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 auditee did not use the minimis cost rate
Texas Legal Services Center, Inc. (TLSC) is a corporation organized under the Nonprofit Corporation Act of the State of Texas. TLSC provides specialized assistance to advocates of low-income people. Additionally, it provides direct legal services to low-income people. The areas of specialized assistance are training, litigation support, and communications. TLSC is principally funded through grants from Texas Access to Justice Foundation (TAJF), and other state, federal and local grants in support of providing basic civil legal aid to low-income individuals.
ACTIVITY DESCRIPTIONS
Advocacy
TLSC represents low-income Texans before state administrative agencies that oversee medical, nutrition, cash assistance, and workforce development services. TLSC also represents low-income utility consumers in securing access to affordable energy and telephone rates, as well as offering litigation support through co-counseling, identification of expert witnesses, and (upon request) assistance with individual cases. TLSC also provides legal representation to victims of violent crimes and veterans.
legal Help Resources and Information
TLSC facilitates sharing of information among poverty law advocates. TLSC disseminates information on legal developments electronically and in paper form. TLSC maintains the Texas Law Help website with legal forms, pamphlets and information. TLSC also publishes pamphlets on topics such as elder law, public benefits, and nursing home law, all of which concern the legal services community. TLSC regularly prepares legal updates that appear on the Texas Law Help website.
Direct Client Services
The Legal Hotline for Texas is a telephone hotline, providing free legal advice and referrals on a broad range of cases for Texans age 60 and older and those who receive Medicare, including matters dealing with Medicare, Medicaid, health care billing, and other health law issues.
TLSC’s Housing Project (ERAP) assists low-income Texans with applying for rental assistance, and in negotiating with landlords to avoid eviction.
The South Central Pension Rights Project (SCPRP) helps individuals understand and exercise their pension and retirement benefit rights.
The Crime Victims Program provides direct legal assistance to victims of crime in Texas.
Legal Aid to Survivors of Sexual Assault (LASSA) assists sexual assault survivors with civil legal needs.
The Parenting Order Legal Line (POLL) is for Texas residents who are non-custodial parents to receive legal advice and brief legal services regarding child support and visitation.
The CPS Family Helpline offers free legal information to parents and family members about Child Protective Services (CPS). Attorneys help callers understand the CPS process, and the court procedures that are involved when CPS contacts their family to investigate child abuse or neglect.
CPS Family Helpline attorneys note special problems and help families contact a CPS ombudsman to resolve issues that fall outside of CPS’s procedures.
Texas Law Help provides free, online legal resources and legal information and advice to low-income Texans and operates 17 virtual legal clinics in rural counties without legal aid offices and provide limited scope representations to low- income Texans with family law matters.
The Virtual Court Assess Project provides legal information about civil legal maters and technical assistance for participating in virtual court hearings.
Medical-Legal Partnerships (MLPs) are a collaboration that produces better health outcomes by embedding attorneys and paralegals within healthcare teams to detect, address, and prevent health-harming legal needs of people and communities.
TLSC Veterans Program provides specialized legal assistance to veterans and their families including legal advice and representation in discharge upgrades.
The Legal Aid for Children’s Health & Security (LACHS) provide legal services interventions to produce successful and healthy outcomes for those individuals, their families, their communities, and the institutions
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 auditee did not use the minimis cost rate
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 TLSC 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.
INCOME TAXES
TLSC is an organization other than a private foundation exempt from Federal income taxes under IRS Code Section 501(c)(3). Therefore, no provision has been made for Federal income taxes in the accompanying financial statements.
TLSC’s policy is to record interest and penalty expense 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.
FIXED ASSETS
Fixed asset purchases of $5,000 and greater are recorded at cost. Contributions of fixed assets, other than software, valued at $5,000 and greater and contributed software with estimated useful lives greater than one year are recorded as support and fixed asset additions at their estimated fair value.
Depreciation on fixed assets is provided using the straight-line method over estimated useful lives of the respective assets, ranging from 3 to 5 years. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected as an increase or decrease in net assets without donor imposed restrictions. Maintenance and repairs are charged to expense and expenditures for improvements that extend the useful life of the assets are capitalized.
Fixed assets acquired with Interest on Lawyer’s Trust Accounts (IOLTA) and Basic Civil Legal Services (BCLS) funds are considered to be owned by TLSC while used in the program or in subsequently authorized programs. However, these funding agencies may retain a reversionary interest in these assets as well as the right to determine the use of any proceeds from the sale of property and equipment purchased with those funds.
LEASES
TLSC 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. TLSC 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.
ACCOUNTS AND GRANTS RECEIVABLE
TLSC has not recorded an allowance for uncollectible accounts because the receivables are considered to be 100% collectible. All receivables on the statement of financial position are due within the next fiscal year. TLSC estimates allowances for uncollectible accounts by evaluating the creditworthiness, the historical collections, and the aging of the accounts. Once an account is deemed
uncollectible, it is written off. Receivables are considered delinquent based on how recently payments have been received.
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.
