Barry University and Subsidiary rpts/2018 barry... · Barry University and Subsidiary Consolidated...

The report accompanying these financial statements was issued by

BDO USA, LLP, a New York limited liability partnership and the U.S. member

of BDO International Limited, a UK company limited by guarantee.

The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.

Barry University and Subsidiary

Consolidated Financial Statements June 30, 2018 and 2017


Contents

Independent Auditor’s Report 2 - 3

Consolidated Financial Statements

Consolidated Statements of Financial Position 4

Consolidated Statements of Activities 5 - 6

Consolidated Statements of Cash Flows 7 - 8

Notes to Consolidated Financial Statements 9 - 34

Supplemental Information

Title IV Strength Factor Score 36

Tel: 305-381-8000 Fax: 305-374-1135 www.bdo.com

100 SE 2ND Street Miami Tower - 17th Floor Miami, FL 33131

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

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Independent Auditor’s Report The Board of Trustees Barry University and Subsidiary Miami, Florida Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Barry University and Subsidiary (the “University”), which comprise the consolidated statements of financial position as of June 30, 2018 and 2017, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 auditor’s 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 University’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 University’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.

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Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Barry University and Subsidiary as of June 30, 2018 and 2017, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matter

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The Title IV Strength Factor Score is presented for purposes of additional analysis required by 34 CFR 668.172 and is not a required part of the consolidated financial statements. The Title IV Strength Factor Score 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. Such information has been subjected to the auditing procedures applied in the audits 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 Title IV Strength Factor Score 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 November 15, 2018 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.

Miami, Florida November 15, 2018 Certified Public Accountants


Consolidated Statements of Financial Position

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June 30, 2018 2017

Assets

Cash and cash equivalents $ 26,148,016 $ 18,535,890

Student accounts receivable, net 4,896,300 4,572,236

Contributions receivable net 448,176 546,734

Other receivables, net 2,516,310 2,177,971

Prepaid expenses and other assets 10,593,356 9,235,085

Loans and notes receivable, net 7,185,240 6,939,512

Investments 37,916,770 34,365,804

Investments held for debt service reserve 6,590,811 6,538,641

Beneficial interest in perpetual trust 4,149,843 3,947,951

Property, plant, and equipment, net 118,278,930 126,427,874

Total Assets $ 218,723,752 $ 213,287,698

Liabilities and Net Assets

Accounts payable and accrued expenses $ 14,179,307 $ 10,112,756

Student deposits and deferred revenue 3,908,659 4,198,888

Other liabilities 10,009,837 8,665,429

Loans payable and capital leases 68,114,415 70,939,351

Total Liabilities 96,212,218 93,916,424

Net Assets

Unrestricted:

Unrestricted - Barry University 89,422,671 88,804,030

Noncontrolling interest in partnership 625,502 577,425

Total Unrestricted 90,048,173 89,381,455

Temporarily restricted 10,884,943 9,825,523

Permanently restricted 21,578,418 20,164,296

Total Net Assets 122,511,534 119,371,274

Total Liabilities and Net Assets $ 218,723,752 $ 213,287,698

See accompanying notes to the consolidated financial statements.


Consolidated Statements of Activities

See accompanying notes to the consolidated financial statements. 5

Temporarily Permanently

Year ended June 30, 2018 Unrestricted Restricted Restricted Total

Changes in Net Assets

Revenues, gains, and other support:

Tuition and fees - net of $49,959,421

financial aid and discounts $ 112,284,575 $ - $ - $ 112,284,575

Private gifts and grants 317,045 1,152,780 765,578 2,235,403

Government grants and contracts 2,469,161 - - 2,469,161

Investment income 101,031 484,492 - 585,523

Net realized and unrealized gains

on investments 542,715 1,409,616 371,892 2,324,223

Rental income from investments 687,557 - - 687,557

Earnings of an equity method investee 233,988 - - 233,988

Other income 5,099,433 2,040 - 5,101,473

Podiatric clinic practice 1,277,733 - - 1,277,733

Auxiliary enterprises 12,460,857 - - 12,460,857

Revenues, Gains and Other Support 135,474,095 3,048,928 1,137,470 139,660,493

Net Assets Released from Restrictions/Transfers 1,712,856 (1,989,508) 276,652 -

Total Revenues, Gains and Other Support 137,186,951 1,059,420 1,414,122 139,660,493

Expenses and Losses

Educational and general expenses:

Academic departments and programs 67,943,330 - - 67,943,330

Grants and contracts 2,528,190 - - 2,528,190

Academic support 6,523,060 - - 6,523,060

Student services 13,987,495 - - 13,987,495

Institutional support 30,251,188 - - 30,251,188

Podiatric clinical practice 2,164,505 - - 2,164,505

Total Educational and General Expenses 123,397,768 - - 123,397,768

Auxiliary Expenses 13,122,465 - - 13,122,465

Total Expenses and Losses 136,520,233 - - 136,520,233

Changes in Net Assets 666,718 1,059,420 1,414,122 3,140,260

Net Assets, beginning of year 89,381,455 9,825,523 20,164,296 119,371,274

Net Assets, end of year $ 90,048,173 $ 10,884,943 $ 21,578,418 $ 122,511,534


Consolidated Statements of Activities (continued)

See accompanying notes to the consolidated financial statements. 6



Changes in Net Assets

Revenues, gains, and other support:

Tuition and fees - net of $48,371,672

financial aid and discounts $ 109,870,746 $ - $ - $ 109,870,746

Private gifts and grants 1,607,892 682,784 222,431 2,513,107

Government grants and contracts 2,910,564 - - 2,910,564

Investment income 173,575 532,745 - 706,320

Net realized and unrealized gains

on investments 764,253 1,769,789 392,048 2,926,090

Rental income from investments 660,633 - - 660,633

Earnings of an equity method investee 233,535 - - 233,535

Other income 5,315,165 1,550 - 5,316,715

Podiatric clinic practice 1,511,203 - - 1,511,203

Auxiliary enterprises 12,542,694 - - 12,542,694

Revenues, Gains and Other Support 135,590,260 2,986,868 614,479 139,191,607

Net Assets Released from Restrictions/Transfers 1,704,218 (2,574,828) 870,610 -

Total Revenues, Gains and Other Support 137,294,478 412,040 1,485,089 139,191,607

Expenses and Losses

Educational and general expenses:

Academic departments and programs 73,468,761 - - 73,468,761

Grants and contracts 2,971,952 - - 2,971,952

Academic support 6,289,710 - - 6,289,710

Student services 13,704,242 - - 13,704,242

Institutional support 34,476,680 - - 34,476,680

Podiatric clinical practice 2,149,114 - - 2,149,114

Total Educational and General Expenses 133,060,459 - - 133,060,459

Auxiliary Expenses 12,536,901 12,536,901

Total Expenses and Losses 145,597,360 - - 145,597,360

Changes in Net Assets (8,302,882) 412,040 1,485,089 (6,405,753)

Net Assets, beginning of year 97,684,337 9,413,483 18,679,207 125,777,027

Net Assets, end of year $ 89,381,455 $ 9,825,523 $ 20,164,296 $ 119,371,274


Consolidated Statements of Cash Flows

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Year ended June 30, 2018 2017

Cash Flows From Operating ActivitiesChanges in net assets $ 3,140,260 $ (6,405,753) Adjustments to reconcile changes in net assets to netcash provided by (used in) operating activities:

Depreciation and amortization 8,560,267 8,495,747 Amortization of bond premiums and discounts (79,746) (79,746) Amortization of bond issuance costs 53,022 55,411 Provision for uncollectible student accounts 1,691,873 1,875,592 receivableChange in fair value of interest rate swap 281,453 465,451 Change in cash surrender value of life insurance (63,710) (125,275) policiesGifts restricted for long-term purposes (765,578) (222,431) (Gain) loss on disposal of fixed assets (2,476,449) 91,172 Net realized and unrealized gain on investments (1,952,331) (2,533,747) Net realized gains on beneficial interest (371,892) (392,047)

in trustChanges in operating assets and liabilities:

Increase in student accounts receivable, net (2,015,938) (1,386,786) (Increase) decrease in other receivables (338,339) 590,313 Decrease in contributions receivable 98,558 1,398,188 (Increase) decrease in prepaid expenses and (1,294,561) 1,023,001 other assets Increase (decrease) in accounts payable 4,066,551 (6,296,442) and accrued expenses(Decrease) increase in student deposits and (290,229) 116,714 other deferred revenueIncrease (decrease) in other liabilities 1,062,955 (603,765)

Net cash provided by (used in) operating activities 9,306,166 (3,934,403)

Cash Flows from Investing ActivitiesPurchases of investments (7,825,865) (10,518,376) Proceeds from sales and maturities of investments 6,345,060 9,470,882 Acquisition and construction of capital assets (4,226,426) (8,777,439) Proceeds from sale of capital assets 7,167,457 - Disbursement of loans to students (1,154,529) (2,260,034) Collections on loans from students 908,801 1,757,152

Net cash provided by (used in) investing activities $ 1,214,498 $ (10,327,815)



Consolidated Statements of Cash Flows (continued)

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Year ended June 30, 2018 2017

Cash Flows From Financing ActivitiesCapital lease payments $ (963,131) $ (899,750) Melbourne Wickham Loan Payments (55,985) (52,470) Gifts restricted for long-term purposes 765,578 222,431

Repayments of principal on indebtedness (2,655,000) (2,545,000)

Net cash used in financing activities (2,908,538) (3,274,789)

Net Increase (Decrease) in Cash and Cash Equivalents 7,612,126 (17,537,007)

Cash and Cash Equivalents, beginning of year 18,535,890 36,072,897

Cash and Cash Equivalents, end of year $ 26,148,016 $ 18,535,890

Supplemental Disclosure of Cash Flow Information

Cash paid for interest $ 3,470,411 $ 3,580,123

Noncash TransactionsProperty, plant, and equipment acquired through capital leases $ $ 1,381,845 Write-off of student accounts receivable $ 1,626,964 $ 2,473,056

875,878



Notes to Consolidated Financial Statements

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1. Summary of Significant Accounting Policies

Organization

Founded in 1940, Barry University is a four-year Catholic university sponsored by the Dominican Sisters of Adrian, Michigan, and is governed by an independent, self-perpetuating board of trustees (the “Board of Trustees”). Barry University, whose main campus is located in Miami Shores, Florida, offers approximately 100 undergraduate, graduate, professional, and doctoral programs to approximately 8,300 full and part-time students at multiple sites throughout the state of Florida, the U.S. Virgin Islands and the Bahamas.

