ML19317D791

Financial Assurance and Financial Statements for the Reed Institute June 30, 2019 and 2018

ML19317D791
Person / Time
Site:	Reed College
Issue date:	10/30/2019
From:	Krahenbuhl M Reed College
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
Download: ML19317D791 (39)

Text

REED COLLEGE

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REACTOR FACILITY 3203 Southeast Portland, Oregon 9nD2-8199 Oct. 30, 2019 tdepbo,,.

503{777-7222 f=

so3f777-n74 ATTN: Document Control Desk rcactcxOrced edo U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 httpJ/rcactor.rced edu Docket: 50-288 License No: R-112 Enclosed are the following

1. Financial Assurance for Reed Institute dba Reed College

2. Financial Statements for The Reed Institute June 30, 2019 and 2018.

I declare under penalty of perjury that the foregoing is true and correct.

Executed on tJcf 30,> UlC/

Melinda Krahenbuhl, Ph.D.

Director, Reed Research Reactor

REED COLLEGE October 28, 2019 Financial Assurance for Cost of Decommissioning Activities OFFICE OF Self-Guarantee Agreement THE TREASURER The guarantee is made by Reed College, a non-profit college, organized under the laws of 3203 Som:heut the State of Oregon, herein referred to as the "guarantor to the U.S. Nuclear Regulatory Woodstoclc Boulevard Commission (NRC), on behalf of the college as licensee.

Portland, Oregon Recitals 97202-8199

1. The guarantor has full authority and capacity to enter into this self-guarantee under the by-laws of the trustees of Reed College.

503fTT7-7506

2. This self-guarantee is being issued to comply with regulations issued by the NRC,

{ttx an agency of the U.S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganiz.ation Act of 1974. NRC has promulgated 503fTT7-T775 regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50, mun/

which require that a holder o+/-: or an applicant for, a materials license issued pursuant to 10 CFR Part 50 provide assurance that funds will be available when needed for required decommissioning activities.

3. The self-guarantee is issued to provide financial assurance for decommissioning activities for the licenses and facilities shown.

License# License description Certified amounts of 2018 Cost and estimates Docket#

R-112 Research and test reactor $2,420,100 50-288 and related facilities located at Reed College Portland Oregon 97202 Subtotal $2,420,100 25% Contingency fund $605,025 Total Estimated Cost $3,025,125

4. The Guarantor meets or exceeds the following financial test for a nonprofit College that issues bonds. Specifically, the most recent rating as of October 2019 for the college is Aa2/VMIG 1 by Moody's Investor Services, and guarantor agrees to comply with all notification requirements as specified in 10 CFR Part 50, and Appendix A to 10 CFR Part 30.

5. The guarantor does not have a parent company holding majority control of its voting stock.

6. Decommissioning activities as used below refer to activities required by 10 CFR Part 50 for decommissioning of the facilities identified.

7. Pursuant to the guarantor's authority to enter into this guarantee, the guarantor guarantees to the NRC that the guarantor shall:

a. Carry out the required decommissioning activities, as required by the license listed above.

8. The guarantor agrees to submit audited financial statements annually within 90 days of the completion of the guarantor's fiscal year audit.

9. The guarantor agrees that if, at the end of any fiscal year before termination of this self-guarantee, it fails to meet the self-guarantee financial test criteria, it shall send in 90 days of the end of the fiscal year, by certified mail to the NRC, that it intends to provide alternative financial assurance as specified in 10 CFR Part 30.

Within 120 days after the end of the fiscal year, the guarantor shall establish such financial assurance. *

10. The guarantor agrees that if it determines, at any time, other than as described in Recital 9, that it no longer meets the self-guarantee financial test criteria or it is disallowed from continuing as a self-guarantor, it shall establish alternative financial assurance as specified in 10 CFR Part 50 within 30 days.

11. The guarantor as well as its successors and assigns, agrees to remain bound jointly and severely under this guarantee notwithstanding any or all of the following:

amendment or modification of the license or NRC approved decommission funding plan for that facility, the extension or reduction of the time of performance of required activities, or any other modification or alteration of an obligation of the licenses pursuant to 10 CFR Parts 50 and 70.

12. The guarantor agrees that it shall be liable for all litigation costs incurred by the NRC in any successful effort to enforce the agreement against the guarantor.

13. The guarantor agrees to remain bound under the self-guarantee for as long as it, as licensee, must comply with the applicable financial assurance requirements of 10 CFR Part 50, for the previously listed facilities, except that the guarantor may cancel this self-guarantee by sending notice by certified mail to the NRC, such cancellation to become effective not before an alternative financial assurance mechanism has been put in place by the guarantor.

14. The guarantor agrees that if it, as licensee, fails to provide alternative financial assurance as specified in 10 CFR Parts 50 and 70 and obtain written approval of such assurance from the NRC within 90 days after a notice of cancellation by the guarantor is received by the NRC from the guarantor, the guarantor shall make full payment under self-guarantee.

15. The guarantor expressly waives notice of acceptance of this self-guarantee by the NRC. The guarantor expressly waives notice of amendments or modifications of decommissioning requirements.

16. If the guarantor files financial reports with the U.S. Securities and Exchange Commission, then it shall promptly submit them to its independent auditor-and to the NRC during each year in which this self-guarantee is in effect

17. The guarantor agrees that if, at any time before termination of this self-guarantee, its most recent bond issuance ceased to be rated in the category of "A" or above by either Standard & Poor's or Moody's, it shall provide notice in writing of such fact to NRC within 20 days of publication of the change by the rating service.

I hereby certify that this self-guarantee is true and correct to the best of my knowledge.

a Carry out the required decommissioning activities, as required by the license listed above.

8. The guarantor agrees to submit audited financial statements annually within 90 days of the completion of the guarantor's fiscal year audit.

9. The guarantor agrees that if, at the end of any fiscal year before termination of this self-guarantee, it fails to meet the self-guarantee financial test criteria, it shall send in 90 days of the end of the fiscal year, by certified mail to the NRC, that it intends to provide alternative financial assurance as specified in 10 CFR Part 30.

Within 120 days after the end of the fiscal year, the guarantor shall establish such financial assurance.

10. The guarantor agrees that if it determines, at any time, other than as described in Recital 9, that it no longer meets the self-guarantee financial test criteria or it is disallowed from continuing as a self-guarantor, it shall establish alternative financial assurance as specified in 10 CFR Part 50 within 30 days.

11. The guarantor as well as its successors and assigns, agrees to remain bound jointly and severely under this guarantee notwithstanding any or all of the following:

amendment or modification of the license or NRC approved decommission funding plan for that facility, the extension or reduction of the time of performance of required activities, or any other modification or alteration of an obligation of the licenses pursuant to 10 CFR Parts 50 and 70.

12. The guarantor agrees that it shall be liable for all litigation costs incurred by the NRC in any successful effort to enforce the agreement against the guarantor.

13. The guarantor agrees to remain bound under the self-guarantee for as long as it, as licensee, must comply with the applicable financial assurance requirements of 10 CFR Part 50, for the previously listed facilities, except that the guarantor may cancel this self-guarantee by sending notice by certified mail to the NRC, such cancellation to become effective not before an alternative financial assurance mechanism has been put in place by the guarantor.

14. The guarantor agrees that if it, as licensee, fails to provide alternative financial assurance as specified in 10 CFR Parts 50 and 70 and obtain written approval of such assurance from the NRC within 90 days after a notice of cancellation by the guarantor is received by the NRC from the guarantor, the guarantor shall make full payment under self-guarantee.

15. The guarantor expressly waives notice of acceptance of this self-guarantee by the NRC. The guarantor expressly waives notice of amendments or modifications of decommissioning requirements.

16. If the guarantor files financial reports with the U.S. Securities and Exchange Commission, then it shall promptly submit them to its independent auditor and to the NRC during each year in which this self-guarantee is in effect

17. The guarantor agrees that if, at any time before termination of this self-guarantee, its most recent bond issuance ceased to be rated in the category of "A" or above by either Standard & Poor's or Moody's, it shall provide notice in writing of such fact to NRC within 20 days of publication of the change by the rating service.

I hereby certify that this self-guarantee is true and correct to the best of my knowledge.

Effective date October 28, 2019 Reed College by:

Lorr~-

Vice President and Treasurer State of Oregon OFFtCIAL STAMP County of Multnomah ~ DELANA SHONTANE UB8US Signed before me this .2..f_ day of (!}dobrv-- 2.cJ/9 NOTARY PUBUC-OREGON COMMISSION NO. 967052 Plf COf6ll88llN EXP1RB1 OOTOBeR 01, 2021 lW/,tf({fL2f!d<.

