The Howard University 31 2010...The Howard University The accompanying notes are an integral part of these financial statements 2 Statements of Financial Position As of March 31, 2010

The Howard University Financial Statements and Supplementary Information

For Nine Month Period Ended March 31, 2010 and

Fiscal Years Ended June 30, 2009 and 2008

Page(s)

Officer Certification…………………….…………………………………… ……...…………....1

Statements of Financial Position……………………………………………………….……….…2

Statements of Activities……………………………………………………………………….......3

Statements of Cash Flows…………………………………………………………………………4

Notes to the Financial Statements……………………………………………………………..5-47

Supplementary Information…………………………………………………………..………48-51

The Howard University

The accompanying notes are an integral part of these financial statements

2

Statements of Financial Position

As of March 31, 2010 and Fiscal Years Ended, June 30,

2009 and 2008

(in thousands)

March 31, 2010 June 30, 2009

June 30, 2008

Assets:

Cash and cash equivalents $ 34,269 $ 32,865 $ 19,621

Operating investments 59,593 61,797 64,561

Deposits with trustees 44,722 40,205 49,220

Receivables, net 116,040 112,217 109,542

Inventories, prepaids and other assets 17,593 12,860 14,701

Unexpended bond proceeds 42 2,623 19,328

Endowment investments 426,298 364,698 453,994

Securities pledged -- -- 34,562

Investment in property and equipment, net 579,922 595,784 567,633

Overfunded defined benefit pension plan -- -- 55,547

Total Assets $ 1,278,479 $ 1,223,049 $ 1,388,709

Liabilities:

Accounts payable and accrued expenses $ 97,306 $ 141,120 $ 118,081

Accrued post retirement benefits 180,249 165,924 119,527

Underfunded defined benefit pension plan 102,666 73,759 --

Deferred revenue 30,856 9,480 12,439

Deposits held in custody for others 313 1,329 1,624

Reserves for professional liabilities 43,366 36,854 31,470

Other liabilities 60,139 64,530 52,212

Securities obligation -- -- 35,539

Notes payable 46,071 41,555 17,517

Capital lease obligations 11,230 14,219 5,623

Bonds payable 151,966 159,580 166,644

Interest rate swap 3,679 3,961 1,799

Refundable advances under U.S. government loans 7,858 8,153 9,498

Total Liabilities 735,699 720,464 571,973

Net Assets:

Unrestricted 249,105 249,280 521,636

Temporarily restricted 191,785 157,793 197,750

Permanently restricted 101,890 95,512 97,350

Total net assets 542,780 502,585 816,736

Total liabilities and net assets $ 1,278,479 $ 1,223,049 $ 1,388,709



3

Statements of Activities

For Nine Month Period Ended March 31, 2010 and Fiscal Years Ended June 30,

2009 and 2008

(in thousands) March 31, 2010 June 30, 2009 June 30, 2008

Academic services:

Tuition and fees, net $ 102,049 $ 134,188 $ 117,314

Grants and contracts 37,304 60,297 64,434 Auxiliary services 48,818 56,934 62,169

Health services:

Patient service - Hospital 195,526 263,720 235,467 Patient service – Faculty practice 24,984 33,349 36,887

Patient service – Dental Clinic 1,320 1,687 1,342

Public support: Federal appropriation 173,551 231,081 230,801

Contributions and investment return designated for current operations 13,426 14,887 15,044

Other income and net assets released from restrictions 20,977 21,633 29,326

Total unrestricted operating revenue 617,955 817,776 792,784

Total temporarily restricted operating revenue 8,550 4,771 1,641

Total permanently restricted operating revenue 2,768 3,050 3,857

Total operating revenues 629,273 825,597 798,282

Salaries and wages 278,658 374,552 362,766 Employee benefits 78,027 111,724 92,101

Utilities and telecommunications 24,856 30,681 33,168

Medical and office supplies 30,811 43,199 32,611

Repairs and maintenance 10,088 28,137 20,336

Food service costs 10,602 12,556 14,511 Grant subcontracts 13,983 46,528 41,338

Insurance and risk management 20,363 24,596 21,248

Professional and purchased services 49,029 57,557 70,523 Other administrative 33,471 54,709 31,379

Provision for bad debts 22,915 35,931 61,722

Interest expense 6,549 6,965 9,591 Depreciation 37,278 45,737 43,034

Total operating expenses 616,630 872,872 834,328

Operating revenues over (under) operating expenses 12,643 (47,275) (36,046)

Investment income/(loss) in excess of amount designated for current operations 23,123 (53,212) (15,489) Restructuring costs -- (22,649) --

Gain (loss) in interest rate swap, net 282 (2,161) (2,477)

Change in funded status of defined benefit pension plan (24,635) (124,964) (3,202) Change in obligation for post-retirement benefit plan (5,927) (27,388) (19,512)

Other items, net 5,657 13,114 (692)

Total unrestricted non-operating income and expenses (1,500) (217,260) (41,372)

Total temporarily restricted non-opearting income and expenses 25,442 (44,728) (17,483)

Total permanently restricted non-operating income and expenses 3,610 (4,888) (1,921)

Total non-operating income and expenses 27,552 (266,876) (60,776)

Unrestricted (175) (272,356) (82,916)

Temporarily restricted 33,992 (39,957) (15,842)

Permanently restricted 6,378 (1,838) 1,936

Change in net assets $ 40,195 $ (314,151) $ (96,822)



4

Statements of Cash Flows

For the Period Ended March 31, 2010 and Fiscal Years Ended June 30,

2009 and 2008

(in thousands) March 31, 2010 June 30, 2009 June 30, 2008

Cash flows from operating activities

Change in net assets $ 40,195 $ (314,151) $ (96,822)

Adjustment to reconcile change in net assets to net cash and cash equivalent

provided by operating activities:

Depreciation and amortization 37,278 45,737 43,034

Amortization of bond premium (151) (170) (244)

Other noncash items (495) 71 (21)

Loss (gain) on disposal of property and equipment -- (11,147) 131

Loss (gain) on interest rate swap (282) 2,162 2,477

Realized loss (gain) on sale of investments (8,482) 45,713 (24,828)

Unrealized loss (gain) on investments (52,067) 50,090 58,713

Contributions and other income restricted for long term use (2,284) (2,836) (305)

Retirement benefits charged to net assets 49,068 183,740 35,791

Employer contributions paid (5,836) (8,037) (8,412)

Change in receivables (excluding notes) (4,347) (3,263) (5,992)

Change in inventory, prepaid expenses and other assets (4,733) 1,471 2,905

Change in deposits with trustees (4,517) 9,015 (463)

Change in accounts payable and accrued expenses (43,814) 23,037 28,517

Change in deferred revenue 21,376 (2,959) 3,246

Change in deposits in custody of others (1,016) (295) (168)

Change in reserve for professional liabilities 6,512 5,385 4,121

Change in other liabilities (4,391) 12,319 962

Change in refundable advances under U.S. government loans (295) (1,345) (902)

Net cash and cash equivalents provided by operating activities 21,719 34,537 41,740

Cash flows from investing activities

Proceeds from sale of investments 197,192 318,269 463,739

Purchases of investments (195,841) (321,677) (451,493)

Previously unexpended bond proceeds 2,581 16,704 25,245

Purchases of property and equipment (26,227) (50,717) (95,305)

Proceeds from sales of property and equipment 4,830 -- --

Cash received under security lending, net -- 34,562 12,767

Net cash and cash equivalents used in investing activities (17,465) (2,859) (45,047)

Cash flows from financing activities

Investment purchased in cash collateral, net -- (35,539) (12,968)

Proceeds from notes payable 69,497 26,335 --

Payment on notes payable (64,981) (2,296) (2,580)

Payment on bonds payable (7,185) (6,820) (6,490)

Capital lease payments (2,989) (3,501) (2,886)

Student loans issued (487) (1,653) (1,801)

Student loans collected 1,011 2,204 1,658

Proceeds from contributions restricted for endowment 2,284 2,836 305

Net cash and cash equivalents used in financing activities (2,850) (18,434) (24,762)

Net increase (decrease) in cash and cash equivalents 1,404 13,244 (28,069)

Cash and cash equivalents at beginning of year 32,865 19,621 47,690

Cash and cash equivalents at end of period $ 34,269 $ 32,865 $ 19,621

Supplemental cash flow information:

Net cash paid for interest $ 4,908 $ 6,722 $ 7 ,765


Notes to the Financial Statements

For Nine Month Period Ended March 31, 2010 and Fiscal Years Ended June 30, 2009 and 2008

(amounts in thousands)

5

Note 1 Summary of Significant Accounting Policies

(a) General

The Howard University (Howard) is a private, nonprofit institution of higher

education (the University) that also operates a hospital located in Washington,

DC. The University provides academic services in the form of education and

training, primarily for students at the undergraduate, graduate, and postdoctoral

levels and performs research, training and other services under grants, contracts,

and similar agreements with sponsoring organizations, primarily departments and

agencies of the United States government. Howard also provides patient

healthcare services at Howard University Hospital (the Hospital) and by certain

members of the University’s faculty as part of its academic medical center.

Howard is exempt from federal income taxes under Section 501(c)(3) of the

Internal Revenue Code.

(b) Basis of Presentation

The interim financial statements of Howard have been prepared, without audit,

and in accordance with generally accepted accounting principles for interim

financial information in the United States of America. In the opinion of

management, all necessary adjustments (consisting of normal recurring accruals)

have been made for a fair presentation of financial position, results of operations

and cash flows at the date and for the periods presented.

(c) 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. These estimates also affect the disclosures 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 amounts realized or

paid could differ significantly from the amounts reported for these assets and

liabilities. Significant items subject to such estimates and assumptions include

asset retirement obligations, carrying value of property and equipment,

investments in illiquid securities, certain real estate holdings, contingency

reserves, retirement benefits, self-insured health benefits, medical malpractice

claims, self-insured workers' compensation liability, and the realization value of

receivables.





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(d) Net Assets

Net assets are classified based on the existence or absence of donor-imposed

restrictions as follows:

Unrestricted – Net assets that are not subject to donor-imposed

stipulations.

Temporarily Restricted – Net assets subject to donor-imposed

stipulations that either expire by the passage of time or can be fulfilled by

actions of Howard pursuant to those stipulations.

Permanently Restricted – Net assets subject to donor-imposed

stipulations that do not expire with time. Generally, the donors of these

assets permit Howard to use all or part of the income earned on related

investments for general or specific purposes.

Contributions are reported as increases in the appropriate category of net assets,

except contributions with donor-imposed restrictions met in the same fiscal year

are included in unrestricted revenues. Operating expenses are reported as

decreases in unrestricted net assets. Gains and losses on investments are reported

as increases or decreases in unrestricted net assets, unless their use is restricted by

explicit donor stipulations or by law. Expirations of temporary restrictions

recognized on net assets (i.e., the donor-stipulated purpose has been fulfilled

and/or the stipulated time period has elapsed) are reported as releases from

temporarily restricted net assets to unrestricted net assets. Donor restrictions on

gifts to acquire long-lived assets are considered fulfilled in the period in which the

assets are acquired or placed in service.

(e) Receivables and Revenue Recognition

(1) Contributions including unconditional promises to give are recognized as

revenues in the period received as unrestricted support. Conditional

promises to give are not recognized until the conditions on which they

depend are substantially met. Contributions of assets other than cash are

recorded at their estimated fair value at the date of gift. Howard has

elected not to recognize or capitalize contributions of works of art,

historical treasures, and similar assets held as part of collections.

Unconditional promises to give with payments due in future periods are

reported as temporarily or permanently restricted support based on time

restrictions and donor stipulations. Contributions revenue for the periods

reported are shown below:





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2010 2009 2008

Unrestricted $ 5,928 $ 7,784 $ 7,964

Temporarily restricted 2,831 2,406 4,405

Permanently restricted 2,284 2,962 3,720

Total contributions revenue $ 11,043 $ 13,152 $ 16,089

Unconditional promises to give with payments to be received after one

year from the date of the financial statements are discounted. For

promises to give prior to July 1, 2008, the discount rate was the risk-free

rate of return at the date of the gift. For promises to give received on and

after July 1, 2008, the discount rate is a risk-adjusted rate approximating

the market rates for unsecured borrowing in accordance with newly

adopted accounting standards related to fair value. Amortization of the

discount is recorded as additional contribution revenue and is used in

accordance with donor imposed restrictions, if any, on the contributions.

Allowance is made for creditworthiness of the donors, past collection

experience, and other relevant factors.

(2) Tuition and fees from student services are recognized ratably over the

academic time period to which they apply. Howard maintains a policy of

offering qualified applicants admission to the University without regard to

financial circumstance. Student financial aid is generally fulfilled through

a combination of scholarships, fellowships, loans, and employment during

the academic year. Tuition and fees are recorded net of discounts for

scholarships, fellowships and need. Funding for need may come from

donor designated sources and from unrestricted operations and assets.

Scholarship allowance for the nine month period ended March 31, 2010

was $52,403 and for years ended June 30, 2009 and 2008 were $40,334

and $42,450, respectively.

