HOUSATONIC COUNCIL BOY SCOUTS OF AMERICA, INC. AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION. YEARS ENDED DECEMBER 31, 2011 and 2010

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1 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2011 and 2010

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3 CONTENTS Audited Financial Statements: Page Independent Auditors Report... 4 Statement of Financial Position... 5 Statement of Activities and Changes in Net Assets... 6 Statement of Functional Expense... 8 Statement of Cash Flows Notes to Financial Statements Supplementary Information... 19

4 Michaud and Accavallo Certified Public Accountants, LLC Accounting, Auditing, Tax & Consulting 158 Main Street, Suite 301 Ansonia, Connecticut Tel Fax INDEPENDENT AUDITORS REPORT 900 Chapel Street, Suite 620 New Haven, Connecticut Tel Fax To the Board of Directors of Housatonic Council Boy Scouts of America, Inc. Derby, Connecticut We have audited the accompanying statement of financial position of Housatonic Council Boy Scouts of America, Inc. (a nonprofit organization) as of December 31, 2011 and 2010, and the related statements of activities, functional expenses, and cash flows for the years then ended. These financial statements are the responsibility of the Organization s management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Housatonic Council Boy Scouts of America, Inc. as of December 31, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedules of financial position by fund and changes in net assets by fund on pages 20 and 21 are 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. Michaud and Accavallo Certified Public Accountants, LLC July 31, 2012 Members of the American Institute of Certified Public Accountants Members of the Connecticut Society of Certified Public Accountants

5 STATEMENT OF FINANCIAL POSITION December 31, ASSETS CURRENT ASSETS Cash and cash equivalents $ 259,573 $ 258,973 Accounts receivable 10,800 9,563 Pledges receivable - 33,410 Inventories 17,313 20,702 Other assets 5,595 4,644 TOTAL CURRENT ASSETS 293, ,292 PROPERTY, BUILDINGS AND EQUIPMENT - net of accumulated depreciation 305, ,917 OTHER ASSETS Long-term investments 304, ,083 LIABILITIES AND NET ASSETS TOTAL ASSETS $ 902,659 $ 793,292 CURRENT LIABILITIES Accounts payables and accrued expenses $ 10,937 $ 13,541 Custodial accounts 16,012 14,519 Deferred activity income 6,295 3,060 Deferred camp income 4,305 4,950 Note payable - line of credit - 45,500 TOTAL CURRENT LIABILITIES 37,549 81,570 NET ASSETS Board designated 251, ,549 Unrestricted 384, ,348 Total unrestricted 636, ,897 Temporarily restricted 163, ,689 Permanently restricted 65,321 62,136 TOTAL NET ASSETS 865, ,722 TOTAL LIABILITIES AND NET ASSETS $ 902,659 $ 793,292 See notes to financial statements - 5 -

6 See notes to financial statements HOUSATONIC COUNCIL BOY SCOUTS OF AMERICA, INC. STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2011 SUPPORT AND REVENUES Unrestricted Temporarily Permanently Total DIRECT SUPPORT Friends of scouting $ 74,300 $ - $ - $ 74,300 Less: Provision for Uncollectable (336) - - (336) Net Friends of Scouting 73, ,964 Special fundraising events 61, ,441 Less: Cost of events (6,934) - - (6,934) Net fundraising events 54, ,507 Foundations and trusts 40, ,408 Other 83,911 51,675 3, ,771 TOTAL DIRECT SUPPORT 252,790 51,675 3, ,650 INDIRECT SUPPORT - United Way 68, ,746 REVENUES Sales of supplies 5, ,529 Less: Cost of goods sold (3,440) - - (3,440) Net income from sales of supplies 2, ,089 Product sales 60, ,971 Less: Cost of goods sold (19,983) - - (19,983) Less: Commissions paid to Units (21,374) - - (21,374) Net income from product sales 19, ,614 Investment income 2,121 2,466-4,587 Unrealized loss on investment (553) - - (553) Camping revenue 183, ,636 Activity revenue 31, ,454 Other revenue 4, ,363 TOTAL REVENUES 242,724 2, ,190 NET ASSETS RELEASED FROM RESTRICTIONS 121,346 (121,346) - - TOTAL SUPPORT AND REVENUES 685,606 (67,205) 3, ,586 EXPENSES Scouting program 349, ,837 Supporting services: Management and general 97, ,218 Fund raising 21, ,143 TOTAL EXPENSES 468, ,198 INCREASE IN NET ASSETS 217,408 (67,205) 3, ,388 Net assets at January 1, , ,689 62, ,722 NET ASSETS AT DECEMBER 31, 2011 $ 636,305 $ 163,484 $ 65,321 $ 865,

