YOUNG MEN S CHRISTIAN ASSOCIATION BUFFALO NIAGARA (d/b/a YMCA BUFFALO NIAGARA) Financial Report

Transcription

1 YOUNG MEN S CHRISTIAN ASSOCIATION BUFFALO NIAGARA (d/b/a YMCA BUFFALO NIAGARA) Financial Report December 31, 2015

2 CONTENTS INDEPENDENT AUDITOR S REPORT ON THE FINANCIAL STATEMENTS 1 2 FINANCIAL STATEMENTS Statement of financial position 3 Statement of activities and changes in net assets 4 Statement of cash flows 5 6 Statement of functional expenses 7 Notes to financial statements 8 30

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5 STATEMENT OF FINANCIAL POSITION Year Ended December 31, 2015 With Summarized Financial Information for 2014 ASSETS Current Assets Cash and cash equivalents $ 1,030,009 $ 398,045 Receivables, net 469, ,871 Prepaid expenses 219, ,813 Total current assets 1,718,710 1,343,729 Other Assets Investments 8,824,075 8,894,153 Beneficial interest in trusts 117, ,096 Bond issuance costs, net of accumulated amortization of $78,660 in 2015 and $59,397 in , ,974 9,280,295 9,381,223 Property and Equipment, net 27,603,613 29,128,232 Total assets $ 38,602,618 $ 39,853,184 LIABILITIES AND NET ASSETS Current Liabilities Current maturities of long-term debt $ 1,098,398 $ 1,085,499 Current maturities of capital leases 174, ,086 Accounts payable 286, ,071 Accrued expenses 435, ,762 Deferred revenue 775, ,169 Total current liabilities 2,770,418 2,961,587 Deferred Naming Rights 600, ,000 Long-Term Debt, less current maturities 16,849,990 17,948,388 Capital Leases, less current maturities 123, ,954 Interest Rate Swap 412, ,268 Total liabilities 20,756,476 22,125,197 Net Assets Unrestricted: Undesignated 8,866,604 8,683,090 Board designated - endowment 8,049,978 8,153,750 16,916,582 16,836,840 Permanently restricted 929, ,147 Total net assets 17,846,142 17,727,987 Total liabilities and net assets $ 38,602,618 $ 39,853,184 See Notes to Financial Statements

6 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS Year Ended December 31, 2015 With Summarized Financial Information for Permanently 2014 Unrestricted Restricted Total Total Operating activities: Public support: Annual campaign $ 561,193 $ - $ 561,193 $ 565,936 Special events, net 304, , ,629 Contributions 306,199 50, , ,154 United Way 54,406-54,406 57,407 1,226,060 50,000 1,276,060 1,185,126 Operating revenue: Membership fees, net 8,540,881-8,540,881 8,097,997 Program service fees, net 6,891,567-6,891,567 6,229,393 Fees and grants from governmental agencies 1,577,980-1,577,980 1,729,868 Rental income 255, , ,904 Miscellaneous 105, ,398 49,691 Merchandise sales 47,713-47,713 45,409 17,419,487-17,419,487 16,489,262 Total operating activities 18,645,547 50,000 18,695,547 17,674,388 Operating expenses: Program services: Youth development 8,965,850-8,965,850 8,771,438 Healthy living 6,926,248-6,926,248 7,266,421 Social responsibility 78,823-78, ,089 15,970,921-15,970,921 16,176,948 Support services: Management and general 2,146,813-2,146,813 1,851,297 Fundraising 270, , ,501 2,416,828-2,416,828 2,137,798 Total operating expenses 18,387,749-18,387,749 18,314,746 Operating income (loss) 257,798 50, ,798 (640,358) Non-operating activities: Investment income (loss) (94,097) - (94,097) 575,021 Change in fair value of beneficial interest in trusts, net of distributions received 8,295 (11,587) (3,292) 6,143 Change in fair value of interest rate swap (95,254) - (95,254) (505,670) Net gain on sale of property and equipment 3,000-3,000 31,900 Loss on impairment of property (523,722) Total non-operating activities (178,056) (11,587) (189,643) (416,328) Change in net assets 79,742 38, ,155 (1,056,686) Net assets, beginning of year 16,836, ,147 17,727,987 18,784,673 Net assets, end of year $ 16,916,582 $ 929,560 $ 17,846,142 $ 17,727,987 See Notes to Financial Statements

