THE BRIDGEWATER STATE UNIVERSITY FOUNDATION (a component unit of Bridgewater State University) CONSOLIDATED FINANCIAL STATEMENTS

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1 THE BRIDGEWATER STATE UNIVERSITY CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2017

2 Consolidated Financial Statements C O N T E N T S Independent Auditors Report 1-2 Consolidated Financial Statements: Consolidated Statements of Financial Position 3 Consolidated Statements of Activities and Changes in Net Assets 4-5 Consolidated Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 7-23 Additional Report: Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Consolidated Financial Statements Performed in Accordance with Government Auditing Standards 24-25

3 INDEPENDENT AUDITORS' REPORT To the Board of Trustees of The Bridgewater State University Foundation Bridgewater, Massachusetts Report on the Financial Statements We have audited the accompanying consolidated financial statements of The Bridgewater State University Foundation which comprise the consolidated statements of financial position as of, and the related consolidated statements of activities and changes in net assets 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 consolidated 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 consolidated 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 consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 25 Braintree Hill Office Park Suite 102 Braintree, MA P: F: Church Street Winchester, MA P: F:

4 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Bridgewater State University Foundation as of June 30, 2017 and 2016, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 3, 2017, on our consideration of The Bridgewater State University Foundation's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering The Bridgewater State University Foundation's internal control over financial reporting and compliance. Certified Public Accountants Braintree, Massachusetts October 3, 2017

5 Consolidated Statements of Financial Position June 30, Assets Current Assets: Cash and equivalents $ 2,528,865 $ 2,340,153 Contributions receivable, net 42,618 3,970 Prepaid expenses 11,752 19,160 Due from affiliate 2,948 - Total Current Assets 2,586,183 2,363,283 Property and Equipment, net 1,822,128 1,120,455 Other Assets: Marketable securities 32,480,197 28,703,876 Contributions receivable, net of current portion 40, ,455 Cash surrender value of life insurance 22,662 - Construction-in-progress - 289,608 Total Other Assets 32,543,548 29,552,939 Total Assets $ 36,951,859 $ 33,036,677 Liabilities and Net Assets Current Liabilities: Accounts payable and accrued expenses $ 17,547 $ 368,725 Due to affiliate - 2,680 Annuities payable 167, ,331 Note payable, current 21,578 - Total Current Liabilities 207, ,736 Long-Term Liability: Note payable, net of current portion 619,431 - Total Liabilities 826, ,736 Net Assets: Unrestricted 13,925,483 12,316,883 Temporarily restricted 5,180,518 3,965,789 Permanently restricted 17,019,398 16,204,269 Total Net Assets 36,125,399 32,486,941 Total Liabilities and Net Assets $ 36,951,859 $ 33,036,677 The accompanying notes are an integral part of the consolidated financial statements

6 Consolidated Statements of Activities and Changes in Net Assets For the Year Ended June 30, 2017 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, Gains and Other Support: Contributions and gifts $ 651,464 $ 332,701 $ 664,234 $ 1,648,399 Investment income, net 1,608,619 2,085,877-3,694,496 In-kind revenue 1,335, ,335,698 Rental income 30, ,000 Net assets released from restrictions 1,052,954 (1,052,954) - - Total Revenues, Gains and Other Support 4,678,735 1,365, ,234 6,708,593 Expenses: Program Services: University support 1,355, ,355,913 Support Services: Operating costs 1,461, ,461,822 Fundraising costs 77, ,628 Total Support Services 1,539, ,539,450 Depreciation 39, ,777 Total Expenses 2,935, ,935,140 Changes in Net Assets Before Other Items 1,743,595 1,365, ,234 3,773,453 Loss on sale of property (114,033) - - (114,033) Change in split interest annuity payable (20,962) - - (20,962) Changes in Net Assets 1,608,600 1,365, ,234 3,638,458 Net Assets, Beginning of Year 12,316,883 3,965,789 16,204,269 32,486,941 Reclassifications - (150,895) 150,895 - Net Assets, End of Year $ 13,925,483 $ 5,180,518 $ 17,019,398 $ 36,125,399 The accompanying notes are an integral part of the consolidated financial statements

