How to Prepare for a Grant Audit: Document Checklist, Stages, Timeline and Remote Format

A grant audit should not be a stressful event for an organisation. If the books have been kept systematically and the documents are in order, the review takes a few weeks and ends with a clean report that can be shown to the donor and used in future funding applications. Problems arise when preparation starts at the last minute: supporting documents are missing, costs have not been allocated between projects, exchange differences have not been recorded.

The MK Audit team has been auditing grants for Ukrainian NGOs under agreements with European, international and private donors for more than 20 years. In this article we share a practical document checklist, describe the stages and typical timeline of a review, explain how a remote audit works and what to do when the auditor raises findings.

What a grant auditor actually checks

The purpose of a grant audit is to confirm that the project financial report is reliable and that the expenditure complies with the budget, the grant agreement and the donor’s rules. Depending on the format (an audit under ISA 800/805 or agreed-upon procedures under ISRS 4400), the auditor checks:

• whether the expenditure matches the approved budget by line and by period;
• whether every cost is supported by properly prepared source documents;
• compliance with the procurement procedures required by the agreement;
• correct currency conversion and exchange rates applied;
• a justified allocation of shared costs (rent, salaries, utilities) between projects;
• actual receipt of donor funds and movements on the dedicated account;
• co-financing and the organisation’s own contribution, where required;
• agreement between the donor report and the organisation’s accounting records.

Document checklist for a grant audit

Below is the list we send to clients before starting an engagement. It is universal; a specific donor may add its own requirements.

Area	Documents
Donor agreement	Grant agreement with all annexes, approved budget, budget and contract amendments, correspondence approving reallocations
Project reporting	Financial reports to the donor for all periods, narrative reports, previous audit reports if any
Constituent documents	Charter, extract from the state register, extract from the Register of Non-Profit Organisations, appointment orders for the director and accountant, accounting policy
Bank	Statements for the project account for the whole period, confirmation of tranches received, currency purchase and sale documents
Accounting	Project trial balances, account ledgers, expenditure register mapped to budget lines, shared cost allocation methodology
Staff	Employment or civil law contracts, job descriptions, attendance records, timesheets allocating time between projects, payroll registers, tax and social contribution payments
Procurement	Requests for quotations, quotations received, supplier selection minutes, contracts, invoices, delivery notes, acceptance certificates, fixed asset registration documents
Travel and events	Travel orders, tickets, hotel invoices, expense reports, signed participant lists, agendas, photo reports
Sub-grants and partners	Partner agreements, partner financial reports, partner source documents or evidence that they were verified
Tax	Non-profit income use report, personal income tax and social contribution returns, confirmation of VAT exemption for international technical assistance projects where applicable

Tip: organise the documents by budget structure, not by date. The auditor works line by line through the budget, and this order cuts the review time considerably.

Stages of the audit and how long it takes

A typical grant audit consists of five stages:

1. Planning. The auditor studies the agreement, the budget and the donor’s requirements and agrees the report format, timeline and document list with the organisation. Usually 2 or 3 business days.
2. Document collection. The organisation provides the documents from the checklist. Duration depends on the client’s readiness: from a few days to a few weeks.
3. Fieldwork. The auditor tests expenditure (in full or on a sample basis, depending on the donor’s requirements), reconciles the report with the accounting records and checks procurement and staff costs. For a mid-sized grant this takes 1 or 2 weeks.
4. Discussion of preliminary results. The auditor sends a list of questions and preliminary findings, and the organisation provides explanations and additional documents. From 3 days to a week.
5. Reporting. Preparation of the audit report and, where needed, a management letter with recommendations. The report is issued in Ukrainian and English. Up to 1 week.

Overall, an audit of a small grant takes 2 to 3 weeks, and a large multi-year project with partners 4 to 8 weeks. The document collection stage has the greatest impact on the timeline, so it is worth starting it before the audit contract is even signed.

How a remote audit works

We perform most grant audits in a hybrid or fully remote format. This suits organisations in the regions, teams working from Kyiv with an office elsewhere, and donors based abroad. A remote audit includes:

• a secure shared folder for document exchange, structured by budget line;
• good quality scans or photos of source documents; originals may be requested on a sample basis;
• read-only access to the accounting software or exports of the ledgers;
• video calls with the director and accountant at the planning stage and when discussing results;
• a written question-and-answer exchange that becomes part of the audit working papers.

Donors generally accept the remote format provided the auditor has obtained sufficient evidence. In some cases (equipment verification, major procurement) the auditor may require a site visit or photo and video evidence of the assets.

How to respond to audit findings

Findings during a grant audit are a normal part of the process, not a verdict. It helps to understand their types:

Ineligible costs

Costs that do not comply with the budget, the project period or the donor’s rules: for example, VAT that should have been recovered, costs outside the project period, purchases without competitive procedures. The donor usually requires such amounts to be refunded or deducts them from the next tranche. The right response is to provide additional documents if they exist, or to accept the finding and propose replacing the cost with other eligible costs within the budget, if the donor’s rules allow it.

Documentation weaknesses

The cost is genuine, but the document is incomplete: no signature, no date, no description of the services. This can often be remedied by obtaining a corrected document or additional confirmation from the supplier.

Internal control weaknesses

For example, no written cost allocation methodology or no timesheets. These are findings about the process rather than a specific amount. They go into the management letter, and the donor expects the organisation to present a remediation plan.

Practical rules for handling findings: respond in writing and on time, do not argue with the auditor without documents, record what was agreed, and after the audit update internal procedures so the findings are not repeated in the next project. If the books are kept by an external team, for example as part of NGO accounting support, that team should take part in the discussion of results together with the organisation’s director.

Tips that make the audit easier

• Open a separate bank account for each project if the donor requires or recommends it.
• Approve a written shared cost allocation methodology and apply it consistently.
• Keep staff timesheets monthly rather than reconstructing them at the end of the project.
• Retain supplier selection documents even for small purchases.
• Reconcile the donor report with the accounting records before every submission.
• Agree budget changes with the donor in writing before spending the money.
• Involve the auditor early: a mid-project consultation costs less than refunding money to the donor.

MK Audit has performed grant and donor project audits since 2000, is listed in the Register of Auditors and Audit Firms (No. 4624) and is a member of DFK International. We work under ISA 800/805 and ISRS 4400, issue reports in Ukrainian and English and perform audits remotely across Ukraine. To receive a checklist tailored to your project and agree on timing, send us a request: we will review the task, prepare a commercial proposal and reply within 1 day.