7 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2010 SUPPORT AND REVENUES Unrestricted Temporarily Permanently Total DIRECT SUPPORT Friends of scouting $ 73,888 $ - $ - $ 73,888 Less: Provision for Uncollectable (2,400) - - (2,400) Net Friends of Scouting 71, ,488 Special fundraising events 57, ,699 Less: Cost of events (7,123) - - (7,123) 50, ,576 Foundations and trusts 12,511 8,705-21,216 Other 25,491 33,136 3,000 61,627 TOTAL DIRECT SUPPORT 160,066 41,841 3, ,907 INDIRECT SUPPORT - United Way 60, ,973 REVENUES Sales of supplies 11, ,261 Less: Cost of goods sold (7,633) - - (7,633) Net income from sales of supplies 3, ,628 Product sales 82,127-82,127 Less: Cost of goods sold (31,552) - - (31,552) Less: Commissions paid to Units (30,678) - - (30,678) Net income from product sales 19, ,897 Investment income 2,234 4,914-7,148 Unrealized gain on investment 7, ,636 Camping revenue 189, ,909 Activity revenue 116, ,479 Other revenue 27, ,804 TOTAL REVENUES 367,587 4, ,501 NET ASSETS RELEASED FROM RESTRICTIONS 5,280 (5,280) - - TOTAL SUPPORT AND REVENUES 593,906 41,475 3, ,381 EXPENSES Scouting program 428, ,421 Supporting services: Management and general 107, ,533 Fund raising 21, ,972 TOTAL EXPENSES 557, ,926 INCREASE IN NET ASSETS 35,980 41,475 3,000 80,455 Net assets at January 1, , ,214 59, ,267 NET ASSETS AT DECEMBER 31, 2010 $ 418,897 $ 230,689 $ 62,136 $ 711,722 See notes to financial statements - 7 -

8 STATEMENT OF FUNCTIONAL EXPENSE FOR THE YEAR ENDED DECEMBER 31, 2011 Total Program Management and General Fund Raising Functional Expenses EMPLOYEE COMPENSATION Salaries $ 151,718 $ 35,467 $ 9,852 $ 197,037 Employee benefits 16,385 3,830 1,064 21,279 Payroll taxes 17,830 4,168 1,158 23,156 TOTAL EMPLOYEE COMPENSATION 185,933 43,465 12, ,472 OTHER EXPENSES Supplies 44,856 9,777 2,876 57,509 Telephone 4, ,305 Postage and shipping 1, ,945 Occupancy 36,562 7,969 2,344 46,875 Rental and maintenance of equipment 7,585 1, ,724 Printing and publications 3, ,641 Auto and travel 11,101 2, ,232 Conferences and meetings 3, ,689 Specific assistance to individuals 4, ,125 Recognition awards 5,088 1, ,523 Professional fees - 15,310-15,310 Interest - 1,360-1,360 Insurance 12,151 2, ,578 Depreciation 18, ,364 Charter and national service fee - 5,901-5,901 Jamboree Bad debts Miscellaneous 11,139 2, ,282 TOTAL OTHER EXPENSES 163,904 53,753 9, ,726 TOTAL FUNCTIONAL EXPENSES $ 349,837 $ 97,218 $ 21,143 $ 468,198 See notes to financial statements - 8 -

