Northeastern University Report on Federal Financial Assistance Programs in Accordance with the OMB Uniform Guidance For the Year Ended June 30, 2016

Report on Federal Financial Assistance Programs in Accordance with the OMB Uniform Guidance For the Year Ended June 30, 2016 Entity Identification #04-1679980

Contents Part I Consolidated Financial Statements and Schedule of Expenditures of Federal Awards Report of Independent Auditors... 1-2 Consolidated Financial Statements and Notes... 3-26 Schedule of Expenditures of Federal Awards... 27-34 Notes to Schedule of Expenditures of Federal Awards... 35 Part II Report on Internal Controls and Compliance Report of Independent Auditors 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... 36-37 Report of Independent Auditors on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with the OMB Uniform Guidance... 38-39 Part III Audit Findings Schedule of Findings and Questioned Costs... 40-41 Schedule of Status of Prior Year Audit Findings... 42

Part I Consolidated Financial Statements and Schedule of Expenditures of Federal Awards

Report of Independent Auditors To the Board of Trustees of Northeastern University Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Northeastern University and its subsidiaries ( Northeastern University ), which comprise the consolidated statements of financial position as of June 30, 2016 and 2015, and the related consolidated statements of activities for the year ended June 30, 2016 and of cash flows for the years ended June 30, 2016 and 2015 and the related notes to the financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the 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 the consolidated financial statements based on our audit. We conducted our audit 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 consolidated 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 our 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, we consider internal control relevant to Northeastern University 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 Northeastern University 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. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Northeastern University as of June 30, 2016 and 2015, and the changes in their net assets for the year ended June 30, 2016 and their cash flows for the years ended June 30, 2016 and 2015 in accordance with accounting principles generally accepted in the United States of America. PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us

Other Matters Other Information We previously audited the consolidated statement of financial position as of June 30, 2015, and the related consolidated statement of activities and of cash flows for the year then ended (not presented herein), and in our report dated September 30, 2015, we expressed an unmodified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying summarized financial information as of June 30, 2015 and for the year then ended is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived. Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying schedule of expenditures of federal awards for the year ended June 30, 2016 is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is not a required part of the consolidated 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 consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 24, 2016 on our consideration of Northeastern University 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 Northeastern University's internal control over financial reporting and compliance. October 24, 2016 PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us

Consolidated Statements of Financial Position June 30, 2016 and 2015 (in thousands of dollars) 2016 2015 Assets Cash and cash equivalents $ 387,158 $ 381,810 Accounts and other receivables, net 40,111 36,949 Prepaids and other assets (Note 4) 26,018 24,641 Pledges receivable, net (Note 5) 94,545 105,466 Student and other loans receivable, net 35,242 35,017 Deposits with trustees (Note 3) 24,019 86,901 Investments (Notes 3 and 6) 840,271 873,885 Property, plant and equipment, net (Note 7) 1,280,326 1,170,426 Total assets $ 2,727,690 $ 2,715,095 Liabilities and Net Assets Liabilities Accounts payable and accrued liabilities $ 142,275 $ 138,748 Accounts payable on construction projects 33,218 27,153 Deferred revenue and student deposits 55,660 47,832 Refundable advances 34,773 35,432 Interest rate swap agreement (Notes 3 and 9) 70,210 52,264 Capital lease obligation (Note 8) 26,760 27,936 Bonds and notes payable (Notes 3 and 9) 903,192 927,350 Total liabilities 1,266,088 1,256,715 Net assets Endowment and similar funds (Note 14) 396,243 428,838 Net investment in plant 376,226 323,956 Other unrestricted 246,781 246,587 Total unrestricted 1,019,250 999,381 Endowment and similar funds (Note 14) 124,950 144,649 Other temporarily restricted 89,746 95,211 Total temporarily restricted (Note 13) 214,696 239,860 Permanently restricted endowment and similar funds (Notes 13 and 14) 227,656 219,139 Total net assets 1,461,602 1,458,380 Total liabilities and net assets $ 2,727,690 $ 2,715,095 The accompanying notes are an integral part of these consolidated financial statements. 3

Consolidated Statement of Activities Year Ended June 30, 2016 (with summarized financial information for the year ended June 30, 2015) Temporarily Permanently (in thousands of dollars) Unrestricted Restricted Restricted 2016 2015 Operating Revenues and other support Tuition and fees $ 1,072,362 $ - $ - $ 1,072,362 $ 1,015,064 Less: Financial aid (292,192) - - (292,192) (266,063) Net student-related revenues 780,170 - - 780,170 749,001 Contributions available for operations 3,832 11,801-15,633 31,500 Grants and contracts 82,679 - - 82,679 81,391 Indirect cost recovery 24,203 - - 24,203 23,119 Auxiliary enterprises 139,234 - - 139,234 130,638 Endowment spending available for operations (Note 14) 14,150 9,220-23,370 22,127 Other investment return available for operations 2,751 - - 2,751 2,642 Other 38,376 - - 38,376 34,261 Total operating revenues 1,085,395 21,021-1,106,416 1,074,679 Net assets released for operations 25,941 (25,941) - - Total operating revenues and other support 1,111,336 (4,920) - 1,106,416 1,074,679 Expenses Instruction 405,883 - - 405,883 392,597 Research 104,012 - - 104,012 102,204 Academic support 138,087 - - 138,087 131,527 Student services 127,136 - - 127,136 117,366 Institutional support 127,204 - - 127,204 119,018 Other student aid 5,525 - - 5,525 4,947 Auxiliary enterprises 122,941 - - 122,941 114,262 Other 4,891 - - 4,891 6,564 Total operating expenses (Notes 7 and 9) 1,035,679 - - 1,035,679 988,485 Increase in net assets from operating activities 75,657 (4,920) - 70,737 86,194 Nonoperating Contributions 3,888 14,292 7,126 25,306 49,774 Contributions available for operations (3,832) (11,801) - (15,633) (31,500) Endowment and other investment return (Note 6) (14,428) (8,027) 606 (21,849) 19,293 Endowment spending available for operations (Note 14) (14,150) (9,220) - (23,370) (22,127) Other investment return available for operations (2,751) - - (2,751) (2,642) Change in annuity and life income funds - (3,024) - (3,024) (1,773) Net realized and change in unrealized loss on interest rate swap agreement (Note 9) (25,269) - - (25,269) (13,264) Other nonoperating losses (925) - - (925) (766) Net assets released from restrictions and other transfers 1,679 (2,464) 785 - - Change in net assets 19,869 (25,164) 8,517 3,222 83,189 Net assets at beginning of year 999,381 239,860 219,139 1,458,380 1,375,191 Net assets at end of year $ 1,019,250 $ 214,696 $ 227,656 $ 1,461,602 $ 1,458,380 The accompanying notes are an integral part of these consolidated financial statements. 4

Consolidated Statements of Cash Flows Years Ended June 30, 2016 and 2015 (in thousands of dollars) 2016 2015 Cash flows from operating activities Cash received from student-related revenues $ 931,405 $ 875,229 Cash received from sponsored programs 97,012 93,362 Cash received from donors 19,743 22,926 Cash received from endowment and other investment income 7,279 9,002 Cash received from auxiliary enterprises other than student housing 9,837 11,222 Cash received from other income 38,040 33,982 Cash paid to employees and vendors (955,043) (892,480) Interest and other payments (38,628) (42,893) Net cash provided by operating activities 109,645 110,350 Cash flows from investing activities Acquisition of property, plant and equipment (168,426) (124,524) Decrease in deposits with trustees 62,882 52,646 Proceeds from sale or maturities of investments 78,600 127,637 Purchases of investments (74,959) (105,187) Student loans and other loans issued (6,764) (5,840) Proceeds from student and other loans 6,130 5,987 Proceeds from sale of property 7,719 1,893 Net cash used in investing activities (94,818) (47,388) Cash flows from financing activities (Decrease) increase in refundable advances (659) 2,123 Interest and dividends restricted for long-term investments 606 454 Payment to annuitants and life income funds (909) (703) Contributions for long-term investments 11,054 12,626 Proceeds from sale of restricted contributed securities 3,755 6,189 Payments on capital lease obligation (1,176) (1,121) Payments on bonds and notes payable (22,150) (16,485) Net cash (used in) provided by financing activities (9,479) 3,083 Increase in cash and cash equivalents 5,348 66,045 Cash and cash equivalents at the beginning of the year 381,810 315,765 Cash and cash equivalents at the end of the year $ 387,158 $ 381,810 The accompanying notes are an integral part of these consolidated financial statements. 5

Notes to Consolidated Financial Statements June 30, 2016 and 2015 1. Background Founded in 1898, Northeastern University ( the University or Northeastern ) is one of the largest private urban universities in the United States. It is a world leader in experiential education, an academic approach that integrates study and professional work to provide a more powerful learning experience. The University is also a leader in the production of use-inspired research that meets societal needs. Northeastern grants associate, bachelor, master and doctoral degrees. The University attracts students from all 50 states within the United States and more than 125 countries. 2. Summary of Significant Accounting Policies The significant accounting policies followed by the University are set forth below. Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis and in accordance with the reporting standards for not-for-profit organizations and include the University and its subsidiaries, principally a real estate holding entity and a research institute. Generally Accepted Accounting Principles ( GAAP ) require classification of net assets and revenues, expenses, gains and losses into three categories, based on the existence or absence of donor or legal restrictions. The categories, unrestricted, temporarily restricted and permanently restricted net assets, are defined as follows: Unrestricted - Net assets not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by management or the Board of Trustees. Temporarily Restricted - Net assets whose use is limited by law or donor-imposed stipulations that will either expire with the passage of time or be fulfilled or removed by actions of the University. Permanently Restricted - Reflects the original amount of gifts and, in some cases, the income generated from these gifts, which are required by the donor to be invested in perpetuity to produce income for general or specific purposes. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Net realized and change in unrealized gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Unconditional promises to give (pledges) are recognized as temporarily or permanently restricted revenues in the period received. Pledges are recorded at the present value of expected future cash flows. Conditional promises to give are not recognized until the conditions on which they depend are substantially met. Gifts of noncash assets are recorded at their fair market value at the date of contribution. The University has received beneficial interests in irrevocable charitable remainder trusts, for which the University does not serve as trustee. For these trusts, the University recorded its beneficial interest in those assets as contributions revenue and pledges receivable at the present value of the expected future cash inflows. Trusts are recorded at the date the University has been notified of 6

