SERVING OUR CHILDRENNon-Profit

Serving Our Children (SOC) outsourced its accounting department to an outside CPA firm, Marcum LLP, in January of 2023. Marcum LLP undertook responsibility for reviewing all financial data and accounting practices and established new policies and procedures for the timely completion of financial information. This process resulted in an extended closing period to ensure the accuracy of the financial data as well as the implementation of effective internal controls. A timely close of the year ended September 30, 2023 is anticipated and the expectation is that this finding will not be repeated

2021-002

Finding 2021-001 ? Fully Adjusted Accounts Criteria: Maintaining financial statements in accordance with Generally Accepted Accounting Principles (GAAP) requires that all adjustments be booked in the period to which they relate and that accounts being properly reconciled in a timely fashion. Condition & Context: A number of accounts that comprise the detail of the statement of financial position required adjustment. Effect: account balances for grants receivable, accrued leave, grant revenue and salaries were misstated by material amounts at September 30, 2021. Financial statements prepared by Serving Our Children during the current fiscal year would have contained material misstatements. Cause: The underlying accounts of the statement of financial position were not reconciled in the manner in accordance with GAAP. Recommendation: Accounting personnel need to receive additional training in regard to account reconciliations and application of GAAP, particularly in those areas covering non-profit organizations. In addition, a member of senior management or the board of directors needs to have sufficient knowledge of GAAP and financial statements to be able to review internal statements for reasonableness and appropriate application of GAAP. Management Response: Serving Our Children understands that account balances for grants receivable, accrued leave, grant revenue and salaries were misstated. Pursuant to guidance from our auditor, and online accounting resources, Serving Our Children understands that appropriate recognition of revenue, and allocation of accrued expenses for the given period, is critical to proper GAAP accounting. Revenue is to be recognized when it is earned and should be equal to expenditures and recognized appropriately according to funding allocations and objectives. Senior staff shall continue to enhance their understanding of the intricacies of nonprofit accounting. To that end, among other things, the Manager of Finance & Operations, the Manager of Family & Community Affairs, and the Executive Director have taken a number of online courses relating to financial accounting and management for nonprofits. SOC is focusing attention on accurately reconciling accrued leave and accrued salaries to the germane expense accounts, and net income or loss to the germane grants receivable or deferral accounts. Corrective Action Plan: The lack of time between the financial audits of September 30, 2020 and September 30, 2021, prevented accounting staff from fully implementing lessons learned from the former audit. Staff has realized that proper account reconciliation and revenue recognition is imperative. Senior staff shall continue to enhance their understanding of the intricacies of nonprofit accounting. Serving Our Children intends to have these measures implemented for the September 30, 2022 audit of financial statements: 1. Match beginning balances in the account with the ending reconciliation detail from the prior period. 2. Match transactions within accounts to the individual transactions. 3. Review any adjusting journal entries. 4. Review reversing entries for correctness. 5. Ensure the ending detail for the account matches the ending balance. Responsible Party: Robert Uyttebroek, Manager, Finance & Operations Action Start Date: November 29, 2022

2020-001

Finding 2021-002 ? Timely Financial Reporting and SF-SAC Submission Criteria: Filing of the SF-SAC Submission timely represents a functioning financial system. Condition and Context: Complete and accurate financial results were not available on a timely basis in order to begin the audit prior to the due date of the SF-SAC. Significant adjustments needed to be determined and posted before an accurate set of financial statements were available to complete the SF-SAC. Effect: Complete and accurate financial results were not available on a timely basis in order to begin the audit prior to the due date of the SF-SAC. Recommendation: Procedures need to be developed for the following: ? Management should implement procedures to complete and reconcile all financial information within a reasonable time period after year end. ? Management should implement a system to track the due date of the SF-SAC to ensure timely filing. Management Response: The closing process for fiscal year 2022 is in progress. Discussions with our auditor has the start date for the financial audit in early January 2023. Among other things undertaken: 1. Expense and revenue accounts shall be reviewed and reconciled for accuracy. 2. Expense accruals and deferrals have been tracked and journal entries created to adjust germane accounts. 3. Journal Entries for rental accounts year-end adjustments has been created. 4. Vacation accruals have been calculated and the corresponding Journal Entries have been created. Corrective Action Plan: The financial audit for the year ended September 30, 2022 should begin in January of 2023. This should place Serving Our Children on track for SF-SAC Submission prior to June 30, 2023. A Fiscal Calendar has been created to track and assign responsibility for the various items that must be accomplished in systematic order to ensure a successful closing of a fiscal year and financial audit. All senior management have the calendar and have noted appropriate dates to ensure the process stays on track. Responsible Party: Robert Uyttebroek, Manager, Finance & Operations Action Start Date: November 29, 2022

