ML23139A132

Reed Research Reactor (Docket No. 50-288/License No. R-112) 2022 Financial Assurance

ML23139A132
Person / Time
Site:	Reed College
Issue date:	05/16/2023
From:	Newhouse J Reed College
To:	Geoffrey Wertz Office of Nuclear Reactor Regulation, Document Control Desk
References
2023-046
Download: ML23139A132 (1)

Text

REED COLLEGE Reed Research Reactor 3203 SE Woodstock Boulevard, Portland, Oregon 97202-8199 phone: 503/777-7222. email: reactor@reed.edu May 16, 2023 2023-046 Document Control Desk Attn: Geoffrey Wertz U.S. Nuclear Regulatory Commission Washington, DC 20555-001 Re: Reed Research Reactor (Docket No. 50-288/License No. R-112) 2022 Financial Assurance Please find attached to this letter Reed Institute dba Reed Colleges 2022 Financial Assurance for Cost of Decommissioning Activities Self-Guarantee Agreement, and Financial Statements for 2022 and 2021.

Sincerely, Jerry Digitally signed by Jerry Newhouse Newhouse Date: 2023.05.19 07:21:17

-07'00' Jerry Newhouse Director, Reed Research Reactor

REED COLLEGE OFFICE OF THE TREASURER 3203 SE Woodstock Boulevard Portland, Oregon 97202-8199 May 16, 2023 Financial Assurance for Cost of Decommissioning Activities Self-Guarantee Agreement Guarantee made by Reed College, a non-profit college, organized under the laws of the State of Oregon, herein referred to as the "guarantor" to the U.S. Nuclear Regulatory commission, on behalf of the college as licensee.

Recitals

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

2. This self-guarantee is being issued to comply with regulations issued by NRC, an agency of the U.S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. NRC has promulgated regulations in title 10, Chapter I of the Cold of Federal Regulations, Part 50, which require that a holder of, or an applicant for, a materials license issued pursuant to 10 CFR Part 50 provide assurance that funds will for, a materials license issued pursuant to 10 CFR part 50 provide assurance that falls 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 Estimate based on Certified amounts and year 2018 dollars of2018 Cost Docket# estimates R-112 Research and Test reactor 50-288 and related facilities $2,420,100.00 $2,420,100.00 located at Reed College Portland Oregon 97202 Subtotal $2,420,100.00 25% Contingency fund $605,025.00 Total Estimated cost $3,025,125.00

4. The guarantor meets or exceeds the following financial test for a nonprofit College that issues bonds. Specifically, the current rating for the college is Aa2NMIGI by Moody's Investor Services and AA- by Standard & Poor and

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 revised financial statements, financial test data annually within 90 days of the completion of our 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 either 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 and 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 my 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 specific 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 grantor 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: May 16th, 2023 Reed College by:

~

Lynn Valenter, Vice President and Treasurer State of Oregon County of Multnomah Signed before me this l.k_ day of Mery, ,z,oZ!;:,

OFFICIALSTAMP STELJ.A ALEKSENDRA LILIEN NOTARYPUBLIC- OREGON COMMISSIONNO.1027642 MYCOMMISSION EXPIRESAUGUST24, 2026

THE REED INSTITUTE Financial Statements June 30, 2022 and 2021 (With Independent Auditors' Report Thereon)

THE REED INSTITUTE Table of Contents Page(s)

Independent Auditors' Report 1-2 Statements of Financial Position 3 Statement of Activities and Changes in Net Assets - Year ended June 30, 2022 4 Statement of Activities and Changes in Net Assets - Year ended June 30, 2021 5 Statements of Cash Flows 6 Notes to Financial Statements 7-32

KPMG LLP Suite 3800 1300 South West Fifth Avenue Portland, OR 97201 Independent Auditors' Report The Board of Trustees The Reed Institute:

Opinion We have audited the financial statements of The Reed Institute (the College), which comprise the statements of financial position as of June 30, 2022 and 2021, and the related statements of activities and changes in net assets, and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the College as of June 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the College and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles, and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the College's ability to continue as a going concern for one year after the date that the financial statements are issued.

Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College's internal control. Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the College's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Portland, Oregon October 7, 2022 2

THE REED INSTITUTE Statements of Financial Position June 30, 2022 and 2021 Assets 2022 2021 Current assets:

Cash and cash equivalents $ 23,952,653 11,343,650 Accounts receivable, net 6,266,542 1,335,903 Contributions receivable, net 2,638,571 2,777,140 Short-term investments 11,768,562 10,205,130 Prepaid expenses and other assets 1,312,788 890,177 Total current assets 45,939,116 26,552,000 Noncurrent assets:

Cash and cash equivalents whose use is limited 18,056,525 530,151 Accounts receivable, net 2,052,332 2,428,112 Contributions receivable, net 3,190,402 4,937,391 Funds held in trust by others 1,416,310 1,358,962 Long-term investments 781,352,572 840,528,532 Property, plant, and equipment, net 159,518,908 157,626,264 Other assets 596,127 694,628 Total noncurrent assets 966,183,176 1,008,104,040 Total assets $ 1,012,122,292 1,034,656,040 Liabilities and Net Assets Current liabilities:

Accounts payable and accrued liabilities $ 12,106,686 7,557,312 Postretirement benefits payable 890,720 937,522 Debt, current portion 1,944,830 Deferred revenue 1,866,982 2,198,082 Other liabilities 106,759 115,246 Total current liabilities 14,971,147 12,752,992 Long-term liabilities:

Liability for split-interest agreements 10,820,407 13,146,653 Postretirement benefits payable 24,357,059 30,400,655 Refundable loan programs 990,392 650,704 Asset retirement obligation 6,180,831 6,051,916 Debt, net of current portion 123,891,378 102,862,578 Other liabilities 741,393 1,685,241 Total long-term liabilities 166,981,460 154,797,747 Total liabilities 181,952,607 167,550,739 Net assets:

Without donor restrictions 455,932,158 469,050,167 With donor restrictions:

Time or purpose 167,288,431 199,927,217 Perpetual 206,949,096 198,127,917 Total net assets with donor restrictions 374,237,527 398,055,134 Total net assets 830,169,685 867,105,301 Total liabilities and net assets $ 1,012,122,292 1,034,656,040 See accompanying notes to financial statements.