The accompanying consolidated financial statements include Barry University and its subsidiary; 6484 Indian Creek Limited Partnership (the “Partnership”), (collectively, the “University”).

The University has a 61.54% interest as the general partner in the Partnership, with the remaining interest held by unrelated minority partners. The Partnership holds land as an investment and earns rental revenues through a ground lease arrangement.

The University holds a 35% equity investment in the South Florida Instructional Television, Inc. (SFITV), which holds licenses for educational broadband service channels. The University acquired this interest in 1985 for no initial investment.

Basis of Presentation

The consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets, revenues, and gains or losses are classified into three categories of net assets based on the existence or absence of donor-imposed restrictions. The three net asset categories reflected in the accompanying consolidated financial statements are as follows:

Unrestricted — Net assets which are free of donor-imposed restrictions; all revenues, gains, and losses that are not changes in permanently or temporarily restricted net assets.

Temporarily Restricted — Net assets whose use by the University is limited by donor-imposed stipulations that either expire by the passage of time or that can be fulfilled or removed by actions of the University pursuant to those stipulations.

Permanently Restricted — Net assets whose use by the University is limited by donor-imposed stipulations that neither expire with the passage of time nor can be fulfilled or otherwise removed by actions.

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Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management relies on historical experience and on other assumptions believed to be reasonable under the circumstances in making its judgments and estimates. Actual results could differ from those estimates.

Consolidation

The accompanying consolidated financial statements present the financial position, changes in net assets, and cash flows of the University and its subsidiary, the Partnership. All significant intercompany balances and transaction are eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of highly liquid instruments with original maturities of three months or less from the date of purchase. The University generally maintains cash on deposit with financial institutions in excess of federally insured amounts.

Investments

Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the accompanying consolidated statements of financial position. As described in Note 2, the University purchased certain properties as investments, consisting of the Sinai Plaza Nursing and Rehabilitation Center (the “Nursing and Rehabilitation Center”), the residence for the University’s president, and an additional investment property that is leased to a third party, all of which are measured at fair value.

The University is not in the business of leasing property or conducting nursing home activities. Based on such, the University has determined to account for these properties as investments and value the properties at fair value, consistent with all of its other investments.

Interest and dividends are included as investment income in the accompanying consolidated statements of activities. Unrealized and realized gains and losses are recognized as changes in net assets in the accompanying consolidated statements of activities. Unless specifically identified, all investment income and unrealized and realized gains and losses are recorded in unrestricted revenues, gains, and other support.




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Student Accounts Receivable

Student accounts receivable consist of amounts due from students for tuition, fees, and room and board for the current term and for prior completed terms adjusted for any scholarships and certain grant funds received. Recoveries of receivables previously written off are recorded in the period received. The allowance for doubtful accounts of student accounts receivable is based on the aging of the outstanding balance and historical collection rates. The University fully reserves all outstanding balances greater than 360 days, which it deems to be uncollectible and provides an additional allowance on balances that are greater than 120 days ranging from 10%-20%.

Loans and Notes Receivable

Loans and notes receivable consist primarily of amounts loaned to students through nursing faculty loan program sponsored by the federal government. The University fully reserves all outstanding balances greater than 360 days, which it deems to be uncollectible.

Property, Plant, and Equipment

The University’s capitalization policy is $5,000 or greater with estimated useful life of more than one year. Property, plant, and equipment are recorded at cost, less accumulated depreciation and amortization. Expenditures that materially increase values, change capacities, or extend useful lives are capitalized, as are interest costs during the period of construction. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets. Donated assets are recorded at fair value at the time of receipt of the contributions. In the absence of donor-imposed restrictions on the use of the asset, gifts of long-lived assets are reported as unrestricted support.

Useful Lives Buildings 40 years Roof and cooling towers 30 years Elevators 25 years Building and land improvements 20 years HVAC/Chillers 20 years Furniture, Fixtures and equipment 7 years Computer equipment 3 years

Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is determined by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If the carrying value of the asset exceeds such cash flows, the asset is considered to be impaired. The impairment charge to be recognized is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value. There were no impairments during fiscal years 2018 and 2017.



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Debt Issuance Costs and discount on bonds

Costs incurred in connection with bond issuances are being amortized using the straight-line method over the life of the debt, which approximates the effective interest method. Amortization of debt issuance costs are included as interest expense in the accompanying consolidated statements of activities. The related amortization totaled $53,022 and $55,411 for the years ended June 30, 2018 and 2017, respectively.

Premium on Bonds

Bond premium are presented as a component of bonds payable in the accompanying consolidated statements of financial position. Premium on bonds are being amortized using the straight-line method over the life of the debt, which approximates the effective interest method. Amortization of the premium on bonds is recorded as a component of interest expense in the accompanying consolidated statements of activities. The related amortization totaled $79,746 for each of the years ended June 30, 2018 and 2017.

Insurance Programs and Policies

The University is a member of the Florida Independent Colleges and Universities Risk Management Association, LLC (FICURMA), which was formed in December 2003. A claims-made insurance program for FICURMA’s members provides coverage for workers’ compensation, general liability, property, and vehicle liability in additional to other exposures, such as hurricanes and wind. FICURMA’s members make annual contributions into the program based on an independent actuarial valuation, which include a $400,000 retention level for workers’ compensation and $400,000 retention level for general liability and vehicle liability and a $400,000 retention level for property. Claims in excess of self-insurance retention limits are covered under excess coverage policies with the program’s carrier up to various aggregate limits. The deductible to members for workers’ compensation and general liability claims is $0. FICURMA was fully funded by its members as of June 30, 2018 and 2017, and management believes that the program has the ability to cover the members’ known and incurred but not reported claims exposures.

In April 2010 and 2009, FICURMA made payments to members for a return of premium based upon the experience of its members related to all claims resolved as of November 2009 and 2008, respectively. These amounts were recorded as a reduction to insurance expense; no payments have been made since April 2010. Pursuant to the return of premium, the University and other member institutions executed debenture notes with FICURMA to allow FICURMA to continue to work independently of its members. The University provided funds in the amount of $100,000 and $910,000 to FICURMA in 2010 and 2009, respectively. The notes are recorded as component of other assets in the accompanying consolidated statements of financial position. The notes bear interest at an annual rate equal to the annual aggregate rate of return on all of FICURMA’s invested capital, which equates to 1.52%. The principal amount of the $100,000 and $910,000 notes mature on April 30, 2020 and 2019, respectively.

Insurance expense related to the program totaled $2,995,586 and $3,012,708 in 2018 and 2017, respectively, and has been recorded in institutional support in the accompanying consolidated statements of activities.

The University is the owner and beneficiary of several life insurance policies with a recorded cash surrender value of $2,147,203 and $2,083,493 as of June 30, 2018 and 2017, respectively. These policies are recorded in prepaid expenses and other assets in the accompanying consolidated statements of financial position.



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Tuition and Fee Revenue

The University recognizes tuition and fee revenue when persuasive evidence of an arrangement with a student exists, services have been delivered to the student, and related billings to the student are determinable and probable of collection. Amounts billed to students in advance are deferred and are recognized as revenue in the term in which the service is provided. The University has reduced its tuition and fee revenue by $49,959,421 and $48,371,672 for the years ended June 30, 2018 and 2017, respectively, to reflect University financial aid and discounts provided to assist students. Revenues and expenses related to summer sessions, which are conducted over the fiscal year end, are reported entirely within the fiscal year in which the session is predominantly conducted.

Contributions

Unconditional promises to give (pledges) are recognized as contribution revenue when the donor’s commitment is received. Pledges with payments due to the University in future periods are recorded as increases in temporarily restricted or permanently restricted net assets at the estimated present value of future cash flows net of an allowance for certain promises that are estimated as uncollectible. The discount rate used to measure the present value of the pledge receivable at the time of the gift is used throughout the life of the pledge. Amortization of the discount due to payments or changes in future payment schedules is recorded as an increase or decrease in contribution revenue and the pledge receivable balance.

Conditional promises are recorded when donor stipulations are substantially met. Conditional promises are considered to be available for general operations of the University, unless specifically restricted by the donor. The University reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires (that is, when a stipulated time restriction ends, or the purpose of the restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying consolidated statements of activities as net assets released from restrictions. Donor-restricted contributions received and collected and/or satisfied during the same year are recorded in the unrestricted net assets class.

