sva 2014 2010 opinion & financial statements

FINANCIAL STATEMENTS

OF

SHENANDOAH VALLEY ACADEMY

June 30, 2014, 2013, 2012, 2011, and 2010

Audited Financial Statements


June 30, 2014, 2013, 2012, 2011, and 2010

TABLE OF CONTENTS

Auditor’s Opinion on the Financial Statements ........................................................................................ 1 - 2 Statements of Financial Position ................................................................................................................... 3 Statements of Changes in Net Assets .......................................................................................................... 4 Statements of Cash Flows ............................................................................................................................ 5 Notes to the Financial Statements ......................................................................................................... 6 - 16

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To the Constituents Shenandoah Valley Academy New Market, Virginia We have audited the accompanying financial statements of Shenandoah Valley Academy (Organization), which comprise the statements of financial position as of June 30, 2014, 2013, 2012, 2011, and 2010, and the related statements of changes in net assets and statements of cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted 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 from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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 qualified audit opinion. Basis for Qualified Opinion The Organization included in these financial statements the cost and accumulated depreciation of land, land improvements, and buildings to which a related entity holds legal title. Accounting principles generally accepted in the United States of America require the cost and accumulated depreciation of land, land improvements, and buildings to be included in the financial statements of the Organization that owns them. In the absence of a written agreement stating otherwise, land improvements and buildings

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are considered to be owned by the legal title-holder of the land upon which they are located. The effects of including these properties in the financial statements of the Organization are to overstate total assets and net assets by $5,361,833, $5,607,045, $5,823,663, $6,056,454, and $6,263,354 at June 30, 2014 and 2013, 2012, 2011, and 2010, respectively, and to understate the change in net assets by $245,212, $216,618, $232,791, $237,915, and $182,768, respectively, for the years then ended. Qualified Opinion In our opinion, except for the effects of the matter discussed in the Basis for Qualified Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Shenandoah Valley Academy as of June 30, 2014 and 2013, 2012, 2011, and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

July 24, 2015

2014 2013 2012 2011 2010Total Total Total Total Total

ASSETSCurrent assetsCash and cash equivalent (Note 2) $ 82,384 - - 92,034 206,676 Accounts receivable, net (Note 4) 119,359 77,836 141,795 293,579 188,381 Inventory (Note 5) 39,580 31,825 33,024 36,001 115,141 Prepaid expense 25,622 24,781 25,948 24,604 25,220 Cash held for agency accounts (Note 2) 39,688 81,299 31,313 59,924 65,762 Total current assets 306,632 215,741 232,080 506,142 601,180

Plant assets, net (Note 6) 5,823,149 6,150,159 6,494,686 6,806,912 7,039,380

Other assetsCash held for: (Note 2) Unexpended plant 13,678 13,690 46,483 8,178 11,424 Endowment fund 57,719 39,734 36,018 23,885 32,720 Investments (Note 3) 817,178 294,528 44,296 31,202 30,376 Beneficial interest in Potomac Conference endowment (Note 4) 167,517 185,138 155,941 150,475 114,162 Accounts receivable (Note 4) - - 120,000 120,290 140,343 Columbia union revolving fund deposits at 1.25% 694,004 1,082,495 1,292,536 1,254,115 1,082,910 Total other assets 1,750,096 1,615,585 1,695,274 1,588,145 1,411,935 Total assets $ 7,879,877 7,981,485 8,422,040 8,901,199 9,052,495

LIABILITIESCurrent liabilitiesAccounts payable (Note 7) $ 437,023 180,336 647,439 542,148 387,765 Agency funds 39,688 82,297 75,528 59,924 65,762 Capital lease liability, current portion - - - - 13,603 Deferred income 58,844 3,000 1,850 62,926 - Total current liabilities 535,555 265,633 724,817 664,998 467,130

Other liabilitiesNotes payable, plant (Note 8) 253,156 326,358 368,046 431,153 521,172 Accrued retirement allowance (Note 7) 63,461 44,034 40,758 35,881 20,550 Long-term payable (Note 7) 1,106,108 857,574 - - - Total other liabilities 1,422,725 1,227,966 408,804 467,034 541,722 Total liabilities 1,958,280 1,493,599 1,133,621 1,132,032 1,008,852

NET ASSETSUnrestricted: unallocated (1,589,119) (1,190,108) (646,642) (477,420) (105,620) Unrestricted: allocated - - - 55,577 55,513 Unrestricted: net invested in plant 5,569,993 5,823,801 6,126,640 6,375,759 6,518,208 Total unrestricted 3,980,874 4,633,693 5,479,998 5,953,916 6,468,101 Temporarily restricted (Note 12) 233,829 189,875 167,347 218,822 180,589 Permanently restricted (Note 13) 1,706,894 1,664,318 1,641,074 1,596,429 1,394,953 Total net assets 5,921,597 6,487,886 7,288,419 7,769,167 8,043,643 Total liabilities and net assets $ 7,879,877 7,981,485 8,422,040 8,901,199 9,052,495

SHENANDOAH VALLEY ACADEMYStatements of Financial Position

June 30, 2014, 2013, 2012, 2011, and 2010

*Inter-fund borrowing is eliminated in the combined totals.See accompanying notes.

