YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY AND YMCA FOUNDATION OF MID-AMERICA COMBINED FINANCIAL STATEMENTS

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1 YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY COMBINED FINANCIAL STATEMENTS For the years ended December 31, 2014 and 2013

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3 COMBINED STATEMENTS OF FINANCIAL POSITION December 31, 2014 and 2013 A S S E T S CASH CASH EQUIVALENTS $ 4,647,858 $ 2,298,693 ACCOUNTS RECEIVABLE, net 556, ,535 UNCONDITIONAL PROMISES TO GIVE, net of allowance for uncollectible promises to give and present value discount 7,528,043 3,646,436 INVESTMENTS 5,406,084 5,949,124 PROPERTY EQUIPMENT, net 26,416,464 28,024,530 OTHER ASSETS 647, ,151 TOTAL ASSETS $ 45,201,773 $ 40,959,469 L I A B I L I T I E S ACCOUNTS PAYABLE ACCRUED EXPENSES $ 1,658,667 $ 1,904,283 ACCRUED SALARIES RELATED EXPENSES 681, ,460 DEFERRED FEES 341, ,241 DERIVATIVE LIABILITY 1,006,384 1,320,076 DEBT OBLIGATIONS 18,868,056 19,899,562 TOTAL LIABILITIES 22,556,090 24,217,622 N E T A S S E T S UNRESTRICTED NET ASSETS Undesignated 5,438,430 5,058,892 Funded reserves 908,024 1,497,320 Board designated 4,894,122 5,739,739 TOTAL UNRESTRICTED NET ASSETS 11,240,576 12,295,951 TEMPORARILY RESTRICTED NET ASSETS 11,405,107 4,445,896 TOTAL NET ASSETS 22,645,683 16,741,847 TOTAL LIABILITIES NET ASSETS $ 45,201,773 $ 40,959,469 See Notes to Combined Financial Statements - 2 -

4 COMBINED STATEMENTS OF ACTIVITIES CHANGES IN NET ASSETS Years Ended December 31, 2014 and UNRESTRICTED NET ASSETS SUPPORT Direct contributions $ 2,068,454 $ 1,779,662 Capital campaign contributions 269, ,628 United Way 1,047,428 1,071,422 Total support 3,385,717 3,426,712 OTHER OPERATING REVENUE Membership dues 13,579,072 13,653,511 Program and use of facilities fees 16,582,713 16,103,988 Contract and grant revenues 8,232,141 7,634,491 Investment income from operating investments 28,492 71,773 Net assets released from restrictions 299, ,440 Total other operating revenue 38,722,227 37,970,203 TOTAL SUPPORT OTHER OPERATING REVENUE 42,107,944 41,396,915 OPERATING EXPENSES BEFORE DEPRECIATION AMORTIZATION Program services 35,199,410 34,804,872 Supporting services Fundraising 797, ,795 General and administrative 4,520,394 4,606,566 Total supporting services 5,318,216 5,433,361 TOTAL OPERATING EXPENSES BEFORE DEPRECIATION AMORTIZATION 40,517,626 40,238,233 CHANGES IN UNRESTRICTED NET ASSETS FROM OPERATIONS BEFORE DEPRECIATION AMORTIZATION 1,590,318 1,158,682 Depreciation and amortization 2,033,006 2,265,415 CHANGES IN UNRESTRICTED NET ASSETS BEFORE OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS (442,688) (1,106,733) OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS Investment income 346, ,745 Change in value of derivative 313, ,599 Bad debt expense - capital campaign (130,313) (72,642) Loss from property impairment (1,019,276) (2,202,948) Loss from discontinued operations (122,902) (568,201) TOTAL OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS (612,687) (1,231,447) CHANGES IN UNRESTRICTED NET ASSETS (1,055,375) (2,338,180) TEMPORARILY RESTRICTED CONTRIBUTIONS Temporarily restricted contributions 7,259,020 2,842,920 Net assets released from restrictions (299,809) (506,440) CHANGES IN TEMPORARILY RESTRICTED NET ASSETS 6,959,211 2,336,480 CHANGES IN NET ASSETS 5,903,836 (1,700) NET ASSETS, BEGINNING OF YEAR 16,741,847 16,743,547 NET ASSETS, END OF YEAR $ 22,645,683 $ 16,741,847 See Notes to Combined Financial Statements - 3 -