7 Consolidated Statements of Activities and Changes in Net Assets For the Year Ended June 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, Gains and Other Support: Contributions and gifts $ 324,370 $ 558,378 $ 2,549,620 $ 3,432,368 Investment income, net (369,282) (445,276) - (814,558) In-kind revenue 967, ,243 Rental income 36, ,000 Net assets released from restrictions 920,337 (920,337) - - Total Revenues, Gains and Other Support 1,878,668 (807,235) 2,549,620 3,621,053 Expenses: Program Services: University support 1,469, ,469,549 Support Services: Operating costs 1,077, ,077,561 Fundraising costs 81, ,309 Total Support Services 1,158, ,158,870 Depreciation 32, ,979 Total Expenses 2,661, ,661,398 Changes in Net Assets Before Other Items (782,730) (807,235) 2,549, ,655 Loss on sale of property (261,508) - - (261,508) Impairment loss (17,000) - - (17,000) Change in split interest annuity payable (18,498) - - (18,498) Changes in Net Assets (1,079,736) (807,235) 2,549, ,649 Net Assets, Beginning of Year 13,396,619 4,773,024 13,654,649 31,824,292 Net Assets, End of Year $ 12,316,883 $ 3,965,789 $ 16,204,269 $ 32,486,941 The accompanying notes are an integral part of the consolidated financial statements

8 Consolidated Statements of Cash Flows For the Years Ended June 30, Cash Flows from Operating Activities: Changes in net assets $ 3,638,458 $ 662,649 Adjustments to reconcile changes in net assets to net cash provided by operating activities: (Recovery of) bad debts (20,000) 3,020 Depreciation 39,777 32,979 Impairment loss - 17,000 Loss on sale of property 114, ,508 Net unrealized and realized (gains) losses on marketable securities (3,259,663) 1,355,473 Change in split interest annuity payable 20,962 18,498 Changes in assets and liabilities: Contributions receivable 500, ,089 Due from affiliate (5,628) 3,370 Prepaid expenses 7,408 (560) Accounts payable and accrued expenses (351,178) 290,301 Net Adjustments (2,954,171) 2,209,678 Net Cash Provided by Operating Activities 684,287 2,872,327 Cash Flows from Investing Activities: Expenditures for construction in progress - (950) Premiums paid on life insurance (22,662) - Proceeds from sale of property 175, ,991 Payments for annuities payable (31,389) (30,376) Proceeds from sale of marketable securities 21,536,435 3,752,525 Purchase of property (741,450) - Purchases of marketable securities (22,053,093) (4,964,895) Net Cash Applied to Investing Activities (1,136,584) (1,130,705) Cash Flows from Financing Activities: Proceeds from issuance of note payable 648,000 - Payments on note payable (6,991) - Net Cash Provided by Financing Activities 641,009 - Net Increase in Cash and Equivalents 188,712 1,741,622 Cash and Equivalents, Beginning of Year 2,340, ,531 Cash and Equivalents, End of Year $ 2,528,865 $ 2,340,153 Supplemental Disclosure: Interest paid $ 11,782 $ - The accompanying notes are an integral part of the consolidated financial statements

9 Notes to the Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies Organization The Bridgewater State University Foundation (the Foundation ) is a nonprofit corporation, whose purpose is to raise funds and to aid and participate in the development and improvements of Bridgewater State University (the University ). The purposes of the Foundation are promoted through educational and research programs, faculty support, scholarships and equipment for the University community. The Foundation operates primarily in Massachusetts and receives most of its revenues from corporate and individual donations. Basis of Consolidation The consolidated financial statements of the Foundation include the activity from the Bridgewater Foundation Summer Street Trust. The Bridgewater Foundation Summer Street Trust holds in trust, property located at 180 Summer Street, Bridgewater, MA for the sole benefit of The Bridgewater State University Foundation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. Management evaluates the estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and assumptions are made as facts and circumstances require. As future events and their effects cannot be determined with certainty, actual results may differ from the estimates used in preparing the accompanying financial statements. Significant estimates and assumptions are required as part of determining the allowance for doubtful accounts, net asset classifications, estimating depreciation, and valuing the annuities payable

10 Note 1 - Summary of Significant Accounting Policies - Continued Financial Instruments Financial instruments that potentially subject the Foundation to concentrations of credit risk consist of cash and equivalents, investments, and contributions receivable. The Foundation maintains its cash and equivalents in bank deposit accounts, the balances of which, at times, may exceed federally insured limits. Investments are maintained at brokerage institutions. Exposure to credit risk is reduced by placing such deposits in high quality financial institutions and insured brokerage houses. Management monitors the financial conditions of the banking institution, along with its cash balances and tries to keep this potential risk to a minimum. In order to minimize excessive risk in geographical, industry and market sectors, the board of trustees meets periodically with its investment advisors and reviews the portfolio for such concentrations and other matters. The carrying amounts of certain financial instruments, including cash and equivalents and contributions receivable, approximates fair value because of the relatively short maturity of these instruments. The carrying amount of marketable securities is reported at market value. Method of Accounting The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Consolidated Financial Statement Presentation Assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Foundation and changes therein are classified and reported as follows: Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Foundation and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets in the statement of activities as net assets are released from restrictions

11 Note 1 - Summary of Significant Accounting Policies - Continued Consolidated Financial Statement Presentation Continued Permanently restricted net assets - Net assets subject to donor-imposed stipulations that will be maintained permanently. Cash and Equivalents The Foundation considers all highly liquid instruments with an original maturity of three months or less to be cash and equivalents. Marketable Securities The Foundation carries investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values in the statements of financial position. Unrealized gains and losses are included in the changes of net assets in the accompanying statements of activities. Contributions All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support. Temporarily restricted contributions received during the year, meeting donor-imposed stipulations, are recorded as unrestricted contributions. Promises to Give Unconditional promises to give are recognized as revenues or gains in the period received. Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Property and Equipment Property and equipment are stated at cost at the date of acquisition or in the case of gifts, at fair market value at the date of donation and are depreciated on a straight-line basis over their estimated useful lives, which is ten years for furniture and equipment and forty years for buildings. Artwork is not depreciated and carried at its estimated fair market value

12 Note 1 - Summary of Significant Accounting Policies - Continued Fair Value Measurements Promulgations of the Financial Accounting Standards Board have established a framework for measuring fair value which provides a 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 are described as follows: Level 1 Level 2 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Foundation has the ability to access. Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; and Inputs that are derived principally from, or corroborated by, observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability'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

13 Note 1 - Summary of Significant Accounting Policies - Continued Annuities Payable The annuities payable represent agreements between the Foundation and various donors. In exchange for the donors contributions, the Foundation agrees to make fixed payments for the life of the respective donors. A liability has been recognized at the present value of future cash flows expected to be paid to the donor based upon the life expectancy of the respective donors. Donated Services Donated services are recorded as contributions at their estimated fair market values in the period received. Certain donated services have not been recognized in the Statements of Activities as the value of these services is not practicable to determine. Advertising The Foundation charges the cost of advertising to expense as incurred. Income Taxes The Foundation has been notified by the Internal Revenue Service that it meets the qualifications to be classified as a tax exempt entity under section 501(c)(3) of the Internal Revenue Code. As a not-for-profit entity exempt from income taxes, the Foundation may, however, be subject to tax on unrelated business income. Accounting principles generally accepted in the United States of America require an entity to assess the probability that a tax position has a more likely than not sustainability after review by tax authorities. If a tax position is deemed not to meet this threshold, any unrecognized tax benefits and costs are estimated and recognized. Tax returns are routinely open for review by the tax authorities for three years from their due date. In certain circumstances, the statute of limitations may remain open indefinitely

14 Note 1 - Summary of Significant Accounting Policies - Continued Endowment Funds Massachusetts law requires not-for-profit organizations and other entities that receive donor contributions to operate in conformity with its enacted version of the Uniform Prudent Management of Institutional Funds Act ("UPMIFA"). In the absences of overriding explicit donor stipulations, UPMIFA prescribes guidelines for expenditures of donor-restricted funds and focuses on the prudent spending of the entire donor-restricted fund, including accumulated earnings, rather than the historical dollar concept. UPMIFA's requirement that amounts may be appropriated for expenditure only after careful consideration of the seven factors outlined in its spending guidelines is bolstered by its intent to have the governing board of the organization make its decisions in light of the donor's intended purpose of the endowment fund, stipulated or otherwise. UPMIFA requires donor-restricted funds to be classified in accordance with their restrictions. Gains on endowment funds and other amounts permitted to be disbursed in accordance with the donors' stipulations must be classified as temporarily restricted net assets until approved for expenditure by the Foundation. Earnings on endowment funds that have not yet been specifically approved for expenditure, but will be, must be classified as temporarily restricted net assets until approved for expenditure by the Foundation. Management of the Foundation has evaluated the terms of the existing donor-restricted fund agreements and adjusted temporary and permanently restricted net assets accordingly. The Foundation's board of trustees classifies donor-restricted funds and earnings thereon in accordance with applicable state law as interpreted by the Attorney General. Endowment fund assets are appropriated for expenditure in accordance with the directions and/or intent of the donor. Unrealized losses that reduce fair value to an amount below the donated value are charged to unrestricted net assets. Unrealized gains will be classified as unrestricted net assets to the extent fair value gains equals donated cost, at which time unrealized gains will be classified in accordance with the Foundation's spending policy. The Foundation's investment policy for endowment funds is intended to preserve capital to the extent possible and provide a reasonable predictable stream of revenue to provide appropriate funding to the programs supported by endowment funds