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2014 2013 2012 2011 2010CHANGES IN UNRESTRICTED NET ASSETS Total Total Total Total TotalUnrestricted revenues and supportTuition $ 1,926,263 1,762,252 2,141,867 2,113,938 2,158,197 Fees 272,170 190,241 266,139 216,103 220,530 Investment income 382 260 1,459 2,686 4,601 Miscellaneous income 105,568 112,957 126,513 105,411 107,825 Total educational and general income 2,304,383 2,065,710 2,535,978 2,438,138 2,491,153 Auxiliaries 1,398,630 1,286,477 1,795,529 2,324,248 2,162,303 Contributed services (Note 14) 40,118 42,146 43,491 29,341 29,372Total unrestricted revenues 3,743,131 3,394,333 4,374,998 4,791,727 4,682,828 Released from restrictions - operating 623,422 274,280 270,898 184,006 403,535 Total unrestricted revenues and support 4,366,553 3,668,613 4,645,896 4,975,733 5,086,363

Expenses and lossesEducational and general program servicesInstructional 2,002,468 1,844,678 1,941,281 1,896,632 1,824,146 Student services 141,238 162,472 195,254 174,362 189,301 Student financial aid 1,107,562 864,049 1,048,631 1,120,102 1,008,576 Total program services 3,251,268 2,871,199 3,185,166 3,191,096 3,022,023

Supporting servicesFund raising 51,725 71,134 105,225 88,867 86,213 Institutional support 781,661 651,385 724,139 691,411 699,697 Total education and general operating expense 4,084,654 3,593,718 4,014,530 3,971,374 3,807,933 Auxiliaries 1,896,431 1,897,315 2,028,804 2,316,687 2,171,820 Total operating expenses and losses 5,981,085 5,491,033 6,043,334 6,288,061 5,979,753 Net increase (decrease) without subsidy (1,614,532) (1,822,420) (1,397,438) (1,312,328) (893,390) Unrestricted subsidies received (Note 10) 912,363 942,000 841,997 752,994 747,996 Net Increase (decrease) from operations (702,169) (880,420) (555,441) (559,334) (145,394)

Nonoperating activityNonoperating revenue (Note 11) (91,183) 34,058 25,263 30,180 - Nonoperating expense (Note 11) (14,295) (16,857) (24,277) (33,671) (38,319) Net gain (loss) on investments (Note 11) 118,182 232 2,784 825 5,857 Net gain (loss) on sale of assets (Note 11) 8,458 300 (2,840) 500 - Released from restrictions - capital 28,188 16,382 80,593 47,315 78,510 Net increase (decrease) from nonoperating activity 49,350 34,115 81,523 45,149 46,048 Increase (decrease) unrestricted net assets (652,819) (846,305) (473,918) (514,185) (99,346)

CHANGES IN TEMPORARILY RESTRICTED NET ASSETSRestricted operating donations 688,394 275,810 218,084 242,239 390,588 Restricted capital donations 7,170 37,380 81,932 27,315 58,510 Total restricted income 695,564 313,190 300,016 269,554 449,098 Released from restrictions - operating (623,422) (274,280) (270,898) (184,006) (403,535) Released from restrictions - capital (28,188) (16,382) (80,593) (47,315) (78,510) Increase (decrease)Temporarily restricted net assets 43,954 22,528 (51,475) 38,233 (32,947)

CHANGES IN PERMANENTLY RESTRICTED NET ASSETSEndowment fund donations (Note 17) 42,576 23,244 39,364 165,163 67,008 Change in beneficial interest in Potomac Conference (Note 17) - - 5,281 36,313 10,065 Increase (decrease)Permanently restricted net assets 42,576 23,244 44,645 201,476 77,073

Increase (decrease) in net assets (566,289) (800,533) (480,748) (274,476) (55,220)

Net assets, beginning of year 6,487,886 7,288,419 7,769,167 8,043,643 7,994,766 Prior period adjustment (Note 19) - - - - 104,097 Net assets, end of year $ 5,921,597 6,487,886 7,288,419 7,769,167 8,043,643

SHENANDOAH VALLEY ACADEMYStatements of Changes in Net Assets

For the years ended June 30, 2014, 2013, 2012, 2011, and 2010

See accompanying notes.4


CASH FLOWS FROM OPERATING ACTIVITIESIncrease (decrease) in net assets $ (566,289) (800,533) (480,748) (274,476) (55,220) Adjustments to reconcile change in net assets to net cash providedDepreciation expense (Note 6) 372,153 385,982 394,059 381,691 335,046 Provision for uncollectable accounts receivable (6,003) 7,024 (8,328) (12,129) (108,278) (Gain) loss on sale of plant assets (8,458) (300) 2,840 (500) - Realized and unrealized (gain) loss on investments (118,182) (232) (2,784) (825) - Write off bookstore inventory - - - 46,779 - (Increase) decrease accounts receivable (35,520) 176,935 160,402 (73,017) 191,425 (Increase) decrease inventories and prepaid (8,596) 2,366 1,633 32,977 36,720 Increase (decrease) accounts payable 524,648 393,747 110,168 169,714 14,720 Increase (decrease) deferred income 55,844 1,150 (61,076) 62,926 (127) (Increase) decrease agency fund cash 41,611 (49,986) 28,611 5,838 127 Increase (decrease) agency fund liability (42,609) 6,769 15,604 (5,838) Net cash provided (used) by operating 208,600 122,922 160,381 333,140 414,413

CASH FLOWS FROM INVESTING ACTIVITIES(Increase) decrease, endowment fund cash (17,985) (3,716) (12,133) 8,835 398 (Increase) decrease, unexpended plant cash 14 32,793 (38,305) 3,246 (960) (Increase) decrease, non-operating investments - - (10,310) - - Change in value of beneficial interest in Potomac Conference endowment 17,621 (29,197) (5,466) (36,313) - New notes receivable (36,649) (40,720) (48,356) (210,428) - Payments received on notes receivable 425,140 250,761 9,935 39,223 (110,647) Proceeds from sale of plant assets 14,422 3,001 2,237 1,500 - Purchases of investments (404,468) (250,000) - - - Purchases of plant assets (51,109) (44,156) (86,910) (150,223) (125,688) Net cash provided (used) by investing (53,014) (81,234) (189,308) (344,160) (236,897)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from external borrowing 12,289 41,215 7,312 30,934 - Principal payments on notes payable (85,491) (82,903) (70,419) (134,556) (90,753) Net cash provided (used) by financing (73,202) (41,688) (63,107) (103,622) (90,753)

