382 99,635 8,384 953,546



June 30, 2016 and 2015

15 (Continued)

2015

Investments Investments classified in

measured the fair value hierarchy Total

at NAV Level 1 Level 2 Level 3 fair value

Pooled cash and cash equivalents $ — 57,541 — — 57,541

Certificate of deposit investments — — 9,407 — 9,407

Mutual funds:

Bonds — 24,065 — — 24,065

Equity — 38,140 — — 38,140

International equity — 41,802 — — 41,802

Real estate — 1,354 — — 1,354

Equity holdings:

Domestic — 36,580 — — 36,580

Fixed income holdings:

Corporate bonds — — 55,509 — 55,509

Municipal bonds — — 6,557 — 6,557

U.S. treasury bonds — — 3,392 — 3,392

Commingled funds:

International equity 150,459 — — — 150,459

Corporate bonds 10,410 — — — 10,410

International government bonds 31,676 — — — 31,676

Hedge funds:

Equity 23,462 — — — 23,462

Distressed debt 28,631 — — — 28,631

Fund of funds 154,759 — — — 154,759

Global opportunistic 22,450 — — — 22,450

Private equity 84,180 — — — 84,180

Real assets 102,301 — — — 102,301

Venture capital 95,981 — — — 95,981

Real estate — — 34,526 — 34,526

Beneficial interest in funds held by

others 7,812 — — — 7,812

Notes and other — 102 — 2,981 3,083

Net pending trades — 8,673 — — 8,673

$ 712,121 208,257 109,391 2,981 1,032,750

The following methods and assumptions were used to estimate the fair value for each class of financial

instrument included in the fair value hierarchy:

Certificate of deposit investments – The fair value of certificate of deposit investments, which are derived

from various sources and pricing matrices, are classified as Level 2.

Equity holdings – Investments in equity holdings are measured at fair value using quoted market prices.

They are classified as Level 1 and are traded in an active market for which closing stock prices are readily

available.

Fixed income holdings – Investments in fixed income holdings include corporate bonds, municipal bonds,

and U.S. treasury bonds. Fixed income holdings are classified as Level 2 based on multiple sources of



June 30, 2016 and 2015

16 (Continued)

information, which may include market data and/or quoted market prices from either markets that are not

active or are for similar assets in active markets.

Real estate investments – Investments in real estate include commercial and residential property holdings.

Real estate investments are classified as Level 2 based on multiple sources of information such as appraisals

and market comparables.

While the University believes its valuation methods are appropriate and consistent with other market

participants, the use of different methodologies or assumptions to determine the fair value of certain financial

instruments could result in a different estimate of fair value at the reporting date.

The following information presents a reconciliation of the consolidated statement of financial position

amounts for financial instruments measured at fair value on a recurring basis using significant unobservable

inputs (Level 3) for the years ended June 30, 2016 and 2015:

June 30, 2016

Fair value measurements using significant

unobservable inputs (level 3)

Venture Notes and

Real assets capital other Total

In thousands

Beginning balance $ — — 2,981 2,981

Total gains (losses):

Realized — — — —

Unrealized (282) — — (282)

Purchases and sales:

Purchases 4,208 1,200 586 5,994

Sales — — (309) (309)

Ending balance $ 3,926 1,200 3,258 8,384

Change in unrealized losses for the

period included in changes in net

assets for assets still held at the

reporting date $ (282) — — (282)



June 30, 2016 and 2015

17 (Continued)

June 30, 2015Fair value measurements using significant unobservable inputs

(level 3)Notes and

other TotalIn thousands

Beginning balance $ 3,243 3,243 Total gains (losses):

Realized 22 22 Unrealized — —

Purchases and sales:Purchases 381 381 Sales (665) (665)

Ending balance $ 2,981 2,981

Change in unrealized gains (losses) for the period included in changes in net assets for assets still held at the reporting date $ — —

There were no transfers between Level 1 and Level 2 investments, or between Level 2 and Level 3, for the

years ended June 30, 2016 and 2015, for assets classified in the fair value hierarchy after adoption of

ASU 2015-07.