Notes to Consolidated Financial Statements June 30, 2016 and 2015 the trust s existence and sufficient information regarding the trust has been accumulated to form the basis for an accrual. Changes in the value of these assets are recorded as a nonoperating change in the valuation of pledges receivable of either temporarily or permanently restricted net assets. Expirations of temporary restrictions on net assets are reported as reclassifications between the applicable classes of net assets in the statement of activities. Gifts with donor-imposed restrictions, which are reported as temporarily restricted revenues, are released to unrestricted net assets when used for an expenditure that satisfies the donor-imposed restriction. Gifts restricted for the purchase of land, buildings and equipment are reported as temporarily restricted nonoperating revenues and are released to unrestricted net assets when the assets are placed into service. Net tuition and fees reflect student financial aid funded by the University s operating budget, restricted endowment funds, and federal and state student assistance programs. Compensation of students for services provided and tuition benefits for employees are presented as expenses. Tuition and fees collected but not earned are reported as deferred revenue and student deposits. Revenues associated with research and other contracts and grants are recognized when related costs are incurred. Indirect cost recoveries by the University on U.S. Government contracts and grants are based upon a negotiated rate and are recorded as unrestricted revenue. Federally funded operating grants and contracts for the year ended June 30, 2016 and 2015 were $88,482,000 and $85,978,000, respectively, including indirect costs of $21,611,000 and $20,930,000, respectively. Auxiliary enterprises include the operation of student housing and dining services, the daycare center and managed properties. Nonoperating activities include all contributions, endowment and other investment return, change in annuity and life income funds, realized and changes in unrealized losses on interest rate swap agreements, net loss on sale of property and net assets released from restrictions and other transfers during the period used for current operations. Nonoperating revenues also include the portion of the endowment return/ (loss) in connection with the University s spending policy in excess of the amount appropriated and other investment return. Contributions available for operations received and spent in the same year are presented as reductions to nonoperating revenues and are reclassified to operating revenues. All other activities are classified as operating. Expenses incurred in carrying out the fund-raising activities of the University, amounted to $19,710,000 and $19,421,000 for the years ended June 30, 2016 and 2015, respectively. Certain 2015 amounts have been reclassified to conform to the current year presentation. The financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the University s financial statements for the year ended June 30, 2015, from which the summarized information was derived. 7

Notes to Consolidated Financial Statements June 30, 2016 and 2015 Cash and Cash Equivalents Cash and cash equivalents consist primarily of cash management accounts, money market funds and bonds with maturities when purchased of three months or less. Most of the University s banking activity, including cash and cash equivalents, is conducted with several national banks with investment grade credit ratings. From time to time in the regular course of business deposit amounts exceed federal insurance limits. It is the University s policy to monitor these banks financial strength and deposit balances on a daily basis and no losses have been experienced to date. Accounts and Loans Receivable Accounts receivable are stated net of allowance for doubtful accounts of $8,721,000 and $7,531,000 at June 30, 2016 and 2015, respectively. Loans receivable are stated net of allowance for doubtful accounts of $687,000 at June 30, 2016 and 2015. Loans receivable are principally amounts due from students under Federally Sponsored Loan Programs, which are subject to significant restrictions; accordingly, it is not practical to determine the fair value of such amounts. The University records an allowance for doubtful accounts for student and other loans receivables including those under the Federal Perkins Loan Program. Management regularly assesses the adequacy of the allowance for credit losses by performing evaluations on the student loan portfolio, current economic environment, and level of delinquent loans. The allowance is adjusted based on the results of these evaluations. Loans disbursed under the Federal Perkins Loan Program are able to be assigned to the Federal government in certain nonrepayment situations. Management believes that this allowance at June 30, 2016 and 2015 is adequate to absorb credit losses inherent in the portfolio as of that date. Deposits with Trustees These funds are established in accordance with the resolutions and loan agreements related to the issuance of the Massachusetts Development Finance Agency Series 2014A bonds. These funds are used for construction of the Interdisciplinary Science and Engineering Complex and are invested in U.S Treasuries, Federal agency bonds and money market funds. Investments Investments include cash and cash equivalents which are designated for long term investment by the University. They also include fixed income and equity portfolios with broadly defined investment strategies. Managers of these portfolios may utilize hedging strategies, invest in securities denominated in foreign currencies, or invest in options, futures, forward contracts, or other financial instruments whose value and performance are derived, at least in part, from the performance of an underlying asset or index and the creditworthiness of the counterparty to the transactions. The University also invests in a number of limited partnerships which sell securities short and which use leverage. All investments are carried at estimated fair value. Gains and losses upon sale of certain investments are calculated using average cost at trade date. Property, Plant and Equipment Property, plant and equipment are stated at cost on the date of acquisition, net of accumulated depreciation. Plant assets donated to the University are stated at fair market value on the date of the gift, net of subsequent accumulated depreciation. 8

Notes to Consolidated Financial Statements June 30, 2016 and 2015 Depreciation is calculated using the straight-line method, with a half-year convention over the following estimated useful lives: Buildings Building improvements Furniture, equipment and books Software 50 years 30 years 5-20 years 4-7 years Expenditures for maintenance and repairs are charged to operations as incurred; significant renewals and betterments are capitalized. Conditional Asset Retirement Obligations The University recognizes the fair value of a liability for legal obligations associated with asset retirements in the period in which the obligation is incurred. When the liability is initially recorded, the cost of the asset retirement obligation is capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost associated with the retirement obligation is depreciated over the useful life of the related asset. Upon settlement of the obligation, any difference between the cost to settle the asset retirement obligation and the liability recorded is recognized as a gain or loss in the consolidated statement of activities. The University recognized $1,172,000 and $1,140,000 of operating expenses related to the accretion of liabilities recorded for the years ended June 30, 2016 and 2015, respectively. Conditional asset retirement obligations of $22,370,000 and $22,406,000 at June 30, 2016 and 2015, respectively, are included in accounts payable and accrued liabilities on the consolidated statement of financial position. Net Investment in Plant Net investment in plant includes the net book value of all capital assets offset by outstanding liabilities associated with those capital assets. Capital assets include prepaid assets, and property, plant and equipment (net of accumulated depreciation). Outstanding liabilities include the conditional asset retirement obligation, accounts payable associated with construction projects, premiums, unamortized debt issuance costs and discounts on bonds and notes paybles, capital lease obligation and outstanding bonds and notes payable, including amounts of the associated interest rate swap agreement. Endowment The endowment includes both donor-restricted funds and funds designated by the Board of Trustees ( the Board ) to function as endowments. The net assets associated with endowment funds including funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donor imposed restrictions in accordance with the laws of the Commonwealth of Massachusetts. The Board of Trustees has interpreted the Massachusetts Uniform Prudent Management of Institutional Funds Act (UPMIFA or Act) for donor-restricted endowment funds as requiring the preservation of the original value of gifts, as of the gift date, to donor-restricted endowment funds, absent explicit donor stipulations to the contrary. The University classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift 9

Notes to Consolidated Financial Statements June 30, 2016 and 2015 instrument at the time the accumulation is added to the fund, if any. Collectively these amounts are referred to as the historic dollar value of the fund. In accordance with the Act, the University considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: the duration and preservation of the fund; the purposes of the donor-restricted endowment fund; general economic conditions; the possible effect of inflation and deflation; the expected total return from income and the appreciation of investments; other resources available; and investment policies. Unrestricted net assets include funds designated by the Board to function as endowments and the income from certain donor-restricted endowment funds, and any accumulated investment return thereon, which pursuant to donor intent may be expended based on trustee or management designation. Temporarily restricted net assets include funds appropriated for expenditure pursuant to endowment and investment spending policies, certain expendable endowment gifts from donors, and any retained income and appreciation on donor-restricted endowment funds, which are restricted by the donor to a specific purpose or by law. When the temporary restrictions on these funds have been met, the funds are reclassified to unrestricted net assets. The University has adopted endowment investment and spending policies that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of endowment assets. To achieve its long-term rate of return objectives, the University relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized gains) and current yield (interest and dividends). The University expects its endowment funds, over time, to provide an average real rate of return of approximately 4% annually. The University s endowment spending policy is calculated using 4% of a sixty month moving average of the endowment fund s market value. This amount is distributed to the appropriate funds and treated as operating revenue in the statement of activities. These distributions consist of dividends, interest and, if necessary, a portion of accumulated investment gains. The amount distributed each year is subject to the Board s approval. During both fiscal years 2016 and 2015, the full payout amount was distributed. From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the value of the initial and subsequent donor gift amounts (deficit). When donor endowment fund deficits exist, they are classified as a reduction of unrestricted net assets. The balances at June 30, 2016 and 2015 are included in Note 14. These deficits usually result from unfavorable market fluctuations that occur shortly after the investment of recently established endowments. Tax Status The University and its subsidiaries are tax-exempt organizations as described in section 501(c)(3) of the Internal Revenue Code. GAAP requires that the University evaluate tax positions taken by the University and recognize a tax liability (or asset) if the University has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service ( IRS ). The University has analyzed the tax positions taken and has concluded that as of June 30, 2016, there are no significant uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. 10

Notes to Consolidated Financial Statements June 30, 2016 and 2015 Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Recently Adopted Accounting Standards On July 1, 2014, the University early adopted new guidance about fair value measurement and disclosures for investments in certain entities that calculate net asset value per share (or its equivalent). This guidance requires the University to show investments that use net asset value ( NAV ) as a practical expedient for valuation purposes, separately from other investments categorized in the fair value hierarchy described in Note 3. This disclosure is reflected in the investment leveling tables shown in Note 3 of the financial statements for both fiscal years 2016 and 2015. On July 1, 2015, the University early adopted new guidance about the recognition and measurement of financial assets and financial liabilities. This guidance no longer requires the University to disclose the fair value of their bonds and notes payable obligations as of June 30, 2016 in the notes to the financial statements. Note 3 no longer discloses this amount. On July 1, 2015, the University adopted guidance about simplifying the presentation of debt issuance costs. This guidance requires the University to show debt issuance costs as a contraliability balance within bonds and notes payable. This change, which was applied retrospectively, can be seen on the statement of financial position and in Note 9 of the financial statements for both fiscal years 2016 and 2015. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs - Contracts with Customers (Subtopic 340-40). This ASU implements a single framework for revenue recognition ensuring that revenue is recognized in a manner which reflects the consideration to which the entity expects to be entitled to in exchange for goods and services. The ASU is effective for fiscal years beginning after December 15, 2017. The University is evaluating the impact on the University consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance allows an entity to choose, investment-by-investment, to report an equity investment that neither has a readily determinable fair value, nor qualifies for the practical expedient for fair value estimation using NAV, at its cost minus impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issue. Impairment of such investments must be assessed qualitatively at each reporting period. Entities must disclose their financial assets and liabilities by measurement category and form of asset either on the face of the statement of financial position or in the accompanying notes. The ASU is effective for annual reporting periods beginning after December 15, 2018. The University is evaluating the impact of the new guidance on the consolidated financial statements. In May 2014, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs - Contracts with Customers (Subtopic 340-40). This ASU implements a single framework for revenue recognition ensuring that revenue is recognized in a manner which 11

