THE JEWISH COMMUNITY CENTER OF GREATER KANSAS CITY AND AFFILIATED ENTITY CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2016

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1 THE JEWISH COMMUNITY CENTER OF GREATER KANSAS CITY AND AFFILIATED ENTITY CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2016

2 Contents Page Independent Auditors Report Consolidated Financial Statements Consolidated Statement Of Financial Position... 3 Consolidated Statements Of Activities Consolidated Statements Of Functional Expenses Consolidated Statement Of Cash Flows... 8 Notes To Consolidated Financial Statements

3 RubinBrown LLP Certified Public Accountants & Business Consultants 1200 Main Street Suite 1000 Kansas City, MO T F W rubinbrown.com E info@rubinbrown.com Independent Auditors Report Board of Directors The Jewish Community Center of Greater Kansas City and Affiliated Entity Overland Park, Kansas Report On The Consolidated Financial Statements We have audited the accompanying consolidated financial statements of The Jewish Community Center of Greater Kansas City and Affiliated Entity, which comprise the consolidated statement of financial position as of September 30, 2016 and 2015, and the related consolidated statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility For The Consolidated 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 audits. We conducted our audits 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.

4 Board of Directors The Jewish Community Center of Greater Kansas City and Affiliated Entity 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 The Jewish Community Center of Greater Kansas City and Affiliated Entity as of September 30, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis Of Matter As discussed in Note 2 to the financial statements, in fiscal year 2016, the Jewish Community Center of Greater Kansas City and Affiliated Entity adopted new accounting guidance within the Accounting Standards Codification caused by Accounting Standards Update (ASU) , Fair Value Measurement (Topic 820) Disclosures for Investments in Certain Entities That Calculate Net Asset Value Per Share (or Its Equivalent). Our opinion is not modified with respect to this matter. January 24, 2017 Page 2

5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets September 30, Current Assets Cash $ 752,334 $ 663,432 Accounts receivable, net of allowance of $16,396 in 2016 and $14,909 in ,567 87,251 Promises to give 15,000 20,000 Prepaid expenses and other assets 168, ,114 Total Current Assets 1,152, ,797 Property And Equipment Leasehold improvements 5,576,273 5,577,826 Equipment 1,298,149 1,501,788 Total Property And Equipment 6,874,422 7,079,614 Less: Accumulated depreciation 2,456,233 2,449,570 Net Property And Equipment 4,418,189 4,630,044 Other Assets Promises to give 9,690 19, (b) plan assets 34,347 9,716 Investments 10,920,148 9,790,096 Total Other Assets 10,964,185 9,818,882 Total Assets $ 16,534,750 $ 15,330,723 Liabilities And Net Assets Current Liabilities Accounts payable and accrued expenses $ 584,564 $ 500,638 Unearned dues and revenues and other liabilities 486, ,346 Total Current Liabilities 1,071, , (b) Plan Long-Term Liability 34,347 9,716 Net Assets Unrestricted: Board-designated 5,491,500 4,716,998 Undesignated 3,769,284 4,010,961 9,260,784 8,727,959 Temporarily restricted 4,018,534 3,457,751 Permanently restricted 2,149,641 2,140,313 Total Net Assets 15,428,959 14,326,023 Total Liabilities And Net Assets $ 16,534,750 $ 15,330,723 See the accompanying notes to consolidated financial statements. Page 3

6 CONSOLIDATED STATEMENT OF ACTIVITIES For The Year Ended September 30, 2016 Revenues, Gains And Other Support Contributions: Agency allocations Jewish Federation of Greater Kansas City 383,700 Temporarily Permanently Unrestricted Restricted Restricted Total $ $ $ $ 383,700 United Way of Greater Kansas City 110, ,501 Contributions and bequests 570, , ,650 Fundraising events 1,010,876 1,010,876 Grants 273, , ,143 Membership dues 2,366,313 2,366,313 Investment return 338, ,378 9, ,680 Tuition and program fees: Early childhood 2,429,397 2,429,397 Day camps 606, ,260 Adult programs 9,144 9,144 Fitness and sports 1,623,159 1,623,159 Children and youth programs 286, ,613 Senior adult programs 83,949 83,949 Cultural arts 315, ,456 Miscellaneous income 23,177 23,177 10,431, ,254 9,328 11,278,018 Change in classification of net assets (117,000) 117,000 Net assets released from restrictions 393,471 (393,471) Total Revenues, Gains And Other Support 10,707, ,783 9,328 11,278,018 Expenses Program and membership services: Early childhood 2,397,786 2,397,786 Day camps 528, ,901 Adult programs 161, ,103 Fitness and sports 2,825,385 2,825,385 Children and youth programs 351, ,366 Senior adult programs 461, ,259 Cultural arts 580, ,016 Total program and membership services 7,305,816 7,305,816 Support services: Endowment support 168, ,887 Fundraising 223, ,495 Management and general 2,476,884 2,476,884 Total support services 2,869,266 2,869,266 Total Expenses 10,175,082 10,175,082 Change In Net Assets 532, ,783 9,328 1,102,936 Net Assets - Beginning Of Year 8,727,959 3,457,751 2,140,313 14,326,023 Net Assets - End Of Year $ 9,260,784 $ 4,018,534 $ 2,149,641 $ 15,428,959 See the accompanying notes to consolidated financial statements. Page 4

