Grantwell Blog

October 19, 2025

Grant Audit Checklist: 12 Steps for Public Safety

Grant audits ensure public safety agencies use funds correctly and follow federal rules. A failed audit can lead to funding loss, repayment demands, or ineligibility for future grants. To succeed, agencies need organized documentation, strong internal controls, and compliance with regulations like the Uniform Guidance (2 CFR 200).

Key steps for audit preparation include:

Common challenges include tracking personnel costs, procurement compliance, and managing multiple funding sources. Automated tools, like Grantwell, can help monitor compliance, manage budgets, and centralize records, simplifying the audit process.

Avoid errors by conducting monthly reviews, providing staff training, and using centralized systems for documentation. Address audit findings promptly with corrective actions and detailed records.

Staying audit-ready year-round not only ensures compliance but also builds trust with funding agencies, paving the way for future opportunities.

Grants Management Audit Preparation Tips Part 1

Audit Preparation Steps

Preparing for an audit requires a blend of organized documentation and well-established, compliant processes. This not only demonstrates adherence to grant requirements but also showcases fiscal responsibility. A great starting point is to ensure all necessary documents are in order.

Gathering Required Documentation

The cornerstone of a successful audit is having all relevant documentation organized and easily accessible. Auditors need to trace every dollar spent back to its intended purpose as outlined in the grant agreement.

Start by collecting both original and amended grant agreements. Include detailed financial records like statements, accounting logs, and bank transactions tied to the grant. For federal grants, the Schedule of Expenditures of Federal Awards (SEFA) is especially important.

Support grant-related expenses with invoices, receipts, and contracts - whether for equipment, training, or technology purchases.

Personnel costs require extra care. Timesheets, payroll records, and overtime documentation must clearly show which grant funded specific staff hours. Additionally, budget and spending records should illustrate how actual expenditures align with the approved budget. For organizations managing multiple grants, maintaining a clear separation of costs is essential.

"The grant audit process also involves reviewing supporting documentation, such as invoices, receipts and contracts, to substantiate grant expenditures." - IGX Solutions [1]

To avoid last-minute stress, establish a systematic filing process early in the grant period. Digital document management systems can make this process smoother, provided documents are consistently categorized and securely stored.

Setting Up Internal Controls

Strong internal controls are critical for grant compliance. They provide the structure and accountability auditors expect under Uniform Guidance and Generally Accepted Government Auditing Standards (GAGAS).

Start by defining clear roles and responsibilities, and ensure staff are trained on procurement rules and cost principles. Separation of duties is key - different individuals should handle authorization, processing, and reconciliation of expenditures.

Document approval workflows to illustrate systematic decision-making. Written policies should clearly outline who can authorize expenditures, what documentation is required, and how budget changes are approved and recorded.

Incorporating ethical practices into your processes strengthens internal controls. Clearly defined authority lines and mechanisms for reporting suspected fraud provide additional layers of accountability.

Choosing Qualified Auditors

Selecting the right auditors is just as important as your internal preparation. Look for certified public accountants (CPAs) or government-auditing firms with expertise in federal grant compliance.

Experience matters. Auditors should have a solid understanding of Generally Accepted Government Auditing Standards (GAGAS), federal grant requirements, and the Uniform Grant Guidance. If your organization spends $750,000 or more in federal funds during a fiscal year, you’ll need a Single Audit, which combines financial statement auditing with compliance testing.

Independence is critical. Auditors must remain objective, free of any financial or personal conflicts that could compromise their evaluation. They should also have a strong grasp of federal, state, and local regulations, as well as specific grantor requirements. For law enforcement agencies, familiarity with Criminal Justice Information Services (CJIS) requirements is essential.

When choosing an auditor, review their recent experience with similar organizations, especially public safety agencies. Asking for references can provide additional confidence. Collaborating closely with your auditor throughout the process helps ensure compliance with regulatory requirements and allows for quick resolution of any issues.

"Knowing that an external party will review records tends to motivate teams to keep thorough documentation and follow consistent accounting procedures." - Cottons [2]

12-Step Grant Audit Checklist for Public Safety

This checklist offers a structured approach to help public safety agencies meet audit requirements effectively. Each step builds on the groundwork laid during the preparation phase, addressing the specific compliance challenges tied to law enforcement and municipal grants.

