HOUSATONIC COUNCIL BOY SCOUTS OF AMERICA, INC. AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION. YEARS ENDED DECEMBER 31, 2016 and 2015

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1 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2016 and 2015

2 CONTENTS Audited Financial Statements: Page Independent Auditors Report... 3 Statement of Financial Position... 5 Statement of Activities and Changes in Net Assets... 6 Statement of Cash Flows... 8 Notes to Financial Statements... 9 Supplementary Information: Schedule of Financial Position by Fund Schedule of Changes in Net Assets by Fund Schedule of Functional Expense... 24

3 Ansonia 158 Main Street, Suite 301 Ansonia, Connecticut P: Killingworth 166 Route 81 Killingworth, Connecticut P: New Haven 900 Chapel Street, Suite 620 New Haven, Connecticut P: Westport 611 Riverside Avenue Westport, Connecticut P: Principals Francis H. Michaud Jr. CPA John A. Accavallo CPA Sandra M. Woodbridge CPA Dominic L. Cusano MBA CPA Darin L. Offerdahl MBA CPA Guiding Successful People To the Board of Directors of Housatonic Council Boy Scouts of America, Inc. Derby, Connecticut INDEPENDENT AUDITORS REPORT We have audited the accompanying statement of financial position of Housatonic Council Boy Scouts of America, Inc. (a nonprofit organization) as of December 31, 2016 and 2015, and the related statements of activities, and cash flows for the years then ended and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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 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. Members of the American Institute of Certified Public Accountants Members of the Connecticut Society of Certified Public Accountants

4 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, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters 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, changes in net assets by fund and schedules of functional expense on pages 22 through 25 are presented for purposes of additional analysis and are 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 Accavallo Woodbridge & Cusano, LLC Michaud Accavallo Woodbridge & Cusano, LLC Ansonia, Connecticut June 1,

5 STATEMENT OF FINANCIAL POSITION December 31, ASSETS CURRENT ASSETS Cash and cash equivalents $ 138,369 $ 134,674 Accounts receivable 4,158 4,356 Pledges receivable 30,000 2,000 Inventories 15,842 14,139 Other assets 41,749 16,504 TOTAL CURRENT ASSETS 230, ,673 PROPERTY, BUILDINGS AND EQUIPMENT - net of accumulated depreciation 445, ,115 OTHER ASSETS Long-term investments 457, ,747 LIABILITIES AND NET ASSETS TOTAL ASSETS $ 1,132,661 $ 1,092,535 CURRENT LIABILITIES Accounts payables and accrued expenses $ 11,337 $ 7,081 Custodial accounts 34,017 22,191 Deferred activity income 64,005 12,625 Deferred camp income 3,970 3,440 Line of credit 24,630 49,734 TOTAL CURRENT LIABILITIES 137,959 95,071 NET ASSETS Board designated 345, ,743 Unrestricted 498, ,699 Total unrestricted 843, ,442 Temporarily restricted 56,121 61,327 Permanently restricted 94,695 94,695 TOTAL NET ASSETS 994, ,464 TOTAL LIABILITIES AND NET ASSETS $ 1,132,661 $ 1,092,535 See notes to financial statements - 5 -

6 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2016 SUPPORT AND REVENUES Unrestricted Temporarily Permanently Total DIRECT SUPPORT Friends of scouting $ 69,930 $ - $ - $ 69,930 Less: Provision for Uncollectable (5,699) - - (5,699) Net Friends of Scouting 64, ,231 Special fundraising events 93, ,421 Less: Cost of events (29,001) - - (29,001) Net fundraising events 64, ,420 Foundations and trusts 112,558 1, ,560 Other 54, ,097 TOTAL DIRECT SUPPORT 295,306 1, ,308 INDIRECT SUPPORT - United Way 46, ,823 REVENUES Sales of supplies 5, ,328 Less: Cost of goods sold (4,731) - - (4,731) Net income from sales of supplies Product sales 42, ,890 Less: Cost of goods sold (16,045) - - (16,045) Less: Commissions paid to Units (15,241) - - (15,241) Net income from product sales 11, ,604 Investment income 3, ,164 Net realized and unrealized gain(loss) on investments 17, ,305 Camping revenue 180, ,143 Activity revenue 20, ,087 Other revenue 2, ,745 TOTAL REVENUES 235, ,645 NET ASSETS RELEASED FROM RESTRICTIONS 6,208 (6,208) - - TOTAL SUPPORT AND REVENUES 583,982 (5,206) - 578,776 EXPENSES Scouting program 429, ,136 Supporting services: Management and general 128, ,801 Fund raising 23, ,601 TOTAL EXPENSES 581, ,538 INCREASE(DECREASE) IN NET ASSETS 2,444 (5,206) - (2,762) Net assets at January 1, ,442 61,327 94, ,464 NET ASSETS AT DECEMBER 31, 2016 $ 843,886 $ 56,121 $ 94,695 $ 994,702 See notes to financial statements - 6 -

