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USF HEALTH PROFESSIONS CONFERENCING CORPORATION

Financial Statements

and Report as Required by the Comptroller General of the United States

June 30, 2018 and 2017

(With Independent Auditor’s Report Thereon)


Table of Contents

Page Independent Auditor’s Report 1 - 2 Financial Statements: Statements of Financial Position 3 Statements of Activities 4 Statement of Functional Expenses 5 Statements of Cash Flows 6 Notes to Financial Statements 7 - 17 Internal Control and Compliance: Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 18 - 19

Member of Kreston International – a global network of independent accounting firms

13577 Feather Sound Drive, Suite 400 � Clearwater, Florida 33762 Main: 727.572.1400 � Fax: 727.571.1933 � www.mhm-pc.com

Independent Auditor’s Report

The Board of Directors USF Health Professions Conferencing Corporation: We have audited the accompanying financial statements of USF Health Professions Conferencing Corporation (a nonprofit organization), which comprise the statements of financial position as of June 30, 2018 and 2017, and the related statements of activities and cash flows for the years then ended, and the statement of functional expenses for the year ended June 30, 2018, 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 audit opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of USF Health Professions Conferencing Corporation as of June 30, 2018 and 2017, and the changes in its net assets and its cash flows for the years then ended, and its functional expenses for the year ended June 30, 2018, in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 11, 2018, on our consideration of USF Health Professions Conferencing Corporation’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering USF Health Professions Conferencing Corporation’s internal control over financial reporting and compliance. Report on Summarized Comparative Information We have previously audited the USF Health Professions Conferencing Corporation’s 2017 financial statements, and our report dated September 29, 2017, expressed an unmodified opinion on those financial statements. In our opinion, the summarized comparative information presented herein for the year ended June 30, 2017, is consistent, in all material respects, with the audited financial statements from which it has been derived. October 11, 2018 Clearwater, Florida


Statements of Financial Position

June 30, 2018 and 2017

See accompanying independent auditor’s report and notes to financial statements. 3

2018 2017

Current assets:Cash and cash equivalents (Note 2) $ 2,308,661 716,467Accounts receivable, net (Note 2) 1,171,791 644,663Accrued receivable, University of South Florida DSO's (Note 8) 507,101 430,462 Accrued receivable, University of South Florida (Note 8) 67,645 60,827 Prepaid expenses 210,401 164,063

Total current assets 4,265,599 2,016,482

Property and equipment, net (Notes 3, 5 and 6) 18,548,062 19,959,194Accounts receivable, noncurrent, net (Note 2) - 220,642Other assets 6,650 6,650

$ 22,820,311 22,202,968

Current liabilities:Current installments of obligation under capital leases (Note 5) $ 1,441,536 1,344,377 Current installments of long-term debt (Note 6) 136,036 175,647 Accounts payable 1,419,474 1,056,075 Accrued expenses, University of South Florida/DSO's (Note 8) 368,732 451,274 Due to USF/DSO's - Program residuals (Note 8) 367,289 324,422 Refunds due to sponsors (Note 8) 33,490 150 Short-term equipment obligations - 19,062 Deferred revenue (Note 2) 1,203,991 1,541,094 Other current liabilities 2,500 -

Total current liabilities 4,973,048 4,912,101

Obligation under capital leases, excluding current installments (Note 5) 14,934,414 15,984,931 Long-term debt, excluding current installments (Note 6) - 136,036 Other 5,380 -

Total liabilities 19,912,842 21,033,068

Net assets (deficit):Unrestricted:

Operating 767,675 (1,377,278) Net investment in property and equipment 2,036,076 2,299,141

2,803,751 921,863

Temporarily restricted (Note 9) 103,718 248,037

Total net assets 2,907,469 1,169,900

Commitments and related party transactions (Notes 5 and 8)

$ 22,820,311 22,202,968

Liabilities and Net Assets (Deficit)

Assets


Statements of Activities

Years Ended June 30, 2018 and 2017


2018 2017

Changes in unrestricted net assets:Support and revenue:

