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← Pepperdine University (USA)

2023-07-31-accounts

Pepperdine University (USA) Annual Report and Financial Statements For the year ended 31 July 2023

Presented in U.S Dollars

Company no: 02635340 Charity no: 1004140

Annual report For the year ended 31 July 2023 Financial statements presented in U.S. Dollars

Page(s)
Directors and advisers 1
Directors' report 2 - 7
Independent auditors’ report 8 - 11
Statement of financial activities (incorporating the income and expenditure account) 12
Balance sheet 13
Statement of cash flows 14
Notes to the financial statements 15 - 26

PEPPERDINE UNIVERSITY (USA) Directors and advisers

Directors (throughout the year and to date of signing)

James A. Gash, Chairman Gary A. Hanson, 1st Vice Chairman Jay Brewster Ronald Cox (appointed in Feb 2023) Beth Laux (resigned in Feb 2023)

Secretaries and registered office

Ronald Cox Beth Laux 56 Princes Gate LONDON SW7 2PG

Key management personnel

Heather Pardee Jennifer Ryan Naomi Goodno

Principal bankers

JP Morgan Chase Bank, N.A. London Branch 25 Bank Street LONDON E14 5JP

Independent Auditors

Solicitors

Mazars LLP 90 Victoria Street BRISTOL BS1 6DP Eversheds Sutherland One Wood Street LONDON EC2V 7WS

1

PEPPERDINE UNIVERSITY (USA)

Pepperdine University (USA), (which shall be referred to in this document as “Pepperdine USA” or “the charitable company”) is a registered charity (charity registration number 1004140) and a company limited by guarantee without share capital (company registration number 02635340). It is governed by a Memorandum and Articles of Association. It is registered with the Charity Commission under the Charities Act 2011.

The board of directors have pleasure in submitting the charitable company’s annual report and audited financial statements for the year ended 31 July 2023. The financial statements are prepared in accordance with applicable accounting standards in the United Kingdom, the Statement of Recommended Practice (SORP) “Accounting and Reporting by Charities” and Financial Reporting Standard (FRS) 102, together with the reporting requirements of the Companies Act 2006 and the Charities Act 2011.

STRUCTURE, GOVERNANCE, AND MANAGEMENT

The Board is a self-appointing body. The panel, comprised of existing directors, selects new members of the board of directors. Applications for directorship are sought by recommendation of the existing directors. Elected directors serve for a staggered three-year term. New members are inducted and provided with an orientation. The board of directors meets at least annually to review the charitable company’s strategy, performance, and to set the operating plans and budgets.

The Directors have delegated management of the charitable activities to the resident directors of the London programme who supervise day-to-day operations. The Directors review the pay of the resident directors and oversee the pay recommendations with regard to pay scales, guidance, and advice based upon the responsibilities held at the time of review. The review takes place annually or if triggered by a change in personnel or responsibilities.

Pepperdine University in Malibu, California, is the parent company and has the power to appoint and remove the majority of the Directors, if necessary.

Principal Activities

Pepperdine USA is supported by Pepperdine University so as to allow American students a continuation of their university education as well as an international cultural experience. Contributions are made from Pepperdine University as needed to fund each academic year.

Pepperdine University is an independent private Christian university committed to the highest standards of academic excellence and Christian values, where students are strengthened for lives of purpose, service, and leadership.

OBJECTIVES AND ACTIVITIES

Charitable Objectives

The charitable company’s main objective is to carry out the London based activities of Pepperdine University, which include teaching regular academic subjects and offering periodic field trips. As a public benefit entity, Pepperdine USA seeks to enable students to undertake a period of study in England to enhance their understanding of the English history and culture, and to take advantage of

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PEPPERDINE UNIVERSITY (USA)

London’s unique cultural, historical, and educational offerings. Pepperdine USA is enriching the students’ overall academic experience by affording them an opportunity to experience a more global perspective. This perspective helps to create an environment of international and intercultural understanding and cooperation. Additionally, these objectives enable Pepperdine USA to serve Pepperdine University’s broader vision as a religiously-affiliated institution of higher education.

In setting Pepperdine USA’s aims, Directors have reviewed and given careful consideration to the Charity Commission for England and Wales’ general guidance on public benefit, and specifically to the sub-sector guidance provided in “The Advancement of Education for the Public Benefit.” Directors pay particular attention to ensuring that Pepperdine USA’s programmes and services are available to all members of the public through funding and marketing of financial aid.