Step 1: Review Grant Agreement and Terms

Start by thoroughly reviewing the grant agreement and any amendments. Pay close attention to conditions specific to the grant type, such as Community Oriented Policing Services (COPS) grants, Edward Byrne Memorial Justice Assistance Grants (JAG), or state-level funding. Ensure all activities align with the grant's objectives. For instance, if you received a hiring grant, confirm that funds are directed toward creating new positions rather than replacing existing staff. Document any special conditions or reporting requirements and verify that vendor and procurement practices comply with federal standards.

Step 2: Check Vendor and Procurement Compliance

Examine vendor contracts and purchase orders to ensure adherence to federal procurement standards, such as those outlined in 2 CFR 200. Confirm that competitive bidding was used for high-value purchases and that contracts for equipment, training, or technology followed approved processes. For sole source procurements, ensure proper justification and authorization are documented.

Step 3: Verify Cost Allowability

Ensure all grant expenses meet federal allowability criteria. Review expenditures to confirm they are reasonable, necessary, and directly tied to the grant's objectives. Common allowable costs include salaries, training, equipment, and travel, while personal or entertainment expenses are typically disallowed. Maintain thorough documentation for each expense, and if claiming indirect costs, ensure rates are current and applied correctly.

Step 4: Check Expenditure Timing

Review financial records, including bank statements and invoices, to confirm that all expenditures occurred within the grant's performance period. Pay extra attention to transactions at the start and end of the grant period. Pre-award costs must have written authorization, and post-award expenses are not allowable. Clearly separate charges from different timeframes and document obligation and payment dates.

Step 5: Audit Payroll and Personnel Costs

Personnel costs are often the largest grant expense, so they require detailed documentation. Review timesheets, payroll records, and overtime calculations to ensure accurate reporting of time spent on grant-funded activities. Keep employee records, including contracts and benefits documentation, to demonstrate compliance with labor laws and grant terms. Verify that fringe benefits for grant-funded staff are reasonable and consistently applied.

Step 6: Document Matching Funds and Cost Sharing

If your grant involves matching funds or cost sharing, ensure these contributions are properly recorded and come from allowable sources. In-kind contributions, like volunteer time or donated equipment, should be accurately valued and documented. Maintain detailed records of when and how matching contributions were provided, whether upfront or alongside expenditures.

Step 7: Monitor Subrecipient Compliance

If grant funds are distributed to subrecipients, confirm their compliance with grant requirements. Review their financial practices, risk assessments, and any corrective actions taken. Document technical assistance provided and how deficiencies were addressed, as your agency is ultimately responsible for compliance. After subrecipient compliance is verified, move on to funding requests.

Step 8: Verify Drawdowns and Reimbursements

Ensure all drawdown requests reflect actual expenditures and meet immediate cash flow needs. Cross-check drawdown amounts with bank deposits and confirm that any interest earned on federal funds is handled correctly. For reimbursement models, verify that each request is fully supported by documentation and properly recorded.

Step 9: Document Budget Amendments

Gather all documents related to budget modifications made during the grant period. While some flexibility exists to reallocate funds, significant changes usually require prior approval. Confirm that budget amendments were submitted and approved in a timely manner, and include a justification explaining how the changes support the grant's goals or address unexpected issues.

Step 10: Check Period of Performance Compliance

Verify that all grant activities occurred within the authorized timeline. Review project schedules, deliverable dates, and final reports to ensure compliance with the performance period. If a no-cost extension was granted, confirm it was requested and approved before the original end date, and document how the extension supported grant objectives. Ensure any late equipment purchases were received and put into use before the deadline.

Step 11: Cross-Check Financial Reports

Compare financial reports submitted to grantors with your internal records. Resolve any discrepancies with clear explanations. Ensure cumulative expenditure totals in final reports match accounting records, and confirm all financial data is accurate and current. Compile records to establish a complete audit trail.

Step 12: Create Complete Audit Trail

Assemble a comprehensive documentation package covering the grant from award to closeout. Include correspondence with grantors, internal approvals, and supporting records for each transaction. Organize these materials logically to simplify the audit process, and create an index or summary highlighting key compliance areas and internal control procedures. Regular expense tracking can help ensure transactions are promptly logged, making audits more efficient.

Tools and Systems for Audit Readiness

Modern grant management systems have transformed how agencies prepare for audits, replacing error-prone manual tracking with streamlined, automated processes. For public safety agencies juggling multiple grants, the right technology platform isn't just helpful - it's essential for staying audit-ready all year long. These systems bring together organized documentation and internal controls, making compliance a built-in feature of daily operations.

Automated Compliance Tracking

One of the standout features of modern grant management tools is automated compliance monitoring. These systems continuously check expenses against federal allowability criteria, flagging potential issues before they turn into problems.

Take Grantwell, for example. Its automated compliance tools keep a close eye on grant activities, sending timely alerts when deadlines are approaching or when spending strays from approved budgets. This proactive system ensures that compliance gaps are caught early, keeping funds aligned with grant requirements and avoiding surprises during audits.

Budget Management and Real-Time Reporting

Managing a grant budget effectively goes far beyond spreadsheets and manual calculations. Real-time financial tracking offers the visibility agencies need to maintain compliance and quickly respond to auditor requests. Modern platforms integrate seamlessly with accounting software to deliver accurate, up-to-the-minute financial summaries.

Grantwell’s budget builder simplifies the process by automating calculations like fringe benefit rates and indirect cost rates, ensuring that every cost category aligns with grantor requirements from the outset. When budget adjustments are necessary, amendment tools track all changes and keep a record of approvals.

A budget-versus-actual tracker provides instant insights into spending variances, helping agencies make timely corrections before small issues escalate. Real-time financial summaries further enhance audit preparation by offering detailed breakdowns of expenditures by category, funding source, and time period. These reports automatically reconcile with drawdown requests and matching fund contributions, giving auditors a full, clear view of financial activity. This level of transparency, combined with centralized data management, makes the audit process smoother and more efficient.

Secure and Centralized Data Management

Public safety grants often involve handling sensitive information, which means robust security measures are non-negotiable. Grant management systems must comply with FedRAMP and CJIS standards to ensure law enforcement data is handled securely. A centralized approach to document storage not only strengthens security but also ensures audit trails are complete and accessible.

Grantwell’s architecture is built to meet these high standards, offering the security framework needed for public safety grant management. The platform maintains detailed audit logs that track system access and document changes, creating a comprehensive trail that meets federal audit requirements. From initial applications to final reports, all grant-related documents are securely stored and easy to retrieve.

Centralizing records also simplifies the audit process. Grant managers can quickly pull up any document from a single system, and version control features guarantee that auditors always receive the most up-to-date information. Additionally, clean CSV exports make it easy to share data in preferred formats while preserving metadata and maintaining a clear, chronological record of all transactions - from authorization to payment.

Common Audit Mistakes and How to Avoid Them

Public safety agencies often encounter challenges during audits. Recognizing the most frequent mistakes can help agencies strengthen their compliance practices and avoid costly findings that may jeopardize future funding opportunities.

Common Public Safety Grant Audit Errors

One of the most frequent audit issues for public safety organizations is internal control weaknesses. When internal controls are lacking, errors can slip through unnoticed, making it harder to catch and correct them before auditors flag them.

Financial management errors are another common problem. Agencies often struggle to properly track and document subaward costs, leaving gaps when auditors request supporting materials. Cost allocation plans are another sticking point - without clear plans for distributing shared expenses across multiple grants, agencies risk overcharging for rent or indirect costs, which can immediately raise concerns during an audit.

Matching fund issues also occur frequently. Agencies sometimes fail to provide adequate or properly documented matching funds, or they neglect to record these contributions in their accounting systems. Timing discrepancies can arise when match contributions aren’t documented on reimbursement requests as expenses occur, creating inconsistencies that auditors will scrutinize.

Personnel cost mistakes are a recurring issue, particularly with timesheet tracking. Many agencies don’t require detailed time records for grant-funded positions, making it difficult to justify personnel costs during an audit. Fringe benefits are sometimes miscategorized, and volunteer in-kind contributions often lack documentation to verify their value.

