#1University of South Carolina Upstate Foundation and Supporting Organization Consolidated Financial Statements Years Ended June 30, 2022 and 2021#2Table of Contents Independent Auditors' Report... Consolidated Financial Statements: Consolidated Statements of Financial Position Consolidated Statements of Activities Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Supplemental Information: Consolidating Statement of Financial Position Consolidating Statement of Activities 1 3 6 7 16 17#3FORV/S Independent Auditors' Report Board of Directors University of South Carolina Upstate Foundation and Supporting Organization Spartanburg, South Carolina Opinion We have audited the accompanying consolidated financial statements of the University of South Carolina Upstate Foundation and Supporting Organization (the “Organization"), which comprise the consolidated statements of financial position as of June 30, 2022 and 2021, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Organization as of June 30, 2022 and 2021, and the consolidated results of its activities, changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America ("GAAS"). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Organization and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern for one year after the date that the consolidated financial statements are available to be issued. Auditors' Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. FORVIS is a trademark of FORVIS, LLP, registration of which is pending with the U.S. Patent and Trademark Office. 1#4FORV/S The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements. In performing an audit in accordance with GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. • Obtain an understanding of internal control relevant to the audit 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 Organization's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplementary information is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position, results of activities, and changes in net assets of the individual entities, and is not a required part of the consolidated 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 consolidated financial statements. The supplementary information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. FORVIS, LLP Greenville, South Carolina September 1, 2022 FORVIS is a trademark of FORVIS, LLP, registration of which is pending with the U.S. Patent and Trademark Office. 2#5University of South Carolina Upstate Foundation and Supporting Organization Consolidated Statements of Financial Position June 30, 2022 and 2021 Assets 2022 2021 Cash and cash equivalents $ Unconditional promises to give, net 161,169 1,350,500 966,713 62,500 Annuity receivable 209,986 Other receivables 301 Investments 15,071,006 16,523,929 Assets held in charitable remainder trust 281,264 325,661 Total assets $ 16,863,939 $ 18,089,090 Liabilities and Net Assets Liabilities: Accounts payable 41,256 $ 64,356 Deferred grant revenue 175,000 Liability under charitable remainder trusts 184,921 226,944 Annuity obligation 209,986 Total liabilities 401,177 501,286 Net assets: Net assets without donor restrictions 849,868 1,452,826 Net assets with donor restrictions 15,612,894 16,134,978 Total net assets 16,462,762 17,587,804 Total liabilities and net assets 16,863,939 $ 18,089,090 3 See accompanying notes.#6University of South Carolina Upstate Foundation and Supporting Organization Consolidated Statement of Activities For the Year Ended June 30, 2022 Net assets without donor restrictions Net assets with donor restrictions Total Operating revenues, gains (losses), and other support: Contributions In-kind contributions Earned income - contributions Unrealized losses on investments, net 151,219 2,403,807 2,555,026 127,222 127,222 76,171 76,171 Investment income, net (417,437) 40,157 (1,982,271) (2,399,708) 54,572 94,729 Change in value of charitable remainder trust (2,374) (2,374) Administrative fee 113,252 113,252 Other revenue 746 746 Satisfaction of program restrictions 1,071,989 (1,071,989) Total operating, revenues, gains (losses), and other support 1,087,148 (522,084) 565,064 Operating expenses: Program expenses: Scholarships 158,380 Supporting services to USC Upstate 953,840 In-kind expenses 127,222 Program operating expenses 247,703 Supporting expenses: Administrative fee 113,252 Bank fees Foundation operating expenses 387 89,322 158,380 953,840 127,222 247,703 113,252 387 Total operating expenses 1,690,106 89,322 1,690,106 Change in net assets (602,958) (522,084) (1,125,042) Net assets, beginning of year 1,452,826 16,134,978 17,587,804 Net assets, end of year 849,868 15,612,894 $ 16,462,762 See accompanying notes.