Program revenues $ 15,098,027 13,459,860 In-kind support 21,750 41,380 Gain from forgiveness of related party costs (Note 8) - 1,343,876 Gain on sale of equipment 10,497 434,501 Other (Note 7) 531,092 354,804

15,661,366 15,634,421

Net assets released from restrictions - programs 248,037 65,341

Total support and revenue 15,909,403 15,699,762

Expenses (Note 8):Program services 12,195,005 12,476,097 Management and general 1,832,510 1,788,742

Total expenses 14,027,515 14,264,839

Increase in unrestricted net assets 1,881,888 1,434,923

Changes in temporarily restricted net assets:Program revenues 103,718 194,641 Net assets released from restrictions - programs (248,037) (65,341)

Increase (decrease) in temporarilyrestricted net assets (144,319) 129,300

Increase in net assets 1,737,569 1,564,223

Net assets (deficit), beginning of year 1,169,900 (394,323)

Net assets, end of year $ 2,907,469 1,169,900


Statement of Functional Expenses

Year Ended June 30, 2018 (With Comparative Totals for 2017)


Program Management Services and General 2018 2017

Salaries and benefits $ 2,002,310 1,361,661 3,363,971 3,296,281 Educational partner expenses 2,220,223 - 2,220,223 176,261 Materials and supplies 1,328,099 32,048 1,360,147 1,253,047 Support services 240,705 124,568 365,273 492,731 Expendable furniture and equipment 4,538 19,329 23,867 17,981 Brochure design, printing and mailing 246,410 1,783 248,193 261,779 Foundation support - - - 197,022 Audio visual, catering and room rentals 920,007 6,200 926,207 1,246,765 Honoraria and consultants 814,580 24,032 838,612 1,084,234 Travel - speakers and staff 505,381 4,866 510,247 445,718 Marketing and development 1,610 20,192 21,802 21,159 Residuals and refunds to sponsors (Note 8) 112,392 - 112,392 783,509 Utilities, repairs and maintenance 1,255,204 42,211 1,297,415 1,357,917 Facilities rent 76 68,269 68,345 110,338 Equipment leases 179,957 67,883 247,840 780,828 Interest 649,529 31,436 680,965 726,064 Depreciation and amortization 1,692,234 28,032 1,720,266 1,971,825 In-kind 21,750 - 21,750 41,380

Total expenses $ 12,195,005 1,832,510 14,027,515 14,264,839

Total Expenses


Statements of Cash Flows

Years Ended June 30, 2018 and 2017


2018 2017

Cash flows from operating activities:Increase in net assets $ 1,737,569 1,564,223 Adjustments to reconcile increase in net assets

to net cash provided by operating activities:Depreciation and amortization 1,720,266 1,971,825 Gain on sale of equipment (10,497) (434,501) Decrease (increase) in accounts receivable (389,943) 809,519 Decrease (increase) in prepaid expenses (46,338) 15,498 Decrease in other assets - 8,863 Increase (decrease) in accounts payable and

accrued expenses 323,724 (1,835,626) Increase (decrease) in refunds due to sponsors 33,340 (4,646) Increase (decrease) in deferred revenue (337,103) 20,634 Increase in other liabilities 7,880 -

Net cash provided by operating activities 3,038,898 2,115,789

Cash flows from investing activities (Note 10):Purchases of property and equipment (344,637) (441,427) Proceeds from sale of equipment 46,000 385,368

Net cash used in investing activities (298,637) (56,059)

Cash flows from financing activities (Note 10):Principal payments under debt obligations (194,709) (115,422) Principal payments under capital lease obligations (953,358) (1,408,598)

Net cash used in financing activities (1,148,067) (1,524,020)

Net increase in cash and cash equivalents 1,592,194 535,710

Cash and cash equivalents at beginning of year 716,467 180,757

Cash and cash equivalents at end of year $ 2,308,661 716,467

Supplemental disclosure of cash flow information:Cash paid during the year for interest $ 680,965 726,064