7 CONSOLIDATED STATEMENT OF ACTIVITIES For The Year Ended September 30, 2015 Revenues, Gains And Other Support Contributions: Agency allocations Jewish Federation of Greater Kansas City 374,200 Temporarily Permanently Unrestricted Restricted Restricted Total $ $ $ $ 374,200 United Way of Greater Kansas City 109, ,998 Contributions and bequests 601, , ,342 Fundraising events 993, ,374 Grants 236, , ,288 Membership dues 2,233,046 2,233,046 Investment loss (200,656) (389,288) (589,944) Tuition and program fees: Early childhood 2,382,739 2,382,739 Day camps 482, ,647 Adult programs 9,944 9,944 Fitness and sports 1,347,293 1,347,293 Children and youth programs 273, ,501 Senior adult programs 85,211 85,211 Cultural arts 298, ,379 Miscellaneous income 28,212 28,212 9,256,003 (136,773) 9,119,230 Net assets released from restrictions 675,032 (675,032) Total Revenues, Gains And Other Support 9,931,035 (811,805) 9,119,230 Expenses Program and membership services: Early childhood 2,324,205 2,324,205 Day camps 470, ,198 Adult programs 179, ,841 Fitness and sports 2,580,096 2,580,096 Children and youth programs 353, ,494 Senior adult programs 481, ,131 Cultural arts 569, ,813 Total program and membership services 6,958,778 6,958,778 Support services: Endowment support 73,241 73,241 Fundraising 221, ,897 Management and general 2,277,014 2,277,014 Total support services 2,572,152 2,572,152 Total Expenses 9,530,930 9,530,930 Change In Net Assets 400,105 (811,805) (411,700) Net Assets - Beginning Of Year 8,327,854 4,269,556 2,140,313 14,737,723 Net Assets - End Of Year $ 8,727,959 $ 3,457,751 $ 2,140,313 $ 14,326,023 See the accompanying notes to consolidated financial statements. Page 5

8 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES For The Year Ended September 30, 2016 Management Children Senior And Endowment Early Day Adult Fitness And And Youth Adult Cultural General Fundraising Support Childhood Camps Programs Sports Programs Programs Arts Total Salaries $ 1,164,486 $ 31,293 $ $ 1,488,135 $ 267,078 $ 71,941 $ 1,446,865 $ 193,033 $ 277,444 $ 231,947 $ 5,172,222 Employee health and retirement benefits 157,198 4, ,976 15,000 10, ,594 15,663 38,830 19, ,253 Payroll taxes and other employee-related expenses 78,852 2, ,571 19,543 5, ,152 14,514 20,813 18, ,191 Occupancy costs 44,809 7, ,396 62,441 3, ,846 42,618 47,879 15,078 1,015,249 Professional fees and contract services 106,206 91,883 52,927 24,285 21,842 45, , , , ,817 Bank fees and service charges 132, ,176 Supplies 23,443 48,482 32,316 42,444 42,654 5, ,412 14,137 21,093 97, ,507 Food, beverage and related expenses 10,780 17,651 1,595 32,737 31,899 1,376 4,112 3, ,360 2, ,664 Insurance 65,077 65,077 Telephone 7,324 2, ,097 1,782 1,733 2,757 23,992 Printing 3,830 6,528 4,089 3,916 5,791 6,866 6,606 1,144 3,469 26,135 68,374 Transportation 1,576 3,996 23,169 4,650 7,124 54,750 68,053 1, ,666 Conferences 27,572 3,771 7, , ,327 Postage 8, , ,760 15,082 Equipment contracts, rental and repairs 55,031 71,943 9,514 2,143 22,437 13,560 2, ,292 Automobile expenses 6,000 6,000 National origination dues 73,981 1,744 2,300 78,025 Bad debt 7,298 7,298 Advertising 35,841 8,169 6,567 5,391 2,109 10,569 68,646 Interdepartmental transfers (53,880) ,155 4,616 3,330 29,285 9,205 (206,998) 10,024 Miscellaneous 161,479 2,246 7,433 23,192 25, , ,919 2,117, , ,887 2,397, , ,103 2,825, , , ,016 9,815,777 Depreciation 355, ,918 Loss on sale of equipment 3,387 3,387 $ 2,476,884 $ 223,495 $ 168,887 $ 2,397,786 $ 528,901 $ 161,103 $ 2,825,385 $ 351,366 $ 461,259 $ 580,016 $ 10,175,082 See the accompanying notes to consolidated financial statements. Page 6

