MCGAW YMCA CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2009

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1 CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2009

2 TABLE OF CONTENTS INDEPENDENT AUDITORS REPORT... 3 CONSOLIDATED FINANCIAL STATEMENTS Statements of Financial Position... 4 Statements of Activities... 5 Statements of Functional Expenses Statements of Cash Flows... 8 Notes to Financial Statements

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4 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION MCGAW YMCA As of June ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 2,080,404 $ 2,323,580 Investments, at Fair Market Value 2,542,504 2,894,262 Accounts Receivable 134, ,693 Short-Term Pledges Receivable, net 752, ,604 Prepaid Expenses 131, ,209 Total Current Assets 5,642,231 5,830,348 NONCURRENT ASSETS Investments, at Fair Market Value 415, ,000 Long-Term Pledges Receivable, net 270, ,200 Contribution Receivable - Charitable Remainder Trust 67,533 Deferred Financing Costs, net of Accumulated Amortization 256, ,238 Property and Equipment, net of Accumulated Depreciation and Amortization 14,464,061 14,194,535 Total Noncurrent Assets 15,474,764 15,144,973 LIABILITIES AND NET ASSETS $ 21,116,995 $ 20,975,321 CURRENT LIABILITIES Current Portion of Bonds Payable $ $ 250,000 Current Portion of Notes Payable 300, ,000 Accounts Payable and Other Accrued Expenses 386, ,929 Accrued Interest 3,021 14,929 Accrued Wages and Payroll Taxes 317, ,690 Accrued Vacation 271, ,872 Deferred Program and Camp Fee Revenue 1,016,886 1,186,073 Deferred Membership Dues 166, ,516 Funds Held - YMCA Sponsored Groups 132, ,760 Total Current Liabilities 2,594,263 2,862,769 NONCURRENT LIABILITIES Notes Payable 1,114,399 1,005,515 Long-Term Bonds Payable 6,300,000 7,175,000 Total Noncurrent Liabilities 7,414,399 8,180,515 NET ASSETS Unrestricted 9,655,029 8,827,036 Temporarily Restricted 1,160, ,910 Permanently Restricted 293, ,091 Total Net Assets 11,108,333 9,932,037 $ 21,116,995 $ 20,975,321 See accompanying notes. 4

5 CONSOLIDATED STATEMENTS OF ACTIVITIES MCGAW YMCA For the Years Ended June Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total REVENUES Support Contributions and Grants $ 2,096,184 $ 617,938 $ 150 $ 2,714,272 $ 1,148,492 $ 600,000 $ 50 $ 1,748,542 United Way 32,200 20,386 52,586 38,000 32,200 70,200 Contribution of Charitable Remainder Trust 67,533 67,533 Special Event Revenue 93,100 93,100 97,940 97,940 Net Assets Released from Restrictions Expiration of Purpose Restrictions 61,150 (61,150) 360,120 (360,120) Expiration of Time Restrictions 286,750 (286,750) 109,042 (109,042) Total Support 2,569, , ,927,491 1,753, , ,916,682 Program Revenues Membership Dues, net 3,559,737 3,559,737 3,447,492 3,447,492 Child Care Fees, net 2,791,388 2,791,388 2,685,510 2,685,510 Camp Echo Fees, net 1,675,531 1,675,531 1,445,537 1,445,537 Transient and Extended Stay (Residence) Fees, net 1,004,693 1,004,693 1,039,645 1,039,645 Program Service Fees, net 1,007,913 1,007, , ,321 Day Camp Fees, net 388, , , ,117 Fee Assistance (1,180,112) (1,180,112) (1,050,936) (1,050,936) Total Program Revenues 9,248,070 9,248,070 8,810,686 8,810,686 Other Revenues Interest and Dividends, net of Investment Expenses of $10,558 and $12, , , , ,229 Realized/Unrealized Net Gains (Losses) on Investments (500,359) (500,359) (272,128) (272,128) Forgiveness of Notes Payable 41,700 41,700 41,700 41,700 Miscellaneous 248, , , ,871 Total Other Revenues, net (67,650) (67,650) 231, ,672 Total Revenues 11,749, , ,107,911 10,795, , ,959,040 EXPENSES Program Services Residence 908, , , ,527 Membership 1,231,257 1,231,257 1,163,748 1,163,748 Health and Fitness 1,712,520 1,712,520 1,829,825 1,829,825 Youth and Family 576, , , ,317 Aquatics 919, , , ,058 Child Care 2,723,006 2,723,006 2,696,075 2,696,075 Day Camp 213, , , ,058 Camp Echo 1,285,792 1,285,792 1,168,199 1,168,199 Total Program Services 9,571,301 9,571,301 9,349,807 9,349,807 Supporting Services Management and General 644, , , ,392 Fundraising and Development 670, , , ,725 Special Event Expenses 35,279 35,279 31,826 31,826 Total Supporting Services 1,350,510 1,350,510 1,255,943 1,255,943 Total Expenses 10,921,811 10,921,811 10,605,750 10,605,750 Bad Debt Loss 9,804 9,804 10,000 10,000 CHANGE IN NET ASSETS 827, , ,176, , , ,290 Net Assets, Beginning of Year 8,827, , ,091 9,932,037 8,636, , ,041 9,588,747 NET ASSETS, ENDING $ 9,655,029 $ 1,160,063 $ 293,241 $ 11,108,333 $ 8,827,036 $ 811,910 $ 293,091 $ 9,932,037 See accompanying notes. 5

