Young Men s Christian Association of Greater Richmond

Transcription

1 Young Men s Christian Association of Greater Richmond Financial Statements As of and for the Years Ended And Report of Independent Auditor

2 Contents Report of Independent Auditor 1 Financial statements Statements of financial position 2 Statements of activities 3-4 Statements of cash flows 5 Statements of functional expenses 6-7 Notes to financial statements 8-22

3 Report of Independent Auditor To the Board of Directors of Young Men s Christian Association of Greater Richmond Richmond, Virginia We have audited the accompanying financial statements of Young Men s Christian Association of Greater Richmond (the Association ), which comprise the statement of financial position as of December 31, 2016, and the related statements of activities, cash flows, and functional expenses for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the 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 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 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 financial statements referred to above present fairly, in all material respects, the financial position of the Association 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. Prior Period The financial statements of the Association as of December 31, 2015, were audited by other auditors whose report dated June 17, 2016 expressed an unmodified opinion of those statements. Richmond, Virginia June 16,

4 Statements of Financial Position Assets Cash and cash equivalents $ 8,780,709 $ 6,527,191 Prepaid expenses and other receivables 361, ,917 Contributions receivable, net (Note 2) 4,728,705 1,888,222 Investments (Notes 3 and 4) 7,342,388 7,139,172 Land, buildings and equipment, net (Note 5) 62,223,854 63,660,383 $ 83,437,314 $ 79,687,885 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses $ 2,881,920 $ 2,570,150 Deferred membership and program fees 1,082,046 1,024,069 Long-term debt (Note 6) 22,312,515 22,725,201 Total liabilities 26,276,481 26,319,420 Commitments (Note 7) Net assets (Note 9): Unrestricted 46,940,910 47,652,320 Temporarily restricted 7,373,258 2,877,985 Permanently restricted 2,846,665 2,838,160 Total net assets 57,160,833 53,368,465 Total liabilities and net assets $ 83,437,314 $ 79,687,885 The accompanying notes to the financial statements are an integral part of these statements. 2

5 Statements of Activities Years Ended Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Revenues and public support: United Way Services $ 228,289 $ - $ - $ 228,289 $ 312,584 $ - $ - $ 312,584 Contributions 2,054,994 1,694,454-3,749,448 2,260,101 1,576,200-3,836,301 Endowment contributions 58,473-8,505 66,978 39,037-40,736 79,773 Capital campaign contributions - 4,397,450-4,397, , ,152 Total public support 2,341,756 6,091,904 8,505 8,442,165 2,611,722 2,325,352 40,736 4,977,810 Membership fees 23,671, ,671,310 23,823, ,823,945 Program fees 12,724, ,724,829 11,999, ,999,010 Rental of facilities 165, , , ,266 Merchandise sales 51, ,065 56, ,596 Other income 130, , , ,494 Investment (loss) gain (Note 3) 173, , ,487 (25,267) (105,039) - (130,306) Net assets released from restrictions (Note 9) 1,858,560 (1,858,560) - - 1,781,734 (1,781,734) - - Total revenues and public support 41,117,406 4,495,273 8,505 45,621,184 40,699, ,579 40,736 41,178,815 (Continued) 3

6 Statements of Activities (Continued) Years Ended Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Expenses: Program services: Healthy living $ 19,871,736 $ - $ - $ 19,871,736 $ 19,419,117 $ - $ - $ 19,419,117 Youth development 13,764, ,764,801 13,115, ,115,199 Social responsibility 2,564, ,564,429 2,059, ,059,528 Total program services 36,200, ,200,966 34,593, ,593,844 Supporting services: General administration 3,994, ,994,462 3,814, ,814,839 Fundraising 1,239, ,239,034 1,204, ,204,155 Total supporting services 5,233, ,233,496 5,018, ,018,994 Unallocated payments to national organization 396, , , ,292 Total expenses 41,831, ,831,218 39,978, ,978,130 Loss on sale of fixed assets (17,373) - - (17,373) (223,742) - - (223,742) Change in net assets before other change (731,185) 4,495,273 8,505 3,772, , ,579 40, ,943 Amortization of prior service cost related to postretirement benefit obligation (Note 7) 19, ,775 19, ,775 Change in net assets (711,410) 4,495,273 8,505 3,792, , ,579 40, ,718 Net assets: Beginning 47,652,320 2,877,985 2,838,160 53,368,465 47,134,917 2,439,406 2,797,424 52,371,747 Ending $ 46,940,910 $ 7,373,258 $ 2,846,665 $ 57,160,833 $ 47,652,320 $ 2,877,985 $ 2,838,160 $ 53,368,465 The accompanying notes to the financial statements are an integral part of these statements. 4