Notes to Consolidated Financial Statements June 30, 2016 and 2015 reflects the consideration to which the entity expects to be entitled to in exchange for goods and services. The ASU is effective for fiscal years beginning after December 15, 2017. The University is evaluating the impact on the University consolidated financial statements. In August, 2016, the FASB issued ASU 2016-14, Presentation of Financial Statements for Not-for- Profit Entities. The ASU amends the requirements for financial statements and notes in Topic 958, Not-for-Profit Entities including changes to the classification of net assets and liquidity disclosures. The ASU is effective for fiscal years beginning after December 15, 2017 with early adoption permissible. The University is evaluating the impact of the new standard on the University consolidated financial statements. 3. Fair Value Measurements The University values its financial assets and liabilities at fair value in accordance with GAAP. GAAP defines fair value, establishes a framework for measuring fair value, and delineates the disclosures required about fair value measurements. Financial assets consist primarily of the endowment and other investments. Additionally, GAAP allows the University the use of estimates to fair value alternative investments at the measurement date using net asset values ( NAV ) reported by the investment managers without further adjustment, provided that the University does not expect to sell the alternative investments at a value other than the NAV. The University performs due diligence procedures on its alternative investments to determine the values recorded are appropriate. GAAP clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, this standard establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 Level 2 Level 3 Valuations using quoted prices in active markets for identical assets or liabilities. Valuations of these products do not require a significant degree of judgment. Valuations using observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; broker or dealer quotations; or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities. Valuations using unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 12

Notes to Consolidated Financial Statements June 30, 2016 and 2015 The following table presents information about assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2016, and indicates the fair value hierarchy utilized to determine such fair value: Fair Value Measurements at the End of the Reporting Period Using Quoted Prices in Active Markets for Significant Other Observable Significant Unobservable Inputs (in thousands) 6/30/2016 Level 1 Level 2 Level 3 Beneficial interest in charitable remainder trust investments $ 4,546 $ - $ - $ 4,546 Deposit with trustees 24,019 24,019 - - Endowment Investments Cash equivalents 9,684 9,684 - - Fixed income 40,546 40,546 - - Domestic equity 130,879 130,879 - - International equity 153,098 153,098 - - Other investments 16,631 16,631 - - Private equity at NAV (a) 115,406 - - - Hedge funds at NAV (a) 204,756 - - - Other alternative investments at NAV (a) 30,958 - - - Total endowment investments 701,958 350,838 - - Other investments Fixed income 120,096 120,096 - - Domestic equity 996 996 - - Auction rate securities and other 17,221 - - 17,221 Total other investments 138,313 121,092-17,221 Total investments 840,271 471,930-17,221 Total assets $ 868,836 $ 495,949 $ - $ 21,767 Interest rate swap agreements liability $ (70,210) $ - $ (70,210) $ - Total liabilities $ (70,210) $ - $ (70,210) $ - (a) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) as a 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 statement of financial position. Excluded from the fair value hierarchy at June 30, 2016 are $115,406,000 of private equity, $204,756,000 of hedge funds and $30,958,000 of other equities for which fair value is measured at NAV per share using the practical expedient. 13

Notes to Consolidated Financial Statements June 30, 2016 and 2015 The following table presents information about assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2015, and indicates the fair value hierarchy utilized to determine such fair value: Fair Value Measurements at the End of the Reporting Period Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (in thousands) 6/30/2015 Level 1 Level 2 Level 3 Beneficial interest in charitable remainder trust investments $ 4,306 $ - $ - $ 4,306 Deposit with trustees 86,901 86,901 - - Endowment Investments Cash equivalents 25,537 25,537 - - Fixed income 40,043 40,043 - - Domestic equity 119,127 119,127 - - International equity 157,950 157,950 - - Other investments 17,382 17,382 - - Private equity at NAV (b) 115,870 - - - Hedge funds at NAV (b) 227,391 - - - Other alternative investments at NAV (b) 39,732 - - - Total endowment investments 743,032 360,039 - - Other investments Fixed income 113,996 113,996 - - Domestic equity 1,135 1,135 - - Auction rate securities and other 15,722 - - 15,722 Total other investments 130,853 115,131-15,722 Total investments 873,885 475,170-15,722 Total assets $ 965,092 $ 562,071 $ - $ 20,028 Interest rate swap agreements liability $ (52,264) $ - $ (52,264) $ - Total liabilities $ (52,264) $ - $ (52,264) $ - (b) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) as a 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 statement of financial position. 14

Notes to Consolidated Financial Statements June 30, 2016 and 2015 Excluded from the fair value hierarchy at June 30, 2015 are $115,870,000 of private equity, $227,391,000 of hedge funds and $39,732,000 of other equities for which fair value is measured at NAV per share using the practical expedient. All financial instruments are valued using a market approach involving identical or comparable assets or liabilities except for auction rate securities and the University s beneficial interest in charitable remainder trusts which are valued using an income approach. At June 30, 2016 the change in the fair value of financial instruments valued using significant unobservable inputs (Level 3) is shown below: Beneficial Interest in Auction Rate Charitable Securities Remainder (in thousands of dollars) and Other Trust Total Fair value recorded at June 30, 2014 $ 15,722 $ 4,091 $ 19,813 Unrealized gains - 215 215 Fair value recorded at June 30, 2015 15,722 4,306 20,028 Unrealized gains 1,499 240 1,739 Fair value recorded at June 30, 2016 $ 17,221 $ 4,546 $ 21,767 The fair values of marketable domestic and international equities and fixed income instruments are determined generally based on quoted market prices in active markets. Alternative investments include private equity funds, hedge funds and other alternative investments. Private equity investments may consist of commitments in a limited partnership that invests in private companies or properties. Hedge funds may include investments that are publicly traded and may be subject to redemption restrictions. At June 30, 2016, redemption terms for investments consist of the following: (in thousands of dollars) 31-60 Days 61-90 Days 91-180 Days 181-365 Days Within 30 Prior Written Prior Written Prior Written Prior Written Redemption Terms Days Notice Notice Notice Notice 1-5 Years 6-10 Years Total Cash equivalents $ 9,684 $ - $ - $ - $ - $ - $ - $ 9,684 Fixed income 160,642 - - - - - - 160,642 Domestic equity 131,875 - - - - - - 131,875 International equity 153,098 - - - - - - 153,098 Private equity - - - - - - 115,406 115,406 Hedge funds 114 421 1,610 58,684 95,788 47,547 592 204,756 Other alternative investments 10,156 17,694-1,036-2,072-30,958 Other investments 16,631 - - - - - 17,221 33,852 $ 482,200 $ 18,115 $ 1,610 $ 59,720 $ 95,788 $ 49,619 $ 133,219 $ 840,271 The University s auction rate securities at June 30, 2016 and 2015 were determined to have a fair value of $17,000,000 and $15,501,000, respectively, and were reflective of a $3,000,000 and $4,499,000 discount, respectively. The auction rate securities are valued using the income approach, specifically a discounted cash flow analysis. This valuation methodology includes utilizing unobservable inputs such as offered quotes and comparability adjustments to arrive at the estimated fair value. The University performs ongoing due diligence to determine that the auction rate securities fair value is reasonable. 15

Notes to Consolidated Financial Statements June 30, 2016 and 2015 Deposits with trustees are carried at fair value. The estimated fair value of the interest rate swap agreement is based on an independent third party valuation. The fair value of swap instruments represents the estimated cost to the University to cancel the agreements at the reporting date. The University has performed due diligence on the fair value of its interest rate swap agreement to determine fair value at June 30, 2016 and 2015. 4. Prepaids and Other Assets Five universities in the Commonwealth of Massachusetts formed The Massachusetts Green High Performance Computing Center, Inc., ( MGHPCC ) and MGHPCC Holyoke, Inc. in May 2010 and April 2011, respectively, to construct and operate a research computing center located in Holyoke, Massachusetts. Both MGHPCC and MGHPCC Holyoke, Inc. are tax-exempt organizations under section 501(c)(3) of the Internal Revenue Code. Each respective university has agreed to contribute $10,000,000 in total. The University has contributed $10,000,000 which is included in the University s statement of financial position within prepaids and other assets. The center became fully operational in January 2013, at which time the University began amortizing the asset over the 10 year expected useful life. 5. Pledges Pledges receivable as of June 30 are expected to be realized in the following time periods: (in thousands of dollars) 2016 2015 One year or less $ 27,431 $ 28,047 Between one and five years 51,868 59,386 Greater than five years 31,286 36,199 110,585 123,632 Less: Discount (11,178) (13,304) Allowance for doubtful pledges (4,862) (4,862) $ 94,545 $ 105,466 At June 30, 2016, the University has $2,500,000 of conditional pledges that are not reflected in the consolidated financial statements due to their conditional nature. 16

Notes to Consolidated Financial Statements June 30, 2016 and 2015 6. Investments Investments, stated at fair value, held by the University at June 30 were as follows: (in thousands of dollars) 2016 2015 Cash equivalents $ 9,684 $ 25,537 Fixed income 160,642 154,039 Domestic equity 131,875 120,262 International equity 153,098 157,950 Private equity 115,406 115,870 Hedge funds 204,756 227,391 Other alternative investments 30,958 39,732 Other investments 33,852 33,104 $ 840,271 $ 873,885 The unfunded commitments, consisting of commitments that the University has made to various private equity investments at June 30, 2016 are listed below. These funds may be called for a period to extend between one and fifteen years. (in thousands of dollars) 2016 Venture capital $ 81,557 Real estate 5,072 Energy & commodities $ 15,596 102,225 Endowment and other investment return is comprised of: (in thousands of dollars) 2016 2015 Realized and change in unrealized (losses) gains Endowment investments $ (34,530) $ 6,916 Other investments 688 (1,366) Investment yield Endowment investments 9,242 11,101 Other investments 2,751 2,642 $ (21,849) $ 19,293 Unrestricted $ (14,428) $ 10,561 Temporarily restricted (8,027) 8,278 Permanently restricted 606 454 $ (21,849) $ 19,293 Direct investment management fees paid were $1,552,000 and $1,677,000 for the years ended June 30, 2016 and 2015, respectively. 17

Notes to Consolidated Financial Statements June 30, 2016 and 2015 7. Property, Plant and Equipment Property, plant and equipment at June 30 consisted of the following: (in thousands of dollars) 2016 2015 Land $ 23,348 $ 23,443 Building and improvements 1,415,466 1,356,563 Capitalized lease 38,410 38,410 Furniture and equipment 252,007 288,626 Library books 52,078 49,727 Construction in progress 160,397 76,275 1,941,706 1,833,044 Less: Accumulated depreciation (661,380) (662,618) $ 1,280,326 $ 1,170,426 Depreciation expense amounted to $57,759,000 and $56,716,000 for the years ended June 30, 2016 and 2015, respectively, and is allocated in the consolidated statement of activities to functional expenses based on specific use of the related facilities. Operation, maintenance and security of plant expense totaled $76,977,000 and $72,752,000 for the years ended June 30, 2016 and 2015, respectively, and is allocated to functional expense categories in the consolidated statement of activities based on salary expense. 8. Capitalized Lease The University commenced the residence hall lease in July 2001. The rent, over the 30-year term of the lease, will be equal to the actual debt service plus customary fees payable with respect to the $31,130,000 principal amount of the bonds issued to finance the building. The annual lease commitments for future years range from $2,620,000 in 2017 to $2,576,000 in 2031. Approximate future annual principal requirements as of June 30, 2016 are as follows: (in thousands of dollars) Principal Payments Year 2017 $ 1,238 2018 1,300 2019 1,366 2020 1,433 2021 1,505 2022-2031 $ 19,918 26,760 18

