Community Neighborhood Housing Services

FINDING 2021-001: Correction of an Error Significant Deficiency Criteria ? The Organization?s management has the responsibility to record, process, and summarize the accounting data to ensure that uses of the data have complete and accurate accounting records. Nonprofit organizations are also required to prepare financial statements in accordance with generally accepted accounting principles (GAAP). Condition ? A correction was made to the prior year financial statements to reclassify net assets with donor restrictions that had been presented as net assets without restrictions. Context - Management is responsible for the recording, processing, summarizing, and review of the accounting data (i.e. maintaining books and records) and for making the necessary adjustments to those books and records before the audit and preparation of the financial statements. Cause - Upon review of the terms of the NeighborWorks America? Project Reinvest award agreement, management realized that the funds used for Down Payment Assistance grants were required to be used twice before the donor restrictions are released. In prior financial statements, the restrictions were released as the original awards were made. Under the terms of the agreement, when those awards are paid back to the Organization by the original recipient, they are required to be awarded to another recipient under the same terms of the award. When the funds are awarded for a second time, that is when the donor restrictions are released. Effect- Members of management and the Board of Directors using the Organization?s internal books and records did not have complete and accurate information regarding the balance of the Organization?s net assets with donor restrictions. Recommendation - We recommend the Organization establish procedures to regularly review its net assets with donor restrictions with grant and funding agreement requirements to ensure its accounting records are complete and accurate. Auditee's comments and response- During 2021, the Organization started a process of capturing and reviewing all of its donor restrictions on an Excel spreadsheet. This document is reviewed regularly by senior management to ensure completeness Responsible party for corrective action: Kjirsten Johnson ? Chief Financial Officer

Community Neighborhood Housing Services, Inc. (CNHS) respectfully submits the following corrective action plan for the year ended September 30, 2021. Audit period: October 1, 2020 ? September 31, 2021 The findings from the September 30, 2021, schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Findings ? Financial Statements Audit Significant Deficiency 2021-001 ? Correction of an Error Recommendations ? The Organization establish procedures to regularly review its net assets with donor restrictions with grant and funding agreement requirements to ensure its accounting records are complete and accurate. Auditee's comments ? During the year, CNHS began tracking and monitoring its restricted funds on an Excel spreadsheet. The spreadsheet is reviewed regularly by the Executive Director and CFO. It was through the creation of this document that the error was discovered. This process will ensure all donor-restricted funds going forward are tracked and properly disclosed. It should also be noted that all underlying restrictions put in place were being followed throughout for all restricted funds. The only error that occurred was the fact that we did not represent that one subset of restricted funds were restricted for our financial statements. All underlying donor restrictions were followed for all funds under our control during the audit period. Name(s) and contact person(s) responsible for corrective action: Jason Peterson. Planned completion date for corrective action plan: Completed in current year.