June 30, 2016 and 2015

18 (Continued)

The following table presents information for applicable investments regarding their funding commitments,

redemption, and restrictions as of June 30, 2016 (in thousands):

Redemption Redemption

Fair Unfunded frequency notice

value commitments (if currently eligible) period

Mutual funds:

Bonds $ 24,547 — daily none

Equity 40,990 — daily none

International equity 15,153 — daily none

Real estate 1,529 — daily none

Commingled funds:

International equity 123,772 — weekly, monthly, quarterly 3–180 days

Corporate bonds 10,878 — monthly 6–7 days

International government bonds 34,102 — monthly 10 days

Hedge funds:

Equity 31,337 — monthly, quarterly 30–90 days

Distressed debt 24,353 7,620 annually, n/a 90–180 days

Fund of funds 156,485 — monthly, annually 95–365 days

Global opportunistic 9,621 — annually, bi-annually 90–180 days

Private equity 83,049 86,045 see below see below

Real assets 110,369 58,356 daily, see below none, see below

Venture capital 96,226 47,938 see below see below

Beneficial interest in funds held

by others 7,079 — see below see below

$ 769,490 199,959

The University holds certain investments in private equity, real assets, and venture capital in the amounts of

$83,049,000, $87,948,000, and $96,226,000, respectively. These do not allow for periodic redemptions, but

rather distributions are received through the liquidation of the underlying assets. At June 30, 2016, they had

estimated termination dates that ranged from 2016 to 2030. Within distressed debt hedge funds, the

University holds $11,438,000 in a close-ended fund with an estimated termination date in 2026. Within fund

of funds hedge funds, the University holds $72,020,000 in funds which currently have lockup periods of up

to three years. After the lockup periods, the funds have a 95 days redemption notice period. The University

also holds beneficial interest in funds that are managed by others. These funds, per donor restriction, are to

be held in perpetuity by the third party and can never be redeemed.



June 30, 2016 and 2015

19 (Continued)

The following schedule summarizes investment returns during 2016 and 2015, presented in “Net return on

operating investments” and “Net (loss) return on nonoperating long-term investments” in the consolidated

statement of activities (in thousands):

2016 2015

Interest, dividends and other income $ 13,406 13,355 Net realized gains 25,539 39,024 Net unrealized losses (54,420) (20,744) Direct management fees and other (5,680) (6,578)

Net (loss) return on investments $ (21,155) 25,057

(6) Endowment

The University’s endowment consists of approximately 800 individual funds established for a variety of

purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the

governing board to function as endowments. Net assets associated with endowment funds, including funds

designated by the governing board to function as endowments, are classified and reported based on the

existence or absence of donor-imposed restrictions.

(a) Interpretation of Relevant Law

The University’s governing board has interpreted UPMIFA enacted in the State of California 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 (a) the original value of the gifts donated

to the permanent endowment, and (b) the original value of subsequent gifts to the permanent

endowment.

The remaining portion of the donor-restricted endowment fund that is not classified as 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 UPMIFA. In accordance with UPMIFA, the University considers the following factors

in making a determination to appropriate or accumulate donor-restricted endowment funds:

1. The duration and preservation of the fund

2. The purposes of the University and the donor-restricted endowment fund

3. General economic conditions

4. The possible effect of inflation and deflation

5. The expected total return from income and the appreciation of investments

6. Other resources of the University

7. The investment policies of the University



June 30, 2016 and 2015

20 (Continued)

(b) Return Objectives and Risk Parameters

The University’s governing board 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 to create intergenerational equity.

Endowment assets include those assets of donor-restricted funds that the University must hold in

perpetuity or for a donor-specified period as well as board-designated funds.

(c) 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 equities, fixed income, and alternative assets. Targeted asset allocation percentages for each of

these components are reviewed periodically throughout the year for potential adjustment of asset mix

while evaluating the relative risk of each component.

(d) Spending Policy

Endowment spending is determined using a weighted average calculation of two components. The first

component is the prior year spending allocated for each endowment increased by an inflationary factor

weighted by 40%. The second component is a 12-quarter rolling market value average times an

established spending rate of 4.5% weighted by 60%. The combination of these two calculations is the

endowment spending allocation.