~ieia Blessm.g;tgn Hene~ Notary Public - State of Oregon

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THE REED INSTITUTE (

Financial Statements

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June 30, 2019 and 2018 (With Independent Audito'rs' Report Thereon) -

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THE REED INSTITUTE

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I Table of Contents Page(s)

Independent Auditors' Report 1-2' Statements of Financial Position 3 Statement bf Activities and Changes m Net Assets - Y~ar ended June 30, 2019 4 S!?tement of Activities and Changes m Net Assets - Year ended June 30, 2018 5 Statements of Cash Flows 6

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Notes to Financial Statements 7-32 l

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KPMG LLP Suite 3800 1300 South West Fifth Avenue Portland, OR 97201 Independent Auditors' Report r

The Board of Trustees The Reed Institute:

We have audited the accompanying financial statements of The Reed Institute (an Oregon nonprofit corporation), which comprise the statements offlnancial position as of June 30, 2019 and 2018, and the related statements of activities and changes In net assets, arid cash flows for the years then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this Includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility I

Our responslblllty Is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. ,,

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The prqcedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making tho'se risk assessments, the auditor considers Internal control relevant to the entity's preparation and fair. presentation of th~ financial statements in order to design audit procedures that are appropriate in the circumstan_ces, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion In our opinion, the financial statements referred to above present fairty in I all material respects, the financial position of The Reed Institute as of June 30, 2019 and 2018, and the changes in its net assets and its cash flows for the years then ended In accordance with U.S. generally accepted accounting principles.

KPMC LLP ,. a Delawore i<mted "*"loty portM<,hrp and ~ U S mcrT'bN frn, of the KPMG netv.orl: ol ~ n t """"""' firm, .tld>oltffi w,lh KPMG lnt<<Nt,o,lol c - t'KPMG lntomatJ<ml"J

• SwtllS ontrty

Emphasis of Matter As discussed in note 2(r) to the financial statements, in 2019, the Reed Institute adopted new accounting guidance in Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), ASU No. 2016-14, Presentafton of Financial statements of Not-for-Profit Entities (Topic 958), and ASU No. 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. Our opinion is not modified with respect to this matter.,

October 7, 2019 2

THE REED INSTITUTE Statements of Financial PosltJon

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June 30, 2019 and 2018 Assets 2019 2018 Current assets*

Cash and cash equivalents $ 11,723,412 3,439,719 Accounts receivable, net 1,046,231 732,569 Contnbutions receivable, net 2,002,294 3,0?5,334 Funds held by trustee 2,240,622 25,211,452 Short-term investments 13,531,888 9,448,087 Prepaid expenses and other assets 888 714 629164 Total current assets 3\4331161 4214861325 Noncurrent assets Cash and cash equivalents whose use 1s l1mrted 884,647. 2,197,463 A=unts receivable, net 3,312,233 3,871,719 Contnbu!Jons receivable, net 3,4201519 5,209,698 Funds held in trust by others 1,289,557 1,291,022 Funds held by trustee 912,000 Long4erm1nvestments 625,096,574 624,507,788 Property, plant, and equipment, net 162,601,568 145,826,934 Other assets 188 782 201 637

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Total noncurrent assets 796i7931880 78410181261 Total assets $ 8281227 ,041 82615041586 Liabilities and Net Assets Current l1ab1lrtJes: / -

Accounts payable and accrued hab1lltles $ 8,581,571 8,407,632 Postrebrement benefrts payable 852,376 1,077,870 Debt, current portion 1,809,830 1,190,170 Deferred revenue 1 517 153 112071121 Total current hab1IJ!Jes 12?60,930 111882,793 Long4erm hab1lr!Jes*

L1ab1l1ty for spilt-interest agreements 11,683,765 11,783,120 Postretirement benefits payable 29,328,566 25,354,183 Refundable loan programs 1,863,723 1,820,048 Asset re!Jrement obligatfon

• 3, 10.1,047 3,073,572 Debt, net of current por!Jon 106,677,239 109,036,729 Other l1ab1lrties 118691103 212731528 Total long4erm l1ab1lr!Jes 15415231443 153,3411180 Total llabllrt1es 1671284,373 16512231973 Net assets Without donor restnct1ons 366,475,437 367,385,528 With donor restncbons*

Time or purpose _ 111,659,446 115,078,858 Perpetual 102,001i705 178,816,227 Total wrth donor restnct1ons 2~,467,231 293,895,085 Tota! net assets . 660,942,668 661,280,613 Total l1ab1ll!Jes and net assets $ 828,227,041 826,504,586 See accompanying notes to fmanCJal statements.

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THE REED INSTITUTE Statement of Actlvrtles and Changes in Net Assets Year ended June 30, 2019 Without donor With donor Total restrictions restrictions 2019 Revenues, gains, and other support Tuition and fees, net of $28,992,930 in college-funded scholarships $ 51,747,823 51)47,823 AuXJhary enterpnses 15,083,123 15,083,123 Grfts and pnvate grants 6,052,84p 5,201,143 11,253,983 ,

Government grants, contracts, and student aid 1,534,536 1,534,536 Investment return on endowment, distnbuted 15,209,080 12,367,505 27,576,585 Other investment gains 1,222,591 1,222,591

,- 4194 Other revenues and additions 1,570,822 1,5751016 Subtotal 40,672,992 17,572,842 58,245,834 Net assets released from restncbons 1513041555 (1513041555)

Total revenues, grfts, and other support 107,725,370 21268,287 \ 109,9931657 Expenses Educational and g~neral:

Instruction 37,139,203 37,139,203 Research 1,570,330 1,570,330 Academic ~upport 13,180,403 13,180,403 General institutional support 8,628,238 8,628,238 Student services 12,606,487 12,606,487 College relatlons 718301345 718301345 Total educational and general 80,955,006 80,955,006 Aux1l1ary enterprises -1719481238 1719481238 Total expens_es 981903,244 9819031244 Increase from 0R9rations 818221126 212681287 1110901413 Nonoperating actJvity:

Endowment losses, net of amounts distnbuted (5,735,667) (2,360,010) (8,095,677)

Change in value of split-interest agreements 518,999 518,999 Net penod benefrt cost, nefof service cost """" (4,152,615) _ (4,152,615) other deductions and transfers 1561065 144 870 3001935 Total nonoperating actrvrty (9,7321217) (116961141) (1114281358)

(Decrease) increase in net assets (910,091) - 572,146 "

(337,945)

Net assets, beginning of year 36713851528 29318951085 6611280,613 Net assets, end of ye_ar $ 3681475,437 294,467,231 66019421668

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See accompanying notes to financial statements 4

THE REED INSTITUTE Statement of AciJvitles and Changes in Net Assets Year ended June 30, 2018 Without donor With donor Total restrictions restrictions 2018 Revenues, gains, and other support:

Tutbon and fees, net of $26,359,478 in college-funded scholarships $ 48,260,416 48,260,416 Auxiliary enterprises 14,910,012 14,910,012 Gifts and private grarits 15,307,645 3,981,909 19,289,554 Government grants, contracts, and student aid 1,280,240 1,280,240

" Investment return on endowment, d1Stnbuted 15,110,710 12,268,558 27,379,268 other investment gains 398,887 398,887 Other revenues -and addmons 1 774 154 4,420 1 778,574 Subtotal 48,781,648 16,254,887 65,036,535 Net assets released from restnct1ons 12,053,203 (12,053,203)

Total revenues, gifts, and other support 109,095,267 4,201 684 113,296,951 Expenses Educabonal and general.

lnstructlon 35,113,051 35,113,051 Research 1,314,647 1,314,647 Academic support 13,581,539 13,581,539 General institutional support 9,106,749 9,106,749 Student services 12,331,777 12,331,777 College relabons 7,752,499 7,752,499 Total educatlonal and general 79,200,262 79,200,262 AuXJhary enterpnses 17,588 415 17,588,415 Total expenses 96,788,677 96,788,677 Increase from operations 12,306,590 4,201,684 16,508,274 Nonoperatmg a,ciJvrty*

Endowment gains, net of amounts d1stnbuted 14,132,033 9,644,741 23,776,774 Change in value of splrt-1rterest agreements 678,657 678,657 Net penod benefit cost, net of service cost (66,749) (66,749)

Loss on defeasance (4,985,976) (4,985,976) other deductJons and transfers (1,894,840) 2,938,715 1,043,875 Total nonoperating actJvity 7 184 468 13,262,113 20,446,581 Increase in net assets 19,491,058 17,463,797 36,954,855 Net assets, beginning of year 347,894,470 276,431,288 624,325,758 Net assets, end of year $ 367,385,528 293,895,085 661,280,613 See accompanying notes to financial statements.

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C THE REED INSTITUTE Statements of Cash Flows Years ended June 30, 2019 and 2018 2019 2018 Cash flows from operating aciJVltfes Increase (decrease) m net assets $ (337,945) 36,954,855 Adjustments to reconcde Increase (decrease) In nefassets to net cash used m operating activities.