5 COMBINED STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2014 Program Services Supporting Services General Healthy Youth Head and Living Development Start Total Administrative Fundraising Total Salaries $ 5,693,722 $ 8,794,288 $ 3,531,071 $ 18,019,081 $ 2,184,450 $ 376,155 $ 20,579,686 Employee benefits 479, , ,658 1,918, ,389 54,299 2,351,380 Payroll taxes and other benefits 354,795 1,004, ,800 1,735, ,220 31,439 1,981,337 Professional fees and expenses 475, , ,968 1,263, , ,974 2,419,908 Supplies 774,371 1,189, ,912 2,582,232 97,691 39,173 2,719,096 Telephone 105,861 92,058 35, ,539 23, ,702 Postage and shipping 80,250 5,557 7,113 92,920 8,431 2, ,660 Rental of space 41,195 1,644, ,746 2,088, ,167 14,237 2,282,665 Utilities 2,007,717 9, ,927 2,208, ,208,369 Building maintenance 1,132,741 58, ,462 1,439,343 4,679 1,904 1,445,926 Interest 604, , ,456 Insurance and property taxes 189, ,582 21, ,664 54, ,322 Equipment maintenance 245,402 74,776 42, ,796 78, ,057 Promotions and publications 441,025 73,741 4, , ,004 45, ,518 Local transportation 84, , , ,084 54,623 3, ,614 Conferences and meetings 40,094 57,497 94, , ,881 6, ,995 Dues and support payments 207, ,527 1, ,395 25,453 1, ,732 Partnership reserve expenses 292, , ,203 Total operating expenses before depreciation and amortization 13,250,856 14,869,990 7,078,564 35,199,410 4,520, ,822 40,517,626 Depreciation and amortization 1,530, , ,408 1,935,844 97,162-2,033,006 Total expenses $ 14,781,401 $ 15,138,881 $ 7,214,972 $ 37,135,254 $ 4,617,556 $ 797,822 $ 42,550,632 Percentage of operating expenses before depreciation and amortization 33% 37% % 17% 87% 11% 2% 100% Percentage of total expenses 35% 35% 17% 87% 11% 2% 100% See Notes to Combined Financial Statements - 4 -

6 COMBINED STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2013 Program Services Supporting Services General Healthy Youth Head and Living Development Start Total Administrative Fundraising Total Salaries $ 5,309,060 $ 8,302,579 $ 3,486,535 $ 17,098,174 $ 2,053,066 $ 334,211 $ 19,485,451 Employee benefits 458, , ,748 1,722, ,460 55,991 2,133,129 Payroll taxes and other benefits 543, , ,182 1,827, ,661 30,482 2,048,816 Professional fees and expenses 1,180, , ,621 1,951,029 1,137, ,018 3,270,961 Supplies 739,587 1,114, ,659 2,351, ,370 54,619 2,600,709 Telephone 102,156 73,851 33, ,327 25, ,390 Postage and shipping 124,854 20,859 7, ,518 7,690 4, ,263 Rental of space 35,537 1,643, ,582 2,063, ,661 84,134 2,323,126 Utilities 1,580,812 15, ,673 1,774, ,774,673 Building maintenance 1,167,172 78, ,615 1,472,685 11, ,484,584 Interest 663, , ,147 Insurance and property taxes 275, ,414 20, ,814 17, ,781 Equipment maintenance 318,439 53,771 14, , , ,806 Promotions and publications 643,341 76,534 1, , ,426 54, ,603 Local transportation 66, , , ,212 57,908 8, ,348 Conferences and meetings 45,883 68,652 25, , ,002 10, ,474 Dues and support payments 190, , ,384 32,998 7, ,032 Partnership reserve expenses 699, , ,940 Total operating expenses before depreciation and amortization 14,146,480 13,908,839 6,749,553 34,804,872 4,606, ,795 40,238,233 Depreciation and amortization 1,706, , ,679 2,170,453 94,962-2,265,415 Total expenses $ 15,853,371 $ 14,181,722 $ 6,940,232 $ 36,975,325 $ 4,701,528 $ 826,795 $ 42,503,648 Percentage of operating expenses before depreciation and amortization 35% 35% 17% 87% 11% 2% 100% Percentage of total expenses 37% 34% 16% 87% 11% 2% 100% See Notes to Combined Financial Statements - 5 -