Equipment and operating expenses also present challenges. Missing inventory records, incomplete disposal documentation, and skipped physical inventory reconciliations can all lead to compliance issues. Similarly, operating costs claimed without proof of payment or expenses reported before they’re incurred violate federal requirements and result in audit findings.

To steer clear of these common pitfalls, consider implementing the following strategies.

How to Prevent Audit Problems

Even with preventive measures, issues may still arise. When they do, it’s important to address them effectively.

Fixing Issues Found During Audits

If problems are identified during an audit, acknowledge them promptly, provide the requested documentation, and take corrective action. A professional and proactive response demonstrates a commitment to compliance.

Audit findings shouldn’t just be viewed as problems to fix; they’re opportunities to improve grant management practices. Agencies that treat audits as a learning process often experience fewer issues in future reviews and build stronger relationships with funding agencies over time.

Maintaining Audit Readiness Year-Round

Effective grant management isn’t just about responding to audits when they happen - it’s about staying prepared every single day. Keeping compliance and documentation in check throughout the year not only avoids last-minute surprises but also strengthens your ability to manage funds effectively.

Regularly reviewing financial, personnel, and vendor records ensures that documentation stays up to date and discrepancies are caught early. Using technology to streamline recordkeeping can make this process much simpler. Tools that centralize access and improve oversight help agencies maintain a steady state of readiness.

Centralized platforms, as mentioned earlier, play a crucial role in staying prepared. By consolidating data and processes, these systems make it easier to respond promptly and thoroughly to audit requests, saving time and reducing stress.

Automated compliance tools are another valuable asset. They help identify issues as they arise, allowing for quick corrective actions before they escalate into bigger problems.

But this isn’t just about passing audits. Staying prepared year-round can lead to unexpected benefits, like uncovering cost-saving opportunities, improving operational efficiency, and building trust with funding agencies. When auditors see organized records and proactive compliance measures, it reflects positively on an agency’s ability to manage federal funds responsibly.

Of course, none of this happens without commitment. Leadership needs to champion the importance of audit readiness, while all staff involved in grant management must stay engaged. Regular training on compliance requirements, clear documentation policies, and frequent reviews of internal controls are essential to keep up with evolving standards and ensure long-term success.

FAQs

What challenges do public safety agencies face during grant audits, and how can they address them?

Public safety agencies often face hurdles during grant audits. Common issues include inconsistent record-keeping, a lack of communication between departments, and weak project oversight. These problems can result in missed deadlines, non-compliance with regulations, and complications during the audit process. On top of this, improper use of grant funds - whether intentional or accidental - can create serious risks.

To tackle these challenges, agencies should implement well-defined grant management policies, foster better collaboration across departments, and appoint skilled project managers to oversee grant-related activities. Keeping things organized, maintaining precise documentation, and adhering to all grant requirements can go a long way in helping agencies avoid these pitfalls and handle audits with confidence.

How does Grantwell's automated compliance tracking help public safety agencies stay prepared for audits year-round?

Grantwell's automated compliance tracking system takes the hassle out of audit preparation by keeping your agency aligned with regulatory requirements. It continuously monitors grant activities, keeps tabs on expenditures, and organizes all critical documentation in one easy-to-access platform. This centralized approach minimizes errors and helps ensure you never miss a deadline.

Designed with public safety grants in mind, Grantwell includes tools that promote transparency and accountability. By simplifying compliance management, your team can remain audit-ready year-round - no stress, no last-minute chaos.

Why should public safety agencies choose auditors who understand CJIS requirements?

Selecting auditors who understand Criminal Justice Information Services (CJIS) requirements is a must for public safety agencies. CJIS outlines strict guidelines for managing, storing, and sharing sensitive law enforcement data, so having an auditor well-versed in these standards ensures your processes are thoroughly assessed and potential risks are identified.

Auditors with CJIS expertise bring more than just compliance checks - they offer customized recommendations to enhance your agency’s data security and privacy measures. Their deep knowledge of public safety operations and regulatory specifics makes them an invaluable resource during audits, helping to minimize the risks of penalties or data breaches.

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