Depreciation and amorbzatJon costs 5,345,976 5,614,985

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Loss on defeasance 4,985,976 Loss on disposal of assets 448,036 Contributions restricted for long-tenn Investment (?73,104) (2,938,319)

Noncash' contributions (5,779,150) (5,060,353)

Net reahzed and' unrealized ga1ris on investments and splrt-mterest agreements (21,460,357) (51,982,036)

Actuanal adjustments o,f habll~s for splrt-mterest agreements 784,252 1,051,978 Change.tq asset retirement obllgatlon 27,475 24,411 Changes 1n operating assets and hab1htles that proVJded (used) cash:

Accounts receivable 245,824 296,5~8 Contributions receivable 2,812,219 (1,213,122)

Prepaid and other (261,54()) (146,172)

Accounts payable and accrued llabllltles 173,939 943,212 Postretlrement benefits payable 3,748,889 (248,380)

Deferred revenue 310,032 63,521 other hab1htles (4041425) (430,670)

Net cash used m operating actJVJtJes (15,067,915) (11,635,520)

Cash flows from Investing actlvrtles Proceeds from matuntJes/sales of Investments 138,028,827 175,340,349 Purchases of investments (115,538,846) (175,162,217)

Contracts receivable collected 35,745 43,309 Contracts receivable advanced (20,900)

Purchase of property, plant, and equ1pment (221395,440) {12,447,589)

Net cash provided by (used in) mvestmg activities 109 386 (1212261148)

Cash flows from flnancmg actJvrtles Contributions restncted for lpng-tenn Investment 273,104 2,938,319 Issuance of new debt / 73,913,650 Payment of debt pnncipal (1,465,000) (45,633,163)

Payments on splrt-interest agre~ents ,,.. (1,351,840) (1,393,586)

Investment Income subject to spllt-lnterest ag,reements 445,571 (217,291)

New hab11ities related to splrt-mterest agreements 101,066 210,905 Changes m governmental loan funds 43,675 (791,316)

Change m deposrt with bond trustee 2318821830 (2611231452)

Net piSh proVJCled by financing aciJVltles 2119291406 219041066 Net decrease m cash and cash equivalents 6,970,877 (20,957,602)

Cash and cash equ,1valents and cash whose use Is limited, beginning of year 516371182 261594,784 Cash and cash equivalents and cash whose use is l1mrted, end of year $ 1216081059 5,637,182 Supplemental d1Sclosure_ of cash flow mfonnatlon:

r 1,461,980 Interest paid, net of amounts capitalized $ 2,382,281 See accompanying notes to flnanCJal statements

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THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 (1) Background The Reed Institute (Reed College) was founded in 1908 by Simeon and Amanda Reed, with one central commitment to provide a balanced, comprehensive education in liberal arts and sciences, fulfilling the highest standards of intellectual excellence. Reed College offers a B.A in one of 25 major fields and numerous mterdisc1plinary fields, as well as a master of arts in liberal studies degree. The Reed College educational program pays particular attention to a balance between broad study in the various areas of human knowledge and close, m-depth study in a recognized academic discipline.

(2) Summary 'ot Significant Accounting Policies (a) Basis of Accounting The financial statements of Reed College have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

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(b) Basis of Presentation Net assets, revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. The definrt1ons used to classify and report net assets are as follows:

• Without donor restri~ions - Net assets that are not subject to donor-imposed stipulations or donor-restricted contributions whose restrictions are met in the same reporting period

• With donor restrictions: time or purpose - Net assets subject to donor-imposed st1pulat1ons that will be met either by actions of Reed College or the passage of time

• Wrth donor restrictions* perpetual - Net assets subject to donor-imposed stipulations that they be pennanently maintained by Reed College; generally, the donors of these assets penn1t Reed College to use all or part of the income earned on related investrryents for general or specific purposes. /

Revenues are reported as increases m net assets without donor restrictions unless their use is limited by donor-imposed restrictions. All *expenses are reported as decreases in net assets without donor restrictions except for activity related to life income agreements. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in net assets without donor restrictions unless their use is restncted either by donor stipulation or by law. Expirations of restrictions on net assets when the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed are reported as reclassifications between the applicable classes of net assets and are reported as "net assets released from restriction" in the statements of activities and changes in net assets.

Restrictions related to contributions for the purchase of capital add1t1ons are released when .the asset is placed in service.

Reed College follows the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 958-205, Not-for-Profit Entities - Presentation of Financial Statements, which provides guidance on the net asset classification of donor-restricted endowment funds for ,a not-for-profit organization that is subJect to an enacted version of the Unifonn Prudent Management of Institutional Funds Act of 2006 and also requires disclosures about endowment funds, both donor-restricted endowment funds and board-designated endowment funds See note 11 for further disclosures 7 (Continued)

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THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 (c) Measure of Operations Reed College's increase from operation's includes all operating revenues and expenses tt:,at are an integral part of its programs and supporting activities, net assets released from donor restriction to support operatin~ expenditures, and transfers from board-designated and other nonoperating funds to support current operating activities. The measure of operat1ons'excludes investment return 1n excess of amounts made available for current use.

(d) Use of Estimates I

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. Actual results could differ from those estimates '

(e) Revenue Recognition Tuition and fees - Reed College's operating revenue is* pnmarily derived from academic programs provided to undergraduate students Tuition and fees revenue 1s earned .for these educational services delivered during an academic term. Tuition and fees are earned over the applicable term and are not considere*d separate performance obligations. Reed College provides financial assistance in the form of scholarships or grants based on the recipients' demonstrated need. The financial assistance is reflected as a reduction of tuition and fees revenues and represents the difference between the stated charge for tuition and fees and the amount that is billed to the student The amount of tuition and fees and college-funded scholarships for the years ended June 30, 2019 and 2018, respectively, are as follows: *

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Years ended June 30, 2019 June 30, 2018

> Tuition and fees $ 80,740,753 74,619,894 '

College-funded scholarships (28,992,930) (26,359,478)

Net tuition and fees $ 51,747,823 . 48,260,416 Academic terms are determined by regulatory requirements mandated by the federal government

-and/or applicable accrediting body. Reed College's academic terms consist of fall and spnn_g The academic terms have start and end dates that fall within Reed College's fiscal year Reed,. College bills tuition and fees in advance of each academic term and recogniz.es the tuition and fee revenue on a straight-line basis, as the educational services are performed, over the academic term. Students are typically entitl~ to a partial refund through approximately the first half of an academic term.

Students pay tuition and fees (net of scholarships) through a variety of funding sources, including, among others, federal loan and grant programs, state grant programs, institutional payment plans, private and institutional scholarships and borrowings, and cash payments.

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THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 Auxiliary enterprises - Auxiliary enterprises consists primarily of fees for room and dining services (board) during the student's education. Reed College considers room fees and dining services to have

. separate performance obligations .

.Room fees are charged at different rates for dormitories and apartments. Room fees are billed in advance of each academic term and recognized as revenue on a straight-line basis over the period housing 1s provided. While Reed College believes the residential experience is an integral part of a student's education, it is beli~ved to be a distinct performance obligation from the academic services.

Dining service fees are charged at different rates depending on the meal plan selected for the term of the agreement Dining services are bill~ in advance of each academic term and are recognized as revenue ratably over the period during which the dining services are offered.

In addition to room and board, auxiliary services includes r~venue earned from the bookstore and for vanous conference services offered by Reed College. Revenue from the sale of these goods and services is recognized once the performance obligations are complete 1 Gifts and private grants - Contributions, including .uncond1t1onal promises to give, are recognized as

' revenues in the period received. Cond1t1onal promises to give are not recognized until they become unconditional.

Government grants and contracts - Individual governmental and private grant arrangements are nonreciprocal and are, therefore, considered contributions. The granting entity has not received a direct benefit in exchange for the resources provided. Revenue 1s recognized when the barrier to entitlement is overcome, which is when expenditures associated with each grant are determined to be allowable, and all other significant conditions of the grant are met Investment return - Investment income or loss (including realized and unrealized gains and losses on investments, interest, and dividends), net of investment expenses is included in op~rating revenues, gains, and other support and nonoperating activities without donor restrictions unless the income or loss 1s restricted by donor, law, or endowment spending.

(f) Investments Investments in marketable equity securities with readily determinable fair values and all investments in debt securities are carried at fair value. Certain investments do not have readily det~rminable fair values including private investments, fixed-income investments, absolute return investments, and investments in equities. Net asset value (NAV), in many instances, may not equal fair value that would be calculated pursuant to ASC Topic 820, Fair Value Measurement.

Realized and unrealized gains and losses arising from the sale, collection, or other disposition of investments, as well as all dividends, interest, and other investment income, are shown in the statements of activities and changes in net assets Gains and investment income that are limited to specific uses by donor-imposed restrictions are reported as increases in net assets without donor restrictions 1f the restrictions are met in the same reporting period that the gains and income are recognized. Losses on investments related to gifts that the donor required to be invested in perpetuity (i e., endowment funds) are classified as decreases in net assets with donor restrictions

• 9 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 (g) Spilt-Interest Agreements Reed College has been named as a beneficiary for various split-interest agreements. Each agreement provides for contractual payments to stated benefiCJanes for their lifetimes, after which remaining principal and interest revert to Reed College. Assets contributed are recorded at fair value In addition, Reed College has recognized the present value of estimated future payments to be made to beneficiaries over their expected lifetimes as a long-term liability. The present values of these estimated payments were determined on the basis of published actuarial factors for-ages of the respective beneficiaries discounted using a rate adjusted for mortality uncertainties and are not changed ~fter the date* of the gift Annual adjustments are made between the liability and the net assets to record actuarial gains or losses. Differences between the assets contributed and the expected payments to be made to beneficiaries have been recorded as contribution revenue in the year established. These donations are either restricted on the basis of time or restricted in perpetuity1 based on the intent of the donor Reed College maintains separate reserve funds adequate to meet future paym,ents under its charitable gift annuity cqntracts, as required by governing states' laws. The total held in separate reserve funds was $6,089,907 and $6,097,946 as of June 30, 2019 and 2018, respectively. The amount included to meet future payments under gift annuity contracts in liability for split-interest agreements was

$2,657,028 and $2,638,687 as of June 30, 2019 and 2018, respectively. *

(h) Contrlbutlons Receivable Unconditional promises to giv~ (contnbutions) are recorded *as gifts and priy~t~ grant income and contributions receivable, Promises to give are not recognized until they become unconditional, that is, when the donor-imposed restrictions are substantially met qontribut1ons other than cash are recorded at their estimated fair value. Management estimates an allowance for uncollectible contributions based on risk factors such as prior collection history, type of contribution, and the nature of the fund raising activity Contributions are generally receivable within five years of the date the commitment was made and were discounted to present value using a discount rate commensurate wrth the risk involved Amortization of the discount 1s recorded as additional contribution revenue in accordance with donor-imposed restnct1ons, 1f any, on the contributions.

