Shepherd University Foundation, Inc. and Supporting Organization€¦ · Stephen G. Skinner 2019 Robert H. Chuey, II ’91 2019 Directors at Large Directors Emeriti Christopher S

ConsolidatedFinancialReportandUniformGuidanceSupplementaryReport

June30,2016

ShepherdUniversityFoundation,Inc.andSupportingOrganization

CONTENTS PAGEOFFICERSANDBOARDOFDIRECTORSOFSHEPHERDUNIVERSITYFOUNDATION,INC. INDEPENDENTAUDITOR'SREPORTONFINANCIALSTATEMENTS 1‐2FINANCIALSTATEMENTS

ConsolidatedStatementsofFinancialPosition 3ConsolidatedStatementsofActivities 4‐5ConsolidatedStatementsofCashFlows 6NotestoConsolidatedFinancialStatements 7‐22

SUPPLEMENTARYINFORMATION ConsolidatingStatementofFinancialPosition 23

ConsolidatingStatementofActivities 24ConsolidatingStatementofCashFlows 25

INDEPENDENTAUDITOR'SREPORTONINTERNALCONTROLOVERFINANCIAL REPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDIT OFFINANCIALSTATEMENTSPERFORMEDINACCORDANCEWITHGOVERNMENT AUDITINGSTANDARDS 26‐27 INDEPENDENTAUDITOR'SREPORTONCOMPLIANCEFOREACHMAJOR

PROGRAMANDONINTERNALCONTROLOVERCOMPLIANCEREQUIREDBYTHEUNIFORMGUIDANCE 28‐30

CONSOLIDATEDSCHEDULEOFEXPENDITURESOFFEDERALAWARDS 31NOTESTOCONSOLIDATEDSCHEDULEOFEXPENDITURESOFFEDERALAWARDS 32‐33SCHEDULEOFFINDINGSANDQUESTIONEDCOSTS 34‐37

SHEPHERDUNIVERSITYFOUNDATION,INC.

Officers

Name PositionMichaelA.Smith‘89 PresidentRamonA.Alvarez‘62 VicePresidentAllenL.Lueck‘67 SecretaryJuliaM.Connell‘84 TreasurerMonicaW.Lingenfelter ExecutiveVicePresidentCathyM.Nevy Comptroller

BoardofDirectorsName ClassTonyW.Price’93 2016J.DavidRickard’56 2016MaryElizabethOates 2016GinaM.Walters’10 2016Dr.HeidiM.Hanrahan 2016KarlL.Wolf’70 2016RamonA.Alvarez’62 2017EricJ.Lewis‘95 2017JuliaM.Connell’84 2017AllenL.Lueck’67 2017Dr.DavidWing 2017JerryP.Kerr’68 2017ElizabethS.Lowe’52 2017AndrewD.Michael’75 2018RobertH.Jensenius’72 2018LarryA.Strite’60 2018WilliamE.Knode,Jr.’58 2018Dr.JasonBest 2018MichaelA.Smith’89 2018ChristopherS.Colbert’95 2019TimothyB.McShea’80 2019BrianK.Jackson’87 2019JohnF.Beatty 2019KennethE.Harbaugh 2019StephenG.Skinner 2019RobertH.Chuey,II’91 2019DirectorsatLarge DirectorsEmeritiChristopherS.Colbert‘95 Dr.JamesA.ButcherMonicaW.Lingenfelter Dr.JaneIkenberry‐Dorrier‘65WandaG.Smith DavidT.Newlin‘76Dr.SylviaManning ChristopherSedlock

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INDEPENDENTAUDITOR'SREPORTBoardofDirectorsShepherdUniversityFoundation,Inc.andSupportingOrganizationShepherdstown,WestVirginiaREPORTONTHECONSOLIDATEDFINANCIALSTATEMENTS WehaveauditedtheaccompanyingconsolidatedfinancialstatementsoftheShepherdUniversityFoundation,Inc.andSupportingOrganization(nonprofitorganizations),whichcomprisetheconsolidatedstatementsoffinancialpositionasofJune30,2016and2015,andtherelatedconsolidatedstatementsofactivitiesandcashflowsfortheyearsthenended,andtherelatednotestotheconsolidatedfinancialstatements.Management’sResponsibilityfortheConsolidatedFinancialStatements ManagementisresponsibleforthepreparationandfairpresentationoftheseconsolidatedfinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica;thisincludesthedesign,implementation,andmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentationofconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditor’sResponsibility Ourresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudits.WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericaandthestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards,issuedbytheComptrollerGeneraloftheUnitedStates.Thosestandardsrequirethatweplanandperformtheauditstoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsarefreefrommaterialmisstatement. Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheconsolidatedfinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationoftheconsolidatedfinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Accordingly,weexpressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements. Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

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Opinion

Inouropinion,theconsolidatedfinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,thefinancialpositionofShepherdUniversityFoundation,Inc.andSupportingOrganizationasofJune30,2016and2015,andthechangesintheirnetassetsandtheircashflowsfortheyearsthenendedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.OtherMattersOtherInformation

Ourauditwasconductedforthepurposeofforminganopinionontheconsolidatedfinancialstatementsasawhole.Thesupplementarystatementsofconsolidatingfinancialposition,consolidatingstatementofactivitiesandconsolidatingstatementofcashflowsarepresentedforpurposesofadditionalanalysisandarenotarequiredpartoftheconsolidatedfinancialstatements.Theaccompanyingconsolidatedscheduleofexpendituresoffederalawards,asrequiredbyTitle2U.S.CodeofFederalRegulations(CFR)Part200,UniformAdministrativeRequirements,CostPrinciples,andAuditRequirementsforFederalAwards,ispresentedforpurposesofadditionalanalysisandisnotarequiredpartoftheconsolidatedfinancialstatements.Suchinformationistheresponsibilityofmanagementandwasderivedfromandrelatesdirectlytotheunderlyingaccountingandotherrecordsusedtopreparetheconsolidatedfinancialstatements.Theinformationhasbeensubjectedtotheauditingproceduresappliedintheauditoftheconsolidatedfinancialstatementsandcertainadditionalprocedures,includingcomparingandreconcilingsuchinformationdirectlytotheunderlyingaccountingandotherrecordsusedtopreparetheconsolidatedfinancialstatementsortotheconsolidatedfinancialstatementsthemselves,andotheradditionalproceduresinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Inouropinion,theinformationisfairlystated,inallmaterialrespects,inrelationtotheconsolidatedfinancialstatementsasawhole.

OtherReportingRequiredbyGovernmentAuditingStandards

InaccordancewithGovernmentAuditingStandards,wehavealsoissuedourreportdatedAugust29,2016,onourconsiderationofShepherdUniversityFoundation,Inc.andSupportingOrganization’sinternalcontroloverfinancialreportingandonourtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrantagreementsandothermatters.Thepurposeofthatreportistodescribethescopeofourtestingofinternalcontroloverfinancialreportingandcomplianceandtheresultsofthattesting,andnottoprovideanopiniononinternalcontroloverfinancialreportingoroncompliance.ThatreportisanintegralpartofanauditperformedinaccordancewithGovernmentAuditingStandardsinconsideringShepherdUniversityFoundationInc.andSupportingOrganization’sinternalcontroloverfinancialreportingandcompliance.

Hagerstown,MarylandAugust29,2016

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONConsolidatedStatementsofFinancialPositionJune30,2016and2015

TheNotestoConsolidatedFinancialStatementsareanintegralpartofthesestatements. 3

2016 2015

ASSETSCurrentAssetsCashandcashequivalents 23,098,204$ 1,991,988$Pledgesreceivable,netofpresentvalueadjustment 3,198,673 3,318,446Otherreceivables 187 6,136Accruedinterestreceivable 32,829 33,360Prepaidexpenses 1,582 1,582Investments 21,523,684 23,206,339Interestinlifeestate 335,035 318,582Loanoriginationcosts,net 567,578 ‐Constructioninprogress 2,001,552 ‐Equipment,net 6,132 5,509

TOTALASSETS 50,765,456$ 28,881,942$

LIABILITIESANDNETASSETSLiabilitiesAccountspayable 1,049,505$ 7,322$Retainagespayable 54,895 ‐Accruedpayroll 11,866 8,648Accruedinterest 15,619 ‐Custodialliabilities 1,574,435 2,012,091Giftannuitiespayable 134,983 146,905Loanspayable 22,385,000 ‐

TotalLiabilities 25,226,303 2,174,966

NetAssetsUnrestricted (6,772,981) (4,567,872)Temporarilyrestricted 7,079,385 6,737,382Permanentlyrestricted 25,232,749 24,537,466

TotalNetAssets 25,539,153 26,706,976

TOTALLIABILITIESANDNETASSETS 50,765,456$ 28,881,942$

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONConsolidatedStatementsofActivitiesYearsEndedJune30,2016and2015


2016 2015CHANGESINUNRESTRICTEDNETASSETSSUPPORTANDREVENUEOtherrevenue 23,311$ 23,035$Netrealizedandunrealizedlossesoninvestments (1,472,419) (1,505,565)Transfers (52,414) (38,338)Netassetsreleasedfromrestrictions 1,585,938 1,539,026

TotalRevenueandOtherSupport 84,416 18,158

EXPENSESProgramServicesScholarshipsandawards 1,509,129 1,445,617Collegesupport 76,809 94,412

GeneralandAdministrativeSalaries 333,748 327,345Investmentmanagementfees 127,948 149,545Printingandreproductioncosts 30,593 32,816Payrolltaxesandbenefits 51,440 50,198Depreciation 6,509 6,737Amortization 21,485 ‐Administrativeexpense 2,162 1,630Rent 12,600 12,600Officesuppliesandpostage 9,798 7,159Insurance 6,499 5,275Changesingiftannuities 9,935 10,910Professionalfees 51,653 19,808Stafftraining 263 238Programdevelopment 30,199 28,003Telephone 2,621 2,331Technology 2,407 1,983Baddebtexpense 3,000 ‐Miscellaneous 727 1,210

TotalExpenses 2,289,525 2,197,817

ChangeInUnrestrictedNetAssets (2,205,109)$ (2,179,659)$

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONConsolidatedStatementsofActivitiesYearsEndedJune30,2016and2015


