Title: NOTE A:
Accounting Policies: NOTE 2: Summary of Signficant Accounting Policies Basis of Accounting
The financial statements of the University have been prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of America (“US
GAAP”).
Basis of Presentation
For reporting purposes, the University’s financial statements have been prepared to focus on the
organization as a whole. Resources are classified into two net asset categories based on the
existence or absence of donor-imposed restrictions. Accordingly, the net assets of the University
and changes therein are classified and reported as follows:
Net Assets Without Donor Restrictions - Net assets that are not subject to donor imposed
restrictions and may be expended for any purpose in performing the mission and primary
objectives of the University. These net assets may be used at the discretion of the
University’s management and those charged with governance.
Net Assets with Donor Restrictions - Net assets subject to stipulations imposed by donors
and grantors. Some donor restrictions are temporary in nature; those restrictions will be met
by actions of the University or by the passage of time. Other donor restrictions are perpetual
in nature, whereby the donor has stipulated the funds be maintained in perpetuity.
Contributions received with donor-imposed restrictions that are met in the same year as received
are reported as revenues of the unrestricted net asset class.
Expiration of restrictions on net assets as the result of the passage of time and/or fulfilling donorimposed
stipulations are reported as net assets released from restrictions between the applicable
classes of net assets in the statement of activities.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 amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
Cash and Cash Equivalents
For the purposes of reporting cash flows, cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original maturities of three months or less, except
for investments purchased with endowment and annuity assets, which are classified as long-term
investments.
Investments
Investments in marketable securities are stated at fair value. Real estate investments are stated
primarily at current appraised value. Securities not publicly traded are stated at estimated market
value. Unrealized gains and losses are included in the changes in net assets.
The estimated fair value of certain alternative investments, such as private equity interests, is
determined by reference to the net asset values allocated to the University at the measurement date.
The University believes the carrying amount of these financial instruments is a reasonable estimate of
fair value. Because alternative investments are not readily marketable, their estimated value is
subject to uncertainty and, therefore, may differ from the value that would have been used had a
ready market for such investments existed. Such difference could be material.
Net appreciation on endowment funds, whose income is unrestricted as to use, is required to be
reported as net assets without donor restrictions unless such net appreciation has been restricted
in perpetuity by the donor or by law. Accordingly, market appreciation on endowment funds without
donor restrictions is classified in the accompanying financial statements as a part of net assets
without donor restrictions. In those cases, where a donor has placed restrictions on the use of
endowment income, any related net appreciation is also subject to the same restriction and is
reported as part of net assets with donor restrictions until such time as the restriction has been met.
See Note 6 for discussion of the University’s endowment spending policy.Accounts Receivable
Student accounts receivable represent amounts due for tuition, fees, and room and board from
currently enrolled and former students. The University extends unsecured credit to students and
parents of dependent students in connection with their studies. Accounts receivable are stated at
the amount management expects to collect from outstanding balances. Management provides for
probable uncollectible amounts through a provision for bad debt expense and an adjustment to a
valuation allowance based on its experience and other circumstances, which may affect the ability
of students and others to meet their obligations. The University evaluates the need for an
allowance for credit losses based upon factors surrounding the credit risk of the specific students,
historical trends, macroeconomic data, supportable forecasts, and other information available.
Balances that are still outstanding after management has used reasonable collection efforts are
written off through a charge to the allowance for credit losses and a credit to accounts receivable.
The allowance for credit losses was $321,157 and $253,197 at May 31, 2024 and 2023,
respectively. Charge-offs, net of recoveries, totaled $94,997 and $269,271 for the years ended
May 31, 2024 and 2023, respectively. Provision for bad debt was $162,957 and $270,028 for
years ended May 31, 2024 and 2023, respectively.
Loans to Students
Loans receivable are carried at unpaid principal balances, less an allowance for credit losses. The
allowance for credit losses is increased by charges to income and decreased by charge-offs (net of
recoveries). Management’s periodic evaluation of the adequacy of the allowance is based on
Perkins loan program requirements, the University’s historical loan loss experience, specific
impaired loans, adverse situations that may affect the borrower’s ability to repay, estimated value of
any underlying collateral, macroeconomic data, supportable forecasts and current economic
conditions. Loans are considered impaired if full principal or interest payments are not anticipated in
accordance with the contractual terms. The University’s practice is to charge off any loan or portion
of a loan when the loan is determined by management to be uncollectible due to the borrower’s
failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the
depreciation of the underlying collateral, or for other reasons.
Loans are placed on nonaccrual when management believes, after considering economic
conditions, business conditions, and collection efforts that the loans are impaired or collection of
interest is doubtful. Uncollected interest previously accrued is charged off or an allowance is
established by a charge to interest income. Interest income on nonaccrual loans is recognized only
to the extent cash payments are received. The amount of loans past due 90 days or more and still
accruing interest as of May 31, 2024 and 2023 totaled $37,426 and $89,922, respectively.
