CENTRAL YESHIVA TOMCHEI TMIMIM LUBAVITZ INC.

841-853 Ocean Parkway Brooklyn NY 11230

EIN # 11-1797166

FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2016

March 27, 2017

David H. Wilschanski Certified Public Accountant 450 W. Kennedy Boulevard Lakewood, NJ 08701 (732) 370-1114

CENTRAL YESHIVA TOMCHEI TMIMIM LUBAVITZ INC.

Table of Contents June 30, 2016

Page

Independent Auditor’s Report ...... 1-2

Statement of Financial Position ...... 3

Statement of Activities and Changes in Net Assets ...... 4

Statement of Cash Flows ...... 5

Notes to Financial Statements ...... 6-7

Schedule of Expenditures of Federal Awards for the Year ended June 30, 2016 ...... 8

Schedule of Findings and Questioned Costs for the Year Ended June 30, 2016 ...... 9

Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...... 10-11

Report on Compliance with Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance…………………………………………………………..12-13

David H Wilschanski Certified Public Accountant ______450 W. Kennedy Boulevard Tel 732 370 1114 Lakewood, NJ 08701 Fax 732 886 7428

Board of Trustees Central Yeshiva Tomchei Tmimim Lubavitz Inc. 841-853 Ocean Parkway Brooklyn, New York 11230

Unmodified Opinion on Financial Statements Accompanied by Other Information

Independent Auditor’s Report

Report on the Financial Statements We have audited the accompanying financial statements of Central Yeshiva Tomchei Tmimim Lubavitz Inc. (a nonprofit organization) which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, and cash flows for the year 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Central Yeshiva Tomchei Tmimim Lubavitz Inc. as of June 30, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

1 Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is 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 audit 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 27, 2017, on our consideration of Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s internal control over financial reporting and compliance.

David H.Wilschanski Certified Public Accountant March 27, 2017

2 Central Yeshiva Tomchei Tmimim Lubavitz Inc.

Statement of Financial Position As of June 30 2016

Temporarily Permanently Unrestricted Restricted Restricted Total

Assets Current Cash in Banks 2039403 2039403 Tuition Receivable 2343377 2343377 Grants Receivable 302115 302115 Prepayments 144402 144402 Loans & Exchanges 65291 65291

Total Current 4894588 4894588

Noncurrent Land, Buildings and Equipment (Net of Accumulated Depreciation of 2966626) 4745548 4745548

Other 37929 37929

Total Noncurrent 4783477 4783477

Total Assets 9678065 9678065

Liabilities Current Accounts Payable 72861 72861 Accrued Expenses 310594 310594 Deferred Tuition 17542 17542

Total Current 400997 400997

Total Liabilities 400997 400997

Net Assets 9277068 9277068

Total Liabilities & Net Assets 9678065 9678065

See Accompanying Notes to Financial Statements 3 Central Yeshiva Tomchei Tmimim Lubavitz Inc.

Statement of Activities and Changes in Net Assets For the Year Ended June 30 2016

Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Tuition & Fees 4461621 4461621 Less Scholarships -385908 -385908

Net Tuition & Fees 4075713 4075713 Rental Income 44142 44142 Other Income 16951 16951 Total Revenues 4136806 4136806

Expenses Program Services Instruction 1151150 1151150 Educational Expenses 285466 285466 Total Program Services 1436616 1436616

Student Services Kitchen and Food 704381 704381 Student Housing 315892 315892 Student Support 118000 118000 Institutional Matching Funds 71175 71175

Total Student Services 1209448 1209448

Support Services Plant Operation and Maintenance 498446 498446 Rental of Facilities 300000 300000 General and Administrative 304402 304402 Depreciation 169033 169033 Professional Fees 118339 118339 Bad Debts 81217 81217 Fundraising 600 600 Other Expenses 2638 2638 Total Support Services 1474675 1474675

Total Expenses 4120739 4120739

Changes in Net Assets 16067 16067

Net Assets 7/01/2015 9261001 9261001

Net Assets 6/30/2016 9277068 9277068

See Accompanying Notes to Financial Statements 4 Central Yeshiva Tomchei Tmimim Lubavitz Inc.