7 STATEMENT OF CASH FLOWS Year Ended December 31, 2015 With Summarized Financial Information for Cash Flows From Operating Activities Change in net assets $ 118,155 $ (1,056,686) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 1,881,801 1,937,380 Amortization 19,263 19,264 Realized (gain) loss on sale of investments 180,181 (1,535,737) Unrealized investment loss 129,319 1,368,658 Change in fair value of beneficial interest in trusts 3,292 (6,143) Net gain on sale/disposal of property and equipment (3,000) (31,900) Contributions of marketable securities (562) (1,422) Change in fair value of interest rate swap 95, ,670 Loss on impairment of property - 523,722 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 88,682 (91,265) Prepaid expense (64,881) 10,520 Increase (decrease) in: Accounts payable (20,109) (187,762) Accrued expenses (11,294) 100,102 Deferred revenue 76,572 (271,829) Net cash provided by operating activities 2,492,673 1,282,572 Cash Flows From Investing Activities Purchases of property and equipment (346,742) (439,045) Proceeds from sale of property and equipment - 33,025 Proceeds from sale of investments 1,759,490 9,130,607 Purchase of investments (1,998,350) (9,327,398) Proceeds from beneficial interest in trusts 8,295 5,198 Net cash used in investing activities (577,307) (597,613) Cash Flows From Financing Activities Principal payments on long-term debt (1,085,499) (1,072,807) Principal payments on capital leases (431,085) (414,500) Cash received from capital campaign 233, ,279 Net cash used in financing activities (1,283,402) (1,183,028) Increase (decrease) in cash and cash equivalents 631,964 (498,069) Cash and cash equivalents: Beginning 398, ,114 Ending $ 1,030,009 $ 398,045 See Notes to Financial Statements

8 STATEMENT OF CASH FLOWS (Continued) Year Ended December 31, 2015 With Summarized Financial Information for Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 540,355 $ 566,596 Supplemental Schedule of Non-Cash Investing and Financing Activities Fixed asset purchases included in accounts payable $ 20,223 $ 12,783 Fixed assets financed with equipment capital lease obligation $ - $ 435,374 See Notes to Financial Statements

9 STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2015 With Summarized Financial Information for 2014 PROGRAM SERVICES SUPPORT SERVICES TOTAL Youth Healthy Social Management Fund Development Living Responsibility Total Total and General Raising Total Total Salaries $ 4,831,582 $ 3,035,505 $ 24,242 $ 7,891,329 $ 7,852,015 $ 860,182 $ 167,739 $ 1,027,921 $ 995,479 $ 8,919,250 $ 8,847,494 Employee benefits 404, ,876 3, , , ,962 26, , , , ,918 Payroll taxes 531, ,732 2, ,777 1,010,111 94,685 15, , , ,886 1,136,614 Total salaries and related expenses 5,766,760 3,668,113 30,879 9,465,752 9,565,132 1,153, ,550 1,363,379 1,354,894 10,829,131 10,920,026 Purchased services 40,635 10, ,326 42, ,120 2, , , , ,111 Supplies 581, ,540 5, , ,587 16,831 24,853 41,684 46, , ,354 Telephone 46,087 30, ,201 71,986 14, ,717 15,634 91,918 87,620 Postage and shipping 22,905 26,439 1,210 50,554 50,146 3,987 2,872 6,859 4,643 57,413 54,789 Occupancy 1,017, ,189 29,820 1,912,749 1,930, , , ,744 2,102,468 2,114,816 Equipment costs 121,139 83,021 1, , ,975 24,043-24,043 21, , ,228 Advertising and promotion 48,720 28, , , , ,931 61, , ,787 Travel 162,917 26, , ,277 19,765 7,545 27,310 28, , ,317 Training and meetings 29,316 25, ,517 37,617 23,460 20,720 44,180 71,824 98, ,441 Investment expense ,665-49,665 30,095 49,665 30,095 Membership dues 111, , , ,923 37, ,214 32, , ,936 Finance costs 251, , , ,723 10,793-10,793 13, , ,153 Miscellaneous 69,484 92,817 1, , , , ,429 Total expenses before depreciation and amortization 8,270,377 5,730,208 72,264 14,072,849 14,224,299 2,143, ,015 2,413,836 2,133,803 16,486,685 16,358,102 Depreciation 695,473 1,176,777 6,559 1,878,809 1,933,385 2,992-2,992 3,995 1,881,801 1,937,380 Amortization - 19,263-19,263 19, ,263 19,264 $ 8,965,850 $ 6,926,248 $ 78,823 $ 15,970,921 $ 16,176,948 $ 2,146,813 $ 270,015 $ 2,416,828 $ 2,137,798 $ 18,387,749 $ 18,314,746 See Notes to Financial Statements

