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TEXAS PREGNANCY

CARE NETWORK
Financial Statements and Compliance with
the Uniform Guidance and the
State of Texas Single Audit Circular
(With Independent Auditors Report Thereon)

August 31, 2016 and 2015


TEXAS PREGNANCY CARE NETWORK
Financial Statements and
Compliance with the Uniform Guidance and
the State of Texas Single Audit Circular
August 31, 2016 and 2015
TABLE OF CONTENTS

Independent Auditors Report 1

Financial Statements:

Statements of Financial Position 3

Statements of Activities and Changes in Net Assets 4

Statements of Functional Expenses 5

Statements of Cash Flows 6

Notes to Financial Statements 7

Supplemental Schedule-Reconciliation of Cash Received from Texas Health and


Human Services Commission to Statements of Activities and Functional Expenses,
Year Ended August 31, 2016 13

Independent Auditors Report on Internal Control Over Financial Reporting and


Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards 14

Independent Auditors Report on Compliance for Each Major Program and on


Internal Control over Compliance Required by the Uniform Guidance and the State
of Texas Single Audit Circular 16

Schedule of Expenditures of Federal and State Awards, Year Ended August 31, 2016 18

Notes to the Schedule of Expenditures of Federal and State Awards 19

Schedule of Findings and Questioned Costs, Year Ended August 31, 2016 20

Auditors Peer Review Report 22


Independent Auditors Report

To the Board of Directors of Texas Pregnancy Care Network:

Report on the Financial Statements


We have audited the accompanying financial statements of Texas Pregnancy Care Network (a nonprofit
organization), which comprise the statement of financial position as of August 31, 2016 and 2015, and the
related statements of activities and changes in net assets, functional expenses, and cash flows for the years then
ended and the related notes to the financial statements.

Managements Responsibility for the Financial Statements


Management is responsible for the preparation and 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 and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.

Auditors 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 auditors 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 entitys 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 entitys 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.

Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Texas Pregnancy Care Network as of August 31, 2016 and 2015, and the changes in its net assets
and its cash flows for the years then ended in accordance with accounting principles generally accepted in the
United States of America.
Other Matters
Required Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The
accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as
required by the audit 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 is not a required part of the financial statements. Such information is the responsibility of
management and was derived from and relates 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
to the financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal
Awards is fairly stated in all material respects in relation to the financial statements as a whole.

Other Information
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The
Supplemental Schedule - Reconciliation of Cash Received from Texas Health and Human Services
Commission to Statements of Activities and Functional Expenses for the year ended August 31, 2016 is
presented for purpose 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 relates 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 to the financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In our
opinion, the Supplemental Schedule - Reconciliation of Cash Received from Texas Health and Human
Services Commission to Statements of Activities and Functional Expenses for the year ended August 31, 2016
is fairly stated in all material respects in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards


In accordance with Government Auditing Standards, we have also issued our report dated March 3, 2017 on
our consideration of Texas Pregnancy Care Networks internal control over financial reporting and on our tests
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 the 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 Texas Pregnancy Care Networks internal control over
financial reporting and compliance.

PMB HELIN DONOVAN, LLP

Dallas, Texas
March 3, 2017
TEXAS PREGNANCY CARE NETWORK
Statements of Financial Position
August 31, 2016 and 2015

2016 2015
Assets

Cash and cash equivalents $ 1,212,545 $ 112,221


Accounts receivable 5,564 865,676
Inventory 2,791 16,019
Prepaid marketing and educational materials 1,185,707 -
Prepaid other 14,190 14,564
Property and equipment, net 14,979 9,744

Total assets $ 2,435,776 $ 1,018,224

Liabilities and Net Assets

Accounts payable $ 936,103 $ 777,408


Deferred contract revenue 1,185,707 -
Accrued expenses 53,690 35,775
Total liabilities 2,175,500 813,183

Net assets:
Unrestricted net assets 260,276 205,041

Total net assets 260,276 205,041

Total liabilities and net assets $ 2,435,776 $ 1,018,224

See accompanying notes and independent auditor's report.


