How should a municipality prepare for an audit by an Office of the Inspector General (“OIG”) for a program administered by a prior administration that focuses on due diligence and proper record keeping?

A municipality’s audit approach should not be impacted by the administration carrying out the audit. The audit approach should focus on cooperation with the Office of the Inspector General (“OIG”) auditors and transparency of past and current program activities. Consider the following good practices in preparation for an audit: 

• Maintain and organize project files in a central location prior to the arrival of the OIG;
• Provide office space for the audit teams to meet and conduct interviews;
• Assign a point person who will be available for the duration of the audit to assist the OIG with coordinating activities and any other needs of the audit team;
• Provide access to staff including employees from the previous administration that worked on the project being audited and personnel assigned to the project as a result of turnover;
• Be prepared to respond to the draft audit report promptly, so that your feedback can be considered prior to the audit report being finalized; and,
• Proactively demonstrate the steps your municipality took to enhance due diligence and record keeping.
• Review laws and regulations pertaining to the grant program.

In demonstrating a sufficient due diligence process in your grant program, municipalities can highlight the following good practices:

• Background checks on vendors and/or subrecipients to ensure they are not on the federal government excluded party list by running entities and individuals through the Sam.gov Exclusionary Search prior to award/or distribution of funding;[1]

• Due diligence of beneficiaries to ensure eligibility for the financial aid being provided;
• Risk assessments on contractors, vendors and subrecipients to show they possess the necessary capacity and level of integrity to carry out the scope of services;
• Self-certification requirements for vendors and/or subrecipients certifying that, among other things, they are not barred from receiving funds and are eligible, capable, and responsible in the management of federal funds; and
• Regular proactive program audits to ensure compliance with established due diligence practices and procedures.

To demonstrate good record keeping practices in grant programs, municipalities can highlight documentation that demonstrates:

• The decision-making process for providing grant funds, including determining the eligible use of funds;
• Grant agreements and subgrant agreements which include grant program requirements, terms and conditions, specifically with Federal regulations applicable to the grant;
• Project timelines, deliverables, and milestones, and key performance indicators;
• Detailed supporting documentation for invoices and proof of payments, or contracts;
• Procurement methodologies, including compliance with the Uniform Guidance;
• Risk assessments and supporting documentation for all subrecipients use of funds; and,
• Description of the central platform used for the electronic storage of all program documentation.
• Policy and procedure manuals relating to grant management, including procurement, payroll, and inventory control, as applicable.

Last Updated: March 1, 2023