Are you getting ready for your grant to be audited?
Wondering what to expect when you’re expecting the auditors to show up and start digging through your grant management?
What To Expect During An Audit
Many of us have gone through the standard financial audit, but when the focus shifts to auditing grant management we may be a bit apprehensive about what areas will be under scrutiny.
Fortunately, the DCAA Contract Audit Manual (CAM) gives us a lot of insight into the focus areas so grantees can prepare for this experience.
In this series of articles, we’ll walk you through what to expect when you’re expecting a federal funds audit.
Three Main Audit Sections
When your grants are getting audited, the process focuses on three main areas:
Audit Section One: Financial Statements
This part of the audit includes looking at the Financial Statements and Schedule of Expenditures of Federal Awards.
This section of the audit looks to see if the financial statements are presented fairly in conformance with GAAP and if the schedule of expenditures of Federal Awards is presented fairly in relationship to the overall Financial Statements.
So far, so good. You’ve probably been through this type of analysis before.
Audit Section Two: Internal Controls
This part of the audit looks at internal control and compliance with the Government Auditing Standards.
Review of internal controls includes testing internal controls and analyzing and reporting on the results of the tests.
You may be familiar with this as well as looking at Internal controls are typically included as part of a standard financial audit.
But be prepared for increased scrutiny of the financial management system, and internal policies and procedures.
Expect a focus on how your organization’s internal controls safeguard the federal funds flowing in and out of your organization.
Audit Section Three: Compliance with Laws and Regulations
Here’s where the rubber meets the road from a grant management standpoint.
Auditors are looking for compliance with applicable laws, regulations and federal award terms and conditions.
Everything related to your grant management process and program results are open for inspection.
You should expect discussions with direct and indirect personnel about a wide range of topics from subrecipient monitoring to suspension and debarment compliance documentation.
For organizations new to this part of the audit process, it can be a nerve-racking Federal Funds Audit experience wondering what will be the focus areas of this part of the audit.
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Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.