15 Note 1 - Summary of Significant Accounting Policies - Continued New Accounting Pronouncements ASU , Presentation of Financial Statements of Not-for-Profit Entities, an amendment to Topic 958, Not-for-Profit Entities, was issued by the Financial Accounting Standards Board in June 2016 with an effective date for fiscal years beginning after December 15, The purpose of this amendment is to improve the transparency and utility of information contained in the financial statements of such entities. Net assets will be presented in two categories, net assets with donor restrictions and net assets without donor restrictions, as opposed to the current three categories. Additional information and disclosures will be required to enable a reader to more readily understand liquidity limitations due to restrictions on net assets. Early application is permitted. Management has not begun its review of the standard, but does not expect implementation to have a material effect on financial position or results of operations. Reclassifications Certain amounts in the 2016 financial statements have been reclassified to conform to the 2017 presentation. Note 2 - Marketable Securities The Foundation invests in bond, alternative, and equity securities managed by several institutional managers of funds. The investments are overseen by the investment committee of the Board Net Unrealized Cost Market Value Gain (Loss) Corporate equity securities $ 20,404,178 $ 22,816,337 $ 2,412,159 Corporate bonds 857, ,367 23,294 Government bonds 1,543,630 1,543,018 (612) Mutual funds 6,784,116 7,240, ,359 Total Investments $ 29,588,997 $ 32,480,197 $ 2,891,

16 Note 2 - Marketable Securities - Continued 2016 Net Unrealized Cost Market Value Gain (Loss) Corporate equity securities $ 18,152,096 $ 18,475,858 $ 323,762 Corporate bonds 685, ,691 38,574 Government bonds 1,134,898 1,172,080 37,182 Mutual funds 8,208,227 8,332, ,020 Total Investments $ 28,180,338 $ 28,703,876 $ 523,538 The following schedule summarizes the investment return and its classification in the consolidated statements of activities for the years ended June 30,: 2017 Temporarily Permanently Unrestricted Restricted Restricted Total Interest and dividends $ 688,655 $ 5,184 $ - $ 693,839 Investment fees (259,006) - - (259,006) Net unrealized gains 852,254 1,512,182-2,364,436 Net realized gains on investments 326, , ,227 Investment income, net $ 1,608,619 $ 2,085,877 $ - $ 3,694,

17 Note 2 - Marketable Securities - Continued Temporarily Permanently Unrestricted Restricted Restricted Total Interest and dividends $ 603,335 $ 82,605 $ - $ 685,940 Investment fees (134,900) (10,125) - (145,025) Net unrealized losses (387,938) (517,756) - (905,694) Net realized losses on investments (449,779) - - (449,779) Investment income, net $ (369,282) $ (445,276) $ - $ (814,558) 2016 Note 3 - Contributions Receivable Contributions receivable consist of unconditional promises to give from individuals. Management has recorded these contributions at their estimated fair value and has recorded an allowance for doubtful accounts. Discount rates have been used to reflect the present value of the non-current portion of the unconditional promises to give equal to the U.S. Treasury yield rates on for the years ended, respectively. Contributions receivable are as follows at June 30,: Individual contributions $ 117,743 $ 629,047 Less: allowance for doubtful accounts (30,000) (50,000) Less: unamortized discount (4,436) (15,622) Net unconditional promises to give $ 83,307 $ 563,

18 Note 3 - Contributions Receivable - Continued A schedule of the anticipated future minimum receipts of individual contributions is as follows: 2017 Less than Due in 1 Year 1-5 Years Total Individual contributions $ 53,243 $ 64,500 $ 117,743 Less: Unamortized discount (625) (3,811) (4,436) Allowance for uncollectible accounts (10,000) (20,000) (30,000) Net unconditional promises to give $ 42,618 $ 40,689 $ 83, Less than Due in 1 Year 1-5 Years Total Individual contributions $ 9,000 $ 620,047 $ 629,047 Less: Unamortized discount (30) (15,592) (15,622) Allowance for uncollectible accounts (5,000) (45,000) (50,000) Net unconditional promises to give $ 3,970 $ 559,455 $ 563,