9 STATEMENT OF FUNCTIONAL EXPENSE FOR THE YEAR ENDED DECEMBER 31, 2010 Total Program Management and General Fund Raising Functional Expenses EMPLOYEE COMPENSATION Salaries $ 149,550 $ 34,960 $ 9,711 $ 194,221 Employee benefits 16,686 3,901 1,083 21,670 Payroll taxes 14,122 3, ,340 TOTAL EMPLOYEE COMPENSATION 180,358 42,162 11, ,231 OTHER EXPENSES Supplies 56,497 12,314 3,622 72,433 Telephone 3, ,108 Postage and shipping 2, ,783 Occupancy 30,569 6,663 1,960 39,192 Rental and maintenance of equipment 7,046 1, ,033 Printing and publications 2, ,629 Auto and travel 24,041 5,239 1,542 30,822 Conferences and meetings 1, ,466 Specific assistance to individuals 6, ,486 Recognition awards 6,234 1, ,992 Professional fees - 9,300-9,300 Interest - 4,360-4,360 Insurance 11,973 2, ,350 Depreciation 18, ,784 Charter and national service fee - 5,338-5,338 Jamboree 62, ,800 Bad debts - 11,506-11,506 Miscellaneous 13,503 2, ,313 TOTAL OTHER EXPENSES 248,063 65,371 10, ,695 TOTAL FUNCTIONAL EXPENSES $ 428,421 $ 107,533 $ 21,972 $ 557,926 See notes to financial statements - 9 -

10 STATEMENT OF CASH FLOWS December 31, CASH FLOWS FROM OPERATING ACTIVITIES Increase in net assets $ 153,388 $ 80,455 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 18,364 18,784 Unrealized gain on investments (2,078) - Contributions restricted for endowment (3,185) (3,000) (Increase) decrease in operating assets: Accounts receivable (1,237) (4,013) Pledges receivable 33,410 4,090 Inventories 3,389 3,979 Other current assets (951) 45,652 Increase (decrease) in operating liabilities: Accounts payable (2,604) (24,382) Custodial accounts 1, Deferred activity income 3,235 (95,382) Deferred camp income (645) (4,710) NET CASH PROVIDED BY OPERATING ACTIVITIES 202,579 21,805 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (167,612) (2,862) Proceeds from sale of investments 7,878 14,245 Purchase of investments 70 (12,333) NET CASH USED IN INVESTING ACTIVITIES (159,664) (950) CASH FLOWS FROM FINANCING ACTIVITIES Contributions restricted for endowment 3,185 3,000 Proceeds from line of credit (45,500) - NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (42,315) 3,000 NET CHANGE IN CASH ,855 Cash and cash equivalents at beginning of year 258, ,118 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 259,573 $ 258,973 Supplemental disclosure of cash flow information: Cash paid during the year for interest expense $ 1,360 $ 4,360 See notes to financial statements

11 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Housatonic Council Boy Scouts of America, Inc. (Council) operates in Derby, Connecticut and includes the communities of Ansonia, Derby, Shelton, Seymour and Oxford, Connecticut. The Council is a nonprofit organization devoted to promoting, within the territory covered by the charter from time to time granted it by the Boy Scouts of America and in accordance with the congressional program, the ability of boys and young men and women to do things for themselves and others, training them in scout craft and teaching them patriotism, courage, and self-reliance. It also prepares them to make ethical choices over their lifetime and achieve their full potential using the methods which are now in common use by the Boy Scouts of America. The Council receives revenue from contributions, special events, activity fees and the sale of merchandise. The Council's scouting program includes: Tiger Cubs: One-year, family-oriented program for a group of teams, each consisting of a first-grade (or 7 year old) boy and an adult partner (usually a parent). A tiger cub den is part of the Cub Scout pack. Cub Scouts: Family-and community-centered approach to learning citizenship, compassion, and courage through service projects, ceremonies, games, and other activities promoting character development and physical fitness. Boy Scouting: With the Scout Oath and Scout Law as guides, and the support of parents and religious and neighborhood organizations, Scouts develop an awareness and appreciation of their role in their community and become well-rounded young men through the advancement of the program. Scouts progress in rank through achievements, gain additional knowledge and responsibilities, and earn merit badges that introduce a lifelong hobby or a rewarding career. Varsity Scouting: Program for young men ages that provides options for those who are looking for rugged high adventure or challenging sporting activities and still want to be a part of a Scouting program that offers the advancement opportunities and values of the Boy Scouts of America. There are five fields of emphasis, including advancement, high adventure/sports, personal development, service, and special programs and events. Venturing: Provides experiences to help young men and women, ages 14-20, become mature, responsible, caring adults. Young teens learn leadership skills and participate in challenging outdoor activities, including having access to Boy Scout camping properties, a recognition program, and youth-protection training. Learning for Life: A program to enable young people to become responsible individuals by teaching positive character traits, career development, leadership and life skills so they can make ethical choices and achieve their full potential. The Council's website address is Financial Statement Presentation The accompanying financial statements of the Council have been prepared on the accrual basis of accounting. The Council also reports 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. Use of Estimates In preparing the financial statements, in conformity with accounting principles generally accepted in the United States