Increase (decrease) cash and equivalents 82,384 - (92,034) (114,642) 86,763 Cash and cash equivalents, beginning - 92,034 92,034 206,676 119,913 Cash and cash equivalents, ending $ 82,384 - - 92,034 206,676

Supplemental cash flow data Cash paid for interest (Note 11) $ 12,289 16,082 23,221 31,737 37,952

For the years ended June 30, 2014, 2013, 2012, 2011, and 2010Statements of Cash Flows


See accompanying notes.5

SHENANDOAH VALLEY ACADEMYNotes to the Financial Statements


(j) Current assets and liabilities: Assets and liabilities are classified as current or long-term, depending on their characteristics. This excludes from currentassets, cash and claims to cash that are: restricted to use for other than current operations, committee allocated for the acquisition or construction of plantassets. This excludes from current liabilities: long-term portion of all debt. Working capital (current assets less current liabilities) for the Organization usuallyreflects working capital of only the operating fund, since usually no assets or liabilities of the endowment fund are classified as current.

(h) Provision for uncollectable accounts: An allowance for uncollectable accounts is recorded based on an analysis of the collectability of accounts. Factorsconsidered include historical collection experience, the aging of receivables, and facts and circumstances surrounding specific accounts.

(i) Inventory: Inventories are presented at the lower of cost or market using the first-in first-out method.

(k) Permanently restricted net assets: The Organization records all donor-restricted perpetual endowments as permanently restricted net assets. TheOrganization interprets state law to require it to record all other endowments, absent donor stipulations, as permanently restricted net assets.

Note 1 – Organization description and summary of significant accounting policies

Organization description

Shenandoah Valley Academy (Organization) is operated by the Potomac Conference (Conference) of Seventh-day Adventists to provide a Christianeducation in a boarding school environment to secondary level students within its territory.

The Organization receives most of its revenue in the form of tuition and other charges from the parents or guardians of its students. It also receives operatingand capital subsidies from the Potomac Conference of Seventh-day Adventists.

The Organization is a religious not-for-profit organization, and is exempt from federal, state, and local income taxes under provisions of Section 501(c)(3) ofthe Internal Revenue Code, and corresponding sections of applicable state and local codes; except for taxes on unrelated business income as described insections 511-514 of the Internal Revenue Code.

Summary of significant accounting policies

(a) Basis of accounting: The significant accounting policies of the Organization are essentially the same as generally accepted accounting principles for not-for-profit organizations as promulgated by the Financial Accounting Standards Board. The significant policies are described below to enhance the usefulness ofthe financial statements. The financial statements of the Organization have been prepared on the accrual basis of accounting. The Organization hasevaluated events that occurred subsequent to the financial statement date, up to July 24, 2015, which is the date the financial statements were available to beissued.

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

(f) Fair value of financial instruments: Following are the major methods and assumptions used to estimate fair values:

(d) Plant assets and depreciation: Plant assets are recorded at cost when purchased or at fair market value at date of gift. Depreciation of land improvements,buildings, and equipment is provided over the estimated useful lives of the respective assets on a straight-line basis. Depreciation expense is reported byvarious program and supporting services in the Statement of Changes in Unrestricted Net Assets. The Organization capitalizes assets greater than $1,000.See Note 6 for disclosure of the estimated useful lives the Organization has established for its various classes of plant assets.

(e) Cash and equivalents: Cash equivalents are highly-liquid assets of the operating fund, which are readily convertible to cash and have a maturity date ofless than three months from date of acquisition. Cash and investments of funds other than operating are not classified as cash and cash equivalents. Theincrease or decrease in nonoperating cash and investments is reported in the statement of cash flows from investing activities.

(c) Restricted resources: The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit theuse of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarilyrestricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

The Organization reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets mustbe used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used toacquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, theOrganization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service.

(g) Student accounts receivable are deemed non-current when a student is no longer enrolled at the Organization. Current student balances must be paid infull before returning for the fall semester. Students enrolled in the monthly payment program could be suspended for financial reasons if payments are morethan one month in arrears. Semester-by-semester payee balances must be paid in full by the first month of each semester; full annual payee balances mustbe paid in full by the first month of the school year. Semester and annual payees who do not meet these deadlines are converted to monthly payment plans.

Short-term financial instruments are valued at their carrying amounts included in the statement of financial position, which are reasonable estimatesof fair value due to the relatively short period to maturity of the instruments. This applies to cash, cash equivalents, accounts receivable, and certaincurrent liabilities.

Investment securities are valued at the quoted market price or other reasonably obtainable market value estimate at the reporting date for those orsimilar securities. The difference between aggregate market value and cost for each type of investment is recorded in a valuation account. Thechange in this account each year is recognized as gain or loss.

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3.

