Audit 357469

Title: NOTE 1: GENERAL STATEMENT AND 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 Organization: General Statement: Texas Rural Water Association (the Association), affiliated with the National Rural Water Association, is a nonprofit Texas corporation without capital stock and is exempt from Federal taxes under Internal Revenue Code 501(c)(6). The Association is a voluntary trade organization of rural water supply corporations, water districts, municipal water systems, and other organizations associated with providing water to rural areas within the State of Texas. The Association provides a variety of services to its members, including technical assistance from state and federal contracts, educational programs in the form of classroom and online training, area meetings, various workshops and conferences, legal assistance, and a bi-monthly magazine that allows members to stay current on water related news and associated activities. Funding for the Association is provided primarily by federal and state contracts, membership dues and conferences, and course fees. Texas Rural Water Foundation (the Foundation) is a separate nonprofit organization established as a 501(c)(3) charitable corporation exempt from federal income taxes. The Foundation is a supporting organization of the Association with a mission to strengthen and advance the water and wastewater industry and to support and expand on the work of the Association. The Foundation is governed by a separate Board of Directors comprised of the current Association Board President and a minimum of four other members of the Association Board of Directors. Funding is provided primarily by donations. Summary of Significant Accounting Policies: Principles of Consolidation: The consolidated financial statements include the accounts of the Association and the Foundation because the Association has both control and an economic interest in the Foundation. All significant intercompany accounts and transactions have been eliminated in consolidation. The entities are collectively referred to as the Association within. Basis of accounting: The Association uses the accrual basis of accounting. Revenues are recorded as earned and expenses recorded as incurred. Dues are assessed in advance at the end of each calendar year based on the number of water meters reported voluntarily by the members. Since dues are voluntary, no allowance for doubtful accounts and no accounts receivable are recorded. Deferred dues are dues received in one fiscal year which are related to the following fiscal year. The Association receives grants from the Environmental Protection Agency (EPA) and the U.S. Department of Agriculture (USDA) through the National Rural Water Association (NRWA). Grants received by the Association are reflected as revenue as expenses are incurred subject to grant funding. The Association also receives money directly from contracts with the Texas Commission on Environmental Quality (TCEQ) and the Texas Water Development Board (TWDB). Trade accounts receivable are recorded when training classes and advertising have been provided to members and non-members. Trade accounts receivable are considered delinquent at 30 days past due and are charged off when management considers the account uncollectible. Property and Equipment: Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over estimated useful lives of 3 – 5 years for Furnishings, Equipment and Vehicles and 10 – 25 years for Buildings and Improvements. The Association capitalizes purchases of property and equipment with a useful life of more than one year and an original cost equal to or greater than $5,000. Grant, Contract and Other Receivables: Grant, contract and other receivables are reported at the amount management expects to collect on balances outstanding at year-end. Management closely monitors outstanding balances and writes off, as of year-end, all balances that are considered to be uncollectible. Cash and Cash Equivalents: Cash and cash equivalents consist of demand deposits and U.S. Treasury secured money market mutual funds. The Association also considers other highly liquid investments with an initial maturity of three months or less to be cash equivalents. Investments: Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position in accordance with ASC Topic 820, “Fair Value Measurement” (ASC 820). Fair value is determined based on quoted market prices, observable inputs, and unobservable inputs. Unrealized gains and losses are included in the change in net assets. Realized gains and losses are computed by utilizing either the first in, first out basis or the average cost. Federal Income Taxes: The Association is exempt from Federal income taxes under Internal Revenue Code (IRC) 501(c)(6) and the Foundation is exempt under IRC 501(c)(3). The Association files an Exempt Organization Business Income Tax return (Form 990-T) with the IRS to report its unrelated business taxable income. The Association’s policy is to record interest and penalties related to income taxes as interest and other expense, respectively. At December 31, 2024, no interest and penalties have been or are required to be accrued. Classification of Net Assets: The financial statement presentation follows the recommendations of the Accounting Standards Codification (ASC) Topic 958, “Not-for-Profit Entities,” where net assets are classified based on the existence or absence of donor or grantor-imposed restrictions. The net assets with donor restrictions are those donated to the legal defense fund (legal defense reserve) established for future contingencies, a