10 Note 1. Nature of the Association and Significant Accounting Policies Nature of the Association: Young Men s Christian Association Buffalo Niagara (d/b/a YMCA Buffalo Niagara) (YMCA or the Association) is a nonprofit organization with the following mission statement: YMCA Buffalo Niagara is a charitable, community based organization committed to providing programs designed to build a healthy spirit, mind and body for all. The YMCA s goal is to advance its cause of strengthening the community through youth development, healthy living and social responsibility. The YMCA is a powerful association of men, women, and children committed to bringing about lasting personal and social change. With a focus on nurturing the potential of every child and teen, improving the nation s health and well-being, and providing opportunities to give back and support our neighbors, the YMCA enables youth, adults, families and communities to be healthy, confident, connected and secure. Program activities: A summary of the YMCA s significant program activities follows: Youth Development The YMCA is committed to nurturing the potential of every child and teen. We believe that all children deserve the opportunity to discover who they are and what they can achieve. That is why we help young people cultivate the values, skills and relationships that lead to positive behaviors, better health and educational achievement. YMCA programs, such as school age child care, summer camp and preschool education, offer a range of experiences that enrich cognitive, social, physical and emotional growth. Healthy Living The YMCA is a leading voice on health and well-being. We bring families closer together, encourage good health and foster connections through fitness, sports, fun and shared interests. As a result, people in our community are receiving the support, guidance and resources they need to achieve greater health in spirit, mind and body. This is particularly important as our nation struggles with an obesity crisis, families struggle with work/life balance and individuals search for personal fulfillment. Social Responsibility The YMCA believes in giving back and supporting our neighbors. We have been listening and responding to our community s most critical social needs. YMCA programs, such as the senior citizen center, volunteer service programs, and CPR & First Aid training, are examples of how we deliver training, resources and support that empower our neighbors to effect change, bridge gaps and overcome obstacles. We engage YMCA members, participants and volunteers in activities that strengthen our community and pave the way for future generations to thrive. As part of our mission, our programs are accessible, affordable and open to all faiths, backgrounds, abilities and income levels. We provide financial assistance to people who otherwise may not have been able to afford to participate

11 Note 1. Nature of the Association and Significant Accounting Policies (Continued) YMCA of the USA: The Association is a member association of the National Council of Young Men s Christian Associations of the United States of America. The Association is an independent autonomous organization, recognized as a member of, but separate from the National Council. The Association must meet annual certification requirements to remain a member. A summary of the Association s significant accounting policies follows: Basis of accounting: The financial statements of the Association have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Basis of presentation: The Association records resources for accounting and reporting purposes into three classes of net assets: unrestricted, temporarily restricted, and permanently restricted, based on the existence or absence of donor-imposed restrictions. Unrestricted Net assets not subject to donor-imposed restrictions. Such net assets are available for any purpose consistent with the Association s mission. Temporarily Restricted Net assets subject to specific, donor-imposed restrictions that must be met by actions of the Association and/or passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statement of activities and changes in net assets as releases from restriction. Restricted contributions received in the same year in which the restrictions are met are recorded as an increase to unrestricted support. The Association does not have any temporarily restricted net assets at December 31, 2015 or Permanently Restricted Net assets subject to donor-imposed restrictions requiring they be maintained permanently by the Association. Such net assets are normally restricted to long-term investment, with income earned and appreciation available for specific or general Association purposes. Operating activities: Operating activities reflect all transactions increasing or decreasing net assets except those items associated with long-term investment such as contributions for endowments and facilities and equipment, investment returns, changes in the fair value of the interest rate swap, and gains/losses on property and equipment from sale or impairment. Revenue recognition: Membership and program fees are recognized as revenue ratably over the period of membership or the duration of the program

12 Note 1. Nature of the Association and Significant Accounting Policies (Continued) Contributions and pledges: The Association records unconditional promises to give (pledges) as receivables and contributions within the appropriate net asset category based on the existence or absence of donor-imposed restrictions. The Association recognizes conditional promises to give when the conditions stipulated by the donor are substantially met. A conditional promise to give is considered unconditional if the possibility that the condition will not be met is remote. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. The Association reports gifts of land, buildings and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Association reports expirations of donor restrictions when the donated or acquired longlived assets are placed in service. Donated services: The YMCA recognized contributions of services received if such services: (a) create or enhance nonfinancial assets, (b) require specialized skills, (c) are provided by individuals possessing those skills, and (d) would typically need to be purchased if not contributed. The YMCA receives services from a large number of volunteers who give significant amounts of their time to the programs of the YMCA. No amounts have been reflected for these types of donated services, as there is no objective basis available to measure the value of such services. Fees and grants from governmental agencies: Fees from contracts and grant revenue from state and local municipalities are recorded when the requirements of the contracts or grants are satisfied. Revenue from such funding agencies is subject to audits and retroactive adjustments. Provisions for retroactive adjustments are recorded in the period that the adjustments are made or approved by the funding source. Cash and cash equivalents: The Association includes all cash accounts, except for cash and cash equivalents designated by the Board of Trustees for long-term investment, which are not subject to withdrawal restrictions or penalties, as cash equivalents. The Association maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Association has not experienced any losses in such accounts. The Association believes it is not exposed to any significant credit risk on cash and cash equivalents