Statement of Cash Flows For the Year Ended June 30 2016

Change in Net Assets 16067

Adjustments to Reconcile Changes in Net Assets to Net Cash

Depreciation and Amortization 169033

Provided by Operating Activities Decrease in Tuition Receivable 80785 Decrease in Grants Receivable 449182 Increase in Prepayments (402) Decrease in Loans and Exchanges 111118 Decrease in Accounts Payable and Accrued Expenses (137889) Decrease in Deferred Tuition (46297)

Net Cash Provided by Operating Activities 456497

Provided by Investing Activities Addition of Land, Buildings and Equipment (143500)

Net Cash Provided by Investing Activities (143500)

Net Cash Increase for the Period 498097

Cash and Cash Equivalents (at Beginning of Year) 1541306

Cash and Cash Equivalents (at End of Year) 2039403

See Accompanying Notes to Financial Statements 5 CENTRAL YESHIVA TOMCHEI TMIMIM LUBAVITZ INC.

Notes to Financial Statements For the Year Ended June 30, 2016

Note A. The Central Yeshiva Tomchei Tmimim Lubavitz Inc. was formed on or about 1940 for the purpose of organizing a college for post-secondary education. It qualifies as an exempt organization pursuant to Section 501(c)(3) of the Internal Revenue Code and, accordingly, is exempt from income taxes. The Institution is currently accredited by The Association of Advanced Rabbinic and Talmudical Schools. The Institution is located in Brooklyn in the Crown Heights and Flatbush sections. Note B. Summary of Significant Accounting Policies. The financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Cash and Cash Equivalents-The Institution considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

Land, Buildings and Improvements are recorded at cost with the exception of 885 Eastern Parkway which was received as a bargain sale and which is carried on the books at the assessed value at 10/19/71, the date of the bargain sale. Depreciation is currently computed using the straight-line method over the estimated useful lives of the assets, either twenty or forty years. Depreciation is recorded as an expense of the unrestricted fund. Expenditures for maintenance and repairs are charged to expense as incurred. Restricted Assets-There are no donor-imposed restrictions on assets. Revenue Recognition-Tuition is reported gross of scholarships to needy students as determined by acceptable methodologies and net of unfunded scholarships, as accrued in the applicable academic period in accordance with required accounting principles. Receivables are recorded at net realizable value. Contributions -Annual contributions and pledge receipts are available for unrestricted use in the related year unless specifically restricted by the donor. Unconditional promises to give are recorded as receivable and those due in subsequent years are reflected as promises to give and are recorded at the present value of their net realizable value, using interest rates applicable to the years in which the promises are received, to discount the amounts. Government Grants and Contracts- Federal awards are specified on the Schedule of Expenditures of Federal Awards and they are subject to their various contracts and regulations. The United States Department of Education awarded Pell grants of $2,050,394. Federal funds disbursed for FSEOG were $73,693. The institutional portion was $37,402. Federal funds disbursed for FWS were $154,044. The institutional portion was $33,773 and $14,216 was expended in administrative cost. Pell and FSEOG are transferred to tuition accounts upon availability with no time lag, and are therefore are not treated as restricted funds. Loans and Exchanges-These represent no-interest short-term on-demand loans to several educational institutions servicing the local community. Use of Estimates- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Credit Risk- Financial Instruments which subject the Institution to credit risk consist of receivables and cash. Most of the Institution’s activity is with individuals within the metropolitan area. While these individuals are involved in many diversified industries, there is an inherent concentration of credit risk. Management believes that the risks associated with the receivables and unconditional promises to give are adequately provided for. The Institution maintains accounts with a number of

6 banks, and to the extent that the balances are in excess of the maximum FDIC protection of $250,000 per bank, this creates an inherent concentration of credit risk.

FASB ASC 958 - The Institution has adopted the provisions of FASB ASC 958 pertaining to accounting for contributions received and contributions made, and financial statements of Not-for- Profit organizations. These provisions require the Institution to distinguish between contributions that increase permanently restricted net assets, temporarily restricted net assets and unrestricted net assets. It also requires recognition of contributions, including contributed services meeting certain criteria, at fair values. FASB ASC 958 further establishes standards for general purpose external financial statements of not-for-profit organizations and requires a statement of financial position, a statement of activities, and a statement of cash flows. The Institution adopted the policy of accounting for investments using fair value in accordance with FASB ASC 958.