6 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES MCGAW YMCA For the Year Ended June 30, 2009 Program Services Supporting Services Total Fundraising Total Health and Youth and Program Management and Special Supporting Total Residence Membership Fitness Family Aquatics Child Care Day Camp Camp Echo Services and General Development Events Services Expenses Salaries $ 388,243 $ 633,028 $ 639,932 $ 298,912 $ 486,916 $ 1,514,709 $ 111,432 $ 536,574 $ 4,609,746 $ 152,221 $ 381,753 $ $ 533,974 $ 5,143,720 Benefits/Payroll Taxes 105, , ,872 74, , ,429 5, ,180 1,170,488 37,264 87, ,857 1,295,345 Supplies 37,666 24,101 60,369 69,771 51, ,596 44, , ,165 39,916 4,542 44, ,623 Contract Fees 29,103 19, ,335 27,401 10, ,279 4,309 31, , ,602 8,201 2, , ,380 Interest Expense 31,539 21,683 79,553 8,279 28,385 8,279 3,942 4, ,799 5,914 5,913 11, ,626 Facility Rental 14, , , ,352 Vehicle Rental and Expense 205 5,415 1,309 64,307 10, , , ,390 Promotion/Advertising 6,979 39,727 4,667 2,569 1,353 9,319 2,115 6,196 72,925 23,023 94,107 32, , ,684 Insurance 1, , , ,845 23,482 46, ,638 70,120 Bond Maintenance Costs 23,070 15,860 57,819 6,056 20,763 6,056 2,884 3, ,536 4,326 4,326 8, ,188 Bank Fees/Computer Expense 94, ,713 27, ,066 5,706 4,318 10, ,090 Dues And Subscriptions ,585 1,693 3,878 13,496 1,990 2,357 4,347 17,843 National YMCA Dues 103, , ,846 Utilities 66,916 46, ,708 17,565 60,224 79,527 8,365 45, ,161 12,547 12,547 25, ,255 Postage 3,301 13,671 7,056 1,853 1,331 7,319 1,099 4,544 40,174 8,157 8,564 16,721 56,895 Telephone 4,053 2,030 3,682 1, , ,528 34, ,326 35,596 Repairs and Maintenance 55,054 35, ,761 13,613 46,675 18,738 6,483 25, ,437 19,791 28,137 47, ,365 Training/Conference ,761 5,590 2,109 7, ,541 27,791 45,058 5,137 50,195 77,986 Laundry/Linen 2,641 26,500 5,086 34,227 34,227 Travel 2,132 2,863 5,178 1,232 2,339 8, ,639 28,831 8,722 5,212 13,934 42,765 Miscellaneous ,532 6,610 9, ,723 16,333 Real Estate Taxes 6,116 6,116 6,116 Bad Debt Expense 41,183 21,905 2, ,655 82,958 82,958 Total Expense Before Depreciation and Amortization Expense 798,955 1,169,373 1,491, , ,759 2,697, ,339 1,253,242 9,001, , ,494 35,279 1,316,756 10,318,703 Depreciation and Amortization Expense 110,013 61, ,236 25,704 81,011 25,704 11,252 32, ,354 16,877 16,877 33, ,108 TOTAL EXPENSES $ 908,968 $ 1,231,257 $ 1,712,520 $ 576,397 $ 919,770 $ 2,723,006 $ 213,591 $ 1,285,792 $ 9,571,301 $ 644,860 $ 670,371 $ 35,279 $ 1,350,510 $ 10,921,811 See accompanying notes. 6

