The University is a party to various law suits and other claims in the ordinary course of business. University officials are of the opinion, based upon the advice of legal counsel, that the ultimate resolution of these matters will not have a material effect on the financial statements of the University, as the maximum exposure to the University is in the range of $500,000 - $775,000.

The University receives financial assistance from federal and state agencies in the form of grants and awards. The expenditure of funds received from these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audit could become a liability of the applicable fund.

The United States Department of Agriculture (USDA) is currently performing a review of the University's administration of NIFA (National Institute of Food and Agriculture)-sponsored programs and associated financial activity. As part of this review, the USDA is questioning if the University has complied with the matching requirements of the grants for the period from 2011 to 2013. If it is determined that the University has not complied with the matching requirements the University could be required to spend an additional amount to meet the matching requirements. The amount could be up to $3,000,000. As of the date of the audit report, the review was not complete.

The University is exposed to various risks of loss from torts; theft of, damage to, destruction of assets; business interruption; employee injuries and illnesses; natural disasters; and employee health and accident benefits. Commercial insurance coverage is purchased for claims arising from these risks. Settled claims have not exceeded this commercial coverage in any of the three preceding years. As a sovereign entity of the Commonwealth of Kentucky, the Kentucky Board of Claims handles tort claims on behalf of the University.

In the Statement of Revenues, Expenses and Changes in Net Position, operating expenses are presented by functional expense purpose. Depreciation is allocated below based on functional classification as required by IPEDS for Fiscal Year 2016. Functional expense purpose is classified by natural classification as follows: