Audit 320065

Title: NOTE 1: ORGANIZATION Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The Texas Access to Justice Foundation (Foundation), previously known as Texas Equal Access to Justice Foundation, is a nonprofit organization organized as a funding source for legal services to indigent Texans in civil matters. The Foundation’s funding is primarily generated by interest earned on lawyers’ trust accounts (IOLTA) throughout Texas and federal awards. On 13 December 1988, the Supreme Court of Texas signed an order converting the Texas Voluntary IOLTA program into a comprehensive program. As of 1 July 1989, Texas attorneys are ordered to participate in the IOLTA program if they maintain nominal and/or short-term funds in trust for clients. The Foundation is also responsible for administering the Basic Civil Legal Services Program, which sets aside certain court filing fees to provide legal services to indigent Texans. The Foundation receives an administration fee equal to 3.5% of all filing fees collected. In January 2002, the Supreme Court of Texas delegated to the Foundation the administration of the Crime Victims Civil Legal Services Program. Under this program, money from the Crime Victims Compensation Funds will be used to fund grants to Texas nonprofit organizations that provide victim-related civil legal services to victims, immediate family members of victims or claimants meeting certain income eligibility requirements. The Foundation is to be reimbursed for administration costs based on a negotiated quarterly percentage of the funds deposited into this program.

Title: NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The Foundation’s Board of Directors are appointed by either the Supreme Court of Texas or the State Bar of Texas, both state government entities. Therefore, the Foundation meets the definition of a governmental entity, and as such, is subject to accounting standards in conformity with U.S. generally accepted accounting principles applicable to governments promulgated by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA). The following is a summary of the significant accounting policies. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION The basic financial statements include both government-wide and fund financial statements. The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the Foundation’s activities. The government-wide financial statements are reported using the economic flow of resources measurement focus and the full accrual basis. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Foundation services are supported primarily by IOLTA remittances, as well as grants, contributions, federal awards, administration fees and investment income (see Note 1). The governmental fund financial statements provide reports on the financial condition and results of operations for governmental funds. The fund financial statements are accounted for on a spending or current financial resources measurement focus and the modified accrual basis of accounting. This basis of accounting recognizes revenues in the accounting period in which they become available and measurable, and expenditures in the accounting period in which the fund liability is incurred, if measurable. Under the modified accrual basis only current assets and current liabilities are included in the balance sheet. The Foundation considers all revenues available if they are collectible within 60 days after year-end. The accounts of the Foundation are organized in separate funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts. They are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with specific regulations, restrictions or limitations and aiding financial management. The following governmental fund types and account groups are maintained by the Foundation: General Fund The General Fund is used to account for all financial resources except those required to be accounted for in another fund. This fund is used to account for general operating and program expenses of the Foundation. Permanent Fund The Permanent Fund is used to account for the nonspendable endowment fund principal. BUDGETARY ACCOUNTING Although not legally required, the Foundation uses budgetary accounting under which a budget is approved by the Board. NET POSITION Net position represents the difference between assets and liabilities. Net position invested in capital and right of use (ROU) assets, net of related debt consists of capital and ROU assets, net of accumulated depreciation and amortization, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of, or lease liabilities related to, those assets. Net position is reported as restricted when there are limitations imposed on its use either through the enabling legislation adopted by the Foundation or through external restrictions imposed by creditors, grantors, laws, or regulations of other governments. When both restricted and unrestricted resources are available for use, it is the Foundation’s policy to use restricted resources first and then unrestricted resources as they are needed. RESTRICTED RESOURCES AND FUND BALANCE SPENDING Fund balances are classified on the balance sheet as nonspendable, restricted, committed, assigned, or unassigned. The Foundation maintains nonspendable, restricted, committed and unassigned fund balances. The nonspendable fund balance in the Permanent Fund represents the principal portion of the endowment that is required, by donors, to be maintained intact. The nonspendable fund balance in the General Fund represents prepaid expenses. The restricted fund balances represent balances required by grantors or donors to be used for particular purposes. Committed fund balances include amounts that can only be used for specific purposes determined by a formal action of the Board or adoption of an ordinance. Limitations imposed by commitments remain in place until formal Board action is taken to remove the limitation. The committed fund balance in the General Fund represents grant awards to others that have been approved by the Board but not yet expended and amounts reserved by the Board for future purposes yet to be determined. The unassigned fund balance represents assets available for any general purpose of the government. Endowment income is classified as restricted within the General Fund. The Foundation uses unassigned funds first as expenses are incurred. Restricted, committed, and/or assigned funds are then used with Board approval. ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions 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 these estimates. FEDERAL INCOME TAX STATUS The Foundation is exempt from Federal income taxes pursuant to the provisions of Section 501(c)(3) of the Internal Revenue Code, except to the extent it has unrelated business activities. Therefore, no provision has been made for Federal income taxes in the accompanying financial statements. CASH AND CASH EQUIVALENTS The Foundation considers cash and cash equivalents to be demand deposits, repurchase sweep accounts, short-term U.S. Treasury positions, commercial paper and investments with an original maturity of less than three months. The carrying amounts approximate fair value because of the short maturity of these instruments. INVESTMENTS Investments in marketable securities with readily determinable fair values and investments in debt securities are valued at their fair values in the Statement of Net Position. Certificates of deposits are recorded at cost. Texas Local Government Investment Pool (TexPool) represents an investment service authorized by the Texas Legislature and is under the direction of the State Comptroller. TexPool uses amortized cost rather than market value to report net assets to compute share price. CAPITAL ASSETS Furniture, fixtures and equipment greater than $500 are capitalized at cost, if purchased and fair value, if donated. Depreciation is provided by the straight-line method over an estimated useful life of three to seven years. LEASES The Foundation determines if an arrangement is or contains a lease at inception. Leases are included in right of use (ROU) assets and lease liability in the statement of financial position. ROU assets and lease liabilities reflect the present value of the future minimum lease payments over the lease term. Lease expense is recognized on a straight-line basis over the lease term. ACCRUED VACATION The Foundation’s policy allows employees to accrue vacation leave as earned up to a maximum of 23 to 67 days depending on the length of employment. PROGRAM REVENUE The Foundation considers IOLTA remittances, grants and contributions, and program administration fees to be program revenue.