Objectives for the Year

The main objective is to offer to Pepperdine University students a variety of academic classes and field trips for educational enrichment and growth. By being located in one of the most important cultural and commercial centres of the world, the objective is to provide students with the opportunity to study the literature, history, culture, and institutions that make up the foundations of civilization. An additional objective is to help students develop global awareness and facilitate the understanding of different cultures, specifically the British culture.

Strategies to Achieve Objectives

The programme in London allows access to unmatched global resources. Visits to museums, art galleries, libraries, Parliament, and other historical and cultural sites are integral to the students’ studies. Students enrolled in these programmes complete their course requirements in a manner that provides unique opportunities for academic, personal, and spiritual development. The strategy for the charitable company in achieving this objective is to provide regular academic subjects taught by American and British lecturers and tutors. In addition, periodic field trips for the cultural education of the students to theatre performances, and various locations (such as Shakespeare’s Globe Theatre, Victoria & Albert Museum, National Gallery, Windsor Castle, Hampton Court, Oxford, and Bath) are arranged, along with the provision of the necessary accommodations and ancillary services.

ACHIEVEMENTS AND PERFORMANCE

Pepperdine USA provides classes in general education as well as various classes of special interest. In 2022, due to COVID-19 concerns, the number of students who enrolled decreased below capacity by approximately 25%. Enrollments were closer to the maximum possible amount in 2023. This past academic year, programmes were offered in literature, law, fine arts, history, humanities, theater, religion, Arabic, economics, statistics, sociology, as well as equestrian education and yoga, to 151 students (2022: 131). In addition to academic programmes, there were field trips to Scotland, Jordan, and Greece for the undergraduate students.

FINANCIAL AID

Pepperdine University awards considerable financial aid to the students in the form of scholarships and grants. Many of these awards are made available by the allocation of University general funds, as well as

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PEPPERDINE UNIVERSITY (USA)

the generosity of donors by means of endowed funds and alumni contributions. Financial aid, in the form of scholarships and grants, is based on full-time enrollment, financial need, academic merit, and personal achievement. Scholarships and grants are considered a component of the student's financial aid award and cannot exceed the cost of attendance. If a student is awarded a scholarship, which exceeds the cost of attendance, the financial aid package will be adjusted accordingly. During the year financial aid was awarded to 111 students (2022: 100), totaling $2,036,549 (2022: $1,833,485).

Most students pursuing studies at Pepperdine USA are students of Pepperdine University in Malibu, California. Tuition and room and board charges are paid at Pepperdine University. Tuition rates for Pepperdine USA are the same that are charged for attending Pepperdine University. These revenues are then credited to Pepperdine USA’s financial statements for all attendees of the programme. Pepperdine University awards all financial assistance made to students, and the awards are shown in the charitable company’s financial statements as student aid expense in the period corresponding to the related tuition revenue.

REVIEW OF BUSINESS AND FUTURE DEVELOPMENT

The statement of financial activities for the year is set out on page 12.

The charitable company had positive net movement in funds for the year ended 31 July 2023 of $13,635 (2022: $6,836). The increase in net movement in funds was due to an increase in tuition and fee income, along with room and board income, due to higher student enrollment.

The charitable company had $21,778 in restricted funds (2022: $18,982), and $114,961 in unrestricted funds (2022: $104,122).

The Directors’ plan for future operations is to continue to send students to study at Pepperdine USA so that students will be able to experience academic rigor, personal growth, and find a path to become globally-minded citizens.

RISKS FACING PEPPERDINE USA

The Directors have assessed business risks and implemented appropriate risk management. This involves identifying the types of risks the charitable company faces, prioritizing them in terms of potential impact and likelihood of occurrence, and identifying means of mitigating the risks. As part of this process the Directors have reviewed the adequacy of the charitable company’s current internal controls.

The charitable company’s systems of internal control are designed to provide reasonable, but not absolute assurance against material misstatement or loss. They include:

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PEPPERDINE UNIVERSITY (USA)

The Directors consider that Pepperdine USA is not exposed to any significant financial risk since it is fully supported by Pepperdine University, which has historically maintained a high credit rating of Aa3 with Moody’s Investors Service. All financial assets are held as cash in bank and the charitable company has no long-term debt and a minimal amount owing to external creditors. The charitable company is exposed to foreign currency fluctuations as cash is denominated in Pounds Sterling, and some expenditure is incurred in Pounds Sterling whilst statements are translated into U.S. dollars. Any gain or loss is offset by contributions from the supporting organization, Pepperdine University.