Note 2 – Cash2014 2013 2012 2011 2010

Operating funds Total Total Total Total TotalImprest cash $ 4,406 4,406 3,024 787 4,406 Cash on hand - - - 62,926 - Checking accounts 79,912 36,605 3,921 18,636 130,747 Money market accounts 615 19,481 3,810 3,890 33,937 Savings accounts 37,139 20,807 20,558 65,719 103,348 Less: cash held for agency (39,688) (81,299) (31,313) (59,924) (65,762) Total operating cash $ 82,384 - - 92,034 206,676

2014 2013 2012 2011 2011Other than operating funds Total Total Total Total TotalChecking accounts* $ 111,085 134,723 113,814 91,987 109,906 Total other funds cash $ 111,085 134,723 113,814 91,987 109,906

(n) Concentrations of risk: The Organization receives most of its revenue from student-related activity. Budget and staff employment decisions each yeartypically must be made before actual enrollment is known. There is a risk that enrollment will be less than anticipated, which would reduce the ability of theOrganization to finance its budgeted level of operations.

Financial instruments that potentially subject the Organization to concentrations of credit risk include cash and cash equivalents, investments, and accountsreceivable. The Organization places its cash with FDIC insured financial institutions. Although such balances may exceed federally insured limits at certaintimes during the year, they are, in the opinion of management, subject to minimal risks. Investments are exposed to various risks, such as interest rate,market and credit risks. Due to the level of risks associated with investment securities, it is at least reasonably possible that changes in values will occur in thenear term. See note 4 for information regarding outstanding receivables.

Note 1 – Organization description and summary of significant accounting policies (continued)

(o) Fund accounting: To ensure observance of limitations and restrictions placed on the use of resources available to the Organization, the accounts aremaintained in accordance with the principles of fund accounting. Resources are classified for accounting and reporting into funds established according totheir nature and purposes. Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds have been combinedinto groups, and totals are presented for the Organization as a whole. The funds and fund groups are described in further detail below.

Operating funds: Include unrestricted and restricted resources available for current operations. These funds reflect the educational and general, auxiliaries,and independent operations operating activities. Additionally, they include plant assets acquired, respective accumulated depreciation, and respective debt.Since the amount is not material, the operating fund also shows the total held as fiscal agent for others.

Endowment funds: Are assets subject to restrictions of gift instruments requiring that the principal be held in perpetuity, be invested, and only the income fromsuch investments be used. The principal of true endowments is reported as permanently restricted net assets. Unspent income is recorded as unrestricted ortemporarily restricted net assets.

A significant degree of financial support for operating purposes is received by appropriation from the Conference. Details of the amounts are set forthin Note 10.

Details of amounts due from or payable to the Conference, and financial transactions, other than those in the ordinary course of business, between theOrganization and the Conference, are set forth in Notes 4 and 7.

*The Organization is required to maintain a minimum balance of $2,500 in the endowment fund checking account with SunTrust Bank to avoid bank fees.

(m) Related organizations: The Organization is an affiliate of the Potomac Conference Corporation of Seventh-day Adventists (Conference) by reason of thefollowing circumstances:

The officers of the Conference, and certain other members of the Conference staff, are members of the Board of Trustees of the Organization.

Legal title to all real property of the Organization is vested in the Conference. Asset values and related depreciation accounts are maintained on theOrganization's records.

(l) Investment income: Ordinary income from investments, loans, and the like is accounted for in the fund owning the assets, except for the endowment fund.Unrestricted income on endowment fund investments is accounted for as income of the operating fund. Restricted income on endowment fund investments isaccounted for as restricted support and temporarily restricted net assets until spent for the restricted purpose designated by the endowment instrument.

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Note 3 – Investments

Investments held for other than operating Cost Market Cost MarketCorporate stocks $ 10,310 8,090 10,310 8,700 Corporate bonds 33,000 33,269 33,000 31,927 General Conference Investments Fund 655,000 775,819 250,000 253,901 Total cost for other than operating 698,310 293,310 Unrealized appreciation (decline) investment value 118,868 1,218 Carrying amount at fair value $ 817,178 817,178 294,528 294,528

Investments held for other than operating Cost Market Cost MarketCorporate stocks $ 10,310 11,461 - - Corporate bonds 33,000 32,835 33,000 31,202 Total cost for other than operating 43,310 33,000 Unrealized appreciation (decline) investment value 118,868 (1,798) Carrying amount at fair value $ 162,178 44,296 31,202 31,202

Investments held for other than operating Cost MarketCorporate bonds $ 33,000 30,376 Total cost for other than operating 33,000 Unrealized appreciation (decline) investment value (2,624) Carrying amount at fair value $ 30,376 30,376

2014 2013 2012 2011 2010Composition of investment return Total Total Total Total TotalInvestment income $ 382 260 1,459 2,686 4,601 Unrealized gain (loss) in value of investments 118,182 232 2,784 825 5,857 Net gain (loss) on investments for which carrying value is fair value* 118,182 232 2,784 825 5,857 Total investment return $ 118,564 492 4,243 3,511 10,458

Level 1:

Level 2:

Level 3:

20132014

The Organization is subject to accounting principles that require disclosure about the information used to determine fair values for assets and liabilities that aresubject to fair value accounting on either a recurring or non-recurring basis. This information is separated into three "levels" of inputs, as follows:

Observable quoted market prices in active markets for identical assets or liabilities.

Direct or indirect observable market data, such as quoted prices in inactive markets for identical assets or liabilities, quoted prices in active marketsfor similar assets or liabilities, and other observable market data correlated to identical or similar assets or liabilities. Investments in GeneralConference Investment Funds are valued at net asset value (NAV) as reported by the General Conference investment office.

Unobservable inputs and assumptions based on the best information available to the entity.

* The Organization did not have any gain or loss on investments for which carrying value is not fair value.

