THE JEWISH COMMUNITY CENTER OF GREATER KANSAS CITY AND AFFILIATED ENTITY CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2011
Contents Page Independent Auditors Report... 1 Consolidated Financial Statements Consolidated Statement Of Financial Position... 2 Consolidated Statements Of Activities... 3-4 Consolidated Statements Of Functional Expenses... 5-6 Consolidated Statement Of Cash Flows... 7 Notes To Consolidated Financial Statements... 8-21
RubinBrown LLP Certified Public Accountants & Business Consultants 10975 Grandview Drive Suite 600 Overland Park, KS 66210 Independent Auditors Report T 913.491.4144 F 913.491.6821 W rubinbrown.com E info@rubinbrown.com Board of Directors The Jewish Community Center of Greater Kansas City and Affiliated Entity Overland Park, Kansas We have audited the accompanying consolidated statement of financial position of The Jewish Community Center of Greater Kansas City and Affiliated Entity (the Center) as of September 30, 2011 and 2010, and the related consolidated statements of activities, functional expenses and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Center s management. 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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Center s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our 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, 2011 and 2010, and the changes in their net assets and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. January 18, 2012
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets September 30, 2011 2010 Current Assets Cash and cash equivalents $ 405,446 $ 598,281 Accounts receivable, net of allowance of $9,628 in 2011 and $9,540 in 2010 126,556 133,908 Promises to give 403,584 412,647 Prepaid expenses and other assets 112,375 141,014 Total Current Assets 1,047,961 1,285,850 Property And Equipment Leasehold improvements 4,318,133 4,324,539 Equipment 1,145,615 1,108,048 Total Property And Equipment 5,463,748 5,432,587 Less: Accumulated depreciation 1,759,286 1,583,016 Net Property And Equipment 3,704,462 3,849,571 Other Assets Promises to give 167,627 510,183 Investments 7,491,473 6,960,488 Note receivable 100,000 Total Other Assets 7,659,100 7,570,671 Total Assets $ 12,411,523 $ 12,706,092 Liabilities And Net Assets Liabilities Accounts payable and accrued expenses $ 306,253 $ 367,292 Unearned dues and revenues and other liabilities 478,749 799,438 Total Liabilities 785,002 1,166,730 Net Assets Unrestricted: Board-designated 3,400,653 3,047,936 Undesignated 3,102,718 3,297,266 6,503,371 6,345,202 Temporarily restricted 3,135,148 3,498,416 Permanently restricted 1,988,002 1,695,744 Total Net Assets 11,626,521 11,539,362 Total Liabilities And Net Assets $ 12,411,523 $ 12,706,092 See the accompanying notes to consolidated financial statements. Page 2
CONSOLIDATED STATEMENT OF ACTIVITIES For The Year Ended September 30, 2011 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, Gains And Other Support Contributions: Agency allocations Jewish Federation of Greater Kansas City $ 383,229 $ $ $ 383,229 United Way of Greater Kansas City 117,890 117,890 Contributions and bequests 702,155 51,412 5,000 758,567 Capital campaign 87,664 1,545 301,383 390,592 Fundraising events 757,537 757,537 Grants 216,384 318,173 534,557 Membership dues 1,835,211 1,835,211 Investment return (78,351) (215,246) (14,125) (307,722) Tuition and program fees: Early childhood 1,667,207 1,667,207 Day camps 432,384 432,384 Adult education 57,434 57,434 Fitness and sports 510,281 510,281 Children and youth programs 208,238 208,238 Social adjustment 38,647 38,647 Cultural arts 210,615 210,615 Miscellaneous income 7,386 7,386 7,153,911 155,884 292,258 7,602,053 Change in classification of net assets (118,140) 118,140 Net assets released from restrictions 637,292 (637,292) Total Revenues, Gains And Other Support 7,673,063 (363,268) 292,258 7,602,053 Expenses Program and membership services: Early childhood 1,715,971 1,715,971 Day camps 400,662 400,662 Adult education 230,842 230,842 Fitness and sports 1,647,983 1,647,983 Children and youth programs 323,393 323,393 Social adjustment 455,944 455,944 Cultural arts 652,308 652,308 Total program and membership services 5,427,103 5,427,103 Support services: Program support services 59,847 59,847 Fundraising 454,321 454,321 Management and general 1,573,623 1,573,623 Total support services 2,087,791 2,087,791 Total Expenses 7,514,894 7,514,894 Change In Net Assets 158,169 (363,268) 292,258 87,159 Net Assets - Beginning Of Year 6,345,202 3,498,416 1,695,744 11,539,362 Net Assets - End Of Year $ 6,503,371 $ 3,135,148 $ 1,988,002 $ 11,626,521 See the accompanying notes to consolidated financial statements. Page 3
