Audit 414241

FY End
2025-12-31
Total Expended
$7.79M
Findings
2
Programs
3
Organization: Leap Social Enterprise INC (NJ)
Year: 2025 Accepted: 2026-09-30

Organization Exclusion Status:

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Findings

ID Ref Severity Repeat Requirement
1239506 2025-001 Material Weakness Yes P
1239507 2025-001 Material Weakness Yes P

Programs

ALN Program Spent Major Findings
84.282 CHARTER SCHOOLS $4.84M Yes 1
10.555 NATIONAL SCHOOL LUNCH PROGRAM $2.90M Yes 1
66.818 BROWNFIELDS MULTIPURPOSE, ASSESSMENT, REVOLVING LOAN FUND, AND CLEANUP COOPERATIVE AGREEMENTS $54,710 Yes 0

Contacts

Name Title Type
XHNWPW3M7TV5 CPA Roberto Cabello Auditee
9739870579 CPA Carlos De Angel Ramirez Auditor
No contacts on file

Notes to SEFA

The information included in the Schedule may not fully agree with other federal awards reports, submitted directly to federal grantor agencies because, among other reasons, the award report may (a) be prepared for a different fiscal period and (b) include cumulative data (from prior years) rather than data from the current year only.
Major programs are identified in the Summary of Auditors’ Results Section in the Schedule of Findings and Questioned Costs. Federal programs are presented by federal agencies.
Assistance Listing Number ("ALN") included in the Schedule are determined based on the program name, review of grant contract information and the public description of federal assistance listings published by the U.S. Government on sam.gov. The first two digits identify the federal department or agency that administers the program, and the last three numbers are assigned by numerical sequence
The reconciliation of expenses in the Statement of Activities and Changes in Net Assets to the total expenditures of federal awards in the Schedule of Expenditures of Federal Awards is as follows: Expenses per Statements of Activities and Changes in Net Assets $ 25,559,136 Less: Unrestricted Funds Expenditures (Non-Federal) (18,477,297) Depreciation Expense in Federal Programs (1,188,620) Plus: Federal Capitalized Expenses 1,899,352 Total Expenditures of Federal Awards in the Schedule of Expenditures of Federal Awards $ 7,792,571
Matching costs, such as the nonfederal share of certain programs costs not borne by the Federal Government, are not included in the Schedule.
For the year ended December 31, 2025, there were no awards passed through to subrecipient