7 Statements of Cash Flows Years Ended Cash flows from operating activities: Change in net assets $ 3,792,368 $ 996,718 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 3,700,443 3,588,523 Discount for net present value of pledges and provision for uncollectible contributions receivable, net 227, ,488 Net realized (gain) loss from disposition of investments and equipment (38,192) 57,628 Unrealized (gain) loss on investments (183,869) 572,313 Contributions restricted for construction (4,397,450) (749,152) Contributions restricted for long-term investments (8,505) (40,736) Non-cash capital asset donations (1,500) (8,316) Changes in assets and liabilities: Prepaid expenses and other receivables 111,259 65,979 Contributions receivable (143,342) (751,343) Accounts payable and accrued expenses 474,728 (4,738) Deferred membership and program fees 57,977 90,622 Net cash provided by operating activities 3,591,847 3,933,986 Cash flows from investing activities: Proceeds from sales of investments 4,456,296 2,506,559 Proceeds from sales of equipment and other assets 6,367 7,999 Purchases of investments (4,420,078) (1,946,378) Acquisition and construction of land, buildings and equipment (2,371,468) (5,470,959) Net cash used in investing activities (2,328,883) (4,902,779) Cash flows from financing activities: Proceeds from long-term debt 98,690 1,785,000 Principal payments on notes payable (490,019) (1,292,187) Payments of debt issuance costs (90,400) - Principal payments on capital lease obligations (8,601) (50,523) Contributions restricted for construction 1,478, ,514 Contributions restricted for long-term investments 2,255 44,336 Net cash provided by financing activities 990,554 1,122,140 Net change in cash and cash equivalents 2,253, ,347 Cash and cash equivalents: Beginning 6,527,191 6,373,844 Ending $ 8,780,709 $ 6,527,191 Supplemental disclosure of cash flow information: Cash payments for interest $ 484,988 $ 374,313 Noncash investing and financing activities: Property and equipment included in accounts payable $ 57,774 $ 220,732 Refinance of long-term debt $ 22,376,787 $ - The accompanying notes to the financial statements are an integral part of these statements. 5

8 Statement of Functional Expenses Year Ended December 31, 2016 Program Services Supporting Services Healthy Youth Social General Fund Living Development Responsibility Total Administration Raising Total Total Salaries and Wages $ 10,243,677 $ 6,378,682 $ 1,071,664 $ 17,694,023 $ 1,946,193 $ 724,105 $ 2,670,298 $ 20,364,321 Employee Benefits 994, , ,538 1,820, , , ,904 2,271,138 Payroll Taxes and Workers Compensation 946, ,592 96,446 1,645, ,324 58, ,179 1,868,740 12,185,139 7,659,031 1,315,648 21,159,818 2,451, ,588 3,344,381 24,504,199 Professional Fees and Contract Services 408, ,597 61, , ,747 79, ,608 1,354,876 Supplies 633,374 1,200, ,206 2,045,043 31, , ,531 2,201,574 Telephone 92,360 65,853 12, , , , ,978 Postage and Shipping 19,164 12,189 1,829 33,182 30, ,416 64,598 Occupancy 3,690,106 2,327, ,193 6,354,150 88,253 19, ,017 6,462,167 Transportation and Travel 83, ,295 24, ,613 21,095 3,736 24, ,444 Conferences and Training 275, ,825 37, , ,272 22, , ,473 Printing, Promotion and Publicity 124,788 82,904 14, , ,266 52, , ,299 Specific Assistance - 7, , , ,695 Bad debt 94,380 73,166 11, , ,400 Miscellaneous 318, ,094 35, ,682 43,897 5,737 49, ,316 17,925,644 12,396,268 2,320,002 32,641,914 3,890,394 1,201,711 5,092,105 37,734,019 Depreciation and Amortization 1,946,092 1,368, ,427 3,559, ,068 37, ,391 3,700,443 $ 19,871,736 $ 13,764,801 $ 2,564,429 $ 36,200,966 $ 3,994,462 $ 1,239,034 $ 5,233,496 $ 41,434,462 The accompanying notes to the financial statements are an integral part of these statements. 6