(i) D~rlvative Instruments Reed College accounts for derivatives in accordance with FASS ASC Subtopic 815-10, Derivatives and Hedging - Overall, which requires that all derivative instruments be recorded on the statements of financial position at their estimated fair values. Changes in the fair value are recognized in the statements of activities and changes in net assets as other investm~nt gains (losses).

lj) Property, Plant, and Equipment, Net Property, plant;and equipment are stated at cost at the date of acquisition, if purchased, or at fair market value, at the date of receipt, if acquired by donation. Equipment under capital leases are stated at the present value of minimum lease payments. Depreciation -is computed on a straight-line basis over the estimated useful lives of buildings (20 to 50 years) and equipment and furnishings (5 years).

Equipment held under capital leases are_ amortized on a straight-line basis over th~ shorter of the lease term or estimated useful life of the asset Routine repair and maintenance expenses and equipment replacement costs are expensed as incurred.

10 (Continued)

THE REED INSTITUTE 1 Notes to Financial Statements June 30, 2019 and 2018 (k) Capitalized Interest Interest costs incurred on debt during the construction of major projects exceeding one year are capitalized. During fiscal years 2019 and 2018, the amount of interest capitalized amounted to

$1,129,347 and $644,658, respectively.

(/) Donated Materials Donated matenals are included in the statements of activities and changes in net assets as gifts and pnvate grants at their estimated fair values at date of receipt. These materials are subsequently expensed when used.

(m) Income Tax Status The Internal Revenue Service has recognized Reed College as exempt from tax under the provisions of Section 501 (a) as an organization described under Section 501 (c)(3) of the Internal Revenue Code, except to the extent of unrelated business income under Sect1oris 511 through 515. Management believes that unrelated business income tax, if any, is immaterial, and ther~fore, no tax provision has been made. Reed College accounts for income taxes in accordance with. FASB ASC Subtopic 740-10, Income Taxes - Overall, an Interpretation of FASB Statement 109, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a threshold of more likely tt,an not for recognition of tax benefits of uncertain tax positions taken or expected to be taken in a tax return. ASC Subtopic 740-10 also provides related guidance on measurement, derecognition, classification, interest and penalties, and disclosure Reed College does

~ -

not have any uncertain taxyos1t1ons. *

(n) Cash and Cash Equivalents Cash and cash equivalents represent cash in bank and other highly liquid investments with original maturities of three months or less, except for certain cash and cash equivalents held by trustee and amounts included in the investment portfolio that are intended to be invested on a long-term basis.

Cash and cash equivalents whose use 1s limited are restricted for the Federal Perkins Loan program.

(o) Deferred Revenue Deferred revenue consists pnmanly of tu1t1on and fees related to future academic years (p) Postretirement Benefits Reed College has a noncontributory postretirement medical benefit plan covering part1c1pating employees upon their ret1remenl Reed College maintains a postret1rement medical benefit plan and accounts for the plan within the framework of FASB ASC Topic 958-715, Not-for-Profit Entities -

Compensation - Retirement Benefits.

Reed College records annual amounts relating to its postretirement medical benefit plan based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, and healthcare cost trend rates Reed College reviews its'assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so Reed College believes that the assumptions utilized.in recording its obligations under its plans are reasonable based on its experience and market conditions.

11 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 (q) Concentration of Risk Reed College's standard financial instruments include commercial paper, U.S. government and agency securities, corporate obligations, mutual funds, commingled funds, limited partnerships, private equity, .

private real assets, and private real estate. These financial instruments may subject Reed College to concentrations of risk.

(r) Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts.with Customers (Topic 606), to clarify the principles for recognizing revenue and to improve financial-reporting by creating common revenue recognition guidance for U.S. generally accepted accounting principles. The amendments in the ASU were applied retrospectively to each prior reporting

• period presented. The adoption of Topic 606. did not have a significant impact on Reed College's ~esults of operations. *

• 1 In June 2018, the FASB,issued ASU No. 2018-08, C/arifying the Scope and the Accounting Gwdance for Contributions Received and Contributions Made, which is intended to clarify and improve the scope and the accounting guidance for contributions received and contnbut1ons made. The amendments in -

this update should assist entities in (1) evaluating whether transactions should be accounted for as contnbutions (nonreciprocal transactions) within the scope of ASC Topic 958, Not-for-Profit Entities, or as exchange (reciprocal) transactions subject to Topic 606 and (2) determining whether a contribution is conditfonal. The amendments in this update are to be applied on a modified prospective basis and were adopted effective for Reed College's fiscal year beginning July 1, 2018 The adoption of ASU No. 2018-08 did not have a significant impact on Reed College's 1inanaal statements In August 2016, the FASB issued ASU No. 2016-14, Prese_ntation of Financial Statements of Not-for-Profit Entlfies (NFPs), to reduce diversity in reporting practice, reduce complexity, and enhance understandability of not-for-profit financial statements. This ASU contains the following key aspects:

(A) reduces the number of net asset classes presented from three to two: with donor restrictions and without donor restrictions; (B) requires all NFPs to pres~nt expenses by their functional aQd their natural classifications in one location in the financial statements; (C) requires NFPs to provide quantitative and qualitative information about manageme_nt of liquid resources and availability of financial assets to meet cash needs within one year of thl? balance sheet date, and (D) retains the option to present operating cash flows in the statement of cash flows using either the direct or indirect method.

• 12 "

(Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 In 2019, Reed College adopted ASU No 2016-14 The effects on Reed College's net asset balances at June 30, 2017 as a result of implementing the standard are as follows ASU 2016-14 Classifications Without With donor With donor donor restrictions - restrlc11pns -

Net asset classlflca11ons restrictions time or eurpose pe!Eetual Total As pre\1ously presented:

Unrestricted $ 347,090,9[9 347,090,979 Temporarily restricted 105,400,313 105,400,313 Pennanently restricted 171,834,466 17\834,466 Net assets as \

pre'.1ously presented 347,090,979 105,400,313 171,834,466 624,325,758 Reclassifications to implement ASU No.2016-14 Underwater endowments 803,491 {803,491)

"{et assets, as reclassified $ 347,894,470 104,596,822 171,834,466 624,325,758 In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230):

Restncted Cash The standard requires that amounts generally described as restricted cash and restncted cash equivalents should be included with cash and cash*equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows In 2019 Reed College adopted ASU No. 2016-18 and applied the amendments using a retrospective transition method to each period presented. , (

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize a lease liability and a right-of-use asset for all lease obligations, with the exception of short-term leases. The lease liability will represent the lessee's obligation to make lease payments 1

arising from the lease measured on discounted basis and the nght-of-use asset will represent the lessee's right to use or control the use of a specified asset for a lease tenn. The lease guidance also

simplifies accounting for sale-leaseback transactions. Topic 842 is'effective for Reed College beginning on July 1, 2019. In 2018, the FASB updated its guidance allowing entities to adopt the provisions of the standard prospectively without adjusting comparabve periods. Reed College is planning to adopt this option. Reed College has evaluated the effect of implementation of the standard and detennined that the adoption of Topic 842 will not have a significant impact on the stater;nents of financial position, the results of operations or cash flows. Reed College will include new disclosures in fiscal year 2020 in accordance with Topic 842.

(s) Reclassifications Certain items previously reported in the prior year financial statements have been reclassified to confonn to current year finar,cial statement presentation These reclassifications h.ad no effect on Reed College's financial position, activities and changes in net assets, or cash flows ,

13 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018

\

As part of adopting the new standard ASU No. 2014-16, Reed College evaluated the exp~nses reported on a functional basis and reclass1f1ed some expenses to better reflect the respective functional category. The reclassifications have occurre_d for both years presented In add1t1on, Reed College has reclassified certain programmatic expenses-that were incorrectly allocated to general institutional support for the year ended June 30, 2018.

(3) Financial Assets and Liquidity Resources

)

Reed College regularly monitors liquidity required to meet its operating needs and other contractual commitments, while also striving to maximize the investment of its available funds. Reed College has various sources of liquidity at its disposal, including cash and cash equivalents and marketable debt sequrities. For purposes of analyzing resources_ available to meet general expenditures over a 12-month period, Reed College considers all expenditures related to its ongoing mission related activities as well as the conduct of services underta~en to support ~ose activities to be general expenditures. In addition to financial assets available to meet general expenditures over the next 12 months, Reed College operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures not covered by donor-restncted resources.

