peninsula metropolitan ymca · 2020. 3. 25. · we have audited the accompanying statements of...

Peninsula Metropolitan YMCA

Financial Statements

Years Ended December 31, 2015 and 2014

Peninsula Metropolitan YMCA

Table of Contents

Independent Auditors' Report .................................................................................................................. 1

Financial Statements:

Statements of Financial Position ......................................................................................................... 3

Statements of Activities ....................................................................................................................... 4

Statements of Cash Flows .................................................................................................................. 5

Notes to Financial Statements ............................................................................................................ 6

Supplementary Information:

Schedules of Functional Expenses ..................................................................................................... 20

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Independent Auditors’ Report

Board of Directors Peninsula Metropolitan YMCA Newport News, Virginia

We have audited the accompanying statements of financial position of Peninsula Metropolitan YMCA, a nonprofit organization, as of December 31, 2015 and 2014, and the related statements of activities and cash flows for the years 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.

Auditors’ Responsibility Our responsibility is to express an opinion on these 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 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 auditors’ 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 Peninsula Metropolitan YMCA, as of December 31, 2015 and 2014, and the results of its changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

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Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedules of functional expenses on page 20 are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

Newport News, Virginia June 21, 2016

See accompanying notes. 3

Peninsula Metropolitan YMCAStatements of Financial PositionDecember 31, 2015 and 2014

2015 2014ASSETSCurrent assets:

Cash and cash equivalents 2,224,516$ 3,433,206$ Certificates of deposit 809,696 414,993 Investments 9,879,182 9,837,940 Unconditional promises to give, net 620,404 821,427 Inventories 2,727 2,300 Prepaid expenses and other current assets 114,660 82,493

Total current assets 13,651,185 14,592,359

Property and equipment, net 32,322,713 31,246,999

Unconditional promises to give, less current portion 1,711,218 1,916,183

47,685,116$ 47,755,541$

LIABILITIES AND NET ASSETSCurrent liabilities:

Accounts payable 252,598$ 402,037$ Accrued expenses 174,246 179,816 Deferred revenues 277,648 353,382 Current portion of long-term debt 1,606,663 7,615,621 Current portion of derivative financial instrument - 75,975

Total current liabilities 2,311,155 8,626,831

Long-term liabilities:Long-term debt, less current portion 10,266,628 5,594,349 Derivative financial instrument, less current portion 149,478 183,655

Total long-term liabilities 10,416,106 5,778,004

Total liabilities 12,727,261 14,404,835

Net assets:Unrestricted:

Board designated 3,453,383 3,354,238 Undesignated 27,810,580 26,785,202

Total unrestricted 31,263,963 30,139,440

Temporarily restricted 3,686,892 3,204,266 Permanently restricted 7,000 7,000

Total net assets 34,957,855 33,350,706

47,685,116$ 47,755,541$

Statements of Activities

(Next Page)

See accompanying notes.

Peninsula Metropolitan YMCAStatements of ActivitiesYears Ended December 31, 2015 and 2014

2015Temporarily Permanently

Unrestricted Restricted Restricted TotalOperating activities:

Public support:Contributions 1,299,044$ 1,481,029$ -$ 2,780,073$ United Way 89,891 - - 89,891 Donated facilities 1,225,854 - - 1,225,854 Net assets released from restriction 1,001,585 (1,001,585) - -

Total public support 3,616,374 479,444 - 4,095,818

Revenue:Program fees 4,651,527 - - 4,651,527 Membership dues 11,361,878 - - 11,361,878 Government monies 679,455 - - 679,455 Building use fees 403,391 - - 403,391 Investment income 219,175 60,731 - 279,906 Realized loss on investments (29,218) (6,469) - (35,687) Sales to public 49,755 - - 49,755 Miscellaneous income 373,899 - - 373,899 Unrealized loss on investments (442,964) (51,080) - (494,044) Unrealized gain on hedged interest

rate swap 110,151 - - 110,151 Total revenue 17,377,049 3,182 - 17,380,231

Total public support and revenue 20,993,423 482,626 - 21,476,049

Expenses:Payments to the YMCA of the U.S.A. 216,078 - - 216,078 Program services 16,654,120 - - 16,654,120 Management and general 2,637,901 - - 2,637,901 Fundraising 360,801 - - 360,801

Total expenses 19,868,900 - - 19,868,900

Change in net assets 1,124,523 482,626 - 1,607,149

Net assets, beginning of year 30,139,440 3,204,266 7,000 33,350,706

Net assets, end of year 31,263,963$ 3,686,892$ 7,000$ 34,957,855$

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2014Temporarily Permanently

Unrestricted Restricted Restricted TotalOperating activities:

Public support:Contributions 2,598,412$ 1,251,349$ -$ 3,849,761$ United Way 93,550 - - 93,550 Donated facilities 1,254,876 - - 1,254,876 Net assets released from restriction 221,376 (221,376) - -

4,168,214 1,029,973 - 5,198,187

Revenue:Program fees 4,780,272 - - 4,780,272 Membership dues 11,197,420 - - 11,197,420 Government monies 709,511 - - 709,511 Building use fees 335,369 - - 335,369 Investment income 217,802 59,679 - 277,481 Realized gain on investments 84,931 78,150 - 163,081 Sales to public 63,563 - - 63,563 Miscellaneous income 148,312 - - 148,312 Unrealized gain (loss) on investments (165,294) 108,289 - (57,005) Loss on disposition of assets (15,776) - - (15,776) Unrealized gain on hedged interest

rate swap 127,419 - - 127,419 Total revenue 17,483,529 246,118 - 17,729,647

Total public support and revenue 21,651,743 1,276,091 - 22,927,834

Expenses:Payments to the YMCA of the U.S.A. 205,994 - - 205,994 Program services 16,900,656 - - 16,900,656 Management and general 2,498,169 - - 2,498,169 Fundraising 379,208 - - 379,208

Total expenses 19,984,027 - - 19,984,027

Change in net assets 1,667,716 1,276,091 - 2,943,807

Net assets, beginning of year 28,471,724 1,928,175 7,000 30,406,899

Net assets, end of year 30,139,440$ 3,204,266$ 7,000$ 33,350,706$

See accompanying notes. 5

Peninsula Metropolitan YMCAStatements of Cash FlowsYears Ended December 31, 2015 and 2014

2015 2014

Cash flows from operating activities:Change in net assets 1,607,149$ 2,943,807$ Adjustments to reconcile to net cash from operating activities:

Bad debt 37,733 5,440 Loss on disposition of assets - 15,776 Depreciation 1,901,095 1,965,654 Realized (gain) loss on investments 35,687 (163,081) Unrealized loss on investments 494,044 57,005 Unrealized gain on hedged interest rate swap (110,151) (127,419) Change in:

Unconditional promises to give 368,255 (700,121) Inventories (427) 963 Prepaid expenses and other current assets (32,167) 67,318 Accounts payable (149,439) (148,666) Accrued expenses (5,570) 23,117 Deferred revenues (75,734) 5,341

Net cash from operating activities 4,070,475 3,945,134

Cash flows from investing activities:Purchases of investments and certificates of deposit (2,435,953) (1,421,720) Proceeds from sale of investments 1,470,276 1,108,566 Acquisition of property and equipment (2,976,809) (1,602,457)

Net cash from investing activities (3,942,486) (1,915,611)

Cash flows from financing activities:Principal payments on capital lease - (2,226) Proceeds from issuance of debt 6,509,819 - Principal payments on long-term debt (7,846,498) (1,296,659)

Net cash from financing activities (1,336,679) (1,298,885)

Net change in cash and cash equivalents (1,208,690) 730,638

Cash and cash equivalents, beginning of year 3,433,206 2,702,568

Cash and cash equivalents, end of year 2,224,516$ 3,433,206$

Supplemental disclosure of cash flow informationCash paid for interest 381,272$ 428,723$

Peninsula Metropolitan YMCA Notes to Financial Statements

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Notes to Financial Statements

Organization and Nature of Activities

The Peninsula Metropolitan YMCA (the Y) is a volunteer-led public charity that includes men, women, and children of all ages, abilities, incomes, races and relations. Our mission is to put Christian principles into practice through programs that build healthy spirit, mind and body for all. Our programs strengthen families and communities focusing on the values of caring, honesty, respect, responsibility and faith.

Every day, we work side by side with our neighbors in our community to make sure that everyone, regardless of age, income or background, has the opportunity to learn, grow and thrive.

Our Focus:

Youth Development: Nurturing the potential of every child and teen We believe that all kids deserve the opportunity to discover who they are and what they can achieve. That’s why, through the Y, hundreds of youth today are cultivating the values, skills and relationships that lead to positive behaviors, better health and educational achievement.

Healthy Living: Improving health and well-being The Y is the leading voice on health and well-being. With a mission centered on balance, the Y brings families closer together, encourages good health and fosters connections through fitness, sports, fun and shared interests. As a result youth, adults and families are receiving the support, guidance and resources needed to achieve greater health and well-being for their spirit, mind and body.

Social Responsibility: Giving back and providing support to our neighbors The Y has been listening and responding to our communities’ most critical social needs for 119 years. Whether developing skills or emotional well-being through education and training, welcoming and connecting diverse demographic populations through global services, or preventing chronic disease and building healthier communities through collaborations with policymakers, the Y fosters the care and respect all people need and deserve. Through volunteers, donors, leaders and partners across the Peninsula Metropolitan service area the Y is empowering people to be healthy, confident, connected and secure.

Summary of Significant Accounting Policies

Basis of presentation

The accompanying financial statements of the Y have been prepared on the accrual basis of accounting as required by generally accepted accounting principles.

Classes of net assets

The Y reports its financial position according to three classes of net assets as follows:

Unrestricted amounts are net assets that are not subject to donor-imposed restrictions. Such net assets are available for any purpose consistent with the Y’s mission.

Temporarily restricted amounts are those that are stipulated by donors for specific purposes. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restriction.

Permanently restricted amounts are restricted to investments in perpetuity, the income from which is expendable in accordance with the conditions of each specific donation.


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All contributions are considered available for unrestricted use unless specifically restricted by the donor or subject to other legal restrictions.

Cash and cash equivalents

The Y considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Investments

Investments are composed of bonds, mutual funds, securities, hedge funds, commodity funds, real estate and money market funds and are carried at the quoted market value. Cash and cash equivalents included as part of an investment account are accounted for as investments in the statements of financial position. All gains and losses arising from the sale or other disposition of investments are accounted for in the statements of activities.

Credit risk

Financial instruments that potentially subject the Y to concentrations of credit risk consist principally of cash and certificates of deposit with various banks and various investment securities. The Y places its temporary cash and certificates of deposit investments with high credit quality financial institutions. For 2015 and 2014, funds held in these accounts were insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At December 31, 2015 and 2014, the Y had approximately $1,379,000 and $2,438,000, respectively, that was subject to credit risk as it was not FDIC insured. Of this uninsured amount at December 31, 2015 and 2014, $140,609 and $163, respectively, was held in overnight repurchase agreements. These agreements are 100% collateralized with government securities, making the swept funds secured by the full faith and credit of the federal government. At December 31, 2015 and 2014, the Y had approximately $9.9 million each year invested in various investment securities, which are not insured by the FDIC, and therefore, are subject to investment risk.

The Y solicits pledges from individuals, businesses, and various agencies. Financial instruments that potentially subject the Y to credit risk include unconditional promises to give. To mitigate risk, management regularly reviews the individual accounts for delinquencies. Donors are then contacted and if necessary the payment plan is revised. Volunteers lead the campaigns and usually solicit from a personal circle of family and friends, which has a positive impact on the collection rate.

Unconditional promises to give

Unconditional promises to give are recognized by the Y when a donor makes a promise to give that is in substance, unconditional. Unconditional promises to give that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. Unconditional promises to give due beyond twelve months of the date of the statement of financial position are reflected as long-term promises to give and are recorded at their present net realizable value, using risk-free interest rates applicable to the years in which the promises are to be received. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Management has determined that unconditional promises to give are fully collectible; therefore, no allowance for uncollectible accounts is considered necessary.

Inventories

Inventories consist of miscellaneous retail items offered for sale to the general public and are stated at lower of cost (on the first-in, first-out basis) or market.


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Property and equipment

Property and equipment are carried at cost. The Y reports gifts of land, buildings and equipment at fair value at the date of donation. These gifts are recorded as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Unless there are explicit donor stipulations about how long those long-lived assets must be maintained, the Y reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. Repairs and maintenance are expensed as incurred.

Depreciation is calculated by the straight-line method over the following estimated useful lives:

Furnishings and equipment 5 - 10 years Vehicles 5 years Buildings and improvements 15 - 39 years Leasehold improvements 15 - 39 years Impairment of long-lived assets

The Y reviews long-lived assets to be held and used for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with the assets are compared to the asset’s carrying amount to determine if a write down to market or discounted cash flow value is required. The Y reports long-lived assets to be disposed of at the lower of carrying amount or fair value less costs to sell. Management has determined that there has been no impairment of long-lived assets.

Membership dues and deferred revenue

Membership dues are recognized as revenue when earned. Deferred revenue represents funds received for specific programs and services that have not yet been provided.

Derivative financial instrument policy - interest rate swap

The Y uses derivatives to manage risks related to interest rate movements. Interest rate swap contracts designated and qualifying as cash flow hedges are reported at fair value. The gain or loss on the effective portion of the hedge is included in the statements of activities. The Y documents its risk management strategy and hedge effectiveness at the inception of, and during the term of, each hedge. The Y’s interest rate risk management strategy is to stabilize cash flow requirements by maintaining interest rate swap contracts to convert variable-rate debt to a fixed rate.

Income taxes

The Y is a nonprofit organization exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code.

Loan costs

Loan costs of $85,102 consist of debt issuance costs related to obtaining financing. Such costs are amortized over the term of the note they relate to and included as a component of interest expense in the statements of activities. The remaining loan costs are shown net of long-term debt. See Note 6. Amortization expense was $890 for the year ended December 31, 2015.

Volunteer services and in-kind contributions

The Y recognizes in-kind contributions as revenues and expenses in the period in which they are received. Donated materials are valued by the donor at fair market value on the date of the gift. In 2015 and 2014, 3,520 and 3,644 volunteers contributed a total of 51,734 and 60,514 hours in all aspects of the Y’s operations, and the Y engaged 283 and 331 leaders and policy makers, respectively. No amounts have been reflected in the accompanying financial statements for volunteer services since they are not susceptible to objective measurement or valuation.


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Functional expenses

The Y allocates its expenses on a functional basis among its various programs and supporting services. Expenses that relate to a specific program or supporting service are allocated directly. Other expenses that are common to several functions are allocated statistically based on financial and nonfinancial data.

Advertising

Printing and public relation costs are expensed as incurred and were $117,640 and $185,495 in 2015 and 2014, respectively.

Estimates

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 reported amounts of assets, liabilities, support and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates and assumptions.

Reclassifications

Certain reclassifications have been made to the 2014 financial statements to conform to the 2015 financial statement presentation. Total net assets and the change in net assets are unchanged due to these reclassifications.

Adoption of new accounting standard

In 2015, the Y retroactively adopted the provision of Accounting Standards Update (ASU) No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which provides an alternative to presenting the debt issuance costs of obtaining financing or refinancing. This alternative allows an entity to present the debt issuance of $85,102 as a reduction of the carrying amount of the debt rather than as an asset. Total long-term debt as of December 31, 2014, was unchanged as there were no debt issuance costs prior to 2015.

Subsequent events

In preparing these financial statements, the Y has evaluated events and transactions for potential recognition or disclosure through June 21, 2016, the date the financial statements were available to be issued.

Investments

Investments are summarized as follows: 2015 Fair Unrealized Cost Value Gain (Loss)

Corporate and government bonds $ 3,134,407 $ 3,123,375 $ (11,032) Mutual funds 4,033,935 4,056,573 22,638 Common stock and securities 1,972,072 1,841,567 (130,505) Hedge funds 247,500 225,167 (22,333) Commodity funds 45,000 35,160 (9,840) Real estate 115,161 117,236 2,075

9,548,075 9,399,078 (148,997) Cash and cash equivalents 274,055 274,055 - Certificates of deposit 206,049 206,049 - $ 10,028,179 $ 9,879,182 $ (148,997)


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2014 Fair Unrealized Cost Value Gain (Loss)

Corporate and government bonds $ 3,263,856 $ 3,358,982 $ 95,126 Mutual funds 2,430,762 2,680,683 249,921 Securities 42,125 42,125 -

5,736,743 6,081,790 345,047 Cash and cash equivalents 3,212,658 3,212,658 - Certificates of deposit 543,492 543,492 - $ 9,492,893 $ 9,837,940 $ 345,047 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair Value Measurements

Accounting standards establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).

The three levels of the fair value hierarchy are described below:

Level 1 Inputs to the valuation methodology are unadjusted quoted market prices for identical assets in active markets that the Y has the ability to access.

Level 2 Inputs to the valuation methodology include: • Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in inactive markets; • Inputs other than quoted prices that are observable for the asset or liability; • Inputs that are derived principally from or corroborated by observable market data by

correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be

observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value

measurement. The asset or liability’s fair value measurement 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 maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis. There have been no changes in the methodologies used at December 31, 2015 and 2014, and there are no assets or liabilities measured at fair value on a nonrecurring basis.

Corporate and government bonds, hedge funds, commodity funds, and securities: valued at prices obtained from an independent pricing service when such prices are available.

Mutual and real estate funds: valued at closing net asset value (or unit value) of the units held by the Y at year end based on information reported by brokers.


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Unconditional promises to give: reported at net realizable value if at the time the promise is made payment is expected to be received in one year or less. Unconditional promises to give that are expected to be collected in more than one year are reported at fair value initially and in subsequent periods. Fair value is calculated as the present value of the expected future promise to be received using a discount rate.

The Y’s financial instruments consist primarily of cash and cash equivalents, certificates of deposits and investments, accounts payable, long-term debt and interest rate swap agreements.

The carrying amount of cash and cash equivalents, certificates of deposit and accounts payable approximate their fair value due to the short-term nature of such instruments.

The carrying amount of the long-term debt approximates fair value, since interest rates are considered market-based and are generally adjusted periodically.

The Y uses a lending institution’s proprietary models, which consider past, present and future assumptions regarding market conditions, to estimate the fair value of the liability for interest rate swap agreements.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Y 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.

The following sets forth by level, within the fair value hierarchy, the Y’s assets at fair value on a recurring basis:

Assets (Liabilities) at Fair Value as of December 31, 2015 Level 1 Level 2 Level 3 Total Mutual Funds $ 4,056,573 $ - $ - $ 4,056,573 Corporate and government bonds 1,668,205 1,455,170 - 3,123,375 Securities 1,841,567 - - 1,841,567 Hedge Funds 225,167 - - 225,167 Real Estate Funds 117,236 - - 117,236 Commodity Funds 35,160 - - 35,160 Unconditional promises to give - - 2,331,622 2,331,622 $ 7,943,908 $ 1,455,170 $ 2,331,622 $ 11,730,700 Derivative financial instrument $ - $ (149,478) $ - $ (149,478) Assets (Liabilities) at Fair Value as of December 31, 2014 Level 1 Level 2 Level 3 Total Corporate and government bonds $ 3,358,982 $ - $ - $ 3,358,982 Mutual funds 2,680,683 - - 2,680,683 Securities 42,125 - - 42,125 Unconditional promises to give - - 2,737,610 2,737,610 $ 6,081,790 $ - $ 2,737,610 $ 8,819,400 Derivative financial instrument $ - $ (259,630) $ - $ (259,630)


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The table below sets forth a summary of changes in the fair value of the Y’s Level 3 unconditional promises to give:

2015 2014 Balance, beginning of year $ 2,737,610 $ 2,042,929 New pledges 983,586 1,461,219 Pledge collections (1,393,410) (839,054) Pledges written off (37,733) (5,440) Adjustment to fair value 41,569 77,956 Balance, end of year $ 2,331,622 $ 2,737,610

Unconditional Promises to Give

Unconditional promises to give are as follows:

2015 2014 Receivables due in less than one year $ 620,404 $ 821,427 Receivables due in one to five years 1,506,428 1,546,959 Receivables due in five years or more 398,743 604,745 Total unconditional promises to give 2,525,575 2,973,131 Less, discount to net present value (193,953) (235,521) $ 2,331,622 $ 2,737,610 Unconditional promises to give are reflected at the net present realizable value of estimated future cash flows using a discount rate of 2.27% and 2.17% for 2015 and 2014, respectively. These rates are based upon the ten year Treasury bond rate.

Property and Equipment

Property and equipment consist of the following:

2015 2014 Furnishings and equipment $ 6,412,238 $ 6,037,457 Vehicles 530,722 518,379 Land 773,386 737,386 Buildings and improvements 40,665,211 39,898,933 Construction in progress 131,471 202,326 Leasehold improvements 1,886,164 389,423 50,399,192 47,783,904 Less, accumulated depreciation (18,076,479) (16,536,905) $ 32,322,713 $ 31,246,999 Depreciation expense was $1,901,095 and $1,965,654 at December 31, 2015 and 2014, respectively.


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Long-Term Debt

Long-term debt consists of the following:

2015 2014

Revenue bond Series 2015 issued by the Middlesex County Economic Development Authority through Towne Bank. Interest and principal are due monthly beginning December 1, 2015, based on a fixed interest rate per annum equal to 2.6% and a 10-year amortization schedule, maturing November 1, 2025. The bond is unsecured, however, any assets of the Y not already encumbered must be maintained free and clear of all liens, encumbrances and pledges. The bond also contains several financial covenants with which management determined the Y was in compliance. $ 6,363,154 $ -

Revenue bond Series 2001B issued by the Poquoson Industrial Development Authority through the Bank of America. Interest only through March 1, 2013, payable monthly at a floating rate per annum equal to 65% of the 30-day London Interbank Offered Rate plus 93 basis points (1.10% and 1.03% at December 31, 2015 and 2014, respectively). A fixed rate of 5.23% has been locked in on a notional amount of $1,500,000 of the loan with an interest rate swap. Interest and principal are due monthly beginning April 1, 2013, based on a 10-year amortization schedule, maturing March 1, 2023. The bank reserves the right to demand repayment on the 12th and 15th anniversary date. The bond is unsecured. However, any assets of the Y not already encumbered must be maintained free and clear of all liens, encumbrances and pledges. The bond also contains several financial covenants with which management determined the Y was in compliance. 3,625,000 4,125,000

Revenue bond Series 2010A issued by the Virginia Small Business Financing Authority through The Old Point National Bank (agreement dated August 19, 2010). Principal amount may not exceed $5,080,000 and must be advanced prior to August 1, 2012. Interest accrues at a variable rate of one month London Interbank Offered Rate plus 225 basis points (2.51% and 2.41% at December 31, 2015 and 2014, respectively), provided, however, that such variable interest rate is at no time less than 2.50% per annum and at no time greater than 5.00% per annum. Accrued interest on this bond is payable monthly in arrears commencing September 1, 2010, and on the first day of each calendar month thereafter until the entire unpaid principal balance of this bond is paid. The principal amount of this bond is payable in monthly installments of $21,167 commencing September 1, 2012. Any remaining unpaid principal balance of the bond and all accrued unpaid interest is due and payable in full on August 1, 2019. The bond is unsecured. However, the Y has a negative pledge agreement with the bank and any assets of the Y not already encumbered must be maintained free and clear of all liens, encumbrances and pledges. The bond also contains several financial covenants with which management determined the Y was in compliance. 1,197,849 1,451,849

Totals (carried forward) $ 11,186,003 $ 5,576,849


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2015 2014

Totals (brought forward) $ 11,186,003 $ 5,576,849

Revenue bond Series 2010B issued by the Virginia Small Business Financing Authority through The Old Point National Bank (agreement dated August 19, 2010). Principal amount may not exceed $920,000 and must be advanced prior to March 1, 2011. Interest accrues at a variable rate of one month London Interbank Offered Rate plus 225 basis points (2.51% and 2.41% at December 31, 2015 and 2014, respectively), provided, however, that such variable interest rate is at no time less than 2.50% per annum and at no time greater than 5.00% per annum. Accrued interest on this bond is payable monthly in arrears commencing September 1, 2010, and on the first day of each calendar month thereafter until the entire unpaid principal balance of this bond is paid. The principal amount of this bond is payable in monthly installments of $3,833 commencing April 1, 2011. Any remaining unpaid principal balance of the bond and all accrued unpaid interest is due and payable in full on March 1, 2018. 701,500 747,500

Unsecured note payable to D Theater, LLC, due in annual payments of $12,000 until satisfied, at 0.0% interest. Payments to begin upon the opening of the Mathews County YMCA facility, which is to be constructed on approximately five acres of land gifted by the payee. 70,000 70,000

Revenue bond Series 2005 issued by the Richmond County Industrial Development Authority through Towne Bank. Interest only through September 1, 2007, payable monthly at a floating rate per annum equal to 65% of the one-month London Interbank Offered Rate plus 83 basis points (1.00% and 0.93% at December 31, 2015 and 2014, respectively). Interest and principal are due monthly beginning October 1, 2007, based on an 18-year amortization schedule, maturing September 1, 2025. The bank reserves the right to demand repayment on or after September 1, 2015. This loan was refinanced with TowneBank in October 2015. - 3,407,811

Revenue bond Series 2005 issued by the Poquoson Industrial Development Authority through Wells Fargo Bank. Interest only through September 1, 2007, payable monthly at a floating rate per annum equal to 65% of the one-month London Interbank Offered Rate plus 83 basis points (1.00% and 0.93% at December 31, 2015 and 2014, respectively). A fixed rate of 3.98% has been locked in on a notional amount of $5,000,000 of the loan with an interest rate swap. Interest and principal are due monthly beginning October 1, 2007, based on an 18-year amortization schedule, maturing September 1, 2015, with a balloon payment due of approximately $3,236,000. This loan was refinanced with TowneBank in October 2015. - 3,407,810

Less, unamortized debt issuance costs (84,212) -

11,873,291 13,209,970 Less, current portion (1,606,663) (7,615,621) $ 10,266,628 $ 5,594,349


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Future principal maturities are as follows:

Year Ending December 31,

2016 $ 1,606,663 2017 1,749,996 2018 2,243,496 2019 1,815,845 2020 1,379,996 Thereafter 3,161,507 Unamortized loan costs (84,212)

$ 11,873,291

Interest Rate Swaps

The Y entered into two interest rate swap agreements with banks covering the issued bonds. Under the terms of the agreements, the parties, in effect, pay each other’s interest cost on a notional amount of the underlying debt. The agreement entered into during 2001 has had the effect of increasing the average effective cost of the Y’s borrowings on bonds in 2015 and 2014 from variable rates of 1.08% and 1.05%, respectively, to a fixed rate of 5.23%. The agreement entered into during 2005 had the effect of increasing the average effective cost of the Y’s borrowings on bonds in 2014 from a variable rate of 0.93% to a fixed rate of 3.98%. The bond and interest rate swap entered into during 2005 were paid off during 2015.

As required by Accounting Standards Codification Topic 815, Derivative Instruments and Hedging, the Y is required to record an asset or liability in conjunction with its derivative instruments based on its fair value. At December 31, 2015 and 2014, the Y recorded a net liability of $149,478 and $259,630, respectively, to reflect the change in the swap contract’s fair value. Over the past five years, the unrealized gain (loss) on hedged interest rate swap and derivative financial instrument liability is as follows: Derivative Unrealized Financial Gain (Loss) Instrument on Hedged Liability Interest as of Rate Swap December 31 2011 $ (31,741) $ 705,893 2012 $ 114,392 $ 591,501 2013 $ 204,452 $ 387,049 2014 $ 127,419 $ 259,630 2015 $ 110,151 $ 149,478

Pension Plan

The Y participates in the YMCA Retirement Fund Retirement Plan which is a defined contribution, money purchase, church plan that is intended to satisfy the qualification requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended and The YMCA Retirement Fund Tax-Deferred Savings Plan which is a retirement income account plan as defined in section 403(b)(9) of the code. Both Plans are sponsored by the Young Men’s Christian Association Retirement Fund (Fund). The Fund is a not-for-profit, tax-exempt pension fund incorporated in the State of New York (1922) organized and operated for the purpose of providing retirement and other benefits for employees of YMCAs throughout the United States. The plans are operated as church pension plans. Participation is available to all duly organized and reorganized YMCAs and their eligible employees. As a defined contribution plan, the Retirement Plan and Tax-Deferred Savings Plan have no unfunded benefit obligations.


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In accordance with the Y’s agreement, contributions for the YMCA Retirement Fund Retirement Plan are a percentage of the participating employees’ salary. These amounts are paid by the Y. For 2015 and 2014, contributions charged to retirement costs aggregated to $622,845 and $600,869, respectively, of which all contributions were paid in full.