building fund (building reserve) established for building repairs, a disaster relief fund, the Legacy Scholarship fund, and the Dwayne Jekel Scholarship fund. The net assets without donor restrictions are for use in general operations. The governing board has designated some of these net assets for an operating reserve and the other named reserve accounts in the consolidated statement of financial position. Revenue Recognition: Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09) requires the recognition of revenues in an amount that reflects the consideration which the Association expects to be entitled in exchange for goods or services. For these “exchange transactions”, the new model requires the identification of performance obligations included in contracts with customers, a determination of the transaction price, and an allocation of the price to those performance obligations. The Association can only recognize revenue when performance obligations are satisfied. For “non-exchange transactions”, revenues are recognized when earned regardless of when cash is received. The following table, and the discussion which follows, summarizes the Association’s revenues for the year ended December 31, 2024: Revenue Classification Exchange Non-Exchange Totals Federal contracts $ 0 $ 1,716,480 $ 1,716,480 State contracts 2,147,760 2,147,760 Membership dues 1,448,440 1,448,440 Conventions & conferences 687,362 687,362 Professional development & training 1,760,815 1,760,815 Contributions 333,079 333,079 Advertising 75,989 75,989 Other revenue from contracts with customers 392,206 392,206 Other 387,634 387,634 Total Revenues $ 6,512,572 $ 2,437,193 $ 8,949,765 State contracts: Revenues are recognized monthly based on the level of completed “assignments” received from TCEQ and the stipulated contractual reimbursement rates. Performance obligations for the state contracts are satisfied as services are rendered. The services provided under this contract include assessing, assisting, and improving the Financial, Managerial, and Technical capabilities of public drinking water systems and wastewater systems in Texas. The Association generally has a right to consideration in an amount that corresponds directly with the value to the customer of the Association’s performance completed to date and may recognize revenue in the amount to which the Association has invoiced and has elected to recognize as revenue for these services using the invoice practical expedient. The amounts are billed to the state agency one month in arrears. The amount earned is based on rates established in the contract for specific tasks and hourly rates for staff time. In late 2022, the Association was one of several contractors awarded a contract from the TWDB for a project titled Asset Management Program for Small Systems (“AMPSS”). Selected water and wastewater systems chose to receive services from one of the contractors and four chose to work with the Association. The Association provides these systems with tools to facilitate short, medium, and long-term planning, efficient operations and maintenance of infrastructure, sustainable use structures, and identification of funding opportunities. In 2024 the Association was awarded a new one year contract by the TWDB titled Water Utilities Technical Assistance Program (“WUTAP”), to perform technical assistance services in the form of review of existing operating procedures, guidance on financial, managerial and/or technical issues as needed, and to assist participating communities in identifying areas where potential improvements could be made. Membership dues: These revenues reflect both regular utility member dues and associate member dues. Member dues are generally assessed each December for the upcoming calendar year based on the number of water meters reported voluntarily by the members, subject to minimums and maximums established periodically by the Association. Member dues are payable by March 31st of the subsequent year. Membership benefits include legal services, advocacy, on-site assistance, emergency response assistance, training & education, publications, and various conference related activities. Associate member benefits include access rights to the Association’s online member directory, reduced pricing on exhibit booths, advertising discounts, and sponsorship opportunities. Since dues are voluntary, no allowance for doubtful accounts and no accounts receivable are recorded. Membership dues revenue is recognized ratably over the life of the membership, which is one calendar year. Deferred dues are dues received in one fiscal year which are related to the following fiscal year. Conventions and conferences: The Association hosts an annual convention and two other conferences each year at strategic locations throughout Texas, which provide members, exhibitors, and sponsors a unique training and networking opportunity. Attendees pay fees in advance, which are only recognized as revenue in the period in which the conference services are fully provided by the Association – generally at the conclusion of the event. Members receive discounted rates. To the extent any such fees are paid in a fiscal year prior to the event, they are recorded as deferred revenues. Professional development & training: The Association’s Professional Development & Training Department offers specialized training on topics such as operations, treatment, regulations, maintenance, operator certification and management skills in both an online and classroom format. Customers pay a fee in advance, which is only recognized as revenue in the period in which the