There were no conditions or events regarding Pepperdine USA’s ability to continue as a going concern that need to be disclosed in these financial statements.

RESERVES POLICY

The charitable company relies upon tuition and fees collected from students, donations, and the support of Pepperdine University to meet its funding requirements and it does not have a specific level of reserves that the Directors have agreed to maintain. Funds sufficient to meet the operating needs of the company are transferred at the start of each term, and supplemental funds are sent on an asneeded basis throughout the year. In the event of a deficit in the unrestricted funds, Pepperdine University, which has sufficient funds, will provide the needed support to Pepperdine USA. Pepperdine University provides a letter of financial support to Pepperdine USA. The Directors review this policy on an annual basis to ensure this methodology is appropriate to ensure on-going operation of the charity.

As at the year end, the free reserves (those not tied up in fixed assets) in unrestricted funds were $112,703 (2022: $76,176). Free reserves are necessary as they enable the charity to fulfil its objectives.

PRINCIPAL FUNDING SOURCES

Pepperdine USA is funded by tuition and programme fees collected from the students, donations from donors, and support from Pepperdine University.

STATEMENT OF TRUSTEES’ RESPONSIBILITIES

The trustees, who are also directors of Pepperdine University (USA) for the purposes of company law, are responsible for preparing the Trustees’ Annual Report (the “Director’s Report”) and the financial statements in accordance with applicable law and regulations.

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PEPPERDINE UNIVERSITY (USA)

Company law requires the trustees to prepare financial statements for each financial year. Under company law the trustees must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of the affairs of the charitable company and of the outgoing resources and application of resources, including the income and expenditure of the charitable company for that period. In preparing these financial statements, the trustees are required to:

The trustees are responsible for keeping adequate accounting records that are sufficient to show and explain the charitable company’s transactions and disclose with reasonable accuracy at any time the financial position of the charitable company and enable them to ensure that the financial statements comply with the Charities Act 2011, the Charity (Accounts and Reports) Regulations 2008 and the provisions of the Companies Act 2006. They are also responsible for safeguarding the assets of the charitable company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as the trustees are aware:

MEMBERS

The liability of each of the members in the event of a winding up is limited to £1 for the payment of debts and liabilities of the charitable company contracted before he/she ceases to be a member, or within one year thereafter. At 31 July 2023 there were four guarantors in the register of members (2022: five).

INDEPENDENT AUDITORS

A resolution to appoint the auditors, Mazars LLP, will be proposed at the annual general meeting.

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PEPPERDINE UNIVERSITY (USA)

The Directors’ Report has been prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating to small companies which gives exemption from preparing the full Directors’ Report. The exemption has been taken to not prepare a Strategic Report as Pepperdine University (USA) is a small company.

By order of the board

Jim Gash

Jim Gash (Feb 15, 2024 06:21 PST)

James A. Gash Chairman

14 February 2024

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PEPPERDINE UNIVERSITY (USA)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PEPPERDINE UNIVERSITY (USA)

Opinion

We have audited the financial statements of Pepperdine University (USA) (the ‘charity’) for the year ended 31 July 2023 which comprise the Statement of Financial Activities (incorporating the income and expenditure account), Balance Sheet, Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).

In our opinion, the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We are independent of the charity in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the trustees’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the charity's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the trustees with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the Annual Report and Financial Statements, other than the financial statements and our auditor’s report thereon. The trustees are responsible for the other information contained within the annual report. Our opinion on the financial statements does not

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PEPPERDINE UNIVERSITY (USA)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PEPPERDINE UNIVERSITY (USA)

cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

Matters on which we are required to report by exception

In light of the knowledge and understanding of the charity and its environment obtained in the course of the audit, we have not identified material misstatements in the Directors’ Report included within the Annual Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of Trustees

As explained more fully in the trustees’ responsibilities statement set out on page 5 and 6, the trustees (who are also the directors of the charitable company for the purposes of charity law) are responsible for

9

PEPPERDINE UNIVERSITY (USA)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PEPPERDINE UNIVERSITY (USA)

the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the trustees determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the trustees are responsible for assessing the charity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the trustees either intend to liquidate the charity or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.

