BERKS COUNTY COMMUNITY FOUNDATION, INC. AND SUPPORTING ORGANIZATIONS. Combined Financial Statements June 30, 2017 and 2016

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1 BERKS COUNTY COMMUNITY FOUNDATION, INC. AND SUPPORTING ORGANIZATIONS Combined Financial Statements

2 CONTENTS INDEPENDENT AUDITORS' REPORT COMBINED FINANCIAL STATEMENTS Combined Statements of Financial Position Combined Statements of Activities Combined Statements of Cash Flows Combined Statements of Functional Expenses

3 Audit & Accounting Tax Strategies Business Advisory Technology Solutions Human Capital Resources Independent Auditors' Report The Board of Directors Berks County Community Foundation, Inc. and Supporting Organizations Reading, Pennsylvania We have audited the accompanying combined financial statements of Berks County Community Foundation, Inc. and Supporting Organizations (a nonprofit organization), which comprise the combined statements of financial position as of, and the related combined statements of activities, cash flows and functional expenses for the years then ended, and the related notes to the combined financial statements. Management's Responsibility for the Combined Financial Statements Management is responsible for the preparation and fair presentation of these combined 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 combined 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 combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the combined 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 combined financial statements. Member of The Leading Edge Alliance 100 Witmer Road, Suite 350, Horsham, PA fax: West Tilghman Street, Suite 230, Allentown, PA

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Berks County Community Foundation, Inc. and Supporting Organizations as of, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 2 of the combined financial statements, in 2017 Berks County Community Foundation, Inc. adopted new accounting guidance related to disclosure of investments and presentation of fair value of certain investments. Prior year disclosures have also been revised to reflect the retrospective application of adopting these changes in accounting. Our opinion is not modified with respect to this matter. Horsham, Pennsylvania October 13, 2017

5 Combined Statements of Financial Position ASSETS Cash and cash equivalents Accounts receivable Contributions receivable, net Beneficial interest in trusts Real estate held for sale Property and equipment, net Building, net Land Loans and interest receivable, net Investments, at fair value Total assets LIABILITIES AND NET ASSETS Liabilities: Accounts payable Grants payable, net Accrued expenses Notes payable Annuity payment liabilities Funds held as agency endowments Total liabilities Net assets: Unrestricted Temporarily restricted Total net assets Total liabilities and net assets $ $ $ $ ,880,365 $ 4,265,999 3,988 8, ,335 59, , , ,900 43,155 42,772 4,891,864 5,048, , ,754 1,227,615 1,574,762 64,400,861 51,989,845 74,333,097 $ 64,103, ,046 $ 54,997 1,684,502 1,674,291 58,477 43,639 1,619,312 1,697, , , , ,159 4,354,988 4,317,715 69,159,949 59,046, , ,375 69,978,109 59,785,878 74,333,097 $ 64,103,593 See accompanying notes to combined financial statements. -1-

6 Combined Statements of Activities Years Ended Revenues and other support: Contributions Other revenues and gains (losses): Investment income Net realized gains on investments Net unrealized gains (losses) on investments Net unrealized gain (loss) from beneficial interest in trusts Other income Total revenues and other support Expenses: Program services General and administrative Fundraising Total expenses Increase in net assets Net assets, beginning of year Net assets, end of year Unrestricted $ 7,764,699 1,073,614 1,599,605 4,611,182 87,919 15,137,019 4,137, , ,133 5,023,573 10,113,446 59,046,503 $69,159, Temporarily Restricted Total $ $ 7,764,699 1,073,614 1,599,605 4,611,182 78,785 78,785 87,919 78,785 15,215,804 4,137, , ,133 5,023,573 78,785 10,192, ,375 59,785,878 $ 818,160 $69,978,109 See accompanying notes to combined financial statements. -2-

7 2016 Temporarily Unrestricted Restricted Total $ 7,328,346 $ 62,446 $ 7,390,792 1,071,735 1,071, , ,225 (2,646,467) (2,646,467) (50,625) (50,625) 125, ,924 6,280,763 11,821 6,292,584 3,736,387 3,736, , , , ,840 4,579,039 4,579,039 1,701,724 11,821 1,713,545 57,344, ,554 58,072,333 $59,046,503 $ 739,375 $59,785,878-3-

