The Children's Center, Inc

THE CHILDREN’S CENTER, INC.

GALVESTON, TEXAS

FINANCIAL STATEMENTS

Year Ended September 30, 2014 with Report of Independent Auditors

THE CHILDREN’S CENTER, INC.

FINANCIAL STATEMENTS

Year Ended September 30, 2014

Table Of Contents

Page

Report of Independent Auditors 1

Financial Statements:

Statement of Financial Position 5 Statement of Activities 6 Statement of Cash Flows 7 Notes to the Financial Statements 8

Supplemental Information

Schedule of Functional Expenses 20

Federal Awards Section

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 25

Independent Auditors’ Report on Compliance for each Major Program and Report on Internal Control over Compliance Required by OMB Circular A-133 27

Schedule of Findings and Questioned Costs 30

Schedule of Expenditures of Federal Awards 35

Notes to Schedule of Expenditures of Federal Awards 36

Texas City Ofﬁ ce 2000 Loop 197 North Suite 200 Texas City, Texas 77590 409.948.4406 Main

whitleypenn.com

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of The Children’s Center, Inc. Galveston, Texas

Report on the Financial Statements

We have audited the accompanying financial statements of The Children’s Center, Inc. (the “Center”), which comprise the statement of financial position as of September 30, 2014, and the related statements of activities, and cash flows for the year ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and the fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1 An Independent Member of Dallas Fort Worth Houston To the Board of Directors of The Children’s Center, Inc.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Children’s Center, Inc. as of September 30, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Summarized Comparative Information

We have previously audited the Center’s 2013 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated June 24, 2014. In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2013, is consistent, in all material respects, with the audited financial statements from which it has been derived.

Other Matters

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations is presented for purposes of additional analysis and is not a required part of the financial statements. The Schedule of Functional Expenses is also presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

Other Reporting Requirements by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 24, 2015, on our consideration of the Center’s internal control over financial reporting and on our test of controls of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Center’s internal control over financial reporting and compliance.

Texas City, Texas June 24, 2015

FINANCIAL STATEMENTS

(This page intentionally left blank.)

THE CHILDREN'S CENTER, INC.

STATEMENTS OF FINANCIAL POSITION

September 30, 2014 2013

Assets Cash and cash equivalents $ 162,532 $ 115,823 Accounts receivable 1,091,902 536,916 Unconditional promises to give, net 40,970 76,763 Prepaid expenses 9,310 11,378 Temporarily restricted cash 19,786 19,747 Property and equipment, net of accumulated depreciation 1,280,954 1,034,746

Total Assets $ 2,605,454 $ 1,795,373

Liabilities and Net Assets Liabilities: Current liabilities Accounts payable $ 423,551 $ 195,897 Accrued liabilities 175,743 102,554 Deferred revenue 74,088 74,088 Due to other - 17,304 Interest payable - 19,077 Current portion due to federal government 164,645 118,699 Current portion due for capital leases 103,698 - Total current liabilities 941,725 527,619 Noncurrent liabilities Due to federal government 988,440 1,167,977 Capital lease payable 167,879 - Total noncurrent liabilities 1,156,319 1,167,977 Total Liabilities 2,098,044 1,695,596

Net Assets: Unrestricted net assets 487,624 80,030 Temporarily restricted net assets 19,786 19,747 Total net assets 507,410 99,777

Total Liabilities and Net Assets $ 2,605,454 $ 1,795,373

See Notes to the Financial Statements.

THE CHILDREN'S CENTER, INC.

STATEMENT OF ACTIVITIES

For the Year Ended September 30, 2014 with Comparative Totals for the Year Ended September 30, 2013

Totals Temporarily Unrestricted Restricted 2014 2013 Revenues and Support Contributions $ 460,130 $ - $ 460,130 $ 636,630 Federal grants - 4,926,121 4,926,121 2,892,591 Program service fees 2,996,095 - 2,996,095 2,060,326 Investment income - 29 29 11 Special events - - - 6,781 Other revenues/losses 22,688 10 22,698 23,024 3,478,913 4,926,160 8,405,073 5,619,363 Net Assets Released From Restrictions Federal funding for the year 4,926,121 (4,926,121) - - Total Unrestricted Revenue, Support and Reclassifications 8,405,034 39 8,405,073 5,619,363

Expenses Program services: Community Youth Development 350,961 - 350,961 302,820 Yeager Center 27,098 - 27,098 35,164 Gulf Coast Street Outreach 133,559 - 133,559 113,731 Therapeutic Foster Care 2,284,156 - 2,284,156 1,538,629 Galveston Multicultural Institute 2,409,545 - 2,409,545 2,327,025 Brazoria County Youth Homes 1,550,418 - 1,550,418 59,860 Gulf Coast Region Community Outreach and Assistance Program 107,186 - 107,186 - Family Shelter 262,223 - 262,223 311,650 Transitional Living 123,786 - 123,786 - Transitional Foster Care 274,298 - 274,298 85,486 Supplemental Housing Program 265,165 - 265,165 242,872 7,788,395 - 7,788,395 5,017,237 Supporting services: General and administrative 76,607 - 76,607 73,966 Fundraising 132,438 - 132,438 185,184 Total expenses 7,997,440 - 7,997,440 5,276,387

Change in net assets 407,594 39 407,633 342,976

Net assets at beginning of year 80,030 19,747 99,777 (243,199)

Net assets at End of year $ 487,624 $ 19,786 $ 507,410 $ 99,777

See Notes to the Financial Statements

THE CHILDREN'S CENTER, INC.