Based on our understanding of the group and the parent charity and its activities, we considered that noncompliance with the following laws and regulations might have a material effect on the financial statements: Companies Act 2006, Charities Act 2011, the Charities Statement of Recommended Practice, UK tax legislation and anti-money laundering regulation.

To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:

We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as tax legislation, pension legislation, the Charities’ SORP, the Charities Act 2011 and the Companies Act 2006.

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PEPPERDINE UNIVERSITY (USA)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PEPPERDINE UNIVERSITY (USA)

In addition, we evaluated the trustees’ and management’s incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in relation to revenue recognition (which we pinpointed to the cut-off assertion), use of restricted funds, and significant one-off or unusual transactions.

Our audit procedures in relation to fraud included but were not limited to:

There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of the audit report

This report is made solely to the charity’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the charity’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charity and the charity’s members as a body for our audit work, for this report, or for the opinions we have formed.

Richard Bott (Feb 15, 2024 17:19 GMT)

Richard Bott (Senior Statutory Auditor) for and on behalf of Mazars LLP Chartered Accountants and Statutory Auditor 90 Victoria Street, Bristol BS1 6DP

Feb 15, 2024

Date

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PEPPERDINE UNIVERSITY (USA)

Statement of financial activities (incorporating the income and expenditure account) for the year ended 31 July 2023

Note
Unrestricted
Funds
Restricted
Funds
2023
$
$
$
Income from:
3
Donations and legacies
5,295
10,000
15,295
Charitable activities
4,657,800
- 4,657,800
Other trading activities
1,030,544
- 1,030,544
Other income
1,083
11,276
12,359
Total
5,694,722
21,276
5,715,998
Expenditure on:
Charitable activities
4
(5,614,340)
(8,480) (5,622,820)
Other expenditures
4
(67,784)
-
(67,784)
Total
(5,682,124)
(8,480) (5,690,604)
Net income/(expenditure)
12,598
12,796
25,394
Transfer between funds
15
10,000
(10,000)
-
(Losses) on currency translation
(11,759)
-
(11,759)
Net movement in funds
6
10,839
2,796
13,635
Reconciliation of funds:
Total funds brought forward at 1 Aug
104,122
18,982
123,104
Total funds carried forward at 31 Jul
114,961
21,778
136,739		 Unrestricted
Funds
Restricted
Funds
2022
$ $ $ 21,350
-
21,350
3,393,346
-
3,393,346
832,876
-
832,876
660,433
10,705
671,138
4,908,005
10,705
4,918,710
(4,846,265)
(13,797) (4,860,062)
-
-
-
(4,846,265)
(13,797) (4,860,062)
61,740
(3,092)
58,648
(51,812)
-
(51,812)
9,928
(3,092)
6,836
94,194
22,074
116,268
104,122
18,982
123,104

The charitable company has no recognized gains or losses, other than as presented above and therefore no separate statement of total recognized gains and losses has been presented.

All the charitable company’s activities are continuing.

The notes on pages 15 to 26 form part of these financial statements

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PEPPERDINE UNIVERSITY (USA)

Registered no: 02635340

Balance sheet as at 31 July 2023

Note
Fixed assets
Tangible assets
9
Total fixed assets
Current assets
Debtors
10
Cash at bank and in hand
11
Total current assets
Liabilities
Creditors: amounts falling due within one year
12
Net Current Assets
Total assets less current liabilities
Total net assets
The funds of the charity:
15
Restricted income funds
Unrestricted income funds
Total charity funds		 2023
$
2,258
2,258
163,114
104,677
267,791
(133,310)
134,481
136,739
136,739
21,778
114,961
136,739		 2022
$ 27,946
27,946
73,934
122,127
196,061
(100,903)
95,158
123,104
123,104
18,982
104,122
123,104

The financial statements were approved by the board of directors on 14 February 2023, and were signed on its behalf by

Jim Gash

Jim Gash (Feb 15, 2024 06:22 PST)

Director, James A. Gash

The notes on pages 15 to 26 form part of these financial statements

13

PEPPERDINE UNIVERSITY (USA)

Statement of cash flows for the year ended 31 July 2023 and 2022

Note
Net cash (outflow) from operating activities
19
Investing activities
Interest received
Purchase of new long-term assets
Net cash inflow from investing activities
(Decrease) in cash and cash equivalents
Cash or cash equivalents brought forward at 1 Aug
Cash or cash equivalents carried forward at 31 Jul		 2023
$
(28,726)
-
11,276
-
11,276
(17,450)
122,127
104,67		 2022
$ (519,971)
-
10,705
-
10,705
631,393
122,127

14

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

1 General Information

Pepperdine USA is a charitable company limited by guarantee in England & Wales, registered number 02635340 and charity number 1004140. Its registered office is 56 Princes Gate, London, SW7 2PG. The financial statements are presented in US Dollars ($), which is the functional currency of the company and are rounded to the nearest dollar.