3

THE REED INSTITUTE Statement of Activities and Changes in Net Assets Year ended June 30, 2022 Without donor With donor Total restrictions restrictions 2022 Revenues, gains, and other support:

Tuition and fees, net of $37,004,425 in college-funded scholarships $ 55,950,747 55,950,747 Auxiliary enterprises 17,315,666 17,315,666 Gifts and private grants 6,402,924 9,660,320 16,063,244 Government grants, contracts, and student aid 8,609,392 8,609,392 Endowment return, appropriated for spending 15,880,409 13,589,867 29,470,276 Other investment (losses) gains (895,300) 77,147 (818,153)

Other revenues and additions 2,627,706 3,417 2,631,123 Net assets released from restrictions 16,650,538 (16,650,538)

Total revenues, gifts, and other support 122,542,082 6,680,213 129,222,295 Expenses:

Educational and general:

Instruction 39,277,791 39,277,791 Research 2,098,551 2,098,551 Academic support 13,765,252 13,765,252 General institutional support 9,910,094 9,910,094 Student services 13,884,376 13,884,376 College relations 7,805,835 7,805,835 Total educational and general 86,741,899 86,741,899 Auxiliary enterprises 20,358,740 20,358,740 Pandemic-related costs 1,455,437 1,455,437 Total operating expenses 108,556,076 108,556,076 Increase from operations 13,986,006 6,680,213 20,666,219 Nonoperating activity:

Endowment return, net of amounts appropriated for spending (33,490,709) (28,657,586) (62,148,295)

Change in value of split-interest agreements (3,019,663) (3,019,663)

Net periodic benefit gain, net of service cost 5,985,829 5,985,829 Loss on debt refinancing (1,050,764) (1,050,764)

Insurance proceeds 3,318,210 3,318,210 Other deductions and transfers (1,866,581) 1,179,429 {687, 1521 Total nonoperating activity {27,104,0151 (30,497,8201 {57,601,8351 Decrease in net assets (13,118,009) (23,817,607) (36,935,616)

Net assets, beginning of year 469,050,167 398,055,134 867,105,301 Net assets, end of year $ 455,932,158 374,237,527 830,169,685 See accompanying notes to financial statements.

4

THE REED INSTITUTE Statement of Activities and Changes in Net Assets Year ended June 30, 2021 Without donor With donor Total restrictions restrictions 2021 Revenues, gains, and other support:

Tuition and fees, net of $29,849,660 in college-funded scholarships $ 50,052,901 50,052,901 Auxiliary enterprises 10,229,448 10,229,448 Gifts and private grants 9,998,134 2,749,477 12,747,611 Government grants, contracts, and student aid 2,994,766 2,994,766 Endowment return, appropriated for spending 15,590,874 13,121,490 28,712,364 Other investment gains 89,412 89,412 Other revenues and additions 4,202,775 3,694 4,206,469 Net assets released from restrictions 13,042,356 (13,042,356)

Total revenues, gifts, and other support 106,200,666 2,832,305 109,032,971 Expenses:

Educational and general:

Instruction 36,602,872 36,602,872 Research 1,753,136 1,753,136 Academic support 12,934,474 12,934,474 General institutional support 8,437,737 8,437,737 Student services 12,610,417 12,610,417 College relations 7,196,175 7,196,175 Total educational and general 79,534,811 79,534,811 Auxiliary enterprises 17,619,552 17,619,552 Pandemic-related costs 5,823,461 5,823,461 Total operating expenses 102,977,824 102,977,824 Increase from operations 3,222,842 2,832,305 6,055,147 Nonoperating activity:

Endowment return, net of amounts appropriated for spending 105,073,385 88,855,621 193,929,006 Change in value of split-interest agreements 4,335,468 4,335,468 Net periodic benefit cost, net of service cost 2,774,152 2,774,152 Other deductions and transfers (2,051,185) 2,075,731 24,546 Total nonoperating activity 105,796,352 95,266,820 201,063,172 Increase in net assets 109,019,194 98,099,125 207,118,319 Net assets, beginning of year 360,030,973 299,956,009 659,986,982 Net assets, end of year $ 469,050,167 398,055,134 867,105,301 See accompanying notes to financial statements.

5

THE REED INSTITUTE Statements of Cash Flows Years ended June 30, 2022 and 2021 2022 2021 Cash flows from operating activities:

Increase (decrease) in net assets $ (36,935,616) 207,118,319 Adjustments to reconcile increase (decrease) in net assets to net cash used in operating activities:

Depreciation and amortization 6,411,408 6,399,524 Amortization of bond premium and issuance cost 13,735 (274,830)

Loss on disposal of assets 24,000 Loss on bond refinancing 1,050,764 Gain on swap termination (301,516)

Contributions restricted for long-term investment (6,659,030) (3,588,257)

Noncash contributions (1,630,543) (939,428)

Net realized and unrealized loss (gain) on investments and split-interest agreements 37,322,399 (229,957,537)

Actuarial adjustments of liabilities for split-interest agreements (886,654) 2,866,527 Change in asset retirement obligation 128,915 128,915 Changes in governmental loan funds 529,603 Insurance proceeds (3,318,210)

Changes in operating assets and liabilities that provided (used) cash:

Accounts receivable (4,554,859) 479,045 Contributions receivable 1,885,558 4,321,214 Prepaid and other (314,055) (538,878)

Accounts payable and accrued liabilities 4,549,374 (895,025)

Postretirement benefits payable (6,090,398) (2,760,282)

Deferred revenue (331,100) (707,478)

Other liabilities (347,637) 78,529 Net cash used in operating activities (9,477,862) (18,245,642)

Cash flows from investing activities:

Proceeds from maturities/sales of investments 148,113,563 204,776,056 Purchases of investments (125,311,766) (189,204,613)

Contracts receivable collected 43,805 33,517 Contracts receivable advanced (53,860) (60,000)