9 Statement of Functional Expenses Year Ended December 31, 2015 Program Services Supporting Services Healthy Youth Social General Fund Living Development Responsibility Total Administration Raising Total Total Salaries and Wages $ 9,635,358 $ 5,993,054 $ 791,977 $ 16,420,389 $ 1,859,521 $ 635,066 $ 2,494,587 $ 18,914,976 Employee Benefits 987, ,669 96,917 1,727, ,795 92, ,922 2,096,223 Payroll Taxes and Workers Compensation 888, ,898 73,149 1,514, ,559 58, ,119 1,745,035 11,511,942 7,188, ,043 19,662,606 2,307, ,753 3,093,628 22,756,234 Professional Fees and Contract Services 499, ,040 43, , , , ,576 1,582,323 Supplies 617,863 1,218, ,912 1,979,676 29, , ,286 2,137,962 Telephone 87,336 62,100 9, , , , ,938 Postage and Shipping 20,250 12,472 2,046 34,768 34, ,472 70,240 Occupancy 3,713,271 2,163, ,551 6,171,856 96,852 14, ,381 6,283,237 Transportation and Travel 67, ,956 19, ,624 14,614 2,377 16, ,615 Conferences and Training 225, ,439 26, , ,518 39, , ,320 Printing, Promotion and Publicity 259, ,875 18, , ,783 22, , ,622 Specific Assistance - 6, , , ,955 Bad debt 123,472 93,190 13, , ,757 Miscellaneous 359, ,862 33, ,936 46,506 7,670 54, ,112 17,485,809 11,809,490 1,854,488 31,149,787 3,708,075 1,166,453 4,874,528 36,024,315 Depreciation and Amortization 1,933,308 1,305, ,040 3,444, ,764 37, ,466 3,588,523 $ 19,419,117 $ 13,115,199 $ 2,059,528 $ 34,593,844 $ 3,814,839 $ 1,204,155 $ 5,018,994 $ 39,612,838 The accompanying notes to the financial statements are an integral part of these statements. 7

10 Note 1. Nature of Activities and Significant Accounting Policies Mission and nature of activities: The mission of the Young Men s Christian Association of Greater Richmond (the Association) is to put Christian principles into practice through programs that build healthy spirit, mind and body for all. The Association is a not-for-profit charitable organization, which promotes healthy living, youth development and social responsibility throughout the Richmond, Virginia metropolitan area and Petersburg, Virginia. The significant accounting policies followed by the Association are described below: Basis of accounting: The accompanying financial statements are presented in accordance with the accrual basis of accounting, whereby revenue is recognized when earned and expenses are recognized when incurred. Unconditional public support is recognized when notification of the support is received by the Association. Basis of presentation: The financial statement presentation follows the recommendations of the Financial Accounting Standards Board s (FASB) Accounting Standards Codification (ASC) 958, Not-for- Profit Entities. Under ASC 958, the Association is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Unrestricted net assets: Unrestricted net assets are the net assets that are neither permanently restricted nor temporarily restricted by donor-imposed stipulations. Temporarily restricted net assets: Temporarily restricted net assets result from contributions whose use is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the Association pursuant to those stipulations. Net assets may be temporarily restricted for various purposes, such as use in future periods or use for specified purposes. Permanently restricted net assets: Permanently restricted net assets result from contributions whose use is limited by donor-imposed stipulations that neither expire by passage of time nor are otherwise removed by the Association s actions. Contributions: Contributions receivable are carried at net present value less an estimate made for potentially uncollectible accounts based on a review of all outstanding amounts on a regular basis. Management determines the allowance by regularly evaluating individual donor receivables and considering a donor s payment history and current economic conditions. Contributions receivable are written off when deemed uncollectible. Recoveries of receivables are recorded when received. The Association reports gifts of cash and other assets as temporarily or permanently restricted support if they are received with donor stipulations that limit the use or timing of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets in the statements of activities. All contributions to be received within one year are considered to be available for unrestricted use unless specifically restricted by the donor. Gifts of property and equipment are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. 8