Finding Details

Finding No. 2025-001 – Material Weakness in Internal Control over Financial Reporting Criteria Management is responsible for the preparation and fair presentation of the Institution’s financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Pursuant to 2 CFR § 200.510(a), the Institution is also responsible for preparing financial statements that reflect its financial position, changes in net assets, and, where appropriate, cash flows for the fiscal year audited. An effective financial reporting process includes maintaining accounting records and supporting documentation sufficient to appropriately recognize, measure, classify, and report significant transactions and account balances in accordance with U.S. GAAP on a timely basis. This process also includes appropriate review, reconciliation, and analysis procedures designed to support the completeness and accuracy of the financial information used in preparing the financial statements. Condition The Institution’s financial reporting and period-end closing process did not include sufficiently formalized and timely procedures for the reconciliation and analysis of significant account balances and for the identification, evaluation, and accounting of significant transactions and contractual arrangements in accordance with U.S. GAAP. As a result, significant audit adjustments and prior-period adjustments were required in connection with the preparation of the financial statements. The following financial statement areas and/or accounts were principally affected:  Cash and cash equivalents – Bank reconciliations were not consistently completed on a monthly basis, and evidence of management review was not available for certain reconciliations. Unreconciled differences and reconciling items without adequate supporting documentation were identified and adjusted during the year-end closing and audit process.  Accounts receivable, revenue, and deferred revenue – The Institution’s process for evaluating revenue recognition and related accounts receivable and deferred revenue was not sufficiently formalized to ensure that revenue was recognized in accordance with the applicable contractual and funding arrangements and U.S. GAAP. Certain amounts had been recognized entirely as revenue although a portion should have remained deferred as of year-end, requiring adjustments to revenue and deferred revenue. In addition, supporting accounts receivable records were not consistently analyzed and reconciled to the general ledger, and certain recorded receivable balances could not be adequately substantiated.  Accounts payable, accrued expenses, and prepaid expenses – The Institution’s process for identifying, analyzing, and reconciling accounts payable and accrued expenses as part of the period-end closing process was not sufficiently formalized. In addition, certain expenditures required further analysis to determine whether they represented current-period expenses, accrued obligations, or prepaid expenses based on the underlying contractual arrangements.  Property and equipment and leasehold improvements – The Institution’s process for evaluating the capitalization and classification of property and equipment and the estimated useful lives, depreciation, and amortization periods of property and equipment and leasehold improvements was not sufficiently formalized. Certain expenditures initially recorded as expenses required and certain leasehold improvements had been amortized over periods that did not appropriately consider the applicable lease terms. These matters resulted in significant currentyear adjustments and material prior-period adjustments to accumulated depreciation and net assets.  Leases and contributed use of facilities – The Institution did not have a sufficiently formalized process to timely identify, review, and evaluate significant lease and facility-use arrangements for appropriate accounting under U.S. GAAP, particularly arrangements with governmental entities providing for nominal or substantially below-market rent. Certain arrangements required adjustments during the year-end closing and audit process to appropriately recognize and present right-of-use assets and lease liabilities, contributed use of facilities, contribution revenue, and related expenses. These matters resulted in significant post-closing adjustments and material prior-period adjustments affecting multiple significant financial statement accounts and demonstrate that the Institution’s financial reporting and period-end closing controls were not sufficient to prevent, or detect and correct, material misstatements in the financial statements on a timely basis. Cause The conditions described above were primarily caused by the lack of sufficiently formalized accounting and period-end closing procedures to ensure the timely analysis, reconciliation, documentation, and review of significant account balances and transactions. In addition, the Institution’s financial reporting process did not provide for sufficient and timely U.S. GAAP accounting analysis and review of certain significant, nonroutine, or complex transactions and contractual arrangements. Effect The deficiencies described above, individually and in combination, created a reasonable possibility that a material misstatement of the Institution’s financial statements, including the related notes and disclosures, would not be prevented, or detected and corrected, on a timely basis. These deficiencies resulted in significant post-closing adjustments and material prior-period adjustments affecting multiple significant financial statement accounts. Questioned Costs None Recommendation We recommend that the Institution strengthen and formalize its accounting and financial reporting processes, including its monthly and year-end closing procedures, to support the preparation of complete, accurate, and timely financial statements in accordance with U.S. GAAP. Management should establish formal procedures that provide for the timely reconciliation and analysis of significant account balances and related subsidiary records, appropriate review and approval of reconciliations and period-end adjustments, and timely resolution of reconciling items and accounting differences. The Institution should also establish procedures to timely identify and evaluate significant, nonroutine, or complex transactions and contractual arrangements, including revenue arrangements, leases and facilityuse agreements, and significant capital expenditures, to determine the appropriate accounting treatment under U.S. GAAP. Management should assign appropriate responsibility and levels of review over the financial reporting and closing process and ensure that personnel involved in these activities have access to the accounting expertise necessary to identify and address significant U.S. GAAP matters on a timely basis. Corrective Action Initiated Subsequent to December 31, 2025, the Institution engaged an experienced certified public accountant to assist management in strengthening its accounting and financial reporting processes. This represents a positive step toward addressing the matters described above. As these enhanced procedures and controls were initiated subsequent to the year under audit, their effectiveness was not reflected in the Institution’s internal control environment during the year ended December 31, 2025. Accordingly, the Institution should continue to implement and monitor these measures and evaluate their effectiveness over an appropriate period of time in addressing the conditions underlying the material weakness. Management’s Response and Corrective Action Plan Management acknowledges the matters described in the finding and has initiated several actions to strengthen the Institution’s accounting, financial reporting, and period-end closing processes. Beginning in January 2026, the Institution added resources to its Finance Department to address the increased volume and complexity of its operations. These resources include a Chief Financial Officer, accounting staff, a purchasing agent, and a budget and compliance officer. The additional resources have also allowed management to further define responsibilities within the accounting function and strengthen review and oversight throughout the financial reporting process. During 2026, the Institution also implemented Sage Intacct, a new accounting and financial management platform with capabilities supporting financial reporting, bank reconciliations, grant management, fixed assets, purchasing, procurement, and other accounting functions. In connection with the implementation, management established a more structured month-end closing workflow, including closing checklists designed to standardize the procedures performed and facilitate timely review and completion of the closing process. With respect to bank reconciliations, management indicates that reconciliations were prepared during the year; however, personnel assignments and the volume of activity contributed to a backlog in completing certain reconciliations by year-end. Management expects that the additional Finance Department resources and revised month-end closing procedures will assist in improving the timeliness and review of the reconciliation process. Management agrees with the prior-period adjustment related to the depreciation and amortization of certain equipment and leasehold improvements and notes that the accounting treatment had been consistently applied during prior years. Management will incorporate additional procedures into its accounting policies to periodically evaluate asset classifications, estimated useful lives, lease terms, and related depreciation and amortization considerations. Management also acknowledges that the accounting for certain lease arrangements and the contributed or in-kind use of facilities involves specialized U.S. GAAP considerations that became more significant during the year. The Institution plans to incorporate procedures addressing these transactions into its accounting policies and procedures, including the evaluation of lease arrangements and in-kind transactions, and to provide appropriate technical accounting training and consultation to Finance Department personnel.-41- LEAP SOCIAL ENTERPRISE INC. (Non-Profit Organization) Schedule of Findings and Questioned Costs For the Year Ended December 31, 2025 SECTION II – FINANCIAL STATEMENTS FINDING, (Continued) With respect to revenue, deferred revenue, and accounts receivable, management notes that during the period from July through December 2025, the Puerto Rico Department of Education (“PRDE”) provided advances related to several schools. In addition, amendments to the Cartas Constitutivas for certain schools affected the timing of funding allocations and collections and increased the complexity of allocating and accounting for related revenues and expenses. Management will further formalize its procedures for evaluating and documenting the appropriate accounting for funding advances, receivables, deferred revenue, and related revenue recognition based on the terms and conditions of the applicable funding arrangements. The Institution is updating its policies and procedures manual to incorporate the recommendations described in this finding, with particular emphasis on period-end closing and reconciliation procedures, revenue recognition, leases, contributed or in-kind transactions, and other areas requiring specialized accounting analysis. Management also plans to provide technical training and obtain appropriate technical accounting assistance, as needed, to support the consistent application of these procedures. Management believes that the additional Finance Department resources, implementation of the new accounting platform, enhanced month-end closing procedures, updated policies and procedures, and continued technical training represent meaningful steps toward addressing the conditions described in this finding. Management will continue to monitor these measures and evaluate their effectiveness as they operate over time. Responsible Official: CPA Robert Cabello, CFO