TRUSTEES OF THE BERKSHIRE MUSEUM. Financial Statements. December 31, Table of Contents. Independent Auditors' Report 2-3

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1 TRUSTEES OF THE BERKSHIRE MUSEUM Financial Statements December 31, 2017 Table of Contents Page Independent Auditors' Report 2-3 Statement of Financial Position 4 Statement of Activities 5 Statement of Cash Flows 6 Statement of Functional Expenses 7 Notes to Financial Statements 8-19

2 Page 2 INDEPENDENT AUDITORS' REPORT To the Board of Trustees of the TRUSTEES OF THE BERKSHIRE MUSEUM Pittsfield, MA Report on the Financial Statements We have audited the accompanying financial statements of Trustees of the Berkshire Museum (a nonprofit organization), which comprise the statement of financial position as of December 31, 2017, and the related statements of activities, functional expenses, changes in net assets, and cash flows for the six months then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3 Page 3 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trustees of the Berkshire Museum as of December 31, 2017, 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. ADELSON & COMPANY PC Pittsfield, MA November 12, 2018

4 Page 4 TRUSTEES OF THE BERKSHIRE MUSEUM STATEMENT OF FINANCIAL POSITION December 31, 2017 ASSETS Current assets Cash and equivalents $ 258,975 Short-term investments 37,287 Accounts receivable 18,025 Unconditional promises to give 321,500 Inventories - museum shop 12,105 Prepaid expenses 47,081 Total current assets 694,973 Cash restricted-endowment 58,332 Unconditional promises to give, long-term 1,006,805 Long-term investments 6,088,622 Property and equipment, net 10,385,473 Collections 1 TOTAL ASSETS $ 18,234,206 LIABILITIES AND NET ASSETS Current liabilities Accounts payable $ 290,606 Accrued payroll 79,265 Accrued expenses 1,685,647 Notes payable due within one year 1,852,426 Total current liabilities 3,907,944 TOTAL LIABILITIES 3,907,944 Net assets Unrestricted 12,459,218 Temporarily restricted 1,498,906 Permanently restricted 368,138 TOTAL NET ASSETS 14,326,262 TOTAL LIABILITIES AND NET ASSETS $ 18,234,206 See notes to financial statements.

5 TRUSTEES OF THE BERKSHIRE MUSEUM Page 5 STATEMENT OF ACTIVITIES For the Six Month Ended December 31, 2017 Temporarily Permanently Total Unrestricted Restricted Restricted 2017 REVENUE, GAINS AND OTHER SUPPORT Contributed income Foundations and corporations $ 172,500 $ 28,000 $ --- $ 200,500 Special events, net 31,250 31,250 Memberships 106, ,487 Annual appeal 76,534 76,534 Other contributions 9,420 9,420 Net assets released from restriction 26,445 (26,445) --- Total contributed income 422,636 1, ,191 Earned income Admissions 142, ,734 Bank interest Museum shop (net of $27,173 cost of goods sold) 32,170 32,170 Facility rental 1,350 1,350 Adult programs 48,479 48,479 Education programs 35,592 35,592 Other earned income 5,738 5,738 Total earned income 266, ,217 Investment support for operating activities 185, ,000 TOTAL REVENUE, GAINS AND OTHER SUPPORT 873,853 1, ,408 EXPENSES Program Services 1,155,044 1,155,044 Management and General 214, ,875 Fund-raising 154, ,125 TOTAL EXPENSES 1,524, ,524,044 Change in net assets from operating activities (650,191) 1, (648,636) NON-OPERATING ACTIVITIES Investment income in excess of operating support 216,647 22, ,681 Berkshire Museum Board Endowment contributions Capital contributions 4, ,650 Strategic planning expense (358,512) (358,512) Releases of capital contributions 139,780 (139,780) --- Deaccession legal fees, net of in-kind contribution (1,602,099) (1,602,099) In-kind contributions for capital project 18,087 18,087 TOTAL NON-OPERATING ACTIVITIES (1,581,514) (139,380) 22,034 (1,698,860) CHANGE IN NET ASSETS (2,231,705) (137,825) 22,034 (2,347,496) Net assets, beginning 14,690,923 1,636, ,104 16,673,758 NET ASSETS, ENDING $ 12,459,218 $ 1,498,906 $ 368,138 $ 14,326,262 See notes to financial statements.