7 COMBINED STATEMENTS OF CASH FLOWS Years Ended December 31, 2014 and CASH FLOWS FROM OPERATING ACTIVITIES Changes in net assets $ 5,903,836 $ (1,700) Adjustments to reconcile changes in net assets to net cash flows from operating activities: Depreciation and amortization 2,033,006 2,265,415 Loss from property impairment 1,019,276 2,202,948 Gain on disposal of property and equipment (24,326) (9,862) Change in allowance for uncollectible promises to give and present value discount 223, ,335 Unconditional promises to give for capital campaigns (7,509,994) (3,194,560) Write off of unconditional promises to give 7,500 2,600 Realized and unrealized gain on investments (177,264) (866,774) Change in derivative liability (313,692) (651,599) Changes in operating assets and liabilities: Accounts receivable (207,495) (135,769) Other assets (20,724) 55,992 Accounts payable and accrued expenses (245,616) (28,389) Accrued salaries and related expenses 106,824 (47,247) Deferred fees (177,542) (16,026) NET CASH FLOWS FROM OPERATING ACTIVITIES 617,588 (260,636) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and insurance claim 35,050 12,800 Proceeds from sale and maturities of investments 897,788 2,946,701 Purchase of investments (177,484) (165,278) Purchase of property and equipment (1,389,359) (1,131,433) NET CASH FLOWS FROM INVESTING ACTIVITIES (634,005) 1,662,790 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds received from capital campaigns 3,397, ,897 Repayment of debt obligations (1,031,506) (939,776) NET CASH FLOWS FROM FINANCING ACTIVITIES 2,365,582 (103,879) NET CHANGES IN CASH CASH EQUIVALENTS 2,349,165 1,298,275 CASH CASH EQUIVALENTS, BEGINNING OF YEAR 2,298,693 1,000,418 CASH CASH EQUIVALENTS, END OF YEAR $ 4,647,858 $ 2,298,

8 NOTES TO COMBINED FINANCIAL STATEMENTS (1) Summary of significant accounting policies Nature of operations - Young Men's Christian Association of Greater Kansas City (the Association ) is a nonprofit charitable corporation that has been serving the people of the Kansas City area for more than 150 years. With a focus on youth development, healthy living and social responsibility, the YMCA of Greater Kansas City is committed to strengthening communities. The Association engages men, women and children - regardless of age, income or background - to nurture the potential of children and teens, improve the nation s health and wellbeing, and provide opportunities to give back and support neighbors. With a history of serving the Kansas City area since 1860, the Association has the long-standing relationships and physical presence not just to promise, but to deliver, lasting personal and social change. YMCA Foundation of Mid-America (the Foundation ) is a nonprofit charitable corporation. The Foundation was organized to support the mission and operations of the Association. Both the income and principal of these board designated funds, which are included in unrestricted net assets in the combined statement of financial position, may be used by the Association with the Foundation's Board of Directors approval. Principals of combination - The combined financial statements include the accounts of the Young Men's Christian Association of Greater Kansas City and the YMCA Foundation of Mid- America (the Organizations ). All inter-organizational transactions have been eliminated. 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. Cash and cash equivalents - For purposes of the statements of cash flows, cash and cash equivalents are considered to be cash on hand, bank checking accounts and investments with original maturities of three months or less. At times, cash balances held at financial institutions may be in excess of FDIC limits. The Organizations have not experienced any losses in such accounts, and management believes the risk of loss is negligible. Of the cash and cash equivalents balance, $370,000 has been set aside as of December 31, 2013 to meet future debt payments. All of the reserved funds were used during the year ended December 31, Accounts receivable - Accounts receivable consist of member dues and program and use of facility fees and are stated at unpaid principal balances, less any allowance for doubtful accounts. During the year ended December 31, 2013, any balances over 60 days old were written off. During the year ended December 31, 2014, each account was analyzed individually to evaluate collectability. Unconditional promises to give - Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows less any allowance for doubtful accounts. The discounts on those amounts are computed using interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Management periodically evaluates the collectability of these promises to give and adjusts the adequacy of the allowance based on the Organizations past bad debt experience, known and other risks inherent to the portfolio, specific impaired receivables, adverse situations that may affect the ability to pay, and current economic conditions. The allowance for uncollectible promises to give was $242,552 and $119,739, respectively, at December 31, 2014 and