STATEMENT OF CASH FLOWS

September 30, 2014 2013 Cash flows from operating activities: Increase (decrease) in net assets $ 407,633 342,976$ Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 114,313 84,048 Unamortized discount on promises to give 5,039 6,700 Allowance for uncollectible promises to give 6,471 16,119 Changes in operating assets and liabilities: Change in receivables - pledges and grants (530,703) (394,398) Change in prepaid expenses 2,068 22,111 Change in accounts payable and accrued expenses 264,462 (10,868) Net cash provided (used) by for operating activities 269,283 66,688

Cash flows from investing activities: Acquisitions of property and equipment (360,521) - Net cash provided (used) by investing activities (360,521) -

Cash flows from financing activities: Proceeds from capital lease borrowing 320,193 - Capital lease payments (48,616) (24,971) Debt payments (133,591) - Net cash provided (used) by financing activities 137,986 (24,971)

Net change in cash and cash equivalents 46,748 41,717

Cash and cash equivalents, beginning of year 135,570 93,853 Cash and cash equivalents, end of year $ 182,318 135,570$

Cash at year end Cash, unrestricted $ 162,532 115,823$ Temporarily Restricted- Scholarship Fund 19,786 19,747 Cash and cash equivalents at end of year $ 182,318 135,570$

See Notes to the Financial Statements.

7 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2014 and 2013

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

Organization and Activities

The Children's Center, Inc. (the “Center”) (a Texas Non-profit Organization) commenced operations on September 1, 1983. The Center was created to consolidate major programs for children and adolescents in Galveston, Texas. Effective September 1, 1998, the net assets and operations of Gulf Coast Region Community Outreach and Assistance Program (a Texas Non-profit Organization) and, effective September 1, 2004, the net assets and operations of Brazoria County Youth Homes, Inc. (a Texas Non- profit Organization) were merged into the net assets and operations of the Center.

The Street Outreach Program provides assistance to vulnerable youth who are victims of abuse. Youth are taught to identify their strengths and to focus on solutions. The National Safe Place of Galveston County is part of a nationwide network of state and local organizations that train staff and volunteers to assist and act as advocates for children and youth who are abused, neglected or in crisis.

Gulf Coast Community Outreach and Assistance Program provides application assistance to clients applying for TANF, Food Stamps, Medicaid and Children’s Health Insurance Program (CHIP). Resource services are also provided to the aged and disabled.

The Jameson Center program recruits, trains and monitors therapeutic foster homes throughout Galveston County and Harris County. The primary populations served are emotionally disturbed children and youth from birth to age 17, but also serves unaccompanied minors from other countries. The program provides ongoing supervision for the care and treatment of children, case management, therapy, child psychiatric services, respite care and other supports to stabilize children and youth.

The Galveston Island Family Crisis Center is an emergency shelter for homeless parents and their children. A case manager provides shelter services, educational, parenting and employment assistance for the residents. The Crisis Center also serves youth who are between the ages of 18 and 22 and who are without family or state agency support. The youth are provided with case management support, home living, community living and educational/vocational skills necessary to achieve independent living.

The Galveston Multicultural Institute and Brazoria Youth Home are residential care facility which works with the U.S. Department of Health and Human Services Office of Refugee Resettlement to serve unaccompanied minors from other countries. The facility provides housing, shelter, education, and case management services. The program seeks to reunite children with their families in the United States, to provide asylum, or return to their home country if other options are not possible. Currently the program can serve up to 72 minors.

The Gulf Coast Housing Initiative, funded by the Department of Federal Housing and Urban Development, currently funds 8 apartments for chronically homeless adults and 7 apartments for homeless families with children on a constantly rotating basis. Its goal is to locate safe and sanitary living conditions for these individuals and families by providing case management assistance that includes rehabilitative skills, accompaniment to appointments and employment assistance. 8 units

8 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued)

Organization and Activities (continued)

The Center’s revenues consist primarily of program service fees and federal, local and state grants.

The Community Youth Development Program, funded by The Department of Family and Protective Services, provides services to address family and community issues that lead to juvenile delinquency. Youth that live or attend school in the 77550 zip code can participate in services such as academic support, career preparation, job- shadowing, mentoring, recreation and youth leadership development.

Basis of Presentation and Accounting

In accordance with generally accepted accounting principles, the financial statements have been prepared on the accrual basis and, accordingly, reflect all significant receivables, payables and other liabilities.

The Center presents its financial statements under the Accounting Standards Codification Topic 958-205 (“ASC Topic No. 958”), Not for Profit Entities – Presentation of Financial Statements. Under ASC Topic No. 958, the Center is required to report information regarding its financial position and activities in three classes of net assets as follows:

 Unrestricted Net Assets – net assets that are not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by the Board of Directors.

