GREAT CIRCLE ADAMS, BROWN, BERAN AND BALL CHARTERED. AND TRUST Year Ended December 31, 2016 with Comparative Totals

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1 ADAMS, BROWN, BERAN AND BALL CHARTERED EMPLOYEE'S CONSOLIDATED PROFIT FINANCIAL SHARING AND STATEMENTS 401(K) PLAN AND TRUST Year Ended December 31, 2016 with Comparative Totals For the FINANCIAL Year Ended STATEMENTS December 31, 2015 Years Ended December 31, 2015 and 2014

2 Table of Contents Page Independent Auditors Report 1 Consolidated Financial Statements: Consolidated Statements of Financial Position 2 Consolidated Statement of Activities 3 Consolidated Statement of Functional Expenses 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Supplementary Information: Independent Auditors Report on Supplementary Information 29 Consolidating Statement of Financial Position 30

3 625 Maryville Centre Drive, Suite 200 St. Louis, MO Main: Fax: INDEPENDENT AUDITORS REPORT To the Board of Directors of Great Circle: We have audited the accompanying consolidated financial statements of Great Circle (a nonprofit organization), which comprise the consolidated statement of financial position as of December 31, 2016, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Great Circle as of December 31, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Great Circle s 2015 consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated May 23, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2015, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived. St. Louis, Missouri May 24, 2017 Member of Kreston International a global network of independent accounting firms

4 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31, 2016 and CURRENT ASSETS: Cash and cash equivalents $ 3,277,269 $ 1,618,335 Accounts receivable (less allowance for doubtful accounts of $577,478 and $819,986 at December 31, 2016 and 2015, respectively) 9,675,533 7,536,248 Promises to give - current 1,988,537 1,547,761 Prepaid expenses and other assets 375, ,780 Interest receivable 101,916 99,365 Other current assets 45,186 33,336 TOTAL CURRENT ASSETS 15,464,305 11,105,825 Investments 45,202,232 44,342,371 Property and equipment, net 36,888,274 35,908,412 Beneficial interest in perpetual trusts 2,927,554 2,886,610 Promises to give - long-term 1,992,608 1,971,476 Cash surrender value of life insurance 181, ,150 Note receivable - related party 179, ,178 Land held for investment 35, ,730 TOTAL ASSETS $ 102,871,831 $ 97,554,752 CURRENT LIABILITIES: Accounts payable and accrued expenses $ 4,673,799 $ 4,352,713 Current portion of notes payable 14,322 13,246 Current portion of annuities payable 191, ,457 TOTAL CURRENT LIABILITIES 4,879,441 4,564,416 Line of credit 1,800, ,000 Notes payable 46,496 61,602 Annuities payable 1,136,386 1,167,530 Accrued pension benefits 2,212,766 2,478,468 TOTAL LIABILITIES 10,075,089 8,722,016 NET ASSETS Unrestricted 45,408,905 43,618,403 Unrestricted - board designated 39,967,434 39,061,784 Temporarily restricted 2,959,244 1,781,277 Permanently restricted 4,461,159 4,371,272 TOTAL NET ASSETS 92,796,742 88,832,736 TOTAL LIABILITIES AND NET ASSETS $ 102,871,831 $ 97,554,752 The accompanying notes are an integral part of these consolidated statements

5 CONSOLIDATED STATEMENT OF ACTIVITIES Year Ended December 31, 2016 with Comparative Totals for the Year Ended December 31, 2015 Operating Fund Unrestricted BGTM Fund Total Unrestricted 2016 Temporarily Restricted Permanently Restricted Total 2015 Total PUBLIC SUPPORT AND PROGRAM REVENUES: Public support - General contributions $ 1,138,428 $ - $ 1,138,428 $ - $ - $ 1,138,428 $ 997,278 Legacies and other - 75,206 75, , ,635 1,509,427 Capital campaign contributions 5,837-5,837 2,275,240-2,281,077 3,370,980 Grants 696, , ,563-1,574, ,164 United Way 25,246-25, , , ,401 Program Revenues - Rehabilitation 41,894,121-41,894, ,894,121 34,511,293 Program support 2,148,423-2,148, ,148,423 2,114,066 Therapy 4,836,473-4,836, ,836,473 3,642,772 Educational day treatment 10,113,604-10,113, ,113,604 9,115,810 Other events revenue (net of expenses of $289,500 and $250,254 for 2016 and 2015, respectively) 462, , , , ,333 Other 1,127,700-1,127,700-48,943 1,176, ,996 Net assets released from restrictions 3,670,052-3,670,052 (3,670,052) TOTAL PUBLIC SUPPORT AND REVENUES 66,118,438 75,206 66,193,644 1,156,410 48,943 67,398,997 58,104,520 OPERATING EXPENSES: Rehabilitation programs 58,130,429-58,130, ,130,429 49,036,711 Management and general 6,564,156 60,439 6,624, ,624,595 5,732,247 Development 1,681,742-1,681, ,681,742 1,623,124 TOTAL OPERATING EXPENSES 66,376,327 60,439 66,436, ,436,766 56,392,082 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (257,889) 14,767 (243,122) 1,156,410 48, ,231 1,712,438 OTHER: Investment income 431,094 2,393,684 2,824,778 38,698-2,863,476 34,969 Contribution received in combination with Butterfield Youth Services, Inc ,962,662 Change in value of beneficial interest in perpetual trusts ,944 40,944 (184,942) Pension related changes other than net periodic benefit costs 97,355-97, ,355 (149,382) Transfer of funds 1,519,942 (1,502,801) 17,141 (17,141) TOTAL OTHER 2,048, ,883 2,939,274 21,557 40,944 3,001,775 5,663,307 CHANGE IN NET ASSETS 1,790, ,650 2,696,152 1,177,967 89,887 3,964,006 7,375,745 NET ASSETS - BEGINNING OF YEAR 43,618,403 39,061,784 82,680,187 1,781,277 4,371,272 88,832,736 81,456,991 NET ASSETS - END OF YEAR $ 45,408,905 $ 39,967,434 $ 85,376,339 $ 2,959,244 $ 4,461,159 $ 92,796,742 $ 88,832,736 The accompanying notes are an integral part of these consolidated statements