8 Combined Statements of Cash Flows Years Ended Cash flows from operating activities: Increase in net assets $ 10,192,231 $ 1,713,545 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Bad debt expense 6,500 97,500 Depreciation 183, ,487 Net unrealized (gains) losses on investments (4,611,182) 2,646,467 Net realized gains on investments (1,599,605) (401,225) Loss on sale of real estate 3,768 Discount on contributions receivable (450) (160) Donated real estate included in contributions (135,900) Discount on grants payable 13,243 (12,743) Increase in value of beneficial interest in trusts (78,785) (11,821) Changes in operating assets and liabilities: (Increase) decrease in assets: Accounts receivable 4,559 (4,330) Contributions receivable (768,655) 598,827 Loans and interest receivable 2,759 (2,981) Increase (decrease) in liabilities: Accounts payable 56,049 (41,537) Grants payable (3,032) (86,938) Accrued expenses 14,838 (4,491) Annuity payment liabilities (22,533) 91,595 Funds held as agency endowments 57,299 (5,617) Net cash provided by operating activities 3,450,771 4,643,678 Cash flows from investing activities: Proceeds from sale of real estate 132,132 Purchase of investments (34,467,963) (15,947,628) Purchase of property and equipment (27,606) (2,471) Proceeds from sale of securities 28,267,736 13,282,555 Purchase of land (6,600) Loan principal and interest receivable payments 442, ,120 Loans advanced (104,400) (384,000) Net cash used in investing activities (5,757,814) (2,349,024) Cash flows from financing activity: Repayments on notes payable (78,591) (75,635) Net increase (decrease) in cash and cash equivalents (2,385,634) 2,219,019 Cash and cash equivalents, beginning of year 4,265,999 2,046,980 Cash and cash equivalents, end of year $ 1,880,365 $ 4,265,999 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 49,639 $ 59,001 See accompanying notes to combined financial statements. -4-

9 Combined Statements of Functional Expenses Years Ended Program Services 2017 General and Administrative Fundraising Total Grants to others $ 3,059,093 $ Bad debt 6,500 Salaries 363, ,574 Office supplies 9,472 5,303 Publicity 18,777 10,691 Depreciation 91,884 51,455 Payroll taxes 24,539 16,254 Interest 16,547 16,546 Conferences and meetings 58,685 11,169 Professional fees 178,895 75,527 Employee benefits 29,018 19,222 Postage 2,080 2,081 Travel and parking 4, Special events 145,626 9,999 Professional dues and subscriptions 14,127 7,911 Telephone 2,667 2,674 Insurance 6,975 6,975 Small equipment and fixtures Equipment maintenance 19,010 14,907 Software maintenance 20,079 18,708 Utilities 27,817 8,345 Cleaning, maintenance and repair 35,799 10,573 Real estate taxes 1, Total expenses $ 4,137,596 $ 501,844 $ $ 3,059,093 6, , ,205 4,168 18,943 10,691 40,159 40, ,767 13,051 53,844 16,546 49,639 11,169 81, ,422 15,431 63,671 2,080 6, ,869 14, ,623 6,216 28,254 2,666 8,007 24,974 38, ,482 14,907 48,824 18,708 57,495 8,346 44,508 10,573 56,945 1,135 $ 384,133 $ 5,023,573 See accompanying notes to combined financial statements. -5-

10 2016 Program General and Services Administrative Fundraising Total $ 2,664,599 $ $ $ 2,664,599 97,500 97, , , , ,663 7,404 4,146 3,258 14,808 16,691 10,399 10,399 37, ,744 56,976 44, ,487 23,912 15,370 12,369 51,651 23,645 17,678 17,678 59,001 73,166 10,853 10,853 94, ,150 72, ,107 26,171 16,823 13,537 56,531 1,669 1,669 1,669 5,007 4, , ,532 10,925 16, ,845 10,401 5,824 4,576 20,801 2,721 2,729 2,721 8,171 6,218 6,218 24,219 36,655 1,504 1,003 1,003 3,510 15,234 12,232 12,232 39,698 17,671 16,850 16,850 51,371 25,082 7,705 7,705 40,492 30,162 8,285 8,285 46,732 5,325 5,325 $ 3,736,387 $ 476,812 $ 365,840 $ 4,579,039-6-