6 TRUSTEES OF THE BERKSHIRE MUSEUM Page 6 STATEMENT OF CASH FLOWS For the Six Months Ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES CHANGE IN NET ASSETS $ (2,347,496) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 249,256 Eliminate non-cash transactions for donated services (97,087) Bad debts 15,000 Realized and unrealized (gains) losses on investments (370,080) (Increase) decrease in operating assets: Accounts receivable 31,939 Unconditional promises to give 114,667 Inventories - museum shop 7,682 Prepaid expenses 75,475 Increase (decrease) in operating liabilities: Accounts payable 15,031 Accrued payroll (3,669) Accrued expenses 1,685,647 Deferred income (56,050) Contributions restricted for long-term purpose: Contributions for long-term capital projects 4,650 Berkshire Museum Board Endowment contributions 66,999 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (608,036) CASH FLOWS FROM INVESTING ACTIVITIES (Increase) decrease in short-term investments (21,650) (Increase) decrease in cash restricted-endowment (23,827) Purchases of long-term investments (3,551,973) Proceeds from sales of long-term investments 4,732,424 Additions to property and equipment (827,108) NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 307,866 CASH FLOWS FROM FINANCING ACTIVITIES Collections of contributions restricted for long-term purposes (71,649) NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (71,649) INCREASE (DECREASE) IN CASH AND EQUIVALENTS (371,819) Cash and equivalents, beginning 630,794 CASH AND EQUIVALENTS, ENDING $ 258,975 SUPPLEMENTAL DATA Interest paid $ 30,301 See notes to financial statements.

7 Page 7 TRUSTEES OF THE BERKSHIRE MUSEUM STATEMENT OF FUNCTIONAL EXPENSES For the Six Months Ended December 31, Compensation and Related Expenses Program Management Fund- Total Services and General raising 2017 Salaries $ 422,950 $ 119,829 $ 103,894 $ 646,673 Employee benefits 32,014 21,645 8,755 62,414 Payroll taxes 31,395 8,250 7,742 47,387 Total 486, , , ,474 Bad Debt 15,000 15,000 Contracted services 8,042 2,900 10,942 Dues and subscriptions 1,496 4, ,989 Event related 1,704 11,819 13,523 Exhibition costs 72,408 72,408 Fees 36 14,459 14,495 Institutional advancement Interest 29, ,301 Marketing and advertising 77, ,286 Occupancy 137,243 7,114 1, ,425 Postage 3, ,104 5,466 Printing 20, ,113 25,679 Professional development Professional services 3,795 18,500 22,295 Rental 13,784 2,108 15,892 Revenue share 1,577 1,577 Service contracts 34,353 1,567 4,764 40,684 Shipping and handling 2,364 2,364 Supplies 15, ,826 Travel 1, ,237 Depreciation 244,096 2,580 2, ,256 TOTAL EXPENSES $ 1,155,044 $ 214,875 $ 154,125 $ 1,524,044 See notes to financial statements.

8 Page 8 TRUSTEES OF THE BERKSHIRE MUSEUM NOTES TO FINANCIAL STATEMENTS December 31, 2017 NOTE 1 - NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities The Trustees of the Berkshire Museum (the Museum) is a not-for-profit corporation organized under Chapter 180 of the laws of the Commonwealth of Massachusetts. The Museum acquires exhibits and preserves art, natural science, and local history collections. The Museum also provides special performances of the arts, concerts, lectures, educational movies, classes, bus trips, and various special events to patrons and benefactors primarily from Berkshire County, Massachusetts. Income Taxes The Museum is exempt from federal taxes under Section 501(c)(3) of the Internal Revenue Code and state taxes under Massachusetts law. In addition, the Museum qualifies for the charitable contribution deduction under Section 170(b)(I)(A)(vi) and has been classified as an organization that is not a private foundation under Section 509(a)(1). Management has evaluated significant tax positions against the criteria established by professional standards and believes there are no such tax positions requiring accounting recognition. The Museum s tax returns are subject to examination by taxing authorities for all years ending on or after June 30, Basis of Accounting and Financial Statement Presentation The financial statements of the Museum have been prepared on the accrual basis of accounting. The Museum is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Contributions The Museum accounts for contributions received as increases in unrestricted, temporarily restricted, or permanently restricted net assets, depending on the existence or nature of any donor restrictions. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Promises to Give Unconditional promises to give are recognized as contribution revenue in the period received as assets, decreases of liabilities, or expenses depending on the form of the benefits received. Promises to give are recorded at net realizable value if expected to be collected in one year and at fair value if expected to be collected in more than one year. Conditional promises to give are recognized when the conditions on which they depend are substantially met. The Museum uses an allowance method for promises to give based upon management s analysis of the accounts and prior collection experience. Contributed Services Volunteers contribute services to the Museum in all aspects of its programs, for which no value has been recognized in the financial statements because these services did not meet the criteria for recognition under generally accepted accounting principles.