9 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES For The Year Ended September 30, 2015 Management Children Senior And Endowment Early Day Adult Fitness And And Youth Adult Cultural General Fundraising Support Childhood Camps Programs Sports Programs Programs Arts Total Salaries $ 1,041,590 $ 20,855 $ $ 1,472,024 $ 267,820 $ 86,713 $ 1,311,413 $ 206,924 $ 221,405 $ 210,766 $ 4,839,510 Employee health and retirement benefits 147,113 4, ,892 14,006 12,693 92,560 19,486 27,597 23, ,630 Payroll taxes and other employee-related expenses 70,391 1, ,636 19,625 6, ,294 15,657 16,991 16, ,975 Occupancy costs 44,186 11, ,677 47,744 5, ,364 37,327 51,223 19,236 1,011,459 Professional fees and contract services 157, ,317 13,852 24,461 14,140 26, ,792 2,491 22, , ,879 Bank fees and service charges 129, ,523 Supplies 19,872 3,602 13,331 38,466 33,843 14, ,452 9,974 12,395 91, ,938 Food, beverage and related expenses 12,650 33, ,658 25,722 10,373 1,729 5,818 63,094 3, ,603 Insurance 69,331 69,331 Telephone 6,567 2, ,665 1,673 1,611 2,586 22,043 Printing 19,518 10,414 3,744 7,679 5,989 8, ,063 28,165 93,207 Transportation 1,250 4,994 23,886 6,012 9,589 49,441 62, ,077 Conferences 15,447 7,289 1, ,743 1, ,491 34,490 Postage 12,599 1, ,106 4,458 21,674 Equipment contracts, rental and repairs 90,592 41,008 3,304 6,025 2,707 33,801 1,614 16,749 5, ,403 Automobile expenses 2,500 2,500 National origination dues 68,642 1,710 1,975 72,327 Bad debt 10,478 10,478 Advertising 29,038 6,005 1,021 2, , ,570 52,955 Interdepartmental transfers , (24,882) (100) Miscellaneous 46,433 5,050 3,228 2, , ,462 82,423 1,995, ,897 73,241 2,324, , ,841 2,580, , , ,813 9,249,425 Depreciation 281, ,505 $ 2,277,014 $ 221,897 $ 73,241 $ 2,324,205 $ 470,198 $ 179,841 $ 2,580,096 $ 353,494 $ 481,131 $ 569,813 $ 9,530,930 See the accompanying notes to consolidated financial statements. Page 7

10 CONSOLIDATED STATEMENT OF CASH FLOWS For The Years Ended September 30, Cash Flows From Operating Activities Increase (decrease) in net assets $ 1,102,936 $ (411,700) Adjustments to reconcile increase (decrease) in net assets to net cash provided by operating activities: Depreciation 355, ,505 Net unrealized/realized loss (gain) on investment transactions (715,432) 778,053 Loss on disposal of property and equipment 3,387 Investment return restricted for long-term investment (9,328) Change in assets and liabilities: (Increase) decrease in accounts receivable (129,316) 56,932 Decrease in promises to give 14,380 24,915 Increase in prepaid expenses and other current assets (57,361) (24,676) Increase in accounts payable and accrued expenses 83,926 8,263 Increase (decrease) in unearned dues and revenues (7,466) 40,437 Net Cash Provided By Operating Activities 641, ,729 Cash Flows From Investing Activities Purchase of property and equipment (151,030) (442,369) Proceeds from sale of property and equipment 3,580 Purchase of investments (1,416,542) (1,373,704) Proceeds from sale of investments 1,001,922 1,134,405 Net Cash Used In Investing Activities (562,070) (681,668) Cash Flows Provided By Financing Activities Proceeds from investment income for permanently restricted contributions 9,328 Net Increase In Cash 88,902 72,061 Cash - Beginning Of Year 663, ,371 Cash - End Of Year $ 752,334 $ 663,432 See the accompanying notes to consolidated financial statements. Page 8