11 (1) Nature of Business Berks County Community Foundation, Inc. and Supporting Organizations (the Foundation) are nonprofit organizations exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code (IRC). In addition, the Foundation qualifies for the charitable contribution deduction under IRC Section 170(b)(l)(a) and has been classified as an organization that is not a private foundation under IRC Section 509(a) because it is an organization of the type described in Section 509(a)(l) of the Code and in the case of its supporting organizations, 509(a)(3). The Foundation was incorporated in 1994 to develop, manage, and distribute funding to meet existing and changing community needs in Berks County, Pennsylvania. See Note 3 for discussion of supporting organizations. (2) Summary of Significant Accounting Policies Basis of Accounting The combined financial statements of the Foundation have been prepared on the accrual basis of accounting and, accordingly, reflect all significant receivables, payables, and other liabilities. Classification of Net Assets The Foundation reports information regarding its financial position and activities according to three classes of net assets as follows: Unrestricted Net Assets - Not subject to donor-imposed stipulations. Temporarily Restricted Net Assets - Subject to donor-imposed stipulations that will be met either by actions of the Foundation or the passage of time. Temporarily restricted net assets include the Foundation's beneficial interest in trusts and grants to be spent over a specific time period. As explained below, m ost contributions w ith donor-imposed restrictions are classified as unrestricted. Permanently Restricted Net Assets - Subject to donor-imposed stipulations that neither expire by the passage of time nor can be fulfilled or otherwise removed by the Foundation. The Foundation has not received any permanently restricted support. -7- Continued...

12 (2) Summary of Significant Accounting Policies, Continued Classification of Net Assets, Continued Substantially all contributions, including those with donor-imposed restrictions, are subject to the unilateral variance power, established by the Foundation 1 s governing documents. The variance power gives the Board of Directors the ability to modify donor restrictions that become unnecessary, incapable of fulfillment or inconsistent with the needs of the Berks County community. In addition, absent contrary directions given in the transferring instrument regarding the use of principal, the Foundation 1 s governing documents further provide all or part of the principal of any fund may be used subject to certain conditions, at the approval of the Board of Directors. Therefore, such contributions are reported as unrestricted net assets. However, this classification does not imply that such funds are available for claims of general creditors of the Foundation. Combined Financial Statements Supporting organizations under common control of the Berks County Community Foundation are reported as one economic entity with the Foundation. As such, interorganizational transactions and balances are eliminated in preparing the combined financial statements. Income Taxes The Foundation accounts for uncertain tax positions in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Income Taxes. FASB ASC 740 prescribes a recognition threshold and measurement attribute for combined financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on various related matters such as derecognition, interest, penalties, and disclosures required. The Foundation recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. There were no interest and penalties related to unrecognized tax benefits for the years ended. The Foundation is no longer subject to examination by the Internal Revenue Service (IRS) and Pennsylvania Department of Revenue for years prior to June 30, Cash and Cash Equivalents The Foundation considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. -8- Continued...

13 (2) Summary of Significant Accounting Policies, Continued Contributions Receivable Unconditional promises to give, less an allowance for uncollectible amounts, are recognized as revenue in the period received and as assets. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Contributions receivable are reflected at a discount of 3% per year on long-term pledges receivable. Beneficial Interest in Trusts Beneficial interest in trusts consist of beneficial interests in charitable remainder trusts. Donors established and funded trusts under which specified distributions are made to a designated beneficiary or beneficiaries over the trusts' term. Upon termination of the trusts, the Foundation receives the assets or a percentage of the assets remaining in the trusts. Beneficial interest in charitable remainder trusts are recorded at the fair value of the trusts' assets calculated based on the present value of future cash flows expected to be received under the agreements. Changes in net assets of the trusts are recorded as gains or losses in the combined statements of activities. Net assets and changes in net assets are recorded as temporarily restricted. Property and Equipment, Building and Land Property and equipment are stated at cost, or if donated, at fair market value at the date of donation. Donations of depreciable assets in excess of $5,000 are subject to appraisal. Property and equipment acquisitions are capitalized if they are in excess of $1,000. Items that are less than the capitalization threshold are expensed in the year acquired. Donations of long-lived assets, received without stipulations as to use, are classified as unrestricted contributions in the year received. Depreciation is provided on the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows: Equipment Furniture and fixtures Software Building 3-5 Years 7Years 3 Years 39 Years -9- Continued...

