Title: NOTE 1: ORGANIZATION
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
STARRY, Inc. (STARRY) is a nonprofit organization chartered in May 2001. STARRY’s primary mission is to support children, youth, and parents in crisis through services that protect, educate, and promote strong families. Program activities at STARRY include counseling services and foster care.
During 2023, operations for Northstar Counseling, a subsidiary for-profit organization, began to provide counseling services for individuals that do not meet federal program eligibility requirements while simultaneously supporting STARRY in their mission to provide sustainable services to children and families at no cost. Northstar Counseling provides fee for service Telehealth Counseling across the state of Texas. The 2023 financial activity for Northstar Counseling was not material to the financial statements and therefore, has not been consolidated.
Title: NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
BASIS OF ACCOUNTING
STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred.
ESTIMATES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. Net assets, revenues, expenses, gains, and losses are classified based on the existence or absence of donor imposed restrictions. Accordingly, net assets of STARRY and changes therein are classified and reported as follows:
Net Assets Without Donor Restrictions: Net assets available for use in general operations and not subject to donor (or certain grantor) restrictions.
Net Assets With Donor Restrictions: Net assets subject to donor (or certain grantor) imposed restrictions. Some donor imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Other donor imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. Donor imposed restrictions are released when a restriction expires, that is when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both.
SUBSEQUENT EVENTS
STARRY has evaluated subsequent events for disclosure through the date of the Independent Auditor’s Report, the date the financial statements were available to be issued.
INCOME TAXES
STARRY is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, except to the extent it has any unrelated business income. Accordingly, no provision for federal income taxes has been accrued.
CONTRIBUTIONS
Unconditional grants and contributions received are recorded at fair value on the date of the award as with donor restrictions or without donor restrictions depending on the existence and/or nature of any donor imposed restrictions. Conditional promises to give are not recognized until the conditions upon which they depend are substantially met.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from contracts with customers consists of federal and state fee for service contracts. Revenue from fee for service contracts is derived from contracts with various host sites to provide counseling sessions and foster care services. Revenue from these contracts is recognized at a point in time when the services are completed. Services are invoiced the month after completion and payment is typically received within 30 days. In general, revenue recognized does not have a significant financing component because payments terms are relatively short.
COST REIMBURSEMENT AWARDS
A significant portion of STARRY’s revenue is derived from cost-reimbursable federal and state awards, which are conditioned upon certain performance requirements and/or the incurrence of allowable qualifying expenses. Amounts received are recognized as revenue when STARRY has incurred expenditures in compliance with specific grant provisions. Amounts received prior to incurring qualifying expenditures are reported as unearned revenue in the statement of financial position. STARRY has contracts for cost reimbursable grants of $2,001,389 for which qualifying expenditures have not been incurred and accordingly have not been recognized at year end.
RECEIVABLES
STARRY considers all recorded receivables to be fully collectible. Accordingly, no allowance for doubtful accounts is required.
FUNCTIONAL ALLOCATION OF EXPENSES
The financial statements report certain categories of expenses that are attributed to more than one program or supporting function. Therefore, expenses require allocation on a reasonable basis that is consistently applied. Expenses that are identifiable to a program are allocated to that specific program. The expense categories that are allocated are payroll and related, technology, transportation and travel, communication, mail and postage, and other expenses, which are based on estimates of time and effort spent by personnel; occupancy, repairs and maintenance, and utilities, which are allocated based on usage of space; and professional fees, insurance, office supplies, and conferences and training which are based on knowledge of the individual accounts and transactions.
LEASES
STARRY determines if an arrangement is or contains a lease at inception. Leases are included in right of use (ROU) assets and operating lease obligations in the statement of financial position. ROU assets and lease obligations reflect the present value of the future minimum lease payments over the lease term. Operating lease expense is recognized on a straight-line basis over the lease term. STARRY does not report ROU assets and lease liabilities for its short-term leases (leases with a term of 12 months or less). Instead, the lease payments of those leases are reported as lease expense on a straight-line basis over the lease term.
Non-lease components, such as common area maintenance charges, are separated from lease components based on the terms of the related lease. Variable lease costs, such as insurance and property taxes, and non-lease components are expensed as incurred within the occupancy account.
Title: NOTE 3: CONCENTRATIONS
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
Funding from two government agencies accounted for 73% of total revenue and 92% of total receivables due at fiscal year end. Counseling services account for 64% of STARRY’s total revenue.
At year end, STARRY held deposits in excess of FDIC coverage of $1,116,473.