7 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 2015 SUPPORT AND REVENUES Unrestricted Temporarily Permanently Total DIRECT SUPPORT Friends of scouting $ 73,950 $ - $ - $ 73,950 Less: Provision for Uncollectable (5,699) - - (5,699) Net Friends of Scouting 68, ,251 Special fundraising events 98, ,937 Less: Cost of events (18,597) - - (18,597) 80, ,340 Foundations and trusts 57, ,091 Other 64, ,647 TOTAL DIRECT SUPPORT 270, ,329 INDIRECT SUPPORT - United Way 47, ,566 REVENUES Sales of supplies 4, ,784 Less: Cost of goods sold (2,554) - - (2,554) Net income from sales of supplies 2, ,230 Product sales 37,527-37,527 Less: Cost of goods sold (14,459) - - (14,459) Less: Commissions paid to Units (13,088) - - (13,088) Net income from product sales 9, ,980 Investment income 10, ,712 Net realized and unrealized gain(loss) on investments 11, ,110 Camping revenue 159, ,111 Activity revenue 18, ,541 Other revenue 6, ,695 TOTAL REVENUES 218, ,379 NET ASSETS RELEASED FROM RESTRICTIONS 2,258 (2,258) - - TOTAL SUPPORT AND REVENUES 538,532 (2,258) - 536,274 EXPENSES Scouting program 372, ,944 Supporting services: Management and general 118, ,792 Fund raising 20, ,319 TOTAL EXPENSES 512, ,055 INCREASE(DECREASE) IN NET ASSETS 26,477 (2,258) - 24,219 Net assets at January 1, ,965 63,585 94, ,245 NET ASSETS AT DECEMBER 31, 2015 $ 841,442 $ 61,327 $ 94,695 $ 997,464 See notes to financial statements - 7 -

8 STATEMENT OF CASH FLOWS December 31, CASH FLOWS FROM OPERATING ACTIVITIES (Decrease)Increase in net assets $ (2,762) $ 24,219 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 40,403 38,907 Net realized and unrealized (gain)/loss on investments (17,305) (11,110) Contributions restricted for endowment 2,000 - (Increase) decrease in operating assets: Accounts receivable 198 (580) Pledges receivable (28,000) 8,225 Inventories (1,702) 1,196 Other current assets (25,245) (10,333) Increase (decrease) in operating liabilities: Accounts payable 4,256 2,381 Custodial accounts 11,826 (5,138) Deferred activity income 51,380 12,051 Deferred camp income 530 (310) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 35,579 59,508 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (17,418) (7,043) Net sales(purchases) of investments 12,638 16,742 NET CASH PROVIDED BY(USED IN) INVESTING ACTIVITIES (4,780) 9,699 CASH FLOWS FROM FINANCING ACTIVITIES Contributions restricted for endowment (2,000) - Payments on line of credit (25,104) (25,861) NET CASH (USED IN)PROVIDED BY FINANCING ACTIVITIES (27,104) (25,861) NET CHANGE IN CASH 3,695 43,346 Cash and cash equivalents at beginning of year 134,674 91,328 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 138,369 $ 134,674 See notes to financial statements - 8 -