Interest on loans is recognized over the term of the loan and is calculated using the simple-interest
method on principal amounts outstanding.Land, Buildings and Equipment
Land, buildings and equipment are stated at cost at date of acquisition or fair value at date of
donation in the case of gifts, less accumulated depreciation, computed on a straight-line basis over
the estimated useful lives ranging from 5 to 75 years. Items having a useful life longer than one
year and costing more than $5,000 are capitalized. Depreciation expense for fiscal years ended
May 31, 2024 and 2023 was $2,559,401 and $2,418,466 respectively.
Inventory
Inventory is valued at the lower of cost on the first-in, first-out basis, and net realizable value.
Inventory consists mainly of books, Bible class materials, and gift items sold by the Christian Store
as well as goods to be sold from dining services.
Income Taxes
The University is exempt from federal income taxes under Section 501(c) (3) of the Internal
Revenue Code; accordingly, no provision for income taxes is made in the financial statements. The
University is current on filing its tax form 990 and form 990T. If interest and penalties are incurred
such amounts are recognized in income tax expense.
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB
Statement No. 109, codified in ASC Topic 740 clarifies the accounting for uncertainty in income
taxes recognized in an entity’s financial statements and prescribes a recognition threshold and
measurement attribute for tax positions taken or expected to be taken on a tax return including the
entity’s status as a tax-exempt not-for-profit entity. Additionally, ASC 740 provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.
The University had no significant uncertain tax positions at May 31, 2024 or 2023.
Endowment and Similar Funds
The endowment and similar funds are subdivided into appropriate classifications. Endowment funds
have been received from benefactors who, by the terms of their conveying instruments, have
stipulated that the principal of their gifts may not be expended. Quasi-endowment funds are funds
which the Board of Trustees of the University has determined are to be retained and invested until
the Board, at its discretion, authorizes their expenditure. The principal of such funds may be either
designated or undesignated as to use. Income derived from investments of endowment and similar
funds is accounted for in the fund to which it is restricted, or if unrestricted, as revenues in
unrestricted current funds.
The Board of Trustees has established that, in the absence of further restrictions, 50 percent of the
corpus of endowment gifts is to be recorded as net assets with donor restrictions held in perpetuity,
since the University’s agreements did not explicitly state the amount of the gift that should be held
in perpetuity. The remaining 50 percent is recorded as net assets with donor restrictions that are
temporary in nature until those amounts are appropriated for expenditure for their donor restricted purpose, and is available to absorb market fluctuations and to award scholarships if the return on
investment in any given year is not sufficient. Management has confirmed with donors the
University’s interpretation of their endowment agreement. This correspondence effectively
confirmed the donor’s intent for the amount of the gift that must be held in perpetuity. Subsequent
to this confirmation, 50 percent of the corpus of these endowments was reclassified from net assets
with donor restrictions held in perpetuity to net assets with donor restrictions that have purpose
restrictions in accordance with the Board’s resolution.
Tuition, Fees and Auxiliary Enterprises
The University’s primary source of revenues from contracts with customers are from tuition, fees
and sales and services of auxiliary enterprises.
In accordance with the adoption of Accounting Standards Update (“ASU”) 2014-09, Revenues
from Contracts with Customers, the University identifies a contract for revenue recognition when
there is approval and commitment from both parties, the rights of the parties and payment terms
are identified, the contract has commercial substance and the collectability of the consideration is
probable. The University evaluates each contract to determine the number of distinct performance
obligations in the contract, which requires the use of judgment. Performance obligations are
determined based on the nature of the services provided by the University.
Tuition and fees are derived from academic services rendered by the University on campus and
online, as well as from related educational resources that the University provides to its students,
such as access to courses and online materials. The University recognizes revenue for academic
services pro-rata over the applicable academic term. Scholarships provided to students by the
University are reflected as a reduction of gross tuition and fees. Tuition and fees received in
advance of services performed are considered contract liabilities and recorded as deferred revenue
and presented as student deposits and advanced payments in the statements of financial position.
Sales and services of auxiliary enterprises include housing services, food services, a bookstore,
camps, and events. The University recognizes revenue for housing and certain food services
proportionately over the applicable academic term. Fees related to housing and food received in
advance of services performed are considered contract liabilities and recorded as deferred revenue
and presented as student deposits and advanced payments in the statements of financial position.
The University typically recognized revenue from other sales and services of auxiliary enterprises at
the point in time sales occur or as services are rendered.
