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Mayo Clinic Financial and Compliance Report December 31, 2016

Contents Independent auditor’s report 1-2 Financial statements

Consolidated statements of financial position 3

Consolidated statements of activities 4

Consolidated statements of cash flows 5

Notes to consolidated financial statements 6-38

Supplemental information

Consolidating statements of financial position 39-40 Consolidating statements of activities 41-42

Schedule of expenditures of federal awards 43-76

Schedule of expenditures of Florida state financial assistance 77

Notes to schedules of expenditures of federal awards and Florida state financial assistance 78

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 79-80

Report on compliance for each major federal program and state project and on internal control

over compliance in accordance with Uniform Guidance and Chapter 10.650, Rules of the Auditor General of the State of Florida 81-82

Schedule of findings and questioned costs 83-85 Corrective action plan 86 Summary schedule of prior audit findings 87

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Independent Auditor’s Report Board of Trustees Mayo Clinic Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Mayo Clinic and its subsidiaries (the Clinic), which comprise the consolidated statements of financial position as of December 31, 2016 and 2015; the related consolidated statements of activities and cash flows for the years then ended; and the related notes to the consolidated financial statements (collectively, 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 Mayo Clinic and its subsidiaries as of December 31, 2016 and 2015, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

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Other Matters Supplemental Information Our audits were conducted for the purpose of forming an opinion on the 2016 and 2015 financial statements as a whole. The accompanying consolidating statements of financial position and activities are presented for purposes of additional analysis and are not a required part of the 2016 and 2015 financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements, or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. The accompanying supplemental cash basis schedules of expenditures of federal awards and Florida state financial assistance and notes to the schedules of expenditures of federal awards and Florida state financial assistance, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and Chapter 10.650, Rules of the Auditor General of the State of Florida, are presented for the purposes of additional analysis and are not a required part of the 2016 financial statements. The schedules provide relevant information that is not provided by the financial statements and are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America or a complete presentation in accordance with the cash basis of accounting. Under the cash basis, expenditures are recognized when paid rather than when the obligation is incurred. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements, or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 24, 2017, on our consideration of the Clinic’s internal control over financial reporting and 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 the 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 the Clinic’s internal control over financial reporting and compliance.

Minneapolis, Minnesota February 24, 2017

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Mayo Clinic

Consolidated Statements of Financial PositionDecember 31, 2016 and 2015 (In Millions)

2016 2015Assets

Current assets:Cash and cash equivalents 57 $ 53 $ Accounts receivable for medical services, less allowances for uncollectible

accounts of $674 in 2016 and $531 in 2015 (Note 2) 1,635 1,658 Securities lending collateral (Note 4) 30 105 Other receivables (Notes 9 and 14) 309 273 Other current assets (Notes 14 and 17) 253 166

Total current assets 2,284 2,255

Investments (Note 3) 7,700 7,061 Investments under securities lending agreement (Note 4) 55 111 Other long-term assets (Notes 3, 9, 12 and 14) 574 636 Property, plant and equipment, net (Note 5 and 8) 4,308 4,230

Total assets 14,921 $ 14,293 $

Liabilities and Net Assets

Current liabilities:Accounts payable 403 $ 399 $ Accrued payroll 678 617 Accrued employee benefits 153 133 Deferred revenue 50 40 Long-term variable-rate debt (Note 7) 670 360 Securities lending payable (Note 4) 30 105 Other current liabilities (Notes 8, 12, 13, 14 and 17) 359 315

Total current liabilities 2,343 1,969

Long-term debt, net of current portion (Note 7) 2,371 2,388 Accrued pension and postretirement benefits, net of current portion (Note 12) 2,012 1,323 Other long-term liabilities (Notes 8, 13 and 14) 1,028 966

Total liabilities 7,754 6,646

Net assets (Notes 9 and 10):Unrestricted 4,542 5,162 Temporarily restricted 1,357 1,319 Permanently restricted 1,268 1,166

Total net assets 7,167 7,647

Total liabilities and net assets 14,921 $ 14,293 $

See notes to consolidated financial statements.

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Mayo Clinic

Consolidated Statements of ActivitiesYears Ended December 31, 2016 and 2015 (In Millions)

Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total

Revenue, gains and other support:Net medical service revenue (Note 2) 9,220$ -$ -$ 9,220$ 8,620$ -$ -$ 8,620$ Grants and contracts 426 - - 426 386 - - 386 Investment return allocated to current activities (Note 3) 198 96 - 294 206 27 - 233 Contributions available for current activities 44 118 - 162 40 171 - 211 Premium revenue 145 - - 145 144 - - 144 Other (Notes 2 and 15) 751 - - 751 721 - - 721 Net assets released from restrictions (Note 9) 210 (210) - - 206 (206) - -

Total revenue, gains and other support 10,994 4 - 10,998 10,323 (8) - 10,315

Expenses (Note 11):Salaries and benefits 6,844 - - 6,844 6,371 - - 6,371 Supplies and services 2,840 - - 2,840 2,621 - - 2,621 Facilities 735 - - 735 697 - - 697 Finance and investment 104 - - 104 100 - - 100

Total expenses 10,523 - - 10,523 9,789 - - 9,789

Income (loss) from current activities 471 4 - 475 534 (8) - 526

Noncurrent and other items:Contributions not available for current activities, net (18) 34 102 118 (10) 12 58 60 Unallocated investment (loss) return, net (Note 3) 26 - - 26 (103) (8) - (111) Income tax expense (Note 6) (13) - - (13) (33) - - (33) Loss from assets held for sale (Note 17) (90) - - (90) - - - - Other 3 - - 3 1 - - 1

Total noncurrent and other items (92) 34 102 44 (145) 4 58 (83)

Increase (decrease) in net assets beforeother changes in net assets 379 38 102 519 389 (4) 58 443

Pension and other postretirement benefit adjustments (Note 12) (999) - - (999) 12 - - 12

Increase (decrease) in net assets (620) 38 102 (480) 401 (4) 58 455

Net assets at beginning of year 5,162 1,319 1,166 7,647 4,761 1,323 1,108 7,192

Net assets at end of year 4,542$ 1,357$ 1,268$ 7,167$ 5,162$ 1,319$ 1,166$ 7,647$


2016 2015

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Mayo Clinic

Consolidated Statements of Cash FlowsYears Ended December 31, 2016 and 2015 (In Millions)

2016 2015Cash flows from current activities:

Increase (decrease) in net assets (480) $ 455 $ Adjustments to reconcile changes in net assets to net cash provided

by current activities:Depreciation and amortization 491 455 Provision for uncollectible accounts 218 200 Net realized and unrealized gain on investments (217) (28) Restricted gifts, bequests and other (102) (58) Net change in accounts receivable and other current assets and

liabilities (80) (357) Pension and other postretirement benefits adjustments 689 (288) Net change in other long-term assets and liabilities 126 108

Net cash provided by current activities 645 487

Cash flows from investing activities:Purchase of property, plant and equipment (631) (628) Purchases of investments (2,351) (1,094) Sales and maturities of investments 1,948 1,220

Net cash used in investing activities (1,034) (502)

Cash flows from financing activities:Restricted gifts, bequests and other 100 62 Borrowings on long-term debt 839 - Payment of long-term debt (546) (49)

Net cash provided by financing activities 393 13

Net increase (decrease) in cash and cash equivalents 4 (2)

Cash and cash equivalents at beginning of year 53 55

Cash and cash equivalents at end of year 57 $ 53 $


Mayo Clinic Notes to Consolidated Financial Statements (in Millions)

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Note 1. Organization and Summary of Significant Accounting Policies

Organization: Mayo Clinic (the Clinic) and its Arizona, Florida, Georgia, Iowa, Minnesota and Wisconsin affiliates provide comprehensive medical care and education in clinical medicine and medical sciences and conduct extensive programs in medical research. The Clinic and its affiliates also provide hospital and outpatient services, and at each major location, the clinical practice is closely integrated with advanced education and research programs. The Clinic and most of its subsidiaries have been determined to qualify as tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code (the Code) and as a public charity under Section 509(a)(2) of the Code. Basis of presentation: Included in the Clinic’s consolidated financial statements are all of its wholly owned or wholly controlled subsidiaries. All significant intercompany transactions have been eliminated in consolidation. In addition, these statements follow generally accepted accounting principles applicable to the not-for-profit industry as described in the Financial Accounting Standards Board’s FASB Accounting Standards Codification (ASC) Topic 958. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Change in accounting principle: New accounting standards adopted: In 2016, the Clinic adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2015-17, Balance Sheet Classification of Deferred Taxes (Subtopic 740-10), which requires classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. In addition, valuation allowances are no longer allocated between current and noncurrent deferred tax assets. The adoption of this ASU did not materially impact the consolidated financial statements. In addition, the Clinic adopted FASB ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance about whether a cloud computing arrangement includes a software license. Cloud computing arrangements which include a software license will be accounted for consistent with the acquisition of other software licenses. Those arrangements that do not include a software license will be accounted for as a service contract. In addition, all software licenses will be accounted for consistent with other licenses of intangible assets. The Clinic adopted the ASU using the prospective transition method which did not materially impact the consolidated financial statements. New accounting standards recently issued: In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825). This ASU clarifies reporting and disclosure for financial instruments to provide users of financial statements with more decision-useful information. This update is effective during interim and annual periods beginning on or after January 1, 2018. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by a lease. Lessor accounting will remain largely unchanged from current GAAP. The ASU will require disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. This update is effective during interim and annual periods beginning on or after January 1, 2019.


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Note 1. Organization and Summary of Significant Accounting Policies (Continued)

In March 2016, the FASB issued ASU No. 2016-07, Investments—Equity Method and Joint Ventures (Topic 323). This ASU simplifies the accounting for equity method investments, and requires the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of income is required. The update is effective during interim and annual periods beginning on or after January 1, 2017. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606).This ASU clarifies the implementation guidance on principal versus agent considerations. This update is effective during interim and annual periods beginning on or after January 1, 2018. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606). This ASU clarifies guidance related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. This update is effective during interim and annual periods beginning on or after January 1, 2018. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. This ASU clarifies guidance related to implementation issues that could arise when organizations implement the new revenue guidance. The effective date for this update is the same as the effective date and transition requirements for ASU No. 2014-09 and any amendments to it. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other documents to extend credit held by a reporting entity. This update is effective during interim and annual periods beginning on or after January 1, 2020. In August 2016, the FASB issues ASU No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities (Topic 958). This ASU changes certain financial statement requirements for not-for-profit entities in an effort to make the information more meaningful to users and reduce reporting complexity. This update is effective for annual financial statements issued for fiscal years beginning after December 15, 2017 and for interim periods within fiscal years beginning after December 15, 2018. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments (Topic 230). This ASU provides consistent principles for evaluating the classification of cash payments and receipts in the statement of cash flows. This update is effective during interim and annual periods beginning on or after January 1, 2018. The Clinic is currently assessing the impact of the preceding ASUs on its consolidated financial statements. Cash and cash equivalents: Cash and cash equivalents include currency on hand, demand deposits with banks or other financial institutions, and short-term investments with maturities of three months or less from the date of purchase, which are not managed by the Clinic’s investment managers.


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Accounts receivable for medical services: Accounts receivable for medical services are stated at estimated net realizable value. The Clinic estimates the allowances for uncollectible accounts based on historic write-offs and the aging of the accounts. Accounts are written off when collection efforts have been exhausted. Inventories: Inventories, consisting primarily of medical supplies and pharmaceuticals, are stated at the lower of cost or market, determined using the first-in, first-out method. Investments: Investments in equity and debt securities, including alternative investments, are recorded at fair value (Notes 3 and 4). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Realized gains and losses are calculated based on the average cost method. Investment income or loss (including realized and unrealized gains and losses on investments, interest and dividends) are included in the consolidated statements of activities. Alternative investments (principally limited partnership interests in absolute return, hedge, private equity, real estate and natural resources funds), represents the Clinic’s ownership interest in the respective partnership, which is valued at net asset value (NAV) obtained from fund manager statements and historical audited financial statements. The investments in alternative investments may individually expose the Clinic to securities lending, short sales, and trading in futures and forward contract options and other derivative products. The Clinic’s risk is limited to the investment’s carrying value. It is the Clinic’s intent to maintain a long-term investment portfolio to support research, education and other activities. Accordingly, the total investment return is reported in the consolidated statements of activities in two categories. The investment return allocated to current activities is determined by a formula, which involves allocating five percent of a three-year moving average of investments related to endowments and additionally entails the matching of financing costs for the assets required for operations. Management believes this return is approximately equal to the real return that the Clinic expects to earn on its investments over the long term. The unallocated investment return, included in noncurrent and other items in the consolidated statements of activities, represents the difference between the total investment return and the amount allocated to current activities. Property, plant and equipment: Property, plant and equipment are carried at cost if purchased or at fair value on the date received through affiliation or donation, less accumulated depreciation. Plant and equipment are depreciated over estimated useful lives ranging from three to fifty years using the straight-line method. Depreciation expense is reflected in facilities expense and was $491 and $455 in 2016 and 2015, respectively, and includes amortization of assets recorded under capital leases. Costs associated with the development and installation of internal-use software are accounted for in accordance with the Intangibles—Goodwill and Other, Internal-Use Software subtopic of the FASB ASC. Accordingly, internal-use software costs are expensed or capitalized and amortized according to the provisions of the accounting standard. Deferred revenue: Deferred revenue consists of payments received in advance for grant, subscription and tuition revenue. Deferred revenues are subsequently recognized as revenue in accordance with the Clinic’s revenue recognition policies. Deferred compensation: The Clinic offers eligible employees a nonqualified, tax-deferred compensation retirement plan. Employees defer compensation into the plan on a pretax basis. For the most part, the plan operates similar to a defined contribution plan.