9 Page 9 NOTE 1 - (Continued) In-Kind Support The Museum records various types of in kind support including professional services, advertising and materials. Contributed professional services are recognized at fair market value if the services received (a) create or enhance long-lived assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Contributions of tangible assets are recognized at fair market value when received. The amounts reflected in the accompanying financial statements as in kind support are offset by like amounts included in expenses or property and equipment. Cash and Equivalents For the purpose of the statement of cash flows, the Museum considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from balances outstanding at year-end. Based on management s assessment of the credit history with customers having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding at year-end will be immaterial. Inventory Inventory is stated at the lower of acquisition cost or net realizable value and consists of general shop merchandise. Cost is determined by the first-in, first-out method. Investments Investments are presented in the financial statements at fair value. Unrealized gains and losses are included in the change in net assets. Restricted gains and investment income whose restrictions are met in the same period are recognized and reported as unrestricted revenue and gains. Property and Equipment The Organization capitalizes all expenditures for property and equipment with a useful life greater than one year and in excess of $2,500. Depreciation of buildings and equipment is provided over the estimated useful lives of the assets using the straight-line method. Purchased equipment is recorded at cost. Donated equipment is recorded at fair market value at the date of the donation. Deferred Income Program fees and traveling exhibit income received in advance for services to be rendered in the next fiscal year are not recognized until earned. Advertising The Museum expenses advertising costs as incurred. Advertising expense was $61,537 for the six months ended December 31, Subsequent Events Management has evaluated subsequent events through November 12, 2018, the date which the financial statements were available to be issued, and has determined that there are no additional adjustments or disclosures required other than those events reported in Note 20.

10 Page 10 NOTE 1 - (Continued) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE 2 - CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject the Museum to concentrations of credit risk, consist principally of cash. The Museum maintains its cash in various bank deposit accounts, which at times may exceed federally insured limits. Bank deposits at December 31, 2017 were fully insured and collateralized. The Museum has not experienced any losses in such accounts. NOTE 3 - INVESTMENTS Investments are comprised of the following groups and reported at fair value: Fair Value Cost Short-term investments Cash and equivalents Money market $ 37,287 $ 37,287 Total short-term investments 37,287 37,287 Cash-restricted 58,332 58,332 Long-term investments Marketable equity securities 4,291,166 3,613,592 Bonds and notes 1,797,456 1,790,548 Total long-term investments 6,088,622 5,404,140 Total investments $ 6,184,241 $ 5,499,759 The following summarizes the relationship between fair values and the cost of investment assets: Fair Unrealized Value Cost Gain (Loss) Balance at end of period $ 6,184,241 $ 5,499,759 $ 684,482 Balance at beginning of period 6,964,136 6,193, ,104 Current period unrealized gains (losses) $ (86,622)

11 Page 11 NOTE 3 (Continued) Investments held in the above accounts were comprised of restricted and unrestricted amounts at December 31, 2017: Unrestricted $ 5,041,261 Board endowment 774,845 Permanently restricted 368,135 Total $ 6,184,241 Investment income and its classification in the statement of activities consisted of the following for the six months ended December 31, 2017: Interest and dividends $ 71,680 Realized gains 456,702 Investment fees (18,079) Current net earnings and realized gains 510,303 Unrealized gains (losses) (86,622) Investment income, net 423,681 Less: investment support for operating activities 185,000 Investments used in excess of operating $ 238,681 Spending Policy The Board, as part of approving the annual budget, follows a spending policy to utilize a portion of the net asset value of the investment portfolio to support operating and program expenses, major maintenance, capital expenditures, and for securing, protecting and preserving the Museum s collections. The annual funding needs of the Museum are determined by the amount of the operating deficit in the fiscal year s budget that is approved by the Board of Trustees. If subsequent operating or funding demands require that an amount over the approved annual budget is needed, it would require a super-majority (2/3) vote of the Trustees to authorize the additional funding needs over the approved amount.

