CHANNEL ISLANDS YOUNG MEN S CHRISTIAN ASSOCIATION (YMCA) FINANCIAL STATEMENTS JUNE 30, 2016 and 2015

Transcription

1 CHANNEL ISLANDS YOUNG MEN S CHRISTIAN ASSOCIATION (YMCA) FINANCIAL STATEMENTS JUNE 30, 2016 and 2015

2 June 30, 2016 and 2015 TABLE OF CONTENTS PAGE Independent Auditor s Report 1-2 Financial Statements: Statements of Financial Position 3-4 Statements of Activities and Changes in Net Assets 5-6 Statements of Functional Expenses 7-8 Statements of Cash Flows 9 Notes to Financial Statements Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 27-28

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5 STATEMENT OF FINANCIAL POSITION June 30, 2016 ASSETS Temporarily Permanently Total Unrestricted Restricted Restricted 2016 Current Assets Cash and cash equivalents $ 1,162,905 $ 536,071 $ - $ 1,698,976 Grants and contracts receivable 100, ,905 Accounts receivable 190, ,255 Promises to give - 221, ,643 Prepaid and other assets 221, ,376 Total Current Assets 1,675, ,714-2,433,155 Endowment Assets Cash 381, ,813 Investments 617, ,540 2,107,889 3,481,964 Total Endowment Assets 999, ,540 2,107,889 3,863,777 Property and equipment (net) 24,939, ,939,396 Total Assets $ 27,614,185 $ 1,514,254 $ 2,107,889 $ 31,236,328 LIABILITIES AND NET ASSETS Current Liabilities Accounts payable $ 439,998 $ - $ - $ 439,998 Unearned revenue 799, ,373 Accrued expenses 940, ,985 Current portion of notes payable 85, ,679 Total Current Liabilities 2,266, ,266,035 Notes payable, net of current portion 3,254, ,254,849 Total Liabilities 5,520, ,520,884 Net Assets Unrestricted 22,093, ,093,301 Temporarily restricted - 1,514,254-1,514,254 Permanently restricted - - 2,107,889 2,107,889 Total Net Assets 22,093,301 1,514,254 2,107,889 25,715,444 Total Liabilities and Net Assets $ 27,614,185 $ 1,514,254 $ 2,107,889 $ 31,236,328 The accompanying notes are an integral part of these financial statements

6 STATEMENT OF FINANCIAL POSITION June 30, 2015 ASSETS Temporarily Permanently Total Unrestricted Restricted Restricted 2015 Current Assets Cash and cash equivalents $ 1,896,971 $ 621,939 $ - $ 2,518,910 Grants and contracts receivable 116, ,093 Accounts receivable 158, ,274 Promises to give 208, ,682 Prepaid and other assets 233, ,143 Total Current Assets 2,404, ,621-3,235,102 Assets Restricted for Capital Campaigns Promises to give - capital campaigns - 4,625-4,625 Total Assets Restricted for Capital Campaigns - 4,625-4,625 Endowment Assets Cash 343, ,482 Investments 757, ,991 2,010,917 3,465,082 Total Endowment Assets 1,100, ,991 2,010,917 3,808,564 Property and equipment (net) 25,015, ,015,815 Total Assets $ 28,520,952 $ 1,532,237 $ 2,010,917 $ 32,064,106 LIABILITIES AND NET ASSETS Current Liabilities Accounts payable $ 412,124 $ - $ - $ 412,124 Unearned revenue 751, ,287 Accrued expenses 905, ,194 Current portion of capital leases payable 28, ,863 Current portion of notes payable 81, ,663 Total Current Liabilities 2,179, ,179,131 Notes payable, net of current portion 3,340, ,340,649 Total Liabilities 5,519, ,519,780 Net Assets Unrestricted 23,001, ,001,172 Temporarily restricted - 1,532,237-1,532,237 Permanently restricted - - 2,010,917 2,010,917 Total Net Assets 23,001,172 1,532,237 2,010,917 26,544,326 Total Liabilities and Net Assets $ 28,520,952 $ 1,532,237 $ 2,010,917 $ 32,064,106 The accompanying notes are an integral part of these financial statements

7 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended June 30, 2016 Temporarily Permanently 2016 Unrestricted Restricted Restricted Total Public Support and Revenue Public Support Contributions - annual campaign $ 951,532 $ - $ - $ 951,532 Contributions - other - 987,835 96,972 1,084,807 Special events, net of direct costs of $83, , ,126 Total Public Support 1,081, ,835 96,972 2,166,465 Revenue Membership dues 9,183, ,183,759 Joining fees 201, ,770 Program fees 1,683, ,683,877 Camp income 1,332, ,332,138 Childcare 1,980, ,980,279 Government funds: Childcare 344, ,087 Other programs 776, ,941 Merchandise sales and rentals 135, ,042 Investment income 10,553 63,516-74,069 Realized gain (loss) on investments - 38,346-38,346 Unrealized gain (loss) on investments (111,861) - - (111,861) Loss on disposal of property and equipment (1,547) - - (1,547) Miscellaneous revenue 40, ,176 Total Revenue 15,575, ,862-15,677,076 Total Public Support and Revenue 16,656,872 1,089,697 96,972 17,843,541 Released from Restrictions 1,107,680 (1,107,680) - - Net Public Support and Revenue 17,764,552 (17,983) 96,972 17,843,541 Expenses Program Services Youth Development 6,237, ,237,950 Healthy Living 8,455, ,455,442 Social Responsibility 995, ,690 Total Program Services 15,689, ,689,082 Supporting Services Management and general 2,385, ,385,059 Fundraising 598, ,282 Total Supporting Services 2,983, ,983,341 Total Expenses 18,672, ,672,423 (Decrease) / increase in Net Assets (907,871) (17,983) 96,972 (828,882) Net Assets at Beginning of Year 23,001,172 1,532,237 2,010,917 26,544,326 Net Assets at End of Year $ 22,093,301 $ 1,514,254 $ 2,107,889 $ 25,715,444 The accompanying notes are an integral part of these financial statements

8 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended June 30, 2015 Temporarily Permanently 2015 Unrestricted Restricted Restricted Total Public Support and Revenue Public Support Contributions - annual campaign $ 901,624 $ - $ - $ 901,624 Contributions - other - 512, , ,875 Special events, net of direct costs of $86, , ,535 United Way Total Public Support 1,050, , ,000 1,723,186 Revenue Membership dues 9,194, ,194,223 Joining fees 224, ,835 Program fees 1,652, ,652,733 Camp income 1,048, ,048,525 Childcare 1,916, ,916,181 Government funds: Childcare 315, ,115 Other programs 753, ,356 Merchandise sales and rentals 44, ,475 Investment income - 67,075-67,075 Realized gain on investments 42,308 1,247-43,555 Unrealized gain on investments (13,808) - - (13,808) Loss on disposal of property and equipment (55,152) - - (55,152) Miscellaneous revenue 62, ,695 Total Revenue 15,185,486 68,322-15,253,808 Total Public Support and Revenue 16,235, , ,000 16,976,994 Released from Restrictions 1,116,316 (1,116,316) - - Net Public Support and Revenue 17,352,113 (535,119) 160,000 16,976,994 Expenses Program Services Youth Development 5,763, ,763,410 Healthy Living 8,058, ,058,322 Social Responsibility 990, ,402 Total Program Services 14,812, ,812,134 Supporting Services Management and general 2,339, ,339,485 Fundraising 590, ,662 Total Supporting Services 2,930, ,930,147 Total Expenses 17,742, ,742,281 Increase / (decrease) in Net Assets (390,168) (535,119) 160,000 (765,287) Net Assets at Beginning of Year 23,391,340 2,067,356 1,850,917 27,309,613 Net Assets at End of Year $ 23,001,172 $ 1,532,237 $ 2,010,917 $ 26,544,326 The accompanying notes are an integral part of these financial statements

9 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended June 30, 2016 Program Services Supporting Services Total Management Youth Healthy Social Program and 2016 Development Living Responsibility Services General Fundraising Total Salaries $ 3,121,646 $ 3,854,481 $ 606,922 $ 7,583,049 $ 1,184,214 $ 290,758 $ 9,058,021 Employee benefits 407, , , , ,172 47,893 1,203,747 Payroll taxes and workers comp insurance 372, ,397 72, , ,676 35,488 1,075,215 Total Salaries and Related Expenses 3,902,543 4,696, ,406 9,388,782 1,574, ,139 11,336,983 Professional fees and contracted services 42,298 50,904 4,620 97, ,552 13, ,703 Supplies 248, ,617 40, ,383 11,589 55, ,629 Communications 26,936 34,033 8,721 69,690 20,925 2,933 93,548 Postage 10,445 11, ,361 7,853 4,411 34,625 Occupancy 603,477 1,461,723 26,954 2,092,154 64,434 7,829 2,164,417 Equipment 172, ,355 41, ,655 66,397 34, ,225 Program costs 400,240 9,372 2, , ,340 Advertising 97, , ,960 39,761 23, ,797 Travel and transportation 174,849 37,022 14, ,236 36,777 7, ,265 Conference 34,423 45,176 7,887 87,486 47,220 13, ,667 Financing costs 130, , , ,062 23, ,678 Other insurance 56,434 93,725 3, ,523 1, ,158 Miscellaneous 19,019 12,756 1,148 32,923 2, ,756 Awards 2,052 1,939 1,605 5,596 13,975 15,857 35,428 Other employee expenses 46,006 32,447 7,736 86,189 12,188 5, ,495 National support 62, , ,696 8,735 12, ,690 Total Expenses before Depreciation Expense 6,029,673 7,465, ,936 14,447,001 2,274, ,071 17,315,404 Depreciation expense 208, ,050 43,754 1,242, ,727 4,211 1,357,019 Total Expenses - June 30, 2016 $ 6,237,950 $ 8,455,442 $ 995,690 $ 15,689,082 $ 2,385,059 $ 598,282 $ 18,672,423 The accompanying notes are an integral part of these financial statements

10 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended June 30, 2015 Program Services Supporting Services Total Management Youth Healthy Social Program and 2015 Development Living Responsibility Services General Fundraising Total Salaries $ 2,894,304 $ 3,691,343 $ 617,036 $ 7,202,683 $ 1,140,738 $ 309,870 $ 8,653,291 Employee benefits 402, , , , ,623 37,714 1,199,901 Payroll taxes and workers comp insurance 337, ,553 75, , ,595 36,829 1,008,944 Total Salaries and Related Expenses 3,634,802 4,530, ,669 8,961,767 1,515, ,413 10,862,136 Professional fees and contracted services 86, ,170 1, , ,181 20, ,222 Supplies 249, ,850 41, ,778 10,293 50, ,236 Communications 24,129 29,047 7,124 60,300 18,078 2,676 81,054 Postage 12,751 14, ,671 5,730 4,727 38,128 Occupancy 594,873 1,365,855 23,540 1,984,268 68,713 6,825 2,059,806 Equipment 148, ,731 49, ,865 94,312 21, ,597 Program costs 239,248 10,750 5, , ,118 Advertising 93, ,387 3, ,394 72,403 24, ,170 Travel and transportation 176,147 53,769 19, ,585 30,109 11, ,431 Conference 41,660 50,468 6,049 98,177 37,843 15, ,328 Financing costs 91,443 94, , ,011 16, ,873 Other insurance 58,228 73,917 2, ,565 1, ,817 Miscellaneous 20,571 18,150 2,806 41,527 1, ,217 Awards 5,747 5,868-11,615 7,116 12,765 31,496 Other employee expenses 37,222 31,623 5,202 74,047 19,909 4,202 98,158 National support 41, , ,522 15,267 10, ,332 Total Expenses before Depreciation Expense 5,555,073 7,082, ,515 13,602,756 2,238, ,017 16,427,119 Depreciation expense 208, ,154 24,887 1,209, ,139 4,645 1,315,162 Total Expenses - June 30, 2015 $ 5,763,410 $ 8,058,322 $ 990,402 $ 14,812,134 $ 2,339,485 $ 590,662 $ 17,742,281 The accompanying notes are an integral part of these financial statements

11 STATEMENT OF CASH FLOWS For the Years Ended June 30, 2016 and Cash Flows from Operating Activities Increase (Decrease) in net assets $ (828,882) $ (765,287) Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation expense 1,357,019 1,315,162 Contributions for endowment (96,972) (160,000) In-kind building donation (470,280) - Change in unrealized gain 111,861 13,808 Realized gain (38,346) (43,555) (Gain) loss on disposal of property and equipment 1,547 55,152 Changes in: Grants and contracts receivable 15,188 (20,620) Accounts receivable (31,981) (88,723) Promises to give (12,961) (5,307) Prepaid expenses and other assets 11,767 (5,209) Accounts payable 27,874 (57,433) Accrued expenses 35,791 74,987 Unearned revenue 48, ,191 Net cash provided by operating activities 129, ,166 Cash Flows from Investing Activities Acquisition of property and equipment (813,392) (453,970) Proceeds from sale of equipment 1,525 1,525 Purchase of investments (279,483) (742,962) Proceeds from sale of investments 189, ,432 Net cash used by investing activities (902,264) (683,975) Cash Flows from Financing Activities Proceeds from borrowing 50,000 - Principal payments on borrowings (160,647) (136,006) Proceeds received from contributions restricted for capital improvements 4,625 18,278 Contributions for endowment 96, ,000 Net cash provided by financing activities (9,050) 42,272 Net Increase (Decrease) in Cash (781,603) (161,537) Cash and Cash Equivalents at Beginning of the Year 2,862,392 3,023,929 Cash and Cash Equivalents at End of the Year $ 2,080,789 $ 2,862,392 Supplementary Information: Cash paid for interest $ 167,380 $ 166,446 The accompanying notes are an integral part of these financial statements

12 NOTE 1: ORGANIZATION Channel Islands Young Men s Christian Association (the YMCA ) is a charitable organization which provides programs based upon Christian principles to men, women, and children of all ages, races, religious beliefs and economic status, in order to develop and enrich the spirit, mind, and body. Santa Barbara Young Men s Christian Association" was established in September Since its establishment it has started or absorbed operations of several YMCAs in neighboring cities and counties. In January 1981 it adopted the current name. The YMCA maintains its principal place of business at 105 E. Carrillo Street in Santa Barbara, California. As a voluntary health and welfare organization qualifying under Internal Revenue Code Section 501(c)(3), the YMCA is generally exempt from federal and state income taxes. The YMCA is not considered a private foundation for income tax purposes. The YMCA is governed by an elected board of directors and officers responsible for the development of policies. Management and staff conduct YMCA activities in accordance with board-established policy. The YMCA is committed to strengthening communities in Santa Barbara and Ventura counties through programs focused on: Youth Development - Nurturing the potential of every child and teen These programs include youth sports, before and after school care, preschool, summer day camps, leadership development, civic engagement, swimming, recreation and offpremise overnight or week-long camping activities. Healthy Living - Improving our communities health and well-being These programs promote family time, health, well-being, fitness, sports, recreation, spiritual development and group interests for adults and families. Social Responsibility - Giving back and providing support to our neighbors These programs include a youth shelter and teen center for at risk youth

13 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements of the YMCA have been prepared on the accrual basis. The YMCA is comprised of facility branches located in Santa Barbara, Montecito, Ventura, Camarillo, Lompoc and Santa Ynez. These branches also operate childcare programs and day camps at school sites. In addition to the facility branches, the Youth and Family Services branch operates programs in Santa Barbara and Isla Vista. This branch primarily serves youth and young adults at a youth shelter, a teen center and as part of a supportive transitional housing program. All significant balances and transactions among the branches have been eliminated. To ensure observance of limitations and restrictions placed on the use of resources available to the YMCA, the accounts of the YMCA are maintained in accordance with the principles of fund accounting. This accounting and reporting method classifies resources by their nature and purpose based on the presence or absence of donor-imposed restrictions into three classes of net assets: Unrestricted Net Assets Unrestricted net assets are those net assets which are received without donor restriction or those net assets for which donor restrictions have been fulfilled. Also included are board designated net assets. Temporarily Restricted Net Assets Temporarily restricted net assets consist of contributions and other inflows of funds temporarily subject to donor-imposed restrictions. The restrictions are temporary in that they are expected to expire with the passage of time or be satisfied and removed by the actions of the YMCA that fulfill donor stipulations. Earnings on donor-restricted endowment funds that have not yet been appropriated are also classified as temporarily restricted net assets. Permanently Restricted Net Assets Permanently restricted net assets consist of contributions and other inflows of funds subject to donor-imposed restrictions that neither expire by the passage of time nor can be fulfilled or otherwise removed by the actions of the YMCA. Cash and Cash Equivalents For purposes of the statement of cash flows, the YMCA considers all highly-liquid investments with an initial maturity of twelve months or less to be cash equivalents. The YMCA maintains several cash accounts to separately hold cash which may not be available for operating purposes as required by certain granting agencies and donors

14 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Promises to Give Unconditional promises to give are recognized as revenues in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Property and Equipment During the fiscal year ended 2015, the Board adopted a capitalization policy of $5,000 or more for the cost of land, buildings and equipment with a similar policy for the fair market value of donated assets, provided the asset had an expected life in excess of one year. Depreciation is provided over the estimated useful lives of the respective assets ranging from three to fifty years on the straight-line method. Leasehold improvements are being amortized over the shorter of the lease term or useful life. Investments Investments are recorded at fair market value. Changes in unrealized gains or losses are recorded as a change in the appropriate class of net assets. Unearned Revenue Revenues from membership dues are recognized over the terms of the memberships. Revenues from childcare fees are recognized over periods of childcare service provided. Revenues from program fees are recognized over the terms of the program. Amounts collected but unearned are reflected in the statement of financial position as unearned revenue. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted public support, depending on the existence and/or nature of any donor restrictions. All 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 stipulated time restrictions end, or the purpose of the restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities and changes in net assets as net assets released from restrictions. Contributed Services The YMCA pays for most services requiring specific expertise. However, a substantial number of volunteers have donated significant amounts of time to assist with the YMCA s program services and its fundraising campaigns (See Note 15)

15 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Advertising Costs The YMCA charges the cost of advertising to expense when incurred. Functional Expenses Expenses for program services shown in the statement of functional expenses primarily consist of program expenses of branches. Management and general expenses are expenses of the Association Office, and fundraising expenses are incurred by all branches and the Association Office. Use of Estimates The preparation of financial statements in conformity with 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used in preparing these financial statements include: Depreciable lives and estimated residual value of fixed assets Allocation of certain expenses by function Allowance for uncollectible contracts, grants and promises to give Fair value of donated land Promises to give discounted to net present value Fair value of financial instruments It is at least reasonably possible that the significant estimates used will change within the next year. Reclassifications Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year financial statements. NOTE 3: GRANTS AND CONTRACTS RECEIVABLE Grants and contracts receivable are mainly from the governmental agencies and private foundations. The YMCA has provided an uncollectible allowance of an amount of $20,667 and $19,882 at June 30, 2016 and 2015, respectively. The remaining balance is expected to be fully collectible within one year from the year end

16 NOTE 4: ACCOUNTS RECEIVABLE The YMCA has provided an allowance for uncollectible accounts receivable of an amount of $38,045 and $30,814 at June 30, 2016 and 2015, respectively, with the remaining balance of accounts receivable expected to be fully collectible within one year from the year end. NOTE 5: PROMISES TO GIVE While the YMCA conducts annual campaigns, many promises to give are the result of a capital campaign. Unconditional promises to give at June 30 are as follows: Receivable in less than one year $ 241,951 $ 268,348 Receivable in one to five years - - Total unconditional promises to give 241, ,348 Less discounts to net present value (effective rate 2.529%) - - Less allowance for uncollectible promises (20,308) (55,041) Total $ 221,643 $ 213,307 Promises to give in the statement of financial position are composed of: Annual campaign net $182,789 $159,682 Capital campaign net - 4,625 Other 38,854 49,000 Total $ 221,643 $ 213,307 NOTE 6: CONDITIONAL PROMISES TO GIVE The YMCA does not record conditional promises to give. The YMCA has been named as a charitable beneficiary in the wills of various donors. However, the donors have retained the right to change charitable beneficiaries; therefore, these intentions have not been recorded as an asset of the YMCA

17 NOTE 7: INVESTMENTS Investments at June 30, 2016, are recorded at market value based upon quoted market prices (fair value) and are summarized as follows: Unrealized Cost Market Value Gain (Loss) Certificates of deposit $ 416,454 $ 420,482 $ 4,028 Mutual funds 21,064 20,110 (954) Domestic equities 1,557,202 2,278, ,984 International equities 786, ,186 (23,486) Current year $ 2,781,392 $ 3,481,964 $ 700,572 Prior year 2,652,649 3,465, ,433 Change in unrealized gain on investments: $ (111,861) Investments at June 30, 2015, are recorded at market value based upon quoted market prices (fair value) and are summarized as follows: Unrealized Cost Market Value Gain (Loss) Certificates of deposit $ 412,994 $ 414,398 $ 1,404 US Treasury bonds 29,794 36,263 6,469 Other bonds 40,350 40, Mutual funds 88,259 86,126 (2,133) Domestic equities 1,332,765 2,089, ,476 International equities 748, ,690 50,203 Current year $ 2,652,649 $ 3,465,082 $ 812,433 Prior year 2,377,564 3,203, ,241 Change in unrealized gain on investments: $ (13,808) The endowment fund investments include unrestricted, temporarily restricted, and permanently restricted investments. Unrestricted investments of the endowment fund consist of amounts that have been designated by the YMCA s board of directors. The earnings from the investments provide an income stream for restricted and unrestricted purposes. Investment return is summarized as follows for the years ended June 30: Interest and dividends $ 74,069 $ 67,075 Change in unrealized gain (111,861) (13,808) Realized gain 38,346 43,555 Total investment gain $ 554 $ 96,