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Asset retirement obligations: The Clinic accounts for the estimated cost of legal obligations associated with long-lived asset retirements in accordance with the Asset Retirement and Environmental Obligations topic of the FASB ASC. The asset retirement liability, recorded in other long-term liabilities, is accreted to the present value of the estimated future costs of these obligations at the end of each period. Net assets: Resources are classified for reporting purposes into three net asset categories (unrestricted, temporarily restricted and permanently restricted) according to the absence or existence of donor-imposed restrictions. Temporarily restricted net assets are those assets, including contributions and accumulated investment returns, whose use has been limited by donors to specific purposes or time periods. Permanently restricted net assets are those for which donors require the principal of the gifts to be maintained in perpetuity and provide a permanent source of income. Reclassifications of net assets are primarily the result of donor redesignations. Net medical service revenue: Net medical service revenue is recognized when services are provided. The Clinic has agreements with third-party payors that provide for payments to the Clinic at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per diem rates. Net medical service revenue is reported at the estimated net amounts due from patients and third-party payors for services rendered. For patients that do not qualify for charity care, the Clinic recognizes revenue on the basis of its standard rates for services provided less an allowance for uncollectible accounts (or on the basis of discounted rates, if negotiated or provided by policy). Based on historical experience, a portion of the Clinic’s patients will be unable or unwilling to pay for the services provided. Thus, the Clinic records a provision for uncollectible accounts related to patients in the period the services are provided. Grants and contracts: Reciprocal grants and contracts revenue is recognized when the expenses have been incurred for the purpose specified by the grantor or in accordance with the terms of the agreement. Grant and contract amounts due to the Clinic are included in other receivables. Premium revenue: Premium revenue represents capitated health premiums received by a managed care subsidiary from third parties and is recognized as revenue in the period in which enrollees are entitled to health care services. Charity and uncompensated care: The Clinic provides health care services to patients who meet certain criteria under its Charity Care Policy without charge or at amounts less than established rates. Since the Clinic does not pursue collection of these amounts, they are not reported as revenue. The estimated cost of providing these services was $83 and $73 in 2016 and 2015, respectively, calculated by multiplying the ratio of cost to gross charges for the Clinic by the gross uncompensated charges associated with providing care to charity patients. In addition to the charges related to the direct patient care provided under the Clinic’s Charity Care Policy, the Clinic has programs offered to benefit the broader community and other governmental reimbursement programs. The Clinic also participates in various state Medicaid programs for indigent patients. The estimated unreimbursed cost of providing services related to Medicaid programs totaled $546 and $476 in 2016 and 2015, respectively.


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Contributions: The Clinic classifies unrestricted contributions and temporarily restricted contributions that are available for current activities as revenue, based on the lack of specific donor restriction or the presence of donor restrictions and the ability of the Clinic to meet those restrictions within the fiscal year. Permanently restricted contributions and temporarily restricted contributions that are not available for current activities are classified in noncurrent and other items in the consolidated statements of activities. Development expenses of $39 ($21 allocated to current and $18 allocated to noncurrent) and $39 ($29 allocated to current and $10 allocated to noncurrent) were incurred in 2016 and 2015, respectively. The current portion is recorded in expenses, and the noncurrent portion is netted against unrestricted contributions not available for current activities in the consolidated statements of activities. Unconditional promises to give and contributions are reported at fair value at the time of the gift. An allowance for uncollectible pledges receivable is estimated based on a combination of historical experience and specific identification. Conditional promises to give are recognized at fair value when the conditions on which they depend are substantially met or the probability that the condition will not be met is remote. The Clinic does not imply a time restriction that expires over the useful life for gifts of long-lived assets. The Clinic periodically receives works of art from various benefactors. These items are unique in nature and are held on display for the benefit and enjoyment of the Clinic’s patients. It is the Clinic’s policy to neither capitalize contributed works of art nor record the related contribution revenue. Income from current activities: The Clinic’s policy is to include in income from current activities all net medical service and other revenue, grants and contracts, investment return allocated to current activities, contributions available for current activities, premium revenue, net assets released from restrictions, and substantially all expenses. Contributions not available for current activities, unallocated investment return, and those items not expected to recur on a regular basis, such as disposal of a business, are included in noncurrent and other items in the consolidated statements of activities. Subsequent events: The Clinic evaluated events and transactions occurring subsequent to December 31, 2016, through February 24, 2017, the date of issuance of the consolidated financial statements. During this period, there were no subsequent events requiring recognition in the consolidated financial statements. Additionally, there were no unrecognized events requiring disclosure.

Note 2. Net Medical Service Revenue, Contractual Arrangements With Third-Party Payors, and Allowance for Doubtful Accounts

The Clinic provides care to patients under the Medicare program and contractual arrangements with other third-party payors. The Medicare program pays for inpatient and most outpatient services at predetermined rates. Certain hospital services are reimbursed based on allowable costs as reported in cost reports, which are subject to retroactive audit and adjustment. Contractual adjustments arising from reimbursement arrangements with third-party payors are recognized on an estimated basis in the period in which the services are rendered. Estimates for recognized cost report settlements can differ from actual reimbursement based on the results of subsequent reviews and cost report audits. The impact to net medical service revenue of such items was not significant in 2016 and 2015.


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Note 2. Net Medical Service Revenue, Contractual Arrangements With Third-Party Payors, and Allowance for Doubtful Accounts (Continued)

Future changes in the Medicare program and reduction of funding levels could have an adverse effect on the Clinic. Net medical service revenue under the Medicare program represented approximately 25 percent and 26 percent of total net medical service revenue for 2016 and 2015, respectively. At December 31, 2016 and 2015, approximately 12 percent and 15 percent, respectively, of accounts receivable for medical services was due from the Medicare program. As a service to the patient, the Clinic bills third-party payors directly and bills the patient when the patient’s liability is determined. Accounts receivable are reduced by an allowance for doubtful accounts. In evaluating the collectability of accounts receivable, the Clinic analyzes its past history and identifies trends for each of its major payor sources of revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. Management regularly reviews data about these major payor sources of revenue in evaluating the sufficiency of the allowance for doubtful accounts. For charges associated with services provided to patients who have third-party coverage, the Clinic analyzes contractually due amounts and provides contractual allowances based on these amounts. Additionally, an allowance for doubtful accounts and a provision for uncollectible accounts is provided for expected uncollectible deductibles and copayments on accounts for which the patient is responsible. For receivables associated with self-pay patients, the Clinic records a significant provision for uncollectible accounts in the period of service on the basis of its past experience and current expectations, which indicates that many patients are unable or unwilling to pay the portion of their bill for which they are financially responsible. The difference between the standard rates (or the discounted rates if negotiated) and the amounts actually collected after all reasonable collection efforts have been exhausted is charged off against the allowance for doubtful accounts. The Clinic’s allowance for doubtful accounts was 29 percent and 24 percent of accounts receivable at December 31, 2016 and 2015, respectively. In addition, the Clinic’s write-offs were $260 and $181 for the years ended December 31, 2016 and 2015, respectively. The Clinic has not significantly changed its charity care policies in 2016. Net medical service revenue for the years ended December 31 consisted of the following:

2016 2015Medical service revenue (net of contractual allowances and

discounts) 9,429 $ 8,817 $ Provision for uncollectible accounts (209) (197)

Net medical service revenue 9,220 $ 8,620 $ The Clinic recognizes patient service revenue associated with services provided to patients who have third-party payor coverage on the basis of contractual rates for the services rendered. Medical service revenue, net of contractual allowances and discounts (but before the provision for uncollectible accounts), recognized in the years ended December 31 from these major payor sources, is as follows:

2016 2015

Third-party payors 8,961 $ 8,414 $ Self-pay 468 403

Total all payors 9,429 $ 8,817 $


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Note 3. Fair Value Measurements

The Clinic holds certain financial instruments that are required to be measured at fair value on a recurring basis. The valuation techniques used to measure fair value under the Fair Value Measurements and Disclosures topic of the FASB ASC are based upon observable and unobservable inputs. The standard establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or

liabilities in active markets. Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active

markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the same term of the financial instrument.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value

measurement. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Clinic’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstances that caused the transfer. During the year ended December 31, 2016, the Clinic transferred $136 of funds from NAV to Level 2 due to a change in measurement inputs. There were no significant transfers in 2015.


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Note 3. Fair Value Measurements (Continued)

The following tables present the financial instruments carried at fair value as of December 31, 2016 and 2015, by caption on the consolidated statements of financial position categorized by the valuation hierarchy and NAV:

TotalLevel 1 Level 2 Level 3 NAV Fair Value

Assets:Securities lending collateral 30 $ -$ -$ -$ 30 $

Investments: Cash equivalents 935 - - - 935 Fixed-income securities:

U.S. government - 200 - - 200 U.S. government agencies - 294 - - 294 U.S. corporate - 304 10 - 314 Foreign - 13 - - 13

Common and preferred stocks:U.S. 444 - 2 - 446 Foreign 345 - - - 345

Funds:Fixed-income 415 - - - 415 Equities 577 289 - - 866

Other investments 65 - - - 65 Less securities under lending

agreement (55) - - - (55) Investments at NAV - - - 3,862 3,862

Total investments 2,726 1,100 12 3,862 7,700

Investments under securities lendingagreement 55 - - - 55

Other long-term assets:Trust receivables 90 30 55 - 175 Technology-based ventures - - 18 - 18

Total other long-term assets 90 30 73 - 193 Total assets at fair value 2,901 $ 1,130 $ 85 $ 3,862 $ 7,978 $

Liabilities:Securities lending payable 30 $ -$ -$ -$ 30 $

Total liabilities at fair value 30 $ -$ -$ -$ 30 $ $ $ $

December 31, 2016


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TotalLevel 1 Level 2 Level 3 NAV Fair Value

Assets:Securities lending collateral 105 $ -$ -$ -$ 105 $

Investments: Cash equivalents 720 - - - 720 Fixed-income securities:

U.S. government - 175 - - 175 U.S. government agencies - 217 - - 217 U.S. corporate - 309 8 - 317 Foreign - 17 - - 17

Common and preferred stocks:U.S. 439 - 2 - 441 Foreign 419 - - - 419

Funds:Fixed-income 390 - - - 390 Equities 489 118 - - 607

Other investments 16 - - - 16 Less securities under lending

agreement (111) - - - (111) Investments at NAV - - - 3,853 3,853

Total investments 2,362 836 10 3,853 7,061

Investments under securities lendingagreement 111 - - - 111

Other long-term assets:Trust receivables 86 33 54 - 173 Technology-based ventures - - 37 - 37

Total other long-term assets 86 33 91 - 210 Total assets at fair value 2,664 $ 869 $ 101 $ 3,853 $ 7,487 $

Liabilities:Securities lending payable 105 $ -$ -$ -$ 105 $

Total liabilities at fair value 105 $ -$ -$ -$ 105 $

December 31, 2015

Following is a description of the Clinic’s valuation methodologies for assets and liabilities measured at fair value. Fair value for Level 1 is based upon quoted market prices. Fair value for Level 2 is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources, including market participants, dealers and brokers. Level 3 primarily consists of trusts recorded at fair value based on the underlying value of the assets in the trust or discounted cash flow of the expected payment streams. The trusts reported as Level 3 are primarily perpetual trusts managed by third parties invested in stocks, mutual funds, and fixed-income securities that are traded in active markets with observable inputs, and since the Clinic will never receive the trust assets, these perpetual trusts are reported as Level 3.


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The methods described above and those recorded at NAV may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Clinic believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following information pertains to those alternative investments recorded at NAV in accordance with the Fair Value Measurements and Disclosures topic of the FASB ASC. At December 31, 2016, alternative investments recorded at NAV consisted of the following:

Redemption RedemptionFair Unfunded Frequency (If Notice

Value Commitment Currently Eligible) Period

Absolute return/hedge funds (a) 1,983 $ -$ Monthly to annually 30–90 daysPrivate partnerships (b) 1,879 1,015

3,862 $ 1,015 $ At December 31, 2015, alternative investments recorded at NAV consisted of the following:



Absolute return/hedge funds (a) 2,175 $ -$ Monthly to annually 30–90 daysPrivate partnerships (b) 1,678 1,023

3,853 $ 1,023 $ (a) This category includes investments in absolute return/hedge funds, which are actively managed

commingled investment vehicles that derive the majority of their returns from factors other than the directional flow of the markets in which they invest. Representative strategies include high-yield credit, distressed debt, merger arbitrage, relative value, and long-short equity strategies. The fair values of the investments in this category have been estimated using the NAV per share of the investments. Investments in this category generally carry “lockup” restrictions that do not allow investors to seek redemption in the first year after acquisition. Following the initial lockup period, liquidity is generally available monthly, quarterly or annually following a redemption request. Over 90 percent of the investments in this category have at least annual liquidity.

(b) This category includes limited partnership interests in closed-end funds that focus on venture capital,

private equity, real estate and resource-related strategies. The fair values of the investments in this category have been estimated using the NAV of the Clinic’s ownership interest in partners’ capital. Distributions from each fund will be received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of most funds will generally be liquidated over a seven- to 10-year period.


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From time to time, the Clinic invests directly in certain derivative contracts that do not qualify for hedge accounting and are recorded at fair value in investments. Changes in fair value are reported as a component of net unrealized gains or losses in the investment returns. These contracts are used in the Clinic’s investment management program to minimize certain investment risks. During the years ended December 31, 2016 and 2015, the realized and unrealized loss from derivative contracts totaled $50 and $41, respectively. The carrying values of cash, cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these financial instruments. The estimated fair value of long-term debt (Note 7), based on quoted market prices for the same or similar issues (Level 2), was approximately $75 and $32 more than its carrying value at December 31, 2016 and 2015, respectively. The Clinic uses various external investment managers to diversify the investments. The largest allocation to any investment strategy manager as of December 31, 2016 and 2015, is $231 (3.5 percent) and $316 (5.0 percent), respectively. The Clinic is required to maintain funds held by trustees under bond indentures and other arrangements. The trustee-held investments, which primarily consist of mutual funds, were $484 and $500, respectively, at December 31, 2016 and 2015, which includes segregated investments for deferred compensation plans of $479 and $421 at December 31, 2016 and 2015, respectively. The Clinic has internally designated investment balances of $1,931 and $1,833 at December 31, 2016 and 2015, respectively, for research, education, and capital replacement and expansion. Investment return consisted of the following for the years ended December 31:

2016 2015

Dividends and interest 103 $ 94 $ Net realized gains 171 189 Net change in unrealized losses 46 (161)

320 $ 122 $ Investment return (Note 1) is reported in the consolidated statements of activities as follows for the years ended December 31:

2016 2015

Investment return allocated to current activities 294 $ 233 $ Unallocated investment return, net 26 (111)

320 $ 122 $


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Note 4. Securities Lending

The Clinic has an arrangement with its investment custodian to lend Clinic securities to approved brokers in exchange for a fee. Among other provisions that limit the Clinic’s risk, the securities lending agreement specifies that the custodian is responsible for lending securities and obtaining adequate collateral from the borrower. Collateral is limited to cash, government securities, and irrevocable letters of credit. Investments are loaned to various brokers and are returnable on demand. In exchange, the Clinic receives collateral. The cash collateral is shown as both an asset and a liability on the consolidated statements of financial position. At December 31, 2016 and 2015, the aggregate market value of securities on loan under securities lending agreements totaled $55 and $111, respectively, and the total value of the collateral supporting the securities is $56 and $116, respectively, which represents 103 percent and 104 percent of the value of the securities on loan at December 31, 2016 and 2015, respectively. The cash portion of the collateral supporting the securities as of December 31, 2016 and 2015, is $30 and $105, respectively. Noncash collateral provided to the Clinic is not recorded in the consolidated statements of financial position, as the collateral may not be sold or repledged. The Clinic’s claim on such collateral is limited to the market value of loaned securities. In the event of nonperformance by the other parties to the securities lending agreements, the Clinic could be exposed to some loss.