11 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Accounting estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Contributed services: Contributed services are recorded at their fair value if such services create or enhance non-financial assets, would have been purchased if not provided by contribution, require specialty skills and are provided by individuals possessing such specialized skills. A substantial number of volunteers contribute significant amounts of time and services to the Association s program operations, fund raising campaigns and boards and committees of the Association. Such contributed services do not meet the criteria for recognition of contributed services and are not reflected in the accompanying financial statements. Membership and program fees: Membership and program fees are recognized as revenue over the membership or program period. Such fees received in advance are recorded as deferred membership and program fees. Joining fees are non-refundable and are recognized as revenue when received. Cash and cash equivalents: For purposes of reporting cash flows, the Association considers all highly liquid debt instruments with maturity, when acquired, of three months or less, to be a cash equivalent. Cash and cash equivalents maintained in the investment account until suitable investments are purchased are considered investments. Investments: Equity securities with readily determinable fair values and all investments in debt securities are reported at fair value. Unrealized gains and losses are reported in the statements of activities. In calculating realized gains and losses, the cost of securities sold is determined by the specificidentification method. Investments received by gift are recorded at the fair value on the date received. Financial risk: The Association places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (FDIC) covers $250,000 for substantially all depository accounts. The Association from time to time may have amounts on deposit in excess of the insured limits. As of December 31, 2016, the Association had $8,537,262 in deposits that exceeded these insured amounts. The Association has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and temporary cash investments. The Association invests in a professionally managed portfolio that contains various securities. Such investments are exposed to various risks such as interest rate, market and credit. Due to the level of risk associated with such investments, and the uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term would materially affect investment balances and the amounts reported in the financial statements. 9

12 Note 1. Nature of Activities and Significant Accounting Policies (Continued) Land, buildings and equipment: Land, buildings and equipment are stated at cost. Depreciation is computed using the straight-line method over the following estimated useful lives: Years Parking lots 5 20 Buildings and land improvements Other recreational facilities Furniture, equipment and vehicles 3 15 Valuation of long-lived assets: Long-lived assets, such as buildings and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the accompanying statements of financial position and reported at the lower of the carrying amount or fair value less costs to sell. Functional expenses: Functional expenses are determined through allocating total expenses incurred to the programs and supporting services benefited. Income taxes: The Association has been recognized by the Internal Revenue Service as tax exempt under Section 501(c)(3) of the Internal Revenue Code. In addition, the Association qualifies for charitable contribution deductions under Section 170(b)(1)(A)(vi) and has been classified as an organization that is not a private foundation under Section 509(a)(1). As a nonprofit organization, the Association is subject to unrelated business income tax (UBIT), if applicable. The Association did not have any unrelated business income for the years ended. Management evaluated the Association s positions and concluded that the Association had taken no uncertain tax positions that require adjustment to the financial statements to comply with the accounting standard on accounting for uncertainty in income taxes. The Association files an informational Form 990 in the U.S. federal jurisdiction. Advertising: Advertising costs are expensed as incurred and totaled $521,103 and $518,784, respectively, for the years ended. Recent accounting pronouncements: In May 2014, the FASB issued Accounting Standards Update (ASU) , Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. In August 2015, the FASB issued ASU , which defers the effective date of ASU one year making it effective for annual reporting periods beginning after December 15, The Association has not yet selected a transition method and is currently evaluating the effect the standard will have on the financial statements. 10