Notes to Consolidated Financial Statements June 30, 2016 and 2015 9. Bonds and Notes Payable Bonds and notes payable consists of the following at June 30: (in thousands of dollars) Name Rate Maturity 2016 2015 Massachusetts Development Finance Agency Series R 4.50%-5.00% 2033 $ 73,695 $ 76,205 Series T -1 2.00%-5.00% 2037 62,260 62,610 Series T -2 3.00%-5.00% 2037 65,315 65,690 Series T -3 Variable 2019 69,025 69,375 Series Y-1 5.00%-5.62% 2029 29,975 31,400 Series Y-2 5.00%-5.50% 2024 12,170 13,120 Series 2010A 3.00%-5.00% 2035 208,390 216,955 Series 2012 4.00%-5.00% 2035 54,385 54,385 Series 2014A 4.37%-5.25% 2044 150,000 150,000 Taxable Revenue Bonds Series 2010B 3.35%-6.43% 2035 65,870 68,600 Series 2014B 0.01%-5.29% 2032 95,300 100,000 Other Notes Payable 2.50% 2019 706 900 887,091 909,240 Add: Unamortized Premium on Bonds 20,987 23,239 Less: Unamoritized Discount on Bonds (3,217) (3,374) Less: Unamortized Issuance Cost on Bonds (1,669) (1,755) $ 903,192 $ 927,350 Approximate future annual principal requirements are below: (in thousands of dollars) Principal Payments Year 2017 $ 23,011 2018 24,015 2019 25,074 2020 26,209 2021 27,240 Thereafter $ 761,542 887,091 The tables above reflect the contractual maturities of the debt agreements which were effective as of June 30, 2016. Interest expense totaled $27,695,000 and $31,458,000 for the years ended June 30, 2016 and 2015, respectively. Interest expense has been allocated to each functional expense category in the consolidated statement of activities based on specific identification. Total amounts paid in 2016 and 2015, were $48,301,000 and $49,235,000, respectively, to meet interest costs including 19

Notes to Consolidated Financial Statements June 30, 2016 and 2015 settlement costs on the related interest rate swap agreement. Interest expense capitalized totaled $11,119,000 and $7,845,000 for the years ended June 30, 2016 and 2015, respectively. The University entered into an interest rate swap agreement on December 22, 2006 to manage the interest cost and variable rate risk associated with its Series T3 outstanding debt. The interest rate swap agreement was not entered into for trading or speculative purposes. Under the terms of the agreement, the University pays a fixed rate, determined at inception, to a third party who in turn pays the University a variable rate on these respective notional principal amounts. The University records the interest rate swap at fair value. Net payments or receipts under the swap agreement along with the change in fair value of the swap are included in the nonoperating section on the consolidated statement of activities. The University has adopted guidance related to the Disclosures about Derivative Instruments and Hedging Activity. Under this guidance, the University is required to disclose the location and amounts of derivatives within the consolidated financial statements. The tables below depict the impact the derivative has on both the consolidated statements of financial position and consolidated statements of activities. June 30, 2016 June 30, 2015 (in thousands of dollars) Fair Value Fair Value Interest rate swap agreement (liability) $ (70,210) $ (52,264) Net realized and unrealized loss on the interest rate swap recorded in the consolidated statement of activities as nonoperating was as follows for the years ended June 30, 2016 and 2015: (in thousands of dollars) 2016 2015 Realized loss $ (7,323) $ (7,584) Change in unrealized loss (17,946) (5,680) $ (25,269) $ (13,264) The following schedule presents the notional principal amounts and fair value of the University s interest rate swap agreement at June 30, 2016: (in thousands of dollars) Bond Issue Date Fair Value Trade Notional Expiration at June 30, Counterparty Type Amount October 1, 2016 MDFA Series T3 AIG Swap $ 207,025 2037 $ (70,210) There is no collateral posting requirement for the University related to the swap with AIG. The University maintained lines of credit with two banks in the aggregate amount of $50,000,000 for years ended June 30, 2016 and 2015. There were no amounts outstanding on the lines of credit at June 30, 2016 and 2015. 20

Notes to Consolidated Financial Statements June 30, 2016 and 2015 10. Retirement Plan The University sponsors a retirement plan under which full-time faculty and staff may elect to contribute an amount of their eligible compensation up to the Internal Revenue Service published limit toward the purchase of contracts with Teachers Insurance and Annuity Association of America and College Retirement Equities Fund and/or Fidelity Management Trust Company. After two years of employment, the University contributes 10% of each participant s eligible compensation to each participant s account providing that the participant contributes a minimum of 5% of eligible compensation to the plan. The cost of the University s contribution to this plan was $27,223,000 and $25,049,000 for the years ended June 30, 2016 and 2015, respectively. 11. Post-Retirement Medical Plan The University sponsors a post retirement medical plan under which faculty and staff who are 55 years of age and have at least 10 years of service can participate. Under the plan retirees can contribute 50% of the premium for the medical plan selected. The plan is provided for Pre- Medicare coverage and such coverage terminates at age 65. Spouses and dependent children may elect coverage under the plan by contributing 100% of the premium. Spouses are eligible until they are able to participate in Medicare and dependent children until age 26. For the year ended June 30, 2016 and 2015, net periodic post-retirement medical benefits cost includes the following: (in thousands of dollars) 2016 2015 Service cost $ 620 $ 617 Interest cost 395 394 $ 1,015 $ 1,011 Changes in the post-retirement medical benefit obligations are as follows: (in thousands of dollars) 2016 2015 Benefit obligations at beginning of year $ 11,523 $ 11,771 Service cost 620 617 Interest cost 395 394 Participant contributions 560 495 Actuarial loss (gain) 2,002 (424) Benefits paid (1,403) (1,330) Benefit obligations at end of year $ 13,697 $ 11,523 These costs are allocated to the functional expense categories in the statement of activities based on salary expense. The accrued post-retirement benefit obligation in the table above is included in accounts payable and accrued liabilities on the consolidated statement of financial position. The plan does not hold assets and is funded as benefits are paid. For measurement purposes, the assumed annual rate of increase in the per capita cost of covered medical benefits was 6.5% for the year ending June 30, 2017, graded down ratably until reaching an ultimate medical trend rate of 3.5% for fiscal year 2022 and thereafter. The discount rate used 21

Notes to Consolidated Financial Statements June 30, 2016 and 2015 to determine the accumulated benefit obligation is 2.71% and 3.56% as of June 30, 2016 and 2015, respectively. The discount rate used to determine the net periodic post-retirement benefit cost is 3.56% and 3.47% as of June 30, 2016 and 2015, respectively. The cumulative amount within unrestricted net assets related to unamortized losses is $879,000 as of June 30, 2016. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage point change in assumed health care cost trend rates would have the following effect: (in thousands of dollars) 2016 2015 Impact of 1% increase in health care cost trend on interest cost plus service cost during the past year $ 106 $ 121 on accumulated post-retirement benefit obligation 1,104 875 Impact of 1% decrease in health care cost trend on interest cost plus service cost during the past year (92) (105) on accumulated post-retirement benefit obligation (990) (787) Expected future benefit payments and cash contributions to the plan are as follows: (in thousands of dollars) Future Benefit Payments Year 2017 $ 836 2018 911 2019 1,012 2020 1,096 2021 1,083 2022-2026 $ 5,953 10,891 12. Self-Insurance The University is self-insured for certain employee health benefits, workers compensation, a portion of property and casualty coverage and a student health plan. The self-insurance reserve balances are $3,183,000 and $4,651,000 at June 30, 2016 and 2015, respectively, and are included in accounts payable and accrued liabilities on the consolidated statement of financial position. 22

Notes to Consolidated Financial Statements June 30, 2016 and 2015 13. Temporarily and Permanently Restricted Net Assets Temporarily and permanently restricted net assets are composed of the following general classes of uses or purpose at June 30: 2016 2015 Temporarily Permanently Temporarily Permanently (in thousands of dollars) Restricted Restricted Restricted Restricted Instruction and academic administration $ 84,668 $ 99,413 $ 88,498 $ 95,085 Research 16,090 17,141 19,243 16,858 Scholarships, fellowship and other aid 92,100 101,381 104,316 96,108 Capital construction and maintenance 7,680 1,313 8,381 694 Life income funds 5,122 3,490 8,253 3,522 Other 9,036 4,918 11,169 6,872 $ 214,696 $ 227,656 $ 239,860 $ 219,139 14. Endowment and Similar Net Assets Endowment and similar net assets composition by type of fund as of June 30, 2016: Temporarily Permanently (in thousands of dollars) Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ (776) (1) $ 124,950 $ 227,656 $ 351,830 Board-designated endowment funds 397,019 - - 397,019 $ 396,243 $ 124,950 $ 227,656 $ 748,849 Endowment and similar net assets composition by type of fund as of June 30, 2015: Temporarily Permanently (in thousands of dollars) Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ (13) (1) $ 144,649 $ 219,139 $ 363,775 Board-designated endowment funds 428,851 - - 428,851 $ 428,838 $ 144,649 $ 219,139 $ 792,626 (1) The $776,000 and $13,000 deficits in unrestricted net assets on June 30, 2016 and 2015, respectively, represent the amounts by which the fair values of certain donor-restricted endowment funds were below the amount required to be retained permanently. 23

Notes to Consolidated Financial Statements June 30, 2016 and 2015 Changes in Endowment and similar net assets for the fiscal year ended June 30, 2016: Temporarily Permanently (in thousands of dollars) Unrestricted Restricted Restricted Total Endowment and similar net assets at July 1, 2015 $ 428,838 $ 144,649 $ 219,139 $ 792,626 Investment income 5,182 4,053 7 9,242 Net appreciation (realized and change in unrealized) (21,994) (11,529) 599 (32,924) Total endowment return (16,812) (7,476) 606 (23,682) Contributions 57 983 7,126 8,166 Endowment spending for operations and reinvestment (14,150) (9,220) - (23,370) Other expenses and transfers (1,690) (3,986) 785 (4,891) Endowment and similar net assets at June 30, 2016 $ 396,243 $ 124,950 $ 227,656 $ 748,849 Changes in Endowment and similar net assets for the fiscal year ended June 30, 2015: Temporarily Permanently (in thousands of dollars) Unrestricted Restricted Restricted Total Endowment and similar net assets at July 1, 2014 $ 433,487 $ 147,051 $ 199,182 $ 779,720 Investment income 6,453 4,648-11,101 Net appreciation (realized and change in unrealized) 3,896 4,303 454 8,653 Total endowment return 10,349 8,951 454 19,754 Contributions 120 3,475 11,727 15,322 Endowment spending for operations and reinvestment (13,923) (8,204) - (22,127) Other expenses and transfers (1,195) (6,624) 7,776 (43) Endowment and similar net assets at June 30, 2015 $ 428,838 $ 144,649 $ 219,139 $ 792,626 Endowment and similar net assets classified as unrestricted net assets include unrestricted gifts from donors and other funds designated by the University as quasi-endowment for the long-term support of the University, including any accumulated income and appreciation. Temporarily restricted endowment net assets include accumulated income and appreciation on permanently restricted endowment funds, life income, annuities and trust funds (net of actuarial liability). Permanently restricted endowment and similar net assets consist of those funds designated by donors to be invested in perpetuity to provide a permanent source of income. Endowment and similar net assets are primarily used to fund scholarships and professorships. 24