7 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES MCGAW YMCA For the Year Ended June 30, 2008 Program Services Supporting Services Total Fundraising Total Health and Youth and Program Management and Special Supporting Total Residence Membership Fitness Family Aquatics Child Care Day Camp Camp Echo Services and General Development Events Services Expenses Salaries $ 373,310 $ 570,893 $ 689,670 $ 280,101 $ 471,607 $ 1,485,941 $ 94,314 $ 486,980 $ 4,452,816 $ 149,591 $ 374,894 $ $ 524,485 $ 4,977,301 Benefits/Payroll Taxes 98, , ,355 74, , ,445 5, ,423 1,156,803 33,673 95, ,739 1,285,542 Supplies 37,556 22,348 60,297 62,612 65, ,785 30, , ,477 45,654 4,980 50, ,111 Contract Fees 28,157 26, ,083 16,904 10, ,799 5,773 30, ,611 77,562 7,970 3,561 89, ,704 Interest Expense 48,675 33, ,992 12,777 43,807 12,777 6,085 6, ,966 9,126 9,126 18, ,218 Facility Rental 15, , , ,622 Vehicle Rental and Expense , ,382 6,669 87, , ,687 Promotion/Advertising 6,220 73,187 4,481 2,633 1,404 7,723 2,194 6, ,277 23,784 30,425 28,265 82, ,751 Insurance 1, , , ,432 24,576 50, ,964 75,540 Bond Maintenance Costs 16,366 11,252 41,017 4,296 14,729 4,296 2,046 2,148 96,150 3,069 3,069 6, ,288 Bank Fees/Computer Expense 87,867 32,153 25, ,864 1,410 1,569 2, ,843 Dues And Subscriptions ,811 2,182 3,791 12,040 3,290 1,110 4,400 16,440 National YMCA Dues 103, , ,135 Utilities 75,359 51, ,868 19,782 67,822 88,295 9,420 48, ,185 14,130 14,130 28, ,445 Postage 4,227 18,976 9,085 2,200 1,796 9,510 1,448 4,110 51,352 10,895 5,942 16,837 68,189 Telephone 4,311 2,077 3,004 1, , ,299 33,927 1,250 1,017 2,267 36,194 Repairs and Maintenance 43,024 28, ,586 11,050 37,886 14,986 5,262 31, ,505 12,960 17,534 30, ,999 Training/Conference ,586 4, , ,084 25,992 45,986 3,745 49,731 75,723 Laundry/Linen 3,882 23,905 3,370 31,157 31,157 Travel 4,863 1,652 6,066 1,187 2,995 7, ,704 32,650 11,674 2,339 14,013 46,663 Miscellaneous ,895 5,791 20, ,046 25,837 Real Estate Taxes 5,996 5,996 5,996 Bad Debt Expense (1,102) 920 1,957 1,775 1,775 Total Expense Before Depreciation and Amortization Expense 746,593 1,103,294 1,592, , ,918 2,671, ,066 1,141,670 8,779, , ,237 31,826 1,222,967 10,002,160 Depreciation and Amortization Expense 107,934 60, ,045 24,260 79,140 24,260 10,992 26, ,614 16,488 16,488 32, ,590 TOTAL EXPENSES $ 854,527 $ 1,163,748 $ 1,829,825 $ 539,317 $ 917,058 $ 2,696,075 $ 181,058 $ 1,168,199 $ 9,349,807 $ 634,392 $ 589,725 $ 31,826 $ 1,255,943 $ 10,605,750 See accompanying notes. 7

8 CONSOLIDATED STATEMENTS OF CASH FLOWS MCGAW YMCA For the Years Ended June CASH FLOWS FROM OPERATING ACTIVITIES Change in Net Assets $ 1,176,296 $ 343,290 Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities Depreciation and Amortization 603, ,590 Amortization of Deferred Financing Costs 68,332 26,032 Unrealized/Realized Net Losses on Investments 500, ,128 Allowance for Uncollectible Pledges (10,000) 10,000 Donated Property and Equipment (15,805) (14,519) Gain on Sale of Property and Equipment (1,000) Forgiveness of Notes Payable (41,700) (41,700) Changes in Operating Assets and Liabilities: (Increase) Decrease in: Accounts Receivable 80,992 (122,354) Pledges Receivable (331,770) (247,200) Prepaid Expenses 8,511 10,341 Contribution Receivable - Charitable Remainder Trust (67,533) Increase (Decrease) in: Accounts Payable and Other Accrued Expenses 51,490 (59,509) Accrued Interest (11,908) (12,030) Accrued Wages and Payroll Taxes 34,920 51,934 Accrued Vacation 9,350 31,826 Deferred Program and Camp Fee Revenue (225,129) (16,559) Funds Held - YMCA Sponsored Groups (17,561) (20,926) Annuity Payable (13,932) Total Adjustments 634, ,122 Net Cash Provided by Operating Activities 1,810, ,412 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of Property and Equipment (856,829) (331,420) Sales of Property and Equipment 1,000 Proceeds from Sales of Investments 800,000 2,350,004 Purchases of Investments (1,164,215) (1,374,777) Net Cash Provided (Used) by Investing Activities (1,220,044) 643,807 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Notes Payable Borrowing 605,000 Principal Payments on Notes Payable (314,084) (160,000) Principal Payments on Bonds Payable (1,125,000) (250,000) Net Cash Used by Financing Activities (834,084) (410,000) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (243,176) 1,034,219 Cash and Cash Equivalents, Beginning 2,323,580 1,289,361 CASH AND CASH EQUIVALENTS, ENDING $ 2,080,404 $ 2,323,580 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash Paid for Interest $ 209,367 $ 316,248 See accompanying notes. 8

