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
Humanities Texas, formerly the Texas Council for the Humanities, the state affiliate of the National Endowment for the Humanities (“NEH”), conducts and supports public programs in history, literature, philosophy, and other humanities disciplines. These programs strengthen Texas communities and ultimately help sustain representative democracy by cultivating informed and educated citizens.
Humanities Texas is a nonprofit, educational organization, and was incorporated in the State of Texas on 5 September 1985. A volunteer board governs Humanities Texas; the Governor of Texas appoints six board members, and the board fills the other vacant seats through a statewide, open nomination process.
Humanities Texas receives its primary funding through federal appropriations from the NEH and additional support from the State of Texas, foundations, corporations, and individuals. Through a competitive grant making program, Humanities Texas provides financial support to nonprofit organizations and institutions for cultural and historical programs aimed primarily at public. Humanities Texas also sponsors occasional programs, serves as a statewide advocate for the humanities, provides assistance to organizations and institutions and issues various publications. The following summarizes the more significant accounting policies that affect the financial statements of Humanities Texas.
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
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 Humanities Texas 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. The Board has designated, from net assets without donor restrictions, funds for a Quasi-Endowment.
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
Humanities Texas 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. Humanities Texas’ policy is to record interest and penalty expense related to income taxes as interest and other expense, respectively. At 31 October 2024, 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 or fair value if donated. Depreciation on fixed assets is provided using the straight-line method over estimated useful lives of the respective assets, ranging from 5 to 7 years for furniture and equipment and 39 years for building and building improvements. 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.
ACCOUNTS AND GRANTS RECEIVABLE
Humanities Texas 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. Humanities Texas 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.
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, depreciation, office space and utilities, travel, and other expenses which are allocated based on estimates of time and effort by personnel. The development function includes cultivating better relationships with Humanities Texas’ cultural partners statewide, updating outreach, strategic planning, and developing new programs.
INVESTMENTS
Investments are reported at fair value. For contributed investments, fair value of the gift is determined by the market value at the date of donation.
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.
FEDERAL AND STATE AWARDS
A significant portion of Humanities Texas’ revenue is derived from cost reimbursable federal and state grants, which are conditioned upon certain performance requirements and/or the incurrence of allowable qualifying expenses. Amounts received are recorded as revenue when Humanities Texas has incurred expenditures in compliance with specific contract or grant provisions. Amounts received prior to incurring qualifying expenditures are reported as deferred revenue in the statement of financial position. Humanities Texas has contracts for cost reimbursable grants of $2,398,244 for which qualifying expenditures have not been incurred and accordingly have not been recognized at year-end.
CONTRIBUTIONS
Contributions received (including unconditional promises to give) are recorded as revenueswithout donor restrictions in the period received unless their use is restricted by explicit donor stipulation or by law. Donor-restricted contributions whose restrictions are met in the same reporting period are reported as support within net assets without donor restrictions. Contributions received which are part of Humanities Texas’ ongoing major or central activities are recognized as revenue. Conditional promises to give to Humanities Texas are recognized as the conditions upon which they depend are substantially met. Promises to give are recognized as revenue only if sufficient evidence exists in the form of verifiable documentation that a promise was made and received.
SUBSEQUENT EVENTS
Humanities Texas 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.
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 audit did not use the minimis cost rate
Humanities Texas 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. Humanities Texas’ 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 Humanities Texas.
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 audit did not use the minimis cost rate
Humanities Texas received 64% of its total revenue from two grantors and 100% of federal and state awards receivable were due from two sources. Bank balances held in financial institutions in excess of FDIC coverage were $583,471 at year- end.
Title: NOTE 5: DEFINED CONTRIBUTION PLAN AND TRUST
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
Humanities Texas maintains a defined contribution 403(b) retirement plan for the benefit of eligible employees. An employee is eligible for participation when the employee has completed one year of service and is at least 21 years old. Humanities Texas contributes 10% of wages to the plan for all participating employees. Contributions to the plan for the year ended 31 October 2024 totaled $105,219.
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 audit did not use the minimis cost rate
Land $618,240
Construction in progress 8,826
Building 1,277,766
Building improvements 3,120,713
Furniture and equipment 259,966
Accumulated depreciation (1,860,362)
$3,425,149
Title: NOTE 7: 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 audit did not use the minimis cost rate
Investments of $6,984,245 are stated at fair value and consist of mutual funds.
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
Amount Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs
(Level 3)
Mutual funds $6,984,245 $6,984,245 N/A N/A
Title: NOTE 9: 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
Balances of net assets with donor restrictions at year end:
Purpose restrictions at year-end
Accumulated investment gains in endowments $1,152,561
Retaining wall 101,174
Other 37,548
1,291,283
Perpetual in nature at year-end:
Original donor-restricted gifts to endowments 3,382,610
$4,673,893
Satisfaction of purpose restrictions during the year:
Outstanding Teacher Awards $90,000
Other 20,167
$110,167
Title: NOTE 10: CASH AND RESTRICTED CASH
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 following table provides a reconciliation of cash and restricted cash reported within the statement of financial position to the sum of corresponding amounts within the statements of cash flows.
Cash $593,468
Restricted cash 101,174
$694,642
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 from the statement of financial position date, comprise the following:
Cash and restricted cash $694,642
Federal and state awards receivable 533,273
Accounts receivable 23,122
1,251,037
Less: amounts unavailable for general expenditure within one year (595,771)
$655,266
As a part of Humanities Texas’ 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 Humanities Texas’ operating accounts.
` Humanities Texas has $2,906,123 in a board designated endowment that could be made available if needed.
See Note 9 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 12: ENDOWMENTS
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
Education Endowment – The permanent $2,000,000 endowment consists of a $500,000 award from NEH to establish the endowment which is matched by $1,500,000 in private funds. Contributions to the endowment fund are subject to donor restrictions that stipulate the original principal of the gift is to be held and invested by Humanities Texas indefinitely, and income from the fund is to be expended in support of education programs for teachers.
Board Designated Quasi-Endowment – The board designated $3,000,000 endowment consists of contributions to support the general operations, programs, and long-term preservation of the Byrne-Reed House. The balance of the board designated quasi-endowment as of 31 October 2024 is $2,906,123, and is classified as net assets without donor restrictions on the accompanying statements of financial position.
Preservation Endowment – Humanities Texas established a Preservation endowment in 2020 that consists of a $250,000 matching grant received from the Still Water Foundation which is matched by $250,000 in private funds. Contributions to the endowment fund are subject to donor restrictions that stipulate the original principal of the gift is to be held and invested by Humanities Texas indefinitely, and income from the fund is to be expended in support of the preservation and maintenance of the Byrne-Reed House.
Kronkosky Education Endowment - The Kronkosky Education Endowment is restricted to support the organization’s education programs principally serving four Texas counties—Bandera, Bexar, Comal, and Kendall—that comprise the Kronkosky Charitable Foundation’s service area. Contributions to the endowment fund are subject to donor restrictions that stipulate the original principal of the gift is to be held and invested by Humanities Texas indefinitely, and income from the fund is to be expended in support of the organization’s education programs in Bandera, Bexar, Comal, and Kendall counties.
Outstanding Teaching Awards Endowment - The Outstanding Teaching Awards Endowment is restricted to support the organization’s Outstanding Teaching Award Program. Contributions to the endowment are subject to donor restrictions that stipulate the original principal of the gift is to be held and invested by Humanities Texas indefinitely, and income from the fund is to be expended in support of the Outstanding Teaching Award Program.
Humanities Texas has interpreted the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”) as requiring the preservation of the fair value of the original gift as of the gift date of donor restricted endowment funds absent explicit donor stipulations to the contrary. At year-end, there were no such stipulations. As a result of this interpretation, Humanities Texas classifies as permanently restricted net assets (1) the original value of initial and subsequent gifts donated to the permanent endowment, and (2) accumulations to the permanent endowment fund made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. Donor restricted amounts not retained in perpetuity are subject to appropriation for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA.
In accordance with UPMIFA, Humanities Texas considers the following factors in making a determination to appropriate or accumulate donor restricted endowment funds: (1) the duration and preservation of the fund, (2) the purpose of the donor restricted endowment fund, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of Humanities Texas, and (7) the investment policies of Humanities Texas.
Investments and spending policies
Humanities Texas has adopted investment and spending policies for endowment assets that attempt to subject the fund to low investment risk and provide its program with current income. Endowment assets are investments in mutual funds. Humanities Texas seeks to build endowment assets through additional contributions. The current spending policy is not expected to allow Humanities Texas’ endowment fund to grow as a result of investment returns. This is consistent with Humanities Texas’ objectives to provide income for the teacher programs, preserve endowment assets without subjecting them to substantial risk, and provide additional real growth through new gifts.
The board determines and authorizes the timing and amount of any one-time or regularly scheduled withdrawals from the endowments. If the board determines that a fixed percentage of endowment assets shall be withdrawn annually as a component of the operating budget of Humanities Texas, such percentage (the “Spending Rate”) shall not exceed 6%. To minimize the effect of market volatility in any given year, the base from which the Spending Rate will be calculated will be a 12-quarter rolling trailing average of total market value of endowment assets.
Changes in endowment net assets during the year:
Without Donor Restrictions With Donor Restrictions Total Endowment
Beginning endowment net assets $2,358,738 $3,362,213 $5,720,951
Contributions 0 422,050 422,050
Investment returns, net 547,385 750,909 1,298,294
$2,906,123 $4,535,172 $7,441,295
As of 31 October 2024, endowment net assets composition by type of fund is as follows:
Without Donor Restrictions With Donor Restrictions Total Endowment
Board-designated quasi-endowment funds $2,906,123 $0 $2,906,123
Donor-Restricted Endowment Funds
Original donor-restricted gift
amount and amounts required to
be maintained in perpetuity by donor 0 3,382,610 3,382,610
Accumulated investment gains 0 1,152,562 1,152,562
$2,906,123 $4,535,172 $7,441,295
As of 31 October 2024, the endowment assets are as follows:
Without Donor Restrictions With Donor Restrictions Total Endowment
Support Education $0 $3,538,800 $3,538,800
Byrne-Reed House Preservation 0 579,322 579,322
Outstanding Teacher Awards 0 417,050 417,050
Board-designated quasi-endowment 2,906,123 0 2,906,123
$2,906,123 $4,535,172 $7,441,295
Title: NOTE 13: 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 audit did not use the minimis cost rate
Program Management and general
Development
Fundraising
Total
Personnel $954,080 $241,748 $323,007 $86,327 $1,605,162
Council conducted
program
796,761
0
0
0
796,761
Grants and
evaluations
752,052
0
0
0
752,052
Depreciation 68,833 14,795 23,343 5,796 112,767
Bldg. maintenance
and utilities
59,166
8,276
13,057
3,242
83,741
Teacher awards 90,000 0 0 0 90,000
Accounting and audit 0 42,870 0 0 42,870
Travel 28,390 20,430 9,628 2,390 60,838
Other 222,835 167,653 47,474 13,055 451,017
$2,972,117 $495,772 $416,509 $110,810 $3,995,208