19 Note 4 - Fair Value Measurement The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, Mutual Funds: Valued at the net asset value ("NAV ) of the shares held at fiscal year end. Mutual funds consist of open-ended mutual funds that strike a NAV at the close of every day that financial markets are open and are available to purchase by the general public through brokerage houses. Corporate Equity Securities: Valued at quoted market value of the shares held at fiscal year-end. Corporate and Government Bonds: Valued at the closing price reported on the active market on which the individual securities are traded. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Although the Foundation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following tables set forth, by level, within the fair value hierarchy, the Foundation's assets and liabilities measured at fair value on a recurring basis as of June 30,: 2017 Level 1 Level 2 Level 3 Total Corporate equities $ 22,816,337 $ - $ - $ 22,816,337 Corporate bonds 880, ,367 Government bonds 1,543, ,543,018 Mutual funds 4,278,189 2,962,286-7,240,475 Annuities payable - - (167,904) (167,904) Total assets and liabilities at fair value $ 29,517,911 $ 2,962,286 $ (167,904) $ 32,312,

20 Note 4 - Fair Value Measurement - Continued Level 1 Level 2 Level 3 Total Corporate equities $ 18,475,858 $ - $ - $ 18,475,858 Coporate bonds 723, ,691 Governments bonds 1,172, ,172,080 Mutual funds 5,597,327 2,734,920-8,332,247 Annuities payable - - (178,331) (178,331) Total assets and liabilities at fair value $ 25,968,956 $ 2,734,920 $ (178,331) $ 28,525, The following table summarizes the changes in fair value of the Foundation's Level 3 liabilities during the years ended June 30,: Level 3 Annuities Payable Beginning of year $ (178,331) $ (190,209) Payments for annuities payable 31,389 30,376 Change in split interest (20,962) (18,498) End of year $ (167,904) $ (178,331)

21 Note 5 - Property and Equipment A summary of the major components of property and equipment at June 30, is as follows: Land $ 531,135 $ 333,585 Building 1,825,364 1,281,464 Equipment and fixtures 56,505 56,505 2,413,004 1,671,554 Less: accumulated depreciation (590,876) (551,099) Property and Equipment $ 1,822,128 $ 1,120,455 During 2017, the Foundation sold property that was previously classified as construction-in-progress at a loss of approximately $114,000. Note 6 - Cash Surrender Value of Life Insurance The Foundation is the beneficiary of a life insurance policy in the name of a former member of the Board of Trustees and current donor. The cash surrender value of the policy is $22,662 at June 30, The Foundation is responsible for the annual premium on the policy with an expected payout of $500,000 when policy terms are met. The Foundation made annual premium payments of approximately $10,700 for the fiscal years ended. Note 7 - Note Payable During 2017, the Foundation mortgaged a property though Bristol County Savings Bank. The mortgage, collateralized by the property at 26 Summer Street in Bridgewater, Massachusetts, was for $648,000 and is payable over 20 years with monthly principal and interest payments. Interest on the mortgage is 4.25% for the first 60 months then is adjusted annually to the Wall Street Journal Prime rate plus 1.00% with a floor of 4.25%. Monthly principal and interest payments at June 30, 2017 were $4,034. Total interest expense for the year ended June 30, 2017 amounted to $11,

22 Note 7 - Note 8 - Note Payable - Continued Future payments are as follows for the year end June 30,: Restrictions on Net Assets Year Amount 2018 $ 21, , , , ,569 Thereafter $ 523, ,009 Permanently Restricted Net Assets Income generated by permanently restricted net assets are designated for scholarships and other academic purposes. Temporarily Restricted Net Assets Temporarily restricted net assets consist of $3,956,060 and $2,984,537 for scholarships and $1,224,458 and $981,252 for programs at, respectively. During 2017, the Foundation identified donations that were incorrectly classified as temporarily restricted that should have been classified as permanently restricted. Accordingly, the net assets have been reclassified to properly reflect the previously received donations. Net Assets Released From Donor Restrictions Net assets released from donor restrictions satisfying the restricted purposes or by occurrence of other events specified by the donor for the years ended June 30, are as follows: Scholarships and grants $ 634,185 $ 618,716 Program expenses 418, ,621 $ 1,052,954 $ 920,337

23 Note 9 - Endowment Net Assets All endowment funds consist of donor-restricted funds. The Foundation has no board-designated endowment funds. Changes in endowment net assets for the years ended are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, at June 30, 2015 $ - $ 4,773,024 $ 13,654,649 $ 18,427,673 Investment return - (445,276) - (445,276) Contributions - 558,378 2,549,620 3,107,998 Amounts appropriated for expenditure - (920,337) - (920,337) Endowment net assets, at June 30, ,965,789 16,204,269 20,170,058 Reclassifications (150,895) 150,895 - Investment return - 2,085,877-2,085,877 Contributions - 332, , ,935 Amounts appropriated for expenditure - (1,052,954) - (1,052,954) Endowment net assets, at June 30, 2017 $ - $ 5,180,518 $ 17,019,398 $ 22,199,916 Note 10 - Donated Goods and Services Endowment Net Assets The value of certain donated goods and services are recorded at their estimated fair value as of the date of receipt. For the years ended, the Foundation received $61,115 and $57,840, respectively, for fundraising events. For the years ended, the Foundation received $94,800 and $18,152, respectively, for various artwork, which was then transferred to Bridgewater State University

24 Note 11 - Related Party Transactions The Foundation is affiliated with The Bridgewater Alumni Association ("The Alumni Association") by common management. Each organization, however, has its own independent board of trustees. The Foundation shares certain costs with The Alumni Association. Typically, any amounts owed to or from The Alumni Association do not bear interest and are liquidated as cash flow permits. Rental Income The Foundation has an operating rental agreement with the University for certain facilities. Annual rent under these agreements is $1 per year through July 31, 2016 and is included, along with its in-kind donation as rental income in the statement of activities. During the year ended June 30, 2017, the Foundation has acquired property that will be leased by the University. Lease payments are scheduled to commence in fiscal year 2018 for $60,000 annually for a ten year term. Contributed Services Received from Personnel of an Affiliate The University provided accounting and development personnel along with budget support for various expenses, including publications to the Foundation without charge. During the years ended, the Foundation recognized revenue and related expense of $976,878 and $891,251, respectively, for contributed services received from the University based on the fair value of comparable services provided by third parties. During the year ended June 30, 2017, the University also provided construction services amounting to $202,905 for renovations of a Foundation property. The Foundation recognized revenue and expenses of contributed services for that amount. Note 12 - Risks, Uncertainties and Commitments Contributions The Foundation is dependent upon continued donor contributions. There is a risk to the extent these contributions are not renewed each year

25 Note 12 - Risks, Uncertainties and Commitments - Continued Investment Risk The Foundation s marketable securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the Foundation s financial position. At June 30, 2017, the Foundation's investment balance is insured up to $500,000 by Securities Investor Protection Corporation, "SIPC". Cash From time to time, the Foundation's cash balances fluctuate and may exceed the federally insured limits. Management monitors the financial condition of the banking institution along with its cash balances and tries to keep the potential risk to a minimum. As of June 30, 2017, the Foundation s uninsured cash balance approximates $2,125,000. Commitments As of June 30, 2017, the Foundation has entered into a multi-year agreement with Community Counselling Service Co., LLC for professional services surrounding a capital campaign. The Foundation will disburse $102,000 relating to this agreement in fiscal year Note 13 - Management s Acceptance of Financial Statements As of July 1, 2017, the Foundation has entered into a lease with the University for the use of property held at 26 Summer Street, Bridgewater, Massachusetts. Lease payments are scheduled to commence in fiscal year 2018 for $60,000 annually for a ten year term. Management evaluated subsequent events through October 3, 2017, the date for which the financial statements were available for issuance. Management accepted the financial statements and did not identify any events subsequent to June 30, 2017, except as noted above, requiring disclosure in these financial statements

26 Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Consolidated Financial Statements Performed in Accordance with Government Auditing Standards

27 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Trustees of The Bridgewater State University Foundation Bridgewater, Massachusetts We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the consolidated financial statements of The Bridgewater State University Foundation (a component unit of Bridgewater State University) (the "Foundation), which comprise the consolidated statements of financial position as of, and the related consolidated statements of activities and changes in net assets and cash flows for the years then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated October 3, Internal Control Over Financial Reporting In planning and performing our audits of the consolidated financial statements, we considered The Bridgewater State University Foundation's internal control over financial reporting ("internal control") to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Foundation's internal control. Accordingly, we do not express an opinion on the effectiveness of the Foundation's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Foundation's consolidated financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 25 Braintree Hill Office Park Suite 102 Braintree, MA P: F: Church Street Winchester, MA P: F:

28 Compliance and Other Matters As part of obtaining reasonable assurance about whether The Bridgewater State University Foundation s consolidated financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Foundation's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Foundation's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Certified Public Accountants Braintree, Massachusetts October 3, 2017