Title: NOTE 3: GRANTS AND ACCOUNTS RECEIVABLE Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate IOLTA remittances $8,147,833 Federal awards 833,201 Accrued interest 500,454 BCLS fees and other 150,742 $9,632,230

Title: NOTE 4: RISK MANAGEMNT Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The Foundation is exposed to various risks of loss related to torts, theft and destruction of assets, errors and omissions, injuries to employees, natural disasters, etc. The Foundation maintains commercial insurance coverage for these types of risks.

Title: NOTE 5: DEPOSITS AND INVESTMENTS Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The Foundation has adopted an investment policy in accordance with Chapter 2256, Texas Government Code, the Public Funds Investment Act. The Foundation’s investment objectives are to pursue the safety of principal, maintenance of adequate liquidity, ensure public trust, and to earn the optimum yield. The Foundation is authorized to invest in financial institution deposits that are guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Share Insurance Fund, or fully collateralized by a letter of credit, fully collateralized repurchase agreements, local government investment pools, certain government money market mutual funds, and various obligations of federal and state governments, its agencies or instrumentalities, including other obligations guaranteed or insured by such governments. At year-end, the Foundation held $32,813,054 in certificates of deposits in amounts greater than FDIC insurance. These certificates of deposits were fully collateralized by securities held by the pledging financial institution. The investment in TexPool plus accrued interest may be redeemed by the Foundation at any time without restriction. At 31 December 2023, the weighted average days to maturity was 38 days. TexPool investments are carried at amortized cost, which approximates fair value. TexPool investments consist exclusively of U.S. government securities, repurchase agreements collateralized by U.S. government securities, and AAA-rated no-load money market mutual funds. Cost Fair Value Government sponsored entities debt securities $62,402,000 $61,662,047 U.S. Treasury notes 12,810,000 12,644,810 Certificates of deposits 34,856,669 34,856,669 TexPool 7,918,865 7,918,865 U.S. Treasury bonds 2,700,000 2,592,995 Money market sweep 826,305 826,305 $121,513,839 $120,501,691 Amount Quoted Prices In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Government sponsored entities debt securities $61,662,047 $0 $61,662,047 $0 U.S. Treasury notes 12,644,810 12,644,810 0 0 U.S. Treasury bonds 2,592,995 2,592,995 0 0 $76,899,852 $15,237,805 $61,662,047 $0 The fair value of Level 2 investments is based on quoted market prices in active markets as well as valuation methodologies using discounted cash flows and observable credit ratings. INTEREST RATE RISK Interest rate risk is the potential for a decline in market value due to rising interest rates. In compliance with the Foundation’s Investment Policy, the Foundation minimized the interest rate risk in the portfolio by limiting the weighted average maturity to less than 2 years and restricting the maximum allowable maturity to five years; structuring the investment portfolio so that securities matured to meet cash requirements for ongoing operations and grant disbursements; monitoring credit ratings of portfolio positions to assure compliance with rating requirements imposed by the Public Funds Investment Act; and investing operating funds primarily in shorter-term securities, deposits, and government investment pools. As of 31 December 2023, the Foundation had the following investments and maturities: Investment Type Fair Value Less than 1 year 1 to 5 years Government sponsored entities $61,662,047 $25,787,644 $35,874,403 U.S. Treasury notes 12,644,810 12,644,810 0 U.S. Treasury bonds 2,592,995 0 2,592,995 $76,899,852 $38,432,454 $38,467,398 CREDIT RISK Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the Foundation. The quality ratings of investments as described by nationally recognized statistical rating organizations at 31 December 2023 are as follows: Item Amount Rating Agency TexPool $7,918,865 AAAm S&P Government sponsored entities: Federal Farm Credit Bank $17,835,622 AA+/A-1+ S&P Federal Home Loan Bank $34,465,012 AA+ S&P Federal Home Loan Mortgage Corporation $2,808,924 AA+ S&P Federal Agriculture Mortgage Corporation $6,552,489 Not rated CONCENTRATION OF CREDIT RISK Concentration of credit risk is the risk of loss attributed to the magnitude of the Foundation’s investment in a single issuer. Investments issued or explicitly guaranteed by the U.S. government and investments in mutual funds, external investment pools (TexPool) and other pooled investments are excluded from disclosure of concentration of credit risk. Concentrations of investments in any one issuer of greater than 5% are as follows: Item Amount % of total investments Government sponsored entities: Federal Home Loan Bank $34,465,012 29% Federal Farm Credit Bank $17,835,622 15% Federal Agricultural Mortgage Corporation $6,552,489 5%

Title: NOTE 6: CAPITAL ASSETS Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate Beginning Balance Additions Deletions Ending Balance Furniture and equipment $85,327 $14,458 $0 $99,785 Accumulated depreciation (70,200) (11,717) 0 (81,917) $15,127 $2,741 $0 $17,868

Title: NOTE 7: OFFICE LEASE Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The Foundation has a lease for office space that expires 30 June 2030. The lease has fixed monthly payments that adjust annually. For the year ended 31 December 2023, total lease expense was approximately $129,000. The future minimum payments due under this agreement, as amended, are as follows: Principal Interest Total 2024 $58,177 $13,949 $72,126 2025 62,624 11,986 74,610 2026 67,218 9,876 77,094 2027 71,970 7,614 79,584 2028 76,878 5,196 82,074 2029-2030 124,551 2,904 127,455 $461,418 $51,525 $512,943 Additionally, the Foundation is obligated for common area maintenance costs, which are estimated to be approximately $47,000 annually. Right of use assets and the related lease liability associated with the office lease are as follows: Beginning Balance Additions Deletions Ending Balance Right of use asset - leases $564,978 $0 $0 $564,978 Accumulated amortization (58,985) 0 (60,668) (119,653) $505,993 $0 ($60,668) $445,325 Beginning Balance Additions Deletions Ending Balance Lease liability $515,283 $0 ($53,865) $461,418 Less: current portion (57,373) $404,045

Title: NOTE 8: DEFINED BENEFIT PLAN AND POST-EMPLOYMENT HEALTH CARE Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate All of the Foundation’s employees are paid through the Bar. The Bar participates in a defined benefit pension plan covering its employees through the Employees Retirement System of Texas. Employees are required to contribute 9.6% and the Foundation contributes 9.8% of covered salaries (reimbursed to the Bar). The Foundation contributed a total of approximately $106,000 in 2023. Retirement benefits vest after 5 years of creditable service. Employees hired before 1 September 2009 may retire at age 60 with 5 years of service, or at any age when the combination of age and service total 80 with a minimum of 5 years of service credit. Employees hired after 1 September 2009 may retire at age 65 or above with 10 years of service, or at any age when the combination of age and service total 80 with a minimum of 10 years of service credit. Post-employment health care and life and dental insurance benefits plans are also available to Bar employees. During 2023, the Foundation contributed (reimbursed to the Bar) a total of approximately $18,000 for these post-retirement insurance benefits. Additional information regarding the plans is available from the Employees Retirement System of Texas.