As of June 30, 2019, the follqwing financial assets could readily be made available within one year of the balance sheet date to meet general expenditures.

2019 Financial assets at year-end:

Cash and cash equi\alents $ 11,723,412 Current acco~mts recei\able, net 1,046,231 Current contributions recei\able, net 2,002,294 lmestments 638,628,462 Total financial assets at year-end 653,400,399 Less amounts not a\ailable to meet general expenditures within one year.

Restricted by donors for use in Mure periods 13,768,129 Board-designated enc;!owment 288,930,801

\

Future expendable donor-restricteq endowment 86,962,842 Donor restricted endowment to be retained in perpetuity 176,999,699 Annuity and life income funds 24,994,403 Financial assets a\ailable to meet general expenditures within one year $ 61,744,525 In addition, at June 30, 2019, Reed College had $288,930,801 of board-designated endowments that, with the board's approval, could be made available for operations.

• 14 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 (4) Investments The fair value of investments at June 30, 2019 and 2018 IS as follows:

2019 2018 lm.estments:

Cash and cash equivalents $ 3,296,433 10,266,880 Fixed income 74,180,284 73,869,648 Public equities 220,795,803 207,667,456 Absolute return 120,724,359 131,704,534 Private equity 116,337,370 109,977,743 Private real assets 54,934,176 "' 55,455,340 Private real estate 21,444,030 1~,397,989 Funds held in trust 24,994,403 24,900,925 Funds held by trustee 2,240,622 26,123,452 Other 3,2111161 31006,382 Total investments $ 6421158,641 661,370,349 The overall investment objective for Reed College's endowment 1s to invest its assets in a prudent manner that will achieve a long-term rate of ~etum sufficient to fund a portion of its annual operating activities and increase investment value after inflation Reed College diversifies its investments among vanous asset classes incorporating multiple strategies and external investment managers. Major investment decisions are authorized by the board's Investment Committee, which oversees Reed College's investment program in accordance with established guidelines Investment strategies include*

• Fixed-income investments, whfch consist of commingled funds, bond mutual funds, and a limited partnership that hold securities, the m'ajority of which have maturities greater than one year and are valued based on quoted market prices in active markets; certain commingled funds and the limited partnership are valued:at NAV reported by the fund managers

• Public equ1t1es investments, which consist of mutual funds, commingled funds, and limited partnerships; these are valued based on quoted market prices in active markets, except for certain commingled funds and limited partnerships, which are valued at NAV reported by the fund managers.

• The absolute return portfolio, which is comprised of inv'estments of limited partnership interests in hedge funds whose managers have the authority to invest in various asset classes at their discretion, including the ability to invest long and short; the substrategies within the absolute return portfolio include equity long/short, crediUevent driven, market neutral, multistrategy, and global macro. The majority of the underlying holdings are marketable securitJes. The remainder of the underlying holdings 1s held in marketable secunt1es that trade infrequently, or in private investments, which are valued by the manager on the basis of an appraised value, discounted cash flows; industry comparables, or some other method. The limited partnership interests are valued at NAV reported by the fund managers.

15 (Continued)

THE REED-INSTITUTE Notes to Financial Statements June 30, 2019 and 2018

/

• Investments in private equity, private real assets, and private real estate, which are in the form of limited partnership interests, and typically invest in private assets for which there 1s no readily detenninable market valu!;!; in these cases, market value is deter:mined by external managers based on a combination of discounted cash flow analysis, industry comparables, and outside appraisals. Where pnvate investment managers hold publicly traded securities, these securities are generally valued based on market prices The limited partnership interests are valued at NAV reported by the fund managers At June 30, 2019 and 2018, Reed College has approximately $491 million and $484 million, respectively, of investments that are not readily marketable. These investments, which include the fixed income, public equities, absolute return portfolio, private equity, private real assets, and private real estate, represent 77%

and 73% of total investments and 74% and 73% of total net assets at June 30, 2019 and 2018,

• respectively. These investments are reported at NAV as reported by the fund managers, which is used as a practical expedient to estimate the fair value. Reed College believes that the reported amount of its investments is a reasonable estimate of fair value as of June 30, 2019 and 2018. Because of the inherent uncertainties of valuation, these estimated fair values may differ significantly fr:om values that would have been used 1f a ready market existed. See note 5 for investment fair value and liquidity measurements Reed College has funds invested in 116 and 114 limited partnerships at June 30, 2019 and 2018, respectively. At ti'rnes, there are certain positions of derivative financial instruments included in the assets _

of the various partnerships Reed College is obligated under certain limited partnership investment fund agreements to advance funding periodically up to specified levels. At June 30, 2019, Reed College has unfunded commitments of approximately $103,000,000. These commitments are callable by the general partner:s/adv1sers* between June 30, 2019 and 2028. The terminations of these partnerships/funds are based upon specific provisions in the agreements. , ,

Included in*cash and cash equivalents and fixed income are $31,155,309 and $30,037,986 of operating funds at June 30, 2019 and 2018, respectively, used to manage Reed College's operating liquidity Included in funds held in trust investments are $24,994,403 and $24,900,925 of planned giving trusts held in mutual funds and other investments,that are not available for ~pending as of June 30, 2019 and 2018, respectively.

At June 30, 2019, Reed College had funds held by trustee of $2,240,622, which was the remaining unspent proceeds from the 2018 State of Oregon notes. The funds held by trustee will be spent on qualifying expenditures of capital projects.

(

Total investment income, excluding funds held in trust investments, was $20,703,499 and $51,554,929 for the years ended June 30, 2019 and.2018, respectively.

(5) Fair Value Measurem-ents The following 1s a descrjption of the valuation methodologies used for assets and liabilities carried at fair values*

Cash, and cash equivalents, and accounts receivable: The carrying amounts~ at face value or cost plus accrued interest, approximate fair value because of the short maturity of these, instruments.

)

16 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 lnvestmlnts: Equity secunties are measured using quoted market prices at the repor!i_ng date multiplied by the quantity held. Debt securities are measured using quoted market prices multiplied by the quantity held when quoted market prices are available. Investments in real estate for which fair value is not readily determinable are carried at estimate<;! fair values, if purchased, or,at fair value at the date of receipt, if acquired by donation.

• Investments that are not readily marketable are valued utilizing NAVas a practical expedient and are cai;Jied at estimated fair values. Reed Colleg?" reviews.and evaluates the values provided by the investment managers and estimate*s the fair value of these investments using the NAV as a practical expedient.

I Interest rate swaps: The fair value of interest rate swaps is determined using pricing models developed based on the LIBOR swap rate and other observable market data. The value was determined after considering the potential impact of collateralization and netting agreements, adjusted to reflect nonperformance risk of both the counterparty and Reed College.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest pnonty to unadjusted quoted pnces in*active markets for id~nt1cal assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that Reed College has the ability to access at the measurement date.

Level 2 inputs are inputs other than quoted prices Included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability Level 3 inputs are unobservable inputs for the asset or liability used to measure fair value to the extent that obs~rvable inputs are not available.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that Is significant to the fair value measurement in its entirety.

In accordance with ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value, investments valued utilizing NAV as a practical expedient are excluded from the fair value hierarchy.

17 (Continued)

THE REED INSTITUTE, Notes to Financial Statements June 30, 2019 and 2018 ,

_/

\

The following table presents assets and liabilities that are measured at fair value on a recurring basis at June 30, 2019*

Quoted prices Significant in active other Significant markets for observable unobservable identical assets Inputs inputs Total (Level 1) (Level 2) (Level 3)

Assets:

Cash and cash equivalents $ 3,296,433 3,296,433 Fixed income 44,725,643 44,725,643 Public equities 72,577,821 72,577,821 Funds held in trust 24,994,403 24,994,403 Funds hel_d by trustee 2,240,622 2,240,622 Other 3,211,161 494 134 2,717,027 Total 151,046,083 123,334,653 24,994,403 2,717,027 Investments where NAV was used as a practical expedient to measure fair value:

Absolute return 120,724,359 Fixed lnc6me 29,454,641 Private equity 116,337,370 Private real assets 54,934,176 Pri~te ~I estate 21,444,030 Public equities 148,217,982 Total 491,112,558 Total investments and otl]er assets $ 642,158,641 123,334,653 24,994,403 2,717,027 Liabilities:

Interest rate swap $ 833,832 833,832 18 (Continued)

THE REED INSTITUTE Notes to-Financial Statements I

June 30, 2019 and 2018 The following table presents assets and liabilities that are measured at fair value on a recurring basis at June 30, 2018:

Quoted prices Slgnlflca rit In active other Slgr'lifioant markets for observable unobservable Identical assets inputs inputs

'Total {Level 1) {Level 2) {Level 3)

Assets.