The University’s accounts receivable represents unconditional rights to consideration from its
contracts with customers. Typically, once a customer is invoiced for tuition, fees, and auxiliary
services, payment is due immediately. Accounts receivable, net of allowance for doubtful accounts
as of the years ended May 31, 2024 and May 31, 2023, were $967,353 and $759,231,
respectively. The University does not present information about outstanding performance obligations as of yearend
because its contracts with students all had original terms of less than one year. The University
does not have any contract assets. The University had no costs that were capitalized to obtain or
to fulfill a contract with a student.
The University maintains an institutional tuition refund policy, which provides for all or a portion of
tuition and fees to be refunded if a student withdraws during the stated refund period. The
University does not record revenue for amounts that may be refunded.
Contributions and Private Gifts
Contributions and private gifts, including unconditional promises to give, are recognized as
revenues in the period received. Conditional promises to give are not recognized until they become
unconditional; that is, when the conditions on which they depend are substantially met.
Contributions of assets other than cash are recorded at their estimated fair value. Contributions to
be received after one year are discounted at an appropriate discount rate commensurate with the
risks involved. Amortization of discounts is recorded as additional contribution revenue in
accordance with donor-imposed restrictions, if any, on the contributions. As of May 31, 2024 and
2023, there were $9,000 and $15,000 unconditional promises to give respectively.
Functional Expenses
Costs of providing the University’s programs are reported in the statements of activities on a
functional basis. Program expenses include costs directly associated with the program and other
indirect costs determined to benefit that program. These costs have been allocated between
functional categories program and supporting services based on estimates made by management.
Impairment of Long-Lived Assets
The University evaluates the recoverability of its long-lived assets for possible impairment when
events or circumstances indicate that the carrying amounts may not be recoverable. Long-lived
assets are grouped and evaluated for impairment at the lowest level for which there are identifiable
cash flows that are independent of the cash flows of other groups of assets. If it is determined that
the carrying amounts of such long-lived assets are not recoverable, the assets are written down to
their fair value. See Note 8.
Reclassifications
Certain reclassifications have been made to the fiscal 2023 financial statements to conform to the
fiscal 2024 presentation.Newly Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments ("ASU 2016-13" or "ASC 326"). ASU 2016-13 revises the
accounting requirements related to the measurement of credit losses and requires organizations to
measure all expected credit losses for financial assets based on historical experience, current
conditions, and reasonable and supportable forecasts about collectability. Assets must be
presented in the financial statements at the net amount expected to be collected.
On January 1, 2023, the University adopted the new accounting standard and all of the applicable
related amendments using the modified retrospective method. The adoption did not have an impact
on the University’s statement of financial position and, therefore, a cumulative-effect adjustment to
net assets was not recorded. The Company does not expect ASC 326 to have a significant impact
on its financial condition or results of operations on an ongoing basis.
De Minimis Rate Used: N
Rate Explanation: The University has elected not to use the 10-percent de minimis indirect cost rate
allowed under the Uniform Guidance.
The schedule of expenditures of federal awards includes the federal grant activity of Freed-
Hardeman University and is presented on the accrual basis of accounting. The
information in this Schedule is presented in accordance with the requirements of Title 2
U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
The University has elected not to use the 10-percent de minimis indirect cost rate
allowed under the Uniform Guidance.
Title: NOTE B:
Accounting Policies: NOTE 2: Summary of Signficant Accounting Policies Basis of Accounting
The financial statements of the University have been prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of America (“US
GAAP”).
Basis of Presentation
For reporting purposes, the University’s financial statements have been prepared to focus on the
organization as a whole. Resources are classified into two net asset categories based on the
existence or absence of donor-imposed restrictions. Accordingly, the net assets of the University
and changes therein are classified and reported as follows:
Net Assets Without Donor Restrictions - Net assets that are not subject to donor imposed
restrictions and may be expended for any purpose in performing the mission and primary
objectives of the University. These net assets may be used at the discretion of the
University’s management and those charged with governance.
Net Assets with Donor Restrictions - Net assets subject to stipulations imposed by donors
and grantors. Some donor restrictions are temporary in nature; those restrictions will be met
by actions of the University or by the passage of time. Other donor restrictions are perpetual
in nature, whereby the donor has stipulated the funds be maintained in perpetuity.
Contributions received with donor-imposed restrictions that are met in the same year as received
are reported as revenues of the unrestricted net asset class.
Expiration of restrictions on net assets as the result of the passage of time and/or fulfilling donorimposed
stipulations are reported as net assets released from restrictions between the applicable
classes of net assets in the statement of activities.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 amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
Cash and Cash Equivalents
For the purposes of reporting cash flows, cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original maturities of three months or less, except
for investments purchased with endowment and annuity assets, which are classified as long-term
investments.