Title: NOTE 4: CONTINGENCIES
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
STARRY participates in a number of federal and state financial assistance programs. These programs are subject to financial and compliance audits by the grantors and regulatory authorities. The purpose of these audits is to ensure compliance with conditions relating to the granting of funds and other reimbursement regulations. Management believes that any liability for reimbursement which could arise as the result of these audits would not be significant.
Title: NOTE 5: RETIREMENT PLAN
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
STARRY participates in a defined contribution pension plan. The plan covers all employees who meet certain eligibility requirements. STARRY contributed approximately $43,000 to the plan during the fiscal year.
Title: NOTE 6: LIQUIDITY AND AVAILABILITY
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
Financial assets available for general expenditure within one year from the statement of financial position date, comprise the following:
Cash $1,366,415
Federal and state award receivables 582,114
Pledges and other receivables 49,800
1,998,329
Less: donor restricted for specific purpose restriction (93,806)
$1,904,523
As a part of STARRY’s liquidity management, it has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due. The policy is that monthly revenues are to cover monthly expenses. Monthly revenues and expenditures are deposited in and deducted from STARRY’s operating account.
Title: NOTE 7: REVENUE FROM CONTRACTS WITH CUSTOMERS
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS
The following table disaggregates STARRY’s revenue based on performance obligations satisfied at a point in time during the fiscal year:
Fee for service contracts-foster care $78,524
Fee for service contracts-federal and state awards 3,952,109
$4,030,633
NOTE 7: REVENUE FROM CONTRACTS WITH CUSTOMERS
CONTRACT BALANCES
Contract receivables consist of STARRY’s right to payment from customers for services that have been provided to the customers for counseling sessions and foster care services. STARRY had contract receivables from counseling sessions and foster care services of $309,202 at 31 August 2023 and $365,413 at 31 August 2022.
Title: NOTE 8: LEASES
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
STARRY evaluated current contracts to determine which met the criteria of a lease. The ROU asset represent STARRY’s right to use underlying assets for the lease term, and the lease obligation represents STARRY’s obligation to make lease payments arising from the lease. The ROU asset and lease obligation, all of which arise from an operating lease, were calculated based on the present value of future lease payments over the lease terms. The weighted average incremental borrowing rate applied to calculate the lease obligations was 4.48%.
STARRY’s operating leases consists of leases for office space located Central Texas and equipment leases that expire in fiscal 2024 through fiscal 2026. The weighted average number of remaining months under the leases is 28. One of STARRY’s leases, that expired in fiscal 2025, has an option to renew for a five year term. For the year ended 31 August 2023, total operating lease cost was approximately $672,000.
Future maturities of lease liabilities are presented in the following table, for the years ending 31 August:
2024 $337,926
2025 90,780
2026 33,040
Less: present value discount (66,627)
$395,119
As of 31 August 2023, ROU assets relating to the operating leases were as follows:
Cost $873,355
Less: accumulated amortization (413,401)
$459,954
NOTE 8: LEASES
Supplemental cash flow information related to leases:
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from operating leases $450,549
ROU assets recognized upon ASC 842 implementation:
Operating leases $873,355
Title: NOTE 9: NET ASSETS WITH DONOR RESTRICTIONS
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
Net assets subject to purpose restrictions at year end: Education on Healthy Child Development $56,250
Georgetown Family Resource Center 37,556
$93,806
Satisfaction of purpose restrictions during the year:
Education on Healthy Child Development $18,750
Georgetown Family Resource Center 75,112
$93,862
Title: NOTE 10: CHANGES IN ACCOUNTING PRINCIPLE
Accounting Policies: STARRY uses the accrual basis of accounting, which recognizes revenue when earned and expenses when incurred. This is regardless of when cash is paid or received for services.
De Minimis Rate Used: Both
Rate Explanation: STARRY elected to not use the de minimis cost rate for the FATHERHOOD: EFFECT Program or the Family and Youth Success Program
During the year, STARRY adopted Accounting Standards Update (ASU) 2016-02, Leases (ASC Topic 842) and subsequent amendments. ASC 842 affects all companies that enter into lease arrangements, with certain limited scope limitations exclusions. Under ASU 2016-02, an entity recognizes ROU assets and lease obligations on its statement of financial position for all leases with a lease term of more than 12 months. Short-term rentals under year-to-year leases or remaining lease terms of 12 months or less are exempt from being capitalized. In adopting the new lease standard, STARRY elected to use a transition method under which existing leases were measured and capitalized as of the date of adoption, 1 September 2022,
in lieu of applying the standard retrospectively. On 1 September 2022, STARRY recorded in its statement of financial position an ROU asset and a lease obligation for operating leases in the amount of $873,355.