Student receivables represent unpaid tuition and fees assessed in current

and prior periods that are generated when a student registers for classes

through the University’s formal registration process. Tuition and fees

relating to future terms or within a term are deferred and recognized

ratably over the term.

(3) Federal appropriation revenue is recognized ratably over the award

period. Howard receives a Federal appropriation that is to be used for

partial support of the University’s educational and general expenditures

and Hospital operations. Of amounts approved, a portion of the Federal

appropriation shall be held for Howard's term endowment. For the nine

month period ended March 31, 2010 and fiscal years ended June 30, 2009,

and 2008, Howard received 28%, 28% and 29% of its revenue support

from a Federal appropriation, respectively. Receivables as of March 31,

2010 represent the portion to be collected related to the term endowment.





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(4) Net patient service revenue is reported at the estimated net realizable

amounts from patients, third-party payors, and others for services

rendered, including estimated retroactive adjustments under

reimbursement agreements with third-party payors. The Hospital and

University faculty physicians have arrangements with third-party payors

that provide for payments at amounts different from established rates.

Payment arrangements include prospectively determined rates per

discharge, reimbursed costs, discounted charges, and per-diem payments.

Retroactive adjustments are accrued on an estimated basis in the period

the related services are rendered and adjusted in future periods as final

settlements are determined. Patient and third party healthcare payors

receivables are the amount due for patient care services rendered by the

University’s Faculty Practice Plan (FPP) and the Hospital.

(5) Grants and contracts revenue is recognized when reimbursable expenses

are incurred. These revenues include recoveries of eligible direct

expenses and of indirect costs and fringe benefits, which are generally

determined as a negotiated or agreed-upon percentage of direct costs, with

certain exclusions. Research grants and development agreements

receivables represent reimbursable amounts due from federal, state, local,

private grants, contracts and others.

(6) Auxiliary Services include student housing, food service, bookstore, and

radio station, and are generally recognized as revenue when services are

rendered or as appropriate activities have been completed. Auxiliary

receivables at report date are comprised primarily of amounts due from the

advertising revenue of Howard’s commercial radio station WHUR,

bookstore vendor credit memos, and rental property receivables.

(f) Cash and Cash Equivalents

Short-term investments with maturities at dates of purchase of three months or

less are classified as cash equivalents, except that any such investments purchased

with funds on deposit with bond trustees, or with funds held in trusts or by

external endowment investing managers are classified as Deposits with Trustees

or Investments, respectively. Cash equivalents include repurchase agreements,

certificates of deposit, short-term U.S. Treasury securities and other short-term,

highly liquid investments and are carried at fair value. Howard’s practice is to

enter into repurchase agreements only when collateralized by government or other

agency securities held in safekeeping by a bank. These transactions are recorded

on the balance sheet, with any earnings recorded as interest income.





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(g) Investments

Investments are segregated between operating and endowment investments on the

balance sheet, all of which are stated at fair value following the applicable

requirements of U.S. generally accepted accounting principles. These balances

may include some cash and cash equivalents held by endowment investment

managers for a specific purpose. In general, fair values are determined by the

most relevant available and observable valuation inputs. Level 1 inputs utilize

quoted prices (unadjusted) in active markets for identical assets. Fair values

determined by Level 2 inputs utilize data points that are observable, such as

quoted prices for comparable assets, interest rates and yield curves. Fair values

determined by Level 3 inputs are based on unobservable data points consistent

with applicable valuation methodologies for similar assets and could include

situations where there is little, if any, market activity for the asset.

Purchases and sales of securities are reflected on a trade-date basis. Gains and

losses on sales of securities are based upon average historical value (cost of

securities purchased or the fair market value at date of gift, if received by

donation). Dividend and interest income are recorded on an accrual basis.

Accrued but unpaid dividends, interest and proceeds from investment sales at the

report date are recorded as investment receivables.

Realized and unrealized investment gains and losses are allocated in a manner

consistent with interest and dividends, to either unrestricted, temporarily

restricted, or permanently restricted net assets, based on donor intent. Such

amounts may be expended for operations, for specified donor purposes if

temporarily restricted, or held in perpetuity at the donor’s request. Realized and

unrealized investment gains and losses on loan funds are accumulated in

permanently restricted net assets.

Operating investment income includes interest, dividends and, if necessary,

portion of the endowment corpus required to meet Howard’s approved spending

rate. Howard follows the total return concept, which combines interest and

dividends with market appreciation to measure investment return.

(h) Inventories

Inventories consist primarily of bookstore items and medical supplies, and are

recorded at the lower of cost or realizable value on a first-in, first-out basis.

(i) Property and equipment

Property and equipment are stated at cost or at estimated fair value if received by

gift, less accumulated depreciation and amortization. Depreciation is computed

using the straight-line method over the estimated useful lives of the assets. A half





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year of depreciation is recorded in the year of acquisition. The useful lives for

fiscal years reported are as follow:

Land and land improvements 0-25 years

Building and building improvements 5-40 years

Furniture and equipment 3-20 years

Software 3-10 years

Library books 10 years

Property and equipment acquired under capital leases are amortized in a manner

consistent with Howard’s normal depreciation policy for owned assets.

Obligations are amortized using the straight-line method, over the shorter period

of the lease term or the estimated useful life.

Property held for expansion consists of land and buildings acquired for future use

in carrying out educational, research and other activities in line with the overall

mission of Howard. Depreciation commences when property is converted to use.

Title to certain equipment purchased using funds provided by government

granting or contracting agencies is vested with Howard, and therefore is included

in reported property balances. Interest costs eligible for capitalization are the

costs of restricted tax-exempt borrowings, less any interest earned on temporary

investment of the proceeds of those borrowings, from the date of borrowing until

qualifying assets are intended for use.

The recorded values of certain properties include the fair value of any asset

retirement obligation necessary to meet contractual or regulatory requirements for

disposal or remediation of the property. For Howard, this primarily pertains to

the cost of removal and disposal of asbestos.

(j) Refundable advances under U.S. government loan programs

Funds provided by the United States Government under the Federal Student Loan

Programs are loaned to qualified students and may be re-loaned after collections.

These funds are ultimately refundable to the Government and are reported as

liabilities in the Statements of Financial Position and as cash flows from financing

activities in the Statements of Cash Flows.

Notes receivable represent loans the University extended to students from

institutional resources to be paid back primarily in short terms at low interest

rates. The notes have stated interest rates and repayment terms. Loans receivable

are evaluated annually by looking at both unsecured and secured loans.

Management has considered the credit and market risk associated with these

outstanding balances and believes the recorded cost of these loans approximates

fair market value at the report date.





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(k) Functional expenses

Howard allocates its expenses on a functional basis among its various programs

and institutional support. Expenses that can be identified with a specific program

are charged directly. Costs related to the operation and maintenance of physical

plant, including depreciation of fixed assets and interest expense, are allocated

among programs and institutional support based upon square footage.

For the period ended March 31, 2010 and fiscal years ended June 30, 2009 and

2008, expenses were allocated across functions as follows:

2010 2009 2008

Program services:

Instruction $ 161,512 $ 223,662 $ 208,301

Research 21,813 31,641 37,815

Public service 5,934 9,859 11,873

Academic support 15,793 39,117 36,396

Student services 15,324 25,326 27,951

Patient care 223,674 289,578 284,732

Total program services expenses 444,050 619,183 607,068

Supporting services:

Institutional support 122,492 185,224 155,693

Auxiliary Enterprises 50,088 68,465 71,567

Total supporting services 172,580 253,689 227,260

Total program and supporting

services expenses $ 616,630 $ 872,872 $ 834,328

(l) Reserves for Professional Liabilities

The reserve for professional liabilities is comprised primarily of amounts accrued

for alleged malpractice claims and includes estimates of the ultimate cost for both

reported claims and claims incurred but not reported. Medical malpractice claims

are discounted at 6%.

(m) Other Liabilities

Other liabilities are comprised primarily of asset retirement obligations, executive

deferred compensation, workers’ compensation, accrued health insurance

benefits, unclaimed property, student deposits and miscellaneous items.

(n) Pension and Postretirement Benefits

The funded status of Howard’s pension and postretirement benefits is recognized

in the Statements of Financial Position as an asset to reflect the Plan’s overfunded

status, or as a liability to reflect the Plan’s underfunded status. Howard’s pension

plan assets and obligations, used to determine funded status, are measured on a





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quarterly basis with any changes in funded status reported as changes in net

assets.

(o) Measure of Operations

Howard includes in its measure of operations all revenue and expenses that are

integral to its core program services. Howard uses a spending rate methodology

to determine the amount of endowment income and gains (losses) that is included

in operating income. Non-operating income and expenses include investment

return in excess of amounts designated for operations, realized and unrealized

gains (losses) on investments including endowment income in excess of the

spending rate, the accounting effects of derivative financial instruments,

nonrecurring charges and income and changes in the funded status of retirement

programs not reflected as periodic benefit cost.

(p) Reclassification

Certain prior year amounts have been reclassified to conform to the current year’s

presentation.

Note 2 Fundraising Expenses

For the nine month period ended March 31, 2010 and the fiscal years ended June

30, 2009 and 2008, Howard incurred expenses of approximately $4,458, $6,870

and $6,769 respectively, in connection with its fundraising activities. These

amounts are reflected on the accompanying Statements of Activities within each

respective expense category.

Note 3 Charity Care

The Hospital provides services to patients who meet the criteria of its charity care

policy, without charge, or at amounts less than established rates. The criteria for

charity services are comprised of family income, net worth and eligibility at time

of application. The total of charges forgone for services and supplies furnished

under the Hospital’s charity care policy were $31,407, $29,775 and $30,867 for

the nine month period ended March 31, 2010 and the fiscal years ended June 30,

2009 and 2008, respectively, and are excluded from net patient service revenues.

Total uncompensated care under all of Howard’s clinical services which includes

bad debt write offs as well as charity care, for the nine month period ended

March, 31, 2010 and the fiscal years ended June 30, 2009 and 2008 was $52,602,

$60,455 and $77,366, respectively.





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Note 4 Insurance

Howard, along with 15 other institutions of higher education, is a subscriber in

Pinnacle Consortium of Higher Education, a Vermont Reciprocal Risk Retention

Group. Pinnacle provides commercial general liability coverage with a limit of

$2,000, per occurrence (inclusive of $500 per occurrence deductible), subject to

an overall general annual aggregate limit of $5,000 per subscriber. The coverages

for products completed liability, broadcasters, advertiser and publisher’s liability,

employee benefits liability, and professional liability; each contains a separate

$2,000 annual aggregate limit. Pinnacle also provides automobile liability

deductible reimbursement coverage with a limit of $475 per occurrence, (excess

of a $25 per occurrence self-insured retention). Howard’s annual payments to

Pinnacle for insurance coverage are based on actuarial studies and are charged to

expense. Pinnacle cedes 95% of its risk to Genesis, Ltd. (Genesis), an affiliated

reinsurer.

Genesis, a Class 2 reinsurer under the Insurance Act of 1978 of Bermuda, was

jointly formed by Howard and 15 other higher education institutions. Genesis

reinsures general liability and automobile liability risks of its shareholders. At

June 30, 2009, Howard had an approximate 10% ownership of Genesis, which

will be reassessed at June 30, 2010, including the pro-rata share of income

generated. Howard’s interest in Genesis and Pinnacle are accounted for using the

equity method of accounting and is included in investments. Liability insurance

coverage in excess of the primary coverage has been purchased by Howard, with

limits of $125,000 from commercial insurance companies.

Note 5 Restructuring Costs

In fiscal year 2009, Howard executed a Staff Voluntary Separation and Incentive

Retirement Program (VSIRP) as a part of a University-wide cost reduction and

restructuring plan. The program allowed eligible University staff the opportunity

to retire and receive severance pay in addition to regular retirement benefits, or

separate by resigning (with ten of more years of vesting service) and receive

severance pay and limited free basic life insurance coverage with portability.

Neither the University’s faculty nor Hospital’s employees were included in the

VSIRP. The cost incurred for the year ended June 30, 2009 for this program was

$22,649, which included $5,706 for the curtailment of certain post retirement

benefits, and is included as a non-operating expense. During fiscal year 2010,

there have been no additional restructuring costs.





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Note 6 Concentration of Credit Risk

Financial instruments that potentially subject Howard to significant

concentrations of credit risk consist principally of cash and cash equivalents,

accounts receivable and investments. At March 31, 2010, June 30, 2009, and

2008, most of the cash and cash equivalent aggregate balances and investment

aggregate balances were in excess of the related government insurance limits.