Auxiliary Enterprises

Auxiliary enterprise operations consist primarily of student housing, book sales, student center services, and activities under an FAA contract (see Note 10). Fee charges are directly related to the costs of services rendered and are recognized as revenue when the services or goods are delivered.

Clinic Revenue

Clinic revenue consists of revenue generated at the University’s clinic facilities and is recorded upon cash receipt. The University has agreements with third-party payors that provide for payments to the University at amounts different from its established rates. Clinic revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered.



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Beneficial Interest in Perpetual Trust

Beneficial interest in perpetual trust consists of the University’s interest in two perpetual trust funds that are invested in equity securities with readily determinable fair values. The beneficial interests in perpetual trusts are recorded at fair value in permanently restricted assets in the accompanying consolidated statements of financial position.

Contributions received of interests in perpetual trusts are recorded at fair value as of the date of the contribution. Distributions received from the perpetual trust funds to the University are included as unrestricted investment income in the accompanying consolidated statements of activities. Unrealized gains and losses are recognized as changes in net assets in the accompanying consolidated statements of activities and are recorded in permanently restricted other income. Deferred Student Revenue Student deposits consist of payments made by students before year-end for classes conducted after year-end to be recognized as revenues in future periods. Deferred Revenue

Revenues received in advance of the period in which it will be earned is reported as deferred revenue, including funds received in advance for the University’s education programs.

Federal and State Income Taxes

The University is exempt from federal and state income taxes under Section 501(a) of the Internal Revenue Code (the Code) as an organization described in Section 501(c)(3) of the Code. Accordingly, the financial statements do not include an income tax provision, except for certain taxable transactions. The University complies with the provisions of Accounting Standards Codification (ASC) 740 (formerly Financial Accounting Standard Board Interpretation (FASB) No. 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109 (“FIN 48”). Under ASC 740, the University must recognize the tax benefit associated with tax positions taken for tax return purposes when it is more-likely-than-not that the position will be sustained. Management of the University does not believe there are any material uncertain tax positions and accordingly has not recognized any liability for unrecognized tax benefits. The University has filed for and received income tax exemptions in the jurisdictions where it is required to do so. Additionally, the University has filed Internal Revenue Service Form 990 tax returns as required and all other applicable returns in those jurisdictions where it is required. The University believes that it is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015. However, the University is still open to examination by taxing authorities from fiscal year 2015 forward. For the years ended June 30, 2018 and 2017, there was no interest or penalties recorded or included in the consolidated statements of activities.

Earnings from unrelated business activities were not significant for the years ended June 30, 2018 and 2017. Accordingly, no provision for income taxes has been made in the accompanying consolidated financial statements.



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Derivative

The University entered into an interest rate swap agreement to manage the interest rate risk on its Series 2007 Bonds effective October 29, 2007. The fair value of the swap agreement has been recognized in the consolidated statements of financial position of the University amounting to $545,008 and $826,461 as of June 30, 2018 and 2017, respectively, and it is included within other liabilities in the accompanying consolidated statements of financial position. Any changes in the fair value of the interest rate swap agreements are recorded as a component of interest expense in the consolidated statements of activities.

Fair Value of Financial Instruments

The fair value of financial instruments held by the University as of June 30, 2018 and 2017, are based on a variety of factors and assumptions and may not necessarily be representative of the actual gains or losses that will be realized in the future and do not include expenses that could be incurred in an actual sale or settlement of such financial instruments. The carrying values for cash and cash equivalents, student accounts receivable, contributions receivable, other receivables, accounts payable and accrued expenses approximate the fair values based on their short-term nature.

The fair values of the University’s investments and beneficial interest in trusts, which are the amounts reported in the statements of financial position, are based on quoted market prices (active and not active), except for the investments in real estate and property, which are based on market comparable values.

Loans payable based on borrowing rates currently available to the University for debt with similar terms and maturities have an estimated fair value of $70,621,000 and $73,483,000 as of June 30, 2018 and 2017, respectively.

Noncontrolling Interest

Noncontrolling interests presented in the consolidated statements of financial position reflect the original investment by these noncontrolling interests in the Partnership, along with their accumulated proportional share of the net earnings or losses of the Partnership, plus any contributions, less any dividend distributions. Increases in net assets attributable to noncontrolling interests in the consolidated statements of activities represents the noncontrolling portion of net income or loss that is attributable to the noncontrolling ownership interests in the Partnership.

Reclassification

Certain 2017 financial information has been reclassified to conform to the 2018 presentation. There was no impact on the net assets balances as a result of the reclassification.

Accounting Pronouncements

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is a comprehensive new revenue recognition standard that will supersede existing revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. FASB issued ASU 2015-14 that deferred the effective date for the University until annual periods beginning after December 15, 2018. Earlier adoption is permitted subject to certain limitations.



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The amendments in this update are required to be applied retrospectively to each prior reporting period presented or with the cumulative effect being recognized at the date of initial application. Management is currently evaluating the impact of this ASU on its financial statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the statement of financial positon and disclosing key information about leasing arrangements for lessees and lessors. The new standard applies a right-of-use (ROU) model that requires, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset for the lease term and a liability to make lease payments to be recorded. The ASU is effective for the University’s fiscal years beginning after December 15, 2019 with early adoption permitted. Management is currently evaluating the impact of this ASU on its financial statements.

In August 2016, FASB issued ASU 2016-14, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954) – Presentation of Financial Statements of Not-for-Profit Entities. The ASU amends the current reporting model for nonprofit organizations and enhances their required disclosures. The major changes include: (a) requiring the presentation of only two classes of net assets now entitled “net assets without donor restrictions” and “net assets with donor restrictions”, (b) modifying the presentation of underwater endowment funds and related disclosures, (c) requiring the use of the placed in service approach to recognize the expirations of restrictions on gifts used to acquire or construct long-lived assets absent explicit donor stipulations otherwise, (d) requiring that all nonprofits present an analysis of expenses by function and nature in either the statement of activities, a separate statement, or in the notes and disclose a summary of the allocation methods used to allocate costs, (e) requiring the disclosure of quantitative and qualitative information regarding liquidity and availability of resources, (f) presenting investment return net of external and direct expenses, and (g) modifying other financial statement reporting requirements and disclosures intended to increase the usefulness of nonprofit financial statements. The ASU is effective for the University’s financial statements for fiscal years beginning after December 15, 2017. Early adoption is permitted. The provisions of the ASU must be applied on a retrospective basis for all years presented although certain optional practical expedients are available for periods prior to adoption. Management is currently evaluating the impact of this ASU on its financial statements.

In June 2018, the FASB issued ASU 2018-08, Not-for-Profit Entities (Topic 958), Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This ASU was issued to standardize how grants and other contracts received and made are classified across the sector, as either an exchange transaction or a contribution. The standard provides guidance to assist in the determination of whether a transaction is a contribution or an exchange transaction. If the transaction is deemed to be a contribution the guidance provides factors to consider with regard to whether the contribution is conditional or unconditional. For contributions received, if determined to be an unconditional contribution, the determination will then need to be made as to whether the contribution is restricted. The ASU will assist in the determination of the nature of the transaction which will then govern the revenue and expense recognition methodology and timing of the transaction. This standard is effective for fiscal years beginning after December 15, 2018. The University is evaluating the impact of this ASU on the consolidated financial statements.



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2. Investments

Investments and investments held for debt service were as follows:

June 30, 2018 2017

Corporate stock $ 13,361,548 $ 13,468,859

Bonds

Corporate bonds 4,449,007 3,091,832

U.S. government obligations 6,977,671 6,886,490

Mutual Funds

Bond mutual funds 6,399,575 4,045,673

Real estate mutual funds 575,850 665,136

Commodities funds - 366,714

Hedge funds 1,401,262 1,343,586

Land and buildings held for investment 10,975,000 10,675,000

Other investments 367,668 361,155

Total investments and investments held for debt

service reserve $ 44,507,581 $ 40,904,445

3. Fair Market Value Measurements

The University complies with ASC 820, Fair Value Measurements and Disclosures (ASC 820), which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a framework for measuring fair value.

ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements based upon the transparency of inputs to the valuation of the asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 – Quoted prices in active markets which are unadjusted and accessible as of the measurement date for identical unrestricted assets and liabilities;

Level 2 – Quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly;

Level 3 – Prices or valuations that require inputs that are unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the reporting entity’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.