(Continued)2016 2015

CHANGESINTEMPORARILYRESTRICTEDNETASSETSSUPPORTANDREVENUECashcontributions 1,092,075$ 1,042,244$Stockcontributions 12,177 47,270Othernon‐cashcontributions 6,125 79,455Otherrevenue 10,613 11,951Interestanddividends 588,215 594,348Netrealizedandunrealizedgainsoninvestments 142,083 118,812Transfers 76,653 17,514Netassetsreleasedfromrestrictions (1,585,938) (1,539,026)

ChangeinTemporarilyRestrictedNetAssets 342,003 372,568

CHANGESINPERMANENTLYRESTRICTEDNETASSETSSUPPORTANDREVENUECashcontributions 670,709 308,076Stockcontributions 6,611 30,353Othernon‐cashcontributions 16,454 15,929Interestanddividends 25,748 25,032Transfers (24,239) 20,824

ChangeInPermanentlyRestrictedNetAssets 695,283 400,214

Increase(Decrease)InNetAssets (1,167,823) (1,406,877)

NETASSETS,BEGINNINGOFYEAR 26,706,976 28,113,853

NETASSETS,ENDOFYEAR 25,539,153$ 26,706,976$

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONConsolidatedStatementsofCashFlowsYearsEndedJune30,2016and2015


2016 2015

CASHFLOWSFROMOPERATINGACTIVITIES(Decrease)innetassets (1,167,823)$ (1,406,877)$Adjustmentstoreconcile(decrease)innetassetstonetcash(usedin)operatingactivities:Netrealizedandunrealizedlossesoninvestments 1,330,336 1,386,753Depreciation 6,509 6,737Amortization 21,485 ‐Non‐cashstockcontributionsreceived (18,788) (77,623)Write‐offofuncollectiblepledgesreceivable 3,000 ‐Decreaseinpledgesreceivables,netofdiscount 116,773 6,204Decreaseinotherreceivables 5,949 26,707Decreaseinaccruedinterestreceivable 531 204(Increase)ininterestinlifeestate (16,453) (15,929)Increaseinaccountspayable 24,575 5,678Increaseinaccruedpayroll 3,218 1,236Increaseinaccruedinterestpayable 15,619 ‐(Decrease)incustodialliabilities (437,656) (432,326)

NetCash(UsedIn)OperatingActivities (112,725) (499,236)

CASHFLOWSFROMINVESTINGACTIVITIESProceedsfromsaleofinvestments 8,363,878 11,704,314Purchasesofinvestments (7,996,776) (10,921,766)Giftannuitypayments (11,922) (22,081)Purchasesofequipment (3,127) (1,270)Paymentsforconstructioninprogress (929,049) ‐

NetCashProvidedBy(UsedIn)InvestingActivities (576,996) 759,197

CASHFLOWSFROMFINANCINGACTIVITIESPaymentofloanoriginationcosts (589,063) ‐Proceedsfromloanborrowings 22,385,000 ‐

NetCashProvidedByFinancingActivities 21,795,937 ‐

NetIncreaseInCashandCashEquivalents 21,106,216 259,961

CASHANDCASHEQUIVALENTS,BEGINNINGOFYEAR 1,991,988 1,732,027

CASHANDCASHEQUIVALENTS,ENDOFYEAR 23,098,204$ 1,991,988$

SUPPLEMENTALDISCLOSUREOFNON‐CASHINVESTINGTRANSACTIONSAtJune30,2016,theFoundationhadaccountspayableandretainagespayableof$1,017,608and$54,895,respectively,thatrelatedtoconstructioninprogress.

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONNotestoConsolidatedFinancialStatementsJune30,2016and2015

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NOTE1 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESReportingPrinciplesTheconsolidatedfinancialstatementsincludeShepherdUniversityFoundation,Inc.andShepherdUniversityFoundationSupportingOrganization(collectivelyreferredtoastheFoundation).ShepherdUniversityFoundation,Inc.sharesacommongoverningboardwithandhasanongoingeconomicinterestintheShepherdUniversityFoundationSupportingOrganization(SupportingOrganization).Asaresult,theseentitiesarefinanciallyinterrelatedandconsolidationisrequiredunderaccountingprinciplesgenerallyacceptedintheUnitedStates.Allsignificantintercompanybalancesandtransactionshavebeeneliminated.OrganizationandNatureofOperationsTheShepherdUniversityFoundation,Inc.,andtheShepherdUniversityFoundationSupportingOrganizationarenonprofitorganizationsincorporatedinthestateofWestVirginiaandheadquarteredinShepherdstown,WestVirginia.TheprimarypurposeoftheShepherdUniversityFoundation,Inc.istoprovideassistanceandsupportforthestudents,facilitiesandprogramsofShepherdUniversity.TheprimarypurposeoftheShepherdUniversityFoundationSupportingFoundationistoprovidefinancialsupportandothersupportingservicestotheShepherdUniversityFoundation,Inc.BasisofAccountingTheconsolidatedfinancialstatementsoftheShepherdUniversityFoundation,Inc.andSupportingOrganizationarepresentedontheaccrualbasisofaccounting,inaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.Netassetsandrevenues,expenses,gainsandlossesareclassifiedbasedontheexistenceorabsenceofdonor‐imposedrestrictions.Accordingly,netassetsoftheFoundationandchangesthereinareclassifiedandreportedasfollows:

UnrestrictedNetAssetsNetassetsthatarenotsubjecttodonor‐imposedstipulations.TemporarilyRestrictedNetAssetsNetassetssubjecttodonor‐imposedstipulationsthatwillbemeteitherbyactionsoftheFoundationand/orthepassageoftime.Restrictionsrelatetomanydifferentscholarshipsandtoconstructionoffixedassets.


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NOTE1 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)

PermanentlyRestrictedNetAssetsNetassetssubjecttodonor‐imposedstipulationsthattheybemaintainedpermanentlybytheFoundation.Generally,thedonorsoftheseassetspermittheFoundationtouseallorpartoftheincomeearnedonrelatedinvestmentsforgeneralorspecificpurposes.Restrictionsaretoprovideassistanceandsupportforthestudents,facilitiesandprogramsofShepherdUniversity.

Revenuesarereportedasincreasesinunrestrictednetassetsunlessuseoftherelatedassetsislimitedbydonor‐imposedrestrictions.Expensesarereportedasdecreasesinunrestrictednetassets.Gainsandlossesonassetsorliabilitiesarereportedasincreasesordecreasesinunrestrictednetassetsunlesstheiruseisrestrictedbyexplicitdonorstipulationorbylaw.Expirationsoftemporaryrestrictionsonnetassets(i.e.,thedonor‐stipulatedpurposehasbeenfulfilledand/orthestipulatedtimeperiodhaselapsed)arereportedasnetassetsreleasedfromrestrictions.CustodialaccountsrepresentingfundsheldbytheFoundationonbehalfofShepherdUniversityand/ordepartmentsoftheUniversityarereportedascustodialliabilities.TheFoundationisresponsibleforthemanagementandadministrationofthesefunds. InvestmentsTheFoundationaccountsforitsinvestmentsinaccordancewithgenerallyacceptedaccountingprinciples(GAAP).UnderGAAP,investmentsinmarketablesecuritieswithreadilydeterminablefairvaluesandallinvestmentsindebtsecuritiesarevaluedattheirfairvaluesintheconsolidatedstatementsoffinancialposition.Unrealizedgainsandlossesareincludedinthechangesinnetassets.PledgesReceivablePledgesarerecordedasrevenuewhenreceived.ItistheFoundation’spolicytoevaluateindividualpledgesannuallytodeterminecollectibility.Pledgesdeemeduncollectiblearewrittenoffaspartofthechangeinnetassetsintheyearsuchdeterminationismade.Thepresentvalueadjustmentforpledgesreceivableiscalculatedbydeterminingthepresentvalueofthefuturecontributionsexpectedtobereceived,usingadiscountrateof6%.PropertyandEquipmentPurchasedassetsarerecordedatcost.DonatedassetsretainedbytheFoundationarerecordedattheircurrentorappraisedvalueatthedatetheyaredonated.Expendituresof$300ormoreandhavingausefullifegreaterthanoneyeararecapitalized.Assetsnolongerinuseareretired.Maintenanceandrepairsareexpensedasincurred.Depreciationiscalculatedbythestraight‐linemethodovertheestimatedusefullivesoftheassetsasfollows:

YearsEquipment 3‐7Buildingandimprovements 40


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NOTE1 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)LoanOriginationCostsInJune2016,theShepherdUniversityFoundationSupportingOrganizationincurredloanoriginationcostsof$589,063associatedwithobtainingfinancing.Thesecostsarebeingamortizedusingthestraight‐linemethodoverthelifeoftherelateddebt,whichis19monthsand20days.AccumulatedamortizationandamortizationexpensefortheyearsendingJune30,2016and2015,amountedto$21,485and$0,respectively.Futureamortizationexpenseassociatedwiththeseloanoriginationcostswillbe$359,367and$208,211fortheyearsendingJune30,2017and2018,respectively.AdvertisingAdvertisingcostsareexpensedasincurredandamountedto$4,785and$2,919fortheyearsendedJune30,2016and2015,respectively.ContributionsContributions,includingunconditionalpromisestogive,arerecognizedasrevenueintheperiodreceived.Allcontributionsareavailableforunrestricteduseunlessspecificallyrestrictedbythedonor.Bequestsarerecordedasrevenueatthetimeanunassailablerighttothegifthasbeenestablishedandtheproceedsaremeasurable.Non‐cashcontributionsreceivedthatareretainedorpassedthroughtoShepherdUniversityarerecordedattheircurrentorappraisedvalueatthedatetheyarecontributed.FunctionalAllocationofExpensesThecostsofprovidingthevariousprogramsandotheractivitieshavebeensummarizedonafunctionalbasisintheconsolidatedstatementofactivities.Accordingly,certaincostshavebeenallocatedamongtheprogramsandsupportingservicesbaseduponmanagement'sjudgmentandpastexperience.TaxExemptStatusTheInternalRevenueServicehasdeterminedthattheShepherdUniversityFoundation,Inc.andShepherdUniversityFoundationSupportingOrganizationareorganizationsdescribedinSection501(c)(3)oftheInternalRevenueCodeandarethereforeexemptfromfederalincometax.TheFoundationfollowsgenerallyacceptedaccountingprinciples,whichprovidesguidanceonaccountingforuncertaintyinincometaxesrecognizedinanorganization’sfinancialstatements.TheFoundation’spolicyistochargepenaltiesandinteresttoincometaxexpenseasincurred.TheFoundation’sfederalandstateincometaxreturnsaresubjecttoexaminationbytheInternalRevenueServiceandstatetaxauthorities,generallyforaperiodofthreeyearsafterthereturnsarefiled.


