Finding 1142262 (2024-001)

Criteria: Grant expenditures under the American Schools and Hospitals Abroad (ASHA) program are recognized in the period incurred as required under the accrual basis of accounting. Condition: The Nazareth Project, Inc. (the "Organization"), applied in August 2024 for reimbursement of expenses incurred under the ASHA grant. The Organization recorded grant revenue and a related grant receivable for the amount incurred during the year ended June 30, 2024, but failed to recognize the matching expense and the related liability in the amount of $741,559. Context: We conducted a search for unrecorded liabilities by examining a sample of The Nazareth Project, Inc.'s cash disbursements subsequent to the end of the fiscal year and investigated whether disbursements for expenses incurred during the fiscal year were included in the the expenses for that year on the Nazareth Project, Inc.'s statement of activities and other changes in net assets. Potential Effect of Condition: There is a risk that the failure to record expenses when incurred will cause the financial statements and the schedule of expenditures of federal awards to be materially misstated. Recommendation: The Organization should record all expenditures presented for reimbursement under a federal grant sorted by the period in which those expenditures are incurred, and verify that grant revenues and expenditures and the related receivables and liabilities all equal the total expenditures incurred for the period. Questioned Costs: None