Note 5. Property, Plant and Equipment, Net

Property, plant and equipment, net, at December 31 consisted of the following:

2016 2015

Land 288 $ 276 $ Buildings and improvements 5,365 5,135 Furniture and equipment 3,501 3,406

9,154 8,817 Accumulated depreciation and amortization (5,227) (4,998)

3,927 3,819 Construction in progress 381 411

4,308 $ 4,230 $ The above costs and accumulated depreciation include costs for capitalized software, including costs capitalized in accordance with the Intangibles—Goodwill and Other, Internal-Use Software subtopic of the FASB ASC Topic 350. The total cost for capitalized software was $570 and $543, and the total accumulated amortization was $507 and $463 at December 31, 2016 and 2015, respectively. Amortization expense for capitalized software was $47 for 2016 and 2015.

Note 6. Income Taxes

Most of the income received by the Clinic and its subsidiaries is exempt from taxation under Section 501(a) of the Internal Revenue Code. Some of its subsidiaries are taxable entities, and some of the income received by otherwise exempt entities is subject to taxation as unrelated business income (UBI). The Clinic or its subsidiaries file income tax returns in the U.S. federal, various state, and foreign jurisdictions. The statutes of limitations for tax years 2013 through 2015 remain open in the major U.S. taxing jurisdictions in which the Clinic and subsidiaries are subject to taxation.


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Note 6. Income Taxes (Continued)

The Internal Revenue Service (IRS) performed an examination of the tax and information returns of the Clinic and two subsidiaries for 2005 and 2006. The IRS has concluded a limited-scope audit of the Clinic for tax year 2011. As of December 31, 2015, the IRS proposed an $11 tax and interest assessment for 2005 through 2012 that the Clinic paid. The Clinic has filed a claim for refund for these amounts, which was rejected by the IRS. The Clinic is litigating the denial of the claims in U.S. District Court. Management has taken this into consideration during its determination of unrecognized tax benefits. The Clinic has recorded $3 including interest and penalties, for uncertain tax positions during the year ended December 31, 2016. It is not anticipated that a significant change in the reserve will occur over the next 12 months. The Clinic’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The components of tax expense are as follows:

December 312016 2015

Current—federal 15 $ 27 $ Current—state 2 3

17 30

Deferred—U.S. domestic (4) 3 Total 13 $ 33 $

Cash payments for income taxes were $14 and $24 for the years ended December 31, 2016 and 2015, respectively.


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Note 6. Income Taxes (Continued)

The Clinic records deferred income taxes due to temporary differences between financial reporting and tax reporting for certain assets and liabilities of its taxable activities. Following is a summary of the components of deferred taxes as of December 31:

2016 2015

Deferred compensation 20 $ 18 $ Pension 20 15 Postretirement benefits 7 3 Other 10 8

Total deferred tax asset 57 44

Deferred tax liability (5) (6) Valuation allowance, net of effects from affiliation (1) (1)

Net deferred tax asset 51 $ 37 $ As of December 31, 2016, the Clinic had no federal net operating losses.

Note 7. Financing

Long-term debt at December 31 consisted of the following:

2016 2015City of Rochester, Minnesota Revenue Bonds issued in various

series, subject to variable interest rates to a maximum rate of 15.00% (the average rate was 0.41% in 2016 and 0.04% in 2015),principal due in varying amounts from 2022 through 2052 595 $ 810 $

City of Rochester, Minnesota Revenue Bonds issued in various series with fixed rates of interest ranging from 4.00% to 5.00%, principal due in varying amounts from 2028 through 2041 615 690

City of Rochester, Minnesota Health Care Facilities RevenueRefunding Bonds, series 2016B, issued with fixed interest rate of5.00%, an effective rate of 2.63% in 2016 after amortization ofpremium, principal due November 15, 2029 through 2036 (unamortized premium of $73 in 2016) 220 -

Industrial Development Authority of the City of Phoenix, Arizonaissued in various series, subject to variable interest rates toa maximum rate of 10.00% (the average rate was 0.33%in 2016 and 0.02% in 2015), principal due in varying amountsfrom 2048 through 2052 180 180


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Note 7. Financing (Continued)

2016 2015Industrial Development Authority of the County of Maricopa Hospital

Revenue Bonds issued in various series, interest rate at 5.00%,principal due in varying amounts from 2031 through 2036 -$ 50 $

City of Jacksonville, Florida Health Care Facilities RevenueRefunding Bonds, series 2016, issued in various series, subjectto variable interest rates to a maximum rate of 10.00% (the averagerate 0.61% in 2016), principal due in varying amounts from 2033 through 2047 125 -

Jacksonville Economic Development Commission Health Care Facilities Revenue Bonds issued in various series, interest rateat 5.00%, principal due in varying amounts from 2031 to 2036 - 125

Wisconsin Health and Educational Facilities Authority Revenue Bonds, Series 2008, issued in various series, with fixed interest rates ranging from 4.00% to 5.75%, principal due in varying amounts through 2030 71 74

Mayo Clinic Taxable Bonds issued with fixed interest rates ranging from 3.774% to 4.125%, principal due in varying amounts from 2039 to 2052 950 600

Fixed-rate notes, payable to banks, interest rate at 2.01%, principal due in 2016 - 45

Fixed-rate notes, payable to an insurance company, interest rate at4.71%, principal due in equal amounts from 2042 through 2046 215 215

Other notes payable 15 16 Unamortized discounts and premiums, net 74 5 Debt issuance cost (15) (13)

3,045 2,797 Long-term variable-rate debt classified as current (670) (360) Current maturities included in other current liabilities (4) (49)

2,371 $ 2,388 $ The Clinic’s outstanding revenue bond issues are limited obligations of various issuing authorities payable solely by the Clinic pursuant to loan agreements between the borrowing entities and the issuing authorities. Under various financing agreements, the Clinic must meet certain operating and financial performance covenants. At December 31, 2016, the $900 of variable-rate bonds consist of variable-rate demand revenue bonds. In conjunction with the issuance of the variable-rate demand revenue bonds, the Clinic has entered into various bank standby purchase and credit agreements in the amount of $230 that expire at various dates commencing January 2018 and $200 that expire on April 10, 2017. Under the terms of these agreements, the bank will make liquidity loans to the Clinic in the amount necessary to purchase a portion of the variable-rate demand revenue bonds if not remarketed. The liquidity loans would be payable over a three- to five-year period, with the first payment due after December 31, 2017. The Clinic has provided self-liquidity for the remaining $470 of variable-rate demand revenue bonds, which, along with the standby purchase and credit agreements expiring on April 10, 2017, have been classified as current in the accompanying consolidated statements of financial position.


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Note 7. Financing (Continued)

In March 2016, the Clinic issued $350 in taxable bonds, with fixed interest rate of 4.128 percent and principal due in varying amounts from 2048 through 2052. The bond proceeds will be used for eligible corporate purposes. On May 3, 2016, the Clinic issued tax-exempt, variable-rate demand revenue bonds in the aggregate principal amount of $200 (City of Jacksonville, Florida Health Care Facilities Revenue Refunding Bonds for $125 and City of Rochester, Minnesota Revenue Bonds for $75), due in varying amounts from 2033 through 2047. The bonds are redeemable prior to maturity at par. The proceeds of the bonds were used to redeem the fixed rate Jacksonville Economic Development Commission Health Care Facilities Revenue Bonds in the amount of $125 and the fixed rate City of Rochester, Minnesota Revenue Bonds Series 2006 in the amount of $75. The gain on extinguishment of the bonds was not significant. In May 2016, the Clinic redeemed the fixed rate Industrial Development Authority of the County Maricopa Hospital Revenue Bonds Series 2006 in the amount of $50. The gain on extinguishment of the bonds was not significant. On October 13, 2016, the Clinic issued special, limited-obligation, fixed-rate revenue bonds in the aggregate principal amount of $220 (City of Rochester, Minnesota Health Care Facilities Revenue Refunding Bonds), due in varying amounts from 2029 through 2036. The bonds were issued at a premium. The proceeds of the bonds were used to redeem the variable rate City of Rochester, Minnesota Revenue Bonds series 2000 in the amount of $290. The loss on the extinguishment of the bonds was not significant. The fixed-rate revenue bonds Series 2016B are not callable. The remaining fixed-rate interest revenue bonds are callable from 2017 to 2052 at the option of the Clinic, at a redemption price of 100 percent of the principal amount or at a price based on U.S. Treasury rates at the time of redemption. The following are scheduled maturities of long-term debt for each of the next five years, assuming the variable-rate demand revenue bonds are remarketed and the standby purchase agreements are renewed. As described above, if such bonds are not remarketed, $470 may be due in 2017 and $430 may be due in years from 2018 to 2022. Years ending December 31:

2017 4 $ 2018 4 2019 4 2020 5 2021 5

Interest payments on long-term debt, net of amounts capitalized for 2016 and 2015, totaled $85 and $79, respectively. The amount of interest capitalized, net of related interest income, was $5 and $3 during 2016 and 2015, respectively. Interest expense totaled $83 and $79 for 2016 and 2015, respectively. At December 31, 2016 and 2015, the Clinic had unsecured lines of credit available with banks totaling $525 and $425, respectively, with varying renewable terms and interest up to 2.5 percent over various published rates. There were no amounts drawn during December 31, 2016 and 2015.


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Note 8. Lease Commitments

Certain leases are classified as capital leases. The leased assets are included as part of property, plant and equipment (Note 5), and the capital lease obligations of $43 and $27 as of December 31, 2016 and 2015, respectively, are recorded in other current and long-term liabilities. Other leases are classified as operating and are not capitalized. The payments on such leases are recorded as expense. Details of the capitalized lease assets are as follows at December 31:

2016 2015

Buildings and equipment 34 $ 34 $ Furniture and equipment 21 5

55 39 Accumulated depreciation (12) (11)

43 $ 28 $ Rental expense incurred for operating leases was $30 and $28 for the years ended December 31, 2016 and 2015, respectively. At December 31, 2016, the estimated future minimum lease payments under noncancellable operating leases and capital leases were as follows:

Operating CapitalYears ending December 31:

2017 20 $ 7 $ 2018 18 7 2019 15 7 2020 13 6 2021 11 5 Thereafter 39 28

Minimum lease payments 116 $ 60

Less amount representing interest (17) Net minimum lease payments under capital leases 43 $


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Note 9. Contributions and Restricted Expenditures

The Clinic receives unrestricted, temporarily restricted and permanently restricted contributions in support of research, education and clinical activities. Temporarily restricted net assets were available for the following at December 31:

2016 2015

Research 612 $ 582 $ Education 268 260 Buildings and equipment 27 16 Charity care 50 48 Clinical 88 87 Other 37 40 Pledges and trusts 275 286

1,357 $ 1,319 $ Permanently restricted net assets at December 31 are summarized below, the income from which is expendable to support the following:

2016 2015

Research 721 $ 644 $ Education 221 206 Charity care 17 17 Clinical 64 57 Other 28 28 Pledges and trusts 217 214

1,268 $ 1,166 $ Net assets were released from donor restrictions as expenditures were made, which satisfied the following restricted purposes for the years ended December 31:

2016 2015

Research 151 $ 146 $ Education 22 24 Buildings and equipment 3 9 Other 34 27

210 $ 206 $


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Note 9. Contributions and Restricted Expenditures (Continued)

At December 31, outstanding pledges from various corporations, foundations and individuals, included in other receivables and other long-term assets, were as follows:

2016 2015Pledges due:

In less than one year 132 $ 117 $ In one to five years 171 217 In more than five years 24 22

327 356 Allowance for uncollectible pledges and discounts (11) (13)

316 $ 343 $ Estimated cash flows from pledge receivables due after one year are discounted using a risk-adjusted rate, ranging from 1 percent to 6 percent, that is commensurate with the pledges’ due dates and established in the year the pledge is received. The Clinic has received interests in various trusts, primarily split-interest, which are included in other long-term assets. The trusts, which are recorded at fair value based on the underlying value of the assets in the trust or discounted cash flow of the expected payment streams, were $175 and $173 at December 31, 2016 and 2015, respectively.

Note 10. Endowment

The Clinic’s endowment consists of approximately 1,500 individual funds established for a variety of purposes. The endowment includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments (board-designated funds). Net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Board of Trustees retains the right to re-designate board-designated funds. The Board of Trustees of the Clinic has interpreted the Minnesota State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Clinic classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by SPMIFA.


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Note 10. Endowment (Continued)

In accordance with SPMIFA, the Clinic considers the following factors in making a determination to appropriate or accumulate donor-restricted funds: 1. The duration and preservation of the fund 2. The purposes of the Clinic and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the Clinic 7. The investment policies of the Clinic The Clinic has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Clinic must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce a real return, net of inflation and investment management costs, of at least five percent over the long term. Actual returns in any given year may vary from this amount. To satisfy its long-term rate-of-return objectives, the Clinic relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Clinic targets a diversified asset allocation that places a greater emphasis on equity-based and alternative investments to achieve its long-term objective within prudent risk constraints. The Clinic has a policy of appropriating for distribution each year five percent of its endowment fund’s moving average fair value over the prior 36 months as of September 30 of the preceding fiscal year in which the distribution is planned. In establishing this policy, the Clinic considered the long-term expected return on its endowment. Accordingly, over the long term, the Clinic expects the current spending policy to allow its endowment to grow at an average of the long-term rate of inflation. This is consistent with the Clinic’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specific term as well as to provide additional real growth through new gifts and investment return. At December 31, 2016, the endowment net asset composition by type of fund consisted of the following:

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Donor-restricted funds -$ 645 $ 1,268 $ 1,913 $ Board-designated funds 1,804 - - 1,804

Total funds 1,804 $ 645 $ 1,268 $ 3,717 $


26


Changes in endowment net assets for the fiscal year ended December 31, 2016, consisted of the following:


Endowment net assets, beginning of year 1,582 $ 628 $ 1,166 $ 3,376 $

Investment return:Investment income 21 18 - 39 Net appreciation (realized and unrealized) 82 71 - 153

Total investment return 103 89 - 192

Contributions - - 102 102

Appropriation of endowment assets forexpenditure (78) (72) - (150)

Other changes:Transfers to create board-designated

endowment funds 197 - - 197 Endowment net assets, end of year 1,804 $ 645 $ 1,268 $ 3,717 $ At December 31, 2015, the endowment net asset composition by type of fund consisted of the following:


Donor-restricted funds -$ 628 $ 1,166 $ 1,794 $ Board-designated funds 1,582 - - 1,582

Total funds 1,582 $ 628 $ 1,166 $ 3,376 $


27


Changes in endowment net assets for the fiscal year ended December 31, 2015, consisted of the following:


Endowment net assets, beginning of year 1,500 $ 677 $ 1,108 $ 3,285 $

Investment return:Investment income 17 17 - 34 Net appreciation (depreciation) (realized

and unrealized) (4) 5 - 1 Total investment return 13 22 - 35

Contributions - - 58 58

Appropriation of endowment assets forexpenditure (65) (71) - (136)

Other changes:Transfers to create board-designated

endowment funds 134 - - 134 Endowment net assets, end of year 1,582 $ 628 $ 1,166 $ 3,376 $