#7University of South Carolina Upstate Foundation and Supporting Organization Consolidated Statement of Activities For the Year Ended June 30, 2021 Net assets without donor restrictions Net assets with donor restrictions Total Operating revenues, gains and other support: Contributions In-kind contributions Earned income - contributions 108,528 702,143 810,671 117,067 117,067 69,032 69,032 Unrealized gains on investments, net 500,753 2,551,960 3,052,713 Gain on sale of land 13,000 13,000 Investment income, net 16,208 119,455 135,663 Change in value of charitable remainder trust 32,510 32,510 Administrative fee 106,027 106,027 Other revenue 57,265 57,265 Satisfaction of program restrictions 614,496 (614,496) Total operating revenues, gains, and other support 1,533,344 2,860,604 4,393,948 Operating expenses: Program expenses: Scholarships Supporting services to USC Upstate Interest expense 109,331 109,331 406,777 406,777 20,310 20,310 In-kind expenses 117,067 117,067 Program operating expenses 125,023 125,023 Supporting expenses: Administrative fee 106,027 106,027 Bank fees 1,938 1,938 Foundation operating expenses 7,403 7,403 Total operating expenses 893,876 893,876 Change in net assets 639,468 2,860,604 3,500,072 Net assets, beginning of year 813,358 13,274,374 14,087,732 Net assets, end of year $ 1,452,826 $ 16,134,978 $ 17,587,804 See accompanying notes. 5#8University of South Carolina Upstate Foundation and Supporting Organization Consolidated Statements of Cash Flows For the Years Ended June 30, 2022 and 2021 Cash flows from operating activities: 2022 2021 Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities: Unrealized losses (gains) on investments Gain on sale of land Net changes in operating assets and liabilities: Unconditional promises to give, net Annuity receivable, net Other receivables Assets held in charitable remainder trust Accounts payable $ (1,125,042) 3,500,072 2,399,708 (3,052,713) (13,000) (1,288,000) 1,128,131 209,986 (209,986) 301 (301) 44,397 (66,455) (23,100) 42,862 Deferred grant revenue 175,000 Liability under charitable remainder trusts (42,023) 33,945 Annuity obligation (209,986) 209,986 Due to Spartanburg County Commission on Higher Education (394,793) Net cash provided by operating activities 141,241 1,177,748 Cash flows from investing activities: Proceeds from sale of land 385,000 Sales of investments 5,790,000 652,910 Purchases of investments (6,736,785) (580,040) Net cash (used) provided by investing activities (946,785) 457,870 Cash flows from financing activities: Payments on long-term debt Net cash used by financing activities (1,601,822) (1,601,822) (Decrease) increase in cash and cash equivalents (805,544) 33,796 Cash and cash equivalents, beginning of year 966,713 932,917 Cash and cash equivalents, end of year $ 161,169 $ 966,713 See accompanying notes. 6#9University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 1. Description of Organization and Summary of Significant Accounting Policies Organization The University of South Carolina Upstate Foundation (the "Foundation") was incorporated under the laws of South Carolina to operate as a permanent foundation to accept gifts for charitable, benevolent, cultural and educational purposes for the exclusive use and benefit of the University of South Carolina Upstate (the “University"). The University of South Carolina Upstate Foundation Capital Development Foundation ("CDF") was formed in 2011 to accept real property donated to the University, serve as the purchasing agent for property on behalf of the University that is integral to the growth of the campus, and to manage property under leasing agreements to the University. In 2020, CDF became a supporting organization of the Foundation and is known collectively as the University of South Carolina Upstate Foundation and Supporting Organization (the "Organization"). The Organization's activities are overseen by a self-perpetuating, independent board of directors. Principles of Consolidation The accompanying consolidated financial statements include the consolidated accounts of the Foundation and CDF. All material intercompany accounts and transactions have been eliminated in consolidation. Basis of Accounting The consolidated financial statements have been prepared using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded as earned and expenses are recorded at the time the liability is incurred. Basis of Presentation Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor- imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Net Assets without Donor Restrictions - Net assets that are not subject to donor-imposed restrictions or otherwise limited by contractual agreements with outside parties and may be expended for any purpose by the Organization. Net Assets with Donor Restrictions - Net assets whose use by the Organization is subject to donor-imposed stipulations. Some donor restrictions are temporary in nature; such restrictions may be fulfilled by actions of the Organization pursuant to those stipulations or by the passage of time. Other donor restrictions are perpetual in nature, where the donor has stipulated the funds be maintained in perpetuity. Use of Estimates The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Methods Used for Allocation of Expenses Among Programs and Supporting Services The Organization allocates expenses on a functional basis among its various programs and supporting services and uses a direct allocation of expenses. 