lewis & clark college

Report of Independent Auditors in accordance with OMB Circular A-133 and Financial

Statements (with Supplementary Information) for

Lewis & Clark College

May 31, 2013 and 2012

CONTENTS PAGEREPORTOFINDEPENDENTAUDITORS 1–2FINANCIALSTATEMENTS Statementsoffinancialposition 3 Statementsofactivities 4–5 Statementsofcashflows 6–7 Notestofinancialstatements 8–35REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROL OVERFINANCIALREPORTINGANDONCOMPLIANCE ANDOTHERMATTERSBASEDONANAUDITOF FINANCIALSTATEMENTSPERFORMEDINACCORDANCE WITHGOVERNMENTAUDITINGSTANDARDS 36–37REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEFORTHE MAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROL OVERCOMPLIANCE 38–39SCHEDULEOFFINDINGSANDQUESTIONEDCOSTS 40–43SUPPLEMENTARYINFORMATION Scheduleofexpendituresoffederalawards 44–45 Notestoscheduleofexpendituresoffederalawards 46

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REPORTOFINDEPENDENTAUDITORSTotheBoardofTrusteesLewis&ClarkCollegeReportontheFinancialStatements

Wehaveauditedtheaccompanying financialstatementsofLewis&ClarkCollege(theCollege),whichcomprisethestatementsoffinancialpositionasofMay31,2013and2012andtherelatedstatementsofactivitiesandcashflowsfortheyearsthenended,andtherelatednotestothefinancialstatements.Management’sResponsibilityfortheFinancialStatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica;thisincludesthe design, implementation, andmaintenance of internal control relevant to the preparation and fairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditor’sResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. Weconductedouraudits inaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericaand thestandardsapplicable to financialauditscontained inGovernmentAuditingStandards,issued by the Comptroller General of the United States. Those standards require that we plan andperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessmentof therisksofmaterialmisstatementof the financialstatements,whetherdue to fraudorerror. Inmakingthoseriskassessments, theauditorconsidersinternalcontrolrelevant to theentity’spreparationand fairpresentationof the financial statements inorder todesignauditprocedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

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REPORTOFINDEPENDENTAUDITORS(continued)OpinionIn our opinion, the financial statements referred to above present fairly, in allmaterial respects, thefinancialpositionofLewis&ClarkCollegeasofMay31,2013and2012andthechangesinitsnetassetsanditscashflowsfortheyearsthenendedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.OtherMattersSupplementaryInformationOurauditwasconductedforthepurposeofforminganopiniononthefinancialstatementsasawhole.The schedule of expenditures of federal awards as required by Office of Management and BudgetCircular A‐133, Audits of States, Local Governments, and Non‐Profit Organizations is presented forpurposesofadditionalanalysisandisnotarequiredpartofthefinancialstatements.Suchinformationisthe responsibility of management and was derived from and relates directly to the underlyingaccounting and other records used to prepare the financial statements. The information has beensubjected to the auditing procedures applied in the audit of the financial statements and certainadditionalprocedures,includingcomparingandreconcilingsuchinformationdirectlytotheunderlyingaccounting and other records used to prepare the financial statements or to the financial statementsthemselves,andotheradditionalproceduresinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Inouropinion,theinformationisfairlystated,inallmaterialrespects,inrelationtothefinancialstatementsasawhole.OtherReportingRequiredbyGovernmentAuditingStandards

InaccordancewithGovernmentAuditingStandards,wehavealsoissuedourreportdatedSeptember23,2013onourconsiderationoftheCollege’sinternalcontroloverfinancialreportingandonourtestsofitscompliancewithcertainprovisionsof laws,regulations,contracts,andgrantagreementsandothermatters. The purpose of that report is to describe the scope of our testing of internal control overfinancial reporting and compliance and the results of that testing, and not to provide an opinion oninternal control over financial reportingor on compliance.That report is an integral part of an auditperformed in accordance with Government Auditing Standards in considering the College’s internalcontroloverfinancialreportingandcompliance.Portland,OregonSeptember23,2013

Seeaccompanyingnotes. 3

LEWIS&CLARKCOLLEGE

STATEMENTSOFFINANCIALPOSITION

2013 2012

Cashandcashequivalents 11,092,261$ 3,722,783$Assetheldforconstructioncosts ‐ 4,496,834Studentaccountsreceivable,net 173,919 399,587Otherreceivables 1,975,442 1,578,207Realestateheldforsale 3,088,000 840,000Prepaidexpensesandotherassets 1,459,844 993,153Studentloansreceivable,net 7,967,163 7,987,028Investments 221,980,742 205,322,584Contributionsreceivable 4,872,833 5,355,070Bondissuancecosts,net 1,101,685 1,140,568Property,plant,andequipment,net 178,805,081 173,381,516

Totalassets 432,516,970$ 405,217,330$

LIABILITIESAccountspayable 3,058,668$ 2,057,469$Accruedandotherliabilities 13,271,895 12,424,284Deferredrevenues 3,749,170 3,503,505Liabilityforsplitinterestagreements 690,208 604,317Bondspayable 108,140,851 108,124,291Interestrateswapsliability 10,556,728 14,430,540U.S.governmentgrantsrefundable 6,265,049 6,341,129

Totalliabilities 145,732,569 147,485,535

NETASSETSUnrestricted 97,347,379 86,131,288Temporarilyrestricted 79,689,449 65,507,879Permanentlyrestricted 109,747,573 106,092,628

Totalnetassets 286,784,401 257,731,795

Totalliabilitiesandnetassets 432,516,970$ 405,217,330$

LIABILITIESANDNETASSETS

LEWISANDCLARKCOLLEGEMay31,

ASSETS

4 Seeaccompanyingnotes.

LEWIS&CLARKCOLLEGESTATEMENTSOFACTIVITIESFORTHEYEARENDEDMAY31,2013

Temporarily PermanentlyUnrestricted Restricted Restricted Total

OPERATINGACTIVITIESRevenuesandgains:

Tuitionandfees,netofscholarshipsandfellowshipsof$40,392,647in2013 84,560,331$ ‐$ ‐$ 84,560,331$Contributions 1,839,412 ‐ ‐ 1,839,412Contractsandotherexchangetransactions 2,882,054 ‐ ‐ 2,882,054Investmentearningsfromendowment,distributed 8,530,384 ‐ ‐ 8,530,384Otherinvestmentincome 76,758 ‐ ‐ 76,758Otherrevenue 2,342,999 ‐ ‐ 2,342,999Salesandservicesofauxiliaryenterprises 16,490,459 ‐ ‐ 16,490,459

Totalrevenuesandgains 116,722,397 ‐ ‐ 116,722,397

Netassetsreleasedfromrestrictionsandotherredesignations 4,142,475 (4,461,923) 319,448 ‐

TOTALREVENUES,GAINS,ANDOTHERSUPPORT 120,864,872 (4,461,923) 319,448 116,722,397

Expenses:Educationalandgeneral:

Instruction 52,273,799 ‐ ‐ 52,273,799Research 3,780,934 ‐ ‐ 3,780,934Publicservice 980,651 ‐ ‐ 980,651Academicsupport 13,490,404 ‐ ‐ 13,490,404Studentservices 12,324,329 ‐ ‐ 12,324,329Institutionalsupport 21,872,879 ‐ ‐ 21,872,879Totaleducationalandgeneral 104,722,996 ‐ ‐ 104,722,996

Auxiliaryenterprises 14,816,838 ‐ ‐ 14,816,838

TOTALEXPENSES 119,539,834 ‐ ‐ 119,539,834

INCREASE(DECREASE)INNETASSETSFROMOPERATINGACTIVITIES 1,325,038 (4,461,923) 319,448 (2,817,437)

NON‐OPERATINGACTIVITIESContributions ‐ 4,047,677 1,595,784 5,643,461Contracts&exchangetransactions 175,802 ‐ ‐ 175,802Endowmentearnings,netofamountsdistributed 5,841,439 14,591,846 1,781,108 22,214,393Changeinvalueofsplitinterestagreements ‐ 3,970 (41,395) (37,425)Gainoninterestrateswapsrelatedtobonds 3,873,812 ‐ ‐ 3,873,812

INCREASEINNETASSETSFROMNON‐OPERATINGACTIVITIES 9,891,053 18,643,493 3,335,497 31,870,043

INCREASEINNETASSETS 11,216,091 14,181,570 3,654,945 29,052,606

NETASSETSATBEGINNINGOFYEAR 86,131,288 65,507,879 106,092,628 257,731,795

NETASSETSATENDOFYEAR 97,347,379$ 79,689,449$ 109,747,573$ 286,784,401$


LEWIS&CLARKCOLLEGESTATEMENTSOFACTIVITIES

FORTHEYEARENDEDMAY31,2012


OPERATINGACTIVITIESRevenuesandgains:

Tuitionandfees,netofscholarshipsandfellowshipsof$37,704,385in2012 82,112,149$ ‐$ ‐$ 82,112,149$Contributions 1,771,261 ‐ ‐ 1,771,261Contractsandotherexchangetransactions 2,653,840 ‐ ‐ 2,653,840Investmentearningsfromendowment,distributed 9,322,028 ‐ ‐ 9,322,028Otherinvestmentincome 92,723 ‐ ‐ 92,723Otherrevenue 2,146,689 ‐ ‐ 2,146,689Salesandservicesofauxiliaryenterprises 15,176,447 ‐ ‐ 15,176,447

Totalrevenuesandgains 113,275,137 ‐ ‐ 113,275,137

Netassetsreleasedfromrestrictionsandotherredesignations 2,323,008 (3,091,852) 768,844 ‐

TOTALREVENUES,GAINS,ANDOTHERSUPPORT 115,598,145 (3,091,852) 768,844 113,275,137

Expenses:Educationalandgeneral:

Instruction 50,850,958 ‐ ‐ 50,850,958Research 3,595,808 ‐ ‐ 3,595,808Publicservice 1,037,761 ‐ ‐ 1,037,761Academicsupport 13,703,878 ‐ ‐ 13,703,878Studentservices 11,590,026 ‐ ‐ 11,590,026Institutionalsupport 20,256,779 ‐ ‐ 20,256,779Totaleducationalandgeneral 101,035,210 ‐ ‐ 101,035,210

Auxiliaryenterprises 12,745,253 ‐ ‐ 12,745,253

TOTALEXPENSES 113,780,463 ‐ ‐ 113,780,463

INCREASE(DECREASE)INNETASSETSFROMOPERATINGACTIVITIES 1,817,682 (3,091,852) 768,844 (505,326)

NON‐OPERATINGACTIVITIESContributions 10,180,521 2,646,574 1,829,331 14,656,426Contracts&exchangetransactions 275,136 ‐ ‐ 275,136Endowmentearnings,netofamountsdistributed (9,809,976) (17,263,297) (113,463) (27,186,736)Changeinvalueofsplitinterestagreements ‐ (33,582) 72,801 39,219Lossoninterestrateswapsrelatedtobonds (6,325,512) ‐ ‐ (6,325,512)

INCREASE(DECREASE)INNETASSETSFROMNON‐OPERATINGACTIVITIES (5,679,831) (14,650,305) 1,788,669 (18,541,467)

INCREASE(DECREASE)INNETASSETS (3,862,149) (17,742,157) 2,557,513 (19,046,793)

NETASSETSATBEGINNINGOFYEAR 89,993,437 83,250,036 103,535,115 276,778,588

NETASSETSATENDOFYEAR 86,131,288$ 65,507,879$ 106,092,628$ 257,731,795$

6 Seeaccompanyingnotes.

LEWIS&CLARKCOLLEGESTATEMENTSOFCASHFLOWS

2013 2012

CASHFLOWSFROMOPERATINGACTIVITIESChangeinnetassets 29,052,606$ (19,046,793)$Adjustmentstoreconcilechangeinnetassetstonet

cashusedbyoperatingactivities:Contributionofmarketablesecurities (986,689) (384,277)Depreciationandamortization 6,372,247 6,552,726Contributionofrealestateheldforsale (2,248,000) ‐Unrealized(gain)lossoninterestrateswapsrelatedtobonds (3,873,812) 6,325,512Actuarial(gain)lossonsplitinterestagreementobligations (18,958) 64,810Changeincontributionsreceivablediscount (16,513) (27,113)Contributionsrestrictedforendowment,trust,andcapitalprojects (1,659,413) (12,009,852)Interestanddividendsrestrictedforlong‐terminvestment (220,026) (322,458)Netrealizedandunrealized(gains)losses (27,656,053) 17,927,442