6 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2016 with Comparative Totals for the Year Ended December 31, 2015 Program Services 2016 Supporting Activities 2015 Rehabilitation Programs Management and General Development Total Supporting Activities Total Total Salaries Payroll taxes and employee benefits TOTAL EMPLOYEE COSTS Cottage, school and program expenses Depreciation Telephone and utilities Repairs and maintenance Insurance Office expenses Professional fees Bad debts Promotion Investment expense Travel and transportation Interest expense TOTAL OPERATING EXPENSES $ 34,188,783 $ 4,180,343 1,153,694 5,334,037 $ 39,522,820 $ 33,767,349 7,299, , ,682 1,124,778 8,424,156 6,914,770 41,488,161 5,068,439 1,390,376 6,458,815 47,946,976 40,682,119 7,866, ,866,159 5,947,544 2,623,572 80,891 14,699 95,590 2,719,162 2,352,640 1,238,633 71,672 23,558 95,230 1,333,863 1,175, , ,231 27, ,678 1,098,075 1,013,297 1,644,448 53,203 30,553 83,756 1,728,204 1,529, , ,143 48, ,504 1,383,380 1,187, , ,924 2, , , ,326 76, , , , , , , ,741-86,737-86,737 86,737 80,220 1,036, ,276 19, ,504 1,169,474 1,137,054-41,139-41,139 41,139 42,450 $ 58,130,429 $ 6,624,595 $ 1,681,742 $ 8,306,337 $ 66,436,766 $ 56,392,082 The accompanying notes are an integral part of these consolidated statements

7 CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2016 and CASH FLOWS FROM OPERATIONS: Increase in net assets $ 3,964,006 $ 7,375,745 Adjustments to reconcile increase in net assets to net cash from operating activities: Depreciation 2,719,162 2,352,640 Gain on sale of investments (376,614) (530,479) Unrealized (gain) loss on investments (1,406,367) 2,292,374 Loss on sale of land held for investment 60,096 - Contribution of land held for investment - (920,000) Acquisiton of Butterfield Youth Services, Inc. - (5,629,160) Increase in cash surrender value of life insurance (4,215) (3,775) Transfer of ownership in life insurance policy - 313,607 Accrued pension costs (168,347) (197,623) Pension plan changes other than net periodic benefit costs (97,355) 149,382 Change in value of beneficial interest in perpetual trusts (40,944) 184,942 Change in assets restricted for permanent investment (48,944) 73 Gain on sale of property and equipment (19,971) (1,668) Changes in assets and liabilites: Increase in accounts receivable (2,139,285) (303,687) (Increase) decrease in prepaid expenses and other assets (116,934) 130,262 (Increase) decrease in interest receivable (2,551) 12,701 Increase in promises to give (461,908) (548,263) Increase (decrease) in accounts payable and accrued expenses 321,086 (1,386,339) Increase (decrease) in annuities payable (38,281) 626,939 NET CASH FLOW FROM OPERATIONS 2,142,634 3,917,671 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in note receivable - related party - (113,465) Repayments of note receivable - related party 27,415 36,145 Proceeds from sales of investments 7,601,479 14,239,628 Purchases of investments (6,629,415) (11,028,900) Proceeds from sale of land held for investment 859,904 - Proceeds from sale of property and equipment 292,835 5,019 Purchases of property and equipment (3,971,888) (8,767,157) NET CASH FLOW FROM INVESTING ACTIVITIES (1,819,670) (5,628,730) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from line of credit 1,350,000 - Payments on notes payable (14,030) (14,493) NET CASH FLOW FROM FINANCING ACTIVITIES 1,335,970 (14,493) NET CHANGE IN CASH AND CASH EQUIVALENTS 1,658,934 (1,725,552) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,618,335 3,343,887 CASH AND CASH EQUIVALENTS - END OF YEAR $ 3,277,269 $ 1,618,335 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 41,139 $ 42,450 NON CASH ACTIVITIES: Fair value of assets of Butterfield Youth Services, Inc. acquired - 6,387,957 Fair value of liabilities of Butterfield Youth Services, Inc. assumed - (758,797) Contribution of land held for investment - 920,000 Transfer of ownership of life insurance policy - (313,607) Property and equipment purchased with line of credit - 450,000 The accompanying notes are an integral part of these consolidated statements