Investments
Investments in marketable securities are stated at fair value. Real estate investments are stated
primarily at current appraised value. Securities not publicly traded are stated at estimated market
value. Unrealized gains and losses are included in the changes in net assets.
The estimated fair value of certain alternative investments, such as private equity interests, is
determined by reference to the net asset values allocated to the University at the measurement date.
The University believes the carrying amount of these financial instruments is a reasonable estimate of
fair value. Because alternative investments are not readily marketable, their estimated value is
subject to uncertainty and, therefore, may differ from the value that would have been used had a
ready market for such investments existed. Such difference could be material.
Net appreciation on endowment funds, whose income is unrestricted as to use, is required to be
reported as net assets without donor restrictions unless such net appreciation has been restricted
in perpetuity by the donor or by law. Accordingly, market appreciation on endowment funds without
donor restrictions is classified in the accompanying financial statements as a part of net assets
without donor restrictions. In those cases, where a donor has placed restrictions on the use of
endowment income, any related net appreciation is also subject to the same restriction and is
reported as part of net assets with donor restrictions until such time as the restriction has been met.
See Note 6 for discussion of the University’s endowment spending policy.Accounts Receivable
Student accounts receivable represent amounts due for tuition, fees, and room and board from
currently enrolled and former students. The University extends unsecured credit to students and
parents of dependent students in connection with their studies. Accounts receivable are stated at
the amount management expects to collect from outstanding balances. Management provides for
probable uncollectible amounts through a provision for bad debt expense and an adjustment to a
valuation allowance based on its experience and other circumstances, which may affect the ability
of students and others to meet their obligations. The University evaluates the need for an
allowance for credit losses based upon factors surrounding the credit risk of the specific students,
historical trends, macroeconomic data, supportable forecasts, and other information available.
Balances that are still outstanding after management has used reasonable collection efforts are
written off through a charge to the allowance for credit losses and a credit to accounts receivable.
The allowance for credit losses was $321,157 and $253,197 at May 31, 2024 and 2023,
respectively. Charge-offs, net of recoveries, totaled $94,997 and $269,271 for the years ended
May 31, 2024 and 2023, respectively. Provision for bad debt was $162,957 and $270,028 for
years ended May 31, 2024 and 2023, respectively.
Loans to Students
Loans receivable are carried at unpaid principal balances, less an allowance for credit losses. The
allowance for credit losses is increased by charges to income and decreased by charge-offs (net of
recoveries). Management’s periodic evaluation of the adequacy of the allowance is based on
Perkins loan program requirements, the University’s historical loan loss experience, specific
impaired loans, adverse situations that may affect the borrower’s ability to repay, estimated value of
any underlying collateral, macroeconomic data, supportable forecasts and current economic
conditions. Loans are considered impaired if full principal or interest payments are not anticipated in
accordance with the contractual terms. The University’s practice is to charge off any loan or portion
of a loan when the loan is determined by management to be uncollectible due to the borrower’s
failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the
depreciation of the underlying collateral, or for other reasons.
Loans are placed on nonaccrual when management believes, after considering economic
conditions, business conditions, and collection efforts that the loans are impaired or collection of
interest is doubtful. Uncollected interest previously accrued is charged off or an allowance is
established by a charge to interest income. Interest income on nonaccrual loans is recognized only
to the extent cash payments are received. The amount of loans past due 90 days or more and still
accruing interest as of May 31, 2024 and 2023 totaled $37,426 and $89,922, respectively.
Interest on loans is recognized over the term of the loan and is calculated using the simple-interest
method on principal amounts outstanding.Land, Buildings and Equipment
Land, buildings and equipment are stated at cost at date of acquisition or fair value at date of
donation in the case of gifts, less accumulated depreciation, computed on a straight-line basis over
the estimated useful lives ranging from 5 to 75 years. Items having a useful life longer than one
year and costing more than $5,000 are capitalized. Depreciation expense for fiscal years ended
May 31, 2024 and 2023 was $2,559,401 and $2,418,466 respectively.
Inventory
Inventory is valued at the lower of cost on the first-in, first-out basis, and net realizable value.
Inventory consists mainly of books, Bible class materials, and gift items sold by the Christian Store
as well as goods to be sold from dining services.
Income Taxes
The University is exempt from federal income taxes under Section 501(c) (3) of the Internal
Revenue Code; accordingly, no provision for income taxes is made in the financial statements. The
University is current on filing its tax form 990 and form 990T. If interest and penalties are incurred
such amounts are recognized in income tax expense.
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB
Statement No. 109, codified in ASC Topic 740 clarifies the accounting for uncertainty in income
taxes recognized in an entity’s financial statements and prescribes a recognition threshold and
measurement attribute for tax positions taken or expected to be taken on a tax return including the
entity’s status as a tax-exempt not-for-profit entity. Additionally, ASC 740 provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.