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The University determines fair value as of June 30, 2018 and 2017 on the following assets using these input levels:

Quoted Prices in Significant Other Significant

Active Markets for Observable Unobservable

Identical Assets Inputs Inputs

June 30, 2018 (Level 1) (Level 2) (Level 3) Total

Assets

Corporate stock $ 13,361,548 $ - $ - $ 13,361,548

Corporate Bonds - 4,449,007 - 4,449,007

Bond mutual funds 6,399,575 - - 6,399,575

Real estate mutual funds 575,850 - - 575,850

Commodities funds - - - -

U.S. government obligations - 6,977,671 - 6,977,671

Land and buildings held for investment - - 10,975,000 10,975,000

Other investments - - 367,668 367,668

Beneficial interest in

perpetual trust - - 4,149,843 4,149,843

Subtotal 20,336,973 11,426,678 15,492,511 47,256,162

Investment measured at net asset value

Hedge funds 1,401,262

Total $ 48,657,424

Liabilities

Interest rate swap $ - $ 545,008 $ - $ 545,008

Fair Value Measurement at Reporting Date




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Quoted Prices in Significant Other Significant

Active Markets for Observable Unobservable

Identical Assets Inputs Inputs

June 30, 2017 (Level 1) (Level 2) (Level 3) Total

Assets

Corporate stock $ 13,468,859 $ - $ - $ 13,468,859

Corporate Bonds - 3,091,832 - 3,091,832

Bond mutual funds 4,045,673 - - 4,045,673

Real estate mutual funds 665,136 - - 665,136

Commodities funds 366,714 - 366,714

U.S. government obligations - 6,886,490 - 6,886,490

Land and buildings held for investment - - 10,675,000 10,675,000

Other investments - - 361,155 361,155

Beneficial interest in -

perpetual trust - - 3,947,951 3,947,951

Subtotal 18,179,668 10,345,036 14,984,106 43,508,810

Investment measured at net asset value

Hedge fund 1,343,586

Total $ 44,852,396

Liabilities

Interest rate swap $ - $ 826,461 $ - $ 826,461

Fair Value Measurement at Reporting Date

The components of investment return in the accompanying consolidated statements of activities for the years ended June 30, 2018 and 2017 are summarized below:

June 30, 2018 2017

Investment Income

Dividends $ 422,672 $ 467,371

Interest 162,851 238,949

Total Investment Income 585,523 706,320

Net realized and unrealized gain

on investments 2,324,223 2,926,090

Rental income from investments 687,557 660,633

Total $ 3,597,303 $ 4,293,043



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Changes in Level 3 assets measured at fair value for the years ended June 30, 2018 and 2017 are as follows:

Beneficial Land and

Interest Buildings

Held in Held for Other

Perpetuity Investment Investments

Ending balance - June 30, 2017 $ 3,947,951 $ 10,675,000 $ 361,155

Annual distribution (170,000) - -

Total unrealized gains included

in statement of activities 371,892 300,000 6,513


The amount of total gain for the period included

in changes in net assets attributable to the

change in unrealized gains or losses relating

to assets/liabilities still held at year-end $ 201,892 $ 300,000 $ 6,513

Beneficial Land and

Interest Buildings

Held in Held for Other

Perpetuity Investment Investments


Annual distribution (183,208) - -

Total unrealized gains included

in statement of activities 392,048 445,000 43,916


The amount of total gain for the period included

in changes in net assets attributable to the

change in unrealized gains or losses relating

to assets/liabilities still held at year-end $ 208,840 $ 445,000 $ 43,916

Significant Unobservable Inputs

(Level 3)

Fair Value Measurements Using

Significant Unobservable Inputs

(Level 3)

Fair Value Measurements Using



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The University’s investments include debt and equity securities and certain other investments. Cumulative unrealized gains on these investments totaled $11,518,680 and $10,086,513 as of June 30, 2018 and 2017, respectively. The fair value on these investments increased by $1,432,167 for the year ended June 30, 2018. The change in fair market value has been included within net realized and unrealized gains or losses on investments in the accompanying consolidated statements of activities. The University incurred $99,508 and $97,794 in fees related to the management of the investments for the years ended June 30, 2018 and 2017, respectively.

The University accounts for its investments categorized as Level 1 through the use of quoted market prices for those investments in debt and equity securities with readily determinable market values.

The University accounts for its investments categorized as Level 2 through the use of observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

The University’s investments categorized as Level 2 consist of corporate bonds, commodities, and U.S. government obligations. The U.S. government obligations are held in satisfaction of the Reserve Fund Requirement for the Series 1998, 2011, and 2012 Bonds for fiscal years ended June 30, 2018 and 2017 (see Note 9). As of June 30, 2018 and 2017, the University had an established debt service reserve of $6,590,811 and $6,538,641, respectively. The reserve is held in U.S. government obligations. Such amount has been classified as an investment held for debt service reserve in the accompanying consolidated statements of financial position.

The University’s investments categorized as Level 3 consist of beneficial interest in perpetual trust; land and buildings held for investment; and a collection of books related to theology, philosophy, religious studies, and supporting disciplines. The land and buildings held for investment include the Nursing and Rehabilitation Center, a nursing facility owned by the University and leased to a third party, the residence for the University’s president, the land investment in the Partnership, and an additional investment property leased to a third party. The significant unobservable inputs used in the fair value measurement of the University’s Level 3 investment include selection of certain investment rates for real estate investments (discount rate, terminal capitalization rate, and overall capitalization rate) and present value of expected cash flows for beneficial interest in trusts. Significant fluctuations in any of those inputs in isolation could result in material change fair value measurement.

The Nursing and Rehabilitation Center lease agreement is dated February 6, 1996, and amended November 6, 2000, April 8, 2003, and March 1, 2007. The lease period of the land and building expires January 31, 2021, and grants the lessee the option to renew the original term of the lease for one renewal period. The renewal period is to begin February 1, 2021, and expire January 31, 2032. The estimated fair value of the Nursing and Rehabilitation Center as of June 30, 2018 and 2017 is $8,500,000 and $8,300,000, respectively. During the years ended June 30, 2018 and 2017, the University recorded an unrealized gain on the fair value of this investment of $200,000 and $400,000, respectively. The valuation was based on an independent third-party appraisal using an income capitalization approach based on the value of the lease.

The University owns land as an investment and earns rental revenues through a ground lease arrangement as part of the Partnership. The land was valued at $1,625,000 and $1,500,000 as of June 30, 2018 and 2017, respectively. The University recorded $125,000 of unrealized gain during the year ended June 30, 2018 and no unrealized gain or loss during 2017. The valuation was based on an independent third-party appraisal based on the market value of the leased fee interest.



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In June 2008, the University acquired an investment property for $841,209 designated as the president’s residence. This property was valued at $850,000 and $875,000 as of June 30, 2018 and 2017, respectively. The University recorded an unrealized loss of $25,000 and unrealized gain of $45,000 for the years ended June 30, 2018 and 2017. Valuations of the property was based on an independent third-party appraisal using recent sales prices and other comparable properties within the geographic marketplace of the investments.

The University holds an investment in a private hedge fund. The hedge fund is valued at $1,401,262 and $1,343,586 as of June 30, 2018 and 2017, respectively. The University recorded an unrealized gain on the investment of $57,676 and an unrealized loss of $567,788 for fiscal years ended June 30, 2018 and 2017, respectively. The University estimated the fair value of the hedge funds primarily using the information provided by the fund manager and historical audited financial results of the hedge fund.

The University has a 35% interest in SFITV and accounts for the related transactions in accordance with the equity method of accounting. The equity method of accounting dictates that an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition. The University’s initial investment was nominal, and SFITV had no activity prior to fiscal year 2009.

On July 24, 2008, SFITV entered into a long-term lease with an unrelated entity, whereby the entity leased three broadband channels from SFITV through December 2016, with additional renewal options requiring Federal Communications Commission (FCC) approval. Under the terms of the lease, SFITV received a $3,000,000 initial payment and received annual lease payments that escalate from $378,000 in the first year to $858,000 in the final year. Total payments that were received under the long-term lease were $7,750,000 recognized the revenues earned from the long-term lease on a straight-line basis over the term of the lease.

On January 4, 2017, SFITV extended the lease agreement for another 10 years through December 18, 2026. Under the extension, the annual lease payments escalate from $858,000 to $3,258,000 in the final year. Total payments that will be received under the long-term lease are $21,380,000. SFITV continues to recognize the revenues earned from the long-term lease on a straight-line basis over the term of the lease. During fiscal year 2018, SFITV recognized $2,138,000 of revenue and presented deferred revenues of $2,013,492 as of June 30, 2018.

During fiscal years 2018 and 2017, the University’s cumulative portion of SFITV’s net income amounted to $3,834,950 and $3,086,650, respectively. The University has received cumulative cash distributions of approximately $3,800,000 from SFITV through June 30, 2018. Such distributions are not refundable, and the University is not liable for obligations of SFITV or committed to provide financial support. As such, the University recorded $233,988 and $233,535 as earnings of an equity method investee in the accompanying consolidated statements of activities for the years ended June 30, 2018 and 2017, respectively.

4. Endowment Investments

The University’s endowment consists of approximately 72 individual donor-restricted funds established for a variety of purposes. As required by generally accepted accounting principles (GAAP), net assets associated with endowment funds are classified and reported based on donor-imposed restrictions.

Endowment investments, presented at fair value, are composed of unrestricted endowments, temporarily restricted endowments, and permanent endowments. Unrestricted endowments are restricted by the University’s board. The board can appropriate as much of the net appreciation on



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board-designated endowments as is prudent considering the University’s present and anticipated financial requirements, expected total return on its investments, price-level trends, and general economic conditions. Temporarily restricted endowments consist of funds limited by donor-imposed stipulations that either expire by the passage of time or that can be fulfilled or removed by actions of the University pursuant to those stipulations. Permanent endowments consist of donor-restricted funds whose use by the University is limited by donor-imposed stipulations that neither expire with the passage of time nor can be fulfilled or otherwise removed by actions of the University. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

The University’s Board of Trustees interpreted the Florida Uniform Prudent Management of Institutional Funds Act (FUPMIFA) as requiring the preservation of the original value of any donor-restricted gift, as of the gift date, absent explicit donor stipulations to the contrary. As a result, the University classifies as permanently restricted net assets (1) the original value of gifts donated to the permanent endowment, (2) the original value of subsequent gifts to the permanent endowment, and (3) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is characterized as temporarily restricted net assets until those amounts are appropriated for expenditure by the University in a manner consistent with the standard for expenditure prescribed by FUPMIFA.