8 (1) Nature of activities and summary of significant accounting policies Principles of consolidation The consolidated financial statements include the accounts of Great Circle and BGTM, Inc. (collectively, the Organization). BGTM, Inc. is a qualified supporting organization. All significant inter-organization accounts, balances and transactions have been eliminated in consolidation. The Organization was created through a merger of Boys Town of Missouri, Inc. and Edgewood Children s Center. Similar services aimed at improving the lives of children with emotional and behavioral problems through rehabilitative therapy, special education, and other family-focused services were provided by both organizations. Nature of activities The Organization operates residential treatment facilities in St. James, St. Louis, Springfield, Marshall and Columbia, Missouri, providing services to emotionally disturbed, socially maladjusted and academically challenged boys, girls and young adults, along with community based programs throughout Missouri. Special educational classes are also provided for children in residential and day treatment programs. The Organization is committed to reshaping vulnerable lives through a community of partners, teachers, and leaders, giving children and families the confidence to create bright futures. Use of estimates The presentation of consolidated financial statements in conformity with U.S. generally accepted accounting principles 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 consolidated financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Basis of presentation The Organization follows accounting standards set by the Financial Accounting Standards Board (FASB). The financial statement presentation follows the recommendations of the FASB Accounting Standards Codification (ASC) Under ASC , the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. Unrestricted Net Assets include all resources which are not subject to donorimposed restrictions of a more specific nature than those which only obligate the Organization to utilize funds in furtherance of its mission. Temporarily Restricted Net Assets carry specific, donor-imposed restrictions on the expenditure or other use of contributed funds or limitations imposed by law. Temporary restrictions may expire either because of the passage of time or because certain actions are taken by the Organization which fulfill the restriction. Permanently Restricted Net Assets are those that are subject to donorimposed restrictions which will never lapse, thus requiring that the funds be retained permanently

9 (1) Nature of activities and summary of significant accounting policies (continued) Prior year summarized information The consolidated 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 accordance with U.S. generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization s consolidated financial statements for the year ended December 31, 2015, from which the summarized information was derived. Fair value measurements The fair value of financial instruments including cash and cash equivalents, accounts and interest receivable, prepaid expenses and other assets, promises to give current, other current assets, accounts payable and accrued expenses, current portion of annuities payable and current portion of notes payable approximate carrying value due to the short-term nature of these accounts. The Organization determines the fair value of certain financial assets and liabilities on a recurring basis through the application of ASC 820, as disclosed in Note 17 to the consolidated financial statements. Instruments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 Quoted prices are available in active markets for identical instruments as of the reporting date. Instruments, which are generally included in this category, include listed equity and debt securities publicly traded on a stock exchange. Level 2 Pricing inputs are other than quoted prices in active market, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Level 2 also includes investments reported at net asset value per share with lock-up periods of 90 days or less. Level 2 methods are also used in measuring the initial fair value of long-term pledges. Level 3 Pricing inputs are unobservable for the instrument and include situations where there is little, if any, market activity for the instrument. The inputs into the determination of fair value require significant management judgment or estimation. Level 3 also includes investments reported at net asset value per share with lock-up periods in excess of 90 days. There were no triggering events that required fair value measurement of the Organization s nonfinancial assets and liabilities at December 31, 2016 and Cash and cash equivalents The Organization considers all highly liquid, short-term investments with original maturities of three months or less, which are available for the Organization s operating needs, to be cash equivalents. Accounts receivable and promises to give Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable - 7 -