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NOTE1 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)UseofEstimatesinthePreparationofConsolidatedFinancialStatementsThepreparationofconsolidatedfinancialstatementsinconformitywithgenerallyacceptedaccountingprinciplesrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateoftheconsolidatedfinancialstatements,andthereportedamountsofrevenueandexpensesduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.ConcentrationsofCreditRiskInthecourseofconductingitsactivitiestheFoundationencouragesalumni,localbusinessesandthegeneralpublictosupportitspurposesbyregularlysolicitingcontributions.Manyofthecontributorspledgetheirsupportoverseveralyearsintheformofpledges.PledgesthatarelegallyenforceablerepresentextensionsofcreditbytheFoundationtoitsdonors.StatementofCashFlowsForpurposesofpresentingcashflowinformation,theFoundationhasdefinedcashequivalentsashighlyliquiddebtinstrumentswithoriginalmaturitiesofthreemonthsorless.RisksTheFoundation’sinvestmentportfoliocontainsgovernmentobligations,fixedincomebonds,andequitysecurities.Suchinvestmentsareexposedtovariousrisks,suchasmarketandcreditrisk.Duetothelevelofriskassociatedwithsuchinvestments,itisatleastreasonablypossiblethatchangesinriskintheneartermwouldmateriallyaffectinvestmentbalancesandtheamountsreportedintheconsolidatedfinancialstatements.TheFoundationplacesitsdemanddepositswithlocalbanks.AttimessuchbalancesmaybeinexcessoftheFederalDepositInsuranceCorporationinsurancelimit.Managementconsidersthistobeanormalbusinessrisk.ReclassificationsCertainreclassificationsofamountspreviouslyreportedhavebeenmadeintheaccompanyingfinancialstatementsinordertomakethemconformtotheclassificationsusedfortheyearendedJune30,2016.


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NOTE2 PLEDGESRECEIVABLEPledgesreceivablerepresentamountsduetotheFoundationforlegallyenforceablepledges.ThesepledgesarepayableinfullorinpartthroughJune30,2023.PledgesreceivableasofJune30,2016and2015consistoftemporarilyandpermanentlyrestrictednetassets.TheseunconditionalpromisestogivearescheduledtobereceivedbytheFoundationoverthenextseveralyears,andareconsideredtobefullycollectible.

2016 2015Receivableinlessthanoneyear 437,683$ 305,376$Receivableinonetofiveyears 2,307,500 2,090,333Receivableoverfiveyears 1,056,000 1,706,000Totalpledgesreceivable 3,801,183 4,101,709Lessdiscounttonetpresentvalue (602,510) (783,263)Netpledgesreceivable 3,198,673$ 3,318,446$

NOTE3 INVESTMENTS

TheFoundationmaintainsinvestmentsecuritieswithvariousbrokeragecompanies.TheFoundationalsoholdsinvestmentsinrealestate,certificatesofdeposit,andsomecommonstockthatarenotinvestedwithbrokeragecompanies.InvestmentsecuritiesatJune30,2016and2015arecomposedofthefollowing:

Description Cost Market2016Certificatesofdeposit 778,988$ 778,988$Governmentsecurities 2,181,513 2,290,350Corporatebondsandnotes 1,836,911 1,837,558Mutualfunds 14,249,625 14,832,667Stocks 1,584,218 1,667,357

InvestmentSecurities 20,631,255$ 21,406,920$

2015Certificatesofdeposit 776,632$ 776,632$Governmentsecurities 2,598,329 2,822,492Corporatebondsandnotes 1,805,238 1,747,479Mutualfunds 15,541,464 16,166,996Stocks 1,252,131 1,571,971

InvestmentSecurities 21,973,794$ 23,085,570$


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NOTE3 INVESTMENTS(CONTINUED)

AtJune30,2016and2015,therewas$1,379,005and$1,194,288,respectively,ofcashandcashequivalentsheldinthebrokerageaccountsavailabletobeinvestedbytheFoundation.Theinvestmentinrealestateisincludedininvestmentsatnetbookvalueontheconsolidatedstatementoffinancialpositionduetonothavingareadilyavailablemarketvalue.Investmentinrealestateiscomprisedofthefollowing:

Accumulated NetDescription Cost Depreciation BookValue

2016Land 40,000$ ‐$ 40,000$Building 160,202 83,438 76,764

200,202$ 83,438$ 116,764$

2015Land 40,000$ ‐$ 40,000$Building 160,202 79,433 80,769

200,202$ 79,433$ 120,769$

Depreciationexpenserelatedtoinvestmentinrealestateamountedto$4,005and$4,005foreachyearendedJune30,2016and2015,respectively.ThefollowingisasummaryoftheFoundation'sinvestmentsatJune30,2016and2015:

Description 2016 2015Investmentsecurities 21,406,920$ 23,085,570$Realestate 116,764 120,769

21,523,684$ 23,206,339$

TherisksofeconomicuncertaintyandmarketvolatilityunderscorethelevelofinvestmentriskassociatedwiththeFoundation’sinvestments.


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NOTE4 INTERESTINLIFEESTATEDuringtheyearendedJune30,2013,adonorestablishedalifeestategivingaremainderinterestinaresidentialpropertytotheFoundation,whileretainingalifeinterestintheproperty.Alifeestateagreementisanarrangementwherebythedonortransferspropertytoacharitywhileretainingtherighttooccupyandotherwiseenjoythefulluseofthepropertyforthedonor’schoiceofatermofyearsorthelifetimeofthedonor.Thepresentcommitmentvalueofthepropertyisbasedontheindividual’slifeexpectancy,whichprovidesforacontributionvaluebaseduponthefactthedonorismakingapresentcommitmenttoafuturecharitablegift.Thevalueofthepropertyisbaseduponathirdpartyappraisalvalueatthedateoftransferof$447,500,discountedbythepresentvalueofthefairmarketrentalvalueofthepropertyatthetimeofthetransferof$1,700permonth.ThepresentvaluewascalculatedbaseduponthelifeexpectancyofthedonorascalculatedbytheSocialSecurityLifeExpectancytablesanda3.25%rateofreturnpertheAmericanCouncilonGiftAnnuities.AssetsheldinlifeestatesatJune30,2016and2015were$335,035and$318,582,respectively,andarereportedatthecalculatedpresentvalueontheFoundation’sconsolidatedstatementoffinancialposition.ChangesinthepresentvalueofthelifeestatewillbereflectedaschangesinpermanentlyrestrictednetassetsintheFoundation’sconsolidatedstatementofactivities.

NOTE5 STUDENTHOUSINGFACILITYPROJECTANDCONSTRUCTIONINPROGRESS

During2016,theShepherdUniversityFoundationSupportingOrganizationbeganthedesignandconstructionofanewstudenthousingfacilityontheShepherdUniversitycampus.TheSupportingOrganizationreceivedinterimfinancingfortheprojectintheformofbondanticipationnotesissuedbytheWestVirginiaEconomicDevelopmentAuthority.TheSupportingOrganizationhasreceivedaruraldevelopmentloancommitmentfora40‐yearpermanentloanfromtheUnitedStatesDepartmentofAgriculturethatwillretiretheWestVirginiabondanticipationnotesatthecompletionofconstructionanduponobtaininganoccupancypermit.TheSupportingOrganizationwillownthebuildingandassociatedequipmentandfurnishingsandhasenteredintoagroundleasewithShepherdUniversity.ThegroundleasebeganinJune2016andwillexpireupontherepaymentofallassociatedoutstandingdebtborrowedbytheSupportingOrganization.Upontheexpirationofthelease,thebuildingandassociatedequipmentandfurnishingswillbetransferredtoShepherdUniversity.Thegroundleaseagreementrequiresannualrentalpaymentsdue30daysafterthereceiptoftheSupportingOrganization’sauditedfinancialstatements.Rentalpaymentswillequalthenetavailablecashflowgeneratedfromthestudenthousingfacilityproject.InJune2016,theSupportingOrganizationenteredintoamanagementagreementwithShepherdUniversity.ThemanagementagreementappointedShepherdUniversityastheSupportingOrganization’sexclusiveagentfortheconstruction,operation,managementandmaintenanceofthestudenthousingfacilityproject.ConstructioninprogressreportedontheconsolidatedstatementsoffinancialpositionatJune30,2016and2015of$2,001,552and$0,respectively,representcostsincurredrelatedtotheconstructionofthestudenthousingfacilityproject.Nodepreciationwillberecognizedonthesecostsuntiltheconstructioniscompleteandthebuildingisplacedintoservice.


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NOTE6 EQUIPMENTEquipmentconsistsofthefollowing:

2016 2015Officeequipment(atcost) 18,970$ 28,115$Accumulateddepreciation (12,838) (22,606)NetBookValue 6,132$ 5,509$

Depreciationexpenserelatedtoequipmentwas$2,504and$2,732fortheyearsendedJune30,2016and2015,respectively.

NOTE7 CUSTODIALLIABILITIESGenerallyacceptedaccountingprinciplesestablishstandardsfortransactionsinwhichafoundationacceptsacontributionfromadonorandagreestotransferthoseassets,thereturnoninvestmentofthoseassets,orboth,toanotherentitythatisspecifiedbythedonor.Specifically,ifanot‐for‐profitorganizationestablishesafundatafoundationwithitsownfundsandspecifiesitselforitsaffiliateasthebeneficiaryofthatfund,thefoundationmustaccountforthetransferofsuchassetsasaliability.Theliabilityhasbeenestablishedatthefairmarketvalueofthefunds,whichisgenerallyequivalenttothepresentvalueoffuturepaymentsexpectedtobemadetothenon‐for‐profitorganizations.Thegrossreceiptsanddisbursementsforthecustodialaccounts,andtheinterestandgainsoninvestmentsforthecustodialaccountsfortheyearsendedJune30,2016and2015areasfollows:

2016 2015Custodialreceipts 195,815$ 167,435$Custodialpayments (641,630) (609,613)Interestandgainsoninvestments 8,159 9,852Net(Decrease)inCustodialLiabilities (437,656)$ (432,326)$


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NOTE8 GIFTANNUITIESGiftannuitiespayableconsistofthefollowingliabilities:

2016 2015DanielandOrphaCowgillAnnuity 22,924$ 25,996$JamesK.Wright,Jr.Annuity 15,759 19,859BenjaminandMaryLouMehrlingAnnuity 3,136 3,462JamesK.andGladysL.WrightAnnuity 10,061 11,210JackandPatEgleAnnuity 26,404 27,810MEOAnnuity 56,699 58,568Total 134,983$ 146,905$

Theassetsreceivedarerecognizedatfairvaluewhenreceived,andthegiftannuityliabilitiesarerecordedusingthepresentvalueoffuturecashflowsexpectedtobepaidtothedonorsandarebeingamortizedovertheexpectedlivesofthedonors.DuringtheyearendedJune30,2015,thebeneficiaryoftheKeithHessAnnuitypassedaway.Inaccordancewiththegiftannuityagreement,theresidualliabilityatthedateofthebeneficiary’sdeathwastransferredintothepermanentlyrestrictednetassetsoftheFoundationtocreateanendowedscholarshipfundinthebeneficiary’sname.