CONSOLIDATED STATEMENT OF ACTIVITIES For The Year Ended September 30, 2010 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, Gains And Other Support Contributions: Agency allocations Jewish Federation of Greater Kansas City $ 385,810 $ $ $ 385,810 United Way of Greater Kansas City 128,103 128,103 Contributions and bequests 641,287 104,663 18,000 763,950 Capital campaign 8,271 3,100 357,081 368,452 Fundraising events 341,396 341,396 Grants 634,769 200,155 834,924 Membership dues 1,821,734 1,821,734 Investment return 257,946 347,267 24,132 629,345 Tuition and program fees: Early childhood 1,649,588 1,649,588 Day camps 371,229 371,229 Adult education 46,707 46,707 Fitness and sports 500,568 500,568 Children and youth programs 231,715 231,715 Social adjustment 38,256 38,256 Cultural arts 175,782 175,782 Miscellaneous income 14,523 14,523 7,247,684 655,185 399,213 8,302,082 Change in classification of net assets (19,710) 12,589 7,121 Net assets released from restrictions 100,704 (100,704) Total Revenues, Gains And Other Support 7,328,678 567,070 406,334 8,302,082 Expenses Program and membership services: Early childhood 1,708,180 1,708,180 Day camps 323,810 323,810 Adult education 211,546 211,546 Fitness and sports 1,705,994 1,705,994 Children and youth programs 332,567 332,567 Social adjustment 433,999 433,999 Cultural arts 476,852 476,852 Total program and membership services 5,192,948 5,192,948 Support services: Program support services 73,255 73,255 Fundraising 127,027 127,027 Management and general 1,524,742 1,524,742 Total support services 1,725,024 1,725,024 Total Expenses 6,917,972 6,917,972 Change In Net Assets 410,706 567,070 406,334 1,384,110 Net Assets - Beginning Of Year 5,934,496 2,931,346 1,289,410 10,155,252 Net Assets - End Of Year $ 6,345,202 $ 3,498,416 $ 1,695,744 $ 11,539,362 See the accompanying notes to consolidated financial statements. Page 4
CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES For The Year Ended September 30, 2011 Management Program Children And Support Early Day Adult Fitness And And Youth Social Cultural General Fundraising Services Childhood Camps Education Sports Programs Adjustment Arts Total Salaries $ 702,287 $ 27,363 $ $ 1,055,618 $ 196,222 $ 146,209 $ 773,016 $ 164,703 $ 189,299 $ 179,290 $ 3,434,007 Employee health and retirement benefits 118,469 198,783 7,449 10,255 72,286 13,882 19,330 22,240 462,694 Payroll taxes and other employee-related expenses 53,963 888 75,502 13,811 10,518 59,843 12,423 14,396 9,810 251,154 Building rentals 33,705 167,593 54,350 3,400 524,163 79,264 48,421 143,376 1,054,272 Professional fees and contract services 96,518 327,627 13,990 21,105 22,468 37,282 96,155 10,285 13,546 138,294 777,270 Bank fees and service charges 74,367 74,367 Supplies 16,183 38,426 21,494 27,818 33,350 6,758 64,967 9,142 9,005 59,364 286,507 Food, beverage and related expenses 10,152 29,762 1,394 152,888 27,625 3,138 1,671 2,967 35,179 2,925 267,701 Insurance 75,424 75,424 Telephone 8,769 78 3,103 834 393 7,162 2,268 2,031 2,841 27,479 Printing 3,870 11,399 1,483 4,527 5,571 4,545 4,793 1,433 9,954 36,255 83,830 Transportation 635 4,488 6 135 30,066 2,671 343 22,966 95,525 6,681 163,516 Conferences 8,996 1,902 2,127 727 2,630 322 3,250 2,475 22,429 Postage 7,614 1,255 305 368 890 562 1,103 361 1,983 4,632 19,073 Equipment contacts, rental and repairs 42,220 2,189 21,175 4,521 1,137 3,742 33,962 3,227 11,895 23,962 148,030 Automobile expenses 6,000 6,000 National origination dues 55,983 55,983 Bad debt (6,410) (6,410) Advertising 25,157 10,846 27 3,767 342 1,010 15,875 57,024 Miscellaneous 7,108 2,081 995 300 4,879 150 2,130 4,288 21,931 1,341,010 454,321 59,847 1,715,971 400,662 230,842 1,647,983 323,393 455,944 652,308 7,282,281 Depreciation 232,613 232,613 $ 1,573,623 $ 454,321 $ 59,847 $ 1,715,971 $ 400,662 $ 230,842 $ 1,647,983 $ 323,393 $ 455,944 $ 652,308 $ 7,514,894 See the accompanying notes to consolidated financial statements. Page 5
CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES For The Year Ended September 30, 2010 Management Program Children And Support Early Day Adult Fitness And And Youth Social Cultural General Fundraising Services Childhood Camps Education Sports Programs Adjustment Arts Total Salaries $ 695,651 $ 4,026 $ $ 1,017,018 $ 160,495 $ 124,721 $ 824,162 $ 169,362 $ 187,454 $ 118,979 $ 3,301,868 Employee health and retirement benefits 58,128 136,523 751 6,794 50,079 11,490 6,716 7,917 278,398 Payroll taxes and other employee-related expenses 49,117 249 70,983 8,810 9,366 61,889 12,647 13,589 8,724 235,374 Building rentals 35,677 177,399 57,107 3,599 550,486 83,901 51,254 150,505 1,109,928 Professional fees and contract services 107,880 66,414 8,150 39,044 6,612 40,249 89,428 5,871 4,991 81,666 450,305 Bank fees and service charges 73,876 20 73,896 Supplies 18,351 17,636 20,526 16,661 19,399 7,339 67,053 10,942 12,225 63,757 253,889 Food, beverage and related expenses 5,705 22,290 977 236,461 28,603 1,605 1,487 3,790 39,913 2,147 342,978 Insurance 79,976 79,976 Telephone 10,467 4,135 1,298 1,245 8,684 2,550 2,229 3,526 34,134 Printing 3,689 7,572 2,634 4,895 4,353 4,968 2,444 7,990 18,419 56,964 Transportation 1,691 3,266 30,649 1,872 6,350 26,138 96,582 399 166,947 Conferences 4,284 1,561 1,712 325 669 1,579 100 1,317 11,547 Postage 13,496 1,140 351 813 3,953 503 400 2,202 3,856 26,714 Equipment contacts, rental and repairs 34,044 41,346 3,705 1,009 3,530 31,454 2,640 6,563 2,781 127,072 Automobile expenses 6,000 6,000 National origination dues 51,602 51,602 Bad debt 3,356 3,356 Advertising 10,227 4,434 695 27 2,230 2,231 14,163 34,007 Miscellaneous 45,402 1,527 814 7,872 292 974 13 56,894 1,308,619 127,027 73,255 1,708,180 323,810 211,546 1,705,994 332,567 433,999 476,852 6,701,849 Depreciation 216,123 216,123 $ 1,524,742 $ 127,027 $ 73,255 $ 1,708,180 $ 323,810 $ 211,546 $ 1,705,994 $ 332,567 $ 433,999 $ 476,852 $ 6,917,972 See the accompanying notes to consolidated financial statements. Page 6
CONSOLIDATED STATEMENT OF CASH FLOWS For The Years Ended September 30, 2011 2010 Cash Flows From Operating Activities Increase in net assets $ 87,159 $ 1,384,110 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 232,613 216,123 Net unrealized/realized (gain) loss on investment transactions 475,699 (499,020) Loss on disposal of property and equipment 8,205 745 Contributions restricted for long-term investment (306,383) (375,081) Investment return restricted for long-term investment 14,125 (24,132) Change in assets and liabilities: Decrease in accounts receivable 7,352 7,965 Decrease in promises to give 351,619 341,358 (Increase) decrease in prepaid expenses and other current assets 28,639 (57,349) Increase (decrease) in accounts payable and accrued expenses (61,039) 42,225 Increase (decrease) in unearned dues and revenues (280,202) 211,739 Increase (decrease) in other liabilities (40,487) 54,400 Net Cash Provided By Operating Activities 517,300 1,303,083 Cash Flows From Investing Activities Purchase of property and equipment (95,859) (125,509) Purchase of investments (2,185,020) (1,256,489) Proceeds from sale of investments 1,178,486 311,976 Proceeds from repayment of note receivable 100,000 Net Cash Used In Investing Activities (1,002,393) (1,070,022) Cash Flows From Financing Activities Permanently restricted contributions 306,383 375,081 Proceeds from investment income for permanently restricted contributions (14,125) 24,132 Net decrease in bank overdrafts (33,993) Net Cash Provided By Financing Activities 292,258 365,220 Net Increase (Decrease) In Cash And Cash Equivalents (192,835) 598,281 Cash And Cash Equivalents - Beginning Of Year 598,281 Cash And Cash Equivalents - End Of Year $ 405,446 $ 598,281 See the accompanying notes to consolidated financial statements. Page 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2011 And 2010 1. 