Concentrations of credit risk with respect to receivables pertain mainly to patient

care receivables as follows:

Hospital FPP

2010 2009 2008 2010 2009 2008

Medicare 14% 14% 19% 7% 9% 26%

Medicaid 34% 46% 44% 36% 45% 45%

Blue Cross 9% 7% 7% 3% 5% 5%

Other third-

party payors 28% 19% 19% 44% 30% 23%

Patients 15% 14% 11% 10% 11% 1%

100% 100% 100% 100% 100% 100%

Note 7 Receivables

Accounts receivable, prior to adjustment for doubtful collections, is summarized

as follows at March 31, 2010, June 30, 2009 and 2008:

Receivables

2010 2009 2008

Student $ 10,715 $ 7,446 $ 6,751

Notes 11,670 12,193 12,781

Federal Appropriation 7,833 6,065 6,128

Faculty Practice Plan 9,431 16,543 16,348

Patient and third-party payors 69,892 66,532 58,190

Research grants and development agreements 14,588 24,354 39,399

Contributions 8,410 7,825 9,075

Insurance claims 14,269 13,752 9,070

Investment income 257 3,147 652

Auxiliary Services 4,755 3,845 6,686

Other 5,965 1,231 5,050

Totals $ 157,785 $ 162,933 $ 170,130





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Allowance for doubtful receivables is summarized as follows at March 31, 2010,

June 30, 2009 and 2008:

Allowance for Doubtful

Receivables

2010 2009 2008

Student $ 5,066 $ 3,079 $ 3,337

Notes 2,396 2,406 2,427

Federal appropriation -- -- --

Faculty practice plan 4,102 9,342 13,682


Research grants and development agreement 1,877 6,793 15,364

Contributions 3,498 3,399 3,068

Insurance claims 2,059 1,971 753

Investment income -- -- --

Auxiliary services 930 713 276

Other 495 403 731

Totals $ 41,745 $ 50,716 $ 60,588

Provision for bad debt is summarized as follows at March 31, 2010, June 30, 2009

and 2008:

Provision for

Bad Debt

2010 2009 2008

Student $ 1,030 $ 1,388 $ 1,426

Notes (9) (21) 63

Federal appropriation -- -- --

Faculty practice plan 5,180 9,417 22,184


Research grants and development agreements 9 2,457 12,728

Contributions -- -- --

Insurance claims 89 1,218 853

Investment income -- -- --

Auxiliary services 218 437 (97)

Other 398 (228) 250

Totals $ 22,915 $ 35,931 $ 61,722

Contributions receivable at March 31, 2010, June 30, 2009 and 2008 are expected

to be received as follows:





16

Contributions Receivable 2010

2009

2008

Within one year $ 2,824 $ 3,611 $ 3,666

Between one and five years 3,747 2,745 3,449

Thereafter 2,423 2,358 2,738

Contributions receivable gross 8,994 8,714 9,853

Unamortized discount on contributions

receivable (2%-5%) (584) (889) (778)

Contributions receivable, net of discounts 8,410 7,825 9,075

Allowance for uncollectible contributions (3,498) (3,399) (3,068)

Contributions receivable, net of discounts

and allowance $ 4,912

$ 4,426

$ 6,007

Note 8 Accounts Payable and Accrued Expenses

Components of this balance sheet account at March 31, 2010, June 30, 2009 and

2008 are as follows:

Accounts Payable and Accrued

Expenses 2010

2009

2008

Vendor invoices $ 46,355 $ 66,061 $ 66,041

Accrued salaries and wages 21,187 46,588 22,922

Accrued employee benefits 19,708 20,148 20,673

Accrued interest 2,291 1,211 1,123

Accrued professional services 1,452 1,560 814

Other 6,313 5,552 6,508

Total $ 97,306 $ 141,120 $ 118,081

Note 9 Other Liabilities and Deferred Revenue

These balance sheet accounts include the following at March 31, 2010, June 30,

2009 and 2008:

Other liabilities 2010

2009

2008

Asset retirement obligation $ 11,240 $ 10,929 $ 7,775

Environmental remediation 3,000 3,000 --

Deferred compensation -- -- 1,785

Unclaimed property 3,222 2,638 1,896

Student deposits and refunds 1,590 1,891 2,640

Workers’ compensation 31,281 32,623 25,818

Health insurance 7,756 7,361 4,614

Other 2,050 6,088 7,684

Total $ 60,139 $ 64,530 $ 52,212





17

Deferred revenue 2010

2009

2008

Deferred tuition and student fees $ 22,564 $ 1,971 $ 1,961

Deferred grant revenue 8,292 7,509 10,478

Total $ 30,856 $ 9,480 $ 12,439

Note 10 Valuation of Investments and Other Fair Value Instruments

Effective July 1, 2008, the University adopted the applicable accounting standard

that establishes a framework for measuring fair value, establishes a fair value

hierarchy based on available data used to measure fair value and expands

disclosures about such fair value measurements. Fair value is defined as the price

that would be received to sell an asset or paid to transfer a liability (an exit price)

in an orderly transaction between market participants at the measurement date.

The adoption of this standard did not have a material impact on Howard’s

financial statements.

SFAS 157 establishes three broad levels of fair value hierarchy for fair value

measurements based upon the transparency of inputs used to value an asset or

liability as of the measurement date. The three-tier hierarchy prioritizes the inputs

used in measuring fair value as follows:

Level 1 – quoted market prices for identical assets or liabilities in active

markets.

Level 2 – quoted market prices for similar assets or liabilities in an active

market, or other than quoted prices in an active market that are observable

either directly or indirectly.

Level 3 – assets or liabilities for which there is no active market requiring

one or more inputs subject to significant management judgment or

estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the financial instruments carried at fair value as of

March 31, 2010 and June 30, 2009:

2010

2009

Endowment investments reported at fair value $426,298

$364,698

Operating investments reported at fair value 57,505 59,703

Operating investments not subject to fair value reporting 2,088 2,094

Total operating investments 59,593 61,797

Total operating and endowment investments $485,891 $426,495





18

Items not subject to fair value reporting include two limited partnership

investments where the University’s interest exceeds 20% and is accounted for

under the equity method of accounting. Financial instruments reported at fair

value as of March 31, 2010 are summarized under the following fair value

hierarchy as outlined above:

As of March 31, 2010

Level 1

Level 2

Level 3

Total

Assets:

Cash and cash equivalent $ 34,269 $ -- $ -- $ 34,269

Unexpended bonds -- 42 -- 42

Deposits with trustees 13,746 30,976 -- 44,722

Total Asset (non investment) $ 48,015 $ 31,018 $ -- $ 79,033

Operating investments

Money Market Instrument (1) $ 370 -- -- $ 370

Equity-Domestic Common Stock (3) 29,255 -- -- 29,255

Equity-Global Common Stock (3) 660 -- -- 660

Fixed Income-Government Bonds (2) 1,822 -- -- 1,822

Fixed Income-US Treasury Bills (1) 25,148 -- -- 25,148

Real Estate (4) -- -- 250 250

Total operating investments 57,255 -- 250 57,505

Endowment Investments

Money Market Instrument (1) 580 9,361 -- 9,941


Equity-Global Common Stock (3) 32,592 -- -- 32,592

Equity-Private and Venture Capital (4) -- -- 61,760 61,760


Fixed Income – Corporate Bonds (2) -- 7,941 -- 7,941

Fixed Income-Asset backed securities (2) -- 3,106 1,199 4,305

Mutual Funds Investment

Global Securities (2) (3) -- 87,971 -- 87,971

Domestic Equity Securities (3) 16,539 -- -- 16,539

Domestic Fixed Income (2) 39,379 -- -- 39,379

Hedge Fund (4)

Equity – Long/short -- -- 39,287 39,287

Equity – Absolute return -- -- 41,739 41,739

Real Estate (4) -- -- 7,538 7,538

Total endowment investments $ 166,396 $ 108,379 $ 151,523 $ 426,298

Liabilities:

Interest rate swap (5) $ -- $ 3,679 $ -- $ 3,679

Total liabilities $ -- $ 3,679 $ -- $ 3,679

Total assets and liabilities measured

at fair value

$ 271,666

$ 143,076

$ 151,773

$ 566,515





19

Financial instruments reported at fair value as of June 30, 2009 are summarized

under the following fair value hierarchy as outlined above:

As of June 30, 2009

Level 1

Level 2

Level 3

Total

Assets:

Cash and Cash equivalent $ 32,865 $ -- $ -- $ 32,865

Unexpended Bonds -- 2,623 -- 2,623

Deposits with trustees 8,956 31,249 -- 40,205

Total Asset (non investment) $ 41,821 $ 33,872 $ -- $ 75,693

Operating investments

Money Market Instrument (1) $ 386 -- -- $ 386




Total operating investments 59,703 -- -- 59,703

Endowment Investments

Money Market Instrument (1) $ 915 $ 13,580 $ -- $ 14,495



Equity-Private and Venture Capital (4) -- -- 52,622 52,622


Fixed Income – Corporate Bonds (2) -- 13,521 1,478 14,999

Fixed Income-Asset backed securities (2) -- 6,987 556 7,543

Mutual Funds Investment -- -- -- --

Global Securities (2) (3) -- 74,465 -- 74,465

Domestic Equity Securities (3) 8,664 -- -- 8,664

Domestic Fixed Income (2) 35,769 -- -- 35,769

Hedge Fund (4) -- -- -- --

Equity – Long/short -- -- 29,842 29,842

Equity – Absolute return -- -- 35,011 35,011

Real Estate (4) -- -- 9,365 9,365

Total endowment investments $ 127,271 $ 108,553 $ 128,874 $ 364,698

Liabilities:

Interest rate swap (5) $ -- $ 3,961 $ -- $ 3,961

Total liabilities $ -- $ 3,961 $ -- $ 3,961

Total assets and liabilities measured

at fair value

$ 228,795

$ 146,386

$ 128,874

$ 504,055

The following assumptions and estimates were used to determine fair value of

each class of financial instruments listed above:

(1) Cash equivalents include money market accounts, U.S. treasury securities

and certificates of deposit with original maturities of three months or less

are quoted daily in active markets. These investments are classified as

Level 1. Unexpended bond proceeds and deposits held with trustees,

including workers’ compensation, professional and general liability,

health insurance, deferred compensation and bond debt service deposits,

are represented primarily in these financial instruments.

(2) For investments in government securities and corporate bonds, fair value

is based first upon quoted market prices for those securities that can be

classified as Level 1. For securities where an active market is not





20

available, fair value is determined with reference to similar securities

using market prices and broker quotes for similar instruments and are

classified as Level 2.

(3) Common stocks are largely valued based on the last sales price for

identical securities traded on a primary exchange. These investments are

classified as Level 1. Securities that trade inactively, or that have

comparable traded assets – that trade in either active or inactive markets –

are priced using available quotes and other market data that are

observable as of the reporting date, and are classified as Level 2.

(4) Alternative investments include Howard’s limited partnership interests,

hedge, private equity and real estate funds. Trading in this class of funds

is infrequent and, as a result, market values are not readily determinable.

Market value reported at year end is based on Net Asset Value (NAV)

obtained from fund managers. The NAV of securities held by limited

partnerships is determined by the general partner, based on appraisals, or

other estimates that require varying degrees of judgment. Due diligence

procedures performed by management indicate that the values reported

are reasonable. These investments are classified as Level 3.

(5) Interest rate swaps are valued using observable and inputs, such as

quotations received from counterparty dealers or brokers, whenever

available and considered reliable. In instances where models are used, the

value of the interest rate swap depends upon the contractual terms of, and

specific risks inherent in, the instrument as well as the availability and

reliability of the observed inputs. Such inputs include market prices for

reference securities, yield curves, credit curves, measures of volatility,

pre-payment rates, assumptions for non-performance risk, and correlations

of such inputs. Certain parts of the interest rate swap arrangements have

inputs which can generally be corroborated by market data and are

therefore, classified as Level 2 within the fair value hierarchy.

The methods described above may produce a fair value calculation that may not

be indicative of net realizable value or reflective of future fair value.

Furthermore, while Howard believes its valuation methods are appropriate and

consistent with other market participants, the use of different methodologies or

assumptions to determine the fair value of certain financial instruments could

result in a different estimate of fair value as of the reporting date.

The following table presents the changes in amounts included in the Statements of

Financial Position for financial instruments classified within Level 3 of the

valuation hierarchy defined above at March 31, 2010:





21


Equity –

Private

and

Venture

Capital

Fixed

Income

Hedge

Funds

Real

Estate

Total

Beginning balance July 1, 2009 $ 52,622 $ 2,034 $ 64,853 $ 9,365 $ 128,874

Gain and Loss (Realized and

Unrealized)

6,365

131

14,775

(1,841)

19,430

Purchases 11,062 -- 20,000 264 31,326

Transfer out and Sales (8,289) (966) (18,602) -- (27,857)

Ending balance March 31, 2010 $ 61,760 $ 1,199 $ 81,026 $ 7,788 $ 151,773

There were $9,000 in transfers out of Level 3 during the period ended March 31,

2010. All net realized and unrealized gains/(losses) in the table above are

reflected in the accompanying Statements of Activities.

