Audit Checklist For Federal Grants

Technology and life science companies are seeing increased federal funding opportunities during the COVID-19 pandemic, but with these funds come additional compliance requirements.

Our team has developed a federal grants audit checklist to assist your organization with being prepared for increased scrutiny from auditors. This free resource walks through some of the main areas auditors investigate during an audit.

Internal Controls
Internal controls are systems of checks and balances designed to prevent errors, fraud and theft while simultaneously providing management with timely, accurate information for planning, monitoring and reporting business activities.

An internal control system begins with a risk assessment. This step identifies processes more susceptible to error and their potential ramifications for your organization, helping determine which critical processes require more focus, attention and efforts in their implementation, monitoring, and improvement.

Preventive controls seek to mitigate risks before they manifest, for instance by comparing validated cash receipt vouchers against monthly account details in order to detect irregular deposits. Detective controls are designed to detect an error or irregularity after its occurrence has already taken place; an exception report would be an example of such control measures.

After the COVID-19 pandemic, technology and life sciences companies must be ready for increased federal research grants and their audit requirements. By using our free audit checklist below, your company can take full advantage of these additional opportunities while maintaining compliance issues.

Financial Statements
The Government Accountability Office and Office of Inspector General (OIG) collaborate in overseeing policies, expenditures and reporting by Federal grant-making agencies. In addition, these bodies audit how these entities report back their grants’ recipients.

Financial statements such as balance sheets, income statements and cash flow statements are essential tools in evaluating compliance. Auditors must trust the numbers reported.

Grant recipients are required to report various programmatic and financial data at specific intervals throughout the lifecycle of a grant, failing which they risk incurring penalties and losing funding altogether.

Non-Federal entity recipients that expend $750,000 or more in Federal awards during a fiscal year must conduct an independent audit that meets OMB Circular A-133 standards, then submit it through CDC’s Single Audit Data Collection System and Information Entry System for submission. CDC’s Audit Resolution System also offers useful resources for finding more information about reporting your audit report to them.

Subrecipient Relationships
Entities must exercise due diligence when disbursing grant funds to subrecipients, monitoring performance and spending closely to ensure efficient use of grant dollars. This involves monitoring activities properly reported to them as well as progress against budget and performance goals and creating mechanisms to minimize risks.

Many organizations mistakenly assume that contract agreements between vendors and their organizations represent subrecipient relationships; this assumption, however, is incorrect as any agreement wherein scope of work and oversight are solely defined by contract terms will constitute contractor relationships instead.

Other requirements to keep in mind include PI workflow approval on subrecipient invoice vouchers and confirmation that audit certification letters with copies of A-133 reports from each subrecipient have been received. Cash management systems should also be implemented to monitor the inflow and outflow of grant funds in and out of an organization to both reduce legal liability as well as demonstrate adequate spending accountability and transparency. Having an effective grants management system in place can reduce administrative burden while freeing organizations to focus on their core mission-related duties more easily.

Reporting
Funders require regular updates throughout the lifecycle of grants; these updates could take the form of progress reports, expense-related data, site visits or technical support from federal funding agencies.

To meet reporting obligations of federal grants effectively, ensure you and your team understand its specific requirements. A software tool like Instrumentl may assist in tracking compliance deadlines and alerting when they approach.

An essential step in preparing for an audit is making sure all policies and procedures are set up and documented, including clear channels of communication for people to report suspected improprieties. Furthermore, be prepared to explain variances between your original budget and final expenses; for instance if an item overspent its budget limit by writing this into the narrative section of your grant report – similarly with underspending.