Contributions to the YMCA Retirement Fund Tax-Deferred Savings Plan are withheld from employees' salaries and remitted to the YMCA Retirement Fund. There is no matching employer contribution in this plan.

Building Use Fees

Building use fees consist partly of amounts received pursuant to strategic alliances the Y has with hospitals at the Victory Family YMCA branch and the R.F. Wilkinson Family YMCA branch. As part of the leasing arrangement with the hospitals, the Y received $272,621 and $241,333 in 2015 and 2014, respectively.

Commitments and Contingencies

The Y has outstanding information technology commitments of approximately $290,000 covering services to be provided through October 31, 2017. This technology provides on-line access to member accounts, program registration and allows community members to sign up to make pledges and donations.

The Y has outstanding Human Resource Information System (HRIS) commitments of approximately $126,700 covering services to be provided through March 31, 2017. This technology provides recruitment, payroll, time and attendance, and human resource database services.

At December 31, 2015, the Y is committed to incur approximately $293,900 worth of expenditures related to contracts for construction or expansion at three branches of approximately $313,000 in 2015-2016.

Related Parties

The Y paid $207,563 and $197,479, respectively in fees for 2015 and 2014 to the YMCA of the U.S.A. (approximately 1.00% of revenue after allowable deductions for certain types of revenue). In 2015 and 2014, the Y also paid $8,515 per year to the YMCA of the U.S.A. toward the National Cause and is included in program services on the statements of activities.

Leases

Operating Leases

The Y leases various facilities for $1.00 annually per location for recreational activities and administrative offices. The fair value of the annual rentals of $1,225,854 and $1,254,876 for 2015 and 2014, respectively, which represents the total in donated facilities on the statements of activities. The leases expire at various times.

The Y leases equipment and office and facility space under long-term noncancelable operating leases. The leases expire at various times through 2018 with renewal options for additional periods. Lease expense during 2015 and 2014, was $143,467 and $157,903, respectively.


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Future minimum lease payments are as follows:

Year Ending December 31,

2016 $ 138,541 2017 142,316 2018 99,648 2019 167,634 2020 167,737 Thereafter 526,450

$ 1,242,326

Board Designated Net Assets

Unrestricted board designated assets are for operating shortfalls, capital improvements, and emergency maintenance. In addition to operating surpluses, branches budget 5% of annual operations to support these purposes.

Temporarily Restricted Net Assets

Temporarily restricted net assets available for the following purposes are as follows:

2015 2014

Camp Kekoka Capital Fund $ - $ 540,660 Col. Cornwall Memorial Fund * 330,281 * - East Wind Sailing Foundation 5,573 5,573 Middlesex Building Brighter Futures Fund 808,571 662,428 Middlesex Capital Campaigns (Founders and Cap 2K7) - 7,062 Mathews Pool Campaign 11,075 11,075 Nicole White Scholarship Fund * 202,877 * 210,251 Northern Neck Scholarship Fund 35,286 36,823 Northern Neck Child Development Fund * 431,396 * 447,010 Northern Neck Pool Campaign 20,000 - Northumberland Campaign (Site) 57,400 - Richmond County Campaign (Cap216) 128,426 - Robinson Family Trust * 458,062 * 474,825 United Way 46,290 46,290 Mathews Capital Campaign 1,151,655 762,269

$ 3,686,892 $ 3,204,266

* Included in Endowment Funds.

Permanently Restricted Net Assets

Permanently restricted net assets are as follows:

2015 2014

Northern Neck Scholarship Fund $ 7,000 $ 7,000


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Donor-Designated Endowments

The Endowment Fund of the Peninsula Metropolitan YMCA (Endowment Fund) was established to support the Y’s mission. The Endowment Fund builds long-term stability for the future of the Y by providing an additional source of income to meet an increasing demand for local programs and services.

The Endowment Fund includes both donor-restricted funds and funds designated by the Board of Directors to function as endowments. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Board of Directors of the Y has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) 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 Y 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 Y in a manner consistent with the standard of prudence prescribed by SPMIFA. In accordance with SPMIFA, the Y considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the donor-restricted endowment funds, (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 Y, and (7) the Y’s investment policies.

Investment Return Objectives, Risk Parameters and Strategies. The Y has adopted investment and spending policies, approved by the Endowment Trustees, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the long-term. Accordingly, the investment process seeks to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a well-diversified asset mix that is intended to result in a consistent inflation-protected rate of return. The Endowment Fund goal is to annually achieve a total rate of return of at least 3% in excess of the rate of inflation. Actual returns in any given year may vary from this amount. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk.

Spending Policy. The Metropolitan Board of Directors governs the use of the Endowment Fund and identifies the mission related programs and services for which the funds will be used.

Currently: Second grade learn-to-swim programs, two $5,000 annual scholarship awards (Nicole White Scholarship Fund), $25,920 annual payment for lease of land at the R.F. Wilkinson Branch, support of the youth programs at the Northern Neck Branch, and the various administrative and meeting costs related to the Endowment Fund are authorized expenditures.