18 NOTE 8: PROPERTY AND EQUIPMENT The following is a summary of property and equipment as of June 30: Land $ 7,027,608 $ 7,027,608 Land improvements 4,376,222 4,121,450 Buildings and improvements 27,149,578 26,641,050 Equipment and fixtures 2,830,612 2,525,778 Vehicles 96,950 96,950 Construction in progress 423, ,779 41,904,815 40,748,615 Less accumulated depreciation (16,965,419) (15,732,800) Total $ 24,939,396 $ 25,015,815 NOTE 9: RELATED PARTY TRANSACTIONS During 2016 and 2015, the YMCA s bank accounts and debt were held by a bank whose senior officer is a board member of the YMCA. During 2016 and 2015, the YMCA was charged legal expenses of $4,192 and $6,144 by a local law firm for various matters. A partner of the local law firm is also a member of the YMCA s board of directors. During 2016, the YMCA was charged legal expenses of $9,328 and by another local law firm for various matters. A partner of the local law firm is also a member of the YMCA s board of directors. NOTE 10: CONTINGENCIES The YMCA received a number of grants from various governmental agencies. These grants are subject to audit by the corresponding oversight agency as to allowable costs paid with governmental funds and as to the share of costs contributed by the YMCA. For 2016 and 2015, the YMCA could be liable for as much as the full amount of federal governmental funds expended up to approximately $292,355 and $300,306 if, under audit, the oversight agency were to determine that all costs charged to the project were disallowed. Management believes it is unlikely that the various agencies would disallow a significant portion of the costs

19 NOTE 11: RETIREMENT PLAN The YMCA has a 401(a) defined contribution retirement plan provided through the YMCA Retirement Fund. To be eligible, an employee must be age twenty-one or older and work 1,000 hours in each of two years. Once eligible, the employee is immediately vested and remains in the plan. Employees who transfer from another YMCA, where they participated in the Retirement Fund, will continue to participate without interruption. The YMCA contributed 8% of eligible employee wages to the Retirement Fund each month for 2016 and 2015, respectively. Retirement contribution expense was $402,274 and $381,254 for the years ended June 30, 2016 and 2015, respectively. The YMCA also offers a 403(b) retirement savings plan to all employees, regardless of age or hours worked, which allows employees to invest on a pre-tax basis through payroll deductions. NOTE 12: LONG-TERM DEBT During 2014 the YMCA obtained two loans from a bank for the purchase of the Carrillo Street building which is now used as the Association s Headquarters. Both loans have an interest rate of 4.81%, are secured by real property, and are payable over a 25-year period with a maturity date of October 1, The balances at June 30, 2016 and 2015, for the first loan, which is secured by the Carrillo Street building, were $1,928,929 and $1,976,156, while the balances of the second loan, which is secured by the Camarillo facility, were $1,411,599 and $1,446,156, respectively. Aggregate maturities of long-term debt over the next five years and thereafter are as follows: Amount 2017 $ 85, , , , ,815 Thereafter 2,867,880 $ 3,340,528 During 2014 the YMCA obtained a $1,250,000 revolving line of credit with a bank. The line of credit is secured by a 1st trust deed on the Santa Barbara branch real property and a UCC-a filing on all business assets. The loan terms require monthly interest payments at a variable annual rate of the Wall Street Journal Prime rate plus.5%. There were no borrowings on this line of credit at years ended June 30, 2016 and 2015, respectively

20 NOTE 12: LONG-TERM DEBT (Continued) In November 2012, the YMCA entered into two lease agreements to finance the purchase of cardio equipment for the Santa Barbara and Ventura branches. The leases were offered to the YMCA by the vendor at 0% financing. The capital lease debt relating to this financing was calculated using a present value calculation and an interest rate of 3.75%, which the YMCA s borrowing rate was at the time the contracts were signed. In 2016, the leases were paid in full. For 2016 and 2015, capital lease assets totaled $35,537 and $59,229, respectively, while $23,692 was charged to depreciation expense for both periods, respectively. Total interest expense for notes payable for the years ended June 30, 2016 and 2015 was $167,380 and $166,446, respectively. The YMCA was in compliance with all applicable debt covenants as of June 30, NOTE 13: DESIGNATIONS AND RESTRICTIONS ON NET ASSETS Temporarily restricted net assets: Temporarily restricted net assets are available for the following purpose or period: Facility improvements $ 2,230 $ 59,408 Subsequent years activities 755, ,838 Unappropriated endowment earnings 756, ,991 Total $ 1,514,254 $ 1,532,237 Permanently restricted net assets: Permanently restricted net assets consist of investments in perpetuity, the income from which is expendable to support operations of the YMCA. NOTE 14: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Summary of cash and cash equivalents as of June 30: Unrestricted $ 1,162,905 $ 1,896,971 Temporarily restricted 536, ,939 Unrestricted endowment 381, ,482 Total $ 2,080,789 $ 2,862,392 Certain donor-restricted donations required separate bank accounts which are included above