Increase(decrease)incashduetochangesinassetsandliabilities:Assetsheldforconstructioncosts 4,496,834 3,724,331Accountsandotherreceivables (171,567) 445,144Prepaidexpenseondotherassets (466,691) 246,618Contributionsreceivable 498,750 595,415Accountspayable 1,001,199 (456,535)Accruedandotherliabilities 847,611 (2,346,043)Newsplitinterestagreementobligations 173,533 ‐Deferredrevenues 245,665 1,822,176

Netcashfromoperatingactivities 5,370,723 3,111,103

CASHFLOWSFROMINVESTINGACTIVITIESPaymentsreceivedonstudentloansreceivable,net 19,865 35,199PaymentsonU.S.governmentgrantsrefundable,net (76,080) (37,145)Purchasesofland,property,plantandequipment (11,740,369) (16,452,809)Proceedsfromsalesofinvestments 93,849,481 75,014,482Purchasesofinvestments (81,864,897) (73,607,333)

Netcashfrominvestingactivities 188,000 (15,047,606)

YearsEndedMay31,


LEWIS&CLARKCOLLEGESTATEMENTSOFCASHFLOWS

2013 2012YearsEndedMay31,

CASHFLOWSFROMFINANCINGACTIVITIES

Contributionsrestrictedforendowment,trust,andcapitalprojects 1,659,413$ 12,009,852$Interestanddividendsrestrictedforlong‐termreinvestment 220,026 322,458Maturitiesofsplitinterestobligations (68,684) (161,230)

Netcashfromfinancingactivities 1,810,755 12,171,080

NETINCREASEINCASHANDCASHEQUIVALENTS 7,369,478 234,577

CASHANDCASHEQUIVALENTS,beginningofyear 3,722,783 3,488,206

CASHANDCASHEQUIVALENTS,endofyear 11,092,261$ 3,722,783$

SUPPLEMENTALDISCLOSUREOFCASHFLOWINFORMATIONCashpaidforinterest 7,724,454$ 7,277,110$

LEWIS&CLARKCOLLEGENOTESTOFINANCIALSTATEMENTS

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Note1–OrganizationandSummaryofSignificantAccountingPoliciesGeneral – Lewis & Clark College (the College) is a private, nonprofit institution of higher educationbased in Portland, Oregon. The College provides education and training services for undergraduatestudentsthroughtheCollegeofArtsandSciences,forgraduatestudentsthroughtheGraduateSchoolofEducation and Counseling, and for law students through the Lewis & Clark Law School. The Collegeperforms research, training, and other services under grants and contracts with sponsoringorganizations,whichareprimarilydepartmentsandagenciesoftheUnitedStatesgovernment.Basisofaccounting–ThefinancialstatementsoftheCollegehavebeenpreparedontheaccrualbasisofaccounting.Basisofpresentation –Net assets, revenues, expenses, gains, and losses are classifiedbasedon theexistence or absence of donor‐imposed restrictions. The definitions used to classify and report netassetsareasfollows: Unrestrictednetassets–netassetsthatarenotsubjecttodonor‐imposedrestrictions. Temporarilyrestrictednetassets–netassetssubjecttodonor‐imposedrestrictionsthatwillbemet

eitherbyactionsoftheCollegeorthepassageoftime. Permanently restricted net assets – net assets subject to donor‐imposed restrictions that are

permanentlymaintainedbytheCollege.Generally,thedonorsoftheseassetspermittheCollegetouseallorpartoftheincomeearnedonrelatedinvestmentsforgeneralorspecificpurposes.

Revenuerecognition–Revenuesarereportedasincreasesinunrestrictednetassetsunlesstheiruseislimitedbydonor‐imposedrestrictions.

Tuitionandfees–Studenttuitionandfeesarerecordedasrevenueinthetermthatthelastdayofclassesoccur.Studenttuitionandfeesreceivedinadvanceofservicestoberenderedarerecordedas deferred revenue. Themajority of the College’s students rely on funds received from variousfederal financialaidprogramsunderTitle IVof theHigherEducationActof1965,asamended, topayforasubstantialportionoftheirtuition.TheseprogramsaresubjecttoperiodicreviewbytheUnited StatesDepartmentofEducation (DOE).Disbursements under eachprogramare subject todisallowanceby theDOEandrepaymentby theCollege. Inaddition,asaneducational institution,the College is subject to licensure from various accrediting and state authorities and otherregulatoryrequirementsoftheDOE.


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Note1–OrganizationandSummaryofSignificantAccountingPolicies(continued)

Contributions–Contributions,includingunconditionalpromisestogive,arerecognizedasrevenuein the period received and are reported as increases in the appropriate category of net assets.Unconditionalpromisestogiveareinitiallyrecordedatfairvalueusingthepresentvalueoffuturecash flows, discounted using a risk adjusted rate. Subsequent measurements of unconditionalpromisestogivedonotrepresentfairvalue.Conditionalpromisestogivearenotrecognizeduntiltheybecomeunconditional,thatiswhentheconditionsonwhichtheydependaresubstantiallymet.Contributionsofassetsotherthancasharerecordedattheirestimatedfairvalue.Contributionstobereceivedinfutureperiodsarediscountedatanappropriatediscountrate.Amortizeddiscountsarerecordedasadditionalcontributionrevenueandaresubjecttodonor‐imposedrestrictions.Grantsandcontracts–Revenuesfromgrantsandcontractsarereportedasincreasesinunrestrictednetassets,asallowableexpendituresundersuchagreementsareincurred.Investmentreturn– Investment incomeandrealizedandunrealizedgainsand lossesarerecordedandreportedasincreasesordecreasestotheappropriatenetassetcategory.Incomeandnetgainsoninvestmentsofendowmentandsimilarfundsarereportedasfollows: Increases in permanently restricted net assets if the terms of the gift or the College’s

interpretation of relevant state law require they be added to the principal of a permanentlyrestrictednetasset.

Increasesintemporarilyrestrictednetassetsifthetermsofthegiftimposerestrictionsonthetimingortheuseoftheincome.

Increasesinunrestrictednetassetsinallothercases.Auxiliary enterprises–Auxiliary enterprises include income primarily from student housing, foodservices, transportationservices,conventionsandconferences,athletics,andstudentperformancegroups.Accordingly,theauxiliaryenterpriseexpensesincludeallcostsincurredinprovidingthoseservices. Athletic and student performance group revenues consist only of ticket sales,while theexpenses includeallcostsrelatedtotheadministrationandoperationoftheCollege’sathleticandstudentperformancegroupprograms.

The College’smeasure of operations presented in the Statement of Activities includes revenues fromtuitionandfees,grantsandcontracts,unrestrictedcontributions,investmentincomefromunrestrictedinvestmentsexceptthosegainsandlossesearnedbyunrestrictedfundsfunctioningasendowmentsthathavenotbeenappropriatedforexpenditureinthecurrentyear,amountsappropriatedforexpenditurefrom restricted endowments in the current year, and revenues from auxiliary enterprises and othersources,aswellasnetassetsreleasedfromrestrictionbaseduponthesatisfactionofthoserestrictions.Operatingexpensesarereportedbyfunctionalcategories,afterallocatingcostsforplantmaintenance,informationservices,interestonlongtermindebtednessanddepreciation.


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Note1–OrganizationandSummaryofSignificantAccountingPolicies(continued)Non‐operating activities presented in the Statement ofActivities include gifts for buildings andotherdepreciable assets, unconditional promises to give, investment gains and losses on loan funds andpermanently restricted endowments, gains and losses earned by unrestricted funds functioning asendowmentsthathavenotbeenappropriatedforexpenditureinthecurrentyear,changesinthevalueof split‐interest agreements, and gains and losses from changes in the value of assets due to thefluctuationofexchangerates.Cashandcashequivalents–TheCollegeconsidersallhighly‐liquiddebtinstrumentspurchasedwithoriginal maturities of three months or less to be cash equivalents. Cash equivalents are invested inmoneymarketaccountsorcommercialpaperandarestatedatcost.Assetsheld forconstructioncosts –Assetsheld forconstructioncosts included fundsrestricted forthe construction of a new campus dormitory. These funds were reimbursed to the College from afinancial institution which held these funds, based on approved expenditures. Construction wascompleted in fiscal year 2013 and the remaining funds have been transferred to debt service fundswhichare includedinprepaidexpensesandotherassetsonthestatementof financialposition.Theserestrictedfundsarecomprisedofmoneymarketfundsandcertificatesofdepositandarestatedatcost.Studentaccountsand loans receivable – Student accounts receivable are recorded at the invoicedamount and do not bear interest. At May 31, 2013 and 2012, student accounts receivable totaled$173,919and$399,587,respectively,netofallowancefordoubtfulaccountsof$180,000and$240,000,respectively.Studentloansreceivabletotaled$7,967,163and$7,987,028,respectively,netofallowancefor doubtful accounts of $485,200 for each year. The allowance for doubtful accounts represents theCollege’s best estimate of the amount of probable credit losses in the College’s existing accountsreceivableandstudentloansreceivable.TheCollegedeterminestheallowancebyperformingon‐goingevaluationsofitsstudentsandtheirabilitytomakepayments.TheCollegedeterminestheadequacyofthe allowance based on length of time past due, historical experience, and judgment of economicconditions.Accountandloanbalancesarechargedoffagainsttheallowanceafterallmeansofcollectionhave been exhausted and the potential recovery is considered remote. The College follows federalguidelines for determining when student loans are delinquent or past due for both federal andinstitutionalloans.


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Note1–OrganizationandSummaryofSignificantAccountingPolicies(continued)Realestateheldforsale–Realestateheldforsaleconsistsofthefollowing:

59.50acresofundevelopedlandinYamhillCounty–AtrustandtheCollegeareactivelyseekingabuyerfortheproperty.AtMay31,2013and2012,thepropertywasvaluedat$840,000.The2013 estimate was based on the property tax assessment and the recommendation of anindependent property auctioneer obtained in prior years. As ofMay 31, 2013 and 2012, theCollege has recorded a cumulative write down of $5,062,200 on this property. No losses onwritedownwererecognizedinfiscalyearsended2013and2012.

TwocommercialbuildingsinthecityofPortland,Oregon–Priorto2013,thesepropertieswereincludedinatrustatacostbasisof$944,000.DuringtheyearendedMay31,2013,therelatedtrust matured and these assets were contributed to the College at an appraised value of$2,248,000.TheCollegehassignedpurchaseandsaleagreementsonbothpropertiesandbothareexpectedtoclosebySeptember30,2013.