The University had no significant uncertain tax positions at May 31, 2024 or 2023.
Endowment and Similar Funds
The endowment and similar funds are subdivided into appropriate classifications. Endowment funds
have been received from benefactors who, by the terms of their conveying instruments, have
stipulated that the principal of their gifts may not be expended. Quasi-endowment funds are funds
which the Board of Trustees of the University has determined are to be retained and invested until
the Board, at its discretion, authorizes their expenditure. The principal of such funds may be either
designated or undesignated as to use. Income derived from investments of endowment and similar
funds is accounted for in the fund to which it is restricted, or if unrestricted, as revenues in
unrestricted current funds.
The Board of Trustees has established that, in the absence of further restrictions, 50 percent of the
corpus of endowment gifts is to be recorded as net assets with donor restrictions held in perpetuity,
since the University’s agreements did not explicitly state the amount of the gift that should be held
in perpetuity. The remaining 50 percent is recorded as net assets with donor restrictions that are
temporary in nature until those amounts are appropriated for expenditure for their donor restricted purpose, and is available to absorb market fluctuations and to award scholarships if the return on
investment in any given year is not sufficient. Management has confirmed with donors the
University’s interpretation of their endowment agreement. This correspondence effectively
confirmed the donor’s intent for the amount of the gift that must be held in perpetuity. Subsequent
to this confirmation, 50 percent of the corpus of these endowments was reclassified from net assets
with donor restrictions held in perpetuity to net assets with donor restrictions that have purpose
restrictions in accordance with the Board’s resolution.
Tuition, Fees and Auxiliary Enterprises
The University’s primary source of revenues from contracts with customers are from tuition, fees
and sales and services of auxiliary enterprises.
In accordance with the adoption of Accounting Standards Update (“ASU”) 2014-09, Revenues
from Contracts with Customers, the University identifies a contract for revenue recognition when
there is approval and commitment from both parties, the rights of the parties and payment terms
are identified, the contract has commercial substance and the collectability of the consideration is
probable. The University evaluates each contract to determine the number of distinct performance
obligations in the contract, which requires the use of judgment. Performance obligations are
determined based on the nature of the services provided by the University.
Tuition and fees are derived from academic services rendered by the University on campus and
online, as well as from related educational resources that the University provides to its students,
such as access to courses and online materials. The University recognizes revenue for academic
services pro-rata over the applicable academic term. Scholarships provided to students by the
University are reflected as a reduction of gross tuition and fees. Tuition and fees received in
advance of services performed are considered contract liabilities and recorded as deferred revenue
and presented as student deposits and advanced payments in the statements of financial position.
Sales and services of auxiliary enterprises include housing services, food services, a bookstore,
camps, and events. The University recognizes revenue for housing and certain food services
proportionately over the applicable academic term. Fees related to housing and food received in
advance of services performed are considered contract liabilities and recorded as deferred revenue
and presented as student deposits and advanced payments in the statements of financial position.
The University typically recognized revenue from other sales and services of auxiliary enterprises at
the point in time sales occur or as services are rendered.
The University’s accounts receivable represents unconditional rights to consideration from its
contracts with customers. Typically, once a customer is invoiced for tuition, fees, and auxiliary
services, payment is due immediately. Accounts receivable, net of allowance for doubtful accounts
as of the years ended May 31, 2024 and May 31, 2023, were $967,353 and $759,231,
respectively. The University does not present information about outstanding performance obligations as of yearend
because its contracts with students all had original terms of less than one year. The University
does not have any contract assets. The University had no costs that were capitalized to obtain or
to fulfill a contract with a student.
The University maintains an institutional tuition refund policy, which provides for all or a portion of
tuition and fees to be refunded if a student withdraws during the stated refund period. The
University does not record revenue for amounts that may be refunded.
Contributions and Private Gifts
Contributions and private gifts, including unconditional promises to give, are recognized as
revenues in the period received. Conditional promises to give are not recognized until they become
unconditional; that is, when the conditions on which they depend are substantially met.
Contributions of assets other than cash are recorded at their estimated fair value. Contributions to
be received after one year are discounted at an appropriate discount rate commensurate with the
risks involved. Amortization of discounts is recorded as additional contribution revenue in
accordance with donor-imposed restrictions, if any, on the contributions. As of May 31, 2024 and
2023, there were $9,000 and $15,000 unconditional promises to give respectively.
Functional Expenses
Costs of providing the University’s programs are reported in the statements of activities on a
functional basis. Program expenses include costs directly associated with the program and other
indirect costs determined to benefit that program. These costs have been allocated between
functional categories program and supporting services based on estimates made by management.