14 (2) Summary of Significant Accounting Policies, Continued Loans and Interest Receivable Loans extended from several funds are reported in the combined statements of financial position at the outstanding principal adjusted for any charge-offs. Management intends, and has the ability, to hold these loans for the foreseeable future or until maturity or payoff. Interest income is recognized when earned. See Note 5. Investments The Foundation accounts for investments under F ASB ASC , Investments - Debt and Equity Securities. Under F ASB ASC , investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the combined statements of financial position. Investment management fees, custodial fees, and investment consulting fees are netted against unrealized gains or added to unrealized losses on the marketable securities. For fiscal years ended, investment management fees of $146,008 and $145,869, respectively, are included in net unrealized gains (losses). Fair Value Measurements FASB ASC 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1: Level 2: Level 3: Quoted market prices for identical assets or liabilities in active markets. Observable market based inputs or unobservable inputs that are corroborated by market data. Unobservable inputs that are not corroborated by market data. The asset's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. For a description of the valuation methodologies used for assets measured at fair value, see Note 8. There have been no changes in the methodologies used at June 30, 2017 and Continued...

15 (2) Summary of Significant Accounting Policies, Continued Contributions Contributions received are recorded as unrestricted or temporarily restricted, depending on the existence and/ or nature of donor restrictions. Amounts received which are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the combined statement of activities as net assets released from restrictions. The Foundation reports donated marketable securities as contributions at their fair value at the date of donation, upon which they are immediately converted into cash. Donated Services Under F ASB ASC , Revenue Recognition, the Foundation recognizes services requiring specialized skills such as those provided by accountants, attorneys, marketing consultants, and other professionals if the services would need to be purchased if not donated. There were no donated services that met the criteria for recognition for the years ended. Derivatives The Foundation uses one privately-held hedge fund-of-funds whose primary focus is investing in funds specializing in equities, both long-term and short-term. The Foundation uses this hedge fund-of-fund strategy to generate superior risk-adjusted returns with a low correlation to both the equity and fixed income markets. The Foundation's risk management policy of providing a more stable long-term yield as documented in its Investment Policy Statement is obtained by this blending of different strategies and asset classes. Concentrations of Risk Financial instruments that potentially subject the Foundation to concentrations of risk consist primarily of unconditional promises to give, as these originate within Berks County, as well as cash and cash equivalents and investments. The Foundation places its cash and cash equivalents with quality credit institutions and, at times, such balances may be in excess of FDIC limits Continued...

16 (2) Summary of Significant Accounting Policies, Continued Concentrations of Risk, Continued The Foundation invests in various investment securities that are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the value of investment securities will occur in the near term and that such changes could materially affect investment account balances. Functional Expense Allocations Expenses relating to more than one function are allocated to program services, general and administrative, and fundraising costs based on employee time estimates or other appropriate usage factors. Use of Estimates The preparation of combined financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of disclosures. Accordingly, actual results could differ from those estimates. Reclassifications Certain amounts in the 2016 financial statements have been reclassified to conform to the current year presentation. Recent Accounting Pronouncements On May 1, 2015, FASB issued Accounting Standards Update (ASU) , Fair Value Measurement (Topic 820): Disclosure for Investments in Certain Entities That Calculate Net Asset Value (NAV) per Share (or Its Equivalent). ASU removes the requirement to categorize, within the fair value hierarchy (Note 8), all investments for which fair value is measured using the NAV per share practical expedient. However, sufficient information must be provided to permit reconciliation of the fair value of assets categorized within the fair value hierarchy to the amounts presented in the statement of financial position. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the NAV per share practical expedient. The amendments in this update are effective for fiscal years beginning after December 15, Early adoption is permitted. Upon adoption, the amendments shall be applied retrospectively to all periods presented. The Foundation has elected to early adopt ASU for the year ended June 30, 2017 and the update was retroactively applied to June 30, Continued...

17 (2) Summary of Significant Accounting Policies, Continued Recent Accounting Pronouncements, Continued Presentation of Financial Statements of Not-for-Profit Entities - Issued in August 2016, ASU is intended to improve the presentation of financial statements of not-for-profit (NFP) entities and provide more useful information to donors, grantors, and other users. The ASU eliminates the distinction between resources with permanent restrictions and those with temporary restrictions from the face of NFP financial statements by reducing the current three net asset classes (unrestricted, temporarily restricted, and permanently restricted) to two classes (net assets with donor restrictions and net assets without donor restrictions). The ASU will also require additional information to be disclosed about investment return, expense classifications, liquidity and availability of resources, and presentation of operating cash flows. The standard will take effect for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, Early application will be permitted. The Foundation is assessing the potential impact this guidance will have on its financial statements. Subsequent Events Management has performed an evaluation of subsequent events through October 13, 2017, which is the date the combined financial statements were available to be issued. (3) Supporting Organizations of and Disregarded Entities Owned by Berks County Community Foundation, Inc. During the fiscal year ended June 30, 2004, Berks County Foundation Properties II, Inc. (Properties II, Inc.) was formed as a supporting foundation of the Foundation under IRC Section 509(a)(3). Properties II, Inc. was formed specifically to accept gifts of real property for the benefit of Berks County Community Foundation, Inc. Boyertown Area Community Trust, Inc. (the Trust) previously transferred the majority of its assets to Berks County Community Foundation, Inc. The Trust exists to capture specific bequests to the Trust. During the fiscal year ended June 30, 2006, the IRS determined that the Trust is a Type 1 supporting foundation under IRC Section 509(a)(3). In fiscal year ended June 30, 2016, the Trust was formally merged into Community General Hospital Foundation, another supporting organization of the Foundation Continued...

