Audit 414956

Subsequent to the issuance of EBCHC’s 2023 financial statements an error was identified resulting in an overstatement of net assets without donor restrictions and an understatement of net assets with donor restrictions. As a result of the clarity provided in ASU 2018-08, it was determined that the restrictions to revenue recognition associated with its 2018 and prior HOME Fund commitments have not been met and the amount received shouldhave been recognized as net assets with donor restrictions due to its ongoing compliance requirements. Identification as a Repeat Finding Not applicable Criteria ASU 2018-08 Clarifying the Scope and the Accounting Guidance for Contributions Received and ContributionsMade (“ASU 2018-08”) provided certain clarity as it relates to determining whether a contribution is conditional (i.e.barriers) as opposed to unconditional with donor-imposed restrictions. This updated guidance was not considered in the 2023 financial statements in recognizing grant revenue. Cause The updated guidance in ASU 2018-08 was not considered in the 2023 financial statements in recognizing grant revenue. Effect of Potential Effect As a result the 2023 financial statements overstated net assets without donor restrictions by $3,924,400 and understated net assets with donor restrictions by $3,924,400 requiring a restatement of the 2023 financial statements. Recommendations EBCHC should develop and implement a control activity that includes a review of all newly executed grantagreements specifically to determine the following: 1) should the grant agreement be accounted for as an exchange transaction or a contribution, 2) if determined to be a contribution, does the contribution include barriers to entitlement (i.e. repayment requirements if affordability restrictions are not complied with) making the contribution conditional or is the contribution unconditional, 3) has the grant agreement been properly recognized in the booksand records of EBCHC at each reporting period. Views of Management and Responsible Parties Management’s plans to remediate this finding include: 1)the Organization’s Finance Committee and Director will meet annually with its independent auditors specifically to review and evaluate the potential impact of Accounting Standard Updates; 2) the Organization’s Director and bookkeeper will seek out continuing professional education specifically focused on GAAP for not-for-profit organizations; 3) newly executed grant agreements will be presented to the Organization’s Finance Committee by the Director on a quarterly basis with a focus on determining proper revenue recognition. Section III - Federal Awards Findings and Questioned Costs None Section IIII - Follow-up of Prior Year Audit Findings and Questioned Costs None .