13 Note 1. Nature of Activities and Significant Accounting Policies (Continued) In April 2015, the FASB issued ASU No , Interest - Imputation of Interest (Subtopic ): Simplifying the Presentation of Debt Issuance Costs. ASU amends current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to the issuance of ASU , debt issuance costs were required to be presented as an asset in the balance sheet. The Association adopted the provisions of ASU upon issuance and prior period amounts have been reclassified to conform to the current period presentation. As of December 31, 2016, $85,880 of debt issuance costs were reclassified from other assets to long-term debt. As of December 31, 2015, $73,124 of debt issuance costs were reclassified from other assets to long-term debt. The adoption of ASU did not have a material impact on the Association s financial position, results of operations or cash flows. In February 2016, the FASB issued ASU , Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The standard is effective on January 1, 2020, with early adoption permitted. The Association is in the process of evaluating the impact of this new guidance. Note 2. Contributions Receivable Anticipated collections of contributions receivable at, are as follows: Within one year $ 1,881,619 $ 871,657 One to five years 3,352,001 1,293,550 5,233,620 2,165,207 Less Discounts for the time-value of money at 2.5% in 2016 and 2015 (229,915) (101,985) Allowance for uncollectible contributions receivable (275,000) (175,000) $ 4,728,705 $ 1,888,222 Included in the balances above are amounts of $561,483 and $466,349 at, respectively, which are due from members of the Board of Directors and members of management. For the years ended, there were approximately $252,051 and $610,139 in gift revenues from those directors and members, respectively. 11

14 Note 3. Investments Investments are composed of the following at : Cost 2016 Fair Value Common stocks $ 4,160,138 $ 4,726,960 Corporate bonds 1,812,999 1,820,804 Cash and cash equivalents 454, ,303 Variable adjustable life insurance policy 257, ,321 $ 6,685,023 $ 7,342,388 Cost 2015 Fair Value Common stocks $ 4,129,330 $ 4,570,298 Corporate bonds 1,827,499 1,796,101 Cash and cash equivalents 459, ,815 Variable adjustable life insurance policy 244, ,958 $ 6,661,227 $ 7,139,172 Components of investment gain (loss) for the years ended, consist of the following: Realized gain $ 55,565 $ 166,114 Unrealized gain (loss) 183,869 (572,313) Interest and dividends 196, ,893 $ 435,487 $ (130,306) 12

15 Note 4. Fair Value Measurements The Association uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurement Topic of the ASC, the fair value of a financial instrument 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 and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below: Level 1 Level 2 Level 3 Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The types of investments included in Level 1 include listed equities and listed derivatives. As required, the Association does not adjust the quoted price for these investments, even in situations where the Association holds a large position and a sale could reasonably impact the quoted price. Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, and fair value is determined through the use of models or other valuation methodologies. Investments which are generally included in this category include certain corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement. Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. Investments that are included in this category generally include equity and debt positions in private companies and general and limited partnership interests in corporate private equity and real estate funds, debt funds, and distressed debt. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Association s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. In determining the appropriate levels, the Association performs a detailed analysis of the assets and liabilities that are subject to fair value measurements. Publicly traded securities, both equity and debt securities, are classified as Level 1 instruments because they comprise assets traded on public exchanges with readily determinable fair values and observable market based inputs. Cash values of life insurance policies are presented at fair value based on the amount available in cash upon cancellation of the insurance policy before maturity as of the reporting period. The fair value is determined by the insurer and represents the exit price from the perspective of the Association. However, since the valuation is considered unobservable, the cash surrender value calculation is considered a Level 3 input. 13

16 Note 4. Fair Value Measurements (Continued) The following tables summarize, by level within the fair value hierarchy, the assets and liabilities measured at fair value on a recurring basis as of : Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Description Total (Level 1) (Level 2) (Level 3) 2016 Assets Common stocks $ 4,726,960 $ 4,709,642 $ 17,318 $ - Corporate bonds 1,820,804 1,820, Variable adjustable life insurance policy 340, ,321 $ 6,888,085 $ 6,530,446 $ 17,318 $ 340, Assets Common stocks $ 4,570,298 $ 4,570,298 $ - $ - Corporate bonds 1,796,101 1,796, Variable adjustable life insurance policy 312, ,958 $ 6,679,357 $ 6,366,399 $ - $ 312,958 Fair value for Level 1 is based on quoted market prices. The variable adjustable life insurance policy includes investments in publicly traded common stocks and corporate bonds. The following is a reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using significant unobservable (Level 3) inputs during the years ended December 31, 2016 and 2015: Variable Adjustable Life Insurance Policy Balance, January 1 $ 312,958 $ 291,633 Increase in cash surrender value 27,363 21,325 Balance, December 31 $ 340,321 $ 312,958 14