2020-004

Finding 2020-001 ? Fully Adjusted Accounts Program CFDA 84.370 Criteria: Maintaining financial statements in accordance with Generally Accepted Accounting Standards (GAAP) requires that all adjustments be booked in the period to which they relate and that accounts being properly reconciled in a timely fashion. Condition & Context: During our audit procedures, substantially all accounts that comprise the detail of the statement of financial position required adjustment. We also noted that audit adjustments determined during the audit of the September 30, 2018, financial statements were not recorded in Serving Our Children?s accounting system. Effect: Account balances for grants receivable, net assets, accounts payable, accrued leave, deferred revenue and grants revenue were misstated by material amounts at September 30, 2019. In addition, items were capitalized as property & equipment that had been expensed in prior years resulting in a significant analysis of net assets to determine the adjustments posted. Financial statements prepared by Serving Our Children during the current fiscal year would have contained material misstatements. Cause: The underlying accounts of the statement of financial position were not reconciled in a manner in accordance with GAAP. In addition, audit adjustments determined for the year ended September 30, 2018, were not recorded in the accounting system. Recommendation: Accounting personnel need to receive additional training in regard to account reconciliations and the application of GAAP, particularly in those areas covering nonprofit organizations. In addition, a member of senior management or the board of directors needs to have sufficient knowledge of GAAP and financial statements to be able to review internal statements for reasonableness and appropriate application of GAAP. Management response: Serving Our Children (SOC) recognizes that accounts that detail the statement of financial position required additional adjustment. In addition, SOC had developed a software system in 2016 through a grant from a non-federal sponsor that was capitalized and then depreciated during 2019. Upon the counsel of our auditor, SOC understands that this software system should not have been capitalized or depreciated, and SOC shall rectify and reconcile the accounting. These fixed assets shall be disposed for financial statements dated 30 September 2021. Corrective Action Plan: All adjustments to accounts have been entered, reviewed internally, and reviewed by our auditor. Our accounts are in agreement at 30 September 2020 with our Auditor, prior to initiating into the FY21 Audit. To ensure that similar accounting errors do not recur, senior staff shall attain sufficient knowledge of nonprofit accounting as necessary to review properly financial statements for reasonableness and appropriate application of GAAP. SOC shall seek professional guidance in this matter, including a commitment by the financial manager and senior management to attend training classes on non-profit accounting. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 15 May 2022