Subsequent Events-Management has reviewed, through March 27, 2017, events occurring subsequent to June 30, 2016 in order to evaluate their impact on the financial statements. GAAP distinguishes between two types of subsequent events:

Recognized- events or transactions that provide evidence about conditions that existed at the date of the statement of financial position including inherent estimates. All such evidence was factored into the preparation of the financial statements.

Non-Recognized- events that did not exist as of the date of the statement of financial position but arose subsequently and are not recognized in the financial assertions. These events may be disclosed to inform the users of the financial assertions. There were no significant non-recognized events to report.

7 CENTRAL YESHIVA TOMCHEI TMIMIM LUBAVITZ INC.

Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2016

Federal Agency or Program Federal Grantor/Pass-Through CFDA Pass- Or Award Revenues Federal Grantor/ Program Title Number Through Amount Recognized Expenditures Number U.S. Department of Education: Student Financial Aid Cluster --Pell 84.063 N/A 2050394 2050394 2050394

Note A --College Work-Study Program 84.033 N/A 154044 154044 154044

--Supplemental Education Note B Opportunity Grants 84.007 N/A 73693 73693 73693

Total Student Financial Aid Cluster 2278131 2278131 2278131

Total Federal Awards 2278131 2278131 2278131

Note A. $38511 was transferred to the FSEOG program and $14216 was expended in administrative cost. Total earned compensation for FWS Program was $135090.

Note B. $38511 was transferred from the FWS program. Total FSEOG grants were $149606.

Note C. The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the Federal Award activity of Central Yeshiva Tomchei Tmimim Lubavitz Inc for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance),

Note D. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Institution has not elected to use the 10% de minimis indirect cost rate

See independent auditor’s report on Supplementary Schedule of Expenditures of Federal Awards

8

CENTRAL YESHIVA TOMCHEI TMIMIM LUBAVITZ INC.

Schedule of Findings and Questioned Costs For the Year Ended June 30, 2016

Section I-Summary of Auditor’s Results

Financial Statements

Type of auditor’s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? _____yes __X__no Significant deficiency(s) identified that are not considered to be material weakness(es)? _____yes __X__none reported

Noncompliance material to financial statements noted? _____yes __X__no

Federal Awards

Internal control over major programs: Material weakness(es) identified? _____yes __X__no Significant deficiency(s) identified that are not considered to be material weakness(es)? _____yes __X__none reported

Type of auditor’s report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? _____yes __X__no

Identification of major programs: Pell Grants CFDA #84.063 College Work-Study Program CFDA #84.033 Supplemental Educational Opportunity Grants CFDA #84.007

Dollar threshold used to distinguish between type A and type B programs: $ 750,000

Auditee qualified as low-risk auditee? __X__yes _____no

Section II-Financial Statement Findings

There were no findings, questioned costs or matters, including prior years follow-up matters, to be reported.

Section III-Award Findings and Questioned Costs There were no findings, questioned costs or matters, including prior years follow-up matters, to be reported.

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David H Wilschanski Certified Public Accountant ______450 W. Kennedy Boulevard Tel 732 370 1114 Lakewood, NJ 08701 Fax 732 886 7428

Board of Trustees Central Yeshiva Tomchei Tmimim Lubavitz Inc. 841-853 Ocean Parkway Brooklyn, New York 11230

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States the financial statements of Central Yeshiva Tomchei Tmimim Lubavitz Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 27, 2017.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s financial statements are free from material misstatement, we performed tests of its 10 compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

David H.Wilschanski Certified Public Accountant March 27, 2017

11 David H Wilschanski Certified Public Accountant ______450 W. Kennedy Boulevard Tel 732 370 1114 Lakewood, NJ 08701 Fax 732 886 7428

Board of Trustees Central Yeshiva Tomchei Tmimim Lubavitz Inc. 841-853 Ocean Parkway Brooklyn, New York 11230

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

Report on Compliance for Each Major Federal Program We have audited Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s major federal programs for the year ended June 30, 2016. Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s compliance.

Opinion on Each Major Federal Program

In our opinion, Central Yeshiva Tomchei Tmimim Lubavitz Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016.

12 Report on Internal Control over Compliance

Management of Central Yeshiva Tomchei Tmimim Lubavitz Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Central Yeshiva Tomchei Tmimim Lubavitz Inc.’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

David H.Wilschanski Certified Public Accountant

March 27, 2017

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