Notes to Financial Statements

June 30, 2018 and 2017

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(1) Description of Organization and Summary of Significant Accounting Policies (a) Description of Organization

USF Health Professions Conferencing Corporation (HPCC), a Florida not-for-profit corporation, was incorporated February 7, 2005 and began operations July 1, 2007. HPCC is a direct support organization (DSO) of the University of South Florida (the “University”) and was established to provide educational, administrative, logistical and financial services to support the Office of Continuing Professional Development (OCPD). The OCPD is committed to sponsoring quality continuing education activities to meet the needs of University faculty, alumni and healthcare professionals practicing throughout the state, nationally and internationally. Many of these activities are now conducted at the USF Health Center for Advanced Medical Learning and Simulation (CAMLS) which opened in February 2012 in downtown Tampa, Florida. HPCC is the sole tenant of CAMLS (see Note 6 for information regarding the related capital lease). Effective July 1, 2007, the assets, liabilities and net assets of the OCPD were transferred from USF Medical Services Support Corporation (MSSC), a direct support organization of the University, to HPCC. The assets, liabilities and net assets were transferred based on June 30, 2007 audited financial information. Prior to January 1, 2016, all of HPCC’s personnel were either employees of MSSC or the University. Effective January 1, 2016, all MSSC employees and related obligations were transferred to University Medical Services Association, Inc. (UMSA).

(b) Financial Statement Presentation These financial statements, which are presented on the accrual basis of accounting, have been prepared to focus on the Organization as a whole and to present net assets and revenues, expenses, gains, and losses based on the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified as follows: Unrestricted net assets consist of unrestricted amounts that are available for use in carrying out the operations of HPCC. Temporarily restricted net assets represent those amounts which are not available until future periods or are donor restricted for specific purposes. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law.


Notes to Financial Statements - Continued

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(1) Description of Organization and Summary of Significant Accounting Policies - Continued (c) Contributions

Contributions received, including unconditional promises to give, are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire or are otherwise satisfied in the fiscal year in which the contributions are recognized.

(d) Financial Accounting Standards The Financial Accounting Standards Board (FASB) has issued authoritative guidance establishing two levels of U.S. generally accepted accounting principles (GAAP), authoritative and non-authoritative, and making the Accounting Standards Codification (ASC) the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission. This guidance was incorporated into ASC Topic 105, Generally Accepted Accounting Principles.

(e) Cash Equivalents Cash and cash equivalents includes cash related to temporarily restricted net assets with a purpose restriction that will be satisfied in the next fiscal year. For purposes of the statement of cash flows, the Organization considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents.

(f) Accounts Receivable The Organization grants credit to joint sponsors of activities as well as participants in certain activities. Accounts receivable are stated at estimated net realizable value. For certain trade receivables over sixty days past due, an interest rate of 1.5% is applied against the outstanding balance. Receivables are considered impaired if full principal payments are not received in accordance with contractual terms. It is the Organization’s policy to charge off uncollectible receivables when management determines the receivable will not be collected. Management determined an allowance for doubtful accounts was not necessary at June 30, 2018 and 2017.

(g) Property and Equipment Property and equipment are stated at cost, if purchased, or at estimated fair value at the date of receipt if acquired by gift. The Organization capitalizes all expenditures for property and equipment in excess of $1,000. Major renewals and betterments are capitalized. Maintenance, repairs, and minor renewals are charged to expense as incurred. Property and equipment are depreciated over estimated useful lives ranging from three to forty years using the straight-line method. Donations of property and equipment are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose.



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(1) Description of Organization and Summary of Significant Accounting Policies - Continued (h) Revenue Recognition

Revenues are recognized when the earnings process is substantially complete or purpose restrictions have been met. Continuing professional development participant registrations and exhibitor fees are recognized when the educational activity has been held or the educational materials have been delivered. Revenue generated from commercial and institutional grants are recognized as related expenses are incurred. Deferred revenues associated with amounts received for contractual programs not yet held, or for educational materials not yet delivered were approximately $1.2 million and $1.5 million at June 30, 2018 and 2017, respectively.