9 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 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 that are now in common use by the Boy Scouts of America. The Council receives revenue from contributions, grants, special events, activity fees and the sale of merchandise. The Council's scouting program includes: Lion Pilot Program: The Lion pilot is a national pilot, which began in the fall of and will remain a pilot until otherwise determined by the National Executive Board Boy Scouts of America. The Lion program is designed to introduce kindergarten-age boys and their families to the fun of Scouting. Lions must be 5 years old by September 30 to participate. The Lion pilot is run by volunteers at the unit level. A kindergarten-age boy and his adult partner join and attend meetings and activities together. The national pilot is for approved councils. Success of the program will be based in part on feedback from the pilot participants. A group of usually six to eight kindergarten-age boys meet to participate in the Lion program with their adult partners and form a Lion s den. Lion Pilot is not a sibling only program. It s also a chance to create memories with other families that will last a lifetime, and build a stronger family through the Scouting program. 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

10 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 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 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. Functional Allocation of Expenses The cost of providing the various programs and other activities has been summarized by functional 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 totaled $2,000 and $10,225 for the years ended December 31, 2016 and 2015, 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 revenue on the Statement of Activities. Product sales for the years ended December 31, 2016 and 2015, was $42,890 and $37,527, respectively. Product expense totaled $31,286 and $27,547, respectively, for the years then ended. Net product sales for the years then ended totaled $11,604 and $9,980. Supply sales for the years ended December 31, 2016 and 2015, was $5,328 and $4,784, respectively. Supply expense totaled $4,731 and $2,554, respectively, for the years then ended. Net product sales for the years then ended totaled $597 and $2,230. 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

11 Donated Assets and Services HOUSATONIC COUNCIL BOY SCOUTS OF AMERICA, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 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. 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 months or less, when purchased, to be cash. At December 31, 2016, the carrying amount of the Council s deposits was $134,674 and balances in banks amounted to $132,182. Deposits in banks are insured by the Federal Deposit Insurance Corporation up to $250,000. There are no amounts that remained uninsured at year-end. At December 31, 2015, the carrying amount of the Council s deposits was $91,328 and balances in banks amounted to $105,030. Deposits in banks are insured by the Federal Deposit Insurance Corporation up to $250,000. There are no amounts that remained uninsured at year-end. 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 investment 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 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 is 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

12 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 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 (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 URMIFA, 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 interest 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 that 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 Council is required to measure the fair value of its assets and liabilities under a three-level hierarchy. In addition, The Community Foundation adopted in fiscal year 2015, ASU Topic 820, Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent), as issued by the Financial Accounting Standards Board. In summary, ASU Topic 820 is a practical expedient to measure the fair value of certain investments that utilize a net asset value rather than categorized under the fair value hierarchy. For those investments that do not utilize a net asset value methodology (or its equivalent), The Council will continue to measure the fair value under the threelevel hierarchy, as follows:

13 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Level 1: Observable inputs from quoted market prices for identical assets or liabilities to which The Council has independent access at the measurement date. Level 2: Observable inputs derived from direct quoted market prices or indices for the asset or liability, either directly or indirectly, or can be corroborated by observable inputs and market data, and The Council has the ability to redeem the asset in the near term (within 90 days) subsequent to the measurement date. Level 3: Prices, which may be based on an underlying quoted market price, observable input and/or market data contained in Level 1and Level 2, which also requires significant judgment on observable inputs by the investee as to the net asset value per share or unit of The Council's ownership interest in the partners' capital, and where redemption would be available in a period of more than 90 days from the measurement date. Valuation methodologies include, but are not limited to, discounted cash flow analysis, comparable asset analysis, third-party appraisals, third party pricing services and other applicable indices. Where: Observable inputs reflect the market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and from independent sources that are actively Involved in the relevant markets, and include assumptions made in pricing and valuations of the asset or liability that are developed from sources independent of The Council; and Unobservable inputs reflect The Council's own assumptions about the fair value assumptions made by investees' use in pricing the asset or liability developed based on the best information available. The Council does not use unobservable inputs for determining fair value of its investments. All of the Council's pooled, long-term investments are classified within the fair value levels in Note 2. Net Assets Restricted net assets comprise those amounts restricted by donors, grantors, or applicable state law for endowment or other specific purposes. Temporarily restricted net assets comprise those amounts restricted by donors or grantors for use during a specified time period or for a particular purpose. The expiration of a temporary restriction is evidenced by a transfer of net assets to the unrestricted classification. Unrestricted net assets include general operations and board designated. General operations comprise the ongoing, day-to-day activities of the Council, including, but not limited to, merchandise sales, magazine publications, high-adventure base operations, program development, field support, and program marketing. Board-designated net assets are designated by the Council. These assets act as endowment and are described in the endowment policy note. Advertising Advertising costs are charged to operations in the period in which the advertisement is placed. Advertising expense for the years ended December 31, 2016 and 2015, $6,208 and $- 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