2010

2012 2011

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Note 3 – Investments (continued)

Level 1 Level 2 Level 3Corporate stocks $ 8,090 - - Corporate bonds - 33,269 - General Conference Investments Fund - 775,819 - Totals $ 8,090 809,088 -

Level 1 Level 2 Level 3Corporate stocks $ 8,700 - - Corporate bonds - 31,927 - General Conference Investments Fund - 253,901 - Totals $ 8,700 285,828 -

Level 1 Level 2 Level 3Corporate stocks $ 11,461 - - Corporate bonds - 32,835 - Totals $ 11,461 32,835 -

Level 1 Level 2 Level 3Corporate bonds $ - 31,202 - Totals $ - 31,202 -

Level 1 Level 2 Level 3Corporate bonds $ - 30,376 - Totals $ - 30,376 -

Note 4 – Accounts receivable2014 2013 2012 2011 2010

Operating fund Total Total Total Total TotalCurrent student accounts $ 66,881 89,237 52,412 117,996 70,932 Former student accounts 39,745 33,161 67,309 39,344 87,933 Total student accounts 106,626 122,398 119,721 157,340 158,865 Less: allowance for uncollectable accounts (86,201) (92,204) (85,180) (93,508) (105,637) Net student accounts 20,425 30,194 34,541 63,832 53,228 Operations 27,600 - - - - Potomac Conference 66,384 42,083 28,451 48,726 - Other denominational organizations - 3,375 988 - 11,040 Faculty and staff accounts 750 1,950 100 2,050 - Trade accounts 4,200 234 57,715 145,386 38,020 Pledges receivable - - 20,000 20,000 20,000 Miscellaneous - - - 13,585 66,093 Net current accounts receivable 119,359 77,836 141,795 293,579 188,381

- - 120,000 120,290 140,343 Total operating fund accounts receivable 119,359 77,836 261,795 413,869 328,724

Endowment fund

167,517 185,138 155,941 150,475 114,162Total accounts receivable $ 286,876 262,974 417,736 564,344 442,886

Note 5 – Inventory 2014 2013 2012 2011 2010Total Total Total Total Total

Bookstore $ 742 742 742 1,391 81,963 Cafeteria 38,838 31,083 32,282 34,610 33,178 Total inventory $ 39,580 31,825 33,024 36,001 115,141

The Organization used the following inputs to determine fair values of assets valued on a recurring basis.

2012


2011


2010

2014The Organization used the following inputs to determine fair values of assets valued on a recurring basis.


2013

Pledges receivable, $20,000 within 1 year (received)

Beneficial interest in Potomac Conference endowment

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Note 6 – Plant assets Total Accumulated Depreciation

Educational, general, and auxiliaries Cost Depreciation Net Value ExpenseLand $ 37,106 - 37,106 - Land improvements (lives of 10 to 20 years) 770,573 443,767 326,806 57,094 Buildings (lives of 25 to 75 years) 7,600,535 2,776,705 4,823,830 174,043 Equipment (lives of 3 to 10 years) 2,312,980 1,861,491 451,489 124,838 Total educational, general, and auxiliaries 10,721,194 5,081,963 5,639,231 355,975

Independent operationsLand improvements (fully depreciated) 3,926 3,926 - - Buildings (lives of 25 to 33 years) 469,179 295,089 174,090 14,075 Equipment (lives of 3 to 10 years) 93,427 83,599 9,828 2,103 Total independent operations 566,532 382,614 183,918 16,178

Total plant assets $ 11,287,726 5,464,577 5,823,149 372,153

Total Accumulated DepreciationEducational, general, and auxiliaries Cost Depreciation Net Value ExpenseLand $ 37,106 - 37,106 - Land improvements (lives of 10 to 20 years) 770,573 386,673 383,900 50,555 Buildings (lives of 25 to 75 years) 7,600,535 2,602,662 4,997,873 173,970 Equipment (lives of 3 to 10 years) 2,273,488 1,751,325 522,163 146,969 Total educational, general, and auxiliaries 10,681,702 4,740,660 5,941,042 371,494

Independent operationsLand improvements (fully depreciated) 3,926 3,926 - - Buildings (lives of 25 to 33 years) 469,179 281,014 188,165 14,075 Equipment (lives of 3 to 10 years) 116,377 95,425 20,952 413 Total independent operations 589,482 380,365 209,117 14,488



Independent operationsLand improvements (fully depreciated) 3,926 3,926 - - Buildings (lives of 25 to 33 years) 469,179 266,938 202,241 14,075 Equipment (lives of 3 to 10 years) 116,377 95,012 21,365 413 Total independent operations 589,482 365,876 223,606 14,488





2013

2011

2014

2012

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Note 6 – Plant assets (continued)Total Accumulated Depreciation

Educational, general, and auxiliaries Cost Depreciation Net Value ExpenseLand $ 37,106 - 37,106 - Land improvements (lives of 10 to 20 years) 748,590 235,009 513,581 1,769 Buildings (lives of 25 to 75 years) 7,564,123 2,081,848 5,482,275 167,155 Equipment (lives of 3 to 10 years) 2,025,404 1,270,519 754,885 150,329 Equipment under capital lease 59,087 59,087 - - Total educational, general, and auxiliaries 10,434,310 3,646,463 6,787,847 319,253



Note 7 – Accounts payable 2014 2013 2012 2011 2010Total Total Total Total Total

Commercial accounts $ 267,037 52,909 183,615 159,029 131,199 Potomac Conference 1,106,108 857,574 325,060 183,307 113,381 Student credit balances 104,818 78,370 87,684 133,880 104,353 Accrued vacation/labor 28,109 23,887 35,050 40,587 32,405 Taxes Payable 41 - - - - Miscellaneous 37,018 25,170 16,030 25,345 6,427 Current accounts payable 1,543,131 1,037,910 647,439 542,148 387,765 Accrued retirement allowance 63,461 44,034 40,758 35,881 20,550 Total accounts payable $ 1,606,592 1,081,944 688,197 578,029 408,315

