Audit 361541

Title: NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES Accounting Policies: Basis of presentation – The schedules of expenditures of federal and state awards (the schedules) are prepared on the accrual basis of accounting. The information in these schedules is presented in accordance with the requirements of Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the Texas Grant Management Standards. Federal and state expenses include allowable expenses funded by federal and state grants. Allowable costs are subject to the cost principles of the Uniform Guidance, the Texas Grant Management Standards, and U. S. Department of the Treasury guidelines, and include both costs that are capitalized and costs that are recognized as expenses in HAWC’s financial statements in conformity with generally accepted accounting principles. HAWC has elected to use the 10% de minimis cost rate for indirect costs. Because the schedules present only a selected portion of the operations of HAWC, they are not intended to and do not present the financial position, changes in net assets, or cash flows of HAWC. De Minimis Rate Used: Y Rate Explanation: The Auditee has elected to use the 10% de minimis cost rate for indirect costs. Basis of presentation – The schedules of expenditures of federal and state awards (the schedules) are prepared on the accrual basis of accounting. The information in these schedules is presented in accordance with the requirements of Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the Texas Grant Management Standards. Federal and state expenses include allowable expenses funded by federal and state grants. Allowable costs are subject to the cost principles of the Uniform Guidance, the Texas Grant Management Standards, and U. S. Department of the Treasury guidelines, and include both costs that are capitalized and costs that are recognized as expenses in HAWC’s financial statements in conformity with generally accepted accounting principles. HAWC has elected to use the 10% de minimis cost rate for indirect costs. Because the schedules present only a selected portion of the operations of HAWC, they are not intended to and do not present the financial position, changes in net assets, or cash flows of HAWC.

Title: NOTE 2 – U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT LOAN PROGRAM Accounting Policies: Basis of presentation – The schedules of expenditures of federal and state awards (the schedules) are prepared on the accrual basis of accounting. The information in these schedules is presented in accordance with the requirements of Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the Texas Grant Management Standards. Federal and state expenses include allowable expenses funded by federal and state grants. Allowable costs are subject to the cost principles of the Uniform Guidance, the Texas Grant Management Standards, and U. S. Department of the Treasury guidelines, and include both costs that are capitalized and costs that are recognized as expenses in HAWC’s financial statements in conformity with generally accepted accounting principles. HAWC has elected to use the 10% de minimis cost rate for indirect costs. Because the schedules present only a selected portion of the operations of HAWC, they are not intended to and do not present the financial position, changes in net assets, or cash flows of HAWC. De Minimis Rate Used: Y Rate Explanation: The Auditee has elected to use the 10% de minimis cost rate for indirect costs. In February 2023, HAWC ESH LLC (the LLC) received a U. S. Department of Housing and Urban Development loan passed through City of Houston under Section 3205 of the American Rescue Plan Act of 2021 for a HOME Investment Partnerships ARP Program. The balance of the loan outstanding at December 31, 2024 is reported in the schedule of expenditures of federal awards under Assistance Listing #14.239 in the amount of $14,265,000.