2 Principal Accounting Policies

The financial statements are prepared in accordance with applicable accounting standards in the United Kingdom, the Statement of Recommended Practice (SORP) “Accounting and Reporting by Charities” and the Financial Reporting Standard (FRS) 102, together with the reporting requirements of the Companies Act 2006 and the Charities Act 2011.

The charitable company does not seek to make a profit, nor can its results be measured by normal commercial criteria. In order that a true and fair view should be given in these financial statements, the directors have set out on page 12 the statement of financial activities, which shows the results for the year. In the opinion of the directors, the format adopted provides clarity on the nature of the charitable company's activities and discloses the required information relating thereto. The charitable company has availed itself of provisions under the Companies Act 2006 and has adapted the Companies Act and requirements of the SORP formats to reflect the special nature of the charitable company’s activities. The charitable company is a public benefit entity.

The major accounting policies adopted by the directors are set out below and have been applied consistently throughout the year and in the preceding year:

Key Estimates and Judgements

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities, and revenues and expenses for the periods presented. Items which could be materially affected by such estimates include receivables and accrued liabilities.

Charitable expenditure includes the direct costs of providing the academic programme in London and the support costs of supporting that programme. Direct costs include London-based academic and consulting faculty salaries and benefits, student accommodation, student and faculty travel, student aid and 80% of the costs of the London campus. Support costs include London-based support staff salaries and benefits, 97% of allocated academic support, 20% of the costs of the London campus and all other costs that are not governance. The salary and benefits cost of the London directors and assistant directors are allocated based on time spent teaching or working directly with students.

Income

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PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

Expenditure

Student aid and operational expenses are charged as they fall due on an accrual basis. Expenditures made in the UK include irrecoverable UK VAT charged to the category to which it relates.

Governance costs include audit fees and the internal costs of preparing the year-end financial statements and reports, filing statutory reports, and board meetings. These are based on estimated time spent by finance staff.

Financial Assets

Financial assets consist of cash, debtors, and prepaid expenses. The charitable company recognizes a financial asset when it gains a contractual right to the asset. The exception is when the financial asset is consideration from students for services provided. In this case the financial asset is recognized when the revenue recognition criteria are met. A financial asset is removed from the statement of financial activities when the charitable company no longer has a contractual right to the asset, or when the asset is transferred to another party. Financial assets are classified as basic financial instruments and on initial recognition are measured at fair value. Subsequent to initial recognition the financial assets are measured at amortized cost.

Financial Liabilities

Financial liabilities consist of accrued expenses. The charitable company recognizes a financial liability when it becomes a party to the contractual provisions of the financial instrument. The exception is any liability related to the purchase of goods or services in the normal course of business. In this case the financial liability is recognized when, and to the extent that, the goods and services are provided. A financial liability is removed from the statement of financial position when it is extinguished, i.e. when the obligation in the contract is paid, is cancelled, or expires. Financial liabilities are classified as basic financial instruments and on initial recognition are measured at fair value. Subsequent to initial recognition the financial liabilities are measured at amortized cost.

Financial instruments

The charitable company only has financial assets and financial liabilities of a kind that qualify as basic

16

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

2 Principal accounting policies

financial instruments. Basic financial instruments are initially recognised at transaction value and subsequently measured at their settlement value with the exception of bank loans, which are subsequently measured at amortised cost using the effective interest method.

Tangible Assets

Tangible assets are stated at their purchase price together with any incidental expenses of acquisition less accumulated depreciation. They are for direct use by the charitable company. The charitable company reviews its tangible assets at each reporting date to determine if there has been any impairment.

Provision for depreciation is made so as to write off the cost of fixed assets over the expected useful economic lives of the assets concerned, or down to their expected scrap value. Depreciation on new assets starts in the fiscal year following the fiscal year the asset was purchased. The following depreciation methods and periods are used:

Method Period
Computer Hardware straight line 2 years
Furniture, fixtures and fittings straight line 10-15 years

Funds Structure

Unrestricted funds comprise those funds that Directors use in furtherance of the charitable objectives.