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TEXAS PREGNANCY CARE NETWORK
Statements of Activities and Changes in Net Assets
For the Years Ended August 31, 2016 and 2015

2016 2015
Unrestricted Unrestricted
Revenues and support
HHSC contract revenue $ 7,964,293 $ 5,150,000
Other income and support 127,563 121,501
Total revenues and support 8,091,856 5,271,501

Expenses and losses


Program services:
Client services 5,924,320 4,389,201
Information outreach and referral 1,553,213 443,369
Total program services 7,477,533 4,832,570

Supporting services:
Project administration 493,436 421,452
Management and general 65,652 55,319
Total supporting services 559,088 476,771

Total expenses 8,036,621 5,309,341

Changes in net assets 55,235 (37,840)


Net assets, beginning of year 205,041 242,881
Net assets, end of year $ 260,276 $ 205,041

See accompanying notes and independent auditor's report.


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TEXAS PREGNANCY CARE NETWORK
Statements of Functional Expenses
For the Years Ended August 31, 2016 and 2015

Year Ended August 31, 2016 Year Ended August 31, 2015
Information, Information,
Client Outreach and Project Management Client Outreach and Project Management
Services Referral Administration and General Total Services Referral Administration and General Total
Client reimbursement $ 5,905,266 $ - $ - $ - $ 5,905,266 $ 4,379,475 $ - $ - $ - $ 4,379,475
Compensation and benefits - 358,112 371,309 38,728 768,149 - 254,007 307,705 32,084 593,796
Training and education 19,054 152,239 - 14,555 185,848 9,726 102,481 - 14,813 127,020
Marketing - 896,123 1,431 - 897,554 - 5,854 150 - 6,004
Rent - - 69,502 - 69,502 - - 51,576 - 51,576
Other - - 7,378 5,844 13,222 - - 6,079 4,986 11,065
Travel and entertainment - 37,993 209 766 38,968 - 30,694 765 1,770 33,229
Consulting - 102,750 3,574 - 106,324 - 44,910 3,489 - 48,399
Professional fees - - 21,520 3,768 25,288 - - 39,986 - 39,986
Utilities - 5,996 3,766 73 9,835 - 5,423 1,783 73 7,279
Supplies - - 8,412 1,918 10,330 - - 4,566 1,593 6,159
Insurance - - 3,125 - 3,125 - - 2,894 - 2,894
Depreciation - - 3,210 - 3,210 - - 2,459 - 2,459
$ 5,924,320 $ 1,553,213 $ 493,436 $ 65,652 $ 8,036,621 $ 4,389,201 $ 443,369 $ 421,452 $ 55,319 $ 5,309,341

See accompanying notes and independent auditor's report.


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TEXAS PREGNANCY CARE NETWORK
Statements of Cash Flows
For the Years Ended August 31, 2016 and 2015

2016 2015
Cash Flow from Operating Activities
Changes in net assets $ 55,235 $ (37,840)
Adjustments to reconcile changes in net assets
to cash provided by (used in) operations:
Depreciation expense 3,210 2,459
Loss on disposal of property and equipment 1,570 -
Changes in assets and liabilities:
Accounts receivable 860,112 (6,711)
Inventory 13,228 (2,483)
Prepaid expenses (1,185,333) 105,821
Deferred contract revenue 1,185,707 -
Accounts payable and accrued expenses 176,610 (90,411)
Cash provided by (used in) operating activities 1,110,339 (29,165)

Cash Flow from Investing Activities


Purchase of property and equipment (10,015) (688)
Cash used in investing activities (10,015) (688)

Net change in cash and cash equivalents 1,100,324 (29,853)


Cash and cash equivalents balance, beginning of year 112,221 142,074
Cash and cash equivalent balance, end of year $ 1,212,545 $ 112,221

See accompanying notes and independent auditor's report.


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TEXAS PREGNANCY CARE NETWORK
Notes to the Financial Statements
August 31, 2016 and 2015

Note 1 - Organization and Summary of Significant Accounting Policies

Organization

Texas Pregnancy Care Network (TPCN) was organized in August 2005 as a Texas not-for-profit
corporation. TPCN is an autonomous non-profit institution exempt from federal income taxes under Internal
Revenue Code 501(c)(3) and qualifies as a public charity under 170(b)(1). TPCN assists women facing
unplanned pregnancies with realistic alternatives to abortion services by administering funding to pro-life
social service agencies, pregnancy centers, maternity homes, and adoption agencies in Texas. Program
services include client assistance and information outreach.