Note 11. Functional Expenses

The expenses reported in the consolidated statements of activities for the years ended December 31, 2016 and 2015, supported the following:

2016 2015

Patient care 7,976 $ 7,343 $ Lab and technology ventures 1,103 1,050 Research 710 659 Graduate and other education 298 286 General and administrative 168 259 Development expenses 21 29 Other activities 247 163

10,523 $ 9,789 $


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Note 12. Employee Benefit Programs

The Clinic serves as plan sponsor for several defined benefit pension funds and other postretirement benefits. Included in other changes in unrestricted net assets at December 31, 2016 and 2015, are the following amounts, respectively, that have not yet been recognized in net periodic cost: unrecognized actuarial losses of $3,664 and $2,794 and unrecognized prior service benefit of $480 and $618. Actuarial losses are amortized as a component of net periodic pension cost, only if the losses exceed ten percent of the greater of the projected benefit obligation or the fair value of plan assets. Unrecognized prior service benefits are amortized on a straight-line basis over the estimated life of plan participants. The unrecognized actuarial losses and prior service benefit included in net assets are expected to be recognized in net periodic pension cost during the year ending December 31, 2017, in the amount of $170 and $97, respectively. Changes in plan assets and benefit obligations recognized in unrestricted net assets during 2016 and 2015 included the following:

2016 2015

Current-year actuarial loss (986) $ (33) $ Amortization of actuarial loss 126 161 Current-year prior service cost (27) (1) Amortization of prior service credit (112) (115)

Pension and other postretirement benefit adjustments (999) $ 12 $ Pension plans: Obligations and funded status: Following is a summary of the changes in the benefit obligation and plan assets, the resulting funded status of the qualified and nonqualified pension plans, and accumulated benefit obligation as of and for the years ended December 31:

Qualified Nonqualified Qualified NonqualifiedChange in projected benefit obligation:

Benefit obligation, beginning of year 7,311 $ 2 $ 7,353 $ 3 $ Service cost 367 - 393 - Interest cost 336 - 307 - Actuarial loss (gain) 639 - (371) - Benefits paid (339) - (371) (1)

Estimated benefit obligation at end of year 8,314 $ 2 $ 7,311 $ 2 $

Change in plan assets:Fair value of plan assets, beginning of year 6,792 $ -$ 6,556 $ -$

Actual return on plan assets 341 - 102 - Employer contributions 466 - 505 1 Benefits paid (339) - (371) (1)

Fair value of plan assets at end of year 7,260 $ -$ 6,792 $ -$

2016 2015


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Note 12. Employee Benefit Programs (Continued)

Qualified Nonqualified Qualified Nonqualified

Funded status of the plan (1,053) $ (2) $ (519) $ (2) $

Accumulated benefit obligation 8,138 $ 2 $ 7,202 $ 2 $

Pension Benefits2016 2015

Amounts recognized in the consolidated statements of financial position consist of the following at December 31:


Noncurrent asset -$ -$ -$ -$ Current liabilities - - - - Noncurrent liabilities (1,053) (2) (519) (2)

Net amount recognized (1,053) $ (2) $ (519) $ (2) $

2016 2015

Components of net periodic benefit cost are as follows at December 31:


Service cost 367 $ -$ 393 $ -$ Interest cost 336 - 307 - Expected return on plan assets (559) - (511) - Amortization of unrecognized:

Prior service benefit (58) - (61) - Net actuarial loss 125 - 158 -

Net periodic benefit cost 211 $ -$ 286 $ -$

2016 2015

Plan assets: The largest of the pension funds is the Mayo Clinic Master Retirement Trust Plan, which holds $7,155 of the $7,260 in combined plan assets at December 31, 2016. The investment policies described below apply to the Mayo Clinic Master Retirement Trust Plan (the Plan). The Plan employs a global, multi-asset approach in managing its retirement plan assets. This approach is designed to maximize risk-adjusted returns over a long-term investment horizon, consistent with the nature of the pension liabilities being funded. The plan asset portfolio’s target allocation for total return investment strategies, which include public equities, private equities, absolute return, and real assets, is 80 percent. The portfolio’s target fixed-income exposure is 20 percent. The fixed-income exposure may include the use of long-term interest rate swap contracts structured to increase the portfolio’s interest rate sensitivity and thereby provide a hedge of the plan liabilities resulting from falling long-term interest rates. Investments in private equities, real assets, and absolute return strategies are held to improve diversification and thereby enhance long-term, risk-adjusted returns. However, recognizing that these investments are not as liquid as publicly traded stocks and bonds, portfolio investment policies limit overall exposure to these assets. The portfolio’s allocation to private equities and real assets is limited to a maximum of 25 percent (with a target allocation of 20 percent), and exposure to absolute return strategies is limited to a maximum of 35 percent (with a target of 28 percent). The Clinic reviews performance, asset allocation, and risk management reports for plan asset portfolios on a monthly basis.


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The fair values of the Plan’s assets at December 31, 2016, by asset category are as follows:

Quoted Pricesin Active Significant Significant

Markets for Observable UnobservableIdentical Assets Inputs Inputs

Assets (Level 1) (Level 2) (Level 3) NAV Total

Cash and cash equivalents 541$ 18$ -$ -$ 559$ Fixed-income securities:

U.S. government - 124 - - 124 U.S. government agencies - 147 - - 147 U.S. corporate - 287 - - 287 Foreign - 21 - - 21

Common and preferred stocks:U.S. 546 31 10 - 587 Foreign 356 - - - 356

Funds: Fixed-income 240 - - - 240 Equities 266 404 - - 670

Investments at NAV - - - 4,164 4,164 Total investments 1,949$ 1,032$ 10$ 4,164$ 7,155$

The fair values of the Plan’s assets at December 31, 2015, by asset category are as follows:

Quoted Pricesin Active Significant Significant

Markets for Observable UnobservableIdentical Assets Inputs Inputs

Assets (Level 1) (Level 2) (Level 3) NAV Total

Cash and cash equivalents 295$ 23$ -$ -$ 318$ Fixed-income securities:

U.S. government - 157 - - 157 U.S. government agencies - 108 - - 108 U.S. corporate - 252 - - 252 Foreign - 21 - - 21

Common and preferred stocks:U.S. 503 33 14 - 550 Foreign 428 - - - 428

Funds: Fixed-income 200 - - - 200 Equities 174 203 - - 377

Investments at NAV - - - 4,277 4,277 Total investments 1,600$ 797$ 14$ 4,277$ 6,688$


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Following is a description of the Plan’s valuation methodologies for assets and liabilities measured at fair value. Fair value for Level 1 is based upon quoted market prices. Fair value for Level 2 is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources, including market participants, dealers and brokers. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Clinic’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstances that caused the transfer. During the year ended December 31, 2016, the Clinic transferred $217 of funds from NAV to Level 2 due to a change in measurement inputs. There were no significant transfers in 2015. The methods described above and those recorded at NAV may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following information pertains to those alternative investments recorded at NAV in accordance with the Fair Value Measurements and Disclosures topic of the FASB ASC. At December 31, 2016, alternative investments recorded at NAV consisted of the following:



Absolute return/hedge funds (a) 2,564$ -$ Monthly to annually 30–90 daysPrivate partnerships (b) 1,600 962

4,164$ 962$ At December 31, 2015, alternative investments recorded at NAV consisted of the following:



Absolute return/hedge funds (a) 2,633$ -$ Monthly to annually 30–90 daysPrivate partnerships (b) 1,644 970

4,277$ 970$ (a) This category includes investments in absolute return/hedge funds, which are actively managed

commingled investment vehicles that derive the majority of their returns from factors other than the directional flow of the markets in which they invest. Representative strategies include high-yield credit, distressed debt, merger arbitrage, relative value, and long-short equity strategies. The fair values of the investments in this category have been estimated using the NAV per share of the investments. Investments in this category generally carry “lockup” restrictions that do not allow investors to seek redemption in the first year after acquisition. Following the initial lockup period, liquidity is generally available monthly, quarterly or annually following a redemption request. Over 90 percent of the investments in this category have at least annual liquidity.


32


(b) This category includes limited partnership interests in closed-end funds that focus on venture capital, private equity, real estate and resource-related strategies. The fair values of the investments in this category have been estimated using the NAV of the Plan’s ownership interest in partners’ capital. These investments cannot be redeemed with the funds. Distributions from each fund will be received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of most funds will generally be liquidated over a seven- to ten-year period.

No plan assets are expected to be returned to the employer during 2017. Other postretirement benefits: Obligations and funded status: A summary of the changes in the benefit obligation and plan assets and the resulting funded status of the other postretirement plans is as follows as of and for the years ended December 31:

2016 2015Change in projected benefit obligation:

Benefit obligation at beginning of year 841 $ 843 $ Service cost 10 12 Interest cost 38 35 Plan participants’ contributions 25 21 Amendments 26 1 Medicare subsidy 3 2 Actuarial loss (gain) 139 (6) Benefits paid (77) (67)

Estimated benefit obligation at end of year 1,005 $ 841 $

Change in plan assets:Fair value of plan assets at beginning of year -$ -$

Employer contributions 49 44 Plan participants’ contributions 25 21 Medicare subsidy 3 2 Benefits paid (77) (67)

Fair value of plan assets at end of year -$ -$

Funded status of the plan (1,005) $ (841) $ Amounts recognized in the consolidated statements of financial position for postretirement benefits consist of the following at December 31:

2016 2015

Current liabilities (48) $ (39) $ Noncurrent liabilities (957) (802)

Net amount recognized (1,005) $ (841) $


33


Components of net periodic benefit cost for other postretirement benefits are as follows for the years ended December 31:

2016 2015

Service cost 10 $ 12 $ Interest cost 38 35 Amortization of:

Unrecognized prior service benefit (54) (54) Unrecognized net actuarial loss 2 3

Net periodic benefit cost for other postretirement benefits (4) $ (4) $ The Clinic has concluded that the prescription drug benefits under its defined benefit postretirement plan are actuarially equivalent to Medicare Part D under the Medicare Modernization Act (the Act) and that the Clinic will receive the subsidy available under the Act. The following reflects the expected future Medicare Part D subsidy receipts: Years ending December 31:

2017 6 $ 2018 6 2019 6 2020 7 2021 7 2022–2026 37

A one-percentage-point change in the assumed health care cost trend rate would have the following effects:

One-Percentage- One-Percentage-Point Increase Point Decrease

Effect on total service and interest cost components in 2016 2 $ (2) $ Effect on postretirement benefit obligation at December 31, 2016 49 (41) Pension and postretirement benefits: Assumptions: Weighted-average assumptions used to determine pension and postretirement benefit obligations at the measurement date are as follows:

2016 2015 2016 2015

Discount rate 4.31% 4.70% 4.24% 4.63%Rate of compensation increase 3.36% 3.33% N/A N/A

Pension Benefits Postretirement Benefits


34


Weighted-average assumptions used to determine net periodic pension and postretirement benefit cost are as follows:

2016 2015 2016 2015

Discount rate 4.70% 4.28% 4.63% 4.20%Expected long-term return on plan assets 8.00% 8.00% N/A N/ARate of compensation increase 3.33% 3.31% N/A N/A

Pension Benefits Postretirement Benefits

The Clinic utilizes a building block approach in determining the expected long-term rate of return for its plan assets. First, historical data on individual asset class returns are studied. Next, the historical correlation among and between asset class returns is studied under both normal conditions and in times of market turbulence. Then, various mixes of asset classes are considered under multiple long-term investment scenarios. Finally, after considering liquidity concerns related to the use of certain alternative asset classes, the plan sponsor selects the portfolio blend that it believes will produce the highest expected long-term return on a risk-adjusted basis. Cash flows: Contributions: The Clinic expects to contribute $643 to its pension plans in 2017. Estimated future benefit payments: The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

PostretirementQualified Nonqualified Benefits

Years ending December 31:2017 380 $ -$ 49 $ 2018 415 - 50 2019 435 - 52 2020 455 - 53 2021 480 - 54 2022–2026 2,692 1 291

Pension Benefits

In addition to the defined benefit plans, the Clinic sponsors various defined contribution benefit plans. Expense recognized by the Clinic for those plans was $93 and $83 for 2016 and 2015, respectively.

Note 13. General and Professional Liability Insurance

The Clinic insures substantially all general and professional liability risks through a combination of a wholly owned captive insurance company and self-insurance. The insurance program combines various levels of self-insured retention with excess commercial insurance coverage. Actuarial consultants have been retained to assist in the estimation of outstanding general and professional liability loss.


35

Note 13. General and Professional Liability Insurance (Continued)

The Clinic’s general and professional liability as reported in the accompanying consolidated statements of financial position was $81 and $100 at December 31, 2016 and 2015, respectively. Provisions for the general and professional liability risks are based on an actuarial estimate of losses using the Clinic’s actual loss data adjusted for industry trends and current conditions and considering an evaluation of claims by the Clinic’s legal counsel. The provision includes estimates of ultimate costs for both reported claims and claims incurred but not reported. Activity in the liability is summarized as follows for the years ended December 31:

2016 2015

Balance, beginning of year 100 $ 103 $

Incurred related to captive insurance company liability:Current year 22 22 Prior years (9) (15)

Total incurred 13 7

Paid related to captive insurance company liability: Current year - - Prior years (23) (7)

Total paid (23) (7)

Net change in self-insurance liability (9) (3) Balance, end of year 81 $ 100 $

Note 14. Other Receivables, Other Current and Long-Term Assets, and Other Current and Long-Term Liabilities

At December 31, other receivables consisted of the following:

2016 2015

Pledges receivable 132 $ 117 $ Grants receivable 66 54 Other 111 102

309 $ 273 $ At December 31, other current assets consisted of the following:

2016 2015

Inventories 129 $ 121 $ Prepaid expenses 59 45 Other 65 -

253 $ 166 $


36

Note 14. Other Receivables, Other Current and Long-Term Assets, and Other Current and Long-Term Liabilities (Continued)

At December 31, other long-term assets consisted of the following:

2016 2015

Pledges receivable 184 $ 226 $ Trust receivables 175 173 Oil and gas interests 49 50 Long-term portion of deferred tax asset 51 37 Technology-based ventures 18 37 Other 97 113

574 $ 636 $ At December 31, other current liabilities consisted of the following:

2016 2015

Other taxes 64 $ 35 $ Current pension and postretirement benefit 48 39 Short-term disability 37 32 Current portion of professional and general liability 29 26 Current portion of long-term disability 29 25 Real estate tax accrual 26 25 Current portion of workers’ compensation liability 15 14 Other 111 119

359 $ 315 $ At December 31, other long-term liabilities consisted of the following:

2016 2015

Deferred compensation 478 $ 421 $ Long-term disability 150 129 Professional and general liability 52 74 Electronic medical record 62 52 Trust obligations 43 47 Gift annuities 46 46 Retirement community obligations 36 37 Workers’ compensation liability 21 28 Lease agreement liability 38 26 Asset retirement obligation 24 25 Contract deposit 22 22 Other 56 59

1,028 $ 966 $


37

Note 15. Other Revenue

For the years ended December 31, other revenue consisted of the following:

2016 2015

Retail pharmacy sales 278 $ 281 $ Royalties 61 65 Retail stores 53 41 Technology commercialization, health information, and medical

products 49 51 Cafeteria revenue 40 38 Graduate medical and other education revenue 35 31 Third-party administrative revenue 15 18 Oil- and gas-producing activities 11 14 Other 209 182

751 $ 721 $

Note 16. Commitments and Contingencies

The Clinic has various construction projects and the electronic medical record project discussed below in progress related to patient care, research, and educational facilities. The estimated costs committed to complete the various projects at December 31, 2016, approximated $996, all of which is expected to be expended over the next three to five years. The Clinic has an initiative with a major health care software company to consolidate onto a single, integrated, patient-centered electronic medical record and revenue cycle management platform. The project is highly complex and integral to operations. Operating and capital expenditures are estimated to exceed $1 billion with a project timeline of approximately five years for implementation at all Clinic locations. Successful installation will enhance the Clinic’s ability to further standardize patient care and administrative activities that will improve outcomes and experiences for all patients. One of the Clinic’s affiliation agreements limits the involvement of a third party in operations of a consolidated affiliate. A process exists to resolve disputes; however, in the event of an irreconcilable dispute between the parties, the agreement further provides for a one-time payment of approximately $87 by the consolidated affiliate to release the third party from the affiliation. Such payment would be subordinate to other debtors of the consolidated affiliated entity. No amount has been accrued in the consolidated financial statements for this contingency. While the Clinic is self-insured for a substantial portion of its general and workers’ compensation liabilities, the Clinic maintains commercial insurance coverage against catastrophic loss. Additionally, the Clinic maintains a self-insurance program for its long-term disability coverage. The provision for estimated self-insured claims includes estimates of the ultimate costs for both reported claims and claims incurred but not reported.