12 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. Natural Categories of Expenses The cost of providing the various programs and other activities has been summarized by natural categories in the statement of activities. Accordingly, certain expenses have been allocated among the various programs and supporting services benefited. Support The Council reports contributions received or pledged as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. Restricted net assets are reclassified to unrestricted net assets upon satisfaction of the time or purpose restrictions. Pledges receivable totals $- and $32,500 as of the years ended December 31, 2011 and 2010, respectively, and represent temporarily restricted funds for specific uses. Revenue The Council sells product and supplies to boy scouts throughout their region. Revenue is recognized from the sales when the sale and transfer of goods occurs. The Council reports product and supply sales net of related expense in in Revenue on the Statement of Activities. Product sales for the years ended December 31, 2011 and 2010, was $60,971 and $82,127, respectively. Product expense totaled $41,357 and $62,230, respectively, for the years then ended. Net product sales for the years then ended totaled $19,614 and $19,897. Supply sales for the years ended December 31, 2011 and 2010, was $5,529 and $11,261, respectively. Supply expense totaled $3,440 and $7,633, respectively, for the years then ended. Net product sales for the years then ended totaled $2,089 and $3,628. The Council also derives revenue from camping and activities fees, which are generally considered to be exchange transactions in which the contractor requires the performance of specified activities. Revenue is recognized to the extent of services provided. Receipts in excess of revenues recognized are presented as deferred activity and camp revenue on the statement of financial position. Donated Assets and Services The Council records the estimated fair value of the donated materials, equipment and usage of assets as both revenues and expenses in the period in which the donation is received. If the asset has a useful life of greater than one year and a fair market value greater than $1,000, the council will capitalize and depreciate the asset over its remaining useful life. The Council recognizes donated services if they create or enhance non-financial assets or requires specialized skills and would typically be purchased if not provided by donation. The Council values these volunteer services based upon an hourly rate determined by an estimated standard market rate multiplied by the number of volunteer hours. Cash and Cash Equivalents and Credit Risk For purposes of reporting cash flows, the Council considers all highly liquid investments with a maturity of three

13 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 months or less, when purchased, to be cash At December 31, 2011, the carrying amount of the Council s deposits was $259,573 and balances in banks amounted to $279,110. Deposits in banks are insured by the Federal Deposit Insurance Corporation up to $250,000. There is an no amounts that remained uninsured at yearend.. At December 31, 2010, the carrying amount of the Council s deposits was $258,973 and balances in banks amounted to $256,268. Deposits in banks are insured by the Federal Deposit Insurance Corporation up to $250,000. There is an excess of $6,268 that remains uninsured. Pledges Receivable Pledges receivable consist of unconditional promises to give and are recognized when the pledge is received. All pledges are expected to be collected in less than one year and are measured at net realizable value because that amount results in a reasonable estimate of fair value. Inventory Inventories, consisting primarily of items for resale, are stated at the lower of cost or market, determined by the firstin, first-out method. Investments The Council carries investments in alternative investments at the fair value of their underlying assets and allocated to the investors in proportion to their ownership percentage in the Statement of Financial Position. Investment income and unrealized gains and losses are included in the Statement of Changes in Net Assets. Investments are exposed to various risks such as significant world events, interest rate, credit and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the fair value of investments will occur in the near term and that such changes could materially affect the amounts reported in the Statement of Financial Position. Investments are to be invested in prudent manner so as to preserve and enhance the Council's ability to provide for the benefit of Scouting. In support of the mission of the Boy Scouts of America, the Endowment Fund should be invested to provide sufficient earnings in the form of a total return from capital appreciation and income in real terms, considering inflation and to regulate the Trust's long term ability to distribute income. The primary investment mission is to preserve principal and purchasing power in real dollar terms, while supporting current income requirements. Endowment The Council's endowment fund consists of three funds established for various purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowment funds. Net assets associated with endowment funds, including funds designated by the Board of Directors, are classified and reported based upon the existence or absence of donor imposed restrictions. The Council has classified its Board designated endowment as unrestricted net assets and its donor-restricted endowment as permanently restricted net assets in the financial statements. The Board of Directors has interpreted the Connecticut 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 Council classifies as permanently restricted net assets (a) the original value of the gifts donated to the permanent endowment