Summary of Significant Accounting Policies

Basis of Presentation TPCNs financial statements have been prepared on the accrual basis of accounting,
in accordance with accounting principles generally accepted in the United States (GAAP) for not-for-profit
organizations. Under these provisions, net assets, revenues, gains, and losses are classified based on the
existence or absence of donor-imposed restrictions. Expenses are classified as unrestricted. Accordingly, net
assets of TPCN and changes therein are classified and reported as follows:
Permanently Restricted - Net assets subject to donor-imposed stipulations that they be maintained
permanently by TPCN.
Temporarily Restricted - Net assets subject to donor-imposed stipulations that can be fulfilled by actions
of TPCN pursuant to those stipulations or that expire by the passage of time. Temporarily restricted net
assets include the portion of donor-restricted endowment funds that have not been appropriated for
expenditure by the TPCN.
Unrestricted Net assets that are not subject to donor-imposed stipulations. Unrestricted net assets may
be used for any purpose or designated for specific purposes by action of the Board of Directors.
Contributions for which restrictions are satisfied in the same period are classified as unrestricted.

As of August 31, 2016 and 2015, TPCN had no temporarily or permanently restricted net assets.

Cash and Cash Equivalents - Cash and cash equivalents consist of cash in checking accounts and money-
market accounts. TPCN considers all highly liquid investments with a maturity of three months or less to be
cash equivalents.

Accounts Receivable - Accounts receivable are stated net of an allowance for doubtful accounts. TPCN
evaluates the collectability of its receivables and adequacy of its allowance for doubtful accounts on a
periodic basis. The evaluation includes historical loss experience and length of time the receivables are past
due. There was no allowance for doubtful accounts as of August 31, 2016 and 2015.

Inventory Inventory consists of educational material such as pamphlets and videos. These are purchased by
TPCN and stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO)
method. The education materials are distributed free of charge to the providers.

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TEXAS PREGNANCY CARE NETWORK
Notes to the Financial Statements
August 31, 2016 and 2015

Note 1 - Organization and Summary of Significant Accounting Policies - Continued

Summary of Significant Accounting Policies - Continued

Prepaid Expenses - Prepaid expenses consist of prepaid marketing, materials and insurance and are amortized
in the period utilized. TPCN had prepaid expenses of $1,199,897 and $14,564 at August 31, 2016 and 2015,
respectively.

During August 2016, TPCN entered into a marketing/media placement project agreement to develop a
campaign aimed at improving attitudes towards adoption. The campaign includes account management,
website and educational videos and reporting, media and effectiveness testing, creative development and
testing. Funding for this campaign was approved by the Texas Health and Human Services Commission
(HHSC). As such, certain expenditures were paid in 2016 which relate to media use in future periods. This
resulted in approximately $960,000 being included in prepaid expenses and the related contract revenue from
HHSC being deferred at August 31, 2016 to comply with GAAP.

In August 2016, TPCN also purchased educational materials from funds approved by HHSC. Materials
purchased will be shipped and used by providers in 2017. Therefore, expenses totaling $225,707 have been
classified as prepaid expenses and the related contract revenue from HHSC is deferred at August 31, 2016 to
comply with GAAP.

Property and Equipment - TPCN records property and equipment at cost (or estimated fair value if donated).
Property and equipment is depreciated over estimated useful lives (ranging from three to five years) using the
straight-line method. TPCN capitalizes property and equipment purchases of $500 and greater. Upon
retirement or disposition of the assets, TPCN reports related gains or losses in the statement of activities and
changes in net assets.

Revenue Sources of revenue and support for TPCN may include contributions from the community,
contracts, and grants from government agencies, foundations and businesses.

Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support
in the period received depending on the existence and/or nature of any donor restrictions. Contributions
received which are part of TPCNs ongoing major or central activities are recognized as revenue, while
contributions which are peripheral or incidental are recognized as gains. Donated assets are recorded at their
estimated fair market values at the date of receipt.

Contributed services are reported as revenue if the services either (a) create or enhance a non-financial asset
or (b) require specialized skills.

During the years ended August 31, 2016 and 2015, the value of contributed services meeting the requirements
for recognition in the financial statements was not material. Although individuals volunteer their time and
perform a variety of tasks that assist TPCN, these services do not meet the criteria for recognition as
contributed services.

Contract with the Texas Health and Human Services Commission - TPCN entered into an agreement with
HHSC to fund program and administrative services using Temporary Assistance for Needy Families
(TANF) federal funding and state funding from the State of Texas to promote childbirth, rather than
abortion. This contract expires August 31, 2017, unless renewed, extended, or terminated pursuant to the
contract provisions. During the years ended August 31, 2016 and 2015, the TPCN received $9,150,000 and
$5,150,000, respectively, which also included recorded contract receivables of $0 and $865,676 from HHSC,
respectively.

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TEXAS PREGNANCY CARE NETWORK
Notes to the Financial Statements - Continued
August 31, 2016 and 2015

Note 1 - Organization and Summary of Significant Accounting Policies - Continued

Summary of Significant Accounting Policies - Continued

Compensated Absences - TPCN accrues for compensated absences. Compensated absences for the years
ended August 31, 2016 and 2015 were approximately $11,700 and $7,500, respectively.

Marketing Costs - Marketing costs are expensed as incurred or in the period in which the marketing takes
place. Marketing expenses for the years ended August 31, 2016 and 2015 were approximately $898,000 and
$6,000, respectively, and are primarily included in program services. As discussed above, TPCN entered into
a marketing/media placement contract during 2016 totaling approximately $1,442,000. Of this total,
approximately $482,000 was incurred during this year and is included in marketing expense. The remaining
amount is being deferred to a future period.

Functional Expenses - The expense information contained in the statements of activities is presented on a
functional basis. Accordingly, certain expenses are allocated between functional categories based on
managements estimates. Program services include client services and information, outreach and referral.

Fair Value of Financial Instruments - TPCN adopted guidance which defines fair value, establishes a
framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value
measurements. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and
other liabilities approximated fair value at August 31, 2016 and 2015.

Income Taxes - TPCN is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue
Code. Unrelated business income, of which TPCN had no significant amounts for the years ended August 31,
2016 and 2015, is subject to federal income taxes. Accordingly, there is no provision or liability for federal
income taxes in the accompanying financial statements.

Management has analyzed the tax positions taken by TPCN, and has concluded that as of August 31, 2016
and 2015 there are no uncertain positions taken or expected to be taken that would require recognition of a
liability (or asset) or disclosure in the financial statements. Management believes it is no longer subject to
income tax examinations for years prior to its fiscal year ended August 31, 2013.

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimated.

Concentration of Credit Risk - TPCN maintains cash balances at federally insured financial institutions. At
various times during the years ended August 31, 2016 and 2015, balances in these accounts may have
exceeded Federal Deposit Insurance Corporation (FDIC) insured limits. At August 31, 2016 and 2015, TPCN
had cash exceeding the FDIC insured limits of approximately $968,000 and $0, respectively. TPCN has not
experienced and does not anticipate any credit losses on these deposits.

Recent Accounting Pronouncements


In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) 2016-02, Leases (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease
liability under most operating leases in its balance sheet. For private companies, the ASU is effective for years
beginning after December 15, 2019. Early adoption is permitted. TPCN has elected not to early adopt this
ASU as of August 31, 2016.

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TEXAS PREGNANCY CARE NETWORK
Notes to the Financial Statements - Continued
August 31, 2016 and 2015

Note 1 - Organization and Summary of Significant Accounting Policies - Continued

Summary of Significant Accounting Policies - Continued

Accounting Standards Update No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial
Statements of Not-for-Profit Entities decreases the number of net asset classes from three to two. The new
classes will be net assets with donor restrictions and net assets without donor restrictions. The standard
also:
Requires reporting of the underwater amounts of donor-restricted endowment funds in net assets
with donor restrictions and enhances disclosures about underwater endowments.
Continues to allow preparers to choose between the direct method and indirect method for
presenting operating cash flows, eliminating the requirement for those who use the direct
method to perform reconciliation with the indirect method.
Requires a not-for-profit to provide in the notes qualitative information on how it manages its
liquid available resources and liquidity risks. Quantitative information that communicates the
availability of a not-for-profit's financial assets at the balance sheet date to meet cash needs for
general expenditures within one year is required to be presented on the face of the financial
statement and/or in the notes.
Requires reporting of expenses by function and nature, as well as an analysis of expenses by
both function and nature.