13 Note 1. Nature of the Association and Significant Accounting Policies (Continued) Receivables: Receivables are carried at their original amount less an estimate made for doubtful receivables based on a periodic review of all outstanding amounts. Management determines the allowance for doubtful accounts by identifying troubled accounts and using historical experience applied to an aging of accounts. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding past its original due date. The YMCA does not accrue interest on unpaid accounts receivable. Investments: The Association has investments in debt and marketable equity securities. Debt securities consist of obligations of domestic and international corporations and the U.S. government and its agencies. Marketable equity securities consist primarily of common stocks, mutual funds and money market funds that are traded or listed on national exchanges. Investments are reported at fair value, with realized and unrealized holding gains and losses reported in the statement of activities and changes in net assets. Interest on debt securities is recognized in income as earned, and dividends on marketable equity securities are recognized in income when declared. Realized gains and losses are determined on the basis of the specific securities sold. Beneficial interest in trusts: In the absence of donor-imposed conditions, the Association recognizes its beneficial interest in a trust as a contribution in the period in which it receives notice that the trust agreement conveys an unconditional right to receive benefits. The Association is an income beneficiary under the trusts, the corpus of which is not controlled by the Association. Although the Association has no control over the administration of the investment of the trusts assets, the fair value of the Association s beneficial interest is recognized in the financial statements. The Association values the beneficial interest in trusts based upon the Association s beneficial interest in the underlying assets of the trust reported at fair value by the trustee. Bond issuance costs: The Association capitalized bond issuance costs associated with obtaining a civic facility revenue bond. The Association is amortizing these costs over the bond term on a straight-line basis. Amortization expense is expected to amount to approximately $19,200 per year through

14 Note 1. Nature of the Association and Significant Accounting Policies (Continued) Property and equipment: Property and equipment are stated at cost. Depreciation is computed on a straight-line basis over the following estimated useful lives: Years Buildings and improvements 5-40 Equipment 3-20 Expenditures for maintenance and repairs are charged to expense as incurred. The carrying value of the YMCA s long-lived assets is reviewed to determine if facts or circumstances suggest that the assets may be impaired or that the remaining useful, depreciable life may need to be changed. The YMCA considers internal and external factors related to each asset, including future asset utilization and business climate. If these factors and the projected undiscounted cash flows of the asset over the remaining life indicate that the asset will not be recoverable, the carrying value will be adjusted down to the estimated fair value if less than book value. Capital leases: In accordance with generally accepted accounting principles, leases which meet the capital lease criteria are recorded as assets and obligations at the lesser of the present value of future rental payments or the fair market value of the leased property and equipment at the inception of the lease. Amortization of property and equipment under capital leases has been provided using the straight-line method over the terms of the related lease and is included in depreciation expense. Interest rate swap: The interest rate swap is recorded in the statement of financial position at its fair value. Changes in its fair value are recorded in the statement of activities and changes in net assets. Deferred revenue: Membership fees are recognized as revenue over the membership period. Program service fee income is recognized as revenue in the year the program occurs. Payment for memberships and program services received in advance of the membership or program service period are deferred until the membership or program service period occurs

15 Note 1. Nature of the Association and Significant Accounting Policies (Continued) Deferred naming rights: The Association has received a $2,000,000 conditional sponsorship for naming rights of the Independent Health Family Branch YMCA. Sponsorship revenue of $1,400,000 was contingent on the construction of the facility and $600,000 was contingent on the facility being open for ten years. The YMCA recognized $1,400,000 as revenue in 2013 when the building was placed in service. The remaining $600,000 has been recorded in the accompanying statement of financial position as deferred naming rights as the sponsorship is contingent. Endowments: The Association s endowments consist of donor-restricted and board-designated endowment funds. The donor-restricted endowment is established through donor-restricted contributions. The Board of Trustees of the Association has set aside funds through unrestricted donor contributions representing a portion of the Association s unrestricted net assets in a boarddesignated endowment. The New York Prudent Management of Institutional Funds Act (NYPMIFA or the Act), New York s version of the Uniform Prudent Management of Institutional Funds Act, governs the management and investment of funds held by not-for-profit corporations and other institutions. The Association has interpreted the Act as requiring the preservation of the fair value of the original gift as of the gift date of donor-restricted endowment funds which is prudent, absent explicit donor stipulations to the contrary. As a result of this interpretation, the Association 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 Association in a manner consistent with the standards of prudence prescribed by NYPMIFA. When making a determination to appropriate or accumulate donor-restricted endowment funds, the Association considers the following: the duration and preservation of the endowment fund; the purposes of the board-designated and the donor-restricted endowment fund; general economic conditions; the possible effect of inflation and deflation; the expected total return from income and the appreciation of investments; other resources of the Association; where appropriate and circumstances would otherwise warrant, alternatives to expenditure of the endowment fund, giving due consideration to the effect that such alternatives may have on the Association; and the investment policies of the Association