12 Page 12 NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 2017: Work in progress $ 1,184,777 Land 56,971 Equipment 567,194 Aquarium tank 16,049 Building and improvements 12,950,061 Auditorium improvements 56,234 Galleries and exhibits 764,219 Universal access 306,770 Total property and equipment 15,902,275 Accumulated depreciation (5,516,802) Property and equipment, net $ 10,385,473 Depreciation expense was $249,256 for the six months ended December 31, Work in progress consisted of conceptual and schematic design costs incurred towards the proposed renovation of the facility. NOTE 5 - UNCONDITIONAL PROMISES TO GIVE Unconditional promises to give at December 31, 2017 are expected to be realized in the following periods: In one year or less $ 321,500 Between one year and five years 1,202,000 Total 1,523,500 Unamortized discount (185,195) Allowance for uncollectibles (10,000) Net Realizable 1,328,305 Portion to be realized within one year (321,500) Unconditional promises to give, long-term $ 1,006,805 Unconditional promises to give at December 31, 2017 were restricted for the 21st Century Campaign and Master Plan. Funds are for the purposes of improving the facility, maintaining the integrity of programs and to ensure financial sustainability into the future.

13 Page 13 NOTE 6 - SHORT TERM NOTE The Museum has a $2,000,000 bank line of credit with variable interest payable monthly at the LIBOR (London Interbank Offered Rate) one-month rate for U.S. Dollar deposits plus 2.0% (3.38% at December 31, 2017). The note is collateralized by investments. The outstanding balance on the line of credit at December 31, 2017 was $1,852,426. NOTE 7 - UNRESTRICTED NET ASSETS Unrestricted net assets have been designated by the Board of Directors to be used for the following purposes: Keep Crane Fund Net assets available for the enhancement, care, preservation and protection of collections. Operations Fund Net assets available to support operations as designated by the Board of Trustees. Berkshire Museum Endowment Fund Net assets available for program and building needs as designated by the Board of Trustees. Undesignated Net Assets The undesignated portion of net assets represents the net worth of the Organization resulting from the accumulated unrestricted net income and losses since the Museum s inception. The balance includes liquid assets such as cash and equivalents, operating investments, receivables, inventory, prepaid expenses, payables, and other liabilities as well as illiquid assets such as property and equipment, net of related accumulated depreciation and debt. Unrestricted net assets as designated by the Board of Directors were as follows at December 31, 2017: Keep Crane Fund $ 5,174,064 Operations Fund 3,777 Berkshire Museum Endowment Fund 827,827 Undesignated Net Assets 6,453,550 Total $ 12,459,218 Changes in board designated endowments for the six months ended December 31, 2017: Board designated endowment net assets, beginning of period $ 794,262 Contributions 333 Investment return: Investment income 6,103 Realized and unrealized gains 37,129 Total investment return 43,232 Reduction for write-down of pledge receivable (10,000) Board designated endowment net assets, end of period $ 827,827

14 Page 14 NOTE 8 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets were available for the following purposes or periods at December 31, 2017: Purpose restriction: Aquarium $ 15,555 Change Capital 9,703 Feigenbaum Hall of Innovation (FHOI) 104,610 Theater Upgrade 125,000 Summer Camp programs 3,000 Wider Window 25,000 Master Planning Process 900 Time restriction: 21st Century Campaign - operations 1,215,138 Total $ 1,498,906 NOTE 9 - NET ASSETS RELEASED FROM RESTRICTION Net assets were released from donor restrictions during the six months ended December 31, 2017 by incurring expenses satisfying the following restricted purposes specified by the donors. Change Capital $ 139,780 Education Program 22,000 Acquarium 4,445 Total $ 166,225 NOTE 10 - ENDOWMENTS The Museum s endowment consists of individual funds established for a variety of purposes. Its endowment includes donor restricted endowment funds (Note 11) and funds designated by the Board of Trustees (Note 7). It does not include the unrestricted funds designated by the Board. As required by U.S. generally accepted accounting principles, net assets associated with endowment funds, are classified and reported based on the existence or absence of donor-imposed restrictions. Chapter 180A Uniform Prudent Management of Institutional Funds (MA UPMIFA), which except for gift instruments stating otherwise, allows an organization to spend below the fund s historical dollar value and eliminates the 7% spending limitation. It sanctions application of a reasonable spending rate to all endowment funds.

