Financial Statements of
JEWISH COMMUNITY FOUNDATION OF CALGARY Year ended June 30, 2016
KPMG LLP 3100, 205 5th Avenue SW Suite 3100 Calgary AB T2P 4B9 Canada Telephone (403) 691-8000 Fax (403) 691-8008 www.kpmg.ca
INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS To the Members of the Jewish Community Foundation of Calgary We have audited the accompanying financial statements of the Jewish Community Foundation of Calgary, which comprise the statement of financial position as at June 30, 2016 and the statements of operations and changes in foundation funds and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation 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 audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and 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 our 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 we consider 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International�), a Swiss entity. KPMG Canada provides services to KPMG LLP.
Opinion In our opinion, these financial statements present fairly, in all material respects, the financial position of the Jewish Community Foundation of Calgary as at June 30, 2016 and its results of operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.
Chartered Professional Accountants
September 28, 2016 Calgary, Canada
JEWISH COMMUNITY FOUNDATION OF CALGARY Statement of Financial Position June 30, 2016, with comparative information for 2015 2016
2015
Assets Current assets: Cash and cash equivalents Accounts receivable
$
Investments, at fair value (note 2)
983,567 808 984,375
$
379,789 919 380,708
7,099,365
5,493,878
State of Israel bonds, at fair value (note 3)
549,058
557,920
Cash surrender value of life insurance (note 4)
243,336
227,255
$ 8,876,134
$ 6,659,761
$
$
Liabilities and Fund Balances Current liabilities: Accounts payable Deferred flow-through grants (note 5)
Custodial funds (note 6)
Foundation fund balances (note 7): Unrestricted Restricted Endowment
1,610 521,861 523,471
3,000 428,307 431,307
2,632,940 3,156,411
1,377,704 1,809,011
35,815 2,186,895 3,497,013 5,719,723
34,601 2,279,513 2,536,636 4,850,750
$ 8,876,134
$ 6,659,761
JEWISH COMMUNITY FOUNDATION OF CALGARY Statement of Operations and Changes in Foundation Funds Year ended June 30, 2016, with comparative information for 2015 June 30, 2016 Revenue: Contributions (note 8) Investment income (note 9)
Unrestricted
$
Total revenue Expenditures: Grants Insurance premiums Administrative costs Marketing & advertising Audit & legal Investment management charges Total expenditures Excess of revenue over expenditures Transfer between funds Funds transferred out Increase in deferred flow-through grants (note 5)
Revenue: Contributions (note 8) Investment income (note 9)
103,864 59,414
$ 1,017,688 63,430
2,472
163,278
700 – 604 100 82 202 1,688
1,732 740
$
–
1,081,118
337,083
1,583,951
44,849 8,432 34,059 5,651 4,609 16,214
26,523 32,958 48,665 8,035 6,555 17,310
227,148 – 8,242 1,363 1,112 2,740
299,220 41,390 91,570 15,149 12,358 36,466
113,814
140,046
240,605
496,153
49,464 (29,064) (113,018)
941,072 19,305 –
96,478 9,329 (12,253)
1,087,798 – (125,271)
–
(93,554)
(92,618)
–
868,973
–
4,850,750
–
$ 5,719,723
Flow-through
Total
2,536,636
35,815
$ 2,186,895
$ 3,497,013
Unrestricted
Restricted
Endowment
1,648 1,440
$
309,762 88,112
$
(93,554)
960,377
2,279,513
$
$
Total
$ 1,450,327 133,624
34,601 $
Flow-through
327,043 10,040
–
1,214
Balance, beginning of year
June 30, 2015
Endowment
784 430 –
Change in Foundation funds in the year
Balance, end of year
Restricted
114,767 101,339
$
$
350,417 15,878
$
776,594 206,769
Total revenue
3,088
397,874
216,106
366,295
983,363
Expenditures: Grants Insurance premiums Administrative costs Marketing & advertising Audit & legal Investment management charges
4,000 – 618 52 97 258
80,085 8,335 38,475 5,760 6,042 15,347
119,032 33,049 44,288 4,080 6,954 17,592
266,740 – 6,949 587 1,091 2,749
469,857 41,384 90,330 10,479 14,184 35,946
Total expenditures
5,025
154,044
224,995
278,116
662,180
(1,937)
243,830
88,179
321,183
Excess (deficiency) of revenue over expenditures Increase in deferred flow-through grants (note 5)
–
–
–
Change in Foundation funds in the year
(1,937)
Balance, beginning of year
36,538
2,035,683
2,545,525
34,601
$ 2,279,513
$ 2,536,636
Balance, end of year
$
243,830
(8,889)
See accompanying notes to financial statements.
(88,179)
(8,889)
$
(88,179)
–
233,004
–
4,617,746
–
$ 4,850,750
JEWISH COMMUNITY FOUNDATION OF CALGARY Statement of Cash Flows Year ended June 30, 2016, with comparative information for 2015 2016
2015
Cash provided from (used in): Operating activities: Excess of revenue over expenses Items not involving cash and cash equivalents: Change in unrealized loss on investments Change in unrealized loss on custodial funds Increase in cash surrender value Change in non-cash working capital Contributions in shares
$ 1,087,798
Investing activities: Purchases of investments Sale of investments Financing activities: Change in custodial funds
$
321,183
69,464 24,381 (16,082) (1,277) 1,164,284
102,875 34,768 (22,112) (2,572) (1,500) 432,642
(4,905,151) 3,091,409 (1,813,742)
(3,844,797) 2,907,712 (937,085)
1,255,236
(69,580)
Increase (decrease) in cash and cash equivalents
603,778
(574,023)
Cash and cash equivalents, beginning of year
379,789
953,812
Cash and cash equivalents, end of year
See accompanying notes to financial statements.
$
983,567
$
379,789
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
Nature of operations: Jewish Community Foundation of Calgary (the "Foundation") was incorporated under the Societies Act of Alberta on January 25, 1990. The Foundation is a registered charity classified as a public foundation under the Income Tax Act (Canada) and, accordingly, is exempt from income taxes and can issue donation receipts for income tax purposes. The purpose of the Foundation is to further the religious and educational needs of the Calgary Jewish Community, the Calgary Community at large and Canadian Jewry. Custodial funds are owned by other charitable organizations and pooled with Foundation assets for investment purposes.
1. Significant accounting policies: (a) Basis of presentation: These financial statements have been prepared in accordance with Canadian Accounting Standards for Not-For-Profit Organizations. These financial statements have, in management’s opinion, been properly prepared within the framework of the accounting policies summarized as follows: (b) Financial instruments: The Foundation’s financial instruments consist of cash and cash equivalents, accounts receivable, investments, State of Israel bonds, cash surrender value of life insurance, accounts payable, deferred flow-through grants and custodial funds. Management has classified the Foundation’s investments and cash as held for trading, the State of Israel bonds as held to maturity, accounts receivable as loans and receivables and accounts payable, deferred flow-through grants and managed funds as other liabilities. State of Israel bonds are reflected at fair value. Financial instruments are recorded at fair value on initial recognition. Freestanding derivative instruments that are not in a qualifying hedging relationship and equity instruments that are quoted in an active market are subsequently measured at fair value. All other financial instruments are subsequently recorded at cost or amortized cost, unless management has elected to carry the instruments at fair value. Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred.
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
1. Significant accounting policies (continued): (b) Financial instruments (continued): Financial assets are assessed for impairment on an annual basis at the end of the fiscal year if there are indicators of impairment. If there is an indicator of impairment, the Foundation determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset. If there is a significant adverse change in the expected cash flows, the carrying value of the financial asset is reduced to the highest of the present value of the expected cash flows, the amount that could be realized from selling the financial asset or the amount the Foundation expects to realize by exercising its right to any collateral. If events and circumstances reverse in a future period, the impairment loss will be reversed to the extent of the improvement, not exceeding the initial carrying value. (c) Investment income: The Foundation recognizes interest income that is not externally restricted as part of investment income, in the general (unrestricted) fund. Externally restricted investment income is recognized as part of interest income in the appropriate restricted fund. (d) Donated securities: Donated securities are recorded at their market value on date of donation. (e) Donated services: A number of people donate significant time and expertise to the Foundation across its operations. However, since no objective basis exists for recording and assigning fair values to donated services, the value of this time has not been reflected in these financial statements. (f) Contributions: The Foundation follows the restricted fund method of accounting. Unrestricted contributions related to general operations are recognized as revenue in the general fund in the year received. Restricted contributions are recognized as revenue in the appropriate restricted fund in the year received. The Foundation manages capital in several funds with various conditions. These funds have been amalgamated as part of the restricted fund. Flowthrough contributions, not distributed in the year of receipt, are established as a liability until the grants are made. (i) Flow-through (restricted): Flow-through (restricted) contributions are distributed within the terms of the contract, with the advice of the donors. (ii) Restricted: These are funds that are restricted for a period of time usually exceeding two years for which donors support specified charitable causes.
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
1. Significant accounting policies (continued): (f) Contributions (continued): (iii) Endowment: These are permanent funds through which donors provide support for specified charitable causes. (g) Allocation of service and other costs The Foundation allocates service and other costs to foundation funds on an annual basis based on the average annual market value of each fund. Service and other costs are allocated to custodial funds in accordance with the agreements. Expenses incurred for a specific fund are charged to that fund. (h)
Management estimates: The preparation of financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the amounts and disclosures reported in financial statements and accompanying notes. Significant estimates include the fair market value of investments. Management believes that the estimates utilized in preparing these financial statements are reasonable and prudent. However actual results could differ from these estimates.
2. Investments: June 30, 2016 Equity securities: Canada United States Short term bond fund units:
June 30, 2015 Equity securities: Canada United States Short term bond fund units:
Cost
Fair value
$ 2,923,038 1,250,546 2,629,849
$ 3,276,017 1,233,795 2,589,553
$ 6,803,433
$ 7,099,365
Cost
Fair value
$ 2,060,036 910,502 2,130,192
$ 2,355,615 1,055,608 2,082,655
$ 5,100,730
$ 5,493,878
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
3. State of Israel Bonds: 2016 State of Israel bonds held to maturity with interest between 2.15% and 4.00% maturing between 2016 and 2020, at fair value (2015 – interest between 0.75% and 4.00%, maturing between 2015 and 2020) $
549,058
2015
$
557,920
4. Cash surrender value of life insurance: The Foundation is the beneficiary named under whole and term life insurance policies. The cash surrender value (CSV) is recorded as an asset. As the realizable amount in excess to the cash value is not certain, the Foundation will record the benefits when the proceeds can be reasonably determined. The details of the policies are as follows: Premiums paid
2016 Whole life policies Term life policies
$
8,432 32,958
$
239,050 4,286
$
$
41,390
$
243,336
$ 1,429,549
CSV
Face value
Premiums paid
2015 Whole life policies Term life policies
Face value
CSV
829,549 600,000
$
8,436 32,958
$
223,230 4,025
$
835,230 600,000
$
41,394
$
227,255
$ 1,435,230
2016
2015
5. Deferred flow-through grants:
Balance, beginning of year
$
Contributions Investment gains Grants administered in year Administrative/program costs incurred Transfers between funds Balance, end of year
428,307
$
327,043 10,040 (227,148) (13,457) (2,924) $
521,861
340,128 350,417 15,878 (266,740) (11,376) -
$
428,307
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
6. Custodial funds: 2016 Increases: Deposits Investment gains
Decreases: Withdrawals Service costs
$ 1,234,535 27,589 1,262,124 6,888 6,888
2015
$
96,821 40,466 137,287 201,461 5,406 206,867
Change during the year
1,255,236
Balance, beginning of year
1,377,704
1,447,284
$ 2,632,940
$ 1,377,704
Balance, end of year
(69,580)
Pursuant to an agreement dated November 29, 2006, Calgary Beth Tzedec Congregation Society established a “Managed Fund” with the JCFC whereby the JCFC will manage these commingled funds for an initial period of three years. After the three year term the agreement is renewed automatically unless the funds are withdrawn. JCFC earns a fee for providing management services. As at June 30, 2016 the fund has a balance of $2,128,572 (2015 $877,490). Pursuant to an agreement dated January 12, 2010, Jewish Historical Society of Southern Alberta established a “Managed Fund” with the JCFC whereby the JCFC will manage these commingled funds for an initial period of three years. After the three year term the agreement is renewed automatically unless the funds are withdrawn. JCFC earns a fee for providing management services. As at June 30, 2016 the fund has a balance of $504,368 (2015 - $500,214).