14 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment funds are classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Council in a manner consistent with the standard prudence prescribed by UPMIFA. In accordance with UPMIFA, the Council considers the various factors in making a determination to appropriate or accumulate donor-restricted endowment funds including the purpose of the Council and the donor-restricted endowment fund, general economic conditions, the expected total return from income and the appreciation of investments and other Council resources. The Council's spending plan, as the method of distributing income from the Endowment Fund, is based on the yearend market value of the trust investments. The income withdrawals shall be no greater than fifty percent (50%) of the total income earned from the fixed portion of the allocation of Unrestricted Fund assets up to a maximum of five percent (5%) of the fund's value. 100% of the interested earned on the Eagle Scholarship Fund and the Campership Fund may be withdrawn. Property and Equipment Purchased property and equipment is carried at cost and includes expenditures which substantially increase the useful life of the equipment. Expenditures for maintenance and repairs are charged to expense as incurred. Gains and losses on dispositions are included in income as incurred. Donations of equipment are recorded as support at their estimated fair value. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the Club reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Council reclassifies temporarily restricted net assets to unrestricted net assets at that time. Provision for depreciation is computed by the straight-line method over the estimated useful lives of the assets (generally 3 to 10 years for equipment and 5 to 33 years for building and improvements). The Council follows the practice of capitalizing all expenditures for property, plant and equipment in excess of $1,000. Fair Value Measurements The Financial Accounting Standards Board issued an accounting standard requiring certain assets to be reported at fair value. The standard defined fair value, established valuation techniques and required disclosures about fair value measurements. The Council adopted the standard as of January 1, The adoption of this standard did not require any new fair value measurements for the Council and there was no material impact to the financial statements. The standard provided for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 - Inputs consisting of unadjusted quoted prices in active markets for identical assets and have the highest priority. Level 2 - Inputs to the valuation methodology consisting of quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Inputs to the valuation methodology which are unobservable and significant to fair value measurement

15 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 The level within the hierarchy at which the fair value measurement is calculated is based upon the lowest level of any input that is significant to the fair value measurement. When available, Level 1, observable inputs are used because they provide the most reliable evidence of fair value. Level 3 inputs are only used when Level 1 or Level 2 inputs are not available. All of the Council's pooled, long-term investments are considered to be Level 3 items. Advertising Advertising costs are charged to operations in the period in which the advertisement is placed. There was no advertising expense for the years ended December 31, 2011 and 2010, respectively. Income Tax Status The Council is a nonprofit organization exempt from federal and state income taxes under Section 501 (c)(3) of the Internal Revenue Code as a charitable organization whereby only unrelated business income, as defined by Section 509(a)(1) of the Code, is subject to federal and state income tax. The Council currently has no unrelated business income. Accordingly, no provision for income taxes has been recorded. The Organization is subject to tax on unrelated business income, if incurred, as well as certain State filing fees. The Organization has concluded that there are no uncertain tax positions that would require recognition in the financial statements. The Organizations conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based on ongoing analysis of tax laws, regulations and interpretations thereof as well as other factors. Generally, federal and state authorities may examine the Organization's tax returns for three years from the date of filing. Consequently, income tax returns for years prior to 2006 are no longer subject to examination by taxing authorities. Reclassifications Certain items in the prior year financial statements have been reclassified for comparative purposes to conform to the current year presentation. NOTE 2 - INVESTMENTS The Council, during 2008, entered into an investment management agreement with the Valley Community Foundation, Inc. (VCF), an affiliate of the Community Foundation of Greater New Haven, Inc., to manage all the Council's Long-Term Investments. Under the agreement, VCF is responsible for investing and managing all the funds under their control. Any expenditure of funds is made in accordance with the Spending Rule Policy as determined by VCF. The Council may, by providing VCF at least sixty days notice, direct VCF to distribute amounts larger than the amount calculated under the Policy. Investments are pooled with other funds held by VCF into Income Pool #1 which is managed by various investment managers for VCF. The investment pool consists of the following investments:

16 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 Large Capital Equities 23.60% Small Capital Equities 7.50% International Equities 27.10% Private Equity Funds 27.90% Real Estate Funds 10.10% Bonds 3.80% Total % The following schedule summarizes the investment return in the Statement of Activities and Changes in Net Assets for the years ended December 31, 2011 and 2010 and a summary of changes in the fair value of the Council's Level 3 assets for the years ended December 31, 2011 and 2010: Balance at beginning of year $ 310,083 $ 311,995 Realized gains(losses) 1, Unrealized gains(losses) (2,078) 7,636 Investment income 5,442 7,181 Investment expenses (2,881) (2,681) Withdrawls (7,878) (14,245) Balance at end of year $ 304,213 $ 310,083 NOTE 3 - ENDOWMENT FUND Changes in the endowment net assets for the years ended December 31, 2011 and 2010 are as follows: Unrestricted Board Designated Temporarily Restricted Permanently Restricted Total Balance at December 31, 2009 $ 252,878 $ 13,747 $ 59,136 $ 325,761 Investment return 6,926 $ 2,624-9,550 Contributions 5,990-3,000 8,990 Transfer to Operating Fund (14,245) - - (14,245) Balance at December 31, ,549 16,371 62, ,056 Investment return 3, ,378 Contributions - 3,185 3,185 Transfer to Operating Fund (7,878) - - (7,878) Balance at December 31, 2011 $ 247,049 $ 16,371 $ 65,321 $ 328,

17 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 NOTE 4 - PROPERTY AND EQUIPMENT A summary of property and equipment is as follows: December 31, Land and improvements $ 27,209 26,810 Buildings and improvements 99,324 94,598 Furniture, fixtures and equipment 522, ,214 Vehicles 17,746 17, , ,368 Less: Accumulated depreciation (537,933) (519,568) 128, ,800 Construction in progress 176,357 21,117 Total $ 305,165 $ 155,917 NOTE 5 - LINE OF CREDIT The Council has a $50,000 line of credit with Bank of America. The line of credit is collateralized by all of the Council assets and the outstanding principal balance is due on demand with interest payable monthly at prime plus 1.50%. As of December 31, 2011 and 2010, $ - and $45,500, of the line of credit had been used, respectively. Interest expense incurred on the line was $1,360 and $4,360 and interest rates were 4.75% as of the years then ended, respectively. NOTE 6 - RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: December 31, Net change Membership billboard advertising $ 18,164 $ 8,600 $ 9,564 Scouting for food program 24,350-24,350 Learning for life program 6,000 22,245 (16,245) Camp Strang showershouse 66, ,787 (85,114) Camp Strang improvements 31,720 31, Computer equipment - 2,413 (2,413) Eagle scholarships 9,651 7,238 2,413 Camperships 6,896 6,896 - Total $ 163,454 $ 230,689 $ (67,235) Permanently restricted net assets consist of endowment fund assets to be held indefinitely. The income from the following funds is restricted for the following purposes:

18 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 December 31, Net change Eagle scholarships $ 26,165 $ 26,165 $ - Camperships 24,921 24,921 - Camp improvements 14,235 11,050 3,185 $ 65,321 $ 62,136 $ 3,185 NOTE 7 - LEASES The Council leases its office facility from a member of the board of directors under an agreement ending August 31, Rent expense for the years ended December 31, 2011 and 2010 was $12,000, respectively, and is included under Occupancy Expense in the Statement of Functional Expenses. The Council leases office equipment under an operating lease expiring in 2012, and is classified under rental and maintenance of equipment in the Statement of Functional Expenses. Total lease expense for the years ended December 31, 2011 and 2010 was $3,744, respectively. Future minimum lease payments under the non-cancelable operating lease with remaining terms of one year or more is as follows: 2012 $ 3,744 NOTE 8 - PENSION PLAN The Council participates in a multi-employer plan with Boy Scouts of America covering substantially all fulltime employees who have completed one year of service. Payments made into the multi-employer plan for the years ended December 31, 2011 and 2010 were $7,312 and $8,020, respectively. To be eligible, an employee must have completed twelve full months of continuous employment in a full-time regular, year-round position and worked at least 21 hours per week. Part-time or temporary employees become eligible after working 1,000 hours in the first twelve months of employment beginning with their hire date NOTE 9 - RELATED PARTY TRANSACTIONS The Council is an affiliate member of Boy Scouts of America. The Council purchases clothing, pins, badges and other goods from Boy Scouts of America for resale to its scouting members. Total purchases for the years ended December 31, 2011 and 2010 were $3,440 and $7,633, respectively. NOTE 10 - SUBSEQUENT EVENTS Management has evaluated subsequent events through July 31, 2012, the date on which the financial statements were available to be issued, and concluded that there were no items requiring adjustment to or disclosure in these financial statements