16 Note 1. Nature of the Association and Significant Accounting Policies (Continued) Endowments (continued): From time-to-time the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or relevant law requires the Association to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, deficiencies of this nature would be reported in temporarily restricted net assets to the extent accumulated gains are available to absorb such loss, otherwise unrestricted net assets. The reporting of such deficiencies as a reduction of Associationcontrolled unrestricted net assets does not legally create an affirmative obligation of the Association to restore the fair value of those funds from unrestricted assets. Deficiencies of this nature amounted to $37,954 and $21,648 at December 31, 2015 and December 31, 2014, respectively. The Association has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to the Association while seeking to maintain the purchasing power of the endowment assets after considering the effects of inflation. Endowment assets include those assets of donor-restricted funds that the Association must hold in perpetuity or for a donor-specified period(s), as well as boarddesignated funds. Under this policy, as approved by the Board of Trustees, the endowment assets are to be invested in a manner that is intended to achieve returns, net of fees, in excess of a relevant balanced benchmark as defined by the target asset allocation while assuming a moderate level of investment risk. To satisfy its long-term rate-of-return objectives, the Association 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 Association targets a diversified asset allocation that places a greater emphasis on equity-based and fixed income investments to achieve its long-term return objectives within prudent risk constraints. The Association s Board of Trustees will review the fund s performance at least annually and will appropriate for distribution an amount it feels is appropriate. Annual endowment fund spending is expected to be no more than 5% of the average market value for the last 20 quarters, unless modified and approved by a two-thirds vote of the Investment and Finance Committee and a majority of the Board of Trustees. All endowment expenditures will be made in accordance with any donor restrictions or board designations. Income taxes: The YMCA has received a favorable determination letter from the Internal Revenue Service stating that it is exempt from federal income taxes under Section 501(a) of the Internal Revenue Code (IRC) of 1986, as an organization described in Section 501(c)(3), except for income taxes pertaining to unrelated business income. The Financial Accounting Standards Board guidance requires tax effects from uncertain tax positions to be recognized in the financial statements only if the position is more likely than not to be sustained if the position were to be challenged by a taxing authority. Management has determined that there are no material uncertain positions that require recognition in the financial statements. Additionally, no provision for income taxes is reflected in these financial statements. Interest and penalties would be recognized as tax expense; however, there is no interest or penalties recognized in the statement of activities and changes in net assets. The tax years after 2011 are still open to audit for both federal and state purposes

17 Note 1. Nature of the Association and Significant Accounting Policies (Continued) Advertising: The Association expenses advertising costs in the year incurred. Advertising and promotion expenses amounted to $352,595 and $177,787 for the years ended December 31, 2015 and 2014, respectively. Functional allocation of expenses: The cost of providing the varied Association programs, services and other activities has been summarized on a functional basis in the statement of activities and changes in net assets. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Summarized comparative financial information: The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Association s financial statements for the year ended December 31, 2014, from which the summarized information was derived. Subsequent events: Management has evaluated subsequent events through April 21, 2016, which is the date that the financial statements were available to be issued

18 Note 2. Receivables Receivables at December 31, 2015 and 2014 are summarized as follows: Trade accounts $ 237,960 $ 321,717 Interest and dividends 13,351 23,990 Pledges receivable Annual Campaign 207, ,006 Capital campaign pledge receivables 9, ,158 $ 469,007 $ 790,871 Receivables are presented net of an allowance for doubtful accounts of $97,237 and $151,202 at December 31, 2015 and 2014, respectively. Note 3. Fair Value Measurements Accounting principles generally accepted in the United States of America establishes a framework for measuring fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority level to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Association has the ability to access. Level 2 Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs

19 Note 3. Fair Value Measurements (Continued) The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at December 31, 2015 and 2014: Common stocks: Valued at the daily closing price as reported on the public exchange. Mutual funds: Valued at the daily closing price as reported by the fund. Mutual funds owned by the Association are open-end funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value (NAV) and to transact at that price. The Association deems mutual funds owned by them, except for the money market funds, to be actively traded. The money market funds generally transact at $1.00 NAV as reported by the fund and is based on the amortized cost of the underlying securities of the fund. The $1.00 NAV is considered to be the price to sell the money market fund and its estimated fair value. The Association s investments in money market funds have a daily redemption frequency. There are no required redemption notice periods and there are no unfunded commitments at December 31, 2015 and U.S. government agency securities, corporate bonds and certificates of deposit: Valued at approximate fair value as determined by a service provider to the bond custodian using a pricing model. Beneficial interest in trusts: Valued based upon the Association s interest percentage in the fair value of the underlying trust assets at December 31, 2015 and 2014 as reported by the Trustee. Trust assets are primarily invested in equity securities and mutual funds that are valued daily on public exchanges. Interest rate swap: Valued by the issuing financial institution using proprietary marketbased model. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Association 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 fair value measurement at the reporting date