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 United Way of Greater Kansas City and 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 Center), 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 Center and the Supporting Foundation. Significant inter-entity transactions have been eliminated in consolidation. Basis Of Presentation The financial statement presentation follows the recommendations 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 Center 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 8
KANSAS CITY AND AFFILIATED ENTITY Estimates And Assumptions The preparation of 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 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 Center considers all bank balances as cash. Cash and cash equivalents held with investment managers are considered investments for reporting purposes. The Center maintains cash balances at banks in excess of federally insured limits at various times during the year. The Center has not experienced any losses in such accounts. Investments Investments in equity securities having a readily determinable fair value are carried at fair value. Other investments are valued at the lower of cost (or fair value at time of donation, if acquired by contribution) or fair value. 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 Center maintains 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 9
The Center 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. Accounts Receivable Accounts receivable are stated at the amounts billed to customers. The Center 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. Promises To Give Unconditional promises to give are recognized as support in the period the promises are received. Contributions receivable 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. 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. Page 10
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 3-5 years Depreciation expense for the years ended September 30, 2011 and 2010 was $232,613 and $216,123, respectively. 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. 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 2007 and later remain subject to examination by taxing authorities. Allocation Of Expenses Rent expense is 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 2010 consolidated financial statements, where appropriate, to conform to the current year s presentation. Page 11
3. Promises To Give Promises to give at September 30 are collectible as follows: 2011 2010 In one year or less $ 403,584 $ 412,647 Between one and three years 179,002 547,593 582,586 960,240 Less: discount to present value 5,549 23,006 Less: allowance for doubtful promises to give 5,826 14,404 $ 571,211 $ 922,830 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: 2011 Unrealized Fair Appreciation Cost Value (Depreciation) Pooled investments $ 6,883,266 $ 6,901,445 $ 18,179 Mutual funds and index funds 612,198 555,674 (56,524) Money market funds 25,854 25,854 Art work 8,500 8,500 $ 7,529,818 $ 7,491,473 $ (38,345) 2010 Unrealized Fair Appreciation Cost Value (Depreciation) Pooled investments $ 5,739,788 $ 6,309,836 $ 570,048 Mutual funds and index funds 444,173 603,352 159,179 Money market funds 38,800 38,800 Art work 8,500 8,500 $ 6,231,261 $ 6,960,488 $ 729,227 Page 12
Pooled investments primarily consist of marketable equity and debt securities, and are managed by the Foundation within its investment portfolio. Investment return is summarized as follows: 2011 2010 Interest and dividend income $ 167,977 $ 130,325 Realized gain 291,873 50,188 Unrealized gain (loss) (767,572) 448,832 $ (307,722) $ 629,345 5. Fair Value Measurements The Center 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 Center 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. Page 13