The following table presents the changes in amounts included in the Statements of

Financial Position for financial instruments classified within Level 3 of the

valuation hierarchy defined above at June 30, 2009:

As of June 30, 2009

Equity –

Private and

Venture

Capital

Fixed

Income

Hedge

Funds

Real

Estate

Total

Beginning balance July 1, 2008 $ 54,980 $ 2,291 $ 66,655 $ 11,687 $ 135,613

Gain and Loss (Realized and

Unrealized)

(12,569)

(257)

(14,048)

(4,435)

(31,309)

Purchases 13,744 -- 16,704 2,213 32,661

Transfer out and Sales (3,533) -- (4,458) (100) (8,091)

Ending balance June 30, 2009 $ 52,622 $ 2,034 $ 64,853 $ 9,365 $ 128,874

There were no transfers into or out of Level 3 during the year ended June 30,

2009. All net realized and unrealized gains/(losses) in the table above are

reflected in the accompanying Statements of Activities.

Financial instruments reported at fair value as of June 30, 2008 prior to the

adoption of accounting guidance related to fair value measurements are

summarized as follows:





22

2008

Certificates of deposit $ 2,500

Money market instruments 11,784

Bonds 110,916

U.S. Treasury and government agency securities 20,055

Common stocks 237,237

Real estate and other partnerships 66,992

Hedge funds 64,865

Other investments 4,206

Total operating and endowment investments $ 518,555

Unexpended bond proceeds $ 19,328

Net investment income (loss) is summarized as follows for the period ended

March 31, 2010 and years ended June 30, 2009 and 2008:

2010

2009

2008

Interest and dividends $ 8,578 $ 13,630 $ 14,421

Net realized gains (loss) 8,482 (45,713) 24,828

Net unrealized gains (loss) 52,067 (50,090) (58,713)

Other investment income (expenses) (640) (1,603) 446

Investment expenses (1,659) (2,768) (2,256)

Net investment income (loss) $ 66,828 $ (86,544) $ (21,274)

Unrestricted operating investment income $ 7,498 $ 7,103 $ 7,080

Unrestricted non-operating investment

income (loss) 23,123 (53,212) (15,489)

Temporarily restricted investment income

(loss) 32,393 (36,310) (10,193)

Permanently restricted investment income

(loss) 3,814 (4,125) (2,672)

Net investment income (loss) $ 66,828 $ (86,544) $ (21,274)

Investment Commitments – For the period ended March 31, 2010 and years

ended June 30, 2009 and 2008, Howard’s investment commitments are

summarized below. Additionally, some of these investments do not have readily

ascertainable market values and may be subject to withdrawal restrictions and are

less liquid than Howard’s other investments.





23

2010

2009

2008

Private Equity Funds $ 137,703 $ 136,920 $ 97,701

Real Estate Funds 20,000 15,000 12,500

Total financial commitment 157,703 151,920 110,201

Paid in capital 98,066 85,448 61,732

Unfunded commitment $ 59,637 $ 66,472 $ 48,469

Securities Lending – Howard engaged in a securities lending program whereby

certain securities were lent to approved brokers to earn additional income. Cash

and U.S. agency government securities valued at no less than 102% of the value

of the securities on loan were retained as collateral. The collateral was invested

by the lending agent in accordance with investment guidelines approved by

Howard. The securities lending agreement was suspended in September 2008

and not reinstituted. As of June 30, 2008, the value of loaned securities was

$34,562 with associated collateral of $35,539.

Note 11 Endowment Fund

Howard’s endowment includes approximately 810 individual accounts established

to fund scholarships, professorships, student loans, general operations and other

purposes. Effective July 1, 2008, Howard adopted Financial Accounting

Standards Board Staff Position – Endowments of Not-for-profit Organizations:

Net Asset Classifications of Funds Subject to the District of Columbia Uniform

Prudent Management of Institutional Funds Act of 2008 (DC UPMIFA).

Interpretation of Relevant Law

Net Asset Classification - The Board of Trustees of Howard has interpreted the

DC UPMIFA as requiring the preservation of the fair value of the original gift, as

of the gift dates of the donor-restricted endowment funds, absent explicit donor

stipulations to the contrary. As a result of this interpretation, Howard classifies as

permanently restricted net assets:

1. The original value of gifts with permanent donor-directed use

restrictions.

2. The original value of subsequent gifts with permanent donor-directed

use restrictions.

3. The value of accumulations in accordance with the applicable donor

gift instrument at the time the accumulation occurs.

Any portion of the donor-restricted gift that is not classified as permanently

restricted is classified as temporarily restricted until those amounts are

appropriated for expenditure in a manner consistent with the standard of prudence

prescribed by DC UPMIFA.





24

Spending - In accordance with DC UPMIFA, Howard considers the following

factors in making a determination to spend or accumulate donor-restricted

endowment funds:

1. The duration and preservation of the fund

2. The purposes of Howard and the donor-restricted endowment fund

3. General economic conditions

4. The possible effect of inflation and deflation

5. The expected total return from income and appreciation of investments

6. Other resources of Howard

7. The investment policies of Howard

Management and Investment - In accordance with DC UPMIFA, Howard

considers the following factors in making investment, as well as other

management decisions regarding donor-restricted endowment funds:

1. General economic conditions

2. The possible effect of inflation and deflation

3. The expected tax consequences, if any

4. The role of an investment/action in context of the entire portfolio

5. The expected total income and appreciation

6. Other University resources

7. The needs to preserve capital and make distributions

8. An asset’s special relationship or value to the University’s charitable

purpose.

For the period nine month period ended March 31, 2010 and fiscal years ended

June 30, 2009 and 2008, total endowment funds classified as permanently

restricted and temporarily restricted net assets were:

2010

2009

2008

Permanently Restricted Net Assets

The portion of perpetual endowment funds

that is required to be retained

permanently either by explicit donor

stipulation for by UPMIFA $ 69,202 $ 66,478 $ 64,290

Temporarily Restricted Net Assets

Term endowment funds $ 110,020 $ 94,049 $ 100,421

The portion of perpetual endowment funds

subject to a time restriction under UPMIFA:

Without purpose restrictions 3,969 3,109 5,962

With purpose restrictions 55,001 43,082 78,902

Total endowment funds classified as

temporarily restricted net assets $ 168,990 $ 140,240 $ 185,285





25

The change in value and the composition of amounts classified as endowment as

of March 31, 2010 is as follows:


Unrestricted

Temporarily

Restricted

Permanently

Restricted

Total

Endowment net assets, beginning of year $ 164,045 $ 140,240 $ 66,478 $ 370,763

Investment return:

Investment income 4,480 1,640 110 6,230

Net appreciation (realized and unrealized) 32,553 33,124 90 65,767

Total investment return 37,033 34,764 200 71,997

Contributions 336 3,566 2,626 6,528

Appropriation of endowment assets

for expenditure

(5,511)

(9,468)

(123)

(15,102)

Other changes:

Match release -- -- -- --

Transfer and other changes Transfer and other changes) 36 (112) 21 (55)

Endowment net assets, end of year $ 195,939 $ 168,990 $ 69,202 $ 434,131

Donor-restricted endowment funds $ (3,319) $ 168,990 $ 69,202 $ 234,873

Board-designated endowment funds 199,258 -- -- 199,258


The match release will occur and be reported on at fiscal year end.


of June 30, 2009 is as follows:

As of June 30, 2009

Unrestricted

Temporarily

Restricted

Permanently

Restricted

Total


Investment return:


Net depreciation (realized and unrealized) (44,074) (45,700) (653) (90,427)

Total investment return (39,197) (41,142) (484) (80,823)

Contributions -- 3,484 2,776 6,260


for expenditure

(9,323)

(4,892)

--

(14,215)

Other changes:

Match release 2,495 (2,495) -- --

Transfer and other changes Transfer and other changes) (477) -- (104) (581)


Donor-restricted endowment funds $ (10,167) $ 140,240 $ 66,478 $ 196,551







26


of June 30, 2008 is as follows:

As of June 30, 2008

Unrestricted

Temporarily

Restricted

Permanently

Restricted

Total


Net asset reclassification based on

change in law

(7,242)

7,242

--

--

Endowment net assets after reclassification 227,038 204,203 61,441 492,682

Investment return:


Net depreciation (realized and unrealized) (14,858) (17,946) (389) (33,193)

Total investment return (9,106) (10,430) (124) (19,660)

Contributions -- 4,113 2,880 6,993


for expenditure

(4,837)

(7,652)

--

(12,489)

Other changes:

Match release 5,928 (5,928) -- --

Transfer and other changes Transfer and other changes) (8,476) 979 93 (7,404)


Donor-restricted endowment funds $ (266) $ 185,285 $ 64,290 $ 249,309



Howard’s endowment net assets include receivables related to the federal term

endowment, which have not been received and therefore not included as part of

endowment investments. For the period ended March 31, 2010 and fiscal years

ended June 30, 2009 and 2008, receivables of $7,833, $6,065 and $6,128,

respectively were recorded, and represent the difference between endowment

investments reflected on the Statements of Financial Position and endowment net

assets reported above.

Funds with Deficiencies - From time to time, the fair value of assets associated

with individual donor-restricted endowment funds may fall below the level the

donor or DC UPMIFA requires Howard to retain as a fund of perpetual duration.

Deficiencies of this nature, so called “underwater accounts”, are reported in

unrestricted net assets and totaled $10,167 and $266 as of June 30, 2009 and

2008, respectively. As of March 31, 2010, Howard has an underwater account

balance of $3,319 indicating a recovery of $6,847 of the underwater account

balance as of June 30, 2009. No new accounts have gone underwater in 2010.

Howard has adopted a policy allowing spending in certain situations from

underwater, donor-restricted endowment funds, absent overriding provisions in

donor agreements. Howard’s investment and spending policy is intended to

comport with the DC UPMIFA which allows spending in underwater

endowments, in support of an endowment’s purpose.





27

Return Objectives and Risk Parameters - Howard has adopted investment and

spending policies for endowment assets that attempts to provide a predictable

stream of funding to programs supported by its endowment while seeking to

minimize the risk associated with obtaining such income streams. Endowment

assets include those that the organization must hold in perpetuity or for a donor-

specified period(s), as well as board-designated endowment funds. Under these

policies the endowment assets are invested through a well-diversified investment

program designed to exceed the risk-adjusted performance of the market

benchmark representative of each asset class over rolling five to seven year

periods. Howard’s objective, over time, is to obtain an average total real rate of

return (inflation adjusted) that exceed its targeted distribution amount over rolling

five to seven year periods. The University’s investment strategy aims for a low to

moderate level of investment risk. Actual returns in any given year may

significantly vary from this objective.

Strategies Employed for Achieving Objectives - To satisfy its long-term rate-of-

return objectives, Howard relies on a total return strategy in which investment

returns are achieved through both capital appreciation (realized and unrealized)

and yield (interest and dividends). Howard targets a diversified asset allocation

which places greater emphasis on domestic equity-based investments

complimented by global equities, private markets, real estate and fixed income

strategies to achieve its long-term return objectives within prudent risk

constraints. The endowment’s long-term target asset allocation is approved by the

Investment Committee of the Board of Trustees.

Spending Policy and How the Investment Objectives Relate to Spending Policy - Howard’s spending policy allows for distribution each year of up to 5 percent of

its endowment fund's market value, excluding Federal term and Islamic Funds,

based upon a three-year moving average with the most recent year removed. In

establishing this policy, Howard considered the long-term expected return on its

endowment consistent with its general goal of facilitating the ability of

endowments (specifically permanent and time specific endowments) to best fulfill

the purposes for which they were designed.





28

Note 12 Net Assets

Temporarily restricted net assets consist of the following at the report date:

2010

2009 2008

Scholarships $ 49,975 $ 35,574 $ 53,813

Professorships 28,941 20,360 30,152

Student loans 310 124 134

Federal term 104,290 87,568 90,745

General operations and other 8,269 14,167 22,906

Total temporarily restricted net

assets $ 191,785 $ 157,793 $ 197,750

Permanently restricted net assets are held in perpetuity and the income therefrom

is only expendable for the noted purposes at the following report dates,

2010

2009 2008

Scholarships $ 48,236 $ 47,860 $ 47,749

Professorships 14,224 13,210 10,157

Student loans 34,471 31,216 34,289


Total permanently restricted net

assets $ 101,890 $ 95,512 $ 97,350

Net assets were released from donor restrictions due to the passage of time or by

incurring expenses satisfying the restricted purpose specified by the donors as

noted for the following periods ended March 31, 2010, and June 30, 2009 and

2008. The legal conditions governing the federal term component for 2010 will

be satisfied and reported on at June 30, 2010.

2010

2009

2008

Federal term $ -- $ 2,495 $ 5,822

Restrictions released based on time -- 788 107

Restrictions released based on

purpose:

Scholarships and fellowships 2,388 2,252 3,918

Professorships 902 932 1,040

Student loans -- 348 205


Total net assets released from

restrictions $ 5,003 $ 8,946 $ 13,106





29

Note 13 Net Patient Service Revenue

The Hospital and University’s Faculty Practice Plan have arrangements with

third-party payors that provide for payments at amounts different from the

established rates. A summary of the payment arrangements with major third-

party payors is as follows:

(a) Medicare

Payments from Medicare for inpatient acute services are made on a prospective

basis. Under this program, payments are made at a predetermined specified rate

for each discharge, based on a patient’s diagnosis weighted by an acuity factor.

