Closing a grant project: 7 things to do before the auditor arrives

Before the auditor arrives at the close of a grant project, do seven things: cut off costs at the project end date, settle liabilities, reconcile the final report with the books and the budget, determine the remaining balance of funds, take an inventory of equipment, complete payments to staff and contractors, and organise the archive. Each of these answers a separate question the auditor will ask during the final review.

We described how to prepare for a final audit three months ahead in final project audit. This is a shorter practical list for the last weeks of a project, with an explanation of why each point matters under donor rules.

What the rules say

For grants from the EU budget, the general rules are set by Regulation (EU, Euratom) 2024/2509 of 23 September 2024. Text: EUR-Lex. The following provisions matter at project closure.

• Article 189(3)(a). Actual costs are eligible if incurred during the duration of the action. An exception is made for costs relating to final reports and audit certificates.
• Article 189(4)(b). Costs of certificates on financial statements and verification reports may be eligible where the donor requires them and has declared them eligible in the call.
• Article 205(1). The grant amount becomes final only after the final reports are approved, and subsequent audits, checks and investigations remain possible.
• Article 129. A recipient of EU funds grants access rights for checks to the Commission, OLAF, the European Court of Auditors and, where appropriate, national authorities.

Ukrainian law adds a requirement for the archive: under Article 8 of the Accounting Law (zakon.rada.gov.ua) documents, ledgers and reports are kept for the established period, but no less than three years. Other donors have their own rules, but the logic is the same: costs within the period, a report that matches the books, and documents available after closure.

Who this applies to

• civil society organisations and foundations whose grant project ends in the coming months;
• consortium partners and sub-grantees reporting to the lead beneficiary;
• accountants preparing the final financial report and the package for the auditor;
• directors who sign the final report and agree with the donor on the transfer of assets and the return of the balance.

7 things to do before the auditor arrives

1. Cost cut-off by date. Review all costs of the last weeks and the first payments after the end date. A service delivered after the end date is usually ineligible, even if the contract was signed earlier. Look for exceptions in the agreement, in particular for the final report and audit.
2. Settling liabilities. List unpaid invoices and advances paid. An advance to a supplier with no act at the closing date does not prove a project cost.
3. Reconciling the final report with the books and budget. Every line of the report must match the project analytics. Variances beyond the limits allowed by the agreement must be approved by the donor in writing.
4. Remaining balance. Determine the balance on the project account, interest earned and exchange differences, if any, and check in the agreement what to do with them. More in unspent grant funds.
5. Equipment inventory. Take an inventory of property bought under the grant. Article 10 of the Accounting Law requires an inventory, and the donor usually sets out in the agreement who receives the assets after the project. Document the transfer.
6. Payments to staff and contractors. Close the timesheets for the last month, final payroll entries and contracts with consultants. Check that the share of time charged to the project matches the timesheets.
7. Project archive. Bring together the agreement and amendments, budgets, reports, primary documents, procurement files and correspondence with the donor. Set the retention period: at least three years under the law, or longer if the agreement requires it.

Common risks at closure

• Buying “so we do not have to return it”. Large purchases in the last weeks with no link to project activities get special attention from the auditor: a cost must be needed for the project, not for using up the balance.
• Payment after the end date for a service delivered after the end date. The date of the act matters more than the date of the contract.
• A final report built from the budget, not the books. Then the report figures are not supported by the ledgers.
• Assets left without a decision. Equipment sits in the office, but there is neither a transfer nor the donor’s consent to keep it.
• Documents scattered among people. After the project ends the manager leaves, and part of the correspondence with the donor disappears with their mailbox.

Start this list at least a month before the project end date. Then the cost cut-off and settlement of liabilities can still be done within the period, rather than explaining to the auditor why a service was received a week late. Points 4 and 5 require correspondence with the donor, so send your request about the remaining balance and assets early and keep the reply in the project archive.

FAQ

How we help

We carry out final audits and expenditure verifications of grant projects and, before them, help with closure: reconciling the report with the books, checking cost cut-off and the archive. See grant audit, NGO audit and NGO accounting. For accountants and project managers we run free webinars for NGOs. Write to us via contacts.

Prepared by the MK Audit team