training services are fully provided by the Association – generally at the conclusion of the class. Members receive discounted rates. To the extent any such fees are paid in a fiscal year prior to the event, they are recorded as deferred revenues. Advertising: Advertising revenues primarily reflect advertisements in the Association’s “Quench” publication, which is published six times each year and is distributed to all regular and associate members, as well as to other state associations. Advertising revenues are recognized upon the publication and release of each issue. Other fee revenue: • Field service revenues – The Association offers water and wastewater utility members a variety of services to help them optimize their systems or troubleshoot problems. These services include Geographic Information Systems (GIS) mapping, asset management, tank inspections, and UAV/Drone services. Revenue is recognized upon completion of the contractually-agreed services. • Eminent domain fees – Senate Bill 1812 by the 2015 Texas Legislature requires all entities with eminent domain authority to report specific information to the Texas Comptroller on a yearly basis. The Association earns a fee, which is discounted for members, for filing the members’ required annual report with the Texas Comptroller’s office. The report is required to be filed by February 1st each year. Revenue is recognized upon completion of the required filing for each member. • Publication sales – Primarily reflects the sale of operator certification manuals to customers. Revenue is recognized upon the shipment of the publications. • Partnership revenues – Primarily reflects collaborations with an entity involved in lending money to water or wastewater systems, which includes bridge loans for USDA Rural Development long-term project financing; and with an entity that provides various insurance products to water and wastewater systems. Revenues are recognized upon the completion of contractual deliverables, generally monthly or quarterly. In general, revenue recognized does not have a significant financing component because payments terms are relatively short. Determining a measure of progress requires management to make judgments that affect the timing of revenue recognized. The Association has determined that the above methods provide a faithful depiction of the transfer of goods or services to the customer. Federal contracts: A portion of the Association’s revenue is derived from cost-reimbursable federal contracts, which are conditioned upon certain performance requirements and/or the incurrence of allowable qualifying expenses. These contracts are identified as “conditional”. Amounts received are treated as nonexchange transactions and recognized as revenue when the Association has incurred expenditures in compliance with specific contract or grant provisions. The Association has received cost-reimbursable grants of $879,217 that have not been recognized at December 31, 2024, because qualifying expenditures have not yet been incurred. Receipt of these funds is contingent upon continued federal funding of the Federal Grant. Contributions: Reflects voluntary contributions to the Association’s legal fund, building fund, disaster relief fund, or to the Foundation. Since the contributions are voluntary, no allowance for doubtful accounts is recorded. Other revenue: consists of various nonexchange revenue streams including gains on dispositions of assets, and investment income. The revenue is recognized as earned regardless of when cash is received. Functional Expenses: The costs of providing various programs and other activities have been listed according to their nature and function in the consolidated statement of functional expenses. Some expenses require allocation on a reasonable basis that is consistently applied. The expenses that are allocated include depreciation, which is allocated based on other direct costs for each program, and personnel expenses, which are allocated based on amount of time spent on each program as documented by time sheets or logs. Individual expense transactions that relate entirely to a specific function are not allocated, but are recorded directly to that function. The Association’s functional expense cost categories consist of the following: State: Includes the activities related to the contracts with TCEQ, AMPSS, and WUTAP. Federal: Includes the activities relating to the federal funds contracts with NRWA and other pass through grantor agencies. Professional Development and Training: Includes the activities relating to the educational classes provided by the Association for operator certification credit. Executive Director, Legal and Legislative: Includes the activities relating to the legal and legislative services provided by the Association to its members. Membership: Includes the activities relating to all other member services provided by the Association including conferences, area meetings, seminars and publications. Management and General: Includes the general and administrative activities of the Association. Texas Rural Water Foundation: Includes the general and administrative activities of the Foundation, including the issuance of scholarship awards. Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events: The Association has evaluated subsequent events for disclosure through the date of the Independent Auditor’s Report, the date the consolidated financial statements were available to be issued. There have been no events that have occurred that would require adjustments to our disclosures in these Notes to Consolidated Financial Statements.