 Temporarily Restricted Net Assets – Net assets subject to donor-restricted stipulations that will be met by actions of the Center pursuant to those stipulations or that expire by the passage of time.

 Permanently Restricted Net Assets – Net assets subject to donor-imposed stipulations that they must be permanently maintained by the Center. Generally, the donors of those assets permit the Center to use all or part of the investment returns on those assets.

Revenues are reported as increases in unrestricted net assets unless they are limited to donor-imposed stipulations. Expenses are generally reported as decreases in unrestricted net assets. Satisfaction of donor-imposed stipulations that simultaneously increase unrestricted net assets and decrease temporarily restricted net assets are reported

Promises to Give

Donations are recognized when the donor makes a promise to give to the Center that is, in substance, an unconditional promise. Donations or contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. The interest earning on permanently restricted assets is unrestricted and is recorded to the unrestricted net assets for payments in the current year. Conditional promises to give are recognized when the conditions on which they depend are substantially met. As of September 30, 2014, and 2013 promises to give, net of the unamortized totaled $40,970 and $76,763, respectively and are to be collected during the subsequent fiscal year.

9 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued)

Contributions

In accordance with FASB ACS 958-605-15 Revenue Recognition- Contributions Received, contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence or nature of any donor restrictions. Time-restricted contributions are required to be reported as temporarily restricted support and are then reclassified to unrestricted net assets upon expiration of the time restriction.

Donated Materials and Services

The Center receives various services from many volunteers to maintain and operate the programs of the Center. The Center pays for most services requiring specific expertise and, during the year ended September 30, 2014, the value of contributed services meeting the requirements for recognition in the financial statements was recorded as in-kind contributions.

Donated materials, rents and equipment are reflected as contributions in the accompanying statements at their estimated values at date of receipt. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose.

Tax Status and Uncertain Tax Positions

The Center is exempted from federal income taxes under Section 501 (c)(3) of the Internal Revenue Code, and the state of Texas margin tax. Therefore, no provision for income taxes is made in the financial statement for functional income. In addition, the Center qualifies for the charitable-contribution deduction under Section 170(b) (1) (A) and has been classified as an organization that is not a private foundation under Section 509 (a) (2). The Center believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. The Organization believes it is no longer subject to income tax examination for years prior to 2011.

Investments

In accordance with FASB ACS 958-320 , Accounting for Certain Investments Held by Not-for-Profit Organizations, 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. Unrealized gains and losses are included in the change in net assets.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Reclassifications

Certain amounts in 2013 have been reclassified to conform to the 2014 presentation.

10 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued)

Property and Equipment and Depreciation

Property and equipment are carried at cost or if donated, at the approximate fair value at the date of donation. Property and equipment are recorded as unrestricted assets. Currently, the Center does not have property and equipment with donor-imposed restrictions. It is the Center’s policy to capitalize and depreciate property and equipment having a value of $5,000 or more. Amounts for repairs and maintenance are recorded and expenses as incurred. Depreciation of property and equipment is provided over the estimated useful lives of the respective assets on a straight-line basis as follows:

Buildings 31 ½ years Building improvements 31 ½ years Vehicles 5 years Furniture and equipment 5 years

Compensated Absences

Employees accrue vacation at the rates of 10 hours per month for 1 to 3 years of service and 14 hours per month for time above 3 years. Sick leave is accrued at a rate of 8 hours per month. They can carry 40 or 70 hours of vacation time depending on their length of employment and can carry up to 720 hours sick leave. The Center accrues vacation payable due to the fact that it will be paid upon separation, but does not accrue sick leave. Included in accrued liabilities at September 30, 2014 and 2013, were $70,258 and $41,399 respectively, for vacation not paid to employees at year end.

Functional Allocation of Expenses

The costs of providing the Center’s programs and supporting services have been summarized on a functional basis. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

Allowance for Uncollectible Amounts

As of September 30, 2014 and 2013, the allowance for uncollectible promises to give totaled $22,590 and $16,119, respectively.

Fair Value of Financial Instruments

The carrying value of cash, receivables and payables approximates fair value due to the short maturity of these instruments. The Center does not have any financial instruments held for trading purposes.

Management did not elect the fair value option for its financial liabilities, which were all eligible for the fair value option, since those instruments were not affected by changes in management’s risk management and investment strategy.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Center considers petty cash and cash in checking accounts, savings accounts and money market accounts to be cash equivalents.

11 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued)

Prior Year Summarized Comparative Information

The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Center’s financial statements for the year ended September 30, 2013, from which the summarized information was derived.

Note 2 - Cash and Cash Equivalents

Cash consists of deposits in checking, savings and money market accounts in local area financial institutions, and are recorded at market value. Additionally, the Center entered into a Treasury Management Services agreement with their operating account financial institution in 2003. This agreement authorizes the financial institution to sweep excess funds (over $100,000) from the Center’s operating account into a money market mutual fund. The Center maintains cash balances at three different financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. As of September 30, 2014, Frost bank ending balances were $289,074 and in excess of the insured amount, leaving an uncollateralized amount of $39,074.

