Title: NOTE 1: ORGANIZATION
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
The Wright House Wellness Center dba ASHwell (ASHwell) began operation in 1988 to address the health issues of persons living with HIV/AIDS. Although the initial program focused primarily on the needs of gay, white men living with HIV/AIDS, ASHwell has changed over the years to include and target those populations at greatest risk of contracting sexually transmitted diseases - people of color (especially men who have sex with men and women) and recreational drug users in the lower income areas of Austin, Texas. As medical treatment for HIV/AIDS has changed from a focus on delaying death to managing illness and improving quality of life and productivity, ASHwell’s services have changed to emphasize wellness strategies, treatment adherence, and disease prevention. In 2018, ASHwell opened clinic services to provide care and prescribe drugs for patients with HIV and STD at no charge. Revenues come from government awards, contributions, and the drug pricing program.
ASHwell’s programs and services include the following:
I. HIV Case Management
HIV Case Management activities include: Client intake and assessment; information and referral; assistance accessing community resources; social support provided by professional case managers and/or supervised interns. Goals of the HIV Case Management program are to assist clients to: access and maintain primary medical care, adhere to HIV medical treatment, maintain/increase quality of life, increase education and awareness of HIV/AIDS issues, identify and decrease barriers to services, increase continuity of care and coordination of services, and increase self- sufficiency, ultimately to the point where case management services are no longer needed.
II. HIV Prevention and Outreach
Outreach is done in all five counties in the greater Austin area. Linkage to care, education, referrals, and free condoms are provided. Basic needs backpacks are also provided to those that are homeless in the City of Austin.
III. Clinic
ASHwell is qualified to operate as a 340B provider under Section 340B(a)(4) of the Public Health Service Act, namely as both an STI/STD treatment and prevention provider as well as a Ryan White services provider. ASHWell provides medical care for PrEP (Pre-Exposure Prophylaxis to prevent HIV infection), HIV and HCV treatment, and STI/STD screening and treatment. All direct care services, including provider visits and testing, are provided at no charge. Additionally, team members work with health insurance and manufacturer programs to ensure clients receive the prescribed medications at no/low cost. Client eligibility is not dependent on ability to pay, legal status, etc. Unlike other agency programs, eligibility is NOT limited to the Austin Transitional Grant Area (TGA) (Travis, Williamson, Bastrop, Caldwell, and Hays counties).
Title: NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
BASIS OF ACCOUNTING
ASHwell prepares its financial statements on the accrual basis of accounting whereby revenues and expenses are recognized in the period earned or incurred.
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REVENUE RECOGNITION
Revenue and accounts receivable are recorded when earned. Revenue from drug pricing services is recognized when the services are performed. Revenue earned under governmental cost- reimbursement contracts is recognized as services are performed under the contracts, which is when the related costs have been incurred. ASHwell considers all receivables to be fully collectible; accordingly, no allowance for doubtful accounts has been recorded.
A significant portion of ASHwell’s revenue is derived from cost-reimbursable federal and local awards, which are conditioned upon certain performance requirements and/or the occurrence of allowable qualifying expenses. ASHwell was awarded cost-reimbursable grants of $427,108 that have not been recognized at 31 December 2023 because qualifying expenditures have not been incurred.
Contributions are recognized when cash, securities or other assets, or an unconditional promise to give is received. Conditional promises to give are not recognized until the conditions on which they depend have been substantially met.
FINANCIAL STATEMENT PRESENTATION
Net assets, revenues, gains, and losses are classified based on the existence or absence of donor or grantor imposed restrictions. Accordingly, net assets 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. 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.
FIXED ASSETS
Fixed assets are recorded at cost (or fair value if donated). ASHwell capitalizes fixed assets with a useful life of more than one year and a cost equal to or greater than $1,000. Depreciation is computed using the straight-line method based on the estimated useful life of the asset, ranging from 3 to 10 years.
FEDERAL INCOME TAXES
ASHwell is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, except on net income derived from unrelated business activities. ASHwell’s policy is to record interest and penalties related to income taxes as interest and other expense, respectively. At year-end, no interest or penalties have been or are required to be accrued. Additionally, no provision for federal income taxes has been made in the accompanying financial statements.
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ESTIMATES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
SUBSEQUENT EVENTS
ASHwell has evaluated subsequent events as of the date of the Independent Auditor’s Report, the date the financial statements were available to be issued.
LEASES
ASHwell 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. ASHwell 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 as rent payments are made.
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.
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. The expenses that are allocated include occupancy, which is allocated on a square footage basis, as well as personnel, payroll processing fees, supplies and equipment, and other, which are allocated on the basis of estimates of time and effort. Depreciation is recorded as administrative expenses. Travel and staff development, contracted services, advertising and marketing, HIV prevention and outreach, HIV case management, and clinic services expenses are allocated based on knowledge of individual expenses.
