Texas Children’s is a not-for-profit organization with a mission to create a healthier future for children and women throughout its global community by leading in patient care, education, and research. The consolidated financial statements of Texas Children’s include numerous entities; those entities which received federal and state grant awards are described below. Texas Children’s Hospital (TCH) primarily provides direct patient care and conducts educational and research activities within Houston, Austin, and their surrounding communities. Houston is comprised of a 660 licensed-bed comprehensive tertiary care pediatric facility and a 151 licensed-bed facility, providing obstetrics and gynecological care, both located in Houston’s Texas Medical Center (medical Center), an 86 licensed-bed full-service pediatric facility located in west Houston, and a 74 licensed-bed full service pediatric facility located in The Woodlands. Beginning in February 2024, TCH opened and began services of a 60 licensed-bed comprehensive pediatric, obstetric, and gynecological care facility located in the North Austin area. Texas Children's Physician Organization (TCPO) serves as a governance body for all Texas Children’s physician entities, to ensure optimal professional coverage and patient access. TCPO was created in January 2025. Texas Children’s Pediatrics (TCP) is a group of pediatric practices that provide primary care services and conduct educational activities. It acquires, manages, and affiliates with pediatric practices primarily in Houston and Austin and their surrounding counties. Texas Children’s Urgent Care (TCUC) is a group of clinics that provides pediatric urgent care primarily in Houston and Austin and their surrounding counties. Texas Children’s Health Plan, Inc. (TCHP) operates a health maintenance organization, the first of its kind for pediatrics in the nation, and has a Certificate of Authority from the Texas Department of Insurance. It improves the quality, cost, and access of pediatric and obstetrical services delivered to health plan members in its service area. Texas Children’s is the sole corporate member of TCH, TCPO, and TCHP. TCPO is the sole corporate member of TCP and TCP is the sole corporate member of TCUC. All Texas Children’s entities described above are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code.
The consolidated financial statements of Texas Children’s include the entities described above as well as other entities. Intercompany balances and transactions have been eliminated in consolidation. The consolidated basic financial statements of Texas Children’s were audited by Ernst & Young, LLP (E&Y), whose report dated December 11, 2025, except for the Schedule of Expenditures of Federal Awards (SEFA) for which the date is June 23, 2026, was furnished to McConnell & Jones LLP. Such report indicated that the SEFA was subjected to the auditing procedures applied in E&Y’s audit of the basic financial statements, and that the SEFA is fairly stated, in all material respects, in relation to the consolidated basic financial statements as a whole.
The accompanying SEFA includes the federal grant expenditures of Texas Children’s under programs of the federal government for the year ended September 30, 2025. The information in this SEFA 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) as applicable. Because the SEFA presents only a selected portion of the operations of Texas Children’s, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Texas Children’s.
Amounts reflected in the financial reports submitted to grantor agencies for the programs and the SEFA may not agree because of accruals which would be included in the next reports filed with grantor agencies and because of the different program year-ends.
Texas Children’s has an affiliation agreement with Baylor College of Medicine (Baylor). Under the terms of this agreement, Baylor conducts research and educational activities, and its physicians provide patient care services while utilizing the Texas Children’s facilities in the practical application of the teaching process. Mutual commitments include sharing operational and research costs, including residents’ and physicians’ salaries. The following summarizes expenses included in the SEFA that represent payments made to Baylor for reimbursement of professional fees for physicians’ time under this affiliation agreement: Coordinated Services and Access to Research for Women, Infants, Children and Youth (ALN 93.153) $ 10,279 Total payments made to Baylor included in the SEFA $ 10,279
Texas Children’s incurred costs associated with property damages resulting from Hurricane Beryl, the Texas Severe Winter Storms, and emergency protective measures taken during the COVID-19 pandemic. These expenditures are eligible for reimbursement under Federal Emergency Management Administration’s (FEMA) Public Assistance (Presidentially Declared Disasters) (Assistance Listing No. 97.036). During fiscal year 2025, Texas Children’s reported $403,361 in the SEFA, representing costs that were incurred in prior fiscal years. In addition, $612,273 of eligible expenditures incurred in previous fiscal years were not reported in the SEFA because they had not yet been approved and obligated by FEMA as of September 30, 2025.
Texas Children’s federal programs are subject to review and audit by grantor agencies. Consequently, Texas Children’s may become liable to refund money to funding agencies where it fails to comply with contract provisions. In addition, Texas Children’s may not fully collect federal grant receivables as at September 30, 2025, related to the reported federal grant expenditures as these receivables may be subject to the grantors’ compliance approval process. Texas Children’s management believes that the results of these reviews and audits will not have a material effect on the amounts reported in the SEFA.