Title: NOTE 2: INVESTMENTS 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 Investments consisted of the following at December 31, 2024: Long Term: Certificates of deposit $101,272 Fixed Income funds 1,484,019 Equity funds 763,153 Total long-term investments $2,348,444 In April, 2021 the TRWA Board of Directors approved a revised Investment Policy, which expanded the list of authorized investment asset classes. The revised investment policy provides for minimum and maximum percentages to be invested in Fixed Income, Equities (including large-cap, small and mid-cap, and international), Other (primarily real estate investment trusts and commodities), and Cash and Money Market funds. The new Investment Policy was implemented in July of 2021. All investment income, including changes in the fair value of investments, is recognized as revenue in the statement of activities. Realized gains and losses reflect those investments actually sold. Unrealized gains or losses are differences in beginning of year fair value of the investment and the fair value of the investment as of the statement of financial position date, adjusted for any purchases and sales during the year.

Title: NOTE 3: FAIR VALUE MEASUREMENTS 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 The Association has determined that the only material assets and liabilities in the Association’s financial statements that are required to be measured at fair value on a recurring basis are the cash equivalents and marketable securities portfolio. The Association defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Association applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Association’s marketable securities portfolio consist of equity exchange traded products, fixed income exchange traded products, and Real Estate Investment Trust (“REIT”) exchange traded products and are reflected on our consolidated statement of financial position under the heading Investments. The following summarizes the fair value of our financial instruments at December 31, 2024: Money Market Funds and Certificates of Deposits are excluded, as they are recorded at amortized cost and not subject to fair value.

Title: NOTE 4: PROPERTY AND EQUIPMENT 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 Property and equipment consisted of the following at December 31, 2024: Building and improvements – under construction $4,359,780 Building – held for sale 505,242 Vehicles 1,248,382 Furnishings and equipment 684,692 Accumulated depreciation (1,796,935) 5,001,161 Land 1,942,950 $6,944,111 Included in total fixed assets are four mobile generators with an original cost of $144,008 purchased primarily with USDA grant resources. As such, the grantor has a reversionary interest in the generators purchased with these funds. On April 10, 2024 the Association completed the acquisition of new office space in an existing office condominium project located in Austin, Texas. The new downtown Austin office facility consists of approximately 11,000 square feet of occupiable space, and will serve as the Associations new headquarters’ facility upon the completion of remodeling work in early 2025. The purchase price was approximately $5,365,000 and consisted of $1,697,000 in cash and a promissory note with Frost Bank in the amount of $3,500,000. $3,621,000 of the purchase price was allocated to the office space, with $1,704,000 allocated to land. Depreciation of the building and improvements under construction are being deferred until the renovations are complete, and the Association occupies the space. The land and building at 1700 Rio Grande were appraised at a market value of $2,571,722 for 2025 by the Travis Central Appraisal District. The initial term of the interest-only note is for two years, with the interest rate calculated monthly based on the Ameribor Term-30 benchmark plus 2.5%, or approximately 7.86% per annum as of the purchase date. At the maturity date of April 10, 2026 the entire amount of the Note, principal and accrued interest then remaining unpaid, shall be then due and payable. The land and building at 1616 Rio Grande were appraised at a market value of $3,279,237 for 2025 by the Travis Central Appraisal District. The mortgage for this property was paid off in 2002 and a Release of Lien was secured. Currently the land and building are free of any encumbrances. The Association intends to sell this property after moving into the new facility.

Title: NOTE 5: NET 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 The Association’s net assets at December 31, 2024 are comprised of Board designated amounts as follows: Without donor restrictions Designated by the Board for building reserve $ 8,076 Designated by the Board for legal defense reserve 53,493 Designated by the Board for depreciation reserve Designated by the Board for operating reserve 113,233 2,257,178 Total $ 2,431,980 Net assets with donor restrictions consist of: Building reserve – amounts contributed by members for major repairs to the office building. Legal defense reserve – amounts contributed by members for payment of legal expenses relating to cases affecting members. Disaster relief fund – amounts contributed by members intended for disaster relief. Texas Rural Water Foundation – amounts contributed for certain student scholarships, currently the Legacy Scholarship Fund and the Dwayne Jekel Scholarship Fund. With donor restrictions Building reserve $222,400 Legal defense reserve 677,643 Disaster relief fund Texas Rural Water Foundation 175,341 28,836 Total $1,104,220 Satisfaction of donor restrictions during the year ended December 31, 2024: Building reserve $28,190 Legal defense reserve 2,864 Disaster relief fund 18,984 Total $50,038

Title: NOTE 6: COMMITMENTS AND CONTINGENCIES 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 Lease Agreements: The Association recorded lease expense of $11,101 for 2024 for office equipment lease agreements. The minimum future obligations under all leases in effect at December 31, 2024 are as follows: 2025 $10,287 2026 5,427 2027 3,807 2028 3,807 2029 1,903 $25,231 Contracts for Future Services: The Association has entered into various contracts with hotels and convention centers to provide hotel guest rooms and meeting space for the Annual Convention, Technical Conference and other conferences for 2025 through 2029. The Association has the option to cancel the contracts at any time prior to the event, with variable payment liability based on the length of time remaining until the event. As of December 31, 2024, the Association’s commitment under these contracts was approximately $782,348. Construction Commitments: On April 10, 2024 the Association completed the acquisition of new office space in an existing office condominium project located in Austin, Texas. Interior and exterior renovation activities commenced in the second half of 2024, and continued into 2025. As of December 31, 2024, the Associations’ commitment under these renovation contracts was approximately $259,425. Contracts with Grantors: The Association is funded by contracts that are subject to review and audit by the grantor agencies. These contracts have certain compliance requirements and should audits by the grantor agencies disclose any areas of substantial noncompliance, the Association may be required to refund any disallowed costs.