9 NATURE OF ORGANIZATION The mission of the McGaw YMCA (the Association) is to develop responsible, honest, respectful and caring youth and adults through the promotion of health spirit, mind, and body in an open membership association organized to serve its diverse community. The Association also provides a wide range of programs and services to the community including temporary housing facilities. The Association is supported primarily through member dues, donor contributions, governmental loans, program service fees and the United Way. One donor contributed $1,667,533, comprised of $1,000,000 in cash, $600,000 pledge receivable due in the near future, and $67,533 representing the present value of a Charitable Remainder Unit Trust of which the Association is a 33% beneficiary. NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies is presented to assist in understanding the Association s financial statements. The financial statements and notes are representations of management who is responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. BASIS OF CONSOLIDATION The financial statements of the Association and the YMCA Camp Echo Corporation have been consolidated in accordance with the standards for consolidation under Statement of Position All inter-organizational transactions have been eliminated in consolidation. BASIS OF ACCOUNTING The accompanying financial statements have been prepared using the accrual basis of accounting. Therefore, revenues are recognized when earned and expenses are recognized when incurred. BASIS OF PRESENTATION Financial statement presentation follows the requirements of the Financial Accounting Standards Board in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for-Profit Organizations. Under SFAS No. 117, the Association is required to report information regarding its financial position and activities into three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. These classes of net assets are based on the existence or absence of externally (donor) imposed restrictions. Accordingly, net assets of the Association and changes therein are classified and reported as follows: UNRESTRICTED NET ASSETS Unrestricted net assets are not subject to donor-imposed stipulations and reflect revenues earned and expenses incurred in the operation of all Association activities. Contributions and grants received with restrictions that are met in the same year are reported as revenues of the unrestricted net asset class. Investment earnings are reported as revenue in unrestricted net assets unless such amounts are restricted by the donor. Earnings restricted and expended within the same year are reported as revenues of the unrestricted net asset class. 9

10 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) BASIS OF PRESENTATION (Continued) TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are subject to donor-imposed stipulations that can be removed through the passage of time (time restrictions) or actions of the Association (purpose restrictions). A significant portion of these net assets results from pledges receivable that have an implied donor-imposed restriction, which will elapse with the passage of time. PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets are subject to restrictions imposed by donors who require that the principal of these classes of net assets be invested in perpetuity and only the investment earnings be expended. USE OF ESTIMATES The preparation of 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. CASH EQUIVALENTS Cash and cash equivalents are comprised of petty cash, cash in banks and money market funds. Money market funds are recorded at cost, which approximates fair value. ACCOUNTS RECEIVABLE Receivables consisting of program fees are reported at net realizable value, which is the amount management expects to collect from balances outstanding at year-end. Based on management s assessment of the credit history of individuals having outstanding balances and taking into consideration the age of past due accounts, an assessment of the ability to pay, as well as current relationships, management considers receivables to be fully collectible at June 30, 2009 and Accordingly, no allowance for doubtful accounts is required. Individual accounts are written off when collection appears doubtful. DEFERRED FINANCING COSTS Deferred financing costs represent the unamortized balance of costs associated with the issuance of tax-exempt bonds and loan acquisition costs. These costs are amortized over 2 to 25 years through 2026, which are the maturity dates of the related bonds and the term of the loans. Amortization expense was $68,332 for 2009 due to the early retirement of certain bonds (See Note 8) and $26,032 for Amortization expense for each of the next five years is expected to be $15,

11 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) INVESTMENTS Investments consist of marketable securities that are stated at fair market value based on quoted market prices. Unrealized gains or losses on such securities are based on the change in market value of the assets from the beginning to the end of the fiscal year. Realized gains or losses are based on the change in market value of the assets from the beginning of the fiscal year to the date of sale. PROPERTY AND EQUIPMENT Property and equipment purchases of $500 or more are recorded at cost and depreciated over their estimated useful lives on a straight-line basis. Major renewals and betterments, which extend the useful life of an asset, are capitalized while routine maintenance and repairs are expensed as incurred. Gains or losses on dispositions of property and equipment are included in the Statements of Activities. Asset Building and Building Improvements... Vehicles, Furniture and Equipment... Computer Hardware... Computer Software... Useful Life 40 years 5-8 years 5 years 3 years PUBLIC SUPPORT AND PLEDGES RECEIVABLE Public support consists of cash and securities received from donors. Securities and other assets received as contributions are recorded at fair market value at the date of gift. During the year ended June 30, 2009, the Association received $15,805 of donated vehicles. Unconditional promises to give contributions are recorded as revenue when the promises are received. These pledges receivable have been discounted to their estimated present values. Management assesses the collectibility of pledges receivable based on historical experience and has established an allowance for uncollectible pledges accordingly. When amounts are determined to be uncollectible they are written off and charged to Bad Debt Loss. CONTRIBUTED FACILITIES AND SERVICES The Association utilizes, at no cost, a parking lot owned by a third party. As no fair value is provided to the Association, the contributed facilities and corresponding expense are not reflected in the financial statements. In addition, a significant amount of donated services are contributed to the Association by various individuals who volunteer their time and perform a variety of tasks that assist the Association with specific programs and various committee assignments. The Association received more than 29,000 volunteer hours for 2009 and 26,000 volunteer hours for The value of these services is not reflected in these financial statements since they do not meet the criteria for recognition under SFAS No. 116, Accounting for Contributions Received and Contributions Made. 11