Inventories–Inventoriesconsistprimarilyofbooksandsuppliesandarerecordedatthelowerofcost(first‐in,first‐out)ormarketandareincludedinotherassetsinthestatementoffinancialposition.Investments–Investmentsarestatedatfairvalue.Thefairvalueofalldebtandequitysecuritieswithareadily determinable fair value are based on quotations from national securities exchanges. Thealternative investments, which are not readily marketable, are carried at estimated fair values asprovidedby the investmentmanagers.TheCollege reviewsand evaluates the valuesprovidedby theinvestmentmanagersandagreeswiththevaluationmethodsandassumptionsusedindeterminingthefairvalueof thealternative investments.Thoseestimated fairvaluesmaydiffersignificantly fromthevalues thatwould have been used had a readymarket for these securities existed. The value of realestateinvestmentsisdeterminedfromvaluationspreparedbyindependentappraisersatthetimeofgiftand these investments are carried at cost.Managementwill assess these investments for impairmentwhencircumstancesindicateadeclineinvalueisotherthantemporary.TheCollegeinvestsinavarietyofinvestmentsecuritieswhichareexposedtovariousriskssuchasinterestrate,credit,andoverallmarketvolatilityrisks.Duetothelevelofriskassociatedwithcertaininvestmentsecurities, it is reasonablypossible that changes in thevaluesof investment securitieswill occur in thenear‐termandsuchchangescouldmateriallyaffecttheamountsreportedinthefinancialstatements.Contributions receivable – An allowance for uncollectible receivables is provided based uponmanagement’s judgment, including such factors as prior collection history and type of receivable.Accountsarechargedoffwhenallcollectioneffortshavebeenexhausted.Bond issuancecosts–BondissuancecostsareamountspaidbytheCollege inconnectionwithbondfinancing.Amortization is calculatedusing the straight‐linemethod,whichapproximates theeffectiveinterestmethod,overthelifeofthebonds.


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Note1–OrganizationandSummaryofSignificantAccountingPolicies(continued)Split‐interestagreements –TheCollegeuses theactuarialmethodof recordingcertainsplit‐interestagreements.Underthismethod,thepresentvalueofthepaymentstobeneficiariesisdeterminedbaseduponlifeexpectancytableswhenthegiftisreceived.Thepresentvalueofthosepaymentsisrecordedasa liabilityandtheremainderasnetassets.Discountratesranging from1.00%to8.60%wereusedtocalculatethepresentvalueoftheliabilitybasedontheestimatedlifeexpectanciesofthebeneficiaries.ThediscountratesrepresenttheFederalApplicableRatesthatwereeffectivewhenthegiftagreementswere established. Periodic adjustments are made between the liability and the net assets to recordactuarialgainsorlosses.TherewerethreenewagreementsduringtheyearendedMay31,2013.TheCollege isnamedasbeneficiaryofvarious trust fundswhere theCollege’sultimate receiptof thefunds is uncertainbecauseof stipulations in the trust agreement.These trust funds are comprisedofagreementswhichnamethirdpartiesasco‐beneficiariesandagreementswherethenamedbeneficiarycan be revoked by the donor. The College has reflected appropriate liabilities for such trusts in theaccompanyingstatementsoffinancialposition.FortheyearsendedMay31,2013and2012,theCollegedistributed$276,408and$379,658,respectively,insplit‐interestbeneficiarypayments.Fairvaluemeasurements–Accountingliteraturedefinesfairvalueasthepricethatwouldbereceivedtosellanasset,orpaidtotransferaliability,inanorderlytransactionbetweenmarketparticipantsatthe measurement date. The valuation techniques used are based on observable and unobservableinputs.Observable inputsreflectmarketdataobtainedfromindependentsources,whileunobservableinputsreflecttheCollege’smarketassumptions.Thesetwotypesofinputscreatethefollowingfairvaluehierarchy:

Level1–Inputsareunadjusted,andrepresentquotedpricesinactivemarketsforidenticalassetsorliabilitiesatthemeasurementdate.Level2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectlyobservablefortheassetorliabilitythroughcorrelationwithmarketdataatthemeasurementdate.Level 3 – Inputs reflect management’s best estimate of what market participants would use inpricingtheassetorliabilityatthemeasurementdate.Considerationisgiventotheriskinherentinthe valuation technique and/or the risk inherent in the inputs to themodel. Securities classifiedwithinlevel3investmentsarebasedonvaluationsprovidedbytheexternalinvestmentmanagers.Thevaluationsconsidervariablessuchasfinancialperformanceofinvestments,recentsalespricesofinvestments,andotherpertinentinformation.TheInvestmentCommittee,inconjunctionwiththeVicePresidentforBusiness&Financeandexternalinvestmentadvisors,reviewsthevaluationoftheinvestmentsonaquarterlybasis.TheInvestmentCommitteereportstotheBoardofTrustees.


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Note1–OrganizationandSummaryofSignificantAccountingPolicies(continued)A financial instrument is defined as a contractual obligation thatultimately endswith thedeliveryofcashoranownershipinterestinanentity.Disclosuresincludedinthesenotesregardingthefairvalueoffinancialinstrumentshavebeenderivedusingexternalmarketsources,estimatesusingpresentvalue,or other valuation techniques. Most financial assets and liabilities for which the carrying amountapproximates fair value are considered by the College to be level 1 measurements in the fair valuehierarchy.Determination of the fair value of loan fund receivables, which are primarily federally sponsoredstudent loans with U.S. governmental mandated interest rates and repayment terms and subject tosignificantrestrictionsastotheirtransferordisposition,couldnotbemadewithoutincurringexcessivecosts.TheCollegeissuedOFA(OregonFacilitiesAuthority)bondsthatarereportedatanamortizedcostof$108,140,851and$108,124,291respectively,intheStatementofFinancialPosition.TheseOFAbondshave an approximate fair value of $121,567,000 and $122,522,000 as of May 31, 2013 and 2012,respectively. The College determined these OFA bonds to be level 2 measurements in the fair valuehierarchy.SeeNote8forotherdisclosuresofdebtobligations.Incometaxes–TheCollegeisatax‐exemptorganizationandisnotsubjecttofederalorstateincometaxes, except for unrelated business income, in accordance with Section 501(c)(3) of the InternalRevenueCode.Inaddition,theCollegequalifiedforthecharitablecontributiondeductionunderSection170(b)(1)(A) and has been classified as an organization that is not a private foundation. Unrelatedbusiness income tax, if any, is insignificant andno taxprovisionhasbeenmade in the accompanyingfinancialstatements.The College recognizes interest accrued and penalties related to unrecognized tax benefits as anadministrative expense. During the years ended May 31, 2013 and 2012, the College recognized nointerestandpenalties.TheCollegehadnounrecognizedtaxbenefitsatMay31,2013.TheCollegefilesanexemptorganizationincometaxreturn,anunrelatedbusinessincometaxreturnintheU.S.federaljurisdictionandunrelatedbusinessincometaxreturnsinvariousstatejurisdictions.Withfewexceptions,theCollegeisnolongersubjecttoU.S.federalorstate/localincometaxexaminationsbytaxauthoritiesforyearsbefore2009.Use of estimates – The preparation of financial statements, in conformity with generally acceptedaccountingprinciples,requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of thefinancialstatements,andthereportedamountsofrevenuesandexpensesduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.Redesignationofnetassets–Certainamountspreviouslyreceivedfromdonorshavebeentransferredamongnetassetcategoriesduetochangesindonordesignations.


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Note1–OrganizationandSummaryofSignificantAccountingPolicies(continued)Relatedpartytransactions–MembersoftheCollege’sBoardofTrusteesandseniormanagementmay,fromtimetotime,beassociated,eitherdirectlyor indirectly,withcompaniesdoingbusinesswiththeCollege.Forseniormanagement,theCollegerequiresannualdisclosureofsignificantfinancialinterestsin, or employment or consulting relationships with, entities doing business with the College. Theseannual disclosures cover both seniormanagement and their immediate familymembers.When suchrelationshipsexist,measuresaretakentoappropriatelymanagetheactualorperceivedconflictinthebest interestsof theCollege.TheCollegehasawrittenconflictof interestpolicy that requires,amongotherthings,thatnomemberoftheBoardofTrusteescanparticipateinanydecisioninwhichheorshe(or an immediate family member) has a material financial interest. When such relationships exist,measures are taken to mitigate any actual or perceived conflict, including requiring that suchtransactionsbeconductedatarm’slength,forgoodandsufficientconsideration,basedontermsthatarefairandreasonable toand for thebenefitof theCollege,and inaccordancewithapplicableconflictofinterestlaws.Nosuchassociationsareconsideredtobefinanciallysignificant.Subsequent events – Subsequent events are events or transactions that occur after the date of thestatementsoffinancialpositionbutbeforefinancialstatementsareissued.TheCollegerecognizesinthefinancial statements the effects of all subsequent events that provide additional evidence aboutconditions that existed at the date of the statements of financial position, including the estimatesinherentintheprocessofpreparingthefinancialstatements.TheCollege’sfinancialstatementsdonotrecognizesubsequenteventsthatprovideevidenceaboutconditionsthatdidnotexistatthedateofthestatements of financial position but arose after the date of the statements of financial position andbeforefinancialstatementsareavailabletobeissued.The College has evaluated subsequent events through September 23, 2013, which is the date thefinancialstatementswereissued.Note2–StudentLoansReceivableStudentloansreceivablerepresentsloansfromthePerkinsloanfundsthataregenerallypayablewithinterestbetween3.00%and5.00%overapproximately11yearsfollowingcollegeattendance.Principalpayments,interest,andlossesduetocancellationaresharedbytheCollegeandtheU.S.governmentinproportion to their share of funds provided. The program provides for cancellation of loans if thestudentisemployedincertainoccupationsfollowinggraduation.LossesfromemploymentcancellationsareabsorbedinfullbytheU.S.government.AtMay31,2013and2012,studentloansfundedthroughthePerkinsloanprogramwere$7,967,163and$7,987,028,respectively.TheavailabilityoffundsforloansunderthePerkinsprogramisdependentonreimbursementstothepoolfrom repayments on outstanding loans. Funds advanced by the Federal government of $6,265,049 and$6,341,129atMay31,2013and2012, respectively,areultimatelyrefundable to thegovernmentandareclassifiedasliabilitiesinthestatementsoffinancialposition.Outstandingloanscancelledundertheprogramresultinareductionofthefundsavailableforloanandadecreaseintheliabilitytothegovernment.


15

Note2–StudentLoansReceivable(continued)AtMay31,2013and2012,thefollowingamountswerepastdueunderstudentloanprograms:

Total1‐60Days 60‐90Days 90+Days PastDue

May31,2013 129,804$ 206,094$ 357,461$ 693,359$May31,2012 127,896 184,692 287,402 599,990

Amounts due under the Perkins loan program are guaranteed by the government and, therefore, noreservesareplacedonanypastduebalancesundertheprogram.Note3–PromisestoGiveConditionalpromises–AtMay31,2013and2012,theCollegehadreceivedconditionalpromisestogiveofapproximately$2,825,000.Theseconditionalpromisesarenotrecognizedasassetsand,iftheyare received,will generally be restricted for specific purposes stipulated by the donors primarily forendowment,generaloperationalsupport,orplantfacilities.Unconditional promises – At May 31, 2013 and 2012, the College had uncollected unconditionalpromises to give of $5,062,500 and $5,561,250, respectively, which are shown as contributionsreceivable, net of unamortized discounts of $189,667 and $206,180, respectively. ContributionsreceivableafteroneyearwerediscountedusinganadjustedriskfreeinterestratecommensuratewiththeperiodoverwhichthecontributionwillbereceivedfortheyearsendedMay31,2013and2012.Theweightedaverageratewas2.43%and2.28%fortheyearsendedMay31,2013and2012,respectively.Amountsdueareasfollows:

2013 2012

Amountsreceivableinlessthanoneyear 1,613,165$ 1,566,133$Amountsreceivableinonetofiveyears 3,449,335 3,995,117Amountsreceivableinmorethanfiveyears ‐ ‐

5,062,500 5,561,250Unamortizeddiscount (189,667) (206,180)

Totalcontributionsreceivable 4,872,833$ 5,355,070$

May31,


16

Note4–InvestmentsAtMay31,thevaluesofinvestmentsbytypeareasfollows:

2013 2012Pooledinvestments

Equitysecurities Internationalmutualfunds 20,084,500$ 27,400,296$ Domesticmutualfunds 4,737,407 6,131,713 Marketabledomesticequitysecurities 4,185,543 7,989,277 Commoditymutualfunds 1,874,354 4,509,858Debtsecurities Internationalfixedincomemutualfunds 8,909,557 5,027,718 Domestichighyieldmutualfunds 7,738,936 6,372,565 Domesticfixedincomemutualfunds 4,061,080 5,507,547CommingledTrusts