9 NOTES TO COMBINED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Investments - Investments are reported at their fair values in the combined statements of financial position. Unrealized gains and losses are included in the combined statements of activities. Investment income and gains are reported as increases in unrestricted net assets if the restrictions are met in the reporting period in which the income and gains are recognized. Property and equipment - Land, buildings and improvements, and equipment are stated on the basis of cost or fair value on the date of donation. Depreciation is computed by the straight-line method over the following useful lives: Estimated Assets Buildings and leasehold improvements Equipment Useful Lives 2-30 years 2-20 years Intangible assets - Bond costs are recorded at cost and are being amortized over the life of the bonds, which is 16 years. Amortization expense totaling $65,581 was recognized during both of the years ending December 31, 2014 and Amortization expense is anticipated to approximate $65,500 during each of the next five years. Intangible assets are included in other assets on the combined statements of financial position. Deferred fees - Income from membership dues and other program services are deferred and recognized over the periods to which the dues and fees relate. Contribution and grant revenue - All contributions, pledges, and grants are considered to be available for unrestricted use unless specifically restricted by the donor. Revenue that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. Temporarily restricted net assets consisted of contributions, pledges, and grants to the Association for specific projects and specific locations. Membership and program fee revenue - The Association charges membership fees and fees for sports and educational programs. This revenue is used for the Association s primary activity and general operations. Donated assets and services - Donated assets are reflected as contributions at their estimated fair value at the date of receipt. Donated assets and services amounting to $39,131 and $117,513 are reflected in the combined financial statements for the years ended December 31, 2014 and 2013, respectively. The Association pays for most services requiring specific expertise. A substantial number of volunteers have donated hundreds of hours during the years ended December 31, 2014 and 2013, which do not meet the requirements of the Not-For-Profit Topic of the FASB ASC related to revenue recognition of contributions received and, accordingly, are not recorded in these combined financial statements. Advertising - Advertising costs, which are principally included in printing expense, are expensed as incurred. Advertising expense was $720,518 and $896,603 for the years ended December 31, 2014 and 2013, respectively. Taxes - The Association and Foundation have been granted exemptions from income taxes by the Internal Revenue Service under the provisions of Section 501(c)(3) of the Internal Revenue Code and are not considered private foundations. The Association follows the Income Taxes Topic of the FASB ASC related to uncertain tax positions. This Topic prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Association did not have any material uncertain tax positions at December 31, 2014 or

10 NOTES TO COMBINED FINANCIAL STATEMENTS (1) Summary of significant accounting policies (continued) Functional expenses - The Association and Foundation allocate expenses on a functional basis among various programs and support services. Expenses that can be identified with a specific program and support service are allocated directly according to their natural expenditure classification. Other expenses that are common to several functions are allocated by management's estimate of resources devoted to the program or support service. Fair value of financial instruments - The Association applies the provision of the Fair Value Measurement and Disclosures Topic of the FASB ASC for its financial and non-financial assets and liabilities which the Association has recognized or disclosed at fair value on a recurring basis. This Topic, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America, and expands disclosures about fair value measurements for financial assets and liabilities. This Topic also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are 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 and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, other assets, accounts payable, and accrued liabilities approximate fair value due to their short maturities. See Note 4 for the fair value disclosures on investments. See Note 6 for the fair value disclosures on debt obligations. (2) Unconditional promises to give Unconditional promises to give consist of promises to give from donors concentrated within the Kansas City area related to capital campaigns. December 31, Unconditional promises to give $ 8,008,052 $ 3,902,646 Less: Unamortized discount (237,457) (136,471) Subtotal 7,770,595 3,766,175 Less: Allowance for uncollectibles (242,552) (119,739) Net unconditional promises to give $ 7,528,043 $ 3,646,

11 NOTES TO COMBINED FINANCIAL STATEMENTS (2) Unconditional promises to give (continued) Amounts due in: Years ending December 31, 2015 $ 3,777, ,496, ,410, , ,000 Thereafter 300,000 Total unconditional promises to give $ 8,008,052 Discount rates applied to pledges during the years ended December 31, 2014 and 2013 ranged from 1.22% to 5.00%. (3) Conditional promises to give Conditional promises to give at December 31, 2014 and 2013 totaled $790,000 and $4,140,000, respectively, which consisted of pledges that are conditional upon the Association achieving certain conditions related to the construction or renovation of certain building locations. Conditional promises to give represent promises to give which are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. As a result, conditional pledges are not recorded in the combined financial statements. (4) Investments The following is a summary of investments: December 31, Cost Fair Value Cost Fair Value Money market investments $ 144,836 $ 144,836 $ 115,698 $ 115,698 Equities: Direct ownership 1,411,563 1,809,807 1,481,052 1,998,189 Held in mutual funds 1,143,260 1,461,159 1,325,745 1,767,468 Fixed income mutual funds 1,999,263 1,990,282 2,093,537 2,067,769 Total $ 4,698,922 $ 5,406,084 $ 5,016,032 $ 5,949,124 The Association and Foundation have instituted guidelines for board designated investment income available for current use. Investment income in excess is classified as a non-operating activity in the accompanying combined statement of unrestricted activities

12 (4) Investments (continued) NOTES TO COMBINED FINANCIAL STATEMENTS Investment income consists of the following: Years Ended December 31, Realized and unrealized gains $ 177,264 $ 866,774 Interest and dividends 197, ,744 Total $ 374,604 $ 1,032,518 The management of the Association and Foundation endeavor to utilize the best available information in measuring fair value. The following table summarizes the valuation of financial instruments by the fair value pricing levels summarized in Note 1 as of December 31, 2014: Quoted Significant prices in other Significant active observable unobservable Total fair markets inputs inputs value Level 1 Level 2 Level 3 Money market investments $ 144,836 $ 144,836 $ - $ - Equities 3,270,966 3,270, Fixed income mutual funds 1,990,282 1,990, Total $ 5,406,084 $ 5,406,084 $ - $ - The following table summarizes the valuation of financial instruments by the fair value pricing levels summarized in Note 1 as of December 31, 2013: Quoted Significant prices in other Significant active observable unobservable Total fair markets inputs inputs value Level 1 Level 2 Level 3 Money market investments $ 115,698 $ 115,698 $ - $ - Equities 3,765,657 3,765, Fixed income mutual funds 2,067,769 2,067, Total $ 5,949,124 $ 5,949,124 $ - $