Purchase of property, plant, and equipment (8,304,052) (869,714)

Insurance proceeds 3,318,210 Net cash provided by investing activities 17,805,900 14,675,246 Cash flows from financing activities:

Contributions restricted for long-term investment 6,659,030 3,588,257 Issuance of new debt 123,877,643 Payment of debt principal (105,858, 173) (1,595,000)

Swap termination (303,182)

Payments on split-interest agreements (1,525,249) (1,470,475)

Investment income subject to split-interest agreements 389,372 762,711 New liabilities related to split-interest agreements 13,044 52,194 Changes in governmental loan funds (189,915) (425,918)

Net cash provided by financing activities 23,062,570 911,769 Net increase (decrease) in cash and cash equivalents 31,390,608 (2,658,627)

Cash and cash equivalents and cash whose use is limited, beginning of year 16,750,145 19,408,772 Cash and cash equivalents and cash whose use is limited, end of year $ 48,140,753 16,750,145 Supplemental disclosures of cash flow information:

Interest paid $ 3,631,509 2,984,008 See accompanying notes to financial statements.

6

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (1) Background The Reed Institute (Reed College or the 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 Bachelor of Arts degree in one of 25 major fields and numerous interdisciplinary fields, as well as a master of arts in liberal studies degree. The College educational program pays particular attention to a balance between broad study in the various areas of human knowledge and close, in-depth study in a recognized academic discipline.

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

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

• Without donor restrictions - 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 stipulations that will be met by either actions of the College or the passage of time

• With donor restrictions: perpetual - Net assets subject to donor-imposed stipulations that they be permanently maintained by the College; generally, the donors of these assets permit the College to use all or part of the income earned on related investments for general or specific purposes.

Revenues are reported as increases in 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 restricted 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 additions 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 Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA) and also requires disclosures about endowment funds, both donor-restricted endowment funds and board-designated endowment funds.

See note 12 for further disclosures.

7 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (c) Measure of Operations Reed College's increase from operations includes all operating revenues and expenses that are an integral part of its programs and supporting activities, net assets released from donor restriction to support operating expenditures, and transfers from board-designated and other nonoperating funds to support current operating activities. The measure of operations excludes investment return in excess of amounts made available for current use, as well as infrequent items such as loss on debt refinancing and insurance proceeds.

(d) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(e) Revenue Recognition Tuition and fees - Reed College's operating revenue is primarily derived from academic programs provided to undergraduate students. The College bills tuition and fees in advance of each academic term and recognizes the revenue on a straight-line basis over the academic term as the educational services are performed. Tuition and fees are not considered separate performance obligations.

Students are typically entitled to a partial refund through approximately the first half of an academic term. The 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.

Academic terms are determined by regulatory requirements mandated by the federal government and/or applicable accrediting body. The College's academic terms consist of fall and spring. The academic terms have start and end dates that fall within the College's fiscal year.

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.

Auxiliary enterprises - Auxiliary enterprises consist 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 is provided. While the College believes the residential experience is an integral part of a student's education, it is believed 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 billed in advance of each academic term and are recognized as revenue ratably over the period during which the dining services are offered.

8 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 In addition to room and board, auxiliary services include revenue earned from the bookstore and for various conference services offered by the College. Revenue from the sale of these goods and services is recognized once the performance obligations are complete.

Gifts and private grants - Contributions, including unconditional promises to give, are recognized as revenues in the period received. Conditional 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 is 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. For the year ended June 30, 2022, the College received a grant from the Federal Emergency Management Agency for $5,173,604 to reimburse for diagnostic testing costs incurred between August 2020 and June 2021, in addition to other grant programs received in prior fiscal years.

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 operating revenues, gains, and other support and nonoperating activities without donor restrictions unless the income or loss is 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. Some investments do not have readily determinable fair values, including certain private investments, fixed-income investments, absolute return investments, and investments in equities, and are valued at net asset value (NAV) as a practical expedient for fair value.

NAV in many instances, may not equal the price for which the asset could be exchanged or settled on the measurement date.

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. 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, 2022 and 2021 (g) Split-Interest Agreements Reed College has been named as a beneficiary for various split-interest agreements. Each agreement provides for contractual payments to stated beneficiaries for their lifetimes, after which remaining principal and interest revert to the College. Assets contributed are recorded at fair value. In addition, the 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 after 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 perpetuity based on the intent of the donor.

The College maintains separate reserve funds adequate to meet future payments under its charitable gift annuity contracts, as required by governing states' laws. The total held in separate reserve funds was $5,630,980 and $7,117,480 as of June 30, 2022 and 2021, respectively. The amount included to meet future payments under gift annuity contracts in liability for split-interest agreements was

$2,283,261 and $2,422,043 as of June 30, 2022 and 2021, respectively.

(h) Contributions Receivable Unconditional promises to give (contributions) are recorded as gifts and private grant income and contributions receivable. Promises to give are not recognized until they become unconditional, that is, when the donor-imposed conditions are substantially met. Contributions 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 fundraising 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 with the risk involved.

Amortization of the discount is recorded as additional contribution revenue in accordance with

• donor-imposed restrictions, if any, on the contributions.

(i) Derivative Instruments Reed College accounts for derivatives in accordance with FASB 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 investment gains (losses).

(j) 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 the 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 Notes to Financial Statements June 30, 2022 and 2021 (k) Donated Materials Donated materials are included in the statements of activities and changes in net assets as gifts and private grants at their estimated fair values at date of receipt. These materials are subsequently expensed when used.

(I) 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 Sections 511 through 515. Management believes that unrelated business income tax, if any, is immaterial, and therefore, no tax provision has been made. The College accounts for income taxes in accordance with FASB ASC Subtopic 740-10, Income Taxes - Overall, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a threshold of more likely than 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. The College does not have any uncertain tax positions.

(m) 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. Certain cash equivalents held by trustee and amounts included in the investment portfolio are intended to be invested on a long-term basis and are not included in the statements of cash flows. Cash and cash equivalents whose use is limited includes bond proceeds that are designated for capital projects and/or funds that are restricted for the Federal Perkins Loan program.