Note 8 – Notes payable 2014 2013 2012 2011 2010Total Total Total Total Total

$ 253,156 326,358 368,046 431,153 521,172 Total plant-related notes payable $ 253,156 326,358 368,046 431,153 521,172

2012 $ 76,2052013 79,5082014 64,1662015 8,7262016 9,105

Future 15,446Total $ 253,156

Note 9 – Capital lease liability


Dell Computers @ 10.41%, $1,025.87 per mo. $ - - - - 3,823 IKON Copiers @ 7.00%, $1,170 per month - - - - 9,780 Total capital lease - net present value $ - - - - 13,603

2010

Secured, Columbia Union Revolving Fund @ 4.25%

The Organization is the lessee of several capital leases. The assets and liabilities under capital lease are recorded at the lower of the present value of theminimum lease payments or the fair value of the asset. The assets are depreciated over the lower of their related lease terms or their estimated productivelives. Depreciation of the assets under capital lease is included in depreciation expense for 2011 and 2010.

Payments due on principal during the next five years are as follows:

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Note 10 – Subsidies received 2014 2013 2012 2011 2010Total Total Total Total Total

$ 912,363 942,000 841,997 752,994 747,996 Total unrestricted subsidies received $ 912,363 942,000 841,997 752,994 747,996

Note 11 – Nonoperating activity 2014 2013 2,012 2011 2010Total Total Total Total Total

Investment income $ (91,183) 34,058 25,263 30,180 - Nonoperating revenue $ (91,183) 34,058 25,263 30,180 -

Interest paid on debt $ (12,289) (16,082) (23,221) (31,737) (37,952) Miscellaneous expense (2,006) (775) (1,056) (1,934) (367) Nonoperating expenses $ (14,295) (16,857) (24,277) (33,671) (38,319)

Unrealized gain (loss) investment value $ 118,182 232 2,784 825 5,857 Net gain (loss) on investments $ 118,182 232 2,784 825 5,857

Proceeds from sale of plant assets $ 14,422 3,001 2,237 1,500 - Net value of plant assets sold (5,964) (2,701) (5,077) (1,000) - Net gain (loss) on sale of assets $ 8,458 300 (2,840) 500 -

Total nonoperating activity $ 21,162 17,733 930 (2,166) (32,462)

Note 12 – Temporarily restricted net assets

Temporarily restricted net assets are available for the following purposes or periods Balance Balance Balance Balance BalanceOperating funds 6/30/14 6/30/13 6/30/12 6/30/11 6/30/10Instructional $ 3,200 3 4,156 1,711 1,710 SVA Mission 61,047 21,625 16,898 18,359 - Campus beautification - - 1,120 1,120 4,149 Student aid 2 2 1 56,477 13,575 Orchard donations 4,943 3,633 2,678 - - Institutional advancement 21,043 - - - Total operating temporarily restricted net assets 90,235 25,263 24,853 77,667 19,434

Restricted capital donations, educ. and general 143,594 164,612 142,494 141,155 161,155 Total temporarily restricted net assets $ 233,829 189,875 167,347 218,822 180,589

Note 13 – Permanently restricted net assets Balance Balance Balance Balance Balance6/30/14 6/30/13 6/30/12 6/30/11 6/30/10

SVA true endowment $ 1,551,138 1,508,562 1,485,318 1,445,954 1,280,791

155,756 155,756 155,756 150,475 114,162 Total permanently restricted net assets $ 1,706,894 1,664,318 1,641,074 1,596,429 1,394,953

General operating subsidies - Potomac Conference


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Note 14 – Contributed services

Note 15 – Pension and other post-retirement benefits

Defined benefit plans

1.

2.

Required contributions from the Organization: NADRP RAHAP TOTALFor the year ended June 30, 2014 $ 65,162 61,640 126,802 For the year ended June 30, 2013 $ 53,976 51,058 105,034 For the year ended June 30, 2012 $ 58,877 55,695 114,572 For the year ended June 30, 2011 $ 43,791 41,424 85,215 For the year ended June 30, 2010 $ 46,733 44,208 90,941

Total contributions received from all employers:For the plan year ended December 31, 2014 $ 101,806,557 37,344,915 For the plan year ended December 31, 2013 $ 91,820,841 35,959,775 For the plan year ended December 31, 2012 $ 88,114,315 32,072,730 For the plan year ended December 31, 2011 $ 88,687,413 32,212,355 For the plan year ended December 31, 2010 $ 86,381,495 31,037,165

For the plan year ended December 31, 2014 less than less than For the plan year ended December 31, 2013 less than less than For the plan year ended December 31, 2012 less than less than For the plan year ended December 31, 2011 less than less than For the plan year ended December 31, 2010 less than less than

The Organization participates in the following non-contributory, defined benefit plans:

Because the following information is not publicly available, it is required to be disclosed on the basis of information received from each plan.

Whether the Organization’s contributions were more than or less than 5% of the total contributions received by each plan:

The defined benefit pension plan known as the Seventh-day Adventist Retirement Plan of the North American Division (NADRP). This plan, whichcovers substantially all employees of the Organizations, is administered by the General Conference of Seventh-day Adventists, North AmericanDivision (NAD), in Silver Spring, Maryland, and is exempt from the Employee Retirement Income Security Act of 1974 as a "multiple-employer" planof a church-related agency. This plan provides primarily monthly pension benefits based on years of service and other factors.

The NAD Committee voted to freeze accrual of service credit in NADRP effective December 31, 1999, except for employees who chose the careercompletion option, and to start a new defined contribution plan effective January 1, 2000. Certain employees will continue to be eligible for future benefitsunder this plan. The Organizations continue to make contributions to this plan, at rates determined annually by the plan.