17 Note 5. Land, Buildings and Equipment Land, buildings and equipment as of, consist of the following: Land $ 6,745,384 $ 6,745,384 Parking lots 2,792,082 2,527,008 Buildings and land improvements 82,445,096 81,358,505 Other recreational facilities 1,742,721 1,736,821 Furniture, equipment and vehicles, including assets under capital leases 2016 $10,093 and 2015 $13,168 12,630,090 12,869,362 Construction in progress 211, , ,566, ,699,854 Less accumulated depreciation, including amortization applicable to assets under capital leases 2016 $4,542 and 2015 $4,676 (44,342,867) (42,039,471) $ 62,223,854 $ 63,660,383 Included in construction in progress above are amounts of $57,774 and $220,732 at December 31, 2016 and 2015, respectively, which are accrued in accounts payable and accrued expenses. The Powhatan and Goochland facilities are constructed on leased land with initial terms of 50 and 99 years, respectively. Both leases contain provisions for extension of the initial terms. Note 6. Debt At, long-term debt consisted of the following: Note payable pursuant to loan agreement with the Economic Development Authority of the Town of Ashland, Virginia, dated November 23, 2010 $ - $ 20,628,000 Note payable pursuant to loan agreement with the Economic Development Authority of the Town of Ashland, Virginia, dated May 2, ,646,690 - Notes payable to Wells Fargo Bank - 2,158,807 Notes payable to TowneBank 1,748,787 - Capital lease obligations 2,918 11,518 22,398,395 22,798,325 Less unamortized bond issuance costs (85,880) (73,124) $ 22,312,515 $ 22,725,201 15

18 Note 6. Debt (Continued) Note payable pursuant to loan agreement with the Economic Development Authority of the Town of Ashland, Virginia, dated November 23, 2010: The Association entered into a transaction with the Economic Development Authority (EDA) of the Town of Ashland, Virginia in which the EDA issued its Health and Community Services Facilities Revenue and Refunding Bonds (2010 Bonds) in the amount of $26,000,000, pursuant to an Indenture of Trust dated November 1, 2010 (Indenture) between the EDA and Wells Fargo Bank, National Association, as bond trustee. The EDA loaned the proceeds of the 2010 Bonds, all of which were purchased by Wells Fargo Bank, National Association (Bank), to the Association pursuant to a loan agreement between the EDA and the Association, in exchange for an unsecured note. The unsecured note, and all principal and interest payments to be made pursuant thereto, were irrevocably assigned to the bond trustee for the benefit of the Bank. Interest on the 2010 Bonds is excludable from gross income for federal income tax purposes pursuant to the Internal Revenue Code of 1986, as amended. Proceeds of the 2010 Bonds were applied as follows: Refund Series A 2000 bonds $ 7,865,000 Principal and interest on the line of credit 8,479,356 Deposit to project fund to be used for facility development projects and issuance costs 9,655,644 $ 26,000,000 The 2010 Bonds have a scheduled maturity of December 1, 2030, and bear interest at 66% of one-month London InterBank Offered Rate (LIBOR) (reset monthly) plus 1.21%. Pursuant to the terms of a Continuing Covenant Agreement dated as of November 1, 2010 (Covenant Agreement) between the Bank and the Association, the Bank and the Association agreed to an amortization schedule that provides for annual principal payments. Pursuant to the Covenant Agreement, the Bank agreed to purchase the 2010 Bonds for an initial three-year term. On June 2, 2013, the Bank and the Association agreed to extend the term for an additional three years ending on June 2, The interest rate was 1.49% as of December 31, On May 2, 2016, the Association entered into a transaction with TowneBank and the EDA. As part of the transaction, the EDA issued its Health and Community Services Facilities Revenue and Refunding Bond (2016 Bond) in the amount of $20,727,690 to TowneBank (Bank). The Bank loaned the 2016 Bond proceeds to the EDA and the EDA in turn loaned the proceeds to the Association. The Association used the 2016 Bond proceeds to refund current outstanding 2010 Bonds and to pay related bond issuance costs. The Association s obligations regarding the 2016 Bond are evidenced by a bond purchase and loan agreement between the Association, the EDA and the Bank and an unsecured note in the principal amount of the 2016 Bond. The EDA assigned the unsecured note, and all principal and interest payments to be made pursuant thereto to the Bank (except for certain fees and expenses of the EDA). Interest on the 2016 Bond is excludable from gross income for federal income tax purposes pursuant to the Internal Revenue Code of 1986, as amended. The 2016 Bonds have a scheduled maturity of December 1, 2036, and bear a fixed interest rate of 2.18% through December 1, The interest rate will reset to an agreed upon variable rate or fixed rate for the remainder of the term. The Bank and the Association agreed to an amortization schedule that provides for quarterly principal payments. 16