In accordance with FUPMIFA, the University considers the following factors in making a determination to appropriate or accumulate donor-restricted funds:

1) The duration and preservation of the fund;

2) The purposes of the University and the 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; and

7) The investment policies of the University.

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 FUPMIFA requires the University to retain as a fund of perpetual duration. These deficiencies result from unfavorable market fluctuations that occurred shortly after newly restricted contributions were received. For the years ended June 30, 2018 and 2017, there are no permanently restricted endowment whose fair value of assets is less than the level required by donor stipulation.




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The University has developed an investment policy for all of its investable assets whose general purpose is to preserve the capital and purchasing power of the University and to provide sufficient investment return for current and future spending needs. The University has adopted a total return strategy that is designed to provide balance to the overall structure of the University’s investment program over a long-term period. The endowment net asset composition by fund type as of June 30, 2018 and 2017, is composed of the following:


As of June 30, 2018 Unrestricted Restricted Restricted Total

Donor-restricted endowment $ - $ 7,058,105 $ 21,578,418 $ 28,636,523

Board-designated endowment 15,344,381 - - 15,344,381

Total endowment funds $ 15,344,381 $ 7,058,105 $ 21,578,418 $ 43,980,904



Endowment net assets –

beginning of year $ 14,969,833 $ 4,952,013 $ 20,164,296 $ 40,086,142

Contributions - - 765,578 765,578

Investment return –

investment income 59,785 484,492 - 544,277

Realized/Unrealized gains 537,629 1,409,616 371,892 2,319,137

Expenditures (229,759) - - (229,759)

Transfer from unrestricted

undesignated net assets (19,885) - - (19,885)

Other/transfers 26,778 211,984 276,652 515,414

Total endowment funds –

end of year $ 15,344,381 $ 7,058,105 $ 21,578,418 $ 43,980,904

Endowment Net Asset Composition by Net Asset Type

Endowment Net Asset Reconciliation by Net Asset Type




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As of June 30, 2017 Unrestricted Restricted Restricted Total

Donor-restricted endowment $ - $ 4,952,013 $ 20,164,296 $ 25,116,309

Board-designated endowment 14,969,833 - - 14,969,833

Total endowment funds $ 14,969,833 $ 4,952,013 $ 20,164,296 $ 40,086,142



Endowment net assets - beginning of

year $ 14,619,709 $ 3,273,003 $ 18,679,207 $ 36,571,919

Contributions - - 222,431 222,431

Investment return - investment

income

Realized/Unrealized gains (losses) 720,164 1,769,745 392,048 2,881,957

Expenditures (499,244) - - (499,244)

Transfer from unrestricted

undesignated net assets

Other/transfers (393,708) (623,334) 870,610 (146,432)

Total endowment funds - end of year $ 14,969,833 $ 4,952,013 $ 20,164,296 $ 40,086,142

586,030

Endowment Net Asset Composition by Net Asset Type

Endowment Net Asset Reconciliation by Net Asset Type

469,481 - - 469,481

53,431 532,599 -

The University’s objective is to fully utilize endowment total return for purposes designated by the respective donors. Barry University’s endowment distribution policy must balance support of the current generation of student and faculty with the need to preserve the College’s endowment for future generations. The Trustee-mandated formula for distributing endowment return for distributing endowment return for support of current operations targets the annual distribution percentage between 2 percent and 6 percent of a three-year endowment market value. The actual annual distribution percentage is set each year by the Investment Committee. Surplus return, if any, is reinvested for future distribution. The University’s investment committee approved the distribution of the endowment scholarship fund at 4% annual. The actual distribution during the fiscal year ended June 30, 2018 and 2017 were approximately 1% and 2%, respectively.




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5. Student Accounts Receivable and Loans and Notes Receivable - Net

Student accounts receivable and loans and notes receivable as of June 30, 2018 and 2017 are as follows:

2018 2017

Student accounts receivable $ 5,516,071 $ 5,046,031

Allowance for doubtful accounts (619,771) (473,795)

Total student accounts receivable - net 4,896,300 4,572,236

Loans and notes receivable 7,476,458 7,074,613

Allowance for doubtful accounts (291,218) (135,101)

Total loans and notes receivable - net $ 7,185,240 $ 6,939,512

2018 2017

Pledges Due

Less than one year $ 244,833 $ 279,000

One year to five years 288,988 358,988

Greater than five years 30,000 30,000

Total contributions receivable before unamortized discount 563,821 667,988

Less unamortized discount (115,645) (121,254)

Total contributions receivable - net $ 448,176 $ 546,734


6. Contributions Receivable - Net Outstanding pledges receivable are from various individuals, foundations, and corporations. The discounted present values of pledges receivable are computed using expected payout periods, an average risk-free interest rate in effect as of the date of the pledge, and an estimated allowance for uncollectible pledges using specific experience factors. Contributions receivable as of June 30, 2018 and 2017, are summarized as follows:



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7. Beneficial Interest in Perpetual Trust

In March 2008, the University was notified that it received a bequest that consisted of interests in two perpetual trust funds. Since that time, the trust funds were subject to legal proceedings pending a final resolution. On August 18, 2011, the Surrogate’s Court of New York entered an order confirming the University’s entitlement to the interest in the perpetual trust funds. As a result, the University was entitled to receive distributions of five percent (5%) of the average value of the funds on an annual basis from the bequest. During the years ended June 30, 2018 and 2017, the University received a distribution of $170,000 and $183,208, respectively, which is recorded as investment income on the consolidated statements of activities. Beneficial interest in perpetual trust as of June 30, 2018 and 2017 amounted to $4,149,843 and $3,947,951, respectively.

The University’s beneficial interest in the perpetual trust is composed of debt and equity securities that are permanently restricted. The fair value of these investments increased by $201,892 and $208,840 for the years ended June 30, 2018 and 2017, respectively. The Trust incurred $22,262 and $21,004 in fees related to the management of the investments for the year ended June 30, 2018 and 2017, respectively.

8. Property, Plant, and Equipment - Net

Property, plant, and equipment as of June 30, 2018 and 2017, consists of the following:

2018 2017

Land $ 7,921,889 $ 8,839,803 Land improvements 5,893,924 5,790,537 Buildings and building improvements 159,856,685 160,712,878 Furniture, fixtures, and equipment 55,074,424 54,962,106 Law library acquisitions 6,492,717 6,492,717 Constructions in progress 4,407,791 5,578,902

Total property, plant and equipment 239,647,430 242,376,943

Less accumulated depreciation and amortization (121,368,500) (115,949,069)

Property, plant, and equipment – net $ 118,278,930 $ 126,427,874

Depreciation and amortization expense on property, plant and equipment totaled $8,560,267 and $8,495,747 for the years ended June 30, 2018 and 2017, respectively. Total committed to complete on construction in progress as of June 30, 2018 and 2017 totaled $4,407,792 and $5,578,902, respectively. The estimated cost to complete is mainly due to the implementation costs of the new Student module in Workday system, various ongoing renovations, and facility improvements.

\



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Assets under capital leases, which are included in land improvements and buildings, at June 30 were as follows:

2018 2017

Equipment $ 3,578,577 $ 4,284,920

Less accumulated amortization (1,833,168) (2,449,424)

Total $ 1,745,409 $ 1,835,496




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9. Loans Payable and Capital Leases The following represents loans payable and capital leases: June 30, 2018 2017

Loans Payable

Loan from Wickham Oaks Ltd proceeds used to refurbishleased offices located at 401 North Wickham Rd. Suite103,104,105 Melbourne County, Brevard State of Florida.Effective Interest Rate 6.5%, 8/1/14-10/31/2021. 215,158$ 271,143$

2007 Pinellas County Educational Facilities AuthorityRevenue, and Revenue refunding bonds; annual paymentsdue each October with a variable interest rate equal toLondon InterBank Offered Rate (LIBOR) plus 1.50% settledmonthly; the effective interest rate at June 30, 2018 was3.91%. 6,165,000 6,630,000

2011 Pinellas County Educational Facilities AuthorityRevenue, annual principal payments made; semi-annualinterest payments due each April and October; variableinterest rate commencing at 3.000% and increasing to 6%;the effective interest rate at June 30, 2018 was 3.00%. 31,730,000 33,050,000

2012 Pinellas County Educational Facilities AuthorityRevenue & Refunding Bonds; annual principal paymentsmade; semi-annual interest payments due each April andOctober; variable interest rate commencing at 2.50% andincreasing to 5.25%; the effective interest rate at June 30,2018 was 2.5%. 27,955,000 28,825,000

Unamortized premium on bonds 1,101,361 1,181,107

Bond issuance costs and discounts (805,263) (858,285)

Total Loans Payable 66,361,256 69,098,965

Capital Leases, various 1,753,159 1,840,386

Total Loans Payable and Capital Leases 68,114,415$ 70,939,351$



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Series 2007 Bonds

On October 24, 2007, the Authority issued $10,000,000 of Pinellas County Educational Facilities Authority Revenue and Revenue Refunding Bonds, Series 2007 (“Series 2007 Bonds”). The proceeds of the sale of the Series 2007 Bonds have been loaned to the University (the “2007 Loan”) to (i) fund the construction of a building for the Institute for Community Health & Minority Medicine and related improvements of the University campus; (ii) refund a taxable loan dated May 7, 2004, from Bank of America, N.A. (the “Bank”), to the University in the original amount of $7,300,000; and (iii) pay certain costs of issuance of the Series 2007 Bonds.