21 NOTE 15: CONTRIBUTED SERVICES A substantial number of volunteers have donated significant amounts of their time performing services to the YMCA during fiscal years ended June 30, 2016 and For those years ended, the YMCA estimates that approximately 20,986 and 16,558 hours were contributed by policy, advisory, fundraising and program volunteers. Valued at the most recent Independent Sector volunteer rate for California, the YMCA received benefits estimated at $579,004 and $444,913, for 2016 and 2015, respectively. These estimated benefits are not recorded in the financial statements. NOTE 16: FAIR VALUE MEASUREMENT Fair values of assets have been measured in accordance with generally accepted accounting principles (GAAP), which establishes 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 (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1: Level 2: Level 3: Quoted prices in active markets for identical assets or liabilities Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; discounted cash flows; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities The asset 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

22 NOTE 16: FAIR VALUE MEASUREMENT (Continued) The following is a description of the valuation methodologies used for assets measured at fair value: US Treasury bonds Other bonds Equities Valued at the closing price reported in the active market in which the bond is traded. Certain corporate bonds are valued at the closing price reported in the active market in which the bond is traded. Other corporate bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings. Certain common stocks are valued at the closing price reported in the active market in which the individual securities are traded. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value of reflective of future fair values. Furthermore, although the YMCA 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. Gains and losses (realized and unrealized) are on the statement of activities and changes in net assets. The following table sets forth by level within the fair value hierarchy the YMCA s assets at fair values as of June 30, 2016: Description Level 1 Level 2 Level 3 Total Investments: Certificates of deposit $ 420,482 $ - $ - $ 420,482 Mutual funds 20, ,110 Domestic equities 2,278, ,278,186 International equities 763, ,186 Total assets measured at fair value $ 3,481,964 $ - $ - $ 3,481,

23 NOTE 16: FAIR VALUE MEASUREMENT (Continued) The following table sets forth by level within the fair value hierarchy the YMCA s assets at fair values as of June 30, 2015: Description Level 1 Level 2 Level 3 Total Investments: Certificates of deposit $ 414,398 $ - $ - $ 414,398 US Treasury bonds 36, ,263 Other bonds 40, ,364 Domestic equities 2,175, ,175,367 International equities 798, ,690 Total assets measured at fair value $ 3,465,082 $ - $ - $ 3,465,082 There were no significant transfers between Levels 1, 2 and 3 of the fair value hierarchy during the years ended June 30, 2016 and Fair Value of Financial Instruments The fair value of the grants and pledges receivable, other receivables, prepaid expenses and other assets, accounts payable and accrued liabilities, and unearned revenue approximate carrying value because of the short-term nature of these items. NOTE 17: OPERATING LEASES The YMCA has entered into several long-term lease agreements for land and facilities, with leases expiring between April 2017 and May 2031, and total annual rents currently of $59,624. Additionally the YMCA also leases certain of its childcare facilities under monthto-month leases. Rent expense for all leases was $189,319 and $198,771 for the years ended June 30, 2016 and 2015, respectively. The following is a schedule of future minimum rental payments on non-cancelable leases with remaining terms in excess of one year: Years ending June 30: 2017 $ 60, , , , ,676 Thereafter 388,815 Total $ 616,

24 NOTE 18: ENDOWMENT FUNDS The YMCA s endowment consists of individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the board of directors to function as endowments. As required by GAAP, net assets associated with endowment funds, including those designated by board of directors, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The board of directors of the YMCA has interpreted the California adopted Universal 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 YMCA classified 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 YMCA in a manner consistent with the standard for prudence prescribed by UPMIFA. In accordance with California UPMIFA, the YMCA 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 YMCA 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 YMCA 7. The investment policies of the YMCA Endowment net assets are composed of the following as of June 30, 2016: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted $ - $ 756,540 $ 2,107,889 $ 2,864,429 Board-designated 999, ,348 Total endowment funds $ 999,348 $ 756,540 $ 2,107,889 $ 3,863,