11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2016 And Nature Of Organization The Jewish Community Center of Greater Kansas City is a not-for-profit organization which provides educational, cultural and recreational activities for both adults and children. The Jewish Community Center of Greater Kansas City is a beneficiary agency of the United Way of Greater Kansas City and the Jewish Federation of Greater Kansas City (the Federation). The Jewish Community Center Charitable Supporting Foundation (the Supporting Foundation), a not-for-profit corporation, supports the Jewish Community Center of Greater Kansas City and the Jewish Community Foundation of Greater Kansas City. The Jewish Community Center of Greater Kansas City appoints the majority of the Board of Directors of the Supporting Foundation and has an economic interest in the Supporting Foundation. Accordingly, the Jewish Community Center of Greater Kansas City s financial statements consolidate the accounts and activities of the Supporting Foundation, (collectively, the J), which pools investments with the Jewish Community Foundation of Greater Kansas City (the Foundation). 2. Significant Accounting Policies Basis Of Accounting The accompanying consolidated financial statements have been prepared on the accrual basis of accounting and include the accounts and activities of the Jewish Community Center of Greater Kansas City and the Supporting Foundation. Significant inter-entity transactions have been eliminated upon consolidation. Basis Of Presentation The financial statement presentation follows the requirements of the Financial Accounting Standards Board for Not-for-Profit Organizations by presenting assets and liabilities within similar groups and classifying them in ways that provide relevant information about their interrelationships, liquidity, and financial flexibility. As a result, the J is required to report information regarding its financial position and activities according to the following three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. Page 9

12 Estimates And Assumptions The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Cash The J considers all bank balances as cash. Cash and cash equivalents held with investment managers are considered investments for reporting purposes. The J maintains cash balances at banks in excess of federally insured limits at various times during the year. The J has not experienced any losses in such accounts. Investments Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Investment return includes dividends, interest and other investment income, realized and unrealized gains and losses on investments carried at fair value, and realized gains and losses on other investments. Investment return that is restricted by donor stipulation and for which the restrictions will be satisfied in the same year is included in unrestricted net assets. Other investment return is reflected in the consolidated statements of activities as unrestricted, temporarily restricted or permanently restricted based upon the existence and nature of any donor or legally imposed restrictions. The J utilizes pooled investments for its endowments. Investment income and realized and unrealized gains and losses from securities in the pooled investment accounts are allocated monthly to the individual endowments based on the relationship of the fair value of the interest of each endowment to the total fair value of the pooled investment accounts, as adjusted for additions to or deductions from those accounts. Page 10

13 The J invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the consolidated statement of financial position. Recent Accounting Pronouncements In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) , Fair Value Measurement (Topic 820) Disclosures For Investments in Certain Entities That Calculate Net Asset Value Per Share (or Its Equivalent). ASU removes the requirement to include within the fair value hierarchy leveling table those investments that measure fair value using the practical expedient available for investments that calculate a net asset value (NAV) per share. Instead, an entity would be required to include those investments as a reconciling item so that the total fair value amount of investments in the disclosure is consistent with the fair value balance on the consolidated statement of financial position. Even though these investments are removed from the fair value hierarchy, entities should provide or disclose the total amount of investments measured using the NAV per share (or its equivalent) practical expedient in order to permit reconciliation of the fair value of investments included in the fair value hierarchy to the line items presented in the consolidated statement of financial position. The guidance contained in the ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. Management has elected to adopt the guidance resulting from this ASU early. This guidance has been applied retrospectively. Accounts Receivable Accounts receivable are stated at the amounts billed to customers. The J provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. Page 11