10 (1) Nature of activities and summary of significant accounting policies (continued) uncollected amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Promises to give in future periods that are unconditional are recognized as support in the period the promises are received. At the pledge date, promises to give and received beyond one year are discounted to the present value of estimated future cash flows using a risk adjusted discount rate of 1.89 % and 1.65% for the years ended December 31, 2016 and 2015, respectively. The initially recorded fair value is considered a Level 2 fair value approach. For pledges made and received within one year, the net realizable value is a reasonable estimate of the fair value. Amortization of the discount is included in contribution revenue. Promises to give are reported at the amount management expects to collect on balances outstanding at December 31, Management considers all promises to give at December 31, 2016 and 2015 to be collectible. Accordingly, no allowance for uncollectible promises to give has been reflected in the consolidated financial statements. Investments The Organization s investments are carried at fair value and net realized and unrealized gains (losses) are reflected in the consolidated statement of activities (see Note 7), with the exception of certificate of deposits which are carried at cost plus accrued interest which approximates fair value. Gains and losses on sales of investments are generally determined on a specific cost identification basis. The Organization is provided with estimates regarding fair value measures for these investments by their investment managers, who have derived these values from available information from actively traded markets. This information has been used by the Organization in preparing the consolidated financial statements. Property and equipment Property and equipment is recorded at cost, if purchased or at estimated fair market value on the date of receipt, if donated. Expenditures greater than $3,000 are reviewed for capitalization. Assets under construction are capitalized as construction in progress and reported at cost. Construction in progress is not depreciated. Once the asset is complete and available for use, depreciation is commenced. Expenditures for repairs and maintenance are charged to expense as incurred, and additions and improvements that significantly extend the lives of assets are capitalized. Depreciation is provided on a straight-line basis over the following useful lives: Land improvements Buildings and improvements Equipment and furnishings Vehicles Computer equipment Useful Lives 5 years years 8 years 4 years 3 years At times, the Organization may acquire title to property and equipment purchased with federal grant funds. In certain instances, the Federal government retains a reversionary interest in federally funded assets in the event of program termination

11 (1) Nature of activities and summary of significant accounting policies (continued) Restricted and unrestricted public support The Organization reports gifts of cash and other assets as unrestricted, temporarily restricted or permanently restricted, depending on the existence and/or nature of any donor restrictions. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. Program revenues The Organization has contractual arrangements with various funders which provide for reimbursement of residential, day treatment and community based service programs at negotiated rates for specific services. Program service revenues and related accounts receivable are recorded at their estimated net realizable amounts. Approximately 59% and 51%, respectively, of program revenues were received from two funding sources during the years ended December 31, 2016 and Approximately 21% and 30% of accounts receivable are due from one and two funding sources at December 31, 2016 and 2015, respectively. Donated supplies and services Various supplies are donated to the Organization. These items generally are recorded as contributions at their fair values as of the date of receipt. A number of volunteers have donated a significant amount of their time to the Organization s programs that did not meet the requirements of ASC , and is not reflected in the accompanying consolidated financial statements. Description of program services and supporting activities The following program services and supporting activities are included in the accompanying consolidated financial statements: Rehabilitation programs: Includes those expenditures to assist the Organization in rehabilitating and treating children and families with emotional and behavioral disorders as well as providing special educational classes for children in residential and day treatment programs. Management and general: Includes the functions necessary to maintain an equitable employment program; ensure an adequate working environment; provide coordination and articulation of the Organization s program strategy; secure proper administrative functioning of the Board of Directors; and manage the financial and budgetary responsibilities of the Organization. Development: Provides the structure necessary to encourage and secure private financial support from corporations, foundations and individuals through various fundraising and special events. Allocation of expenses Expenses are charged to program services and supporting activities on the basis of periodic time and expense studies. Management and general expenses include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Organization

12 (1) Nature of activities and summary of significant accounting policies (continued) Income taxes The Organization is a not-for-profit corporation, exempt from Federal income tax under section 501(c)3 of the Internal Revenue Code and none of its present or anticipated future activities are subject to taxation as unrelated business income. Therefore, no provision for income taxes has been made in the accompanying consolidated financial statements. The Organization follows the provisions of ASC requiring disclosure of uncertain tax positions. There have been no interest or penalties neither recognized in the consolidated statement of activities nor in the consolidated statement of financial position related to uncertain tax positions. In addition, no tax positions exist for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Organization files income tax returns in the U.S. federal jurisdiction. The statute of limitations is three years and the years that remain subject to examination are 2013, 2014 and The Organization evaluates its uncertain tax positions, if any, on a continual basis through review of its policies and procedures, review of its regular tax filings, and discussions with outside experts. Reclassifications Certain reclassifications have been made to the 2015 consolidated financial statements to conform with the 2016 consolidated financial statement presentation. The reclassifications had no effect on the change in net assets. (2) Business combination On August 1, 2015, the Organization combined operations with Butterfield Youth Services, Inc. (BYS). The Organization and BYS share similar missions and, as a result, the Organization will bring efficiencies and expanded services to the communities served by BYS. No consideration was transferred in the acquisition. The components of the fair value of the BYS acquisition were as follows: Assets acquired: Cash and cash equivalents $ 333,502 Accounts receivable 296,755 Investments 546,750 Property and equipment 5,396,676 Other assets 147,776 Liabilities assumed: Accounts payable and accrued expenses (300,842) Note payable (415,068) Annuities payable (42,887) Inherent contribution received $ 5,962,662 The inherent contribution received is recorded in the consolidated statement of activities and increases unrestricted net assets, temporarily restricted net assets and permanently restricted net assets based on the net asset classification acquired from BYS