13 (5) Property and equipment NOTES TO COMBINED FINANCIAL STATEMENTS December 31, Cost Land $ 1,640,487 $ 1,640,487 Buildings and improvements 51,721,660 52,001,166 Equipment 6,002,521 6,187,802 Construction in progress 305, ,712 Total cost 59,669,811 59,935,167 Accumulated depreciation (33,253,347) (31,910,637) Net property and equipment $ 26,416,464 $ 28,024,530 The aggregate depreciation charged to operations was $1,967,425 and $2,199,834 for the years ended December 31, 2014 and 2013, respectively. (6) Debt obligations December 31, Note payable, collateralized by certain property and all equipment, furniture, and fixtures, with interest at BBA LIBOR plus 3.50%. Interest accrues and is paid monthly. Principal payments of $43,950 are made semi-annually with unpaid principal and any accrued interest due November 1, Lease termination obligation due to the closing of the Lenexa Express Y location. Payable in monthly payments of $15,398 with final payment of $237,770, which included a one-time asset buildout payment, due and paid in May $ 2,108,056 $ 2,195, ,606 Note payable, collateralized by investments, with interest at BBA LIBOR plus 2.40%. Interest accrues and is paid monthly. Principal and any accrued interest is due November 1, ,500,000 1,500,

14 (6) Debt obligations (continued) NOTES TO COMBINED FINANCIAL STATEMENTS The Industrial Development Authority of the County of Jackson, State of Missouri issued variable rate demand recreational facilities bonds (Series 2002A) and The City of Olathe, Kansas issued variable rate demand recreational facility bonds (Series 2002B) (collectively, the "Authorities") for the purpose of making a loan to the Association to provide funds to finance and refinance costs of certain recreational facilities of the Association. The bonds are secured by loan and security agreements between the Association and Foundation and the Authorities and from funds drawn on irrevocable direct pay letters of credit issued by a local bank. In addition, the loans are secured by all accounts receivable, including pledges, and real property. The bonds are payable in increasing annual increments of principal through November 2018, as disclosed in the schedule of maturities below, and monthly payments of interest. The bonds are subject to the Association and Foundation meeting, on a combined basis, certain covenants as defined in the agreement, as well as a requirement that certain nonfinancial covenants are met, among which include that the Association provides the bank, for the bank's written approval, plans for its downtown project and new site location (the Plans) no later than June 30, 2015 and obtain written approval of the plans by June 30, Also, the Association shall obtain written approval of a lease or deed of conveyance within a time period approved by the bank, which is anticipated to occur after the dates in the preceding sentence. The bonds have a base rate of prime plus 2.00% (5.25% as of December 31, 2014 and 2013) and a term loan rate of base plus 2.00% (7.25%). Fair value of the bonds, calculated using the present value of future payments, approximates book value. December 31, ,260,000 15,910,000 Total debt obligations $ 18,868,056 $ 19,899,562 The Association entered into an interest rate swap agreement (the agreement ) with Bank of America to hedge cash flows against changes in interest rates on its variable rate long-term debt. The notional amount associated with the agreement totaled $15,260,000 and $15,910,000 for 2014 and 2013, respectively. The Association pays a fixed interest rate of 3.42% on the agreement, which matures in The fair value of the interest rate swap has been valued on a mark to market basis and has been recorded as a derivative liability in the combined statements of financial position. The change in the fair value of the interest rate swap has been reflected as a non-operating activity in the combined statements of activities