Notes to Consolidated Financial Statements June 30, 2016 and 2015 15. Lease Commitments and Contingencies The University is subject to certain legal proceedings and claims which arise in the normal course of operations. In the opinion of management, the ultimate outcome of these actions will not have a material effect on the University s financial position. The University leases property, plant and equipment. The annual operating minimum lease commitments for property rentals through the year 2021 are approximated below: (in thousands of dollars) Minimum Lease Commitments Year 2017 $ 31,542 2018 29,636 2019 27,889 2020 25,998 2021 $ 24,888 139,953 Total rental expense, including computer software licenses, for the University was $43,262,000 and $37,418,000 for the years ended June 30, 2016 and 2015, respectively. The University has entered into contracts for various construction, maintenance and renovation projects for which a balance of $59,631,000 is committed at June 30, 2016. 25

Notes to Consolidated Financial Statements June 30, 2016 and 2015 16. Cash Flow Statement The University has presented cash flows from operating activities in the statement of cash flows using the direct method. The following table reconciles total changes in net assets to net cash provided by or used in operating activities. (in thousands of dollars) 2016 2015 Cash flows from operating activities Change in net assets $ 3,222 $ 83,189 Adjustments to reconcile total changes in net assets to net cash provided by operating activities Depreciation and amortization 55,750 54,556 Accretion expense 1,172 1,140 Student loan cancellations 409 263 Allowance for bad debt 3,975 3,552 Loss on disposals of property, plant, and equipment 4,014 826 Contributions in kind (1,916) (2,250) Contributed securities (6,117) (7,487) Proceeds from sale of contributed securities 2,362 1,298 Contributions for long-term investments (11,054) (12,626) Interest and dividends restricted for long-term investments (606) (454) Net realized and change in unrealized loss (gain) on investments 29,973 (9,622) Unrealized loss on interest rate swap agreement 17,946 5,680 Net (gain) loss on sale of property (2,986) 766 Changes in assets and liabilities Decrease (increase) in receivables and prepaid assets 2,407 (23,902) Increase in accounts payable and accrued liabilities 3,266 7,770 Increase in deferred revenue and student deposits 7,828 7,651 Net cash provided by operating activities $ 109,645 $ 110,350 17. Subsequent Events The University has assessed the impact of subsequent events through October 24, 2016, the date of the audited consolidated financial statements were issued, and has concluded that there were no such events that require adjustment to the audited consolidated financial statements or disclosure in the notes to the audited consolidated financial statements. 26

Schedule of Expenditures of Federal Awards and Notes to Schedule of Expenditures of Federal Awards

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 Federal Program CFDA Direct Pass-Through Pass-Through Entity Research and Development Cluster DEPARTMENT OF AGRICULTURE Agriculture and Food Research Initiative (AFRI) 10.310 $ 32,899 - Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients $ $ 32,899 $ - Agriculture and Food Research Initiative (AFRI) 10.310-16,775 Louisiana State University 2012-67017-19293 16,775 - Total Department of Agriculture 32,899 16,775 49,674 - DEPARTMENT OF COMMERCE Department of Commerce 11.RD - 7,857 The Nature Conservancy Agreement dated 8/18/14 7,857 - NOAA Mission-Related Education Awards 11.008-25,443 Museum of Science - Boston 4743-NEU-01 25,443 - Education Quality Award Ambassadorship 11.013-552 Oregon State University X0175A-A 552 - Sea Grant Support 11.417-8,204 University of Massachusetts Boston S20100000013116 8,204 - Sea Grant Support 11.417-31,883 Woods Hole Oceanographic Institute A101191 31,883 - Fisheries Development And Utilization Research And 11.427 51,781-51,781 - Climate And Atmospheric Research 11.431 74,707-74,707 - Unallied Management Projects 11.454 108,705-108,705 15,771 Unallied Management Projects 11.454-27,287 University of Massachusetts 17563 27,287 - Measurement And Engineering Research And Standards 11.609 97,688-97,688 - Technology Innovation Program (TIP) 11.616 (6,931) - (6,931) - Total Department of Commerce 325,950 101,226 427,176 15,771 DEPARTMENT OF DEFENSE Department of Defense 12.RD 476,637-476,637 - Department of Defense 12.RD - (7,424) Draper Laboratory SC001-0000000857 (7,424) - Department of Defense 12.RD - (46,265) General Technical Services LLC GTS-S-14-164 (46,265) - Department of Defense 12.RD - 121,871 General Technical Services LLC GTS-S-15-015 121,871 - Department of Defense 12.RD - 46,766 Harvard University 133668 / W911NF-11-1-0036 46,766 - Department of Defense 12.RD - 59,499 Hewlett-Packard Company PO7000074811 59,499 - Department of Defense 12.RD - 417,798 Honeywell International Inc 4205573591 417,798 8,717 Department of Defense 12.RD - 3,913 Massachusetts Institute of Technology SUBCONTRACT NO: 5710003456 3,913 - Department of Defense 12.RD - 40,855 MIT Lincoln Labs PO #7000286979 40,855 - Department of Defense 12.RD - 41,420 MIT Lincoln Labs PO 7000287618 41,420 - Department of Defense 12.RD - 23,973 MIT Lincoln Labs PO# 7000249196 23,973 - Department of Defense 12.RD - 10,016 MIT Lincoln Labs PO# 7000295162 10,016 - Department of Defense 12.RD - 101,377 Power Film Inc W56KGU-14-C-0014 (PRIME) 101,377 - Department of Defense 12.RD - 4,324 Soartech 1029I.OI.NEU 4,324 - Department of Defense 12.RD - 1,081 Square One Systems Design Inc W909MY-15-C-20017 1,081 - Department of Defense 12.RD - (25,413) UES, Inc S-875-060-018 (25,413) - Department of Defense 12.RD - 33,335 University of California Santa Barbara N00014-15-1-2948 33,335 - Department of Defense 12.RD - 91,068 University of Southern California 10302956 91,068 - Basic And Applied Scientific Research 12.300 1,437,607-1,437,607 127,343 Basic And Applied Scientific Research 12.300-140,333 Boston University 4500000533 140,333 - Basic And Applied Scientific Research 12.300-48,372 Carnegie Mellon University 11401194 298656 48,372 - Basic And Applied Scientific Research 12.300-77,879 Massachusetts Institute of Technology 5710003147 77,879 - Basic And Applied Scientific Research 12.300-108,297 Purdue University 4104-65924 108,297 - Basic And Applied Scientific Research 12.300-149,522 SUNY Buffalo R951396 / FA8750-14-1-0074 149,522 - Basic And Applied Scientific Research 12.300-262,174 University of California Santa Barbara KK1243/FA8750-12-2-0101 262,174 - Basic And Applied Scientific Research 12.300-70,352 University Of Pennsylvania 555991 70,352 - Basic And Applied Scientific Research 12.300-42,359 University of Southern California 69722883/N00014-15-1-2550 42,359 - Basic And Applied Scientific Research 12.300-68,831 University of Southern California N0000141512468 68,831 - Basic And Applied Scientific Research 12.300-16,652 University of Southern California SUBAWARD NO. 137762 16,652 - Navy Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance 12.335-303,036 University of California Santa Barbara KK1407 303,036 - Basic Scientific Research - Combating Weapons Of Mass Destruction 12.351 309,880-309,880 - Basic Scientific Research - Combating Weapons Of Mass Destruction 12.351-99,545 The Ohio State University 60040869 99,545 - Basic Scientific Research - Combating Weapons Of Mass Destruction 12.351-46,905 University of Oklahoma 2014-35 46,905 - Basic Scientific Research - Combating Weapons Of Mass Destruction 12.351-96,605 Virginia Tech 432917-19357 96,605 - Military Medical Research And Development 12.420 520,375-520,375 69,121 The accompanying notes are an integral part of this schedule. 27

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 (continued) Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients Federal Program CFDA Direct Pass-Through Pass-Through Entity R&D Cluster - Department of Defense (Continued) Military Medical Research And Development 12.420-16,091 University of Southern California W911NF-04-D-0005 16,091 - Military Medical Research And Development 12.420-180,736 Worcester Polytechnic Inst 14-215454-01 180,736 - Basic Scientific Research 12.431 2,278,905-2,278,905 806,901 Basic Scientific Research 12.431-354,569 BBN Technologies Corp W911NF-09-2-0053 354,569 - Basic Scientific Research 12.431-164,858 University Of Minnesota A004135002 164,858 - Basic Scientific Research 12.431-941,030 Worcester Polytechnic Inst 15-215456-03-00 941,030 592,935 Basic, Applied, And Advanced Research In Science And Engineering 12.630 45,287-45,287 - Basic, Applied, And Advanced Research In Science And Engineering 12.630-34,033 Battelle Memorial Institute US001-0000428330 34,033 - Air Force Defense Research Sciences Program 12.800 953,370-953,370 - Air Force Defense Research Sciences Program 12.800-18,985 Andro Computational Solutions ACS-16-AF10-BT09-03 / FA8750 18,985 - Air Force Defense Research Sciences Program 12.800-32,895 BAE Systems Research 858424 32,895 - Air Force Defense Research Sciences Program 12.800-147,299 Intelligent Automation Inc. 2015-1 147,299 - Air Force Defense Research Sciences Program 12.800-59,796 LongShortWay Inc. 20150730 59,796 - Air Force Defense Research Sciences Program 12.800-80,257 Polestar Technologies Inc. G475P05348/FA8650-15-C-5095 80,257 - Air Force Defense Research Sciences Program 12.800-173,413 University of California Irvine 2015-3275 173,413 91,766 Air Force Defense Research Sciences Program 12.800-160,950 University of Southern California 56453236 160,950 - Language Grant Program 12.900 42,867-42,867 - Mathematical Sciences Grants Program 12.901 2,129-2,129 - Information Security Grant Program 12.902 114,999-114,999 - Research And Technology Development 12.910 1,483,846-1,483,846 427,634 Research And Technology Development 12.910-494,194 BAE Systems Research FA8750-14-C-002 494,194 - Research And Technology Development 12.910-295,948 Draper Laboratory HR0011-15-C-0138 295,948 - Research And Technology Development 12.910-166,681 Massachusetts Institute of Technology 5710003895 166,681 - Research And Technology Development 12.910-4,576 TracLabs T0058.01-T013 4,576 - Research And Technology Development 12.910-175,097 ViStology VIS-0065-2014 175,097 - Research And Technology Development 12.910-22,748 Winchester Technologies D15PC0009 22,748 - Total Department of Defense 7,665,902 5,973,212 13,639,114 2,124,417 CENTRAL INTELLIGENCE AGENCY Central Intelligence Agency 13.RD - (21,133) SUNY Buffalo R801648 (21,133) - Total Central Intelligence Agency - (21,133) (21,133) - DEPARTMENT OF JUSTICE Department of Justice 16.RD - 114,568 CSR #00001308 114,568 - Department of Justice 16.RD - 8,354 University of California Davis 2014034662-01 8,354 - Justice Research Development And Evaluation Project 16.560 289,063-289,063 234,621 Justice Research Development And Evaluation Project 16.560-63,667 Arizona State University 16-807 / 2014-IJ-CX0026 63,667 - Justice Research Development And Evaluation Project 16.560-9,309 Boston Children's Hospital 0000514961 9,309 - Justice Research Development And Evaluation Project 16.560-28,302 Boston University 4500001766 28,302 - Justice Research Development And Evaluation Project 16.560-56,406 Childrens Hospital Boston RSTFD0000674955 56,406 - Justice Research Development And Evaluation Project 16.560 - (1,113) Pennsylvania State University 4098NU-NIJ-0001 (1,113) - Criminal Justice Research And Development Graduate 16.562 20,403-20,403 - National Institute Of Justice W.E.B. Dubois Fellowship Program (B) 16.566 2,052-2,052 - Crime Victim Assistance/Discretionary Grants 16.582 543,260-543,260 187,976 Total Department of Justice 854,778 279,493 1,134,271 422,597 DEPARTMENT OF LABOR Department of Labor 17.RD - 973 Commonwealth Corporation 55001 973 - Total Department of Labor - 973 973 - NATIONAL AERONAUTICS AND SPACE ADMINISTRATION National Aeronautics and Space Administration 43.RD 40,485-40,485 - Aerospace Education Services Program 43.001 313,828-313,828 57,471 Aerospace Education Services Program 43.001-28,124 University of Texas R-14-0023/ NASA 28,124 - Aeronautics, Recovery Act 43.004 67,430-67,430 - Space Operations 43.007-12,111 Iowa State University 422-25-05A 12,111 - Space Technology 43.012 45,372-45,372 - Total National Aeronautics and Space Administration 467,115 40,235 507,350 57,471 The accompanying notes are an integral part of this schedule. 28