Cash balances at September 30, 2014 and 2013, are summarized as follows:

2014 2013 Checking/savings accounts $ 182,318 $ 135,570 Total $ 182,318 $ 135,570

As of September 30, 2014 and 2013, cash and cash equivalents included restricted cash of $19,776 and $19,747 respectively. These amounts were restricted by donors for scholarships.

Note 3 - Accounts Receivable

Accounts receivable consist of the following at September 30:

2014 2013 Texas Department of Family Protective Services - Community Youth Development $ 60,286 $ 38,752 Texas Department of Family Protective Services - Jameson Center 430,014 357,283 United Way - Mainland Communities 6,500 5,833 Unaccompanied Alien Children Federal Program 457,201 131,566 USDA - National School Lunch Program 6,500 3,482 HUD Permanent Supporting Housing 35,965 - Other 95,436 - $ 1,091,902 $ 536,916

12 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 4 - Unconditional Promises to Give Receivable

2014 2013 Unconditional promises to give before unamortized discount and allowance for uncollectible $ 75,299 $ 99,582 Less: Unamortized discount (11,739) (6,700) 63,560 92,882 Less: allowance for uncollectibles (22,590) (16,119) Net unconditiional promises to give $ 40,970 $ 76,763

Amounts due in: Less than one year $ 30,000 $ 6,782 One to five years 45,000 92,400 More than five years 299 400 Total $ 75,299 $ 99,582

Note 5 - Property and Equipment

Balances in property and equipment, as of September 30, 2014, are as follows:

Beginning Deletions & Ending Balance Additions Reclassifications Balance Nondepreciated Land$ 450,000 $ - $ - $ 450,000 Depreciated Buildings and improvements 1,399,677 - - 1,399,677 Furniture, fixtures, computers, and equipment 20,051 8,146 - 28,197 Vehicles 303,474 352,375 - 655,849 Donated Assets 10,320 - - 10,320 Total Property and Equipment 2,183,522 360,521 - 2,544,043 Less: accumulated depreciation (1,148,776) (114,313) - (1,263,089) Total Property and Equipment, Net of Accumulated Depreciation$ 1,034,746 $ 246,208 $ - $ 1,280,954

Depreciation expense, for the years ended September 30, 2014 and 2013, was $114,313 and $84,048 respectively.

13 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 6 - Capital Leases

Vehicles under capital lease have a combined capitalized cost of $352,375. Accumulated depreciation in the statement of financial position included $36,137 relating to these leases. Depreciation expense reported in the statement of activities includes $36,137 for the vehicless under capital lease. For the year ended September 30, 2014 and 2013 capital lease payments of $48,616 and $25,712 were made, respectively. The future minimum lease payments are as follows:

Year Ending September 30, Amount

2015$ 103,698 2016 109,295 2017 58,586

Net minimum lease payments 271,579 Amount representing interest 19,328

Present value of minimum lease payments$ 290,907

Several lease-purchase agreements for vehicles were entered into during the fiscal year 2014. The payments begin in January 2014 and will end in June 2017 and the interest rates range from 4.950% to 5.453%, respectively.

Note 7 - Net Assets

Unrestricted Net Assets

Unrestricted net assets include unrestricted resources available for the Center to provide housing, education, care, maintenance, counseling, and other assistance to needy and/or dependent children and young adults. The unrestricted net asset amounts available for future operations, at September 30, 2014 and 2013, were $487,624 and $80,030 respectively.

Temporarily Restricted Net Assets

As of September 30, 2014 and 2013, Temporarily Restricted Net Assets balance was $19,776 and $19,747 respectively. These funds are the balance of the Lillian Travis Scholarship Fund, established by Ms. Travis for residents of the Brazoria County Youth Home upon graduation from high school. The fund also provides financial assistance for residents who are furthering their education through college or a trade school.

Permanently Restricted Net Assets

Permanently restricted net assets are subject to donor-imposed stipulations that they be permanently maintained by the Center. Generally, the donors of these assets permit the Center to use all or part of the investment return on these net assets. The Center, currently, does not have any net assets that are permanently restricted.

14 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 8 - Obligations under Operating Lease

In September 2007, The Center’s administration moved its office to the Moody House which is owned by the Moody Foundation, Inc. The lease agreement calls for $1 per year for 10 years. The Center is responsible for all maintenance of the building, insurance, utilities and both minor and major repairs as well as any leasehold improvements.

The Center utilizes buildings owned by Galveston County for their Youth Center and ORR programs. These buildings are located at the various addresses in the City of Galveston.

Building Address Galveston Multi-Cultural Centers Offices (ORR program use) 4428 Avenue N Galveston Multi-Cultural Centers Girl’s Residence (ORR program use) 1424 45th Street Galveston Multi-Cultural Centers Boy’s Residence (ORR program use) 4424 Avenue N Recreation Center (ORR program and other The Children’s Center use) 1401 43rd Street Yeager Youth Center (Other The Children’s Center use) 4428 Avenue M

The agreement calls for the Center to be responsible for all repairs and maintenance, insurance, and any leasehold improvements. In return for ongoing maintenance, upkeep and insurance, the Center does not pay any rent. The estimated rental value on these 5 buildings is $195,090 for both fiscal year 2014 and 2013 and this amount is included as unrestricted contributions and occupancy expense for the year ended September 30, 2014.