15 (6) Debt obligations (continued) NOTES TO COMBINED FINANCIAL STATEMENTS The following table sets forth, by level within the fair value hierarchy, the Association s financial liabilities that were measured at fair value on a recurring basis as of December 31, 2014 and Level 1 Level 2 Level 3 December 31, 2014 Interest rate swap $ - $ (1,006,384) $ - December 31, 2013 Interest rate swap $ - $ (1,320,076) $ - Maturities for debt obligations are as follows: Years Ending December 31, 2015 $ 737, , , ,654,356 (7) Temporarily restricted net assets Total debt obligations $ 18,868,056 Temporarily restricted net assets are restricted for the following purposes: December 31, Healthy Living Programs $ 240,560 $ 169,258 Youth Development Programs 317, ,409 Capital Campaigns 10,847,322 4,104,229 Total temporarily restricted net assets $ 11,405,107 $ 4,445,896 Some of the capital campaign amounts reflected above also have time restrictions in addition to purpose restrictions. The amounts with time restrictions are reflected as unconditional promises to give on the statement of financial position. (8) Operating leases The Association leases office facilities, program space, fitness equipment, and office equipment under agreements accounted for as operating leases. Total rent expense under these leases was $2,437,669 and $2,483,784 for the years ended December 31, 2014 and 2013, respectively. Future minimum payments under the operating lease agreements with fixed monthly fees consisted of the following at December 31, 2014: Years Ending December 31, 2015 $ 1,330, , , ,367 $ 2,115,

16 (9) Retirement plan YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY NOTES TO COMBINED FINANCIAL STATEMENTS The Association participates in the YMCA Retirement Fund 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 Internal Revenue Code of 1986, as amended, and the YMCA Retirement Fund Tax-Deferred Savings Plan which is a retirement income account plan as defined in section 403(b)(9) of the code. Both plans are sponsored by The Young Men s Christian Association Retirement Fund (Fund). The Fund is a not-for-profit, tax-exempt pension fund incorporated in the State of New York (1922) 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 the agreement with the YMCA Retirement Fund, the Association contributions are 8% of the participating employees eligible salaries, and are remitted to the YMCA Retirement Fund monthly. Total retirement contributions charged to employee benefit expenses were $854,936 and $812,788 for the years ended December 31, 2014 and 2013, respectively. (10) Cash flow disclosures Cash and cash equivalents consist of cash on hand and demand deposits with financial institutions. At times, cash balances held at financial institutions are in excess of FDIC insurance limits. Management monitors the soundness of these financial institutions and believes the risk of loss to the Association and Foundation is negligible. The following is a summary of supplemental cash flow information: December 31, Cash paid for interest, inclusive of amounts associated with interest rate swap agreement $ 604,456 $ 663,147 (11) Discontinued operations Due to several years of net operating losses at each facility, during the year ended December 31, 2013, management decided to discontinue the operations of the Raytown (Richard C. Green) and Independence Y facilities as well as opt out of its management fee contract with the Miami County Y facility. The Raytown and Independence facilities were sold in April In addition to these facility closures, during the year ended December 31, 2012, the Y discontinued the operations of the Lenexa Express Y facility. Total liabilities on the statement of financial position related to discontinued operations of the Lenexa Express Y facility consist of lease obligations of $293,606 as of December 31, 2013, and are included in debt obligations on the statements of financial position. These lease obligations were settled during the year ended December 31, Total losses related to all discontinued operations totaling $122,902 and $568,201 for the years ended December 31, 2014 and 2013, respectively, are included on the statements of activities and changes in net assets

17 (11) Discontinued operations (continued) NOTES TO COMBINED FINANCIAL STATEMENTS In addition, the Association reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Due to the discontinued operations discussed above, impairment was evaluated based on the costs associated with replacing the existing assets. An impairment of $1,019,276 and $2,202,948 has been reflected on the combined statements of activities and changes in net assets for the years ended December 31, 2014 and 2013, respectively, in order to reduce the carrying value of the impaired asset to its estimated fair value. (12) Subsequent events Management has performed an evaluation of events that have occurred subsequent to December 31, 2014, as of April 30, 2015, which is the date the financial statements were available to be issued. No significant matters were identified for disclosure during this evaluation other than as discussed within Note

18 SUPPLEMENTARY INFORMATION

19 SUPPLEMENTARY INFORMATION - COMBINING STATEMENT OF FINANCIAL POSITION December 31, 2014 A S S E T S Association Foundation Eliminations Total CASH CASH EQUIVALENTS $ 4,647,858 $ - $ - $ 4,647,858 ACCOUNTS RECEIVABLE, net 556,030 1,500,225 (1,500,225) 556,030 UNCONDITIONAL PROMISES TO GIVE, net of allowance for uncollectible promises to give and present value discount 7,528, ,528,043 INVESTMENTS 613,769 4,792,315-5,406,084 PROPERTY EQUIPMENT, net 26,416, ,416,464 OTHER ASSETS 545, , ,294 TOTAL ASSETS $ 40,307,876 $ 6,394,122 $ (1,500,225) $ 45,201,773 L I A B I L I T I E S ACCOUNTS PAYABLE ACCRUED EXPENSES $ 3,158,892 $ - $ (1,500,225) $ 1,658,667 ACCRUED SALARIES RELATED EXPENSES 681, ,284 DEFERRED FEES 341, ,699 DERIVATIVE LIABILITY 1,006, ,006,384 DEBT OBLIGATION 17,368,056 1,500,000-18,868,056 TOTAL LIABILITIES 22,556,315 1,500,000 (1,500,225) 22,556,090 N E T A S S E T S UNRESTRICTED NET ASSETS Undesignated 5,438, ,438,430 Funded reserves 908, ,024 Board designated - 4,894,122-4,894,122 TOTAL UNRESTRICTED NET ASSETS 6,346,454 4,894,122-11,240,576 TEMPORARILY RESTRICTED NET ASSETS 11,405, ,405,107 TOTAL NET ASSETS 17,751,561 4,894,122-22,645,683 TOTAL LIABILITIES NET ASSETS $ 40,307,876 $ 6,394,122 $ (1,500,225) $ 45,201,