25 NOTE 18: ENDOWMENT FUNDS (Continued) Endowment net assets are composed of the following as of June 30, 2015: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted $ - $ 696,991 $ 2,010,917 $ 2,707,908 Board-designated 1,100, ,100,656 Total endowment funds $ 1,100,656 $ 696,991 $ 2,010,917 $ 3,808,564 Changes in endowment net assets for the year ended June 30, 2016 and 2015 are: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, beginning of year 2015 $ 1,110,638 $ 634,442 $ 1,850,917 $ 3,595,997 Net investment return (investment income, realized and unrealized gains and losses) 27,099 68,322-95,421 Contributions , ,000 Appropriation of endowment assets for expenditure (37,081) (5,773) - (42,854) Endowment net assets, end of year 2015 and beginning of year 2016 $ 1,100,656 $ 696,991 $ 2,010,917 $ 3,808,564 Net investment return (investment income, realized and unrealized gains and losses) (101,308) 101, Contributions ,972 96,972 Appropriation of endowment assets for expenditure - (42,313) - (42,313) Endowment net assets, end of year 2016 $ 999,348 $ 756,540 $ 2,107,889 $ 3,863,

26 NOTE 18: ENDOWMENT FUNDS (Continued) Return Objectives and Risk Parameters The YMCA has adopted investment and spending policies 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 the endowment assets. Endowment assets include those assets of donor-restricted funds that the YMCA must hold in perpetuity for donor-specified periods as well as board-designated funds. The endowment assets are invested in a manner that is intended to produce results that provide a reasonable balance between the quest for growth and the need to protect principal. The investment policy calls for a diverse portfolio utilizing various asset classes with a goal of reducing volatility and risk. The YMCA expects its endowment funds, over time, to provide an average rate of return of approximately 7% annually. Actual returns in any given year may vary from this amount. Spending Policy and How the Investment Objectives Relate to Spending Policy The YMCA has a policy of appropriating for expenditure each year an amount not to exceed 5% of the average past twelve quarterly asset market value balances as of December 31. In establishing this policy, the YMCA considered the long-term expected return on its endowment. Accordingly, over the long-term, the YMCA expects the current spending policy to allow its endowment to grow at an average of 2% annually. This is consistent with the YMCA s objective to maintain the purchasing power of the endowment assets held in perpetuity for a specified term as well as to provide additional real growth through new gifts and investment return. During 2016 and 2015, $42,313 and $42,854 of appropriations for expenditures were made. Endowment Funds with Deficiencies From time to time, the fair value of the assets associated with individual donor-restricted funds may fall below the level that current law requires the YMCA to retain for a fund of perpetual duration. In accordance with accounting principles generally accepted in the United States of America, these deficiencies are reported as a reduction in unrestricted net assets. Such deficiencies may result from unfavorable market fluctuations. As of June 30, 2016 and 2015, the endowment fund had no deficiencies. NOTE 19: CONCENTRATIONS OF RISK The YMCA maintains cash balances at several financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000 for each insured financial institution. At June 30, 2016, the YMCA had uninsured cash balances of $1,450,

27 NOTE 19: CONCENTRATIONS OF RISK (Continued) The YMCA s major source of revenue is from membership income for its physical education programs. Revenue generated from this source is approximately 51% of its operating revenue. A significant portion of the YMCA s revenues and contracts and grants receivable consists of Federal, State of California and local government grants and contracts. These revenues and grants are earned by the YMCA based on its services to clients in Santa Barbara and Ventura Counties. NOTE 20: INCOME TAXES The YMCA is exempt from taxes on income under Internal Revenue Code section 501(c)(3) and California Revenue and Taxation Code 23701(d), therefore no amounts for income taxes are reflected in the accompanying financial statements. Management is not aware of any transactions that would affect the YMCA s tax-exempt status. The YMCA evaluates uncertain tax positions, whereby the effect of the uncertainty would be recorded if the outcome was considered probable and reasonably estimable. As of June 30, 2016 and 2015, the YMCA had no uncertain tax positions requiring accrual. The YMCA files tax returns in California and U.S. federal jurisdictions. The YMCA is no longer subject to U.S. federal and state tax examinations by tax authorities for years before 2012 and 2011, respectively. NOTE 21: RENTAL INCOME During 2015, the YMCA entered into an agreement with a local Company to lease a portion of the Association s headquarters. The lease period commenced on April 1, 2015 and will expire on January 31, Base rent of $9,435 is charged per month commencing on July 1, 2015, with an additional $280 per month charged for two parking spaces. At the end of the lease the tenant has an option to renew for an additional 24 months. The lease agreement allowed for the payment of rent to begin on July 1, However, as the tenant had occupied the space beginning in April 2015, the Association recognized rental income of $25,171 during the fiscal year which is reported in merchandise sales and rentals income on the statement of activities. The following is a schedule of future minimum rental receipts from the lessee: Years ending June 30: 2017 $ 68,

28 NOTE 22: SUBSEQUENT EVENTS In preparing these financial statements, the YMCA has evaluated events and transactions for potential recognition or disclosure through November 9, 2016, the date the financial statements were available for issuance

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