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UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) INDEPENDENT AUDITORS’ REPORT AND FINANCIAL STATEMENTS AND REPORTS AND SCHEDULES REQUIRED BY THE UNIFORM GUIDANCE For the year ended September 30, 2018 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) TABLE OF CONTENTS SEPTEMBER 30, 2018 Pages INDEPENDENT AUDITORS’ REPORT 1 - 3 MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) 4 - 13 FINANCIAL STATEMENTS: Statement of Net Position 14 - 15 Statement of Revenues, Expenses and Changes in Net Position 16 Statement of Cash Flows 17 - 18 Notes to the Financial Statements 19 - 49 REQUIRED SUPPLEMENTARY INFORMATION: Schedule of the University’s Proportionate Share of the Net Pension Liability 51 Schedule of the University’s Contributions 52 Schedule of the University’s Proportionate Share of the Other Postemployment Benefits Liability 53 Notes to Required Supplementary Information 54 Schedule of Expenditures of Federal Awards 55 - 60 Notes to Schedule of Expenditure of Federal Awards 61 INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 62 - 64 SINGLE AUDIT REPORT: INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE 66 - 68 Schedule of Findings and Questioned Costs 69 - 78 Summary Schedule of Prior Year Findings 79 BDO in Puerto Rico 1302 Ponce De Leon Ave. 1ST Floor San Juan, Puerto Rico 00907 Tel: 787-754-3999 Fax: 787-754-3105 www.bdopr.com BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. INDEPENDENT AUDITORS’ REPORT To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands): Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of the University of the Virgin Islands (a Component Unit of the Government of the U.S. Virgin Islands) (the “University”), as of and for the year ended September 30, 2018, which collectively comprise the University's basic financial statements, as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with generally accepted accounting principles in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, and the discretely presented component unit of the University as of September 30, 2018, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with the accounting principles generally accepted in the United States of America. Emphasis of Matters Prior Period Adjustment As disclosed in Notes 15 and 20, the University implemented the GASB Statement No. 75 “Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans” (“OPEB”), which requires the recognition of the proportionate share of collective total OPEB liability, collective deferred outflows of resources, collective deferred inflows of resources, and collective OPEB expense. As consequence, the University restated the beginning net position (deficit) and other postemployment benefits liability of its business-type activities to record the total OPEB liability. Our opinion is not modified with respect to this matter. Going Concern The University has a deficit of approximately $32.3 million. The University is highly dependent on funding from the Government of the Virgin Islands (the “Government”) to repay obligations and fund its obligations. Approximately 50% of the University’s total revenues are derived from the Government’s appropriations. The Government is in a significant net deficit position and currently faces significant fiscal, economic, and liquidity challenges related to the increasing net deficit, high levels of debt and unfunded pension obligations. There can be no assurance that the Government’s actions will be sufficient to permit continued funding of the University such that its operations and activities will not be curtailed or ceased in the future. Considering that the University depends significantly on appropriations from the Government, the financial condition and liquidity of the University could be affected. Our opinion is not modified with respect to this matter. Required Supplementary Information Accounting principles generally accepted in the United States require that management’s discussion and analysis on pages 4 through 13 and the Schedule of the University’s Proportionate Share of the Net Pension Liability, Schedule of the University’s Contributions, and Schedule of the University’s Proportionate Share of the Other Postemployment Benefits Other Than Pension Plans on pages 51 through 54, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic or historical context. To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the financial statements, and other knowledge we obtained during our audit of the financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statement. The accompanying Schedule of Expenditures of Federal Awards included on pages 55 through 60, is presented for purposes of additional analysis as required by the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards, and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statement. The information has been subjected to the auditing procedures applied in the audit of the financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statement and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the financial statement as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we also have issued our report dated June 27, 2019, on our consideration of the University’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control over financial reporting and compliance. June 27, 2019 (except for the Notes 1, 15, 16, 20, and 22, as to which the date is June 25, 2020) St. Thomas, U.S. Virgin Islands UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 The following discussion presents an overview of the financial position and activities of the University of the Virgin Islands (a Component Unit of the Government of the U.S. Virgin Islands) (the “University”) for the fiscal year ended September 30, 2018, with selected comparative information for the year ended September 30, 2017. This discussion also includes some of management’s insights and analysis of the University’s financial performance for the year. The discussion and analysis is designed to focus on current activities, resulting changes and current known facts. The financial statements, notes to the financial statements and this discussion are the responsibility of management. The financial reporting entity consists of the University and its component units which are legally separate organizations for which the University is financially accountable. The primary government consists of the University, and one blended component unit. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization’s governing body, and it is either able to impose its will on that organization, or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on the primary government. The primary government may also be financially accountable for organizations that are fiscally dependent on it if there is a potential for the organizations to provide specific financial benefits to the primary government or impose specific financial burdens on the primary government regardless of whether the organizations have separate elected governing boards, governing boards appointed by higher levels of government or jointly appointed boards. The University is financially accountable for all of its component units. The financial operations and position of two institutional cooperative organizations: Foundation for the University of the Virgin Islands (the “Foundation”) and Foundation for the Reichhold Center for the Arts (the “Reichhold Foundation”), are considered component units of the University and are included by blended and discrete presentation, respectively, in the University’s financial statements. Blended Component Unit: The Foundation, a blended component unit, although legally separate, is reported as if it was part of the primary government because it operates for the sole purpose of assisting and supporting the University in accomplishing its charitable and educational mission, engages collaboratively with the University in its fundraising efforts, and provides services entirely to the University. Complete financial statements of the Foundation can be obtained by contacting the University’s administrative offices. Discretely Presented Component Unit: The Reichhold Foundation is a not-for-profit corporation organized exclusively for charitable and educational purposes with its principal emphasis on the arts in the Virgin Islands. The resources (and income thereon), which the Reichhold Foundation holds and invests, are restricted to the activities of the University. Since the University does not appoint a voting majority of the Reichhold Foundation’s governing body nor is the Reichhold Foundation fiscally dependent on the University, the University is not considered to be financially 4 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 accountable for the Reichhold Foundation. However, as the resources held by the Reichhold Foundation can only be used by, or for the benefit of the University, the Reichhold Foundation is considered a component unit of the University and is discretely presented in the University’s financial statements. The financial statements of the discretely presented component unit have a September 30 year-end, the same as the University’s financial statements year-end. Complete financial statements of the Reichhold Foundation can be obtained by contacting the Reichhold Foundation’s administrative offices. The financial statements encompass the University of the Virgin Islands and its component units; however, Management’s Discussion and Analysis focuses only on the operations of the University, including the Foundation, which is treated as a blended component unit. It excludes its discretely presented component unit. Reporting Entity The University is a component unit of the Government of the U.S. Virgin Islands (the “Government”). It was organized under Act 852 of March 16, 1962, in accordance with Section 16(a) of the revised Organic Act of the U.S. Virgin Islands of 1954, as amended. The University receives substantial financial and other support from the Government. In addition, the University is exempt from all taxes and special assessments of the U.S. Virgin Islands or any taxing authority or body thereof. Overview of the Basic Financial Statements This discussion and analysis is intended to serve as an introduction to the basic financial statements of the University. The basic financial statements present information about the University as a primary government, which includes the University’s blended component unit. This information is presented separately from the University’s discretely presented component unit. The accounting and reporting policies of the University conform to accounting principles generally accepted in the United States of America, as applicable to governmental entities. The Governmental Accounting Standards Board (“GASB”) is the accepted standards setting body for establishing governmental accounting and financial reporting principles. The financial statement presentation required by GASB provides a comprehensive, entity-wide perspective of the University’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position, revenues, expenses, changes in net position and cash flows. For financial reporting purposes, the University is considered a special purpose governmental agency engaged only in business type activities, as defined by GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation 5 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 has been incurred. All significant transactions related to internal service activities such as publications, and institutional computing, as well as, inter-fund receivable and payable balances and transactions, have been eliminated where appropriate. The basic financial statements of the University include the following: (1) Statement of Net Position, (2) Statement of Revenues, Expenses, and Changes in Net Position, (3) Statement of Cash Flows, and (4) Notes to the Financial Statements. The first two statements are further discussed in the next sections. The Statement of Cash Flows shows changes in cash and cash equivalents, resulting from operating, non–capital and capital financing and investing activities, which include cash receipts and cash disbursements information, and the Notes to the Financial Statements provide additional information that is essential for a full understanding of the data provided in the basic financial statements. The net position (deficit) previously reported at September 30, 2017 for $21.9 million (accumulated deficit) was restated during the current year as part of the adoption of Statement No. 75 of the Governmental Accounting Standards Board, "Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans" ("OPEB"), which resulted in a recognition of an other postemployment benefits liability of $10.6 million as of October 1, 2017, increasing the beginning deficit to $32.5 million. (See Notes 15 and 20). Statement of Net Position The Statement of Net Position presents information on all the University’s assets and liabilities. Net position is the difference between: (a) assets and deferred outflows of resources, and (b) liabilities and deferred inflows of resources. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the University is improving or deteriorating. The net position is displayed in three parts: net investment in capital assets, restricted and unrestricted. Restricted net position may either be expendable or nonexpendable and are those assets that are restricted by law on third-party agreements or by an external donor. Unrestricted net position, while it is generally designated for specific purposes, is available for use by the University to meet current expenses for any purpose. The Statements of Net Position, along with all of the University’s basic financial statements, are prepared under the accrual basis of accounting, whereby revenues are recognized when the service is provided and expenses are recognized when others provide the service to the University, regardless of when cash is exchanged. Assets and liabilities included in the statements of net position are classified as current or noncurrent. 6 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 The difference between total assets and deferred outflows of resources, and total liabilities and deferred inflows of resources, net position, is one indicator of the current financial condition of the University. Fiscal Year Fiscal Year 2018 2017 Change Assets Current assets $ 19,239,057 $ 14,050,558 $ 5,188,499 Non-current assets: Capital assets, net 58,180,007 65,294,603 (7,114,596) Other 67,450,874 63,337,312 4,113,562 Total assets 144,869,938 142,682,473 2,187,465 Deferred outflows of resources: Deferred loss resulting from debt refinancing 4,562,597 4,812,960 (250,363) Unrealized pension contributions and losses 13,113,994 25,359,261 (12,245,267) Total deferred outflows 17,676,591 30,172,221 (12,495,630) Liabilities Current liabilities 9,640,793 14,480,106 (4,839,313) Non-current liabilities 179,912,438 187,033,053 (7,120,615) Total liabilities 189,553,231 201,513,159 (11,959,928) Deferred inflows of resources: Deferred inflows related to OPEB 677,144 - 677,144 Deferred inflows related to pension 4,589,181 3,912,998 676,183 Total deferred inflows 5,266,325 3,912,998 1,353,327 Total net (deficit) position $ (32,273,027) $ (32,571,463) $ 298,436 Current assets Current assets consist primarily of cash, cash equivalents and receivables. The current assets remained comparable. The University’s current assets of $19.2 million cover the current liabilities of $9.6 million. The current ratio of 2 increased when compared to fiscal year 2017, by 1.9. The change is primarily due to an increase in cash on hand. Capital assets One of the critical factors in continuing the quality of the University’s academic and research programs is the development and renewal of capital assets. The University continues to implement its long-range plan to modernize its complement of older buildings along with a balanced investment in new construction. Capital assets additions totaled $6.4 million and $5 million for fiscal years 2018 and 2017, respectively. 