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value: Money Market Funds and Mutual Funds Valued at the net asset value (NAV) of shares held by the Center at year end. Pooled Investments Valued at the NAV of shares held by the Center at year end. The unit value or NAV is determined by the Foundation based on the total fair value of the pooled investments divided by the number of units held by the Center at year end. The following table sets forth by level, within the fair value hierarchy, the Center s assets at fair value as of September 30, 2011: Level 1 Level 2 Level 3 Total Money market funds $ 25,854 $ $ $ 25,854 Mutual funds Corporate bond funds 143,234 143,234 Domestic equity - large cap 293,998 293,998 Domestic equity - small cap 34,384 34,384 International equity 69,042 69,042 Commodities 15,016 15,016 Pooled investments Foundation common pool 2,950,767 2,950,767 Foundation long-term pool 3,950,678 3,950,678 $ 581,528 $ 6,901,445 $ $ 7,482,973 Page 14
The following table sets forth by level, within the fair value hierarchy, the Center s assets at fair value as of September 30, 2010: Level 1 Level 2 Level 3 Total Money market funds $ 38,800 $ $ $ 38,800 Mutual funds Corporate bond funds 15,089 15,089 International equity 409,943 409,943 Commodities 178,320 178,320 Pooled investments - Foundation common pool 2,537,325 2,537,325 Foundation long-term pool 3,772,511 3,772,511 - $ 642,152 $ 6,309,836 $ $ 6,951,988 Included within pooled investments are investments held at the Foundation in the Foundation s Common Pool and the Long-Term Pool. The Center s investments in either pool may be redeemed within one to three business days. The Foundation has a stated investment objective of seeking long-term growth while seeking to minimize principal fluctuations and meet ongoing spending policy objectives. The target asset allocation policy for the Common Pool has been established as 40% equities and 60% fixed income. The target asset allocation of the Long-Term Pool is 60% equities and 40% fixed income. 6. Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes at September 30: 2011 2010 Innovative programming $ 881,627 $ 953,719 Cultural arts 365,163 399,146 Youth programs 258,544 258,280 Senior adults 649,639 820,034 Fitness and Sports 854,594 998,702 Other 125,581 68,535 $ 3,135,148 $ 3,498,416 Page 15
7. Permanently Restricted Net Assets As of September 30, 2011 and 2010, permanently restricted net assets of $1,988,002 and $1,695,744, 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 (or loss) for one endowment is required to be reinvested in permanently restricted net assets. In 2011, investment losses of $14,125 were applied to permanently restricted net assets. In 2010, investment income of $24,132 was reinvested in permanently restricted net assets per donor agreements. 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: 2011 2010 Innovative programming $ 44,770 $ 42,249 Cultural arts 15,192 18,563 Youth programs 9,629 7,909 Senior adults 323,128 8,561 Fitness and sports 134,486 20,074 Other 110,087 3,348 Net assets released from restrictions $ 637,292 $ 100,704 9. Endowment Funds The Center s endowment consists of several donor-restricted funds established for various purposes. Assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Page 16
As of September 30, 2011 the asset composition of the endowment was as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Board-designated endowment funds $ 2,041,804 $ $ $ 2,041,804 Donor-restricted endowment funds 3,979 339,908 1,674,469 2,018,356 $ 2,045,783 $ 339,908 $ 1,674,469 $ 4,060,160 As of September 30, 2010 the asset composition of the endowment was as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Board-designated endowment funds $ 2,338,685 $ $ $ 2,338,685 Donor-restricted endowment funds 122,119 522,679 1,242,394 1,887,192 $ 2,460,804 $ 522,679 $ 1,242,394 $ 4,225,877 The changes in the endowment assets for the year ended September 30, 2011 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Balance - October 1, 2010 $ 2,460,804 $ 522,679 $ 1,242,394 $ 4,225,877 Investment return Investment income 57,784 39,756 97,540 Net depreciation (311,382) (183,212) (14,125) (508,719) Total investment return (253,598) (143,456) (14,125) (411,179) Contributions 446,200 446,200 Amounts appropriated for spending (161,423) (39,315) (200,738) Balance - September 30, 2011 $ 2,045,783 $ 339,908 $ 1,674,469 $ 4,060,160 Page 17