Marketableinternationalequitysecurities 37,226,240 25,680,088USTreasurysecurities 14,895,526 13,611,036Marketabledomesticequitysecurities 13,142,235 9,991,654Marketableinternationalfixedincomesecurities 8,094,181 6,520,764Realestateinvestmenttrust 4,851,291 7,452,346

AlternativeinvestmentsHedgefunds

Multi‐strategy 32,818,095 28,026,326Long/shortequityfunds 14,800,928 14,047,515Creditopportunities 6,427,249 5,377,400Globalmacro 6,113,044 ‐

Domesticprivateequityfunds 4,742,644 3,875,464Internationalprivateequityfunds 4,203,397 3,345,046Naturalresourcesfunds 3,756,591 2,654,631Venturecapitalfunds 3,676,765 2,563,441Realestatefunds 1,623,541 1,511,093

Realestateandothers(reportedatcost) 55,399 92,331

Totalpooledinvestments 208,018,503 187,688,109


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Note4–Investments(continued)

2013 2012Separateinvestments

AssetsheldincharitableremaindertrustsEquitymutualfunds 1,729,409$ 1,278,943$Fixedincomemutualfunds 1,402,757 1,738,035Marketablefixedincomesecurities 681,036 1,071,707Realestateandothers(reportedatcost) 13,063 1,166,710

Equitysecurities Balancedmutualfunds 1,395,809 1,158,046 Marketabledomesticequitysecurities ‐ 25,852Debtsecurities Domesticfixedincomemutualfunds 6,232,656 7,278,930 USTreasurysecurities 1,558,831 3,454,716

Collateralizeddebtsecurities 488,540 ‐Realestateandothers(reportedatcost) 460,138 461,536

Totalseparateinvestments 13,962,239 17,634,475

Totalinvestments 221,980,742$ 205,322,584$

AtMay31,thevaluesofinvestmentsbycategoryareasfollows:

2013 2012

EndowmentPooledinvestments 208,018,503$ 187,688,109$Separatelyinvested 3,316,633 4,976,153

Totalendowment 211,335,136 192,664,262

AnnuityandlifeincomecontractsSeparatelyinvested 3,826,265 5,255,395

Totalannuityandlifeincomecontracts 3,826,265 5,255,395

SeparatelyinvestedConstructionfunds 488,540 ‐Operations 6,232,656 7,304,783Other 98,145 98,144

Totalinvestmentsbycategory 221,980,742$ 205,322,584$


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Note5–SplitInterestAgreementsAsofMay31,2013, theCollegehadelevengiftannuitycontracts issuedandoutstanding.TheCollegemaintainsareserveadequatetomeettheactuariallydeterminedfuturepaymentsofthesecontracts.AsofMay31,2013,thefairvalueofthetotalassetsheldwas$576,750.Thereservewas$455,264,leaving$121,486ofnetassetsinexcess.DuringthefiscalyearendedMay31,2013,distributionstoannuitantstotaled$38,670.As ofMay 31, 2012, the College had eight gift annuity contracts issued and outstanding. The Collegemaintainsareserveadequatetomeettheactuariallydeterminedfuturepaymentsofthesecontracts.AsofMay31,2012,thefairvalueofthetotalassetsheldwas$338,871.Thereservewas$258,555,leaving$80,316ofnetassets inexcess.DuringthefiscalyearendedMay31,2012,distributionstoannuitantstotaled$38,670.TheCollegeacts as trustee for a varietyof split‐interest agreements,mainly in the formof charitableremaindertrusts,includingbothannuitytrustsandunitrusts.AtMay31,2013and2012,theCollege’sactuariallydeterminedfuturepaymentsandotherobligationswereasfollows:

2013 2012

Giftannuityreserve 455,264$ 258,555$Presentvalueoffuturepayments–annuitytrusts 120,575 164,096Presentvalueoffuturepayments–fixedrateunitrusts 114,369 181,666

Totalliabilityforsplit‐interestagreements 690,208$ 604,317$

Note6–FairValueofAssetsandLiabilitiesTheCollegeusedthefollowingmethodsandsignificantassumptionstoestimatefairvalueforitsassetsandliabilitiesmeasuredandcarriedatfairvalueinthefinancialstatements:

Investments–Investmentsarecomprisedofmarketablesecurities,commingledtrusts,hedgefunds,andalternativeinvestments.Marketablesecurityfairvaluesarebasedonquotedmarketprices.Ifaquotedmarketpriceisnotavailable,fairvalueisestimatedusingquotedmarketpricesforsimilarsecurities. Commingled trusts and hedge funds are valued using net asset value. Alternativeinvestments are valued at fair value using significant unobservable inputs. The value of theseinvestments is determined by fundmanagers and valuation experts, using relevantmarket data.Such valuations generally reflect discounts for illiquidity and consider variables such as financialperformance of investments, recent sales prices of similar investments, and other pertinentinformation. The private investments have a high concentration of pre‐initial public offeringsecurities,subjectingtheseinvestmentstomarketvaluevolatility.Thevaluationmethodsutilizedbythefundmanagersandvaluationexpertsaresubjecttoregularreviewbymanagement.


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Note6–FairValueofAssetsandLiabilities(continued)

Assetsheldincharitableremaindertrusts–Assetsheldincharitableremaindertrustsarecomprisedof marketable securities and real property. Marketable security fair values are based on quotedmarketpricesanddiscounted,whenappropriate.Ifaquotedmarketpriceisnotavailable,fairvalueisestimatedusingquotedmarketpricesforsimilarsecurities.Therealestateinvestmentsareheldatcostandmanagementassessestheseinvestmentsforimpairmentwhencircumstancesindicateadeclineinvalueisotherthantemporary.Interestrateswapagreements–Thefairvaluesof interestrateswapagreementsaretheestimatedamount theCollegewould receiveorpay to terminate theagreementat the reportingdate, takingintoconsiderationthecurrentinterestratesandcreditworthinessofcounterparties.

The following is a summary categorization, as ofMay 31, 2013 and 2012, of the College’s assets andliabilitiesbasedonthelevelofinputsutilizedindeterminingthevalueofsuchinvestments:

AtMay31,2013Level1 Level2 Level3 Totals

EquitysecuritiesInternationalmutualfunds 20,084,500$ ‐$ ‐$ 20,084,500$Domesticmutualfunds 4,737,407 ‐ ‐ 4,737,407Marketabledomesticequitysecurities 4,185,543 ‐ ‐ 4,185,543Commoditymutualfunds 1,874,354 ‐ ‐ 1,874,354Balancedmutualfunds 1,395,809 ‐ ‐ 1,395,809DebtsecuritiesDomesticfixedincomemutualfunds 10,293,736 ‐ ‐ 10,293,736Internationalfixedincomemutualfunds 8,909,557 ‐ ‐ 8,909,557Domestichighyieldmutualfunds 7,738,936 ‐ ‐ 7,738,936USTreasurysecurities ‐ 1,558,831 ‐ 1,558,831Collateralizeddebtsecurities ‐ 488,540 ‐ 488,540CommingledTrustsMarketableinternationalequitysecurities ‐ 37,226,240 ‐ 37,226,240USTreasurysecurities ‐ 14,895,526 ‐ 14,895,526Marketabledomesticequitysecurities ‐ 13,142,235 ‐ 13,142,235Marketableinternationalfixedincomesecurities ‐ 8,094,181 ‐ 8,094,181Realestateinvestmenttrust ‐ 4,851,291 ‐ 4,851,291HedgefundinvestmentsMulti‐strategyfunds ‐ 77,230 32,740,865 32,818,095Long/shortequityfunds ‐ 5,032,037 9,768,891 14,800,928Creditopportunitiesfunds ‐ ‐ 6,427,249 6,427,249Globalmacrofunds ‐ 2,000,280 4,112,764 6,113,044Domesticprivateequityfunds ‐ ‐ 4,742,644 4,742,644Internationalprivateequityfunds ‐ ‐ 4,203,397 4,203,397Naturalresourcesfunds ‐ ‐ 3,756,591 3,756,591Venturecapitalfunds ‐ ‐ 3,676,765 3,676,765Realestatefunds ‐ ‐ 1,623,541 1,623,541

AssetsheldincharitableremaindertrustsEquitymutualfunds 1,729,409 ‐ ‐ 1,729,409Fixedincomemutualfunds 1,402,757 ‐ ‐ 1,402,757Marketablefixedincomesecurities ‐ 681,036 ‐ 681,036

Interestrateswapsliability ‐ (10,556,728) ‐ (10,556,728)

Totals 62,352,008$ 77,490,699$ 71,052,707$ 210,895,414$


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AtMay31,2012Level1 Level2 Level3 Totals

EquitysecuritiesInternationalmutualfunds 27,400,296$ ‐$ ‐$ 27,400,296$Marketabledomesticequitysecurities 8,015,129 ‐ ‐ 8,015,129Domesticmutualfunds 6,131,713 ‐ ‐ 6,131,713Commoditymutualfunds 4,509,858 ‐ ‐ 4,509,858Balancedmutualfunds 1,158,046 ‐ ‐ 1,158,046DebtsecuritiesDomesticfixedincomemutualfunds 12,786,477 ‐ ‐ 12,786,478Domestichighyieldmutualfunds 6,372,565 ‐ ‐ 6,372,565Internationalfixedincomemutualfunds 5,027,718 ‐ 5,027,718USTreasurysecurities ‐ 3,454,716 ‐ 3,454,716CommingledTrustsMarketableinternationalequitysecurities ‐ 25,680,088 ‐ 25,680,088USTreasurysecurities ‐ 13,611,036 ‐ 13,611,036Marketabledomesticequitysecurities ‐ 9,991,654 ‐ 9,991,654Realestateinvestmenttrust 7,452,346 7,452,346Marketableinternationalfixedincomesecurities ‐ 6,520,764 ‐ 6,520,764HedgefundinvestmentsMulti‐strategyfunds ‐ 1,521,805 26,504,521 28,026,326Long/shortequityfunds ‐ 4,833,548 9,213,967 14,047,515Creditopportunitiesfunds ‐ ‐ 5,377,400 5,377,400Domesticprivateequityfunds ‐ ‐ 3,875,464 3,875,464Internationalprivateequityfunds ‐ ‐ 3,345,046 3,345,046Venturecapitalfunds ‐ ‐ 2,563,441 2,563,441Naturalresourcesfunds ‐ ‐ 2,654,631 2,654,631Realestatefunds ‐ ‐ 1,511,093 1,511,093

AssetsheldincharitableremaindertrustsFixedincomemutualfunds 1,738,035 ‐ ‐ 1,738,035Equitymutualfunds 1,278,943 ‐ ‐ 1,278,943Marketablefixedincomesecurities ‐ 1,071,707 ‐ 1,071,707

Interestrateswapsliability ‐ (14,430,540) ‐ (14,430,540)

Totals 74,418,780$ 59,707,124$ 55,045,563$ 189,171,467$


21

Note6–FairValueofAssetsandLiabilities(continued)Thefollowingtableprovidesareconciliationofassetsmeasuredatfairvalueusingsignificantunobservableinputs(Level3)onarecurringbasisduringtheyearsendedMay31,2013and2012:

Multi‐ Credit Domestic International Natural Venturestrategy Long/short opportunities Globalmacro privateequity privateequity resources capital Realestatefunds equityfunds funds funds funds funds funds funds funds Total

Beginningbalances,May31,2012 26,504,521$ 9,213,967$ 5,377,400$ ‐$ 3,875,464$ 3,345,046$ 2,654,631$ 2,563,441$ 1,511,093$ 55,045,563$

Gains&losses(realized/unrealized) 4,782,942 656,498 1,049,849 112,764 63,482 147,848 27,558 60,412 104,416 7,005,769

Purchasesandissuances, 2,000,000 ‐ ‐ 4,000,000 1,457,056 1,116,263 1,477,567 1,088,317 244,023 11,383,226

