6 steps to recover unspent or misused funds in contract audits

A thorough contract audit can uncover fraud, identify areas of noncompliance or inefficiency, and result in cost savings. The author details six steps auditors can take to reverse engineer cash flow and recover potentially significant unspent or misappropriated funds.

This article was updated on November 17, 2025.

Disclaimer: The examples and findings are based on a composite, aggregated and synthesized body of knowledge derived from multiple anonymized audits and experiences. The views are solely those of the author and do not represent the official policy or position of any past, present or future employer or client. This content is for informational purposes only and does not constitute professional advice.

Contract audits verify whether organizations that receive funding under contracts from government agencies, grantors or public entities (the funders) have spent those funds according to the agreement. These audits determine if recipients delivered agreed-upon services and complied with performance, eligibility or reporting requirements. They can also determine whether any funds have been misappropriated.

As an auditor, I often review these types of contracts for clients and help them recover funds when necessary. In this column, I’ll describe the process I use to reverse engineer cash flow and identify misspent or misappropriated dollars.