7 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 During fiscal year 2018, the University had construction in progress of $13.2 million which is activity associated with the construction of the Medical School facilities. The University entered into construction contract valued at $19 million for the construction of the Medical School facilities. As of September 30, 2018, outstanding commitments of $5 million had not yet been incurred. Capital asset additions primarily represent replacement and improvements to existing buildings, as well as significant investments in equipment. Depreciation expense was $2.5 million and $2.9 million for fiscal years 2018 and 2017, respectively. On September 6, 2017 and September 20, 2017, Hurricanes Irma and Maria devastated the University and the U.S. Virgin Islands. The Hurricanes caused infrastructure-related damages disrupting the activities and operations of the University. During the years ended September 30, 2018 and 2017, the University recognized an impaiment loss of $10.4 million. Other Non-current assets Non-current assets include restricted cash and cash equivalents, restricted deposits with trustee, students’ loans receivables and endowment investments at fair value. Current liabilities Current liabilities consist primarily of accounts payable and accrued liabilities, unearned revenue, and the current portion of the long-term liabilities. Current liabilities totaled $9.6 million on September 30, 2018, as compared to $14.5 million on September 30, 2017. The overall decrease of $5 million in current liabilities is due to a decline in deferred revenues and accounts payable and accrued expenses. Following the September 2017 hurricanes, the University's fall semester extended into fiscal year 2018, resulting in a larger amount of deferred revenue recognized during that period. Non-current liabilities, including long-term debt Non-current liabilities consist of long-term debt and other obligations for which the principal is due more than one year from the Statement of Net Position date. Non-current liabilities decreased by $7 million in fiscal year September 30, 2018 due to the decrease in pension liability of $7.1 million. Under a loan agreement executed February 2015 with the US Department of Education Capital Financing Loan program, the University was authorized to request advances up to $19 million under the Series 2015-1 loan. During fiscal year 2018, $2.5 million was drawn down against the $19 million loan. 8 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 Net position Net position represents the residual amount in the University’s assets and deferred outflows of resources after liabilities and deferred inflows of resources are deducted. Total net position at September 30, 2018 and 2017, is summarized as follows: Fiscal Year Fiscal Year 2018 2017 Net position: Net investment in capital assets $ (19,385,387) $ (9,539,332) Restricted 38,250,424 58,311,040 Deficit (51,138,064) (81,343,171) Total net (deficit) position $ (32,273,027) $ (32,571,463) Restricted, non-expendable net position consists of assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets. Restricted, non- expendable assets include endowment and similar type funds which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Restricted, expendable net position consists of restricted, expendable assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets. Restricted, expendable assets include resources that the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. Restricted non-expendable assets was $11.9 million in 2018. Restricted expendable assets comprised of grants of $9.2 million, scholarships of $11.2 million, loans of $881 thousand, debt service of $2.5 million, and other of $2.6 million, totaling $38.2 million total restricted net position. Unrestricted net position is the net position amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of the net investment in capital assets or restricted components of net position. It represents resources derived from student tuition and fees, local government appropriations, sales and services of educational activities and auxiliary enterprises. Auxiliary enterprises are substantially self-supporting activities that provide services for students, faculty, and staff. While unrestricted net position may be designated for specific purposes by action of management or the Board, they are available for use, at the discretion of the governing board, to meet current expenses for any purpose. As of September 30, 2018, the University has a deficit of approximately $32.3 million due to the cumulative effect of recognizing the net pension liability, OPEB liability of $10.6 million as of October 1, 2017, as well the impairment loss of the $10.4 million. 9 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 Net investment in capital assets consists of the University’s capital assets, net of accumulated depreciation, reduced by outstanding debt obligations that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are required to be included in this component of net position. Statement of Revenues, Expenses, and Changes in Net Position The Statement of Revenues, Expenses, and Changes in Net Position presents information on how the University’s net position changed during the reporting periods. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. The purpose of this statement is to present the revenues earned, both operating and non-operating, and the expenses paid and accrued and any other revenues, expenses, gains and losses earned or spent by the University during the reporting periods. Generally, operating revenues are used to provide goods and services to the various customers and constituencies of the University. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the University. Non-operating revenues are revenues received for which goods and services are not provided. A summarized comparison of the University’s revenues, expenses, and changes in net position for the years ended September 30, 2018 and 2017, follows: Fiscal Year Fiscal Year 2018 2017 Change Operating revenues: Tuition and fees, net of scholarship allowance $ 12,879,895 $ 13,664,896 $ (785,001) Federal grants and contracts 18,234,797 16,982,906 1,251,891 State grants and contracts 3,235,438 7,141,769 (3,906,331) Auxiliary enterprises 1,502,714 2,897,904 (1,395,190) Other operating revenues 1,865,253 661,277 1,203,976 Total operating revenues 37,718,097 41,348,752 (3,630,655) Operating expenses 77,208,424 82,008,261 (4,799,837) Net operating loss (39,490,327) (40,659,509) 1,169,182 Non-operating revenues (expenses): Local government appropriation 24,784,701 20,404,581 4,380,120 Federal Pell Grant program 3,450,932 4,645,011 (1,194,079) Other non-operating income 5,892,057 3,579,540 2,312,517 Insurance proceeds 13,920,500 - 13,920,500 Loss on impairment of capital assets (10,372,523) (10,372,523) - Interest on indebtness (3,064,965) (3,107,703) 42,738 Local government contributions-OPEB 185,855 - 185,855 Net non-operating revenues 34,796,557 15,148,906 19,647,651 Loss before other revenues (4,693,770) (25,510,603) 20,816,833 Capital appropriations 4,992,206 4,992,205 1 Change in net position 298,436 (20,518,398) 20,816,834 Net position: At beginning of year, as restated (32,571,463) (12,053,065) (20,518,398) At end of year $ (32,273,027) $ (32,571,463) $ 298,436 10 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 The University supplements the funds it receives from student tuition and fees, with local government appropriations, federal and local sponsored programs, private gifts and grants, and investment income. The University manages the financial resources from these efforts to fund its operating activities. Tuition and local government appropriations are the primary source of funding for the University’s academic programs. There is a direct relationship between the growth or reduction in local government support and the University’s ability to restrain tuition and fee increases. The University strives to provide students with access to a quality education at an affordable cost. The University continues to foster a strong relationship and partnership with the local government and recognizes the importance of its continued support. The $3.9 million decrease in state grants and contracts is related to a decrease in grants awarded and received during fiscal year September 30, 2018, when compared to fiscal year September 30, 2017. Auxiliary enterprises include the revenues derived from bookstore sales, residence halls and campus housing fees, Wellness Center membership fees, and ticket and concession stand sales. There was no significant change in this area. Operating revenues decreased by less than 1% following the impact of the hurricanes on the University's enrollment in fiscal year September 30, 2018. Other revenues consist mainly of capital appropriations received from the Government to meet outstanding capital debt obligations. Other non-operating revenues consist of investment income and gifts. For the year September 30, 2018, operating expenses totaled $77.2 million including compensation and benefits of $46.5 million, supplies and other expenditures of $18.2 million, depreciation expense of $2.6 million, scholarships of $7.2 million, and utilities of $2.7 million. A comparative summary of the University’s operating expenses by object categories for the years ended September 30, 2018 and 2017, is as follows: Fiscal Year Fiscal Year 2018 2017 Compensation and benefits $ 46,456,064 $ 49,205,663 Supplies and other 18,150,843 18,517,803 Depreciation 2,586,790 2,978,873 Scholarships 7,282,839 7,989,715 Utilities 2,731,888 3,316,207 Total operating expenses $ 77,208,424 $ 82,008,261 11 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 Compensation and benefits is the largest category of expenses, representing 60% of the expenses. The University is committed to recruiting and retaining outstanding faculty and staff and the compensation package is one way to successfully compete with peer institutions and non- academic employers. The decrease in compensation and benefits of $2.7 million, was primarily due to the loss of faculty and staff following the hurricanes of September 2017. Supplies and other expenses decreased due to the University’s strict policy on holding departments to their budgets. Measures were put in place to ensure departments adhere to their respective budgets. A comparative summary of the University’s total operating expenses by functional classification for the years ended September 30, 2018 and 2017, is as follows: Fiscal Year Fiscal Year Function: 2018 2017 Instruction $ 15,255,027 $ 15,561,123 Institutional support 12,451,879 12,575,290 Research 12,181,083 10,488,202 Operation and maintenance of plant 7,681,509 8,827,096 Student aid 6,215,157 7,866,041 Public service 5,847,999 6,992,477 Academic support 5,509,974 6,135,580 Auxiliary enterprises 3,977,724 5,781,133 Student services 4,729,174 4,700,911 Depreciation 2,586,790 2,978,873 Other 772,108 101,535 Total expenses by function $ 77,208,424 $ 82,008,261 Expenditure programs with the increases were research, student services, and other. The expenditures with decreases were instruction, institutional support, operation and maintenance of plant, student aid, public service, academic support, auxiliary enterprises, and depreciation. Factors Impacting Future Periods During fiscal year 2018, the University continued to feel the impact of economic contraction. The University’s President and the Board continue to explore new ways to address the reduction in revenues in the face of increasing expenditures. The University seeks to utilize online education as a method for better supporting students by providing additional options for studies. The offering of online degrees would necessitate offering a full complement of general education courses. The University is offering many general education courses online through additional faculty training or external partnerships. 12 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 Financial Condition The University is highly dependent on funding from the Government of the U.S. Virgin Islands (“GVI”) to repay obligations and fund its obligations. Approximately 50% of the University’s total revenues are derived from government appropriations. GVI is in net deficit position and currently faces significant fiscal, economic, and liquidity challenges related to the increasing net deficit, high levels of debt and unfunded pension and OPEB obligations. In January and March 2017, the matching fund bonds and gross receipts tax bonds of the GVI experienced credit rating downgrades due to the financial and budgetary challenges experienced by the GVI. Such downgrades are likely to negatively impact the GVI’s ability to access credit markets or to access them at supportable rates in the foreseeable future. In March 2017, the Legislature addressed the general fund deficits with the enactment of the Virgin Islands Revenue Enhancement and Economic Recovery Act, a five year plan of revenue initiatives and cost-cutting measures. The challenge of unfunded pension liabilities was addressed through increases in the contribution rates of the employers and members participating in the GVI’s multiple employer cost-sharing pension plan. The administrator of the pension plan, Government Employees' Retirement System, is an independent and separate agency of GVI. Also, during 2018 the University implemented the requirements of GASB Statement No.75 "Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans" ("OPEB"), which requires that the University recognizes the proportionate share of collective total OPEB liability, collective deferred outflows of resources, collective deferred inflows of resources, and collective OPEB expense. The recognition of OPEB in the University, increases the liabilities and the deficit as of October 1, 2017. To date, revenues pledged for debt service have not been significantly impacted by GVI’s financial condition and it is unknown what impact, if any, the GVI’s financial condition will have on the University. Request for Information This financial report is designed to provide a general overview of the University’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Vice President for Administration and Finance. The executive offices of the University are located at #2 John Brewer’s Bay, St. Thomas, Virgin Islands 00802-9990. 13 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) STATEMENT OF NET POSITION SEPTEMBER 30, 2018 University Reichhold Foundation ASSETS Current assets: Cash and cash equivalents $ 10,720,177 $ 44,056 Accounts receivable, net 7,042,842 5,000 Inventories 532,998 - Prepaid expenses and other current assets 943,040 - Total current assets 19,239,057 49,056 Noncurrent assets: Restricted cash and cash equivalents 182,515 - Restricted deposits with trustee 4,770,405 - Students loans receivable, net of allowance for doubtful accounts of $336,144 316,411 - Investments at fair value - 11,804,143 Restricted investments at fair value 60,749,758 - Loan receivable, RT Park 1,431,785 - Capital assets, net 58,180,007 - Total noncurrent assets 125,630,881 11,804,143 Total assets $ 144,869,938 $ 11,853,199 Deferred outflows of resources: Deferred loss resulting from debt refinancing $ 4,562,597 $ - Deferred amounts related to pensions 13,113,994 - Total deferred outflows of resources 17,676,591 - LIABILITIES Current liabilities: Accounts payable and accrued liabilities 3,012,484 312,500 Unearned revenue 3,915,983 - Current portion of long-term liabilities 2,712,326 - Total current liabilities 9,640,793 312,500 Noncurrent liabilities: Long-term debt 79,415,665 - Accrued vacation 4,825,000 - Net pension liability 84,782,113 - Other postemployment benefit liability 10,589,360 - Other long-term liabilities 300,300 - Total noncurrent liabilities 179,912,438 - Total liabilities 189,553,231 312,500 (continues) 14 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) STATEMENT OF NET POSITION SEPTEMBER 30, 2018 (continued) University Reichhold Foundation Deferred inflow of resources: Deferred amounts related to OPEB 677,144 - Deferred amounts related to pension 4,589,181 - Total deferred inflows of resources 5,266,325 - Net position: Net investment in capital assets (19,385,387) - Restricted non-expendable 11,941,664 - Restricted expendable: Grants 9,182,028 - Scholarships 11,162,668 - Loans 881,742 - Debt service 2,497,460 - Other 2,584,862 - Unrestricted (deficit) (51,138,064) 11,540,699 Total net (deficit) position $ (32,273,027) $ 11,540,699 (concluded) The accompanying notes are an integral part of these financial statements. 15 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2018 University Reichhold Foundation Revenues Operating revenues: Tuition and fees, net of scholarship allowance of $388,092 $ 12,879,895 $ - Federal grants and contracts 18,234,797 - State grant and contracts 3,235,438 - Auxiliary enterprises 1,502,714 - Other 1,865,253 - Net investment income - 836,346 In-kind contribution - 175,447 Total operating revenues 37,718,097 1,011,793 Expenses Salaries: Faculty 9,435,490 - Exempt staff 13,771,408 - Nonexempt wages 6,881,659 - Benefits 16,367,507 - Scholarships 7,282,839 - In-kind contribution - 175,459 Contributions to the University - 550,000 Utilities 2,731,888 - Supplies and other services 17,378,735 83,378 Depreciation 2,586,790 - Other expenses 772,108 - Total operating expenses 77,208,424 808,837 Operating (loss) income (39,490,327) 202,956 Non-operating revenues (expenses): Local government appropriation 24,784,701 - Federal Pell Grant program 3,450,932 - Endowment gifts 3,149,434 - Net investment income 2,742,623 - Insurance proceeds 13,920,500 - Loss on impairment of capital assets (10,372,523) - Interest on indebtedness (3,064,965) - Local government contributions-OPEB 185,855 - Total non-operating revenues, net 34,796,557 - (Decrease) increase in net position before capital appropriations (4,693,770) 202,956 Local government capital appropriations 4,992,206 - Increase in net position 298,436 202,956 Net (deficit) position at beginning of the year (32,571,463) 11,337,743 Net (deficit) position at end of the year $ (32,273,027) $ 11,540,699 The accompanying notes are an integral part of these financial statements. 16 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2018 University Reichhold Foundation CASH FLOWS FROM OPERATING ACTIVITIES: Tuition and fees collected $ 12,879,895 $ - Insurance proceeds 13,920,500 - Grants and contracts collected 24,921,163 - Auxiliary enterprises and other collected revenues 3,942,947 - Contributions received - 326 Interest, dividends, and realized gains on investments - 328,178 Payments of contributions to the University - (237,500) Payments to suppliers and vendors (18,170,567) (83,390) Payments to employees (30,088,556) - Payments for utilities (2,731,888) - Payments for benefits (17,390,186) - Payments for scholarships (3,795,982) - Net cash used in operating activities (16,512,674) 7,614 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES: Local government appropriations 24,784,701 - Federal Pell Grant Program 3,450,932 - Endowment gifts 3,149,433 - Net cash provided by non-capital financing activities 31,385,066 - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Local government capital appropriations 4,992,205 - Purchase of capital assets (6,427,545) - Proceeds from capital debt 2,540,828 - Principal paid on capital debt (2,469,753) - Interest paid on capital debt (3,081,158) - Net cash used in capital and related financing activities (4,445,423) - CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales and redemption of investments 2,076,698 1,095,398 Net investment income (4,532,733) - Purchases of investments (1,499,828) (1,087,220) Net cash used in investing activities (3,955,863) 8,178 Net change in cash, cash equivalents, and restricted cash 6,471,106 15,792 Cash, cash equivalents, and restricted cash, at beginning of the year 9,201,991 28,264 Cash, cash equivalents, and restricted cash, at end of the year $ 15,673,097 $ 44,056 (continues) 17 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (continued) University Reichhold Foundation RECONCILIATION OF CASH AND CASH EQUIVALENTS PRESENTED IN THE STATEMENT OF NET POSITION Cash and cash equivalents $ 10,720,177 $ 44,056 Restricted cash and cash equivalents 182,515 - Restricted deposits with trustee 4,770,405 - Total cash, cash equivalents, and restricted cash $ 15,673,097 $ 44,056 RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES Operating loss $ (39,490,327) 202,956 Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation 2,586,790 - Bad debt expenses (894,605) - Pension expense 5,778,565 - OPEB expense 830,007 - Reinvestment of realized gains on investments - (48,191) Unrealized gains on investments - (459,651) Loss on disposal of assets 591,177 - Changes in assets and liabilities, net: Grants and contracts receivable 5,151,259 - Student loans receivables (9,562) - Other accounts receivables 429,074 - Contributions receivable 3,450,932 - Inventories 39,050 - Prepaid expenses and other current assets (457,053) - Accounts payable and accrued liabilities 3,945,971 312,500 Unearned revenue 1,264,055 - Accrued vacations 271,993 - Net cash used in operating activities $ (16,512,674) $ 7,614 Supplemental cash flow information - Impairment loss on capital assets $ 10,372,523 $ - (concluded) The accompanying notes are an integral part of these financial statements. 