The standard will take effect for annual financial statements issued for fiscal years beginning after
December 15, 2017. Early application of the standard is permitted. TPCN has elected not to early adopt
this ASU as of August 31, 2016.

Note 2 - Cash and Cash Equivalents


The composition of the TPCNs cash and cash equivalents at August 31, 2016 and 2015 was as follows:
2016 2015
Cash and demand deposits $ 1,061,198 $ 110,175
Money market accounts 151,347 2,046
Total cash and cash equivalents $ 1,212,545 $ 112,221

Note 3 Prepaid Expenses

As of August 31, 2016 and 2015, prepaid expenses were composed of the following:
2016 2015
Marketing project $ 960,000 $ -
Education materials 225,707 -
Other 14,190 14,564
Total prepaid expenses $ 1,199,897 $ 14,564

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TEXAS PREGNANCY CARE NETWORK
Notes to the Financial Statements - Continued
August 31, 2016 and 2015

Note 4 - Property and Equipment


As of August 31, 2016 and 2015, property and equipment consisted of:

2016 2015
Furniture $ 20,669 $ 16,666
Equipment 61,983 61,983
82,652 78,649
Accumulated depreciation (57,983) (68,905)
Total property and equipment $ 14,979 $ 9,744

Depreciation expense was $3,210 and $2,459 for the years ended August 31, 2016 and 2015, respectively.

Note 5 - Line of Credit

TPCN maintains a $350,000 revolving line of credit with Business Bank of Texas, N.A. The line has a
one-year term through May 1, 2017 and is secured by substantially all of the assets of TPCN. Interest
accrues at 5% per annum on the outstanding balance. Any principal outstanding under the loan is due in
full at the end of the term. Any accrued, but unpaid interest, is due monthly. As of August 31, 2016 and
2015, there were no amounts outstanding under this line of credit.

Note 6 - Commitment and Contingencies

Leases
TPCN leases certain office space under non-cancellable operating leases. TPCN recognizes rent expense
on a straight-line basis over the lease term. Total rent expense under the leases was approximately
$69,500 and $51,600 for the years ended August 31, 2016 and 2015, respectively.

Future minimum lease payments under the noncancelable operating leases are as follows for the years
ending August 31:
2017 $ 69,604
2018 5,800
Total $ 75,404

Licenses
On September 1, 2016, TPCN entered into a license agreement for the use of the BriteWorks PS System
which provides for methods, materials, and software to enable centralized reimbursement and
management of pregnancy support services. The agreement covers the period from September 1, 2016
through August 31, 2017 and requires a monthly license fee of $5,000 per month.

Litigation
TPCN from time to time may be involved in litigation relating to claims arising out of its ordinary course
of business. Management believes that there are no claims or actions pending or threatened against the
TPCN, the ultimate disposition of which would have a material impact on the TPCNs financial position,
results of operations or cash flows.

Risk Management
TPCN maintains various forms of insurance that the TPCNs management believes are adequate to reduce
the exposure to these risks to an acceptable level.

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TEXAS PREGNANCY CARE NETWORK
Notes to the Financial Statements - Continued
August 31, 2016 and 2015

Note 7 - Concentrations

TPCNs primary source of revenue is from HHSC, which is used to fund program and administrative
services to implement a statewide program for females focused on pregnancy support services that
promote childbirth. As described in Note 1, the current contract runs through August 2017 and TPCN
will receive $9,150,000 for fiscal year 2017. During each of the years ended August 31, 2016 and 2015,
approximately 98% of TPCNs revenues were a result of HHSC funding.

Note 8 - Subsequent Events

TPCN evaluates events that occur subsequent to the statement of financial position date, but before
financial statements are issued, for possible adjustment to such financial statements or other disclosure.
This evaluation generally occurs through the date at which the TPCNs financial statements are issued.
For the financial statements as of and for the year ending August 31, 2016, this date was March 3, 2017.

