Steps to get ready for a grant audit

A grant acquittal audit is a key accountability requirement imposed by the funding providers. 

This audit is typically performed by an independent practitioner, who plays a vital role in attesting that the funds have been used appropriately and in line with the terms outlined in the grant agreement. 

The audit also ensures that all financial and operations aspects have been properly recorded and documented. To ensure a successful audit outcome, organisation should adopt best practices throughout the project's lifecycle.  

To facilitate a successful audit and adherence to the conditions of the grant agreement, organisations should implement several best practices during the course of the project.

Developing a comprehensive project plan

One of the first and most crucial steps in managing a grant-funded project an organisation should take is to create a comprehensive project plan. This plan should clearly outline key milestones, including progress reporting deadlines, internal review dates, scheduled audit timeframes and final completion dates. 

A well thought-out plan not only keeps the project on track but also supports timely and compliant reporting to the funding body. Consistent monitoring against these milestones can help identify and address any delays or discrepancies early in the process.

Tracking income and expenditure 

Effective financial management is essential for any grant funded project. An organisation should establish cost centres within their accounting system. These cost centres serve to track income and expenditure relating to the project, making it easier to manage budgets, monitor spending patterns, and prepare for audits. In addition, having distinct cost centres ensures that grant-related transactions are easily accessible for reporting and audit purposes, significantly simplifying the audit process.

Documentation management and record keeping

Organisation should establish and maintain a repository (electronic if possible) to store all documentation regarding the grant. This repository should include grant agreements, agreement variations, progress reports, financial statements, receipts, invoices and payroll records. Additionally, ensure any overhead allocations are fully supported and documented, including any assumptions applied. Accurate and accessible documentation plays a central role in demonstrating compliance during the audit.

Engaging an Auditor and planning ahead

Engaging an independent auditor well before project completion is another important step in ensuring a seamless acquittal process.  This early engagement allows organisations to understand audit requirements, confirm the auditor’s availability, and clarify any grant specific expectations. 

It is also advisable to obtain an estimate of the audit fee to be charged, as often this cost can be included as part of the project expenditure. Note that the grant agreement may impose specific qualifications that your auditor must hold, for example being a Registered Company Auditor and/or a member of Chartered Accountants Australia New Zealand (CAANZ) or CPA Australia.

Finalising records and determining audit opinion requirements

Before submitting information to the auditor, all financial and project related records should be finalised and reviewed for accuracy. This includes reconciling financial statements, verifying supporting documents and ensuring that all relevant files are ready for inspection. In some instances, grant agreements do not clearly specify the format and content of the audit opinion. Where this is the case, we recommend discussing this with your auditor early in the project to obtain a template opinion and engaging with the funding body to ensure the audit opinion proposed is sufficient for their needs.

Ensuring a successful audit outcome

By implementing these practices, organisation can significantly increase the likelihood of a successful and timely grant acquittal audit. These steps not only support compliance but also demonstrate transparency and accountability, strengthening relationships with funding providers and paving the way for future grant opportunities.

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, don’t hesitate to get in touch with your local RSM auditor today.