NetFreedom PioneersNon-Profit

Criteria : Financial statements are required to present correct classification of expenses. The Statement of Financial Position, Statement of Activities and Statement of Functional Expenses are affected by the incorrect expense cut-off. Condition : During the audit, auditors noted that year-end accruals related to payroll expense, vacation and related payroll taxes were missing or incorrect. As a result, salaries and wage and payroll tax expenses for the year ended December 31, 2022 were understated. Cause: The Organization incorrectly calculated or missed year-end accruals related to its payroll. Effect : Without accurate financial information, financial reports may be misstated and management may be unable to make informed decisions. Recommendation : We recommend that the Organization's management implements year-end procedures to ensure proper expense cut-off to have all accruals recorded as liabilities at year end.

Criteria : Management is responsible for proper classification of grants received to accurately prepare the Schedule of Expenditures of Federal Awards (SEFA). Condition : Changes to the SEFA were required to properly state federal funds received. Cause: The accounting staff did not prepare the SEFA accurately. Effect : Failure to maintain records of the federal funds received could result in incorrect reporting. Recommendation : We recommend the Organization implement year-end procedures to properly classify federal expenditures to ensure the SEFA is accurately prepared.

CRITERIA: FINANCIAL STATEMENTS ARE EQUIRED TO PRESENT EXPENSES AND REVENUES IN THE CORRECT PERIOD. THE STATEMENT OF FINANCIAL POSITION, STATEMENT OF ACTIVITIES AND STATEMENT OF FUNCTIONAL EXPENSES IN THE CURRENT YEAR ARE AFFECTED BY THE ENTRIES NOT RECORDED IN THYE PRIOR YEAR.CONDITION: DURING THE AUDIT, AUDITORS NOTED THAT JOURNAL ENTRIES PROPOSED DURING THE PRIOR YEAR AUDIT WERE NOT RECORDED IN THE ORGANIZATION'S BOOKS. AS A RESULT, BEGINNIG NET ASSETS DID NOT AGREE TO THE PRIOR YEAR ENDING NET ASSETS PER THE AUDITED FINANCIAL STATEMENTS.EFFECT: WITHOUT ACCURATE FINANCIAL INFORMATION, FINANCIAL REPORTS MAY BE MISSTATED AND MANAGEMENT MAY BE IUNABLE TO MAKE INFORMED DECISIONS.CAUSE: THERE WERE CHANGES IN THE ORGANIZATION'S ACCOUNTING PERSONNEL AND OUTSIDE BOOKKEEPERS.RECOMENDATIONS: WE RECOMMEND THAT THE ORGANIZATION'S MANAGEMENT IMPLEMENTS PROCEDURES TO ENSURE PROPER RECORDING OF ALL AUDIT ADJUSTMENTS ON THE ORGANIZATION'S BOOKS.

Recordkeeping error: Missed year-end accruals. Criteria: Financial statements are required to present correct classification of expenses. The Statement of Financial Position, Statement of Activities and Statement of Functional Expenses are affected by the incorrect expense cut-off. Condition: During the audit, auditors noted that year-end accruals related to benefit plan matching expense and employee bonuses and related payroll taxes were missing or incorrect. As a result, salaries and wages, payroll taxes and employer benefit plan expenses for the year ended December 31, 2019 were understated. Effect: Without accurate financial information, financial reports may be misstated and management may be unable to make informed decisions. Cause: Due to changes in in third-party payroll processing companies and plan administrators during the year ended December 31, 2019, the Organization incorrectly calculated or missed year-end accruals related to its payroll and benefit plan. Recommendations: We recommend that the Organization's management implements year-end procedures to ensure proper expense cut-off to have all accruals recorded as liabilities at year end.

Recordkeeping error: Incorrect revenue recognition Criteria: Financial statements are required to present correct revenue recognition. The Statement of Financial Position and Statement of Activities are affected by the incorrect revenue recognition. Condition: During the audit, auditors noted that government grant revenue for the year ended December 31, 2019 was not adjusted to defer the portion that was not yet earned at December 31, 2019. As a result, government grant revenue for the year ended December 31, 2019 was overstated and liabilities at December 31, 2019 were understated. Effect: Without accurate financial information, financial reports may be misstated and management may be unable to make informed decisions. Cause: Due to incorrect bookkeeping during the year ended December 31, 2019, the Organization incorrectly recognized the unearned portion of a government grant as revenue during the year ended December 31, 2020. Recommendations: We recommend that the Organization's management implements year-end procedures to search for unearned revenue and reclassify it as a liability at year end.

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