Cash and cash equivalents reported in the statements of cash flows were comprised of the following at June 30:

2022 2021 Cash and cash equivalents $ 23,952,653 11,343,650 Cash and cash equivalents whose use is limited 18,056,525 530,151 Cash held for long-term im.estment 6,131,575 4,876,344 Total cash and cash equivalents reported in the statements of cash flows $ 48,140,753 16,750,145 (n) Deferred Revenue Deferred revenue consists primarily of tuition and fees related to future academic years.

11 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (o) Postretirement Benefits Reed College has a noncontributory postretirement medical benefit plan covering participating employees upon their retirement. The College maintains a postretirement medical benefit plan and accounts for the plan within the framework of FASB ASC Subtopic 958-715, Not-for-Profit Entities-Compensation - Retirement Benefits.

The 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. The 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. The College believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.

(p) 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 the College to concentrations of risk.

(q) Recent Accounting Pronouncements In August 2018, the FASB issued ASU No. 2018-15, Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which applies to all entities that are a customer in a hosting arrangement that is a service contract. The amendments in ASU No. 2018-14, which align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, were adopted for the year ending June 30, 2022. The adoption of this standard was not significant and did not impact the College's statements of financial position, the results of operations or cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, with certain amendments made to the standard in November 2018 through ASU No. 2018-09, Codification Improvements to Topic 326, Financial Instruments - Credit Losses and ASU No. 2019-10 Financial Instruments- Credit Losses, Derivatives and Hedging, and Leases: Effective Dates, which applies to entities holding financial assets. The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in ASU 2016-13 are effective for the year ending June 30, 2023.

Reed College is currently evaluating the impact this guidance will have on its statements of financial position, the results of operations, or cash flows.

12 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (r) Reclassifications Certain items previously reported in the prior-year financial statements have been reclassified to conform to current-year financial statement presentation. These reclassifications had no effect on Reed College's financial position, activities and changes in net assets, or cash flows.

(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. The College has various sources of liquidity at its disposal, including cash and cash equivalents and marketable debt securities. For purposes of analyzing resources available to meet general expenditures over a 12-month period, the College considers all expenditures related to its ongoing mission-related activities as well as the conduct of services undertaken to support those activities to be general expenditures. In addition to financial assets available to meet general expenditures over the next 12 months, the College operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures not covered by donor-restricted resources.

As of June 30, 2022, the following financial assets could readily be made available within one year of the balance sheet date to meet general expenditures:

2022 2021 Financial assets at year-end:

Cash and cash equivalents $ 23,952,653 11,343,650 Current accounts receivable, net 6,266,542 1,335,903 Current contributions receivable, net 2,638,571 2,777,140 Investments 794,537,444 852,092,624 Total financial assets at year-end 827,395,210 867,549,317 Less amounts not available to meet general expenditures within one year:

Restricted by donors for use in future periods 17,855,201 17,356,497 Board-designated endowment 357,326,884 389,503,674 Future expendable donor-restricted endowment 138,542,382 167,199,968 Donor-restricted endowment to be retained in perpetuity 200,565,937 190,541,484 Annuity and life income funds 24,708,577 30,172,852 Funds held in trust by others 1,416,310 1,358,962 Financial assets available to meet general expenditures within one year $ 86,979,919 71,415,880 13 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (4) Investments The fair value of investments consists of the following at June 30:

2022 2021 lm.estments:

Cash and cash equivalents $ 6,131,575 4,876,344 Fixed income 54,781,194 78,509,140 Public equities 242,011,467 299,916,615 Absolute return 131,710,315 129,063,948 Private equity 222,906,994 211,062,641 Private real assets 70,213,843 54,414,383 Private real estate 38,822,231 33,327,792 Funds held in trust 24,708,576 30,172,852 lm.estment funding in transit 700,000 8,018,516 Other 2,551,249 2,730,393 Total im.estments $ 794,537,444 852,092,624 The overall investment objective for the College's endowment is to invest its assets in a prudent manner that will achieve a long-term rate of return sufficient to fund a portion of its annual operating activities and increase investment value after inflation. The College diversifies its investments among various asset classes incorporating multiple strategies and external investment managers. Major investment decisions are authorized by the board's Investment Committee, which oversees the College's investment program in accordance with established guidelines.

Investment strategies include the following:

• Fixed-income investments, which consist of commingled funds, bond mutual funds, and a limited partnership that hold securities, the majority 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 equities 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 consists of investments 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, credit/event driven, market neutral, multistrategy, and global macro. The majority of the underlying holdings are marketable securities. The remainder of the underlying holdings is held in marketable securities 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.

14 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021

• 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 is no readily determinable market value; in these cases, market value is determined by external managers based on a combination of discounted cash flow analysis, industry comparables, and outside appraisals. Where private 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, 2022 and 2021, Reed College has approximately $664 million and $692 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 84%

and 81 % of total investments and 80% and 80% of total net assets at June 30, 2022 and 2021, 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. The College believes that the reported amount of its investments is a reasonable estimate of fair value as of June 30, 2022 and 2021. Because of the inherent uncertainties of valuation, these estimated fair values may differ significantly from values that would have been used if a ready market existed. See note 5 for investment fair value and liquidity measurements.

The College has funds invested in 167 and 135 limited partnerships at June 30, 2022 and 2021, respectively. At times, there are certain positions of derivative financial instruments included in the assets of the various partnerships. The College is obligated under certain limited partnership investment fund agreements to advance funding periodically up to specified levels. At June 30, 2022, the College has unfunded commitments of approximately $131,301,544. These commitments are callable by the general partners/advisers between June 30, 2022 and 2032. The terminations of these partnerships/funds are based upon specific provisions in the agreements.

Included in funds held in trust investments are $24,708,577 and $30,172,852 of planned giving trusts held in mutual funds and other investments that are not available for spending as of June 30, 2022 and 2021, respectively.

Included in investment funding in transit are funds transferred to a manager prior to June 30, 2021 and invested in an absolute return investment on July 1, 2021.