13 (3) BGTM Fund BGTM, Inc., functions as a qualified supporting organization of Great Circle under Section 509(a)(3) of the Internal Revenue Code. The primary purpose of BGTM, Inc. is to manage and administer the endowment funds and other investment assets of Great Circle and to support Great Circle through periodic distributions to the operating budget. For financial reporting purposes, BGTM, Inc. is consolidated with Great Circle, and is presented as the unrestricted BGTM Fund in the consolidated financial statements. Great Circle and BGTM, Inc. have three common board members, and Great Circle provides administrative services to BGTM, Inc. (4) Cash and cash equivalents The Organization maintains several cash accounts at banks. The total balance at each bank is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At December 31, 2016 and 2015, $2,854,009 and $461,354, respectively, of cash and cash equivalents was above FDIC insurance limits. Certain financial institutions have secured the Organization s accounts with pledged federal securities, ensuring deposits above FDIC limits are not at risk. (5) Promises to give Unconditional promises to give are collectible as follows: December 31, Due within one year $ 1,988,537 $ 1,547,761 Due in one to five years 2,111,423 2,102,030 4,099,960 3,649,791 Less: Present value discount of future cash flows 118, ,554 $ 3,981,145 $ 3,519,237 These amounts are reported in the consolidated statements of financial position as follows: December 31, Promises to give - current $ 1,988,537 $ 1,547,761 Promises to give - long-term 1,992,608 1,971,476 $ 3,981,145 $ 3,519,

14 (6) Note receivable related party Included in note receivable related party is a non-interest bearing note receivable from the Executive Director. The note receivable was issued in conjunction with the relocation of the executive office. The note is being repaid in monthly installments of $2,778 and matures in July The note receivable is collateralized by residential real estate. Interest has been imputed on this note at a rate of 4.75%. The current and long term portions, $33,336 and $179,763, respectively, are included on the consolidated statement of financial position at December 31, (7) Investments Investments are recorded at fair value in the accompanying consolidated statements of financial position in accordance with ASC Investments consist of the following at: December 31, Cost Fair Value Cost Fair Value Short-term investments $ 1,307,573 $ 1,307,573 $ 1,690,799 $ 1,690,799 Certificates of deposit 815, , , ,723 Government and agency obligations 7,052,543 7,010,362 8,828,064 8,846,046 Mutual funds 22,162,499 28,088,800 20,464,020 24,917,130 Fixed income mutual funds 994, , , ,301 Corporate obligations 7,236,726 7,315,023 7,395,553 7,387,372 $ 39,569,488 $ 45,202,232 $ 40,121,551 $ 44,342,371 The components of total investment return were as follows: Years Ended December 31, Interest and dividends $ 1,080,495 $ 1,796,864 Gain on sale of investments 376, ,479 Unrealized gain (loss) on investments 1,406,367 (2,292,374) Total investment income $ 2,863,476 $ 34,

15 (8) Beneficial interest in perpetual trusts Beneficial interest in perpetual trusts consists of unconditional promises to give from perpetual trusts created by independent donors, which are not in the possession or control of the Organization but are held and administered by independent bank trustees. The Organization, along with other specified not-for-profit organizations, is a beneficiary of these trusts. The Organization only derives income from these trusts, which is included in interest and dividends on the consolidated statement of activities. The principal of each trust is not available to the Organization. The Organization has recorded the promises to give equal to the Organization s estimated share of the current fair value of the trusts. For the years ended December 31, 2016 and 2015, the Organization s share of the change in the fair value of trusts was $40,944 and ($184,942), respectively. The values of the underlying assets within the Organization s beneficial interests in perpetual trusts are determined by the benefactors investment managers, who have derived these values from available information in actively traded markets. However, the Organization does not have access to any existing markets in which its beneficial interest could be bought or sold. As a result, management has classified its interest in beneficial trusts as Level 3 (subject to unobservable inputs) for purposes of fair value disclosure requirements at Note 17. (9) Property and equipment Property and equipment consist of the following at: December 31, Land $ 3,962,153 $ 3,816,283 Land improvements 1,831,117 1,774,298 Buildings and improvements 50,240,396 50,841,829 Equipment and furnishings 5,953,164 5,661,639 Vehicles 3,348,353 3,273,810 Computer equipment 2,160,146 1,965,793 Construction in progress 2,614, ,344 70,109,880 67,610,996 Less accumulated depreciation (33,221,606) (31,702,584) Total property and equipment, net $ 36,888,274 $ 35,908,412 Depreciation expense for the years ended December 31, 2016 and 2015 was $2,719,162 and $2,352,640, respectively