20 SUPPLEMENTARY INFORMATION - COMBINING STATEMENT OF ACTIVITIES Year Ended December 31, 2014 Association Foundation Total UNRESTRICTED NET ASSETS SUPPORT Direct contributions $ 2,067,229 $ 1,225 $ 2,068,454 Campaign contributions 269, ,835 United Way 1,047,428-1,047,428 Total support 3,384,492 1,225 3,385,717 OTHER OPERATING REVENUE Membership dues 13,579,072-13,579,072 Program and use of facilities fees 16,582,713-16,582,713 Contract and grant revenues 8,232,141-8,232,141 Investment income 28,492-28,492 Net assets released from restrictions 299, ,809 Total other operating revenue 38,722,227-38,722,227 TOTAL SUPPORT OPERATING REVENUE 42,106,719 1,225 42,107,944 OPERATING EXPENSES BEFORE DEPRECIATION AMORTZATION Program services 35,199,410-35,199,410 Supporting services Fundraising 797, ,822 Management and general 4,442,476 77,918 4,520,394 Total supporting services 5,240,298 77,918 5,318,216 TOTAL OPERATING EXPENSES BEFORE DEPRECIATION AMORTIZATION 40,439,708 77,918 40,517,626 CHANGE IN UNRESTRICTED NET ASSETS FROM OPERATIONS BEFORE DEPRECIATION AMORTIZATION 1,667,011 (76,693) 1,590,318 Depreciation and amortization 2,033,006-2,033,006 CHANGE IN UNRESTRICTED NET ASSETS FROM OPERATIONS BEFORE OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS (365,995) (76,693) (442,688) OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS Investment income 24, , ,112 Change in value of derivative 313, ,692 Bad debt expense - capital campaign (130,313) - (130,313) Loss from property impairment (1,019,276) - (1,019,276) Loss from discontinued operations (122,902) - (122,902) TOTAL OTHER REVENUE (EXPENSE), LOSS FROM PROPERTY IMPAIRMENT, LOSS FROM DISCONTINUED OPERATIONS (934,473) 321,786 (612,687) CHANGE IN UNRESTRICTED NET ASSETS (1,300,468) 245,093 (1,055,375) TEMPORARILY RESTRICTED CONTRIBUTIONS Temporarily restricted contributions 7,259,020-7,259,020 Net assets released from restrictions (299,809) - (299,809) CHANGE IN TEMPORARILY RESTRICTED NET ASSETS 6,959,211-6,959,211 CHANGE IN NET ASSETS BEFORE INTER-ORGANIZATIONAL CONTRIBUTION 5,658, ,093 5,903,836 NET ASSETS, BEGINNING OF YEAR 11,002,108 5,739,739 16,741,847 INTER-ORGANIZATIONAL CONTRIBUTION 1,090,710 (1,090,710) - NET ASSETS, END OF YEAR $ 17,751,561 $ 4,894,122 $ 22,645,

21 OMB CIRCULAR A-133 SUPPLEMENTARY REPORTS

22 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended December 31, 2014 Federal Grantor/ Program Title Federal Pass-Through/ CFDA Federal Contract Number Number Expenditures U.S. Department of Health and Human Services 07CH7056/03 Head Start - Pass-Through from MARC 07CH7056/ $ 6,111,093 U.S. Department of Agriculture Child and Adult Care Food Program - Pass-Through from State of Missouri ,409 U.S. Department of Housing and Urban Development Community Development Block Grants / Entitlement Grants - Pass-Through from Johnson County, Kansas and the City of Shawnee, Kansas ,900 Corporation for National & Community Service AmeriCorps - Pass-Through from the State of Kansas 12AFHKS AFHKS AFHMO ,832 U.S. Department of Education S287C Twenty-First Century Community Learning Centers - S287C Pass-Through from the State of Kansas S287C C 272,826 Total expenditures of federal awards $ 6,998,060 See Notes to Schedule of Expenditures of Federal Awards