Total investment (loss) income, excluding funds held in trust investments, was ($30,853,195) and

$222,730,782 for the years ended June 30, 2022 and 2021, respectively.

(5) Fair Value Measurements 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 priority to unadjusted quoted prices in active markets for identical 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 the College has the ability to access at the measurement date.

15 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 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 observable 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.

The following is a description of the valuation methodologies used for assets and liabilities carried at fair values:

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

Investments: Fixed income investments include bonds, treasuries, and bond mutual funds. Public equities include publicly traded stocks, mutual funds, and exchange-traded funds. Treasuries, bond mutual funds and public equities are classified as Level 1 in the fair value hierarchy table as their fair value is measured using quoted market prices multiplied by the quantity held. Corporate bonds are classified as Level 2 in the fair value hierarchy table as their fair value is measured using other inputs that are observable or can be corroborated by market data for the term of the instrument.

Funds held in trust: The College's beneficial interest in irrevocable split-interest agreements held or controlled by a third party are based on a combination of Level 1 inputs (observable market values of the trusts' investment portfolios), Level 2 indirect observable inputs (real estate investments trusts), and Level 3 significant unobservable inputs (real estate). The fair values are measured at the present value of the future distributions the College expects to receive over the term of the agreements. The shares and units held by a trustee in registered investment funds are classified in Level 2, because while the underlying securities are marketable, the College does not have the ability to redeem its interest at or near the date of the statements of financial position. Investments classified as Level 3 consist of donated real estate holdings, which are recorded at the appraised value at the date of receipt.

Other investments classified in Level 3 consist of shares or units in nonregistered investment funds as opposed to direct interests in the funds' underlying securities. Even though these shares and units in nonregistered investment funds are classified in Level 3, some of the underlying securities are marketable or not difficult to value.

Interest rate swap: The fair value of the interest rate swap 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 the College. The primary inputs into the valuation of interest rate swaps are interest yield curves, interest rate volatility, and credit spreads. The College's interest rate swaps are classified within Level 2 of the fair value hierarchy, since all significant inputs are corroborated by market observable data.

16 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 The College measures the fair value for certain investments that are not exchange traded using net asset value (NAV) as a practical expedient. The practical expedient would not be used if it is determined to be probable that the College will sell the investment for an amount different from the reported NAV. In accordance with FASB ASC Subtopic 820-10, an investment measured at fair value using the net asset value per share practical expedient has not been classified in the fair value hierarchy.

The inputs or methodology used 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 assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022:

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 $ 6,131,575 6,131,575 Fixed income 54,781,194 37,730,549 17,050,645 Public equities 41,936,057 41,936,057 Funds held in trust 24,708,576 24,019,576 689,000 Other 2,551,249 80,191 2,471,058 Total 130,108,651 $ 109,897,948 17,050,645 3,160,058 lm.estments where NAV was used as a practical expedient to measure fair value:

Absolute return 131,710,315 Private equity 222,906,994 Private real assets 70,213,843 Private real estate 38,822,231 Public equities 200,075,410 Total 663,728,793 lm.estment funding in transit 700,000 Total im.estments and other assets $ 794,537,444 17 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 The following table presents assets and liabilities that are measured at fair value on a recurring basis at June 30, 2021:

Quoted prices Significant in active other Significant marketsfor observable unobservable identical assets inputs inputs Total {Level 1} {Level 2} {Level 3}

Assets:

Cash and cash equivalents $ 4,876,344 4,876,344 Fixed income 65,074,793 43,165,813 21,908,980 Public equities 49,615,203 49,615,203 Funds held in trust 30,172,852 29,483,852 689,000 Other 2,730,393 108,371 2,622,022 Total* 152,469,585 $ 127,249,583 21,908,980 3,311,022 lnwstments where NAV was used as a practical expedient to measurefair value:

Absolute return 129,063,948 Fixed income 13,434,347 Privateequity 211,062,641 Privatereal assets 54,414,383 Privatereal estate 33,327,792 Public equities 250,301,412 Total 691,604,523 lnwstment fundingin transit 8,018,516 Total inwstments and other assets $ 852,092,624 Liabilities:

Interestrate swap $ 604,698 604,698 18 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 The following table presents the 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, 2022 and 2021, respectively:

Balance at June 30, 2020 $ 3,307,975 Total realized and unrealized gains 3,047 Purchases, issuances, and settlements (net)

Balance at June 30, 2021 3,311,022 Total realized and unrealized gains 96,183 Purchases, issuances, and settlements (net) {247,147}

Balance at June 30, 2022 $ 3,160,058 The following table presents information for investments where the NAV was used as a practical expedient to measure fair value at June 30, 2022:

Lockup Redemption Redemption Fair value eeriod freguencl notice eeriod Absolute return $ 1,269,609 Liquidating N/A N/A Public equities 62,200,008 15 Days Semimonthly 9--15 Days Public equities 57,442,912 1 Month Monthly 5-10 Days Absolute return 9,452,694 1 Month Monthly 30 Days Absolute return 111,722,999 3 Months Quarterly 30-75 Days Public equities 70,917,013 3 Months Quarterly 30-75 Days Public equities 9,515,477 3 Months Semiannually 90 Days Absolute return 9,265,013 9 Months Annual 60-90 Days Private equity 222,906,994 Illiquid Private real assets 70,213,843 Illiquid Private real estate 38,822,231 Illiquid Total imestments where NAV was used as a practical expedient to measure fair value $ 663,728,793 19 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 The following table presents information for investments where the NAV was used as a practical expedient to measure fair value at June 30, 2021:

Lockup Redemption Redemption Fair value eeriod freguency notice eeriod Absolute return $ 1,339,800 Liquidating NIA N/A Absolute return 9,248,892 1 Month Monthly 5-30 Days Public equities 73,911,481 1 Month Monthly 5-30 Days Public equities 75,664,799 1 Month Semimonthly 9-15 Days Absolute return 98,796,075 3 Months Quarterly 30-75 Days Public equities 100,725,132 3 Months Quarterly 30-75 Days Absolute return 19,679,181 9 Months Annually 60-90 Days Private equity 211,062,641 Illiquid Private real assets 54,414,383 Illiquid Private real estate 33,327,792 Illiquid Fixed income 13,434,347 Illiquid Total in-.estments where NAV was used as a practical expedient to measure fair value $ 691,604,523 The College holds investments in private limited partnerships and certain fixed income commingled funds where NAV is used as a practical expedient to measure fair value at June 30, 2022 and 2021. 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, plant, and equipment consist of the following at June 30:

2022 2021 Land and land impro-.ements $ 14,330,063 14,219,852 Buildings 245,870,625 244,371,931 Equipment, furniture, and fixtures 18,336,534 17,100,025 Construction in progress 5,458,638 283,995,860 275,691,808 Less accumulated depreciation {124,476,952} {118,065,544}

Net property, plant, and equipment $ 159,518,908 157,626,264 20 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 Depreciation expense was $6,411,408 and $6,399,524 for the years ended June 30, 2022 and 2021, respectively, and is allocated to the functional expenses based on the relative square footage of the departments.

(7) Long-Term Debt (a) Notes Payable Effective February 24, 2022, the College issued $125,000,000 of taxable fixed rate bonds. The bonds have a single maturity on July 1, 2052 and bear interest at 3.872%. A portion of the bond proceeds in the amount of $74,108, 173 was deposited with a trustee in an irrevocable escrow trust account to service the 2017 State of Oregon Bonds until July 1, 2027, which is the earliest date the bonds are callable. As of June 30, 2022, the College had $71,380,274 on deposit with the trustee. The defeased bonds and the related trust are not reflected in the accompanying financial statements.

The bond proceeds were also used to refund the 2008 State of Oregon Bonds in the amount of

$31,750,000. The 2008 State of Oregon Bonds bore interest based on a weekly basis set through a remarketing process. Wells Fargo Bank was the liquidity facility provider should the bonds have failed to remarket. The Liquidity Facility agreement was terminated upon the issuance of the 2022 taxable fixed rate bonds.

The remaining bond proceeds in the amount of $17,716,289 will be used to finance the reconstruction of two gymnasiums on campus.

Notes payable consists of the following at June 30:

2022 2021 2022 Taxable fixed rate bonds $ 125,000,000 2017 State of Oregon notes 65,650,000 2008 State of Oregon notes 31,750,000 125,000,000 97,400,000 Unamortized premium 7,802,750 Unamortized issuance costs (1, 1o8,622l (395,342)

Total long-term debt 123,891,378 104,807,408 Less amounts due within one year 1,944,830 Total long-term debt due after one year $ 123,891,378 102,862,578 21 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 Interest on the State of Oregon notes payable and amortization of premium and issuance costs at June 30 are as follows:

2022 2021 Interest $ 3,631,509 2,984,008 Amortization of premium and issuance costs 13,735 (274,830)

Total interest cost recorded in the statement of actil,ities $ ==3,,..64=5...,2=44= 2,709,178 Amortization is calculated over the life of the notes. Interest and amortization are allocated to the functional expenses based on the relative square footage of the departments.

(b) Interest Rate Risk Management In June 2006, the College issued $16,650,000 of auction rate debt through the Oregon Facilities Authority. The 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. The College subsequently refinanced the 2006 notes with the 2008 series debt and retained this swap arrangement for interest rate risk management. On February 24, 2022, $303,182 of proceeds from the 2022 taxable fixed rate bonds was used to terminate the swap resulting in a gain of $301,516. The change in the unrealized gain and loss on the swap agreement for the year ended June 30, 2021 was a gain of $273,258. Gains related to the swap agreement are reported in the statements of activities and changes in net assets as other investment gains (losses).

(8) Retirement and Postretirement Benefits (a) Retirement Plan The College has a defined-contribution pension plan administered through Teachers Insurance and Annuity Association - College Retirement Equities Fund. Employees are able to voluntarily contribute funds to this plan beginning on the first day of employment provided they are not students. Employees are eligible for fixed employer contributions the first month following the completion of one year of service and must have attained the age of 21. Participants are immediately vested in their employee and employer contributions and earnings thereon. The College's policy is to fund pension expenses as incurred. Expenditures relating to the plan were $4,065,428 and $3,941,572 for the years ended June 30, 2022 and 2021, respectively, and are included in education and general expenses and auxiliary enterprises in the accompanying statements of activities and changes in net assets.

(b) Defined-Benefit Retiree Medical Insurance Plan The 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 the College at or after age 55 with at least 10 years of continuous service. Employees hired between September 1, 2001 and June 30, 2006 must retire from the College at or after age 55 with 20 years of continuous service.

22 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 Participating retirees have the option of continuing to be insured by either the College's current plan or a plan offered by the Emeriti Retirement Health Solutions program. Participating retirees who retired prior to September 2, 2001 and spouses/domestic partners are covered for their lifetime. All 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 $663,187 and $586,539 for the years ended June 30, 2022 and 2021, respectively.

The accrued liability for postretirement benefits consists of the following at June 30:

2022 2021 Change in benefit obligation:

Benefit obligation at beginning of year $ 31,338,177 34,098,459 SeNce cost 508,386 593,519 Interest cost 910,748 925,090 Benefits paid (612,955) (579,649)

Actuarial gain {6,896,577} {3,699,242}

Benefit obligation at end of year and funded status $ 25,247,779 31,338,177 Amounts recognized in the balance sheet consist of:

Postretirement benefits payable - current $ 890,720 937,522 Postretirement benefits payable - long term 24,357,059 30,400,655

$ 25,247,779 31,338,177 The College used the following actuarial assumptions to determine its employee benefit obligations and net periodic benefit cost for the years ended June 30, 2022 and 2021, as measured at June 30:

2022 2021 Benefit obligation:

Weighted average discount rate 4.75 % 2.95%

Rate of increase in per capita cost of covered 7.5% trending to 6.25% trending to healthcare benefits 4.5% in 2033 4.00% in 2032 Net periodic benefit cost:

Weighted average discount rate 2.95% 2.75%

Rate of increase in per capita cost of covered 6.25% trending to 6.50% trending to healthcare benefits 4.00% in 2031 4.00% in 2031 Actuarial changes were driven by changes in the mortality rate assumptions, the discount rate, and changes in healthcare cost trends.

