Final Project Audit at Grant Closure: What to Prepare Three Months Before the End

The final audit is the last review before a donor treats a project as complete and closes its financial obligations. Its outcome determines whether all costs are accepted, whether part of the funding has to be returned and whether the organisation earns a good reference for future calls.

The most common mistake is to start preparing once the project has already ended. By then some documents can no longer be obtained: suppliers do not issue duplicates, staff have left, and badly documented procurement cannot be redone. Below is a preparation plan that should start roughly three months before the end date.

How a final audit differs from an interim one

An interim review covers part of the period and exists to find problems while they can still be fixed. A final audit covers the entire project duration, including periods already reviewed, and ends with a report on which the donor accepts the final financial statement.

The second difference is scope. Beyond costs, the auditor looks at closure as a process: whether unspent funds were returned, assets transferred, obligations to staff and contractors settled and contracts terminated. The report format is set by the donor’s terms of reference and may be ISA 805, ISRS 4400 or the donor’s own template; the formats are compared in our article on ISA 800, ISA 805 and ISAE 3000.

Three months out: reconcile the budget

The first step is a “budget, actual, variance” table for every line since the start of the project. This is where problems that can still be solved become visible:

• lines overspent against the budget, requiring the donor’s written approval for reallocation;
• lines with a large unspent balance, where there is still time to use the funds as intended or agree a change;
• costs that actually belong to another project or to core activities and must be reclassified;
• costs falling outside the eligibility period.

Donors nearly always allow reallocation within an agreed percentage, but only on a prior written request. A letter sent a week before closure rarely helps.

Two months out: documents and procurement

The second step is a full review of the project file. Every material cost needs a contract, an invoice, an acceptance act or delivery note, a payment document and a bank statement. Procurement is checked separately: were quotations collected, is there a selection record, is there any conflict of interest. This is covered in our article on procurement checks in a grant project.

Personnel documents are reviewed at the same time: contracts, orders, timesheets, payroll registers and tax and social contribution returns. If a person works on several projects, the allocation of time must be evidenced month by month, not by a single note at the end.

One month out: assets, balances, liabilities

Equipment and property

Prepare a list of everything bought with project funds, with inventory numbers and locations. The agreement decides what happens next: transfer to the beneficiary, to a partner or to the target group, or retention by the organisation. Every action is documented with an act. Run the inventory count before closure, not after.

Unspent funds

The balance on the project account is reconciled to the calculation in the final report. If funds are repayable, the payment is made before the report is submitted and the payment order is attached to the package. Bank interest earned on the balance is, under most agreements, also repayable or recognised as project income.

Liabilities

Settle accounts with contractors, pay compensation for unused leave, terminate lease agreements. Payables outstanding at the closure date are a question the auditor will always ask.

The document package for the auditor

Area	What to provide
Agreement	Donor contract, budget, all annexes and written amendments
Reporting	Interim reports, the final financial and narrative report
Accounting	Trial balance for the project, analytics by budget line, bank statements
Costs	Source documents on a sample basis or in full
Procurement	Quotations, selection records, contracts, acceptance acts
Personnel	Contracts, timesheets, payroll registers, tax returns
Assets	Inventory count, transfer acts
Closure	Balance calculation, payment order for the refund, bank confirmation

How much time to allow

The audit of a medium-sized project itself takes two to four weeks once the complete package is received. To that you should add time for preparing documents internally and for answering the auditor’s queries. If the donor has set a deadline for the final report, the auditor should be engaged no later than six weeks before that date.

One practical point: an auditor who carried out the interim review of the same project completes the final audit faster, because the accounting system and document flow are already familiar.

Typical findings in final reports

• costs incurred after the eligibility period ended, or paid after the account was closed;
• overspending on a budget line without the donor’s written approval;
• procurement without a competitive procedure where the amount exceeds the donor’s threshold;
• salaries without timesheets, or with an allocation that is not documented;
• equipment not counted in an inventory, and no record of what happened to assets after the project;
• unspent balance not returned, or returned without evidence;
• the final report not reconciled to the accounting records.

Most of these can be fixed if they are found two or three months before the end. That is why an interim review costs less than repaying funds to the donor.

MK Audit has carried out interim and final audits of donor-funded projects since 2000, is listed in the Ukrainian register of auditors (No. 4624) and is a member of DFK International. We issue reports in Ukrainian and English and, where required, in the donor’s template. If your project ends in the coming months, send us a request: we will review the donor’s terms of reference and set out a preparation schedule. Commercial proposal after reviewing the assignment, response within 1 day.