Costs related to medical education are reimbursed on a per-resident rate basis,

using 1985 as a base year. The Hospital is paid a disproportionate share

adjustment for servicing certain low income patients. Outpatient services are paid

at prospectively determined rates per procedure under a methodology which

utilizes ambulatory payment classifications. Similar to the inpatient rates,

outpatient rates vary according to the procedures performed. Other outpatient

services are based on fee schedules. Sub-acute services are reimbursed on a

prospective rate per diem based on a patient’s level of acuity. Additional

payments are made to the Hospital for the cost of cases that have an unusually

high cost in comparison to national averages. The Hospital is reimbursed for cost

reimbursable items, at a tentative rate, with final settlement determined after

submission of annual cost reports by the Hospital and audits thereof by the

Medicare fiscal intermediary.

(b) Medicaid

Medicaid payments are based on diagnosis related groupings at a predetermined

specified rate for each discharge, subject to a weight or acuity factor based on a

patient’s diagnosis. The Medicaid inpatient payment also includes payments for

medical education and capital on a per discharge basis. Outpatient services are

reimbursed based on a fixed rate per visit basis determined by Medicaid. The

Hospital and FPP are paid a disproportionate share adjustment for servicing

certain low income patients.

(c) Blue Cross and Other

The Hospital and FPP have also entered into payment agreements with certain

commercial insurance carriers such as Blue Cross, health maintenance

organizations, and preferred provider organizations. The basis for payment under

these agreements includes prospectively determined rates per discharge, discounts

from established charges, and prospectively determined daily or procedure rates.





30

Gross revenues (before contractual discounts) from each major third-party payor

for the nine month period ended March 31, 2010 and years ended June 30, 2009

and 2008 were as follows:

Hospital FPP

2010 2009 2008 2010 2009 2008

Medicare $ 96,287 $ 128,321 $ 131,562 $ 12,169 $ 14,862 $ 12,714

Medicaid 159,629 259,904 238,048 29,956 32,442 17,236

Blue Cross and others 161,321 129,470 122,809 21,798 26,770 30,792

Total $ 417,237 $ 517,695 $ 492,419 $ 63,923 $ 74,074 $ 60,742

Note 14 Estimated Third-Party Settlements

Certain services rendered by the Hospital and FPP are reimbursed by several

third-party payors at cost, based upon cost reports filed after year-end.

Contractual allowances are recorded based upon preliminary estimates of

reimbursable costs. Net patient revenue recorded under cost reimbursement

agreements for the current and prior years is subject to audit and retroactive

adjustments by significant third-party payors for the following years:

Medicare 2000-2009

Medicaid 2006-2009

Final settlements and changes in estimates related to Medicare and Medicaid

third-party cost reports for prior years resulted in an increase to net patient service

revenues of approximately, $2,565 and $652 for the years ended June 30, 2009

and 2008, respectively. For the period ended March 31, 2010, there were no final

settlements.

Note 15 Deposits with Trustees

Dedicated Assets Estimated Liability

2010 2009 2008 2010 2009 2008

Debt service reserve fund $ 10,172 $ 10,171 $ 9,954 NA NA NA

Professional liability 30,563 25,739 24,353 $ 43,366 $ 36,854 $ 31,470

Workers’ compensation

trust funds 3,626 3,622 3,517 31,281 32,623 25,818

Health insurance trust

fund and other 361 673 11,396 7,756 7,361 4,614

Total $ 44,722 $ 40,205 $ 49,220 $ 82,403 $ 76,838 $ 61,902

NA = Not applicable





31

(a) Debt Service Reserve Fund

As required by the 1998 Revenue Refunding Bonds, Howard maintains a debt

service reserve fund in an amount equal to the lesser of (1) the maximum annual

debt service requirement on the bonds, (2) 10% of the principal amount of the

bonds, or (3) 125% of the average annual debt service on the bonds. The assets in

the debt service reserve fund consist primarily of cash, money market funds and

treasury bills.

(b) Professional Liability

The Hospital and FPP are self-insured through a revocable trust for the purpose of

providing medical malpractice and comprehensive general liability. The assets in

the self-insurance trust fund consists primarily of cash equivalents, U.S. corporate

and government bonds and equity securities.

The self-insurance program pays for primary professional liability costs up to

$5,000 per occurrence. In addition, the Hospital has two additional layers of

excess insurance coverage. The first layer of the excess insurance coverage is up

to $35,000 on a claims-made basis. For the first layer, the Hospital has invested

in a captive insurance company, Howard University Capitol Insurance Company

Ltd. (HUCIC). Organized under the laws of the Cayman Islands, HUCIC is

completely reinsured for the $35,000. The Hospital’s second layer of excess

liability insurance which also covers comprehensive general liability, managed-

care liability, and professional liability is up to $50,000 on a claims-made basis.

The second layer of excess coverage is provided by an independent excess

insurance company. HUCIC coverage is for professional liabilities, and covers

prior acts retroactive to two separate policy periods dating July 1, 1996 and

January 1, 1986 to a maximum liability amount of $35,000.

The Hospital is involved in litigation arising in the ordinary course of business.

Claims alleging malpractice have been asserted against the Hospital and certain

faculty physicians and are currently in various stages of litigation. Additional

claims may be asserted arising from services provided to patients through March

31, 2010. It is the opinion of management based on the advice of actuaries and

legal counsel that estimated gross malpractice costs accrued at March 31, 2010,

June 30, 2009 and 2008 of approximately $53,090, $43,594 and $37,053,

respectively, is adequate to provide for losses resulting from probable unasserted

claims and pending or threatened litigation, and is recorded on the accompanying

Statements of Financial Position in reserves for professional liabilities. Accrued

malpractice losses for the periods ended March 31, 2010, June 30, 2009 and 2008

have been discounted at 6%.





32

(c) Workers’ Compensation Trust Fund

Howard established a revocable trust fund to provide for the satisfaction of its

liability under applicable workers’ compensation laws and for the care and

security of its employees. Howard pays claims up to the amount of the insurance

deductible, as well as excess claims over the insured limits. The assets in the

workers’ compensation trust fund consists of U.S. Treasury Bills and obligations,

as well as domestic and foreign corporate bonds. As required, Howard also

maintains $10,715 in letters of credit, which serve as collateral for specific

insurance carriers. These letters of credit are secured by Howard’s revolving line

of credit. Howard has provided for workers’ compensation benefits primarily

through self insurance, with excess commercial insurance subject to an annual per

occurrence retention of $500. For the period ended March 31, 2010 and years

ended June 30, 2009 and 2008, expenses related to workers’ compensation were

$5,046, $5,353 and $5,632, respectively and are reflected in employee benefits.

Estimated claims for which payments will be covered under existing insurance

policies were $12,209, $11,781 and $8,317 at March 31, 2010, June 30, 2009 and

2008, respectively, net of allowances for uncollectible amounts and are reflected

in other receivables.

The total liability for future workers’ compensation liability claims was

approximately $31,281, $32,623 and $25,818 at March 31, 2010, June 30, 2009

and 2008, respectively, and includes liabilities for claims covered under existing

insurance policies. Reserves reflect estimates for losses on asserted claims, as

well as unasserted claims arising from reported and unreported incidents.

(d) Health Insurance Trust Fund Howard established a self-insured trust fund for the purpose of funding group

health benefits for its employees. The assets consist primarily of investments in

money market funds. Deposits to the fund are amounts withheld from employees’

salaries and wages and Howard’s contributions based on estimates established by

the claims administrator. Disbursements from the fund are made in accordance

with the payment plan established with the claims administrator. The total

estimated liability included in other liabilities in the accompanying Statements of

Financial Position at March 31, 2010, June 30, 2009 and 2008, is approximately

$7,756, $7,361 and $4,614, respectively.





33

Note 16 Property and Equipment

2010

2009

2008

Land and land improvements $ 27,735 $ 27,772 $ 22,797

Buildings and building

improvements 757,500

752,724

694,133

Property held for expansion 58,214 58,799 45,850

Furniture and equipment 255,386 253,502 270,869

Library books 89,172 88,614 85,332

Equipment under capital leases 29,817 29,817 18,844

Software 88,321 87,563 66,466

Software in progress 2,849 2,092 24,367

Construction in progress 16,088 3,718 26,024

Property and equipment, gross 1,325,082 1,304,601 1,254,682

Accumulated depreciation and

amortization (745,160)

(708,817)

(687,049)

Property and equipment, net $ 579,922 $ 595,784 $ 567,633

Depreciation and amortization expenses for the period ended March 31, 2010 and

years ended June 30, 2009 and 2008 were $37,278, $45,737 and $43,034,

respectively. For the years ended June 30, 2009 and 2008 respectively, the net

interest costs of $2,016 and $722 were incurred during construction and were

capitalized as part of the cost of capital projects. For period ended March 31,

2010, Howard did not incur any capitalizable interest costs.

Howard’s asset retirement costs and obligations are reported in investment in

property and equipment and other liabilities in the Statements of Financial

Position, respectively. These costs for the reporting periods ended were as follow

below:

2010 2009 2008

Asset retirement costs $ 4,565 $ 4,565 $ 1,786

Accumulated depreciation 1,952 1,905 1,385

Asset retirement obligation 11,240 10,929 7,775

Howard incurred costs related to asbestos abatement during the period ended

March 31, 2010 and fiscal years 2009 and 2008 of $128, $1,106 and $865,

respectively.

During the year ended June 30, 2009, Howard completed a land swap with the

District of Columbia to control a more contiguous series of parcels. The

transaction was accounted for at fair value and reported as a $13,710 non-

operating gain, net of costs and $3,000 environmental remediation.





34

Note 17 Leases

Lease Payments

Howard is obligated under capital leases for office and medical equipment that

extend through 2014. The assets are amortized over their estimated useful lives.

Accumulated amortization related to the leased assets is $18,987, $15,722 and

$13,380 at March 31, 2010, June 30, 2009 and 2008, respectively.

Howard also has several non-cancelable operating leases for office space and

equipment that expire by 2019. Rental payments are recognized on a straight-

line basis and reflected in the Statements of Activities within other administrative

expenses. Rent expense related to buildings and equipment for the nine month

period ended March 31, 2010 and for fiscal years ended June 30, 2009 and 2008

was approximately $6,663, $8,758 and $6,204, respectively.

The minimum lease payments under capital leases and non-cancelable operating

leases (with initial or remaining lease terms in excess of one year) for remaining

period in 2010 and future years ending June 30, are as follow:

Capital

Leases

Operating

Leases

April 1 through June 30, 2010 $ 1,168 $ 91

2011 3,991 3,074

2012 3,272 2,451

2013 2,663 2,405

2014 1,157 636

2015 and thereafter 75 2,487

Obligation, gross 12,326 11,944

Amounts representing interest rates from 4% to 8% (1,096) --

Total Lease Obligations, net $ 11,230 $ 11,944

Lease Income

Howard leases property to several area businesses, non-profit organizations and

individuals under non-cancelable operating leases. Howard receives monthly

income under these lease agreements, which have termination dates through 2016.





35

The future minimum lease income for the remaining period in 2010 and years

ending at June 30 is as follow:

April 1 through June 30, 2010 $ 129

2011 523

2012 452

2013 258

2014 155

2015 and thereafter 762

Total minimum lease income receipts $ 2,279

Note 18 Bonds and Notes Payable

(a) Bonds Payable

Howard is obligated with respect to the following bond issues at the report date:

2010

2009

2008

District of Columbia issues:

2006A Revenue Refunding bonds,

5.00% Serial due 2021 through 2031 $ 54,646 $ 54,674 $ 54,727

2006B Revenue Refunding Bonds,

weekly rate, serial due 2007 through

2026 39,500

41,125

42,675

1998 Revenue Refunding bonds, 5.00%

to 5.50% Serial due 2021 through

2031 57,820

63,781

69,242

Total Bonds Payable $ 151,966 $ 159,580 $ 166,644

In March 1998, Howard issued $109,425 of Series 1998 unsecured Revenue

Refunding bonds with a premium of $4,283. The bonds were used for purposes of

refunding $13,590 of the 1987A Howard Plaza Housing Project Bonds, $59,020

of the 1990A University Revenue Bonds, $16,575 of the 1992A University

Revenue Bonds and $5,140 of the 1992B University Revenue Bonds. As of June

30, 1998, the proceeds from the issuance of the 1998 Revenue Refunding Bonds

were held in an irrevocable trust and, therefore, the $94,325 of bonds is

considered to be extinguished as of June 30, 1998. A portion of the proceeds

continue to be held in an irrevocable trust as of March 31, 2010 as required by the

bond agreement until the bondholders have been paid out, transferred or released.