23 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 Net periodic benefit cost included the following components for the years ended June 30:

2022 2021 Service cost $ 508,386 593,519 Interest cost 910,748 925,090 Recognition of actuarial gain (6,896,577) (3,699,242)

Net periodic benefit gain (5,477,443) (2,180,633)

$ ================

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.

The College's policy is to fund the plan as claims payments are made. In the 2022-2023 fiscal year, the College expects to contribute, from ongoing cash flows and current assets, $890,720 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:

Year(s) ending:

2023 $ 890,720 2024 941,099 2025 1,032,383 2026 1,130,776 2027 1,204,476 2028-2032 7,283,136 (c) Emeriti Retiree Defined-Contribution Health Plan The College has a defined-contribution retiree health plan for employees hired on or after July 1, 2006.

the College makes contributions on each eligible employee's behalf once the individual reaches the age of 40 years. Employees are also eligible to make discretionary after-tax contributions to their account if the individual is 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 the College.

Employer expenses related to this plan, net of forfeitures, were $286,294 and $555,954 for fiscal years ended June 30, 2022 and 2021, 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 The College has been named beneficiary of a portion of the remainder of three trusts maturing at specified dates in the future. These trusts are administered by other entities. The College revalues the receivables using the fair value of expected future cash flows. At June 30, 2022 and 2021, the trusts receivable were

$1,416,310 and $1,358,962, respectively, and were reported as noncurrent funds held in trust by others in the statements of financial position.

24 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (10) Contributions and Accounts Receivable Contributions receivable consist of the following at June 30:

2022 2021 Annual fund $ 1,831,757 2,099,686 Campaign 260,976 2,718,450 Endowment 4,135,315 3,337,601 Facilities 15,000 Gross contributions receivable $ 6,228,048 8,170,737 Contributions receivable consist of the following at June 30:

2022 2021 Current:

Gross contributions receivable $ 2,777,571 2,923,140 Less allowance for doubtful accounts (139,000} {146,000}

Total current net contributions receivable 2,638,571 2,777,140 Long term (one to fi1.e years):

Gross contributions receivable 3,450,477 5,247,597 Less allowance for doubtful accounts {168,000} {260,000}

Net long-term contributions receivable 3,282,477 4,987,597 Less discount to present value {92,075} {50,206}

Total long-term net contributions receivable 3,190,402 4,937,391 Total net contributions receivable $ 5,828,973 7,714,531 Contributions receivable due in excess of one year are discounted at 1.34% to 1.77% and 0.15% to 0.53%

for the years ended June 30, 2022 and 2021, respectively.

Of the net unconditional promises to give included above, $2,861,394 represents an unconditional promise to give from 9 members of the College Board of Trustees. These are considered related party transactions under ASC 850.

25 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 Accounts receivable consist of the following at June 30:

2022 2021 Current:

Student accounts receivable $ 81,980 471,207 Related parties 13,858 8,881 Gowrnment agencies 6,052,711 778,030 Other receivables 117,993 77,785 6,266,542 1,335,903 Noncurrent:

Student accounts receivable 3,771 2,596 Reed loans 1,001,097 1,075,381 Related parties 2,865 4,236 Federal Perkins loans 1,104,838 1,406,138 2,112,571 2,488,351 Less allowance for doubtful accounts {60,239} {60,239}

$ 8,318,874 3,764,015 The Federal Perkins Loans and Reed loans are generally payable at interest rates of 5% to 9% over approximately 1O 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 the College and the U.S. government in proportion to their share of funds provided. The Federal Perkins Loan program provides for cancellation of loans if the student is employed in certain occupations following graduation (employment cancellations). 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, 2018. Institutions 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 and forfeiting the institution's remaining net assets (institutional capital contribution). The College intends to continue servicing the outstanding Perkins loans.

26 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (11) Net Assets At June 30, 2022 and 2021, net assets consisted of the following:

2022 2021 Without donor restrictions:

Operating and designated for special programs $ 67,276,915 31,536,211 Institutional loan programs 1,882,242 1,848,040 Funds functioning as endowment 119,656,493 117,729,619 Accumulated quasi-endowment gains 237,670,391 271,774,055 Net im.estment in plant 29,446,117 46,162,242 Subtotal 455,932,158 469,050,167 With donor restrictions - time or purpose:

Educational and general programs 17,855,201 17,356,497 Annuity and life income funds 8,937,602 10,796,095 Accumulated endowment gains 138,542,382 167,199,968 Other time or purpose restrictions 1,953,246 4,574,657 Subtotal 167,288,431 199,927,217 With donor restrictions - perpetual:

True endowment funds 200,565,937 190,541,484 Annuity and life income funds 6,383,159 7,586,433 Subtotal 206,949,096 198,127,917 Total $ 830,169,685 867,105,301 (12) Endowments At June 30, 2021, the College's endowment consisted of approximately 550 individual funds established for a variety of purposes. The endowment includes both donor-restricted endowments and funds designated by the College to function as endowments (quasi-endowments). Quasi-endowment funds do not have donor restrictions and may be expended at the discretion of the 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 absence of donor-imposed restrictions.

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THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 Interpretation of relevant law- The State of Oregon has enacted UPMIFA, the provisions of which apply to endowment funds. The 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. The College classifies as net assets with perpetual donor restrictions the original value of gifts to donor-restricted endowments and any other amounts added to donor-restricted endowments that donors have stipulated are not expendable. The remaining portion of the donor-restricted endowment fund that is not classified as net assets with perpetual donor restrictions, including deficiencies associated with funds where the value of the fund has fallen below the original value of the gift, is classified as net assets with donor-imposed time or purpose restrictions until those amounts are appropriated for expenditure by the College in a manner consistent with the standard of prudence prescribed by UPMIFA.