FUNCTIONAL ALLOCATION OF EXPENSES
The financial statements report certain categories of expenses that are attributed to more than one program or supporting function. Therefore, some expenses require allocation on a reasonable basis that is consistently applied. The expenses that are allocated include personnel, communication, professional contracts and consultants, staff development, printing and publications, supplies, occupancy, business, which are allocated based on estimates of time and effort by personnel and travel, meals and entertainment which is allocated based on managements knowledge of the accounts.
SUBSEQUENT EVENTS
TLSC 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.
FEDERAL AWARDS
A significant portion of TLSC’s revenue is derived from cost reimbursable federal grants, which are conditioned upon certain performance requirements and/or the incurrence of allowable qualifying expenses. Amounts received are recorded as revenue when TLSC has incurred expenditures in compliance with specific contract or grant provisions. TLSC has contracts for cost reimbursable grants of $8,447,555 for which qualifying expenditures have not been incurred and accordingly have not been recognized at year-end.
Title: NOTE 3: 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 auditee did not use the minimis cost rate
TLSC 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. TLSC’s management believes that any liability for reimbursement which could arise as the result of these audits would not be material to the financial position of TLSC
Title: NOTE 4: 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 auditee did not use the minimis cost rate
Funding from one grantor accounted for 72% of TLSC’s total revenue and 82% of total receivables is due from four grantors as of and for the year-ended 31 August 2024.
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 auditee did not use the minimis cost rate
TLSC evaluated current contracts to determine which met the criteria of a lease. The ROU assets represent TLSC’s right to use the underlying assets for the lease term, and the lease obligations represent TLSC’s obligation to make lease payments arising from the leases. The ROU assets and lease obligations, all of which arise from an operating lease, were calculated based on the present value of future lease payments over the lease terms. A discount rate of 5% was applied to the lease to calculate the lease obligation based on the TLSC’s estimated incremental borrowing rate.
TLSC leases office space under an operating lease which will expire on 30 June 2025. The weighted average remaining term is 10 months.
Future maturities of lease liabilities are presented in the following table, for the years ending 31 August:
2025 $162,500
Less: present value discount (7,738)
$154,762
Total occupancy expense:
Operating lease cost $195,000
Proportionate share of basic costs 54,720
Other occupancy costs 50,339
$300,059
Supplemental cash flow information related to leases:
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows from operating leases $195,000
Title: NOTE 6: 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 auditee did not use the minimis cost rate
Furniture and equipment $797,305Website 154,131
Multimedia library 140,000
Kiosk computer and equipment 125,678
Software (includes $42,250 in progress not being depreciated) 123,150
Accumulated depreciation (1,021,492)
$318,772
Multimedia library and kiosk computer and equipment were purchased with grant funding. As such, the grantor has reversionary interest in the assets purchased with these funds.
Title: NOTE 7: 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 auditee did not use the minimis cost rate
Satisfaction of purpose restrictions during the year:
CyPres-Rural Texas Veterans with Disabilities $10,238
Family helpline 97,340
Expanding statewide legal helpline 127,500
$235,078
Title: NOTE 8: PENSION 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 auditee did not use the minimis cost rate
TLSC participates in a SEP IRA retirement plan under section 408(k) of the Internal Revenue Code which covers all employees meeting age and service requirements. Plan contributions are funded monthly by TLSC at 5-8% of eligible employee salaries. Employer contributions to the SEP IRA retirement plan for the fiscal year were $216,856.
Title: NOTE 9: 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 auditee 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 from the statement of financial position date, comprise the following:
Cash $3,781,950
Accounts receivable 5,682
Grants receivable 430,192
4,217,824
Less: amounts unavailable for general expenditure within one year (55,229)
$4,162,595
As a part of TLSC’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 TLSC’s operating accounts.
See Note 7 for additional details regarding the nature of donor imposed restrictions on assets that are not available for general expenditures within one year of the statement of financial position date.
Title: NOTE 10: CONTRIBUTED SERVICES
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 auditee did not use the minimis cost rate
TLSC receives donated services from a variety of unpaid volunteers including attorneys, law students, and paralegals. These volunteers provide guidance through various legal assistance programs offered by TLSC. Services valued at approximately $118,985 have not been recognized in the accompanying statement of activities, as they do not meet the requirements for recognition
Title: NOTE 11: FUNCTIONAL EXPENSE ALLOCATION
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 auditee did not use the minimis cost rate
Program Administrative Fundraising Total
Personnel $6,119,270 $141,680 $307,687 $6,568,637
Professional contracts and consultants
1,110,658
189,828
11,082
1,311,568
Occupancy 215,786 82,598 1,675 300,059
Business 107,598 47,788 1,050 156,436
Travel, meals and entertainment 109,023 1,448 0 110,471
Staff development 73,270 10,486 3,137 86,893
Communication 72,674 7,537 2,749 82,960
Supplies 64,818 2,218 553 67,589
Printing and publications 22,175 2,216 1,274 25,665
Client services 6,455 0 0 6,455
$7,901,727 $485,799 $329,207 $8,716,733