2022 Annual Report LU Digital

Financial Report Included in the following pages are highlights of the University’s 2021–2022 fiscal year financial results, as well as key excerpts from the University’s consolidated financial statements. Statement of Financial Position A S S E T S The largest categories within the University’s $3.1 billion asset balance are investments and capital assets. The University’s endowment fund comprises the majority of the University’s investment balance (see “Endowment Review” on page 19) and experiences growth based on donor support and investment return net of operating distributions. Significant capital projects in process or recently completed include renovations to Chandler-Ullmann Hall, the Lehigh Business Building Expansion, and continued progress on new residential housing facilities. L I A B I L I T I E S The Bonds, Loans and Notes Payable balance of $499 million comprises the largest liability balance on the consolidated financial statements. The University’s debt balance includes a diversified mix of fixed and variable rate, and taxable and tax-exempt obligations. In support of the tax-exempt debt portfolio, the University has entered into interest rate exchange agreements that effectively minimize the variable rate exposure and/or reduce the University’s effective interest rate. In fiscal year 2021–2022, the University’s balance sheet also includes a $44.4 million asset (in Property, Plant and Equipment) and corresponding liability (in Other Liabilities) relating to the SouthSide Commons residential facility that is operated by a third party under the terms of a ground lease. N E T A S S E T S The University’s Net Assets balance of over $2.4 billion is classified as “with donor restrictions” or “without donor restrictions” in accordance with accounting standards. Net assets without donor restrictions are free of donor restrictions but may be designated for specific purposes by action of the Board of Trustees or senior management. Net assets with donor restrictions include net assets with donor-imposed restrictions that may be met by actions of the University or by the passage of time as well as net assets that are subject to permanent donor restrictions. Donors of these assets generally permit the University to use all or part of the investment income on related investments for general or specific purposes in accordance with a Board-approved spending policy. Statement of Activities O P E R AT I N G R E V E N U E S Net Tuition Revenue and Investment Return comprise the two largest sources of unrestricted operating revenue, representing 56% and 22% of the consolidated total in fiscal year 2021–2022. Tuition and fee revenue is reported net of related scholarships. Operating Investment Return includes $70.4 million of distributed earnings from the University endowment fund. The University’s policy for the distribution of endowment earnings is based on a three-year moving average market value that includes a ceiling and floor to insulate program spending from significant market fluctuations. While the $70.4 million of distributed earnings from the university endowment must be used according to the specified purpose of each fund, the payout touches all areas of the university and demonstrates the ongoing commitment to financial aid with more than 46 percent of the university's donor restricted endowment designated for scholarships and fellowships. In fiscal year 2021–2022, institutional financial aid was provided to more than 50 percent of undergraduate students, with an average need-based aid award of just over $49,313. O P E R AT I N G E X P E N S E The University continues to manage its expenses responsibly, aligning institutional resources from all sources to support its mission of education, research and public service. Salaries and benefits comprise approximately one-half of the University’s annual operating expense. NONO P E R AT I N G AC T I V I T Y Nonoperating activity includes transactions of a long-term investment nature or that indirectly relate to core activities. Examples include contributions restricted for campus improvements, contributions restricted because of donorimposed stipulations, income and expense resulting from certain fair-value adjustments, and investment returns from endowment net of earnings distributed for operations. 1 7 | L E H I G H U N I V E R S I T Y