Pursuant to the supplemental loan agreement between the University and the Authority, Barry University is solely responsible for all payments due under Series 2007 Bonds. The Series 2007 Bonds mature October 1, 2037. The Series 2007 Bonds are variable-rate obligations secured by an irrevocable, direct pay, letter of credit issued by the Bank on behalf of the University for the benefit of bondholders, which expires on January 31, 2021. The University is responsible for reimbursing the Bank for all draws under the letter of credit. The 2007 Loan Agreement is subject to certain covenants and financial ratios specified in the Master Trust Indenture (the “Indenture”) and supplemental indenture, as amended.

In connection with the bond issue, the University entered into an interest rate swap agreement with the Bank to manage the interest rate risk on its Series 2007 Bonds in an initial notional amount of $10,000,000, effective October 29, 2007. The agreement swaps the University’s variable rate for a fixed rate of 3.9%. The notional amount declines over time and terminates on October 1, 2027. The University began making payments under the agreement on December 1, 2007. The University has recorded the fair value of the swap agreement as of June 30, 2018 and 2017, as a liability in the amount of $545,008 and $826,461, respectively, within other liabilities in its consolidated statements of financial position, and the change in fair value as interest expense within its consolidated statements of activities. The fair market value classification of the swap agreement is Level 2.

The University is required to make loan payments in amounts sufficient for the Authority to pay the principal and interest on the Series 2007 Bonds, whether at maturity, upon acceleration, or upon redemption, and to maintain the required amount in the reserve fund established under the Indenture.

Series 2011 Bonds

On August 2, 2011, the Authority issued $38,575,000 of Pinellas County Educational Facilities Authority Revenue and Revenue Refunding Bonds, Series 2011 (“Series 2011 Bonds”). The proceeds of the sale of the Series 2011 Bonds have been loaned to the University (the “2011 Loan”) to (i) finance the cost of acquisitions, construction, and equipping of certain educational facilities and other capital improvements to be owned and operated by the University and to reimburse advances made by the University to pay a portion of such costs; (ii) refinance certain obligations of the University which were used to finance the acquisition, construction, and improvements to certain educational facilities of the University; (iii) make a deposit in an amount equal to the Series 2011 Reserve Fund Requirement to the 2011 Reserve Fund established for the Series 2011 Bonds; (iv) pay a portion of the interest coming due on the Series 2011 Bonds through August 1, 2012; and (v) pay certain costs of issuance of the Series 2011 Bonds.

As referenced above, certain proceeds of the Series 2011 Bonds were used to refinance certain existing debt. On August 2, 2011, the outstanding principal balances of $6,912,870, relating to the Bank of America $7 million term loan, for the construction on the law school campus and $4,960,761 for the Bank of America $5.2 million term loan, for the purchase of an apartment complex for student housing were repaid.



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Series 2012 Bonds

On March 28, 2012, the Authority issued $31,445,000 of Pinellas County Educational Facilities Authority Revenue Refunding Bonds, Series 2012 (“Series 2012 Bonds”). The proceeds of the sale of the Series 2012 Bonds have been loaned to the University (the “2012 Loan”) to (i) fully refund the Series 2000 Bonds in the amount, (ii) partially refund Series 1998 Bonds, and (iii) pay certain costs of issuance of the Series 2012 Bonds.

On March 29, 2012, the University used the proceeds from the Series 2012 Bonds to pay $15,555,000 of the Series 2000 Bonds.

As of June 30, 2018, management of the University believes they were in compliance with the debt covenants under the Master Trust Indenture with the exception of Section 3.7(a) of the Master Trust Indenture which requires maintenance of net operating revenues of at least 110% of the fiscal year's debt service requirement. This noncompliance does not cause acceleration of payment of the bonds. The University is in process of curing the noncompliance. As of June 30, 2018, Barry University is in full compliance with the debt covenants.

Capital leases

Barry University has capital lease agreements with U.S. Bank, First American, SCG Capital, Bank of America Leasing, Huntington Technology Finance, Cort Business Service Lease and California National Bank. The interest rates on these leases vary from 1.97% to 3.00% with a lease term ranging from 36 to 60 months.

The annual principal maturities for loans, mortgages, notes payable, and capital leases as of June 30, 2018, are as follows:

Loans Capital

Years ended June 30, Payable Leases Total

2019 $ 2,844,734 $ 818,127 $ 3,662,861

2020 2,973,735 607,584 3,581,319

2021 3,128,003 209,386 3,337,389

2022 3,258,686 95,697 3,354,383

2023 3,380,000 22,365 3,402,365

2024 and thereafter 50,480,000 - 50,480,000

Total 66,065,158 1,753,159 67,818,317

Premium on bonds 1,101,361 - 1,101,361

Bond issuance cost and discounts (805,263) - (805,263)

Total $ 66,361,256 $ 1,753,159 $ 68,114,415 Interest costs expensed during fiscal years 2018 and 2017 were $3,457,623 and $3,585,989, respectively. There was no capitalized interest for the years ended June 30, 2018 and 2017.



32

10. Net Assets

Controlling

Unrestricted Net Assets Total Interest

Balance, June 30, 2016 $ 97,684,337 $ 97,106,953 $ 577,384

Changes in net assets (8,302,923) (8,302,923) -

Changes in net assets attributed to

noncontrolling interest 41 - 41

Change in unrestricted net assets (8,302,882) (8,302,923) 41

Balance, June 30, 2017 89,381,455 88,804,030 577,425

Changes in net assets 618,641 618,641 -

Changes in net assets attributed to

noncontrolling interest 48,077 - 48,077

Change in unrestricted net assets 666,718 618,641 48,077

Balance, June 30, 2018 $ 90,048,173 $ 89,422,671 $ 625,502

Noncontrolling Interest

Temporarily restricted net assets as of June 30, 2018 and 2017, are available for the following purposes:

2018 2017

Educational and general expenses $ 9,422,526 $ 8,223,085

Scholarships 1,381,073 1,521,094

Student loan funds 81,344 81,344

Total $ 10,884,943 $ 9,825,523

As of June 30, 2018 and 2017, the University has temporarily and permanently restricted net assets totaling $448,176 and $546,734, respectively, for educational and general expenses, which will be funded through outstanding pledges due in future periods.

Net assets were released from restrictions by incurring expenses satisfying the restricted purposes or by the occurrence of other events specified by donors. As described in Note 1, donor-restricted contributions whose restrictions are met in the same reporting period are reported as unrestricted support. Net assets released from restrictions by function for the years ended June 30, 2018 and 2017, were as follows:

2018 2017

Educational and general $ 940,863 $ 701,125

Scholarships 771,993 1,003,093

Total $ 1,712,856 $ 1,704,218



33

During the year ended June 30, 2018, the University transferred the amount of $276,652 from temporarily restricted to permanently restricted net assets based on advice by donors imposing restrictions on the funds to be held in perpetuity. The University received $170,000 and $183,208 from the perpetual trust fund as distribution during the years ended June 30, 2018 and 2017, respectively.

11. Retirement Plan

The University established a defined contribution retirement plan on September 1, 1963 for personnel. Effective January 1, 2012, the Plan was frozen, and no further participant elective deferrals or employer contributions were allowed into the Plan. The program was administered by a third party, with the University contributing up to 8.5% of the employee’s salary.

Effective January 1, 2012, the University established a defined contribution 401(K) Plan (the “Retirement Plan”) sponsored by Barry University, Inc., (the “Employer”, “Plan Administrator”). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). Employer will make a safe harbor matching contribution equal to 100% of a participant’s deferral up to 4% of compensation plus 50% of a participant’s deferral between 4% and 5% of compensation. Participants must complete one consecutive year of service with the Employer before being eligible to receive contributions made by the Employer. Additional amounts may be contributed at the discretion of the Employer (profit sharing and match contribution). Additionally, the Employer will make a safe harbor matching contribution.

Effective January 1, 2017, the University reduced its contribution to up to 4% of the employee’s salary.

The University’s contribution to the Retirement Plan was $1,903,050 and $4,200,170 for the years ended June 30, 2018 and 2017, respectively.

12. Commitments and Contingencies

Operating Leases — The University leases space at various locations to provide off-campus programs. The University also leases certain information technology (e.g., computers, routers, and storage) as part of a technology refresh program.

The schedule by years of future minimum lease payments under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2018, is as follows:

Years ended June 30,

2019 $ 1,583,688

2020 908,362

2021 546,433

2022 323,743

2023 122,965

$ 3,485,191

Rent expense amounted to $3,274,067 and $2,822,283 in 2018 and 2017, respectively.



34

Litigation

The University is, at times, subject to threatened or filed legal action. Based upon counsel’s advice and its knowledge of these cases, management does not expect the outcome of these matters to have a material adverse effect on the University’s future financial condition, results of activities, or cash flows. However, there can be no assurances regarding the ultimate outcome of these matters.

Grants

The University receives state and federal grant funding in support of their educational missions. Grants are subject to annual renewal and periodic amendment and require the fulfillment of certain conditions as set forth in each instrument of grant. Failure to fulfill the conditions could result in the return of the funds to grantors. Management believes that the University has met all conditions under their grant programs.