20 Note 3. Fair Value Measurements (Continued) Financial instruments at December 31, 2015, stated at fair value, consist of the following: Level 1 Level 2 Level 3 Total Investments: Common stocks: Consumer discretionary $ 373,665 $ - $ - $ 373,665 Consumer staples 308, ,016 Energy 262, ,985 Financials 465, ,396 Healthcare 478, ,359 Industrials 331, ,778 Information technology 644, ,301 Materials 90, ,791 Telecom services 61, ,602 Utilities 85, ,857 3,102, ,102,750 Bonds: U.S. government agencies - 202, ,614 Corporate short-term - 349, ,988 Corporate medium-term - 508, ,064 International - 51,234-51,234-1,111,900-1,111,900 Mutual funds: International large-cap 1,606, ,606,394 International small-cap 533, ,636 Domestic large-cap 136, ,789 Domestic mid-cap 921, ,940 Domestic small-cap 699, ,122 Global bonds 176, ,962 Short-term bonds 180, ,305 4,255, ,255,148 Money market funds - 354, ,277 $ 7,357,898 $ 1,466,177 $ - $ 8,824,075 Beneficial interest in trusts $ - $ - $ 117,509 $ 117,509 Interest rate swap $ - $ (412,522) $ - $ (412,522)

21 Note 3. Fair Value Measurements (Continued) Financial instruments at December 31, 2014, stated at fair value, consist of the following: Level 1 Level 2 Level 3 Total Investments: Common stocks: Consumer discretionary $ 337,090 $ - $ - $ 337,090 Consumer staples 270, ,903 Energy 229, ,436 Financials 456, ,928 Healthcare 400, ,407 Industrials 306, ,938 Information technology 479, ,988 Materials 57, ,452 Telecom services 56, ,259 Utilities 101, ,587 2,696, ,696,988 Bonds: U.S. government agencies - 212, ,564 Corporate short-term - 351, ,240 Corporate medium-term - 511, ,062 International - 52,675-52,675-1,127,541-1,127,541 Mutual funds: International large-cap 1,733, ,733,524 International small-cap 268, ,881 Domestic large-cap 107, ,618 Domestic mid-cap 1,716, ,716,821 Domestic small-cap 647, ,625 Global bonds 306, ,277 Short-term bonds 44, ,362 4,825, ,825,108 Money market funds - 144, ,403 Certificates of deposit - 100, ,113 $ 7,522,096 $ 1,372,057 $ - $ 8,894,153 Beneficial interest in trusts $ - $ - $ 129,096 $ 129,096 Interest rate swap $ - $ (317,268) $ - $ (317,268)

22 Note 3. Fair Value Measurements (Continued) The following table sets forth a summary of changes in the fair value of the beneficial interest in trusts Level 3 assets for the years ended December 31, 2015 and 2014: Balance, beginning of year $ 129,096 $ 128,151 Change in fair value (3,292) 6,143 Distributions (8,295) (5,198) Balance, end of year $ 117,509 $ 129,096 Note 4. Investments and Investment Income Investments at December 31, 2015, stated at fair value, consist of the following: Cost Net Unrealized Gain (Loss) Fair Value Common stocks $ 3,072,304 $ 30,446 $ 3,102,750 Bonds 1,117,416 (5,516) 1,111,900 Mutual funds 4,662,061 (406,913) 4,255,148 Money market funds 354, ,277 $ 9,206,058 $ (381,983) $ 8,824,075 Investments at December 31, 2014, stated at fair value, consist of the following: Cost Net Unrealized Gain (Loss) Fair Value Common stocks $ 2,690,633 $ 6,355 $ 2,696,988 Bonds 1,131,817 (4,276) 1,127,541 Mutual funds 5,079,964 (254,856) 4,825,108 Money market funds 144, ,403 Certificates of deposit 100, ,113 $ 9,146,817 $ (252,664) $ 8,894,

23 Note 4. Investments and Investment Income (Continued) A summary of investment income included in the accompanying statement of activities and changes in net assets for the years ended December 31, 2015 and 2014 is as follows: Unrealized loss $ (129,319) $ (1,368,658) Realized gain (loss) on sale of securities (180,181) 1,535,737 Interest and dividend income 215, ,942 Total investment income (loss) $ (94,097) $ 575,021 The Association invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risks associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the financial position of the Association. Note 5. Property and Equipment Property and equipment at December 31, 2015 and 2014 consist of the following: Land $ 1,735,572 $ 1,735,572 Buildings and improvements 37,499,983 37,421,562 Equipment 3,209,533 3,247,328 Construction-in-progress 10,000-42,455,088 42,404,462 Less accumulated depreciation 14,851,475 13,276,230 Total property and equipment, net $ 27,603,613 $ 29,128,232 Note 6. Note Payable, Bank The YMCA has a bank revolving demand note with a maximum borrowing capacity of $500,000. Borrowed amounts bear interest at the prime rate (3.5% at December 31, 2015). There were no outstanding borrowings on the note at December 31, 2015 or

