jewish federation of greater indianapolis, inc. financial statements

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. FINANCIAL STATEMENTS December 31, 2013 and 2012

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. Indianapolis, Indiana FINANCIAL STATEMENTS December 31, 2013 and 2012

CONTENTS

INDEPENDENT ................................................................................................................................................................................................... AUDITOR'S REPORT 1 FINANCIAL STATEMENTS

................................................................................................................................................................................................... STATEMENTS OF FINANCIAL POSITION 3

................................................................................................................................................................................................... STATEMENTS OF ACTIVITIES 4

................................................................................................................................................................................................... STATEMENTS OF CASH FLOWS 5

................................................................................................................................................................................................... STATEMENTS OF FUNCTIONAL EXPENSES 6

................................................................................................................................................................................................... NOTES TO FINANCIAL STATEMENTS 7

Crowe Horwath LLP Independent Member Crowe Horwath International

INDEPENDENT AUDITOR'S REPORT Board of Directors Jewish Federation of Greater Indianapolis, Inc. Indianapolis, Indiana Report on the Financial Statements We have audited the accompanying financial statements of the Jewish Federation of Greater Indianapolis, Inc. (Jewish Federation), which comprise the statements of financial position as of December 31, 2013 and 2012, and the related statements of activities, cash flows and functional expenses 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. Auditor's 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 audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

(Continued) 1.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Jewish Federation as of December 31, 2013 and 2012, and the change 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.

Crowe Horwath LLP Indianapolis, Indiana May 19, 2014

2.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. STATEMENTS OF FINANCIAL POSITION December 31, 2013 and 2012

2013 ASSETS Cash and cash equivalents Investments (Note 3) Pledges receivable, net (Note 4) Due from Constituent Agencies, net (Note 5) Loans to Agencies (Note 6) Property and equipment, net (Note 7) Other assets Total assets

LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses Investments held in trust for Agencies Funds held for others Charitable gift annuities Note payable (Note 8) Total liabilities Net assets Unrestricted (Note 13) Temporarily restricted (Note 14) Permanently restricted (Note 15) Total net assets Total liabilities and net assets

$

2012

7,777,726 74,831,503 2,160,925 387,259 155,741 9,805,159 445,199

$ 15,283,870 57,809,454 1,771,990 319,863 196,734 11,653,592 605,034

$ 95,563,512

$ 87,640,537

$

$

341,712 13,122,403 95,541 1,018,960 2,051,709 16,630,325

419,474 10,756,524 141,989 1,059,184 2,227,158 14,604,329

58,733,882 13,018,392 7,180,913 78,933,187

52,654,286 13,303,509 7,078,413 73,036,208

$ 95,563,512

$ 87,640,537

See accompanying notes to financial statements. 3.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. STATEMENTS OF ACTIVITIES Years ended December 31, 2013 and 2012 ---------------------------------- 2013 ------------------------------Temporarily Permanently Unrestricted Restricted Restricted Total Public support and revenue Campaign contributions (Note 1) Other contributions Net investment income Rental income (Note 9) Program service fees and grants Net assets released from restrictions (Note 16) Total public support and revenue Expenses and allocations Program services, including grants and allocations (Note 2) Management and general Fund raising Total expenses and allocations Change in net assets from operations

$

2,992,504 2,135,440 2,844,805 1,638,745 792,157

$

15,745 29,778 -

$

2,992,504 2,253,685 2,874,583 1,638,745

$

2,377,415 2,919,633 2,621,526 1,636,424

-

792,157

796,828

$

10,016,320 23,902 -

$

-

349,913 -

$

2,377,415 13,285,866 2,645,428 1,636,424

-

796,828

-

-

(1,155,926)

-

-

1,321,844

(1,321,844)

11,559,577

(1,110,403)

102,500

10,551,674

11,673,670

8,718,378

349,913

20,741,961

9,270,098 381,924 1,078,635

-

-

9,270,098 381,924 1,078,635

10,091,535 345,038 1,125,172

-

-

10,091,535 345,038 1,125,172

10,730,657

-

-

10,730,657

11,561,745

-

-

11,561,745

111,925

8,718,378

349,913

9,180,216

828,920

(1,110,403)

5,250,676

825,286

Change in net assets

6,079,596

(285,117)

Net assets, end of year

102,500 -

1,155,926

Net unrealized gains on investments

Net assets, beginning of year

$

---------------------------------- 2012 ------------------------------Temporarily Permanently Unrestricted Restricted Restricted Total

52,654,286

13,303,509

$ 58,733,882

$ 13,018,392

102,500

$

(178,983)

-

6,075,962

1,619,459

578,586

-

2,198,045

102,500

5,896,979

1,731,384

9,296,964

349,913

11,378,261

7,078,413

73,036,208

50,922,902

4,006,545

6,728,500

61,657,947

7,180,913

$ 78,933,187

$ 52,654,286

$ 13,303,509

7,078,413

$ 73,036,208

$

See accompanying notes to financial statements. 4.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. STATEMENTS OF CASH FLOWS Years ended December 31, 2013 and 2012 2013 Cash flows from operating activities Change in net assets Adjustments to reconcile change in net assets to net cash from operating activities Net realized gain on sale of investments Net unrealized gain on investments Stock contributions Depreciation Bad debt expense Charitable gift annuities Proceeds from income restricted for long-term investment Increase (decrease) in cash due to changes in: Pledges receivable Loans to Agencies Due from Constituent Agencies Other assets Accounts payable and accrued expenses Funds held for others Investments held in trust for Agencies Net cash from operating activities

$

Cash flows from investing activities Purchases of property and equipment Proceeds from sale of investments Purchases of investments Net cash from investing activities

5,896,979

2012 $ 11,378,261

(1,676,485) (6,075,962) 1,214,412 1,851,887 120,000 (40,224) (102,500)

(1,534,901) (2,198,045) 1,345,963 2,034,962 120,000 (68,032) (349,913)