June 30, 2016 and 2015

21 (Continued)

Changes in endowment net assets and net asset composition for the year ended June 30, 2016 are as

follows (in thousands):

2016

Temporarily Permanently

Unrestricted restricted restricted Total

Endowment net assets, June 30, 2015 $ 160,858 433,674 292,353 886,885

Investment return:

Investment income 3,236 3,083 — 6,319

Net realized and unrealized (loss)

on investments (4,287) (27,619) — (31,906)

Total investment (loss)

return (1,051) (24,536) — (25,587)

Contributions — 2,192 13,526 15,718

Appropriation of endowment assets

for expenditure (6,795) (25,920) — (32,715)

Other changes:

Transfers to board-designated

endowment funds 3,378 38 — 3,416

Maturity of annuities — 46 — 46


Composition of endowment net assets:

Donor-restricted endowment funds $ (482) 385,494 305,879 690,891

Board-designated endowment funds 156,872 — — 156,872

Total endowment net

assets $ 156,390 385,494 305,879 847,763



June 30, 2016 and 2015

22 (Continued)

Changes in endowment net assets and net asset composition for the year ended June 30, 2015 are as

follows (in thousands):

2015

Temporarily Permanently

Unrestricted restricted restricted Total


Investment return:

Investment income 1,194 3,755 — 4,949

Net realized and unrealized gain on —

investments 3,710 16,379 — 20,089

Total investment return 4,904 20,134 — 25,038

Contributions — 1,540 10,627 12,167

Appropriation of endowment assets

for expenditure (6,200) (22,786) — (28,986)

Other changes:

Transfers to board-designated

endowment funds — 1,820 — 1,820


Composition of endowment net assets:

Donor-restricted endowment funds $ — 433,674 292,353 726,027

Board-designated endowment funds 160,858 — — 160,858

Total endowment net

assets $ 160,858 433,674 292,353 886,885

(e) 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 UPMIFA requires the University to retain as a fund of

perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets were $482,000

as of June 30, 2016. No deficiencies were reported as of June 30, 2015. These deficiencies resulted

from unfavorable market fluctuations that occurred shortly after the investment of new permanently

restricted contributions and continued appropriation for certain programs that was deemed prudent by

the governing board. Subsequent gains that restore the fair value of the assets of the endowment fund

to the required level will be classified as an increase in unrestricted net assets.



June 30, 2016 and 2015

23 (Continued)

(7) Plant Facilities

Plant facilities as of June 30, 2016 and 2015 are as follows (in thousands):

2016 2015

Land $ 79,655 53,026 Buildings 734,820 687,591 Improvements other than buildings 101,719 93,239 Equipment 146,734 135,181 Library books 70,098 71,529

1,133,026 1,040,566

Accumulated depreciation and amortization (346,276) (326,584)

786,750 713,982

Construction in progress 13,218 18,919

$ 799,968 732,901

(8) Bonds and Notes Payable

Bonds and notes payable as of June 30, 2016 and 2015 are as follows (in thousands):

2016 2015

3% to 5% California Educational Facilities Authority(CEFA) Revenue Bonds Series 2015 maturing seriallythrough April 1, 2036 and CEFA term bonds totaling$54,440 maturing April 1, 2039 and 2045, secured bythe full faith and credit of the University $ 116,754 —

2% to 5% California Educational Facilities Authority(CEFA) Revenue Bonds Series 2010 maturing seriallythrough February 1, 2030 and CEFA term bonds totaling$27,740 maturing February 1, 2029, 2032, and 2040,secured by the full faith and credit of the University 47,682 49,132

4% to 5.625% CEFA Series 2008 bonds maturing seriallythrough April 1, 2028 and CEFA term bonds totaling$1,715 maturing April 1, 2033 and 2037, secured bythe full faith and credit of the University 7,606 60,121

3.5% to 5.25% CEFA Series 1999 bonds maturing seriallythrough September 1, 2020 and CEFA term bonds totaling$37,845 maturing September 1, 2023 and 2026, fully insuredas to principal and interest, secured by the full faith andcredit of the University 55,006 58,901

LIBOR + 30 bps Wells Fargo Term Note maturing seriallythrough July 1, 2019, secured by the full faith andcredit of the University 7,245 7,995

$ 234,293 176,149



June 30, 2016 and 2015

24 (Continued)

In August 2015, $102,230,000 in revenue bonds were issued by CEFA on behalf of the University. Proceeds

from the issue were used to partially defease the CEFA Series 2008 serial and term bonds and to finance

various capital projects. An accounting loss of $6,688,000 was incurred as a result of this defeasance.