Note 9 - Concentrations

Generally accepted accounting principles require disclosure of concentrations in the volume of business transacted with a particular customer, supplier, lender, grantor or contributor that meet certain criteria. The following concentrations with particular customers existed for the year ended September 30, 2014:

Approximately 59% of the Center’s revenues, for the year ended September 30, 2014, were provided by grants from the federal government. Funds provided by the Texas Department of Family Protective Services (TDFPS) made up approximately 39% of total revenues. At September 30, 2014 approximately 43% of the accounts receivable balance was due from TDFPS and 43% was due from U.S. Department of Health and Human Services.

Note 10 - Contingencies

The Center, because of its activities, is subject to various claims and litigations. In the opinion of management, the outcome of such matters will not have a material effect on the financial position of the Center. The Center’s risk management policy is to maintain adequate insurance through commercial carriers for the various liability exposures.

Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor, other than the liability due to ORR as described in Note 12, cannot be determined at this time, although the Center expects such amounts, if any, to be immaterial.

15 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 11 - Deferred Revenue

The Center received a portion of its FEMA assistance related to Hurricane Ike in fiscal year 2011. Expenditures related to Hurricane Ike were incurred in fiscal year 2009. FEMA assistance was used for the Yeager and Galveston Multi-Cultural Centers. Of the approved project worksheets, approximately $78,310 was recognized as revenue in fiscal year 2009. In fiscal year 2010, the Center received $74,088 as additional FEMA reimbursement for the aforementioned FEMA 2009 expenditures; however, these funds were previously reimbursed to the Center with other federal funds. As of the date of report issuance, it has been undetermined if the Center will have to repay FEMA for the proceeds received in 2010. Therefore, this amount continues to be classified as deferred revenue.

Note 12 - Due to Federal Government

On July 19, 2013, the Center’s Board approved a plan that allowed it to restructure its payments as they relate to the amounts owed to the U.S. Department of Health and Human Services concerning a grant from Office of Refugee Resettlement (ORR). The debt is made up of disallowed expenditures for fiscal years 2009 and 2010 totally $629,867 and $656,850, respectively. The U.S. Department of Health and Human Services, Assistant Secretary for Administration has allowed the Center make monthly payments until the debt is paid. The 2009 liability requires an initial lump sum of $8,619 on February 1, 2014 and monthly installments of $8,099 beginning March 1, 2014. The 2010 liability also requires an initial lump sum of $10,457 on February 1, 2014, and monthly installments of $7,767 beginning March 1, 2014. Interest will accrue at a rate of one percent per year. If the Center defaults on any payment, the debt will be recalculated using the original rate of 10.875%. Based on the terms of the agreement, the Center’s last payment will be made on February 1, 2021. Below is the schedule of payments through fiscal year 2021.

FY Principal Interest 2015$ 164,645 9,885$ 2016 181,341 9,055 2017 183,163 7,233 2018 185,003 5,393 2019 186,861 3,534 2019-2021 252,072 1,789 $ 1,153,085 36,889$

Note 13 - 403(b) Deferred Compensation Plan

All full-time employees with at least one year of service may elect to participate in the Center’s Deferred Compensation Plan. The plan’s retirement benefit is funded through tax-deferred contributions made by the participating employee and made on behalf of the employee by the Center. Currently, there are 11 employees that have assets in the plan. The Center matches dollar for dollar up to 3% of the employee’s gross pay. Contributions made by the Center on behalf of employees amounted to $58,396 in 2014 and $28,839 in 2013.

16 THE CHILDREN’S CENTER, INC.

NOTES TO THE FINANCIAL STATEMENTS (continued)

Note 14 - Subsequent Events

In preparing these financial statements, the Center has evaluated events and transaction for potential recognition or disclosure through June 24, 2015, the date the financial statements were available to be issued. In October 2014 the Board approved the sale of Family Shelter property in the amount of $350,000. In March 2015 Board approved to move forward with a class action suit against British Petroleum.

The Center received a letter of credit for Moody Bank in the amount of $400,000 in October 2014.

(This page intentionally left blank.)