16 (10) Operating leases The Organization leases office equipment, employee automobiles and a building under noncancelable operating lease agreements having an initial term of greater than one year. The expected future minimum lease payments are as follows: Years Ending December 31: , , , ,692 Thereafter 3,104 Totals $ 454,006 (11) Related party transactions The Organization owns approximately 43% of the Missouri Alliance For Children and Families, LLC (Alliance), a Missouri limited liability company. The Alliance is made up of seven partner members. The unaudited balance sheet of the Alliance reported a member equity surplus of approximately $600,000 at December 31, 2016 and a deficit of approximately $900,000 at December 31, During the year ended December 31, 2016, the Alliance was awarded a new contract beginning January 1, 2016 and ending September 30, During the term of the agreement, the Alliance partners agree to receive a monthly payment for case management services rendered. In addition, the partners are responsible for managing the service budgets in the regions where they provide services. If the actual cost of services for cases the Organization manages is less than the service budgets agreed upon, the surplus will be distributed to the Organization throughout the contract year. If the actual cost of service is more, the deficit will be paid by the Organization to the Alliance throughout the contract year. The Organization had amounts receivable of $99,662 and $337,964 at December 31, 2016 and 2015, respectively. At December 31, 2016 and 2015, a reserve of $0 and $337,964 was recorded against the amount receivable, respectively, from the Alliance due to the uncertainty of the outcome under the contract of certain cases. The Organization recorded program revenue of approximately $14,150,000 and $13,128,000 respectively, for the services provided to the Alliance during the years ended December 31, 2016 and

17 (12) Charitable gift annuities The Organization maintains a charitable gift annuity program whereby individuals make gifts to the Organization and receive an annuity payment for the remainder of their lives. During the years ended December 31, 2016 and 2015, the Organization received $1,000 and $281,097, respectively, of assets pursuant to charitable gift annuity agreements. Under the agreements, the Organization pays the donors equal quarterly, semi-annual, or annual installments. The annual amount paid was approximately $180,000 and $176,000 for the years ended December 31, 2016 and The assets held for annuity are recorded by the Organization at fair value and amounted to approximately $1,991,000 and $2,128,000, respectively, at December 31, 2016 and 2015 and are included in investments in the consolidated statement of financial position. At the inception of the split-interest agreement, an obligation is recorded at present value, which is a Level 2 fair value approach, using discount rates ranging from 1.0% to 9.0%. The Organization recognized support of $0 and $50,157, respectively, related to the charitable gift annuities received during the years ended December 31, 2016 and (13) Employee benefit plans Frozen defined benefit pension plan The Organization has a defined benefit pension plan, which covers employees of Edgewood Children s Center who became participants on or before May 1, Benefits are based on Credited Service and Five-Year Average compensation, each frozen as of May 2, All participants are vested. The Organization s funding policy is to contribute an amount at least equal to the minimum required contribution per applicable regulations. The Organization s accrued benefit cost as of December 31, 2016 and 2015 amounts to $2,212,766 and $2,478,468, respectively. The following represents financial disclosure information for the above plan for the years ended December 31, 2016 and 2015: Weighted-average assumptions used to determine benefit obligations at: Discount rate Rate of compensation increase December 31, % 4.50% N/A N/A

18 (13) Employee benefit plans (continued) December 31, Change in benefit obligation Net benefit obligation at beginning of year $ 7,662,710 $ 7,976,145 Interest cost 337, ,992 Actuarial gain (171,522) (316,301) Gross benefits paid (325,260) (329,126) Projected benefit obligation at end of year 7,503,432 7,662,710 Accumulated benefit obligation at end of year 7,503,432 7,662,710 Change in plan assets Fair value of plan assets at beginning of year 5,184,242 5,449,436 Employer contributions 100, ,000 Actual return on plan assets 331,684 (91,068) Gross benefits paid (325,260) (329,126) Fair value of plan assets 5,290,666 5,184,242 Funded status and accrued benefit cost amount recognized at end of year $ (2,212,766) $ (2,478,468) Weighted-average assumptions used to determine net periodic benefit cost: Years Ending December 31, Discount rate Expected long-term return on plan assets 4.50% 7.00% 4.25% 7.00% Rate of compensation increase N/A N/A Components of net periodic benefit cost Interest cost $ 337,504 $ 331,992 Expected return on plan assets (355,859) (376,139) Actuarial loss amortization 62,328 58,503 Total net periodic benefit cost $ 43,973 $ 14,356 During the years ended December 31, 2016 and 2015, an actuarial gain of $97,355 and a loss of $149,382, respectively, was recognized for the plan outside of operations

19 (13) Employee benefit plans (continued) Measurement date: The Organization uses a measurement date of December 31 for its pension plan. Sensitivity to changes in assumptions: The table below outlines the sensitivity of the Organization s pension plan to potential changes in key assumptions: December 31, Net Periodic Benefit Cost Benefit Obligation Net Periodic Benefit Cost Benefit Obligation 0.25% decrease in discount rate $ (8,055) $ 262,989 $ (8,951) $ 275, % decrease in expected return on assets 12,709-13,434 - The expected long-term return on plan assets is based upon management s estimation of what a portfolio, with the target allocation shown below, will earn over a long-term horizon. Plan assets: The Organization s pension plan weighted-average asset allocation by asset category is as follows: December 31, Target Allocation Plan Assets Target Allocation Plan Assets Asset category Equity securities 40-70% 68% 40-70% 63% Fixed investments and cash equivalents 30-80% 32% 30-80% 37% Real estate 0-5% 0% 0-5% 0% Total 100% 100% The Organization has retained a professional manager to help set an investment strategy, recommend individual investment managers and to monitor the results of the portfolio s allocations. As part of this arrangement, the Organization meets quarterly with the manager to review portfolio content and results as well as to confirm or modify asset allocation targets