(i) Estimates in Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of increases or decreases in net assets during the period. Actual results could differ from those estimates.

(j) Functional Allocation of Expenses The costs of providing the Organization’s various programs and other activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among program services and supporting services.

(k) Income Taxes The Organization is exempt from federal income taxes on income other than unrelated business income under Section 501(c)(3) of the Internal Revenue Code. For the years ending June 30, 2018 and 2017, the Organization’s sole source of unrelated business income was conferencing services. The Organization has adopted FASB guidance regarding Uncertainty in Income Taxes as codified in FASB ASC 740-10. At June 30, 2018, management does not believe it has taken any tax positions that are subject to a significant degree of uncertainty. The Organization’s income tax filings are subject to examination by taxing authorities and filings for periods after fiscal 2014 remain open for examination.

(l) Reclassification Amounts receivable from and payable to the University of South Florida DSO’s and the University of South Florida have been modified as of June 30, 2017 to conform to the 2018 financial statement presentation.



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(2) Concentrations of Credit Risk and Significant Customers Financial instruments that are exposed to concentrations of credit risk consist of cash and accounts receivable. The Organization maintains deposit balances with what management believes to be high credit quality commercial banks. At June 30, 2018 and 2017, a total of $2,175,635 and $524,848, respectively, was held in a government checking account in excess of the FDIC insurance limit. These excess amounts are covered by collateral protection required by State of Florida Statute 280. The amount due from one customer was approximately 20% of total accounts receivable at June 30, 2018. Amounts due from four customers were approximately 60% of total accounts receivable at June 30, 2017. The Organization performs ongoing credit evaluations of its customers, and generally, requires no collateral from them. Deferred revenue associated with amounts received from one customer was approximately $150,000 or 12% of total deferred revenue as of June 30, 2018 and was approximately $387,000 or 25% of total deferred revenue as of June 30, 2017.

(3) Property and Equipment Property and equipment consists of the following at June 30, 2018 and 2017:

2018 2017

Furniture and equipment $ 751,284 958,232 Computers 2,036,383 1,910,212 Medical equipment 10,188,521 11,458,697 Leasehold improvements 1,599,770 1,486,407 Building 20,907,385 20,907,385

35,483,343 36,720,933

Less accumulated depreciation (16,935,281) (16,761,739)

$ 18,548,062 19,959,194

Depreciation expense was $1,720,266 and $1,971,825 for the years ended June 30, 2018 and 2017, respectively.

(4) Retirement Plans The Organization’s personnel are employed by UMSA or the State of Florida (USF). UMSA employees participate in a defined contribution tax-deferred annuity retirement plan that covers substantially all eligible personnel upon completion of one year of service. USF employees choose between a defined contribution tax-deferred annuity retirement plan or defined benefit pension plan that covers substantially all eligible personnel. Under these plans the Organization contributes at the rate of 3.3% to 7.85% of each eligible individual’s total compensation depending on the retirement plan selected. Contribution expense related to the plans was approximately $114,000 and $115,000 for the years ended June 30, 2018 and 2017, respectively.



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(4) Retirement Plans - Continued The Organization’s employees can also participate in a voluntary tax-deferred annuity plan. Under this plan, all personnel may make voluntary contributions through the purchase of individual annuity contracts. Both of the retirement plans are sponsored by UMSA.