36

The Series 1998 Bonds agreement provides for the establishment and maintenance

with the Trustee of a Debt Service Reserve Fund, which amount is equal to the

lesser of (a) Maximum Annual Debt Services in the Series 1998 Bonds

outstanding as of the date of determination, (b) 10% of the principal amount of the

Series 1998 Bonds as of the date of determination, or (c) 125% of the average

annual debt service on the 1998 Bonds outstanding as of the date of

determination. Any deficiencies in the Debt Service Reserve Funds are required to

be replenished first from earnings received from the investment of funds in the

Debt Service Reserve Funds and second by payments from Howard, derived from

any available source pursuant to the loan agreement in twelve equal monthly

installments. The Series 1998 Bonds require Howard to deposit and maintain

specified amounts in trustee controlled accounts as repair, maintenance and debt

service reserve (See note 15). The Series 1998 Bonds are further secured by the

Insurer’s Policy, which is sufficient to pay all regularly scheduled principal and

interest obligations.

In July 2006, Howard issued $53,490 of Series 2006A Bonds and $44,175 of

Series 2006B Bonds. The Series 2006A Bonds were for the purposes of (1)

financing, refinancing, or reimbursing certain costs of repairing and replacing

elevators and electrical and mechanical systems, installing a central operating

system, installing sprinkler and fire alarm systems and abatement of hazardous

substances in multiple building on the Main Campus and the School of Law

Campus, each of which is located in Washington, DC and (2) paying certain costs

of issuance related to the Series 2006A Bonds, including the 2006A Bond

insurance premium. Upon issuance of the Series 2006B Bonds $5,094 was

released from the Debt Service Reserve Fund for purposes of refunding $46,515

of the Series 1996 Revenue Refunding Bonds. Upon issuance of these Bonds, the

Debt Service Reserve Fund for the 1996 Bonds was liquidated. Accordingly,

approximately $43,173 of the proceeds was used to pay off the tender of the

Bonds. The defeased debts, along with the related trust funds, do not appear on

the Statements of Financial Position.

As defined in the Indenture, the Series 1998, 2006A and 2006B Bonds are subject

to optional redemption by the District of Columbia, in whole or in part. The

redemption can occur on any date selected by, and at the direction of Howard

prior to their respective maturity dates. The redemption price for the Series

2006A and 2006B Bonds is equal to the principal amount thereof, plus accrued

interest, without any premium. The Series 1998 Bonds have a 1% optional

redemption premium through September 30, 2010. Thereafter, the premium

provision is no longer in effect.

Further, the Series 1998, 2006A and 2006B Bonds are also subject to a mandatory

redemption through the application of sinking fund payment, at specified dates.

The redemption price is equal to the principal amount thereof, plus accrued

interest, without any premium.





37

In June 2008, pursuant to the direction of Howard and terms of the Indenture, the

Series 2006B Bonds were converted from the Auction Rate Mode to the Weekly

Rate Mode. Concurrently with, and as a condition of the re-offering transaction,

Howard caused the Letter of Credit Provider to deliver an irrevocable letter of

Credit to the Trustee. The Letter of Credit between Howard and Letter of Credit

Provider enables Howard to draw up to (a) the principal amount of the Series

2006B Bonds or the portion of the purchase price of the Series 2006B Bonds

corresponding to the principal of the Series 2006B Bonds and (b) up to 35 days

accrued interest on the Series 2006B Bonds (at a maximum rate of 10% per

annum) or that portion of the purchase price of the Series 2006B Bonds

corresponding to the accrued interest thereon. The Letter of Credit has a stated

expiration date of June 19, 2011. The change in interest mode resulted in a

mandatory tender and remarketing of the Bonds, which combined with the

delivery of the Letter of Credit, caused certain unamortized costs of the original

issuance to be written off in the amount of $692. This write-off is reflected in

non-operating activities in the Statements of Activities for the year ended June 30,

2008.

The estimated fair value of Howard’s bonds is determined based on quoted

market prices. At March 31, 2010, June 30, 2009 and 2008, the estimated fair

value was approximately $160,000, $158,783 and $168,118, respectively. Fair

value estimates are made at a specific point in time, are subjective in nature, and

involve uncertainties and matters of judgment. Howard is not required to settle its

debt obligations at fair value and settlement is not possible in most cases because

of the terms under which the debt was issued and legal limitations on refunding

tax-exempt debt.





38

(b) Notes Payable

Howard is obligated with respect to the following notes payable at the report date:

2010

2009

2008

Bank of America Commercial Loan

Due monthly, July 2007 through

March 31, 2013 fixed interest rate

of 6.685% $ 3,268 $ 4,130 $ 5,279

Bank of America Property Loan Due monthly, through February 28,

2014 fixed interest rate of 5.01% 10,229 11,090 12,238

SunTrust Bank Term Note

Due August 31, 2010 variable interest

rate at LIBOR plus 1.9% 19,945 -- --

Bank of America Equipment Note Due October 6, 2010 fixed interest

rate of 4.81% per annum 3,344 -- --

Bank of America Line of Credit

Due March 31, 2011 variable interest

rate at LIBOR plus 1.1% 9,285 26,335 --

Total Notes Payable $ 46,071 $ 41,555 $ 17,517

In addition to the borrowings above, Howard maintains a $25,000 364 day

secured term loan with Bank of America with no borrowings outstanding as of

March 31, 2010. This loan matures on November 28, 2010. Howard’s $20,000

unsecured line of credit with Bank of America has outstanding borrowings of

$9,285 and $10,715 in letters of credit committed to specific parties. Howard is

subject to a restrictive covenant on the line of credit, the compliance with which

has been disclosed below.

(c) Covenants and Aggregate Annual Maturities

Pursuant to the irrevocable Letter of Credit and Reimbursement Agreement (“the

Letter”), the Revolving Credit Agreement (“the Line”) and the 1998 Revenue

Refunding Bonds, Howard is subject to the following restrictive financial

covenants:





39

Covenant

Instrument

Measurement

Date

Criteria

Leverage Ratio 1998 Revenue Refunding Bonds June 30 each year 0.50:1.0

Leverage Ratio Letter of Credit and Reimbursement June 30 each year 0.75:1.0

Agreement and 2006 Revenue Bonds

Debt Service Coverage Ratio Letter of Credit and Reimbursement June 30 each year 1.0:1.0

Agreement and Revolving Credit

Agreement

Liquidity Ratio Letter of Credit and Reimbursement June 30 and 0.30:1.0

Agreement and Revolving Credit December 31

Agreement each year

At June 30, 2009 Howard was not in compliance with the covenants related to the

leverage and debt service coverage ratios, as well as certain non-financial

covenants. These non- financial covenants stipulate the provision of audited

financial statements, with an unqualified opinion, within a specified time period.

Howard obtained waivers from its respective lenders, which effectively waives

the failure to comply with the applicable financial covenants for the Fiscal Year

ended June 30, 2009 and any Event of Default which has occurred or may exist as

a result of any such failure. Non-financial covenants were waived through

February 26, 2010. The Debt Service Coverage and Liquidity Ratios were added

to the 1998 and 2006 Revenue Bonds, the latter also being increased to 0.30:1 for

June 30, 2010 and increasing to 0.50:1 for December 31, 2011.

At March 31, 2010, Howard is in compliance with financial covenants linked to a

general event of default, which would apply at June 30, 2010.

The aggregate annual maturities of the bonds and notes payable (based on

principal outstanding at March 31, 2010) for the subsequent five years ending

June 30 and thereafter are as follows:

Aggregate annual maturities 2010 2009 2008

2010 $ 32,869 $ 35,816 $ 9,117

2011 9,842 9,842 9,482

2012 10,241 10,241 9,842

2013 10,196 10,196 10,242

2014 6,889 6,889 10,191

Thereafter 124,826 124,826 131,717

Subtotal 194,863 197,810 180,591

Bond premiums, net of discounts 3,174 3,325 3,570

Total $ 198,037 $ 201,135 $ 184,161





40

Howard uses variable rate debt to finance certain activities. These debt

obligations expose Howard to variability in interest payments, due to changes in

interest rates. If interest rates increase, interest expense increases. Conversely, if

interest rates decrease, interest expense also decreases.

(d) Interest Rate Swap

On April 3, 1998, Howard entered into an interest rate swap agreement, a

derivative instrument, with Bank of America, N.A., whereby Howard agreed to

pay Bank of America a 6.7% fixed rate of interest on $17,233 in exchange for the

receipt of a floating interest payment based on the 30-day London Interbank

Offered Rate (LIBOR) plus 75 basis points. (LIBOR at June 30, 2009 was 2.5%).

This agreement is to continue in effect until March 31, 2013, and is tied to the

Bank of America Commercial Loan.

On December 29, 2004, Howard entered into an interest rate swap agreement, a

derivative instrument with Goldman Sachs, whereby Howard agreed to pay

Goldman Sachs a 3.5% fixed rate of interest on $42,675, subject to an annual

adjustment which began October 1, 2007, in exchange for the receipt of a floating

interest payment based on sixty-seven percent of the 30-day LIBOR rate. This

agreement commenced on July 3, 2006 and continues in effect until October 1,

2026, and is tied to the 2006B Revenue Refunding Bonds.

The gains and losses recognized under the interest rate swap agreements for the

nine month period ended March 31, 2010 and the fiscal years ended June 30, 2009

and 2008 were as follows:

2010

2009

2008

Cumulative gain (loss) at

beginning of year $ (3,961) $ (1,799) $ 678

Gain (loss) on interest rate swap 282 (2,162) (2,477)

Cumulative gain (loss) at end

of year $ (3,679) $ (3,961) $ (1,799)

Note 19 Pension and Postretirement Benefit Plans

Howard has a noncontributory, defined benefit pension plan (the Plan) available

to substantially all full-time employees. The policy of the University is to make

annual contributions to the Plan at least equal to the minimum contribution, in

accordance with government funding regulations. The Plan’s benefit formula

provides that eligible retirees receive a percentage of their final annual pay, based

upon years of service and other factors. Plan assets consist primarily of common

equity securities, U.S. Treasury securities, corporate bonds, and private





41

investment funds. There were no changes in the Plan during fiscal 2009 and

2008.

Howard also provides postretirement medical benefits and life insurance to

employees who meet specified eligibility and service requirements at the time

they retire. Howard pays a portion of the cost of participants’ medical insurance

coverage. Howard’s portion of the cost for an individual participant depends on

various factors, including employment start date, age, years of service and time of

retirement or retirement eligibility of the participant. The postretirement benefit

plan is unfunded and has no plan assets. Effective June 30, 2009, certain

assumptions were revised resulting in an increase in the accumulated plan benefit

obligation of approximately $46,000.

Howard recognizes a plan’s overfunded or underfunded status as an asset or

liability, with an offsetting adjustment to unrestricted net assets. The

reconciliation of the Plan’s funded status to amounts recognized in the financial

statements at March 31, 2010, June 30, 2009 and 2008, using a June 30

measurement date follows:

Pension Benefits Postretirement Benefits

2010 2009 2008 2010 2009 2008

Change in benefit obligation:

Projected benefit obligation at beginning

of year $ 462,854 $ 432,293 $ 437,991 $ 165,924 $ 119,527 $ 122,700

Service cost 5,568 8,501 10,235 295 435 543

Interest cost 23,863 29,833 27,201 8,507 8,212 7,586

Actuarial (gain)/loss 54,395 12,831 (24,615) 13,089 (3,647) (2,890)

Benefits paid (17,974) (20,605) (18,519) (10,613) (11,784) (11,922)

Medicare Part D subsidy -- -- -- 306 408 220

Employee contributions -- -- -- 2,741 3,337 3,290

Prior service amendment -- -- -- -- 45,919 --

Curtailment -- 1 -- -- 3,517 --

Projected benefit obligation at end

of year $ 528,706 $ 462,854 $ 432,293 $ 180,249 $ 165,924 $ 119,527

Change in plan assets:

Fair value of plan assets at beginning

of year $389,095 $487,840 $524,089 $ -- $ -- $ --

Actual return on plan assets 54,919 (78,140) (17,730) -- -- --

Employer contributions -- -- -- 7,566 8,039 8,412

Employee contributions -- -- -- 2,741 3,337 3,290

Medicare Part D subsidy -- -- -- 306 408 220

Benefits paid (17,974) (20,605) (18,519) (10,613) (11,784) (11,922)

Fair value at end of year $ 426,040 $ 389,095 $ 487,840 $ -- $ -- $ --

Total $ (102,666) $ (73,759) $ 55,547 $ (180,249) $ (165,924) $ (119,527)





42

Components of net periodic benefit cost and other amounts recognized in

unrestricted net assets at March 31 and June 30:

Amounts not yet recognized in net periodic benefit cost and included in

unrestricted net assets at March 31 and June 30:

The estimated net actuarial loss, prior service cost, and transition obligation for

the pension and post-retirement plans that will be accounted for as a part of net

periodic benefit cost over the next fiscal year are $64, $178, and $4,417,

respectively. Expected employer contribution for the pension plan over the next

fiscal year is $17,000.