14 Promises To Give Unconditional promises to give are recognized as support in the period the promises are received. Promises to give that are expected to be collected within one year are recorded at their net realizable value. Promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows, less an allowance for uncollectible promises. At September 30, 2016 and 2015, no such allowance was considered necessary. The discounts on those amounts are computed using a risk-free interest rate applicable to the year in which the promises are received. Amortization of the discount is included in contribution revenue. Conditional contributions, which depend upon specified future and uncertain events, are not included as support until such time as the conditions are substantially met. Restricted And Unrestricted Support Contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support, depending on the existence and nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a 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 statements of activities as net assets released from restrictions. Property And Equipment Property and equipment are recorded at cost, if acquired by purchase, or at the estimated fair value at the date of receipt, if acquired by donation. Depreciation of property and equipment is provided over the following estimated useful lives on a straight-line basis: Leasehold improvements Equipment 5-40 years 3-7 years Depreciation expense for the years ended September 30, 2016 and 2015 was $355,918 and $281,505, respectively. Page 12

15 Revenue Recognition Membership dues are recognized as income over the period of the membership. Tuition and program fees are recognized as income over the period of the underlying programs, which are primarily short-term in nature. Advertising Costs The J expenses all advertising costs as incurred. Advertising costs of $68,646 and $52,955 were expensed for the years ending September 30, 2016 and 2015, respectively. Income Taxes The Jewish Community Center of Greater Kansas City and the Supporting Foundation are exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code, as not-for-profit organizations. The Jewish Community Center of Greater Kansas City and the Supporting Foundation s federal tax returns for tax years 2012 and later remain subject to examination by taxing authorities. Allocation Of Expenses Occupancy costs are allocated to program and supporting services based on square footage. Other expenses have been allocated among the program and supporting services on the basis of percentage of time expended and direct expenses incurred. Reclassifications Certain reclassifications have been made to the prior year amounts to conform to the current year s presentation. The reclassifications had no effect on net assets. Subsequent Events Management has evaluated subsequent events through January 24, 2017, the date which the consolidated financial statements were available for issue. Page 13

16 3. Promises To Give Promises to give at September 30 are collectible as follows: In one year or less $ 15,000 $ 20,000 Between one and three years 10,000 20,000 25,000 40,000 Less: discount to present value $ 24,690 $ 39,070 Promises to give are reported net of a discount, at a rate of 3.1%, to the present value of future cash flows. 4. Investments Investment securities and unrealized appreciation (depreciation) are as follows at September 30: 2016 Fair Unrealized Cost Value Appreciation Pooled investments $ 9,882,129 $ 10,396,143 $ 514,014 Mutual funds 471, ,219 40,494 Money market funds 11,786 11,786 $ 10,365,640 $ 10,920,148 $ 554, Unrealized Fair Appreciation Cost Value (Depreciation) Pooled investments $ 9,624,072 $ 9,288,104 $ (335,968) Mutual funds 483, ,942 5,491 Money market funds 13,050 13,050 $ 10,120,573 $ 9,790,096 $ (330,477) Pooled investments consist of holdings in certain collective investment funds maintained by the Foundation (Note 5). These collective investment funds invest in a portfolio of underlying managed funds that are facilitated by the Foundation s investment manager and, ultimately, consist of U.S. government securities and foreign and domestic corporate equity and debt securities. Page 14

17 Investment return is summarized as follows: Interest and dividend income $ 103,248 $ 188,109 Realized gain (loss) (169,553) 385,334 Unrealized gain (loss) 884,985 (1,163,387) $ 818,680 $ (589,944) 5. Fair Value Measurements The J follows an established 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 these rules are described below: Level 1 Level 2 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the J has the ability to access. 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. Page 15

18 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: Money Market Funds And Mutual Funds Valued at the daily closing price as reported by the fund. Mutual funds and money market funds held by the J are open-end investment funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value (NAV) and to transact at that price. The mutual funds and money market funds held by the J are deemed to be actively traded. Pooled Investments Valued at the NAV of units of the pooled investment fund held at the Foundation. The NAV, as provided by the Foundation, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. There have been no changes in the methodologies used at September 30, 2016 and Page 16