Cash and cash equi\0lents $ 10,266,880 10,266,880 Fixed income 42,519,751' 42,519,751 Public equities 70,439,200 70,439,200 Funds held in trust 24,900,925 24,900,925 Funds held by trustee 26,123,452 26,123,452 Other 3,006,382 71 869 2,9341513 Total 177,256,590 149,421,152 24,9001925 2,934,513 lm.estments where NAV was used as a practical expedient to measure fair \0lue:

Absolute return 131,704,534 Fixed income 31,349,897 Private equity 109,977,743 Private real assets , 55,455,340 Private real estate 18,397,989 Public equities 137,228,256 Total 4841 113,759 Total im.estments and other assets $ 6611370,349 149,421,152 24,9001925 219341513 Liabilities:

Interest rate swap $ 824,712 , 824,712

~

Reed College's beneficial interest in irrevocable split-interest agreements held or controlled by a third party is classified as Level 1, Level 2, and Level 3 as the fair values are based on a combination of Level 1 inputs (observable market values of the trusts' investment portfolios), indirect observable inputs (real estate investments trusts), and significant unobservable inputs (real estate). The fair values are measured at the present value of the future distributions Reed College expects to receive over the term of the agreements.

Treasunes, registered bond mutual funds, registered large-cap equity mutual funds, and money market funds are-classified in Level 1 of the fair value hierarchy, as defined above, because their fair values are based on quoted prices for identical securities, Most investments classified in Uevels 2 and 3 consist of shares or units in nonregistered investment funds as opposea to direct interests in the funds' underlying securities. Even though these shares and units in nonreg1stered investment funds a're classified in Levels 2 j

(Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 and 3, some of the underlying securities are marketable or not difficult to value In addition to evaluating the inputs as described above, Reed College's ability to redeem its interest at or near the date of the statements of financial position 1s also considered in determining the level in which a fund's fair va!ue measurement is classified. The inputs or methodology us_ed for valuing or classifying investments for financial reporting purposes are not necessarily an indication of the risks associated With those investments or a reflection of the liquidity of or degree of difficulty in estimating the fair value of each fund's underlying assets and liabilities.

The following table presents Reed College's activity for assets measured at fair value on~a recurring basis using significant unobservable inputs (Level 3) for the years ended June 30, 2019 and 2018, respectively:

Balance at June 30, 2017 $ 2,654,206 I

Total realized and unrealized gains - 23,182 Purchases, issuances, and settlements (net) 257,125 Balance at June 30, 2018 2,934,513 Total realized and unrealized gains (14,280)

Purchases, issuances, and settlements (net) {203,206}

Balance at June 30, 2019 $ 2,717,027 The-following table presetnts ' information for investments where the NAV was used as a practical expedient to measure fair value at June 30, 2019:

Lockup Redemption Redemption Fair value eenod freguency notice eenod Absolute return and fixed income $\ 21,256,245 Liquidating NIA NIA Public equrties 18,086,209 1 month Semimonthly 15 days Absolute return 8,115,474 1 month M.onthly 30 days Public equities 62,171,575 ~ month Monthly 5--15 days Absolute return 9,308,259 2 months Quarterly 60 days Absolute return 78,187,495 3 months Quarterly 30-75 days Public equities 67,960,198 3 months Quarterly 60 days Absolute return 1 21,213,096 9 months Annually 60--90 days Fixed income 12,098,431 Illiquid Pri\01:e equity 116,337,370 Illiquid Pri\01:e real estate 21,444,~ Illiquid Pri\01:e real assets 541934, 176 Illiquid Total 1rl\eStments where NAV was used as a J?lclCtlcal expedient to measure fair \Glue $ 491, 1121558 20 (Continued)

THE REED INSTITUTE Notes to ~inancial Statements June 30, 2019 and 2018 The following table presents i11fonnat1on for investments where the NAV was used as a practical expedient to measure fair value at June 30, 2018:

Lockup Redemption Redemption Fair value period freguenc)'. notice period Absolute return and public equities $ 12,841,173 Uquldatlng NIA NIA Public equities 81,198,681 1 month Monthly 5--15 days Absolute return 9,972,803 2 months Quarterly 60 days Absolute return 75,032,160 3 months Quarterly 30--75 days Public equrt1es and fixed income 77,267,094 3 months Quarterly ,,60 days Absolute return 8,689,546 6 months sen:i iannually 60 days Absolute return 3,491,255 6 months Annually 45 days Absolute return 22,026,913 9 months Annually 60--90 days FLXed income 9,763,062 llllqu1d Pmate equity 109,977,743 Illiquid Pri1,0te real estate 18,397,989 Illiquid Pmate real assets 55,455,340 Illiquid Total in\eStments where NAV was used as a practical expedient to measure fair value $ 484,113,759 Reed College holds investments in private limited partnerships and certain fixed income commingled funds where NA\/ is used as a practical expedient to measure fair value at June 30, 2019. These investments do not allow for periodic redemptions but rather distribute earnings at the discretion of the fund managers and fully liquidate upon the termination date as stated in the agreement. Therefore, these are considered illiquid.

(6) Property, Plant, and Equipment, Net Property, plc!nt, and equipment at June 30, 2019 and 2018 consist of the followi[lg:

2019- 2018 Land and land impro\emerrts $ 14;219,852 14,219,852 Buildings 209,153,416 208,270,507 Equipment, furniture, and fixtures 16,286,327- 15,597,027 Construction in progress 281651,551 7 1871 i750 268,311,146 245,959,136 Less accumulated depreciation {1051709,578} {1001132,202}

Net property, plant, and equipment $ 1621601,568 145,826,934 21 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 Depreciation expense was $5,620,806 and $5,768,913 for the years ended June 30, 2019 and 2018, respectively, and is allocated to-the functional expenses based on the relative square footage of the departments-(7) Long-:renn Debt (a) Notes Payable Outing 2008, Reed College refinanced the 2006 and the 2007 State of Oregon Bonds in the amount of

$47,0~0,000. The 2008 State of Oregon notes,mature on July 1, 2038 and bear interest based on a weekly basis set through the remarketmg process.

Wells Fargo Bank 1s the liquidity facility provider Jar the 2008 bond issue shouJd the bonds fail to remarket The Liquidity Facility agreement was renewed 1n January 2018 for an additional five years and remains in effect until January 31, 2023, unless renewed or terminated pursuant to the terms and conditions set forth in the agreement.

Effective March 22, 2011, Reed College refinanced the 2000 State of Oregon bonds in the amount of

$19,080,000 and borrowed an additional $20,950,000 to be used to finance the construction of a new perforrrnng arts building._

Effective December 5, 2017, Reed Coll~ge refinanced the 2011 State of Oregon bonds in the amount of $40,030,000 and borrowed an additional $25,620,000 to be used to finance the construction of a new residence hall. A portion of the bond proceeds was deposited with a trustee in an irrevocable -

- escrow trust account to service the 2011 State of Oregon bonds until Juli 1, 2020, which is the earliest date the bonds are callable. As of June 30, 2019, Reed College had $41,902,373 on deposit with the trustee The defeased bonds and the related trust are not reflected in the accompanying financial statements Notes payable are summarized as follows.

2019 2018 2008 State of Oregon notes $ 34,880,000 36,345,000 2017 State of Oregon notes 651650,000 651650,000 100,530', 000 101,995,000 Unamortized premium 8,388,517 8,681,400 Unamortized Issuance costs {43\448} {449,501}

Total 108,487,069 110,226,899 Less amounts due within on year \8091830 1 190,170 Total long-tenn debt due after one year $ '106,677,239 109,036, 7-29 22 (Continued)

/

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 Principal payments on the notes payable become due as follows:

• 2017 State of 2008 State c;>f

-oregon notes Oregon, notes Total 2020 $ 1,535,000 1,535,000 2021 1,595,000 1,595,000 2022 1,670,000 1,670,000 2023 1,720,000 1,720,000 2024 1,795,000 1,795,000 Thereafter 65,650,000 26,565,000 92,215,000

$ __e_5_,e_5_o_,o_o_o~ 34,880,000 100,530,000 Interest on the State of Oregon notes payable and amortization of premium, discount, and issuance costs are as follows:

2019 2018 Interest $ 3,511,628 2,106,638 Amortization of premium, discount, and issuance costs (274,830) (153,928)

Less amounts capitalized . (1,129,347) (644,658)

Total interest cost recorded in the statement of acti"1ties 2,107,451 1,308,052 Amortization is calculated over the life of the notes .

.(b) Interest Rate Risk Management In June 2006, Reed College issued~$16,650,000 of auction rate debt through ttie Oregon Facilities Authority. Reed College entered into an interest rate swap of like term, amortization, and notional amount with an investment bank to hedge this underlying variable rate debt Reed College subsequently refinanced the 2006 notes with the 2008 series debt and retained this swap arrangement for interest rate risk management The notional amount of the swap was $8,875,000 and $9,950,000 at June 30, 2019 and 2018, respectively. Pursuant to this swap, Reed College works with a consulting firm to aid in monitoring changes in interest rates and the impact they may have on long-term debt.

