Blog · 24 September 2026 · 7 min read

Preparing grant records for a donor audit

Practical steps to prepare grant records for a donor audit, build a clear evidence trail, and address common findings before fieldwork.

A donor audit can feel daunting when your records consist of spreadsheets, bank statements, mobile money messages and paper receipts. The auditor may ask you to prove not only that money was spent, but also that each cost was allowed, approved and connected to project work.

Preparation means building a clear path through the records. A reviewer should be able to start with a figure in the donor report and trace it to the ledger, payment, supporting evidence and project purpose, then follow the same path in reverse.

Start with the grant rules and audit request

Before rearranging receipts, read the signed grant agreement, approved budget and any later amendments. Note the reporting period, eligible cost dates, procurement rules, approval limits, exchange-rate method and restrictions on moving money between budget lines. These rules determine what evidence the auditor will expect.

Ask for the audit request list as early as possible. It may ask for the general ledger, donor reports, bank statements, cash records, payroll files, procurement documents, asset register and governing body approvals. Create a tracker with one row for each request, the responsible person, the file location and its status.

Confirm the audit scope. Is the auditor examining one grant, one financial year or the whole organisation? Will records be checked remotely or on site? Will original papers be needed? Do not send unrelated personal or beneficiary information unless it is required. Ask how sensitive documents should be transferred.

• Keep the signed agreement and amendments together.
• Use the final approved budget, not an early draft.
• Record questions where a donor rule is unclear.
• Preserve original files when creating audit copies.
• Agree one contact person for auditor requests.

Build a complete evidence pack for each transaction

A receipt alone does not always explain a transaction. A useful evidence pack shows what was bought, why it was needed, who approved it, how it was paid and where it appears in the accounts. Number the pack with the same reference used in the ledger or transaction list.

For example, suppose the ledger shows 8,000 in local currency for workshop meals. The pack might contain the supplier invoice, attendance list, workshop agenda, approved activity request, payment voucher and bank or mobile money confirmation. The documents should agree on the date, supplier, amount and activity.

Keep explanations factual. If the supplier name on the receipt differs from the bank account holder, add a signed note explaining the relationship and any checks made at the time. Do not create a replacement invoice, alter a date or ask someone to sign an approval as though it happened earlier. A late explanation should be clearly dated as a late explanation.

• Ledger or transaction reference
• Invoice, receipt or supplier acknowledgement
• Evidence of payment
• Approval under the organisation's rules
• Evidence of delivery or attendance where relevant
• Explanation of the project purpose

Test the trail in both directions

Auditors may select a figure from the donor report and trace it down to the supporting documents. They may also select a bank payment or receipt and trace it up to the ledger and report. Test both directions before fieldwork begins.

Take a reported travel cost of 15,000. First find the amount in the donor report. Trace it to the detailed ledger, then to the travel claim, approval, tickets or transport receipts, evidence of payment and activity records. Check that the traveller, destination and dates fit the project activity.

Now reverse the test. Select a payment of 20,000 from the project bank statement. Find its ledger entry and supporting pack. Confirm that it appears once in the donor report, in the correct reporting period. If part of the payment belongs to another grant, keep a written allocation calculation showing how the split was made.

The same references should be used throughout. A bank payment reference such as BP-042 can also appear in the ledger and on the document cover sheet. If your donor report combines several transactions into one line, keep a schedule listing every transaction included in that total. The schedule is the bridge between the summary report and detailed evidence.

• Report to ledger to payment to evidence
• Bank or cash record to ledger to report
• One reference that connects each stage
• A calculation for every combined or split amount

Give extra attention to higher-risk records

Some records need more than a receipt. Cash withdrawals require a trail showing who received the cash, what it paid for and whether any balance was returned. Mobile money payments need transaction confirmations and a clear link between the registered phone number and the supplier or recipient.

Payroll files should support each staff cost with a contract, approved pay rate, payroll calculation, proof of payment and required tax or pension records. Timesheets or documented allocation methods may be needed where one person works across several grants. Protect personnel records and provide them through the agreed secure process.

Purchases may need quotations, bid comparisons, selection notes, purchase orders and evidence that goods were received. Equipment should also appear in the asset register, with its location, custodian, identification number and funding source. If the required procurement process was not followed, gather the real documents and explanation rather than trying to reconstruct a competition that did not occur.

• Cash advances and unretired balances
• Payments to staff or personal accounts
• Procurement near approval limits
• Shared costs divided between grants
• Equipment and other controlled assets
• Taxes, exchange rates and bank charges

Run a pre-audit review and record problems honestly

Use the auditor's likely sample approach on your own records. Select transactions from different months, budget lines, payment methods and staff members. Include large and small costs. Give each sample to someone who did not prepare the original report and ask whether they can follow the trail without verbal guidance.

Common findings include missing approval, incomplete supplier details, costs outside the grant period, unsupported exchange rates, duplicate entries, unexplained differences between records, weak procurement files, personal payments without justification, missing payroll support and equipment absent from the asset register. A bank balance that agrees with the ledger does not resolve these evidence or compliance problems.

Create an issues log before the audit. For each problem, state the transaction, amount, missing or conflicting evidence, action taken, responsible person and current status. Separate a corrected clerical error from a possible ineligible cost. If a correction changes a submitted report, check the grant rules and discuss the proper treatment with the authorised manager or donor contact.

• Do not remove difficult transactions from the file.
• Do not backdate approvals or alter source documents.
• Keep both the original and corrected version of a record.
• Document why a journal or report adjustment was made.
• Answer requests directly and provide an index of attachments.
• Record documents supplied and questions still open.

Questions

Good audit preparation is not about making the file look perfect. It is about presenting the real records in a clear order, identifying gaps and documenting corrections honestly. Honest Record can help match reports, payments and supporting evidence, but responsibility for approvals, grant rules and explanations remains with the organisation.

More guides

• Add budget versus actual without confusion
• What donors check in a small NGO financial report
• Using AI for bookkeeping safely
• How to report a payment when the receipt is missing