NOTE9 LOANSPAYABLEAsdisclosedinNote5,inJune2016theShepherdUniversityFoundationSupportingOrganizationobtainedinterimfinancingfortheirstudenthousingfacilityprojectthroughbondanticipationnotesissuedbytheWestVirginiaEconomicDevelopmentAuthority.TheShepherdUniversityFoundationSupportingOrganizationborrowed$22,035,000underSeries2016Abondanticipationnoteswithaninterestrateof1.20%and$350,000ofSeries2016Btaxablebondanticipationnoteswithaninterestrateof2.45%.TheloansmatureonFebruary1,2018andrequiresemi‐annualinterestonlypaymentsonAugust1andFebruary1ofeachloanyear.OnFebruary1,2018,alloutstandinginterestandprincipalisrequiredtoberepaid.Theloansaresecuredbyaleaseholddeedoftrustonthestudenthousingfacilityproject.TheoutstandingbalanceofloanspayableatJune30,2016and2015was$22,385,000and$0,respectively.Totalinterestcapitalizedandaccruedamountedto$15,619and$0fortheyearsendedJune30,2016and2015,respectively.Thecarryingvalueoftheleaseholdimprovementwas$2,001,552atJune30,2016.TheShepherdUniversityFoundationSupportingOrganizationhasaloancommitmentagreementforupto$22,735,000withtheUnitedStatesDepartmentofAgriculture(USDA).Atthecompletionofthestudenthousingfacilityprojectconstructionandreceiptofoccupancypermit,theUSDAwillprovidepermanentfinancingfortheprojectundera40‐yeartermloanandwillpayofftheoutstandingbalanceoftheWestVirginiabondanticipationnotes.


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NOTE10 EMPLOYEEPENSIONPLANTheFoundationparticipatesintheTIAA‐CREFretirementplan.TheFoundationcontributestotheplanbasedonadollarfordollarmatchofthecontributionsoffulltimeemployeesupto6%.ThecostrecognizedduringtheyearsendedJune30,2016and2015was$10,002and$9,501,respectively.

NOTE11 CONDITIONALPROMISESTOGIVE

Inthenormalcourseofoperations,theFoundationhasbeennotifiedasbeingdesignatedtoreceivevariousdeferredgiftsfromalumniandfriendsinsupportofShepherdUniversitythatarenotrecordedintheconsolidatedfinancialstatementsbecauseoftheircontingentnature.However,theFoundationfacilitatesandmonitorsdeferredgiftsthroughtheuseofMemorandumsofUnderstandingdetailingthedonor'sintentandstipulationsforadministrationofthegiftforsuchitemsasbequests,charitableremaindertrustsandinsurancepolicies.

NOTE12 RELATEDPARTYTheFoundationisacomponentunitofShepherdUniversity(University).TheFoundationutilizesspaceownedbytheUniversitybutdoesnotpayrent.In‐kindrevenueandexpenseof$12,600hasbeenrecordedfortheuseofthisspacefortheyearsendedJune30,2016and2015,respectively.AsdisclosedinNote5,theShepherdUniversityFoundationSupportingOrganizationhasenteredintoagroundleaseagreementandmanagementagreementwiththeUniversityaspartofthestudenthousingfacilitiesproject.

NOTE13 FAIRVALUEMEASUREMENTSAccountingStandardsCodification(ASC)820,FairValueMeasurements,definesfairvalue,establishesaframeworkformeasuringfairvalue,establishesathree‐levelvaluationhierarchyfordisclosureoffairvaluemeasurementandenhancesdisclosurerequirementsforfairvaluemeasurements.Thevaluationhierarchyisbaseduponthetransparencyofinputstothevaluationofanassetorliabilityasofthemeasurementdate.Thethreelevelsaredefinedasfollows:

Level1–Representedbyquotedpricesthatareavailableinanactivemarket.Level1securitiesincludehighlyliquidgovernmentbonds,treasurysecurities,mortgageproductsandexchangetradedequities.

Level2–RepresentedbyassetsandliabilitiessimilartoLevel1wherequotedprices

arenotavailable,butareobservable,eitherdirectlyorindirectlythroughcorroborationwithobservablemarketdata,suchasquotedpricesforsimilarsecuritiesandquotedpricesininactivemarketsandestimatedusingpricingmodelsordiscountedcashflows.Level2securitieswouldincludeU.S.agencysecurities,mortgage‐backedagencysecurities,obligationsofstatesandpoliticalsubdivisionsandcertaincorporate,assetbackedsecuritiesandswapagreements.


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NOTE13 FAIRVALUEMEASUREMENTS(CONTINUED) Level3–Representedbyfinancialinstrumentswherethereislimitedactivityor

unobservablemarketpricesandpricingmodelssignificanttodeterminingthefairvaluemeasurementincludethereportingentity’sownassumptionsaboutthemarketrisk.Level3securitieswouldincludehedgefunds,privateequitysecurities,andprivateinvestmentsinpublicentities.

FairvalueofassetsmeasuredonarecurringbasisatJune30,2016and2015areasfollows:

QuotedPricesinActive

MarketsforIdenticalAssets

SignificantOther

ObservableInputs

SignificantUnobservable

InputsFairValue (Level1) (Level2) (Level3)

2016Pledgesreceivable $3,198,673 $‐ $‐ $3,198,673GovernmentsecuritiesUSTreasuries 1,442,955 1,442,955 ‐ ‐AgencySecurities 458,949 ‐ 458,949 ‐MunicipalBonds 104,862 ‐ 104,862 ‐MortgagePools 283,584 ‐ 283,584 ‐

CorporateBonds 1,837,558 ‐ 1,837,558 ‐MutualfundsUSLargeCap 2,627,463 2,627,463 ‐ ‐USSmallandMid‐Cap 2,192,162 2,192,162 ‐ ‐InternationalEquity 2,445,613 2,445,613 ‐ ‐InternationalFixedIncome 679,410 679,410 ‐ ‐High‐YieldBond 304,883 304,883 ‐ ‐REITs 604,750 604,750 ‐ ‐Commodities 374,857 374,857 ‐ ‐EquityEnergy 236,971 236,971 ‐ ‐HedgedEquity 1,586,680 1,586,680 ‐ ‐MasterLimitedPartnerships 882,155 882,155 ‐ ‐DiversifiedAlternatives 2,091,381 864,152 ‐ 1,227,229ManagedFutures 806,342 806,342 ‐ ‐

StocksUSSmallandMid‐Cap 909,927 909,927 ‐ ‐InternationalEquity 757,430 757,430 ‐ ‐

23,826,605$ 16,715,750$ 2,684,953$ 4,425,902$


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NOTE13 FAIRVALUEMEASUREMENTS(CONTINUED)

QuotedPricesinActive

MarketsforIdenticalAssets

SignificantOther

ObservableInputs

SignificantUnobservable

InputsFairValue (Level1) (Level2) (Level3)

2015Pledgesreceivable $3,318,446 $‐ $‐ $3,318,446GovernmentsecuritiesUSTreasuries 2,038,962 2,038,962 ‐ ‐AgencySecurities 461,591 ‐ 461,591 ‐MunicipalBonds 73,112 ‐ 73,112 ‐MortgagePools 248,827 ‐ 248,827 ‐

CorporateBonds 1,747,479 ‐ 1,747,479 ‐MutualfundsUSLargeCap 2,222,931 2,222,931 ‐ ‐USSmallandMid‐Cap 1,491,201 1,491,201 ‐ ‐InternationalEquity 2,447,896 2,447,896 ‐ ‐InternationalFixedIncome 1,108,706 1,108,706 ‐ ‐REITs 725,901 725,901 ‐ ‐Commodities 1,394,207 1,394,207 ‐ ‐GlobalEquity 1,391,725 1,391,725 ‐ ‐HedgedEquity 1,065,139 1,065,139 ‐ ‐MasterLimitedPartnerships 909,483 909,483 ‐ ‐DiversifiedAlternatives 2,369,744 1,483,038 ‐ 886,706ManagedFutures 1,040,063 1,040,063 ‐ ‐

StocksUSSmallandMid‐Cap 781,021 781,021 ‐ ‐InternationalEquity 790,950 790,950 ‐ ‐

25,627,384$ 18,891,223$ 2,531,009$ 4,205,152$

ThefairvaluesofShepherdUniversityFoundation’sassetsaremeasuredusingdifferenttechniques.Thefairvalueforpledgesreceivableisdeterminedbycalculatingthepresentvalueofthepledgesexpectedtobereceived,usingadiscountrateof6%.Thefairvaluemeasurementforinvestmentsisbaseduponquotedmarketprices,whenavailable(Level1).Ifquotedmarketpricesarenotavailable,fairvaluesaremeasuredutilizingindependentvaluationtechniquesofidenticalorsimilarsecuritiesforwhichsignificantassumptionsarederivedprimarilyfromorcorroboratedbyobservablemarketdata(Level2).Incertaincaseswherethereislimitedactivityorlesstransparencyaroundinputstothevaluation,securitiesareclassifiedwithinLevel3ofthehierarchy.ThefairvaluemeasurementoftheFoundation’sLevel3investmentsabovehavebeendeterminedbasedonthenetassetvaluesoftheunderlyingfundinvestments.