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TEXAS PREGNANCY CARE NETWORK
Supplemental Schedule - Reconciliation of Cash Received from Texas Health and
Human Services Commission to the Statements of Activities and Functional Expenses
For the Year Ended August 31, 2016

Reconciliation of Cash Received from HHSC to the Statement of Activities


Cash received from Texas Health
and Human Services Commission $ 9,150,000

Report of federal expenses to Texas Health


and Human Services Commission $ 9,150,000
Current year audit adjustments -
Total expenditures of federal awards 9,150,000

Reconciling items:
Deferred revenue related to marketing contract $ (960,000)
Deferred revenue related to educational materials (225,707)
Total adjustments (1,185,707)
Total HHSC contract revenue $ 7,964,293

Reconciliation of Cash Received from HHSC to the Statement of Functional Expenses


Cash received from Texas Health
and Human Services Commission $ 9,150,000

Report of federal expenses to Texas Health


and Human Services Commission $ 9,150,000
Current year audit adjustments -
Total expenditures of federal awards 9,150,000

Reconciling items:
Prepaid expenses related to educational materials (225,707)
Prepaid expenses related to marketing contract (960,000)
(1,185,707)
Management and general expenses not covered by grant funds 72,328
Total adjustments (1,113,379)
Total functional expenses $ 8,036,621

See accompanying notes and independent auditor's report.


13
Independent Auditors Report on Internal Control over Financial Reporting and
Compliance and Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards

To the Board of Directors of Texas Pregnancy Care Network:

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 Texas Pregnancy Care
Network (a nonprofit organization), which comprise the statement of financial position as of August 31,
2016, and the related statements of activities and changes in net assets, functional expenses, and cash
flows for the year then ended, and the related notes to the financial statements, and have issued our report
thereon dated March 3, 2017.

Internal Control over Financial Reporting


In planning and performing our audit of the financial statements, we considered Texas Pregnancy Care
Networks 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 Texas Pregnancy Care
Networks internal control. Accordingly, we do not express an opinion on the effectiveness of the
organizations 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 entitys 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. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.

Compliance and Other Matters


As part of obtaining reasonable assurance about whether Texas Pregnancy Care Networks financial
statements are free from 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.
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 results of that testing, and not to provide an opinion on the effectiveness of the organizations
internal control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the organizations internal control and compliance.
Accordingly, this communication is not suitable for any other purpose.

PMB HELIN DONOVAN, LLP

Dallas, Texas
March 3, 2017
Independent Auditors Report on Compliance for Each Major Program and on
Internal Control over Compliance Required by the Uniform Guidance
and the State of Texas Single Audit Circular

To the Board of Directors of Texas Pregnancy Care Network:

Report on Compliance for Each Major Federal and State Program


We have audited Texas Pregnancy Care Networks compliance with the types of compliance
requirements described in the U.S Office of Management and Budget (OMB) Compliance Supplement
and the State of Texas Single Audit Circular that could have a direct and material effect on each of Texas
Pregnancy Care Networks major federal and state programs for the year ended August 31, 2016. Texas
Pregnancy Care Networks major federal and state programs are identified in the summary of auditors
results section of the accompanying schedule of findings and questioned costs.

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

Auditors Responsibility
Our responsibility is to express an opinion on compliance for each of Texas Pregnancy Care Networks
major federal and state 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; the audit 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 State of Texas
Single Audit Circular. Those standards and guidelines 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 or state program occurred.
An audit includes examining, on a test basis, evidence about Texas Pregnancy Care Networks
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 and state program. However, our audit does not provide a legal determination of Texas Pregnancy
Care Networks compliance.

Opinion on Each Major Federal and State Program


In our opinion, Texas Pregnancy Care Network 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 and state programs for the year ended August 31, 2016.
Report on Internal Control over Compliance
Management of Texas Pregnancy Care Network 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 Texas Pregnancy Care Networks
internal control over compliance with the types of requirements that could have a direct and material
effect on each major federal and state 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 and
state program and to test and report on internal control over compliance in accordance with the Uniform
Guidance and the State of Texas Single Audit Circular, 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 Texas Pregnancy Care Networks 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 or state 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 a
reasonable possibility that material noncompliance with a type of compliance requirement of a federal or
state 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 or state 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. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.

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 the
Uniform Guidance and the State of Texas Single Audit Circular. Accordingly, this report is not suitable
for any other purpose.