24 Note 7. Long-Term Debt Long-term debt at December 31, 2015 and 2014 consists of the following: Civic facility revenue bond with a bank due in monthly principal and interest payments of $88,000 through July Interest is variable and is equal to the bank purchase variable rate of 30 day LIBOR plus 2.15% times 67% (1.6% at December 31, 2015). $ 16,123,388 $ 16,908,887 Business loan agreement with a bank due in monthly principal installments of $25,000 through February Interest is variable and is equal to the bank purchase variable rate of 30 day LIBOR plus.75% (0.99% at December 31, 2015). 1,825,000 2,125,000 17,948,388 19,033,887 Less current maturities 1,098,398 1,085,499 $ 16,849,990 $ 17,948,388 The above revenue bonds are subject to certain covenants which, among other things, require the Association to maintain the following: minimum amount of tangible net assets, debt service coverage ratio, and minimum unrestricted endowment fund assets. At December 31, 2015 the YMCA was in compliance with these requirements. The above debt is secured by a mortgage on property in Amherst and West Seneca, New York, capital campaign pledges and property and equipment at two branches. Aggregate maturities required on long-term debt at December 31, 2015 are as follows: Years ending December 31, 2016 $ 1,098, ,111, ,124, ,138, ,152,151 Thereafter 12,323,110 Total $ 17,948,

25 Note 7. Long-Term Debt (Continued) The YMCA entered into an interest rate swap agreement with a bank for an original notional amount of $18,000,000 to eliminate the risk of changes in interest rates on the civic facility revenue bond. The notional amounts at December 31, 2015 and 2014 were $16,123,388 and $16,908,887, respectively. The agreement effectively changes the YMCA s interest rate exposure on the notional amount to a fixed rate of 3.00% through The YMCA is exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreement; however, the YMCA does not anticipate such non-performance. The effect of the interest rate swap agreement resulted in a liability of $412,522 and $317,268 as of December 31, 2015 and 2014, respectively. As a result of the swap agreement, the Association incurred a loss of $95,254, and $505,670 for the years ended December 31, 2015 and 2014, respectively. Interest expense amounted to $538,325 and $564,305 for the years ended December 31, 2015 and 2014, respectively. Interest expense is included in finance costs in the accompanying statement of functional expenses. Note 8. Capital Leases - Lessee The YMCA has entered into various capital lease agreements for equipment. Capital lease obligations at December 31, 2015 and 2014 consist of the following: Equipment lease payable to a bank, due in fixed monthly installments of $3,601, including interest at 3.37% through August $ 28,446 $ 69,936 Equipment lease payable to a bank, due in fixed monthly installments of $5,520, including interest at 3.42% through July , ,567 Equipment lease payable to a bank, due in fixed monthly installments of $7,257, including interest at 3.74% through December , ,750 Equipment lease paid in full during , , ,040 Less current maturities 174, ,086 $ 123,546 $ 297,

26 Note 8. Capital Leases Lessee (Continued) Future minimum payments required on capital lease obligations at December 31, 2015 are as follows: Years ending December 31, 2016 $ 182, , ,852 Less amount representing interest (9,897) Present value of net minimum lease payments $ 297,955 Equipment held under capital leases at December 31, 2015 and 2014 consists of the following: Equipment cost $ 588,606 $ 1,318,082 Accumulated depreciation (297,432) (550,099) Net equipment held under capital leases $ 291,174 $ 767,983 Note 9. Operating Leases Lessee The YMCA leases a building and various equipment under non-cancelable operating lease agreements requiring various minimum rental payments through October Future minimum payments, by years and in the aggregate, under non-cancelable operating leases are as follows: Years ending December 31, 2016 $ 290, , , , ,334 Total $ 954,192 Rent expense, including rent under non-cancelable operating leases and rent under month-tomonth rental agreements, amounted to $504,332 and $484,322 for the years ended December 31, 2015 and 2014, respectively, and is included in occupancy and equipment costs in the statement of functional expenses

27 Note 10. Operating Lease Lessor The Association entered into non-cancelable operating lease agreements for a portion of one of its branches through Future minimum lease receipts, by years and in the aggregate, under non-cancellable operating leases are as follows: Years ending December 31, 2016 $ 74, , , , ,829 Thereafter 36,648 Total $ 250,097 The Association rents certain facilities on a daily or longer term basis that are generally cancelable. Income for all rental activities was $255,948 and $336,904 for the years ended December 31, 2015 and 2014, respectively. Note 11. Permanently Restricted Net Assets Permanently restricted net assets as of December 31, 2015 and 2014 are restricted as follows: Investment in perpetuity, the income from which is expendable to support any of the City of Buffalo YMCA branches. $ 500,000 $ 500,000 Investment in perpetuity, the income from which is expendable to support Camp Weona and general YMCA operations. 150, ,000 Investment in perpetuity, the income from which is expendable to support Camp Weona. 162, ,051 Beneficial interest in trusts, the income from which is expendable to support general YMCA operations and the Niagara Falls Branch. 117, ,096 $ 929,560 $ 891,147 Permanently restricted net assets of $812,051 and $762,051 at December 31, 2015 and 2014, respectively, represent the donor-restricted endowment (Note 12)