Salesandsettlements (546,598) (101,574) ‐ ‐ (653,358) (405,760) (403,165) (35,405) (235,991) (2,381,851)

Endingbalances,May31,2013 32,740,865$ 9,768,891$ 6,427,249$ 4,112,764$ 4,742,644$ 4,203,397$ 3,756,591$ 3,676,765$ 1,623,541$ 71,052,707$

Thetotalamountofgains(losses)fortheperiodincludedinchangesinnetassetsattributabletothechangeinunrealizedgains(losses)relatingtoassetsstillheldatMay31,2013 3,302,997$ 1,600,928$ 1,327,249$ 112,764$ (998,690)$ 260,750$ 423,645$ 163,054$ (142,395)$ 6,050,301$

LevelIIIInstruments


22


Multi‐ Credit Domestic International Venture Naturalstrategy Long/short opportunities privateequity privateequity capital resources Realestatefunds funds funds funds funds funds funds funds Total

Beginningbalances,May31,2011 20,697,542$ 13,975,239$ 4,794,287$ 3,714,484$ 2,497,007$ 1,551,582$ 1,785,285$ 1,099,701$ 50,115,127$

Gainsandlosses(realized/unrealized) 264,735 48,213 (16,887) (618,644) 70,599 190,633 146,071 69,395 154,115

Purchasesandissuances 10,100,000 ‐ 600,000 1,311,750 862,500 930,096 765,917 401,100 14,971,363

Salesandsettlements (3,035,951) (2,098,426) ‐ (532,126) (85,060) (108,870) (42,642) (59,103) (5,962,178)

TransferoutofLevel3(a) (1,521,805) (2,711,059) ‐ ‐ ‐ ‐ ‐ ‐ (4,232,864)

Endingbalances,May31,2012 26,504,521$ 9,213,967$ 5,377,400$ 3,875,464$ 3,345,046$ 2,563,441$ 2,654,631$ 1,511,093$ 55,045,563$

Thetotalamountofgains(losses)fortheperiodincludedinchangesinnetassetsattributabletothechangeinunrealizedgains(losses)relatingtoassetsstillheldatMay31,2012. 473,972$ 512,393$ 277,400$ (1,137,107)$ 112,902$ 102,642$ 396,088$ (246,811)$ 491,479$

(a)TransferredfromLevel3toLevel2becauseofexpirationoffundaccessrestrictions.

Level3Instruments

TheCollege’spolicyistorecognizetransfersinandoutasoftheactualdateoftheeventorchangeincircumstancesthatcausedthetransfer.TherewerenotransfersbetweenLevel1,2or3fortheyearendedMay31,2013.


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Note6–FairValueofAssetsandLiabilities(continued)TheCollegeusestheNetAssetValue(NAV)todeterminethefairvalueofalltheunderlyinginvestmentswhich (a) do not have a readily determinable fair value and (b) prepare their financial statementsconsistent with the measurement principles or have the attributes of an investment company. Thefollowing table lists investments in other investment companies (in partnership format) by majorcategory:

FairValueMay31,2013

UnfundedCommitments

RedemptionFrequency

RedemptionNoticePeriod

OtherRestrictions

Commingledtrusts(a)

Marketableinternationalequitysecurities 37,226,240$ ‐$Rangefrommonthlytoquarterly

6‐30days none

U.S.Treasurysecurities 14,895,526 ‐ Daily 2‐5days noneMarketabledomesticequitysecurities 13,142,235 ‐ Quarterly 60days none

Marketableinternationalfixedincomesecurities 8,094,181 ‐ Monthly 10days

Fundsdeliveredbetween5and15daysaftervaluationdate

Realestateinvestmenttrust 4,851,291 ‐ Monthly 5days

Fundsdeliveredbetween5and15daysaftervaluationdate

HedgeFunds(b)

Multi‐StrategyFunds(b) 32,818,095 ‐Rangefromquarterlytoannually

30–90daysnotice

rollingonetotwoyearlockup

Long/ShortFunds(b) 14,800,928 ‐Rangefrommonthlytoannually

30–90daysnotice

rolling12monthlockup

CreditOpportunitiesFunds(b) 6,427,249 ‐Rangefromannuallytobi‐annually

90daysnoticerollingonetotwoyearlockup

GlobalMacroFunds(b) 6,113,044 ‐Rangefromdailytoquarterly

1‐33days

Fundsdelivered90daysafterredemptionrequest

DomesticprivateequityFunds(c) 4,742,644 4,434,650 N/A* N/A* N/A*Internationalprivateequityfunds(c) 4,203,397 1,699,500 N/A* N/A* N/A*Naturalresourcesfunds(d) 3,756,591 6,209,500 N/A* N/A* N/A*Venturecapitalfunds(c) 3,676,765 6,507,500 N/A* N/A* N/A*Realestatefunds(e) 1,623,541 486,550 N/A* N/A* N/A*

156,371,727$ 19,337,700$

*Thesefundsareinprivateequitystructure,withnoabilitytoberedeemed.

(a)Thesearedirectionalinvestments,investedindomesticandinternationaldebtandequitysecurities.Thesefundsinvestmostlyinlong‐termsecurities,andsomeinvestbothlongandshort‐term.Theinvestmentsarepublicsecurities,andthefundsareheldinpartnershiportrustformat.(b)Hedgefundstrategiesandallocationsinclude53%multi‐strategy,12%distressedopportunities,35%long/short.(c)Thiscategoryincludesinvestmentsinbothdedicatedprivateequityorventurecapitalfundsandinfund‐of‐funds,whichinvestin15‐30privateequityorventurecapitalfunds.Privateequityfunds,throughnegotiationortenderoffer,attempttotakeoveramajoritypercentageofacompany'sequity,withthepurposeofacquiringitsassetsandoperations.Venturecapitalfundsinvestinnon‐marketablesecuritiesofnewcompaniesorcompaniesconsideredtobeintheearlystagesofgrowth.(d)Thiscategoryinvestsinfund‐of‐funds,whichinvestin15‐30naturalresourcefundscreatedtoinvestintheexplorationordevelopmentofenergy‐relatedreserves.(e)Thiscategoryincludesinvestmentsinfund‐of‐funds,whichinvestin15‐30privaterealestatefunds.Privaterealestatefundstakeownershippositionsinlandandbuildings,equity‐likeinvestmentsinmortgagesorlandleasesthatincludesubstantialparticipationinrevenues,capitalappreciation,andprivateoperatingcompanies.


24

Note6–FairValueofAssetsandLiabilities(continued)Fundsnoted aboveheld at year endhave remaining lives ranging from1 to15yearswith estimatedcommitmentsdueasfollows:

Amount

YearsendingMay31, 2014 6,045,268$2015 9,812,3702016 2,908,0102017 572,052

19,337,700$

InvestmentreturnsfortheyearsendedMay31aresummarizedasfollows:

2013 2012

Interestanddividendincome 1,109,822$ 2,296,571$

Netrealizedandunrealizedgains(losses)oninvestmentscarriedatfairvalue 29,711,713 (20,068,556)

Totalinvestmentreturn 30,821,535 (17,771,985)Less:Operatinginvestmentreturn 8,607,142 9,414,751

Nonoperatinginvestmentreturn 22,214,393$ (27,186,736)$

Interest,dividends, realized,andunrealized incomeontheCollege’sunrestrictedendowment funds isincluded in operating activities in the statements of activities as those investment types are used foractivitiescloselyrelated to theCollege’seducationalandresidentialmission,aswellasanynecessaryancillaryactivities.Theyarealsoshownasanexpenseinthenon‐operatingsection.Allotherinvestmentreturnisconsiderednon‐operating.


25

Note7–Property,Plant,andEquipmentProperty, plant, and equipment are stated at cost at the date of acquisition or fair value on the datecontributed.Newequipmentandexpendituresformajorrepairsandimprovementsexceeding$10,000forequipmentandbuildingsarecapitalized;conversely,maintenance,repairs,androutinereplacementsare charged to expense as incurred. All plant assets except land and art and artifacts collections aredepreciated over their estimateduseful livesusing the straight‐linemethod.Estimateduseful livesofland improvements and buildings are 50 to 100 years; building improvements are 20years; andfurnitureandequipmentare5to7years.

Accumulated NetCost Depreciation BookValue

Land 18,132,443$ ‐$ 18,132,443$Landimprovements 14,153,610 7,374,558 6,779,052Buildingsandimprovements 201,204,065 58,128,271 143,075,794Art&Artifactscollection 2,546,469 ‐ 2,546,469Furnitureandequipment 41,734,575 35,223,693 6,510,882Constructioninprogress 1,760,441 ‐ 1,760,441

279,531,603$ 100,726,522$ 178,805,081$

May31,2013

Accumulated NetCost Depreciation BookValue

Land 18,132,443$ ‐$ 18,132,443$Landimprovements 13,139,768 6,795,785 6,343,983Buildingsandimprovements 183,753,474 53,772,300 129,981,174Artcollection 2,542,171 ‐ 2,542,171Furnitureandequipment 38,446,557 33,841,633 4,604,924Constructioninprogress 11,776,821 ‐ 11,776,821

267,791,234$ 94,409,718$ 173,381,516$

May31,2012


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Note8–BondsPayableAtMay31,bondspayableconsistofthefollowing:

2013 2012

StateofOregonRevenueBonds,2011SeriesA,fixedinterestratesrangingfrom4.00%to5.75%,securedbyaUniformCommercialCodesecurityinterestintheunrestrictedrevenuesoftheCollege,payableinannualinstallmentsbeginningOctober2015,withmaturityin2041 108,140,851$ 108,124,291$

Totalbondspayable 108,140,851$ 108,124,291$

On March 7, 2011, the College entered into a loan agreement and trust indenture with the State ofOregon Facilities Authority that provided for the issuance of $108,610,000 2011 Series A RevenueBondswithmandatoryfinalredemptiononOctober1,2041.ThebondswereissuedtorefundalloftheCollege’s2008SeriesABonds,andtofinancethecostsassociatedwithconstructionofanewresidencehall for students. Included in the outstanding balances at May 31, 2013 and 2012 are unamortizeddiscountsof$469,149and$485,709,respectively.The2008bondswere issued torefundalloutstandingpriorbond issues.Proceedsofpreviousbondswereused for constructionandexpansionof classrooms, libraryandoffice facilities, studenthousing,landscaping, road and street improvements, acquisition of the Franciscan Renewal Center, and theBicentennial Project, which included the renovation and expansion of Albany Hall. The bonds werepayablefromtheCollege’sunrestrictedrevenues.Interestexpenseforallbondspayablewas$7,724,968and$7,489,294fortheyearsendedMay31,2013and2012,respectively.Dates fixed forredemptionoccurannuallyonOctober1,andcontinue through2041.Futureprincipalandinterestpaymentsareasfollows:

Principal Interest

2014 ‐$ 5,955,800$2015 ‐ 5,955,8002016 580,000 5,944,2002017 600,000 5,920,6002018 625,000 5,896,100Thereafter 106,335,851 98,680,031

108,140,851$ 128,352,531$

YearsendedMay31,


27

Note8–BondsPayable(continued)The agreement contains certain restrictive covenants as to additional indebtedness, as defined in theagreement.Note9–InterestRateSwapsTheCollegehadusedvariable‐ratedebttofinancetheacquisitionofproperty,plant,andequipmentasindicatedinNote8.ThesedebtobligationshadexposedtheCollegetovariabilityininterestpaymentsduetochangesininterestrates.The College had swapped virtually 100% of its variable‐rate cash flow exposure on these debtobligations for fixed‐rate cash flows by entering into receive‐variable, pay‐fixed interest rate swaps.Under the interest rate swaps, the College received variable‐rate interest payments and made fixedinterestratepayments,therebycreatingsubstantiallyfixedinterestratepaymentsontherelateddebtobligations. The College does not enter into derivative instruments for investment purposes. TheCollege’sexistingswapswerecontractedascashflowhedges.InMarch2011,theCollegenovateda30‐yearswaptotheBankofNewYork,atanannualfixedrateof3.85%.ThenotionalamountatMay31,2013and2012wasequalto$10,000,000.AlsoinMarch2011,theCollegenovateda30‐year swap toDeutscheBank,atanannual fixed rateof3.85%.ThenotionalamountatMay31,2013and2012wasequalto$10,000,000.InJanuary2007,theCollegeexecuteda25‐yearswapwiththeBankofNewYorkatanannualfixedrateof3.422%.ThenotionalamountatMay31,2013and2012wasequalto$35,940,000and$37,045,000,respectively.Ineachoftheseswaps,theCollege’svariable‐ratereceiptsaretiedtoapercentageofone‐monthLIBOR.Changesinthefairmarketvalueoftheinterestrateswapsarereportedasunrealizedgainsorlossesoninterest rate swaps in unrestricted other revenue or expense in the statements of activities. As ofMay31,2013and2012,thevaluationoftheswapresultedinanunrealizedgainof$3,873,812andanunrealizedlossof$6,325,512,respectively.ProvidingtheCollegeholdstheswapstomaturity,thevalueof thederivativeswillbezero.Theseswappingtransactionscanbeterminatedatmarketratesatanytimeduringthetermoftheswap.