18 (3) Supporting Organizations of and Disregarded Entities Owned by Berks County Community Foundation, Inc., Continued Community General Hospital Foundation (the Hospital Foundation) previously transferred its assets to Berks County Community Foundation, Inc. The Hospital Foundation exists to capture specific bequests for the former Community General Hospital. During the fiscal year ended June 30, 2006, the IRS determined that the Hospital Foundation is a Type 1 supporting foundation under IRC section 509(a)(3). In fiscal year ended June 30, 2016, Boyertown Area Community Trust, another supporting organization of the Foundation was merged into the Hospital Foundation. The Hospital Foundation, being the surviving corporation, was then renamed Berks Community Health Alliance (the Health Alliance). South Mountain Camps Foundation (SM Camps) transferred its assets to Berks County Community Foundation, Inc. in January SM Camps exists to capture specific bequests for South Mountain YMCA. During fiscal year end June 30, 2011, the IRS determined that the SM Camps is a Type 1 supporting foundation under IRC section 509(a)(3). During the fiscal year ended June 30, 2016, Berks County Community Foundation, Inc. became the sole member of BCCF Properties, LLC (Properties, LLC), a newly formed limited liability company. Properties, LLC was formed specifically to accept gifts of real property and to liquidate them for the benefit of Berks County Community Foundation, Inc. Contributions to a disregarded single member limited liability company wholly-owned or controlled by a foundation described in IRC Section 170(b)(1) are treated as a charitable contribution to its controlling member. In May 2016, a residential semi-detached house was donated to Properties, LLC. The property was not sold as of June 30, 2016 and, therefore, is included in the 2016 combined statement of financial position as real estate held for sale. In January 2017, the property was sold and a $3,768 loss on the sale is included in the 2017 combined statement of activities. During the fiscal year ended June 30, 2016, Berks County Community Foundation, Inc. became the sole member of Community Properties, LLC, a newly formed limited liability company. Community Properties, LLC was formed specifically to hold land not held for resale for the benefit of Berks County Community Foundation, Inc. In January 2016, a small parcel of land was purchased by Community Properties, LLC. The land is located next to the Foundation headquarters and will eventually be used for parking for Foundation staff and visitors Continued...

19 (3) Supporting Organizations of and Disregarded Entities Owned by Berks County Community Foundation, Inc., Continued Properties II, Inc., the Health Alliance, SM Camps, Properties, LLC, Community Properties, LLC and the Foundation are under common control. Financial statements of these organizations are included in the combined statements of financial position, activities, functional expenses, and cash flows. The components of net assets of the Foundation and Supporting Organizations are as follows as of June 30: Net assets Unrestricted: Berks County Community Foundation, Inc. $ 69,088,872 $ 58,773,339 Berks County Community Foundation Properties 11, Inc. 64, ,649 Community Properties, LLC 6,600 6,600 BCCF Properties, LLC ,915 Total unrestricted net assets $ 69,159,949 $ 59,046, Temporarily Restricted: Berks County Community Foundation, Inc. $ 818,160 $ 739,375 (4) Contributions Receivable Contributions receivable consists of unconditional promises to give for operations, endowments, and the building. Contributions receivable are as follows at June 30: Receivable in less than one year $ 812,083 $ 32,428 Receivable in one to five years 21,000 32,000 Total contributions receivable 833,083 64,428 Less: allowance for uncollectible contributions 4,178 4,178 Less: discounts to net present value 570 1,020 Net contributions receivable $ 828,335 $ 59,