(508,935) 40,993 (67,396) 159,835 (77,762) (46,448) 2,365,879 3,054,273

(110,707) 38,794 (250,556) 53,492 107,598 141,989 1,245,325 11,954,230

(3,454) 4,134,850 (14,618,864) (10,487,468)

(43,391) 13,241,747 (15,242,947) (2,044,591)

102,500 (175,449) (72,949)

349,913 (165,046) 184,867

Cash flows from financing activities Proceeds from income restricted for long-term investment Principal payments on note payable Net cash from financing activities Net change in cash and cash equivalents

(7,506,144)

10,094,506

Cash and cash equivalents at beginning of year

15,283,870

5,189,364 $ 15,283,870

Cash and cash equivalents at end of year

$

7,777,726

Supplemental disclosure of cash flow information: Interest paid

$

113,479

Supplemental schedule of non-cash activity: Stock contributions Investment return allocated to agency funds Rent subsidies

1,214,412 1,126,639 1,308,628

$

122,581 1,345,963 618,242 1,308,628

See accompanying notes to financial statements. 5.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. STATEMENTS OF FUNCTIONAL EXPENSES Years ended December 31, 2013 and 2012 ---------------------------------- 2013 ------------------------------Management Program and Fund Services General Raising Total Salaries and wages Employee benefits and payroll taxes Total salaries and benefits*

$

$

85,719 454,472

Grants and allocations Program specific expenses Office expenses Conferences and programs Professional fees and dues Interest expense Bad debt expense Depreciation Administrative expense Total expenses before allocation of shared campus services Allocation of shared campus services Total functional expenses

368,753

$

73,590

$

555,622

$

997,965

---------------------------------- 2012 ------------------------------Management Program and Services General Fund Raising Total $

337,078

37,433 111,023

136,138 691,760

259,290 1,257,255

85,809 422,887

6,148,438 313,437 41,694 1,076 1,060 113,479 1,800,381 48,719 8,468,284

143,777 15,000 34,432 18,328 (97,438) 114,099

36,747 64,650 2,770 120,000 33,178 48,719 306,064

6,148,438 313,437 222,218 80,726 38,262 113,479 120,000 1,851,887 8,888,447

8,922,756

225,122

997,824

347,342

156,802

9,270,098 86.4%

$

381,924 3.6%

$

$

69,871

$

623,656

$

1,030,605

22,318 92,189

141,270 764,926

249,397 1,280,002

6,662,450 398,305 43,086 727 1,065 122,581 1,979,794 40,002 9,248,010

127,804 7,689 33,857 20,159 (80,004) 109,505

23,173 54,610 6,212 120,000 35,009 40,002 279,006

6,662,450 398,305 194,063 63,026 41,134 122,581 120,000 2,034,962 9,636,521

10,145,702

9,670,897

201,694

1,043,932

10,916,523

80,811

584,955

420,638

143,344

81,240

645,222

1,078,635

$ 10,730,657

$ 10,091,535

1,125,172

$ 11,561,745

10.0%

100.0%

87.3%

$

345,038 3.0%

$

9.7%

100.0%

*Salaries and wages and employee benefits and payroll taxes from shared campus services are not included here. Instead they are included in the allocation of shared campus services.

See accompanying notes to financial statements. 6.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: The Jewish Federation of Greater Indianapolis, Inc. (Jewish Federation or JFGI) is the central philanthropic, and planning organization of the Jewish community. The Jewish Federation provides and manages financial resources to meet and advance the social welfare, cultural, Jewish and general educational and recreational needs, and purposes of the Indianapolis Jewish community. Many activities are coordinated and performed through constituent and beneficiary agencies (Agency or Agencies) and through the national and international Jewish community. Constituent Agencies include the Indianapolis Jewish Home (Hooverwood), the Jewish Community Center Association (Jewish Community Center), the Bureau of Jewish Education, Jacobs Home and the Jewish Community Relations Council. Each of these constituent Agencies is governed autonomously by a Board of Directors, and each has representation on the Jewish Federation Board of Directors. Financial Statement Presentation: Accounting principles generally accepted in the United States of America (GAAP) requires, among other things, that the financial statements report the changes in and total of each of the net asset classes, based upon donor restrictions, as applicable. Net assets are to be classified as unrestricted, temporarily restricted, and permanently restricted. The following classes of net assets are used to reflect donor intent: Unrestricted Net Assets - The unrestricted net asset class includes general assets and liabilities of the Jewish Federation. The unrestricted net assets may be used to support the Jewish Federation’s purposes and operations. Temporarily Restricted Net Assets - The temporarily restricted net asset class includes assets of the Jewish Federation related to gifts with explicit donor-imposed restrictions that have not been met as to specified purpose, or to later periods of time or after specified dates. Permanently Restricted Net Assets - The permanently restricted net asset class includes assets of the Jewish Federation which the donor has stipulated be maintained in perpetuity. Donorimposed restrictions limiting the use of the assets or its economic benefit neither expire with the passage of time nor can be removed by satisfying a specific purpose. Use of Estimates in Preparation of Financial Statements: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Tax Status: The Jewish Federation is a not-for-profit organization exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and corresponding state tax law. Accordingly, no provision has been made for federal or state income taxes. Additionally, the Jewish Federation has been classified as a publicly supported organization under Section 509(a)(1) of the Internal Revenue Code. Income Taxes: Guidance issued by the Financial Accounting Standards Board (FASB) requires the Jewish Federation to recognize a tax benefit only if it is more likely than not the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the more-likely-than-not test, no tax benefit is recorded. The Jewish Federation has examined this issue and has determined there are no material contingent tax liabilities or questionable tax positions.