12 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) PROGRAM FEES, GRANTS AND DEFERRED REVENUE Program fees and grant revenues are recognized as revenue when earned. Certain organizations involved in exchange transactions may specify monies be used in a specific future period and, as such, they are initially recorded as deferred revenue, and are then recognized in the period for which they were designated. FUNCTIONAL ALLOCATION OF EXPENSES Expenses are charged to programs and supporting services on the basis of periodic time and expense studies as well as direct allocation of expenses incurred. 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 Association. In 2009, Building Service Expenses totaling $1,515,536 were allocated by program on the Statements of Functional Expenses. Building Services Expenses included Salaries and Wages of $468,876, Benefits of $128,112, Utilities of $418,225, Maintenance of $324,130 and various other items. In 2008, Building Service Expenses totaling $1,524,575 were also allocated by program and included Salaries and Wages of $484,726, Benefits of $130,593, Utilities of $470,993, Maintenance of $263,099 and various other items. INCOME TAXES The Association is a nonprofit organization which has been granted an exemption from federal income taxes as a public charity under Section 501(c)(3) of the Internal Revenue Code for all business income related to its tax-exempt purpose. No unrelated business income tax provisions were required for 2009 or The Association is similarly classified by the State of Illinois. CONCENTRATION OF CREDIT RISK The Association maintains cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits. The Association has not experienced any losses in such accounts and believes they are not exposed to any significant credit risk on cash and cash equivalents. NOTE 2 INVESTMENTS Current and noncurrent investments consist of the following: Equities...$ 1,050,323 $ 1,522,793 Federal HOME Loan Bank Notes , ,131 Corporate Bonds... 1,020, ,338 Certificates of Deposit , ,000 Municipal Bonds... 73, $ 2,958,118 $ 3,094,262 The above totals do not include $1,064,138 of money market funds at June 30, 2009 and $1,439,367 at June 30, 2008 which is included in cash and cash equivalents on the Statements of Financial Position. 12

13 NOTE 3 PLEDGES RECEIVABLE Pledges receivable represent unconditional promises to give. Pledges at June 30 consist of items receivable in: Less than One Year...$ 256,424 $ 370,104 One to Five Years , , , ,104 Less: Discount to Net Present Value... 39,350 74,800 Less: Allowance for Uncollectible Pledges , , , ,300 Net Pledges Receivable , ,804 Less: Current Portion , ,604 Long Term Portion...$ 270,650 $ 425,200 The discount rate used in determining the net present value of pledges receivable is 6%. There were pledges receivable from Board members and employees totaling $202,720 at June 30, 2009 and $309,804 at June 30, NOTE 4 CHARITABLE REMAINDER TRUST The Association was named as a beneficiary of a charitable remainder trust that began in The charitable remainder trust provides for the payment of distributions to the designated beneficiary over the designated beneficiary s lifetime. At the end of the trust s term, one-third of the remaining assets are available for the Association s use. The portion of the trust attributable to the present value of the future benefits to be received by the Association is recorded in the statements of activities as a temporarily restricted contribution in 2009, when the Organization was notified of the trust and in the statements of financial position as a beneficial interest in a charitable remainder trust. The Association has not been designated as the trustee of the trust and, therefore, does not hold any of the trust assets, nor is liable for payment of distributions to the beneficiary. The present value of the estimated future payments was calculated using a discount rate of 8.00% and the estimated life expectancy of the beneficiary. NOTE 5 FAIR VALUE MEASUREMENTS Financial Accounting Standards Board Statement No. 157, Fair Value Measurements (FASB Statement No. 157), establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB Statement No. 157 are described below: 13

14 NOTE 5 FAIR VALUE MEASUREMENTS (Continued) Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access. Level 2 Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2009 and Level 1 Fair Value Measurements The fair values of common stock, equity mutual funds, corporate bonds, municipal bonds and U.S. government securities are available are based on quoted market prices, when available. Level 2 Fair Value Measurements The Association did not value any assets using level 2 inputs. Level 3 Fair Value Measurements The fair value of the certificates of deposit is based on amortized cost or original cost plus accrued interest. The beneficial interest in a charitable remainder trust is not actively traded and significant other observable inputs are not available. Thus, the fair value of the beneficial interest in the charitable remainder trust is determined by discounting the related cash flows based on current yields of similar instruments with comparable durations. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. 14