The defined benefit health care plan known as the General Conference of Seventh-day Adventist North American Division Retiree AuxiliaryHealthcare Assistance and Death Benefit Plan (RAHAP). This plan, which covers substantially all employees of the Organization, is administered byNAD in Silver Spring, Maryland, and is exempt from the Employee Retirement Income Security Act of 1974 as a “multiple-employer” plan of a church-related agency. This plan provides primarily health-care benefits which supplement Medicare benefits. The extent of these benefits is based on yearsof service and the beneficiary’s monthly contribution.

Accounting standards define these plans as “multiemployer” plans. As such, it is not required, nor is it possible, to determine the actuarial value ofaccumulated benefits or plan net assets for employees of the Organization apart from other plan participants.

Information about the required contributions to these plans, the actuarial obligation for future benefits, and the funded status of these plans, is presented in thetables below.

Under provisions of Financial Accounting Standards Board's Accounting Standards Codification Section 958-605-25-16, contributions of services shall berecognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing thoseskills, and would typically need to be purchased if not provided by donation. The Organization has received the services of the General Conference AuditingService who have assisted in the audit of the financial statements for the years ended June 30, 2014, 2013, 2012, 2011, and 2010. The amount of contributedservices recognized as revenues and recorded as administrative expense for the periods are $40,118, $42,146, $43,491, $29,341, and $29,372 for the yearsthen ended, respectively. These amounts are product of the number of person-hours spent in performing the audit and the cost-recovery rate established bythe General Conference of Seventh-day Adventists. The cost of these services is paid 50% by General Conference of Seventh-day Adventists, NorthAmerican Division and 50% by Columbia Union Conference of Seventh-day Adventists.

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Note 15 – Pension and other post-retirement benefits, continued

NADRP RAHAPFor the plan year ended December 31, 2014 $ 218,023,700 66,446,449 For the plan year ended December 31, 2013 $ 209,924,999 71,035,285 For the plan year ended December 31, 2012 $ 193,148,475 62,771,811 For the plan year ended December 31, 2011 $ 185,118,134 59,165,497 For the plan year ended December 31, 2010 $ 198,283,923 62,164,536

Date of plan year-end for latest actuarial information 12/31/2013 12/31/2012Actuarial liability for future benefits $ 1,481,982,124 1,013,326,701 Value of net assets available for benefits $ 209,924,999 62,771,811 Plan funded status as of date of last actuarial data Less than 65% Less than 65%

●

●

●

●

●

●

●

●

Note 16 – Uncertain tax positions

Note 17 – Endowments

Other information about risks and contingencies related to these plans are as follows:Information about the plans is not publicly available, so no “certified zone status” has been determined.The Organization's required contributions are not the subject of any collective bargaining agreement.No funding improvement plans or rehabilitation plans had been implemented or were pending.

Risks and other informationThe risks of participating in multiemployer plans are different from single-employer plans, in the following aspects:

Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.If a participating employer stops contributing to a plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

If the Organization chooses to stop participating in a multiemployer plan, the Organization may be required to pay the plan an amount based on theunderfunded status of the plan, referred to as a withdrawal liability.

Plan net assets available for benefits:

Actuarial obligation and funded statusBecause the following information is not publicly available, it is required to be disclosed on

The Organization has not paid any “surcharge” to either of the plans.

1. The duration and preservation of the fund 2. The purposes of the Organization and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the Organization 7. The investment policies of the Organization

Investment earnings from donor-restricted endowment funds are classified as unrestricted income absent explicit donor stipulations to the contrary. In theevent that the fair value of donor-restricted endowment funds falls below the level required to be maintained in perpetuity, the resulting deficiency is recordedas a reduction of unrestricted net assets. Appreciation recorded during the years ended June 30, 2014, 2013, 2012, 2011, and 2010 amounted to $118,182,$232, $2,784, $825, and $5,867, respectively.

Endowment investment policies – return objectives, risk parameters, and strategies: The Organization recognizes the perpetual nature of endowments andthe need to maintain an investment return sufficient to support the program for which the principal was given, the Endowment Pool principal will be invested inthose assets which have the highest statistical probability of preserving , in real rather than nominal terms, the principal, while simultaneously generating themaximum possible rate of return.

Endowment spending policies and relation to investment objectives: The Organization will allocate 80% of the average of the prior three year returns net of theOrganization's tuition inflation rate for scholarship funding. The residual 20% would be retained to permit scholarship funding during years in which theendowment earnings were flat. There will be a minimum allocation of $5,000 per year for scholarship funding.

The Organization is subject to the provisions of the Virginia Prudent Management of Institutional Funds Act (VPMIFA) and has chosen to preserve the fairvalue of the original gift of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result, the Organization classifies aspermanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to thepermanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument.The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restrictednet assets until those amounts are appropriated for expenditure by the Organization. The Organization considers the following factors in making adetermination to appropriate or accumulate donor-restricted endowment funds.

Tax positions are taken based on interpretation of federal, state and local income tax laws. Management periodically reviews and evaluates the status ofuncertain tax positions and makes estimates of amounts, including interest and penalties, ultimately due or owed. No amounts have been identified, orrecorded as uncertain tax positions. Federal, state, and local tax returns generally remain open for examination by the various taxing authorities for a period ofthree to four years.

No minimum contribution for future periods has been determined or required of the Organization.