(Continued) 7.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Jewish Federation is no longer subject to examination by taxing authorities for years before 2010. The Jewish Federation does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months. The Jewish Federation recognizes interest and/or penalties related to income tax matters in income tax expense. The Jewish Federation did not have any amounts accrued for interest and penalties at December 31, 2013 and 2012. Cash and Cash Equivalents: Cash and cash equivalents represent demand deposit and money market funds held with financial institutions and investment advisors. For purposes of the statement of cash flows, the Jewish Federation considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. The Jewish Federation maintains cash balances in financial institutions which, at times, may exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation (FDIC); however, the Dodd-Frank Insurance Provision allowed for unlimited FDIC coverage for non-interest bearing accounts until December 31, 2012. As a result, the Jewish Federation holds some funds at financial institutions in noninterest bearing accounts that are FDIC insured in full. Also, the Jewish Federation maintains accounts with a stock brokerage firm which contains cash and securities. These funds are not federally insured by the FDIC, but are insured up to $500,000 (with a limit of $250,000 for cash) by the Securities Investor Protection Corporation (SIPC). Investments: Investments are initially recorded at their acquisition cost if they were purchased and at fair value if they are received through a contribution or exchange transaction. Investments are reflected at fair value, based on estimates made by investment trust administrators, using current quoted market prices or the market prices of similar securities. Alternative investments, such as fund of funds and limited partnerships, are valued based upon the unaudited financial reporting of the entities as independent market valuations are not readily available. The Jewish Federation believes the carrying amount of these financial instruments is a reasonable estimate of fair value. Because these alternative investments are not readily marketable, their estimated value is subject to uncertainty and therefore may differ from the value that would have been used had a ready market for such investments existed. The various investments in securities, alternative investments, and other investments are exposed to a variety of uncertainties, including interest rate, market and credit risks. Due to the level of risk associated with certain investments, it is possible that changes in the values of these investments could occur in the near term. Such changes could materially affect the amounts reported in the financial statements of the Jewish Federation. For portfolio management purposes, the Jewish Federation pools investments in multiple pool categories to meet the needs of donor intent, and for designations by the board. The Jewish Federation allocates monthly investment income and realized and unrealized gains and losses from investments assigned to the pool categories based on weighted average daily balances. Income and expenses from investments held as custodian are recorded as an increase or decrease to a trust liability account and not recorded on the statement of activities. Investments include amounts held as custodian for constituent and beneficiary agencies.

(Continued) 8.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Pledges Receivable: Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using rates commensurate with risk applicable to the years in which the promises are received. Amortization of discounts is included in the valuation of contribution revenue. Conditional promises to give are not included as support until the conditions have been substantially met. A transfer of assets with a conditional promise to contribute them is recorded as funds held in trust until the conditions have been met. Allowance for Doubtful Accounts and Uncollectible Pledges: The allowances for uncollectible accounts and pledges are determined by management estimates based upon the Jewish Federation’s historical losses, specific circumstances and general economic conditions. Periodically, management reviews receivables and records allowances based on current circumstances, and charges off a receivable against the allowance when all attempts to collect a receivable are deemed to have failed in accordance with the Jewish Federation’s collection procedures. Loans to Agencies: Loans are carried at the principal amount outstanding. Interest income is accrued on the principal balances of loans. Since there are a small number of loans outstanding, the allowance for loan loss is considered and estimated by identifying specific troubled loans. Estimating the risk of loss and the amount of loss on any loan is necessarily subjective. Accordingly, the allowance is considered and maintained by management at a level considered adequate to cover possible losses that are currently anticipated based on past loss experience, general economic conditions, information about specific borrower situations including their financial position and collateral values, and other factors and estimates which are subject to change over time. A loan is charged-off by management as a loss when deemed uncollectible, although collection efforts continue and future recoveries may occur. Interest on loans is accrued over the term of the loan based on the amount of principal outstanding. Where serious doubt exists as to the collectibility of a loan, the accrual of interest is discontinued. Property and Equipment: Expenditures for property and equipment and items in excess of $5,000 which substantially increase the useful life of existing assets, are capitalized at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives range from 10 to 40 years for building and building improvements, and 5 to 15 years for furniture and equipment. Donated property and equipment is recorded at estimated fair value at the date of donation. Purchase of property and equipment by the Jewish Federation for use by the Jewish Federation and certain purchases for other Agencies are capitalized as assets of the Jewish Federation on the Statement of Financial Position. Interest on notes payable and depreciation and amortization expense related to property and equipment have been allocated in the statement of functional expenses based on the estimated use and benefit of programs and services. Impairment of Long-Lived Assets: In accordance with GAAP, the Jewish Federation reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the fair value is less than the carrying amount of the asset, an impairment loss is recognized for the difference. No impairment loss has been recognized during the years ended December 31, 2013 and 2012. Other Assets: The Jewish Federation’s other assets balance consists primarily of various prepaid expenses and the value of cash surrender life insurance policies for which the Jewish Federation is the beneficiary.

(Continued) 9.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Funds Held For Others: The Jewish Federation holds assets for the USA Jewish Partnership Consortium, which consists of twelve Federations across the United States, that provide grants to various organizations. Charitable Gift Annuities: The Jewish Federation has received several gift annuities which require future payments to the donors or their named beneficiaries. The assets received from the donors are recorded at fair value and are included in investments. The liability has been determined using the applicable discount rate and annuitant rates of return ranging from 5.5 percent to 8.5 percent. Fair Value of Financial Instruments: Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the Jewish Federation’s principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Except for investments, the fair value of the Jewish Federation’s financial instruments, which include cash and cash equivalents, loans receivable, pledges receivable, accounts payable, charitable gift annuity liabilities and notes payable, are based on a variety of factors. In some cases, fair values represent quoted market prices for identical or comparable instruments (Level 1 inputs - market approach). In other cases, fair values have been estimated based on assumptions about the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk (Level 2 inputs - income approach). Accordingly, the fair values may not represent actual values that could have been realized at year-end or that will be realized in the future. All other financial instruments' carrying values approximate fair value as of December 31, 2013 and 2012. Campaign Contributions: Campaign contributions consist of pledges received for the Annual Campaign. The 2013 Annual Campaign, which ran from September 1, 2012 to December 31, 2013, raised $3,755,140 and the 2012 Annual Campaign, which ran from September 1, 2011 to December 31, 2012 raised $3,807,261. Contributions are recognized as revenue when pledged or received, whichever is first. In addition, some of these contributions did not qualify as revenue for GAAP purposes (such as contribution payments from Donor Advised Funds to Annual Campaign), therefore Annual Campaign revenue, as reflected in these financial statements, for the years ending December 31, 2013 and 2012 was $2,992,504 and $2,377,415, respectively. Other Contributions: Other contributions consist of all non-campaign contribution revenues including donor advised funds, bequests and other miscellaneous contributions, which may fluctuate significantly from year to year. Donor Imposed Restrictions: The Jewish Federation conducts annual campaigns and other capital and special purpose campaigns to support its mission. All contributions are considered available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. Statement of Functional Expenses: The costs of providing various programs and other activities have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

(Continued) 10.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Subsequent Events: Management has performed an analysis of the activities and transactions subsequent to December 31, 2013, to determine the need for any adjustments or disclosures to the audited financial statements for the year ended December 31, 2013. Management has performed their analysis through May 19, 2014, the date the financial statements were available to be issued. NOTE 2 - PROGRAM SERVICES The Jewish Federation is the central fundraising and coordinating body for the Indianapolis Jewish community. The Jewish Federation provides financial support through allocations to its Constituent Agencies to supplement their operations and through the use of services, property and equipment. The Jewish Federation also makes grants to other charitable entities. For the years ended December 31, 2013 and 2012, program services and expenses include the following activities: Grants and allocations: Operating allocations and rent subsidies for Constituent Agencies Other grants and allocations

2013 $

2,605,633 2,140,240

2012 $

2,620,299 2,330,909

Grants from donor philanthropic funds

1,402,565

1,711,242

Direct programs: Operation of Eldercare programs Operation of Outreach programs Other expenses and allocated expenses

662,671 149,070 2,309,919

709,566 156,502 2,563,017

9,270,098

$ 10,091,535

$

Additional grants of $1,178,024 and $1,479,755 were made from donor philanthropic funds or other endowment funds to the Jewish Federation Annual Campaign or other programs for the years ending December 31, 2013 and 2012, respectively. These grants are inter-company allocations and have not been included on the statement of activities, nor are they included in the program expenses above. NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS GAAP establishes a fair value hierarchy which places the highest priority on quoted market prices in active markets for identical assets or liabilities (Level 1 measurements) and gives the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs within the fair value hierarchy are defined as follows: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

(Continued) 11.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. Inputs and Valuation Techniques: The fair value of mutual funds and equities are based on quoted prices in active markets using the market approach. This is considered a level 1 input. The fair value of U.S. & government agency obligations, and corporate and municipal bonds are based on quoted market prices of similar securities with similar due dates using the market approach. These are considered level 2 inputs. The fair value of purchase money mortgages and Israel bonds are based on observable transactions and comparable types of investments. Due to the limited availability of comparable investments for these investments, the inputs are considered level 3 inputs. For other investments for which there is no active market, generally referred to as “alternative investments”, the Jewish Federation uses the net asset value (NAV), with additional analysis performed by management, as such investments have significant unobservable valuation inputs. Due to current market conditions as well as the limited trading activity of these securities, the fair value of the securities is highly sensitive to assumption changes and market volatility (Level 3 inputs). However, for some investments, the Jewish Federation has the ability to redeem these investments at the fund's NAV within a reasonable amount of time (Level 2 inputs). For both levels, the market approach is used to determine fair value. Description of Alternative Investments and Liquidity: The Jewish Federation's alternative investments include three fund of funds and six limited partnerships at December 31, 2013, and alternative investments represented 32% and 18% of the total investments held by the Jewish Federation as of December 31, 2013 and 2012, respectively. The Jewish Federation had unfulfilled capital commitments of $168,866 related to these alternative investments as of December 31, 2013 and 2012. Fund of Funds:  One portfolio, with an approximate value of $3.1 million and $2.6 million at December 31, 2013 and 2012, is geared toward equities related to global natural resources. Shares of the fund are available for purchase on a monthly basis. Redemptions are permitted only on the first business day of January, April, July, and October and require 45 days prior written notice (Level 2). 

The second portfolio, with an approximate value of $2.9 million and $2.3 million at December 31, 2013 and 2012, is geared toward equity securities of companies ordinarily located in any country other than the United States and Canada. Withdrawals from the portfolio may only be made on the first business day of each month unless otherwise approved by the investment manager and the custodial trustee (Level 2).



The third portfolio, with an approximate value of $4.6 million and $0 at December 31, 2013 and 2012, invests broadly in issuers domiciled in the United States and foreign countries. Withdrawals from the portfolio may be made on any business day (Level 2).

(Continued) 12.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) Limited Partnerships:  One partnership, with an approximate value of $12.6 million and $11.0 million at December 31, 2013 and 2012, is an endowment pool, which invests in domestic, international, emerging markets and private equities, absolute return, real assets, and fixed income limited partnerships. The primary objective is to attain an average annual real total return of at least five percent over consecutive rolling five-year periods. Contributions and withdrawals of partner capital can be made to, or from, the partnership at any time subject to the approval of a Majority-in-Interest of partners. Full withdrawals require advance written notice of 92 days, may be subject to restrictions, and only 80% will be distributed within one quarter (Level 3). 

The second partnership, with an approximate value of $632,000 and $694,000 at December 31, 2013 and 2012, is an offshore limited partnership which invests primarily in private equity, including the buyout, venture capital, special situations, and international sectors. The primary objective is the diversification of the Jewish Federation investment portfolio. As a limited partner, the Jewish Federation does not have the right to withdraw or transfer any of its capital from the partnership unless consented to by the General Partner until December 31, 2016, when the partnership is expected to dissolve (Level 3).



The other four partnerships are part of the Horizon managed investment portfolio and totaled $178,370 and $65,919 at December 31, 2013 and 2012. These funds have various liquidation restrictions and have been classified as Level 3.

Assets Measured on a Recurring Basis: Assets measured at fair value on a recurring basis are summarized below: Fair Value Measurements at December 31, 2013 Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs (Level 2)

(Level 1) Assets: Municipal bonds U.S. & government agency obligations Corporate bonds Israel bonds Mutual funds Purchase money mortgages Alternative investments: Fund of funds Limited partnerships Equity: Large cap All cap Other securities International securities

$

$

25,724,928 -

$

Significant Unobservable Inputs (Level 3)

1,252,263 2,391,278 2,964,374 -

$

1,970,377 1,644,283

Total $

1,252,263 2,391,278 2,964,374 1,970,377 25,724,928 1,644,283

-

10,569,776 -

13,426,205

10,569,776 13,426,205

4,040,202 10,645,451 33,984 168,382

-

-

4,040,202 10,645,451 33,984 168,382

40,612,947

$

17,177,691

$

17,040,865

$

74,831,503

(Continued) 13.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) Fair Value Measurements at December 31, 2012 Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs (Level 2)

(Level 1) Assets: Municipal bonds U.S. & government agency obligations Corporate bonds Israel bonds Mutual funds Purchase money mortgages Alternative investments: Fund of funds Limited partnerships Equity: Large cap All cap Other securities International securities

$

$

19,957,313 -

$

Significant Unobservable Inputs (Level 3)

1,301,762 2,605,214 2,540,903 -

$

1,965,380 1,260,786

Total $

1,301,762 2,605,214 2,540,903 1,965,380 19,957,313 1,260,786

-

4,885,908 -

11,733,928

4,885,908 11,733,928

2,822,019 7,225,394 58,728 1,452,119

-

-

2,822,019 7,225,394 58,728 1,452,119

31,515,573

$

11,333,787

$

14,960,094

$

57,809,454

The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2013 and 2012: Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Purchase Money Mortgages Beginning balance, January 1, 2013

$

Total gains or losses (realized / unrealized) included in earnings: Interest and dividend income on securities Unrealized gains Realized gains on sale of securities Purchases Withdrawals Investment fees Ending balance, December 31, 2013

1,260,786

Limited Partnerships $

992,523 (609,026) $

1,644,283

11,733,928

Israel Bonds $

60,006 1,456,056 378,808 31,888 (173,400) (61,081) $

13,426,205

1,965,380

Total $

684,997 (680,000) $

1,970,377

14,960,094

60,006 2,448,579 378,808 716,885 (1,462,426) (61,081) $

17,040,865

(Continued) 14.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Purchase Money Mortgages Beginning balance, January 1, 2012

$

Total gains or losses (realized / unrealized) included in earnings: Interest and dividend income on securities Unrealized gains Realized gains on sale of securities Purchases Withdrawals Investment fees Ending balance, December 31, 2012

1,394,058

Limited Partnerships $

311 (133,583) $

1,260,786

10,859,025

Israel Bonds $

1,943,919

43,760 710,095 269,916 (91,898) (56,970) $

11,733,928

Total $

14,197,002

21,461 500,000 (500,000) $

1,965,380

65,221 710,406 269,916 500,000 (725,481) (56,970) $

14,960,094

Unrealized gains or losses from level 3 investments are reported in net unrealized gains (losses) on investments on the statement of activities. For the years ending December 31, 2013 and 2012, the Jewish Federation had unrealized gains of approximately $859,000 and $419,000 on investments that were still held as of the end of the fiscal year. The following schedule summarizes the investment return recognized as income of the Jewish Federation on the Statement of Activities for the years ended December 31, 2013 and 2012: 2013 Interest and dividends Net realized gain on sale of securities Investment related expenses

2012

$

1,466,348 $ 1,676,485 (268,250) 2,874,583 6,075,962

1,323,595 1,534,901 (213,068) 2,645,428 2,198,045

$

8,950,545

4,843,473

Net unrealized gain

$

NOTE 4 - PLEDGES RECEIVABLE The Jewish Federation conducts fundraising campaigns to support the needs of the Jewish community. There were no pledges receivable due in one to five years requiring a discount for 2013 and 2012. Following are descriptions of the Jewish Federation's campaigns and other pledges: Annual: The annual campaign pledges are unconditional and unrestricted promises to give made annually which are recorded as revenue and a receivable when pledged. Jewish Community Campus Development: This campaign raised funds for a development project to construct and renovate the Jewish Community Campus. All donor-imposed restrictions have been met with the completion of the project.

(Continued) 15.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 4 - PLEDGES RECEIVABLE (Continued) Aquatics Center: This campaign raised funds for a new aquatic center on the Jewish Community Campus. All donor-imposed restrictions have been met with the completion of the project. Pledges receivable balances at December 31, 2013 and 2012 include the following: 2013 Annual Jewish Community Campus Development Aquatics Center Total gross pledges receivable

$

Less allowance for uncollectible pledges

2,510,185 4,500 2,514,685

2012 $

(353,760) $

2,160,925

1,997,387 11,349 5,750 2,014,486 (242,496)

$

1,771,990

The gross amount of pledges receivable past due and due currently as of December 31, 2013 and 2012 are as follows: 2013 Past due Due currently

2012

$

1,217,743 1,296,942

$

949,517 1,064,969

$

2,514,685

$

2,014,486

Concentration of Pledges Receivable: At December 31, 2013, the Jewish Federation had pledges receivable from two contributors that represented approximately $1,139,408, or 45%, of gross pledges receivable. At December 31, 2012, the Jewish Federation had pledges receivable from two contributors that represented approximately $889,408, or 44%, of gross pledges receivable. NOTE 5 - DUE FROM CONSTITUENT AGENCIES Amounts due from Constituent Agencies resulting from short-term cash advances or holdings and interagency reimbursement of services consisted of the following at December 31, 2013 and 2012:

Due from Jewish Community Center Due from Hooverwood Due from Bureau of Jewish Education Due from Jewish Community Relations Council Due from Jacobs Home

$

Less allowance for uncollectible amounts $

2013

2012

259,423 $ 124,254 53,776 4,796 45,010 487,259 (100,000)

297,651 64,418 476 12,308 45,010 419,863 (100,000)

387,259

$

319,863

(Continued) 16.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 6 - LOANS TO AGENCIES The Jewish Federation has periodically provided unsecured loans or advances to its Agencies. Outstanding balances for loans and advances with accrued interest, as applicable, are as follows: 2013 Indiana University Hillel advance (non-interest bearing)

$

2012

17,850

$

17,850

Hasten Hebrew Academy loan (payable in annual installments of $4,000, non-interest bearing; due 2016.)

6,666

10,666

Jewish Community Center loan (payable in monthly installments of $1,608 including interest at 6.5%; due December 2022)

131,225

141,623

Jewish Community Center software loan (payable in monthly installments of $2,289 including interest at 6.0%; paid in December 2013)

-

26,595

$

155,741

$

196,734

NOTE 7 - PROPERTY AND EQUIPMENT At December 31, 2013 and 2012, property and equipment included: 2013 Land and land improvements Buildings Furniture and equipment

$

Less accumulated depreciation $

2012

1,305,059 $ 1,305,059 39,900,469 39,911,865 6,116,620 6,116,620 47,322,148 47,333,544 (37,516,989) (35,679,952) 9,805,159

$ 11,653,592

(Continued) 17.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 8 - NOTE PAYABLE The Jewish Federation has a note payable to Chase Bank, the holder of Indiana Finance Authority (IFA) issued tax-exempt bonds. The bonds were issued by the IFA for the purpose of making a loan to the Jewish Federation to finance a portion of the costs associated with the construction and renovation of the health facilities at Hooverwood. The tax-exempt bonds are special limited obligations of IFA which are payable solely from payments made by the Jewish Federation pursuant to a Loan Agreement between the parties. The note is payable in monthly installments of $24,116, beginning November 1, 2007 with a final balloon payment of approximately $1,305,000 due October 1, 2017. The interest rate on the note is 5.25%. Balances at December 31, 2013 and 2012 were as follows: 2013 Indiana Finance Authority, Health Facility Revenue Bond, Series 2007 – $3,000,000 (Hooverwood Project)

$

2,051,709

2012 $

2,227,158

Scheduled principal repayments over the term of the note are as follows: 2014 2015 2016 2017

$

184,681 194,755 205,130 1,467,143

Total

$

2,051,709

The loan agreement includes a financial covenant requiring the Jewish Federation to maintain a minimum liquidity ratio and a minimum ratio of unrestricted cash and investments to funded debt. As of December 31, 2013 and 2012, the Jewish Federation reported compliance with this financial covenant. Interest expense was $113,479 and $122,581 for the years ended December 31, 2013 and 2012, respectively. NOTE 9 - OPERATING LEASES (FEDERATION AS LESSOR) Hooverwood Lease: The Jewish Federation entered into an original facilities lease agreement with Hooverwood commencing on January 1, 1985 and amended in October 2007 to extend through October 2017. The lease agreement effectively transferred ownership of all of Hooverwood’s current and future land, building and equipment to the Jewish Federation. The facilities leased by Hooverwood are reported at historical cost and included the following: 2013 Land and land improvements Furniture and equipment Buildings and improvements

$

Accumulated depreciation $

2012

22,114 $ 22,114 1,366,781 1,366,781 12,353,652 12,365,048 13,742,547 13,753,943 (11,709,912) (11,243,839) 2,032,635

$

2,510,104

(Continued) 18.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 9 - OPERATING LEASES (FEDERATION AS LESSOR) (Continued) Significant terms of the lease include the following: 

Rental payments on the original facility equipment from Hooverwood were $168,866 in 2013 and 2012. Effective October 31, 2007, Hooverwood's rental payments were increased by $289,396 for the renovations made to Hooverwood for upgrades to mechanical systems. Total rent payments made by Hooverwood were $648,032 in 2013 and 2012.



The Jewish Federation has provided a subsidy allocation of the lease payments to Hooverwood of $358,636 for the years ended December 31, 2013 and 2012.



The lease continues to be a net lease requiring Hooverwood to pay all executory costs (taxes, insurance, utilities and maintenance).

Future minimum lease payments for the lease is as follows: 2014 2015 2016 2017

$

648,032 648,032 648,032 577,573

$

2,521,669

Other Leases: Including Hooverwood, the Jewish Federation leases property and equipment to Constituent Agencies and others. Total gross rental income from these properties for 2013 and 2012 is as follows: 2013 2012 Hooverwood Jewish Community Center Bureau of Jewish Education Properties leased to others

$

648,032 799,992 150,000 40,721

$

648,032 799,992 150,000 38,400

$

1,638,745

$

1,636,424

The Jewish Federation has provided the following lease subsidies to the Constituent Agencies: 2013 Hooverwood Jewish Community Center Bureau of Jewish Education

2012

$

358,636 799,992 150,000

$

358,636 799,992 150,000

$

1,308,628

$

1,308,628

(Continued) 19.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 10 - RELATED PARTY TRANSACTIONS Balances and transactions with related parties are summarized below for the years ended December 31, 2013 and 2012: Due from Constituent Agencies: Amounts due from Constituent Agencies resulting from short-term cash advances and holdings and reimbursement of services totaled $387,259 and $319,863 at December 31, 2013 and 2012, respectively, and are disclosed in Note 5 to the financial statements. Loans to Constituent Agencies: The Jewish Federation has provided loans or advances to Constituent Agencies, which are disclosed in Note 6 to the financial statements. Operating Allocations and Rent Subsidies to Constituent Agencies: The Jewish Federation Board of Directors approves annual operating allocations and rent subsidies to its Constituent Agencies. Information on allocations and subsidies are disclosed in Note 2 and Note 9 to the financial statements. Board of Director Relationships: From time to time, the Jewish Federation utilizes the services of, or purchases goods from companies that have a board relationship. These services were not significant and management believes they were procured at, or below, fair value. NOTE 11 - EMPLOYER SPONSORED RETIREMENT PLAN On January 4, 2011, the Jewish Federation merged the Jewish Federation of Greater Indianapolis, Inc. Money Purchase Pension Plan and the Jewish Home, Inc. Money Purchase Pension Plan into the JFGI, Inc, and Affiliated Agencies 401(k) Plan. The balance of each participant’s account in the JFGI, Inc. and Affiliated Agencies 401(k) Plan was equal to the value of the participant's balance under the Jewish Federation of Greater Indianapolis, Inc. Money Purchase Pension Plan or Jewish Home, Inc. Money Purchase Pension Plan immediately prior to the merger. The 401(k) plan is administered by MetLife and all participant account balances are self-directed. Eligible plan participants may receive contributions from the Jewish Federation for Safe Harbor, Matching, and Year-End Discretionary Contributions. In 2013 and 2012, the Jewish Federation made contributions of 3% for Safe Harbor, 2% for Matching and 2% for Year-End Discretionary Contributions to eligible plan participants. The Jewish Federation and Agencies contribute to the plans based on the terms of the plan documents. Forfeitures of non-vested participants reduce plan contribution requirements in subsequent years. Retirement cost for the Jewish Federation portion of the plans was $79,670 and $82,215 for the years ended December 31, 2013 and 2012. NOTE 12 - JFGI/GLICK LONG-TERM ENDOWMENT FUND FOR THE FUTURE An endowment fund was established by Gene and Marilyn Glick and the Jewish Federation with each party contributing $1,000,000, giving the fund a total principal of $2,000,000. By legal agreement between the Jewish Federation and the Glick's, this fund is to be held separately with the investment of these funds to be determined by the Jewish Federation. These funds are to be held without any withdrawals except normal fees and expenses until (a) the fund has reached a total of $100,000,000 or (b) the year 2072, whichever occurs first. At such time, earnings of these funds, including net income and net appreciation, both realized and unrealized, at 5% a year may be utilized by the Jewish Federation to carry out its role and mission as described by its governing documents.

(Continued) 20.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 12 - JFGI/GLICK LONG-TERM ENDOWMENT FUND FOR THE FUTURE (Continued) One exception to the restriction described above is that the Jewish Federation may at any one time, with prior written consent from the donor, utilize up to one half of the amount of the fund for the building or rebuilding of a new JCC facility. It is further stipulated that if funds are used in this matter, that (a) the name of Arthur M. Glick will remain on the new JCC building and (b) no further distributions will be made from the fund until 2084 or until the fund reaches $100,000,000, whichever occurs first. The JFGI/Glick Long-Term Endowment Fund for the Future is divided into three classes of net assets for financial statement presentation. Summaries for these three classes of net assets are presented in notes 13, 14 and 15 of the financial statements. At December 31, 2013 and 2012, the Jewish Federation funded principal of $1,000,000 plus interest earned of $548,392 and $412,753, respectively, is presented as unrestricted and designated for the JFGI/Endowment Fund for the Future. At December 31, 2013 and 2012, the donor funded principal of $1,000,000 is presented as permanently restricted, and income from the donor funded principal of $548,392 and $413,160, respectively, is presented as temporarily restricted. NOTE 13 - UNRESTRICTED NET ASSETS Portions of unrestricted net assets have been designated by the Board of Directors as Philanthropic (Donor Advised) and Endowment Funds. Unrestricted net assets consist of the following: 2013 Philanthropic Funds (Donor Advised) General Endowment Fund JFGI/Glick Endowment Fund for the Future Other Named Endowment Funds Mel Simon Legacy Fund Undesignated Funds Funds With Deficiencies

2012

$ 45,733,958 $ 41,821,672 10,490,792 9,117,653 1,548,392 1,412,753 5,228,657 4,643,165 1,072,708 (4,987,457) (3,798,894) (353,168) (542,063) $ 58,733,882

$ 52,654,286

Undesignated Funds Undesignated funds include the cumulative net effect of operating activities and balance sheet changes not defined as Philanthropic (Donor Advised) or Endowment activities, including campaigns, various program services, property and equipment, and portions of other assets and liabilities. A significant portion of the activity of the undesignated funds is non-cash activity such as depreciation expense, which is not annually included in the Jewish Federation's balanced operating budget. As disclosed in Note 7, the Jewish Federation has property and equipment with a cost basis of $47,322,148 as of December 31, 2013, which management estimates would more than adequately cover any undesignated funds. Funds with Deficiencies From time to time, the fair value of assets associated with individual donor restricted endowment funds may fall below the level that the donor or UPMIFA requires the Jewish Federation to retain as a fund of perpetual duration. In accordance with GAAP, deficiencies of this nature that are reported in unrestricted net assets were $353,168 and $542,063 as of December 31, 2013 and 2012, respectively. These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs that was deemed prudent by the Endowment Committee.

(Continued) 21.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 14 - TEMPORARILY RESTRICTED NET ASSETS Net assets are available for the following purposes or time periods for the years ended December 31, 2013 and 2012: 2013 Time restrictions: Mel Simon Legacy Fund

$

Purpose restrictions: LOJE/PACE Funds Living PACE Fund JFGI/Glick Long-Term Endowment Fund for the Future Other Named Endowment Funds Total temporarily restricted net assets

8,050,063

2012 $

9,000,000

125,564 237,818

82,579 217,245

548,392 4,056,555

413,160 3,590,525

$ 13,018,392

$ 13,303,509

The Mel Simon Legacy Fund is restricted by time. The trust agreement allows for the Jewish Federation to annually withdraw from the fund up to 25% of the total amount raised from the previous year's annual campaign, with the annual withdraw limited to $1,000,000 per year. NOTE 15 - PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets for the years ended December 31, 2013 and 2012 consist of the following: 2013 LOJE/PACE Funds JFGI/Glick Long-Term Endowment Fund for the Future JFGI Endowment Fund for Elderly Service Other Named Endowment Funds Total permanently restricted net assets

$

1,481,665

2012 $

1,000,000 3,000,000 1,699,248 $

7,180,913

1,380,165 1,000,000 3,000,000 1,698,248

$

7,078,413

NOTE 16 - NET ASSETS RELEASED FROM RESTRICTIONS Temporarily restricted net assets have been released from restriction due to a purpose or time restriction being met during the years ended December 31, 2013 and 2012 are as follows: 2013 LOJE/PACE Funds Mel Simon Legacy Fund Operation Promise Other Named Endowment Funds

2012

$

54,608 949,937 151,381

$

52,366 1,000,000 50,000 219,478

$

1,155,926

$

1,321,844

(Continued) 22.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 17 - ENDOWMENT COMPOSITION The Jewish Federation's endowment consists of approximately 300 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 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. Interpretation of Relevant Law: The Endowment Committee, authorized by the Board of Directors of the Jewish Federation, 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 Jewish Federation 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 if requested by the donor, 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 organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the organization 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 Jewish Federation and the donor-restricted endowment fund (3) General economic conditions and the possible effect of inflation and deflation (4) The expected total return from income and the appreciation of investments (5) The investment policies and other resources of the Jewish Federation Endowment net asset composition by type of fund as of December 31, 2013: Temporarily Restricted

Unrestricted Donor-restricted: LOJE/PACE Funds JFGI/Glick Endowment Fund for the Future JFGI Endowment Fund for Elderly Service Mel Simon Legacy Fund Other Named Endowment Funds Board-designated: General Endowment Fund Total funds

$

(58,587) $

363,382

1,548,392

Permanently Restricted $

1,481,665

Total $

1,786,460

548,392

1,000,000

3,096,784

(251,265) 1,072,708

8,050,063

3,000,000 -

2,748,735 9,122,771

5,185,341

4,056,555

1,699,248

10,941,144

10,490,792

-

-

10,490,792

$ 17,987,381

$ 13,018,392

7,180,913

$ 38,186,686

$

(Continued) 23.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 17 - ENDOWMENT COMPOSITION (Continued) Endowment net asset composition by type of fund as of December 31, 2012: Temporarily Restricted

Unrestricted Donor-restricted: LOJE/PACE Funds JFGI/Glick Endowment Fund for the Future JFGI Endowment Fund for Elderly Service Mel Simon Legacy Fund Other Named Endowment Funds Board-designated: General Endowment Fund Total funds

$

(90,606) $

299,824

1,412,753

Permanently Restricted $

1,380,165

Total $

1,589,383

413,160

1,000,000

2,825,913

9,000,000

3,000,000 -

2,609,872 9,000,000

4,581,836

3,590,525

1,698,248

9,870,609

9,117,653

-

-

9,117,653

$ 14,631,508

$ 13,303,509

7,078,413

$ 35,013,430

(390,128) -

$

Changes in endowment net assets for year ended December 31, 2013:

Net assets, beginning of year Investment return: Investment income, net of fees Net appreciation (realized and unrealized) Total investment return New gifts Appropriation of endowment assets for expenditure Net assets, end of year

Unrestricted

Temporarily Restricted

$ 14,631,508

$ 13,303,509

213,081

Permanently Restricted 7,078,413

$ 35,013,430

29,778

-

242,859

2,067,104 2,280,185

825,286 855,064

-

2,892,390 3,135,249

1,400,082

15,745

102,500

1,518,327

(324,394) $ 17,987,381

$

Total

(1,155,926) $ 13,018,392

$

7,180,913

(1,480,320) $ 38,186,686

(Continued) 24.

JEWISH FEDERATION OF GREATER INDIANAPOLIS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE 17 - ENDOWMENT COMPOSITION (Continued) Changes in endowment net assets for year ended December 31, 2012: Temporarily Restricted

Unrestricted Net assets, beginning of year Investment return: Investment income, net of fees Net appreciation (realized and unrealized) Total investment return New gifts Appropriation of endowment assets for expenditure Net assets, end of year

$ 13,481,951

$

3,956,545

Permanently Restricted $

Total

6,728,500

$ 24,166,996

81,261

23,902

-

105,163

905,467 986,728

578,586 602,488

-

1,484,053 1,589,216

1,077,591

10,016,320

349,913

11,443,824

(914,762) $ 14,631,508

(1,271,844) $ 13,303,509

$

7,078,413

(2,186,606) $ 35,013,430

Return Objectives and Risk Parameters The Jewish Federation 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 Jewish Federation must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the Endowment Committee, the endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of the S&P 500 index while assuming a moderate level of investment risk. The Jewish Federation expects its endowment funds, over time, to provide an average rate of return in excess of a broad portfolio index based on the Jewish Federation’s broad target allocation. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Jewish Federation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Jewish Federation targets a diversified asset allocation to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Jewish Federation has a general policy of appropriating for distribution each year 5 percent of its endowment fund’s fair value at calendar year-end preceding the fiscal year in which the distribution is planned. In establishing this policy, the Jewish Federation considered the long-term expected return on its endowment. Accordingly, over the long term, the Jewish Federation expects the current spending policy to allow its endowment to grow in excess of annual distribution amount. This is consistent with the Jewish Federation’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Endowment Fund principal, unless otherwise directed by the donor, shall not be disbursed except for emergency situations.

25.