2019-001

Finding 2020-002 ? Uncleared Checks Program CFDA 84.370 Criteria ? As part of the bank reconciliation process, all reconciling items including uncleared checks need to be investigated, reissued as necessary or reported as unclaimed property after three years. Condition and Context ? During the performance of our cash audit procedures we noted that the balance of uncashed checks has grown substantially during the year. Uncashed checks for the year ended September 30, 2019 and 2018, totaled $238,085 and $16,263, respectively. Effect ? Substantial uncleared checks may result in disallowed costs and/or penalties from local governments due to unclaimed property regulations. Cause ? During 2019, old, uncleared checks have not been processed in an effective manner. Recommendation ? Procedures need to be adopted to adequately process old outstanding items. Management Response - Serving Our Children (SOC) issues scholarship checks for attendance in District of Columbia private schools. The checks are issued payable to the parent or guardian of the student and delivered to the appropriate school of the student?s attendance. This cumbersome policy was developed and used by previous program administrators in order to make the process consistent with federal law and legal advice. The school must coordinate with the parent to meet and review the Invoice Confirmation Report (ICR). The ICR is a report generated by our program database for each student that lists all charges invoiced by the germane school and the application of the allocated funding of the scholarship. If the parent and school agree on the charges against the scholarship, the parent is asked to endorse the check and the school shall deposit the check in their account. This process can often require up to three months or more to complete in normal times. During the pandemic, the challenge of meeting in-person with roughly 1,800 parents each semester was significantly exacerbated. Our schools had to develop resourceful procedures to confer with their parents with safety for all as a primary concern. Further, it is sometimes the case that a school may wait over a year to get a check signed, or a check may never be signed because the parent has moved, or for other reasons. As of 31 December 2020, all checks older than one year were canceled. Further, SOC implemented new procedures on 31 December 2020, whereby all stale checks (issued date is aged for more than 180 days) are voided, with a possible reprint if the school believes the parent can be found to endorse the check. Initially, these uncashed checks were placed in an ?Unclaimed Property? account, keeping the uncashed check open. Upon further deliberation, SOC determined this was not an appropriate policy. As noted, SOC now voids the check upon it?s reaching the status of stale and makes notation in our program database that the check in question is eligible for a reprint if requested by the school due the scholarship. SOC also has procedures to investigate fully uncleared checks: Upon the completion of the monthly bank account reconciliations, a roster is produced listing all outstanding and cleared checks. This roster of outstanding checks is reviewed and at the end of each fiscal year quarter, and all checks outstanding for 180 days or longer are voided and the funds returned to the program. Moreover, this roster can be checked against the roster of cashed checks received from Wells Fargo. At all times, unsigned checks are in the control of the school, SOC, or are voided. The SOC roster identifies each check number, the associated guardian/student, the amount issued, and the school attended. In this way, SOC is able to identify which guardians have failed to sign checks. In an effort to enhance our ability to prompt guardians to sign checks, we asked our software developer, Acumen, to develop an enhancement to our system whereby parents or guardians cannot complete the next year scholarship application if a prior year?s check has not been endorsed or resolved. This enhancement was completed August of 2020 and is now in effect. Corrective Action Plan: As of 31 December 2020, all checks older than one year were voided or cancelled. Checks have been continued to be cleared as per our 180 day ?stale? policy and we have removed Unclaimed Property from our accounts. Software enhancements to our student application system have been implemented to flag those parents or guardians that have an outstanding check that requires their endorsement. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 1 January 2021

2019-002

Finding 2020-003 Job Costing / Revenue Recognition Program CFDA 84.370 Criteria ? As part of the revenue recognition process, costs should be allocated according to their final cost objectives in sufficient detail to ensure that revenue recognized is appropriate for the funding objectives. The record of those costs should be used as a basis for revenue recognition. Condition and Context ? During our testing of revenue recognition we noted that revenue for federal awards was based on cash receipts and revenue for non-federal grants was based on a non-cost estimate. Effect ? Revenue recognition was not accurate. Cause ? There are currently no procedures to recognize revenue in an accurate manner. Recommendation ? Accounting personnel need to receive additional training in regard to account reconciliations and the application of GAAP, particularly in those areas covering nonprofit organizations. Management Response - Serving Our Children (SOC) understands that the revenue from some non-federal grants was recognized upon receipt, rather than upon expenditure for the designated purpose. SOC shall implement the proper method to record and recognize revenue, as per GAAP and associated Accounting Standards Updates from the FASB. SOC shall recognize revenue at an amount corresponding to, and equal to expenses going forward. Corrective Action Plan: Serving Our Children understands that revenue must correspond to and equal expenses, and any variation must be booked as a deferral of revenue, either as an asset or as a liability, as warranted. Further, SOC shall seek professional guidance in this matter, including a commitment by the finance staff and senior management to attend training classes on non-profit accounting. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 15 May 2022