SUPPLEMENTAL INFORMATION

19 THE CHILDREN’S CENTER, INC.

SCHEDULE OF FUNCTIONAL EXPENSES

Year Ended September 30, 2014 with Comparative totals for 2013

CHIP Program Gulf Coast Region Community Yeager Community Gulf Coast Galveston Brazoria Outreach & Youth Crisis Youth Street Therapeutic Multicultural County Youth Assistance Center Development Outreach Foster Care Institute Homes Program

Salaries and Benefits$ - $ 111,590 $ 77,392 $ 476,242 $ 1,421,719 $ 464,709 $ 79,084 Professional and contract services - 214,260 34,389 1,620,643 141,351 233,121 7,380 Supplies - 2,952 3,858 16,134 67,380 188,751 2,352 Utilities - 2,927 2,191 14,375 145,489 57,481 2,809 Rental, repair and maintenance - 9,282 6,092 49,501 200,668 318,912 1,443 Advertising and publications - - 640 2,474 - 1,601 376 Travel - 1,305 5,222 29,029 53,346 23,344 2,597 Professional development - 210 2,000 1,204 2,497 1,950 374 Direct program expenses 4,225 2,004 1,775 2,937 190,897 116,909 271 Other - - - 882 2,819 4,929 - Depreciation 22,873 - - 19,952 5,664 30,679 - Central office support expense - 6,431 - 50,783 177,715 108,032 10,500 Fundraising expense ------Total Expenses $ 27,098 $ 350,961 $ 133,559 $ 2,284,156 $ 2,409,545 $ 1,550,418 $ 107,186

Transitional Supplemental General Fundraising Family Living Transitional Housing Total Program Administrative and Grand Total Grand Total Shelter Program Foster Care Program Services Services Development 09/30/14 09/30/13

$ 140,878 $ 19,475 88,488$ $ 45,248 $ 2,924,825 $ 291,332 $ 93,716 $ 3,309,873 $ 2,196,601 27,197 432 67,328 1,784 2,347,885 43,676 7,092 2,398,653 1,510,316 4,533 5,273 12,010 2,061 305,304 22,693 7,534 335,531 117,838 32,491 12,989 3,381 1,218 275,351 16,136 - 291,487 220,398 12,992 34,051 70,772 198,363 902,076 4,043 - 906,119 552,633 - 1 193 250 5,535 2,347 4,940 12,822 5,368 4,363 3,567 2,622 1,456 126,851 17,087 - 143,938 92,544 50 1,000 - 1,945 11,230 3,528 80 14,838 19,111 23,081 32,823 2,762 1,677 379,361 2,351 184 381,896 432,184 1,423 620 1,565 - 12,238 67,402 3,565 83,205 44,063 11,236 12,762 9,300 - 112,466 1,847 - 114,313 84,048 3,979 793 15,877 11,163 385,273 (395,835) 10,562 ------4,765 4,765 1,283 $ 262,223 $ 123,786 $ 274,298 $ 265,165 $ 7,788,395 $ 76,607 $ 132,438 $ 7,997,440 $ 5,276,387

(This page intentionally left blank.)

FEDERAL AWARDS SECTION

(This page intentionally left blank.)

Texas City Ofﬁ ce 2000 Loop 197 North Suite 200 Texas City, Texas 77590 409.948.4406 Main

whitleypenn.com

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of Directors The Children’s Center, Inc. Galveston, Texas

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of The Children’s Center, Inc. (the “Center”), which comprise the statement of financial position as of September 30, 2014, and the related statements of activities, and cash flows for the year ended, and the related notes to the financial statements, and have issued our report thereon dated June 24, 2015.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Center’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Center’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Center’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify a deficiency in internal control, described in the accompanying schedule of findings and questioned costs as item #2012-001.

25 An Independent Member of Dallas Fort Worth Houston Board of Directors The Children’s Center, Inc.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Center's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

The Center’s Response to Findings

The Center’s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Center’s response was not subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the Center’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Texas City, Texas June 24, 2015

Texas City Ofﬁ ce 2000 Loop 197 North Suite 200 Texas City, Texas 77590 409.948.4406 Main whitleypenn.com

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133

To the Board of Directors The Children’s Center, Inc. Galveston, Texas

Report on Compliance for Each Major Federal Program

We have audited The Children’s Center, Inc. (the “Center”) (a non-profit organization) compliance with the type of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect of the Center’s major federal programs for the year ended September 30, 2014. The Center’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of Center’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Center’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Center’s compliance.

An Independent Member of Dallas Fort Worth Houston Board of Directors The Children’s Center, Inc.

Opinion on Each Major Federal Program

In our opinion, the Center complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30, 2014.

Other Matters

The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as item #2013-002. Our opinion on each major federal program is not modified with respect to these matters.

The Center’s response to the noncompliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The Center’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

Report on Internal Control over Compliance

Management of the Center is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Center’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Center’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as item #2013-002 that we consider to be significant deficiencies.

28 Board of Directors The Children’s Center, Inc.

The Center’s response to the internal control over compliance findings identified in our audit are described in the accompanying the Schedule of Findings and Questioned Costs. The Center’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

Texas City, Texas June 24, 2015

29 THE CHILDREN’S CENTER, INC

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Years Ended September 30, 2014

Section I - Summary of Auditors’ Results

Financial Statements

Type of auditors’ report issued: Unmodified

Internal control over financial reporting: Material weakness(es) identified? None

Significant deficiencies identified that are not considered to be material weaknesses? Yes; #2012-001

Noncompliance material to financial statements noted? None

Federal Awards

Internal control over major programs: Material weakness(es) identified? None

Significant deficiencies identified that are not considered to be material weaknesses? Yes; #2013-002

