How to Record a Donor-Required Project-Specific Audit as a Program Expense
Expensing an audit mandated and funded by the donor for a specific project as a direct program cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Program Expense: Project Audit | Expense (+) | 4,000.00 | - |
| Cash / Accounts Payable | Asset/Liability (-) | - | 4,000.00 |
💡 Accountant's Note
When a donor mandates and funds a project audit, the cost is a direct program expense charged to that grant. The fee may be partially recoverable as an indirect cost.
Practitioner & Systems Framework
💻 ERP Architecture
Project audits are included in the grant budget as a direct cost. Manage the procurement process (request for proposals, selection of audit firm) per both the NGO's and donor's procurement policies. Provide the auditor with all grant documentation. The audit report must be submitted to the donor within the required timeframe.
⚠️ Audit Flags
The auditor conducting the project audit will examine all transactions charged to the grant. They are independent of the statutory auditor and may have different findings. A qualified project audit report must be disclosed to the donor immediately. Non-submission within the required timeframe is a grant compliance breach.
📄 Required Documentation
Donor grant agreement specifying audit requirement, audit firm selection documentation, engagement letter, project audit report, and donor submission confirmation.
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