(5) Leases The Organization has several non-cancellable operating leases for office facilities and equipment. Rent expense for the years ended June 30, 2018 and 2017 was approximately $309,000 and $829,000, respectively. The Organization was obligated under two capital leases during the year ended June 30, 2018. The first capital lease is for certain medical equipment and requires monthly payments of $32,050 through July 2022. Included in the monthly lease payments are amounts paid for services of $12,840. These amounts are expensed each month when paid. The gross amount of equipment and the related accumulated amortization recorded under this capital lease were $1,031,030 and $224,486, respectively, at June 30, 2018. The second capital lease, signed in December 2010, relates to the Organization’s CAMLS facility in Tampa, Florida which was completed in February 2012. As discussed in Note 8, this lease is with a related party, the USF Financing Corporation (USFFC). Since this is a build-to-suit transaction with a related party and the lease transfers essentially all rights and responsibilities of ownership to the Organization, the Organization has accounted for the lease as if it were the owner during the construction period and thereafter. The gross amount of the building and the related accumulated amortization recorded under this capital lease were $20,907,385 and $4,581,480, respectively, at June 30, 2018. During fiscal year 2018, USFFC refinanced the debt associated with CAMLS, reducing the net interest rate from 4.01% to 3.51% which in turn reduced the Organization’s annual lease payments to approximately $1.52 million through 2031. The gross amount of the facility and equipment and the related accumulated amortization recorded under capital leases at June 30, 2018 and 2017 were:

2018 2017

Facility and equipment $ 21,938,415 21,938,415 Accumulated amortization (4,805,966) (4,086,630)

$ 17,132,449 17,851,785

Amortization of the assets held under these capital leases is included in depreciation and amortization expense. Interest rates on capitalized leases are imputed based on the lower of the Organization’s incremental borrowing rate at the inception of each lease or the lessor’s implicit rate of return and range from 3.51% on the facility lease to 4.64% on an equipment lease.



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(5) Leases - Continued The present value of future minimum capital lease payments and future minimum lease payments on non-cancellable operating leases as of June 30, 2018 are as follows:

Capital OperatingLeases Leases Total

$ 2,007,416 268,500 2,275,9161,622,813 255,792 1,878,6051,646,506 209,069 1,855,5751,671,660 154,080 1,825,7401,467,839 12,840 1,480,679

12,038,709 - 12,038,709

Total minimum lease payments 20,454,943 900,281 21,355,224

Less amount representing interest 4,078,993

Present value of minimum capital lease payments 16,375,950

Current installments of capital lease obligations 1,441,536

Capital lease obligations, less current installments $ 14,934,414

Thereafter

Year Ending June 30,

20192020202120222023

(6) Long-Term Debt During the year ended June 30, 2017, HPCC entered into a loan agreement with a financial institution to finance the acquisition of medical equipment. The loan requires three monthly payments of $100 followed by 21 monthly payments of $15,469, including interest, through March 2019 with an interest rate of 3.65%. The loan is secured by equipment. Maturities of long-term debt for the years subsequent to June 30, 2018 are $136,036 for fiscal 2019.

(7) Rental Income The Organization sub-leases space within its CAMLS facility under non-cancellable operating lease agreements. Rental income was approximately $271,000 and $102,000 for the years ended June 30, 2018 and 2017, respectively, and is recorded as a component of other income in the accompanying statements of activities. Future minimum lease payments to the Organization under non-cancellable operating sublease agreements as of June 30, 2018 are approximately $284,000 for 2019, $160,000 for 2020 and $32,000 for 2021 for a grand total of $476,000 over the three year period.



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(8) Related Party Transactions In the normal course of business, the Organization transacts with the following related parties: Related Party Relationship

University of South Florida (USF) Governing OrganizationUniversity Medical Services Association, Inc. (UMSA) Direct support organization of Governing OrganizationUSF Financing Corporation (USFFC) Direct support organization of Governing OrganizationUSF Foundation Direct support organization of Governing OrganizationUSF Health & Education International Foundation (HEIF) Affiliate of Governing Organization

Summary of Transactions with Related Parties The significant related party balances and transactions as of and for the years ended June 30, 2018 and 2017 are summarized and approximated as follows: (a) Programming, Facility Operations and Support Revenue The Organization receives contractual and support funding for continuing education, training and academic programming. The summary of transactions related to the Organization’s delivery of programming included in Program revenues is as follows:

Outstanding OutstandingAmount of Receivable Amount of Receivable

Transaction Balance Transaction Balancefor the Year at June 30 for the Year at June 30

UMSA $ 1,500,000 76,212 2,200,000 37,096USF 3,841,000 67,645 3,269,000 60,827USF Foundation 22,000 5,000 18,000 10,095

$ 5,363,000 148,857 5,487,000 108,018

2018 2017

The Organization’s financial statements report the financial management of HEIF revenues and expenses at net rather than gross. The gross amount of transactions was approximately $436,000 and $254,000 for the years ended June 30, 2018 and 2017 respectively.