20 (5) Loans and Interest Receivable As of June 30, 2017, the Foundation has loans outstanding to businesses, students, and nonprofit organizations from several funds. Repayment terms vary from two to ten years including interest rates from 0% to 12%. Management has evaluated the need for an allowance for loan losses based on the risks inherent in the portfolio, the estimated value of any underlying collateral and the guarantees, if any, of the principal borrowed. Management has established an allowance for loan losses of $215,499 and $208,999 as of, respectively. During the years ended, the Foundation received principal payments of $442,287 and $709,120 and interest income of $46,865 and $78,078, respectively. Loans and interest receivable are as follows at June 30: Receivable in less than one year $ 269,871 $ 513,810 Receivable in one to five years 1,087, ,175 Receivable in more than five years 73, ,098 Total loans receivable 1,431,195 1,769,083 Less: allowance for loan losses 215, ,999 Net loans receivable 1,215,696 1,560,084 Interest receivable 11,919 14,678 Net loans and interest receivable $ 1,227,615 $ 1,574,762 Additionally, the Metropolitan Edison Company Sustainable Energy Fund advanced $500,000 to the Green Building Fund of Berks County Community Found ation to be repaid in one lump sum payment including interest at 2% by February Interest expense on this loan was $10,000 for each of the years ended. This loan and interest between the funds was eliminated for financial statement presentation purposes. -16-

21 (6) Property and Equipment Property and equipment summarized by major classification are as follows at June 30: Equipment $ 132,979 $ 105,374 Furniture and fixtures 161, ,459 Software 23,885 23,885 Total property and equipment 318, ,718 Less: accumulated depreciation 275, ,946 Property and equipment, net $ 43,155 $ 42,772 Depreciation expense for the years ended was $27,222 and $46,943, respectively. (7) Building In September 2009, the Foundation moved into its newly constructed LEED platinum certified corporate headquarters and community conference center. As of January 1, 2012, the 3rd floor fit-out was completed to accommodate the Jump Start Incubator program. Building is as follows at June 30: Building $ 6,105,225 $ 6,105,225 Less: accumulated dpreciation 1,213,361 1,056,816 Building, net $ 4,891,864 $ 5,048,409 Depreciation expense was $156,545 for each of the years ended. -17-

22 (8) Fair Value Measurements The Foundation uses prices and inputs that are current as of measurement date, obtained through multiple third-party custodians from independent pricing services. To differentiate between the varying degrees of certainty of these fair market valuations, the Foundation identifies three levels covering securities with a ready market (level 1 measurements) to securities which may have a specific or illiquid market (level 3 measurements). A description of the valuation techniques applied to the major categories of investments measured at fair value is outlined below. Common and foreign stocks and U.S. debt securities: valued at the closing price reported on the active market on which the individual securities are traded. Equity and fixed income mutual funds: valued at the daily closing price as reported by the fund. Mutual funds held by the Foundation are open end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily NA V and to transact at that price. The mutual funds held by the Foundation are deemed to be actively traded. Corporate and local government debt securities: valued using pricing models maximizing the use of observable inputs for similar securities. This includes basing value on yields currently available on comparable securities of issuers with similar credit ratings. Beneficial interest in trusts: valued at present value based on the Foundation's interest in the quoted market prices of the underlying assets contained in the trusts at year end. Control of the assets is held by a trustee, not the Foundation. Additionally, the Foundation's beneficial interest in these trusts is invested in assets whose fair value is determined using NAV of the respective trust's investments. Although the investments in these trusts are exclusively identified as Level 3 of the fair value hierarchy, the underlying holdings of the trusts comprise Level 1, 2, and 3 securities. The trustees report the NA V of these trusts on a periodic basis Continued...

23 (8) Fair Value Measurements, Continued Partnership interests and hedge funds: valued at NAV of units held. The NAV is used as a practical expedient to estimate fair value. The NA V is based on the fair value of the underlying investments held by the fund less its liability. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NA V. The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for example, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less than observable in the market, the determination of fair value requires more judgment. The fair value hierarchy table presenting the Foundation's investments measured at fair value is as follows at June 30: Assets at Fair Value as of June 30, 2017 Levell Level2 Level3 Total Cash and certificates of deposit $ 3,829,903 $ $ $ 3,829,903 U.S. government debt securities 80,451 80,451 Corporate debt securities 424, ,739 Equity securities 5,513,695 5,513,695 Equity mutual funds 34,925,658 34,925,658 Fixed income mutual funds 10,248,892 10,248,892 Total investments in fair value hierarchy 54,598, ,739 55,023,338 Investments measured at NAV (a) 9,377,523 Total investments at fair value 54,598, ,739 64,400,861 Beneficial interest in trusts 818, ,160 Total assets at fair value $ 54,598,599 $ 424,739 $ 818,160 $ 65,219, Continued...