14 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 The Organization has concluded that there are no uncertain tax positions that would require recognition in the financial statements. The Organization s 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 2012 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 for the years ended December 31, 2016 and 2015: December 31, 2016 December 31, 2015 Short-term investments $ 7,964 $ 12,931 Bond and bond funds 89,131 89,912 Equities: International 86,416 82,440 Domestic 95,608 94,083 Global 77,209 60,278 Alternatives: Hedged equity 76,914 89,468 Absolute return - - Real Assets - - Private equity 24,171 23,635 $ 457,413 $ 452,747 The following schedule summarizes the investment return in the Statement of Activities and Changes in Net Assets for the years ended December 31, 2016 and 2015 and a summary of changes in the fair value of the Council's investment assets for the years ended December 31, 2016 and 2015:

15 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, Balance at beginning of year $ 452,747 $ 458,379 Realized gains(losses) 16, ,537 Unrealized gains(losses) 1,036 (93,426) Investment income 3,292 7,461 Investment expenses (4,709) (6,064) Additions 8,605 - Withdrawals (19,826) (18,140) Balance at end of year $ 457,413 $ 452,747 The following tables set forth by level, within the fair value hierarchy, the Council s investment assets measured at fair value as of December 31, 2016 and 2015: December 31, 2016 Fair value Level 1 Level 2 Level 3 NAV (a) Short-term investments $ 7,964 $ 7,964 $ - $ - $ - Bond and bond funds 89,131 42, ,669 Equities: International 86,416 42, ,722 Domestic 95, ,608 Global 77,209 9, ,347 Alternatives: - Hedged equity 76, ,914 Absolute return Real Assets Private equity 24, ,171 $ 457,413 $ 102,982 $ - $ - $ 354,431 Percent of Total 100.0% 22.5% 0.0% 0.0% 77.5% December 31, 2015 Fair value Level 1 Level 2 Level 3 NAV (a) Short-term investments $ 12,931 $ 12,931 $ - $ - $ - Bond and bond funds 89,912 46,111-43,801 Equities: International 82,440 48, ,271 Domestic 94,083 2, ,948 Global 60,278 14, ,218 Alternatives: Hedged equity 89,468 48, ,062 Absolute return Real Assets Private equity 23, ,635 $ 452,747 $ 171,812 $ - $ - $ 280,935 Percent of Total 100.0% 37.9% 0.0% 0.0% 62.1%

16 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 a. Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the combined statement of financial position. There were no transfers between levels of investments during the years ended December 31, 2016 and The following table discloses certain additional information as of December 31, 2016 related to The Council s investments that report fair value based on net asset value per share and are not traded in an active market, although such net asset values may be based on underlying securities that are traded in an active market: Fair Unfunded Redemption Redemption Description Value Commitments Terms Restrictions Investments valued at Net Asset Value: Fixed income $ 46,669 None International equity 111,069 None Domestic equity 95,608 None More than 3 years Monthly to 3 year lock-up period Daily to quarterly N/A 5-90 days notice 0-60 days notice Hedged equity (Class B) 66,618 None Annually with a 1 year lock-up period 60 days written notice Hedged equity (Class B2) 10,296 None Annually beginning 2013 with a 1-year lock-up period 95 days written notice Absolute return - None Real assets - None Private equity 24,171 $ 14,005 Annually with a 3-year lock-up period More than 3 years More than 3 years 100 days written notice N/A N/A Total Net Asset Value $ 354,431 $ 14,