2019-003

Finding 2020-004 Timely Financial Reporting and SF-SAC Submission Program CFDA 84.370 Criteria ? Filing of the SF-SAC Submission timely represents a functioning financial system. Condition and Context ? Complete and accurate financial results were not available on a timely basis in order to begin the audit prior to the due date of the SF-SAC. Significant adjustments needed to be determined and posted before an accurate set of financial statements was available to complete the SF-SAC (see Finding 2020-01) Effect ? Complete and accurate financial results were not available on a timely basis in order to begin the audit prior to the due date of the SF-SAC. Recommendation ? Procedures need to be developed for the following: 1. Management should implement procedures to complete and reconcile all financial information within a reasonable time period after year-end. 2. Management should implement a system to track the due date of the SF-SAC to ensure timely filing. Management Response - Serving Our Children (SOC) has subscribed to an accounting system that holds our software and our data in the ?cloud.? In the winter of 2020, the entire company?s software and client database was held in a ransomware attack that rendered the system offline for six weeks and full system availability was not available for six months. Upon restoration, all lost accounting data had to be restored from a date supplied. SOC has found that transactions prior to this date had been corrupted as well. This unforeseen debilitation, in conjunction with the pandemic at the same time, caused a delay in the completion of the audit. Going forward, SOC believes all corruption of data has been resolved. SOC is aware of the submission to the Federal Audit Clearinghouse requirements of thirty days after the completion of the audit or nine months after the end of the audit period. Corrective Action Plan: Coming out of the worldwide pandemic, Serving Our Children is committed to compliance with all due dates for the submission of financial reports. Going forward post-pandemic, timely completion of audit preparations will be a primary auditing focus. Our immediate goal is to return to our schedule of being audit ready three months after the end of the fiscal year (31 December), with the audit being completed by the sixth month after the end of the reporting period (31 March). During the 90 days after the end of the period, a thorough review of the trial balance and the general ledger, with any adjustments being entered and fiscal year closing procedures undertaken. Upon the close, a review of all required financial statements shall be done. These timelines will be noted on calendars of the financial staff and senior management. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 14 June 2022

2019-004

Finding 2019-001 ? Fully Adjusted Accounts Program CFDA 84.370 Criteria: Maintaining financial statements in accordance with Generally Accepted Accounting Standards (GAAP) requires that all adjustments be booked in the period to which they relate and that accounts being properly reconciled in a timely fashion. Condition & Context: During our audit procedures, substantially all accounts that comprise the detail of the statement of financial position required adjustment. We also noted that audit adjustments determined during the audit of the September 30, 2018, financial statements were not recorded in Serving Our Children?s accounting system. Effect: Account balances for grants receivable, net assets, accounts payable, accrued leave, deferred revenue and grants revenue were misstated by material amounts at September 30, 2019. In addition, items were capitalized as property & equipment that had been expensed in prior years resulting in a significant analysis of net assets to determine the adjustments posted. Financial statements prepared by Serving Our Children during the current fiscal year would have contained material misstatements. Cause: The underlying accounts of the statement of financial position were not reconciled in a manner in accordance with GAAP. In addition, audit adjustments determined for the year ended September 30, 2018, were not recorded in the accounting system. Recommendation: Accounting personnel need to receive additional training in regard to account reconciliations and the application of GAAP, particularly in those areas covering nonprofit organizations. In addition, a member of senior management or the board of directors needs to have sufficient knowledge of GAAP and financial statements to be able to review internal statements for reasonableness and appropriate application of GAAP. Management response: Serving Our Children (SOC) recognizes that accounts that detail the statement of financial position required additional adjustment. In addition, SOC had developed a software system in 2016 through a grant from a non-federal sponsor that was capitalized and then depreciated during 2019. Upon the counsel of our auditor, SOC understands that this software system should not have been capitalized or depreciated, and SOC shall rectify and reconcile the accounting. These fixed assets shall be disposed for financial statements dated 30 September 2021. Corrective Action Plan: All adjustments to accounts have been entered, reviewed internally, and reviewed by our auditor. Our accounts are in agreement at 30 September 2020 with our Auditor, prior to initiating into the FY21 Audit. To ensure that similar accounting errors do not recur, senior staff shall attain sufficient knowledge of nonprofit accounting as necessary to review properly financial statements for reasonableness and appropriate application of GAAP. SOC shall seek professional guidance in this matter, including a commitment by the financial manager and senior management to attend training classes on non-profit accounting. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 15 May 2022