Title: NOTE 9: ADJUSTMENTS TO CONVERT FUND STATEMENTS TO GOVT WIDE Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate Governmental funds change in fund balance $66,204,290Capital outlay 14,458 Depreciation expense not included in the fund statements (11,717) Amortization of right of use asset is not reported in fund statements (6,803) Change in accrued leave is not reported in the fund financial statements (9,964) Government-wide change in net position $66,190,264 Governmental funds fund balance $128,820,312 Capital assets not recorded in the fund statements 17,868 Right of use assets not recorded in the fund statements 445,325 Long-term lease liability is not reported in the fund statements (461,418) Accrued leave not reported in the fund financial statements (142,839) Government-wide net position $128,679,248

Title: NOTE 10: NET POSITION/FUND BALANCES Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate Restricted Net Position and Fund Balance: Donor-restricted for grant awards $3,163,299 Jamail Endowment (See Note 11) 1,061,901 Investment earnings on endowment funds (see Note 11) 159,337 4,384,537 Committed Fund Balance: Grants awarded for 2024-2025 $23,917,953 Reserved for future use determined by the Board 21,697,510 45,615,463 Total Restricted and Committed Fund Balances $50,000,000

Title: NOTE 11: PERMANENT FUND-JAMAIL ENDOWMENT Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The Foundation established a permanent endowment fund to provide a stable source of support for Legal Aid for Veterans. The endowment funds are permanently restricted as per the donors’ request. The Board of Directors of the Foundation have interpreted the Texas Uniform Prudent Management of Institutional Funds Act as requiring the preservation of the fair value of the original gift as of the date of the contribution, absent any explicit donor stipulation to the contrary. Thus, donor contributions to the permanent endowment fund are reported in the nonspendable fund balance. The undistributed earnings from the fund are restricted by the donor to be used for Legal Aid for Veterans. Return Objective and Risk Parameters and Strategies Employed for Achieving Objectives Endowment funds are invested with the Foundation’s other available cash in investment vehicles deemed appropriate under the Public Funds Investment Act (PFIA), which can be found in the Texas Government Code Chapter 2256. Return objectives include producing a rate of return that allows for maximum support for Legal Aid for Veterans, along with prudent management of investments, preservation of principal and potential for long-term asset growth. Spending Policy and How the Investments Objective Relate to Spending Policy Earnings on the endowment are available to be distributed upon approval by the Foundation’s Board of Directors. To date, the Foundation has not requested any distributions from the endowment funds. Following are the changes in the endowment fund for the year ended 31 December 2023: Permanent Fund (Nonspendable) Endowment, beginning of year $1,001,201 Contributions 60,700 Endowment, end of year $1,061,901

Title: NOTE 12: STUDENT LOAN REPAYMENT ASSISTANCE PROGRAM LIABILITY Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The Foundation administers the Student Loan Repayment Assistance Program (the Program). The Program provides qualified attorneys working for qualified nonprofit organizations assistance in repaying their student loans. In order to qualify for the program, participants cannot earn more than a set threshold, must work for a qualifying nonprofit organization, and cannot have loans in default. Funding for the Program is provided from the State Bar of Texas, and paid out quarterly. These are considered pass-through funds, therefore, they are not recorded as revenue or expense.

Title: NOTE 13: STATE BAR OF TEXAS Accounting Policies: TAJF 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: N Rate Explanation: TAJF did not elect to use the 10% de minimis cost rate The State Bar of Texas (Bar) pays for various expenses incurred by the Foundation, including postage, printing, salaries and fringe benefits expenses. The Foundation usually reimburses the Bar for these expenses on a monthly basis. During 2023, the Bar billed the Foundation for approximately $1,402,000 related to these expenses. At 31 December 2023, the Foundation owed $232,683 to the Bar.