15 Page 15 NOTE 10 (Continued) The Board of Trustees of the Museum has interpreted the MA 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 Museum classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. In accordance with MA UPMIFA, the Museum considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the donor-restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Museum, and (7) the Museum s investment policies. Investment Return Objectives, Risk Parameters and Strategies. The Museum has adopted investment and spending policies, approved by the Board of Trustees, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the long-term. Accordingly, the goal is to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a well-diversified asset mix that is intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make an annual distribution while growing the funds if possible. In years where additional draws have been necessary and prudent to fund operations and/or capital improvements, investment principal has been expended and as such impacts the funds ability to generate returns to restore the principal. Actual returns in any given year may vary from this amount. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk. The Museum s investment spending policy is disclosed in Note 3. NOTE 11 - PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets at December 31, 2017 include the following donor restricted principal in perpetuity, the revenue of which is expendable as provided by the donor: Ruth P. Boraski Children's Fund $ 249,324 Nash Endowment 118,814 Total $ 368,138 Endowment net assets, beginning of period $ 346,104 Investment gain Investment income 3,142 Realized and unrealized gains 18,892 Total investment gain 22,034 Endowment net assets, end of period $ 368,138

16 Page 16 NOTE 12 - IN-KIND CONTRIBUTION During the six months ended December 31, 2017, the Museum received in-kind contributions of engineering services amounting to $18,087 and accrued $79,000 of in-kind contributions related to deaccession legal fees. NOTE 13 - DEFINED CONTRIBUTION PLAN The Museum maintains a defined contribution retirement plan for all eligible employees. Contributions are voluntarily made by employees. The plan allows for discretionary matching contributions as determined by the Museum. The Museum elected to match 3% of employees contributions for the six months ended December 31, 2017, which amounted to $10,531. Participants have the option of having contributions to their accounts deposited in either the Teachers Insurance and Annuity Association (TIAA) or the College Retirement Equities Fund (CREF). At the time of an employee s retirement, an individual annuity is purchased with the proceeds accumulated in the employee s account. NOTE 14 - OPERATING LEASE In October 2014, the Museum entered into a 60-month lease agreement for a new copier with monthly payments of $565. Lease payments were $3,387 for the six months ended December 31, Approximate future lease commitments payable during the years ending December 31, are as follows: 2018 $ 6, ,081 Total $ 11,855 NOTE 15 - COLLECTIONS The Museum follows a practice of not capitalizing its collections. The collections carry a significant value in connection with the Museum s mission of enriching, educating and entertaining patrons and are included as an asset on the statement of financial position valued at a $1. They are not considered assets in the monetary sense. The collections consist of permanent collections of art, natural science, costume, decorative arts, ancient civilizations, historical objects and exotic marine life. The art collection consists of approximately 500 paintings, 125 sculptures, 2,000 decorative art objects, 400 prints and works on paper, and more than 2,000 photographs from both American and European artists from the fifteenth through the twentieth centuries. The ancient civilization collections feature art and artifacts of Babylonia, Assyria, Egypt, Greece, Rome and China. The natural history collection consists of exotic shells, gemstones, minerals, flowers, mushrooms, fossils, mounted birds and animals, a live aquarium consisting of animals from around the world, as well as dioramas of animals in their natural habitat. Interdisciplinary changing exhibitions are either produced in house by staff or rented by the Museum. Recent exhibits have included Guitars ; Morgan Bulkeley, and Festival of Trees. In July 2017, the board voted to deaccession 40 art works from its collection (see Note 20)