17 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 The investment management firm assesses and reports on the liquidity of all investments on a quarterly basis to ensure that it has access to sufficient resources necessary for its current and future operational activities. Overall, The investment management firm has access to approximately forty percent (40.6%) of the fair value of its investments on a monthly basis, and just over sixty percent (60.4%) of the fair value of its investments on a quarterly basis. The Council s investments consist of the following types: Short term Investments: Investments consist of treasury securities with an average maturity of 120 days or less, checking accounts, and money market instruments with daily liquidity. Fixed Income: Fixed income investments consist of both domestic and foreign issuances of debt instruments and include both government and corporate holdings. Domestically, The Community Foundation concentrates primarily on U.S. treasuries, including a separate account approach of Treasury Inflation Protected Securities (TIPS). Internationally, the fixed income strategy includes sovereign issued, local currency denominated debt holdings and a global fixed income approach that seeks a long term, value oriented approach in local currency debt instruments. Equities: Domestic and international equities, including international emerging market equities, are listed securities traded on public exchanges, at various market capitalizations, and are priced daily by the underlying managers. The Community Foundation accesses both domestic and international equities through institutional class mutual funds, limited partnerships and separate accounts. Publicly traded domestic and international equities are accessed through a limited partnership arrangement. Hedged Equity: This strategy involves equity investments, either long or short, in marketable and publicly traded equities. Traditionally, hedge funds purchase stocks that they perceive to be undervalued and sell stocks that they perceive to be overvalued. The research intensive and quantitative efforts in identifying promising stocks to hold long in a portfolio may also provide short sale opportunities, and for this reason many directional hedged equity funds often maintain both long and short positions, as employed by The Community Foundation. Absolute Return: This investment strategy has an objective to generate in most market environments an annualized return equal to or greater than the 91 day U.S. Treasury Bill plus 5%, net of all costs. Absolute return strategies consist of capital structure arbitrage, hedged equity, special situations, distressed debt and event arbitrage, and employ derivatives, as described above. Real Assets: The Community Foundation s real assets investments consist of several fund of-funds commercial, industrial and residential limited partnerships where diversity of property type, region, manager and strategy is a fundamental premise. These investments may also include the purchase, restructure or origination of loans secured by real property or secured by interests in such property. Private Equity: This strategy consists of making equity capital available through a fund of funds structure whereby the underlying investments in the specific companies are not quoted on a public exchange. Private equity consists of qualified investors and institutional funds that make investments directly into private companies or conduct buyouts of public companies. Private equity investments are made with a long term perspective, or generally about ten years in duration

18 NOTE 3 - ENDOWMENT FUND HOUSATONIC COUNCIL BOY SCOUTS OF AMERICA, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Changes in the endowment net assets for the years ended December 31, 2016 and 2015 are as follows: Unrestricted Board Designated Temporarily Restricted Permanently Restricted Total Balance at December 31, 2014 $ 336,726 $ 14,521 $ 94,695 $ 445,942 Investment return 18, ,572 Contributions 5, ,023 Scholarships and Fees (6,893) (2,000) (8,893) Transfer to Operating Fund (9,535) - - (9,535) Balance at December 31, ,743 12,671 94, ,109 Investment return 20, ,502 Contributions 5,170 2,850-8,020 Scholarships and Fees (5,575) (2,000) (7,575) Transfer to Operating Fund (19,826) - - (19,826) Balance at December 31, 2016 $ 345,014 $ 13,521 $ 94,695 $ 453,230 NOTE 4 - PROPERTY AND EQUIPMENT A summary of property and equipment is as follows: December 31, Land and improvements $ 37,680 $ 37,680 Buildings and improvements 531, ,325 Furniture, fixtures and equipment 567, ,227 Vehicles 17,746 17,746 1,155,196 1,135,978 Less: Accumulated depreciation (716,518) (676,114) 438, ,864 Construction in progress 6,452 8,251 Total $ 445,130 $ 468,115 NOTE 5 - LINE OF CREDIT The Council has a $100,000 line of credit with Naugatuck Valley Savings and Loan. 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, 2016 and 2015, $24,630 and $49,734, of the line of credit had been used, respectively. Interest expense incurred on the line was $2,265 and $1,862 and interest rates was 4.75% and 4.25% for the years then ended December 31, 2016 and 2015, respectively