15 NOTE 5 FAIR VALUE MEASUREMENTS (Continued) Fair values of assets measured on a recurring basis at June 30, 2009 are as follows: Quoted Prices in Active Markets for Significant Identical Unobservable Assets Inputs Fair Value (Level 1) (Level 3) Investments...$ 2,958,118 $ 2,344,190 $ 613,928 Contribution Receivable - Beneficial Interest in Charitable Remainder Trust... 67,533 67,533 Total Assets...$ 3,025,651 $ 2,344,190 $ 681,461 Fair values of assets measured on a recurring basis at June 30, 2008 are as follows: Quoted Prices in Active Markets for Significant Identical Unobservable Assets Inputs Fair Value (Level 1) (Level 3) Investments...$ 3,094,262 $ 2,894,262 $ 200,000 Fair values for investments are determined by reference to quoted market prices and other relevant information generated by market transactions. Fair value for the contribution receivable from a charitable remainder trust is determined by calculating the present value of the future distributions expected to be received, using published life expectancy tables and a 6.00% discount rate. The table below presents information about the changes in the contribution receivable beneficial interest in term trust, which is measured at fair value on a recurring basis using significant unobservable inputs: Balance, July 1, $ 200,000 Purchases and Maturities of Certificates of Deposit ,076 Change in Market Values... 17,852 Contribution of Charitable Remainder Trust... 67,533 June 30, $ 681,461 The change in value in beneficial interest is included in other gains and losses in the statement of activities and is related to an asset still held at the statement of financial position date. 15

16 NOTE 6 PROPERTY AND EQUIPMENT Property and equipment consist of the following: Land...$ 1,015,484 $ 1,015,484 Building... 1,479,126 1,354,629 Building Improvements... 18,399,179 17,918,731 Furniture and Equipment... 2,611,235 2,478,739 Computer Hardware , ,419 Computer Software , ,550 Vehicles , ,931 24,217,117 23,404,483 Accumulated Depreciation and Amortization... 9,753,056 9,209,948 $ 14,464,061 $ 14,194,535 Depreciation and Amortization Expense...$ 603,108 $ 603,590 NOTE 7 NOTES PAYABLE Note Payable to Illinois Housing Development Authority (IHDA) in connection with the funding of the rehabilitation work on the residence floors. The loan is a 20-year term due April 1, 2016, at 0% interest, with the entire principal balance forgiven at maturity unless certain material defaults exist as defined in the loan agreement. The note is secured by a third mortgage on the property, as well as other security and collateral as detailed in the Third Mortgage, Security Agreement and Collateral Assignment of Rents and Leases Agreement (See Note 10 for additional information)....$ 415,891 $ 415,891 Note Payable to County of Cook, Illinois (lender) under its HOME Investment Partnership Program in connection with the funding of the rehabilitation work on the residence floors. The loan will be forgiven at the rate of 1/20th of the principal amount annually if the Association is in compliance with the rules and regulations of the HOME program as determined by an annual review by the lender. The maturity date of the loan is December 1, The note is secured by a junior mortgage on the property, as well as other security and collateral as detailed in the HOME Investment Partnerships Loan Agreement (See Note 10 for additional information) , ,624 16

17 NOTE 7 NOTES PAYABLE (Continued) Note Payable to officer, annual principal payments of $100,000 with accrued interest at 6.32% compounded and payable annually. The maturity date of the loan is June 1, , ,000 Note Payable to JPMorgan Chase Bank, N.A., monthly principal payments of $5,694 plus accrued interest at the adjusted rate (LIBOR [1.68% at June 30, 2009] plus.175%). The maturity date of the loan is March 15, , ,000 Note Payable to Harris, N.A., monthly principal payments of $11,000 plus accrued interest at the prime rate (3.25% at June 30, 2009) less.75%. The maturity date of the loan is November 30, ,000 1,414,731 1,165,515 Less Current Portion , ,000 Long-Term Portion...$ 1,114,399 $ 1,005,515 Principal repayments due for the years ending June 30, 2009 through 2011 are $100,000 for the Note Payable to an officer and $68,332 per year through 2012 for the Note Payable to JPMorgan Chase Bank, N.A. and $132,000 per year through 2011 for the Note Payable to Harris Bank N.A. The expected forgiveness of the Note Payable to the County of Cook under the HOME Investment Partnership Program is $41,700 per year through the maturity date. NOTE 8 BONDS PAYABLE Bond Payable to Illinois Development Finance Authority in connection with the issuance of Adjustable Rate Demand Revenue Bonds, at rates from 5% to 8% secured by two irrevocable letters of credit issued by a bank (See Note 9 for additional information). The bonds were retired in $ --- $ 1,125,000 Bond Payable (Series 2002) to Illinois Development Finance Authority in connection with the issuance of Adjustable Rate Demand Revenue Bonds, at a rate of 3.7%, secured by an irrevocable letter of credit issued by a bank (See Note 11 for additional information).... 6,300,000 6,300,000 6,300,000 7,425,000 Less Current Portion ,000 Long-Term Portion...$ 6,300,000 $ 7,175,000 17