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 (continued) The accompanying notes are an integral part of this schedule. 29 Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients Federal Program CFDA Direct Pass-Through Pass-Through Entity NATIONAL ENDOWMENT FOR THE HUMANITIES Promotion Of The Humanities Division Of Preservation And 45.149 136,210-136,210 - Promotion Of The Humanities - Research 45.161 28,633-28,633 - Promotion Of The Humanities - Research 45.169 212-212 - Promotion Of The Humanities - Research 45.169-19,078 Univ of Maryland HT5007012 19,078 - Promotion Of The Humanities - Research 45.169-13,281 University of Illinois Urbana 2014-04776-02 13,281 - Total National Endowment for the Humanities 165,055 32,359 197,414 - NATIONAL SCIENCE FOUNDATION National Science Foundation 47.RD - 43,778 Massachusetts Clean Energy Center TASK ORDER 14-1 43,778 - Engineering Grants 47.041 3,901,901-3,901,901 504,897 Engineering Grants 47.041 - (2,095) AndrosRobotics LLC IIP-1346396 (2,095) - Engineering Grants 47.041-78,280 Georgia Institute of Technology CMMU1437362 78,280 - Engineering Grants 47.041-19,814 Keystone Tower Systems 1353507-1 / IIP-1353507 19,814 - Engineering Grants 47.041-35,000 NeuroFieldz Inc. NU-NSF-1-2015 35,000 - Engineering Grants 47.041-12,000 Tufts University 100857 12,000 - Engineering Grants 47.041-42,592 UCLA 0140-G SA031 42,592 - Engineering Grants 47.041-89,511 University Of Pennsylvania 566982/10051397/15160 89,511 - Engineering Grants 47.041-308,529 University of Tennessee A12-0044-S001-A01 308,529 - Mathematical And Physical Sciences 47.049 76,768-76,768 Mathematical And Physical Sciences 47.049 2,180,476-2,180,476 - Mathematical And Physical Sciences 47.049-42,349 Board of Regents, University of Nebraska, UNL 25-0521-0178-003 42,349 - Mathematical And Physical Sciences 47.049-17,030 Princeton University SUBAWARD NO. 00002101 17,030 - Geosciences 47.050 1,062,916-1,062,916 47,871 Geosciences 47.050-27,885 University of Massachusetts Amherst 14-007840 A 00 27,885 - Computer And Information Science And Engineering 47.070 7,744,743-7,744,743 579,131 Computer And Information Science And Engineering 47.070-27,140 Massachusetts Institute of Technology 5710003110 27,140 - Computer And Information Science And Engineering 47.070-71,377 Oregon Health and Science University 9007150_LEEN_NEU 71,377 - Computer And Information Science And Engineering 47.070-38,774 Purdue University SUB NO.: 4101-66765 38,774 - Computer And Information Science And Engineering 47.070-67,768 SUNY Buffalo CNS-1218717 67,768 - Computer And Information Science And Engineering 47.070-38,108 SUNY Buffalo R934576 38,108 - Computer And Information Science And Engineering 47.070-10,591 UARSC Auxillary & Research Services Copr SUBAWARD NO. 85865-DJ-02 10,591 - Computer And Information Science And Engineering 47.070 - (26,758) University of California San Diego 1441828 (26,758) - Computer And Information Science And Engineering 47.070-98,670 University of California San Diego 50080219 98,670 - Computer And Information Science And Engineering 47.070-76,248 University of California San Diego 64482659 76,248 - Computer And Information Science And Engineering 47.070-73,906 University Of Minnesota A001629602 / CCF-102971 73,906 - Computer And Information Science And Engineering 47.070-50,474 University of Washington CNS-1318396 50,474 - Biological Sciences 47.074 1,915,834-1,915,834 139,813 Biological Sciences 47.074-71,411 University of Florida UFDSP00011178 71,411 - Social Behavioral And Economic Sciences 47.075 804,298-804,298 23,668 Social Behavioral And Economic Sciences 47.075 - (85) Boston University 4500001285 (85) - Social Behavioral And Economic Sciences 47.075-31,225 Brown University SES-1338751 31,225 - Education And Human Resources 47.076 2,899,605-2,899,605 236,124 Education And Human Resources 47.076-17,340 Business Higher Education Forum 770-60 17,340 - Education And Human Resources 47.076-4,314 Montclair State University DUE-1245630-NEU 4,314 - Education And Human Resources 47.076-70,731 Technical Education Research Centers 33455 70,731 - Education And Human Resources 47.076-101,934 University of Massachusetts Amherst 12-006782-C-00 101,934 - Polar Programs 47.078 10,084-10,084 - International Science And Engineering (Oise) (B) 47.079 20,040-20,040 - International Science And Engineering (Oise) (B) 47.079-35,759 Arizona State University ASU NO. 12-814 35,759 - Trans-NSF Recovery Act Research Support 47.082 14,040-14,040 - Total National Science Foundation 20,630,705 1,573,600 22,204,305 1,531,504 DEPARTMENT OF VETERAN AFFAIRS Department of Veteran Affairs 64.RD 482,367-482,367 - Total Department of Veteran Affairs 482,367-482,367 - DEPARTMENT OF ENERGY Department of Energy 81.RD - - Abt Associates Inc #32064/40428-1 - Department of Energy 81.RD - 133,828 IBM Client Procurement Services 4913003803 133,828 - Department of Energy 81.RD - 34,247 Lawrence Livermore National Laboratory B615662 34,247 -

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 (continued) The accompanying notes are an integral part of this schedule. 30 Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients Federal Program CFDA Direct Pass-Through Pass-Through Entity R&D Cluster - Department of Energy (Continued) Department of Energy 81.RD - 13,242 Los Alamos National Laboratory 273101 13,242 - Department of Energy 81.RD - 73,486 Proton Energy Systems Inc. EC-015760-03 73,486 - Department of Energy 81.RD - 204,035 Temple University 254998 204,035 - Department of Energy 81.RD - 984 TVN Systems DE-AR0000262 984 - Department of Energy 81.RD - 472 University of California 6714901/DE-AC03-765F0098 472 - Basic Energy Sciences University And Science Education 81.049 937,447-937,447 48,059 Basic Energy Sciences University And Science Education 81.049-116,107 Purdue University 4105-65003 116,107 - Renewable Energy Research And Development 81.087 433,337-433,337 190,205 Renewable Energy Research And Development 81.087-35,392 Keystone Tower Systems EE0006736-1 35,392 - Fossil Energy Research And Development 81.089-3,934 Virginia Tech 429334-19357 3,934 - Electricity Delivery And Energy Reliability, Research, Development And Analysis (B) 81.122 - (3,104) Entergy Services Inc DE-OE0000375 (3,104) - Advanced Research And Projects Agency - Energy Financial Assistance Program 81.135-3,104 Boston University BU #45000001282/ DE-AR0000223 3,104 - Advanced Research And Projects Agency - Energy Financial Assistance Program 81.135-202,548 Massachusetts Institute of Technology 5710003863 202,548 - Advanced Research And Projects Agency - Energy Financial Assistance Program 81.135-231,746 SAFCell DE-AR0000495 231,746 - Total Department of Energy 1,370,784 1,050,021 2,420,805 238,264 DEPARTMENT OF EDUCATION National Institute On Disability And Rehabilitation 84.133 (26,642) - (26,642) - National Institute On Disability And Rehabilitation 84.133-13,440 Pennsylvania State University 5102-NU-USDE-0026 13,440 - Education Research, Development And Dissemination 84.305-58,784 University of Connecticut 61767 58,784 - Research In Special Education 84.324 248,038-248,038 - Total Department of Education 221,396 72,224 293,620 - DEPARTMENT OF HEALTH AND HUMAN SERVICES Department of Health and Human Services 93.RD (4,623) - (4,623) - Department of Health and Human Services 93.RD - 19,417 Bodimojo 143DK105623-01 19,417 - Department of Health and Human Services 93.RD - 74,994 Duke University 90RE5023-01-00 74,994 - Department of Health and Human Services 93.RD - 39,076 EveryFit HHSN261201300082C/EFNEU-SPADE 39,076 - Department of Health and Human Services 93.RD - 59,328 N2Biomedical NP00609 / 1R43DE025526-01 59,328 - Department of Health and Human Services 93.RD - 77,602 Spectral MD Incorporated HHSO100201300022C (CONTRACT) 77,602 - Department of Health and Human Services 93.RD - 47,293 TargaGenix Inc. Agreement dated 10/29/15 47,293 - Family Smoking Prevention and Tobacco Control Act Regulatory Research 93.077 85,349-85,349 70,055 Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED 93.104-77,422 Boston Public Health Commission FY16016683 77,422 - Biological Response To Environmental Health Hazards 93.113 887,583-887,583 183,982 Biological Response To Environmental Health Hazards 93.113-2,808 Silent Spring Institute 7473-NEU 5R01ES017514-04 2,808 - Biological Response To Environmental Health Hazards 93.113-61,803 Silent Spring Institute 7511-NU 5R01ES021726-03 61,803 - Oral Diseases And Disorders Research 93.121 13,447-13,447 - Injury Prevention And Control Research And State Grants 93.136-5,780 Rhode Island Hospital 1U01CE002531-01 5,780 - NIEHS Superfund Hazardous Substances - Basic Research and Education 93.143 2,721,503-2,721,503 979,100 National Aids Education And Training Centers 93.145-39,784 JSI Research and Training Institute, Inc 36904.2015.0002/ UF2HA026520 39,784 - Human Genome Research 93.172 297,379-297,379 13,864 Human Genome Research 93.172-185,441 Boston University Medical Center 1R01HG007746-01 185,441 - Human Genome Research 93.172-538,276 Dana Farber Cancer Institute 5P50HG004233-07 538,276 - Human Genome Research 93.172 - (310) University of California Santa Cruz 1R01HG006321-01/S0183595 (310) - Research Related To Deafness And Communication Disorders 93.173 716,887-716,887 123,084 Research Related To Deafness And Communication Disorders 93.173-124,135 Boston University 4500001270/1P50DC013207-04 124,135 - Research Related To Deafness And Communication Disorders 93.173-260,052 Oregon Health and Science University 1005685_NEU / 2R01DC009834-06A 260,052 - Health Services Research And Development Grants 93.226-67,271 Boston Medical Center R21HS022938 67,271 - Health Services Research And Development Grants 93.226 - (758) Boston University 5R01GM097320-04/ 4500000770 (758) - Health Services Research And Development Grants 93.226-11,623 Brigham & Women's Hospital 1P30HS023535-01 11,623 - Health Services Research And Development Grants 93.226-115,444 Duke University 2034864 / 1R01HS023821-01A1 115,444 - Health Services Research And Development Grants 93.226 - (11,445) Rutgers University 1R18HS023464-01 (11,445) - Mental Health Research Grants 93.242 409,699-409,699 17,563 Mental Health Research Grants 93.242-92,900 Anagin 1R43MH103936-01 92,900 - Mental Health Research Grants 93.242-26,336 Brown University R01MH099078 26,336 - Mental Health Research Grants 93.242-81,259 Massachusetts General Hospital 5R01MH093394-04/ #219390 81,259 - Mental Health Research Grants 93.242-135,751 University of Massachusetts Boston 1R01MH104400 135,751 - Mental Health Research Grants 93.242-20,774 Yale University R25MH087217 20,774 - Mental Health Research Grants 93.242-16,666 Yale University 5R24MH087217 16,666 - Substance Abuse And Mental Health Services-Projects Of Regional And National Significance (B) 93.243 855,374-855,374 409,334

