FAC Explorer

Audit 352898

FY End
2023-12-31
Total Expended
$6.52M
Findings
2
Programs
3
Organization: Solutions for Change, Inc. (CA)
Year: 2023 Accepted: 2025-04-07
Auditor: Leaf & Cole LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
554298 2023-005 - - P
1130740 2023-005 - - P

Programs

ALN Program Spent Major Findings
14.256 Neighborhood Stabilization Program (recovery Act Funded) $633,119 Yes 0
14.218 Community Development Block Grants/entitlement Grants $472,556 Yes 0
14.239 Home Investment Partnerships Program $195,459 - 0

Contacts

Name Title Type
SFLQS539APJ5 Irene Tua Auditee
7609416545 Jill Branch Auditor
No contacts on file

Notes to SEFA

Title: Basis of Presentation Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles contained in OMB Circular A-122, Cost Principles for Non-Profit Organizations or the cost principles contained in Uniform Guidance wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: Solutions for Change, Inc. has elected not to use the 10-percent de minimis indirect cost rate as allowed under Uniform Guidance. The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of Solutions for Change, Inc. under programs of the federal government for the year ended December 31, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Solutions for Change, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Solutions for Change, Inc.
Title: Summary of Significant Accounting Policies Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles contained in OMB Circular A-122, Cost Principles for Non-Profit Organizations or the cost principles contained in Uniform Guidance wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: Solutions for Change, Inc. has elected not to use the 10-percent de minimis indirect cost rate as allowed under Uniform Guidance. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles contained in OMB Circular A-122, Cost Principles for Non-Profit Organizations or the cost principles contained in Uniform Guidance wherein certain types of expenditures are not allowable or are limited as to reimbursement. Solutions for Change, Inc. has elected not to use the 10-percent de minimis indirect cost rate as allowed under Uniform Guidance.
Title: Loan Programs Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles contained in OMB Circular A-122, Cost Principles for Non-Profit Organizations or the cost principles contained in Uniform Guidance wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: Solutions for Change, Inc. has elected not to use the 10-percent de minimis indirect cost rate as allowed under Uniform Guidance. Assistance Listing Number: 14.218, Program Name: Community Development Block Grant/Entitlement Grants, Loans Outstanding December 31, 2022: $472,556, Loans Awarded for the Year Ended December 31, 2023: $0, Loans Principal Repaid for the Year Ended December 31, 2023: $0, Loans Outstanding at December 31, 2023: $472,556. Assistance Listing Number: 14.239, Program Name: HOME Investment Partnership Program, Loans Outstanding December 31, 2022: $3,130,936, Loans Awarded for the Year Ended December 31, 2023: $0, Loans Principal Repaid for the Year Ended December 31, 2023: $0, Loans Outstanding at December 31, 2023: $3,130,936. Assistance Listing Number: 14.256, Program Name: Neighborhood Stabilization Program, Loans Outstanding December 31, 2022: $2,911,798, Loans Awarded for the Year Ended December 31, 2023: $0, Loans Principal Repaid for the Year Ended December 31, 2023: $0, Loans Outstanding at December 31, 2023: $2,911,798.