During the years ended June 30, 2019 and 2018, $201,337 and $282,119 was paid, respectively, and is recorded in the statements of activities and changes in net assets as other investment gains. The change in unrealized gain and loss on the swap agreements for the years ended* June 30, 2019 and J 2018 was a loss of $9,120 and a gain of $501,128, respectively, and is recorded in the statements of activities and changes in net assets as other investment gains. The fair value of the swap agreement as of June 30, 2019 and 2018 was a liability of $833,832 and $824,712, respectively, and is recorded in the statements of financial position as other long-term liabilities.

23 (Continued)

(

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 (8) Retirement and Postretirement Benefits (a) Retirement Plan Reed Collkge has a defined-contnbution pension plan administered through Teachers Insurance and Annuity Association - College Retirement Equities Fund. Ei'nploye~s are able to voluntarily contribute funds to this plan b8£1inning on the first day of employment provided they are not students. Employees are eligible for fixed employer contnbutions the first month following the completion of a year of service and must have attained the age of 21. Participants are immediately,vested in their employee and employer contributions and earnings thereon. Reed College's policy is to fund pension expenses as incurred. Expenditures relating to the plan were $3,680,506 and $3,629,026 for the years ended*

June 30, 2019 and 2018, respectively, and are included in education and general expenses in the accompanying statements of activities and changes in net assets. '

(b) Defined-Benerrt Retlree Medical Insurance Plan Reed College maintains* a defined-benefit retiree medical insurance plan, which is not funded.

Employees hired after June 30, 2006 do not participate in this plan. In order to participate, employees hired prior to September 2, 2001 must retire from Reed College at or after age 55 with at least 1O years of continuous service. Employees hired betweeo September 1, 2001 and June 30, 2006 must retire from Reed CollegEp at or after age 55 with 20 years of continuous service. -

, )

Participating retirees have the option of continuing to be insured by ~1ther ' a Kaiser plan or other plan offered by Emeriti Participating retirees who retired prior to September 2, 2001 and spouses/domestic partners are covered for their lifetime.---AII other participating retirees are covered at the lowest premium plan for their lifetime and spouses/domestic partners are covered at the rate of 50% of the lowest premium plan for their lifetime. Employer premium expenses were $812,917 and $755,896 for the years ended June 30, 2019 and 2018, respectively I

The accrued liability for postretirement benefits a~ year-end 1s as follows:

2019 2018 Change in benefit obligation:

Benefit obligation at begi~ning of year $ 26,432,053 26,680,433 Ser\Ace cost 409,191 440,767 Interest cost 1,061,839 1,047,559 Benefits paid (812,917) (755,896)

Actuarial gain 3,090,776 (980,810)

B,enefit obligation at end of year and funded status 11_a_o_,94==-2=

$ =-3....o.... 26,432,053 Amounts recognized in the balance sheet consist of:

Postretirement benefits payable - current $ 852,376 1,077,870 Postretirement benefits payable 29,328,566 25,354,183

$ """'"_3_o_,1=a_o_,94=-e2= 26,432,053 24 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 Net periodic benefit cost for the years ended June 30 included the following components:

2019 2018 Service cost $ 409,191 440,1s'1 Interest cost 1,061,839 1,047,559 Recognition of actuarial los~ (gain) 3,090,776 (980,810)

Net periodic benefit cost $ =-4-,5=6=1;..'8_06""'-= 507 516

/

Service cost is included in education and general expenses and the other components of net periodic postretirement benefit are included in nonoperating activity in the accompanying statements of activities and changes in net assets.

, ~

Reed College used the following actuarial assvmpt1ons to determine its employee benefit obligations at and ne_t periodic benefit cost for the years ended June 30, 2019 and 2018, as mea~ured at June 30.

2019 2018 Benefit obligation:

Weighted a\erage discount rate 3.6% 4.1%

Rate of increase in per capita cost of covered 6.5% trending to 5 5% trending to healthcare benefits 4.0% in 2030 4.0% in 2022

\

Net penodic benefit cost: -

Weighted average discount rate 41% 4.0%

Rate of increase in per capita cost of co-.ered 5. 5% trending to 6.0% trending to healthcare benefits 4 0% in 2022 4.0% in 2022 Reed College;s policy is to fund the plan as claims payments are made. In the 2019-2020 fiscal year, Reed College expects to contnbute, from ongoing cash flows and current assets, $852,376 to the plan.

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows for the years ending June 30:

Years ending.

2020 $ 852,376 2021 944,143

)

2022 1,001,271

, . 2023 1,041,649 2024 1,117,658 2025-2029 6,855,365 25 (Continued)

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THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 (c) Emarltl Retiree Defined-Contribution H8JJ/th Plan Reed College has a defined-contnbution retiree health plan for employees hired on or after July 1, 2006. Reed College makes contributions on each eligible e,mployee's behalf once the individual ,

reaches the age of 40 years. l;mployees are also eligible to make discretionary after-tax contributions '

to their account if the individual 1s 21 years or older Employees are eligible to receive benefits from the plan if the employee has attained age, 55 years and achieved 20 years of continuous service to Reed College. Employer expenses related to this plan were $542,618 and $696,820 for 1iscal years ended June 30, 2019 and 2018, respectively, and are included in education and general expenses in the accompanying statements of activities and changes in net assets.

(9) Funds Held in Trust by Others Reed 9<)llege has been named beneficiary of a portion of the remainder of three trusts maturing at speci1i~d dates in t~e future. 'These trusts are administered by other entities Reed College revalues the receivables using the fair value of expected future cash flows. At Jurie 30, 2019 and 2018, the trusts receivable were $1,289,557 and $1,291,022, respectively, and were reported as noncurrent funds held in trust by others m the statements of financial position.,

(10) Contributions and Accounts Receivable Contributions receivable consist of the following.

2019 2018 Annual fund $ 700,862 1,124,502

/

Campaign 1,560,183 3,146,949 Endowment 3,551,261 4,557,067 Facilities 45,000 60,000 Gross contributions ~.eh.able $ _ _s_,8_5=7=,3=06= 8,8~8,518 Contributions receivable reported on the statements of 1inancial position ,

were as follows:

2019 2018 Current:

Gross contributions receivable $ 2,107,294 3,184,334 Less allowance for doubtful accounts {1051000} {159,000}

Total current net contributions receivable 2,002,294 3,025,334 Long term (one to five years).

Gr:pss contributions rece1\8ble 3,750,012 5,704,184 Less allowance for doubtful accounts {180,000} {274,000}

Net long-term contributions recei\Elble 3,570,012 5,430,184 26 (Continued)

/

/

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 2019 2018 Less discount to present \0lue $ _ _(~14_9~,4_9~3)~ (220,486)

Total long-tenn net contributions receivable 3,420,519 5,209,698 Total net contributions recei\0ble $ ==5+/-,4_2_,2e:=,8=1=3= 8,235,032 Contribu'tions receivable due in excess of one yeaf are discounted at 2.52% 'to 2.57% and 1.92% to 2.30%

for the years ended June 30, 2019 and 2018, respectively.

Of the net uncond1t1onal promises to give included above, $2,995,262 represents an unconditional promise ,

to give from 7 members of !he Reed College board of trustees due in one to three years.

Accounts receivable consist of the following at June 30*

2019 2018 Current

,.Student accounts receivable $ 101,675 46,928 Rel.ated parbes 18,312 61,565 other receivables 926,244 624,076 1,046,231 732,569 Noncurrent Student accounts receivable 10,216 8,832 Reed loans 1,101,991 1,177,107 Related parties 3,887 5,320 Federal Perkins loans 2,256,378 2,740,699 3,372,472 3,931,958 Less allowance for doubtful accounts (60,239) (60,239)

$ 4,3581464 4,604,288

==-c,c,:i:

The Federal Perkins Loans and Reed loans are generally payable at interest rates of 5% to 9% over approximately 10 years. Repayment begins after a designated grace period following the student's college attendance. Principal payments, interest, and losses due to cancellation are shared by Reed College and the U.S. governnierit m proportion to their share of funds provided. The Federal Perkins Loan program provides for cancellation of loans lf the student is employed in certain occupations following graduation (employment cancelations). Such employment cancellations are absorbed in full by the U.S. government

'Congress did not renew the Federal Perkins Loan Program after September 2017, and the transition period permitting disbursements ended on June 30, 2019. lnst1tut1ons have the option to either continue to service the outstanding loans and remit excess cash periodically to the Department of Education or liquidate the portfolio, which would include assigning remaining loans to the federal government 1

and forfeiting the 27 (Continued)

/

THE 1REED INSTITUTE Notescto Financial Statements June 30, 2019 and 2018

- I institution's remaining net assets (institutional capit?I contnbution). Reed College intends to continue servicing the outstanding Perkins loans.

(11) Net Assets I - At June 30, 2019 and 2018, net assets consisted of the following:

2019 2018 Without donor restrictions.