2018-002

Finding 2019-002 ? Uncleared Checks Program CFDA 84.370 Criteria ? As part of the bank reconciliation process, all reconciling items including uncleared checks need to be investigated, reissued as necessary or reported as unclaimed property after three years. Condition and Context ? During the performance of our cash audit procedures we noted that the balance of uncashed checks has grown substantially during the year. Uncashed checks for the year ended September 30, 2019 and 2018, totaled $238,085 and $16,263, respectively. Effect ? Substantial uncleared checks may result in disallowed costs and/or penalties from local governments due to unclaimed property regulations. Cause ? During 2019, old, uncleared checks have not been processed in an effective manner. Recommendation ? Procedures need to be adopted to adequately process old outstanding items. Management Response - Serving Our Children (SOC) issues scholarship checks for attendance in District of Columbia private schools. The checks are issued payable to the parent or guardian of the student and delivered to the appropriate school of the student?s attendance. This cumbersome policy was developed and used by previous program administrators in order to make the process consistent with federal law and legal advice. The school must coordinate with the parent to meet and review the Invoice Confirmation Report (ICR). The ICR is a report generated by our program database for each student that lists all charges invoiced by the germane school and the application of the allocated funding of the scholarship. If the parent and school agree on the charges against the scholarship, the parent is asked to endorse the check and the school shall deposit the check in their account. This process can often require up to three months or more to complete in normal times. During the pandemic, the challenge of meeting in-person with roughly 1,800 parents each semester was significantly exacerbated. Our schools had to develop resourceful procedures to confer with their parents with safety for all as a primary concern. Further, it is sometimes the case that a school may wait over a year to get a check signed, or a check may never be signed because the parent has moved, or for other reasons. As of 31 December 2020, all checks older than one year were canceled. Further, SOC implemented new procedures on 31 December 2020, whereby all stale checks (issued date is aged for more than 180 days) are voided, with a possible reprint if the school believes the parent can be found to endorse the check. Initially, these uncashed checks were placed in an ?Unclaimed Property? account, keeping the uncashed check open. Upon further deliberation, SOC determined this was not an appropriate policy. As noted, SOC now voids the check upon it?s reaching the status of stale and makes notation in our program database that the check in question is eligible for a reprint if requested by the school due the scholarship. SOC also has procedures to investigate fully uncleared checks: Upon the completion of the monthly bank account reconciliations, a roster is produced listing all outstanding and cleared checks. This roster of outstanding checks is reviewed and at the end of each fiscal year quarter, and all checks outstanding for 180 days or longer are voided and the funds returned to the program. Moreover, this roster can be checked against the roster of cashed checks received from Wells Fargo. At all times, unsigned checks are in the control of the school, SOC, or are voided. The SOC roster identifies each check number, the associated guardian/student, the amount issued, and the school attended. In this way, SOC is able to identify which guardians have failed to sign checks. In an effort to enhance our ability to prompt guardians to sign checks, we asked our software developer, Acumen, to develop an enhancement to our system whereby parents or guardians cannot complete the next year scholarship application if a prior year?s check has not been endorsed or resolved. This enhancement was completed August of 2020 and is now in effect. Corrective Action Plan: As of 31 December 2020, all checks older than one year were voided or cancelled. Checks have been continued to be cleared as per our 180 day ?stale? policy and we have removed Unclaimed Property from our accounts. Software enhancements to our student application system have been implemented to flag those parents or guardians that have an outstanding check that requires their endorsement. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 1 January 2021