18 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 1. REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY The University of the Virgin Islands (the “University”) is a component unit of the Government of the U.S. Virgin Islands (“GVI”). It was organized under Act 852 of March 16, 1962, in accordance with Section 16(a) of the Revised Organic Act of the U.S. Virgin Islands of 1954, as amended. The University receives substantial financial and other support from GVI and is exempt from all taxes and special assessments of the U.S. Virgin Islands or any taxing authority or body thereof. The University is a higher education institution that offers four-year liberal arts degree and master's degree programs in teacher education, business and public administration and associates degree in arts and occupational programs. The University operates through campuses on the islands of St. Thomas and St. Croix. The financial reporting entity consists of the University and its component units which are legally separate organizations for which the University is financially accountable. Primary government consists of the University and its blended component unit. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization’s governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on the primary government. The primary government may also be financially accountable for organizations that are fiscally dependent on it if there is a potential for the organizations to provide specific financial benefits to the primary government or impose specific financial burdens on the primary government regardless of whether the organizations have separate elected governing boards, governing boards appointed by higher levels of government or jointly appointed boards. The University is financially accountable for all its component units. The financial statements encompass the University and its two component units, the Foundation for the University of the Virgin Islands (the “Foundation”) and the Foundation for the Reichhold Center for the Arts (“Reichhold Foundation”), included by blended and discrete presentation, respectively. Component units A component unit is reported as blended when either (1) the component unit’s governing body is substantively the same as the University, and (a) there is a financial benefit or burden relationship between the University and the component unit, or (b) management 19 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 of the University has operational responsibility for the component unit, or (2) the component unit provides services entirely, or almost entirely, to the University or otherwise exclusively, or almost exclusively, benefits the University, or (3) the component unit’s outstanding debt is expected to be repaid entirely or almost entirely with resources of the University. Blended component unit - The following component unit, although, legally separate, is reported as if it was part of the primary government because it operates for the sole purpose of assisting and supporting the University in accomplishing its mission: Foundation for the University of the Virgin Islands The Foundation is a legally separate entity from the University and is governed by separate board. The Foundation is a not-for-profit corporation organized for the sole purpose of assisting and supporting the University in accomplishing its charitable and educational mission. Because the Foundation was established for the purpose of supporting the core mission and purposes of the University, engages collaboratively with the University in its fundraising efforts, and provides services entirely to the University, the Foundation has been determined to be a blended component unit. Complete financial statements of the Foundation can be obtained by contacting the University’s administrative offices. Discretely presented component unit - The discretely presented component unit is legally separate from the University. This entity is reported as a discretely presented component unit because a financial benefit/burden situation exists. The following is presented as a discrete component unit: Foundation for the Reichhold Center for the Arts The Reichhold Foundation is a not-for-profit corporation organized exclusively for charitable and educational purposes with its principal emphasis on the arts in the Virgin Islands. The Reichhold Foundation provides financial assistance incidental to maintaining and operating the Reichhold Center for the Arts located on the St. Thomas campus. The resources (and income thereon), which the Reichhold Foundation holds and invests, are restricted to the activities of the University. Since the University does not appoint a voting majority of the Reichhold Foundation’s governing body nor is the Reichhold Foundation fiscally dependent on the University, the University is not considered to be financially accountable for the Reichhold Foundation. However, as the resources held by the Reichhold Foundation can only be used by, or for the benefit of the University, the Reichhold Foundation is considered a component unit of the University and is discretely presented in the University’s financial statements. The financial statements of the discretely presented component unit have a September 30 year-end, as the University’s financial statements year-end. 20 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 The Reichhold Foundation conforms to the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 958, Not- for-Profit Entities, (“ASC 958”). ASC 958 establishes standards for external financial reporting by not-for-profit organizations and requires that resources be classified for accounting and reporting purposes into three net assets categories according to externally (donor) imposed restrictions: unrestricted, temporarily restricted, and permanently restricted net assets. However, when the Reichhold Foundation is incorporated in the financial statements of the University, it conforms to the requirements of Governmental Accounting Standards. Complete financial statements of the Reichhold Foundation can be obtained by contacting the Reichhold Foundation’s administrative offices at 2 John Brewers Bay, St. Thomas, VI 00802. The following is a summary of the significant accounting policies followed by the University: Measurement Focus and Basis of Accounting The accounting and reporting policies of the University conform to accounting principles generally accepted in the United States of America, as applicable to governmental entities. The Governmental Accounting Standards Board (“GASB”) is the accepted standards setting body for establishing governmental accounting and financial reporting principles. For financial reporting purposes, the University is considered a special purpose governmental agency engaged only in business type activities, as defined by GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant transactions related to internal service activities such as publications, telecommunications and institutional computing have been eliminated where appropriate. Cash and cash equivalents The University considers all cash held in banks and investments with a maturity of three months or less from the date of purchase as cash and cash equivalents for financial reporting purposes. 21 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Investments Investments in marketable securities are reported at fair value, which is based upon values provided by the University’s custodians or current market quotations. Investment income, including changes in fair value of investments, is recognized as gain/(loss) in the accompanying statement of revenues, expenses, and changes in net position. Investments in alternative strategies are reported at fair value, whose fair values have been estimated by management in the absence of readily determinable fair values. The estimated fair value of alternative strategies is based on valuations provided by the external investment managers as of September 30. Because investments in alternative strategies are not readily marketable, their estimated value is subject to uncertainty and therefore, may differ from the value that would have been used had a ready market for such investments existed. Students and other receivables, and allowance for doubtful accounts Students and other receivables are reported at the estimated net realizable amount. The allowance for doubtful accounts is an amount that management believes will be adequate to absorb possible losses on existing receivables that may become uncollectible based on evaluations of the collectability of the receivables and prior credit loss experience. The bad debt expense for the fiscal year ended September 30, 2018, amounted to a credit of $(894,605). Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market, and consist primarily of textbooks available for sale to students. The University evaluates bookstore inventory on a quarterly basis to determine inventory movement on merchandise. The University determines and writes-off inventory damaged or obsoleted twice a year. Any textbooks which have remained unsold for four years are written-off. Capital assets The University’s capital assets consist of land, buildings, infrastructure and improvements, furniture and equipment, library resources, and construction in progress. Capital assets are recorded at cost or, if donated, at acquisition value at the date of donation. It is the policy of the University to capitalize expenditures according to the Board approved thresholds by category (see below) and to remove from the accounts major items retired. Net interest costs on debt related to construction in progress are capitalized. Depreciation is recorded using the straight-line method over 22 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 the estimated useful lives of the assets, generally 25 to 50 years for buildings and infrastructure, 5 to 20 years for equipment and library materials, including computer and computer software, and 7 to 30 years for land improvements. Renovations to buildings and other capital assets that significantly increase the value or extend the useful life of the asset is capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense is incurred. Description Capitalization Threshold Land $1 Land improvements 1 New buildings 1 Betterment and improvement of buildings 10,000 Infrastructure 10,000 Machinery and equipment 2,500 Library collection 1 Computer software 50,000 Impairment of capital assets A capital asset is considered impaired when its service utility has declined significantly and unexpectedly. The University evaluates prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred. Such events or changes in circumstances that may be indicative of impairment include evidence of physical damage, enactment or approval of laws or regulations or other changes in environmental factors, technological changes or evidence of obsolescence, changes in the manner or duration of use of a capital asset, and construction stoppage, among others. The University reviews the carrying value of its capital assets to determine if circumstances exist indicating impairment. If facts or circumstances support the possibility of impairment, an impairment is recognized in the year the impairment occurs. Impairment losses are reported in the statement of revenues, expenses, and change in net position net of any realizable insurance recovery. For impairment losses recoverable through disaster assistance programs sponsored by higher levels of government (such as Federal Emergency Management Agency), the loss would be reported separately from the grant awarded for recovery purposes. Any impairment adjustment to the carrying value of a capital asset would be treated as a proportionate reduction of both the reported value of the asset and its accumulated depreciation, based on the notion that the impairment represents the effective retirement of a portion of the asset. During the fiscal year 2018, an impairment loss on capital assets amounting $10.4 was recorded in statement of revenues, expenses and change in net position as a result of the damages caused by Hurricanes Irma and Maria on September 2017. 23 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Deferred outflows of resources The University reports separate sections in the Statement of Net Position for deferred inflows of resources and deferred outflows of resources. These separate financial statement elements represent a consumption or receipt of resources that applies to a future period and therefore will not be recognized as an inflow or outflow of resources until then. The University includes in the deferred outflows of resources reporting category the deferred charges on refunded debt resulting from the difference in the carrying value of the refunded debt and its reacquisition price. Differences between expected and actual experience with regard to economic or demographic factors in the measurement of the total pension liability and changes of assumptions about future economic or demographic factors or other inputs are reported as deferred outflows of resources and inflows of resources related to pensions. The University reports in the deferred outflows of resources and in the deferred inflows of resources the deferred components which are amortized over the average of the expected remaining service lives of its employees, OPEB and pension contributions made after the measurement date of September 30, 2015, and before October 1, 2017. Unearned revenues Unearned revenue consists primarily of cash received in advance of an event, such as student tuition and fees related to tuition for future fiscal years. At September 30, 2018, approximately $3.9 million of tuition and fees collected that relate to the remainder of the fall semester are deferred. Pension For purpose of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, the University reports amounts on the same basis as reported by the Government Employees Retirement System (“GERS”). For information about the fiduciary net position of GERS, recognition of benefit payments, and additions to deductions from fiduciary net position, see GERS’s separately issued audit report available at www.usvigers.com/ Reports/AuditedFinancial Reports.aspx. Other postemployment benefits The Government provides other postemployment benefits (OPEB) of healthcare, prescription, dental and life insurance coverage. These benefits are provided in accordance with Title 3, Chapter 25, Subchapter VIII of the Virgin Island’s Code as part of a multiple employer defined benefit OPEB plan, in which the University participates. For purpose of measuring the OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, the University reports amounts on the same basis as reported by the Government of the Virgin Islands. 24 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Net position The University’s net position is classified as follows: Net investment in capital assets - represents the University’s capital assets, net of accumulated depreciation, reduced by outstanding debt obligations that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are required to be included in this component of net position. To the extent proceeds from issuance of debt has been received but not yet expended for capital assets or deferred inflow of resources attributable to the unspent amount, such amounts are not included as a component of net investment in capital assets. Restricted, non-expendable - net position consists of restricted, non-expendable assets reduced by liabilities and deferred inflows of resources related to those assets. Restricted, non-expendable assets include endowment and similar type funds which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Restricted, expendable - net position consists of restricted, expendable assets reduced by liabilities and deferred inflows of resources related to those assets. Restricted, expendable assets include resources that the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. Unrestricted - net position is the net position amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of the net investment in capital assets or restricted components of net position. It represents resources derived from student tuition and fees, state appropriations, sales and services of educational activities and auxiliary enterprises. Auxiliary enterprises are substantially self-supporting activities that provide services for students, faculty, and staff. While unrestricted net position may be designated for specific purposes by actions of management or the Board of Trustees, they are available for use, at the discretion of the governing board, to meet current expenses for any purpose. As of September 30, 2018, the University has an accumulated deficit of approximately $21 million. When an expense is incurred that can be paid using either restricted or unrestricted resources, it is generally the University’s practice to use restricted resources first to the extent permissible, then unrestricted resources when they are needed. 