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EAST TEXAS COUNCIL ON ALCOHOLISM AND DRUG ABUSE <br />NOTES TO FINANCIAL STATEMENTS <br />August 31, 2008 <br />NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br />( A ) Organization <br />East Texas Council on Alcoholism and Drug Abuse ("Council") was chartered in 1966 and serves a twenty three <br />county area. The Council provides substance abuse prevention, intervention and criminal justice programs <br />designed to increase public understanding of the nature, controi and remedy of alcoholism, drug abuse and <br />other addictions. <br />( B ) Income Tax Status <br />The Council qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and, <br />therefore, has no provision for federal income tax. <br />( C ) Basis of Accountina <br />The financial statements of the East Texas Council on Alcoholism and Drug Abuse have been prepared on the <br />accrual basis of accounting and, accordingly, reflect all significant receivables, payables, and other liabilities. <br />( D ) Basis of Presentation <br />Financial statement presentation follows the recommendations of the Financial Accounting Standards Board in <br />its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements for Not-for-Profit <br />Organizations. Under SFAS No. 117, the Organization is required to report information regarding its financial <br />position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted <br />net assets, and permanently restricted net assets. <br />( E ) Functional Expenses <br />Expenses are charged to each program based on direct expenditures incurred. Certain allocations of general <br />and administrative expenses have been estimated by management. <br />( F ) Grants <br />The Organization records income from grants in the period during which contract provisions are satisfied and <br />the grant proceeds are considered to be earned. <br />( G) Cash and Cash Equivalents <br />For purposes of the Statement of Cash Flows, the Council considers all unrestricted, highly liquid investments <br />with an initial maturity of three months or less to be cash equivalents. <br />7 <br />~ 000104 <br />