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(8) Related Party Transactions - Continued (b) Outsourcing Services All of the Organization’ personnel are either employees of UMSA or employees of the University. The Organization has entered service agreements or approved allocations of various support services based on actual usage or cost allocation in the following areas: staffing, personnel services, payroll processing, internal audit, information technology, vivarium services, instructors and other related functions. The summary of transactions arising from the Organization’s service agreements and related charges included in Program services and Management and general expenses is as follows:

Outstanding OutstandingAmount of Payable Amount of Payable


UMSA $ 2,213,000 (324,364) 2,325,000 (361,900)USF 1,792,000 (27,281) 1,687,000 (91,779)

$ 4,005,000 (351,645) 4,012,000 (453,679)

2018 2017

(c) Lease Transactions (Organizations as Lessee) The summary of transactions arising from the Organization’s capitalized lease agreement allocated between insurance, management fees and interest included in Program services and Management and general expenses and principal as a reduction of Current installments under capital leases and Obligations under capital leases, excluding current installments is as follows:

Current Obligation Under Current Obligation UnderInstallments of Capital Leases, Installments of Capital Leases,

Amount of Obligation Under Excluding Current Amount of Obligation Under Excluding CurrentTransaction Capital Lease Installments Transaction Capital Lease Installmentsfor the Year at June 30 at June 30 for the Year at June 30 at June 30

USFFC $ 1,750,316 1,245,863 14,289,967 1,851,270 1,173,460 15,128,911

20172018

(d) Program Net Revenues The Organization collaborates with various USF departments. Net revenues from these activities are either retained by the Organization for use in future programs or paid out.



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(8) Related Party Transactions - Continued (d) Program Net Revenues - Continued The summary of transactions arising from the Organization’s program net revenues included in Program Services except HEIF is as follows:

Outstanding OutstandingAmount of Payable Amount of Payable


UMSA $ 2,650 (42,168) 4,700 (59,246)USF 53,300 (288,925) 670,000 (265,176)HEIF 406,300 (36,196) 197,000 (43,412)

$ 462,250 (367,289) 871,700 (367,834)

2018 2017

During fiscal year 2017, the Organization and USF Health determined that certain related party costs incurred for contracts or programming completed prior to July 1, 2015 be either forgiven or transferred from designated net assets to undesignated net assets. As a result, $1,343,876 of liabilities for related party costs were forgiven and written off to income in the accompanying statement of activities. In addition, $1,564,014 of designated net assets were transferred to undesignated net assets. Additionally, $365,709 of USF Health departmental designated net assets from Continuing Professional Development programming from the year ending June 30, 2016 were reclassified as liabilities from designated net assets. These obligations were recorded as increased program expenses in the accompanying statement of activities for fiscal year 2017. The impact of the adjustments to the accompanying financial statements is as follows at June 30, 2017:

Increase(Decrease)

Accrued expenses, University of South Florida DSO's $ (400,805)Accrued expenses, University of South Florida (577,362)

Total decrease in liabilities $ (978,167)

Net assets:Operating $ 2,907,890Designated unrestricted net assets (1,929,723)

Total increase in net assets $ 978,167

The outstanding balances presented are non-interest bearing and collectible/payable on demand.