Impairment of Long-Lived Assets
The University evaluates the recoverability of its long-lived assets for possible impairment when
events or circumstances indicate that the carrying amounts may not be recoverable. Long-lived
assets are grouped and evaluated for impairment at the lowest level for which there are identifiable
cash flows that are independent of the cash flows of other groups of assets. If it is determined that
the carrying amounts of such long-lived assets are not recoverable, the assets are written down to
their fair value. See Note 8.
Reclassifications
Certain reclassifications have been made to the fiscal 2023 financial statements to conform to the
fiscal 2024 presentation.Newly Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments ("ASU 2016-13" or "ASC 326"). ASU 2016-13 revises the
accounting requirements related to the measurement of credit losses and requires organizations to
measure all expected credit losses for financial assets based on historical experience, current
conditions, and reasonable and supportable forecasts about collectability. Assets must be
presented in the financial statements at the net amount expected to be collected.
On January 1, 2023, the University adopted the new accounting standard and all of the applicable
related amendments using the modified retrospective method. The adoption did not have an impact
on the University’s statement of financial position and, therefore, a cumulative-effect adjustment to
net assets was not recorded. The Company does not expect ASC 326 to have a significant impact
on its financial condition or results of operations on an ongoing basis.
De Minimis Rate Used: N
Rate Explanation: The University has elected not to use the 10-percent de minimis indirect cost rate
allowed under the Uniform Guidance.
The University is responsible only for the performance of certain administrative duties
with respect to federal direct student loans, and accordingly, these loans are not included
in the financial statements. The loans processed are included in the Schedule of
Expenditures of Federal Awards as part of the student financial assistance cluster.
During the year ended May 31, 2024, the University processed $9,997,688 of new loans
under the Federal Direct Student Loans program.
Title: Note C:
Accounting Policies: NOTE 2: Summary of Signficant Accounting Policies Basis of Accounting
The financial statements of the University have been prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of America (“US
GAAP”).
Basis of Presentation
For reporting purposes, the University’s financial statements have been prepared to focus on the
organization as a whole. Resources are classified into two net asset categories based on the
existence or absence of donor-imposed restrictions. Accordingly, the net assets of the University
and changes therein are classified and reported as follows:
Net Assets Without Donor Restrictions - Net assets that are not subject to donor imposed
restrictions and may be expended for any purpose in performing the mission and primary
objectives of the University. These net assets may be used at the discretion of the
University’s management and those charged with governance.
Net Assets with Donor Restrictions - Net assets subject to stipulations imposed by donors
and grantors. Some donor restrictions are temporary in nature; those restrictions will be met
by actions of the University or by the passage of time. Other donor restrictions are perpetual
in nature, whereby the donor has stipulated the funds be maintained in perpetuity.
Contributions received with donor-imposed restrictions that are met in the same year as received
are reported as revenues of the unrestricted net asset class.
Expiration of restrictions on net assets as the result of the passage of time and/or fulfilling donorimposed
stipulations are reported as net assets released from restrictions between the applicable
classes of net assets in the statement of activities.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 amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
Cash and Cash Equivalents
For the purposes of reporting cash flows, cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original maturities of three months or less, except
for investments purchased with endowment and annuity assets, which are classified as long-term
investments.
Investments
Investments in marketable securities are stated at fair value. Real estate investments are stated
primarily at current appraised value. Securities not publicly traded are stated at estimated market
value. Unrealized gains and losses are included in the changes in net assets.
The estimated fair value of certain alternative investments, such as private equity interests, is
determined by reference to the net asset values allocated to the University at the measurement date.
The University believes the carrying amount of these financial instruments is a reasonable estimate of
fair value. Because alternative investments are not readily marketable, their estimated value is
subject to uncertainty and, therefore, may differ from the value that would have been used had a
ready market for such investments existed. Such difference could be material.
Net appreciation on endowment funds, whose income is unrestricted as to use, is required to be
reported as net assets without donor restrictions unless such net appreciation has been restricted
in perpetuity by the donor or by law. Accordingly, market appreciation on endowment funds without
donor restrictions is classified in the accompanying financial statements as a part of net assets
without donor restrictions. In those cases, where a donor has placed restrictions on the use of
endowment income, any related net appreciation is also subject to the same restriction and is
reported as part of net assets with donor restrictions until such time as the restriction has been met.
See Note 6 for discussion of the University’s endowment spending policy.Accounts Receivable
Student accounts receivable represent amounts due for tuition, fees, and room and board from
currently enrolled and former students. The University extends unsecured credit to students and
parents of dependent students in connection with their studies. Accounts receivable are stated at
the amount management expects to collect from outstanding balances. Management provides for
probable uncollectible amounts through a provision for bad debt expense and an adjustment to a
valuation allowance based on its experience and other circumstances, which may affect the ability
of students and others to meet their obligations. The University evaluates the need for an
allowance for credit losses based upon factors surrounding the credit risk of the specific students,
historical trends, macroeconomic data, supportable forecasts, and other information available.