The changes in the endowment assets for the year ended September 30, 2010 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Balance - October 1, 2009 $ 2,320,857 $ 355,725 $ 753,720 $ 3,430,302 Investment return Investment income 135,474 36,190 4,073 175,737 Net appreciation 114,331 157,023 20,059 291,413 Total investment return 249,805 193,213 24,132 467,150 Contributions 98 468,410 468,508 Amounts appropriated for spending (109,858) (30,225) (140,083) Other changes 3,868 (3,868) Balance - September 30, 2010 $ 2,460,804 $ 522,679 $ 1,242,394 $ 4,225,877 Page 18
Interpretation Of Relevant Law The Center 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 Center 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 Center in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Center 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 Center 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 Center, and (7) The investment policies of the Center. Return Objectives And Risk Parameters The Center 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 specified periods, as well as those of boarddesignated endowment funds. Under the Center 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 Center 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. Page 19
Strategies Employed For Achieving Objectives To satisfy its long-term rate of return objectives, the Center 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 Center 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 Center 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 Center considered the long-term expected return on its endowment. Accordingly, over the long term, the Center expects the current spending policy to allow its endowment to grow at an average of at least 3% annually. This is consistent with the Center 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. 10. Related Parties The Center leases its facilities from the Jewish Community Campus of Greater Kansas City, Inc. (the Campus) on an annual basis based on a memorandum of understanding. The bylaws of the Campus require two Center Board members also serve as Campus Board members. Rent expense totaled $1,045,619 and $1,106,795 for the years ended September 30, 2011 and 2010, respectively, which includes fees for janitorial and maintenance services. As of September 30, 2011 and 2010, $5,176 and $91, respectively, is due to the Campus. The Center received contributions of $383,229 and $385,810 from the Federation in 2011 and 2010, respectively. At September 30, 2010 the Center had a related party note receivable from a member of management of $100,000 which bore interest at a rate of 5% and was originally due on July 29, 2012. This note was repaid in its entirety during 2011. Page 20
11. Defined Contribution Retirement Plan The Center 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 Center will match up to 3% of each participant s compensation for participants who participate in the Plan. In addition, the Center will contribute an amount equal to 4% of compensation for all eligible employees, regardless if they have made contributions to the Plan. From April 2009 through September 2010, the employer contributions were frozen by the Center. For the year ended September 30, 2011, the Center made contributions of $141,207. The Center did not make any contributions during the year ended September 30, 2010. 12. Deferred Compensation Plan Effective October 1, 2010, the Center 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 year ended September 30, 2011, the Center made deferrals of $12,271. The Center did not make any deferrals during the year ended September 30, 2010. 13. Subsequent Events Subsequent to September 30, 2011, the Center entered into a contract for the remodeling of its locker room facilities. The cost for this project, which is scheduled to be completed during the 2012 fiscal year, is expected to approximate $297,000. Management has evaluated subsequent events through January 18, 2012 the date which the consolidated financial statements were available for issue. Page 21