Income and net gains on investments of endowment are reported as follows:

• Increases in net assets with perpetual donor restrictions if the terms of the gift or the College's interpretation of relevant state law require they be added to the principal of a true endowment fund

• Increases in net assets with donor-imposed restrictions if the terms of the gift restrict its use and endowment income has not yet been appropriated for expenditure

• Increases in net assets without donor restrictions in all other cases.

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

Deficiencies of this nature are reported in net assets with perpetual donor restrictions. As of June 30, 2022 and 2021, funds with an original gift value of $7,607,603 and $0 were "underwater" by $372,283 and $0, respectively.

Investment and spending policies - To enable broad diversification and economies of scale; the 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.

The 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 additions to the pooled endowment. The primary investment objective 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 range of economic scenarios, while avoiding undue risk concentrations in any single asset class or investment category. Sufficient liquidity in the endowment portfolio to meet the spending policy and operational needs, preserve the College's desired credit ratings, and maintain compliance with any debt agreements is also considered when making investment decisions regarding asset allocation.

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THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 In accordance with UPMIFA, the 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 purposes of the College and the donor-restricted 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 the College; and (7) the investment policies of the College.

Pooled endowment spending is determined using the total return concept. The policy on spending endowment income for fiscal years 2022 and 2021 is to spend 5.00% over a rolling 13-quarter moving average of the fair value or market value of the endowment.

Endowment net assets by type of fund as of June 30, 2022:

Without With donor With donor donor restrictions - restrictions -

restrictions time or eureose ee~etual Total Donor-restricted endowment funds $ 138,542,382 200,565,937 339,108,319 Board-designated endowment funds 357,326,884 357,326,884 Total funds $ 357,326,884 138,542,382 200,565,937 696,435,203 Endowment net assets by type of fund as of June 30, 2021:

Without With donor With donor donor restrictions - restrictions -

restrictions time or eureose eereetual Total Donor-restricted endowment funds $ 167,199,968 190,541,484 357,741,452 Board-designated endowment funds 389,503,674 389,503,674 Total funds $ 389,503,674 167,199,968 190,541,484 747,245,126 29 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 Changes in endowment net assets for the years ended June 30, 2022 and 2021 are as follows:

Without With donor With donor donor restrictions - restrictions -

restrictions time or eureose eereetual Total Endowment net assets, July 1, 2021 $ 389,503,674 167,199,968 190,541,484 747,245,126 lm.estment return:

Net im.estment gain (17,045,518) (14,588,087) (31,633,605)

Net appreciation of im.estments (564,782) (479,632) (1,044,414)

Contributions 200,965 8,764,460 8,965,425 Contributions from trust terminations 16,017 16,017 Appropriation of endowment assets for expenditure (15,880,409) (13,589,867) (29,470,276)

Transfers and other reclassifications 1,112,954 1,243,976 2,356,930 Endowment net assets, June 30, 2022 $ 357,326,884 138,542,382 200,565,937 696,435,203 Without With donor With donor donor restrictions - restrictions -

restrictions time or eureose eerpetual Total Endowment net assets, July 1, 2020 $ 280,889,636 78,344,347 185,860,014 545,093,997 lm.estment return:

Net im.estment gain 120,273,098 101,646,598 221,919,696 Net appreciation of im.estments 391,162 330,513 721,675 Contributions 953,671 2,602,045 3,555,716 Contributions from trust terminations 27,855 27,855 Appropriation of endowment assets for expenditure (15,590,874) (13,121,490) (28,712,364)

Transfers and other reclassifications 2,586,981 2,051,570 4,638,551 Endowment net assets, June 30, 2021 $ 389,503,674 167,199,968 190,541,484 747,245,126 30 (Continued)

THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (13) Functional Classification of Expenses Educational program expenses include instruction, academic support, and student services. 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 variety of cost allocation techniques, such as square footage and time and effort. Pandemic-related costs incurred for the years ended June 30, 2022 and 2021 are reported as general institutional support.

The table below presents expenses by both their nature and function for the year ended June 30, 2022.

General Educational Auxiliary College institutional programs Research enterprises relations support Total Salaries and wages $ 34,462,450 1,022,838 3,311,396 4,401,014 4,275,297 47,472,995 Benefits 12,221,452 241,693 1,031,535 1,688,053 1,639,834 16,822,567 Utilities, alterations, and repairs 2,105,356 180,979 3,696,718 54,760 228,855 6,266,668 Depreciation 2,731,072 459,977 2,880,366 51,445 288,548 6,411,408 Interest and accretion 1,659,358 144,596 1,762,265 31,477 176,553 3,774,249 Supplies, services, and other 13,747,731 48,468 7,676,460 1,579,086 4,756,444 27,808,189 Total $ 66,927,419 2,098,551 20,358,740 7,805,835 11,365,531 108,556,076 The table below presents expenses by both by their nature and function for the year ended June 30, 2021.

General Educational Auxiliary College institutional programs Research entererises relations support Total Salariesand wages $ 33,292,796 902,990 3,124,319 4,452,034 3,892,974 45,665,113 Benefits 11,046,030 219,718 1,003,897 1,696,289 1,483,278 15,449,212 Utilities,alterations, and repairs 1,849,779 158,907 3,322,884 52,257 197,012 5,580,839 Depreciation 2,813,332 245,154 2,988,337 53,368 299,333 6,399,524 Interestand accretion 1,247,775 108,731 1,325,157 23,670 132,761 2,838,094 Supplies,services, and other 11,898,051 117,636 5,854,958 918,557 8,255,840 27,045,042 Total $ 62,147,763 1,753,136 17,619,552 7,196,175 14,261,198 102,977,824 (14) Fundraising Expense The College expended $3,198,823 and $3,115,351 for the years ended June 30, 2022 and 2021, respectively, for payroll and benefits, informational materials, 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.

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THE REED INSTITUTE Notes to Financial Statements June 30, 2022 and 2021 (15) Commitments and Contingencies From time to time, the 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 disposition of these matters will not have a material effect on the College's financial position, statements of activities and changes in net assets, or cash flows.

(16) Subsequent Events The College has evaluated subsequent events from the statement of financial position date through October 7, 2022, the date at which the financial statements were issued, and determined that there are no other items to disclose.

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