Balances that are still outstanding after management has used reasonable collection efforts are
written off through a charge to the allowance for credit losses and a credit to accounts receivable.
The allowance for credit losses was $321,157 and $253,197 at May 31, 2024 and 2023,
respectively. Charge-offs, net of recoveries, totaled $94,997 and $269,271 for the years ended
May 31, 2024 and 2023, respectively. Provision for bad debt was $162,957 and $270,028 for
years ended May 31, 2024 and 2023, respectively.
Loans to Students
Loans receivable are carried at unpaid principal balances, less an allowance for credit losses. The
allowance for credit losses is increased by charges to income and decreased by charge-offs (net of
recoveries). Management’s periodic evaluation of the adequacy of the allowance is based on
Perkins loan program requirements, the University’s historical loan loss experience, specific
impaired loans, adverse situations that may affect the borrower’s ability to repay, estimated value of
any underlying collateral, macroeconomic data, supportable forecasts and current economic
conditions. Loans are considered impaired if full principal or interest payments are not anticipated in
accordance with the contractual terms. The University’s practice is to charge off any loan or portion
of a loan when the loan is determined by management to be uncollectible due to the borrower’s
failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the
depreciation of the underlying collateral, or for other reasons.
Loans are placed on nonaccrual when management believes, after considering economic
conditions, business conditions, and collection efforts that the loans are impaired or collection of
interest is doubtful. Uncollected interest previously accrued is charged off or an allowance is
established by a charge to interest income. Interest income on nonaccrual loans is recognized only
to the extent cash payments are received. The amount of loans past due 90 days or more and still
accruing interest as of May 31, 2024 and 2023 totaled $37,426 and $89,922, respectively.
Interest on loans is recognized over the term of the loan and is calculated using the simple-interest
method on principal amounts outstanding.Land, Buildings and Equipment
Land, buildings and equipment are stated at cost at date of acquisition or fair value at date of
donation in the case of gifts, less accumulated depreciation, computed on a straight-line basis over
the estimated useful lives ranging from 5 to 75 years. Items having a useful life longer than one
year and costing more than $5,000 are capitalized. Depreciation expense for fiscal years ended
May 31, 2024 and 2023 was $2,559,401 and $2,418,466 respectively.
Inventory
Inventory is valued at the lower of cost on the first-in, first-out basis, and net realizable value.
Inventory consists mainly of books, Bible class materials, and gift items sold by the Christian Store
as well as goods to be sold from dining services.
Income Taxes
The University is exempt from federal income taxes under Section 501(c) (3) of the Internal
Revenue Code; accordingly, no provision for income taxes is made in the financial statements. The
University is current on filing its tax form 990 and form 990T. If interest and penalties are incurred
such amounts are recognized in income tax expense.
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB
Statement No. 109, codified in ASC Topic 740 clarifies the accounting for uncertainty in income
taxes recognized in an entity’s financial statements and prescribes a recognition threshold and
measurement attribute for tax positions taken or expected to be taken on a tax return including the
entity’s status as a tax-exempt not-for-profit entity. Additionally, ASC 740 provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.
The University had no significant uncertain tax positions at May 31, 2024 or 2023.
Endowment and Similar Funds
The endowment and similar funds are subdivided into appropriate classifications. Endowment funds
have been received from benefactors who, by the terms of their conveying instruments, have
stipulated that the principal of their gifts may not be expended. Quasi-endowment funds are funds
which the Board of Trustees of the University has determined are to be retained and invested until
the Board, at its discretion, authorizes their expenditure. The principal of such funds may be either
designated or undesignated as to use. Income derived from investments of endowment and similar
funds is accounted for in the fund to which it is restricted, or if unrestricted, as revenues in
unrestricted current funds.
The Board of Trustees has established that, in the absence of further restrictions, 50 percent of the
corpus of endowment gifts is to be recorded as net assets with donor restrictions held in perpetuity,
since the University’s agreements did not explicitly state the amount of the gift that should be held
in perpetuity. The remaining 50 percent is recorded as net assets with donor restrictions that are
temporary in nature until those amounts are appropriated for expenditure for their donor restricted purpose, and is available to absorb market fluctuations and to award scholarships if the return on
investment in any given year is not sufficient. Management has confirmed with donors the
University’s interpretation of their endowment agreement. This correspondence effectively
confirmed the donor’s intent for the amount of the gift that must be held in perpetuity. Subsequent
to this confirmation, 50 percent of the corpus of these endowments was reclassified from net assets
with donor restrictions held in perpetuity to net assets with donor restrictions that have purpose
restrictions in accordance with the Board’s resolution.