19 The following table sets forth by level, within the fair value hierarchy, the J s assets at fair value as of September 30, 2016: Level 1 Level 2 Level 3 Total Money market funds $ 11,786 $ $ $ 11,786 Mutual funds 512, ,219 Total Assets In The Fair Value Hierarchy 524, ,005 Investments measured at net asset value per share (a) 10,396,143 Total Assets At Fair Value $ 10,920,148 The following table sets forth by level, within the fair value hierarchy, the J s assets at fair value as of September 30, 2015: Level 1 Level 2 Level 3 Total Money market funds $ 13,050 $ $ $ 13,050 Mutual funds 488, ,942 Total Assets In The Fair Value Hierarchy 501, ,992 Investments measured at net asset value per share (a) 9,288,104 Total Assets At Fair Value $ 9,790,096 (a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statement of financial position. Page 17

20 Included within pooled investments are investments held at the Foundation in the Foundation s Common Pool, and the Long-Term Pool. The J s investments in any pool may typically be redeemed within one to three business days. However, the Foundation maintains the right to disburse funds according to the following policy: if the withdrawn funds are less than $250,000, then 80% of the funds would be disbursed immediately, and the remaining 20% will be disbursed once monthly allocations of earnings/losses can be made. If the withdrawn funds are more than $250,000, then 50% of the requested funds would be disbursed immediately, and 80% of the remaining amount requested would be disbursed after 30 days. The final requested portion would be disbursed once final income and expense allocations can be made to the remaining balance. The Foundation has a stated investment objective of seeking long-term growth while seeking to minimize principal fluctuations and meet ongoing spending policy objectives. At September 30, 2015, the target asset allocation policy for the Common Pool had been established as 45% equities and 55% fixed income. The target asset allocation of the Long-Term Pool was 68% equities and 32% fixed income. As of September 30, 2016, the Common Pool target asset allocation policy has been changed to 37% equities, 15% hedge funds, and 48% fixed income and the Long- Term Pool target asset allocation policy has been changed to 62% equities, 14% hedge funds, and 24% fixed income. 6. Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes at September 30: Innovative programming $ 1,002,795 $ 937,292 Cultural arts 539, ,499 Youth programs 566, ,158 Senior adults 701, ,451 Fitness and sports 938, ,845 Other 269, ,506 $ 4,018,534 $ 3,457,751 Page 18

21 7. Permanently Restricted Net Assets As of September 30, 2016 and 2015, permanently restricted net assets of $2,149,641 and $2,140,313, respectively, are restricted for investment in perpetuity. The income from these net assets is to be used primarily for scholarships, educational programs and/or social programs and may be temporarily restricted or unrestricted. A portion of investment income for one endowment is required to be reinvested in permanently restricted net assets. In 2016, investment earnings of $9,328 were reinvested in permanently restricted net assets per donor agreements. In 2015, no investment earnings were reinvested in permanently restricted net assets. 8. Net Assets Released From Restrictions Net assets were released from donor-imposed restrictions by incurring expenses satisfying the restricted purpose specified by donors during the years ended September 30, as follows: Innovative programming $ 15,389 $ 50,502 Cultural arts 120, ,323 Youth programs 16,294 77,956 Senior adults 160, ,395 Fitness and sports 58,784 83,199 Other 21, ,657 Promises to give - time restriction 16,000 Net assets released from restrictions $ 393,471 $ 675, Endowment Funds The J s endowment consists of several donor-restricted and board-designated funds established for various purposes. Assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions and are exclusive of any promises to give to the J s endowment funds. Page 19

22 As of September 30, 2016, the asset composition of the endowment was as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Board-designated endowment funds $ 4,970,089 $ $ $ 4,970,089 Donor-restricted endowment funds 855,383 2,149,641 3,005,024 $ 4,970,089 $ 855,383 $ 2,149,641 $ 7,975,113 As of September 30, 2015, the asset composition of the endowment was as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Board-designated endowment funds $ 4,269,382 $ $ $ 4,269,382 Donor-restricted endowment funds 678,045 2,140,313 2,818,358 $ 4,269,382 $ 678,045 $ 2,140,313 $ 7,087,740 The changes in the endowment assets for the year ended September 30, 2016 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Balance - October 1, 2015 $ 4,269,382 $ 678,045 $ 2,140,313 $ 7,087,740 Investment return Investment income 51,293 27,123 1,598 80,014 Net appreciation 286, ,372 7, ,389 Total investment income 337, ,495 9, ,403 Additional board designations 1,041,085 1,041,085 Amounts appropriated for spending (677,958) (68,157) (746,115) Balance - September 30, 2016 $ 4,970,089 $ 855,383 $ 2,149,641 $ 7,975,113 Page 20