Type of auditors' report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with section .510 (a) of OMB Circular A-133? Yes; #2013-002

Identification of Major Programs: CFDA #: Unaccompanied Alien Children Program 93.676 Promoting Safe and Stable Families 93.556

Dollar threshold used to distinguish between type A and type B federal programs: $300,000

Auditee qualified as a low risk auditee? No

30 THE CHILDREN’S CENTER, INC

SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)

Section II - Financial Statement Findings

FINDING #2012-001 – Significant Deficiency: Financial Close and Reporting and Document Management Criteria Documentation for general ledger transactions and balances should exist as support. Condition Documentation related to the audit should be more readily available. There was some documentation that required much effort to locate. The number of journal entries and amounts were material to the financial statements. Effect It is important that all supporting documentation is maintained in order to support both asset and liability balances and revenue and expense transactions. Cause The Center had a reduction in staff during in the previously fiscal year and had not fully staffed in the current fiscal year. As such, there was only one person to assist with financial close and reporting, etc. The additional accounts payable clerk did not begin with the Center until September 2, 2014. Recommendation Supporting documentation should be maintained in a central location where it can be easily retrieved by accounting personnel. Views of The Center agrees and will continue to implement procedures to ensure internal Responsible controls are strengthened. On September 2, 2014, the Center hired an accounts Officials payable clerk, who has developed a filing system for all expense and journal entry documentation, which is maintained in one central location.

31 THE CHILDREN’S CENTER, INC

SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)

Section III - Federal Award Findings and Questioned Costs

Finding # 2013-002 Significant Deficiency and Noncompliance : CFDA 93.676 Unaccompanied Alien Children Program – Allowable/Unallowable Activities and Cost Principles Criteria Each disbursement of federal funds is accompanied by supporting documentation. In addition, the documentation is reviewed and approved by program personnel or central administration personnel. The documentation will allow the reviewer to determine if an expense is an allowable activity/cost for the federal program in question. The normal operating procedures should be utilized when procuring goods and services with proper documentation. Condition The Center did not maintain supporting documentation for allowable charges to the Federal program. In addition, where supporting documentation was maintained the documentation was inconsistently reviewed and approved with a signature. We also noted in our testing that the Center’s paid contract laborers approximately $27,000 using petty cash funds. We did note, however, that some contract laborers for the same project were paid through the normal accounts payable process. Furthermore, program employees also utilized their own credit cards to purchase goods for the program but in some instances, not all support was attached to the purchase. In our sample, approximately $54,000 was reimbursed to the employee from federal funds. Questioned Costs Based on our sample of 60 transactions, we could not determine whether expenses totaling $11,436 should have been charged to the federal program. Total tested in our sample was $514,098, yielding an error rate of 2.27 percent. The total non-payroll population (excluding depreciation, in-kind costs and central office costs) for this grant is $1,912,078. Effect We were unable to determine if certain expenses should have been charged to the program due to insufficient documentation. In addition, circumventing the normal accounts payable process and allowing employees to charge large amounts on their personal credit cards could lead to material noncompliance. Cause Certain transactions are allocated to various programs. The program director in some instances signs off on the portions that apply to his program. For particular transactions, there was more charged to the federal program than there was approved support to charge to the program. In other instances, documentation was not available for us to review the transactions selected for testing which resulted in the questioned costs. In addition, many of the expenditures incurred during fiscal year 2014 related to the Brazoria County Youth Home repairs necessary to ready the facility for use. Recommendation The Center should review and approve supporting documentations consistently to allow auditors and management to readily determine if the amounts charged to the federal program are appropriate and allowable. In addition, the Center should ensure that all documentation charged to federal programs is maintained.

32 THE CHILDREN’S CENTER, INC

SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)

Section III - Federal Award Findings and Questioned Costs (continued)

Finding # 2013-002 Significant Deficiency and Noncompliance : CFDA 93.676 Unaccompanied Alien Children Program – Allowable/Unallowable Activities and Cost Principles (continued)

Views of The Center hired a Compliance Officer on July 14, 2014 to insure proper compliance for Responsible all State and Federal grants received by the agency. Additionally, an Accounts Payable Officials Clerk was hired on September 2, 2014 to insure that all general ledger transactions for all programs of the agency had proper supporting documentation in one central location.

The Center placed the Brazoria County Youth Home (BCYH) into operation on May 30, 2014. There were many repairs that had to occur and purchases made to allow BCYH to house the influx of immigrants. Federal officials became aware that unusually large influxes of children from Central America were expected to cross the U.S. and Mexican Border by the Spring of 2014. There was a 120-day period between budget approval in February, modifications of buildings and grounds, additions of furnishing and equipment, all leading to licensing of the facility and acceptance of children in May of 2014. During this extremely short time frame there was considerable demand internally and externally to open beds in response to the influx of children. These same considerable demands occurred in identifying the staffing pattern and preparing staff for work in the program, to include recruitment, hiring, background work and training. The influx of Central American children had become a national emergency with the President of the United States.

Section IV - Status of Prior Year Findings and Questioned Costs

Finding # Description Status #2012-001 Financial Close and Reporting, Journal Partially Resolved. Journal entries made by the Entry Approval and Document Center were better documented in the current fiscal Management year. The other items were not resolved. #2013-001 CFDA 93.676 Unaccompanied Alien Resolved. Children Program – Reporting #2013-002 CFDA 93.676 Unaccompanied Alien Not Resolved. See Current Finding. Children Program – Allowable/Unallowable Activities and Cost Principles #2013-003 CFDA 93.676 Unaccompanied Alien Resolved. The Third Party payroll service was able Children Program and CFDA 93.556 to provide time sheets for employees selected for Promoting Safe and Stable Families-B. testing. Each federal program directors approval Allowable Costs/Cost Principles was present through the electronic approval process. The approvals were also provided by the payroll service.

33 THE CHILDREN’S CENTER, INC

SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued)

Section V - Corrective Action Plan

Finding # 2012-001 – Financial Close and Reporting and Document Management Response On September 2, 2014, the Center hired an accounts payable clerk to develop and maintain a filing system for all supporting documentation for all general ledger entries. The accounts payable clerk’s position will be expanded to include automating the requisition and purchase order approval process. The Center will also hire a consultant that is a Certified Public Accountant who will serve as an extension to staff and will work with the Vice President of Finance and Business Administration to assist in the financial close and reporting process on a quarterly basis. Responsible Party Mary Ross Vice President of Finance & Business Administration. Estimated Completion Immediately date. FINDING #2013-002 - CFDA 93.676 Unaccompanied Alien Children Program – Allowable/Unallowable Activities and Cost Principles Response Supporting documentation for allowable charges to the Unaccompanied Alien Children Program and all other Federally funded programs in addition to all of the agencies programs is kept in a central location by the accounts payable clerk who was hired on September 2, 2014. The accounts payable clerk’s position will be expanded to include automating the requisition and purchase order approval process. In addition, compliance with a consistent review is being implemented by the Compliance Officer who was hired on July 14, 2014 to do this for all State and Federal funds received by the agency. Responsible Party James T. Keel, Chief Executive Officer; Dr. Fred Sussman, Director of Standards Evaluation and Training; Amanda Gilbbert, Accounts Payable Clerk; and Dr. Santiago Inchauregui, ORR Program Director. Estimated Completion Immediately

34 THE CHILDREN’S CENTER, INC.

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

September 30, 2014

Amount CFDA Pass Through Program Provided to Federal Grantor /Pass Through Grantor/Program Title Number Grantor's Number Expenditures Subrecipients

U.S. Department of Housing and Urban Development Office of Community Planning and Development Direct: Supportive Housing Program - 14.235 TX0221B6E040800$ 235,788 $ - Total Department of Housing and Urban Development 235,788 -

U.S. Department of Health and Human Services Direct Program: Street Outreach Program 93.623 90YO0143 110,903 - Unaccompanied Alien Children Program - GMI 93.676 90ZU0118-01-07 2,256,556 - Unaccompanied Alien Children Program - BCYH 93.676 90ZU0118-01-07 1,493,847 Unaccompanied Alien Children Program - TFC 93.676 90ZU0118-01-07 298,092

Administration for Children and Families Passed through the Texas Department of Family Protective Services: Promoting Safe and Stable Families 93.556 23794881 320,329 211,303 Passed through Change Happens: Navigators in Federally facilitated and State Partnership Exchanges 93.750 CA-NAV-13-001 105,000 Total U.S. Department of Health and Human Services 4,584,727 211,303

U.S. Department of Homeland Security: Passed through United Way: Emergency Food and Shelter National Board Program - LRO 97.024 806600-009 56,631 56,631 Emergency Food and Shelter National Board Program - LRO 97.024 806600-009 13,229 Total U.S Department of Homeland Security 69,860 56,631

U.S. Department of Agriculture Passed through Texas Department of Human Services: National School Lunch Program 10.555 TX-0840002 35,746 - Total U.S. Department of Agriculture 35,746 -

Total Expenditures of Federal Awards $ 4,926,121 $ 267,934

35 THE CHILDREN’S CENTER, INC.

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

Years Ended September 30, 2014

Note 1 - Basis of Presentation

The accompanying schedule of expenditures of federal awards (the “schedule”) includes the federal grant activity of The Children's Center, Inc. (the “Center”) under programs of the federal government for the year ended September 30, 2014. The information in this schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Because the schedule presents only a selected portion of the operations of the Center, it is not intended to and does not present the financial position, changes in net assets or cash flows of the Center.

Note 2 - Summary of Significant Accounting Policies

In accordance with generally accepted accounting principles, the Center accounts for all awards under federal programs on an accrual basis of accounting and, accordingly, reflects all significant receivables, payables, and other liabilities.

Federal grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. When such funds are advanced to the Center, they are recorded as deferred revenues until earned. Otherwise, federal grant funds are received on a reimbursement basis from the respective federal program agencies. Generally, unused balances are returned to the grantor at the close of specified project periods.

Expenditures reported on the schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-122, Cost Principles for Nonprofit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available.