17 Page 17 NOTE 16 - FAIR VALUE MEASUREMENTS The following methods and assumptions were used by the Museum in estimating its fair value disclosures for financial instruments: Long-term investments: The fair values of investments are based on quoted market prices for those or similar investments (Level 1). Long-term unconditional promises to give: The fair value of promises to give that are due in more than one year is estimated, at the time of the pledge, by calculating the present value of the future expected payments from the donors (Level 3) and applying an allowance for uncollectibles. Fair values of assets measured on a recurring basis at December 31, 2017 are as follows: Quoted Prices in Active Markets Significant Unobservable Inputs Fair value (Level 1) (Level 3) Investment $ 6,184,241 $ 6,184,241 $ --- Unconditional promises to give 1,328, ,328,305 Total $ 7,512,546 $ 6,184,241 $ 1,328,305 Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs): The table below presents information about unconditional promises to give at December 31, 2017: Unconditional promises to give measured at fair value Promised cash flows $ 1,523,500 Fair value (carrying amount) of long-term unconditional promises $ 1,006,805 Unconditional promises to give, due within one year (net realizable value) Carrying amount 321,500 Net realizable unconditional promises to give (Note 5) $ 1,328,305 The table below presents information about the changes in unconditional promises to give for the six months ended December 31, 2017: Balance July 1, 2017 $ 1,363,972 New promises 205,483 Collections (241,150) Balance December 31, 2017 $ 1,328,305

18 Page 18 NOTE 17 - RELATED PARTY A company owned by one of the board members provided $389,882 of engineering services to the Museum during the six months ended December 31, As mentioned in Note 12, the company provided $18,087 of these services in-kind. NOTE 18 - SPECIAL EVENTS ACTIVITIES FOR THE SIX MONTHS ENDED DECEMBER 31, 2017 WERE AS FOLLOWS: Special event revenues Ticket sales $ 6,630 Auction Revenues 19,420 Sponsorship and contributions 17,076 Total 43,126 Less contributions 3,970 Total special event revenues 39,156 Direct benefit to donors: Reception 7,336 Entertainment 570 Total direct benefits to donors 7,906 Special events revenue, net $ 31,250 NOTE 19 - COMMITMENTS AND CONTINGENT LIABILITIES The Museum periodically receives some of its support from state and federal contracts. The contracts permit audits of both the financial operation of the programs and compliance with the terms of the agreements. Such audits could result in the disallowance of some costs charged to the contract and, therefore, create a liability to the funding source. Liabilities resulting from these audits, if any, will be recorded in the period in which the amount of the liability is ascertained. Grants, bequests, and endowments require the fulfillment of certain conditions as set forth in the instrument of grant. Failure to fulfill the conditions, or in the case of endowments, failure to continue to fulfill them, could result in the return of the funds to grantors. Although that is a possibility, the Museum s Board deems the contingency remote, since by accepting the gifts and their terms, it has accommodated the objectives of the provisions of the gift.

19 Page 19 NOTE 20 SUBSEQUENT EVENTS Deaccessioning and Art sale In 2015, the Berkshire Museum Board of Trustees and leadership staff began a master planning process designed to outline a strategy to address the Museum s programmatic, financial, demographic, and competitive challenges and ensure that the organization is sustainable and relevant for its current and future audiences. The Museum announced the results of the Master Plan as its New Vision in July The announcement included the fact that the Museum had removed (deaccessioned) 40 art works from its collection, and intended to sell the works at auction and use the proceeds, coupled with additional fundraising, to establish a sufficient endowment and make improvements in its facilities and visitor experience. Within weeks of the announcement, some community members voiced opposition to the sale, and the Massachusetts Attorney General s Office (AGO) began an investigation of the Museum s planning process. In October 2017, lawsuits were filed by two groups of private parties opposed to selling works from the Museum s collection. The AGO, citing its need to continue its investigation, joined the lawsuit. In February 2018, following the conclusion of the AGO s investigation, the AGO and the Museum announced a resolution of the matter under which the Museum would be permitted to go forward with the sale of certain works, subject to agreed limitations and conditions, if approved by the Massachusetts Supreme Judicial Court (SJC). The Museum, with the AGO s support, petitioned the SJC for equitable relief authorizing the Museum to proceed with a sale subject to the agreed limitations and conditions. In April 2018, the SJC granted the Museum s petition and entered judgment allowing the Museum to sell the deaccessioned artworks subject to the agreed limitations and conditions. As of the date of these financial statements Museum has sold 20 works in conformance with the SJC s judgement and has received net proceeds of $51.7 million after deducting legal fees and other costs incurred in connection with the deaccession. Line of Credit The Organization paid off its line of credit (Note 6) balance of $1,852,426 in April Retirement Agreement On June 26, 2018 the Museum entered into a retirement agreement with the Executive Director, who officially retired as of June 27, According to the agreement, the Museum will pay approximately $92,000 in compensation in two equal installments before September 1, 2018 and on or before January 1, 2019.