Title: NOTE 7: EMPLOYEE BENEFIT 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 Retirement Plan: The Association created a 401(k) plan effective January 1, 1997. The plan covers all eligible employees who have completed one year of service and attained the age of 21. The Association made a discretionary contribution to the plan in 2024 totaling $189,524 or 7% of compensation (10% for full time employees with 15 or more years of service). Employees share in the employer contribution pro rata based on his or her salary compared to the total salaries of all participating employees if they contribute any salary deferral to the Plan. Employees vest in the employer contribution at 20% per year of service. Flexible Spending Accounts: In December 2000, the Board of the Association voted to make supplemental insurance and flexible spending accounts available to employees, in addition to already established pre-tax premiums for dependent health insurance. Health Reimbursement Arrangement/ Health Saving Accounts: In July 2009, the Board of the Association voted to establish a self-insured medical reimbursement plan applicable to full-time employees that are not in their probationary employment period. During 2024, the Association contributed $166.67 per month, per employee payable semiannually to reimburse medical expenses that are not reimbursed under any other medical insurance plan or reimbursement program. In May, 2017, the Board of Directors of the Association voted to add a new health insurance benefit option of a high deductible plan, coupled with a Health Savings Account. During 2024, the Association contributed $625 quarterly to Health Savings Accounts for employees choosing a High Deductible medical plan.

Title: NOTE 8: 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 Revenues and Receivables: The Association expended $1,716,098 in 2024 of federal pass-through contracts from the National Rural Water Association. The Association recorded $1,875,212 of “state” revenues in 2024 from the Texas Commission on Environmental Quality. These two funding sources represent approximately 40% in 2024 of the Association’s public support and revenue. Approximately 96% of total grants and contracts receivable as reflected on the Consolidated Statement of Financial Position were attributable to three Grantors at December 31, 2024.

Title: NOTE 9: CREDIT RISK 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 The Association held its portfolio of investments in three separate financial institutions as of December 31, 2024. As of this date, the balance held in the Invesco money market mutual funds exceeded SIPC (Securities Investor Protection Corporation) coverage by $190,653, and investments held at Frost Brokerage Services exceeded SIPC coverage by $2,584,582. Balances in bank checking accounts exceeded FDIC (Federal Deposit Insurance Corporation) coverage by $156,473 at December 31, 2024.

Title: NOTE 10: 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 of the consolidated statement of financial position date, comprise the following: Cash and cash equivalents $1,968,608 Grants and contracts receivable 767,773 Accounts and other receivables 126,192 Investments 2,348,444 Less: those unavailable for general expenditure Within one year, due to: Donor restrictions (1,104,220) Board designations to: Building reserve (8,076) Legal defense reserve (53,493) Depreciation reserve (113,233) Financial assets available to meet cash needs for General expenditures within one year $3,931,995 As part of the Association’s liquidity management plan, cash in excess of monthly requirements is invested in money market mutual funds, certificates of deposit, equity exchange traded products, fixed income exchange traded products, and REIT exchange traded products in accordance with the Associations’ investment policy guidelines. See Note 5 for additional information about board designated net assets and net assets with donor restrictions. Board designated funds can be made available for general expenditure upon board approval if needed.

Title: NOTE 11: 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 auditee did not use the minimis cost rate DISAGGREGATION OF REVENUE Revenue earned over time $ 3,596,200 Revenue earned at a point in time 2,916,372 Total $ 6,512,572 Revenue earned over time consists of membership dues and state contracts. Revenue recognized at a point in time consists of convention and conferences, professional development and training, advertising, and other fee revenue. CONTRACT BALANCES Contract liability balances primarily consist of deferred revenues for amounts received in one year that relates to services or events to occur in the following year. All deferred revenues related to contracts will be earned within one year. Contract receivables balances primarily consist of the Association's right to payment from customers for services that have been provided and events that have occurred. Contract balances are as follows: 2024 2023 Contract liabilities: Deferred membership dues $209,083 $66,184 Deferred associate dues 12,110 8,421 Deferred professional development and training fees 17,085 16,500 Deferred other 2,200 4.110 $240,478 $95,215 Receivables: State contracts receivable $411,492 $805,444 Professional development and training registration receivables 61,659 61,204 Other receivables from contracts with customers 64,443 46,002 $537,584 $912,650