Finding 2019-003 Job Costing / Revenue Recognition Program CFDA 84.370 Criteria ? As part of the revenue recognition process, costs should be allocated according to their final cost objectives in sufficient detail to ensure that revenue recognized is appropriate for the funding objectives. The record of those costs should be used as a basis for revenue recognition. Condition and Context ? During our testing of revenue recognition we noted that revenue for federal awards was based on cash receipts and revenue for non-federal grants was based on a non-cost estimate. Effect ? Revenue recognition was not accurate. Cause ? There are currently no procedures to recognize revenue in an accurate manner. Recommendation ? Accounting personnel need to receive additional training in regard to account reconciliations and the application of GAAP, particularly in those areas covering nonprofit organizations. Management Response - Serving Our Children (SOC) understands that the revenue from some non-federal grants was recognized upon receipt, rather than upon expenditure for the designated purpose. SOC shall implement the proper method to record and recognize revenue, as per GAAP and associated Accounting Standards Updates from the FASB. SOC shall recognize revenue at an amount corresponding to, and equal to expenses going forward. Corrective Action Plan: Serving Our Children understands that revenue must correspond to and equal expenses, and any variation must be booked as a deferral of revenue, either as an asset or as a liability, as warranted. Further, SOC shall seek professional guidance in this matter, including a commitment by the finance staff and senior management to attend training classes on non-profit accounting. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 15 May 2022

Finding 2019-004 Timely Financial Reporting and SGF-SAC Submission Program CFDA 84.370 Criteria ? Filing of the SF-SAC Submission timely represents a functioning financial system. Condition and Context ? Complete and accurate financial results were not available on a timely basis in order to begin the audit prior to the due date of the SF-SAC. Significant adjustments needed to be determined and posted before an accurate set of financial statements was available to complete the SF-SAC (see Finding 2020-01) Effect ? Complete and accurate financial results were not available on a timely basis in order to begin the audit prior to the due date of the SF-SAC. Recommendation ? Procedures need to be developed for the following: 1. Management should implement procedures to complete and reconcile all financial information within a reasonable time period after year-end. 2. Management should implement a system to track the due date of the SF-SAC to ensure timely filing. Management Response - Serving Our Children (SOC) has subscribed to an accounting system that holds our software and our data in the ?cloud.? In the winter of 2020, the entire company?s software and client database was held in a ransomware attack that rendered the system offline for six weeks and full system availability was not available for six months. Upon restoration, all lost accounting data had to be restored from a date supplied. SOC has found that transactions prior to this date had been corrupted as well. This unforeseen debilitation, in conjunction with the pandemic at the same time, caused a delay in the completion of the audit. Going forward, SOC believes all corruption of data has been resolved. SOC is aware of the submission to the Federal Audit Clearinghouse requirements of thirty days after the completion of the audit or nine months after the end of the audit period. Corrective Action Plan: Coming out of the worldwide pandemic, Serving Our Children is committed to compliance with all due dates for the submission of financial reports. Going forward post-pandemic, timely completion of audit preparations will be a primary auditing focus. Our immediate goal is to return to our schedule of being audit ready three months after the end of the fiscal year (31 December), with the audit being completed by the sixth month after the end of the reporting period (31 March). During the 90 days after the end of the period, a thorough review of the trial balance and the general ledger, with any adjustments being entered and fiscal year closing procedures undertaken. Upon the close, a review of all required financial statements shall be done. These timelines will be noted on calendars of the financial staff and senior management. Responsible Party: Robert J. Uyttebroek, Chief Financial Officer Action Start Date: 14 June 2022

GSA_MIGRATION

2017-004

GSA_MIGRATION

2016-001

GSA_MIGRATION

GSA_MIGRATION