19 Note 6. Debt (Continued) Notes payable to Wells Fargo Bank: In 2015, the Association borrowed $1,785,000 to finance capital improvements to a branch facility. The note payable is unsecured, bears a fixed interest rate of 3.16% and is payable in monthly installments through In the event of prepayment or acceleration of amounts due, the note provides for potential additional compensation to the lending institution. During 2003, the Association borrowed $2,000,000 to finance the expansion of a branch facility. The note payable is unsecured, bears a fixed interest rate of 5.98% and is payable in monthly installments through In the event of prepayment or acceleration of amounts due, the note provides for potential additional compensation to the lending institution. On December 20, 2016, both notes payable to Wells Fargo Bank were consolidated into a single note payable to TowneBank for $1,748,787. The note payable is unsecured, bears a fixed interest rate of 3.19% and is payable in monthly installments through January 1, In the event of prepayment or acceleration of amounts due, the note provides for potential additional compensation to the lending institution. Other credit facilities: The Association established a $500,000 unsecured line of credit available for general Association purposes through August 31, Borrowings bear variable interest at one-month LIBOR plus 1.5% (1.93% at December 31, 2015). This facility had not been utilized as of December 31, The line was cancelled in April The Association loan agreements contain various restrictive covenants, including limitations on additional indebtedness, the ability to encumber assets and revenues, and the maintenance of a minimum debt service coverage ratio. In addition, the loan agreements require the Association to deliver audited financial statements to the lending institutions within 180 days of the Association s year-end. At December 31, 2016, long-term debt matures as follows: Years ending December 31: 2017 $ 426, ,114, ,141, ,169, ,197,721 Thereafter 17,348,417 22,398,395 Less unamortized bond issuance costs (85,880) $ 22,312,515 Total interest expense incurred was $480,261 in 2016 and $377,722 in In 2016 and 2015, interest expense of $4,393 and $42,621, respectively, was capitalized. 17

20 Note 7. Commitments and Contingencies Leases: The Association leases various facilities and equipment under operating leases with terms of one to ten years. Total rent expense was $816,092 in 2016 and $833,151 in The total minimum rental commitment at December 31, 2016, is due as follows: Years ending December 31: 2017 $ 594, , , $ 49,234 1,215,579 Pension plan: The Association is a participant in the National Y.M.C.A. Retirement Fund (Fund) defined contribution (individual accounts) plan for eligible employees. The Association s contributions to the Fund are 12% of covered employees annual salaries. The total expense to the Association was $1,264,236 in 2016 and $1,174,433 in Postretirement benefit plan: Effective January 1, 2013, the Association adopted a postretirement medical benefit plan. The plan allows for the payment of $100 per month to a limited number of retirees who meet certain eligibility requirements. Upon plan initiation, the previously unrecognized prior service costs of $147,175 were recognized as a separate line item within changes in unrestricted net assets. The amortization of prior service costs was $19,775 in 2016 and $19,775 in The accumulated postretirement benefit obligation under the plan included in accounts payable and accrued expenses was $228,508 and $227,031 at, respectively. Note 8. Related Parties The Association conducts business with financial institutions and other service providers throughout the Richmond and Petersburg areas. Certain members of the Association s Board of Directors, volunteers and donors are employed by such entities. Note 9. Restricted Net Assets Temporarily restricted net assets are comprised primarily of funds raised for capital projects, as well as other funds not yet utilized for their intended purpose. Net assets totaling $1,858,560 and $1,781,734 were released from donor restrictions during 2016 and 2015, respectively, comprised primarily of expenditures for the purchase of property and equipment in connection with capital campaigns as well as certain operating contributions. 18

