National Trust for Historic Preservation and its Subsidiaries and Affiliates Consolidated Financial Statements, Supplemental Schedules and Independent Auditor’s Report Years Ended June 30, 2018 and 2017 The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee. National Trust for Historic Preservation and its Subsidiaries and Affiliates Consolidated Financial Statements, Supplemental Schedules and Independent Auditor’s Report Years Ended June 30, 2018 and 2017 National Trust for Historic Preservation and its Subsidiaries and Affiliates Contents Independent Auditor’s Report 3-4 Consolidated Financial Statements Consolidated Statements of Financial Position 5 Consolidated Statements of Activities 6-7 Consolidated Statements of Functional Expenses 8-9 Consolidated Statements of Cash Flows 10 Notes to Consolidated Financial Statements 11-41 Supplemental Schedules Consolidating Statement of Financial Position 42 Consolidating Statement of Activities 43 2 Tel: 703-893-0600 8401 Greensboro Drive Fax: 703-893-2766 Suite 800 www.bdo.com McLean, VA 22102 Independent Auditor’s Report The Board of Trustees National Trust for Historic Preservation and its Subsidiaries and Affiliates Washington, D.C. We have audited the accompanying consolidated financial statements of the National Trust for Historic Preservation and its Subsidiaries and Affiliates (the Trust), which comprise the consolidated statements of financial position as of June 30, 2018 and 2017, and the related consolidated statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the consolidated financial statements of the National Trust Community Investment Corporation (NTCIC), a wholly-owned subsidiary which constitutes $15,933,985 and $11,276,472 of total consolidated assets as of June 30, 2018 and 2017, respectively and $11,831,719 and $11,466,075 of total consolidated operating revenues for the years ended June 30, 2018 and 2017, respectively. Those statements were audited in accordance with accounting principles generally accepted in the United States of America, and were audited by other auditors, whose report has been furnished to us. Our opinion, insofar as it relates to the amounts included for NTCIC, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the 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 the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. 3 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, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the National Trust for Historic Preservation and its Subsidiaries and Affiliates as of June 30, 2018 and 2017, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating statement of financial position as of June 30, 2018 and consolidating statement of activities for the year ended June 30, 2018 are presented for purposes of additional analysis and are 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 information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. December 14, 2018 4 Consolidated Financial Statements National Trust for Historic Preservation and its Subsidiaries and Affiliates Consolidated Statements of Financial Position June 30, 2018 2017 Assets Current assets: Cash and cash equivalents $ 7,767,892 $ 7,029,995 Short-term investments (notes 8 and 9) 4,246,036 4,256,499 Accounts receivable 4,844,047 3,636,976 Contributions receivable, current (note 4) 8,327,128 6,451,634 Merchandise inventory 443,944 447,868 Prepaid expenses and other assets 1,243,306 1,115,186 Donated properties held for resale - 250,000 Total current assets 26,872,353 23,188,158 Noncurrent investments: (notes 8, 9, and 10) Revolving loan funds 32,182 541,018 Endowments and similar funds 250,952,996 245,765,841 Amounts held for others (note 8) 16,962,142 16,797,313 Other investments (notes 6 and 8) 18,440,505 14,770,210 Total noncurrent investments 286,387,825 277,874,382 Contributions receivable, net of current (note 4) 33,961,184 1,779,731 Deferred tax assets (note 1(p)) 356,033 472,370 Property and equipment, net (note 3) 17,405,501 12,488,307 Other long-term assets 784,529 694,185 Total noncurrent assets 338,895,072 293,308,975 Total assets $ 365,767,425 $ 316,497,133 Liabilities and net assets Liabilities Current liabilities: Accounts payable $ 9,526,799 $ 6,540,510 Accrued expenses 1,997,353 2,063,838 Deferred revenue, current 5,294,273 4,034,505 Notes payable, current (note 12) 8,528,758 2,527,248 Total current liabilities 25,347,183 15,166,101 Notes payable, net of current (note 12) 4,299,361 1,372,792 Deferred revenue, net of current 5,996,337 8,416,862 Amounts held for others (note 5) 16,962,142 16,797,313 Deferred rent 5,401,692 5,587,284 Other liabilities 1,809,108 1,845,493 Total liabilities 59,815,823 49,185,845 Commitments and contingencies (note 16) Net assets (note 13) Unrestricted 100,309,592 99,478,175 Temporarily restricted 87,688,782 81,710,960 Permanently restricted 117,953,228 86,122,153 Total net assets 305,951,602 267,311,288 Total liabilities and net assets $ 365,767,425 $ 316,497,133 See accompanying notes to consolidated financial statements. 5 National Trust for Historic Preservation and its Subsidiaries and Affiliates Consolidated Statements of Activities Temporarily Permanently Year ended June 30, 2018 Unrestricted Restricted Restricted Total Operating revenues, gains, and other support Grant income$ 2,571,691 $ - $ - $ 2,571,691 Contributions 24,008,452 12,480,405 30,991,143 67,480,000 Membership dues 1,899,666 - - 1,899,666 Admissions and special events 3,287,274 - - 3,287,274 Investment income (note 8) 10,804,301 2,708,256 2,463 13,515,020 Contract services 11,219,102 - - 11,219,102 Sales of articles 869,928 - - 869,928 Advertising 674,298 - - 674,298 Rental income 620,403 - - 620,403 Public service announcements 359,072 - - 359,072 Royalty income 454,601 - - 454,601 Miscellaneous 2,345,327 - 35,000 2,380,327 Net assets released from restrictions 11,646,538 (11,646,538) - - Total operating