Restricted funds and expendable portions of endowments comprise funds that are to be used in accordance with specific restriction imposed by the donor.

Foreign Currencies

Transactions that are denominated in Pounds Sterling are translated into U.S. Dollars at the prevailing rate at the time of the transaction. Foreign exchange gains and losses are included in the Statement of Financial Activities for the period in which they were incurred. Balances in Pounds Sterling are translated into U.S. Dollars at the rate of exchange prevailing at the balance sheet date.

Operating Leases

Costs in respect of operating leases are charged on a straight-line basis over the lease term.

Going Concern

The financial statements have been prepared on a going concern basis, which is due to the continued support committed by Pepperdine University. Pepperdine University has committed to provide students with a continuation of the UK educational programme and has issued to Pepperdine USA a letter of financial support in this respect.

17

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

2 Principal accounting policies

Pension Costs

Pension costs for the London employees who participate in a defined contribution plan sponsored by Pepperdine University or other UK pension plans are recorded in the period the contributions accrue. The contributions are non-refundable and fully vested. The pension expense and liability are allocated to unrestricted funds.

3 Income

Unrestricted
Donations and legacies
Gift donations
Tuition
Class fees
Charitable activities
Room and board
Textbook sales
Telephone and laundry
Other trading activities
Miscellaneous income
Other income
Restricted
Donations and legacies
Gift donations
Other income
Quasi-endowment income
4 Expenditures

Direct staff costs
Other direct costs
Apportioned support costs		 2023
$

5,295

4,354,893
302,907
4,657,800

1,018,274
8,837
3,433
1,030,544

1,083
1,083
5,694,722


10,000
11,276
21,276
2023
$
235,882
2,918,551
2,536,171		 2022
$ 21,350
3,183,599
209,747
3,393,346
820,046
8,773
4,057
832,876
660,433
660,433
4,908,005
-
10,705
10,705
2022
$ 231,660
2,537,941
2,090,461
5,690,604 4,860,062

18

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

4 Expenditures

Activities undertaken directly
Student aid *
Travel
Student meals / subsistence
Salaries and personnel benefits
Consulting faculty and speakers / Outside services
Utilities
Maintenance
Premises and equipment rental
Textbooks and educational materials		 2023
$
2,036,549
436,596
256,706
235,882
86,069
48,321
44,650
4,840
4,820
3,154,433		 2022
$ 1,833,484
281,431
244,866
231,660
78,988
47,753
39,263
4,926
7,230
2,769,601

*Refer to pages 3 and 4 under Financial Aid for additional information

Support costs charitable expenditures
Allocated academic support
Salaries and personnel benefits
Governance costs
Parent Contribution
Travel & faculty / staff development
Supplies, postage and office costs
Depreciation
Property tax
Utilities
Maintenance
Equipment
Outside services
Bank Charges
Premise and equipment rental
Advertising / promotional		 2023
$
1,557,361
674,622
72,191
67,784
43,118
32,912
25,688
23,224
12,080
11,163
8,728
4,167
1,772
1,210
151
2,536,171		 2022
$ 1,176,979
685,281
65,126
-
33,465
33,452
25,688
22,000
11,939
9,815
14,715
7,141
403
1,231
3,226
2,090,461

19

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

5 Governance Costs

Allocated academic support
Auditors' remuneration		 2023
2022
$
$ 48,166
40,433
24,025
24,693
72,191
65,126

6 Net Movement in Funds

Net movement in funds is stated after charging:

2023 2022
$ $
Depreciation 25,688 25,688
Auditors’ remuneration 24,025 24,693
Operating leases 4,969 5,301

7 Employee Information

The Directors of the charitable company received no remuneration or reimbursement of expenses during the year (2022: nil). The resident undergraduate and visiting graduate programme directors are the key management personnel for the charity.

Pepperdine University acquires indemnity insurance for all its directors including those in Pepperdine USA. Pepperdine University is unable to reliably apportion the costs relating to the UK.

Total employment costs were:

Wages and salaries
Social security costs
Employee benefits
Other pension costs		 2023
$
741,932
65,316
81,514
21,742
910,504		 2022
$ 767,533
65,458
62,001
21,949
916,941

Employee benefits include charges for life insurance and medical insurance that are provided centrally by Pepperdine University and are calculated as a percentage of salary cost.