Title: NOTE 3: LINES OF CREDIT
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
ASHwell has a line of credit with a total available amount of $80,000. The line was executed on December 2022 and renewed on January 2024 with Frost Bank and is collateralized by all accounts, inventory and furniture and equipment. The line bears a variable interest rate and is currently at 10.25%. At year-end there was no amounts drawn on the line of credit.
ASHwell has a second line of credit with a total available amount of $175,000. The line was executed on July 2023 and is collateralized by all accounts, inventory and furniture and equipment. The line bears 8% interest at a variable rate, and is payable in 11 monthly installments of interest and one final installment of principal and interest until 5 August 2024. At year-end there was no amounts drawn on this line of credit.
Title: NOTE 4: FIXED ASSETS
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
Furniture and equipment $144,881
Leasehold improvements 452,391
Software 3,468
Accumulated depreciation (247,705)
$353,035
Title: NOTE 5: LEASES
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
ASHwell evaluated current contracts to determine which met the criteria of a lease. The ROU assets represent the ASHwell’s right to use the underlying assets for the lease term, and the lease obligations represent ASHwell’s obligation to make lease payments arising from the leases. The ROU assets and lease obligations, all of which arise from two operating leases, were calculated based on the present value of future lease payments over the lease terms. A discount rate of 3.25% was applied to both leases to calculate the lease obligation based on the ASHwell’s estimated incremental borrowing rate.
ASHwell leases two office spaces under operating leases that expire in March 2029 and a 3rd office space under an operating lease that expires in February 2025. The weighted average remaining term on these leases is 60 months.
Future maturities of lease liabilities are presented in the following table, for the years ending 31 December:
2024 $523,601
2025 438,371
2026 429,722
2027 440,498
2028 451,472
Thereafter 114,492
2,398,156
Less: present value discount (222,569)
Less: current portion (718,520)
Plus: Accumulated unpaid second floor rent 265,626
$1,722,693
For the two years ended 31 December 2023, ASHwell was unable to pay the scheduled operating lease obligation payments for the second floor office space amounting to $265,626, plus the related interest payments of $80,379 and operating expenses of $185,293. These amounts are recorded in operating lease obligations, accrued liabilities, and accounts payable, respectively, in the statement of financial position at year-end. ASHWell is working towards receiving formal forgiveness of the operating lease obligation, related interest, and the operating expenses from the landlord for the second floor lease commitment. If successful, this forgiveness would result in a gain of $531,298.
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As of 31 December 2023, the ROU assets related to the operating leases were as follows:
Cost $2,953,690
Less: accumulated amortization (870,799)
$2,082,891
Total occupancy expense:
Operating lease cost $525,665
Proportionate share of basic costs and overtime HVAC 227,760
Janitorial services, utilities, and other occupancy costs 97,846
$851,271
Supplemental cash flow information related to leases:
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from operating leases $310,545
Title: NOTE 6: CONCENTRATIONS
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
ASHwell received 11% of its total revenue from one governmental agency. The entire federal and local government awards receivable balance at year-end is due from this agency.
At year-end, cash deposits in financial institutions exceeded FDIC coverage by $1,466,305
Title: NOTE 7: CONTINGENCY
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
ASHwell receives grants for specific purposes that are subject to grantor review. Such reviews could result in a request for reimbursement by the grantor if unallowable costs are identified. Management believes all significant terms and conditions have been met
Title: NOTE 8: FAIR VALUE DISCLOSURES
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
Quoted Prices in Active
Markets for Identical Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Interest in undistributed net assets
held by Bingo Unit $60,642 N/A $60,642 N/A
The carrying value of the interest in the undistributed share of net assets held by Bingo Unit represents ASHwell’s proportionate share of the undistributed net assets of the Bingo Unit, as reported in the Bingo Unit’s unaudited financial statements.
Title: NOTE 9: NORTH LAMAR BINGO UNIT
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
In accordance with the Texas Charitable Bingo Enabling Act and the Texas Administrative Code, ASHwell began participation in the North Lamar Bingo Unit (Bingo Unit) with 3 other nonprofit
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organizations in late 2015. Additional organizations were added in 2016 and 2020. The 6 organizations equally share revenue, expenses and the net assets of the Bingo Unit. The “interest in undistributed net assets held by Bingo Unit” in the amount of $60,642 represents ASHwell’s interest in the net assets of the Bingo Unit as of year-end.
The 6 organizations have also authorized a designated agent to be responsible for the activities of the Bingo Unit. The Bingo Unit files quarterly reports with the Texas State Comptroller. The Bingo Unit is a high volume cash operation run entirely by the designated agent. ASHwell puts forth little or no effort into the operation and received quarterly distributions totaling $9,624 during the year. There was no change in the carrying value of the “interest in undistributed net assets held by Bingo Unit” recorded in the statement of financial position. Income from the Bingo Unit is subject to Federal income taxes as unrelated business income.
Title: NOTE 10: RETIREMENT PLAN
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
ASHwell provides a 401(k) defined contribution plan to its employees. ASHwell contributes a matching contribution of 4% to 5% of each eligible employee’s compensation to the plan. Contributions to the plan by ASHwell were $79,243 for the year.