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(8) Related Party Transactions - Continued (e) Receivable Balances

2018 2017

UMSA $ 95,182 37,096USF 67,645 60,827USF Foundation 5,000 10,095USFFC 406,919 383,271

$ 574,746 491,289

Due from related party balances are booked under the following accounts in the statement of financial position at June 30:

2018 2017

Accrued receivable, University of South Florida DSO's $ 507,101 430,462Accrued receivable, University of South Florida 67,645 60,827

Accounts receivable, USF/DSO $ 574,746 491,289

(f) Payable Balances

2018 2017

UMSA $ 385,202 375,328USF 316,207 400,368USFFC (1,584) - HEIF 36,196 -

$ 736,021 775,696

Due to related party balances are booked under the following accounts in the statement of financial position at June 30:

2018 2017

Accrued expenses - USF/DSO $ 368,732 451,274Due to USF/DSO's - Program residuals 367,289 324,422

$ 736,021 775,696



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(9) Temporarily Restricted Net Assets As of June 30, 2018 and 2017, temporary restrictions on net assets relate to the following:

2018 2017

Specific continuing education program activities $ 103,718 248,037

Grants received from institutional and commercial organizations for continuing professional education activities are recorded as additions to temporarily restricted net assets when received. Temporary restrictions on net assets are released as eligible expenses are incurred for the restricted purpose of the grant or as refunds to joint sponsoring organizations are paid.

(10) Cash Flow Information Noncash financing and investing activity during the year ended June 30, 2017 included $76,250 of equipment financed through a short-term debt obligation and $311,683 of equipment financed through a long-term note payable. The Organization received a donation of equipment of $83,463 during fiscal year 2017 under a pledge agreement recorded during fiscal 2014. During the year ended June 30, 2017, $1,026,937 of equipment was financed through a capital lease. During the year ended June 30, 2017, HPCC sold equipment and realized a gain of $434,501. HPCC is holding a note receivable of $220,642 related to this equipment sale.

(11) Subsequent Events The Organization has evaluated subsequent events through October 11, 2018, the date the financial statements were available for issuance.

INTERNAL CONTROL AND COMPLIANCE



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Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing Standards The Board of Directors USF Health Professions Conferencing Corporation: We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of USF Health Professions Conferencing Corporation (a nonprofit organization), which comprise the statement of financial position as of June 30, 2018, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated October 11, 2018. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered USF Health Professions Conferencing Corporation’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of USF Health Professions Conferencing Corporation’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

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Compliance and Other Matters As part of obtaining reasonable assurance about whether USF Health Professions Conferencing Corporation’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. October 11, 2018 Clearwater, Florida



October 11, 2018 To the Board of Directors and Finance and Audit Committee USF Health Professions Conferencing Corporation: We have audited the financial statements of USF Health Professions Conferencing Corporation for the year ended June 30, 2018, and have issued our report thereon dated October 11, 2018. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter dated June 7, 2018 and in materials presented to you on June 14, 2018. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by USF Health Professions Conferencing Corporation are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during fiscal 2018. We noted no transactions entered into by the Organization during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were:

Management’s estimate of the allowance for uncollectible accounts receivable is based on historical experience and an analysis of the collectability of individual receivable balances. We evaluated the key factors and assumptions used by management to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. Management’s estimate of accumulated depreciation and amortization of property and equipment and related depreciation and amortization expense is based on the current physical condition of property and equipment and current and anticipated economic conditions affecting their useful lives. We evaluated the key factors and assumptions used by management in determining original

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and remaining useful lives to ascertain that accumulated depreciation and depreciation expense are reasonable in relation to the financial statements as of and for the year ended June 30, 2018, taken as a whole. The procedures used by management and the amounts seem reasonable at this time.

Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements is presented in Note 8 and describes a variety of transactions involving related parties including the forgiveness of related party costs in fiscal 2017 that resulted in the recognition of a gain in the financial statements of approximately $1.3 million. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated October 11, 2018. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Organization’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

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Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Organization’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of the Board of Directors, the Finance and Audit Committee and management of USF Health Professions Conferencing Corporation and is not intended to be and should not be, used by anyone other than these specified parties. Very truly yours, Mayer Hoffman McCann P.C. Clearwater, Florida

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