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Endowment Fund net asset composition and type of fund is as follows:

Total Net Endowment Temporarily Permanently Fund

December 31, 2015 Unrestricted Restricted Restricted Assets Donor restricted endowment funds $ - $ 1,422,616 $ 7,000 $ 1,429,616 Board designated endowment funds 1,157,382 - - 1,157,382

$ 1,157,382 $ 1,422,616 $ 7,000 $ 2,586,998 Total Net Endowment Temporarily Permanently Fund

December 31, 2014 Unrestricted Restricted Restricted Assets Donor restricted endowment funds $ - $ 1,132,086 $ 7,000 $ 1,139,086 Board designated endowment funds 1,541,595 - - 1,541,595

$ 1,541,595 $ 1,132,086 $ 7,000 $ 2,680,681 Changes in Endowment Fund net assets were as follows:


December 31, 2015 Unrestricted Restricted Restricted Assets Endowment Fund net assets, beginning of year $ 1,541,595 $ 1,132,086 $ 7,000 $ 2,680,681 Contributions 21,246 40,370 - 61,616 Interfund transfers (307,873) 246,257 - (61,616) Investment income 39,363 52,779 - 92,142 Net appreciation (depreciation) (111,189) (48,491) - (159,680) Amounts released (25,760) (385) - (26,145)

Endowment Fund net assets, end of year $ 1,157,383 $ 1,422,617 $ 7,001 $ 2,586,999


December 31, 2014 Unrestricted Restricted Restricted Assets Endowment Fund net assets, beginning of year $ 1,538,250 $ 1,093,808 $ 7,000 $ 2,639,058 Contributions 1,910 67,615 - 69,525 Investment income 186,351 132,690 - 319,041 Net appreciation 145,971 103,949 - 249,920 Amounts released (330,887) (265,976) - (596,863)

Endowment Fund net assets, end of year $ 1,541,595 $ 1,132,086 $ 7,000 $ 2,680,681

Supplementary Information

See independent auditors' report.

Peninsula Metropolitan YMCASchedules of Functional ExpensesYears Ended December 31, 2015 and 2014

2015Supporting Services

Program Management Services and General Fundraising Total

Salaries and wages 7,878,002$ 1,466,567$ 82,708$ 9,427,277$ Employee benefits 753,759 232,602 12,874 999,235 Payroll taxes 662,184 106,831 6,335 775,350

Total salaries andrelated expenses 9,293,945 1,806,000 101,917 11,201,862

Bad debt 37,733 - - 37,733 Conferences and training 134,804 60,559 6,142 201,505 Contract services 724,838 425,553 9,375 1,159,766 Dues 14,125 13,702 2,410 30,237 Equipment 37,528 12,182 - 49,710 Interest 348,026 - - 348,026 Miscellaneous 65,875 - - 65,875 Occupancy 2,786,462 42,787 - 2,829,249 Payments to the YMCA

of the U.S.A. 216,078 - - 216,078 Postage 14,459 2,220 - 16,679 Printing and public relations 78,640 39,000 - 117,640 Supplies 1,076,085 106,742 236,534 1,419,361 Telephone 91,777 18,409 739 110,925 Travel 122,805 36,670 3,684 163,159

Total functional expensesbefore depreciation 15,043,180 2,563,824 360,801 17,967,805

Depreciation 1,827,018 74,077 - 1,901,095

Total functional expenses 16,870,198$ 2,637,901$ 360,801$ 19,868,900$

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2014Supporting Services

Program ManagementServices and General Fundraising Total

Salaries and wages 7,824,245$ 1,369,189$ 92,878$ 9,286,312$ Employee benefits 720,493 221,393 13,471 955,357 Payroll taxes 655,939 100,719 6,746 763,404

Total salaries andrelated expenses 9,200,677 1,691,301 113,095 11,005,073

Bad debt 5,440 - - 5,440 Conferences and training 107,321 69,525 8,848 185,694 Contract services 792,020 364,509 8,945 1,165,474 Dues 15,320 13,607 2,587 31,514 Equipment 30,272 10,923 - 41,195 Interest 423,282 - - 423,282 Miscellaneous 141,584 - - 141,584 Occupancy 2,819,609 43,370 - 2,862,979 Payments to the YMCA

of the U.S.A. 205,994 - - 205,994 Postage 16,449 2,840 645 19,934 Printing and public relations 135,731 48,762 1,002 185,495 Supplies 1,072,480 125,392 239,213 1,437,085 Telephone 94,518 18,871 1,069 114,458 Travel 153,447 35,921 3,804 193,172

Total functional expensesbefore depreciation 15,214,144 2,425,021 379,208 18,018,373

Depreciation 1,892,506 73,148 - 1,965,654

Total functional expenses 17,106,650$ 2,498,169$ 379,208$ 19,984,027$

peninsula metropolitan ymca · 2020. 3. 25. · we have audited the accompanying statements of...

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