25 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Classification of revenues and expenses The University has classified its revenues and expenses as either operating or non- operating. Operating revenues include activities that have the characteristics of exchange transactions such as student tuition and fees, net of scholarship discounts and allowances; sales and services of auxiliary enterprises; and some Federal, state and local grants and contracts. Non-operating revenues include activities that have the characteristics of non-exchange transactions, and other revenue sources that are defined as non-operating, such as state appropriations, Federal Pell grants, gifts and investment income. Gifts to the endowment fund are classified as other non-operating revenues. The University classifies all expenses as operating, except for interest expense and losses on disposal of capital assets, if any, which are classified as non-operating. Gifts, pledges and contributions Pledges of financial support from organizations and individuals representing an unconditional promise to give are recognized once all eligibility requirements, including time requirements, have been met. In the absence of such promise, revenue is recognized when the gift is received. Gift and contributions are recognized when received. Endowments pledges generally do not meet eligibility requirements, as defined, and are not recorded as assets until the related gift has been received. Unconditional promises that are expected to be collected in future years are recorded at the present value of the estimated future cash flows. Grants and contracts The University has been awarded grants and contracts for which the funds have not been received or expenses made for the purpose specified in the award. These awards have not been reflected in the accompanying financial statements but represent commitments of sponsors to provide funds for specific research or training projects. For grants that have allowable cost provisions, the revenue will be recognized as the related expenditures are made. For grants with work completion requirements, the revenue is recognized as the work is completed, and for grants without either of the above requirements, the revenue is recognized as it is received. 26 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Tuition and fees Student tuition and fee revenues are reported net of scholarship discounts and allowances in the accompanying statement of revenues, expenses and changes in net position. Scholarship discounts and allowances are the differences between the stated charge for goods and services provided by the University, and the amount that is paid by students and third parties making payments on behalf of students. The scholarship discounts and allowance for the fiscal year ended September 30, 2018, amounted to $388,092. Effect of recent GASB statements Under GASB Statement No. 72, Fair Value Measurement and Application, (“GASB 72”) the University values investments at quoted market prices when available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or values obtained from independent pricing services. Fair value is described as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at a measurement date. GASB 72 establishes a hierarchy of inputs for valuation techniques used to measure fair value. The hierarchy has three levels. Level 1 inputs are quoted prices in active markets for identical assets and liabilities. Level 2 inputs are inputs—other than quoted prices—included within Level 1 that are observable for the asset or liability, either directly or indirectly. Finally, Level 3 inputs are unobservable inputs, such as management’s assumption of the default rate among underlying mortgages of a mortgage-backed security. GASB Statement No. 75, Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans ("OPEB"), which replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. The effective date for GASB 75 is for fiscal years beginning after June 15, 2017. This statement requires participating employers to recognize their proportionate share of collective total OPEB liability, collective deferred outflows of resources, collective deferred inflows of resources, and collective OPEB expense. 27 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 2. BLENDED COMPONENT UNIT CONDENSED FINANCIAL INFORMATION Following is the Foundation’s condensed financial information as of and for the fiscal year ended September 30, 2018: Condensed information from Statement of Net Position Current assets $ 1,380,026 Non-current assets, excluding capital assets 64,051,616 Capital assets, less accumulated depreciation 113,000 Total assets 65,544,642 Current liabilities 37,305,082 Total liabilities 37,305,082 Net position: Restricted non-expendable 11,941,664 Restricted expendable 16,297,896 Total net position $ 28,239,560 Condensed information from Statement of Revenue, Expenses and Changes in Net Position Operating expenses $ (2,507,277) Non-operating revenues 3,557,912 Change in net position 1,050,635 Net position: Net position at beginning of year 27,188,925 Net position at end of year $ 28,239,560 Operating activities: Contribution received $ 788,028 Loan interest received 39,426 Interest, dividends, and realized gains received 451,278 Payments for University programs and awards (2,376,189) Payments for service fees and investment advisory fees (33,247) Payments for general and administrative functions (95,184) Payments from/(to) University 1,214,468 Net cash used in operating activities (11,420) Investing activities: Proceeds from loan repayments made by RT Park 172,583 Proceeds from the sale and redemption of investment 2,076,698 Proceeds from other loan repayments 632 Purchases of investments (871,144) Net cash provided by investing activities 1,378,769 Net change in cash and cash equivalents 1,367,349 Cash and cash equivalents at beginning of year 2,462,958 Cash and cash equivalents at end of year $ 3,830,307 28 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 3. CASH AND CASH EQUIVALENTS All the operating cash of the University is pooled into one bank account. Cash balances by funds represent the cash that is allocated to each fund of the University. By law, banks or trust companies designated as depository of public funds of the Government and its various agencies, authorities and instrumentalities, are to maintain corporate surety bond or pledge collateral satisfactory to the Commissioner of Finance of GVI to secure all governmental funds deposited. At September 30, 2018, the University’s carrying amounts of cash and cash equivalents were covered by federal deposit insurance, corporate surety bonds or by collateral held by GVI. As of September 30, 2018, cash and cash equivalents amounted to approximately $5.6 million and restricted cash and cash equivalents amounted to approximately $4.8 million. 4. ACCOUNTS RECEIVABLE The University’s accounts receivable as of September 30, 2018, are composed of the following: Amount U.S. Virgin Islands Government $ 651,383 U.S. Federal Government 3,167,144 Students 1,819,390 Due from related party (Tech Park) 270,000 Other 2,492,064 8,399,981 Less: Allowance for doubtful accounts (1,357,139) Accounts receivable, net $ 7,042,842 The bad debt expense for the fiscal year ended September 30, 2018, amounted to $894,605. 5. INVESTMENTS The Board of Trustees (the “Board”), as the governing Board, is responsible for the management of the University’s investments and establishes investment policy, which is carried out by the Vice President for Administration and Finance. The University and the Reichhold Foundation have a formal investment policy approved by their corresponding Board of Trustees, which contains a requisite section on addressing risks. In fiscal year 2014, the Board passed a resolution to transfer all the University’s investments to the Foundation’s investments portfolio for management and investment purposes. 29 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Investments are recorded at fair value. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. The University measures and records its investments using fair value measurement guidelines, as follows:  Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that a government can access at the measurement date.  Level 2: Inputs are other than quoted prices included within Level 1 that are observable for an asset or liability, either directly or indirectly. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data.  Level 3: Inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. At September 30, 2018, the University had the following recurring fair value measurements: Fair Value Measurement Level 1 Level 2 Level 3 Equity securities $ 4,023,958 $ 4,023,958 $ - $ - Mutual funds 501,354 501,354 - - Common fund: Multi strategy bond fund 18,502,164 - - 18,502,164 Multi strategy equity fund 33,050,016 - - 33,050,016 Multi strategy intermediate fund 2,012,860 2,012,860 Total investment at fair value 58,090,352 4,525,312 53,565,040 Investments measured at the net asset value (NAV) - Private capital fund 2,659,406 - - - Total $ 60,749,758 $ 4,525,312 $ - $ 53,565,040 30 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 At September 30, 2018, the Reichhold Foundation had the following recurring fair value measurements: Fair Value Measurement Level 1 Level 2 Level 3 Corporate bonds and US debt securities $ 148 $ - $ 148 $ - Mutual funds 559,216 559,216 - - Fixed income 3,556,288 3,556,288 - - Equity securities 7,688,491 7,688,491 - - Total $ 11,804,143 $ 11,803,995 $ 148 $ - The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Equity securities – Investments in equity securities are measured at fair value using quoted market prices. They are classified as Level 1 as they are traded in an active market for which closing stock prices are readily available. Mutual funds – Investments in mutual funds are measured at fair value using quoted market prices. They are classified as Level 1 as they are traded in an active market for which market prices are readily available. Fixed income securities – Investments in fixed income securities are classified as Level 2, since their pricing is based on multiple sources of information that include market data and/or quoted prices from either market that are not active or are for the identical or similar assets in an active market. Alternative strategies – The Foundation invests in certain alternative strategies that are essentially funds of funds. The Multi-Strategy Bond Fund and the Multi-Strategy Equity Fund are classified as Level 3, since these contain underlying investments for which their pricing is based on multiple sources of information that include market data and/or quoted prices from either markets that are not active or are for the identical or similar assets in an active market, as well as underlying investments for which valuation is based on unobservable inputs. Common fund’s marketable funds pricing and valuation processes are built upon a base of independent third-party pricing for the majority of fund holdings. Independent third-party pricing sources are used to price all security positions for which a readily determinable market price is available. Securities for which a third- party pricing sources are not available are priced on a “fair value” basis, subject to review and approval by the Fair Value Committee. The University values its private capital funds using the net asset value (“NAV”) provided by the private investment companies as a practical expedient. 31 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 The University applies the practical expedient to its private capital funds on an investment-by-investment basis, and consistently with the University’s entire position in a particular investment, unless it is probable that the University will sell a portion of an investment at an amount different from the NAV of the investment. The Foundation can make redemptions from the Multi-Strategy funds on a monthly basis upon five business days’ notice. 6. RISK There are many factors that can affect the value of investments. Some, such as custodial credit risk or concentration of credit risk, may affect both equity and fixed income securities. Equity securities respond to such factors as economic conditions, individual company earnings performance and market liquidity, while fixed income securities are particularly sensitive to credit risk and changes in interest rates. Interest-rate risk Interest-rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The prices of fixed income securities with longer maturity time tend to be more sensitive to changes in interest rates and, therefore, more volatile than those with shorter durations. Credit risk Credit risk is the risk that the University and the Reichhold Foundation will not recover their investment due to the inability of the counterparty to fulfill its obligation. The University’s and the Reichhold Foundation’s investments issued or explicitly guaranteed by the United States Government are not considered to be exposed to credit risk. As of September 30, 2018, the University and Reichhold Foundation's credit quality distribution for securities was as follows: Carrying Value Credit Agency Rating Multi-Strategy Bond Fund $ 18,502,164 AA (average rating) Intermediate Term Fund 2,012,860 AA (average rating) Sate street Inst US Govt MM Fund 2,512,953 AAA (average rating) Blackrock CoreAlpha Bond Fund* 3,556,288 AAA through B, Derivatives, Not Rated and Other $ 26,584,265 * At least 80% of this fund is comprised obligations issued or guaranteed by the U.S. Government. 32 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Custodial credit risk Custodial credit risk related to investments is the risk that, in the event of failure of the counterparty to a transaction, the University and the Reichhold Foundation may not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. At September 30, 2018, the custody of these investments is held by the trust department of a commercial bank in the name of the University and the Reichhold Foundation, and the portfolio is managed by a brokerage firm. 7. DONOR-RESTRICTED ENDOWMENTS The University’s endowment consists of donations from individuals, private corporations and the Federal government. The fund was established for a variety of purposes. The endowment includes both donor-restricted endowment funds and funds designated by the Board to function as endowments. Net position associated with endowment funds, including funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The University classifies as restricted nonexpendable net position (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts to the endowment, and (c) accumulations to the endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified as restricted nonexpendable net position is classified as restricted expendable net position. The University has a spending policy that establishes specific terms under which endowment funds can be spent. The Board must consider the use of funds for spending on a year to year basis. The policy spending rate per annum shall be not more than 5% on the entire value of the donor-restricted endowment fund, unless the donor stipulates otherwise. Restricted Investments Subject to the intent of a donor expressed in a gift instrument, the Foundation may appropriate for expenditures or accumulate so much of the investments as the Board of Directors determines to be prudent for the uses, benefits, purposes and duration for which each of the separate endowments in the investments are established. In making a determination to appropriate or accumulate, the Foundation shall act in good faith, with the care of an ordinary prudent person in a like position would exercise under similar circumstances and shall consider, if relevant, the following factors:  the duration and preservation of the investments  the purposes of the Foundation and the investments  general economic conditions  the possible effect of inflation or deflation 33 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018  the expected total return from income and the appreciation of investments  other resources of the Foundation  the Foundation's investment policy The policy spending rate per annum for the investments shall be not more than five percent. The amount available for appropriation during each fiscal year shall be calculated by applying the policy spending rate to the average of the previous three fiscal years' beginning period endowment values. Any special appropriation or decision not to spend the amount indicated by the spending formula must be approved in advance by the Board of Directors. 8. STUDENT LOANS RECEIVABLE Student loans receivable are generally repayable over a maximum period of 10 years and bear interest at varying rates, once the loan is classified as repayment status. Student loans receivable are normally classified in repayment status at the time a recipient no longer maintains student status in the University, but such classification may be further extended in certain cases. 