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 (continued) Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients Federal Program CFDA Direct Pass-Through Pass-Through Entity R&D Cluster - Department of Health and Human Services (Continued) Substance Abuse And Mental Health Services-Projects Of Regional And National Significance (B) 93.243-21,096 Boston Children's Hospital RSTFD552059/1U79TI025389 21,096 - Substance Abuse And Mental Health Services-Projects Of Regional And National Significance (B) 93.243-62,714 Boston Public Health Commission TI-13-001 62,714 - Substance Abuse And Mental Health Services-Projects Of Regional And National Significance (B) 93.243-906 Florida International University 800006116-02UG 906 - Advanced Education Nursing Grant Program (B) 93.247 (7,791) - (7,791) - Occupational Safety And Health Program 93.262 935,430-935,430 262,423 Occupational Safety And Health Program 93.262-254,948 CPWR U60OH009762 254,948 - Occupational Safety And Health Program 93.262 - (15,588) CPWR U60OH009762/ 3004-007-02 (15,588) - Alcohol Research Programs 93.273 561,335-561,335 111,368 Alcohol Research Programs 93.273-14,789 UMASS Medical School WA00328784/RFS2016025 14,789 - Drug Abuse National Research Service Awards For Research 93.278 (188) - (188) - Drug Abuse And Addiction Research Programs 93.279 3,382,135-3,382,135 733,012 Drug Abuse And Addiction Research Programs 93.279-5,734 University of Connecticut DA07215 5,734 4,555 Drug Abuse And Addiction Research Programs 93.279 - (453) MAK Scientific, LLC HHSN271200900031C (453) - Drug Abuse And Addiction Research Programs 93.279-18,264 MAK Scientific, LLC R43DA036982 18,264 - Drug Abuse And Addiction Research Programs 93.279-117,022 McLean Hospital 5R01DA031020-05 117,022 - Drug Abuse And Addiction Research Programs 93.279-19,957 University of California San Diego 5R37DA019829-08/ PO 10322319 19,957 - Drug Abuse And Addiction Research Programs 93.279-58,799 University of California San Diego 63203137 58,799 - Drug Abuse And Addiction Research Programs 93.279-2,978 University of California-San Francisco SUB 9080SC 2,978 - Mental Health National Research Service Awards for Research Training 93.282 1,299-1,299 - Discovery And Applied Research For Technological Innovations To Improve Human Health 93.286 190,964-190,964 137 National Community Centers Of Excellence In Women'S Health (B) 93.290-139,651 Harvard School of Public Health 5U19OH008861-08 139,651 - Minority Health And Health Disparities Research 93.307-55,652 Boston Medical Center 5R01MD006213-04 55,652 - Minority Health And Health Disparities Research 93.307 - (139) University Of Minnesota H003876601/7R01MD006064-05 (139) - Trans-NIH Research Support 93.310 446,745-446,745 - Trans-NIH Research Support 93.310-228,439 Morgan State University 1UL1MD009605-01 228,439 - Research Infrastructure Programs 93.350-28,993 Tufts University 5UL1TR001964-03 28,993 - Research Infrastructure Programs 93.350-109,088 Tufts University UL1TR001064 109,088 - Nurse Education, Practice Quality and Retention Grants 93.359 317,654-317,654 39,588 Nursing Research 93.361 720,279-720,279 70,241 Nursing Research 93.361-2,820 Rhode Island Hospital 1R01NR014782-01 2,820 - Nursing Research 93.361-98,423 University of California San Diego 5R01NR013500-04 98,423 - National Center For Research Resources 93.389-28,601 University of Utah 5P41GM103545-16/ 10030962NEU16 28,601 - Cancer Cause And Prevention Research 93.393 1,244,286-1,244,286 327,431 Cancer Cause And Prevention Research 93.393-46,546 Roswell Park HRI 5R01CA164574-03/101-01 46,546 - Cancer Detection And Diagnosis Research 93.394 100,297-100,297 44,630 Cancer Detection And Diagnosis Research 93.394-112,821 Nemucore Medical Innovations Inc 5R01CA158881-05 112,821 - Cancer Detection And Diagnosis Research 93.394-114,770 Sloan Kettering Institute for Cancer Research BD518441/R01CA199673 114,770 - Cancer Treatment Research 93.395 479,254-479,254 - Cancer Treatment Research 93.395-135,412 Boston Medical Center 5R01CA158219-06 135,412 - Cancer Treatment Research 93.395-113,844 Dana Farber Cancer Institute 1235701 113,844 - Cancer Treatment Research 93.395-1,451 Virginia Commonwealth Univ PT112505-SC107210 1,451 - Cancer Biology Research 93.396 600,923-600,923 - Cancer Biology Research 93.396-54,855 Dana Farber Cancer Institute 1261501 54,855 - Cancer Biology Research 93.396-62,248 Dana Farber Cancer Institute 2R01CA050239-25 62,248 - Cancer Biology Research 93.398 371,142-371,142 24,552 ACL National Institute on Disability, Independent Living, and Rehabilitation Research 93.433-20,150 Pennsylvania State University 90RE5017-02-00 20,150 - Health Care Innovation Awards (HCIA) 93.610 289,433-289,433 - Trans-NIH Recovery Act Research Support 93.701 (486) - (486) - Cardiovascular Diseases Research 93.837 316,341-316,341 - Cardiovascular Diseases Research 93.837 - (2,064) Duke University 203-2139/203-1039 (2,064) - Cardiovascular Diseases Research 93.837-187,591 Rhode Island Hospital #701-5552/ 5R01HL110791-03 187,591 - Cardiovascular Diseases Research 93.837-93,409 Stanford University R01HL116448-02/60385549-106653 93,409 - Cardiovascular Diseases Research 93.837-224,395 UCLA 1R01HL1214437-02 224,395 - Cardiovascular Diseases Research 93.837-8,795 UMASS Medical School WA00413220/OSP2016177 8,795 - Cardiovascular Diseases Research 93.837-33,284 University of Chicago FP055673-A 33,284 - Cardiovascular Diseases Research 93.837-305,722 University of Massachusetts Lowell 7P50HL1050185-05 305,722 - Lung Diseases Research 93.838-118,658 Brigham & Women's Hospital 1R01HL118455-01A1 118,658 - Lung Diseases Research 93.838-147,997 Brigham & Women's Hospital 52R01HL089856-08 147,997 - Lung Diseases Research 93.838-4,283 Brigham & Women's Hospital 5T32HL007427-34 4,283 - The accompanying notes are an integral part of this schedule. 31