Chartwells Agreement

On June 1, 2015, the University entered into a Food Service Agreement (the Agreement) with Chartwells to provide and manage the University’s food service program. The agreement is for a ten-year period expiring on May 31, 2024, with additional five-year options to renew upon mutual agreement by both parties. Either party may terminate the agreement by giving a 90-days’ notice prior to the proposed termination date. On June 1, 2017, Chartwells and the University amended the agreement to extend the terms through June 30, 2029. As part of the agreement, the University received certain advances from Chartwells in the form of a signing bonus, financial investments to improve dining facilities, guaranteed commissions and other concessions in exchange for the exclusive rights to use the University facilities and equipment. These advances are refundable to Chartwells should the University terminate the agreement prior to its expiration, the amount of the refundable amount is proportionate to the unexpired portion of the terms. Accordingly, the University recorded the unamortized portion of these advances amounting to $4,163,898 and $3,131,096 as of June 30, 2018 and 2017 as deferred revenue reported as a component of accounts payable and accrued expenses in the accompanying consolidated statements of financial position. The University recognized $314,241 and $549,084 as reduction to food service expense during the years ended June 30, 2018 and 2017, respectively, related to this agreement.

13. Subsequent Events

Management of the University has reviewed subsequent events from June 30, 2018, through November 15, 2018, the date the accompanying consolidated financial statements are available to be issued.

35

Supplementary Information


Title IV Strength Factor Score June 30, 2018

36

Primary Reserve Ratio Data (in $'000) Strength FactorStrength Factor

CalculationStrength Factor

WeightWeighted

Strength Factor

Unrestricted net assets + 90,048$

Temporarily restricted net assets + 10,885

Temporarily restricted annuities, term endowment & life income funds - -

Intangible assets - -

Net property, plant & equipment (PPE) - 118,279

Post-employment & retirement liabilities + -

Long-term debt* + 68,114

Unsecured related-party receivables - -

Numerator total 50,768$

Total unrestricted expenses 136,520$

Denominator total 136,520$

Primary Reserve Ratio: 0.37 10.00 3.00 0.4 1.20*Long-term debt is limited to Net PPE in this ratio

Equity Ratio Unrestricted net assets + 90,048$

Temporarily restricted net assets + 10,885

Permanently restricted net assets + 21,578



Numerator total 122,512$

Total assets + 218,261$




Equity Ratio: 0.56 6.00 3.00 0.4 1.20

Net Income Ratio Change in unrestricted net assets 667$

Numerator total 667$

Total unrestricted revenue 137,187$


Net Income Ratio: 0.00 1 + (50x) 0.24 0.2 0.05

STRENGTH FACTOR SCORE 2.45

The report accompanying these financial statements was issued by

BDO USA, LLP, a New York limited liability partnership and the U.S. member

of BDO International Limited, a UK company limited by guarantee.

The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee.


Reports Required by Government Auditing Standards, the Uniform Guidance, and Chapter

10.650, Rules of the Florida Auditor General and Schedule of Expenditures of Federal Awards

and State Projects

For the Year Ended June 30, 2018


Reports Required by Government Auditing Standards, the Uniform Guidance, and Chapter 10.650, Rules of the Florida

Auditor General and Schedule of Expenditures of Federal Awards and State Projects


Contents

Page Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 2 Independent Auditor’s Report on Compliance for Each Major Federal Program and State Project; Report on Internal Control over Compliance 4 Independent Auditor’s Report on the Schedule of Expenditures of Federal Awards and State Projects Required by the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General 7 Schedule of Expenditures of Federal Awards and State Projects 8 Notes to Schedule of Expenditures of Federal Awards and State Projects 10 Schedule of Findings and Questioned Costs 12 Summary Schedule of Prior Audit Findings 16 Independent Auditor’s Management Letter in Accordance with the State of Florida Rules of the Auditor General 17 State of Florida Financial Assistance Program – Schedule of Population, Samples Tested and Questioned Costs 19 Management Corrective Action Plan 20



2

Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

To the Board of Trustees Barry University and Subsidiary Miami, Florida

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 Barry University and Subsidiary (the “University”), which comprise the consolidated statement of financial position as of June 30, 2018, 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 November 15, 2018.

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 University’s consolidated 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.

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms .

3

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the University’s consolidated financial statements are free of 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 consolidated 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.

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.




4

Independent Auditor’s Report on Compliance for Each Major Federal Program and State Project and Report on Internal Control over Compliance To the Board of Trustees Barry University and Subsidiary Miami, Florida Report on Compliance for Each Major Federal Program and State Project We have audited Barry University and Subsidiary’s (the “University”) compliance with the types of compliance requirements described in the OMB Compliance Supplement and the requirements described in the Florida Department of Financial Services’ State Project Compliance Supplement, that could have a direct and material effect on each of the University’s major federal programs and state projects for the year ended June 30, 2018. The University’s major federal programs and state projects are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of federal statutes, regulations, and the terms and conditions of its federal awards and state financial assistance projects applicable to its federal program and state projects. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the University’s major federal programs and state projects 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; 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”); and Chapter 10.650, Rules of the Florida Auditor General. Those standards, the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General, 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 and state projects 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 qualified and unmodified opinions on compliance for each major federal program and state projects. However, our audit does not provide a legal determination of the University’s compliance.

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

5

Opinion on Each Major Federal Program and State Projects 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 and state projects for the year ended June 30, 2018. Other Matters The results of our auditing procedures disclosed other instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General and which are described in the accompanying schedule of findings and questioned costs as item 2018-001. Our opinion on each major federal program and state project is not modified with respect to these matters. The University’s responses to the noncompliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The University’s responses were not subjected to the auditing procedures applied in the audit of noncompliance and, accordingly, we express no opinion on the responses. 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 a major federal program and state projects 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 state projects and to test and report on internal control over compliance in accordance with the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program or state project that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

6

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 and Chapter 10.650, Rules of the Florida Auditor General. Accordingly, this report is not suitable for any other purpose.




BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms

7

Independent Auditor’s Report on the Schedule of Expenditures of Federal Awards and State Project Required by the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General To the Board of Trustees Barry University and Subsidiary Miami, Florida We have audited the consolidated financial statements of the University as of and for the year ended June 30, 2018, and have issued our report thereon dated November 15, 2018, which contained an unmodified opinion on those consolidated financial statements. 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 and state projects is presented for purposes of additional analysis as required by the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General, 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 expenditures of federal awards and state projects is fairly stated in all material respects in relation to the consolidated financial statements as a whole.



Schedule of Expenditures of Federal Awards and State Projects Year Ended June 30, 2018

8

Federal Federal Award Federal

Federal Grantor/Pass-Through CFDA Passed Through to Awards

Grantor /Program or Cluster Title Number Subrecipients Expenditures

Student Financial Aid - Cluster:

U.S. Department of Education:

Office of Student Education Assistance Programs: Teach Education Assistance for College and Higher Education (TEACH) 84.379 -$ 19,587$

Federal Pell Grant Program 84.063 - 8,164,944

Federal Supplemental Educational Opportunity Grant (FSEOG) 84.007 - 573,171

Federal Work-Study Program 84.033 - 986,161

Federal Direct Student Loans Program 84.268 - 118,666,176

Total Office of Student Financial Assistance Programs - 128,410,039

U.S. Department of Health & Human Services:Office of Health Resources and Services Administration

Scholarship for Disadvantaged Students 93.925 - 795,517

Nurse Facility Loan Program 93.264 - 975,152

Total U.S. Department of Health and Human Services - 1,770,669

Total Student Financial Assistance Cluster - 130,180,708

Research and Development Cluster:

U.S. Department of Health & Human Services - Direct Programs Office

of National Institutes of Health Biomedical Research (MBRS RISE) 93.859 - 165,480

U.S. Department of Health & Human Services

Advanced Education Nursing Trainee

Nurse Anesthetist Traineeship Program 93.124 - 51,516

Nursing Workforce Diversity 93.178 - 150,424

Indirect Programs:

Passed through Kids in Distress, Inc.

Child Abuse and Neglect Discretionary Activities -

Housing, Empowerment, Achievement, Recovery, and Triumph

Alliance for Sustainable Families (HEART) Passed through University

of Central Florida 93.670 - 56,617

Centers for Medicare & Medicaid Services

Pass-through Florida Atlantic University

Reinvesting of Civil Money Penalties to Benefit Nursing

Home Residents 93.636 - 15,938

Total U.S. Department of Health & Human Services - 439,975

U.S. Department of Justice

Services for Trafficking Victims -

Sheriff Ric L. Bradshaw - Palm Beach County Enhanced Strategy to

Combat Human Trafficking 16.320 - 1,209

Total U.S. Department of Justice - 1,209

Total Expenditures of Federal Awards -$ 130,621,892$

Continued


Schedule of Expenditures of Federal Awards and State Projects Year Ended June 30, 2018

9

State Grantor/Pass-Through Grantor /Program State CFDA Number

Pass-through Entity Identifying

Number or Contract Number

State Financial Assistance

Expenditures

State Projects and Financial Assistance Programs:

State of Florida Department of Education - Florida Student Financial

Assistance Programs - Direct Programs:

Florida Resident Access Grant (FRAG) 48.064 N/A 4,780,200$

Florida Student Assistance Grant (FSAG) 48.054 N/A 1,521,267

Minority Teacher Education Scholars Program 48.049 N/A 14,000

Children of Deceased or Disabled Veterans Scholarship Program 48.055 N/A 9,328 Honorably Discharged Graduate Assistance Program (HDGAP) 48.118 OSFA-STATE# 17-18:15 16,950

Florida Academic Scholars Program 48.059 N/A 125,973

Florida Medallion Scholarship Program 48.059 N/A 74,690

Total State of Florida Department of Education - Florida Student 6,542,408

Financial Assistance Programs

Other State of Florida Department of Education - Direct Programs:

(CROP) College Reach Out Program 48.028 851-95010-8Q001 50,080

Total Other Florida Department of Education -Direct Programs 50,080

Total Florida Department of Education 6,592,488

Florida Department of State -Indirect Program

Pass through Southeast Florida Library Information Network

Library Cooperative Grant Program 45.018 N/A 136 State of Florida Public Guardianship - Direct Project

Public Guardianship 65.003 X9246, X9247 631,854

State of Florida Department of Health

Bureau of Tobacco Free Florida/Young Adult Interventions Initiative 64.093 N/A 745

State of Florida Department of Highway Safety and Motor Vehicles

Direct Project - License Plate 76.006 N/A 10,000

Total State Financial Assistance 7,235,223

Total Expenditures of Federal Awards and State Financial Assistance 137,857,115$

See accompanying notes to the schedule of expenditures

of federal awards and state projects.