38

Note 16. Commitments and Contingencies (Continued)

Laws and regulations concerning government programs, including Medicare, Medicaid and various research grant programs, are complex and subject to varying interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. As a result of nationwide investigations by governmental agencies, various health care organizations have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties and potential exclusion from the related programs. The Clinic expects that the level of review and audit to which it is subject will increase. There can be no assurance that regulatory authorities will not challenge the Clinic’s compliance with these laws and regulations, and it is not possible to determine the impact (if any) such claims or penalties would have upon the Clinic. The Clinic is a defendant in various lawsuits arising in the ordinary course of business and records an estimated liability for probable claims. Although the outcome of these lawsuits cannot be predicted with certainty, management believes the ultimate disposition of such matters will not have a material effect on the Clinic’s consolidated financial position or statement of activities.

Note 17. Disposal of Affiliate

On September 29, 2016, the Hospital Authority of Ware County (Authority), Mayo Clinic Health System – Waycross (Waycross), and Mayo Clinic Jacksonville (MCJ) entered into a non-binding Memorandum of Understanding with HCA Management Services, L.P. (HCA), pursuant to which HCA intends to purchase substantially all of the real property and other assets of the Authority and Waycross. In December 2016, the Clinic entered into a separation agreement withdrawing MCJ as the sole member of Waycross no later than March 31, 2017. As of December 31, 2016, assets and liabilities held for sale, included in other current assets and other current liabilities relating to Waycross totaled $65 and $39, respectively, and included in noncurrent and other items of the statement of activities is a loss from assets held for sale of $90.

Supplementary Information

39

Mayo Clinic

Consolidating Statement of Financial PositionDecember 31, 2016 (In Millions)

Florida All OtherMayo Clinic MFMER * Hospital Entities Eliminations Total

Assets

Current assets:Cash and cash equivalents 4 $ 24 $ -$ 29 $ -$ 57 Accounts receivable for medical services, less allowances for

uncollectible accounts 297 5 115 1,218 - 1,635 Securities lending collateral 30 - - - - 30 Other receivables 873 1,301 460 1,063 (3,388) 309 Other current assets 20 89 13 131 - 253

Total current assets 1,224 1,419 588 2,441 (3,388) 2,284

Investments 4,864 701 - 2,135 - 7,700 - (90)

Investments under securities lending agreement 55 - - - - 55

Other long-term assets 574 40 - 268 (308) 574

Property, plant and equipment, net 1,277 244 240 2,547 - 4,308

Total assets 7,994 $ 2,404 $ 828 $ 7,391 $ (3,696) $ 14,921 $


Current liabilities:Accounts payable 30 $ 292 $ 5 $ 76 $ -$ 403 $ Accrued payroll 187 353 5 133 - 678 Accrued employee benefits 153 - - - - 153 Deferred revenue 22 11 - 17 - 50 Long-term variable-rate debt 545 - 125 - - 670 Securities lending payable 30 - - - - 30 Other current liabilities 1,216 1,295 107 1,130 (3,389) 359

Total current liabilities 2,183 1,951 242 1,356 (3,389) 2,343

Long-term debt 2,111 - - 260 - 2,371

Accrued pension and postretirement benefits, net of current 1,939 - - 73 - 2,012

Other long-term liabilities 498 242 53 398 (163) 1,028 Total liabilities 6,731 2,193 295 2,087 (3,552) 7,754

Net assets:Unrestricted (903) 204 533 4,852 (144) 4,542 Temporarily restricted 1,146 5 - 206 - 1,357 Permanently restricted 1,020 2 - 246 - 1,268

Total net assets 1,263 211 533 5,304 (144) 7,167

Total liabilities and net assets 7,994 $ 2,404 $ 828 $ 7,391 $ (3,696) $ 14,921 $

*Mayo Foundation for Medical Education and Research (MFMER)

40

Mayo Clinic

Consolidating Statement of Financial PositionDecember 31, 2015 (In Millions)


Assets

Current assets:Cash and cash equivalents 3 $ 33 $ -$ 17 $ -$ 53 $ Accounts receivable for medical services, less allowances for 307 6 108 1,237 - 1,658

uncollectible accounts Securities lending collateral 105 - - - - 105 Other receivables 591 1,567 377 1,100 (3,362) 273 Other current assets 17 78 13 61 - 169

Total current assets 1,023 1,684 498 2,415 (3,362) 2,258

Investments 4,660 320 - 2,081 - 7,061

Investments under securities lending agreement 111 - - - - 111

Other long-term assets 630 54 - 276 (327) 633

Property, plant and equipment, net 1,231 228 240 2,531 - 4,230

Total assets 7,655 $ 2,286 $ 738 $ 7,303 $ (3,689) $ 14,293 $


Current liabilities:Accounts payable 37 $ 279 $ 5 $ 78 $ -$ 399 $ Accrued payroll 166 326 4 121 - 617 Accrued employee benefits 133 - - - - 133 Deferred revenue 16 12 - 12 - 40 Long-term variable-rate debt 360 - - - - 360 Securities lending payable 105 - - - - 105 Other current liabilities 1,256 1,245 113 1,062 (3,361) 315

Total current liabilities 2,073 1,862 122 1,273 (3,361) 1,969

Long-term debt 1,948 - 126 314 - 2,388

Accrued pension and postretirement benefits, net of current 1,272 - - 51 - 1,323

Other long-term liabilities 409 224 52 465 (184) 966 Total liabilities 5,702 2,086 300 2,103 (3,545) 6,646

Net assets: Unrestricted (120) 194 438 4,794 (144) 5,162 Temporarily restricted 1,136 4 - 179 - 1,319 Permanently restricted 937 2 - 227 - 1,166

Total net assets 1,953 200 438 5,200 (144) 7,647

Total liabilities and net assets 7,655 $ 2,286 $ 738 $ 7,303 $ (3,689) $ 14,293 $


41

Mayo Clinic

Consolidating Statement of ActivitiesYear Ended December 31, 2016 (In Millions)


Revenue, gains and other support:Net medical service revenue 2,140$ 43$ 517$ 6,533$ (13)$ 9,220$ Grants and contracts 347 - - 79 - 426 Investment return allocated to current activities 293 - - 1 - 294 Contributions available for current activities 131 - - 31 - 162 Premium revenue - - - 145 - 145 Other 497 328 13 355 (442) 751 Net assets released from restrictions - - - - - -

Total revenue, gains and other support 3,408 371 530 7,144 (455) 10,998

Expenses:Salaries and benefits 2,471 899 117 3,378 (21) 6,844 Supplies and services 894 (644) 283 2,740 (433) 2,840 Facilities 252 93 31 360 (1) 735 Finance and investment 80 13 4 7 - 104

Total expenses 3,697 361 435 6,485 (455) 10,523

Income (loss) from current activities (289) 10 95 659 - 475 873 1,063

Noncurrent and other items:Contributions not available for current activities, net 136 - - (18) - 118 Unallocated investment (loss) return, net (19) - - 45 - 26 Income tax expense 6 3 - (22) - (13) Loss from assets held for sale - - - (90) - (90) Other 2 - - 1 - 3

Total noncurrent and other items 125 3 - (84) - 44

Increase (decrease) in net assets before otherchanges in net assets (164) 13 95 575 - 519

Pension and other postretirement benefit adjustments (981) - - (18) - (999) Transfer from (to) related organizations 455 (2) - (453) - -

Increase in net assets (690) 11 95 104 - (480)

Net assets at beginning of year 1,953 200 438 5,200 (144) 7,647

Net assets at end of year 1,263$ 211$ 533$ 5,304$ (144)$ 7,167$


42

Mayo Clinic

Consolidating Statement of ActivitiesYear Ended December 31, 2015 (In Millions)


Revenue, gains and other support:Net medical service revenue 2,015$ 40$ 460$ 6,118$ (13)$ 8,620 $ Grants and contracts 319 - - 67 - 386 Investment return allocated to current activities 232 - - 1 - 233 Contributions available for current activities 177 - - 34 - 211 Premium revenue - - - 144 - 144 Other 444 329 10 340 (402) 721 Net assets released from restrictions - - - - - -

Total revenue, gains and other support 3,187 369 470 6,704 (415) 10,315

Expenses:Salaries and benefits 2,234 770 108 3,278 (19) 6,371 Supplies and services 834 (525) 259 2,447 (394) 2,621 Facilities 227 106 29 337 (2) 697 Finance and investment 69 13 9 9 - 100

Total expenses 3,364 364 405 6,071 (415) 9,789

Income (loss) from current activities (177) 5 65 633 - 526

Noncurrent and other items:Contributions not available for current activities, net 69 - - (9) - 60 Unallocated investment (loss) return, net (128) 6 - 11 - (111) Income tax expense (2) (5) - (26) - (33) Reclassifications and other 2 - - (1) - 1

Total noncurrent and other items (59) 1 - (25) - (83)

Increase in net assets before otherchanges in net assets (236) 6 65 608 - 443

Pension and other postretirement benefit adjustments (48) - - 60 - 12 Transfer from (to) related organizations 294 (5) - (289) - -

Increase (decrease) in net assets 10 1 65 379 - 455

Net assets at beginning of year 1,943 199 373 4,821 (144) 7,192

Net assets at end of year 1,953$ 200$ 438$ 5,200$ (144)$ 7,647 $


43

Mayo Clinic

Schedule of Expenditures of Federal AwardsYear Ended December 31, 2016

Federal/ Pass-Through

CFDA Pass-Through to

Sponsor/CFDA Description/Project Description Number Award Number Expenditures Subrecipients

RESEARCH AND DEVELOPMENT CLUSTER

DEPARTMENT OF DEFENSE

DIRECT AWARDS

National Security Agency

Contract 12.RDC N66001-12-D-0088 1,144,510 $ -$

U.S. Army Medical Research and Medical Command

Military Medical Research and Development (12.420)

Military Medical Research and Development 12.420 W81XWH-12-1-0059 98,921 -



Military Medical Research and Development 12.420 W81XWH-15-1-0286 550,963 47,605











Military Medical Research and Development 12.420 W81XWH-12-1-0327A 398,562 -











Contract 12.RDC HR0011-14-D-0001 1,315,482 -

Contract 12.RDC SPPDG-13-D-0123 5,080,268 -

Contract 12.RDC SPPDG-10-D-0043 2,676,203 90,000

Department of the Navy, Office of the Chief of Naval Research

Basic and Applied Scientific Research (12.300)

Basic and Applied Scientific Research 12.300 N00014-14-1-0564 245,160 -


Basic and Applied Scientific Research 12.300 N00014-16-1-3173 1,887 -


Basic and Applied Scientific Research 12.RDC N00173-15-P-6402 40,696 -

U.S. Army Materiel Command

Basic Scientific Research (12.431)

Basic Scientific Research 12.431 W911NF-16-1-264 144,940 -

15,996,265 385,840

(Continued)

Subtotal Direct Awards

44

Mayo Clinic

Schedule of Expenditures of Federal Awards (Continued)Year Ended December 31, 2016



Sponsor/CFDA Description/Project Description Number Award Number Expenditures Subrecipients

RESEARCH AND DEVELOPMENT CLUSTER (Continued)

DEPARTMENT OF DEFENSE (Continued)

PASS-THROUGH AWARDS

Brigham and Women's Hospital

Military Medical Research and Development 12.420 W81XWH-15-1-0269 37,275 $ -$

Creatv MicroTech, Inc.

Contract 12.RDC W911NF-14-C-0098 9,953 -

Northern California Institute for Research and Education



Oklahoma State University

Basic Scientific Research 12.351 HDTRA1-13-0042 143,740 -

University of Alabama at Birmingham


University of Delaware



University of Pennsylvania

Research and Technology Development 12.910 N66001-14-2-4-31 208,160 -

University of Pittsburgh


University of Southern California


University of Tennessee


Vanderbilt University Medical Center




Vivonics, Inc.