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NOTE13 FAIRVALUEMEASUREMENTS(CONTINUED)Totalrealizedgain(loss)fortheinvestmentsnotedabovethatisincludedinthechangeinnetassetsatJune30,2016and2015was$(1,088,208)and$503,606respectively.Theunrealized(loss)fortheinvestmentsnotedabovethatisincludedinthechangeinnetassetsatJune30,2016and2015was$(242,128)and$(1,890,359)respectively.Assetsmeasuredatfairvalueonarecurringbasisusingsignificantunobservableinputs(Level3inputs)consistofpledgesreceivableandfundsinvestedinSkyBridgeMulti‐AdvisorSeriesG(SkyBridgeFund)andIronwoodInstitutionalMulti‐StrategyFund,LLC(IronwoodFund),whicharespeculativefundsoffunds.ThechangesinLevel3assetsareasfollowsfortheyearsendedJune30,2016and2015:

Pledges SkyBridge IronwoodReceivable Fund Fund Total

FairValueasofJuly1,2015 3,318,446$ ‐$ 886,706$ 4,205,152$Pledgeswrittenoff (3,000) ‐ ‐ (3,000)Paymentsreceived (297,526) ‐ ‐ (297,526)Changeinvaluation 180,753 ‐ ‐ 180,753Purchaseoffunds ‐ 408,000 22,774 430,774Unrealized(loss) ‐ (40,861) (49,390) (90,251)FairValueasofJune30,2016 3,198,673$ 367,139$ 860,090$ 4,425,902$

June30,2016UnobservableInputs(Level3)

FairValueMeasurementsUsingSignificant

Pledges IronwoodReceivable Fund Total

FairValueasofJuly1,2014 3,324,650$ 509,628$ 3,834,278$Newpledges 25,999 ‐ 25,999Paymentsreceived (216,585) ‐ (216,585)Changeinvaluation 184,382 ‐ 184,382Purchaseoffunds ‐ 373,926 373,926Unrealizedgain ‐ 3,152 3,152FairValueasofJune30,2015 3,318,446$ 886,706$ 4,205,152$

June30,2015

FairValueMeasurementsUsingSignificantUnobservableInputs(Level3)

Theamountoftotalgains(losses)includedinthechangesinnetassetsrelatedtoLevel3assetsfortheyearsendingJune30,2016and2015was$(90,251)and$3,152,respectively.


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NOTE14 ENDOWMENTSTheFoundation’sendowmentsconsistofindividualfundsestablishedtoprovideinvestmentincomefortheFoundation’soperations.Theendowmentsincludedonor‐restrictedendowmentfunds.Netassetsassociatedwithendowmentfunds,includingfundsdesignatedbytheFoundationtofunctionasendowments,areclassifiedandreportedaspermanentlyrestrictednetassetsbasedonthedonor‐imposedrestrictions.Theclassificationisbasedontheboard’sinterpretationofWestVirginia’sstatutesthatgovernsuchendowmentsanditsinterpretationsofdonorintentandtherelatedendowmentbylaws.TheFoundationconsidersseveralfactorswhenmakingadeterminationtoappropriateoraccumulatedonor‐restrictedendowmentfunds.Thesefactorsincludethedurationandpreservationofthefund,themissionoftheFoundation,thepurposeofanydonor‐restrictions,generaleconomicconditions,thepossibleeffectofinflationanddeflation,theexpectedtotalreturnfromincomeandtheappreciationofinvestments,andotherresources.TheBoardofTrusteesoftheFoundationhasinterpretedtheStatePrudentManagementofInstitutionalFundsAct(SPMIFA)asrequiringthepreservationofthefairvalueoftheoriginalgiftasofthegiftdateofthedonor‐restrictedendowmentfundsabsentexplicitdonorstipulationstothecontrary.Asaresultofthisinterpretation,TheFoundationclassifiesaspermanentlyrestrictednetassets(a)theoriginalvalueofgiftsdonatedtothepermanentendowment,(b)theoriginalvalueofsubsequentgiftstothepermanentendowment,and(c)accumulationstothepermanentendowmentmadeinaccordancewiththedirectionoftheapplicabledonorgiftinstrumentatthetimetheaccumulationisaddedtothefund.Theremainingportionofthedonor‐restrictedendowmentfundthatisnotclassifiedinpermanentlyrestrictednetassetsisclassifiedastemporarilyrestrictednetassetsuntilthoseamountsareappropriatedforexpenditurebytheorganizationinamannerconsistentwiththestandardofprudenceprescribedbySPMIFA.TheShepherdUniversityFoundation’sDirectorsmakeanannualdeterminationoftheleveloffundingthatwillbeprovidedbytheFoundation’sinvestments.ThepolicyoftheFoundation’sDirectorsistodeterminetheamountoftheannualincomedistributionbasedontheinvestmentportfolio’stotalreturnforthepreviousfiscalyear.Anyundistributedinvestmentincomeaswellasallgainsandlossesandunrestrictedcontributionsareaddedtounrestrictednetassets.TheendowmentsareinvestedconsistentwithaninvestmentpolicystatementthatismonitoredbytheFoundation’sDirectors.Tosatisfythelong‐termrate‐of‐returnobjectives,theFoundationreliesonatotalreturnstrategyinwhichinvestmentreturnsareachievedthroughbothcapitalappreciation(realizedandunrealized)andcurrentyield(interestanddividends).FundsintheendowmentareprimarilyinvestedinU.S.GovernmentSecuritiesandmanagedequityfundswithseveralinvestmentmanagersusinganinvestmentphilosophythatmaintainsequitiesintherangeof77%to87%ofthetotalfund,realestateintherangeof0%to9%,commoditiesintherangeof3%to13%,fixedincomesecuritiesintherangeof12%to22%,andcashintherangeof0%to6%.

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONNotestoConsolidatedFinancialStatementsJune30,2016AND2015

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NOTE14 ENDOWMENTS(CONTINUED)Endowmentnetassetsconsistedofdonorpermanentlyrestrictedendowmentfundsof$25,232,749and$24,537,466asofJune30,2016and2015,respectively.Theinvestmentincomederivedfromtheendowmentfundsisprimarilyrestrictedtoprovidingscholarshipsforstudents.ThechangesinendowmentnetassetsfortheyearsendedJune30,2016and2015wereasfollows:

EndowmentNetAssetsatJuly1,2014 24,137,252$

Investmentincome 25,032Contributions 354,358Transfers 20,824

EndowmentNetAssetsatJune30,2015 24,537,466$

Investmentincome 25,748Contributions 693,774Transfers (24,239)

EndowmentNetAssetsatJune30,2016 25,232,749$

Fromtimetotime,thefairvalueofassetsassociatedwithindividualdonor‐restrictedendowmentfundsmayfallbelowthelevelthatthedonororSPMIFArequirestheFoundationtoretainasafundofperpetualduration.TheFoundation’saccountingrecordsdonotcontaintheinformationnecessarytodeterminetheportionoftheunrestrictednetassetdeficitthatisattributabletoendowmentfundsandthebalanceofdeficienciesofthisnaturewasnotabletobedeterminedasofJune30,2016and2015.

NOTE15 UNRESTRICTEDNETASSETDEFICITTheFoundationrecordsallrealizedandunrealizedgainsandlossestounrestrictednetassetsastheyareincurred.TheunrestrictednetassetdeficitoftheFoundationistheresultofcumulativeunrealizedandrealizedlossesnotbeingallocatedasareductiontotemporarilyrestrictednetassetsaswellscholarshipdisbursementsfromfundsinexcessoftheactualunrealizedandrealizedinvestmentearningsofprioryears.Inordertoreducethedeficitandgeneratepositiveunrestrictednetassets,theFoundationwillneedtogenerategainsontheirinvestmentsforconsecutiveyears,reducethelevelofannualfunddisbursements,orgeneraterevenuesfromanotheroutsidesource.Thebalanceoftheunrestrictednetassetdeficitwas$(6,772,981)and$(4,567,872)fortheyearsendedJune30,2016and2015,respectively.

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONNotestoConsolidatedFinancialStatementsJune30,2016AND2015

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NOTE16 SUBSEQUENTEVENTSTheFoundationhasevaluatedeventsandtransactionssubsequenttoJune30,2016throughAugust29,2016,thedatethesefinancialstatementswereavailabletobeissued.Basedonthedefinitionsandrequirementsofgenerallyacceptedaccountingprinciples,managementhasnotidentifiedanyeventsthathaveoccurredsubsequenttoJune30,2016andthroughAugust29,2016,thatrequirerecognitionordisclosureinthefinancialstatements.

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONConsolidatingStatementofFinancialPositionJune30,2016

23

ShepherdUniversity ShepherdUniversityShepherdUniversity FoundationSupporting FoundationandFoundationInc. Organization Eliminations SupportingOrganization

ASSETSCurrentAssetsCashandcashequivalents 2,239,681$ 20,858,523$ ‐$ 23,098,204$Pledgesreceivable,netofpresentvalueadjustment 3,198,673 ‐ ‐ 3,198,673Otherreceivables 187 ‐ ‐ 187Accruedinterestreceivable 32,829 ‐ ‐ 32,829Prepaidexpenses 1,582 ‐ ‐ 1,582Investments 21,523,684 ‐ ‐ 21,523,684Interestinlifeestate 335,035 ‐ ‐ 335,035Loanoriginationcosts,net ‐ 567,578 ‐ 567,578Constructioninprogress ‐ 2,001,552 ‐ 2,001,552Equipment,net 6,132 ‐ ‐ 6,132

TOTALASSETS 27,337,803$ 23,427,653$ ‐$ 50,765,456$

LIABILITIESANDNETASSETSLiabilitiesAccountspayable 31,897$ 1,017,608$ ‐$ 1,049,505$Retainagespayable ‐ 54,895 ‐ 54,895Accruedpayroll 11,866 ‐ ‐ 11,866Accruedinterest ‐ 15,619 ‐ 15,619Custodialliabilities 1,574,435 ‐ ‐ 1,574,435Giftannuitiespayable 134,983 ‐ ‐ 134,983Loanspayable ‐ 22,385,000 ‐ 22,385,000

TotalLiabilities 1,753,181 23,473,122 ‐ 25,226,303

NetAssetsUnrestricted (6,727,512) (45,469) ‐ (6,772,981)Temporarilyrestricted 7,079,385 ‐ ‐ 7,079,385Permanentlyrestricted 25,232,749 ‐ ‐ 25,232,749

TotalNetAssets 25,584,622 (45,469) ‐ 25,539,153

TOTALLIABILITIESANDNETASSETS 27,337,803$ 23,427,653$ ‐$ 50,765,456$

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONConsolidatingStatementofActivityYearEndedJune30,2016


