Lincoln Towers HDFCNon-Profit

Finding No. 2022-001 (Material Weakness): Criteria: There were errors related to accounting for non- marketable securities and amortization of debt issuance costs resulting in cumulatively material errors requiring restatement of previously issued financial statements. Condition: The financial reporting process was not sufficiently designed to effectively detect and prevent the issuance of financial statements with cumulatively material errors in certain account balances. Context: Audit procedures over investments revealed immaterial variances with investment statements and an accounting policy selection for non-marketable securities that did not follow Generally Accepted Accounting Principles in the United States of America (?US GAAP?). Furthermore, audit procedures over debt issuance costs revealed that the accounting policy election to amortize such costs on a straight-line basis did not follow US GAAP. Cause: The Organization adopted an incorrect accounting policy for recognizing non-marketable securities on their balance sheets and an incorrect policy election to amortize debt issuance cost over the term of the related debt obligation. Effect: The fair value and cost of investments were overstated, and net assets and financial expenses were understated, in the previously issued financial statements. Recommendation: Management should strengthen procedures for selecting appropriate accounting policies for significant items impacting their balance sheets. Such policies and resulting accounting should include processes that more closely follow published authoritative guidelines for initial recognition and subsequent measurement of assets and liabilities on the books and records. Response: Management concurs with the finding and restated the prior year financial statements.