Contract 12.RDC W81XWH-14-C-0009 8,700 -

Wake Forest


Subtotal Pass-Through Awards 1,062,251 -

Total Department of Defense 17,058,516 385,840

DEPARTMENT OF LABOR

PASS-THROUGH AWARDS

Employment Training Administration

Massachusetts Eye and Ear

Trade Adjustment Assistance Community College and

Career Training (TAACCCT) Grants 17.282 W81XWH-14-1-0187 5,024 -

Subtotal Pass-Through Awards 5,024 -

Total Department of Labor 5,024 -

DEPARTMENT OF EDUCATION

DIRECT AWARDS

Office of Special Education and Rehabilitative Services

National Institute on Disability and Rehabilitation Research

(84.133)

National Institute on Disability and Rehabilitation Research 84.133 H133A120026 391,935 -

Subtotal Direct Awards 391,935 -

Total Department of Education 391,935 -

(Continued)

45

Mayo Clinic




Sponsor/CFDA Description/Project Description Number Award Number Expenditures Subrecipients RESEARCH AND DEVELOPMENT CLUSTER (Continued)

DEPARTMENT OF ENERGY

DIRECT AWARDS

Office of Science Financial Assistance Program (81.049)

Office of Science Financial Assistance Program 81.049 DE-SC0008947 3,700 $ 1,401 $

Subtotal Direct Awards 3,700 1,401

Total Department of Energy 3,700 1,401

DEPARTMENT OF HEALTH AND HUMAN SERVICES

DIRECT AWARDS

Agency for Healthcare Research and Quality

Research on Healthcare Costs, Quality and Outcomes (93.226)

Research on Healthcare Costs, Quality and Outcomes 93.226 HS22008 175,543 10,826

Research on Healthcare Costs, Quality and Outcomes 93.226 HS22911 105,182 -


Research on Healthcare Costs, Quality and Outcomes 93.226 HS23077 40,891 7,987

Research on Healthcare Costs, Quality and Outcomes 93.226 AHRQ 16 30,535 -

Centers for Disease Control and Prevention

Global AIDS (93.067)

Global AIDS 93.067 GH00221 81,696 -

Project Grants and Cooperative Agreements for

Tuberculosis Control Programs (93.116)

Project Grants and Cooperative Agreements for

Tuberculosis Control Programs 93.116 PS04096 816,614 -

Centers for Medicare & Medicaid Services

ACA-Transforming Clinical Practice Initiative: Practice

Transformation Networks (93.638)

ACA-Transforming Clinical Practice Initiative: Practice

Transformation Networks 93.638 CMS331449 1,408,451 -

Food and Drug Administration

Food and Drug Administration-Research (93.103)

Food and Drug Administration-Research 93.103 FD003938 43,344 -



National Institutes of Health

Environmental Health (93.113)

Environmental Health 93.113 ES20715 177,578 -



Oral Diseases and Disorders Research (93.121)

Oral Diseases and Disorders Research 93.121 DE14036 320,007 38,405

Oral Diseases and Disorders Research 93.121 DE20194 74,025 -

Oral Diseases and Disorders Research 93.121 DE25593 159,876 63,834

Human Genome Research (93.172)

Human Genome Research 93.172 HG06379 916,095 42,663

Human Genome Research 93.172 HG06431 438,266 -

Research Related to Deafness and Communication Disorders

(93.173)

Research Related to Deafness and Communication Disorders 93.173 DC12519 292,038 -

Research and Training in Complementary and Alternative

Medicine (93.213)

Research and Training in Complementary and Alternative

Medicine 93.213 AT06515 455,373 278,180

(Continued)

46

Mayo Clinic





DEPARTMENT OF HEALTH AND HUMAN SERVICES (Continued)

DIRECT AWARDS (Continued)

National Institutes of Health (Continued)

National Center on Sleep Disorders Research (93.233)

National Center on Sleep Disorders Research 93.233 HL96750 557,171 $ -$

National Center on Sleep Disorders Research 93.233 HL114024 658,722 -

National Center on Sleep Disorders Research 93.233 HL65176 206,228 -

Mental Health Research Grants (93.242)

Mental Health Research Grants 93.242 MH100468 40,721 -



Mental Health Research Grants 93.242 MH93522 675,868 60,926 Alcohol Research Programs (93.273)

Alcohol Research Programs 93.273 AA18779 358,838 -

Alcohol Research Programs 93.273 AA19976 313,486 79,408 Alcohol Research Programs 93.273 AA21171 591,776 - Alcohol Research Programs 93.273 AA21788 746,195 - Alcohol Research Programs 93.273 AA25214 187,529 -

Drug Abuse and Addiction Research Programs (93.279)

Drug Abuse and Addiction Research Programs 93.279 DA42492 267,352 -


Drug Abuse and Addiction Research Programs 93.279 DA35546 141,660 63,840

Discovery and Applied Research for Technological Innovations

to Improve Human Health (93.286)

Discovery and Applied Research for Technological

Innovations to Improve Human Health 93.286 EB001981 329,053 -


Innovations to Improve Human Health 93.286 EB16966 1,020,992 -


Innovations to Improve Human Health 93.286 EB17185 926,556 29,679























(Continued)

47

Mayo Clinic








Discovery and Applied Research for Technological Innovations

to Improve Human Health (93.286) (Continued)


Innovations to Improve Human Health 93.286 EB21148 124,960 $ 79,704 $





Minority Health and Health Disparities Research (93.307)

Minority Health and Health Disparities Research 93.307 MD08934 306,829 89,429

Minority Health and Health Disparities Research (93.307)

Minority Health and Health Disparities Research 93.307 MD09682 319,963 32,298

Trans-NIH Research Support (93.310)

Trans-NIH Research Support 93.310 OD23121 312,259 -

Trans-NIH Research Support 93.310 DK100469 2,063,352 -

Trans-NIH Research Support 93.310 GM102282 21,554 -

Trans-NIH Research Support 93.310 ES20715 54,563 -

Trans-NIH Research Support 93.310 CA195764 102,734 -

Trans-NIH Research Support 93.310 HG09450 37,497 -

Trans-NIH Research Support 93.310 TR00884 750,953 -

Trans-NIH Research Support 93.310 TR00954 537,646 -

National Center for Advancing Translational Sciences (93.350)

National Center for Advancing Translational Sciences 93.350 TR00135 5,148,476 -

National Center for Advancing Translational Sciences 93.350 TR00136 1,635,832 -

National Center for Advancing Translational Sciences 93.350 TR00137 422,923 - Research Infrastructure Programs (93.351)

Research Infrastructure Programs 93.351 OD21879 67,368 6,023

Nursing Research (93.361)

Nursing Research 93.361 NR15441 271,706 60,229

Nursing Research 93.361 NR14253 121,305 -

Nursing Research 93.361 NR15259 619,498 - Cancer Cause and Prevention Research (93.393)

Cancer Cause and Prevention Research 93.393 CA140290 81,232 - Cancer Cause and Prevention Research 93.393 CA151254 245,312 - Cancer Cause and Prevention Research 93.393 CA154517 320,062 238,844 Cancer Cause and Prevention Research 93.393 CA154537 783,801 232,408 Cancer Cause and Prevention Research 93.393 CA157881 6,345 -

Cancer Cause and Prevention Research 93.393 CA81436 485,556 - Cancer Cause and Prevention Research 93.393 CA200703 199,392 - Cancer Cause and Prevention Research 93.393 CA176785 563,098 349,153 Cancer Cause and Prevention Research 93.393 CA179243 490,903 -

Cancer Cause and Prevention Research 93.393 CA181178 263,337 - Cancer Cause and Prevention Research 93.393 CA186734 58,241 14,355 Cancer Cause and Prevention Research 93.393 CA189404 79,124 - Cancer Cause and Prevention Research 93.393 CA189666 339,862 -

Cancer Cause and Prevention Research 93.393 CA192393 1,905,278 554,942 Cancer Cause and Prevention Research 93.393 CA116167 450,356 185,451 Cancer Cause and Prevention Research 93.393 CA126828 303,263 - Cancer Cause and Prevention Research 93.393 CA118444 292,469 55,350 Cancer Cause and Prevention Research 93.393 CA114229 244,693 -

(Continued)

48

Mayo Clinic







National Institutes of Health (Continued)Cancer Cause and Prevention Research (93.393) (Continued)

Cancer Cause and Prevention Research 93.393 CA154300 705,270 $ 462,086 $

Cancer Cause and Prevention Research 93.393 CA164533 463,174 237,016 Cancer Cause and Prevention Research 93.393 CA166025 333,896 - Cancer Cause and Prevention Research 93.393 CA176830 237,867 - Cancer Cause and Prevention Research 93.393 CA177150 636,258 287,223 Cancer Cause and Prevention Research 93.393 CA77839 1,031,882 947,317

Cancer Cause and Prevention Research 93.393 CA191270 132,294 - Cancer Cause and Prevention Research 93.393 CA195568 2,349,008 1,510,621 Cancer Cause and Prevention Research 93.393 CA132991 160,750 - Cancer Cause and Prevention Research 93.393 CA140286 15,679 -

Cancer Cause and Prevention Research 93.393 CA130996 348,403 - Cancer Cause and Prevention Research 93.393 CA132878 287,862 - Cancer Cause and Prevention Research 93.393 CA197752 177,749 - Cancer Cause and Prevention Research 93.393 CA157489 185,195 -

Cancer Cause and Prevention Research 93.393 CA168709 351,094 - Cancer Cause and Prevention Research 93.393 CA203971 180,920 - Cancer Cause and Prevention Research 93.393 CA207048 21,804 - Cancer Cause and Prevention Research 93.393 CA208517 75,148 -

Cancer Detection and Diagnosis Research (93.394)

Cancer Detection and Diagnosis Research 93.394 CA148994 330,269 -


Cancer Detection and Diagnosis Research 93.394 CA168575 382,215 200,796


























(Continued)

49

Mayo Clinic








Cancer Treatment Research (93.395)

Cancer Treatment Research 93.395 CA194498 323,910 $ -$

Cancer Treatment Research 93.395 CA154348 110,608 -





Cancer Treatment Research 93.395 CA179157 218,323 61,308

Cancer Treatment Research 93.395 CA180790 1,460,638 -

Cancer Treatment Research 93.395 CA180882 7,319,661 2,261,005





Cancer Treatment Research 93.395 CA189823 10,036,050 3,433,423






























(Continued)

50

Mayo Clinic








Cancer Biology Research (93.396)

Cancer Biology Research 93.396 CA148940 60,801 $ -$

Cancer Biology Research 93.396 CA151351 58,085 -


Cancer Biology Research 93.396 CA166347 224,391 64,448














Cancer Biology Research 93.396 CA116201 1,956,885 35,865



Cancer Biology Research 93.396 CA184320 1,001,172 176,401












Cancer Centers Support Grants (93.397)

Cancer Centers Support Grants 93.397 CA15083 6,307,036 -

Cancer Centers Support Grants 93.397 CA136393 2,355,062 439,094


Cancer Centers Support Grants 93.397 CA108961 1,353,326 10,058


Cancer Centers Support Grants 93.397 CA153605 438,659 147,836

Cancer Research Manpower (93.398)

Cancer Research Manpower 93.398 CA92049 457,873 -

Cancer Research Manpower 93.398 CA90628 948,892 40,010




(Continued)

51

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Cancer Research Manpower (93.398) (Continued)

Cancer Research Manpower 93.398 CA210334 20,098 $ -$








Cancer Control (93.399)

Cancer Control 93.399 CA37404 38,085 -


Cardiovascular Diseases Research (93.837)

Cardiovascular Diseases Research 93.837 HL115205 6,942 -

Cardiovascular Diseases Research 93.837 HL107304 554,268 10,670







Cardiovascular Diseases Research 93.837 HL85631 1,029,784 144,589












Cardiovascular Diseases Research 93.837 HL96750 178 -
















(Continued)

52

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Cardiovascular Diseases Research (93.837) (Continued)

Cardiovascular Diseases Research 93.837 HL124045 129,979 $ -$



















Lung Diseases Research (93.838)

Lung Diseases Research 93.838 HL108712 601,026 450,444


Lung Diseases Research 93.838 HL65228 339,130 -















Lung Diseases Research 93.838 CA206388 21,453 -





Blood Diseases and Resources Research (93.839)

Blood Diseases and Resources Research 93.839 HL109109 262,721 -


Blood Diseases and Resources Research 93.839 HL121232 459,023 112,843

Arthritis, Musculoskeletal and Skin Diseases Research (93.846)

Arthritis, Musculoskeletal and Skin Diseases Research 93.846 AR57745 556,280 -


(Continued)

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Arthritis, Musculoskeletal and Skin Diseases Research (93.846) (Continued)

Arthritis, Musculoskeletal and Skin Diseases Research 93.846 AR66643 75,677 $ -$

Arthritis, Musculoskeletal and Skin Diseases Research 93.846 AR46849 488,553 36,914






























Diabetes, Endocrinology and Metabolism Research (93.847)

Diabetes, Digestive, and Kidney Diseases Extramural

Research 93.847 DK69370 353,860 -


Research 93.847 DK79856 605,768 348,311


Research 93.847 DK90038 382,363 -


Research 93.847 DK90358 847,232 61,655


Research 93.847 DK90541 207,718 -


Research 93.847 DK92179 166,293 -


Research 93.847 DK58816 278,280 -


Research 93.847 DK105778 21,731 -

(Continued)

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Diabetes, Endocrinology and Metabolism Research (93.847) (Continued)


Research 93.847 DK57061 344,798 $ -$


Research 93.847 DK32878 84,460 -


Research 93.847 DK62410 7,277 3,110


Research 93.847 DK07352 259,382 -


Research 93.847 DK107402 74,800 -


Research 93.847 DK78646 451,037 42,600


Research 93.847 DK100081 692,814 -


Research 93.847 DK100638 127,059 -


Research 93.847 DK101405 94,057 -


Research 93.847 DK101738 130,378 -


Research 93.847 DK102232 39,446 -


Research 93.847 DK104273 309,455 -


Research 93.847 DK95924 160,780 -


Research 93.847 DK98468 369,914 -


Research 93.847 DK98493 379,236 -


Research 93.847 DK99160 292,268 -


Research 93.847 DK83908 1,329,530 473,723


Research 93.847 DK109096 276,803 -


Research 93.847 DK100575 139,275 -


Research 93.847 DK100227 1,418,120 80,353


Research 93.847 DK92460 518,487 -


Research 93.847 DK92470 127,550 -


Research 93.847 DK97054 119,843 -


Research 93.847 DK98832 116 -

(Continued)

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Research 93.847 DK99231 199,714 $ -$


Research 93.847 DK41973 141,278 -


Research 93.847 DK41876 348,951 -


Research 93.847 DK07013 121,530 -


Research 93.847 DK84567 1,109,867 -


Research 93.847 DK90728 1,115,527 -


Research 93.847 DK29953 602,195 22,868


Research 93.847 DK109134 101,405 -


Research 93.847 DK07198 393,759 -


Research 93.847 DK44863 324,082 -


Research 93.847 DK82843 8,100 -


Research 93.847 DK78924 358,410 -


Research 93.847 DK57993 361,486 -


Research 93.847 DK84960 131,946 -


Research 93.847 DK45343 505,980 -


Research 93.847 DK47060 280,228 -


Research 93.847 DK109597 15,351 -


Research 93.847 DK52913 359,835 -


Research 93.847 DK111378 25,942 -


Research 93.847 DK100358 348,208 -


Research 93.847 DK101889 206,752 -


Research 93.847 DK102360 266,189 -


Research 93.847 DK102325 924,339 -


Research 93.847 DK103829 68,590 -

(Continued)

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Research 93.847 DK103850 553,663 $ 214,837 $


Research 93.847 DK103911 152,138 -


Research 93.847 DK106011 350,598 -


Research 93.847 DK106056 148,961 -


Research 93.847 DK106427 153,761 -


Research 93.847 DK106456 142,157 -


Research 93.847 DK106667 390,269 84,979


Research 93.847 DK106785 569,448 337,993


Research 93.847 DK106957 327,991 -


Research 93.847 DK108288 199,474 -


Research 93.847 DK85516 149,128 -


Research 93.847 DK89178 88,782 -


Research 93.847 DK92255 279,165 -


Research 93.847 DK92408 23,770 10,368


Research 93.847 DK97178 127,454 -

Digestive Diseases and Nutrition Research (93.848)