The weighted average assumptions used to determine the benefit obligation in the

actuarial valuations for the period ended March 31, 2010 and years ended June

30, 2009 and 2008 were as follows:


2010 2009 2008 2010 2009 2008

Net Periodic Cost:

Service cost $ 5,568 $ 8,501 $ 10,235 $ 294 $ 435 $ 543

Interest cost 23,863 29,833 27,201 8,507 8,212 7,586

Expected return on plan assets (25,220) (33,996) (37,798) -- -- --

Curtailment (gain) loss -- 2 -- -- 5,706 --

Amortization of transition obligation -- -- -- 2,831 4,417 4,417

Amortization of prior service cost (credit) 2 3 3 1,690 175 175

Amortization of net (gain) loss 1,210 -- 453 -- 64 261

Net periodic benefit cost $ 5,423 $ 4,343 $ 94 $ 13,322 $ 19,009 $ 12,982

Other changes in plan assets and benefits

Obligations recognized in unrestricted

net assets

Net loss (gain) 25,609 $124,967 $ 30,913 13,089 $ (3,647) $ (2,890)

Prior service cost (credit) arising during period -- -- -- -- 45,919 --

Recognition of curtailment loss -- -- -- -- (2,189) --

Amortization of transition obligation -- -- -- (2,831) (4,417) (4,417)

Amortization of prior service cost (credit) (2) (3) (3) (1,690) (175) (175)

Amortization of gain (loss) (1,210) -- (453) -- (64) (261)

Total recognized in unrestricted net assets 24,397 124,964 30,457 8,568 35,427 (7,743)

Total recognized in net periodic benefit cost

and unrestricted net assets $ 29,820 $129,307 $ 30,551 $ 21,890 $ 54,436 $ 5,239


2010 2009 2008 2010 2009 2008

Net actuarial loss $(191,497) $(167,098) $ (42,130) $ (2,922) $ (2,922) $ (6,261)

Prior service cost (4) (7) $ (11) (46,307) (46,307) (575)

Transition obligation -- -- -- (15,109) (15,109) (22,075)

Total $(191,501) $(167,105) $ (42,141) $ (64,338) $ (64,338) $ (28,911)





43


2010 2009 2008 2010 2009 2008

Discount rate 6.10% 7.10% 7.13% 6.10% 7.10% 7.13%

Expected return on plan assets 7.50% 7.50% 8.50% 0.00% 0.00% 0.00%

Rate of compensation increase 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%

The weighted average assumptions used to determine net periodic cost in the

actuarial valuations for the years ended June 30 were as follows:


2010 2009 2008 2010 2009 2008

Discount rate 7.10% 7.13% 6.40% 7.10% 7.13% 6.40%

Expected return on plan assets 7.50% 7.50% 8.50% 0.00% 0.00% 0.00%

Rate of compensation increase

To age 35 3.50% 3.50% 5.00% 3.50% 3.50% 5.00%

Thereafter 3.50% 3.50% 3.25% 3.50% 3.50% 3.25%

The overall long-term rate of return for the pension plan assets was developed by

estimating the expected long-term real return for each asset class within the

portfolio. An average weighted real rate of return was computed for the portfolio

which reflects the Plan’s targeted asset allocation. Consideration was given to the

correlation between asset classes and the anticipated real rate of return was added

to the anticipated long-term rate of inflation.

The asset allocation of the Plan is analyzed annually to determine the need for

rebalancing to maintain an allocation that is within the allowable ranges. The

investment strategy is to invest in asset classes that are negatively correlated to

minimize overall risk in the portfolio. Interim targets outside of the allowable

ranges were set to allow for flexibility in reaching the long-term targets in the

private equity and real estate categories. The actual allocation for the plan for the

years ended June 30, and the allowable range is as follows:

2009 2008 Allowable Range

Mid-Large Cap U.S. Equity 15.4% 16.9% 10-20% Small Cap U.S. Equity 5.4% 5.9% 5-7% Global ex U.S. Equity 15.8% 17.3% 10-25% Private Equity/Venture Capital 13.4% 11.6% 10-20% Hedge Funds 13.3% 11.1% 10-20% Inflation Hedging 8.4% 11.4% 5-15% U.S. Core Bonds 28.3% 25.3% 20-30% U.S. Long Bonds 0.0% 0.0% 20-30% Cash and Equivalents 0.0% 0.5% 0-3% Total 100% 100%





44

The trend rate for growth in health care costs, excluding dental, used in the

calculation for fiscal year 2010 was 9.05%. This growth rate was assumed to

decrease gradually to 4.50%% in 2030 and to remain at this level thereafter. The

growth rate in the trend rate dental care costs used in the calculations for fiscal

year 2010 was 6%. The growth rate was assumed to decrease gradually to

4.50%% by 2030 and to remain at that level thereafter. The health care cost trend

rate assumption has a significant effect on the amounts reported for the health

care plans.

A one-percentage change in assumed annual health care cost trend rate would

have the following effects:

2009 2008

1% Point

Increase

1% Point

Decrease

1% Point

Increase

1% Point

Decrease

Effect on total of service

and interest cost components $ 314 $ (274) $ 288 $ (265)

Effect on postretirement benefit obligation $ 4,351 $ (3,804) $ 4,402 $ (3,843)

The following benefit payments, which reflect expected future service as

appropriate, are expected to be paid as follows:

Postretirement Benefits

Pension

Benefits

Excluding

Subsidy

Subsidy

Payments

Net of

Subsidy

Year ending June 30:

2010 $ 29,438 $ 13,479 $ (1,157) $ 12,322

2011 32,741 13,889 (1,295) 12,594

2012 33,289 14,256 (1,449) 12,807

2013 33,879 14,587 (1,616) 12,971

2014 35,649 14,744 (1,792) 12,952

Years 2015-2019 197,122 74,433 (4,975) 69,458

Total $ 362,118 $ 145,388 $ (12,284) $ 133,104

Supplemental Employee Retirement Plan – Howard also has a supplemental

retirement plan available to certain retired executives. The plan is

noncontributory, unfunded and has a June 30 measurement date. The projected

benefit obligation is $2,152 at March 31, 2010 and June 30, 2009 and $2,206 at

June 30, 2008. The amounts not yet reflected in net periodic benefit costs and

included in unrestricted net assets pertain to accumulated losses of $1,051 as of

June 30, 2009 and $1,024 as of June 30, 2008. The actuarial cost method and the

assumption on discount rate used to determine the benefit obligation and net

periodic cost in the actuarial valuations for the years ended June 30, 2009 and

2008 are consistent with the method and assumptions used for the defined benefit

pension plan.





45

For the year ended June 30, 2009 and through period March 31, 2010, there were

no changes that would have affected the additions or deductions of the plan.

Howard follows the Internal Revenue Service (IRS) guidelines in the

administration of the Plan.

Savings Plan – Howard supplements its pension plan by offering employees a

defined contribution plan referred to as a 403(b), or tax deferred annuity, which

operates under Section 403(b) of the Internal Revenue Code. The University

contributes 6% of an eligible employee’s base salary on a bi-weekly basis to the

plan. Eligible employees are also permitted to contribute up to 15% of their base

pay to the plan. The administration of the plan is provided by three financial

administrators: Teachers Insurance and Annuity Association/College Retirement

Equities Fund, American International Group – Variable Annuity Life Insurance

Company, and Lincoln Financial. These administered plans provide additional

retirement benefits including the purchase of annuity contracts for eligible

employees. Total costs recognized in the Statements of Activities were $8,668,

$12,743 and $11,204 for the nine month period ended March 31, 2010 and the

fiscal years ended June 30, 2009 and 2008, respectively.

Note 20 Commitments and Contingencies

(a) Federal Awards

Howard receives substantial revenues from government grants, contracts, and

Federal student financial assistance programs authorized by Title IV and Title VII

of the Higher Education Act of 1965. Previous compliance audits have reported

certain deficiencies in the administration of both the University’s Title IV and

Title VII programs and its federal grants and contracts. The ultimate

determination of amounts received under these programs generally is based upon

allowable costs reported to and audited by the government or its designees.

(b) PATH Initiatives

In June 2002, Howard entered into a settlement agreement with the Office of the

Inspector General to settle claims resulting from an audit of Medicare Part B

billings submitted by Howard University College of Medicine Faculty Practice

Plan (the PATH audit). As part of the PATH settlement, the University entered

into an Institutional Compliance Agreement (ICA) with The Department of

Health and Human Services (HHS). The ICA requires Howard to maintain a

Compliance Program that includes a Compliance Officer and Committee, written

standards, training, and education, and an extensive review program that entails

hiring an Independent Review Organization (IRO) to conduct a claims and

unallowable cost review on an annual basis.





46

(c) Litigation and Other Claims

Howard is a party to various litigation and other claims in the ordinary course of

business. It is also subject to potential future claims based on findings or

accusations arising from past practices under governmental programs and

regulations. In the opinion of management and general counsel, an appropriate

provision has been made for probable losses and the ultimate resolution of these

matters.

(d) Collective Bargaining Agreements

The Hospital has several collective bargaining agreements currently in effect with

unions representing certain employees. The agreement with the American

Federation of State County Municipal Employees (Local 2094) was entered into

in May 2008 which will be effective through October 20, 2010. The agreement

with the District of Columbia Nurses Association (DCNA) was entered into in

December 2008 which is effective July 1, 2009 through June 30, 2011. Local

2094 and DCNA members represent 28% and 35% of the Hospital’s salaries and

wages as of March 31, 2010, 30.5% and 32.3% of the Hospital’s salaries and

wages during 2009 and 30.1% and 29.1% of Hospital’s salaries and wages during

2008.

Note 21 Related Party Transactions

Howard University Board of Trustees founded Howard University Charter Middle

School of Mathematics and Science, which operates from premises owned by

Howard. Howard provided these facilities at zero cost in fiscal years 2010, 2009

and 2008, valued at $946 in 2010, 2009 and 2008, respectively.

Howard contributes to the school’s operations at its discretion. During the nine

month period ended March 31, 2010 and the fiscal years ended June 30, 2009 and

2008, Howard contributed approximately $750, $750 and $1,000, respectively.

Howard has donated computer equipment valued at approximately $251 and $374

in 2009 and 2008, respectively.

Note 22 Subsequent Events

a) Pension Plans - Howard announced that effective July 1, 2010 the “Howard

University Employee Retirement Plan” would cease to accrue benefits. In

addition, the “Howard University 403(b) Savings Plan” was modified such

that Howard will automatically, upon hire, contribute 6% of any eligible

employee’s base pay, regardless of tenure or election into the Savings Plan.

Howard will contribute a matching contribution of up to 2%, of employee

elected self contributions.





47

b) Leases – Howard has committed to draw an additional $17,600 under an

existing lease financing arrangement to finance medical and information

technology equipment. The lease periods commence in future months and

continue for a period of five years after the start date.

c) Chiller Plant – In March 2010, Howard entered into a structured financing

arrangement to build a new plant that will provide chilled water for the air

conditioning system at the Hospital. The construction will occur over the next

twelve months.

The University has performed an evaluation of subsequent events through May

18, 2010, which is the date the financial statements were available to be issued,

noting no additional events which affect the financial statements as of March 31,

2010.

