What donors check in a small NGO financial report
A practical guide to the totals, dates, budget lines, balances and supporting records donors check in a small NGO financial report.
A donor reviewing your financial report is usually trying to answer a few basic questions. Was the money spent during the correct period, on the agreed activities, within the approved budget, and with enough evidence to explain each amount?
A neat spreadsheet helps, but appearance is not the main test. The figures must agree with one another and lead back to real transactions. Understanding these checks can help you review a report before sending it, even if you are not a trained accountant.
The report covers the correct grant and period
The first check is often simple: does the report clearly identify the grant, project and reporting period? A report for April to June should not quietly include March costs or leave out late-June payments without explanation.
Check the dates used in your transaction list. Donors may distinguish between the date an expense was incurred, the date it was paid and the date it appeared on the bank statement. Follow the basis required by the grant agreement or reporting template. If the instructions are unclear, apply one method consistently and explain any important timing difference.
For example, training materials were delivered on 28 June, but the supplier was paid on 3 July. If reports are prepared on a cash basis, the cost may belong in the July to September report. If the donor requires costs to be reported when incurred, it may belong in the April to June report as an unpaid amount. Do not include it in both.
The donor will also look for costs outside the grant dates. A payment made shortly after the end date may still relate to an activity completed during the grant, but it needs a clear explanation and may require approval. A receipt dated before the project began also deserves review rather than automatic inclusion.
Before submitting, make sure the report shows the project name, grant reference if one exists, reporting period, currency and date of preparation. These details prevent confusion when a donor manages several grants.
- Use one stated basis for deciding which period contains each cost.
- Review transactions close to the start and end dates separately.
- Explain legitimate timing differences instead of changing dates.
- Make sure every worksheet uses the same reporting period and currency.
The totals add up and connect
Donors check whether the numbers are internally consistent. They may add the budget lines, compare the summary with the transaction list and check that the opening balance, money received, spending and closing balance form a complete calculation.
Suppose the project opened the quarter with 2,000, received 10,000 and reported expenditure of 8,500. The expected closing balance is 3,500. If the report shows 3,200, there is a difference of 300 that must be explained. It could be a bank charge, an exchange difference, an omitted payment or a simple formula error.
The same principle applies to category totals. If the transaction list contains travel costs of 400, 600 and 500, the travel line in the summary should be 1,500. A donor may test only a few lines, but one failed calculation can lead to questions about the rest of the workbook.
Look carefully for duplicated transactions. A payment may appear once under its invoice date and again under its bank date. Two receipts may have similar amounts but be separate purchases, so do not delete one merely because it looks familiar. Compare the supplier, date, purpose and payment reference.
Also check the direction of refunds and corrections. If a supplier returned 200, recording it as another 200 expense makes spending too high by 400 compared with the correct position. Refunds should reduce expenditure or be shown clearly as recoveries, according to the donor’s format.
- Recalculate every summary line from the underlying transaction list.
- Check opening balance plus receipts minus expenditure against the reported closing balance.
- Search for duplicate dates, amounts and payment references.
- Review refunds, reversals and negative entries carefully.
- Replace manual totals with checked formulas where possible.
Spending fits the approved budget
A donor does not only ask whether a payment happened. The donor also asks whether it belongs to the approved project and budget. A genuine receipt can support a cost that is still ineligible under the grant.
Read each budget heading together with its description. A line called “community meetings” may cover venue hire, refreshments and local transport, but it may not cover office furniture. The wording in the approved budget and grant conditions matters more than the label chosen in your bookkeeping file.
Compare actual spending with the current approved budget, including any written revisions. Do not use an old budget simply because it was attached to the first agreement. Keep evidence of approved changes and make sure the report reflects them.
For example, the approved budget contains 6,000 for field travel and 2,000 for printing. By the end of the quarter, travel spending is 5,800 and printing spending is 600. The issue is not automatically that travel must stop. The donor may want to know what activities remain, whether later travel is planned and whether movement between budget lines needs prior approval.
Under-spending can also attract questions. If a planned workshop did not happen, the report should not hide the unused budget. The programme explanation and financial report should tell the same story. If the activity was postponed, say so in the appropriate narrative section rather than moving unrelated costs into that line.
Check grant rules for restricted items such as equipment, staff benefits, taxes, alcohol, penalties, personal expenses or costs paid to related parties. Rules differ between grants, so do not rely on what another donor allowed.
- Use the latest approved budget as the comparison point.
- Confirm that each cost supports an agreed project activity.
- Identify large or unusual differences in money terms and explain the reason.
- Do not rename an ineligible cost to make it appear eligible.
- Keep written approval for budget changes or exceptional purchases.