19 NOTE 6 - RESTRICTED NET ASSETS HOUSATONIC COUNCIL BOY SCOUTS OF AMERICA, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 Temporarily restricted net assets are available for the following purposes: December 31, Net change Membership billboard advertising $ 11,548 $ 17,756 $ (6,208) Learning for life program 7,000 7,000 - Camp Strang improvements 13,516 13, Eagle scholarships 8,651 7, Camperships 15,406 15,406 - Total $ 56,121 $ 61,327 $ (5,206) 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: December 31, Net change Eagle scholarships $ 30,727 $ 30,727 $ - Camperships 48,282 48,282 - Camp improvements 15,686 15,686 - $ 94,695 $ 94,695 $ - NOTE 7 - LEASES The Council leases its office facility from a member of the board of directors under an agreement ending August Rent expense for the years ended December 31, 2016 and 2015 was $12,000, and is included under Occupancy Expense in the Statement of Functional Expenses. The Council leases office equipment under an operating lease expiring in 2021, and is classified under rental and maintenance of equipment in the Statement of Functional Expenses. Total lease expense for the years ended December 31, 2016 and 2015 was $3,446 and $3,596, respectively. Future minimum lease payments under the noncancelable operating lease with remaining terms is as follows: 2017 $ 3, , , , $ 1,650 14,

20 NOTE 8 - PENSION PLAN HOUSATONIC COUNCIL BOY SCOUTS OF AMERICA, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 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, 2016 and 2015 were $9,988 and $7,060, 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, 2016 and 2015 were $4,731 and $2,554, respectively. The Council leases office space from a Board member (see note 7 for more information). NOTE 10 - SUBSEQUENT EVENTS Management has evaluated subsequent events through June 1, 2017, 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

21 SUPPLEMENTARY INFORMATION

22 SCHEDULE OF FINANCIAL POSITION BY FUND December 31, Operating Fund Capital Fund Endowment Fund Total ASSETS CURRENT ASSETS Cash and cash equivalents $ 129,651 $ 128,422 $ - $ 2,554 $ 8,718 $ 3,698 $ 138,369 $ 134,674 Accounts receivable 4,158 4, ,158 4,356 Pledges receivable 30,000 2, ,000 2,000 Inventories 15,842 14, ,842 14,139 Other assets 41,749 7, ,605 41,749 16,504 TOTAL CURRENT ASSETS 221, ,816-2,554 8,718 12, , ,673 NON-CURRENT ASSETS Property, buildings and equipment, net , , , ,115 Long-term investments 8,773 8,800 4,128 4, , , , ,747 TOTAL ASSETS $ 230,173 $ 165,616 $ 449,258 $ 474,810 $ 453,230 $ 452,109 $ 1,132,661 $ 1,092,535 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payables and accrued expenses $ 11,337 $ 7,081 $ - $ - $ - $ - $ 11,337 $ 7,081 Custodial accounts 27,117 22,191 6, ,017 22,191 Deferred activity income 64,005 12, ,005 12,625 Deferred camp income 3,970 3, ,970 3,440 Note payable ,630 49, ,630 49,734 TOTAL CURRENT LIABILITIES 106,429 45,337 31,530 49, ,959 95,071 NET ASSETS Unrestricted 94,836 85, , , , , , ,442 Temporarily restricted 28,908 35,116 13,692 13,540 13,521 12,671 56,121 61,327 Permanently restricted ,695 94,695 94,695 94,695 TOTAL NET ASSETS 123, , , , , , , ,464 TOTAL LIABILITIES AND NET ASSETS $ 230,173 $ 165,616 $ 449,258 $ 474,810 $ 453,230 $ 452,109 $ 1,132,661 $ 1,092,535 See Independent Auditors Report