CHANGESINUNRESTRICTEDNETASSETSSUPPORTANDREVENUEOtherrevenue 23,311$ ‐$ ‐$ 23,311$Netrealizedandunrealized(losses)oninvestments (1,472,419) ‐ ‐ (1,472,419)

Transfers (52,414) ‐ ‐ (52,414)Netassetsreleasedfromrestrictions 1,585,938 ‐ ‐ 1,585,938

TotalRevenueandOtherSupport 84,416 ‐ ‐ 84,416

EXPENSESProgramServicesScholarshipsandawards 1,509,129 ‐ ‐ 1,509,129Collegesupport 76,809 ‐ ‐ 76,809

GeneralandAdministrativeSalaries 333,748 ‐ ‐ 333,748Investmentmanagementfees 127,948 ‐ ‐ 127,948Printingandreproductioncosts 30,593 ‐ ‐ 30,593Payrolltaxesandbenefits 51,440 ‐ ‐ 51,440Depreciation 6,509 ‐ ‐ 6,509Amortization ‐ 21,485 ‐ 21,485Administrativeexpense 2,090 72 ‐ 2,162Rent 12,600 ‐ ‐ 12,600Officesuppliesandpostage 9,798 ‐ ‐ 9,798Insurance 5,824 675 ‐ 6,499Changesingiftannuities 9,935 ‐ ‐ 9,935Professionalfees 28,416 23,237 ‐ 51,653Stafftraining 263 ‐ ‐ 263Programdevelopment 30,199 ‐ ‐ 30,199Telephone 2,621 ‐ ‐ 2,621Technology 2,407 ‐ ‐ 2,407Baddebtexpense 3,000 ‐ ‐ 3,000Miscellaneous 727 ‐ ‐ 727

TotalExpenses 2,244,056 45,469 ‐ 2,289,525

ChangeInUnrestrictedNetAssets (2,159,640)$ (45,469)$ ‐$ (2,205,109)$

24


CHANGESINTEMPORARILYRESTRICTEDNETASSETSSUPPORTANDREVENUECashcontributions 1,092,075$ ‐$ ‐$ 1,092,075$Stockcontributions 12,177 ‐ ‐ 12,177Othernon‐cashcontributions 6,125 ‐ ‐ 6,125Otherrevenue 10,613 ‐ ‐ 10,613Interestanddividends 588,215 ‐ ‐ 588,215Netrealizedandunrealizedgainsoninvestments 142,083 ‐ ‐ 142,083

Transfers 76,653 ‐ ‐ 76,653Netassetsreleasedfromrestrictions (1,585,938) ‐ ‐ (1,585,938)

ChangeinTemporarilyRestrictedNetAssets 342,003 ‐ ‐ 342,003

CHANGESINPERMANENTLYRESTRICTEDNETASSETSSUPPORTANDREVENUECashcontributions 670,709 ‐ ‐ 670,709Stockcontributions 6,611 ‐ ‐ 6,611Othernon‐cashcontributions 16,454 ‐ ‐ 16,454Interestanddividends 25,748 ‐ ‐ 25,748Transfers (24,239) ‐ ‐ (24,239)

ChangeInPermanentlyRestrictedNetAssets 695,283 ‐ ‐ 695,283

Increase(Decrease)InNetAssets (1,122,354) (45,469) ‐ (1,167,823)

NETASSETS,BEGINNINGOFYEAR 26,706,976 ‐ ‐ 26,706,976

NETASSETS,ENDOFYEAR 25,584,622$ (45,469)$ ‐$ 25,539,153$

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONConsolidatingStatementofCashFlowsYearEndedJune30,2016

25


CASHFLOWSFROMOPERATINGACTIVITIES(Decrease)innetassets (1,122,354)$ (45,469)$ ‐$ (1,167,823)$Adjustmentstoreconcile(decrease)innetassetstonetcash(usedin)operatingactivities:Netrealizedandunrealizedlossesoninvestments 1,330,336 ‐ ‐ 1,330,336Depreciation 6,509 ‐ ‐ 6,509Amortization ‐ 21,485 ‐ 21,485Non‐cashstockcontributionsreceived (18,788) ‐ ‐ (18,788)Write‐offofuncollectiblepledgesreceivable 3,000 ‐ ‐ 3,000Decreaseinpledgesreceivables,netofdiscount 116,773 ‐ ‐ 116,773Decreaseinotherreceivables 5,949 ‐ ‐ 5,949Decreaseinaccruedinterestreceivable 531 ‐ ‐ 531(Increase)ininterestinlifeestate (16,453) ‐ ‐ (16,453)Increaseinaccountspayable 24,575 ‐ ‐ 24,575Increaseinaccruedpayroll 3,218 ‐ ‐ 3,218Increaseinaccruedinterestpayable ‐ 15,619 ‐ 15,619(Decrease)incustodialliabilities (437,656) ‐ ‐ (437,656)

NetCash(UsedIn)OperatingActivities (104,360) (8,365) ‐ (112,725)

CASHFLOWSFROMINVESTINGACTIVITIESProceedsfromsaleofinvestments 8,363,878 ‐ ‐ 8,363,878Purchasesofinvestments (7,996,776) ‐ ‐ (7,996,776)Giftannuitypayments (11,922) ‐ ‐ (11,922)Purchasesofequipment (3,127) ‐ ‐ (3,127)Paymentsforconstructioninprogress (929,049) ‐ (929,049)

NetCashProvidedBy(UsedIn)InvestingActivities 352,053 (929,049) ‐ (576,996)

CASHFLOWSFROMFINANCINGACTIVITIESPaymentofloanoriginationcosts ‐ (589,063) ‐ (589,063)Proceedsfromloanborrowings ‐ 22,385,000 ‐ 22,385,000

NetCashProvidedByFinancingActivities ‐ 21,795,937 ‐ 21,795,937

NetIncreaseInCashandCashEquivalents 247,693 20,858,523 ‐ 21,106,216

CASHANDCASHEQUIVALENTS,BEGINNINGOFYEAR 1,991,988 ‐ ‐ 1,991,988

CASHANDCASHEQUIVALENTS,ENDOFYEAR 2,239,681$ 20,858,523$ ‐$ 23,098,204$

SUPPLEMENTALDISCLOSUREOFNON‐CASHINVESTINGTRANSACTIONSAtJune30,2016,ShepherdUniversityFoundationSupportingOrganizationhadaccountspayableandretainagespayableof$1,017,608and$54,895,respectively,thatrelatedtoconstructioninprogress.

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INDEPENDENTAUDITOR'SREPORTONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOFFINANCIALSTATEMENTSPERFORMEDIN

ACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS

BoardofDirectorsShepherdUniversityFoundation,Inc.andSupportingOrganizationShepherdstown,WestVirginia

Wehaveaudited,inaccordancewiththeauditingstandardsgenerallyacceptedintheUnitedStatesofAmericaandthestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandardsissuedbytheComptrollerGeneraloftheUnitedStates,theconsolidatedfinancialstatementsofShepherdUniversityFoundation,Inc.andSupportingOrganization(anonprofitorganization),whichcomprisetheconsolidatedstatementsoffinancialpositionasofJune30,2016and2015,andtherelatedconsolidatedstatementsofactivitiesandcashflowsfortheyearsthenended,andtherelatednotestotheconsolidatedfinancialstatements,andhaveissuedourreportthereondatedAugust29,2016.

InternalControlOverFinancialReporting

Inplanningandperformingourauditsoftheconsolidatedfinancialstatements,weconsideredShepherdUniversityFoundation,Inc.andSupportingOrganization’sinternalcontroloverfinancialreporting(internalcontrol)todeterminetheauditproceduresthatareappropriateinthecircumstancesforthepurposeofexpressingouropinionontheconsolidatedfinancialstatements,butnotforthepurposeofexpressinganopinionontheeffectivenessofShepherdUniversityFoundation,Inc.andSupportingOrganization’sinternalcontrol.Accordingly,wedonotexpressanopinionontheeffectivenessofShepherdUniversityFoundation,Inc.andSupportingOrganization’sinternalcontrol.

Adeficiencyininternalcontrolexistswhenthedesignoroperationofacontroldoesnotallow

managementoremployees,inthenormalcourseofperformingtheirassignedfunctions,toprevent,ordetectandcorrect,misstatementsonatimelybasis.Amaterialweaknessisadeficiency,oracombinationofdeficiencies,ininternalcontrol,suchthatthereisareasonablepossibilitythatamaterialmisstatementoftheentity’sfinancialstatementswillnotbeprevented,ordetectedandcorrectedonatimelybasis.Asignificantdeficiencyisadeficiency,oracombinationofdeficiencies,ininternalcontrolthatislessseverethanamaterialweakness,yetimportantenoughtomeritattentionbythosechargedwithgovernance.

Ourconsiderationofinternalcontrolwasforthelimitedpurposedescribedinthefirst

paragraphofthissectionandwasnotdesignedtoidentifyalldeficienciesininternalcontrolthatmightbematerialweaknessesorsignificantdeficiencies.Giventheselimitations,duringourauditswedidnotidentifyanydeficienciesininternalcontrolthatweconsidertobematerialweaknesses.However,materialweaknessesmayexistthathavenotbeenidentified.

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ComplianceandOtherMatters

AspartofobtainingreasonableassuranceaboutwhetherShepherdUniversityFoundation,Inc.andSupportingOrganization’sconsolidatedfinancialstatementsarefreefrommaterialmisstatement,weperformedtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrantagreements,noncompliancewithwhichcouldhaveadirectandmaterialeffectonthedeterminationofconsolidatedfinancialstatementamounts.However,providinganopiniononcompliancewiththoseprovisionswasnotanobjectiveofouraudits,andaccordingly,wedonotexpresssuchanopinion.TheresultsofourtestsdisclosednoinstancesofnoncomplianceorothermattersthatarerequiredtobereportedunderGovernmentAuditingStandards.

PurposeofthisReport

Thepurposeofthisreportissolelytodescribethescopeofourtestingofinternalcontrolandcomplianceandtheresultsofthattesting,andnottoprovideanopinionontheeffectivenessoftheFoundation’sinternalcontroloroncompliance.ThisreportisanintegralpartofanauditperformedinaccordancewithGovernmentAuditingStandardsinconsideringtheorganization’sinternalcontrolandcompliance.Accordingly,thiscommunicationisnotsuitableforanyotherpurpose.