9. CAPITAL ASSETS Changes in capital assets for the year ended September 30, 2018, are as follows: Beginning Balance Additions Reductions Ending Balance Capital assets not being depreciated: Land $ 7,485,112 $ - $ - $ 7,485,112 Construction in progress 8,672,559 4,562,488 - 13,235,047 Total capital assets not being depreciated 16,157,671 4,562,488 - 20,720,159 Capital assets being depreciated: Land improvements 2,824,128 32,815 - 2,856,943 Buildings, fixed equipment, improvements, and infrastructure 83,892,364 - (10,372,523) 73,519,841 Equipment and library materials 14,846,888 1,832,942 (3,218,918) 13,460,912 Total capital assets being depreciated 101,563,380 1,865,757 (13,591,441) 89,837,696 Less: Accumulated depreciation: Land improvements (2,137,519) (54,549) - (2,192,068) Buildings, fixed equipment, improvements, and infrastructure (39,985,115) (1,738,730) - (41,723,845) Equipment and library materials (10,303,814) (793,512) 2,635,391 (8,461,935) Total accumulated depreciation (52,426,448) (2,586,791) 2,635,391 (52,377,848) Total capital assets being depreciated, net 49,136,932 (721,034) (10,956,050) 37,459,848 Total capital assets, net $ 65,294,603 $ 3,841,454 $(10,956,050) $ 58,180,007 Interest cost capitalized in construction in progress amounted to $107,201, for the year ended September 30, 2018. 34 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 During 2017, the University was impacted by Hurricanes Irma and Maria and certain assets sustained physical damage, were destroyed, and other assets require considerable effort to restore their service utility. The University evaluated its capital assets for impairment and recognized a loss of $10.4 million, based on calculations using the restoration cost approach. Under this approach, the amount of impairment is derived from the estimated costs to restore the utility of the capital asset. The estimated restoration cost using an appropriate cost index or by applying a ratio of the estimated restoration cost over estimated replacement cost to the carrying value of the capital asset. 10. NON-CURRENT LIABILITIES Changes in non-current liabilities for the year ended September 30, 2018, are as follows: Beginning Balance Additions Reductions Ending Balance Less: Amounts Due Within One Year Non-current liabilities Notes payable: HBCU $ 57,950,679 $ 2,540,828 $ 2,241,483 $ 58,197,444 $ 2,599,070 $ 55,598,374 First Bank 23,224,192 - - 23,224,192 - 23,224,192 Other 813,630 - 107,275 706,355 113,256 593,099 Total notes payable $ 81,988,501 $ 2,540,828 $ 2,348,758 $ 82,127,991 $ 2,712,326 $ 79,415,665 Accrued vacation 5,217,703 224,243 616,946 4,825,000 453,795 4,371,205 Other long-term liabilities 285,800 14,500 - 300,300 - 300,300 Total $ 87,492,004 $ 2,779,571 $ 2,965,704 $ 87,253,291 $ 3,166,121 $ 84,087,170 11. NOTES PAYABLE During the fiscal year 2015, the University entered into two capital project loan agreements for the medical school with HBCU under Series 2015 3-1 and Series 2015 3-2. During the fiscal year 2018, the University received advances amounting to $2,540,828, related with Series 2015 3-1. The University also entered into a loan agreement with First Bank of Puerto Rico for a Medical School Loan. A variable rate was assigned to all the loans. During fiscal year 2011, the University entered into two capital project loan agreements (loan agreements). Under the loan agreements, the University was authorized to drawdown advances up to $44 million under the Series 2011-2 Bonds and up to $16 million under the Series 2011-3 Bonds. The 2011-2 Bonds have serial maturity dates through August 1, 2034, and the 2011-3 Bonds have maturity dates through August 1, 2040. Interest payments are due February and August. Interest on the 2011-2 Bonds is calculated at 3.48% and interest on the 2011-3 Bonds is variable and calculated from the date of each advance using the long-term U.S. Treasury Rate on that day plus 22.5 basis points. 35 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 During 1994, the construction of certain academic facilities and a water distribution system was completed by the University. The amounts originally advanced by the United States Department of Education were converted to a note payable at that time. As of September 30, 2018, the amount outstanding was $593,089. The note is payable, along with the related interest, in semi-annual installments of $75,284, including interest, over a term of 30 years, and bears interest at an annual rate of 5.5%. The note is secured by a general obligation of GVI. For the year ended September 30, 2018, the interest expense was $3,064,965. This amount is included in the accompanying statement of revenues, expenses, and changes in net position. Future principal and interest payments on notes payables are as follows: Year ending September 30, Principal Interest Total 2019 2,712,326 2,623,589 5,335,915 2020 3,325,866 2,661,495 5,987,361 2021 3,534,484 2,400,835 5,935,319 2022 3,689,309 2,256,671 5,945,980 2023-2027 24,682,456 10,585,568 35,268,024 2028-2032 23,609,818 3,495,285 27,105,103 2033-2037 13,258,466 2,382,524 15,640,990 2038-2042 6,382,609 300,086 6,682,695 2043-2046 932,656 28,196 960,852 Total $ 82,127,990 $ 26,734,249 $ 108,862,239 The loan and reimbursement agreements contain various covenants which, among other things, require the University to comply with certain affirmative and negative covenants. At September 30, September 30, 2018, the University was in compliance with the required covenants. 12. LEASES The University has several non-cancelable operating leases, primarily for the facilities being used by the University’s Small Business Development Center and Virgin Islands Development and Disabilities (“VIUCEDD”) which expire over the next four years. These leases generally contain renewal options for periods ranging from one to five years. 36 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Future minimum lease payments under non-cancelable operating leases as of September 30, 2018, are as follows: Year ending September 30, Amount 2019 204,982 2020 212,432 2021 67,303 Total minimum lease payments $ 484,717 Total rent expense related to these agreements amounted to $198,054 for the year ended September 30, 2018. 13. ACCRUED VACATIONS The University pays vacation time to all eligible employees. Vacation time is accrued based on years of service. Accruals are made based on the following: Length of service Hours/week Rate of accrual Annual accrual 0-3 years 35 8.75 hours per month 15 days 3+ years 35 12.25 hours per month 21 days 0-3 years 40 10 hours per month 15 days 3+ years 40 14 hours per month 21 days As of September 30, 2018, the University had accrued $4,825,000 for vacation. 14. RETIREMENT PLAN The University has two retirement plans in which all eligible employees are required to participate. The following is a brief description of each plan. (a) Teachers Insurance and Annuity Association- College Retirement Equities Fund (“TIAA- CREF”) - is a defined contribution pension plan covering participating, full- time faculty members and other exempt employees, under which the contributions, including employees’ contributions, are used to purchase annuities. There are no unfunded past service costs, and vested benefits are equal to the annuities purchased under TIAA-CREF. The University’s Board of Trustees administers, establishes and amends benefit provisions of the TIAA-CREF. Plan members are required to contribute 8.0% of their annual covered salary, and the University is required to contribute 14.5% of the annual covered payroll. The University and the plan member's contributions to TIAA-CREF for the years ended September 30, 2018 and 2017, were $2,469,127 and $2,515,991, respectively. 37 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 (b) Employees’ Retirement System of the Government of the Virgin Islands (“GERS”) Plan Description Full time employees of the University are members of the Employees’ Retirement System of the Government of the Virgin Islands (“GERS”), a cost-sharing, multiple- employer, defined benefit pension plan (the “Plan”) established as of October 1, 1959 under Title 3, Chapter 27 of the Virgin Islands Code to provide retirement, death and disability benefits. The plan covers all employees of the Government and its component units except employees compensated on a contract, fee basis, casual, per diem or provisional and part-time employees who work less than 20 hours per week. Persons over the age of 55 may opt out of the plan by providing formal notification to the plan. Vesting of benefits occurs after 10 years of service. Benefits may be extended to beneficiaries of plan members. There are two tiers within the plan:  Tier I: Employees hired prior to September 30, 2005  Tier II: Employees hired on or after October 1, 2005 Regular employees are eligible for a full-service retirement annuity when they have completed 30 years of credited service or have attained the age of 60 with at least 10 years of credited service. Regular employees who have attained the age of 50 with at least 10 years of credited service can elect to retire early with a reduced benefit. The monthly annuity benefit payment is determined by applying a stipulated benefit ratio to the member’s average compensation. Average compensation for Tier I members is determined by averaging the five highest years of salary the member earned within the last ten years of service, subject to the maximum salary limitation in effect during such service. Average compensation for Tier II members is determined by averaging the most recent five years of service, subject to the maximum salary limitations in effect during the service. The maximum annual salary that can be used in this computation is $65,000. Contribution Information Contributions to GERS are established by the Board of Trustees of GERS. The Government’s required employer contribution for Tier I and Tier II members was 20.5% of member’s annual salary. Contributions to the pension plan from the University were $1,456,118 for the year ended September 30, 2018. 38 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Effective January 1, 2017, Tier I member contributions increased by 1% to 11% of annual salary for regular employees. Member contributions will increase an additional 1% on January 1, 2018. Effective January 1, 2017, Tier II member contributions increased by 1% to 11.5% of annual salary for regular employees and will increase an additional 1% on January 1, 2018. Prior to June 29, 2000, member contributions were refundable without interest upon withdrawal from employment before retirement. Effective July 1, 2009, GERS Board of Trustees approved an effective annual interest rate on refunded contributions of 2% per annum. Additional Information Regarding the Pension Plan To obtain additional information regarding the audited financial statements of the pension plan, requests for information may be made to: http://www.usvigers.com/reports/auditedfinancialreports.aspx Pension Plan Expense The University’s proportionate share of pension expense is computed based on the percentage of actual employer contributions to total contributions to the plan for the previous year ended September 30, 2017. Pension expense, reported for the year ended September 30, 2018, amounted to $5,778,565. Pension Liability The net pension liability of the University reported as of September 30, 2017, was as follows: Total Net Pension Liability of the Plan University’s Proportionate Share Percentage Net Pension Liability $ 5,225,911,082 1.9355% $ 95,371,473 The net pension liability at September 30, September 30, 2018 was measured as of September 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The University’s proportionate share of the net pension liability was $84.7 million or 1.9355% of the total net pension liability of the Plan. At September 30, 2018, the University’s proportion decreased by 0.0514 percentage points from its proportion reported as of September 30, 2017. 39 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Deferred Outflows and Inflows of Resources In computing the net pension liability, consideration was given to differences between expected and actual experience with regard to economic or demographic factors in the measurement of the total pension liability and changes of assumptions about future economic or demographic factors or other inputs are reported as deferred outflows of resources related to pensions. Investment Rate of Return The long-term expected rate of return of 7.0% on pension plan investments was determined using the building-block method in which best-estimate ranges of expected future real rates of returns (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of the measurement date of September 30, 2017, are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Inflows Domestic equity % 29 % 6.21 International equity % 12 % 7.21 Fixed income % 27 % 1.60 Cash % 2 % 0.91 Alternatives % 30 % 5.50 Total asset class % 100 Discount Rate The discount rate used to measure total pension liability was 3.74% as of September 30, 2017. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate, including the increases in the employee contribution rates effective January 1, 2017. Based on these assumptions, the pension plan’s fiduciary net position was not projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments of 7.0% was applied to all periods of projected benefit payments that are covered by projected assets. For periods where projected future benefit payments are not covered by projected assets, the yield on a 20-year AA Municipal Bond Index was applied. As of September 30, 2017, that rate was 3.64%. 40 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Detailed information about the pension plan’s fiduciary net position is available in the separately issued GERS financial report at: http://www.usvigers.com/benefits/actuarialreport.aspx. 15. OTHER POST-EMPLOYMENT BENEFITS The Government provides other postemployment benefits (OPEB) of healthcare, prescription, dental and life insurance coverage. These benefits are provided in accordance with Title 3, Chapter 25, Subchapter VIII of the Virgin Island’s Code as part of a multiple employer defined benefit OPEB plan, in which the University participates. All employees who retire from government service after attaining age fifty-five (55) with al least thirty (30) years of service, except for policemen and firemen who can retire with at least twenty (20) years of service, are eligible for these benefits. During the year ended September 30, 2018, the University implemented the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This standard requires the reporting and disclosure of costs and liabilities associated with postemployment benefits provided to retirees of the University. Healthcare, prescription, and dental insurance is provided through negotiated contracts with private insurance companies. Participants in the plan may elect coverage for their spouses and dependent children. Participants are required to contribute 35% of medical, prescription, and dental premiums. Employees covered by benefits terms. At September 30, 2018, the following employees were covered by the benefit terms: Description Total Service and disability retirees 51 Active employees 445 Total 496 The contribution requirements of plan members are legislated within the Virgin Island’s Code, and may be amended, by the Virgin Islands Legislature. Payments paid by the Government of the Virgin Islands does not qualify as a special funding situation. The University recognized $185,855 of revenues related to the cost paid by the Government of the Virgin Islands for the University’s retirees. The plan is a non-trusted pay-as-you-go plan, no assets have been accumulated in a trust that meets the criteria in paragraph 4 of GAB 75, and expenditures are paid as they become due. 41 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 At September 30, 2018, the University reported a total OPEB liability for its proportionate share of 1.29% as of the measurement date of October 1, 2017, which was an increase of .04% from its proportionate share measured as of October 1, 2016. The proportionate share is determined based on the respective census data. The amount recognized by the University for its proportionate share were as follow: 2018 The University’s proportionate share of total OPEB liability $ 10,589,360 Expense and Deferred Inflows of Resources The University recognized expenses of $830,007, inclusive of amortization of deferred inflows of OPEB related items for the year ended September 30, 2018. At September 30, 2018, the University reported deferred inflows of resources from the following resource: Deferred Inflows of Resources 2018 Change in actuarial assumptions or other inputs $ 677,144 The amounts of the University’s balances of deferred inflows of resources related to OPEB will be recognized in OPEB expense as follow: Year ending September 30, Amount 2019 $ 125,165 2020 125,165 2021 125,165 2022 125,165 2023 125,165 Thereafter 51,319 Total $ 677,144 Actuarial Assumptions The postemployment benefit plan is an unfunded plan. An actuarial valuation was conducted of the amount required to fund the plan, involving assumptions about the probability of the occurrence of the events in the future. Actuarial assumptions used in the computation of the total OPEB liability were as follow: Valuation date October 1, 2017 Measurement date October 1, 2017 Report date September 30, 2018 Actuarial cost method Entry age normal cost method 42 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Amortization method Recognition period of 6 years Salary increases Payroll growth of 3.25% per year Discount rate Beginning of year rate of 2.89% End of year rate of 3.35% S&P Municipal Bond 20-year high grade rate index as of September 30, 2017 Healthcare cost trend rates Pre-medicare increases of 7% in 2018 to 4.50% in 2023 Medicare increases of 5.50% in 2018 to 4.50% in 2023 Dental increases of 5.50% in 2018 to 4.50% in 2023 Inflation 2.25% implicit rate in healthcare trend analysis Retirees share of costs 35% of Medical and dental premiums and noncontributory life insurance coverage Mortality RP-2014 Blue Collar Mortality Generational Table adjusted 110% with scale MP-2015 for healthy lives For disability retirees, RP-2014 Disable Mortality Generational Table adjusted 125% with scale MP-2015 Marital status Assumed 50% of future male retirees and 25% of future female retirees cover spouses in retirement husbands assumed to be 3 years older than spouse subsidized coverage of spouses and dependents ceases upon death Actuarial experience study The actuarial assumptions used in the October 1, 2017, valuation was based on the results of an actuarial experience study for the period October 1, 2014 - September 30, 2015 43 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Discount Rate Sensitivity Analysis The following schedule shows the impact of the total OPEB liability if the discount rate was 1% less than and 1% greater than the discount rate that was used (3.35%) in measuring the total OPEB liability. 