23 SCHEDULE OF CHANGE IN NET ASSETS BY FUND December 31, 2016 December 31, 2015 SUPPORT AND REVENUES Operating Fund Capital Fund Endowment Fund All Funds Total All Funds Total DIRECT SUPPORT Friends of scouting $ 64,231 $ - $ - $ 64,231 $ 68,251 Less: Provision for Uncollectable Net Friends of Scouting 64,231 64,231 68,251 Special fundraising events 93, ,421 98,937 Less: Cost of events (29,001) - - (29,001) (18,597) Net fundraising events 64, ,420 80,340 Foundations and trusts 113, ,560 57,091 Other direct support 22,179 25,400 6,518 54,097 64,647 TOTAL DIRECT SUPPORT 264,390 25,400 6, , ,329 INDIRECT SUPPORT - United Way 46, ,823 47,566 REVENUES Sales of supplies 5, ,328 4,784 Less: Cost of goods sold (4,731) - - (4,731) (2,554) Net income from sales of supplies ,230 Product sales 42,890-42,890 37,527 Less: Cost of goods sold (16,045) - - (16,045) (14,459) Less: Commissions paid to Units (15,241) - - (15,241) (13,088) Net income from product sales 11, ,604 9,980 Investment income, net of investment expenses (24) (9) 3,197 3,164 10,712 Net realized and unrealized gain(loss) on investments ,305 17,305 11,110 Camping revenue 180, , ,111 Activity revenue 20, ,087 18,541 Other revenue 2, ,745 6,695 TOTAL REVENUES 215,152 (9) 20, , ,379 TOTAL DIRECT SUPPORT AND REVENUES 526,365 25,391 27, , ,274 EXPENSES Scouting program 383,741 44,006 1, , ,944 Supporting services: Management and general 120,837 3,305 4, , ,792 Fund raising 23, ,601 20,319 TOTAL EXPENSES 527,923 47,542 6, , ,055 (1,558) (22,151) 20,947 (2,762) 24,219 OPERATING TRANSFER IN(OUT) 5,023 14,803 (19,826) - - INCREASE(DECREASE) IN NET ASSETS 3,465 (7,348) 1,121 (2,762) 24,219 Net assets at beginning of year 120, , , , ,245 NET ASSETS AT END OF YEAR $ 123,744 $ 417,728 $ 453,230 $ 994,702 $ 997,464 See Independent Auditors Report

24 SCHEDULE OF FUNCTIONAL EXPENSE YEAR ENDED DECEMBER 31, 2016 Total Program Management and General Fund Raising Functional Expenses EMPLOYEE COMPENSATION Salaries $ 181,712 $ 42,478 $ 11,800 $ 235,990 Employee benefits 23,282 5,443 1,512 30,237 Payroll taxes 12,883 3, ,731 TOTAL EMPLOYEE COMPENSATION 217,877 50,932 14, ,958 OTHER EXPENSES Supplies 49,771 10,848 3,191 63,810 Telephone 4,785 1, ,135 Postage and shipping 2, ,391 Occupancy 32,833 7,157 2,105 42,095 Rental and maintenance of equipment 7,415 1, ,506 Printing and publications 1, ,997 Auto and travel 11,214 2, ,377 Conferences and meetings 4, ,205 Specific assistance to individuals 23, ,466 Recognition awards 5,174 1, ,633 Professional fees - 38,126-38,126 Interest - 2,265-2,265 Insurance 18,210 3,968 1,168 23,346 Depreciation 40, ,403 Charter and national service fee - 5,104-5,104 Jamboree Bad debts Miscellaneous 9,724 2, ,467 TOTAL OTHER EXPENSES 211,259 77,869 9, ,580 TOTAL FUNCTIONAL EXPENSES $ 429,136 $ 128,801 $ 23,601 $ 581,538 See Independent Auditors Report

25 SCHEDULE OF FUNCTIONAL EXPENSE YEAR ENDED DECEMBER 31, 2015 Total Program Management and General Fund Raising Functional Expenses EMPLOYEE COMPENSATION Salaries $ 151,806 $ 35,487 $ 9,858 $ 197,151 Employee benefits 15,408 3,602 1,000 20,010 Payroll taxes 10,626 2, ,800 TOTAL EMPLOYEE COMPENSATION 177,840 41,573 11, ,961 OTHER EXPENSES Supplies 51,981 11,330 3,332 66,643 Telephone 3, ,788 Postage and shipping 1, ,362 Occupancy 33,885 7,386 2,173 43,444 Rental and maintenance of equipment 7,849 1, ,062 Printing and publications 3, ,855 Auto and travel 8,065 1, ,340 Conferences and meetings 4,689 1, ,011 Specific assistance to individuals 19, ,389 Recognition awards 3, ,863 Professional fees - 38,214-38,214 Interest - 1,862-1,862 Insurance 9,347 2, ,983 Depreciation 38, ,907 Charter and national service fee - 6,432-6,432 Jamboree Bad debts Miscellaneous 9,394 2, ,044 TOTAL OTHER EXPENSES 195,104 77,219 8, ,094 TOTAL FUNCTIONAL EXPENSES $ 372,944 $ 118,792 $ 20,319 $ 512,055 See Independent Auditors Report