23 The changes in the endowment assets for the year ended September 30, 2015 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Balance - October 1, 2014 $ 4,251,313 $ 1,011,843 $ 2,140,313 $ 7,403,469 Investment return Investment income 87,555 51, ,319 Net depreciation (289,430) (248,953) (538,383) Total investment return (201,875) (197,189) (399,064) Additional board designations 767, ,504 Amounts appropriated for spending (547,560) (136,609) (684,169) Balance - September 30, 2015 $ 4,269,382 $ 678,045 $ 2,140,313 $ 7,087,740 Interpretation Of Relevant Law The J s governing body has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the J classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction, if any is given, of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the J in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the J considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the fund, (2) The purposes of the J and the donor-restricted endowment fund, (3) General economic conditions, (4) The possible effect of inflation and deflation, (5) The expected total return from income and the appreciation of investments, (6) Other resources of the J, and (7) The investment policies of the J. Page 21

24 Return Objectives And Risk Parameters The J has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs and other items supported by its endowment while seeking to maintain the purchasing power of the endowment. Endowment assets include those assets of donor-restricted endowment funds the J must hold in perpetuity or for donor-specified periods, as well as those of board-designated endowment funds. Under the J s policies, endowment assets are invested in a manner that is intended to produce income to fund current operations while assuming a prudent level of investment risk. The J expects its endowment funds to provide an average rate of return of approximately 8% annually over time. Actual returns in any given year may vary from this amount. Strategies Employed For Achieving Objectives To satisfy its long-term rate of return objectives, the J relies on a total return strategy in which investment returns are achieved through both current yield (investment income such as dividends and interest) and capital appreciation (both realized and unrealized). The J targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy And How The Investment Objectives Relate To Spending Policy The J has a policy (the spending policy) of appropriating for expenditure each year up to 5% of its endowment fund s market values as of January 1 st of the year in which the expenditure is planned. In establishing this policy, the J considered the long-term expected return on its endowment. Accordingly, over the long term, the J expects the current spending policy to allow its endowment to grow at an average of at least 3% annually. This is consistent with the J s objective to maintain the purchasing power of endowment assets held in perpetuity or for a specified term, as well as provide additional real growth through new gifts and investment return. Page 22

25 10. Related Parties The J reimburses the Jewish Community Campus of Greater Kansas City, Inc. (the Campus) for occupancy costs on an annual basis based on a memorandum of understanding. The bylaws of the Campus require two J Board members also serve as Campus Board members. Occupancy costs totaled $985,140 and $977,952 for the years ended September 30, 2016 and 2015, respectively, which includes fees for maintenance services. As of September 30, 2016 and 2015, $6,709 and $84,526 respectively, was due to the Campus. The Campus receives certain funding which allows it to reduce the fees charged the J and other tenants in the building. Because of this funding, the amount charged to the J was reduced by $221,196 and 225,516 for the years ended September 30, 2016 and 2015, respectively, in order to determine the amounts noted above. There is no certainty that this funding will continue in the future, and it is possible that the amounts charged to the J could increase accordingly in subsequent periods. The J received contributions of $383,700 and $374,200 from the Federation in 2016 and 2015, respectively. Through June 30, 2015, the Federation maintained the network infrastructure that supports the J. The J paid technology maintenance fees of $61,182 to the Federation in As of September 30, 2015, $20,162 was due to the Federation. 11. Defined Contribution Retirement Plan The J participates in a 403(b) defined contribution plan (the Plan) covering substantially all eligible employees. Participants may make salary reduction contributions to the Plan as a percentage of the participant s compensation. The J will match up to 3% of each participant s compensation for participants who participate in the Plan. In addition, the J will contribute an amount equal to 4% of compensation for all eligible employees, regardless of whether they have made contributions to the Plan. For the years ended September 30, 2016 and 2015, the J made contributions of $199,023 and $179,356, respectively. Page 23

26 12. Deferred Compensation Plan Effective October 1, 2010, the J instituted a 457(b) deferred compensation plan for the benefit of a particular class of employees. Participants receive a nonelective employer deferral equal to 4% of compensation. Deferrals are used to purchase annuity contracts for the benefit of participants. For the years ended September 30, 2016 and 2015, the J made deferrals of $12,671 and $21,833, respectively. The J s restricted investments for deferred compensation in both 2016 and 2015 consist of mutual funds. The fair value of these securities is determined using quoted market prices in actively traded markets for identical assets. Page 24