1% Decrease in Discount Rate 2.35% Current Single Discount Rate 3.35% 1% Increase in Discount Rate 4.35% University's proportionate share of the total OPEB liability: $ 12,446,871 $ 10,589,360 $ 9,101,525 Healthcare Trend Sensitivity Analysis The following schedule shows the impact of the total OPEB liability if a healthcare trend rate is 1% less than and 1% greater than the assumed 7% rate used. 1% Decrease in Healthcare Trend Rate 6% Current Single Healthcare Trend Rate 7% 1% Increase in Healthcare Trend Rate 8% University's proportionate share of the total OPEB liability: $ 8,913,363 $ 10,589,360 $ 12,761,166 16. FUNCTIONAL INFORMATION The University’s operating expenses by functional classification as of September 30, 2018, were as follows: Functional Classification Salaries and Benefits Supplies and other services Scholarship and other services Utilities Depreciation Other Expenses Total Instruction $ 13,806,998 $ 1,281,657 $ 28,904 $ 137,468 $ - $ - $ 15,255,027 Research 6,082,984 5,454,323 569,753 74,023 - - 12,181,083 Public service 5,109,884 589,720 131,535 16,860 - - 5,847,999 Academic support 3,942,791 1,313,960 252,665 558 - - 5,509,974 Student services 3,219,984 1,017,066 2,034 490,090 - - 4,729,174 Institutional Support 8,163,853 4,281,061 1,400 5,565 - - 12,451,879 Operation/plant maintenance 4,613,096 1,110,425 - 1,957,988 - - 7,681,509 Student aid 347,717 95,005 5,772,435 - - - 6,215,157 Auxiliary 1,168,757 2,235,518 524,113 49,336 - - 3,977,724 Depreciation - - - - 2,586,790 - 2,586,790 Other - - - - - 772,108 772,108 $ 46,456,064 $ 17,378,735 $ 7,282,839 $ 2,731,888 $ 2,586,790 $ 772,108 $ 77,208,424 44 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 17. RELATED PARTY TRANSACTIONS As of September 30, 2018, the University and the Foundation was owed $851,077 and $850,708, respectively, from the University of the Virgin Islands Research and Technology Park Corporation (RT Park) for payroll paid on its behalf. The RT Park is a public corporation and a component unit of the GVI. As of September 30, 2018, the University was owed $37,305,082 from the Foundation for payments made on its behalf. This amount is considered as inter-fund transaction and was eliminated from the balance sheet for consolidation presentation purposes between the University and the Foundation. Appropriations received from GVI for the year ended September 30, 2018, amounted to $29,776,906. 18. CONTINGENCIES The University participates in various federally funded programs including the U.S. Department of Education and student financial assistance under Title IV of the Higher Education Act of 1965, as amended. These financial assistance programs are routinely subject to compliance audits by the grantor and/or federal agency. Such grantor and/or federal agencies have the authority to determine liabilities as well as to limit, suspend, or terminate federal student financial assistance programs. Other federal programs are also subject to audits. Such audits could result in claims against the resources of the University. No provision has been made for any liabilities, which may arise from such audits since the amount, if any, cannot be determined at this date. In addition, the University is a defendant in various lawsuits arising from its normal operations. It is management’s opinion, after consulting with its legal counsels, that any losses resulting from these lawsuits will not have a significant effect on the University’s financial position and operations. 19. RISK MANAGEMENT The University has commercial insurance to mitigate its exposure to certain losses involving real and personal property (including windstorm, flood and earthquake damages) and comprehensive general and automobile claims. 45 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 Each commercial insurance policy maintained by the University contains specific policy limits and deductibles. A summary of the commercial insurance maintained by the University is as follows: Coverage Deductible Policy Limit Real and personal property: Windstorm $500,000 per event $20 million per event Flood $500,000 per event $20 million per event Earthquake $500,000 per event $40 million per event All other $10,000 per event $20 million per event Automobile $1 million per event Comprehensive general liabilities $1 million per event Professional liability $1 million per event First excess general liability $900,000 Officers and Directors $1 million per event Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past fiscal years. However, for the year ended September 30, 2018, the University is still negotiating with insurance companies regarding the claims filed resulting from the damages caused by Hurricanes Irma and Maria. The University has approximately $10.3 million in construction commitment as of September 30, 2018. 20. PRIOR PERIOD ADJUSTMENT AND RESTATEMENT On October 1, 2017, the University restated the net position (deficit) of its business-type activities to record the total other postemployment benefits ("OPEB") liability as of the beginning of the current year pursuant to the provisions of GASB Statement No. 75 as discussed in Note 15 to the financial statements. The effect as of the beginning of the current year of the aforementioned adjustments and restatements in the net position (deficit) of the governmental activities was as follow: Non-current liabilities Deferred inflows-OPEB Net position (deficit) Change in net position (deficit) As previously reported $ 169,323,078 $ - $ (21,949,111) $ 942,588 Prior period adjustment pursuant to GASB Statement No. 75 - OPEB liability 10,589,360 677,144 (10,622,352) (644,152) Beginning balances, as restated $ 179,912,438 $ 677,144 $ (32,571,463) $ 298,436 46 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 21. FINANCIAL CONDITION The University is highly dependent on funding from the GVI to repay obligations and fund its obligations. Approximately 50% of the University’s total revenues are derived from government appropriations. GVI is in a significant net deficit position and currently faces significant fiscal, economic, and liquidity challenges related to the increasing net deficit, high levels of debt and unfunded pension obligations. In January and March 2017, the matching fund bonds and gross receipts tax bonds of GVI experienced credit rating downgrades due to the financial and budgetary challenges experienced by GVI. Such downgrades are likely to negatively impact GVI’s ability to access credit markets or to access them at supportable rates in the foreseeable future. In March 2017, the Legislature addressed the general fund deficits with the enactment of the Virgin Islands Revenue Enhancement and Economic Recovery Act, a five-year plan of revenue initiatives and cost-cutting measures. The challenge of unfunded pension liabilities was addressed through increases in the contribution rates of the employers and members participating in GVI’s multiple employer cost-sharing pension plan. The administrator of the pension plan, GERS, is an independent and separate agency of GVI. To date, revenues pledged for debt service have not been significantly impacted by GVI’s financial condition and it is unknown what impact, if any, GVI’s financial condition will have on the University. The University’s budget for fiscal year 2019 is not expected to change. There can be no assurance that the GVI’s actions will be sufficient to permit continued funding of the University such that its operations and activities will not be curtailed or ceased in the future. Natural Disasters - Hurricanes Irma and Maria On September 6 and September 19, 2017, the United States Virgin Islands were struck by two hurricanes, Irma and Maria, respectively. The extent and severity resulted in catastrophic damage to the Territory. As a result, substantial damage was sustained throughout the St. Thomas and St. Croix campuses, as well as the St. John Academic Center, impacting classes and normal operations, numerous computers, servers, and other technology infrastructure were destroyed. The University suffered property damages amounting $29 million. The University had purchased commercial insurance to cover its risk of loss from destruction of assets and under these policies the University submitted an insurance claim for which there is a deductible of $500 thousand. The University is currently negotiating its insurance settlement to the extent of the University’s policy. The costs in excess of the University’s policy will be absorbed by the University, with financial assistance from the Federal Government. 47 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 22. SUBSEQUENT EVENTS The University is making significant progress towards restoring its facilities which were damaged by Hurricanes Irma and Maria in September 2017. The University is in the process of tabulating the associated costs and expenses with respect to remediation, clean-up, mitigation, and the restoration of services.  The University commenced the permanent repairs to its hurricane-damaged facilities in January 2018. The University has spent $5.1 million on campus restoration, with the largest project being the restoration of the West Hall Dormitory, with a final cost of $1.9 million. Repairs commenced on the Reichhold Center for the Arts, with an actual cost to date of $965 thousand, and the School of Business with an actual cost of $770 thousand. The Administration and Conference Center, and Sports and Fitness Center with actual costs $364 thousand and $530 thousand, respectively, are also included in this restoration efforts.  In January 2019, the 32nd Legislature of the Virgin Islands signed Act No.8155, the Virgin Islands Higher Education Scholarship program, also referred to as the Free Tuition program, which provides financial aid for tuition for residents of the Virgin Islands for post-secondary education at the University of the Virgin Islands.  The University’s insurance provider advanced $5 million related to the settlement of hurricane claims in FY19. The final settlement is still pending.  The University is in the process of pursuing the Community Disaster Loan option; however, a decision is still pending.  The RT Park settled 100% of the receivable due to the University of the Virgin Islands in February 2020.  In March of 2020, the territory was directly impacted by the COVID 19 virus. As a result, the University converted all classes to online courses and proceeded with the semester. The University provided refunds for the remaining balance of student’s room and board charges, however, the semester continued, as planned. Currently, the territory is impacted by a decline in revenues from tourism. Consequently, the Government has communicated a reduction in allotment for the University in the amount of $3.3 million. The University has reduced its operating budget for fiscal year 2020, to support this change in allotments. The University was also able to offset the reduction in allotments with funds from the CARES Act, of approximately $3.5 million of which $856 thousand was used directly for the support of students. The territory is taking advantage of all opportunities for recovery and support being provided by the Federal Government. 48 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 The University insures all of its properties and is in the process of working with the insurance provider to recover the losses related to damages to the insured properties. In an effort to close potential shortfalls and to serve returning students, the University continues to work closely with Federal agencies to maximize its recovery from all available sources, subject to any sub limits and retentions. While inflows of Federal and private funds continue to bolster the reconstruction activity, the eventual amount and timing for receipt of such funds cannot be predicted at this time. The full impact of these hurricanes on the University remains unknown at this time and therefore, it is not yet possible for the University to estimate the impact of hurricane related losses on revenue collections or expenditures. The University evaluated subsequent events through June 25, 2020, the date on which the audited financial statements were available to be issued. There are no material subsequent events that would require further disclosure in the University’s audited financial statements. 49 REQUIRED SUPPLEMENTARY INFORMATION UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF THE UNIVERSITY’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY SEPTEMBER 30, 2018 2018 2017 2016 2015 University’s proportion of the Net Pension Liability 1.9869% 2.0943% 2.0471% 2.1137% Univeristy’s proportionate share of the Net Pension Liability $ 91,924,998 $ 85,271,734 $ 63,173,875 $ 57,914,485 University’s covered-employee payroll $ 7,515,486 $ 7,230,037 $ 6,526,549 $ 6,245,067 University’s proportionate share of the Net Pension Liability as a percentage of its covered-employee payroll 1223% 1179% 968% 927% Plan net position as percentage of the total pension liability 17% 20% 27% 31% *The amounts presented for each fiscal year are as of the measurement date (September 30) of the previous year. This schedule is intended to show a 10 year trend. Information for years before 2014, is not available. 51 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF THE UNIVERSITY’S CONTRIBUTIONS SEPTEMBER 30, 2018 2018 2017 2016 2015 Contractually required contributions $ 1,491,530 $ 1,500,992 $ 1,531,380 $ 1,401,719 Contributions in relation to the contractually required contributions 1,491,530 1,500,992 1,531,380 1,401,719 Contribution deficiency (excess) - - - - Covered-employee payroll 7,427,200 7,515,486 7,230,037 6,526,549 Contributions as a percentage of covered- employee payroll 20% 20% 21% 21% *The amounts presented are for the fiscal year noted. This schedule is intended to show a 10 year trend. Information for years before 2014, is not available. 52 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF THE UNIVERSITY’S PROPORTIONATE SHARE OF THE OTHER POSTEMPLOYMENT BENEFITS LIABILITY SEPTEMBER 30, 2018 2018 2017 Measurement period ended October 1, 2017 2016 Univeristy’s proportionate share of the Net OPEB Liability (percentage) 1.29% 1.25% Univeristy’s proportionate share of the Net OPEB Liability (amount) $ 10,589,360 $ 10,622,352 Total Net OPEB Liability $ 10,589,360 $ 10,622,352 University's employee covered payroll $ 7,427,200 $ 7,515,486 Total OPEB Liability as a percentage of the University's employee covered payroll 142.6% 141.3% The authority does not have assets accumulated in a trust that meets the criteria of Paragraph 4 of GASB Statement No. 75 to pay related benefits. Potential factors that may significantly decrease/increase the Government’s total OPEB liability reported as of September 30, 2018, include: discount rate, inflation rate, salary increases, payroll growth, healthcare inflation, retiree contribution increase rate, medical aging factors, healthcare participation, healthcare cost trends, mortality rates, and other demographic assumptions. The discount rate changed from 2.89% for the opening balance as of September 30, 2017 to the discount rate of 3.35% as of September 30, 2018. This change resulted in a decrease in total OPEB liability. 