Tuition, Fees and Auxiliary Enterprises
The University’s primary source of revenues from contracts with customers are from tuition, fees
and sales and services of auxiliary enterprises.
In accordance with the adoption of Accounting Standards Update (“ASU”) 2014-09, Revenues
from Contracts with Customers, the University identifies a contract for revenue recognition when
there is approval and commitment from both parties, the rights of the parties and payment terms
are identified, the contract has commercial substance and the collectability of the consideration is
probable. The University evaluates each contract to determine the number of distinct performance
obligations in the contract, which requires the use of judgment. Performance obligations are
determined based on the nature of the services provided by the University.
Tuition and fees are derived from academic services rendered by the University on campus and
online, as well as from related educational resources that the University provides to its students,
such as access to courses and online materials. The University recognizes revenue for academic
services pro-rata over the applicable academic term. Scholarships provided to students by the
University are reflected as a reduction of gross tuition and fees. Tuition and fees received in
advance of services performed are considered contract liabilities and recorded as deferred revenue
and presented as student deposits and advanced payments in the statements of financial position.
Sales and services of auxiliary enterprises include housing services, food services, a bookstore,
camps, and events. The University recognizes revenue for housing and certain food services
proportionately over the applicable academic term. Fees related to housing and food received in
advance of services performed are considered contract liabilities and recorded as deferred revenue
and presented as student deposits and advanced payments in the statements of financial position.
The University typically recognized revenue from other sales and services of auxiliary enterprises at
the point in time sales occur or as services are rendered.
The University’s accounts receivable represents unconditional rights to consideration from its
contracts with customers. Typically, once a customer is invoiced for tuition, fees, and auxiliary
services, payment is due immediately. Accounts receivable, net of allowance for doubtful accounts
as of the years ended May 31, 2024 and May 31, 2023, were $967,353 and $759,231,
respectively. The University does not present information about outstanding performance obligations as of yearend
because its contracts with students all had original terms of less than one year. The University
does not have any contract assets. The University had no costs that were capitalized to obtain or
to fulfill a contract with a student.
The University maintains an institutional tuition refund policy, which provides for all or a portion of
tuition and fees to be refunded if a student withdraws during the stated refund period. The
University does not record revenue for amounts that may be refunded.
Contributions and Private Gifts
Contributions and private gifts, including unconditional promises to give, are recognized as
revenues in the period received. Conditional promises to give are not recognized until they become
unconditional; that is, when the conditions on which they depend are substantially met.
Contributions of assets other than cash are recorded at their estimated fair value. Contributions to
be received after one year are discounted at an appropriate discount rate commensurate with the
risks involved. Amortization of discounts is recorded as additional contribution revenue in
accordance with donor-imposed restrictions, if any, on the contributions. As of May 31, 2024 and
2023, there were $9,000 and $15,000 unconditional promises to give respectively.
Functional Expenses
Costs of providing the University’s programs are reported in the statements of activities on a
functional basis. Program expenses include costs directly associated with the program and other
indirect costs determined to benefit that program. These costs have been allocated between
functional categories program and supporting services based on estimates made by management.
Impairment of Long-Lived Assets
The University evaluates the recoverability of its long-lived assets for possible impairment when
events or circumstances indicate that the carrying amounts may not be recoverable. Long-lived
assets are grouped and evaluated for impairment at the lowest level for which there are identifiable
cash flows that are independent of the cash flows of other groups of assets. If it is determined that
the carrying amounts of such long-lived assets are not recoverable, the assets are written down to
their fair value. See Note 8.
Reclassifications
Certain reclassifications have been made to the fiscal 2023 financial statements to conform to the
fiscal 2024 presentation.Newly Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments ("ASU 2016-13" or "ASC 326"). ASU 2016-13 revises the
accounting requirements related to the measurement of credit losses and requires organizations to
measure all expected credit losses for financial assets based on historical experience, current
conditions, and reasonable and supportable forecasts about collectability. Assets must be
presented in the financial statements at the net amount expected to be collected.
On January 1, 2023, the University adopted the new accounting standard and all of the applicable
related amendments using the modified retrospective method. The adoption did not have an impact
on the University’s statement of financial position and, therefore, a cumulative-effect adjustment to
net assets was not recorded. The Company does not expect ASC 326 to have a significant impact
on its financial condition or results of operations on an ongoing basis.
De Minimis Rate Used: N
Rate Explanation: The University has elected not to use the 10-percent de minimis indirect cost rate
allowed under the Uniform Guidance.
At May 31, 2024, the cumulative Federal Perkins loans receivable balance was
$168,784, while there were no new loans issued in fiscal 2024.