Digestive Diseases and Nutrition Research 93.848 DK24031 532,116 -



Digestive Diseases and Nutrition Research 93.848 DK80670 313,801 30,906






Digestive Diseases and Nutrition Research 93.848 DK68055 2,077,536 -


Kidney Diseases, Urology and Hematology Research (93.849)

Kidney Diseases, Urology and Hematology Research 93.849 DK73608 138,239 -


Kidney Diseases, Urology and Hematology Research 93.849 DK56957 214,786 29,351


(Continued)

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Extramural Research Programs in the Neurosciences and

Neurological Disorders (93.853)


Neurological Disorders 93.853 NS70872 154,240 $ -$


Neurological Disorders 93.853 NS75013 153,474 -














Neurological Disorders 93.853 NS83937 186,324 86,296






















Neurological Disorders 93.853 NS80168 4,296,154 2,028,984


Neurological Disorders 93.853 NS84974 1,619,641 -







(Continued)

58

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Neurological Disorders (93.853) (Continued)






















Neurological Disorders 93.853 NS72187 1,237,662 -



























(Continued)

59

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Neurological Disorders (93.853) (Continued)













Allergy, Immunology and Transplantation Research (93.855)

Allergy, Immunology and Transplantation Research 93.855 AI89859 3,428,613 2,442,542

Allergy, Immunology and Transplantation Research 93.855 AI08971 2,298 -


Allergy, Immunology and Transplantation Research 93.855 AI96326 443,602 3,390





























Allergy, Immunology and Transplantation Research 93.855 AI127998 308 -


(Continued)

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Biomedical Research and Research Training (93.859)

Biomedical Research and Research Training 93.859 GM063904 583,812 $ 161,697 $

Biomedical Research and Research Training 93.859 GM59763 102,142 -

Biomedical Research and Research Training 93.859 GM75965 450,192 105,020






















Child Health and Human Development Extramural Research (93.865)

Child Health and Human Development Extramural Research 93.865 HD89035 48,273 8,493


Child Health and Human Development Extramural Research 93.865 HD42569 363,258 -






Aging Research (93.866)

Aging Research 93.866 AG13925 285,945 16,122

Aging Research 93.866 AG37526 4,471 -


Aging Research 93.866 AG45390 3,014,147 1,695,435





Aging Research 93.866 AG06786 2,274,844 -



(Continued)

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Aging Research (93.866) (Continued)

Aging Research 93.866 AG44075 39,963 $ -$

























Aging Research 93.866 AG34676 1,123,264 46,390




Aging Research 93.866 AG41122 1,986,901 688,246










Vision Research (93.867)

Vision Research 93.867 EY25181 6,794 -



Vision Research 93.867 EY24333 587,111 198,407

Vision Research 93.867 EY26490 532,079 199,046




(Continued)

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Medical Library Assistance (93.879)

Medical Library Assistance 93.879 LM12120 166,549 $ -$

Medical Library Assistance 93.879 LM11934 497,699 324,759

Medical Library Assistance 93.879 LM11972 192,330 93,478

Medical Library Assistance 93.879 LM12021 52,100 -

Contract

Contract 93.RDC CM01018 99,245 -

Contract 93.RDC CM17104 58 -

Contract 93.RDC HHS-N-268-2016-00003I 58,833 -


Contract 93.RDC HHS-N-261-2012-00042I 1,317,353 446,596

Contract 93.RDC HHS-N-261-2015-00438P 15,000 -


Contract 93.RDC HHS-N-272-2010-00025C 16,065 -


Contract 93.RDC HHS-A-290-2015-00013I 633,182 -


Contract 93.RDC HHS-N-261-2014-00537P 24,849 -

Subtotal Direct Awards 238,265,233 30,341,886

PASS-THROUGH AWARDS

Abt Associates Inc.

Contract 93.RDC HS-D-2000-2013-M53890 7,620 -

Advanced Medical Electronics Corporation




Albert Einstein College of Medicine of Yeshiva University



American College of Radiology


Artann Laboratories


Arizona State University






Research 93.847 DK47936 37,489 -


Research 93.847 DK94013 49,231 -


Research 93.847 DK66483 50,825 -



(Continued)

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PASS-THROUGH AWARDS (Continued)

Arizona State University (Continued)

Aging Research 93.866 AG54048 930 $ -$


Contract 93.RDC HHS-O-100-2010-00008C 3,001 -

Banner Health



Beth Israel Deaconess Med Ctr


Boston University






Brigham and Women’s Hospital

Human Genome Research 93.172 HG06834 220,666 -


Cancer Treatment Research 93.395 A11104 555 -

Cancer Treatment Research 93.395 A151216 17,929 -

Cancer Treatment Research 93.395 A021101 293 -




Research 93.847 DK103784 10,125 -

Case Western Reserve University



Research 93.847 DK104438 10,940 -


Research 93.847 DK101074 4,280 -


Research 93.847 DK94157 142,578 -

Children’s Hospital Boston


Children’s Hospital of Philadelphia



Contract 93.RDC N02-CM-62212 20,587 -

Children’s Hospital Med Center (Cincinnati)


Arthritis, Musculoskeletal and Skin Diseases Research 93.846 AT65068 5,858 -

Cleveland Clinic Foundation


Coalition of Ntl Cancer Coop


Columbia University

Environmental Health 93.113 ES16348 892 -

Cancer Centers Support Grants 93.397 CA163004 121,884 -



(Continued)

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Dartmouth College

Research on Healthcare Costs, Quality and Outcomes 93.226 HS24075 70,151 $ -$

Duke Clinical Research Institute


Duke University






Contract 93.RDC HHS-N-272-2013-000171 79,490 -

Dystonia Medical Research FNDT



ECOG-ACRIN Medical Research Foundation


Enbiotix, Inc.

Allergy and Infectious Diseases Research 93.855 AI126978 54,870 -

Endomimetics, LLC



Florida State University


Fond Du Lac Reservation

Demonstration Projects for Indian Health 93.933 IHS300411 - -

Fox Chase Cancer Center

Cancer Cause and Prevention Research 93.393 CA155347 168,271 -

Fred Hutchinson Cancer Research Center


Cancer Cause and Prevention Research 93.393 CA170122 - -



Frontier Science and Technology Research Foundation


General Electric Global Research Center



Great Lakes Hemophilia Foundation

Blood Disorder Program: Prevention, Surveillance, and Research 93.080 DD01155 39,089 -

Maternal and Child Health Federal Consolidated Programs 93.110 MC24052 18,945 -

Disabilities Prevention 93.184 DD00862 864 -

Gynecologic Oncology Group



H. Lee Moffit Cancer Center and Research Institute, Inc.




(Continued)

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ICF Resources, Inc.

Contract 93.RDC HHS-N-261-2012-000010 82,503 $ -$

ICAHN School of Medicine


ICON Clinical Research


Imanis Life Sciences

National Center for Advancing Translational Sciences 93.350 TR01191 - -


Indiana University


Innovative Design Labs Inc.


Institute for Clinical Research


Institute for Clinical Systems Improvement

Health Care Innovation Awards 93.610 CMS331048 - -

Iowa State University

Research Infrastructure Programs 93.351 OD20166 72,597 -

Iron Horse Diagnostics, Inc.



Ischemia Clinical Coordinating


Jaeb Center for Health Research




Joan and Sanford Weill Medical


Johns Hopkins University

Food and Drug Administration Research 93.103 FD03898 - -


Cancer Cause and Prevention Research 93.393 CA89600 2,256,613 482,260




Research 93.847 DK74008 245,330 -





Kaiser Foundation


Koronis Biomedical Tech Corp

National Center for Advancing Translational Sciences 93.350 TR01687 2,745 -

Lam Foundation

National Center for Advancing Translational Sciences 93.350 HL127672 226 -

(Continued)

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Leidos Biomedical Research

Contract 93.RDC HHS-N-261-2008-00001E 193,162 $ -$

Massachusetts Eye & Ear Infirmary



Massachusetts General Hospital






Neurological Disorders 93.853 NS86905 413 -

Medical College of Wisconsin


Medical University of South Carolina


Research 93.847 DK104833 23,397 -

Minneapolis Medical Research Foundation




Research 93.847 DK66013 258,245 -

Minnesota Department of Health

ACA - State Innovation Models: Funding for Model Design

and Model Testing Assistance 93.624 CMS331163 203,322 -

Hospital Preparedness Program (HPP) Ebola Preparedness

and Response Activities 93.817 MDH102271 6,000 -


and Response Activities 93.817 MDH104013 49,022 -

National Bioterrorism Hospital Preparedness Program 93.889 MDH10327 338,538 -

Minnesota HealthSolutions Corporation



Minnesota Veterans Research Institute

Lung Diseases Research 93.838 HL74416 - -

Modulation Therapeutics


Mount Sinai Medical Center of Florida

Cardiovascular Diseases Research 93.837 HL102084 - -


Mount Sinai School of Medicine at NYU


National Jewish Health


National Marrow Donor Program

Blood Diseases and Resources Research 93.839 NMDP #0402 1,356 -

Neurosigma, Inc



(Continued)

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New England Research Institute


New York Academy of Medicine


New York School of Medicine


NORC

Contract 93.RDC 200-2013-M-53955 12,986 -

North Dakota State University


Northern California Institute Research and Education


Northwestern University






Research 93.847 DK104876 53,822 -

NRG Oncology Foundation


Ohio State University


Olmsted Medical Center

Research on Healthcare Costs, Quality and Outcomes 93.226 HS18431 - -

O.N. Diagnostics


Oregon Health Sciences University


Pennsylvania State University


Princeton University


Radiation Monitoring Devices


Radiological Society of North America


Contract 93.RDC HHS-N-268-2013-00071C - -


Recombinetics, Inc.


Research 93.847 DK104500 5,547 -

The Research Foundation of SUNY




(Continued)

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The Research Institute at Nationwide Children's Hospital


Research 93.847 DK100866 13,008 $ -$

Roswell Park Cancer Institute



Rush University


SAIC-Frederick

Contract 93.RDC 12XS301 804 -

Contract 93.RDC 13XS500 542,001 -

Sanford-Burnham Medical


Research 93.847 DK108743 9,463 -

Sequent Medical Inc.



Sirnax, Inc.


Sloan-Kettering


Social & Scientific Systems, Inc.

Contract 93.RDC ES55503 1,384 -

Contract 93.RDC 11XS088 22,841 -

Southern Illinois University


Stanford University



Research 93.847 DK34238 278 -




Stellenbosch University



Sun Health Research Institute




Texas A&M University



Texas Tech University


Translational Genomics Research Institue


University of Alabama



(Continued)

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University of Arizona

Family Smoking Prevention and Tobacco Control Act Regulatory Res 93.077 DA37378 135,717 $ -$

University of California—Los Angeles


University of California—San Diego











University of California—San Francisco













University of California—Santa Barbara


Research 93.847 DK94331 350,148 29,250

University of Chicago


University of Cincinnati



University of Colorado

Food and Drug Administration Research 93.103 FD04086 44,052 -



University of Florida



University of Illinois at Urbana Champaign

Trans-NIH Research Support 93.310 GM114838 357,604 -




(Continued)

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University of Iowa

Cancer Centers Support Grants 93.397 CA097274 1,651,737 $ -$

Contract 93.RDC PC35143 129,405 -

University of Kansas Medical Center

Cancer Detection and Diagnosis Research 93.394 CA182715 641 -

University of Maryland—Baltimore


University of Maryland Biotechnology Institute



University of Massachusetts


Neurological Disorders Contract 93.853 NS88689 23,295 -


University of Medicine and Dentistry of New Jersey


Neurological Disorders (93.853) 93.853 NS38384 116,159 -

University of Miami


Neurological Disorders (93.853) 93.853 NS92091 97,224 -

University of Michigan




Blood Diseases and Resources Research 93.839 NMDP #1205 986 -





Research 93.847 DK20572 115,599 -


Research 93.847 DK83912 79,037 -






University of Minnesota

Occupational Safety and Health Program 93.262 OH08434 22,297 -






Research 93.847 DK98203 19,779 -


Research 93.847 DK50456 118,628 -


Research 93.847 DK100530 2,457 -

(Continued)

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University of Minnesota (Continued)


Research 93.847 DK101402 252,512 $ -$


Research 93.847 DK87919 1,190 -












University of Mississippi Medical Center



University of Nebraska


University of North Carolina


Research 93.847 DK109191 14,583 -


Research 93.847 DK92239 2,784 -

University of Oklahoma Health Sciences Center




University of Pennsylvania

Food and Drug Administration Research 93.103 FD003516 14,416 -










Research 93.847 DK100846 20,494 -

Extramural Research Programs in the Neurosciences

and Neurological Disorders 93.853 NS63930 2,200 -


(Continued)

72

Mayo Clinic







University of Pittsburgh


Research 93.847 DK82864 6,845 $ -$

Allergy and Infectious Diseases Research 93.855 AI122369 40 -




University of South Alabama


University of South Carolina


University of Southern California



University of Tennessee

Family Smoking Prevention and Tobacco Control

Act Regulatory Research 93.077 DA37273 43,076 -



University of Texas


University of Texas Health Science Center



Residency Training in the General Practice of Dentistry 93.897 LM11829 112,882 -

University of Texas M.D. Anderson Cancer Center





Research 93.847 DK108328 20,189 -


University of Texas Southwestern Medical Center


Research 93.847 DK107733 38,666 -

University of Utah


Research 93.847 DK91437 26,101 -


University of Vermont


University of Virginia


Research 93.847 DK108483 116,528 -



University of Washington

Trans-NIH Research Support 93.310 AR66795 114,281 -


(Continued)

73

Mayo Clinic







University of Washington (Continued)





University of Wisconsin



Vanderbilt University



Wake Forest University Health Sciences

Contract 93.RDC HC95257 152,388 -

Washington University in St. Louis







Westat


Wyss Institute at Harvard University

Contract 93.RDC W911NF-16-C-0050 228,225 -

Yale University



Mental Health Research Grants 93.242 MH109648 472 -




Contract 93.RDC HHS-M-500-2013-13018I - -

Subtotal Pass-Through Awards 29,255,932 542,312

Total Department of Health and Human

Services 267,521,165 30,884,198

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

DIRECT AWARDS

NASA Shared Services Center

Exploration 43.003 NNX16AK50G 16,053 -

NASA Grant 43.NNX08AQ20 NNX08AQ20G 19,243 -

Total National Aeronautics and Space

Administration 35,296 -

NATIONAL SCIENCE FOUNDATION

DIRECT AWARDS

Computer and Information Science and Engineering (47.070)

Computer and Information Science and Engineering 47.070 CCF1318347 122,464 -

Computer and Information Science and Engineering 47.070 NSF4 26,655 -

(Continued)

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Mayo Clinic





NATIONAL SCIENCE FOUNDATION (Continued)