28 Note 12. Endowment Funds The Association s endowment consists of a variety of individual funds established for various purposes and includes both donor-restricted endowment funds and funds that have been designated by the Board of Trustees to function as an endowment. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Changes in endowment net assets and net asset composition as of and for the years ended December 31, 2015 and 2014 are as follows: Unrestricted Permanently Restricted Total Endowment net assets, December 31, 2013 $ 7,766,810 $ 762,051 $ 8,528,861 Investment return: Unrealized/realized gain on investments 167, ,079 Interest and dividends 407, ,942 Investment expense (30,095) - (30,095) 544, ,926 Donated securities 1,422-1,422 Cash contributions 3,000-3,000 Appropriation of endowment assets for expenditure (184,056) - (184,056) Endowment net assets, December 31, ,132, ,051 8,894,153 Investment return: Unrealized/realized loss on investments (309,500) - (309,500) Interest and dividends 215, ,403 Investment expense (49,665) - (49,665) (143,762) - (143,762) Donated securities Cash contributions 23,122 50,000 73,122 Endowment net assets, December 31, 2015 $ 8,012,024 $ 812,051 $ 8,824,

29 Note 12. Endowment Funds (Continued) Endowment net asset composition by type of fund as of December 31, 2015 and 2014 are as follows: 2015 Unrestricted Permanently Restricted Total Donor restricted endowment funds $ (37,954) $ 812,051 $ 774,097 Board designated endowment funds 8,049,978-8,049,978 $ 8,012,024 $ 812,051 $ 8,824, Unrestricted Permanently Restricted Total Donor restricted endowment funds $ (21,648) $ 762,051 $ 740,403 Board designated endowment funds 8,153,750-8,153,750 $ 8,132,102 $ 762,051 $ 8,894,153 Note 13. Special Events As part of its fundraising efforts, the YMCA holds periodic special events. Revenue for special events is recognized in the period in which the event is held and is presented net of direct expenses in the statement of activities and changes in net assets. Special event revenue and direct expenses for the years ended December 31, 2015 and 2014 are as follows: Revenue $ 636,824 $ 606,852 Direct expenses (332,562) (289,223) Special event revenue, net $ 304,262 $ 317,

30 Note 14. Financial Assistance Provided The YMCA provides financial assistance, through contributions and other fundraising, to help defray the costs of membership and program service and other fees for individuals that demonstrate financial needs. Membership and program service fee revenues are recorded net of financial assistance provided in the accompanying statement of activities and changes in net assets. Gross revenue for membership and program service fees along with financial assistance provided for the years ended December 31, 2015 and 2014 amounted to: Gross membership fees $ 8,820,939 $ 8,469,455 Less financial assistance provided 280, ,458 Membership fees, net $ 8,540,881 $ 8,097,997 Gross program service fees $ 7,604,505 $ 7,043,297 Less financial assistance provided 712, ,904 Program service fees, net $ 6,891,567 $ 6,229,393 Note 15. Retirement Plans The YMCA participates in the YMCA Retirement Fund Retirement Plan (the Retirement Plan) which is a defined contribution, money purchase, church plan that is intended to satisfy the qualification requirements of Section 401(a) of the IRC of 1986, as amended, and The YMCA Retirement Fund Tax-Deferred Savings Plan (the Tax-Deferred Savings Plan) which is a retirement income account plan as defined in Section 403(b)(9) of the IRC. Both plans are sponsored by The Young Men s Christian Association Retirement Fund (the Fund). The Fund is a not-for-profit, tax-exempt pension fund incorporated in the State of New York (1922). The Fund is organized and operated for the purpose of providing retirement and other benefits for employees of YMCAs throughout the United States. The plans are operated as church pension plans. Participation is available to all duly organized and reorganized YMCAs and their eligible employees. As a defined contribution plan, the Retirement Plan and Tax- Deferred Savings Plan have no unfunded benefit obligations. In accordance with an agreement between the Fund and the YMCA, contributions for the Retirement Plan are a percentage of the participating employees salaries. These amounts are paid by the YMCA. Total contributions charged to retirement costs aggregated $472,684 and $447,845 for the years ended December 31, 2015 and 2014, respectively, of which $-0- was unpaid at December 31, 2015 and Contributions to the Tax-Deferred Savings Plan are withheld from employees salaries and remitted to the YMCA Retirement Fund. There is no matching employer contribution to this plan