19 SUPPLEMENTARY INFORMATION

20 STATEMENT OF FINANCIAL POSITION BY FUND ASSETS December 31, Operating Fund Capital Fund Endowment Fund Total CURRENT ASSETS Cash and cash equivalents $ 97,752 $ 104,430 $ 125,674 $ 123,046 $ 36,147 $ 31,497 $ 259,573 $ 258,973 Accounts receivable 10,800 9, ,800 9,563 Pledges receivable , ,410 Inventories 17,313 20, ,313 20,702 Other assets 5,595 4, ,595 4,644 TOTAL CURRENT ASSETS 131, , , ,546 36,147 31, , ,292 NON-CURRENT ASSETS Property, buildings and equipment, net , , , ,917 Long-term investments 7,902 7,837 3,717 3, , , , ,083 TOTAL ASSETS $ 139,362 $ 148,086 $ 434,556 $ 315,150 $ 328,741 $ 330,056 $ 902,659 $ 793,292 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payables and accrued expenses $ 10,937 $ 13,541 $ - $ - $ - $ - $ 10,937 $ 13,541 Custodial accounts 16,012 14, ,012 14,519 Deferred activity income 6,295 3, ,295 3,060 Deferred camp income 4,305 4, ,305 4,950 Note payable - 45, ,500 TOTAL CURRENT LIABILITIES 37,549 81,570 37,549 81,570 NET ASSETS Unrestricted 53,299 35,671 $ 335,987 $ 131,677 $ 247,049 $ 251, , ,897 Temporarily restricted 48,514 30,845 98, ,473 16,371 16, , ,689 Permanently restricted ,321 62,136 65,321 62,136 TOTAL NET ASSETS 101,813 66, , , , , , ,722 TOTAL LIABILITIES AND NET ASSETS $ 139,362 $ 148,086 $ 434,556 $ 315,150 $ 328,741 $ 330,056 $ 902,659 $ 793,

21 STATEMENT OF CHANGES IN NET ASSETS BY FUND December 31, 2011 SUPPORT AND REVENUES Operating Fund Capital Fund Endowment Fund All Funds Total DIRECT SUPPORT Friends of scouting $ 74,300 $ - $ - $ 74,300 Less: Provision for Uncollectable (336) - - (336) Net Friends of Scouting 73,964 73,964 Special fundraising events 61, ,441 Less: Cost of events (6,934) - - (6,934) Net fundraising events 54, ,507 Foundations and trusts 25,308 15,100-40,408 Other direct support 20, ,322 4, ,771 TOTAL DIRECT SUPPORT 248, ,422 4, ,650 INDIRECT SUPPORT - United Way 68, ,746 REVENUES Sales of supplies 5, ,529 Less: Cost of goods sold (3,440) - - (3,440) Net income from sales of supplies 2, ,089 Product sales 60,971-60,971 Less: Cost of goods sold (19,983) - - (19,983) Less: Commissions paid to Units (21,374) - - (21,374) Net income from product sales 19, ,614 Investment income 2, ,466 4,587 Unrealized loss on investment - - (553) (553) Camping revenue 183, ,636 Activity revenue 31, ,454 Other revenue 4, ,363 TOTAL REVENUES 243, , ,190 TOTAL DIRECT SUPPORT AND REVENUES 560, ,453 6, ,586 EXPENSES Scouting program 331,473 18, ,837 Supporting services: Management and general 97, ,218 Fund raising 21, ,143 TOTAL EXPENSES 449,806 18, , , , ,388 OPERATING TRANSFER IN(OUT) (1,467) 9,345 (7,878) - INCREASE IN NET ASSETS 109, ,406 (1,315) 153,388 Net assets at beginning of year 66, , , ,722 NET ASSETS AT END OF YEAR $ 175,777 $ 434,556 $ 328,741 $ 865,