28

Note10–TemporarilyRestrictedNetAssetsTemporarilyrestrictednetassetsarerestrictedforthefollowingpurposes:

2013 2012

TheportionofperpetualendowmentfundssubjecttoatimerestrictionunderUPMIFA

Withoutpurposerestrictions 2,749,481$ 2,343,968$Withpurposerestrictions:

Scholarships 37,219,128 29,637,750Chairs 11,848,448 9,157,271Facilities 10,810,550 8,713,225Departmental 5,033,214 3,860,175

Totaltemporarilyrestrictedendowmentnetassets 67,660,821 53,712,389

Splitinterestagreements 256,532 169,860Studentloans 1,565,362 1,565,362Restrictedforspecificprojects 10,206,734 10,060,268

Totaltemporarilyrestrictednetassets 79,689,449$ 65,507,879$

Note11–PermanentlyRestrictedNetAssetsPermanentlyrestrictednetassetsconsistof:

2013 2012

TheportionofperpetualendowmentfundsthatisrequiredtoberetainedpermanentlyeitherbyexplicitdonorstipulationorbyUPMIFA 98,665,422$ 93,387,435$

Totalendowments 98,665,422 93,387,435

Trustsheldforendowment 3,807,945 5,430,987PropertyheldforCollegeuseinperpetuity 7,274,206 7,274,206

Totalpermanentlyrestrictednetassets 109,747,573$ 106,092,628$

The income from these investments togetherwith the incomeonnetendowment investmentgains isspendableforinstruction,scholarships,distributiontotrustbeneficiaries,andoperations.


29

Note12–EndowmentsThe College’s endowment consists of approximately 600 individual funds established for a variety ofpurposes.Itsendowmentincludesbothdonor‐restrictedendowmentfundsandfundsdesignatedbytheBoardofTrusteestofunctionasendowments.AsrequiredbyGenerallyAcceptedAccountingPrinciples(GAAP), net assets associated with endowment funds, including funds designated by the Board ofTrusteesto functionasendowments,areclassifiedandreportedbasedontheexistenceorabsenceofdonor‐imposedrestrictions.Fromtimetotime,thefairvalueofassetsassociatedwithindividualdonorrestrictedendowmentfundsmayfallbelowthelevelthatthedonorortheUniformPrudentManagementofInstitutionalFundsAct(UPMIFAortheAct)requirestheCollegetoretainasafundofperpetualduration.InaccordancewithGAAP, deficiencies of this nature that are reported in unrestricted net assets were $576,605 and$2,513,140 as ofMay 31, 2013 and 2012, respectively. These deficiencies resulted from unfavorablemarket fluctuations that occurred shortly after the investment of new permanently restrictedcontributions and continued appropriation for certain programs that were deemed prudent by theBoardofTrustees.The College invests its endowment investment portfolio and allocates the related earnings forexpenditure in accordancewith the total return concept. A distribution of endowment return that isindependentof thecashyieldandappreciationof investmentsearnedduring theyear isprovided forprogram support. The College has adopted an endowment spending policy designed specifically tostabilizeannual spending levelsand topreserve therealvalueof theendowmentportfolioover time.Thespendingpolicyattempts toachieve these twoobjectivesbyusinga long‐termtargetedspendingratecombinedwithasmoothingrule,whichadjustsspendinggradually tochanges in theendowmentmarketvalue.TheCollegeuses a spending rate of 4.50%of the sixteenquarter rolling average endowmentmarketvalueinadditiontoasupplementalamountapprovedbytheBoardtooffset interestpayments,nottoexceed 1.50%. The supplemental spendingwill be reduced by 0.10% per year until themaximum is0.50%.Theactual spendingrate, includingsupplemental spending, in2013and2012was5.10%ofamaximum allowable spending of 5.70% and 5.50% of a maximum allowable spending of 5.80%,respectively.Effective January 1, 2008, the state of Oregon enacted UPMIFA, the provisions of which apply toendowment fundsexistingonorestablishedafter thatdate.TheBoardofTrusteesof theCollegehasinterpretedtheActasrequiringthepreservationofthefairvalueoftheoriginalgiftasofthegiftdateofthedonor‐restrictedendowmentfundsabsentexplicitdonorstipulationstothecontrary.Asaresultofthis interpretation, theCollegeclassifiesaspermanently restrictednetassets (a) theoriginalvalueofgiftsdonatedtothepermanentendowment,(b)theoriginalvalueofsubsequentgiftstothepermanentendowment,and(c)accumulationstothepermanentendowmentmadeinaccordancewiththedirectionoftheapplicabledonorgiftinstrumentatthetimetheaccumulationisaddedtothefund.


30

Note12–Endowments(continued)The remaining portion of the donor‐restricted endowment fund that is not classified in permanentlyrestricted net assets is classified as temporarily restricted net assets until those amounts areappropriated for expenditure by the College in a manner consistent with the standard of prudenceprescribedbytheAct.InaccordancewiththeAct,theCollegeconsidersthefollowingfactorsinmakingadeterminationtoappropriateoraccumulatedonor‐restrictedendowmentfunds:(1)Thedurationandpreservationofthefund(2)ThepurposesoftheCollegeandthedonor‐restrictedendowmentfund(3)Generaleconomicconditions(4)Thepossibleeffectofinflationanddeflation(5)Theexpectedtotalreturnfromincomeandtheappreciationofinvestments(6)OtherresourcesoftheCollege(7)TheinvestmentpoliciesoftheCollegeEndowmentnetassetsconsistofthefollowingatMay31,2013:


Donor‐restrictedendowmentfunds (576,605)$ 67,660,821$ 98,665,422$ 165,749,638$Board‐designatedendowmentfunds 45,457,860 ‐ ‐ 45,457,860

Totalfunds 44,881,255$ 67,660,821$ 98,665,422$ 211,207,498$

EndowmentnetassetsconsistofthefollowingatMay31,2012:


Donor‐restrictedendowmentfunds (2,513,140)$ 53,712,389$ 93,387,435$ 144,586,684$Board‐designatedendowmentfunds 37,683,529 ‐ ‐ 37,683,529

Totalfunds 35,170,389$ 53,712,389$ 93,387,435$ 182,270,213$


31

Note12–Endowments(continued)ChangesintheendowmentnetassetsfortheyearendedMay31,2013areasfollows:


Endowmentnetassets,May31,2012 35,170,389$ 53,712,389$ 93,387,435$ 182,270,213$

InvestmentreturnInvestmentincome 562,343 884,112 ‐ 1,446,455Netappreciation(realizedandunrealized) 11,254,719 21,988,869 ‐ 33,243,588

Totalinvestmentreturn 11,817,062 22,872,981 ‐ 34,690,043

Contributions ‐ ‐ 1,595,784 1,595,784Maturedtrustsandothertransfers ‐ ‐ 3,682,203 3,682,203

Appropriationofendowmentassetsforexpenditure (4,042,731) (6,988,014) ‐ (11,030,745)

Changeinunderwaterendowments 1,936,535 (1,936,535) ‐ ‐

Endowmentnetassets,endofyearMay31,2013 44,881,255$ 67,660,821$ 98,665,422$ 211,207,498$

ChangesintheendowmentnetassetsfortheyearendedMay31,2012areasfollows:


Endowmentnetassets,May31,2011 41,312,502$ 71,573,086$ 91,255,619$ 204,141,207$

InvestmentreturnInvestmentincome 468,362 1,704,288 ‐ 2,172,650Netappreciation(realizedandunrealized) (10,596,525) (13,523,187) ‐ (24,119,712)

Totalinvestmentreturn (10,128,163) (11,818,899) ‐ (21,947,062)

Contributions 10,180,521 ‐ 1,829,331 12,009,852Maturedtrustsandothertransfers ‐ ‐ 302,485 302,485

Appropriationofendowmentassetsforexpenditure (4,373,586) (7,862,683) ‐ (12,236,269)

Changeinunderwaterendowments (1,820,885) 1,820,885 ‐ ‐

Endowmentnetassets,endofyearMay31,2012 35,170,389$ 53,712,389$ 93,387,435$ 182,270,213$


32

Note13–PensionPlanThe College participates in a contributory retirement plan covering substantially all personnel. Allemployees are eligible to make voluntary deferrals to the plan immediately upon employment. Allregular employees working at least half time receive College contributions after one year ofemployment.TheplanisadministeredbytheTeachers’InsuranceandAnnuityAssociationandCollegeRetirementEquitiesFund.Onceanemployeebecomeseligiblefortheemployercontribution,theCollegemakesmonthlypaymentsof 9.00% of the employee’s compensation. There is no requirement for the employee to make acontributioninordertoreceivetheCollege’scontribution.Allfundsvestimmediately.TheCollegehadacontractualobligation,throughMay31,2013,tomake10.00%contributionsonbehalfofapproximately28 union employees. Aggregate pension expense for the years ended May 31, 2013 and 2012, wasapproximately$3,834,000and$3,560,000,respectively.Note14–Post‐RetirementHealthcareBenefitsIn addition to providing pensionbenefits, theCollegeprovides certain healthcare benefits for retiredemployees.Employeeswhoretirewithatleastfiveyearsoffull‐timeservicemaypurchaseaMedicaresupplementthroughtheRetireeMedicalInsuranceProgram.TheCollegepaysaportionofthepremium.The College recognizes the funded status of defined benefit post‐retirement plans be recognized aseither an asset or liability on the statements of financial position. The benefit plan is not funded inseparateaccountsandcostsarepaidfromtheCollege’sgeneralcashaccountsonapay‐as‐you‐gobasis.