However, the defeasance will result in a present value cash flow savings of approximately $5,996,000 to the

University by reducing future debt service payments. The CEFA Series 2015 Bonds were issued with an

original issue premium of $14,943,000, which is being amortized over the life of the bonds. Remaining

principal of $9,630,000 on the CEFA 2008 serial and term bonds mature in fixed increments through

April 2037.

The University’s policy is to capitalize interest cost incurred on debt during the construction of major projects

exceeding one year. During the years ended June 30, 2016 and 2015, $1,089,000 and $877,000 of interest

was capitalized, respectively. For the years ended June 30, 2016 and 2015, total interest expense, net of

amounts capitalized, was $12,379,000 and $10,875,000, respectively. During the years ended June 30, 2016

and 2015, $3,729,000 and $3,127,000, respectively, represents interest expense associated with the

University’s capital lease obligations.

The annual debt service requirements subsequent to June 30, 2016 are as follows (in thousands):

Principalmaturities Interest Total

Year ending June 30:2017 $ 8,207 10,232 18,439 2018 8,588 9,892 18,480 2019 8,957 9,541 18,498 2020 13,731 9,398 23,129 2021 8,791 9,004 17,795 Thereafter 186,019 101,467 287,486

$ 234,293 149,534 383,827

The University has $5,000,000 available under an unsecured revolving credit agreement that matures in

April 2017. As of June 30, 2016 and 2015, no amounts were outstanding on this line of credit.

(9) Capital Leases

The University has an agreement to lease a student residential housing facility. Two members of the

University’s Board of Trustees and their families have material financial interests in the entities that

developed and are leasing the facility to the University. The lease term is for 234 months ending

February 2031. At the end of the lease term, the University has two successive options to extend the lease

for additional eight-year terms. The gross amount of buildings recorded under this capital lease was

$45,553,000 at June 30, 2016 and June 30, 2015. The amortization expense for the capital lease is calculated

on a straight-line basis over the useful life of 234 months and included within the University’s depreciation

and amortization expense. This amount was $2,336,000 for the years ended June 30, 2016 and June 30, 2015.

In November 2014, the University entered into an agreement to lease a commercial office building, which

was remodeled to be used as office and classroom space. Two members of the University’s Board of Trustees



June 30, 2016 and 2015

25 (Continued)

and their families have material financial interests in the entities that developed and are leasing the facility

to the University. The lease term is for 234 months ending April 2034. At the end of the lease term, the

University has two successive options to extend the lease for additional ten-year terms. The gross amount of

buildings recorded under this capital lease was $23,800,000 at June 30, 2016 and June 30, 2015. The

amortization expense for the capital lease is calculated on a straight-line basis over the useful life of 234

months and included within the University’s depreciation and amortization expense. This amount was

$1,231,000 and $616,000 for the years ended June 30, 2016 and June 30, 2015, respectively.

In fiscal year 2015, the University entered into two equipment financing leases for the purchase of

networking equipment and associated licenses. The agreements end in fiscal 2017 and 2018. The gross

amount of equipment recorded under these capital leases was $8,468,000 and $631,000 at June 30, 2016 and

June 30, 2015, respectively.

Future minimum capital lease payments as of June 30, 2016 are as follows (in thousands):

Capitallease

Year ending June 30:2017 $ 8,973 2018 8,818 2019 6,218 2020 6,286 2021 6,355 Thereafter 72,062

Total minimum lease payments 108,712

Less amount representing interest 38,396

Present value of net minimum capital lease payments $ 70,316

(10) Defined Contribution Plan

The University provides retirement benefits for faculty, staff, and administrative employees through Internal

Revenue Code (IRC), Section 401(a) and 403(b) plans. During 2016 and 2015, the University contributed

approximately $13,485,000 and $12,525,000, respectively, to the defined contribution 401(a) retirement plan

on behalf of its faculty, staff, and administrative employees. Contributions over the next five years are

expected to be comparable to historical contributions, with moderate increases expected from salary

increases and headcount changes. The University does not contribute to the 403(b) plan.

(11) Income Taxes

The University is recognized by the Internal Revenue Service as an organization exempt from income taxes

on related income under Section 501(c)(3) of the Internal Revenue Code and is also exempt under California

Revenue and Taxation Code Section 23701d. However, the University is subject to income taxes on any net

income that is derived from a trade or business, regularly carried on, and not in furtherance of the purpose



June 30, 2016 and 2015

26 (Continued)

for which it is granted exemption. The University receives some unrelated business income. Taxes on such

income, if any, are not material to the University’s consolidated financial statements.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles

prescribes for all entities minimum thresholds for financial statement recognition of an uncertain position

taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction) and requires

certain expanded tax disclosures. Management believes no such uncertain tax positions exist for the

University at June 30, 2016 and 2015. The University files income tax returns in the U.S. federal and other

state jurisdictions, and is no longer subject to income tax examinations for tax years before 2012 for federal

and 2011 for California.