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INDEPENDENTAUDITOR'SREPORTONCOMPLIANCEFOREACHMAJORPROGRAMANDONINTERNALCONTROLOVERCOMPLIANCEREQUIREDBY

THEUNIFORMGUIDANCE

BoardofDirectorsShepherdUniversityFoundation,Inc.andSupportingOrganizationShepherdstown,WestVirginiaREPORTONCOMPLIANCEFOREACHMAJORFEDERALPROGRAM

WehaveauditedShepherdUniversityFoundation,Inc.andSupportingOrganization’scompliancewiththetypesofcompliancerequirementsdescribedintheOMBComplianceSupplementthatcouldhaveadirectandmaterialeffectoneachofShepherdUniversityFoundation,Inc.andSupportingOrganization’smajorfederalprogramsfortheyearendedJune30,2016.ShepherdUniversityFoundation,Inc.andSupportingOrganization’smajorfederalprogramsareidentifiedinthesummaryofauditor’sresultssectionoftheaccompanyingscheduleoffindingsandquestionedcosts.

Management’sResponsibility

Managementisresponsibleforcompliancewithfederalstatutes,regulations,andthetermsandconditionsofitsfederalawardsapplicabletoitsfederalprograms.Auditor’sResponsibility

OurresponsibilityistoexpressanopiniononcomplianceforeachofShepherdUniversityFoundation,Inc.andSupportingOrganization’smajorfederalprogramsbasedonourauditofthetypesofcompliancerequirementsreferredtoabove.WeconductedourauditofcomplianceinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica;thestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards,issuedbytheComptrollerGeneraloftheUnitedStates;andtheauditrequirementsofTitle2U.S.CodeofFederalRegulationsPart200,UniformAdministrativeRequirements,CostPrinciples,andAuditRequirementsforFederalAwards(UniformGuidance).ThosestandardsandtheUniformGuidancerequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethernoncompliancewiththetypesofcompliancerequirementsreferredtoabovethatcouldhaveadirectandmaterialeffectonamajorfederalprogramoccurred.Anauditincludesexamining,onatestbasis,evidenceaboutShepherdUniversityFoundation,Inc.andSupportingOrganization’scompliancewiththoserequirementsandperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.

Webelievethatourauditprovidesareasonablebasisforouropiniononcomplianceforeachmajorfederalprogram.However,ourauditdoesnotprovidealegaldeterminationofShepherdUniversityFoundation,Inc.andSupportingOrganization’scompliance.

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OpiniononEachMajorFederalProgram

Inouropinion,ShepherdUniversityFoundation,Inc.andSupportingOrganizationcomplied,inallmaterialrespects,withthetypesofcompliancerequirementsreferredtoabovethatcouldhaveadirectandmaterialeffectoneachofitsmajorfederalprogramsfortheyearendedJune30,2016.OtherMatters

Theresultsofourauditingproceduresdisclosedinstancesofnoncompliance,whicharerequiredtobereportedinaccordancewiththeUniformGuidanceandwhicharedescribedintheaccompanyingscheduleoffindingsandquestionedcostsasitemFinding2016‐001andFinding2016‐002.Ouropiniononeachmajorfederalprogramisnotmodifiedwithrespecttothesematters.

ShepherdUniversityFoundation,Inc.andSupportingOrganization’sresponsestothe

noncompliancefindingsidentifiedinourauditisdescribedintheaccompanyingscheduleoffindingsandquestionedcosts.ShepherdUniversityFoundation,Inc.andSupportingOrganization’sresponseswerenotsubjectedtotheauditingproceduresappliedintheauditofcomplianceand,accordingly,weexpressnoopinionontheresponses.

REPORTONINTERNALCONTROLOVERCOMPLIANCE

ManagementofShepherdUniversityFoundation,Inc.andSupportingOrganizationisresponsibleforestablishingandmaintainingeffectiveinternalcontrolovercompliancewiththetypesofcompliancerequirementsreferredtoabove.Inplanningandperformingourauditofcompliance,weconsideredShepherdUniversityFoundation,Inc.andSupportingOrganization’sinternalcontrolovercompliancewiththetypesofrequirementsthatcouldhaveadirectandmaterialeffectoneachmajorfederalprogramtodeterminetheauditingproceduresthatareappropriateinthecircumstancesforthepurposeofexpressinganopiniononcomplianceforeachmajorfederalprogramandtotestandreportoninternalcontrolovercomplianceinaccordancewiththeUniformGuidance,butnotforthepurposeofexpressinganopinionontheeffectivenessofinternalcontrolovercompliance.Accordingly,wedonotexpressanopinionontheeffectivenessofShepherdUniversityFoundation,Inc.andSupportingOrganization’sinternalcontrolovercompliance.

Ourconsiderationofinternalcontrolovercompliancewasforthelimitedpurposedescribedin

theprecedingparagraphandwasnotdesignedtoidentifyalldeficienciesininternalcontrolovercompliancethatmightbematerialweaknessesorsignificantdeficienciesandtherefore,materialweaknessesorsignificantdeficienciesmayexistthatwerenotidentified.However,asdiscussedbelow,weidentifiedcertaindeficienciesininternalcontrolovercompliancethatweconsidertobematerialweaknesses.

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Adeficiencyininternalcontrolovercomplianceexistswhenthedesignoroperationofacontrolovercompliancedoesnotallowmanagementoremployees,inthenormalcourseofperformingtheirassignedfunctions,toprevent,ordetectandcorrect,noncompliancewithatypeofcompliancerequirementofafederalprogramonatimelybasis.Amaterialweaknessininternalcontrolovercomplianceisadeficiency,orcombinationofdeficiencies,ininternalcontrolovercompliance,suchthatthereisareasonablepossibilitythatmaterialnoncompliancewithatypeofcompliancerequirementofafederalprogramwillnotbeprevented,ordetectedandcorrected,onatimelybasis.Asignificantdeficiencyininternalcontrolovercomplianceisadeficiency,oracombinationofdeficiencies,ininternalcontrolovercompliancewithatypeofcompliancerequirementofafederalprogramthatislessseverethanamaterialweaknessininternalcontrolovercompliance,yetimportantenoughtomeritattentionbythosechargedwithgovernance.WeconsiderthedeficienciesininternalcontrolovercompliancedescribedintheaccompanyingscheduleoffindingsandquestionedcostsasitemsFinding2016‐001andFinding2016‐002tobematerialweaknesses.

ShepherdUniversityFoundation,Inc.andSupportingOrganization’sresponsestotheinternal

controlovercompliancefindingsidentifiedinourauditisdescribedintheaccompanyingscheduleoffindingsandquestionedcosts.ShepherdUniversityFoundation,Inc.andSupportingOrganization’sresponseswerenotsubjectedtotheauditingproceduresappliedintheauditofcomplianceand,accordingly,weexpressnoopinionontheresponses.

ThepurposeofthisreportoninternalcontrolovercomplianceissolelytodescribethescopeofourtestingofinternalcontrolovercomplianceandtheresultsofthattestingbasedontherequirementsoftheUniformGuidance.Accordingly,thisreportisnotsuitableforanyotherpurpose.


SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONNotestoConsolidatedScheduleofExpendituresofFederalAwardsJune30,2016

Theaccompanyingnotesareanintegralpartofthisschedule. 31

FederalCFDA Grant PassedThrough Federal

FederalGrantor/ProgramTitle Number Number toSubrecipients ExpendituresDEPARTMENTOFAGRICULTUREDirectProgram:CommunityFacilitiesLoansandGrants 10.766 57‐019‐811054787 ‐ 2,590,615$

TotalDepartmentofAgriculture ‐ 2,590,615

TOTALEXPENDITURESOFFEDERALAWARDS ‐$ 2,590,615$


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NOTE1 BASISOFPRESENTATION

Theconsolidatedscheduleofexpendituresoffederalawards(theSchedule)reflectsthefederalgrantactivityofShepherdUniversityFoundationInc.andSupportingOrganizationunderprogramsofthefederalgovernmentfortheyearendedJune30,2016.ShepherdUniversityFoundation,Inc.hasnotreceivedanyfundingunderfederalawardprogramsandtheexpendituresincludedontheSchedulereflectonlythoseofShepherdUniversityFoundationSupportingOrganization.TheinformationintheScheduleispresentedinaccordancewiththerequirementsofTitle2U.S.CodeofFederalRegulationsPart200,UniformAdministrativeRequirements,CostPrinciples,andAuditRequirementsforFederalAwards(UniformGuidance).BecausetheSchedulepresentsonlyaselectedportionoftheoperationsoftheFoundation,itisnotintendedtoanddoesnotpresentthefinancialposition,changesinnetassets,orcashflowsoftheFoundation.

NOTE2 FISCALPERIODAUDITED

SingleaudittestingprocedureswereperformedforprogramtransactionsoccurringduringthefiscalyearendedJune30,2016.

NOTE3 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES

TheaccompanyingScheduleincludesallfederalgrantsandloanprogramsoftheFoundationwhichhadexpendituresorcontinuingloancompliancerequirementsduringfiscalyear2016ontheaccrualbasisofaccounting.ThisSchedulehasbeenpreparedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica,TheFoundationchargesonlydirectcoststofederalawardprogramsandhasnotnegotiatedanindirectcostratewithgrantorsorelectedtousethe10%deminimusindirectcostrateasallowedundertheUniformGuidance.

NOTE4 FEDERALLYFINANCEDLOANSTheFoundationhasreceivedaloancommitmentfromtheUnitedStatesDepartmentofAgriculture(USDA)undertheCommunityFacilitiesLoansandGrantsprogram(CFDA#10.766)toconstructastudenthousingfacilityontheShepherdUniversitycampus.InterimfinancingoftheprojectduringdevelopmentandconstructionisbeingprovidedbybondanticipationnotesissuedbytheWestVirginiaEconomicDevelopmentAuthority.Uponcompletionofconstruction,fundingfromtheUSDACommunityFacilitiesLoanwillbeusedtorepaytheWestVirginiabondanticipationnotesandpermanentlyfinancetheproject.InaccordancewithfederalrequirementsapplicabletotheUSDACommunityFacilitiesLoanandGrantsprogram,expendituresfundedwithinterimfinancingthatwillberepaidwiththefederalloanareconsideredfederalawardswhenexpendedandareincludedonthescheduleofexpendituresoffederalawards.