24 (8) Fair Value Measurements, Continued Assets at Fair Value as of June 30, 2016 Levell Level 2 Level3 Cash $ 410,098 $ $ U.S. government debt securities 153,845 Local government debt securities 128,375 Corporate debt securities 1,278,908 Equity securities 6,027,530 Equity mutual funds 27,870,340 Fixed income mutual funds 9,022,136 Total investments in fair value hierarchy 43,483,949 1,407,283 Investments measured at NA V (a) Total investments at fair value 43,483,949 1,407,283 Beneficial interest in trusts 739,375 Total $ 410, , ,375 1,278,908 6,027,530 27,870,340 9,022,136 44,891,232 7,098,613 51,989, ,375 Total assets at fair value $ 43,483,949 $ 1,407,283 $ (a) The Foundation invests in private equity investments and hedge funds which trade at the NA V per share practical expedient of the fund. These funds are not categorized within the fair value hierarchy. 739,375 $ 52,729,220 The following table summarizes investments measured at fair value on the NAV per share as a practical expedient as of June 30: Farr Value at June30, Unfunded Redemption Redemption Investment Commitments Frequency Notice Period Hedge funds: lighthouse Diversified Fund $ 4,995,663 $ 4,530,631 $ Monthly 91 days, subject to 1 year lock provision Private equity partnerships: ecap limited liability Corp 100, ,000 Not applicable Not applicable Falcon Strategic Partners V 416,949 13, ,418 Not applicable Not applicable Gem Realty Fund 827, , ,000 Not applicable Not applicable Strategic Value SP SIT II 805, ,113 86,667 Not applicable Not applicable WCPNewcold 784, ,138 Not applicable Not applicable Strategic Value SP SIT III 1,147, ,281 90,000 Not applicable Not applicable WIS limited Partnership 299, ,472 Not applicable Not applicable Total $ 9,377,523 $ 7,098,613 $ 1,222, Continued...

25 (8) Fair Value Measurements, Continued The following table sets forth a reconciliation of changes in the fair value of investments classified as Level 3 in the fair value hierarchy noted above for the years ended June 30: Balance as of June 30, 2015 Total unrealized losses for assets held at year end included in changes in net assets Contributions Balance as of June 30, 2016 Total unrealized gains for assets held at year end included in changes in net assets Balance as of June 30, 2017 Beneficial Interest in Trusts $ 727,554 (50,625) 62, ,375 78,785 $ 818,160 (9) Beneficial Interest in Trusts The Foundation has been named as a beneficiary of several irrevocable charitable remainder trusts, six of which were quantifiable as of. The present value attributable to the future interest of the Foundation is recorded in the combined statements of activities as a temporarily restricted contribution in the period that the trust is established. In subsequent years, the change in fair value attributable to the future interest of the Foundation is recorded as an increase or decrease in temporarily restricted contributions. The Foundation estimates fair value based on the present value of the estimated future payments which is calculated using the discount rate at the time the trust was established and applicable mortality tables. These rates range from 4.8% to 7.8%. -21-

26 (10) Grants Payable Grants authorized but unpaid at year end are reported as liabilities in accordance with the F ASB ASC , Revenue Recognition. Grants to be paid in more than one year are discounted 3% per year. The following is a summary of grants authorized and payable as of June 30: To be paid in less than one year $ 1,123,482 $ 1,057,906 To be paid in one to five years 589, ,653 Gross grants authorized and unpaid 1,712,527 1,715,559 Less: discounts on long-term grants 28,025 41,268 Net grants authorized and unpaid $ 1,684,502 $ 1,674,291 (11) Employee Benefits The Foundation maintains a 403(b) retirement plan. The Foundation matches 50% of eligible employee contributions up to a maximum of 6% of salary. The Foundation contributed $19,740 and $18,857 to the 403(b) plan in fiscal years 2017 and 2016, respectively. (12) Notes Payable Notes payable are summarized as follows at June 30: Note payable to local bank in 239 monthly installments of $3,341, bearing interest at LIBOR plus 1.85% (3.07% at June 30, 2017), and collateralized by land and property. All unpaid principal and interest is due July $ 485,146 $ 510,137 Note payable to local bank in 221 monthly installments of $7,452, bearing interest at LIBOR plus 1.85% (3.07% at June 30, 2017), and collateralized by land and property. All unpaid principal and interest is due August ,134,166 1,187,766 $ 1,619,312 $ 1,697, Continued...