(12) Related-Party Transactions and Amounts Held on Behalf of Others

The Jesuit Community is a separate entity and provides the University with teaching and administrative

services. Compensation paid to the Jesuit Community for those services approximated $3,492,000 and

$3,685,000 in 2016 and 2015, respectively, which is included in educational and general expenses in the

accompanying consolidated financial statements.

As of June 30, 2016 and 2015, $29,233,000 and $31,425,000, respectively, of contributions receivable are

due from members of the Board of Trustees.

During 2006, the University entered into an agreement with the Mission Cemetery owned by the Jesuit

Community to participate in the University’s investment activity by transferring cash into the University’s

endowment investment portfolio. The Mission Cemetery’s investment at fair value is reflected in Amounts

Held on Behalf of Others in the University’s consolidated statement of financial position. The fair value of

the investment at June 30, 2016 is $44,709,000. The University also holds $2,462,000 in Amounts Held on

Behalf of Others for the California Province of the Society of Jesus (CPSJ) Insurance Group of which it is a

member and whose administrators are employees of the University. The remaining balance of $274,000 as

of June 30, 2016 in Amounts Held on Behalf of Others is held by the University on behalf of various other

outside agencies.

As discussed in note 9, two members of the University’s Board of Trustees and their families have material

financial interests in the entities that developed and are leasing facilities to the University.

(13) Commitments and Contingencies

As of June 30, 2016, the University has contractual obligations of approximately $14,206,000 for completion

of facilities projects under construction. These obligations are financed with certain debt proceeds,

unexpended funds, and gifts. The University self-insures unemployment benefits. It is management’s opinion

that the amount provided in accrued expenses to cover expected claims is adequate.

The University is subject to audits for amounts received under federal government student financial aid

awards and research grants from the federal government. Management believes such audits will not result in

any material liabilities against the University.



June 30, 2016 and 2015

27

The University is a defendant in various legal actions. While the outcome of these actions is not currently

determinable, management is of the opinion that any uninsured liability from such actions will not have a

material effect on the University’s financial position.

(14) Subsequent Events

Subsequent events have been evaluated through October 21, 2016, which corresponds to the date when the

financial statements were available to be issued. There are no subsequent events that require disclosure.

28

Independent Auditors’ 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


Santa Clara 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 consolidated financial statements of Santa Clara

University (the University), which comprise the consolidated statement of financial position as of June 30,

2016, and the related consolidated statements of activities and cash flows for the year then ended, and the

related notes to the consolidated financial statements, and have issued our report thereon dated October 21,

2016.

Internal Control over Financial Reporting

In planning and performing our audit of the consolidated 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 consolidated 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 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 consolidated 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.



29

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 University’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.


October 21, 2016

30

Independent Auditors’ Report on Compliance for Each Major Federal Program and Report on

Internal Control over Compliance


Santa Clara University

Report on Compliance for Each Major Federal Program

We have audited Santa Clara University’s (the University) compliance with the types of compliance

requirements described in the OMB Compliance Supplement that could have a direct and material effect on

each of the University’s major federal programs for the year ended June 30, 2016. The University’s major

federal programs are identified in the summary of auditors’ results section of the accompanying schedule of

findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions

of its federal awards applicable to its federal programs.

Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of the University’s major federal programs

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; and the audit requirements of Title 2 U.S. Code of Federal

Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for

Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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

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 each major federal

program. However, our audit does not provide a legal determination of the University’s compliance.

Opinion on Each Major Federal Program

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 each of its major federal programs for the

year ended June 30, 2016.



31

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 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 and to test and report on internal control over compliance in

accordance with the Uniform Guidance, 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 on a timely basis. A material weakness in internal control over compliance is a deficiency, or

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 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 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.

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 the Uniform

Guidance. Accordingly, this report is not suitable for any other purpose.