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NOTE4 FEDERALLYFINANCEDLOANS(CONTINUED)

Asummaryofthebeginningloanprogrambalance,currentyearexpendituresandendingloanprogrambalancesrelatedtotheUSDACommunityFacilitiesLoansandGrantsprogramcommitmentisasfollows:

LoanbalanceatJune30,2015 ‐$

Borrowings 2,590,615

LoanbalanceatJune30,2016 2,590,615$

SHEPHERDUNIVERSITYFOUNDATION,INC.ANDSUPPORTINGORGANIZATIONScheduleofFindingsandQuestionedCostsJune30,2016

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SECTIONI SUMMARYOFAUDITOR’SRESULTS

FinancialStatementsTypeofauditor'sreportissued:

Internalcontroloverfinancialreporting:Materialweakness(es)identified? yes X no

Significantdeficiency(ies)identifiedthatarenot noneconsideredtobematerialweakness(es)? yes X reported

Noncompliancematerialtofinancialstatementsnoted? yes X no

FederalAwardsInternalcontrolovermajorprograms:Materialweakness(es)identified? X yes no

Significantdeficiency(ies)identifiedthatarenot noneconsidedtobematerialweakness(es)? yes X reported

Typeofauditor'sreportissuedoncomplianceformajorprograms:

Anyauditfindingsdisclosedthatarerequiredtobereportedinaccordancewith2CFRsection200.516(a)? X yes no

Identificationofmajorprograms:

CFDANumber(s)

10.766

DollarthresholdusedtodistinguishbetweentypeAandtypeBprograms: 750,000$

Auditeequalifiedaslow‐riskauditee? yes X no

Unmodified

Unmodified

NameofFederalProgramorCluster

CommunityFacilitiesLoansandGrants

SECTIONII FINANCIALSTATEMENTFINDINGS

Therewerenofinancialstatementfindings.


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SECTIONIII FEDERALAWARDFINDINGSANDQUESTIONEDCOSTSFinding2016‐001 CommunityFacilitiesLoansandGrants–CFDA#10.766 Grant#57‐019‐811054787;GrantPeriod–FederalFiscalYear2016

Criteria: Asanon‐staterecipientoffederalfundingundertherequirementsoftheUniform

Guidance,writtenprocurementpoliciesmustbemaintainedthataddresstheprocurementcompliancerequirementsoffederalgrantsandloans.2CFRsection200.320requirestheprocurementpoliciesoffederalawardrecipientstousespecificprocurementmethodsbaseduponthedollaramountoftheprocurement.Micro‐purchases(thosecostinglessthan$3,000)maybeawardedwithoutsolicitingcompetitivequotationsifthepriceisreasonable.Smallpurchases(thosecostingbetween$3,000and$150,000)requirepriceorratequotationstobereceivedfromanadequatenumberofqualifiedsources.Ifthecostofaprocurementtransactionexceeds$150,000,thenrecipientsarerequiredtousecompetitivebiddingproceduresorprocedurescoveringsole‐sourceproviders,asoutlinedbytheregulation.

Condition:TheFoundationenteredintoamanagementagreementwithShepherdUniversity,a

componentunitoftheStateofWestVirginiathatassignedcertainaspectsoftheloanawardcompliancerequirementstotheUniversity.Oneoftheresponsibilitiesassignedbythisagreementwastheresponsibilityovertheprocurementoftheservicesandgoodsrelatedtotheloanproject.Baseduponaudittestingperformed,itwasnotedthattheprocurementpoliciesmanualusedbyShepherdUniversitydidnotcontaintheprovisionsasrequiredby2CFRSection200.320.Inaccordancewith2CFR200.317,ShepherdUniversity,asacomponentunitofastate,mustfollowthesamepoliciesandprocedurestheyuseforprocurementsmadewithnon‐federalfundsandtherequirementsof2CFRSection200.320donotapplytotheUniversity’sprocurements.However,theexemptionoftherequirementtotheprocurementsmadefortheUniversitydoesnotapplytotheUniversity’sprocurementsmadeonbehalfoftheFoundation,whichisanon‐stateentitysubjecttotherequirementsof2CFRSection200.320.

Cause: Asastateagencyexemptfrom2CFRSection200.320,theShepherdUniversity

procurementdepartmentwasnotawareoftherequirementsapplicabletonon‐stateentitiesunderthefederalrequirement.ProgrammanagementwasnotawareoftherequirementsanddidnotinformprocurementpersonnelattheUniversityoftheadditionalrequirementsapplicabletoprocurementsmadeonbehalfoftheFoundation.

Effect: Failuretocomplywiththeprocurementrequirementsapplicabletofederalawards

couldresultindeniedprojectfinancingundertheUSDAloanordenialoffutureapplicationsforfederalfunding.

QuestionedCosts:Therewerenoquestionedcosts.


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Context: TheUniversity’sprocurementpolicyrequirescompetitivebiddingforcontractsexceeding$25,000,whichisbelowthe$150,000thresholdrequiringcompetitivebiddingasrequiredby2CFRSection200.320.Theareawherenon‐compliancemayoccuriscontractsbetween$3,000and$25,000,whichrequiresquotationstobeobtainedbyfederalregulations.UndertheprocurementpolicyusedbyShepherdUniversity,“procurementscostinglessthan$25,000donotrequirequotationsaslongaspricesarereasonable.”

RepeatFinding:Asingleauditwasnotperformedintheprioryear;thereforetherewerenoprior

yearfindings.Recommendation:WerecommendthattheFoundationworkwiththeUniversitytodevelopa

policycoveringallprocurementsmadebytheUniversityonbehalfoftheFoundationthatensurestherequirementsunder2CFRSection200.320aremet.ThispolicyshouldbedocumentedinwritingandfollowedbytheUniversitywhenprocuringservicesonbehalfoftheFoundation.

ViewsofResponsibleOfficialsandPlannedCorrectiveAction:TheFoundationwillworkwith

theUniversitytodevelopapolicycoveringallprocurementsmadebytheUniversityonbehalfoftheFoundationandit'sSupportingOrganizationthatensurestherequirementsunder2CFRSection200.320aremet.ThepolicywillbedocumentedinwritingandfollowedbytheUniversitywhenprocuringservicesonbehalfoftheFoundationanditsSupportingOrganization.ManagementhasconfirmedameetingwiththeSUVicePresidentofAdministrationtobeginthisprocess.

Finding2016‐002 CommunityFacilitiesLoansandGrants–CFDA#10.766 Grant#57‐019‐811054787;GrantPeriod–FederalFiscalYear2016

Criteria: Inaccordancewith2CFRSection180,non‐federalentitiesareprohibitedfrom

contractingwithormakingsubawardsundercoveredtransactionstopartiesthataresuspendedordebarredfromreceivingfederallyfundedawards.Whenanon‐federalentitymakesafederallyfundedprocurementwithatotalcostequaltoorinexcessof$25,000orissuesafederallyfundedsubawardofanyamounttoanotherentity,theymustverifytheentityisnotsuspendedordebarredfromparticipatinginthefederaltransactions.ThisverificationmaybeaccomplishedbycheckingtheExcludedPartiesListSystemmaintainedbytheGeneralServicesAdministration,collectingacertificationfromtheentity,oraddingaclauseorconditiontothecontractcoveringthetransaction.

Condition:TheFoundationenteredintoamanagementagreementwithShepherdUniversitythat

assignedcertainaspectsoftheloanawardcompliancerequirementstotheUniversity.Oneoftheresponsibilitiesassignedbythisagreementwastheresponsibilityovertheprocurementoftheservicesandgoodsrelatedtotheloanproject.BasedupontheaudittestingperformedonprocurementsmadebytheUniversityonbehalfoftheFoundation,theUniversity’spoliciesandcurrentprocurementproceduresutilizeddidnotrequireindividualsinchargeofprocurementtoperformaverificationthatthevendorisnotsuspendedordebarredfromparticipatinginafederaltransaction.


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Cause: ProgrammanagementandprocurementpersonnelattheUniversitywasnotawareofthisfederalrequirementanddoesnothaveapolicyinplacerequiringfederalsuspensionanddebarmentverificationtobeperformed.

Effect: AlthoughthevendorsusedbytheFoundationwerenotsuspendedordebarred,asper

testingperformedduringtheaudit,iftheFoundationweretocontractwithasuspendedordebarredpartyinthefuture,itcouldresultindeniedprojectfinancingundertheloanorthedenialoffutureapplicationsforfederalfunding.

QuestionedCosts:Therewerenoquestionedcosts.RepeatFinding:Asingleauditwasnotperformedintheprioryear;thereforetherewerenoprior

yearfindings.Context: PerdiscussionwiththeExecutiveDirectorofProcurementforShepherdUniversity,

verificationthatvendorsarenotsuspendedordebarredintheStateofWestVirginiaisperformed,buttheExcludedPartiesListSystemisnotreviewedandcontractsdonotincludeanyclausesorcertificationstoensureentitiesarenotdebarredfromreceivingfederalcontracts.

Recommendation:WerecommendthattheFoundationworkwiththeUniversitytoestablisha

policyrequiringprocurementpersonneltochecktheExcludedPartiesListSystematwww.sam.gov/portal/public/SAMtoensureprospectivevendorsarenotsuspendedordebarred.Aprintoutoftheverificationscreenshouldbemaintainedinthecontractfile.Anotheracceptableprocedurewouldbetocollectasignedcertificationstatementfromthecontractedentitiesstatingthattheyarenotsuspendedordebarredfromworkingonfederallyfundedtransactionsandmaintainthiscertificationwiththeprocurementdocumentation.

ViewsofResponsibleOfficialsandPlannedCorrectiveAction:TheFoundationwillworkwith

theUniversitytoestablishapolicytorequireprocurementpersonneltochecktheExcludedPartiesListSystemtoensureprospectivevendorsarenotsuspendedordebarred.Aprintoutoftheverificationscreenwillbemaintainedinthecontractfile.ManagementhasconfirmedameetingwiththeSUVicePresidentofAdministrationtobeginthisprocess.

SECTIONIV SCHEDULEOFPRIORYEARFINDINGS

Asingleauditwasnotrequiredintheprioryear.Asaresult,therewerenoprioryearfindings.

Documents

Shepherd University Foundation, Inc. and Supporting Organization€¦ · Stephen G. Skinner 2019 Robert H. Chuey, II ’91 2019 Directors at Large Directors Emeriti Christopher S