53 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2018 Valuation Date October 1, 2017 Measurement Date September 30, 2018 Actuarialy determnied contribution rates are calculated as of September 30, 2017, one year prior to the end of the fiscal year in which contributions are reported, and applied to all periods included in the measurement. Methods and assumptions used ot determine contribution rates: Actuarial cost method Entry age normal cost using the level percent of salary funding method Amortization method Level dollar, closed group Remaining amortization period 20 years Asset valuation method Market value Inflation 2.50% Salary increases 3.25% including inflation Investment rate of return 3.20%, net of pension plan investment expense, including inflation Retirement age 65 for inactive vested participants Mortality rates RP-2014 Blue Collar Healthy Annuitant and Employee Mortality Table using Scale MP-2015 54 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 CFDA No. Federal Grantor/Program or Cluster Title Pass-through Entity Identification Number Student Financial Assistance Research & Development Cluster Higher Education Institutional Aid Small Business Development Other Programs Total Federal Expenditures Award Provided to Subrecipients STUDENT FINANCIAL ASSITANCE CLUSTER: UNITED STATES DEPARTMENT OF EDUCATION U.S. Department of Education Direct Programs: 84.007 Federal Supplemental Educational Opportunity Grant $ 101,771 $ - $ - $ - $ - $ 101,771 $ - 84.033 Federal Work-Study Program 78,110 - - - - 78,110 - 84.038 Perkins Loan Program: Loans Outstanding as of September 30, 2018 6,444 - - - - 6,444 - 84.063 Federal Pell Grant Program 3,450,931 - - - - 3,450,931 - 84.268 Federal Direct Student Loan 4,139,159 - - - - 4,139,159 - 84.375 Academic Competitiveness Grant (1,500) - - - - (1,500) - TOTAL UNITED SATES DEPARTMENT OF EDUCATION 7,774,915 - - - - 7,774,915 - REASEARCH AND DEVELOPMENT CLUSTER: UNITED STATES DEPARTMENT OF AGRICULTURE U.S. Department of Agriculuture Direct Programs: 10.025 Plant & Animal Disease Pest Control & Animal Care - 79,636 - - - 79,636 - 10.202 Cooperative Extension Service - 34,936 - - - 34,936 - 10.203 Agricultural Experiment Station Under Hatch Act - 1,057,487 - - - 1,057,487 - 10.308 Resident Instruction Grants for Insular Areas - 86,017 - - - 86,017 - 10.322 Distance Education Grants for Institutions of Highered - 187,046 - - - 187,046 - 10.500 Cooperative Extension Service - 1,566,034 - - - 1,566,034 - 10.902 Soil & Water Conservation - 6,545 - - - 6,545 - 10.905 Plant Materials for Conservation - (375) - - - (375) - Sub total Department of Agriculture Direct Programs - 3,017,326 - - - 3,017,326 - U.S. Department of Agriculuture Pass-through from: 10.170 Virgin Islands Department of Agriculture - Specialty Crop Block Program: Trellis System Sustainable Pitaya Evaluation of Cucumber for Downy Mildew Tumeric Product & Market Potential in the Virgin Islands Sweet Potato Weed Control 12-2501-0-1-352 02-V101 8/23/17 COOP 3/11/16 - - - - 23,334 3,418 5,410 33,822 - - - - - - - - - - - - 23,334 3,418 5,410 33,822 - - - - 10.215 University of Georgia - Sustainable Agricultural Research & Education: SARE Model State Program Assistance Sustainable Agriculture Research & Education-SARE SARE-Professional Development Program RD309-137/S001478 RD309-134/S001279 RD309-134/S001296 - - - 2,775 7,620 20,695 - - - - - - - - - 2,775 7,620 20,695 - - - 10.308 University of Puerto Rico - Resident Instruction Grants for Insular Activities - Working in Agricultural Training 2016-7004-25657 - 34,972 - - - 34,972 - Sub total Department of Agriculture Pass-through prgrams - 132,046 - - - 132,046 - TOTAL UNITED SATES DEPARTMENT OF AGRICULTURE - 3,149,372 - - - 3,149,372 - (continues) 55 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 CFDA No. Federal Grantor/Program or Cluster Title Pass-through Entity Identification Number Student Financial Assistance Research & Development Cluster Higher Education Institutional Aid Small Business Development Other Programs Total Federal Expenditures Award Provided to Subrecipients UNITED STATES DEPARTMENT OF COMMERCE U.S. Department of Commerce Direct Programs: 11.427 Fisheries Development & Utilization $ - $ 215,496 $ - $ - $ - $ 215,496 $ - 11.433 Marine Fisheries Initiative - (4,649) - - - (4,649) - 11.478 Center for Sponsored Coastal Ocean Research - 15,065 - - - 15,065 - 11.482 Coral Reef Conservation - 37,768 - - - 37,768 - 11.999 Marine Debris Program - 28,877 - - - 28,877 11,325 Sub total Department of Commerce Direct Programs - 292,557 - - - 292,557 11,325 U.S. Department of Commerce Pass-through from: 11.012 University of Miami - CARICCOS - Enhancing Coastal Intelligence 2016-2017-007 - 19,109 - - - 19,109 - 11.417 University of Puerto Rico - Sea Grant Support NOAA - VI Marine Advisory Service FY14-18 A-151-2-14 UPR - 77,662 - - - 77,662 - 11.427 HJR Reefscaping - Fisheries Development & Utilization PSA 2/12/2018 - 32,118 - - - 32,118 - 11.433 University of South Carolina - Marine Fishesries Initiative - Filing Life Hist Info Fisheries 16-2997 - 18,554 - - - 18,554 - 11.432 University of Miami - NOAA Cooperative Institutes - Coral Reef Monitoring Program S18-04 - 34,635 - - - 34,635 - 11.478 Florida Gulf Coast University - Center for Sponsored Coastal Ocean Research - ECOHAB:CIGUATOX 17024-UVI-001 - 3,713 - - - 3,713 - Sub total U.S. Department of Commerce Pass-through programs: - 185,791 - - - 185,791 - TOTAL UNITED STATES DEPARTMENT OF COMMERCE - 478,348 - - - 478,348 11,325 UNITED STATES DEPARTMENT OF THE INTERIOR U.S. Department of the Interior Direct Program - 15.630 Fisheries Developmentevelopment & Utilization - (97) - - - (97) - 15.945 Cooperative Research & Traning Systems-NPS - 25,593 - - - 25,593 - 15.875 Economic, Political and Social Development of the Territories - - - - 131,546 131,546 - Sub total Department of the Interior Direct Program - 25,496 - - 131,546 157,042 - U.S. Department of the Interior Pass-through from - 15.875 Virgin Islands Department of Planning & Natural Resources - Economic, Social & Political Development of the Territories - Ocean Acidification Coral Reef Program USVI-CRI-5 - 507 - - - 507 - Office of the Governor - Climate Change Vulnerability Assessment G0010MBT17 - 198,468 - - - 198,468 - TOTAL UNITED STATES DEPARTMENT OF THE INTERIOR - 224,471 - - 131,546 356,017 - (continues) 56 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 CFDA No. Federal Grantor/Program or Cluster Title Pass-through Entity Identification Number Student Financial Assistance Research & Development Cluster Higher Education Institutional Aid Small Business Development Other Programs Total Federal Expenditures Award Provided to Subrecipients UNITED STATES GEOLOGICAL SURVEY 15.805 Asst to State Water Resource Research - 53,806 - - - 53,806 - TOTAL UNITED STATES GEOLOGICAL SURVEY - 53,806 - - - 53,806 - UNITED STATES NATIONAL AERONAUTICS & SPACE ADMINISTRATION U.S. National Aeronautics & Space Administration Direct Program - 43.008 EDUCATION PROGRAM - 607,933 - - - 607,933 - Sub total U.S. National Aeronautics & Space Adminsitration Direct Program - 607,933 - - - 607,933 - U.S. National Aeronautics & Space Administration Pass- through from: 43.001 University of South Florida - Basic Research Educational Outreach - Laying the Foundation of the MBON Network 80NSSC18K0318 - 1,343 - - - 1,343 - 43.008 College of Charleston - EDUCATION PROGRAM: Develop VI Center Etelman Observatory Effects of Watershed Development 520999-UVI 521202-UVI - - 45,798 104,022 - - - - - - 45,798 104,022 - - 43.012 Space Telescope Science Institue - Space Technology - 3-D Magneto-Hydrodynamic Simulation HST-AR-15053-001-A - 11,491 - - - 11,491 - Sub total U.S. National Aeronautics & Space Adminsitration Pass-through programs - 162,654 - - - 162,654 - TOTAL UNITED NATIONAL AERONAUTICS & SPACE ADMINISTRATION - 770,587 - - - 770,587 - UNITED STATES DEPARTMENT OF ENERGY U.S. Department of Energy Pass-through from: 81.123 Norfolk State University - NNSA HBCU Program F10400061-14-11 - 302,993 - - - 302,993 - TOTAL UNITED STATES DEPARTMENT OF ENERGY - 302,993 - - - 302,993 - UNITED STATES NATIONAL SCIENCE U.S. National Science Foundation Direct Programs: 47.050 Geosciences - 6,298 - - - 6,298 - 47.076 Education & Human Resources - 1,096,694 - - - 1,096,694 - 47.079 Office of International & Integrative Activities - 4,623,022 - - - 4,623,022 - Sub total U.S. National Science Foundation Direct Programs - 5,726,014 - - - 5,726,014 - (continues) 57 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 CFDA No. Federal Grantor/Program or Cluster Title Pass-through Entity Identification Number Student Financial Assistance Research & Development Cluster Higher Education Institutional Aid Small Business Development Other Programs Total Federal Expenditures Award Provided to Subrecipients U.S. National Science Foundation Pass-through from: 47.050 Arkansas State University-Jonesboro - Geosciences - RUI: Beyond Cleaning Symbiosis SA15-052-16-1 - 12,510 - - - 12,510 - Cornell University - Geosciences - Ionospheric Irreg Investigation II 70817-10703 - 12,781 - - - 12,781 - Arizona State University - Geoscienses - GOLD: Sparks for change 17-075 - 10,702 - - - 10,702 - 47.079 University of South Alabama - Office of International & Integrative Activities - PIRE Advancing Global Strategies A17-0170-S0001 - 13,328 - - - 13,328 - Sub total U.S. National Science Foundation Pass- through programs - 49,321 - - - 49,321 - TOTAL UNITED STATES NATIONAL SCIENCE FOUNDATION - 5,775,335 - - - 5,775,335 - UNITED STATES DEPARTMENT OF HEALTH & HUMAN SERVICES U.S. Department of Health & Human Services Direct Programs: 93.859 Biomedical & Research Training - 230,586 - - - 230,586 - Sub total U.S. Department of Health & Human Services Direct Programs - 230,586 - - - 230,586 - U.S. Department of Health & Human Services Pass- through from: 93.307 Yale University - Minority & Health Disparities - ECHORN Year 5 M17A1264 (A10932) - 76,996 - - - 76,996 - 93.424 Association of State & Territorial Health Officials - Building Capacity of the Public Health System: Climate Ready Territories Climate Ready Territories 62-11404 62-11405 - - 10,871 10,281 - - - - - - 10,871 10,281 - - Sub total U.S. Department of Health & Human Services Pass-through programs - 98,148 - - - 98,148 - TOTAL UNITED STATES DEPARTMENT OF HEALTH & HUMAN SERVICES - 328,734 - - - 328,734 - (continues) 58 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 CFDA No. Federal Grantor/Program or Cluster Title Pass-through Entity Identification Number Student Financial Assistance Research & Development Cluster Higher Education Institutional Aid Small Business Development Other Programs Total Federal Expenditures Award Provided to Subrecipients OTHER PROGRAMS: UNITED STATES DEPARTMENT OF AGRICULTURE U.S. Department of Agriculture Direct Program - 10.500 Cooperative Extension Service - - - - 71,561 71,561 - U.S. Department of Agriculture Pass-through Programs: 10.500 Kansas State University - Cooperative Extension Service - 4H Military Partnership Program S15063-03 - - - - (391) (391) - TOTAL UNITED STATES DEPARTMENT OF AGRICULTURE - - - - 71,170 71,170 - SMALL BUSINESS ADMINISTRATION Small Business Administration Direct Program: 59.037 Small Business Development Center - - - 639,870 - 639,870 - 59.050 Prime Technical Assistance - - - 45,970 - 45,970 - TOTAL SMALL BUSINESS ADMINISTRATION - - - 685,840 - 685,840 - UNITED STATES DEPARTMENT OF LABOR United States Department of Labor Program: 17.504 Consultation Agreements - - - - 405,617 405,617 - TOTAL UNITED STATES DEPARTMENT OF LABOR - - - - 405,617 405,617 - UNITED STATES DEPARTMENT OF EDUCATION United States Department of Education Direct Programs: 84.224 Assistive Technology - - - - 133,890 133,890 - 84.031B Higher Education Institution Aid - - 1,857,856 - - 1,857,856 - Sub total U.S. Department of Education Direct Programs - - 1,857,856 - 133,890 1,991,746 - United States Department of Education Pass-through from: 84.287 Virgin Islands Department of Education - 21st Century Community Learning Program GC071DOE14 - - - - 12,285 12,285 - Sub total U.S. Department of Education Pass-through Programs - - - - 12,285 12,285 - TOTAL UNITED STATES DEPARTMENT OF EDUCATION - - 1,857,856 - 146,175 2,004,031 - UNITED STATES DEPARTMENT OF HEALTH & HUMAN SERVICES United States Department of Health Services Direct Programs: 93.600 Head Start - - - - 323,418 323,418 - 93.632 University Centers for Excellence - - - - 427,749 427,749 - Sub total U.S. Department of Health & Human Services Direct Programs - - - - 751,167 751,167 - (continues) 59 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 CFDA No. Federal Grantor/Program or Cluster Title Pass-through Entity Identification Number Student Financial Assistance Research & Development Cluster Higher Education Institutional Aid Small Business Development Other Programs Total Federal Expenditures Award Provided to Subrecipients United States Department of Health Services Pass- through Program - 93.110 University of Miami - Maternal & Child Health Federal Programs - Child Development & Multi Disciplinary Facility SPC-000504 - - - - 14,025 14,025 - 93.249 Columbia University - Public Health Training Centers - ACT Public Health 3 GG008408-03 - - - - 12,382 12,382 - Sub total U.S. Department of Health & Human Services Pass-through Program - - - - 26,407 26,407 - TOTAL UNITED STATES DEPARTMENT OF HEALTH & HUMAN SERVICES - - - - 777,574 777,574 - UNITED STATES DEPARTMENT OF DEFENSE United States Department of Defense Direct Program - 12.630 Basic Applied & Advanced Research in Engineering Science - 87,059 - - - 87,059 - TOTAL UNITED STATES DEPARTMENT OF DEFENSE - 87,059 - - - 87,059 - UNITED STATES ENVIRONMENTAL PROTECTION AGENCY United States Environmental Protection Agency Pass- through Program - 66.716 Extension Foundation - Research, Development, Public Education Outreach Studies 83698001 - 7,327 - - - 7,327 - TOTAL UNITED STATES ENVIRONMENTAL PROTECTION AGENCY - 7,327 - - - 7,327 - TOTAL EXPENDITURES OF FEDERAL AWARDS $ 7,774,915 $ 11,178,032 $ 1,857,856 $ 685,840 $ 1,532,082 $ 23,028,725 $ 11,325 (concluded) See accompanying notes to schedule of expenditures of federal awards. 60 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 1. BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (the “Schedule”) includes the federal grant activity of the University of the Virgin Islands (the “University”) and is presented on the accrual basis of accounting. The information in the schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”). Therefore, some amounts presented in the Schedule may differ from amounts presented in, or used in the preparation of, the financial statements. 2. LOAN PROGRAMS During the fiscal year ended September 30, 2018, the University administered new loans related to the Federal Perkins Loan Program which are reported in the Schedule of Expenditures of Federal Awards. As there are continuing compliance requirements with respect to this loan program, the amounts are reported for loan programs on the Schedule of Expenditures of Federal Awards: CFDA Number Total Loans Outstanding as of September 30, 2018 Federal Perkins Loan Program 84.038 $ 6,444 During the fiscal year ended September 30, 2018, the University processed $4,139,159 of new loans under the Federal Direct Student Loans Program (CFDA No. 84.268). Only new loans made during the fiscal year ended September 30, 2018, relating to this program are reported as expended. 3. INDIRECT COST RATE The University has a federally negociated indirect cost agreement applicable to all programs, with an effective date of October 1, 2017 to September 30, 2027. 4. CONTINGENCIES The University participates in various federally funded programs including the U.S. Department of Education, including programs of student financial assistance under Title IV of the Higher Education Act of 1965, as amended. These financial assistance programs are routinely subject to compliance audits by the grantor and/or federal agency. Such grantor and/or federal agencies have the authority to determine liabilities as well as to limit, suspend, or terminate federal student financial assistance programs. Other federal programs are also subject to audits. Such audits could result in claims against the resources of the University. No provision has been made for any liabilities, which may arise from such audits since the amount, if any, cannot be determined at this date. 61 BDO in Puerto Rico 1302 Ponce De Leon Ave. 1ST Floor San Juan, Puerto Rico 00907 Tel: 787-754-3999 Fax: 787-754-3105 www.bdopr.com BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands): We have audited, in accordance with the auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the business- type activities and the discretely presented component unit of the University of the Virgin Islands (a Component Unit of the Government of the U.S. Virgin Islands) (the “University”) as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the University’s basic financial statements, and have issued our report thereon dated June 27, 2019 (except for the Notes 1, 15, 16, 20, and 22, as to which the date is June 25, 2020). We also included an emphasis-of-matter paragraph in our report on the financial statements related to going concern issue due to the fiscal, economic, and liquidity challenges of the Government of the US Virgin Islands and the fact that the University is reliant on the support from the Government. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the University’s internal control over financial reporting (“internal control”) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University’s internal control. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items 2018- 001 and 2018-002, that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the University’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as item 2018-003. This report is replacing a previously issued report dated June 27, 2019, because after the issuance of the previous report, the Government of Virgin Islands implement the GASB Statement No. 75 "Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans" ("OPEB"), which requires that each component unit of the Government of the Virgin Islands, which participate in the OPEB, need to recognize their proportionate share of collective total OPEB liability, collective deferred outflows of resources, collective deferred inflows of resources, and collective OPEB expense. This implementation caused that the basic financial statements of the University, previously issued, were materially misstated, as consequence, the University has to recognized a prior period adjustment, deferred inflows of resources, and income and expenses related with the proportionate share of OPEB liability. We performed additional procedures to obtain sufficient appropriate audit evidence for the implementation and recognition for the OPEB liability as disclosed in Notes 15 and 20 on the basic financial statements. University’s Response to Findings University’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. University’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. June 27, 2019 St. Thomas, U.S. Virgin Islands SINGLE AUDIT REPORT BDO in Puerto Rico 1302 Ponce De Leon Ave. 1ST Floor San Juan, Puerto Rico 00907 Tel: 787-754-3999 Fax: 787-754-3105 www.bdopr.com BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands): Report on Compliance for Each Major Federal Program We have audited the University of the Virgin Islands’s (the “University”) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the University’s major federal programs for the year ended September 30, 2018. The University’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations and the terms and conditions of its federal awards applicable to its federal programs. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of the University’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the University’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the University’s compliance. To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. Opinion on Each Major Federal Program In our opinion, the University of the Virgin Islands complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30, 2018. Other Matters The results of our auditing procedures disclosed instances of noncompliance which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as item 2018-003. Our opinion on each major federal program is not modified with respect to this matter. The University’s response to the noncompliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The University’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance Management of the University is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the University’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance yet important enough to merit attention by those charged with governance. To the Board of Trustees of University of the Virgin Islands (A Component Unit of the Government of the U.S. Virgin Islands) BDO in Puerto Rico offers its services through one or more of the following affiliated entities: BDO-Audit, PSC; BDO-Advisory, LLC; BDO-Outsourcing Services, PSC; BDO-Tax, LLC; BDO Puerto Rico, PSC, and BDO-Government Services, LLC, all Puerto Rico entities. All such entities are members of BDO International Limited, a United Kingdom company limited by guarantee, and form part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The University’s response to the internal control over compliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The University’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. June 27, 2019 St. Thomas, U.S. Virgin Islands UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section I - Summary of Auditor’s Results Financial Statements Section Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP (unmodified, qualified, adverse or disclaimer): Unmodified Internal control over financial reporting: Material weakness(es) identified? X yes no Significant deficiency(ies) identified? yes X no Noncompliance material to financial statements noted? ____yes X no Federal Awards Internal control over major federal programs: Material weakness(es) identified? ___yes X no Significant deficiency(ies) identified? yes X no Type of auditors report issued on compliance for major federal programs (unmodified, qualified, adverse or disclaimer) Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? X yes ___ no Identification of major programs: CFDA Number Name of Federal Program or Cluster 84.031 Higher Education Instutional Aid Various Student Financial Assistance Cluster Various Research and Development Cluster Dollar threshold used to ditinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee? yes X no 69 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section II - Financial Statements Findings This section identifies the significant deficiencies, material weaknesses, fraud, noncompliance with provisions of laws, regulations, contracts and grant agreements, and abuse related to the financial statements for which Government Auditing Standards require reporting. 70 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Finding Number 2018-001 Material Weakness in Internal Controls over Compliance and Compliance with Financial Reporting Requirements - Restatement of the basic financial statements Criteria Article 2.5, the University’s Financial Policies, establishes that the accounting shall be based in general accepted accounting principles as established by the Governmental Accounting Standards Board (GASB). Article 3.2 (G), the University’s Financial Policies, establishes that all accounts and financial reports must be accurate, clear, and complete and fully consistent with generally accepted standards of accounting and reporting. A fundamental element of a system of internal control is an effective financial statement closing process. Such a process is essential in enabling the University to prepare timely and accurate financial statements. This process helps the University ensure that all financial transactions are properly recorded, appropriately supported, and subjected to supervisory review. The financial statement closing process begins with accounting data recorded in the University’s general ledger and culminates in the preparation of the University’s financial statements, including identification and documentation of relevant disclosures that are required under generally accepted accounting principles. Condition The financial statements and the notes to the financial statements provided to us as of June 27, 2019, were materially misstated because the University did not implement the requirements of GASB Statement No. 75 "Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans" ("OPEB") to recognize the liability, deferred outflows and inflows of resources related with OPEB. Cause This situation occurs because the Government of the Virgin Islands has not enforced, effective and efficient accounting and financial reporting policies and procedures to address the implementation of the GASB Statement No. 75 on a timely basis, as consequence, the University did not have the necessary information to implement and recognize the proportionate share of the OPEB liability, deferred outflows and inflows of resources, and expenses related with OPEB in the correspondent period as requested by this statement. Effect The overall effect is that the financial information presented in the basic financial statement were materially misstated at the issuance date. The University must restate the basic financial statements and re-submmit the single audit report to the Federal Clearinghouse and others regulatory agencies. 71 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Recommendation The University should continue its efforts to review and revise its current accounting and financial reporting structure such as the establishment of a designated person which be in charge to be alert of all the regulations and GASB pronouncements that apply to the University to properly implement when are required. Views of responsible officials The University concurs with the finding. The restatement of the University’s financial statements for fiscal year 2018 resulted from a correction of an error. The University of the Virgin Islands is a component unit of the Government of the Virgin Islands (GVI). The University completed and issued its audited financial statements for fiscal year 2018 in June 2019, using the information provided by GVI, however, in March 2020, the GVI shared that additional entries were required, which made it necessary to restate the 2018 statements issued. The University recognizes that this information is the responsibility of an outside entity, and also recognizes that the University is ahead of the GVI in the issuance of audited statements. The University also recognizes that this is a material transaction, which will significantly impact our financial statements. For the future financial statements where this transaction is required, if this situation persists, the University will be required to request extensions for the submission of audited statements, so as to not have a recurrence of this issue. The University will also be meeting with Management of the GVI, to reiterate the significance of timely issuance of the University’s complete financial statements, and will continue working with the GVI and its counterparts, to ensure efficiency in compiling and evaluating this information. Responsible official Earlyn Casimir, Special Assistant to the Vice President for Administration and Finance Stacey Chados, Acting Controller 72 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Finding Number 2018-002 Material Weakness in Internal Controls over Compliance and Compliance with Financial Reporting Requirements Criteria Article 2.5, the University’s Financial Policies, establishes that the accounting shall be based in general accepted accounting principles as established by the Governmental Accounting Standards Board (GASB). Article 3.2 (G), the University’s Financial Policies, establishes that all accounts and financial reports must be accurate, clear, and complete and fully consistent with generally accepted standards of accounting and reporting. A fundamental element of a system of internal control is an effective financial statement closing process. Such a process is essential in enabling the University to prepare timely and accurate financial statements. This process helps the University ensure that all financial transactions are properly recorded, appropriately supported, and subjected to supervisory review. The financial statement closing process begins with accounting data recorded in the University’s general ledger and culminates in the preparation of the University’s financial statements, including identification and documentation of relevant disclosures that are required under generally accepted accounting principles. Condition During our audit, we noted the following areas still need to be addressed:  The trial balance as of September 30, 2018, was provided to us on various occasions because of significant changes made to balances and transactions resulting from analyses performed by management.  Our audit procedures revealed that there are significant delays in producing financial statements at the year end close. Thirty-two post-closing adjustments were provided to us after the audit procedures were performed. The University’s management did not analyze certain balances and transactions periodically throughout the year to accelerate the account analyses and expedite the year-end closing process including:  Bank account balances and reconciliations  Long-term debt balances and transactions  Net pension liability and related deferred outflows and inflows  Investment and interfund balances and transactions  Impairment of capital assets  Accounts payable and other payables  Schedule of Expenditures of Federal Awards 73 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 The University does not periodically reconcile balances in the general ledger with the corresponding subsidiary ledgers used for the preparation of the Schedule of Expenditures of Federal Awards (“SEFA”). As part of our audit procedures, we found differences between the general ledger accounts used to prepare the SEFA and the subsidiary ledgers, which at that moment could not be reconciled. Differences were later reconciled, after extensive management review and analysis.  As part of our audit procedures, we requested the general journal of the audit period to perform the journal entry test. In various occasions, the University provided us with the general journal report, and with the audited beginning account balances of the previous year and the ending account balance of the audit year, we performed a roll-forward to test the completeness of the transactions. However, the University was not able to provide a general journal report to enable us to prove the accuracy and completeness of the journal entries.  As a result of our audit, we found that the Investment Fund activity as provided by the University was not properly reviewed and reconciled to the general ledger. Reviewing and reconciling the investment activity statement to the general ledger is a necessary step in ensuring that the fund is a profitable investment.  During our audit, we found that certain accounts payable balances were not reconciled in monthly basis. We noted that the aging payable had balances due to third parties which were already paid during the year but still due at year ended September 30, 2018. A post- closing adjustment was provided by the University, after extensive management review and analysis of those accounts.  During the audit, we noted that the Net Pension liability account and Deferred Outflows and Inflows of resources were not reconciled with the actuarial valuation report as of October 1, 2017 and Pension Reporting Package as of September 30, 2018.  We noted that various cash accounts were not properly reconciled with bank accounts. After extensive management review and analysis of those accounts, the University provided us significant journal entries to reconcile those accounts.  We noted that the long-term debt rollforward had errors, the principal balances were incorrect resulting in an understatement of the current and long term balances.  We noted that the analysis of impairment and depreciation of assets were not performed on a timely basis, resulting in post-closing adjustments. 74 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Cause This situation occurs because the University has not enforced, effective and efficient accounting and financial reporting policies and procedures to address these requirements. In addition, the University financial accounting and reporting structure is not designed to gather the necessary information efficiently and effectively to permit timely analysis of transactions and balances and proper reconciliation of accounts. The review and analyses of certain accounts are performed late in the year-end closing process. Effect The overall effect is that complete and accurate financial information may not be readily available, thus impacting management decisions taken throughout the year. In addition, errors or irregularities may occur and not be detected on a timely basis. Recommendation The University should continue its efforts to review and revise its current accounting and financial reporting structure such as the establishment or revision of policies and procedures, periodic reconciliation and analyses throughout the year and additional training to accounting personnel related to accounting and financial reporting matters including explanation of the year-end closing process. The University should establish a formal deadline for the preparation of all Federal Awards reconciliations that should require a preparer and reviewer signoff. Also, the University should document errors found, and the disposition or investigation of such errors, if any. Finally, the University should investigate and document any reconciling item not properly explained, or that has remained for an unusual period of time without being recorded. Views of responsible officials The University concurs with the recommendation. To implement the recommendation, the Acting Controller will review and revise the accounting and financial reporting structure; the newly designated Director of Accounting will implement a process to reconcile and analyze material transactions on a monthly basis; and the University will provide Banner Finance training to Controller Office personnel, grant administrators, and support staff. In addition, the Acting Controller will work with the newly designated Director of Contracts and Grants Accounting to implement a formal process to review and reconcile grant activity on a quarterly basis. The University anticipates implementing the recommendation by January 2020. Responsible official Earlyn Casimir, Special Assistant to the Vice President for Administration and Finance Stacey Chados, Acting Controller 75 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III - Federal Award Findings and Questioned Costs This section identifies the audit findings required to be reported by 2 CFR 200.516(a) of the Uniform Guidance (for example, material weaknesses, significant deficiencies and material instances of noncompliance, including questioned costs and material abuse). 76 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Finding No. 2018-003 Deficiency in Internal Controls over Compliance and Compliance with Special Reporting Requirements. CFDA No. 84.033 Federal Work Study Program Criteria 34 CFR 675.18 establishes that an institution must use at least seven percent (7%) of the sum of its initial and supplemental FWS allocations for an award year to compensate students employed in community service activities unless waived by the Secretary of Education. The institution can only use up to 10 percent of its FWS or $75,000, whichever is less, for a JLD program (Section 446(a)(1) of the HEA (42 USC 2756). Condition During our audit, we examined the FWS allocations for the academic year 17-18 and made the assessment with the requirements established in the Compliance Supplement. We noted that the Compensation to Students Enrolled in Community Service Activities did not comply with the parameters. Cause For the University, it was an unprecedented year after experiencing two category five hurricanes (Irma and Maria). The student population decreased because of the hurricanes, which led to unspent funds for this period. The unexpended amount affected the Community Service 7% allowable amount. By that reason, the Community Service Partners were impacted by the hurricanes as well and some of those locations didn't reopen. Effect In the case of the assistance paid with federal funds, it may result in noncompliance to the corresponding federal programs and the Department of Education could saction the Univeristy for noncompliance with this requirement. Questioned costs None Recommendation The University should immediately undertake a process to review its internal control procedures to ensure that they comply with the parameters required in the Compliance Supplement. 77 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Views of responsible officials The University has never previously failed to comply with the requirement to use at least 7 percent of its Federal Work Study allocations to compensate students employed in community service activities. As noted in the report, this condition occurred, or was impacted by, the September 2017 Hurricanes and their aftermath. Nonetheless, the University concurs with the recommendation and will comply with the requirements of the Federal Work Study Program. To implement this recommendation, the Interim Vice Provost for Access and Enrollment Services and the Director of Financial Aid will ensure compliance with the terms and conditions of the Federal Work Study Program or request a waiver through the Secretary of Education when compliance is not possible. Responsible official Mrs. Cheryl A. Roberts, Director of Financial Aid 78 UNIVERSITY OF THE VIRGIN ISLANDS (A Component Unit of the Government of the U.S. Virgin Islands) SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS SEPTEMBER 30, 2018 Finidng Reference Number Finding Description Questioned Cost Finding Current Status 2017-001 Financial Statements Finding None Uncorrected (see finding 2018-002) 2017-002 Information Technology - Password Implementation None Corrected 2017-003 Special Reporting Requirements None Corrected 2017-004 Reporting Requirements None Corrected 79