Operating aljld qesignated for special programs $ 23,335,653 12,839,326 Institutional loan programs 1,788,740 2,229,474 Funds functioning as endowment 110,741,859 113,539, 137 Accumulated quasi-endowment gains 178,188,942 180,127,677 Net imestment in plant 52,420,243 58,649,914 t

Subtotal 366,475,437 36713851528 With donor restrictions - time or purpose.

r- Educational and general programs 13,768,129 13,560,084 Annuity and life income funds 8,788,719 8,690,172 Accumulated endowment gains 86,962,842 88,819,086 Other temporarily restricted net assets 21139,756 4,009,516 Subtotal 11 \6591446 115,078,858 With donor restrictions - p~rpetual:

True endowment funds 176,999,699 173,097,568 Annuity and life income funds 5,808,086 5,718,659 Subtotal 18218071 785 178,816,227 Total $ 660,942,668 661,280,613

\

/

(12) Endowments At June 30, 2019, Reed College's'endowment consisted of approximately 485 ind1viclual funds established for a variety of purposes. The endowment includes both donor-restricted endowments and funds designated by Reed College to function as endowments (quasi-endowments). Quasi-endowment funds do ,,,.-

not have donor restrictions and may be expended at the discretion of Reed College. As required by U.S generally accepted accounting principles, net assets associated with endowment funds, including quasi-endowment funds, are classified and reported based on the existence or ab'sence of donor-imposed restrictions.

Interpretation of relevant law- The State of Oregon has enacted the Uniform Prudent Management of Institutional Funds Act (UPMIFA or the Act), the provisions of which apply to endowment funds. Reed College has interpreted UPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary. Reed College classifies as net assets with perpetual donor restrictions (a) the original value of gifts to 28 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 J

r donor-restricted endowments and (b) any other amounts added to donor-restricted endowments that donors have stipulated are not expendable. The remaining portion of the donor-restncted endowment fund that is not classified as net as5E!ts with perpetual donor restrictions is classified as net assets with donor imposed time or purpose restrictions untiUhose amounts are appropriated for expenditure by Reed College in a manner consistent with the standard of prudence *prescribed by UPMIFA Income and net gains on investments of endowment and similar funds are reported as follows:

)

• Increases in net assets with perpetual donor restnct1ons if the terms of the gift or Reed College's interpretation of relevant state law require they be added to the principal of a permanently restricted net asset

• Increases m net assets with donor imposed time or purpose restrictions if the terms of the gift restrict the use of the income or if endowment income has not yet been appropriated for expenditure

• Increases m net assets without'donor restnctions in all other cases.

From time to time, the fair value of assets associated with 1rid1v1dual donor~restricted endowment funds may fall below the level that the donor or UPMIFA requires to be retained as a fund of perpetual duration.

Def1cienc1es of this nature are reported in net assets with perpetual donor restrictions. As of June 30, 2019 and 2018, funds with an onginal gift value of $11,819,969 and $6,578,431 were "underwater" by $646,279 and $299,319, respectively. 1 '

Investment and spending policies - To enable broad divers1f1cat1on and economies of scale,' Reed College's policy is to pool endowment assets for investment purposes to the fullest extent possible as permitted by gift agreements and applicable government regulations.

\_

l Reed College's pooled endowment provides ongoing financial support for operations that will remain stable (or grow) in real or inflation-adjusted terms, as adjusted for new*additJons to the pooled endowment. The pnmary investment obJect1ve of the pooled endowment is to provide a sustainable maximum level of return consistent with prudent risk levels. The overall, long-term investment _goal of the pooled endowment is to achieve an annualized total return that balances short-term spending needs with the preservation of the real (inflation adjusted) value of assets. Investments are diversified across a wide range of asset classes, including those providing return premiums for illiquidity, so as to provide a balance that will enhance total return under a r~ge of economic scenarios, while avoiding undue nsk concentrations in any single asset class or investment category. Sufficient liquidity in the endowment portfolio to meet the spending-policy and operational needs, preserve Reed College's desired credit ratings, and maintain compliance with any debt agreements 1s also considered when making investment decisions regarding asset allocation.

In accordance with the Act, Reed College considers the following factors, among others, in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation/of the fund; (2) the p_urposes of Reed College and the dorior-restncted endowment fund; (3) general economic conditions, (4) the possible effect of inflation or deflation; (5) the expected total return from income and the appreciation of investments; (6) other resources of Reed College; and (7) the inve~tment policies of Reed College.

29 (Continued)

THE REED INSTITUTE Notes to Financial Statements

, (

June 30, 2019 and 2018 Pooled endowment spending is determined using the total return concept The policy on spending endowment income is to spend 5.10% and 5.15% over a rolling 13-quarter moving average of the fair value or market value of the endowment assets for fiscal years 2019 and 2018, respectively.

Endowment net assets by type of fund as of June 30, 2019*

(

Without With donor With donor donor restrictions - restrictions -

restrictions time or eurpose eerpetual Total Donor-restricted endowment funds $ 86,962,842 176,999,699 263,962,541 Board-designated endpwment funds 288,930,801 288,930,801 Total funds $ 288,930,801 86,962,842 176,999,699 ( 552,893,342 Endowment net assets by type of fund as of June 30, 2018:

C Without With donor With donor donor restrictions - restrictions -

restrictions time or eurpose eerpetual Total Donor-restricted endowment funds $ 88,819,086 173,097,568 261,916,654 Board-designated endowment funds 293,666,814 293,666,814 Total funds $ 293,6661814 88,819,086 173,097,568 555,583,468 Changes IIJ endowment netassets for the years ended June 30, 2019 and 2018 are as follows:

Without With donor With donor donor restrictions - restrl ctl ons -

restrictions time or eurpose eerpetual / Total Endowment net assets, July 1, 2018 $ 293,666,814 88,819,086 173,097,568 555,583,468 '

Investment return:

Net im.estment gain ,866,839 394,461 1,261,300 Net appreciation of investments 8,606,574 9,613,034 18,219,608 Contributions ' 676,977 4,256,842 4,933,819 Contributions from trust terminations 773,346 \ 180,624 953,970 Appropriation of endowment assets for expenditure (15,209,080) (12,367,505) (27,~76,585)

Transfers and other reclassifications {450,669} 503,766 {535,33~ {4821238}

Endowment net assets, June 30, 2019 $ 288,930,801 86,962;842 176,999,699 5521893,342 30 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2019 and 2018 Without With donor With donor donor restrl cti ons - restrictions -

restrictions time or eurpose eerpetual Total Endowment net assets, July 1, 2017 $ 270,285,289 79,174,345 166,759,460 516,219,094 lm.estment return:

Net im.estment galn 183,786 111,102 294,888 Net apprec1at1on of investments 29,058,957 21,802,197 50,861,154 Contributions 8,183,037 3,394,974 11,578,011 Contributions from trust tenninatlons 145,769 46,690 192,459 Appropriation of endowment assets for expenditure (15,110,710) (12,268,558) (27,379,268)

Transfers to create qoard-designated

-,endowment fund 1,609,104 '1,609.104 Trarisfers and other reclassifications {6881418} 2,896,444 2,208,026 Endowment net assets, June 30, 2018 $ 293,6661814 88,819,086 1173,097,568 555,583,468 (13) Functlonal Classlflcatlon of, Expenses Academic and research program expenses include instruction, research, academic support, student services, and auxiliary enterprises. The financial statements report certain categories of expenses that are attributable to more than one program or supporting function. These expenses were allocated among program and supporting functions using a vanety of cost allocation techniques, such as square footage and time and effort. , \

The table below presents expenses both by their nature and their function for the year ended June 30, 2019, General Academic College institutional and research relations sueeort Total Salaries and wages $ 36,542,509 4,392,015 3,447,928 44,382,452 Benefits 12,219,223 1,769,087 1,388,813 15,377,123 Utilities, alterations, and repairs 6,067,142 *65,895 255,455 6,388,492 Depreciation 5,289,376 50,557 280,873 5,620,806 Interest and accretion 2,008,966 19,214 106,747 2,134,927 Supplies, senAce:_s, and other 20,317,445 1,533,577 3,148,422 24,999,444 Total $ 82,444,661 7,830,345 8,628,238 98,903,244 31 (Continued)

I THE REED INSTITUTE Notes to Financi,al Statements June 30, 2019 ana 2018

.I The table below presents expenses both by their nature and their function for the year ended June 30, 2018. .

_; General Academic College Institutional and research relations sueeort Total Salaries and wages $ 35,203,369 4,157,382 3,789,443 43,150,194 Benefits 11,712,920 1,685,049 1,535,935 14,933,904 utilities, alterations, and repairs 6,915,997 73,718 352,273 7,341,988 Depreciation 5,378,919 50,551 339,443 5,768,913 Interest and accretion 1,257,056 11,827 66,644 1,335,527 Supplies, seNces, and other 19,461,168 1,773,972 3,023,011 24,258,151 Total $ 79,929,429 , 7,752,499 9,106,749 96,788,677 (14) Fundralslng Expense Reed College expended $3,316,861 and $3,169,890 for the years ended June 30, 12019 and 2018, respectively, for payroll and benefits, informational matenals, college relations, travel, and special events relating to fundraising activities. These costs are all classified as college, relations in the statements of activities and changes in net assets.

(1~) Commitments and:Contingencles From time to time, Reed.College is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, most of these claims and legal actions are covered by

, insurance and the ultimate dispf>sition of these matters will not have a material effect on Reed College's financial position, statements of activities and changes in net assets, or cash flows (16) Subsequent Events Reed College has evaluated subsequent events from the statement of financial pos1t1on date through October 7, 2019, the date at which the finanaal statements were issued, and determined that there are no other items to disclose.

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32