20 (13) Employee benefit plans (continued) In establishing an overall investment strategy, the Organization s goal is to minimize the investment risk while earning a reasonable return on assets. As part of this, the Organization establishes ranges for each of its investment allocation types. The targets are reviewed quarterly with the manager and have been occasionally adjusted as the circumstances warrant. Fair value measurements related to plan assets: The following are the major categories of assets maintained by the Organization s pension plan measured at fair value on a recurring basis at December 31, 2016 and 2015 using quoted market prices in active markets for identical assets (Level 1); significant observable inputs (Level 2); and significant unobservable inputs (Level 3): December 31, 2016 Level 1 Level 2 Level 3 Total Money market funds $ 119,322 $ - $ - $ 119,322 Government and agency obligations - 956, ,100 Mutual funds: Exchange traded funds/large cap 1,935, ,935,203 Small cap 451, ,055 International 1,067, ,067,989 Corporate obligations - 760, ,997 Total assets $ 3,573,569 $ 1,717,097 $ - $ 5,290,666 December 31, 2015 Level 1 Level 2 Level 3 Total Money market funds $ 92,499 $ - $ - $ 92,499 Certificates of deposit - 679, ,752 Government and agency obligations - 1,160,306-1,160,306 Mutual funds: Exchange traded funds/large cap 1,754, ,754,671 Small cap 379, ,831 International 1,043, ,043,999 Corporate obligations - 73,184-73,184 Total assets $ 3,271,000 $ 1,913,242 $ - $ 5,184,242 Funding requirements: The plan will require funding of approximately $115,000 before July 15,

21 (13) Employee benefit plans (continued) Estimated future benefit payments: The estimated cash demand on the plan assets for the payment of future benefits is as follows: Pension Year Benefits 2017 $ 379, , , , , ,041, (k) retirement plan The Organization has a defined contribution plan which qualifies under Section 401(k) of the Internal Revenue Code that covers all eligible employees. The Organization makes a matching contribution up to 6% of qualifying compensation. For employees with 10 or more years of service, the Organization made an additional contribution equal to 67% of qualifying deferrals up to 6% of qualifying compensation. The Organization s contribution to the plan amounted to $719,686 and $633,189, respectively, for the years ended December 31, 2016 and (14) Borrowings Lines of credit The Organization has two revolving credit agreements with a bank which allows for maximum borrowings of $3,000,000. The lines are payable on demand and are secured by a deed of trust on real property and bears interest at the prime rate (3.75% at December 31, 2016). At December 31, 2016 and 2015, $1,800,000 and $0 was outstanding on these lines of credit. The Organization has a line of credit with a bank for the purpose of financing certain construction costs, with borrowings up to $10,000,000. Interest is payable monthly at 1.45% over LIBOR (2.11% at December 31, 2016), with the balance of principal and interest due August The line is guaranteed by BGTM, Inc. up to the $10,000,000 in borrowings. At December 31, 2016 and 2015, $0 and $450,000 was outstanding on this line of credit. Letter of credit In accordance with the Organization s workers compensation policy as described in Note 16, the Organization has a $1,225,000 letter of credit, secured by an interest in certain real property in Phelps County. Mortgage note payable The Organization has a mortgage note payable. This mortgage matures in December 2023 and is payable in monthly installments of $651, including principal and interest at 5.5%. This mortgage is secured by three parcels of land owned by the Organization. At December 31, 2016 and 2015, $45,304 and $50,469, respectively, was outstanding on this mortgage note payable

22 (14) Borrowings (continued) Future principal payments on the mortgage are as follows: Year Amount , , , ,433 Thereafter 21,560 Total $ 45,304 Vehicle note payable The Organization has a note payable for a vehicle. This note matures in October 2018 and is payable in monthly installments of $739. This note is secured by the vehicle. At December 31, 2016 and 2015, $15,514 and $24,379, respectively was outstanding on this note payable. Future principal payments on this vehicle are as follows: Year Amount , ,649 Total $ 15,514 Interest expense totaled $41,139 and $42,450, respectively, for the years ended December 31, 2016 and (15) Net assets Temporarily restricted net assets are subject to the following donor-imposed time and purpose restrictions as follows: December 31, Time restrictions $ 966,587 $ 912,228 Purpose restrictions: Capital improvements 1,927, ,768 Scholarships 12,892 14,892 Other 13,764 60,496 1,953, ,156 Unappropriated endowment investment earnings 38,698 24,893 $ 2,959,244 $ 1,781,

