Auditors closely examine how grant managers analyze transactions, making a consistent and well-documented review process critical. A structured four-step approach, gathering evidence, applying regulations, identifying issues, and implementing corrective actions, helps ensure compliance and strengthens financial oversight.
Key Insights
- Gather all supporting documentation for each transaction, including contracts, timesheets, and approvals, to build a solid evidentiary foundation.
- Evaluate each cost against federal regulations, specifically 2 CFR 200 subpart E, to confirm it is allowable, allocable, and reasonable.
- Identify root causes of compliance issues and implement targeted corrective actions to prevent repeat findings and reduce audit risks.
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When auditors question a transaction, whether it's a travel reimbursement, an equipment purchase, or a payroll allocation, the very first thing they look at is how well you walk through the transaction analysis process. This slide breaks that process into four central steps that every grant manager should master. First, gather information.
This is the foundation. You collect every piece of support and documentation tied to the cost. Invoices, timesheets, contracts, approvals, procurement worksheets, you name it.
A strong transaction analysis is only as good as the evidence behind it. If something is missing, an approval signature, a purchase order, or a timesheet, it becomes an immediate risk area for question costs. Second, apply the regulations.
This is where 2 CFR 200 subpart E becomes your anchor. You take the documentation and evaluate it against three big tests. Is the cost allowable under specific cost principles? Is it allocable to the award, meaning the award truly did benefit from the expense? And is it reasonable? Would a prudent person have made the same decision under similar circumstances? This regulatory crosswalk is exactly what auditors do, so your internal review should mirror their approach.
Third, identify issues. Now you move from compliance review to diagnostic work. You're looking for gaps, missing approvals, late signatures, unsupported cost allocations, inconsistent methodologies, or documentation that doesn't match the narrative.
This step is where most findings originate. It's also where you begin to understand the root cause. Was it a process failure, a training gap, or a policy that simply doesn't align with federal standards? And finally, drive corrective actions.
Once the issues are clear, you develop the steps needed to resolve them and prevent recurrence. This ties directly back to the corrective action plan elements we reviewed earlier. Specific actions, responsible parties, reasonable timelines, preventative measures, and monitoring.
A disciplined transaction analysis process doesn't just help you survive an audit; it evaluates your organization's overall financial stewardship. And when you apply this framework consistently, you should magically reduce the likelihood of question costs and repeat findings.