7#10University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements Cash and Cash Equivalents Cash and cash equivalents include certain investments in highly liquid debt instruments with original maturities of three months or less. The Organization maintains bank accounts at various financial institutions covered by the Federal Deposit Insurance Corporation ("FDIC"). At times throughout the year, the Organization may maintain bank account balances in excess of the FDIC insured limit. It is management's opinion that the Organization is not exposed to any significant credit risk related to cash. Promises to Give The Organization records unconditional promises to give as receivables and revenues within the appropriate net assets category. Revenues are considered to be available for unrestricted use unless specifically restricted by the donor. Contributions that are expected to be collected within one year are recorded at net realizable value. Contributions that are expected to be collected in future years are recorded at fair value at the date of the promise. The fair value is computed by using the present value of their estimated future cash flows, using a risk- free rate of return appropriate for the expected term of the promise to give. Amortization of the discounts is recorded as contribution revenue in accordance with donor restrictions on the contributions. An allowance for uncollectible promises to give is determined based on collection experience in prior years and management's analysis of specific promises made. Conditional promises to give are recognized when the conditions on which they depend are substantially met. There were no conditional promises to give at June 30, 2022 and 2021. Annuity Under the charitable gift annuity agreement, the Organization agrees to pay an annuity in consideration for a specific gift. For the charitable gift annuity, the asset is recorded at fair value when received on the consolidated statement of financial position with a liability recognized equal to the present value of amounts which the Organization expects to pay the annuity beneficiary. At June 30, 2021 there was one annuity, which was calculated using a discount rate of 2%. During 2022, this annuity was transferred to a different beneficiary so there is no annuity receivable and associated obligation at June 30, 2022. Investments The Organization's investments are recorded at fair value on the consolidated statement of financial position. The Organization reports investment income and gains and losses on investments and increases or decreases in net assets without donor restrictions unless a donor or law restricts their use. Investments are managed to achieve maximum long-term total return. Therefore, the distinction between dividend and interest income and realized gains is not considered significant. The board has authorized a policy permitting the distribution of amounts not exceeding 4% of the prior 12-quarter rolling average Unitized Market Value of the long-term pooled investment portfolio. This policy is designed to maintain the long-term purchasing power of each fund. In July 2022, the policy was updated to 3%-5% of the prior 12-quarter rolling average Unitized Market Value of the long-term pooled investment portfolio. Income Taxes The Organization has been granted exemption from income taxes under Section 501(c)(3) of the Internal Revenue Code and, accordingly, no provision for income tax is recorded in the accompanying consolidated financial statements. The Organization has determined that it does not have any unrecognized tax benefits or obligations as of June 30, 2022. 8#11University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements Deferred Grant Revenue The Organization receives payments for grants in advance of the related expenditures. Income is recognized during the periods grant expenditures are incurred. Charitable Remainder Trusts Charitable remainder trusts represent assets that are currently held in trust for the benefit of designated income beneficiaries. Upon the death of the beneficiaries, the assets held in trust will be distributed to the Organization based upon the provisions of the trust, principally for unrestricted use. The value of assets and liabilities of the charitable remainder trusts is computed using a 3.2% discount rate. For those charitable remainder trusts for which the Organization is the trustee, an asset is recorded for the market value of the assets held in the trust, while a corresponding liability is recorded for the discounted value of future payment of the beneficiary. In-Kind Support Occasionally, the Organization receives contributions of goods and supplies for use in its programs. Contributed goods and supplies are recognized as revenue and expensed at their estimated fair value at the date of receipt. They are classified as in-kind contributions and in-kind expenses on the accompanying consolidated statement of activities. Risk and Uncertainties The Organization maintains investments in various stocks, fixed income securities, money market funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect the Organization's investment balance reported on the consolidated statement of financial position. 2. Unconditional Promises to Give Unconditional promises to give are included on the consolidated financial statements as receivables and revenue of the appropriate net asset category. Amortization of the discount is recorded as additional contribution revenue in accordance with donor-imposed restrictions, if any. The discount for unconditional promises to give as of June 30, 2022 was not significant. Unconditional promises to give include the following at June 30: Due in one year or less Due in one to five years Unconditional promises to give 2022 2021 $ 1,320,500 30,000 $ 19,000 43,500 $ 1,350,500 $ 62,500 9#12University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements 3. Investments Investments are stated at fair value. Realized and unrealized gains and losses are reflected on the consolidated statement of activities. Management has evaluated investment values as of June 30, 2022 and 2021 noting no permanent impairment. Investments consist of the following at June 30: Cash Domestic equity International equity Flexible capital Fixed income Real assets 4. Fair Value Disclosures 2022 2021 1,450,945 6,271,671 47,545 4,937,952 2,665,664 2,708,551 1,756,470 3,244,145 2,895,415 4,062,125 30,841 1,523,611 $ 15,071,006 $ 16,523,929 Fair value as defined under generally accepted accounting principles is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Generally accepted accounting principles establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: • Level 1: Observable inputs such as quoted prices in active markets. • • Level 2: Inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3: Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The recorded market price for alternative investments is at the fund's NAV estimated by the individual investment manager of the fund taking into account such factors as the financial condition of each investee, economic and market conditions affecting their operations, any changes in management, the length of time since the initial investment, recent arm's-length transactions involving the securities of the investee, the value of similar securities issued by companies in the same or similar businesses, the underlying investments held by the fund and limited marketability of the portfolio. The fair value in such investments is subject to review by the Organization and independent annual financial statement audits of these investments. The Organization's investment charitable remainder trusts are valued at the fair value of the trust's underlying assets which is derived principally from inputs of quoted prices in active markets as reported by the trust's fund managers. These are classified within Level 3 of the valuation hierarchy. 10#13University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements The following tables set forth by level within the fair value hierarchy the Organization's assets accounted for at fair value on a recurring basis as of June 30: Fair value measurements at June 30, 2022 using: Quoted prices Fair value at June 30, 2022 in active markets for identical assets (Level 1 inputs) Significant other observable inputs (Level 2 inputs) Significant unobservable inputs (Level 3 inputs) Investments: Domestic equity International equity $ 6,271,671 2,665,664 $ 6,271,671 $ 2,665,664 Fixed income 2,895,415 2,397,949 497,466 Real assets 30,841 11,863,591 30,841 11,366,125 497,466 Alternative investments at net asset value (1) 1,756,470 Total investments 13,620,061 Assets held in charitable remainder trust 281,264 281,264 $ 13,901,325 $ 11,366,125 $ 497,466 281,264 (1) In accordance with Subtopic 820-10, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of financial position. The following table sets forth a summary of the Organization's investments with a reported estimated fair value using net asset value per share at June 30, 2022: Fair Value at June 30, 2022 Redemption Redemption Frequency Period Graham Absolute Return LTD Class B (a) $ 371,914 Quarterly 30 days Alkoen Growth Offshore Fund II LTD Class 3 (b) Nineteen 77 Global Multi-Strategy Alpha II LTD (c) Nineteen 77 Global Merger Arbitrage LTD (d) 308,238 Quarterly 20 days 755,126 Monthly or Quarterly 30 days 321,192 Monthly 15 days Total investments at net asset value $ 1,756,470 Investments: Domestic equity International equity Flexible capital Fixed income Real assets Common stocks Total investments Assets held in charitable remainder trust Fair value measurements at June 30, 2021 using: Quoted prices Significant Fair value at June 30, 2021 in active markets for identical assets (Level 1 inputs) $ 4,678,503 $ 2,708,551 3,244,145 4,062,125 1,523,611 259,449 16,476,384 other observable inputs (Level 2 inputs) $ 3,469,659 1,418,517 3,161,273 Significant unobservable inputs (Level 3 inputs) $ 1,208,844 1,290,034 82,872 4,062,125 356,753 1,166,858 259,449 259,449 12,468,327 3,748,608 325,661 325,661 $ 16,802,045 $ 259,449 $ 12,468,327 $ 4,074,269 11#14University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements Investments, described in Note 3, are held at fair value and included in the table above except cash totaling $1,450,945 and $47,545 at June 30, 2022 and 2021, respectively, which are held by the investment manager for investment. During fiscal year 2021, all investments except common stock were held by the Spartanburg County Foundation. It's annual audited consolidated financial statements are available by contacting the Spartanburg County Foundation at 424 East Kennedy Street, Spartanburg, South Carolina 29302, (864) 582-0138. The following is a description of the alternative investments held by the Organization: (a) The Organization has an alternative investment in a private investment fund of $371,914 and $- as of June 30, 2022 and 2021, respectively. The Organization has committed a total of $320,000 and has no unfunded commitment as of June 30, 2022. The investment objective of the fund is to achieve long-term capital appreciation through professionally managed trading in both U.S. and foreign markets primarily in futures contracts, forward contracts, spot currency contracts, and associated derivative instruments, such as options and swaps as well as equity and fixed income securities. (b) The Organization has an alternative investment in a private investment fund of $308,238 and $- as of June 30, 2022 and 2021, respectively. The Organization has committed a total of $500,000 and has no unfunded commitment as of June 31, 2022. The investment objective of the fund is to achieve capital appreciation by investing primarily in long and short positions of publicly-traded companies globally, including technology stocks. (c) The Organization has an alternative investment in a private investment fund of $755,126 and $- as of June 30, 2022 and 2021, respectively. The Organization has committed a total of $800,000 and has no unfunded commitment as of June 31, 2022. The investment objective of the fund is to realize consistently high risk-adjusted appreciation in the value of its assets. The Fund seeks to achieve its investment objective primarily through a combination of strategies, including, but not limited to, fundamental equity market neutral long/short, fundamental long/short equity, energy transition long/short equity, China long/short equity, convertible arbitrage, merger arbitrage, credit, special purpose acquisition company ("SPAC") investing, supply chain finance, currency and rates and opportunistic. (d) The Organization has an alternative investment in a private investment fund of $321,192 and $- as of June 30, 2022 and 2021, respectively. The Organization has committed a total of $320,000 and has no unfunded commitment as of June 31, 2022. The investment objective of the Fund is to realize consistently high risk- adjusted appreciation in the value of its assets. the Fund primarily invests in the securities of entities involved in announced mergers, acquisitions or contests for control. 5. Restrictions on Net Assets Net assets with donor restrictions are available for the following purposes at June 30: Scholarships Unconditional promises to give - time restriction Other activities of the Organization Perpetual endowment 2022 2021 757,175 1,350,500 3,367,496 496,989 62,500 6,850,127 8,725,362 10,137,723 $ 15,612,894 $ 16,134,978 12#15University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements 6. Endowment Funds The Organization's endowment funds consist of eighty-four individual donor-restricted funds established for a variety of purposes, which includes perpetual endowments. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law Management has interpreted South Carolina's Uniform Prudent Management of Institutional Funds Act ("UPMIFA") as requiring the preservation of the fair value of the original gift as of the gift date of the donor- restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization has classified as perpetual endowment (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 in the applicable 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 in perpetuity is classified as net assets with donor restrictions until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor- restricted endowment funds: (1) The duration and preservation of the endowment fund; (2) The purposes of the Organization and the donor-restricted endowment fund; General economic conditions; =IDIOC (3) (4) The possible effect of inflation and deflation; (5) The expected total return from income and the appreciation of investments; (6) The investment policies of the Organization. Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Organization to retain as a fund of perpetual duration. There were no deficiencies of this nature that are reported in net assets without donor restrictions as of June 30, 2022 and 2021. Return Objectives and Risk Parameters The Organization has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowments while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Organization must hold in perpetuity. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results that allow for growth of the corpus while minimizing the fluctuations in the value of the portfolio to meet the payout obligations as approved by the Board of Directors. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. 13#16University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements Spending Policy and How the Investment Objectives Relate to the Spending Policy The amount of funds allocated for expenditure for the purposes for which the endowed funds were established are reviewed annually and calculated based on the prior 12-quarter rolling average Unitized Market Value of the primary management investment portfolio multiplied by the number of units held by each endowed fund on the calculation date. The current rate as of the date of adoption of this policy is up to 4%. This is consistent with the Organization's objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Changes in endowment net assets by type of fund for the year ended June 30 are as follows: Endowment net assets, June 30, 2020 $ 10,908,977 New gifts Appropriations Investment income Endowment net assets, June 30, 2021 New gifts Appropriations Investment losses Endowment net assets, June 30, 2022 111,395 (89,837) 2,512,295 $ 13,442,830 1,412,361 (456,188) (1,933,254) $ 12,465,749 7. Related Party Transactions The following support was contributed by USC Upstate for the years ended June 30: 2022 2021 Salaries and fringe benefits Occupancy Technology and software 119,812 $ 109,656 4,410 4,411 3,000 3,000 127,222 117,067 The Organization provided the University support totaling $953,840 and $406,777 during the years ended June 30, 2022 and 2021, respectively. 8. Contingencies Loss contingencies are situations involving uncertainties as to possible loss. The uncertainties are resolved when certain events occur or fail to occur. The Organization maintains insurance against certain loss contingencies with liability policies and physical damage coverage. 14#17University of South Carolina Upstate Foundation and Supporting Organization Notes to Consolidated Financial Statements 9. Liquidity and Availability The Organization's liquidity management structures its financial assets to be available as its general expenditures, liabilities and other obligations come due. Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of the consolidated statement of financial position date, comprise the following: Cash and cash equivalents Investments not restricted 10. Subsequent Events 2022 2021 $ 161,169 541,888 966,713 388,951 $ 703,057 1,355,664 The Organization evaluated the effect subsequent events would have on the consolidated financial statements through September 1, 2022, which is the date the consolidated financial statements were available to be issued. 15#18Supplemental Information#19University of South Carolina Upstate Foundation and Supporting Organization Consolidating Statement of Financial Position June 30, 2022 Assets Cash and cash equivalents Unconditional promises to give, net Investments Assets held in charitable remainder trust Total assets Liabilities and Net Assets Liabilities: University of University of South Carolina South Carolina Upstate Capital Upstate Foundation Development Foundation Consolidated 120,851 1,350,500 40,318 $ 15,071,006 161,169 1,350,500 15,071,006 281,264 281,264 $ 16,823,621 40,318 $ 16,863,939 Accounts payable 41,256 Deferred grant revenue 175,000 Liability under charitable remainder trusts 184,921 Total liabilities 401,177 41,256 175,000 184,921 401,177 Net assets: Net assets without donor restrictions Net assets with donor restrictions 809,550 40,318 15,612,894 849,868 15,612,894 Total net assets 16,422,444 40,318 16,462,762 Total liabilities and net assets $ 16,823,621 40,318 $ 16,863,939 See independent auditors' report. 16#20University of South Carolina Upstate Foundation and Supporting Organization Consolidating Statement of Activities June 30, 2022 University of University of South Carolina South Carolina Upstate Foundation Upstate Capital Development Foundation Consolidated Operating revenues, gains and other support: Contributions In-kind contributions Earned income - contributions $ 2,555,026 127,222 76,171 Unrealized losses on investments, net (2,399,708) Investment income, net 94,729 Change in value of charitable remainder trust (2,374) 2,555,026 127,222 76,171 (2,399,708) 94,729 (2,374) Administrative fees 113,252 113,252 Other revenue 746 746 Total operating revenues, gains, and other support 565,064 565,064 Operating expenses: Program expenses: Scholarships 158,380 158,380 Supporting services to USC Upstate 953,840 953,840 In-kind expenses 127,222 127,222 Program operating expenses 247,703 247,703 Supporting expenses: Administrative fee 113,252 113,252 Bank fees 367 20 387 Foundation operating expenses 88,097 1,225 89,322 Total operating expenses 1,688,861 1,245 1,690,106 Change in net assets (1,123,797) (1,245) (1,125,042) Net assets, beginning of year 17,546,241 41,563 17,587,804 Net assets, end of year $ 16,422,444 $ 40,318 $ 16,462,762 See independent auditors' report. 17