Notes to Schedule of Expenditures of Federal Awards and State Projects Year Ended June 30, 2018

10

1. Basis of Presentation

The accompanying schedule of federal awards and state projects (the “Schedule”) includes the federal award and state project activity of Barry University and Subsidiary (the University) under programs of the federal government and State of Florida for the year ended June 30, 2018. The information in this schedule is presented in accordance with the requirements of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the “Uniform Guidance”) and Chapter 10.650, Rules of the Florida Auditor General. Because the Schedule presents only a selected portion of the operations of the University, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the University.

The reimbursement of indirect costs reflected in the accompanying financial statements as federal grant revenue is subject to final approval by federal and state grantors and could be adjusted upon the results of these reviews. Management believes that the results of any such adjustment will not be material to the University’s financial position or change in net assets.

2. Summary of Significant Accounting Policies

Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts, if any, shown on the Schedule represent adjustments or credit made in the normal course of business to amounts reported as expenditures in prior years. The University has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.

3. Federal Loan Program

Federal student loans processed during the fiscal year ended June 30, 2018, are as follows:

Loans Made

Federal During the

CFDA Year

Graduate PLUS Direct Loan 84.268 33,470,931$

Direct Subsidized Loan 84.268 8,188,426

Direct PLUS Loan 84.268 2,841,482

Direct Unsubsidized Loan 84.268 74,165,337

Nurse Faculty Loan Program 93.264 975,152

Total Federal Student Loans 119,641,328$


Notes to Schedule of Expenditures of Federal Awards and State Projects Year Ended June 30, 2018

11

University-administered loans outstanding as of June 30, 2018, are as follows:

Federal Balance as of

CFDA 30-Jun-18

Federal Nursing Student Loans 93.364 5,952$

Nurse Faculty Loan Program 93.264 7,230,995

Nurse Faculty Loan Program - ARRA 93.408 173,855

Total Federal Student Loans Outstanding 7,410,802$


Schedule of Findings and Questioned Costs Year Ended June 30, 2018

12

Part I - Summary of Auditor’s Results Financial Statement Section

Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP:

Unmodified

Internal Control over Financial Reporting:

Material weakness (es) identified? Yes x No Significant deficiency (ies) identified? Yes x None noted Noncompliance material to financial statements noted? Yes x No

Federal Awards and State Projects Section Internal control over major programs:

Material weakness(es) identified? Yes x No Significant deficiency(ies) identified? Yes x None noted

Type of auditor’s report issued on compliance for major federal programs and state projects:

Unmodified

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a) or Chapter 10.650, Rules of the Florida Auditor General?

x

Yes

No




13

Part I – Summary of Auditor’s Results (continued) Identification of Major Federal Programs and State Projects Federal Programs: CFDA Number(s) Name of Program or Cluster 84.007, 84.033, 84.063, 84.268, 84.379, 93.264, 93.925

Student Financial Assistance Cluster

State Projects:

CSFA Number(s) Name of Project Florida Department of Education – Office of Student Financial Aid Cluster

48.059 Florida Bright Futures Scholarship Program* 48.054 Florida Student Assistance Grant 48.049 Minority Teacher Education Scholars Program 48.055 Children of Deceased or Disabled Veterans

Scholarship Program 48.118 Honorably Discharged Graduate Assistance

Program (HDGAD) 48.064 Florida Resident Access Grant 65.003 Public Guardianship *(Medallion Scholars Award, Academic Scholars Award and Gold Seal Vocational Scholars Award) Dollar threshold used to distinguish between

Type A and Type B programs: Federal programs $750,000 State projects $300,000 Auditee qualified as low-risk auditee? x Yes __No



14

Part II - Financial Statement Findings Section

This section should identify significant deficiencies, material weaknesses, fraud, noncompliance with provisions of laws, regulations, contracts, and grant agreements, and abuse related to the financial statements for which Government Auditing Standards requires reporting.

No matters were identified.

Part III - Federal Award Findings and Questioned Costs Section

Finding

2018-001

Federal Agency

U.S. Department of Education

Federal Program Title

Student Financial Aid Cluster

Compliance Requirement

Special Test – Return of Title IV Funds (R2T4)

Criteria 34 CFR Section 668.21(b) requires the University to return funds within 30 days after the date the University becomes aware the student will not or has not begun attendance.

Condition The University did not return the funds to the Department within

30 days after a student officially withdrew.

Context Of the twenty-two (22) samples we tested for the above

requirement, we noted one instance where the return of Title IV funds was not made within the prescribed deadline.

Cause Due to paper manual processing of the official withdrawal form, the

University missed calculating the R2T4 timely.

Effect The University is not in compliance with requirements related to

the return of Title IV funds.

Questioned Costs $ -

Recommendation We recommend that the University review the procedures in processing official withdrawals to ensure timely remittance of return of Title IV funds.

Management Response and Corrective Action Plan

The process is currently a manual review, we are working on an electronic process for the future. In the interim, we will develop a report to be reviewed monthly.



15

Part IV - State Project Findings and Questioned Costs Section

This section identifies the audit findings required to be reported by Chapter 10.650, Rules of the Florida Auditor General, (for example, material weaknesses, significant deficiencies, and material instances of noncompliance, including questioned costs), as well as any abuse findings involving state financial assistance that are material to a major program.

No matters were identified.


Summary Schedule of Prior Audit Findings Year Ended June 30, 2018

16

Finding

2017-001

Federal Program Title

Federal Direct Student Loans (CFDA # 84.268)

Compliance Requirement

Special Test – Disbursements to or on Behalf of Students

We noted during our audit of this compliance requirement that five (5) of the sixty (60) students selected were disbursed with Title IV funds before obtaining the information from National Student Loan Data System (NSLDS). Also, twelve (12) of the selected students does not have the supporting documents evidencing that verification with NSLDS was performed prior disbursement of funds as required by CFR Section 668.19.

Current Year Status Upon further review of the prior year finding, the University was

found to be in compliance with the requirements related to transfer monitoring. During the current year review, an audit trail was made available to verify that the University complies with the requirements.



BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms

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Independent Auditor’s Management Letter in Accordance with the State of Florida Rules of the Auditor General

To the Board of Trustees Barry University and Subsidiary Miami, Florida Report on the Financial Statements We have audited the consolidated financial statements of Barry University and Subsidiary (the University), as of and for the fiscal year ended June 30, 2018, and have issued our report thereon dated November 15, 2018. Auditor’s Responsibility We conducted our audit 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 of America; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (the “Uniform Guidance”); and Chapter 10.650, Rules of the Florida Auditor General. Other Reports and Schedule We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards and Report on Internal Control over Compliance; Report on Schedule of Expenditures of Federal Awards and State Projects Required by the Uniform Guidance and Chapter 10.650, Rules of the Florida Auditor General which are dated November 15, 2018, the Independent Auditor’s Report on Compliance for Each Major Federal Program and State Projects; Schedule of Findings and Questioned Costs; and Summary Schedule of Prior Audit Findings which are dated November 15, 2018, which should be considered in conjunction with this management letter. Other Matter Section 10.654(1)(e), Rules of the Florida Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect of the consolidated financial statements or State project amounts that is less than material, but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings.

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Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the Board of Trustees, and applicable management, and is not intended to be and should not be used by anyone other than those specified parties.



State of Florida Financial Assistance Program Schedule of Population, Samples Tested, and Questioned Costs

Year Ended June 30, 2018

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Award Sample

Amount Recipients Recipients Amount Recipients

% ofPopulation

Amount

% ofPopulation Recipients Amount

% of Sample Amount

% ofSample

Recipients

Florida Resident Access Grant 4,780,200$ 1,731 135,300$ 50 3% 3% -$ -$ -$

Florida Student Assistance Grant 1,521,267 1,037 69,200 50 5% 5% - - -

Minority Teacher Education 14,000 5 14,000 5 100% 100% - - -

Children of Deceased or Disabled 9,328 2 9,328 2 100% 100% - - -

Honorably Discharged Graduate -

Program (HDGAP) 16,950 37 4,580 10 27% 27% - - -

Florida Medallion Scholars Award 74,690 38 16,016 10 21% 26% - - -

Florida Academic Scholars Award 125,973 19 67,401 10 54% 53% - - -

Total 6,542,408$ 2,869 315,825$ 137 5% 5% -$ $ - $ -

Award Population Questioned Costs


Management Corrective Action Plan Year Ended June 30, 2018

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