33

Note14–Post‐RetirementHealthcareBenefits(continued)ObligationsandfundedstatusatMay31areasfollows:

2013 2012

Changeinbenefitobligation:Benefitobligation,beginningofyear 1,707,886$ 1,543,845$Servicecost 112,573 103,939Interestcost 78,998 84,140Actuarial(gain)loss (73,648) 26,122Benefitspaid (46,860) (50,160)

Benefitobligation,endofyear 1,778,949$ 1,707,886$

Reconciliationoffundedstatus:Endofyear 1,778,949$ 1,707,886$Unrecognizednetactuarialloss ‐ ‐

Netamountrecognized 1,778,949$ 1,707,886$

2013 2012Amountsrecognizedinthestatements

offinancialposition:Accruedpostretirementhealthcarebenefits

liability 1,778,949$ 1,707,886$

Amountsrecognizedintheaccompanyingstatementsofactivities:

Transitionobligation 67,938$ 101,908$Netgain (538,468) (502,510)

Total (470,530)$ (400,602)$


34

Note14–Post‐RetirementHealthcareBenefits(continued)ThenetperiodicbenefitcostsfortheyearsendedMay31includedthefollowingcomponents:

2013 2012

Netperiodicbenefitcost:Servicecost 112,573$ 103,939$Interestcost 78,998 84,140Amortizationofpriorservicecost 33,970 33,970Amortizationofactuarialloss (36,793) (34,198)

Netperiodicbenefitcost 188,748$ 187,851$

Thediscountrateusedindeterminingtheaccumulatedpost‐retirementbenefitobligationwas4.50%atMay 31, 2013 and 5.00% at May 31, 2012. To determine the accumulated post‐retirement benefitobligation atMay31, 2013and2012, theCollege’sportionof each eligible employee’s total premiumwasassumedtoremainat$55permonth($660peryear).During theyearsendedMay31,2013and2012,theCollegemadehealthcareinsurancepremiumpaymentsfortheparticipantsofapproximately$46,860and$50,160,respectively.Thehealthcareinsurancepremiumpaymentsfortheparticipantsareexpectedtobepaidasfollows:

2014 46,860$2015 46,8602016 46,8602017 46,8602018 46,8602019through2022intheaggregate 187,440

421,740$

YearsendingMay31,

Note15–CommitmentsandContingenciesTheCollegehasplaceditsliabilityinsurancecoveragewiththeCollegeLiabilityInsuranceCompany,Ltd.(CLIC), established by eight similar western colleges and universities for the purpose of providingliability insurance to higher education institutions. As a portion of its capital, CLIC has placed a$2,000,000 standby letter of credit, ofwhich the College is contingently liable for a pro rata portionbaseduponpremiumcontributionsfromcoveredinstitutions.IntheeventthelossesofCLICexceeditscapital and secondary coverage, the maximum contingent liability exposure to the College isapproximately $223,300. As of May31,2013 and 2012, no amounts were outstanding against thestandbyletterofcredit.


35

Note15–CommitmentsandContingencies(continued)TheCollegehasplacedcertainof itsmedical insurancecoveragewithPioneerEducatorsHealthTrust(theTrust,formerlyOregonIndependentCollegesEmployeeBenefitsTrust).TheTrustwasformulatedby seven similarwestern colleges and universities for the purpose of providingmedical, dental, andvision insurance to higher education institutions. Under the agreement, member institutions arerequired to make contributions to the fund at such times and in an amount as determined by theTrustees for the various benefit programs sufficient to provide the benefits, pay the administrativeexpensesoftheTrustwhicharenototherwisepaidbytheCollegedirectly,andtoestablishandmaintainaminimumreserveasdeterminedbytheTrustee.IntheeventlossesoftheTrustexceeditscapitalandsecondary coverage, the maximum contingent liability exposure to the College is approximately$926,000. This exposure will fluctuate based on factors including changes in actuarial assumptions,medical trend rates, and reinsurance amounts. The level of reinsurance is not expected to fluctuatesignificantlyinthefuture.TheCollegehasanoperatinglineofcredittotaling$10,000,000atabankforthepurposeoffinancingshort‐termoperatingcashflowrequirements.Interestisduemonthlyattheprimeinterestrate(3.25%atMay31,2013).Thescheduledmaturityonthelineofcredit isJanuary31,2014.AsofMay31,2013and 2012, no amountswere outstanding on the line of credit. During the year endedMay 31, 2013,$2,500,000wasborrowedon the lineof credit, andduring theyearendedMay31,2012noamountswere borrowed. The agreement establishes various positive and negative covenants, including liquidassetrequirements.The College receives and expends monies under federal grant programs and is subject to audits bygovernmentalagencies.ManagementbelievesthatanyliabilitiesresultingfromsuchauditswillnothaveamaterialimpactontheCollege.The College is involved in legal proceedings, claims, and litigation arising in the ordinary course ofoperations.Intheopinionofmanagement,thesematterswillnotmateriallyaffecttheCollege’sfinancialposition.Note16–ConcentrationofCreditRiskFinancial instruments that potentially subject the College to concentrations of credit risk consistprincipally of cash and cash equivalents. The College places substantially all of its cash and liquidinvestments with financial institutions; however, cash balances may periodically exceed federallyinsuredlimits.

36

REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOF

FINANCIALSTATEMENTSPERFORMEDINACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS

TheBoardofTrusteesLewis&ClarkCollegeReportontheFinancialStatementsWehaveaudited, inaccordancewiththeauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica and the standards applicable to financial audits contained inGovernmentAuditingStandardsissuedbytheComptrollerGeneraloftheUnitedStates,thefinancialstatementsofLewis&ClarkCollege(the College)which comprise the statement of financial position as ofMay 31, 2013, and the relatedstatementsofactivitiesandcash flows for theyear thenended,and the relatednotes to the financialstatements,andhaveissuedourreportthereondatedSeptember23,2013.InternalControlOverFinancialReportingInplanningandperformingourauditof thefinancialstatements,weconsideredtheCollege’s internalcontrol over financial reporting (internal control) to determine the audit procedures that areappropriateinthecircumstancesforthepurposeofexpressingouropiniononthefinancialstatements,butnot for thepurposeofexpressinganopinionontheeffectivenessof theCollege’s internalcontrol.Accordingly,wedonotexpressanopinionontheeffectivenessoftheCollege’sinternalcontrol.A deficiency in internal control exists when the design or operation of a control does not allowmanagementoremployees,inthenormalcourseofperformingtheirassignedfunctions,toprevent,ordetect and correct, misstatements on a timely basis. A material weakness is a deficiency, or acombinationofdeficiencies,ininternalcontrolsuchthatthereisareasonablepossibilitythatamaterialmisstatementoftheentity'sfinancialstatementswillnotbeprevented,ordetectedandcorrected,onatimelybasis.Asignificantdeficiency isadeficiency,oracombinationofdeficiencies,ininternalcontrolthatislessseverethanamaterialweakness,yetimportantenoughtomeritattentionbythosechargedwithgovernance.

37

REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOF

FINANCIALSTATEMENTSPERFORMEDINACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS(continued)

Ourconsiderationofinternalcontrolwasforthelimitedpurposedescribedinthefirstparagraphofthissection and was not designed to identify all deficiencies in internal control that might be materialweaknessesorsignificantdeficiencies.Giventheselimitations,duringourauditwedidnotidentifyanydeficiencies in internal control that we consider to be material weaknesses. However, materialweaknessesmayexistthathavenotbeenidentified.ComplianceandOtherMattersAs part of obtaining reasonable assurance about whether the College’s financial statements are freefrom material misstatement, we performed tests of its compliance with certain provisions of laws,regulations, contracts, and grant agreements, noncompliance with which could have a direct andmaterialeffectonthedeterminationoffinancialstatementamounts.However,providinganopiniononcompliancewiththoseprovisionswasnotanobjectiveofouraudit,andaccordingly,wedonotexpresssuchanopinion.TheresultsofourtestsdisclosednoinstancesofnoncomplianceorothermattersthatarerequiredtobereportedunderGovernmentAuditingStandards.PurposeofthisReportThe purpose of this report is solely to describe the scope of our testing of internal control andcompliance and the results of that testing, and not to provide an opinion on the effectiveness of theentity’s internal control or on compliance. This report is an integral part of an audit performed inaccordance with Government Auditing Standards in considering the entity’s internal control andcompliance.Accordingly,thiscommunicationisnotsuitableforanyotherpurpose.Portland,OregonSeptember23,2013

38

REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEFORTHEMAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROLOVERCOMPLIANCE

TheBoardofTrusteesLewis&ClarkCollegeReportonCompliancefortheMajorFederalProgram

WehaveauditedLewis&ClarkCollege’s(theCollege)compliancewiththetypesofcompliancerequirementsdescribedintheOMBCircularA‐133ComplianceSupplement thatcouldhaveadirectandmaterialeffectontheCollege'smajorfederalprogramfortheyearendedMay31,2013.TheCollege’smajorfederalprogramisidentified in the summary of auditor's results section of the accompanying schedule of findings andquestionedcosts.Management’sResponsibilityManagementisresponsibleforcompliancewiththerequirementsoflaws,regulations,contracts,andgrantsapplicabletoitsfederalprograms.Auditor’sResponsibilityOurresponsibilityistoexpressanopiniononcompliancefortheCollege’smajorfederalprogrambasedonourauditofthetypesofcompliancerequirementsreferredtoabove.Weconductedourauditofcompliancein accordance with auditing standards generally accepted in the United States of America; the standardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards,issuedbytheComptrollerGeneralof the United States; and OMB Circular A‐133, Audits of States, Local Governments, and Non‐ProfitOrganizations.ThosestandardsandOMBCircularA‐133requirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethernoncompliancewiththetypesofcompliancerequirementsreferredtoabove thatcouldhaveadirectandmaterialeffectonamajor federalprogramoccurred.Anaudit includesexamining,onatestbasis,evidenceabouttheCollege’scompliancewiththoserequirementsandperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.Webelieve thatourauditprovidesareasonablebasis forouropiniononcompliance for themajor federalprogram.However,ourauditdoesnotprovidealegaldeterminationoftheCollege’scompliance.OpinionontheMajorFederalProgramIn our opinion, Lewis & Clark College complied, in all material respects, with the types of compliancerequirementsreferredtoabovethatcouldhaveadirectandmaterialeffectonitsmajorfederalprogramfortheyearendedMay31,2013.

39

REPORTOFINDEPENDENTAUDITORSONCOMPLIANCEFORTHEMAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROLOVERCOMPLIANCE(continued)

OtherMattersThe results of our auditing procedures disclosed an instance of noncompliance which is required to bereported inaccordancewithOMBCircularA‐133andwhich isdescribed in theaccompanying scheduleoffindingsandquestionedcostsas item2013‐01.Ouropinionon themajor federalprogram isnotmodifiedwithrespecttothesematters.TheCollege’sresponsetothenoncompliancefindingidentifiedinourauditisdescribedintheaccompanyingschedule of findings and questioned costs. The College’s response was not subjected to the auditingproceduresappliedintheauditofcomplianceand,accordingly,weexpressnoopinionontheresponse.ReportonInternalControlOverCompliance

Management of the College is responsible for establishing andmaintaining effective internal control overcompliancewith the typesof compliance requirements referred to above. In planning andperformingouraudit of compliance, we considered the College’s internal control over compliance with the types ofrequirements thatcouldhaveadirectandmaterialeffectoneachmajor federalprogramtodetermine theauditingproceduresthatareappropriate inthecircumstances forthepurposeofexpressinganopiniononcompliance for eachmajor federal program and to test and report on internal control over compliance inaccordancewithOMBCircularA‐133,butnotforthepurposeofexpressinganopinionontheeffectivenessofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of theCollege’sinternalcontrolovercompliance.A deficiency in internal control over compliance exists when the design or operation of a control overcompliance does not allowmanagement or employees, in the normal course of performing their assignedfunctions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of afederalprogramonatimelybasis.Amaterialweaknessininternalcontrolovercomplianceisadeficiency,oracombinationofdeficiencies, in internal control over compliance such that there is a reasonablepossibilitythat material noncompliance with a type of compliance requirement of a federal program will not beprevented, or detected and corrected, on a timely basis. A significant deficiency in internal control overcomplianceisadeficiency,oracombinationofdeficiencies,ininternalcontrolovercompliancewithatypeofcompliancerequirementofafederalprogramthatislessseverethanamaterialweaknessininternalcontrolovercompliance,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Our consideration of internal control over compliance was for the limited purpose described in the firstparagraphofthissectionandwasnotdesignedtoidentifyalldeficienciesininternalcontrolovercompliancethatmightbematerialweaknessesorsignificantdeficiencies.Wedidnotidentifyanydeficienciesininternalcontrol over compliance thatwe consider to bematerialweaknesses. However,materialweaknessesmayexistthathavenotbeenidentified.ThepurposeofthisreportoninternalcontrolovercomplianceissolelytodescribethescopeofourtestingofinternalcontrolovercomplianceandtheresultsofthattestingbasedontherequirementsofOMBCircularA‐133.Accordingly,thisreportisnotsuitableforanyotherpurpose.