18 NOTE 8 BONDS PAYABLE (Continued) Maturities or mandatory redemptions (if earlier) on the above debt are as follows: Year Ending June $ 400, , , , ,000 Thereafter... 4,300,000 NOTE 9 CONSTRUCTION FINANCING AND CREDIT ARRANGEMENTS AQUATICS CENTER $ 6,300,000 In connection with the construction of the Aquatic Center and the rehabilitation of the Residence Facility ( The Project ), the Association entered into a loan agreement with the Illinois Development Financing Authority (IDFA) to borrow $3,500,000 through the issuance by IDFA of Adjustable Rate Demand Revenue Bonds. As security for this loan, two irrevocable letters of credit were obtained from a bank. Due to early retirement of the bonds, the letters of credit totaled $-0- at June 30, The balance at June 30, 2008 was $1,201,875. In connection with the two letters of credit issued by the bank, the Association has provided as security a mortgage on its premises. The bank had also imposed certain financial tests and other covenants which were described fully in the Reimbursement Agreement that was entered into at the time the letters of credit were established. Bond issuance costs incurred for services in connection with the bond financing totaled $235,398. Additional bond reissuance costs of $54,654 were incurred during the fiscal year ended June 30, Unamortized bond issuance costs have been written off at June 30, 2009 due to the early retirement of the bonds. Both phases of the Project were substantially completed as of June 30, NOTE 10 CONSTRUCTION FUNDING AND LOAN ARRANGEMENTS RESIDENCE FACILITY In connection with the rehabilitation of the Residence Facility, the Association entered into loan agreements with the Illinois Housing Development Association (IHDA) and County of Cook, Illinois under its HOME Investment Partnership Program to borrow $1,334,000. As security for these loans various mortgage and other collateral agreements were entered into (See Note 7). Loan acquisition costs incurred for services in connection with the above loan financing totaled $46,166. The construction was substantially completed at June 30,

19 NOTE 11 CONSTRUCTION FUNDING AND LOAN ARRANGEMENTS FAMILY ACTIVITY CENTER In connection with the construction of the Family Activity Center, the Association entered into a loan agreement with IDFA to borrow $6,300,000 through the issuance by IDFA of Adjustable Rate Demand Revenue Bonds. As security for this loan, an irrevocable letter of credit was obtained from a bank. The letter of credit totaled $6,405,000 at June 30, 2009 and June 30, The letter of credit expires May 30, Various agreements have been entered into with IDFA. In connection with the letter of credit issued by the bank, the Association has provided as security a mortgage on its premises. The bank has also imposed certain financial tests and other covenants which are described fully in the Reimbursement Agreement that was entered into at the time the letter of credit was established. Bond issuance costs incurred for services in connection with the bond financing totaled $354,097. The bonds were issued in June A cash escrow account was established to handle the disbursement of the funds. There was no balance in this account at June 30, 2009 and June 30, The Family Activity Center began operations in July NOTE 12 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at June 30 were as follows: Pledges Receivable...$ 405,636 $ 681,804 Foster Reading Program... 17,938 Robert Ingram Leitch Memorial Fund... 50,000 50,000 Donald B. Calhoun Memorial Fund... 1,000 Carlyle E. and Elizabeth W. Anderson Fund... 18,956 18,956 Camp Echo... 60,150 $ 492,530 $ 811,910 The principal of $50,000 for the Robert Ingram Leitch Memorial Fund was donated on October 13, The principal is restricted for 50 years under the terms of Mr. Leitch s will. Investment earnings will be distributed to support youth programs annually. Certain pledges receivable are restricted for specific purposes by the donors as follows: $300,000 is restricted for locker room renovations. The remaining temporarily restricted net assets are time restricted. Camp Echo amounts were restricted for camp renovations and were released from restriction in the current period as these restrictions have been met during the fiscal year. 19

20 NOTE 13 DONOR DESIGNATED ENDOWMENT/PERMANENTLY RESTRICTED NET ASSETS In August 2008, the Financial Accounting Standards Board issued FASB Staff Position No. FAS 117-1, Endowments of Not-for-Profit Organization: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds (FSP FAS 117-1). FSP FAS provides guidance on the net asset classification of donor-restricted endowment funds for a nonprofit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA). FSP FAS also requires additional disclosures about an organization s endowment funds (both donor-restricted endowment funds and board-designated endowment funds) whether or not the organization is subject to UPMIFA. The State of Illinois enacted UPMIFA effective June 30, 2009, the provisions of which apply to endowment funds existing on or established after that date. The Association has implemented FSP FAS for the year ending June 30, The Board of Directors has determined that the majority of the Association s permanently restricted net assets meet the definition of endowment funds under UPMIFA. Based on the Association s interpretation of UPMIFA, Association management has reviewed all of its endowment funds, and has created a document stating the purpose for each fund and the board has reviewed and approved all fund designations. Thus for the year ended June 30, 2009, the Association follows the Uniform Management of Institutional Funds Act of 1972 (UMIFA) and its own governing documents. UMIFA requires the historical dollar amount of a donor-restricted endowment fund to be preserved. In the absence of donor restrictions, the net appreciation on a donor-restricted endowment fund is spendable under UMIFA. Some of the Association s donors have placed restrictions on the use of the investment income or net appreciation resulting from the donor-restricted endowment funds, and these are recorded as temporarily restricted until released from restriction when the intended purpose has been met. The Board of Directors has determined that the majority of the Association s contributions are subject to the terms of its governing documents. Certain contributions are received subject to other gift instruments, or are subject to specific agreements with the Association. Under the terms of the Association s governing documents, the Board of Directors has the ability to distribute so much of the original principal of any trust or separate gift, devise, bequest, or fund, as the Board in its sole discretion shall determine. As a result of the ability to distribute the original principal, all contributions not classified as temporarily restricted or permanently restricted are classified as unrestricted net assets for financial statement purposes. Endowment Investment and Spending Policies. The Association has adopted investment and spending polices, approved by the Board of Directors, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of these endowment assets over the long-term. The Association s spending and investment policies work together to achieve this objective. The investment policy establishes an achievable return objective through diversification of asset classes. The current long-term return objective is to return 4%, net of investment fees. Actual returns in any given year may vary from this amount. To satisfy its long-term rate-of-return objectives, the Association relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Association targets a diversified asset allocation that places an emphasis on U.S. Government bonds, corporate bonds, money market, and equity-based investments to achieve its long-term return objectives within prudent risk parameters. 20