Title: NOTE 11: LIQUIDITY AND AVAILABILITY
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of the statement of financial position date, comprise the following:
Cash $1,717,800
Federal and local government awards receivable 289,657
Accounts receivable 443,004
Less: amounts unavailable for general expenditure within one year due to
donor restrictions (127,545)
$2,322,916
As part of ASHwell’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 ASHwell’s operating accounts. See note 15 for additional information related to ASHwell’s net assets.
Title: NOTE 12: REVENUE FROM CONTRACTS WITH CUSTOMERS
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
Contract receivables consist of the ASHwell’s right to payment from customers for services that have been provided. The balances of contract receivables at 31 December 2023 and 2022 were $443,004 and $260,311, respectively.
The following table disaggregates ASHwell’s revenue based on the timing of satisfaction of performance obligations for the year ended 31 December 2023.
Performance obligations satisfied at a point in time $7,393,055
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Revenue recognized at a point of time includes fees from the drug pricing program, which are recognized at the date the service transfers to the customer. Typically, control of the service is deemed to transfer at the date at which the service is provided. Payment is typically due upon completion of the services. Transaction prices vary depending on the service provided
Title: NOTE 13: ADVERTISING COSTS
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
Advertising costs are expenses as incurred
Title: NOTE 14: NET ASSETS WITH DONOR RESTRICTIONS
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
Satisfaction of purpose restrictions during the year:
Capacity Building $179,955
Balances of net assets with donor restrictions at year-end:
Capacity Building $127,545
Title: NOTE 15: DRUG PRICING PROGRAM
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
During 2018, ASHwell began participating in the federal 340B drug pricing program. ASHwell operates a medical clinic at no cost to its patients. ASHwell’s nurse practitioner writes prescriptions and refers clinic patients to four contracted pharmacies (Avita, Walgreens, CVS/Wellpartner and SCL 340BCare Services), where patients purchase prescription drugs at a discounted price. The pharmacies bill the patient or the patients’ insurance for the prescription drug sale and collect payment for the sale. The expenses of the program are the cost of drugs sold and administrative fees that both the participating pharmacies and ASHwell earn.
Per terms of the contract with Avita, Avita sells the prescription drugs, pays for the cost of drugs sold, receives a pharmacy management fee, and remits the net revenue to ASHwell.
Per terms of the contracts with Walgreens, CVS/Wellpartner and SCL 340BCare Services, these pharmacies sell the prescription drugs, receive a pharmacy management fee, and remit the net revenue to ASHwell. ASHwell is billed for the cost of drugs sold, and the prescription drugs are shipped directly to the pharmacies. Additionally, ASHwell is billed an administrative fee by SCL 340BCare Services. ASHwell does not actually receive or distribute any prescription drugs.
(Continued next page)
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Activity for the program was:
Activity Avita Walgreens
SCL
340BCare
Services Wellpartner Total
Prescription drug
sales $15,568,581 $268,508 $3,363 $428,531 $16,268,983
Cost of drugs
sold paid by
pharmacy (6,825,606) 0 0 0 (6,825,606)
Pharmacy
management fees (1,934,899) (36,734) 0 (78,689) (2,050,322)
Drug program
revenue 6,808,076 231,774 3,363 349,842 7,393,055
* Administrative fees paid to SCL 340BCare
Services 0 0 (38,218) 0 (38,218)
$6,808,076 $231,774 ($34,855) $349,842
* Cost of drugs sold paid by ASHwell for pharmacies other than Avita (418,060)
$6,936,777
* (expense included in clinic services expense of $2,095,164 see note 17)
Title: NOTE 16: FUNCTIONAL ALLOCATION OF EXPENSES
Accounting Policies: Basis of Accounting: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
De Minimis Rate Used: N
Rate Explanation: The audit did not use the minimis cost rate
Total
Program Administrative Fundraising Total
Personnel $2,014,607 $863,567 $3,478 $2,881,652 $315,195 $10,321 $3,207,168
Clinic services 2,095,164 0 0 2,095,164 0 0 2,095,164
Occupancy 269,100 106,879 0 375,979 475,292 0 851,271
Contracted services 35,234 8,898 30,065 74,197 327,170 48,871 450,238
Supplies and equipment 125,768 21,264 0 147,032 12,801 411 160,244
Travel and staff development 20,011 16,206 0 36,217 27,540 14,707 78,464
Advertising and marketing 53,418 24 0 53,442 3,807 12,892 70,141
Communications 20,610 3,241 0 23,851 42,614 0 66,465
Depreciation 0 0 0 0 60,205 0 60,205
Payroll processing fees 31,366 0 0 31,366 2,791 0 34,157
Other 8,074 101,089 0 109,163 76,210 55,807 241,180
$4,673,352 $1,121,168 $33,543 $5,828,063 $1,343,625 $143,009 $7,314,697