Transactions have a clear evidence trail
A donor may select several reported amounts and ask you to show how each one can be traced. The expected trail usually starts with the report line, continues to the transaction list and payment record, and ends with documents showing what was bought, why it was needed and who approved it.
A receipt alone may not answer all of those questions. A receipt for 1,200 from a stationery supplier shows the seller and amount, but the file may also need a purchase request, approval, invoice, delivery note or list of items. The exact documents depend on the organisation’s procedures and the donor’s rules.
The description in the transaction list should be useful to someone outside the organisation. “Project expense” is too vague. “Exercise books and pens for youth literacy sessions in May” explains the nature and purpose of the purchase. It also helps the reviewer compare the cost with the activity report.
Names and references should connect across the records. If the bank statement shows a payment to a staff member, while the expense relates to vehicle hire, the file should show why the staff member received the money and how it reached the supplier. An advance form, settlement record and supplier document may provide that link.
Donors also notice altered, incomplete or inconsistent documents. A handwritten correction is not necessarily wrong, but it should be understandable and authorised. Never change a receipt amount or date to make it agree with the report. Correct the accounting record or add an honest explanation instead.
File references make tracing easier. You might give a payment the reference JUN-024 and place that reference in the transaction list, payment voucher and document file. The system can be simple as long as it is used consistently.
- Give each reported transaction a unique reference.
- Write descriptions that state what was bought and its project purpose.
- Keep approval, payment and purchase evidence together where practical.
- Show the full route when money passed through a staff member.
- Explain corrections openly rather than altering source documents.
Cash, advances and currency are understandable
Cash transactions often receive extra attention because a bank statement does not show the final supplier payment. If 3,000 was withdrawn for a field activity, the withdrawal itself is not necessarily the expense. The report should show how the cash was used, what remained and whether any balance was returned.
For example, a coordinator receives an advance of 3,000. Supported activity costs are 2,650, and 350 is returned to the project cash box. The report should recognise 2,650 as expenditure, not 3,000. The advance record, receipts and return of 350 should connect.
Outstanding advances should be visible. If a staff member still holds 800 at the reporting date, do not turn it into travel or workshop expenditure simply to clear the balance. Show it according to the donor’s template and settle it promptly under your organisation’s procedures.
Where several currencies are involved, donors check whether the conversion method is consistent and supported. State the reporting currency and record the exchange rate or calculation used for each relevant transaction. The converted amount should be reproducible from the source amount and rate.
Suppose 500 units of local currency were spent and the documented rate was 50 local units to 1 reporting unit. The reported cost is 10 reporting units. If bank conversion charges or exchange differences are reported separately, label them clearly rather than adding them silently to programme costs.
Finally, compare the reported balance with the funds actually held for the project. Consider the project bank balance, project cash, unsettled advances and any valid outstanding items required by the reporting basis. A difference does not always mean misuse, but it does require a clear calculation and explanation.
- Separate cash withdrawn from cash actually spent.
- Track advances until documents and unused cash are returned.
- State the reporting currency and conversion method.
- Retain evidence for exchange rates and conversion charges.
- Explain how the closing project balance is held.
Questions
Does every transaction need a receipt?
Follow the grant agreement and your organisation’s documented rules. A receipt is common evidence, but some transactions also need an invoice, contract, attendance record, approval or proof of payment. Where normal evidence is unavailable, do not create or alter a document. Record the facts, obtain the permitted alternative evidence and disclose the exception if required.
Will a donor check every line in the report?
A donor may review totals and then select particular transactions, budget lines or unusual items. Prepare the report so that any line can be traced, rather than trying to predict which items will be selected.
What should I do if the report does not match the available balance?
Do not force the figures to agree. Check the opening balance, incoming funds, bank charges, cash withdrawals, refunds, transfers, advances, exchange differences and transactions near the period end. Record the cause of any remaining difference clearly and ask the appropriate finance or donor contact how it should be presented.
Should small expenses receive the same attention as large ones?
All costs should meet the grant rules and have an adequate record. Larger, unusual or sensitive payments may receive more attention, but repeated small errors can also show that totals or procedures are unreliable.
Can I correct a report after it has been submitted?
Yes, if the donor permits corrections. Tell the donor what changed, why it changed and which totals are affected. Keep both the original and revised versions, mark the revision date and avoid silently replacing a submitted file.
Before submitting, read the report as an outside reviewer would: confirm the period, recalculate the totals, compare spending with the approved budget, trace several lines to their evidence, and explain cash, advances and currency clearly. Honest Record can automate transaction matching and some consistency checks, but the person preparing the report still needs to confirm that each cost is genuine, eligible and correctly described.
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