Finding Details

Finding 2023-005
Section III - Federal Award Findings and Questioned Costs Finding 2023-005 - Replacement Reserve Withdrawals – Neighborhood Stabilization Program, Assistance Listing Number 14.256: Statement of Condition Withdrawals in the amount of $26,000 were made from the replacement reserve account for the Projects acquired with Neighborhood Stabilization Program funds were used to cover operating cash flow needs during the year ended December 31, 2023. Criteria According to the County of San Diego Department of Housing and Community Development (the “County”) Regulatory Agreements, disbursements from the replacement reserve accounts may only be made to fund Project expenses with the approval of the County. Effect Solutions for Change was not in compliance with the terms of the County Regulatory Agreements during the year and the replacement reserve accounts had a deficient balance of $30,693 at December 31, 2023. Cause Solutions for Change used funds from the replacement reserve account to cover operating cash flow needs. Recommendation Replacement reserves should be repaid. Future withdrawals should not be used without the approval of the County. Management Response Acknowledgment of Findings: Management acknowledges and agrees with this audit finding. Withdrawals totaling $26,000 were made from the Replacement Reserve Account to support the Project. For over 15 years, Solutions for Change has consistently met this obligation through private-sector donations. However, extraordinary challenges beyond our control limited our ability to do so in this period, necessitating the use of reserve funds. Cause Analysis: Management has conducted an in-depth analysis of the factors leading to this finding and determined that the primary cause is directly related to California’s Housing First mandate. This state-imposed approach significantly reduces funding opportunities for nonprofits that operate accountability-based, self-sufficiency-driven housing models. Under Housing First, funding is restricted to programs that do not require job placement, sobriety, or self-improvement interventions, which are essential elements of Solutions for Change’s proven approach. This policy shift has resulted in decreased access to public funding, forcing a greater reliance on private donations. In response, we made the strategic decision to uphold our core values despite financial uncertainties.Section III - Federal Award Findings and Questioned Costs (Continued) Finding 2023-005 - Replacement Reserve Withdrawals – Neighborhood Stabilization Program, Assistance Listing Number 14.256: (Continued) Management Response (Continued) Corrective Action Plan: To restore the Replacement Reserve Account, the Board of Directors has approved a comprehensive divestment strategy, including the sale of privately owned real estate controlled by the nonprofit. The proceeds from this sale will fully replenish the Replacement Reserve Account in the amount of $30,693. • Planned Sale Timeline: Between June and November 2025 • Full Restoration of Replacement Reserve: By December 1, 2025 This restoration effort is part of a multi-year strategic recovery plan that incorporates a private-sector initiative called “Bridge to Freedom.” In addition, the Board is exploring alternative funding streams to ensure financial stability while maintaining program integrity. Commitment to Financial Responsibility: Solutions for Change remains fully committed to responsible financial management and long-term sustainability. We will continue to implement strategic measures to secure financial stability while staying true to our mission of solving family homelessness through transformative, self-sustaining solutions.
Finding 2023-005
Section III - Federal Award Findings and Questioned Costs Finding 2023-005 - Replacement Reserve Withdrawals – Neighborhood Stabilization Program, Assistance Listing Number 14.256: Statement of Condition Withdrawals in the amount of $26,000 were made from the replacement reserve account for the Projects acquired with Neighborhood Stabilization Program funds were used to cover operating cash flow needs during the year ended December 31, 2023. Criteria According to the County of San Diego Department of Housing and Community Development (the “County”) Regulatory Agreements, disbursements from the replacement reserve accounts may only be made to fund Project expenses with the approval of the County. Effect Solutions for Change was not in compliance with the terms of the County Regulatory Agreements during the year and the replacement reserve accounts had a deficient balance of $30,693 at December 31, 2023. Cause Solutions for Change used funds from the replacement reserve account to cover operating cash flow needs. Recommendation Replacement reserves should be repaid. Future withdrawals should not be used without the approval of the County. Management Response Acknowledgment of Findings: Management acknowledges and agrees with this audit finding. Withdrawals totaling $26,000 were made from the Replacement Reserve Account to support the Project. For over 15 years, Solutions for Change has consistently met this obligation through private-sector donations. However, extraordinary challenges beyond our control limited our ability to do so in this period, necessitating the use of reserve funds. Cause Analysis: Management has conducted an in-depth analysis of the factors leading to this finding and determined that the primary cause is directly related to California’s Housing First mandate. This state-imposed approach significantly reduces funding opportunities for nonprofits that operate accountability-based, self-sufficiency-driven housing models. Under Housing First, funding is restricted to programs that do not require job placement, sobriety, or self-improvement interventions, which are essential elements of Solutions for Change’s proven approach. This policy shift has resulted in decreased access to public funding, forcing a greater reliance on private donations. In response, we made the strategic decision to uphold our core values despite financial uncertainties.Section III - Federal Award Findings and Questioned Costs (Continued) Finding 2023-005 - Replacement Reserve Withdrawals – Neighborhood Stabilization Program, Assistance Listing Number 14.256: (Continued) Management Response (Continued) Corrective Action Plan: To restore the Replacement Reserve Account, the Board of Directors has approved a comprehensive divestment strategy, including the sale of privately owned real estate controlled by the nonprofit. The proceeds from this sale will fully replenish the Replacement Reserve Account in the amount of $30,693. • Planned Sale Timeline: Between June and November 2025 • Full Restoration of Replacement Reserve: By December 1, 2025 This restoration effort is part of a multi-year strategic recovery plan that incorporates a private-sector initiative called “Bridge to Freedom.” In addition, the Board is exploring alternative funding streams to ensure financial stability while maintaining program integrity. Commitment to Financial Responsibility: Solutions for Change remains fully committed to responsible financial management and long-term sustainability. We will continue to implement strategic measures to secure financial stability while staying true to our mission of solving family homelessness through transformative, self-sustaining solutions.