21 Note 9. Restricted Net Assets (Continued) Temporarily restricted net assets set forth below are comprised as follows: Capital projects $ 4,434,845 $ 424,494 Operating contributions for future periods 1,598,746 1,134,260 Cumulative increase in temporarily restricted endowment net assets 1,339,667 1,319,231 $ 7,373,258 $ 2,877,985 Permanently restricted net assets set forth below are comprised primarily of investments in perpetuity, the income from which is expendable to support the indicated purposes: Volunteer and employee training $ 54,508 $ 53,308 Human Opportunity Program Endowment (H.O.P.E.) 300, ,000 Art education program 3,000 3,000 Northside youth programs 1,613,987 1,608,987 Learn To Swim program 56,980 55,675 Financial assistance 114, ,032 General purposes 632, ,283 Youth and Teen programs 71,875 70,875 $ 2,846,665 $ 2,838,160 The Association s endowment consists of 33 individual funds established for a variety of purposes. The endowment includes both donor-restricted endowment funds and funds designated by management as endowments. As required by GAAP, net assets associated with endowment funds, including funds designated by management to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of relevant law: The Association has interpreted the Commonwealth of Virginia enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (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 Association classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets, until those amounts are appropriated for expenditure by the Association in a manner consistent with the standard of prudence prescribed by UPMIFA. 19

22 Note 9. Restricted Net Assets (Continued) In accordance with UPMIFA, the Association considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: a. The duration and preservation of the fund b. The purposes of the Association and the donor-restricted endowment fund c. General economic conditions d. The possible effects of inflation and deflation e. The expected total return from income and the appreciation of investments f. Other resources of the Association g. The investment policies of the Association Return objective and risk parameters: The Association s objective is to earn a reasonable, long-term, risk-adjusted total rate of return to support the designated programs. The Association recognizes and accepts that pursuing a reasonable rate of return involves risk and potential volatility. The generation of current income is a secondary consideration. The Association 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. The Association has established a policy portfolio, or normal asset allocation. While the policy portfolio can be adjusted from time to time, it is designed to serve for long-term horizons based upon long-term expected returns. Spending policy: Spending is first governed by donor stipulations associated with specific gifts with respect to both purpose and amount. Otherwise, the Association will appropriate for expenditure in its annual budget a maximum of 5% of the rolling average of the market value of the endowment assets over the preceding 12 quarters. There may be times when the Association may opt not to take the maximum spending rate but rather to reinvest some of the annual return. No distribution is permitted if the distribution would decrease the contributed principal of the respective component of the endowment fund. 20

23 Note 9. Restricted Net Assets (Continued) The Association had the following endowment-related activities for the years ended December 31, 2016 and 2015: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment assets, December 31, 2014 $ 1,810,472 $ 1,663,211 $ 2,797,424 $ 6,271,107 Investment return: Investment income (net of fees) 55, , ,858 Net loss (realized and unrealized) (107,128) (265,401) - (372,529) Total investment return (52,038) (132,633) - (184,671) Additions 39,037-40,736 79,773 Appropriation of endowment assets for expenditure (83,818) (211,347) - (295,165) Endowment assets, December 31, ,713,653 1,319,231 2,838,160 5,871,044 Investment return: Investment income (net of fees) 36,905 86, ,563 Net appreciation (realized and unrealized) 61, , ,131 Total investment return 98, , ,694 Additions 120,989-8, ,494 Appropriation of endowment assets for expenditure (83,096) (215,590) - (298,686) Endowment assets, December 31, 2016 $ 1,850,214 $ 1,339,667 $ 2,846,665 $ 6,036,546 21

24 Note 9. Restricted Net Assets (Continued) Endowment assets at, are comprised as follows: Temporarily Permanently Unrestricted Restricted Restricted Total 2016 Donor-restricted endowment funds $ - $ 1,339,667 $ 2,846,665 $ 4,186,332 Board-restricted endowment funds 1,850, ,850,214 Total funds $ 1,850,214 $ 1,339,667 $ 2,846,665 $ 6,036, Donor-restricted endowment funds $ - $ 1,319,231 $ 2,838,160 $ 4,157,391 Board-restricted endowment funds 1,713, ,713,653 Total funds $ 1,713,653 $ 1,319,231 $ 2,838,160 $ 5,871,044 Note 10. Subsequent Events The Association evaluated subsequent events for potential required disclosures through June 16, 2017, which is the date the financial statements were available to be issued. 22