27 (12) Notes Payable, Continued Future maturities of notes payable are as follows: Year Ending June 30, 2018 $ Thereafter $ Amount 80,965 83,454 85,935 88,660 91,385 1,188,913 1,619,312 (13) Charitable Gift Annuities The charitable gift annuities provide for the periodic payment of distributions to designated individuals (the annuitants) over a specified period of time. At the end of the specified term, the remaining assets will remain at the Foundation to benefit the donorspecified charity. There were no contributions received under charitable gift annuity agreements for the years ended. Present value of future annuity payments is recognized as a liability in the combined statements of financial position. For the years ended, the annuity payment liabilities totaled $419,193 and $441,726, respectively. (14) ASC Transfers of Assets to a Not-For-Profit Foundation or Charitable Trust That Raises or Holds Contributions for Others The Foundation follows F ASB ASC , Revenue Recognition, which provides standards for transactions in which a community foundation accepts a contribution from a donor and agrees to transfer those assets, the return on investment of those assets, or both, to another entity that is specified by the donor. FASB ASC specifically requires that if a notfor-profit organization (NPO) establishes a fund at a community foundation with its own funds and specifies itself as the beneficiary of that fund, the community foundation must account for the transfer of such assets as a liability. The Foundation refers to such funds as agency endowments Continued...

28 (14) ASC Transfers of Assets to a Not-For-Profit Foundation or Charitable Trust That Raises or Holds Contributions for Others, Continued The Foundation maintains variance power and legal ownership of agency endowment funds and, as such, continues to report the funds as assets of the Foundation. However, in accordance with FASB ASC , a liability has been established for the fair value of the funds, which is generally equivalent to the present value of future payments expected to be made to the NPOs. At, the Foundation was the owner of twelve agency endowment funds with a combined value of $462,458 and $405,159, respectively. The following table summarizes activity in such funds at June 30: Agency endowment fund balances at July 1 $ 405,159 $ 410,776 New contributions 20,000 20,000 Investment income 7,571 7,766 Net unrealized and realized investment gains (losses) 44,654 (18,705) Grants made (14,926) (14,678) Agency endowment fund balances at June 30 $ 462,458 $ 405,159 (15) Endowment Funds F ASB ASC provides guidance on the net asset classification of donor-restricted endowment funds for a NPO that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds of 2006 (UPMIF A). F ASB ASC also improves disclosures about an organization's endowment funds (both donor restricted endowment funds and board designated endowment funds) whether or not the organization is subject to UPMIFA. The Commonwealth of Pennsylvania has not adopted UPMIF A. The Commonwealth of Pennsylvania has enacted Act 141 (the Act). The Act allows the Foundation to elect a "total return investment policy". Income is defined by the Act to mean a fixed percentage of the "value of the assets" held by the Foundation, not less than 2% or more than 7%. The "value of the assets" for the purposes of the Act, is the average fair market value of the assets over a three year period (or the average value of the assets over any shorter period in the cases of assets held less than three years). The Foundation has a total return investment policy with a spending policy of 4.5% and 5% as of, respectively on the three-year average value of the funds. This spending policy determines the funds available for grant-making and administrative expenses Continued...

29 (15) Endowment Funds, Continued The Foundation's investment objective is to maximize returns through a highly diversified portfolio of assets consisting of equity, fixed income and investments such as hedge funds. The return object of the Foundation is the desired annual payout, or spending policy, plus inflation as measured by the Consumer Price Index (CPI) and growth. The Foundation maintains a prudent risk policy through its Investment Policy Statement and the asset allocation described therein is consistent with the public nature and position of the Foundation. Changes in the endowment net assets, which are all classified as unrestricted are as follows for the years ended June 30: Endowment net assets, beginning of year Contributions Transfer from cash Investment income Net appreciation in fair value Amounts appropriated for expenditures Endowment net assets, end of year Endowment net assets, beginning of year Contributions Investment income Net depreciation in fair value Amounts appropriated for expenditures Endowment net assets, end of year $ $ $ $ ,989,845 6,229,673 2,484,237 2,691,617 4,643,642 (3,638,153) 64,400, ,570,011 4,968,347 1,483,484 (2,668,487) (3,363,510) 51,989,