20

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

7 Employee Information

Monthly average number of employees in the year:

2023 2022
Number Number
Faculty 9.00 7.75
Administrative 5.50 5.25
14.50 13.00

The number of employees whose total earnings in the year (including benefits but excluding employer pension contributions) exceeded $77,000, which is the equivalent of £60,000, are shown in the below table:

2023 2022
Number Number
$77,001 to $90,000 1 1
$90,001 to $103,000 1 -
$154,001 to $167,000 1 1

The total compensation for the resident undergraduate and visiting graduate programme directors, who are deemed to be key personnel management, was $252,379 (2022: $157,838), and $81,704 (2022: $76,909) respectively.

Defined contribution pension plan contributions for the resident programme directors were $29,900 (2022: $21,949). There were no amounts prepaid or outstanding at year-end (2022: nil).

8 Taxation

Pepperdine USA is a registered charitable company and is therefore exempt from tax on income and gains falling within sections 466 to 489 of the Corporation Tax Act 2010 and section 256 of the Taxation of Chargeable Gains Act 1992 to the extent that these are applied to its charitable objects. No tax charges have arisen in the charitable company in 2023 (2022: nil).

21

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

9 Tangible Assets

Furniture, Fixtures
and Fittings
$
Cost
At 1 August 2022
22,582
Asset additions in year
0
At 31 July 2023
22,582
Accumulated Depreciation
At 1 August 2022
20,324
Charge for year
0
At 31 July 2023
20,324
Net book value
At 31 July 2023
2,258
At 31 July 2022
2,258
10
Debtors
Employee advances and other accounts receivable
Prepaid expenses
Due from Pepperdine University
11
Analysis of cash and cash equivalents
Cash at bank and in hand		 Computer Hardware
(Audio/ Visual)
Total
$
$
51,376
73,958
0
0
51,376
73,958
25,688
46,012
25,688
25,688
51,376
71,700
0
2,258
25,688
27,946
2023
2022
$
$
34,473
11,826
84,157
62,108
44,484
-
163,114
73,934
2023
2022
$
$
104,677
122,127
104,677
122,127		 Total
$
73,958
0
73,958
46,012
25,688
71,700
2,258
27,946
2023
$

34,473
84,157
44,484
163,114
2023
$

104,677
104,677

22

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

12 Creditors: amounts falling due within one year

Taxation and social security
Accrued accounts payable
Deferred revenue
Accrued auditors’ remuneration
Due to Pepperdine University
Movement in deferred revenue:
Opening balance
Tuition and Room & Board income recognized
Tuition and Room & Board income deferred
Closing balance		 2023
$
(17,172)
(65,268)
(26,844)
(24,026)
-
(133,310)
2023
$
(18,457)
18,457
(26,844)
(26,844)		 2022
$ (16,634)
(14,896)
(18,457)
(24,693)
(26,223)
(100,903)
2022
$ -
-
(18,457)
(18,457)

Deferred revenue for tuition and room and board was generated in 2022 and 2023 due to summer programs that crossed the fiscal years.

13 Share Capital

The charitable company is limited by guarantee and does not have any share capital. The liability of each of the guarantors in the event of a winding up is £1. At 31 July 2023 there were four guarantors in the register of members (2022: five).

14 Analysis of Assets between Funds

2023
Tangible fixed assets
Net current assets		 Unrestricted
Funds
$
2,258
112,703
114,961		 Restricted
Funds
$
-
21,778
21,778		 Total
Funds
$
2,258
134,481
136,739

23

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

14 Analysis of Assets between Funds

2022
Tangible fixed assets
Net current assets		 Unrestricted
Funds
$ 27,946
76,176
104,122		 Restricted
Funds
$ -
18,982
18,982		 Total
Funds
$ 27,946
95,158
123,104

15 Movement in Funds

2023
Opening balance
Income
Expenditure
Transfer between funds
Loss on currency translation
Closing balance		 Unrestricted
Funds
$
104,122
5,694,722
(5,682,124)
10,000
(11,759)
114,961		 Restricted
Funds
$
18,982
21,276
(8,480)
(10,000)
-

21,778		 Total
Funds

$

123,104

5,715,998

(5,690,604)

-

(11,759)

136,739

The transfer between funds was a release from restriction for qualified unrestricted expenditures for financial aid awards.