Computer and Information Science and Engineering (47.070) (Continued)

Computer and Information Science and Engineering 47.070 NSF #6 5,000 $ -$





PASS-THROUGH AWARDS

Michigan Technological University

Engineering Grants 47.041 CBET-1350154 9,162 -

Old Dominion University

Computer and Information Science and Engineering 47.070 IIS-1451028 7,716 -

University of Michigan

Engineering Grants 47.041 NSF1462060 15,726 -


Total National Science Foundation 324,440 -

Total Research and Development Cluster 285,340,076 31,271,439

STUDENT FINANCIAL ASSISTANCE CLUSTER

DEPARTMENT OF EDUCATION

DIRECT AWARDS

Office of Student Financial Assistance Programs

Federal Pell Grant Program (84.063)

Pell Grant Program 84.063 59,274 -

Federal Direct Student Loans (84.268)

Federal Direct Student Loans 84.268 9,325,659 -

Total Student Financial Assistance Cluster 9,384,933 -

OTHER PROGRAMS

DEPARTMENT OF HEALTH AND HUMAN SERVICES

DIRECT AWARDS

Office of the Surgeon General

Military Health Professions Scholarships 93.Unknown 199,600 -


PASS-THROUGH AWARDS

Administration for Children and Families

Centers for Medicare & Medicaid Services

Medical Assistance Program (93.778)

Georgia Board for Physician Workforce 93.778 408,250 -

La Crosse County Department of Human Services 93.778 266,032 -

Subtotal Medical Assistance Program

(CFDA 93.778) 674,282 -

Office of Family Assistance

Temporary Assistance for Needy Families (93.558)

Children's Advocacy Centers of Georgia, Inc. 93.558 24,823 -

Subtotal Temporary Assistance for Needy

Families (CFDA 93.558) 24,823 -

(Continued)

75

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Sponsor/CFDA Description/Project Description Number Award Number Expenditures Subrecipients OTHER PROGRAMS (Continued)



Administration for Children and Families (Continued)

Office of Family Assistance (Continued)

Refugee and Entrant Assistance Voluntary Agency Programs (93.567)

Monroe County Department of Human Services 93.567 17,363 $ -$

Subtotal Refugee and Entrant Assistance

Voluntary Agency Programs (CFDA 93.567) 17,363 -

Block Grants for Community Mental Health Services (93.958)

Trempealeau County Unified Board 93.958 73,380 -

Vernon County Department of Human Services 93.958 32 -

Subtotal Block Grants for Community Mental

Health Services (CFDA 93.958) 73,412 -

Block Grants for Prevention and Treatment of Substance

Abuse (93.959)

Crawford County Department of Human Services 93.959 51,827 -

Human Service Center 93.959 13,307 -

Trempealeau County Unified Board 93.959 14,237 -

Vernon County Department of Human Services 93.959 4 -

Subtotal Block Grants for Prevention and

Treatment of Substance Abuse (CFDA 93.959) 79,375 -

Centers for Disease Control and Prevention

Hospital Preparedness Program (HPP) and Public Health

Emergency Preparedness (PHEP) Aligned Cooperative

Agreements (93.074)

State of Wisconsin 93.074 7,824 -

Subtotal Hospital Preparedness Program (HPP) and

Public Health Emergency Preparedness (PHEP)

Aligned Cooperative Agreements (CFDA 93.074) 7,824 -

Preventive Health and Health Services Block Grant (93.991)

Georgia Governor's Office for Children and Families 93.991 11,065 -

Subtotal Preventive Health and Health Services

Block Grant (CFDA 93.991) 11,065 -

Health Resources and Services Administration

Small Rural Hospital Improvement Grant Program (93.301)

Wisconsin Office of Rural Health 93.301 46,115 -

Minnesota Department of Health 93.301 26,955 -

Subtotal Small Rural Hospital Improvement Grant

Program (CFDA 93.301) 73,070 -


and Response Activities (93.817)

Minnesota Department of Health 93.817 46,190 -

Subtotal Hospital Preparedness Program (HPP)

Ebola Preparedness and Response Activities

(CFDA 93.817) 46,190 -

(Continued)

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Mayo Clinic




Sponsor/CFDA Description/Project Description Number Award Number Expenditures Subrecipients OTHER PROGRAMS (Continued)



Health Resources and Services Administration (Continued)

National Bioterrorism Hospital Preparedness Program (93.889)

Minnesota Department of Health 93.889 270,642 $ -$

Subtotal National Bioterrorism Hospital

Preparedness Program (CFDA 93.889) 270,642 -

Subtotal Pass-Through Awards 1,278,046 -

Total Department of Health and Human Services 1,477,646 -

DEPARTMENT OF JUSTICE

PASS-THROUGH AWARDS

Georgia Bureau of Investigation

Crime Victim Assistance 16.575 294,444 -

Minnesota Department of Public Safety

Crime Victim Assistance 16.575 91,858 -

Children's Advocacy Centers of Georgia, Inc.

Improving the Investigation and Prosecution of Child Abuse

and the Regional and Local Children's Advocacy Centers 16.758 23,511 -


Total Department of Justice 409,813 -

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

PASS-THROUGH AWARDS

Supportive Housing for the Elderly, Section 202 Direct Loan 14.157 407,389 -

Section 8 Housing Choice Vouchers 14.871 47,981 -


Total Department of Housing and Urban

Development 455,370 -

Total Other Programs 2,342,829 -

Total Federal Expenditures 297,067,838 $ 31,271,439 $

77

Mayo Clinic

Schedule of Expenditures of Florida State Financial AssistanceYear Ended December 31, 2016

CSFA Contract/Grant/ Pass-Through

Sponsor/CSFA Description/Project Description Number Subproject Number Expenditures to Subrecipients

STATE OF FLORIDA

Department of Elder Affairs

Direct Projects

Alzheimer Model Day Care, Memory Disorder Clinics, and

Alzheimer Special Projects 65.002 XZ508 161,017 $ -$


Alzheimer Special Projects 65.002 XZ608 88,871 -

Subtotal Direct Projects 249,888 -

Pass-Through Projects

Mount Sinai Medical Center of Florida, Inc.


Alzheimer Special Projects 65.002 XZ507 1,720 -

Subtotal Pass-Through Projects 1,720 -

Total Department of Elder Affairs 251,608 -

Department of Health

Direct Projects

Bankhead-Coley Cancer Research Program 64.078 6BC05 408,359 -

Bankhead-Coley Cancer Research Program 64.078 5BC02 348,590 -

Endowed Chair for Cancer Research 64.130 MOG07 12,194 -

Endowed Chair for Cancer Research 64.130 566,746 -

Ed and Ethel Moore Alzheimer's Disease Research Program 64.135 6AZ12 55,992 18,958

Ed and Ethel Moore Alzheimer's Disease Research Program 64.135 6AZ01 177,601 -

Ed and Ethel Moore Alzheimer's Disease Research Program 64.135 6AZ13 173,807 -

Ed and Ethel Moore Alzheimer's Disease Research Program 64.135 6AZ06 148,575

Subtotal Direct Projects 1,891,864 18,958

Total Department of Health 1,891,864 18,958

Total State of Florida 2,143,472 $ 18,958 $

Mayo Clinic Notes to Schedules of Expenditures of Federal Awards and Florida State Financial Assistance

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Note 1. Basis of Presentation

The accompanying schedules of expenditures of federal awards and Florida state financial assistance (the Schedules) include the federal and Florida state grant activity of Mayo Clinic and its subsidiaries (the Clinic) under programs of the federal and Florida state governments for the year ended December 31, 2016. The information in these schedules is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and Chapter 10.650, Rules of the Auditor General of the State of Florida. Because the Schedules present only a selected portion of the operations of the Clinic, they are not intended to, and do not, present the financial position, changes in net assets, or cash flows of the Clinic. The federal schedule excludes the federal programs of Luther Lakeside Apartments, Inc., an affiliate of the Clinic. This affiliate issued a separate audit report in accordance with Uniform Guidance.

Note 2. Summary of Significant Accounting Policies

Expenditures reported in the Schedules are reported on the cash basis of accounting. Under the cash basis, expenditures are recognized when paid rather than when the obligation is incurred. Such expenditures are reported following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts reported on the Schedules represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. The Clinic has elected to use the 10 percent de minimis indirect cost rate, as allowed under Uniform Guidance, on expenditures of awards received by certain subsidiaries. Other subsidiaries have federally approved indirect cost rates and have not elected to use the 10 percent de minimis rate.

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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

Independent Auditor’s Report Board of Trustees Mayo Clinic 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 consolidated financial statements of Mayo Clinic and its subsidiaries (the Clinic), which comprise the consolidated statement of financial position as of December 31, 2016, the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated February 24, 2017. Internal Control Over Financial Reporting In planning and performing our audit of the consolidated financial statements, we considered the Clinic’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 consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Clinic’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Clinic’s internal control over financial reporting. 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 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 over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies, and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify a certain deficiency in internal control, described as item 2016-001 in the accompanying schedule of findings and questioned costs, that we consider to be a significant deficiency.

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Compliance and Other Matters As part of obtaining reasonable assurance about whether the Clinic’s consolidated financial statements are free of 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 entity’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 Clinic’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Minneapolis, Minnesota February 24, 2017

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Report on Compliance for Each Major Federal Program and State Project and on Internal Control Over Compliance

in Accordance With Uniform Guidance and Chapter 10.650, Rules of the Auditor General of the State of Florida

Independent Auditor’s Report

Board of Trustees Mayo Clinic Report on Compliance for Each Major Federal Program and State Project We have audited Mayo Clinic and its subsidiaries’ (the Clinic) compliance with the types of compliance requirements described in the OMB Compliance Supplement and the requirements described in the Department of Financial Services’ State Projects Compliance Supplement that could have a direct and material effect on each of the Clinic’s major federal program and state projects for the year ended December 31, 2016. The Clinic’s major federal program and state projects are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. The Clinic’s basic financial statements include the operations of Luther Lakeside Apartments, Inc., an affiliate of the Clinic, which is not included in the Clinic’s schedule of expenditures of federal awards for the year ended December 31, 2016. Our audit, described below, did not include the operations of Luther Lakeside Apartments, Inc. because the affiliate issued a separate audit report in accordance with Uniform Guidance. Management’s Responsibility Management is responsible for compliance with federal and state statutes, regulations, and the terms and conditions of its federal and state awards applicable to its federal and state programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the Clinic’s major federal program and state projects based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); and Chapter 10.650, Rules of the Auditor General of the State of Florida. Those standards, Uniform Guidance, and Chapter 10.650 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state project occurred. An audit includes examining, on a test basis, evidence about the Clinic’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

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We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program and state project. However, our audit does not provide a legal determination of the Clinic’s compliance. Opinion on Compliance for Each Major Federal Program and State Project In our opinion, the Clinic complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal program and state projects for the year ended December 31, 2016. Report on Internal Control Over Compliance Management of the Clinic is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Clinic’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program and state project to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and state project and to test and report on internal control over compliance in accordance with Uniform Guidance and Chapter 10.650, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Clinic’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program or state project that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance and Chapter 10.650. Accordingly, this report is not suitable for any other purpose.

Minneapolis, Minnesota April 25, 2017

Mayo Clinic Schedule of Findings and Questioned Costs Year Ended December 31, 2016

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I. SUMMARY OF INDEPENDENT AUDITOR’S RESULTS

A. Financial Statements

1. Type of auditor’s report issued on the financial statements: Unmodified

2. Internal control over financial reporting:

Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not

considered to be material weaknesses? X Yes None reported Noncompliance material to financial statements

identified? Yes X No

B. Federal Awards and Florida State Financial Assistance

Federal Awards

1. Internal control over major programs:


considered to be material weaknesses? Yes X None reported

2. Type of auditor’s report issued on compliance for major programs: Unmodified

Any audit findings that are required to be reported in accordance with Section 2 CFR 200.516(a)? Yes X No

3. Identification of major programs:

4. Dollar threshold used to distinguish between Type A and Type B programs: $3,000,000

5. Auditee qualified as a low-risk? X Yes No

(Continued)

CFDA Number Name of Federal Program Multiple Research and Development Cluster

Mayo Clinic Schedule of Findings and Questioned Costs (Continued) Year Ended December 31, 2016

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Florida State Financial Assistance

1. Internal control over major projects:


considered to be material weaknesses? Yes X None reported

2. Type of auditor’s report issued on compliance for major projects: Unmodified

Any audit findings that are required to be reported in accordance with Chapter 10.650, Rules of the Auditor General of the State of Florida? Yes X No

3. Identification of major state projects:

4. Dollar threshold used to distinguish between Type A and Type B projects: $300,000 II. FINANCIAL STATEMENT FINDINGS FINDING 2016-001—Loss on Assets Held for Sale

Finding: Management did not accurately recognize a loss on assets held for sale related to the anticipated sale of Mayo Clinic Health System—Waycross (Waycross).

Condition: Management had initially concluded that one of the six criteria for assets held for sale was not met. Criteria: Under FASB Accounting Standards Codification Topic 360, a long-lived asset to be sold should be classified as held-for-sale in the period all applicable criterion are met. Context: Anticipated sale of Waycross. Cause: When reviewing documents related to the anticipated sale of Waycross, management initially concluded the transaction did not meet one of the six criteria for assets held for sale, the transaction being “probable.” After consideration of relevant documentation, accounting guidance and further discussion with management and RSM US LLP, management determined that the criteria was met and Waycross should have been reported following the “Assets Held for Sale” guidance, and a loss of $90 million should have been recognized for the year ended December 31, 2016, which is classified as noncurrent in accordance with the Clinic’s policy. Effect: Assets and liabilities held for sale of $65 million and $39 million, respectively, were reported in the statement of financial position at December 31, 2016, and a noncurrent loss from assets held for sale of $90 million was reported in the statement of activities for the year ended December 31, 2016.

(Continued)

State CSFA Number Name of State Project 64.078 64.130

Bankhead-Coley Cancer Research Program Endowed Chair for Cancer Research

Mayo Clinic Schedule of Findings and Questioned Costs (Continued) Year Ended December 31, 2016

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Recommendation: We recommend that management review its current process for evaluating information available and sharing of information in a timely manner when complex transactions arise to help ensure the accumulation of all relevant facts, data and knowledge prior to analyzing and concluding on the accounting treatment related to such transactions.

Views of responsible officials: Management agrees with the auditor observation and recommendation. Effective immediately, we will conduct quarterly meetings including Mayo Clinic senior leadership and Finance leadership to cover nonsite-specific transactions or other significant matters that could have an accounting impact. Currently, these meetings occur for the group practices sites, Mayo Clinic Health System, diversified activities and the research shield. Further, management will document the discussions and resulting treatments to conform with new PCAOB guidance to auditors regarding standards for client documentation.

III. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AND STATE AWARDS

No matters to report.

Mayo Clinic Summary Schedule of Prior Audit Findings Year Ended December 31, 2016

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No prior audit findings

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