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Note 17 – Endowments (continued)

Endowment net asset compositionPermanently

Endowments by type Unrestricted Restricted TotalDonor-restricted endowments, June 30, 2014 $ (55,715) 1,706,894 1,651,179 Donor-restricted endowments, June 30, 2013 $ (82,423) 1,664,318 1,581,895 Donor-restricted endowments, June 30, 2012 $ (117,283) 1,641,074 1,523,791 Donor-restricted endowments, June 30, 2011 $ (145,510) 1,596,429 1,450,919 Donor-restricted endowments, June 30, 2010 $ (175,872) 1,394,953 1,219,081

Changes in endowment net assets are as follows: Permanently

Unrestricted Restricted Total

Endowment net asset, July 1, 2013 $ (82,423) 1,664,318 1,581,895 Investment return:Investment income (91,183) - (91,183) Net appreciation (appreciation) realized and unrealized 118,182 - 118,182 Total investment return 26,999 - 26,999 Contributions - 42,576 42,576 Appropriation of endowment assets for expenditure (291) - (291) Endowment net asset, June 30, 2014 $ (55,715) 1,706,894 1,651,179

Endowment net asset, July 1, 2012 $ (117,283) 1,641,074 1,523,791 Investment return:Investment income 34,058 - 34,058 Net Appreciation (decline) realized and unrealized 232 - 232 Total investment return 34,290 - 34,290 Contributions - 23,244 23,244 Appropriation of endowment assets for expenditure 570 - 570 Endowment net asset, June 30, 2013 $ (82,423) 1,664,318 1,581,895

Endowment net asset, July 1, 2011 $ (145,510) 1,596,429 1,450,919 Investment return:Investment income 25,263 - 25,263 Net Appreciation (decline) realized and unrealized 2,784 - 2,784 Total investment return 28,047 - 28,047 Contributions - 39,364 39,364 Increase in value of beneficial interest in Potomac Conference endowment - 5,281 5,281 Appropriation of endowment assets for expenditure 180 - 180 Endowment net asset, June 30, 2012 $ (117,283) 1,641,074 1,523,791

Endowment net asset, July 1, 2010 $ (175,872) 1,394,953 1,219,081 Investment return:Investment income 30,180 - 30,180 Net Appreciation (decline) realized and unrealized 825 - 825 Total investment return 31,005 - 31,005 Contributions - 165,163 165,163 Increase in value of beneficial interest in Potomac Conference endowment - 36,313 36,313 Appropriation of endowment assets for expenditure (643) - (643) Endowment net asset, June 30, 2011 $ (145,510) 1,596,429 1,450,919

Endowment net asset, July 1, 2009 $ (181,362) 1,317,880 1,136,518 Investment return:Investment income 37,672 - 37,672 Net Appreciation (decline) realized and unrealized 5,856 - 5,856 Total investment return 43,528 - 43,528 Contributions - 67,008 67,008 Increase in value of beneficial interest in Potomac Conference endowment - 10,065 10,065 Appropriation of endowment assets for expenditure (38,038) - (38,038) Endowment net asset, June 30, 2010 $ (175,872) 1,394,953 1,219,081

2014

2013

2012

2011

2010

15



Note 17 – Endowments (continued) 2014 2013 2012 2011 2010

Composition of restricted endowment assets Total Total Total Total TotalSVA true endowment $ 1,551,138 1,508,562 1,485,318 1,445,954 1,280,791

155,756 155,756 155,756 - -

$ 1,706,894 1,664,318 1,641,074 1,445,954 1,280,791

Note 18 – Working capital and liquidity - operating funds 2014 2013 2012 2011 2010

Working capital Total Total Total Total TotalTotal current assets $ 306,632 215,741 232,080 506,142 601,180 Total current liabilities (535,555) (265,633) (724,817) (664,998) (467,130) Actual working capital (228,923) (49,892) (492,737) (158,856) 134,050 Recommended working capital* 1,447,609 1,383,922 1,482,651 1,629,065 1,619,274 Working capital excess (deficit) $ (1,676,532) (1,433,814) (1,975,388) (1,787,921) (1,485,224) Percent of recommended working capital -15.81% -3.61% -33.23% -9.75% 8.28%

Current ratio 0.57 0.81 0.32 0.76 1.29

LiquidityCash and investments $ 82,384 - - 92,034 206,676 Accounts receivable - Conference 66,384 42,083 28,451 - - Total liquid assets 148,768 42,083 28,451 92,034 206,676 Current liabilities (535,555) (265,633) (724,817) (664,998) (467,130) Allocated net assets - - - (55,577) (55,513) Total commitments (535,555) (265,633) (724,817) (720,575) (522,643) Liquid assets surplus (deficit) $ (386,787) (223,550) (696,366) (628,541) (315,967) Percent liquid assets to commitments 27.78% 15.84% 3.93% 12.77% 39.54%

* Calculation of recommended working capital15% of operating expense $ 897,163 823,655 906,500 943,209 896,963 Long-term payables 316,617 370,392 408,804 467,034 541,722 Temporarily restricted net assets 233,829 189,875 167,347 218,822 180,589 Total recommended working capital $ 1,447,609 1,383,922 1,482,651 1,629,065 1,619,274

Note 19 – Prior period adjustment for beneficial Interest in endowment

Accounting principles generally accepted in the United States require the Organization to record as a non-current asset, and as permanently restricted netassets, the net present value of the beneficial interest in the Potomac Conference of Seventh-day Adventists (Conference) endowments. During 2011, it wasdetermined that the Organization has a beneficial interest in an endowment held by the Conference. The cumulative effect of the prior period adjustment atJuly 1, 2009 was to increase non-current assets and permanently restricted net assets by $104,097. The financial activity for the year ended June 30, 2010,has been restated to reflect an increase in the value of this beneficial interest of $10,065.

Total endowment assets classified as permanently restricted net assets


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sva 2014 2010 opinion & financial statements

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