October 21, 2016


Schedule of Expenditures of Federal Awards

Year ended June 30, 2016

Federal grantor/program title

Federal CFDA

Number Pass-Through Entity Identification NumberPassed Through to Subrecipients

Total Federal Expenditures

Student Financial Assistance:Department of Education:

Federal Supplemental Educational Opportunity Grants 84.007 $ $ 392,265 Federal Work-Study Program 84.033 749,268 Federal Perkins Loans 84.038 9,673,712 Federal Pell Grant Program 84.063 2,487,181 Federal Direct Student Loans 84.268 51,288,821 Teacher Education Assistance for College and Higher Education Grants

(TEACH Grants) 84.379 37,867

Total Student Financial Assistance Cluster 64,629,114

Research and Development:National Science Foundation Direct Program:

Intergovernment Personnel Act N/A DFM-1358706 76,366 Mathematical and Physical Sciences 47.049 DMR-1105553/CHE-1056520/DMR-1207298 180,758

PHY-1408646/DMR-1508278/CHE-1559843Geosciences 47.050 1632913 32,320 Biological Sciences 47.074 MCB-1122240 / IOS-1457395 / 1557513 205,280 Social, behavioral and Economic Sciences 47.075 SES-1354490 /BCS-1539795/BCS-1559666/1561333 39,152 Education and Human Resources 47.076 DGE-113584 / DGE-1045434 85,997 Office of International Science and Engineering 47.079 IIA-1427595 4,570

Total National Science Foundation Direct Program 624,443

National Science Foundation Pass-Through Program:Engineering Grants 47.041 1448133 19,664 Mathematical and Physical Sciences 47.049 8794 203,865 Geosciences 47.050 EAR-1316553 / UAF 16-0005 76,751 Biological Sciences 47.074 DBI-1266377 4,415 Education and Human Resources 47.076 73299-1128962-3 32,488

Total National Science Foundation Pass-Through Program 337,183

U.S. Department of Agriculture Direct Program: Agriculture and Food Research Initiative (AFRI) 10.310 2012-69002-19857 / 2014-67012-22270 79,575

U.S. Department of Defense Pass-Through Program:SA Photonics - 12.XXX FA8650-15-M-6660 29,176 Office of Naval Research - Basic and Applied Scientific Research 12.300 N00014-13-1-0898 / N00014-15-1-2278 116,443

U.S. Department of the Interior Direct Program: Central Valley Project Improvement Act, Title XXXIV 15.512 R12AP20022 16,575 25,311

National Aeronautics and Space Administration (NASA)NASA 43.XXX NNA11AA76C / NNX14AT05H 105,607 NASA – Univ. Space Research Assoc. (Pass-Through Program) 43.XXX JPL RSA 1497685 8,269

Total National Aeronautics and Space Administration 113,876

U.S. Environmental Protection Agency Program: P3 Award: National Student Design Competition for Sustainability 66.516 SU-83528801 119

Total U.S. Environmental Protection Agency 16,575 119

U.S. Department of Health and Human Services Direct Program: Mental Health Research grants 93.242 7K01MH096608-04 19,904 151,943

U.S. Department of Health and Human Services Pass-Through Program: University of San Francisco - Cancer Cause and Prevention Research 93.393 8918SC 74,464 University of Washington - Biomedical Research and Research Trainin 93.859 1R01GM101091-01 76,432 University of Mississipp 93.XXX USM-GR05309-02 4,830

Total U.S. Department of Health and Human Services 19,904 307,669

Total Research and Development Cluster 36,479 1,633,795

Other: U.S. Department of Justice Program:

Victims of Human Trafficking 16.320 2015-VT-BX-K031 66,389 83,057 Capital Case Litigation Initiative 16.746 2013-FA-BX-0001 4,526 Postconviction Testing of DNA Evidence to Exonerate the Innocent

(Pass-Through Program) 16.820 CK13031794 / CK14041794 399,915

Total U.S. Department of Justice 66,389 487,498

Internal Revenue Service: Low Income Taxpayer Clinics (Pass-Through Program) 21.008 13LITC0081-02-00 / 15LITC0081-03-00 87,704

National Endowment for the Arts & Humanities:Arts Engagement in American Communitie 45.024 14-5900-7051 9,488 Institute of Museum and Bay Area 45.301 MA-31-14-0112-14 3,487

Total National Endowment for the Arts & Humanities 12,975

U.S. Agency for International Development:Investment Facilitation Initiative for Energy Acces 98.XXX AID-386-A-15-00017 67,089 Enclude Limited (Pass-Through Program) 98.XXX 3,867 48,227

Total U.S. Agency for International Development 115,316

Total Other 66,389 703,493 Total Expenditures of Federal Awards $ 102,868 $ 66,966,402

See accompanying notes to schedule of expenditures of federal awards and independent auditors’ report.