PMB HELIN DONOVAN, LLP

Dallas, Texas
March 3, 2017
TEXAS PREGNANCY CARE NETWORK
Schedule of Expenditures of Federal and State Awards
For the Year Ended August 31, 2016

Federal
Cluster Name / Federal Grantor / Program Name / Pass-Through Entity Federal CFDA State Contract Number Expenditures

EXPENDITURES OF FEDERAL AWARDS:

U.S. Department of Health and Human Services

Passed through Texas Health and Human Services Commission


Temporary Assistance for Needy Families Cluster 93.558 N/A $ 3,000,000

Total Federal expenditures 3,000,000

EXPENDITURES OF STATE AWARDS:

Texas Department of Health and Human Services

Alternatives to Abortion N/A HHSC529-10-0013-00001F; 6,150,000


HHSC529-16-004-00001A

Total State expenditures 6,150,000

Total Federal and State expenditures $ 9,150,000

See accompanying notes to the schedule of expenditures of federal and state awards.
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TEXAS PREGNANCY CARE NETWORK
Notes to Schedule of Expenditures of Federal and State Awards
Year Ended August 31, 2016

(1) Summary of Significant Accounting Policies

(a) Reporting Entity


The Schedule of Expenditures of Federal and State Awards (the Schedule) includes the
activity of all federal assistance and state programs administered by the Texas Pregnancy
Care Network. The Texas Pregnancy Care Networks organization is defined in Note 1 of
Texas Pregnancy Care Networks basic financial statements.

(b) Basis of Presentation


The Schedule presents total awards expended for each individual program in accordance
with the Uniform Guidance and the State of Texas Single Audit Circular.

(c) Basis of Accounting


The expenditures for the federal and state financial assistance and federal and state
programs are presented on the accrual basis of accounting, which is defined in Note 1 of
Texas Pregnancy Care Networks basic financial statements.

(2) Relationship to Financial Reports

The amounts reported in the financial reports have been reconciled to the amounts reported in the
accompanying Schedule which is prepared on the basis explained in Note 1 of Texas Pregnancy
Care Networks financial statements. The cash received from the Texas Health and Human
Services Commission is reconciled to the total expenditures in the financial report at page 13.

(3) Insurance Coverage

Texas Pregnancy Care Network carried insurance coverage during the grant period as explained
in Note 5 of Texas Pregnancy Care Networks financial statements.

(4) Subrecipients

Texas Pregnancy Care Network made no payments to subrecipients during the year.

(5) Indirect Cost Rate

Texas Pregnancy Care Network is subject to negotiated indirect cost rates and, therefore, is not
eligible to use the 10% de minimis indirect cost rate as allowed under the Uniform Guidance,
section 414.

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TEXAS PREGNANCY CARE NETWORK
Schedule of Findings and Questioned Costs
Year Ended August 31, 2016

Section 1 - Summary of Auditors Results

A. Financial Statements

Type of auditors report issued: Unqualified opinion

Internal control over financial reporting:

Material weakness(es) identified? No

Significant deficiency(ies) identified that are not


considered to be material weaknesses? None reported

Noncompliance material to financial statements noted? No

B. Federal and State Awards

Internal control over compliance:

Material weakness(es) identified? No

Significant deficiency(ies) identified that are not


considered to be material weaknesses? None reported

Type of auditors report issued on compliance


for major programs: Unqualified opinion

Any audit findings disclosed that are required to be


reported in accordance with Subpart A section 200.5 of
the Uniform Guidance or the State of Texas Single
Audit Circular? No

Identification of major federal programs:

CFDA
Number Name of Federal Program or Cluster
93.558 Temporary Assistance for Needy Families

Identification of major state programs:

State Contract Number Name of State Program or Cluster


HHSC529-10-0013-00001F;
HHSC529-16-004-0001A Alternatives to Abortion

Dollar threshold used to distinguish programs: $750,000

Auditee qualified as low-risk auditee: Yes

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TEXAS PREGNANCY CARE NETWORK
Schedule of Findings and Questioned Costs
Year Ended August 31, 2016

Section II - Financial Statement Findings

None reported

Section III - Federal Award Findings and Questioned Costs

None reported.

Section IV - Summary Schedule of Prior Audit Findings

None reported.

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