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 (continued) Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients Federal Program CFDA Direct Pass-Through Pass-Through Entity R&D Cluster - Department of Health and Human Services (Continued) Blood Diseases And Resources Research 93.839-63,571 JCVI R01GM103598 63,571 - Arthritis Musculoskeletal And Skin Diseases Research 93.846-26,988 Boston University Medical Center 4500002055 26,988 - Arthritis Musculoskeletal And Skin Diseases Research 93.846-73,303 Childrens Hospital Boston RSTFD0000641872 73,303 - Arthritis Musculoskeletal And Skin Diseases Research 93.846-17,080 Ohio State University 60041105-02 17,080 - Diabetes, Digestive, and Kidney Diseases Extramural Research 93.847 23,515-23,515 - Diabetes, Digestive, and Kidney Diseases Extramural Research 93.847-33,326 Childrens Hospital Boston #6628 /5R10DK091295-04 33,326 - Diabetes, Digestive, and Kidney Diseases Extramural Research 93.847-53,034 Childrens Hospital Boston 5R01DK098655-03 53,034 - Diabetes, Digestive, and Kidney Diseases Extramural Research 93.847 - (8,904) University of Massachusetts Amherst 2R01DK064902-06A1 (8,904) - Digestive Diseases And Nutrition Research 93.848-20,233 Bodimojo 2R44DK085748-04 20,233 - Clinical Research Related To Neurological Disorders 93.853 559,088-559,088 13,205 Allergy Immunology And Transplantation Research 93.855 1,003,836-1,003,836 243,041 Allergy Immunology And Transplantation Research 93.855-28,104 Columbia University 5U19AI067773-10 28,104 - Allergy Immunology And Transplantation Research 93.855-50,498 Dana Farber Cancer Institute 5U19AI091693-04 50,498 - Allergy Immunology And Transplantation Research 93.855-150,804 MMV 1R01AI090662-01 150,804 - Allergy Immunology And Transplantation Research 93.855-146,499 Iowa State University 2R01AI043957-16A1 146,499 - Allergy Immunology And Transplantation Research 93.855-359,729 St. Jude Children's Research Hospital 5R01AI110578-02 359,729 - Allergy Immunology And Transplantation Research 93.855-95,335 University Of Georgia 1R56AI099476-01/4708850 95,335 - Pharmacology Physiology And Biological Chemistry 93.859 1,900,792-1,900,792 214,399 Pharmacology Physiology And Biological Chemistry 93.859-153,671 Fred Hutchinson Cancer Research Center 0000838293 153,671 - Pharmacology Physiology And Biological Chemistry 93.859-158,501 Fred Hutchinson Cancer Research Center 0000838297 158,501 - Pharmacology Physiology And Biological Chemistry 93.859-89,274 Fred Hutchinson Cancer Research Center 0000841710 89,274 - Pharmacology Physiology And Biological Chemistry 93.859-2,703 Fred Hutchinson Cancer Research Center 1U54GM111274-01 2,703 - Pharmacology Physiology And Biological Chemistry 93.859-76,071 Mayo Clinic Rochester NOR-206535 76,071 - Pharmacology Physiology And Biological Chemistry 93.859-72,712 University of Utah 10039172-02 72,712 - Pharmacology Physiology And Biological Chemistry 93.859-120,801 University of Utah 10036794-NEU/2P41GM103545-17 120,801 - Child Health And Human Development Extramural Research 93.865 1,087,946-1,087,946 193,816 Child Health And Human Development Extramural Research 93.865-10,770 Archimage 4R44HD075521-02 10,770 - Child Health And Human Development Extramural Research 93.865-302,016 Indiana University BL-4644311-NEU 302,016 - Child Health And Human Development Extramural Research 93.865-47,334 N2Biomedical NP00621 / 1R43HD086043-01 47,334 - Child Health And Human Development Extramural Research 93.865-3,653 University of Southern California 1R01HD081346-01A1 3,653 - Aging Research 93.866 1,301,731-1,301,731 98,505 Aging Research 93.866-56,921 Brandeis University 1P30AG048785-56,921 - Aging Research 93.866-7,666 Brandeis University 1R01AG019714 7,666 - Aging Research 93.866-41,285 UMASS Medical School WA00369806/OSP2016116 41,285 - Vision Research 93.867 611,396-611,396 200,962 Vision Research 93.867-41,987 Duke University 5R01EY020868-04 41,987 - Vision Research 93.867-183,524 Ohio State University 1R01EY021553-01 183,524 - Vision Research 93.867-28,890 NECO 1R01EY023281-01 28,890 - Vision Research 93.867-5,655 Massachusetts General Hospital 5R21EY022387-02 5,655 - Medical Library Assistance 93.879 68,567-68,567 - Healthy Communities Access Program (Hcap) Demonstration Authority (B) 93.989 - (14,561) Oregon Health and Science University GEBSN0062_NU/3U01TW008163-05S (14,561) - Healthy Communities Access Program (Hcap) Demonstration Authority (B) 93.989-23,097 Oregon Health and Science University U19TW008163 23,097 - Total Department of Health and Human Services 22,488,521 7,727,153 30,215,674 4,378,847 DEPARTMENT OF HOMELAND SECURITY Department of Homeland Security 97.RD 2,317,310-2,317,310 498,112 Department of Homeland Security 97.RD - 137,374 Massachusetts Technology Collaborative MTC TASK ORDER 08-2 137,374 109,027 Centers For Homeland Security (B) 97.061 3,668,610-3,668,610 2,347,335 Centers For Homeland Security (B) 97.061-76,125 University of Illinois Urbana 2015-01722-06 / 2015-ST-061-CI 76,125 62,500 Centers For Homeland Security (B) 97.061-127,707 University of Illinois Urbana 2015-01722-07 127,707 19,442 Total Department of Homeland Security 5,985,920 341,206 6,327,126 3,036,416 US AGENCY FOR INTERNATIONAL DEVELOPMENT US Agency for International Development 98.RD 946-946 - US Agency for International Development 98.RD - 19,901 Tufts University AID046 / AID-OAA-C-16-00020 19,901 - Usaid Development Partnerships For University Cooperation And Development (B) 98.012 - (8,825) University of California San Diego 10322320 (8,825) - Total US Agency for International Development 946 11,076 12,022 - Total Research and Development Cluster 60,692,338 17,198,420 77,890,758 11,805,287 The accompanying notes are an integral part of this schedule. 32

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 (continued) Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients Federal Program CFDA Direct Pass-Through Pass-Through Entity Other Sponsored Programs DEPARTMENT OF COMMERCE Economic Development Technical Assistance 11.303 98,951-98,951 - Total Department of Commerce 98,951-98,951 - DEPARTMENT OF DEFENSE Department of Defense 12.U01-22,752 Draper Laboratory PO# 001-0001037649 22,752 - ROTC Language and Culture Training Grants 12.357-216,934 Institute of International Education 2012-GO-NE 216,934 - Military Medical Research And Development 12.420 87,262-87,262 - Total Department of Defense 87,262 239,686 326,948 - DEPARTMENT OF JUSTICE Legal Assistance For Victims (B) 16.524-32,245 Casa Myrna Vazquez Agreement dated 3/18/15 32,245 - Total Department of Justice - 32,245 32,245 - NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Technology Transfer 43.002 22,500-22,500 - Total National Aeronautics and Space Administration 22,500-22,500 - NATIONAL ENDOWMENT FOR THE HUMANITIES Promotion Of The Humanities - Professional Development 45.163 12,640-12,640 - Promotion Of The Humanities - Research 45.169 42,572-42,572 - Total National Endowment for the Humanities 55,212-55,212 - DEPARTMENT OF VETERANS AFFAIRS Department of Veteran Affairs 64.U02 466,303-466,303 - Subtotal Department of Veterans Affairs 466,303-466,303 - DEPARTMENT OF EDUCATION Training Interpreters for Individuals who are Deaf and Individuals who are Deaf-Blind 84.160 842,403-842,403 - Fund For The Improvement Of Postsecondary Education 84.116 453,198-453,198 - Total Department of Education 1,295,601-1,295,601 - DEPARTMENT OF HEALTH AND HUMAN SERVICES Nurse Anesthetist Traineeships 93.124 23,792-23,792 - Advanced Education Nursing Traineeships 93.358 349,661-349,661 - Total Department of Health and Human Services 373,453-373,453 - CORORATION FOR NATIONAL AND COMMUNITY SERVICE AmeriCorps 94.006 527,494 Massachusetts Service Alliance Mass Promise Fellowship 10-11 527,494 - Total Corporation for National and Community Service - 527,494 527,494 - DEPARTMENT OF HOMELAND SECURITY Homeland Security-Related Science, Technology, Engineering And Mathematics (Hs Stem) Career Development Program 97.104 78,002-78,002 - Total Department of Homeland Security 78,002-78,002 - Total Other Sponsored Programs 2,477,284 799,425 3,276,709 - The accompanying notes are an integral part of this schedule. 33

Schedule of Expenditures of Federal Awards for the year ended June 30, 2016 (continued) Pass-Through Entity Sponsor Number Total Expenditures Passed to Sub- Recipients Federal Program CFDA Direct Pass-Through Pass-Through Entity Student Financial Assistance Cluster DEPARTMENT OF EDUCATION Federal Pell Grant 84.063 11,172,846-11,172,846 - Federal Supplemental Educational Opportunity Grant 84.007 3,993,590-3,993,590 - Federal Work Study 84.033 3,452,110-3,452,110 - Federal Perkins Loan (Note 2) Outstanding Loans as of July 1, 2015 84.038 25,650,523-25,650,523 - New loans issued during 2016 84.038 5,329,618-5,329,618 - Administrative cost allowance 84.038 500,478-500,478 - Federal Direct Student Loan 84.268 146,333,760-146,333,760 - Total Department of Education 196,432,925-196,432,925 - DEPARTMENT OF HEALTH AND HUMAN SERVICES Health Professions Student Loan Program (HPSL) (Note 2) Outstanding Loans as of July 1, 2015 93.342 3,145,834-3,145,834 - New loans issued during 2016 93.342 414,804-414,804 - Nursing Student Loan Program (Note 2) Outstanding Loans as of July 1, 2015 93.364 2,411,688-2,411,688 - New loans issued during 2016 93.364 707,715-707,715 - Nurse Faculty Loan (Note 2) Outstanding Loans as of July 1, 2015 93.264 370,134-370,134 - New loans issued during 2016 93.264 55,845-55,845 - ARRA - Nurse Faculty Loan (Note 2) Outstanding Loans as of July 1, 2015 93.408 3,112-3,112 - New loans issued during 2016 93.408 - - - - Total Department of Health and Human Services 7,109,132-7,109,132 - Total Student Financial Aid Cluster 203,542,057-203,542,057 - Total Federal Award Expenditures $ 266,711,679 $ 17,997,845 $ 284,709,524 $ 11,805,287 The accompanying notes are an integral part of this schedule. 34

Notes to Schedule of Expenditures of Federal Awards June 30, 2016 1. Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") summarizes the expenditures of Northeastern University (the "University") under programs of the federal government for the year ended June 30, 2016. The information presented in the Schedule is presented on the accrual basis of accounting, which is in accordance with the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only the federal award activity of the University, it is not intended to and does not present the financial position, changes in net assets and cash flows of the University. The University applies its predetermined approved facilities and administrative rate when charging indirect costs to federal awards rather than the 10% de minimis cost rate as described in Section 200.414 of the Uniform Guidance. For purposes of the Schedule, federal awards include all grants, contracts and similar agreements entered into directly between the University and agencies and departments of the federal government and all sub-awards to the University by non-federal organizations pursuant to federal grants, contracts and similar agreements. Negative numbers in the Schedule represent adjustments to amounts reported in prior years in the normal course of business. CFDA numbers and pass-through numbers are provided when available. 2. Federal Student Loan Programs The Perkins Loan Program, the Health Professions Student Loan Program (HPSL), and the Nursing Student Loan Program are administered directly by the University and balances and transactions relating to these programs are included in the University s financial statements. The University is responsible for the performance of certain administrative duties with respect to federally guaranteed student loan program. The balances of loans outstanding under the programs administered directly by the University at June 30, 2016 consist of: Perkins Loan Program (CFDA #84.038) $ 25,953,017 HPSL (CFDA #93.342) 3,013,985 Nursing Student Loan Program (CFDA #93.364) 2,577,379 Nurse Faculty Loan (CFDA #93.264) 383,875 ARRA - Nurse Faculty Loan (CFDA #93.408) - Total outstanding loans $ 31,928,256 35

Part II Reports on Internal Control and Compliance

Report of Independent Auditors 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 Northeastern University We have audited, 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, the consolidated financial statements of Northeastern University (the University ), which comprise the consolidated statements of financial position as of June 30, 2016 and 2015, and the related consolidated statements of activities for the year ended June 30, 2016 and of cash flows for the years ended June 30, 2016 and 2015 and the related notes to the financial statements, and have issued our report thereon dated October 24, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the University 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 financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University's internal control. Accordingly, we do not express an opinion on the effectiveness of the University'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 entity's 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 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. PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us

Compliance and Other Matters As part of obtaining reasonable assurance about whether the University s 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 University 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 University s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. October 24, 2016 PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us

Report of Independent Auditors on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with the OMB Uniform Guidance To the Board of Trustees of Northeastern University Report on Compliance for Each Major Federal Program We have audited Northeastern University s (the University ) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the University s major federal programs for the year ended June 30, 2016. The University s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations and the terms and conditions of its federal awards applicable to its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of the University s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the University s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the University s compliance. Opinion on Each Major Federal Program In our opinion, the University complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us

Report on Internal Control Over Compliance Management of the University is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the University s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the University's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance 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 compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. December 2, 2016 PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us