23 (15) Net assets (continued) Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors. Net assets were released for the following purposes: Years Ending December 31, Time period requirements $ 1,093,447 $ 1,259,924 Capital improvements 2,547,205 4,368,855 Scholarships 2,000 - Other 27,400 42,830 $ 3,670,052 $ 5,671,609 Permanently restricted net assets consist of the following: December 31, Beneficial interest in perpetual trusts (Note 8) $ 2,927,554 $ 2,886,610 Various donor-restricted funds 1,353,605 1,304,662 Scholarships 10,000 10,000 Due from operating fund 170, ,000 $ 4,461,159 $ 4,371,272 (16) Commitments and contingencies Grants, bequests and endowments Grants, bequests and endowments require the fulfillment of certain conditions as set forth in the instrument of grant. Failure to fulfill the conditions could result in the return of the funds, or a portion thereof, to the grantors. Revenues received from federal and state granting agencies in the current and prior years are subject to audits and disallowance by the respective granting agencies. Management believes that any disallowance or adjustments would not have a material effect on the Organization s consolidated financial statements. Legal contingencies The Organization is involved in various legal proceedings arising in the normal course of operations. In the opinion of management, based upon consultation with legal counsel, any liability resulting from the disposition of these proceedings will not materially affect the Organization s financial position. Self-insurance program The Organization utilizes a combination of excess insurance coverage and self-insurance programs for employee health insurance. At December 31, 2016 and 2015, there are approximately 1,079 and 540 employees that are enrolled in the program with specific deductibles of $90,000 per individual. During 2016 and 2015, claims, net of specific reimbursement, of approximately $3,998,000 and $2,860,000, respectively, were paid under this

24 (16) Commitments and contingencies (continued) program. The contract period for coverage covers all claims incurred within the 15-month period ending December 31, 2016 and paid within the 12-month period ending December 31, The Organization is self-insured, up to certain limits, for workers compensation insurance. The Organization has purchased stop-loss insurance which will reimburse the Company for claims in excess of annual amounts of $250,000. During the year ended December 31, 2016, claims of approximately $730,000 were paid under this program. The aggregate additional claims for the contract year ending January 31, 2017 are currently estimated at approximately $212,000. In conjunction with the policy, the Organization is required to maintain a $1,225,000 letter of credit as a security deposit as disclosed in Note 14. The Organization has accruals of approximately $505,000 and $580,000 at December 31, 2016 and 2015, respectively, for employee health insurance and $438,000 and $600,000, respectively, for workers compensation insurance, to cover the self-insured portion of these risks based on known facts and historical trends. These amounts are included in accounts payable and accrued expenses on the consolidated statements of financial position. Management believes that such accruals are adequate and their ultimate resolution of these matters will not have a material adverse effect on the financial position of the Organization. (17) Fair value measurements The following are the major categories of assets and liabilities measured at fair value on a recurring basis: December 31, 2016 Level 1 Level 2 Level 3 Total Short-term investments $ 1,307,573 $ - $ - $ 1,307,573 Certificates of deposit - 823, ,618 Government and agency obligations - 7,010,362-7,010,362 Mutual funds: Exchange traded funds/large cap 18,673, ,673,334 Small cap 152, ,588 International 9,142, ,142,714 Real estate 60, ,242 Emerging markets 59, ,922 Fixed income mutual funds 656, ,856 Corporate obligations - 7,315,023-7,315,023 Beneficial interests in perpetual trusts - - 2,927,554 2,927,554 Total assets $ 30,053,229 $ 15,149,003 $ 2,927,554 $ 48,129,

25 (17) Fair value measurements (continued) December 31, 2015 Level 1 Level 2 Level 3 Total Short-term investments $ 1,690,799 $ - $ - $ 1,690,799 Certificates of deposit - 845, ,723 Government and agency obligations - 8,846,046-8,846,046 Mutual funds: Exchange traded funds/large cap 16,227, ,227,268 Small cap 147, ,681 International 8,452, ,452,077 Real estate 60, ,715 Emerging markets 29, ,389 Fixed income mutual funds 655, ,301 Corporate obligations - 7,387,372-7,387,372 Beneficial interests in perpetual trusts - - 2,886,610 2,886,610 Total assets $ 27,263,230 $ 17,079,141 $ 2,886,610 $ 47,228,981 The following is a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2016: Beneficial Interests in Perpetual Trusts Beginning balance, December 31, 2015 $ 2,886,610 Change in value of beneficial interest in perpetual trusts Ending balance, December 31, 2016 $ 40,944 2,927,554 Change in the value of beneficial interest in perpetual trusts and contributions, as applicable, are presented separately on the Organization s consolidated statement of activities for the years ended December 31, 2016 and During the years ended December 31, 2016 and 2015, there were no changes in the methods or assumptions utilized to derive the fair value of the Organization s assets. Further, there were no individual assets that were required to be reclassified between Levels 1 and 2 during the year ended December 31,