21 NOTE 13 DONOR DESIGNATED ENDOWMENT/PERMANENTLY RESTRICTED NET ASSETS (Continued) The spending policy calculates the amount of money annually distributed from the Association s various endowed funds to support the mission of the Association. The current policy is to transfer to the Operating account an annual average of 4% of funds invested in the Association s Wealth Accumulation Strategy (equity holdings of at least 10 years). For each fiscal year s budget, the Board shall authorize for the following fiscal year a fund payout within the range of 0% to 5% based on a March 31 st evaluation. Accordingly, over the long-term, the Association expects its current spending policy to allow its endowment assets to grow. This is consistent with the Association s objective to maintain the purchasing power of endowment assets as well as to provide additional real growth through investment return. Endowment net asset composition by type of fund as of June 30, 2009 is as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-Restricted Endowment Funds... $ (19,064) $ 24,550 $ 293,241 $ 298,727 Changes in endowment net assets as of June 30, 2009 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment Net Assets, July 1, $ $ 50,000 $ 293,091 $ 343,091 Contributions Investment Income... 5,166 6,896 12,062 Net Depreciation... (18,350) (24,496) (42,846) Amounts Appropriated for Expenditure... (5,880) (7,850) (13,730) Endowment Net Assets, June 30, $ (19,064) $ 24,550 $ 293,241 $ (298,727) Permanently restricted net assets are endowment funds restricted in perpetuity to continue the traditions of the Association. Income generated by these assets is used for various programs as designated in the endowment agreements. Permanently restricted net assets at June 30 are as follows: The Richard C. Romano Endowment Fund...$ 102,016 $ 102,016 The Jerry Chiss Memorial Fund... 10,150 10,000 James D. Vail Endowment Fund , ,000 Kristin Kent Nature Trail Fund... 25,000 25,000 Roth Holtz Fund... 9,075 9,075 $ 293,241 $ 293,091 21

22 NOTE 14 FEE ASSISTANCE Fee assistance by program consists of the following: Membership Dues...$ 642,625 $ 565,182 Child Care Fees , ,970 Camp Echo Fees... 98,888 74,727 Transient and Extended Stay (Residence) Fees... 42,858 40,781 Program Service Fees... 47,632 34,715 Day Camp Fees... 31,354 26,561 NOTE 15 LEASED FACILITIES $ 1,180,112 $ 900,936 The Association entered into a ten-year lease with St. Mary s School in Evanston beginning August 1, 1995 through July 31, 2005 for space to be utilized for a day care/child care center, recreational programs and office and meetings. The initial annual base rent of the lease was $180,000 with a 1% annual increase over the prior year. The lease was extended through July 31, Beginning June 1, 2008, the Association entered into a new five-year lease agreement for office space with Family Focus with an annual escalation clause. Monthly rent for the first year was $625 per month. Future minimum lease payments are: Year Ending June , , , ,741 Aggregate Future Minimum Rentals... $ 276,359 Rent expense was $217,352 for 2009 and $216,622 for NOTE 16 RETIREMENT PLAN All employees of the Association, age 21 or older, who have 24 months of service and have worked 1,000 hours in each year are eligible to participate in the YMCA Retirement Fund. The necessary two years are not required to be consecutive. The Plan requires participants to contribute 5% of compensation, and the Association to contribute 7% of participants compensation. The Association has agreed through its personnel policies to pay the participants contributions for all eligible employees. The retirement plan expense was $329,996 for 2009 and $352,695 for NOTE 17 RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to current year presentation. NOTE 18 SUBSEQUENT EVENTS Management has evaluated subsequent events through September 25, 2009, the date which the financial statements were available for issue. There were no subsequent events which require disclosure. 22