Portland,OregonSeptember23,2013

LEWIS&CLARKCOLLEGESCHEDULEOFFINDINGSANDQUESTIONEDCOSTS

YEARENDEDMAY31,2013

40

SECTIONI–SUMMARYOFAUDITOR’SRESULTS

FinancialstatementsTypeofauditor’sreportissued: UnmodifiedInternalcontroloverfinancialreporting: Materialweakness(es)identified? yes no Significantdeficiency(ies)identified? yes nonereportedNoncompliancematerialtofinancial statementsnoted? yes noFederalawardsInternalcontrolovermajorprograms: Materialweakness(es)identified? yes no

Significantdeficiency(ies)identified? yes nonereportedTypeofauditor’sreportissuedoncomplianceformajorprograms: Unmodified Anyauditfindingsdisclosedthatare requiredtobereportedinaccordance withSection510(a)ofOMBCircularA‐133? yes no

LEWIS&CLARKCOLLEGESCHEDULEOFFINDINGSANDQUESTIONEDCOSTSYEARENDEDMAY31,2013

41

SECTIONI–SUMMARYOFAUDITOR’SRESULTS(continued)

Identificationofmajorprograms:

CFDANumbersNameofFederalProgramorCluster StudentFinancialAssistanceCluster: 84.007 FederalSupplementalEducational OpportunityGrants 84.033 FederalWorkStudyProgram 84.038 FederalPerkinsLoanProgram 84.063 FederalPellGrantProgram 84.268 FederalDirectStudentLoans

84.379 TeacherEducationAssistanceforCollegeand HigherEducationGrants

Dollarthresholdusedtodistinguish betweentypeAandtypeBprograms? $300,000

Auditeequalifiedaslow‐riskauditee? yes no

SECTIONII–FINANCIALSTATEMENTFINDINGS

Nonenoted.

LEWIS&CLARKCOLLEGESCHEDULEOFFINDINGSANDQUESTIONEDCOSTS

YEARENDEDMAY31,2013

42

SECTIONIII–FEDERALAWARDFINDINGSANDQUESTIONEDCOSTS

FINDING2013‐01–SpecialTestsandProvisions:StudentStatusChanges

FederalProgram:FederalDirectStudentLoans(CFDA#84.268)FederalAgency:U.S.DepartmentofEducationAwardYear:2012‐13Criteria:UndertheDirectLoanprogram,institutionsmustcompleteandreturnwithin30daysofreceiptthe Roster File sent by the National Student Loan Data System (NSLDS) (OMBNo. 1845‐0035). TheRosterFileistransmittedelectronically.TheinstitutiondetermineshowoftenitreceivestheRosterFile,buttheminimumistwiceayear.Oncereceived,theinstitutionmustupdatetheinformationforchangesin student status, report the date the enrollment status was effective, enter the new anticipatedcompletion date, and submit the changes electronically through the batchmethod or theNSLDSwebsite.UnlesstheinstitutionexpectstocompleteitsnextRosterFilewithin60days,theinstitutionmustnotifyNSLDSwithin30daysif itdiscoversthatastudentwhoreceivedaloaneitherdidnotenrollorceasedtobeenrolledonatleastahalf‐timebasis(DirectLoan,34CFRsection685.309).Althoughmanyinstitutions use a third‐party service organization to perform this function, the responsibility forsubmissiontoNSLDSremainswiththeinstitution.Condition:Duringourtestingofstudentstatuschangereportingwenotedthatin8of25studentstested,a status change was not reported to the National Student Loan Data System within the requiredtimeframes.QuestionedCosts:Nonetobereported.Context:TheCollegehasthreeregistrars,oneforeachschool(CollegeofArts&Sciences(CAS),LawandGraduate)andinourdiscussionswiththeseregistrars,wenotedthereareproceduresinplacebuttheseprocedureshavenotbeenconsistentlydocumentedandfollowedinall threeschools.Additionally,wenotedtherewasturnoverwithintheregistrarpositions.Asaresultofourauditprocedures,wenotedthefollowingerrorsinourtestingsamplebyschool:twoGraduatestudentsgraduatedinSummer2012and were not reported until June 2013; four Law students graduated in May 2013 and were notreported until July 2013; two Law students were not reported accurately within the requiredtimeframes.Ourtotalpopulationofstudentsrequiringastatuschangetobereportedwas627,14werenot reported timely, 8 of which were in our testing sample. We did not note any instances ofnoncomplianceduringourtestingoftheUndergraduatestatuschangereportingsample.Cause/Effect:TheCollegedidnotadequatelymonitorstudentstatuschangestoensurethatallnecessarydataistransmittedtoNSLDSwithinrequiredfederaltimelines.Failuretoreportstudentstatuschangesresultsinnon‐compliancewithfederalrequirements.

LEWIS&CLARKCOLLEGESCHEDULEOFFINDINGSANDQUESTIONEDCOSTSYEARENDEDMAY31,2013

43

FINDING2013‐01–SpecialTestsandProvisions:StudentStatusChanges(continued)Recommendation:WerecommendtheCollegedocumentandconsistentlyadheretotheirproceduresinordertoensurethatallstudentstatuschangesarereportedtotheNSLDSinacomplete,accurateandtimelymanner.ThoseproceduresshouldincludeperiodicverificationwithNSLDSastothereceiptofsubmissions.Viewsofresponsibleofficialsandplannedcorrectiveactions(unaudited):TheGraduateSchoolandLawSchoolhavebothgainedaccessandwillbegin,effectivewithoursummer2013term,directlyreportinglategraduatestatusupdatestoNSLDS.

SUPPLEMENTARYINFORMATION

LEWIS&CLARKCOLLEGESCHEDULEOFEXPENDITURESOFFEDERALAWARDS

YEARENDEDMAY31,2013

Seeaccompanyingnotestoscheduleofexpendituresoffederalawards. 44

Federal Pass‐ThroughCFDA EntityIdentifying FederalNumber Number Expenditures

DepartmentoftheTreasury/InternalRevenueServiceDirectProgram:LowIncomeTaxpayerClinics 21.008 89,144

NationalEndowmentfortheArtsDirectProgram:PromotionoftheArts–PartnershipAgreements 45.025 3,144

NationalEndowmentfortheHumanitiesDirectProgram:PromotionoftheHumanities–OfficeofDigitalHumanities 45.169 5,529

DepartmentofEducation:DepartmentofEducationDirectPrograms:

StudentFinancialAssistanceCluster:FederalSupplementalEducationalOpportunityGrants 84.007 337,498FederalWorkStudyProgram 84.033 512,925FederalPerkinsLoanProgram 84.038 1,459,408FederalPellGrantProgram 84.063 1,863,370FederalDirectStudentLoans 84.268 49,536,518TeacherEducationAssistanceforCollegeandHigherEducationGrants(TEACHGrants) 84.379 17,000

TotalStudentFinancialAssistanceCluster 53,726,719

GainingEarlyAwarenessandReadinessforUndergraduatePrograms 84.334 11,100

SubtotalDepartmentofEducationDirectPrograms 53,737,819

DepartmentofEducationPass‐ThroughProgramsFrom:TheTeachingResearchInstitute,WesternOregonUniversity

ImprovingTeacherQualityGrants‐SAHEs 84.367B TRSUB13.03 100,906UniversityofCaliforniaatBerkeley/NationalWritingProjectCorp

SupportingEffectiveEducatorDevelopmentGrantProgram 84.367D 92‐OR03‐SEED2012 26,578UniversityofCaliforniaatBerkeley–NationalWritingProjectCorp 84.928A 92‐OR03 10,265

TotalDepartmentofEducation 53,875,568

FederalGrantor/Pass‐ThroughGrantor/ProgramorClusterTitle

LEWIS&CLARKCOLLEGESCHEDULEOFEXPENDITURESOFFEDERALAWARDSYEARENDEDMAY31,2013

45 Seeaccompanyingnotestoscheduleofexpendituresoffederalawards.

Federal Pass‐ThroughCFDA EntityIdentifying FederalNumber Number Expenditures

ResearchandDevelopmentCluster:NationalScienceFoundationDirectPrograms:

Engineeringgrants 47.041 32,706$Mathematicalandphysicalsciences 47.049 69,593Biologicalsciences 47.074 356,655Educationandhumanresources 47.076 242,749

SubtotalNationalScienceFoundationDirectPrograms 701,703

NationalScienceFoundationPass‐ThroughProgramsFrom:NationalScienceFoundation–IntergovernmentalPersonnelAct(IPA)MobilityProgram 27.011 CHE‐1127010 115,283WillametteUniversity

MathematicalandPhysicalSciences 47.049 WU‐NSFREU01‐2011 32,172MuseumofScienceBoston

EducationandHumanResources 47.076 4552‐LCC‐01 18,383

TotalNationalScienceFoundation 867,541

DepartmentofHealthandHumanServices–NationalInstitutesofHealthDirectPrograms:

ExtramuralResearchProgramsintheNeurosciences 93.853 105,848andNeurologicalDisordersBiomedicalResearchandResearchTraining 93.859 221,366

TotalDepartmentofHealthandHumanServices–NationalInstitutesofHealthDirectPrograms 327,214

TotalResearchandDevelopmentCluster 1,194,754

Totalexpendituresoffederalawards 55,168,139$

*Seenotes3and4

FederalGrantor/Pass‐ThroughGrantor/ProgramorClusterTitle

LEWIS&CLARKCOLLEGENOTESTOSCHEDULEOFEXPENDITURESOFFEDERALAWARDS

YEARENDEDMAY31,2013

46

Note1–BasisofPresentationThe accompanying schedule of expenditures of federal awards (the Schedule) includes the federalgrantactivityofLewis&ClarkCollege(theCollege)underprogramsofthefederalgovernmentfortheyear ended May 31, 2013. The information in the Schedule is presented in accordance with therequirementsof theOfficeofManagement andBudget (OMB)CircularA‐133,AuditsofStates,LocalGovernments,andNon‐ProfitOrganizations.BecausetheSchedulepresentsonlyaselectedportionoftheoperationsoftheCollege,itisnotintendedtoanddoesnotpresentthefinancialposition,changesinnetassets,orcashflowsoftheCollege.Note2–SummaryofSignificantAccountingPoliciesExpenditures reported on the Schedule are reported on the accrual basis of accounting. Suchexpenditures are recognized following the cost principles contained in OMB Circular A‐21, CostPrinciples forEducation Institutions,wherein certain types of expenditures are not allowable or arelimited as to reimbursement. Negative amounts shown on the Schedule, if applicable, representadjustmentsorcreditsmadeinthenormalcourseofbusinesstoamountsreportedasexpendituresinprioryears.Pass‐throughentityidentifyingnumbersarepresentedwhereavailable.Note3–Non‐CashFederalFinancialAssistanceNon‐cashfederal financialassistanceprovidedtotheCollegetotaled$49,536,518fortheyearendedMay31,2013.Theamountsshownapproximateloansmadetoeligiblestudentsbythirdpartylenders.TheCollege’sresponsibilityovertheseloansistodetermineeligibilityandactasthedisbursingagentfortheloans.TheamountofloansmadetotheCollege’sstudentsinprioryearsforwhichthefederalgovernmentisstillatriskareheldbyindependentthirdpartylenders.Note4–LoanProgramThefederalstudentloanprogramlistedbelowisadministereddirectlybytheCollegeandbalancesandtransactions relating to this program are included in the College’s basic financial statements. Loansmadeduringtheyearareincludedinthefederalexpenditurespresentedintheschedule.ThebalanceofloansoutstandingatMay31,2013consistsof:

OutstandingCFDA BalanceatNumber May31,2013

U.S.DepartmentofEducationFederalPerkinsLoanProgram 84.038 8,430,019$

Anadministrativecostallowanceof$125,954wasclaimedforthe2012–2013schoolyear.

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