48

SUPPLEMENTARY INFORMATION





49

Combining Statements of

Financial Position

As of March 31, 2010 and Fiscal

Years Ended June 30, 2009

and 2008

March 31, 2010

June 30, 2009

June 30, 2008

(in thousands) University Hospital Combined University Hospital Combined University Hospital Combined

Assets:

Cash and cash equivalents $ 18,253 $ 16,016 $ 34,269 $ 4,108 $ 28,757 $ 32,865 $ 2,347 $ 17,274 $ 19,621

Operating investments 59,593 -- 59,593 61,797 -- 61,797 64,561 -- 64,561

Deposits with trustees 9,412 35,310 44,722 9,720 30,485 40,205 20,175 29,045 49,220

Receivables, net 57,463 58,577 116,040 60,436 51,781 112,217 66,451 43,091 109,542

Inventories, prepaids and other assets 11,685 5,908 17,593 6,372 6,488 12,860 7,186 7,515 14,701

Unexpended bond proceeds 42 -- 42 2,623 -- 2,623 19,328 -- 19,328

Endowment investments 426,298 -- 426,298 364,698 -- 364,698 453,994 -- 453,994

Securities pledged -- -- -- -- -- -- 32,758 1,804 34,562

Due from hospital/(Due to university) 3,090 (3,090) -- 8,603 (8,603) -- 47,265 (47,265) --

Investment in property and

equipment, net 478,357 101,565 579,922 490,208 105,576 595,784 467,744 99,889 567,633

Overfunded defined benefit

pension plan -- -- -- -- -- -- 40,830 14,717 55,547

Total Assets $1,064,193 $ 214,286 $1,278,479 $1,008,565 $ 214,484 $1,223,049 $1,222,639 $ 166,070 $1,388,709

Liabilities:

Accounts payable and accrued expenses $ 60,829 $ 36,477 $ 97,306 $ 96,522 $ 44,598 $ 141,120 $ 81,465 $ 36,616 $ 118,081

Accrued post-retirement benefits 128,111 52,138 180,249 117,808 48,116 165,924 84,307 35,220 119,527

Underfunded defined benefit

pension plan 74,560 28,106 102,666 54,130 19,629 73,759 -- -- --

Deferred revenue 30,856 -- 30,856 9,480 -- 9,480 12,439 -- 12,439

Deposits held in custody for others 313 -- 313 1,329 -- 1,329 1,624 -- 1,624

Reserves for professional liabilities -- 43,366 43,366 -- 36,854 36,854 -- 31,470 31,470

Other liabilities 37,741 22,398 60,139 38,455 26,075 64,530 30,117 22,095 52,212

Securities obligation -- -- -- -- -- -- 33,735 1,804 35,539

Notes payable 46,071 -- 46,071 41,555 -- 41,555 17,517 -- 17,517

Capital lease obligation 11,065 165 11,230 14,008 211 14,219 5,266 357 5,623

Bonds payable 117,457 34,509 151,966 121,410 38,170 159,580 124,978 41,666 166,644

Interest rate swap 3,679 -- 3,679 3,961 -- 3,961 1,799 -- 1,799

Refundable advances under U.S.

government loans 7,858 -- 7,858 8,153 -- 8,153 9,498 -- 9,498

Total Liabilities 518,540 217,159 735,699 506,811 213,653 720,464 402,745 169,228 571,973

Net Assets:

Unrestricted 296,978 (47,873) 249,105 293,449 (44,169) 249,280 524,794 (3,158) 521,636

Division capital received/

(contributed) (45,000) 45,000 -- (45,000) 45,000 -- -- -- --

Total unrestricted 251,978 (2,873) 249,105 248,449 831 249,280 524,794 (3,158) 521,636

Temporarily restricted 191,785 -- 191,785 157,793 -- 157,793 197,750 -- 197,750

Permanently restricted 101,890 -- 101,890 95,512 -- 95,512 97,350 -- 97,350

Total net assets 545,653 (2,873) 542,780 501,754 831 502,585 819,894 (3,158) 816,736

Total liabilities and

net assets $1,064,193 $ 214,286 $1,278,479 $1,008,565 $ 214,484 $1,223,049 $1,222,639 $ 166,070 $1,388,709





50

Combining Statements of Activities



March 31, 2010

June 30, 2009

June 30, 2008


Academic services:

Tuition and fees, net $ 102,049 $ -- $ 102,049 $ 134,188 $ -- $ 134,188 $ 117,314 $ -- $ 117,314

Grants and contracts 37,304 -- 37,304 60,297 -- 60,297 64,434 -- 64,434

Auxiliary services 48,818 -- 48,818 56,934 -- 56,934 62,169 -- 62,169

Health services:

Patient service - Hospital -- 195,526 195,526 -- 263,720 263,720 -- 235,467 235,467

Patient service – Faculty practice 24,984 -- 24,984 33,349 -- 33,349 36,887 -- 36,887

Patient service – Dental Clinic 1,320 -- 1,320 1,687 -- 1,687 1,342 -- 1,342

Public support:

Federal appropriation 151,841 21,710 173,551 202,135 28,946 231,081 201,726 29,075 230,801

Contributions and investment return designated

for current operations 13,426 -- 13,426 14,887 -- 14,887

15,044 -- 15,044

Other income and net assets released from

restrictions 8,880 12,097 20,977 12,015 9,618 21,633 18,742 10,584 29,326

Total unrestricted operating revenue 388,622 229,333 617,955 515,492 302,284 817,776 517,658 275,126 792,784

Total temporarily restricted operating revenue 8,550 -- 8,550 4,771 -- 4,771 1,641 -- 1,641

Total permanently restricted operating revenue 2,768 -- 2,768 3,050 -- 3,050 3,857 -- 3,857

Total operating revenues 399,940 229,333 629,273 523,313 302,284 825,597 523,156 275,126 798,282

Salaries and wages 171,495 107,163 278,658 244,889 129,663 374,552 237,842 124,924 362,766

Employee benefits 51,401 26,626 78,027 76,702 35,022 111,724 61,954 30,147 92,101

Utilities and telecommunications 19,616 5,240 24,856 22,217 8,464 30,681 24,612 8,556 33,168

Medical and office supplies 9,501 21,310 30,811 14,737 28,462 43,199 5,409 27,202 32,611

Repairs and maintenance 5,438 4,650 10,088 19,849 8,288 28,137 12,110 8,226 20,336

Food service costs 8,027 2,575 10,602 9,041 3,515 12,556 10,715 3,796 14,511

Grant subcontracts 13,493 490 13,983 46,142 386 46,528 40,145 1,193 41,338

Insurance and risk management 8,727 11,636 20,363 10,458 14,138 24,596 9,450 11,798 21,248

Professional and purchased services 34,254 14,775 49,029 33,188 24,369 57,557 45,684 24,839 70,523

Other administrative 25,166 8,305 33,471 41,515 13,194 54,709 23,333 8,046 31,379

Provision for bad debts 6,901 16,014 22,915 13,431 22,500 35,931 37,307 24,415 61,722

Interest expense 5,276 1,273 6,549 5,079 1,886 6,965 7,562 2,029 9,591

Depreciation 28,953 8,325 37,278 36,209 9,528 45,737 29,771 13,263 43,034

Total operating expenses 388,248 228,382 616,630 573,457 299,415 872,872 545,894 288,434 834,328

Excess of operating revenues over (under)

operating expenses 11,692 951 12,643 (50,144) 2,869 (47,275) (22,738) (13,308) (36,046)

Investment income/(loss) in excess of amount

designated for current operations 20,445 2,678 23,123 (51,232) (1,980) (53,212) (15,144) (345) (15,489)

Restructuring costs -- -- -- (22,649) -- (22,649) -- -- --

Gain (loss) in interest rate swap, net 282 -- 282 (2,161) -- (2,161) (2,477) -- (2,477)

Change in funded status of defined benefit

pension plan (17,328) (7,307) (24,635) (92,069) (32,895) (124,964) 4,493 (7,695) (3,202)

Change in obligation for post-retirement benefit plan (5,901) (26) (5,927) (18,383) (9,005) (27,388) (22,762) 3,250 (19,512)

Other items, net 5,657 -- 5,657 13,114 -- (596) (692) -- (692)

Total unrestricted non-operating income and

expenses 3,155 (4,655) (1,500)

(173,380) (43,880) (217,260) (36,582) (4,790) (41,372)

Total temporarily restricted non-operating income

and expenses 25,442 -- 25,442 (44,728) -- (44,728) (17,483) -- (17,483)

Total permanently restricted non-operating income

and expenses 3,610 -- 3,610 (4,888) -- (4,888) (1,921) -- (1,921)

Total non-operating income and expenses 32,207 (4,655) 27,552 (222,996) (43,880) (266,876) (55,986) (4,790) (60,776)

Unrestricted 3,529 (3,704) (175) (231,345) (41,011) (272,356) (64,818) (18,098) (82,916)

Temporarily restricted 33,992 -- 33,992 (39,957) -- (39,957) (15,842) -- (15,842)

Permanently restricted 6,378 -- 6,378 (1,838) -- (1,838) 1,936 -- 1,936

Change in net assets $ 43,899 $ (3,704) $ 40,195 $(318,140) $ 3,989 $(314,151) $ (78,724) $ (18,098) $ (96,822)





51

Combining Statements of Cash Flows



March 31, 2010

June 30, 2009

June 30, 2008


Cash flows from operating activities

Change in net assets $43,899 $(3,704) $40,195 $(318,140) $ 3,989 $(314,151) $(78,724) $(18,098) $ (96,822)

Adjustments to reconcile change in net assets to net

cash and cash

Equivalent provided by operating activities:

Depreciation and amortization 28,953 8,325 37,278 36,209 9,528 45,737 29,771 13,263 43,034

Amortization of bond premiums (80) (71) (151) (149) (21) (170) (148) (96) (244)

Other noncash items (463) (32) (495) 71 -- 71 (58) 37 (21)

Loss (gain) on disposal of property and

equipment -- -- -- (11,147) -- (11,147) 131 -- 131

Loss (gain) on interest rate swap (282) -- (282) 2,162 -- 2,162 2,477 -- 2,477

Division capital contributed/(received) -- -- -- 45,000 (45,000) -- -- -- --

Realized loss (gain) on sale of investments (8,482) -- (8,482) 45,713 -- 45,713 (24,828) -- (24,828)

Unrealized loss (gain) on investments: (52,067) -- (52,067) 50,090 -- 50,090 58,713 -- 58,713

Contributions and other inc restricted for long-

term use (2,284) -- (2,284) (2,836) -- (2,836) (305) -- (305)

Retirement benefits charged to net assets 36,569 12,499 49,068 133,714 50,026 183,740 26,980 8,811 35,791

Employer coontributions paid (5,836) -- (5,836) (5,253) (2,784) (8,037) (5,588) (2,824) (8,412)

Change in receivables (exlcluding notes) 2,449 (6,796) (4,347) 5,427 (8,690) (3,263) (10,056) 4,064 (5,992)

Change in inventory, prepaid expenses and

other assets (5,313) 580 (4,733) 444 1,027 1,471 4,544 (1,639) 2,905

Change in deposits with trustees 308 (4,825) (4,517) 10,455 (1,440) 9,015 (2,490) 2,027 (463)

Change in accounts payable and accrued

expenses (35,693) (8,121) (43,814) 15,057 7,980 23,037 21,271 7,246 28,517

Change in deferred revenue 21,376 -- 21,376 (2,959) -- (2,959) 3,246 -- 3,246

Change in deposits in custody of others (1,016) -- (1,016) (295) -- (295) (168) -- (168)

Change in reserve for professional liabilities -- 6,512 6,512 -- 5,385 5,385 -- 4,121 4,121

Change in other liabilities (714) (3,677) (4,391) 8,339 3,980 12,319 1,390 (428) 962

Change in refundable advances under U.S.

government loans (295) -- (295) (1,345) -- (1,345) (902) -- (902)

Net cash and cash equivalents provided by

operating activities 21,029 690 21,719 10,557 23,980 34,537 25,256 16,484 41,740

Cash flows from investing activities

Proceeds from sale of investments 197,192 -- 197,192 318,269 -- 318,269 463,739 -- 463,739

Purchases of investments (195,841) -- (195,841) (321,677) -- (321,677) (451,493) -- (451,493)

Previously unexpended bond proceeds 2,581 -- 2,581 16,704 -- 16,704 25,245 -- 25,245

Purchases of property, plant and equipment (17,115) (9,112) (26,227) (35,428) (15,289) (50,717) (78,233) (17,072) (95,305)

Proceeds from sale of property and equipment -- 4,830 4,830 -- -- -- -- -- --

Cash received under security lending, net -- -- -- 32,758 1,804 34,562 11,877 890 12,767

Net cash and cash equivalents provided (used) in

investing activities (13,183) (4,282) (17,465) 10,626 (13,485) (2,859) (28,865) (16,182) (45,047)

Cash flows from financing activities

Investment purchased in cash collateral, net -- -- -- (33,735) (1,804) (35,539) (12,078) (890) (12,968)

Proceeds from notes payable 69,497 -- 69,497 26,335 -- 26,335 -- -- --

Payment on notes payable (64,981) -- (64,981) (2,296) -- (2,296) (2,580) -- (2,580)

Payment on bonds payable (3,595) (3,590) (7,185) (3,420) (3,400) (6,820) (3,265) (3,225) (6,490)

Capital lease payments (2,943) (46) (2,989) (3,355) (146) (3,501) (2,699) (187) (2,886)

Student loans issued (487) -- (487) (1,653) -- (1,653) (1,801) -- (1,801)

Student loans collected 1,011 -- 1,011 2,204 -- 2,204 1,658 -- 1,658

Due to (from) HU hospital net 5,513 (5,513) -- (6,338) 6,338 -- (2,082) 2,082 --

Proceeds from contributions restricted

for endowment 2,284 -- 2,284 2,836 -- 2,836 305 -- 305

Net cash and cash equivalents provided (used) in

financing activities 6,299 (9,149) (2,850) (19,422) 988 (18,434) (22,542) (2,220) (24,762)

Net increase (decrease) in cash and cash

equivalents 14,145 (12,741) 1,404 1,761 11,483 13,244 (26,151) (1,918) (28,069)

Cash and cash equivalents at beginning of year 4,108 28,757 32,865 2,347 17,274 19,621 28,498 19,192 47,690

Cash and cash equivalents at end of period $18,253 $16,016 $34,269 $ 4,108 $ 28,757 $ 32,865 $ 2,347 $ 17,274 $ 19,621

Supplemental cash flow information:

Net cash paid for interest $ 4,094 $ 814 $ 4,908 $ 4,855 $ 1,867 $ 6,722 $ 5,595 $ 2,170 $ 7,765

Documents

The Howard University 31 2010...The Howard University The accompanying notes are an integral part of these financial statements 2 Statements of Financial Position As of March 31, 2010