32


Notes to Schedule of Expenditures of Federal Awards

For the year ended June 30, 2016

33

(1) Basis of Presentation

The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant

activity of Santa Clara University and affiliate and is presented on the accrual basis of accounting. The

information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal

Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for

Federal Awards (Uniform Guidance), for Audits of States, Local Governments, and Non-Profit

Organizations.

(2) Student Financial Assistance Expenditures

Student financial assistance program expenditures include payments to students and each program’s

administrative allowance, and excludes amounts representing cost sharing or matching. Administrative

allowances totaling $149,989 were claimed in the current year.

(3) Federal Student Loan Programs

The University had the following loan balances outstanding as of June 30, 2016. The Federal Perkins Loans

expended during the year ended June 30, 2016, $1,674,134, are included in the balance of Federal Perkins

Loans outstanding as of June 30, 2016.

Federal Perkins Loan Program $ 7,980,475

(4) Indirect Cost Rates

The University has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform

Guidance. Facilities and administrative costs allocated to awards for the year ended June 30, 2016, were

based on predetermined fixed rates up to 35.5% negotiated with the University’s cognizant federal agency,

the U.S. Department of Health and Human Services, and are included as a component of the expenditures in

the Schedule.


Schedule of Findings and Questioned Costs


34 (Continued)

(1) Summary of Auditors’ Results

(a) Financial Statements

Type of auditors’ report issued: unmodified

Internal control over financial reporting:

Material weakness(es) identified? yes no

Significant deficiency(ies) identified? yes none reported

Noncompliance material to financial statements noted? yes no

(b) Federal Awards

Internal control over major programs:

Material weakness(es) identified? yes no

Significant deficiency(ies) identified? yes none reported

Type of auditors’ report issued on compliance for major programs: unmodified

Any audit findings disclosed that are required to be reported

in accordance with 2 CFR 200.516(a)? yes no

(c) Identification of Major Programs

CFDA Number(s) Name of Federal Program or Cluster

Student Financial Assistance Cluster:

84.007 Federal Supplemental Educational Opportunity Grants

84.033 Federal Work-Study Program

84.038 Federal Perkins Loan

84.063 Federal Pell Grant Program

84.268 Federal Direct Student Loans

84.379 Teacher Education Assistance for College and Higher

Education Grants (TEACH Grants)

Various Research and Development Cluster

(d) Dollar threshold used to distinguish between type A and type B programs: $750,000

(e) Auditee qualified as low-risk auditee? yes no


Schedule of Findings and Questioned Costs


35

(2) Financial Statements Findings

None.

(3) Federal Awards Findings and Questioned Costs

None.

SANTA CLARA UNIVERSITY SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2016

Finding 2015‐001 – Enrollment Reporting

Criteria: Under the Pell grant and loan programs, enrollment information must be reported

electronically through the batch method or the National Student Loan Data System (NSLDS) website

within 30 days whenever attendance changes for students, unless an Enrollment Reporting roster file

will be submitted within 60 days. These changes include reductions or increases in attendance levels,

withdrawals, graduations, or approved leaves‐of‐absence. Institutions are responsible for timely

reporting, whether they report directly or via a third‐party servicer. In addition, as noted in Chapter 6.1

in the NSLDS Enrollment Reporting Guide, the Enrollment Reporting roster file is due within 15 days

from the creation of the file that is placed in the institution’s Student Aid Internet Gateway (Pell, 34 CFR

section 690.83(b)(2); FFEL, 34 CFR section 682.610; Direct Loan, 34 CFR section

Condition: Santa Clara University (the University) did not have adequate internal controls in place to

ensure that students’ changes are reported to NSLDS within the 30 and 60 day reporting guidance

referenced above. No items of noncompliance were identified.

Recommendation: We recommend that management strengthen the University’s internal controls over

the monitoring and reporting of student status changes to ensure that status changes are submitted to

NSLDS within the 30 or 60 day reporting deadlines.

Status: Fully corrected.

Documents

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