Post-Issuance Bond Compliance Policy

I. Scope

This policy applies to the Business Affairs Office.

II. Policy Statement

Indiana Wesleyan University (the “University”) monitors post-issuance compliance of any tax-exempt bonds and/or other obligations for the benefit of the University (collectively referred to as “Bonds”), with applicable requirements of the federal securities laws and the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder (the “Treasury Regulations”). The University reserves the right to use its discretion as necessary and appropriate to make exceptions or request additional provisions as circumstances warrant. The University also reserves the right to change this Policy from time to time.

III. Reason for the Policy

IWU monitors compliance for both taxable and tax-exempt bond financing for the following reasons: adhering best practice, as well as avoidance of losing tax exempt status, reputational damage, potential liability to the Internal Revenue Service or to bondholders, inability to access tax exempt bond markets, etc.

IV. Procedures

A. Monitoring of Post-Issuance Compliance

1. Monitoring of post-issuance compliance for Bonds will be the primary responsibility of the CFO of the University. The CFO may designate employees within his or her respective office to carry out such duties under this Policy on his or her behalf through the designation of the Bond Compliance Team, which consists of representatives from the CFO’s Office, Controller’s Office, and Internal Audit Office.
2. The Bond Compliance Team shall consult with bond counsel, financial advisor, IRS publications and/or such other resources as are necessary to understand and meet the requirements of this Policy.
3. Training and education of the Bond Compliance Team will be sought upon the occurrence of new developments and/or upon the hiring of new staff or changes in staff to implement this Policy.

B. Financing Transcripts, Documentation and Retention

1. The Bond Compliance Team shall coordinate the receipt and retention of the following:
   1. Basic records relating to the Bond transaction (e.g., Bond counsel opinion, any minutes, resolutions/ordinances and certificates, Tax Certificate, as defined hereinafter, Rebate Instructions, Form 8038s, Yield of the Bonds, formal elections required by the IRS, Continuing Disclosure Agreement, etc.);
   2. Proof of filing of the Form 8038-G, or other appropriate form;
   3. Documentation evidencing expenditure of proceeds of the issue (e.g., purchase contracts, construction contracts, progress payment requests, requisitions, draw requests, cancelled checks, payment of bond issuance costs, records of allocations of bond proceeds, including reimbursements of project expenditures made before the Bonds were issued);
   4. Documentation regarding the types of facilities financed with the proceeds of the issue;
   5. Documentation evidencing the use of finance property by public or private entities (e.g., any leases, subleases, agreements related to use, management agreements, service agreements, research agreements, etc.);
   6. Documentation evidencing any unrelated trade or business use of the financed facilities;
   7. Documentation evidencing all sources of payment or security for the issue;
   8. Documentation pertaining to any investment of the proceeds of the issue (including the purchase and sale of securities, SLGs subscriptions, yield calculations for investments, guaranteed investment contracts);
   9. Documentation pertaining to any interest rate hedge or other derivative, including the Master Agreement, schedules and annexes to the Master Agreement, the initial confirmation and subsequent amendments or additional confirmations, market valuations and payments and cash flows;
   10. Rebate reports;
   11. Form 8038-Ts; and
   12. Any reports of any IRS examination of the Bonds.
2. The Bond Compliance Team shall coordinate the retention of all such records in a manner that ensures their complete access to the IRS for so long as the issue is outstanding (including any refunding), plus three (3) years.

C. Federal Tax Law Compliance

1. Retention of Bond Counsel. With respect to each issue of Bonds, the University shall engage bond counsel (“Bond Counsel”) to provide an opinion or opinions as to the tax-exempt status of the Bonds and to address requirements pertaining to the tax-exempt status of the Bonds and to provide guidance prior to and at closing with respect to any post-issuance tax compliance matters. The requirements regarding the tax-exempt status of the Bonds shall be documented by bond counsel in a Tax Certificate and Agreement or such other document or documents (the “Tax Certificate”) finalized at or before the issuance of the Bonds.
2. Proper Use of Proceeds. The Bond Compliance Team shall ensure that Bond proceeds are allocated to expenditures in a manner set forth in the Tax Certificate, or if different than or not addressed in the Tax Certificate, as approved by Bond Counsel. The Bond Compliance Team shall maintain a procedure for tracking expenditures and the allocation of Bond proceeds and investment earnings to expenditures, including the reimbursement of pre-issuance expenditures.
3. Investment of Proceeds. The Bond Compliance Team shall ensure that Bond proceeds are invested in investments as provided in the Tax Certificate, or if different than or not addressed in the Tax Certificate, as approved by Bond Counsel. The Bond Compliance Team shall maintain a system for tracking investment earnings and monitoring investments during the applicable “temporary period” (as defined in the Code and Treasury Regulations). The Bond Compliance Team shall ensure that investments acquired with Bond proceeds are purchased at fair market value. The Bond Compliance Team shall arrange for timely yield restriction and/or the computation and payment of any yield reduction payments (as such term is defined in the Code and Treasury Regulations), if applicable.
4. Arbitrage Rebate Calculations. The Bond Compliance Team shall ensure the timely completion of arbitrage rebate calculations, filings and payment if necessary.
5. Use of Bond-Financed Facilities. The Bond Compliance Team shall consult with Bond Counsel before the University enters into any agreement or other arrangement for sale, lease, or use of the bond-financed property, including but not limited to, service, vendor and management contracts, research agreements, licenses to use bond financed property or naming rights agreements.
6. Post Issuance Transactions. The Bond Compliance Team shall consult with Bond Counsel before making any modifications or amendments to the bond documents for the Bond issue, including, but not limited to, entering or modifying investment agreements; making any change in security for the Bonds, engaging in post-issuance credit enhancement transactions (e.g., bond insurance, letter of credit) or hedging transactions (e.g. interest rate swap, cap); releasing any liens or reissuing or refunding the Bonds.
7. Remedial Action. In the event an action causes an issue to meet the private business tests or private loan financing test, or that it is determined that any use of the Bond proceeds or Bond-financed facilities is a “change in use” as defined in the Code and Treasury Regulations), the Bond Compliance Team shall consult with Bond Counsel for the purposes of determining the nature and extent of any remedial action necessary or proper for the University to take with respect to the Bonds or the Bond financed facilities. If self-remediation is not available under applicable Regulations, the Bond Compliance Team shall consult with Bond Counsel to ensure timely identification of violations of federal tax requirements and timely correction of any identified violation(s) through use of the Tax Exempt Bonds Voluntary Closing Agreement Program.

D. Continuing Disclosure Compliance

1. The CFO and Controller shall assure compliance with each Continuing Disclosure Agreement and annually, per the Continuing Disclosure Agreement, file audited financial statements and other information required by each Continuing Disclosure Agreement. The CFO and Controller will monitor the material events, as described in the Continuing Disclosure Agreement and assure compliance with the material event disclosure.

E. Annual Policy Review

1. On an annual basis, or sooner if deemed necessary by the CFO, the Bond Compliance Team shall monitor private business use of bond supported facilities and review this policy to assess the University’s compliance with this Policy.

V. Related Information

IRS Publication 4077 Tax-Exempt Bonds for 501(c)3