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
7. Foundation fund balances: June 30, 2016 Net current assets Investments Cash surrender value of life insurance
Unrestricted $
Net current assets Investments Cash surrender value of life insurance
$
Endowment
245,149 1,803,280
$
– 3,399,317
Total $
280,534 5,202,597
–
167,530
75,806
243,336
35,385
$ 2,215,959
$ 3,475,123
$ 5,726,467
Unrestricted
Restricted
Endowment
Total
181,909 1,943,072
$
$
June 30, 2015
35,385 –
Restricted
$
$
34,601 –
$
– 2,463,913
$
216,510 4,406,985
–
154,532
72,723
227,255
34,601
$ 2,279,513
$ 2,536,636
$ 4,850,750
8. Contributions: Included in contribution amounts are gifts-in-kind of the shares of publicly traded companies with a fair market value of $365,401 (2015 - $603,532) at the time of contribution. These shares were sold at fair value upon receipt in accordance with the Foundation’s policies.
9. Investment Income: 2016 Dividend Income Increase in cash surrender value on life insurance Interest and other income Realized gain Decrease in unrealized gain
2015
$
120,633 16,082 47,841 18,532 (69,464)
$
40,095 17,883 46,880 204,786 (102,875)
$
133,624
$
206,769
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
10. Alberta Charitable Fundraising Act As required under Alberta’s Charitable Fundraising Act and Regulation, the following amounts are disclosed for fundraising activities in the province of Alberta. 2016 Revenue Gross contributions received from non members
$
104,039
Expenses Total administrative costs Total fundraising costs
2015 $
(8,021) (7,894) $
88,124
103,492 (3,300) (2,200)
$
97,992
11. Preservation of purchasing power and financial risk management: Preservation of purchasing power: To support the policy of preserving the purchasing power of permanent endowment funds, the Foundation limits the amount of annual grants to a percentage of the market value of each fund. Risk Management The Foundation has exposure to the following risks from its use of financial instruments:
(i)
Credit risk
Liquidity risk
Market risk Credit risk: Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment resulting in a financial loss to the Foundation. The fair value of a financial instrument takes into account the credit rating of its issuer. The Foundation’s cash and investments are subject to credit risk. The maximum exposure to credit risk on these instruments is their carrying value. The risk is mitigated by the Foundation’s investment policies which include carefully reviewing the credit rating of bond issuers and by hiring a professional investment manager.
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
11. Preservation of purchasing power and financial risk management (continued): (ii)
Liquidity risk: Liquidity risk is the risk that the Foundation will not be able to meet its liabilities as the fall due. Substantially all of the Foundation’s assets are comprised of cash and investments traded in active markets that can be readily liquidated and therefore the Foundation’s liquidity risk is considered minimal. In addition, the Foundation aims to retain a sufficient cash position to manage liquidity. The Foundation’s exposure to and management of liquidity risk has not changed materially since June 30, 2015.
(iii)
Market risk: Market risk is the risk that changes in market prices, as a result of changes in foreign exchange rates, interest rates and market changes, will affect the Foundation’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximizing the return. The Foundation manages this risk by hiring a professional investment manager who adheres to its Investment Policy Statement.
(iv)
Foreign exchange risk: Investments in securities denominated in foreign currencies are exposed to currency risk due to fluctuations in foreign exchange rates. The Foundation is exposed to currency risk on its foreign denominated investments, as the prices denominated in foreign currencies are converted to Canadian dollars in determining fair value. At June 30, 2016, total foreign denominated investments represent approximately 16.1% (June 30, 2015 – 17.4%) of the market value of the Foundation’s total investments.
(v)
Interest rate risk: Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of interest bearing financial instruments held by the Foundation. As June 30, 2016, the total interest bearing investments represented approximately 41.04% (June 30, 2015 – 44.4%) of the market value of the Foundation’s total investments. The Foundation manages this risk by hiring a professional investment manager who adheres to its Investment Policy Statement.
12. Related parties: The directors of the Foundation have established and maintain various funds with the Foundation, which had an aggregate fair value as at June 30, 3016 of $350,497 (2015 $484,213).
JEWISH COMMUNITY FOUNDATION OF CALGARY Notes to Financial Statements Year ended June 30, 2016, with comparative information for 2015
13. Bequests: The Foundation has been made aware by legal counsel for two estates, that it is the Named Beneficiary of two bequests, one estimated to be $250,000 and the other amount not presently known. The final aggregate value will only be known once the administrators of the donor’s estates are in a position to pay the bequests to the Foundation. No recognition of these amounts is contained in the financial statements, as the amount and timing of the receipt of the bequests is unknown.
14. Comparative figures: Certain comparative figures have been reclassified from those previously presented to conform to the presentation of the 2016 financial statements.