Restricted Funds consist of the following:

Restricted Funds consist of the following:
Restricted Fund Name
Purpose
London Spiritual Formation quasi-endowment
Student religious development
Royal Albert quasi-endowed scholarship
Scholarship to attend London programme		 Ending
Balance
$
3,287
18,491
21,778

24

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

16 Operating Equipment Leases

Total future minimum lease payments under non-cancellable operating leases:

Expiring within 1 year
Expiring during 2 to 5 years
Expiring after 5 years		 2023
$
4,185
15,343
-
19,528		 2022
$ 2,209
-
-
7,251

17 Basic Financial Instruments

Financial Instrument
Measurement
Cash
Cash held
Bank deposit
Cash amount on deposit
Debtors
Amount advanced by charity
Creditors
Amount advanced to charity		 2023
$
4,059
100,618
163,114
(133,310)
134,481		 2022
$ 36,406
85,721
73,934
(100,903)
95,158

18 Related Party Transactions

Pepperdine University in Malibu, California is the parent company of Pepperdine University (USA) (subsidiary) and maintains a controlling interest. The parent provides financial support to the subsidiary as needed and there is no requirement for the subsidiary to pay back this financial support. The parent also provides a letter of financial support to the subsidiary in the case there is a liquidity shortfall. At 31 July 2023 the subsidiary contributed $67,784 to the parent (2022: received $656,711 from the parent).

From time to time, directors and key management personnel may make direct contributions to Pepperdine University (USA). Such contributions are not made in exchange for any benefit to the donor. In 2023, a gift donation of $50 was contributed to Pepperdine University (USA) by the Director and Chairman, James A. Gash.

25

PEPPERDINE UNIVERSITY (USA) Notes to the financial statements For the year ended 31 July 2023

19 Reconciliation of net income/(expenditure) to net cash flow from operating activities

Net movement in funds
Less interest received
Depreciation
(Increase)/Decrease in debtors
Increase/(Decrease) in creditors
Net cash (outflow) from operating activities		 2023
$

13,635
(11,276)
25,688
(89,180)
32,407
**(28,726) **		 2022
$ 6,836
(10,705)
25,688
29,462
(571,252)
(519,971)

20 Ultimate Controlling Party

The directors consider Pepperdine University, registered in the United States of America, as the ultimate controlling party by virtue of it being the financial guarantor. Copies of the controlling party's financial statements may be obtained from the Chief Financial Officer, Pepperdine University, 24255 Pacific Coast Highway, Malibu, California 90263, United States of America.

26

FY23 Pepperdine USA Annual Report - to be signed.pdf

Final Audit Report

2024-02-15

Created: 2024-02-14 By: Pepperdine University eSign Portal (eSign@pepperdine.edu) Status: Signed Transaction ID: CBJCHBCAABAA0NmNxJQi0MrHkvub6O7Qer9NYRIaXBH2

"FY23 Pepperdine USA Annual Report - to be signed.pdf" Histor

y

2024-02-14 - 5:46:01 PM GMT- IP address: 137.159.14.134

Document emailed to jim.gash@pepperdine.edu for signature

2024-02-14 - 5:46:09 PM GMT

2024-02-14 - 6:53:12 PM GMT- IP address: 66.249.84.227

Signer jim.gash@pepperdine.edu entered name at signing as Jim Gash

2024-02-15 - 2:21:35 PM GMT- IP address: 137.159.151.86

Signature Date: 2024-02-15 - 2:21:37 PM GMT - Time Source: server- IP address: 137.159.151.86

2024-02-15 - 2:21:39 PM GMT

Email viewed by jim.gash@pepperdine.edu

2024-02-15 - 2:21:44 PM GMT- IP address: 66.249.84.227

Signer jim.gash@pepperdine.edu entered name at signing as Jim Gash

2024-02-15 - 2:21:59 PM GMT- IP address: 137.159.151.86

Document e-signed by Jim Gash (jim.gash@pepperdine.edu)

Signature Date: 2024-02-15 - 2:22:01 PM GMT - Time Source: server- IP address: 137.159.151.86

Document emailed to Richard Bott (richard.bott@mazars.co.uk) for signature 2024-02-15 - 2:22:03 PM GMT

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Signature Date: 2024-02-15 - 5:19:34 PM GMT - Time Source: server- IP address: 147.161.143.93

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Agreement completed.

2024-02-15 - 5:24:03 PM GMT