What are the key differences between a financial audit and a program audit of grants?

1 Financial audit

A financial audit is an independent examination of your financial statements and records, to verify that they are accurate, complete, and comply with the grant agreement and accounting principles. A financial audit may be required by the grantor, a regulatory agency, or your own organization, to ensure accountability and transparency of your grant spending. A financial auditor will review your receipts, invoices, bank statements, ledgers, and other documents, to check for any errors, fraud, or mismanagement of funds. A financial audit will result in an opinion on the fairness and reliability of your financial reporting.

2 Program audit

A program audit is an evaluation of your grant activities and outcomes, to measure how well you have achieved the grant objectives and followed the grant terms and conditions. A program audit may be conducted by the grantor, an external evaluator, or your own staff, to assess the effectiveness, efficiency, and impact of your grant project. A program auditor will examine your grant proposal, work plan, progress reports, performance indicators, and other evidence, to determine if you have delivered the expected outputs and outcomes, and used the grant funds appropriately. A program audit will provide feedback and recommendations on how to improve your grant performance and management.

3 Common elements

Although a financial audit and a program audit have different focuses and methods, they also have some common elements that you should be aware of. Both types of audits require you to maintain clear and consistent documentation of your grant transactions and achievements, and to cooperate with the auditors during the audit process. Both types of audits follow certain standards and criteria, such as the Generally Accepted Government Auditing Standards (GAGAS) or the Evaluation Standards of the American Evaluation Association (AEA). Both types of audits aim to provide assurance and improvement for your grant administration.

4 Key differences

The key differences between a financial audit and a program audit of grants are mainly related to their scope, frequency, and outcome. A financial audit covers your entire financial operations and reporting, while a program audit focuses on a specific grant project or program. A financial audit is usually conducted annually or at the end of the grant period, while a program audit may be conducted at any stage of the grant cycle or as needed. A financial audit produces an opinion on your financial statements, while a program audit generates a report on your grant performance and recommendations.

5 How to prepare

To prepare for a financial audit or a program audit of grants, you should follow some best practices that will help you avoid any issues or surprises. First, you should familiarize yourself with the audit objectives, criteria, and procedures, and communicate with the auditors to clarify any expectations or questions. Second, you should organize and review your grant documentation, and ensure that it is complete, accurate, and consistent. Third, you should provide the auditors with all the information and access they need, and respond to any inquiries or findings promptly and professionally.

6 How to benefit

A financial audit or a program audit of grants can be a valuable opportunity for you to learn and improve your grant administration skills and practices. Instead of seeing them as a burden or a threat, you should view them as a chance to demonstrate your accountability and transparency, and to receive constructive feedback and guidance. You should use the audit results to identify your strengths and weaknesses, and to implement any changes or actions that will enhance your grant performance and management. You should also share your audit experiences and lessons with your colleagues and stakeholders, and foster a culture of continuous learning and improvement.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?