23 (1) Basis of presentation NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended December 31, 2014 The accompanying schedule of expenditures of federal awards includes the federal grant activity of Young Men s Christian Association of Greater Kansas City and YMCA Foundation of Mid- America (collectively, YMCA ) under programs of the federal government for the year ended December 31, The information in this schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133, Audits of State, Local Governments, and Non-Profit Organizations. Because the schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the YMCA. (2) Summary of significant accounting policies Expenditures reported on the schedule of expenditures of federal awards are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-122, Cost Principles for Non-Profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available. (3) Catalog of Federal Domestic Assistance ( CFDA ) number The program titles and CFDA numbers were obtained from the 2014 Catalog of Federal Domestic Assistance

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25 To the Board of Directors INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT MATERIAL EFFECT ON EACH MAJOR PROGRAM ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 YOUNG MEN S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY Report on Compliance for Each Major Federal Program We have audited Young Men's Christian Association of Greater Kansas City (the Association ) compliance with the 14 types of compliance requirements described in the Office of Management and Budget Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Association s major federal programs for the year ended December 31, The Association s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of the Association s major federal programs 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; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 occurred. An audit includes examining, on a test basis, evidence about the Association s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Association s compliance. Opinion on Each Major Federal Program In our opinion, the Association 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 programs for the year ended December 31, Other Matters The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying schedule of findings and questioned costs as item Our opinion on each major federal program is not modified with respect to these matters. The Association s response to the noncompliance finding identified in our audit is described in the accompanying schedule of findings and questioned costs. The Association s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance Management of the Association 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, we considered the Association s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program 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 to test and report on internal control over compliance in accordance with OMB Circular A-133, 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 Association s internal control over compliance

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27 SECTION 1 - SUMMARY OF AUDIT RESULTS FINANCIAL STATEMENTS SCHEDULE OF FINDINGS QUESTIONED COSTS Year Ended December 31, 2014 Type Of Auditor s Report Issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None Reported Noncompliance material to financial statements noted? Yes X No FEDERAL AWARDS Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified? Yes X None Reported Type of auditors report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? X Yes No Identification of program tested as a major program: CFDA Number(s) Name of Federal Program or Cluster Head Start Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? X Yes No SECTION 2 - FINDINGS - FINANCIAL STATEMENTS AUDIT None

28 SCHEDULE OF FINDINGS QUESTIONED COSTS (continued) Year Ended December 31, 2014 SECTION 3 - FINDINGS QUESTIONED COSTS- MAJOR FEDERAL AWARD PROGRAMS Program: U.S. Department of Health and Human Services, Head Start, CFA , passed through MARC Criteria: Per Addendum A of the grant agreement, the Association is required to keep a full enrollment of the number of Head Start eligible children in the program from the first day of operation. Condition: The Association did not meet the enrollment requirements during the months of January and February 2014 as prescribed by the grant agreement. Questioned Cost: None Context: The Association s program is considered fully enrolled as long as any vacant slots are filled within thirty days. While the Association had a waitlist for children to fill these slots for the months noted above, it did not include children that were of the appropriate age for the slots that were open. As a result, these slots remained open for longer than thirty days. Effect: The Association is not in compliance with the grant agreement. This may result in reduced or termination of funding. Cause: The Association maintains a waitlist. However, when slots became vacant, the appropriate aged children had not signed up to be included on the waitlist to fill these open spots. In the past, more scholarship funding was available to cover student fees. However, due to reduced funding from sequestration, less scholarship funds were available for students who could not pay their fees and were then excluded from the program. This increased the number of open spots during the year. Recommendation: The Association should continue to work with the grantee ( MARC ) on ways to improve enrollment and ensure that an appropriate mix of aged-children are included on its waitlist. Views of Responsible Officials and Planned Corrective Actions: The Association's Head Start program has implemented a weekly review of enrollment statistics and recruitment plans. During 2014, sequestration reductions in funding that had occurred in 2013 and had resulted in enrollment challenges that continued into 2014 were restored later in the year and between restored funding for scholarships and strategic changes in recruitment processes, the Y was able to meet its funded enrollment requirement for the remainder of the year

29 SECTION 4 - SUMMARY OF PRIOR YEAR FINDINGS QUESTIONED COSTS During the year ended December 31, 2013, as prescribed by the grant agreement from the U.S. Department of Health and Human Services, Head Start, CFA (passed through MARC) program, the Association did not meet the enrollment requirements during the months of October, November, and December Status: The Association s Head Start program implemented a weekly review of enrollment statistics and recruitment plans. This implementation allowed the Association to obtain the required enrollment level during the year ended December 31, See finding